Three more days, Three more days is all you have to worry about when it comes to me talking about that expiring coupon code linked down below. Don't worry, my birthday is tomorrow and that coupon code expires Monday Check that out for the programs I'm building your wealth link down below. But today, we must start with capitalists. So uh, in about an hour, we will be getting the Pce numbers.

So in this stream, we'll be talking about the personal consumption expenditure numbers. These are the Fed's preferred gauge for inflation. We are expecting Pce deflator month over month to come in at zero. Obviously, if we get a negative read, that would be fantastic.

The prior release was 0.1 year over year, we're expecting a drop from the prior release of 5.5 to 5. We're looking at core going from 0.2 to 0.3 That's actually ticking up slightly. We don't really like that, but then again, point Three annualized is 3.6 and it ain't that bad. Uh, then we've got 4.7 for the prior year over year release.

Now at 4.4 is the expectation. Again, this report comes up in about 50 minutes time. We'll also be getting University of Michigan Sentiment and Expectations reads: uh, one of your expectations for inflation expected to Hold Steady at a four percent. Now, this is, obviously, uh, going to probably leave pre-market a little bit tentative.

Usually, when we get uh, Pce numbers of markets are a little tentative in the morning before and then every bit of trading after matter or is dependent on essentially the result of that. PC You get a hot inflation report. Bad. You get a soft inflation report.

Good, simple good news is, when it comes to the inflation reports, it's usually pretty binary like that. See, when we got retail sales reports, it was not as binary when we got retail sales. uh, numbers. Uh, for last month and then they were down miserably.

We're like Yay It's bad. that's good for inflation. And then we're like, oh wow, but it's really bad. That's bad for going into a recession.

That was sort of the non-binariness of the last retail sales report number that we got, which was a little more, um, heart pounding as a result for the stock market, whereas with inflation there is at this point no level of too low. The lower the better, the faster it falls, the better. The last CPI report was fantastic. Let's hope the Pce report holds up as well.

not as many earnings today. We'll get a little bit in Insight from American Express Chevron Colgate And well, after all, it is Friday and you tend to get less earnings that come out on Fridays We do on the 30th. We'll uh, we will be getting the Dallas Fed Manufacturing report that's on Monday On the 31st, we'll be getting the employment Cost index. Expecting employment costs for the fourth quarter to have risen 1.2 percent annualized, that would work out to 4.8 percent.

Uh, so obviously if we can miss unemployment costs, that would be great. especially since we go into the FED meeting already next week. How Wild is that? Next week? Wednesday We'll get to cover Jpo, uh, doing another press conference that's just in five days away? Yeah, so not too bad. Now we do have quite a few things to cover today.

Uh, we'll go ahead and start just by looking briefly here at some of the earnings numbers that we got. Uh, we'll start just with a brief summary here of uh MasterCard and I'm not the biggest fan of just yapping the actual Uh numbers out to you I find that relatively boring I Try to look for the takeaways uh, and some of the takeaways uh, that I've noticed are that both of them missed expectations. Uh, purchase volumes that both? uh, well, when I say both of them, I should also mention the other company. it's Visa Uh, both companies visa and MasterCard missed purchase volumes, although both of them did rise a Visa saw Purchase Card spent up 1.7 MasterCard up 11.

Both of those were misses though, and they still expect to grow Revenue But when you adjust for inflation, Visa was substantially negative MasterCard was actually still slightly positive, leading MasterCard to say that spending is still positive and healthy. but things are definitely growing slower than expected, which honestly isn't that bad of a sign. Given that we want, we kind of want a little bit of that balance, where again, things are weakening so that the FED can relax but not weakening so terribly that we think we're going into the depths of a 2008 financial crisis again that we definitely don't want. Although I honestly don't think many companies or individuals are planning for a 2008 style financial crisis and personally, they should uh, in my opinion I mean I suppose it's good to have sort of your backup for a worst case scenario your money for a rainy day.

but it seems like most of the company earning call earnings calls that I'm researching uh, indicate that companies actually see this as look either we're not going to have a recession when we find, or we're going to have a shallow recession and the best thing we could do right now is invest in ourselves. And if we invest in ourselves, then we'll be a better version of ourselves outside the other or at the other end of this recession or no recession. Uh, so I I think this applies individualistically as well. It's something that I've been encouraging for the last years.

Hey, you know what? As an individual, obviously, you could cut back on some of your spending, cut back on margin, cut back on debt cut, but you pay down your credit cards, maximize your ability to to borrow on like a home equity line of credit when the time is right to go by. uh, for say, real estate or or whatever. and uh, and and prepare, because usually recessions are great times to invest in yourself, so that works for both individuals and businesses. The goal obviously is not to go bankrupt.

see that doesn't work so well. If you're a money losing company like Rivian or Lucid uh, then it becomes very, very difficult to invest in a recession because you have no money. And guess what? The one thing is we generally don't have in a recession. liquidity.

That's the first thing that goes out of the window. liquidity, The ability to raise money, the ability to get new financing, new debt generally goes out the window. now. Synchrony did come out and uh, indicate that there were some increasing net charge charge offs.

basically? um, they're they're pre-planning for more expected defaults on their cards. Synchrony Bank is uh, one of the uh issuers. although I think JP Morgan took over. They used to be one of the issuers for the Amazon credit card along with many others.

Uh, they do, uh, tend to serve a more low Tier credit customer. Uh, and uh, they mentioned uh that we should not worry because delinquencies are still a below a pre-pandemic level. However, they don't expect delinquencies to normalize until 2024.. 25 of Synchranese borrowers have a credit score of under 650.

even lower credit score borrowers right now, though, are paying back more frequently than they did before the pandemic. So pretty remarkable. Hasbro The toy and board game company is cutting 1000 jobs after a pretty rough Miss on numbers Jeffries Called that a very painful period for Hasbro Sherwood Williams Also sees a materially softer housing market as well as down chemicals which obviously is affected by the housing market as well I Actually think this is a very interesting opportunity to potentially start positioning yourself for taking advantage of uh, housing related stocks residential Investments or plummeting. We expect that construction spending will fall uh substantially as we get into this recession and the backlog of existing construction projects has cleared out in such a way that uh I Wouldn't be surprised that during a recessionary environment here in 2023 and I've been I've been looking for this coming for almost a year now I Wouldn't be surprised if you have a better opportunities to buy solar or green energy related companies for residential.

Investments here in 2023, we'll see, but I I would not have high hopes for solar related plays in 2023. However, I would have High Hopes at being able to pick them up pretty inexpensively because I do believe that for the rest of the decade, solar is going to be pretty darn desirable next to potentially of course, and this is an interesting one. Offshore turbines? Yeah, post 2025, there are 86 gigawatts of Uh of offshore wind turbine projects that have a yet to select a manufacturer. Big plays in the offshore wind turbine: Market are Siemens and Gamusa Vestas and GE each looking to capitalize on somewhere between 27 14 and 11 gigawatts respectively of a power generation I Always think that's really interesting because wind turbines, uh, especially offshore.

Well, wind turbines are really popular in in certain, uh, more rural parts of the world. certainly even countries like uh Germany You see a lot of wind farms pretty darn, uh, popular. And what you'll actually see is a lot of farmers they'll themselves invest in in uh, wind farms because once they make the investment uh, along with the government tax credits, they could break even on the investment and produce cash flow off them pretty darn quickly. But uh, yeah, wind farms are big and long projects that take about three years before they actually, uh, actually, you know, go from paying a manufacturer down payment for a turbine to actually getting it.

And so that's why a lot of folks are now looking at the post 2025 period of unallocated wind turbine Investments and see it as potentially, uh, big Investments For companies like against Siemens Avesta and Vestas and GE kind of wild uh, annual offshore wind build outside China will exceed 10 gigawatts for the first time ever per year in 2026. I I I Don't know if I'm going to be buying a wind turbine anytime soon I think I need to start with a backyard before I could have a wind turbine. Still don't have a backyard. but who needs backyards? Just maintenance, right? Kids can play in the street.

Um, that doesn't sound so great. Uh, anyway. uh, then we've got uh Google uh in Google's uh, an interesting uh. it was an interesting piece about how.

uh. cookie removal? the removal of cookie tracking software? uh, and sort of the Apple uh tracking transparency update. Uh, from almost two years ago. now it's still hurting Google Uh Now what's fascinating here is you've got a company that released an open source product called Uid2.

They use that instead of cookies and guess what? It's trade Desk. Trade Desk is still expected to see substantial growth in the Connected TV industry. Keep in mind though, Connected TV is just a 14 billion dollar industry relative to the 500 billion dollar digital advertising. Market So if the total addressable market for digital advertising is 500 bill, you take 10 of that, you're at 50 Bill 10 of the entire digital advertising Market is still over three times what the Connected TV advertising Market is now.

so it has a lot of people at least, uh, sharing some hopium about digital Connected TV But remember, hope is not an investing strategy. All right, let's take a listen in over here for a moment. let's see what they're yapping about on CNBC Um, the Chinese are going to know where people are going to know uh, details about them. Is that is that what people worry about? Is that what you worry about? Is it the power and influence that the Uh platform could be used for in the future? Which is to say, to try to influence politics? Is it the I Don't know if it's a monopoly, but the just the scale and scope of it.

Insofar as you know, I've had people say look, uh, if you know we would never let a foreign a foreign country if not foreign adversary own every local TV station in America and maybe that's what uh, Tick Tock is especially for a new generation, which is it to you? Look, these are all they're all serious problems and challenges. but uh, for me Andrew you really have to ask um again I go back to where does this go. Are we going to ban any Chinese company I'm much more worried about frankly Facebook than I am about Tick Tock today and the information Facebook has how it was used to hack one of our elections. So uh, I I'm a lot more worried about all these social networks which I think are hugely problematic in terms of privacy issues.

I I don't use tick tock I wouldn't want it on my phone personally. um at the same time, tell us why because you think that there are folks who would actually would hack your phone itself or because I don't trust I don't trust any of them I don't By the way, I don't use Facebook either. Okay, um I think we're gonna wake up one day 10 years from now and realize how destructive all of these social media have been for truth and Trust in this country. But that's another matter.

I'm talking about the Oh man I'm sorry, this guy's a little too exhausting for me. Let's uh, instead, talk about something that could be a lot more. Oh dare I say entertaining? Yes, like fundamentals, we've got to talk about a chat Gbt style. uh GPT style play.

Maybe maybe potentially the chips Market is going to come under pressure, especially after Intel's Miss However, there is one particular company that seems to be standing out. It still expects over 25 growth over the next year and is a company that has a backlog exceeding 18 months of production. Some say their backlog is over two years of production. It's a company that sells very expensive Machinery that makes chips.

It's actually a Dutch company with 35 000 employees that people say no one can copy and that company is Asml. They use a technology that they patented and came up with uh in part. So at least with their technology to called a lithography to produce silicon Wafers and they provide some of the Machinery to companies like Taiwan semiconductors and Intel to actually produce Advanced microchips like the Uh five nanometer chips that Tsmc is now expected to build at a plant in Arizona as they expand under the chips act in the United States Now without Asml, you would lose about 90 of the chip market. Now that's actually really fascinating because a lot of folks, well, I should I should say the advanced chip Market Uh, a lot of folks are really excited about the potential for chat GPT to take over uh uh, you know, in terms of artificial intelligence and and uh, expand, uh, substantial use cases for artificial intelligence very rapidly and so people are going down the rabbit hole of okay, well, if I want to invest in chat GPT then maybe I want to invest in Microsoft But the problem is a 10 billion dollar stake in Microsoft represents only a half percent investment in really open AI if you, uh, if you look at a chat sheet PT as a percentage of Microsoft's market cap in English If you put a hundred dollars into Microsoft stock, maybe you're only getting exposure to chat GPT to the tune of half of one cent.

Not that great. So that's leading a lot of people to say okay, we'll chat GPT uses Microsoft Azure Uh, at a cost of about seven cents per Curie Quarry Uh, and so why not invest in Microsoft right? But wait a minute. Azure is primarily driven by Nvidia and AMD chips mostly Nvidia So Nvidia and AMD are graphic card designers and Taiwan Semiconductors manufactures a lot of those Advanced microprocessors, especially the artificial intelligence ones. given that Taiwan Semiconductor has a 92 share of the advanced chip Market But then we go just one derivative further.

And where would we end up? Asml, which has 90 of the advanced Lithography Market to actually uh, provide machines at that Taiwan Semiconductor can use to make the advanced chips. So as you kind of going down the supply chain I mean soon, we're going to be looking at Sand and where we can Source Silicon for these Wafers But for now, Asml is a little bit of of a shocker in terms of how much market share they have some. call it Europe's Most Valuable Tech Company. They produce these machines uh called Extreme Ultraviolet Machines.

That's one of their most advanced machines. They also produce less Advanced machines. The more advanced machines cannot be sold to China anymore because they're so critically important for making chips. and so the more research we do into Asml, the more we're like, oh my gosh, there's very little competition for them.

Again, they've got about 90 percent of this lithography Market uh and uh. And they basically these ultraviolet machines allow the engraving of these a tiny transistors that are again, four or five nanometers wide. And they do so with these ultraviolet essentially lasers. uh and uh, they've got.

They've got the Machinery uh which is incredible because they also just, uh, released earnings. Uh, And what's great is we could take a peek a little bit at their earnings, call and look at some of their numbers and I'll tell you they're incredible. So here's some of their numbers: We've got a company here that's manufacturing machines and the machines they're selling have a 51.5 percent gross margin which is really incredible because if you think about Tesla again, they sell a hundred dollars worth of machines AKA cars. they're taking maybe 20 to 25 dollars of that to uh, their their operating uh operating expenses.

Here you've got a company that's bringing more than 50 cents of every dollar to their Opex Now that's expected to slow down from about a gross margin of 51.5 percent to maybe, uh, closer to 49, but still really really a phenomenal. Again, it's a European company so when we see numbers, we're going to see a lot of guidance and numbers in uh in in Euros here but uh uh r d uh coming in at as they're higher as they're expecting uh to continue to hire individuals uh and uh SG a expenses up as they just continue to grow. uh their sales in and uh, admin expenses because this company's got a massive backlog. These machines that they sell sell for anywhere between 100 to 200 million dollars.

some even more expensive uh and uh, they so they can in a quarter deliver somewhere around uh, you know 50 I'm sorry In a year in 2022 of the UV Advanced machines they shipped just 54 of the machines I mean these machines are just as valuable as planes Boeings Ave average price per plane is somewhere around 80 million dollars. Asml is selling some products that are twice as expensive as the average plane that Boeing makes. So these are very, very expensive. Uh, pieces of equipment and they're really critical.

Uh, in terms of uh, what? what the future of the chip industry uh, could look like? Yeah, and they're uh, critical to a quick critical suppliers to companies like Taiwan Semiconductors which is now a Warren Buffett stock. Now what I thought was so wild was that despite all of the uncertainty around inflation, macro recession interest rates, there's and despite the fact that they're seeing customers provide evidence of demand weakness, they're still buying the machines to make chips. And what they're simply doing is you've got companies like Taiwan Semiconductors simply operating the lithography machines at lower utilization levels. Uh, and and so this is where.

Uh, a lot of folks say, well wait a minute and this was my thesis initially. First, wouldn't the Machine Company a company like Asml suffer in an environment, uh, like a recession where maybe Taiwan Semiconductors is cutting back on some of their Capital expenditures which they are just slightly below 10 percent cut back from last year on Capex and Asml actually touches on that a little bit. They say they see it to help rebalance inventory levels. Customers are running lithography systems at a lower utilization level somewhat a lower uh and and some would also lowered.

so they also lowered. some of their Capex plans. But they have concluded that customers have made the assess the assessment that the duration of a potential recession is significantly shorter than our average delivery lead time. Uh, Now that's actually quite interesting because it suggests that lithography Investments are strategic in nature.

which means the demand for these systems remains strong And basically companies that would buy lithography machines from uh, from Asml or saying hey, wait a minute if we buy an Asml machine right now, it's going to take us a couple years to get it. Do we actually think we're still going to be in a recession in a couple years? No. So we may as well continue to make investments and provide down payments now on Machinery to make sure we're in the queue to get that Machinery when we're out of recession. This is very interesting because to me, it goes back to the rubber band thesis that I have for demand uh, and uh, Supply chains.

So the rubber band thesis is pretty simple. The rubber band thesis suggests that hey, when we went into the pandemic, we had Supply chains that kind of looked like this and with all of the crazy stimulus spending that we had, the rubber band basically stretched to the extreme and in many cases snapped. That's not good. You don't want the rubber band to snap because that's how prices Skyrocket Because everybody then has pricing power to the tune of raising nominal prices and people are paying whatever just to get their hands on things because they've got so much stimulus money that led to the pretty insane inflation that we're seeing now.

However, when Asml tells us hey, you know companies are actually just running Machinery at a lower utilization level and they're still investing in the future, It implies to me that the rubber band of Supply chains is actually kind of scrunchying down and that as soon as we see a Chinese reopening and the exit of a recession for the United States we could actually see that rubber band just kind of go back to normal uh, in that we would just stretch from a scrunchy period to a normal period. And the Asml report really reiterates that that's kind of exactly what's going on. that companies aren't really looking at this recession, especially ones with high cash flow that say oh, uh yeah, we're um, we're going into recession so we're going to cut all our spending. No, they're seeing this instead as an opportunity, uh, to to invest more in their businesses, just run some of their Machinery at a slower level.

This is what we're seeing with Intel as well, right? Intel Terrible numbers? Uh Intel Way worse guidance than expected Uh PC Market down over 33 from uh, their forecast. The demand for memory is plummeted. so you're looking at a lot of pain at least in the near term coming off of all of the spending we saw in 2020 21 22 in the upgrade cycle for chips. Uh, and now with a weakening crypto uh, mining demand set as well, you're not seeing as much ship demand.

This is obvious, right? We already knew that this is why. Nvidia AMD Taiwan Semiconductor sold off terribly last year. Samsung Also coming out with numbers that are terribly or terribly low and miserable. Yet, a lot of these stocks have actually risen off of their lows because we see that light at the end of the tunnel that these companies are making insane.

Investments To make sure their position for what probably is going to be insane growth for the rest of the decade. Bloomberg Intelligence is going as far as calling the chip sector the next. Oil In other words, as oil becomes less and less prominent over the next 50 years, it's going to be a while. Oil is going to be with us for a while.

Okay, it's just gonna become less prominent over time. Chips are going to be going in completely the opposite direction. They think about how an average car has over a thousand chips and these aren't all like you know your motherboards. These could be little chips like chips that held up Ford assembly lines because they didn't have wiper blade chips.

Everything has a chip. Now it's insane. I Actually remember 10 years ago. Actually more than 10 years ago at this point.

but uh I'll just call it about 10 years ago. it was about 11 years ago. Uh, we I bought a new washing machine and uh, the stupid thing broke within a week and I despise the idea of dealing with a warranty and sitting on the phone with people. So I disassembled the entire washing machine myself.

Uh, diagnose the problem with my little Voltai multimeter. it's multimeter I like to call it a multimeter. Uh, but anyway. uh, found a stupid 25 cent chip that I thought I suspected was the Troublemaker some pressure flow measure or whatever.

uh and I replaced this like 25 cent chip. uh that I had to wait a week for to get and uh of the shipping costs more than the chip was worth. As soon as I replaced that chip, washing machine worked for another 12 years. This is great.

uh and uh and it really made me realize like wow how important chips are. Just one thing ruins and stops the entire process of being able to use the machine. I mean this is why we went away from using vacuum tubes for computers or mechanical switches and computers because one little piece breaks one little bug so to speak and the entire system shuts down. So chips, uh I mean really remarkably important Asml here in their report talking about how demand continues to exceed Supply I mean this is like the Tesla of Chip makers here.

memory buyers are making strategic Investments because they've recognized that at a certain point in time the market is going to come back and they are going to need capacity. You do have a 1.5 percent drag on gross margin coming from inflation. I Would say most of that we expect to recover during this year. This actually reiterates what we're seeing with the inflation story.

for a lot of companies. A lot of companies talking about how they're expecting inflation to really go away over the next. uh, uh, probably probably closer to the second half of the year. Average selling prices of these machines they're selling sitting at somewhere of the advanced machines at least.

Uh, the Euvs sitting at around 165 to 170 million Euros per machine. Again, about twice the cost of a Boeing the average Boeing jet uh customers. Again seeing some kind of feeling that we might see a chip recovery in the second half of the year. Uh and uh and and uh.

Ultimately, Uh Asml is saying. look, we don't want to skimp on our investments in the first half because we think mid to long term demand is just going to continue to significantly exceed our build capacity. Sometimes they say by the tune of 40 to 50 percent, demand is still higher than what they can make. Anytime you have demand exceeding Supply, you're you're in a situation of pricing.

Power. Simple pricing. power. Uh, let's see what what else we have here.

We've got uh, testing protocol, some chatting about trying to reduce, uh, some of those cycles for testing and some of the initial setup for their customers. and uh, we have. Let's see anything else in the earnings call this earnings call by the way, from January 25th. So pretty dang new just a couple days ago and that was at night a couple days ago.

So uh, because it's a European company. so this is really only about a day old. Pretty good here. Of course we had significant hiring in the course of Q4 those people we added this year.

This is why we saw that SG A increase the research and development we had. increase in wages of course. But uh, what do we have here? As you would have seen, if you look at the 2025 and 2030 scenarios we've talked about, uh, you've uh, seen it that down a little. That's clearly the intention to get some operating leverage.

So that's to say that by 2020, uh, well, the scenarios of 2025 to 2030. they see the percentage of SG A and research down slightly relative to sales. That is normal because you want to see an expansion there. that actually is proof of expanding pricing power.

If you can maintain margins uh, and actually expand margins by reducing your Opex relative to your sales, that's good. They're also setting up to get even more complex in their research and development, especially as They're moving from what now is considered an advanced chip of five nanometers maybe even four nanometers down to new chips like this. Over here, a product portfolio that's going to bring them down to two, the one and a half and the one nanometer, and even beyond that. so in other words, smaller.

so less than one nanometer chips for the rest of the decade. Things that they're working on Now now remember when you're talking nanometers, we're not talking about nanometer chips. I Should clarify the the nanometer refers to the size of the transistor, which is kind of like a non-mechanical switch. So if you're weirded out by the idea of what a transistor is, think about it like a light switch.

but instead of being mechanical, it's chemical science, chemistry, electromagnets. Uh, anyway, all right. so uh, and non-physical ones at that, which is also kind of weird. But anyway.

uh okay. great level of confidence and demand. Uh blah blah blah Okay, we kind of get the idea here, but uh and then of course we talk a little bit about how China doesn't get access to the fancy Eve UVS But keep in mind you have to use Duvs to use Euvs China Can't get a hold of the Euvs so what's China trying to do well China is actually trying to steal r D, uh and IP intellectual property from companies like Asml. so they're having to actually substantially increase their staff screening processes, their security processes because they basically think China is just going to steal all their information and try to build Euvs themselves.

That's pretty incredible. So you've got some serious uh, potentially uh, National Security concerns for uh, well, countries within Europe and the United States trying to basically protect companies like Asml from letting their Machinery their 150 million dollar machines and the technology around those to fall into the hands of Chinese. A lot of folks believe that China will ultimately, uh, triple down and manufacture their own uh chip making machines. Some folks fearful about investing in Taiwan semiconductors for the risk of Chinese Invasion we are seeing Taiwan also expand their manufacturing outside of Taiwan though they're pretty confident that China won't invade.

China's got enough economic problems to deal with. But I'll tell you in terms of chat GPT style stocks that maybe other people are talking about. Dang Asml. I Mean, we've put days of research into this I Know that doesn't sound like that impressive, but it's actually a lot.

Uh, because it's It's been something we've been looking at pretty full time over the last few days here and uh, we're very, very impressed. Uh with Asml? Uh, I know that sounds like ASMR and it's like Kevin why are you pitching us some random International stock? Uh, I'll be clear I don't own a dime of it right now because I'm still on the research phase. but wow, Uh, it is. It's pretty remarkable.

Uh, what I will do is provide a little bit of Fundy on it because the stock is has exploded. Uh, you know, in in recent years here, uh as well, we've gone through sort of a chip explosion uh, over the uh, covet pandemic and that. So if we look at Asml uh, again, it is a Dutch company. If we get a little bit of financial analysis, uh, on this company, we can see uh, we've got about 18.47 Euros expected of earnings per share by the end of 2023 in a course member live stream.

By the way, we've gone through the fundamentals of the company as well from a perspective of the revenue statement which is also known as the income statement. uh, the balance sheet, the cash flow statement I Do try my best to conduct fundamental analysis like that on a daily basis. whether it's stocks and real estate with y'all in the course member live stream where we do Q A together and obviously I would love to have you in the course member live stream. so check out those Uh links down below.

The next coupon code does expire in three days. that's Monday the 30th and uh, it's the guaranteed lowest price you can get probably all year, but at the bare minimum for three months so we'd love to have you there. So uh, EPS in US Dollars Expected to to be twenty twenty dollars of earnings per share expected for twenty Thirty Looking at the share price right now, sitting at 683 divided by 20 puts you at about a 34 times. Uh, multiple for this company.

company is expected to grow EPS between 34 to 12? Well, I'll just read it out. We got 34, 25, 26, 25 9. Those are sort of your EPS growth rates. So if you went with an average EPS growth rate of about 25 34 divided by 25 probably selling for about a 1.36 times.

Peg Not as juicy as some other plays in the in the chip space, selling for substantially lower Peg ratios but uh, quite a bit less than dial on similar conductors right now. Uh, fascinating. Really, really fascinating company. and uh, quite quite an exciting uh argument for potential PP Uh, and PP go up.

We like it when PP goes up. No, there's nothing I like more than PP going up at companies pricing power is, in my opinion, the number one thing you want to pay attention to after. of course, you make sure that these companies actually have positive cash flow. I Do not believe that in a recessionary environment, you want to be exposing yourself to companies that don't have PP Uh, you or cash flow.

You want to stay away from cash flow cash or a lack of cash flow. money losing companies. Bad, not good. Anyway, that's potentially another chat GPT Stock for you.

All right? next up, we Must talk about real estate. Let's take a moment to talk about real estate. We haven't talked about real estate in a hot minute, so let's spill some tea on real estate, shall we? Okay, the first thing we have to do is complain about Redfin but I'll do that after. I take a sip of coffee and I want to look at some of your questions actually first.

Oh gamer Dan Are you saying you have three courses? I love it and I love you unless you're talking about a three-course meal. I'm not sure Kevin What would you consider a second wave of inflation? I'm assuming you do not expect a steady decline back to two to three percent I don't really understand how this two wait. What do you? What would you consider a second wave? I'm assuming you do not expect a steady decline back to two point, two to three percent. Okay, I'll answer that.

the best I can. So a second wave of inflation, uh, to me, would be any kind of month over month reads that give us warnings that inflation on an annualized basis is, uh, running amok Again, running amok on month over month. Inflationary reads, in my opinion, would be anything with a Uh 0.4 uh, or greater on the month over month reads because that would show us that an annualized inflation rate of around 4.8 percent, those would be red flags about a second wave of inflation I Do not actually believe that a second wave of inflation is possible? Uh I I You know, think that ultimately, uh, Supply chains will will keep that. keep a lid on inflation.

But uh, I would actually expect this year, a rapid uh, decline of inflation potentially below uh, uh, three percent Pretty dang quickly. Well, maybe by by Uh July August September We we could honestly be negative because of the housing sector dragging everything down. uh, as a giant anchor representing about 32 percent of CPI 25 of Pce where we end up leveling off in the future will be quite interesting I Don't really know. Obviously, if we level off, uh, in sort of a an environment that's that's sitting below below two percent, It just gives the fed the license to print money again and and stop quantitative typing quite quickly.

But I don't know where where we'll end up that? That'll be the interesting thing. Are we going to go back in the path of the great moderation of negative interest rates? Maybe. Maybe. All right, let's see here, how much more metal is in an EV versus an ice vehicle? Oh yeah, let's just let's just add up copper, shall we? Can we look at Wave: Do you think of them as a viable energy source? What do you think of them as a long-term investment? I Don't even know what that is man.

wave wave like I when I type in Wave I Literally just get wave power and and like height Hydro Let me try wave stock. What is this Eco Wave power Global ADR What is Ticker wave Eco Wave power. You're asking me about a penny stock. Um, changing the world.

One wave at a time. it's some Hydro stock. It's some Hydro Penny stock is what you're asking about. Avoid the maintenance on that looks terrible.

Think about the rust and and uh um IR oblige for a brief moment. Let's see what you got here. Report of foreign Issuers: oh my God I Don't care about some philanthropic uh. press release I Want earnings I Want financials I'll just go to financial reports.

Let's see. let's see what's inside shall we? Brief look: let's see what this is All right. So brief look Revenue 242 What is this Mill of seks I don't even know what that is Sweet Swedish Money Wow. One Swedish Krona is 9.7 cents? Yeah, wow.

Okay So you're you're pitching a penny stock that has revenue of about 24 million dollars and operates a net loss of about 670 thousand dollars. Um, with margins of what is that? barely 200? You don't want to poop on that. It's not bad. Uh, but especially if you're manufacturing product.

It's no Asml, but okay. 19.8 percent and has this improved at all? No, their net loss has gotten worse. Their sales shrunk. That's not good.

A company that's selling 20 million dollars a product had their sales shrank from 21 to 22. sounds scary I know I'd like to go back even further to Prior years. Do they do they ever make money right? I Don't know. Let's find out.

Let's look at their annual 2019 report I don't think they're changing anything one wave at a time I Think they're They're losing more money one wave at a time. Okay, well what do we have here? Hold on a second. Oh, they had no revenues in 2019. Fantastic.

Uh, Q2 so they just I Mean this is. this is a risky bat. You're looking at a penny stock that has no provable revenues here. They had at the beginning of 2020 they had four million bucks worth.

Basically, wait. no, hold on Ten Thousand Oh what is this? No, this is I'm sorry. this is way less because this is 440 000 krona which is like forty thousand dollars of Revenue I like I don't know why I mean this is like you'd have to gamble on on a penny stock like this or have some kind of like Insider information that this was like the next big thing. Scary.

If we are scrunchie right now and go to normal, wouldn't that imply a second wave of inflation? No fair fair question. Okay, I will add some clarity. Hold on a moment. This is so going back to the scrunchie example.

The scrunchy example it does not should not be confused with. Well, if we're a scrunchie and we expand to here, we end up in a situation where we have inflation. Again, The idea of the scrunchie is that actually companies that want to make product and sell product actually have so much spare capacity and such better Supply chains and shipping methods that they would love to have more demand. and rather than actually raise prices because they can't meet all of the demand, they just increase their production output to meet more demand at the same level of profit and the same pricing levels.

Think about it. Would you rather? And it's simple: would you rather sell 10 uh PP widgets? I'm going to call them and where you make one dollar of profit each. In other words, you made ten dollars. Would you rather sell 10 PP Widgets Or would you rather sell 100 uh of the Pp widgets there we go.

Uh and make you know a hundred dollars a profit? Well obviously you would rather sell 100 PP widgets. Now, if your supply was constrained at 75 and you were able to raise the price and maybe you were able to make I don't know a buck 20 a profit. So so twenty percent more profit. Uh well now all of a sudden you would.

you'd be at 75 bucks times 1.2 Now you're at 90 of profit with a 20 price hike because your production is constrained, but the company would much rather not be production constrained, and do more units because they would make more money in that example. So here's an example where a 20 price hike actually is not as desirable as just having properly lubricated Supply chains. So the idea of of the scrunchie is that companies are seeing through this recession and they realize that once we go back to a regular demand environment, companies never ever want to be in a situation again where they can't fulfill demand. There's nothing more frustrating than a company that can't that that faces a lack of being able to fulfill the band.

There's nothing more frustrating than that You call up a ship. you're like I Got all this product I Got a customer who wants to buy it. Can you ship it for me? Sorry, Got no capacity. You got to wait six months before we can get you a ship.

That pisses companies off. So what do they do? Well, what did Walmart Do They bought their own freaking ships and they're like fine. We'll ship it ourselves because this is right. So so companies want to provide goods and services to their customers.

Because the other thing is, it's not just the loss of of profit in a supply chain crisis, but it's also pissed off customers. There is no customer that wants to wait six months for a product. Nobody wants that. No one.

There's no one who goes to Walmart and is happy when there's supply chain shortages and there's not enough deodorant on the shelves or tampons. Gotta have enough tampons. Okay, not having enough tampons is a bad day anyway. a little bit more on the scrunchie there for you.

Okay, well before we talk about real estate, we have to prepare because Pce comes out in five minutes and a Pce report is a big deal because it's the Fed's preferred inflation gauge. All right folks. get ready for it because we also get personal income. Personal income expected to be up 0.2 percent personal spending expected to be down point: one percent Pce deflator month over month zero year over year five.

You know. I'm gonna put these on screen. Uh, so you want uh estimates? Earth's income? Uh point two percent per spend Negative point: one percent uh, Pce mom zero percent Pce year over year Five percent. All right, we'll see what happens, so we'll slap that up.

We have four minutes to go until we get those Pce numbers. In the meantime, let's listen to what CNBC is talking about in regards to streaming: I don't wanna get any on any certain companies but I think that, uh, the NAT the concept of National Carriers uh, pending regulatory approvals in the U.S or other countries uh will happen. and I think whether it's Latin America Europe or the US uh or even you know Eastward I think there will be more Telecom consolidation to come. What's the latest thing you want that you really like? I actually I Watched a few things I watched Sauda on Netflix there's not a new one I Don't care about this at all I'm a human.

boring. This is why the mainstream media is killing me. as soon as I switch to them, it's at all right. I mean I Get it? It's not their fault.

I mean you come here and all you get is a coupon code pitch I Guess that's not as bad Anyway, so Bolsonaro's wife returns to Brazil alone, ending the U.S vacation Bolsonaro apparently staying back in Florida Amex predicts Revenue surge after record card holder spending American Express Said customer spending on its Network climbed to a record last quarter and a credit card giant predicted that revenue and earnings for this year will surge well above what some analysts have expected shares of the company Rose more than five percent. While volume increased less than expected in the final quarter, revenue is expected to grow by 17 in 2023.. I Mean, if there's any credit card company that I've always liked, it's been Amex But then again, I'm not too excited about financials in a recessionary environment. but hey, Amex is expected to increase their quarterly dividend to 60 cents now.

Chevron falls on profit disappointment after huge share of buyback and Intel gives one of the Grimace forecasts ever. Americans Fool Now this is interesting: Americans are falling behind on car payments at a higher rate than in 2009. individuals and Americans facing car repossessions are an ominous sign for the U.S Economy: During the pandemic, a surgeon used car prices for spiders to take on bigger loans for vehicles. Now more Americans are falling behind on their car payments during the finance than during the financial crisis.

In December the percentage of subprime auto borrowers who were at least 60 60 days late on their bills Rose to 5.67 up from a seven year low of 2.58 in April of 2021. That 5.67 compares to 5.04 in January 2009. The peak pain period of the Great Recession higher interest rates are making it even more difficult to make monthly payments. The average new auto loan was eight percent in December up from 5.15 a year ago.

Although if you look at a Tesla, they're pitching this idea that you could get a 5.45 interest rate. although that's probably with perfect credit. Anyway, thus is bad news. In the meantime, when we look at bad news, we will also now look at Pce numbers which come out in about five seconds.

Who is ready for Pce numbers to make stocks go up or down? I Am All right. Here we go. All right and personal income matches. point two: Personal spending comes in worse than expected negative 0.2 versus the negative point one expected Pce numbers standing by for those not out yet.

But again, personal income? Okay, Pce month over month ooh comes in slightly hotter than expected. Point One: On the month over month pce deflator, the expectation was Zero. Uh, Year over year matches five percent. Real personal spending Negative Point three percent.

And in terms of revisions, you have a slightly upward revision on the oh sorry, no, you have downward revisions here. Personal income revised down last month. Point three percent versus point four. Personal spending revised down: Negative point one percent versus point one percent Prior: you've got real personal spending also revised down to negative point two percent from prior.

So, uh. All in all, this is roughly a match across the board for PC with the exception of the month over month number, the month over month number coming in. Uh, again. point one percent hotter than expected.

Uh, but point one percent is still the equivalent of 1.2 percent inflation. Pretty darn nominal. Uh, in terms of uh, the Market's reaction. right now, it's relatively muted.

A little bit up, a little bit of down. Uh, so relatively muted reaction so far. We'll see if we can get a little bit more data here. Yeah, no, that's about it.

Let's take a listen here to what they're saying about it: I shouldn't fight personal incomes up two tenths of a percent on the month, and personal spending down two tenths. Uh, those both match estimates. So uh, Bravo To the Uh: Economist who did the forecasting The incomes number? uh, down from a revised three tenths last month spending is uh, down from a revised negative one-tenth Interesting note here guys, please. Um, and this didn't show up as much in GDP because that comes out as a quarterly number October A personal consumption was up, but uh, November and December down.

So the sequential move is to a slowing consumer at this point. I I Want you to go to the basics here: I'm always looking as an amateur year over year Pce to Plater and as you mentioned, 5.5 down to five. but you've been lecturing me in the last 90 days. Month over month matters into this new year.

Is month over month more important to you and the FED than year over year personally? I Don't care. But to the FED no, uh, seriously to defend, it matters because what they're trying to do is eliminate the base effects from last year and they want to see what the sequential progress is. If you were going to do a comparison to last year, you might want to do something compared to say March of last year when they started raising interest rates. So the year over year is what gets the headlines and what uh, kind of the consumer looks at.

But the Fed's looking at the sequential change because they want to make sure that, uh, they're getting a regular decline in the numbers. Let me just give you this uh, savings rate. It went up to 3.4 percent from 2.9 percent So that was a concern out there that people were spending down all of their leftover stimi money and now it looks like uh, they kept some aside in the month of December uh. wages and salaries though.

uh, they sort of decelerate three tenths. Uh, November was five tenths now? uh uh. revised down to three tenths. so a little bit of slowing on the wage and salary front which is also going to be good news for the fed.

Well basically this is not really that newsy for the market. So basically stasis across the board. as people priced in most of this, this was pretty much bang in line with expectations. The one area Mike that I want to focus in on though real personal spending.

When you when you strip away the inflationary impulse behind it, it dropped more than expected. Are we seeing a consumer that is being warned duly by what's going on and pulling back ahead of the storm? Well, I think that you're seeing basically that now. is it because they accelerated all their spending into October? Uh, and September was also large as well because they felt they needed to get their Christmas shopping out of the way early? Or is it because people are really pulling back? This is a something of a seasonal thing. The last year we saw basically the same Dynamic So are we, uh, seeing a change in consumer spending patterns? Uh, but you're right, real personal spending lower.

Now you're taking inflation out of that. Uh, real personal spending up three tenths compared to a two-tenths decline last month. So all right. So one of the notes in the actual report shows us here at the bottom that uh within Goods the decrease in p ECE was widespread.

So this is good. Within Goods decreases were widespread. We want to hear that right. We want widespread decreases in in prices led by gasoline as well as motor vehicles and parts.

Thanks Tesla Within Services The largest contributors to the increase were spending for housing Transportation mainly air transportation and health care. Now again, we expect housing to plummet As long as it does, we should be okay. Uh, put that in the wrong spot. There we go.

Air Transportation. Now This is fascinating because we do continue to see pain in air transportation. And this actually brings me to a a report on Southwest which gives us some more insight into some of the actual inflationary impulses that we're still seeing uh at the Airlines And we've been studying the airlines here. not as a potential investment, but more is sort of an indicator of what inflation could be doing going forward.

Southwest has new 737 Maxes which, fortunately, are more fuel efficient. However, there's the expectation that China's reopening could end up pressuring ticket prices. Uh, and the Assumption right now is that if fuel prices stay stable, we're still going to be putting more pressure on flying. And given that the entire industry is still smaller than what it was in 2019, in other words, it's smaller today than what it was in 2019.

Pilot costs are expected to continue to go up. Salaries in the Uh: Airline Industries are expected to continue to rise for Pilots. Pilot salaries could rise as much as 18 as soon as early this year, potentially another five percent by the end of the year according to research by Bloomberg Fares are expected to need to rise from today 19 to 27 percent just to get to 2019. Levels of Profitability: That's insane.

Think about that. Prices still have to go up 19 to 20 percent on airfares just to get to 2019. Profitability: Now, that doesn't mean prices are actually going to rise 19 to 27 because they might not have the power to do that. Consider: for example, what United Airlines said in their earnings call they said that if our competitors start cutting prices, we are prepared to cut prices as well because we think we're more efficient.

That does not mean you're going to get back to 2019 profitability. And guess what? you have more of today than ever before. Debt: In my opinion, that makes the airline industry a terrible investment, but it certainly continues to increase the inflationary Dynamic and concern that we have. and if you couple with that Chinese reopening there's there's concern that we're going to continue to see inflation at least in the air transportation sector, which apparently was one of the leaders in inflation for Pce and the report that just came out this morning.

Now there is a suggestion that by a lot of Institutions and hedge funds and I think it's nonsense, but a lot of Institutions and hedge funds are calling for 100 oil upon the Chinese reopening. I Personally, don't see it. It's possible Brent's sitting at 88.42 right now. it's been slowly sneaking up.

But one of the things that I think is quite interesting is what you saw when China shut down and Russia invaded Ukraine is you saw Russian oil instead of going as much to China because of the covet pandemic and their lockdowns, their three years of lockdowns, uh, and and also a removal of Russian oil from other parts of the world like the United States or otherwise. Well, you actually interestingly saw him was you saw a substantial amount of Russian oil. Go! guess what to India A lot of Russian oil while it's still flowing to China went straight to India this year and you could see that on this particular chart here. while this orange level is expected to rise uh, because this is all representative of a Chinese lockdown era, what you actually have is right after the invasion, the other parts of the world such as Europe and the United States saw the purchases of Russian oil almost disappear to nothing whereas you have India's purchases of Russian oil Skyrocket and basically more than absorb more, you could see that more than absorb over here, more than absorb of their available oil from Russia.

Now what I think is remarkable about that is, guess what kind of companies are starting to all of a sudden dump a lot of money into investing in India? Well, you happen to have one of the largest companies in the world which happens to be an American company and it happens to be a company that probably 50 percent of you are watching me on right now. it's Apple Folks, Apple Apple wants to see 25 of their Manufacturing in India in the future that they expect to have 25 of their products manufactured in India And guess who's taken all? well, maybe not all but a ton. Literally millions uh of barrels of oil. Uh, hundreds of millions.

Quite frankly, when you add it all up, who's taking it all? India So it's kind of interesting as Europe and the United States on one hand say oh, we're going to make sure Russia pays and we're going to stop buying their oil and we're going to put price caps on fine, put price caps on that creates shortages of oil. It increases the cost of oil for us in America. But what does it also do Creates an Arbitrage opportunity where uh, countries like India can buy the oil cheaper and so now you actually have potentially cheaper domestic production in India And what companies are taking advantage of it? Oh, American companies that are swooping in to take advantage of a cheaper cost of production. It's pretty weird when when you think about geopolitics and how on one hand you uh, you have to politically show oh, we're gonna punish Russia but on the other hand, American companies are hopping in to benefit from exactly that.

Uh, it's expected that India could be getting somewhere between a 25 to 40 dollar Arbitrage on the cost of oil. Uh, cheap oil. Kind of fascinating. Now, this uh, by the way, is also expected to uh, impact the Uh or be impacted by uh, uh, Chinese reopening because as India has started taking so much of Uh Russian oil, if China does reopen as strongly as expected, uh, now all of a sudden that Russian oil might not be eaten up by a Chinese reopening, creating again shortages because uh, now what was otherwise displaced by other countries is getting eaten up by India So the interesting potential thesis that yes, maybe it is possible oil could still take up to that hundred dollar range personally Again, I Don't think so.

I'm not a big believer that oil prices are going to run I think we'll end up relatively stable and if anything, we might Trend down. but that is a big trade that's being done right now or being made right now. Do keep in mind as well China itself is expecting uh, some substantial uh Investments uh not only into the real estate sector, but also the auto sector. And it's worth considering that for a moment right now.

and and this, all of this, by the way contributes to the Chinese re-inflationary Boom The first number that you have to remember is that China's discretionary savings is sitting at about 700 billion dollars. That's about one uh third the size of what uh, the American discretionary savings were. and when you look at that on a per person basis, it's even more wild given that India has is about a 1.4 billion individuals, you're really only looking at about 500 of savings, whereas Americans had about 12 times that, or about six thousand dollars of savings contributing to that inflationary nightmare. So the per person increase the per capita increase in in uh sort of available cash is not that high in China relative to what we saw during the U.S boom if you will.

but in Aggregates hey, 700 billion dollars of a potential uh uh, built up savings rate uh or amount is is still quite a bit and it still has that potential for driving some form of inflation, especially since China is now providing guarantees to their developers to help them finally get the real estate industry moving back again. China makes a lot or Chinese Cities and towns make a lot of their money from property auctions, so they're very incentivized to keep the real estate market going. We've seen a uh, say an 18 decline in sales from from January to November member of 2022. However, that's only down to Uh down at about a six percent decline if you go year over year January to January And that's because in December and January you've seen a lot more support for the real estate market in China which could also be inflationary.

Again, it's easier for real estate companies to issue bonds now because some of the debt is being guaranteed or the performance of developers is being guaranteed, making Chinese uh, Bond debt for real estate companies less risky. That potentially means okay, great, less of a crazy housing crash, but then it also potentially means uh-oh Are we going to go back to that speculative real estate bubble that we had in China where Chinese developers are building ghost cities literally cities with high rises and no one living there because the thought of oh well, if we build it, they will come wasn't actually true. So you had a lot of developers building properties that didn't end up actually being sold or rented to anyone. So there is that risk of creating another bubble environment.

And if you create another real estate bubble in China yeah, you're going to have some more real estate uh, or induced inflation. especially as more real estate uh, development increases the cost of concrete. It increases the cost of iron, increases the cost of copper, which as commodity prices go up. What happens? We have uh Supply induced inflation which eventually ends up showing in Consumer Price numbers.

So there is a claim to the idea: uh, that China is going to be inflationary again I Think because of my rubber band scrunchie analogy, that Supply chains have become so much more resilient. We probably won't have as much inflation as individuals are expecting, but China doesn't want to be held back and so they are doing everything in their power uh, the Chinese Communist party to make sure they continue to invest. Such as the likelihood that China is potentially going to become the world's number two exporter of vehicles surpassing both South Korea and the United States and certainly Japan as well. These are all a pretty substantial exporters of vehicles, and you've got companies like Pollstar being manufactured by Volvo and getting investments from the Chinese parent company.

Gili Really hoping to take advantage of the Chinese export? Market Though cars exported by China are a lot less expensive than cars produced by companies like Pole Star or even Tesla, China is really known for its cheap Cars usually exports cars about 30 percent cheaper than their Japanese at counterparts. Cars tend to be exported at an average price of just thirteen thousand, seven hundred dollars. China Right now exports about two and a half million passenger vehicles, But get this, They expect that to grow to 8 million Vehicles by 2030.. that is 3.2 times the export vehicle market for China by 2030..

Now personally, I actually think that is a big positive for a company like Tesla You want the wins at your back in China You don't want China saying oh Tesla's American let's put a lid on them China wants to do whatever they can to ensure they can get as many vehicles out of China as possible. They are encouraging exports, building more railways, expanding ports as much as possible, and a strengthening US dollar or sorry, a weakening US dollar could actually be good for companies that like American companies like Tesla that export uh vehicles from China to other areas, but also keep in mind only about 45 of revenue for for Tesla comes from the United States So a weakening dollar is going to increase the value of that 55 International Revenue which is great. Uh, okay, so this is interesting right? So when it comes to inflationary impulses, you have uh, oil concerns. You do have the real estate concern of China You've got this blowing up expanding car market in China You've got inflationary concerns from the airlines, but you've also got inflationary concerns from Staples I Hate to say it, but the other day I reported that Procter and Gamble was showing us some pretty concerning uh, inflationary Trends uh and that that kind of slaps us in the face of thinking that oh yeah, we're definitely going to see deflation right? I Mean, take a look at this, this is Procter Gamble This was one of the most critical portions of the report.

On the commodity side, we've seen our some of our Commodities annualized as you say, showed some decreases that's great, but the majority of our commodity basket still sees week over week and month over month increases. so they're still seeing pain uh from inflationary pressures at Procter and Gamble and I was hoping to get a different story from Johnson and Johnson Johnson obviously another Staples provider, but unfortunately, what we got at Jo