DHUnplugged #792: Disrupter < Disrupters

Hello and welcome to Dvorak Horowitz Unplugged, an hour-long discussion of activity in the financial markets around the world, featuring columnist John C. Dvorak and money manager Andrew Horowitz. This conversation is casual and unrehearsed. Let's join John and Andrew now. I'm John C. Dvorak. And I'm Andrew Horowitz. And here it is, uh wrapping up February already. It's pretty quick. Uh it is the twenty-fourth of twenty twenty-sixth of February. Yeah. Exciting stuff. Exciting stuff.

The uh State of the Union address is going on right about now. So I am certain we're gonna see some interesting moves with regard to the um potential for markets to move. And we'll see all sorts of things because there are some Some hints that he's going to be discussing another tax relief package. Yeah, I heard that. That's pretty unbelievable if you think about it.

Okay. Well, uh I mean, didn't we just have a huge one that was taking our tax down to the lowest level of whatever, but yet we have a major deficit and we have still a lot of debt? How do you do all that? It's pretty amazing. Yeah, you just Hope for the best.

Oh, I'm not getting anywhere we do. Anyway, look, we got a new close to the pin we announced last week on Caterpillar. That's good and running right now. You got another what is the exact time? Let's see. Three days, two hours, fifty-seven minutes, and seven seconds. to put your guess in for that particular close to the pin over on dh unplug dot com.

We're going to be talking about DOD, which is dead on delivery, dead on doornail. Um D-O-D, Department of Defense, which is now Department of No Disruptor Disruptors. Disrupt. Have you heard this yet? No. You can't because I just made it up. Disruptors, disruptor.

China Markets reopening after the Lunar New Year, uh little things happening there and actually a little bit of a relief because we did see over the weekend uh Did you get your moon cake? I did not. Should I have? Mm-hmm. Boy, you're supposed to. Did you get? No. Did you get those little packets, those little envelopes, the little red envelopes with Stuff in it? That's very good look. The red envelope? I got red uh envelope with some stuff in it for uh the new agenda show.

Uh but it was show donation in one of those envelopes. Yeah, well that's the good thing. Really? And they're not too big, but they're very nice. That was a very by the way, I listened to the entire I was on my way over to Saint Pete last weekend and you told me that I should listen to No Agenda, which I do. But this time sometimes, you know, I skip around a little bit here and there. I listened to it from start to finish. I did not hear one That must have been the show before.

Oh I'll listen to that one. Two shows a week. Maybe it's maybe it's the one which that's on Thursdays and Sundays, two PM Eastern. Yeah. Yeah. Yeah, some good stuff though. There was some really good commentary on the on the last My wife and I were giggling on a few of them on the way over. Um Mexico cartel war's going on. Oh boy, yeah. Well, I that affected me.

Well, were you gonna go to Cancun? Uh no, I was gonna go actually? No, even worse. I was going to Jalisco in Guadalajara. Ugh, not good. I was supposed to be there March ninth. I was invited over by This is an interesting story. I was invited over, did I tell you this? Um, by the uh patron, the tequila company. Right, the the the uh yeah, the tequila people. Yeah, I was uh invited over to Hacienda Patron for three days on them.

Uh Yeah, that'd been great. Great. They're flying me over. They're putting me up. They're having meals made for me by private chefs. They have um Uh Agave uh farm tours and it goes on and on and on. And uh then this happens.

At least right now. I wouldn't think so, yeah. I was in the middle of it all. Uh Marcus, mortgage rates looking good. We're seeing uh a multi-year low on mortgage rates, which is awesome. Tariffs found illegal. That was another thing that happened last Friday. What Thursday? Friday? Thursday, Friday. Um not stopping anything because right after that, President Trump said that uh it's okay because actually we're gonna collect more money now.

Yes, I saw that. Yes, funny. And uh he went to immediately a ten percent increase in the tariffs on a broad-based basis across for everybody. So which kind of in a way blew out a lot of his pressure points because He used them as a tactic specific To get his way by putting on twenty, forty, fifty, whatever it was, and then coming back and saying, okay, we'll drop the tariffs. And now it's just blanket across, pissed off.

Um India India basically said, Thank you. Now we're not negotiating anymore. Uh you don't have the pr you don't have the pull anymore. Uh and also in Europe, the EU said, You know what? Uh, you know, you a deal's a deal. We're not giving you another cent. Whatever we Did is what we're doing. After 10% a day passed, and then he increased it to fifteen percent.

And we're not quite sure how this is gonna work. There's a I've got the section, two two fifty-two or something tariff. It's good for 150 days that doesn't require congressional approval until the 150th day, and then probably it's gonna come off. If Congress And then he can re put it in that s at fifteen point one percent. I don't think so. I don't think I think this No, you can. You can as long as it's different. So you could be switching it every day, just extending it forever?

Well, switching it every hundred and fifty days forever, yeah. He's not gonna do that.

On Monday we came back and uh markets weren't totally happy about that and a few things. AI taking a bite out of stock prices. And uh there's a lot going on. Fascinating. IBM, what happened there? See, do I we have something on IBM here? Because if not, yeah, here, let's talk about that right now. This is pretty fascinating. This is the disruption of the disruptor. Disrupting the disruption. AI. Almost every day there's a new

announcement that AI can do this or do that. We saw that with the lawyers, right? Where a lot of the like legal zoom and all that got smushed. There was uh Charles Schwab and Morgan Stanley, and a few of these guys got hurt because it was a new tool that could do some financial work for you. And um was seeing Item after item, like the real estate companies and the software companies like Workday or Salesforce or whatever. Well,

It was the now it turned to another again. This is having rapid fire. All of a sudden, the realization or the tool that can help. As AI is uh putting out, particularly anthropic Claude, put out a code release because There was a security code tool by Anthropic, which scans code databases, uh code bases for vulnerabilities. So what it does is.

Where we do you would put a company like CloudStrike or name your company out there, put it on uh and and this company would would protect you because it was looking for vulnerabilities, it would put another protection layer and it would do scanning and all this. Well. anthropic and part of of of Claude, the code security. It can scan the database and the code base for vulnerabilities and suggest software patches for human review fueling this narrative.

that the AI platforms may be moving more quickly into parts of the security workflow that investors had previously expected. CrowdStrike and others dropping, but that was down like nine percent. Now for cybersecurity, what this did was it raised this concern about the potential for well, who the hell's gonna need these companies anymore if we have a constant AI surveillance team? that maybe you have to pay for or as a as a kimono right now not, that

You could identify all this cloud security and workflows and security operations and the automation where the AI, these native AI tools could start to narrow the perceived differentiation of all the different ones and why we didn't need this. Do you follow what I'm saying? This is a big, big deal. Don't you think that AI is starting to creep into real life now, into hurting some of these companies?

Well, I think it's definitely hurting some of these companies, but whether it's actually can useful uh in the in the in security is I I don't personally see it. Well if if it's gonna be continually learning and adjusting and adapting and scanning your database and your code for vulnerabilities and then suggesting patchwork to to Immediately fix it, w how is that not beneficial? Well one, uh I don't think it can do that'cause it does it's not a learning

does d AI doesn't learn we've knew we know that. You can't really it it it it's based on what it already knows. It doesn't learn anything new generally speaking. uh when you interact with it, it doesn't it won't take your it'll take your advice and then compare it to the to the large language model and then it'll if it's not in there, it it will it just ignores you half the time, or o if not all the time, A. And B uh, I think that's the same thing

Vulnerabilities have never been understood, fully understood. And I don't see how AI is gonna be any better than a human. in in that regard and I just don't see how it's gonna r ruin what you're saying is it's gonna ruin the uh the f the future of Cloudflare. Yep. Uh is basically is the company we're talking about. Uh

I it unless I'd have to see it to believe it. Let's put it that way. All right. Well let me tell you what else happened. So then on the heels of that, another software issue happened where we saw that Claude can automate COBOL modernization. Now, Cobalt, which I think it's been around since what, 1959 or something like that? It's old. It's old.

Which is uh stands for common business oriented language. It's a high level English like programming tool. Yeah, fifty nine. It's creating fifty nine for business, finance, administrative data processing. So it's renowned for it's this this is the the the It's the first major language after Fortran. Right. There's I learned this in high school. We had to learn COBOL.

For basic stuff. You know, I was testing on this stuff and all that. Um what's interesting about this is about COBOL. I don't know if you know this. It's estimated that still, after all this time, 70 to 80% of the world's business transactions are processed by COBOL. Did you know that? It doesn't surprise me. It it think about that. There's a language from 1959. It's been adjusted and modernized and all that over time. But wow. Now.

With the automation and the ability for Claude to modernize COBOL, the main benefactor of COBOL usage is what company? IBM. IBM, I guess, owns it or something, right? Does IBM own COBOL? No. Well, why'd it drop so much though? I think they're I B M N Cobal. Let's see what this is.

Um, heavily invested in COMBOL, its mainframe business. It relies as less language for its core banking insurance and government applications. It provides modern development environments and uh compilers and debuggers for COBOL. While IBM is modernizing legacy code with AI, recent advancements from competitors can translate to uh increased uh pressure. So they come out with this tool. IBM is down the most has been down at twenty. Why wouldn't it go up?

Because Claude did it for free. You don't need IBM now. Oh you don't need the consulting services. So now IBM is down, I think 13%, the worst since like 2008 or something. Yeah. W wiped out uh ridiculous amount of Profit from the company. Well what happens when Claude decides to start? modernizing or doing uh vibe coding or whatever you want to call it with uh when it comes to Red Hat. That that's gonna be even worse on IBM. Could be.

That was a big part of the IBM may be the may be ruined by this all this stuff. Now this I this I can agree with. Well it it The problem is that its own it it it's its own uh not competitors, but the people that are building this stuff, it's starting to kill the it's starting to kill the the the the parents. It's like the mini computer ending up getting eaten up by the microcomputer.

Mainframes, yeah, they they're useful for certain things you can't really do with small desktop stuff. But it's bound to happen. I mean I F IBM was v insightful, they would have bought out one of the AI companies before this all h b before any of this happened, uh got in early, been a been a partner, done something like Elon did, and uh not have to worry about it and just let it you know, do it internally.

But they're not. No, well they missed the boat. They missed the boat on a lot of things, IBM, over the years, and that's why they had to go out and buy uh buy Red Hat that basically was the savior of of the company, right? It's what it looks like.

Now it's interesting. I asked as I was thinking through this, I was like, Okay, so what's gonna happen to all these companies? What what's actually gonna what's gonna be the the end result. And I started thinking back to the same discussion I've been having about open AI being the first I mean Being the first in on this chat bot and public usage AI, the way we know it now, right? And how how how open AI has been basically f uh funding, right? There's been funding the

feature with an unknown bankroll. We talked about this. The unknown bankroll, yes. Circular banking. Circular investing. Yeah, and it's getting worse. Today there's another one out there, which we'll talk about. Uh Grok, I I I load up Grok and I'm like, hey, give me a prediction about the future of open AI chat GPT. Like, where's this going? So it made a really nice table for me, by the way. It said that uh the scenario is a thriving leader.

The uh likelihood, it said my estimate. The likelihood, my estimate, that's what this came back as, as it was calculated, about 40% probability of that. Sustain the breaks they'll have to do, partnership with like uh Microsoft regulatory wins and open AI will end up as a AI giant. Chat GPT as an ecosystem hub for agents and robots. What's the uh more probable? An evolved survivor. High probability, uh five fifty percent.

The key factors will be adaptation to agents and hardware, mergers. Outcome forum exists but rebranded. ChatGPT integrates it to a daily life tool. That's the highest probability. They're not going to be the one. They'll probably be absorbed, merged, uh, or rebranded somehow.

And uh a decline and an absolute acquisition that just because of the they d don't uh do well, they just have to get out is uh the lowest probability, about ten percent. Key factors over competition funding collapse, which I don't know. I'm I'm an app this Uh outcome forum absorbed by legacy or absorbed or legacy chat GPT commod commodit commoditized or becomes obsolete. This is obsolete. This is on uh this is the disruptor disruption. Disrupting the disruptors.

Uh this is on episode number 792 of the of DHUnplugged over on DHUnplugged.com, by the way. That table is available. I thought it was a pretty interesting insight, and I loved how it said my estimate. Like it was really thinking through this. Yeah. Yeah. Is this taking a look at whatever uh other people thought maybe. Yeah. Exactly. Yeah, there's no guy, you c it is not reasoned. So the terrorist, um I'd like to say that who knows what's actually going on here. We have one hundred percent.

Chaos. There's no now now it's really hard to follow. Maybe that's intentional. I don't know. Supreme Court ruled six to five, uh sixty-three that it was illegal. Illegal. Now we have again 10% flat. Wait, hold on a second. 15%. FedEx is seeking for illegal AIPA tariff imposed by Trump refunds.

After the Supreme Court ruled uh they were uh exceeding his authority. Now there's also, besides them, is numerous lawsuits expected. Let me tell you something. You wanna know who the winner in the Trump administration is? It's the lawyers. Well they're gonna keep busy. They're gonna keep it busy charging all four. If anybody thinks they're getting their money back, they got a s another thing coming.

You don't think that's the case'cause they pass it along to the consumer. Is the consumer not gonna get to sue Federal Express for overcharging? I want my money. Let's go that. I know, but let's go if they're if they're gonna get their money back, they can b which they pass along, something like eighty percent gets passed on to the customer. Should the customer now sue them? I think I think you should I think you should

Be the party that does a class action. You're the person that starts a class action for the average Joe out there to get their refund back. Find an attorney to do it and you'll be the guy. Yeah. Well, I need to find the attorney. Yeah. So Apple uh has now also spent more than three billion on tariffs since These trade policies were enacted. What about those? Again, I bought a you bought an iPhone and uh the companies weren't. Absorbing all the tariffs, maybe some of them, right? Don't you think?

Yeah, another lawsuit waiting to happen. Yep. So estimated uh nobody's getting their money. Yeah. I think the changeover starting tomorrow where the tariffs change again. A group of 22 U.S. Senate Democrats on Monday have already introduced legislation that would require President Trump's administration to fully refund with 180 days of the revenue, all the revenue, with interest, by the way, with interest. Yeah. Kind of interesting, I thought.

Again, I I think it's very confusing. It throws our certainty, and that's why the dollar continues to go down, by the way, why gold and silver again pop. Uh stocks moved down, moved up, they don't exactly know what to do with all this. Bonds, we had about four percent on the ten year, which is a multi, multi, multi month low. Mortgage rates clipped six percent, under six percent for the thirty-year mortgage. Pretty good. That's gonna help spur some housing for the wrong reasons.

For the wrong reasons. I'd like to uh take a moment, John, and say stop the presses. After years of John C. Devorak's rants on a subject, he's finally getting his way. Finally, a question that remained unanswered and disturbing, probably one of the most difficult quandaries to explain in decades, has finally been resolved. You wanna know what that is? I know what it is What is it?

It's a touch screen on a MacBook. A touch screen on a MacBook, which since I've known you, you've said, What the hell? Yeah, well it's because they were so far behind. This is a what how how many was it over a decade? Everyone's been putting touch screens on these machines. uh portable machines and and regular screens too sometimes, but it's that's rare. But yeah, all these little laptops have had touch screens for ever.

And and the Apple people did uh, you know, it's not as though it's a technology that was, you know, on the cutting edge of anything. Uh, they just k kept putting it off and putting it off, figuring, why should we do it? Because our our customers are gonna just buy our product no matter what, like because and so we'll just go along with the you know, just selling in the

Same old, same old, and uh with not that much in the way of modifications and heck with the touch screen. Why should we put the extra effort in? And they finally caved. I think that you were always of the opinion that it was a marketing deal to have people buy not only the computer, but they want a touch screen, they're gonna have to get the iPad. That I think that was your basis, wasn't it?

I don't remember the this is over ten years ago that I started this complaining. Well, let's just talk about that. Apple now is gonna be introducing touch screens on the Mac. They can also have the new dynamic island at the center type of the display. They're gonna have OLED screen technology. It's gonna be refreshed, dynamic, user interface, and it can shift between being optimized for touch or point and click input. What tells point and click?

Is that mouse or touchpad? Yeah, point and click. Mouse or pad. Pad probably mouse. Optimize. It's optimized for that, by the way. Optimized. They're optimizing it. Doesn't mean anything. Well, if it's gonna be optimized, I may buy one. Yeah, it's gonna be optimized. Whatever. I don't want a sub optimized. I want an optimized. I want an optimized. I'm gonna buy that. What a crock.

Oh Europe, uh, back to tariffs. We're just gonna skip that. They said a deal's a deal and all active discussions are halted. But oh, by the way, the potential winners. Who are the potential what countries? Where where in the world? are the potential winners from this tariff uh illegality which doesn't matter because they're still gonna be Well they did these deals. They come the countries that did the deals first are the winners, aren't they?

I think the could be got in, they got in, they did their deal, they signed on the dotted line and now we're out of here. You can do whatever you want after this, but it's we we did a deal. We're gonna do this. It it could be if if if the tariffs on those are no longer any higher because We have these blankets out there at 15% now plus some other deal. But it looks like from every all the research I've seen is is Brazil and China.

Because these from what I've read and what I've seen, President Xi Jinping of China has a now more bargaining power because he's gonna be like, you know, all right, what do you want? Well, you can't like hit us any h you can't hit us with a fifty percent anymore. Remember how we went through that whole thing? Oh, you're not doing what I want here is you know, we're gonna charge fifty percent, sixty percent, a hundred percent, hundred and forty percent. Remember that whole thing?

Oh yeah. So the removal of these tariff threats will make it harder for the president to press China and and Xi Jinping for larger purposes of you know what, you know what we uh somehow want them to buy, right? It's like the it seems like the most important soybeans. Yes, the most important vegetable in the world, it seems. Soybeans. Soybeans. Soybeans. What about the poor potatoes in Idaho?

They don't eat potatoes in China. They do not. Nor do they really have a lot of milk in their in their d dairy. In fact, most of the world, except for w uh the western countries, uh have lactose intolerance. I am ch I am part Chinese possibly. Most I I think it's like eighty percent of Chinese have lactose intolerance. Yeah, you never hear like a mugu gai pan with uh melted Swiss cheese.

No. It's in the French and the Spanish we we you know, where they make all this cheese. They don't make cheese in China. Right. Right. They would I mean if they could eat cheese they would at the you know, they just no. They just don't just not done. Right. Would you like the egg roll with or without cheese, sir?

No. Berkeley back in the day, uh sixties and seventies had a a they before food trucks there were these Kind of like it was har it's like a trailer that there was left on campus and this is one kid that was a Chinese kid selling egg rolls. on the University of California campus right in front of the ASUC store and he uh developed an egg roll with a w with a with a a nice, delicious product and he Yeah. And it which was absolutely delicious. Egg roll with cheddar cheese is astonishingly nice.

And I guess he didn't he could eat it. And w there's also a guy, uh there's a cheese shop in Berkeley that's over by Monterey Foods that is run by Chinese a Chinese guy who is a cheese expert. And he's the the cheese guy. I mean the Chinese there are Chinese that can tolerate lactose and it's not like a problem for'em and uh they appreciate it. So it's it's not unknown, but it's just not common.

Soybeans, soybeans will be being purchased. Uh, maybe. Possibly, we're gonna see. Um You know, this whole... crazy demands which would not be Right. Now we're gonna see probably the team push harder for access to advanced semiconductors because the removal of these trade restrictions on Chinese companies they want. Um US they want they're gonna probably say they want uh reduced US support for the for for Taiwan.

So is according to Wu Xinbo, director of Fudan University's Center for American Studies.

Where is this? That's what you do. You s you study us. Yeah. Like like aliens picking us up and Dissecting us kind of study? It's like Chinese studies at the University of California or Stanford. This is in uh same thing. You're just doing it the going the other way. Shanghai. Okay. Shanghai. Food and university.

NVIDIA uh is going to drop its uh fiscal Q for two thousand twenty-six, ending January two thousand twenty-five results tomorrow after making uh after a make or break moment for the AI trade. So this could be pretty big. The bar's pretty high. After years, and I say years of blowout results, whispers of peak AI. Yeah. I'm I I'm all in with this. They're keeping investors on edge, consensus expectations, looking for it'll be it'll be super high, but it it may be the end of it. Yep. Uh

Jensen Wong is is a a master at what would we call it? Uh Hawking Barnum and Bailey is bar PT Barnamism. He's a master at getting people to buy into whatever it is is whether it's believable or not. Most of the stuff he said, give him credit, come true, so we gotta believe him. But the estimates uh for analysts are about sixty-five to sixty-six billion dollars. Um they guided about 65 billion in the prior report, which is about up 2%. EPS, about$1.50 to$1.53, up 72%. From a year ago.

They're targeting. Listen to this number. This is pretty unbelievable. Targeting gross margin. Now, what is a good gross margin? A good gross margin is I don't know, fifty percent? Forty. Forty percent's a good gross margin. Seventy-five percent on a non-gap basis. That's a good that's a good gross margin. Good gross margin, which says to me one thing. Price is too high for the object itself. It's overpriced. That's exactly right. By two.

Uh twice as expensive as it should be. Yep, exactly. But if you can get the pri if you can get listen, if you were if you were in business and you can get twice what it should be, would you get it?

Absolutely. And I get a new I but I'd also get a new leather jacket. Who else is doing I saw Nissan Talib, you know who that is? The guy that was the yes you do. The guy that uh wrote the book Black Swan. Oh that guy, yeah. He wears like a double breasted black blazer with a black. uh mock turtle or a rounded collar, whatever you want to call it. Not mock turtle, rounded collar. That's his garb at all times. He's like that guy.

I was wondering I always wonder why these characters have to feel that they have to wear what amounts to a uniform. Not only uniform, like it's it's more than a uniform because I mean some uniforms like a football uniform, if you're home or away, it changes. Navy uniforms, depending on if it's formal, there's different things you could wear, right?

These guys wear the same thing like they have any like it'd be scary. Steve Jobs' fault. It could be. And what was her name? I think so. Yeah, Steve Jobs and and and the and the woman that that was incarcerated because of her lies about her blood testing. Oh right. Uh yeah, that that that gal. What's her name? The Theranos lady. The Theranos, yeah. Yeah, I can't remember her name. I I can think of it in a second. Elizabeth Holmes.

Yeah, that's right. Elizabeth Holmes. Yeah, she wore Yeah, she always talked like this. She uh had an outfit that she can she would just wore out. But it's the same thing that you you wonder if you go in this person's house, you know they don't just have one. This is a billionaire. He's gotta have literally a closet. Full of the same outfit.

Yes, exactly. You know, this goes by I don't wanna this is calling in something from the v distant past, but I remember Faith Popcorn used to be a very famous uh female influencer before social networks and sh her name was Faith Popcorn. I remember the name. I don't remember what this was. Yeah, she and she had all these recommendations that dress for success. She was a dress for success woman. And she says, if you find something like a dress or a top that you like, buy a dozen of them.

And just wear'em all the time. Like it it makes you look like you d never have a change of clothes. What do you mean it just m to me, I always thought that was the stupidest thing I've ever heard.

So in other words you're so limited in your perspective about what you can wear that you you just buy one outfit and wear that's all you wear. And I think that's where that this the This kind of filter down into Steve Jobs and Elizabeth Holmes and others, especially in Silicon Valley, where they have no taste. IBM used to have a address code. And I remember when IBM dropped their dress code and these poor bastards, the uh you know the IBM dress code was a certain dress code, you'd always see it.

Back in the 80s, and they dropped it somewhere along the line. And the first thing you started to notice is these guys didn't know how to dress themselves. Hmm. Hmm. But I don't know where that rant was going or where it's headed, but it's an observation. NVIDIA is putting out the earnings tomorrow. Yeah. Yes, and it's gonna be good. This is gonna be money. Yep. So the um key driver in um the the earnings probably

circled around data centers, the segment there they're expected to crush numbers pretty well. Um and and and hopefully see a major ramp up by the Blackwell chip. And then and after don't forget, after Blackwell they have the what the Vera Rubin. That's the next thing. And then they get to start talking about because China's not taking any delivery yet on the high end chips that were simple now allowed. The H two hundreds? Yeah. But they they

Right now I thought I think I saw a report today that literally zero have been sold into China. That doesn't mean they have been sold into China through other outlets and workarounds, but direct sales from NVIDIA have not happened.

Then we got Home Depot earnings, the uh the the home improvement retailer, the giant. gained uh about two and a half percent today after posting fourth quarter adjusted earnings of about two dollars and seventy two percent per share on revenue about thirty eight and a half billion. That exceeded the Per share earnings by about uh just short of twenty cents, and revenues were a little bit Higher by just ever so slightly better.

That was good enough to get things going there. AMD, uh, that's the news today that was the wacky, wacky world of circular financing and vendor financing. Now listen to this. Semiconductor company of AMD was up a lot early on this morning on this news. Came down a little bit, but it's still up about I don't know, ten percent. After it inked a multi year deal with Meta.

To lend, that's the word they use, to lend up to six gigawatts of its graphics processing units to artificial intelligence data centers. Now the cost of the deal is unclear. But the companies agreed to include a performance-based warrant that could amount up to a hundred and sixty million shares of AMD. by the way, that will be given or granted to Meta if they take it at one cent each. We call that free in some circles, by the way. Yeah, it's free. Yeah.

Now Meta has committed to deploying up to six gigawytes of AMD's instinct GPUs, these high-end uh GPUs, uh optimized for AI AI workflows to power its massive AI data center. The um analysts estimate the GPU portion alone can be worth anywhere from sixty to a hundred billion dollars over five years. So just to get back to this for a second.

Meta says, we will buy all of these, we'll get these and all that, and uh pay you for it, but in exchange, you're gonna give us shares at one cent. You see how that works up to 10% of the company. G how why are why is this going on? Well you tell me you're better at At this than I am when it comes to why this is going on. It's shenanigans. Okay. It's it's it's called shenanigans. It's it's financing it's shen shenanigans.

It's it's it's creative math. Uh and once again, you get the opportunity to uh get something, but for less value. It's uh it's because they're gonna get money back. It's it'd to get a piece of the company. So basically sh the the saying you want to buy the company, fine, we'll sell it, but we're gonna do it in the form of getting revenue from it. The whole thing's weird. The whole thing's weird. It's a ver yeah, it's a way of buying stock.

That is convoluted. It's the whole thing is is very weird. And Why isn't it just straight out like outright, you know, hey, uh it's like me buying something, somebody buying and then me giving you I'll give you a piece of my house for that. But you're gonna pay me in the meantime, and then I'll maybe give you the back end of this kind of to pay you back.

It it's i it's the whole thing is it's very odd. And they give it to him basically for free on top of it all. They give him warrants to buy it at point oh one. Now there's they're performance-based. There's there's something baked into the agreement that would require, of course, for uh some kind of some kind of level of uh financial w uh you know uh uh high watermarks, something.

in the deal, whether it's production based or whether it's um getting enough power or whether it's n enough, you know, the juice of the AI is doing what it's supposed to do. Whatever whatever exactly the requirement and the benchmark is to get this deal done. To give them that I mean it would it would seem that the the performance base would want to happen. So it's an enticement is what it is for meta.

To buy these quickly, to utilize them, uh, etc. And then they'll say, you know, we do all this, we'll give you a piece of the company. It's almost like uh freaking flyer miles for buying AMD chips. We'll give you a couple shares.

Yeah. Crazy. Mortgage rates. The average mortgage rate on the 30-year mortgage fell to 5.99% on Monday. And uh Crazy stuff. There's crazy stuff going on. Because this is the lowest level from 2022. Basically, what's happening is here, yes, some of it is being forced by the Fed or the idea that

The Fed's lowering rates, but that usually happens on the short end of the curve. As a matter of fact, I'm gonna have a discussion with this this week on the Disciplined Investor Podcast with Daniel DiMartino Booth. who is a Fed insider. She worked at the Fed for many years, wrote a book called Fed Up. And kind of exposed a lot of stuff that happened at the Fed. So she'll be my guest coming up this week. I like the title. Yeah, Fed Up. Yeah. She's awesome. Very funny. She's awesome. Um

Last year at this time, this is what's really interesting. Last year, mortgage rates were 6.89%. So here's the math. If you're buying a house and you put down 20%, on um on a house, about four hundred thousand dollar house, your monthly payment would have been a year ago nineteen hundred and sixteen dollars for the both the uh principal and interest.

Uh today. A year ago would have been about twenty one hundred. So you're saving about a hundred and eighty nine dollars per month, which is a substantial savings when you multiply that out. Yeah. So mortgages are down. The problem is we have a lot of stubborn homeowners that are sellers that don't wanna come down to the price. And more so we have a bunch of boneheaded real estate agents.

That don't want to drop the price because maybe their commission will be cut a little bit, not realizing they drop the price, they'll sell it and they can move on to the next house to sell and make even more. But we're seeing that there are survey after survey Nobody wants to drop the price. Nobody wants to drop the price, the real estate agent or the homeowners. No. They think your house is worth more. Next door is worth less, but their house is worth more. You know how that goes.

There's a lot of have you seen this some of the tactics that are going on? It used to be you put your host up house up for sale, somebody come in and say, I like this, come in and redo it. Today, there's all the staging that's being done at homes. Have you seen all this? Stage has been going on for a decade. You you get like a Sotheby's that will come in and actually redecorate your house, put furniture in, and will give you a commission if they sell the furniture with your house.

Well, I don't know about I didn't know about that part. Yep. This is hardcore staging. That's a that is hardcore staging. We're not talking about just putting up like pretty pictures of someone else's family in your house. We're talking about, you know, saying, hey, let's put in furniture that really is more current. Yeah, they they redecorate. Yeah. Yep.

We have a record uh to announce on life insurance. Not every day do I see something like this. As a matter of fact, I never see anything like this. I thought this was pretty fascinating. Manu Life Financial sold a$300 million life insurance policy in Singapore.

Topping, this is kind of something also interesting. I guess there's a record for everything. Topping what Guinness World Records certified as the most valuable policy ever issued. Can you believe there's something as a Guinness World Book of Records? largest life insurance policy. It's great. Well makes kind of make sense. Now the policy surpassed the previous record of two hundred and fifty million set by HSBC life in Hong Kong.

In two thousand twenty-four. ManuLife said in a statement Tuesday that the dealer reflects the growing demand from ultra wealthy clients to preserve their assets. In Singapore over the last twelve months, manualites. Wait, wait a minute. How's that preserving their assets? You can do a lot of really interesting estate planning with life insurance. So for example, you have a hundred million dollar estate.

When you die, uh take out some of that because you get uh allowable amounts to be passed on. So let's just take out$25 million, just for lack of lack of a better number. Uh$75 million is now taxable and you could go up to about 50% in estate tax.

There are some things you could do, but generally speaking, you you'll you're gonna have an estate tax problem. What you do is you buy a very uh you buy maybe a$75 or$100 million life insurance policy. And what happens is that goes to your estate, your heirs tax-free. And you take some money out that you would have had, lower your estate down so your estate is worth less in the future, less taxes, but yet you increased your estate by buying this life and.

And you could do that in a couple of different ways. You could do it with well, you'll do it inside of a special trust and you can give some of that money and and and uh on a on an annual basis so you don't geat into your whole unified credit. Uh and then on top of that. What's interesting is you could do it in a in a in a second-to-die life insurance policy where you get preferential rates because you actually are insuring the lives of two people in one contract.

And that, my folks, is your estate planning life insurance lesson of the day. Well that sounds like just a way to cheat the tax man. Correct. Well, why don't you just eliminate the death tax? Well, because they still get their money, the tax man. They'll get their money on the base estate.

They'll still get the money, but your family uses dollars that are discounted to buy life insurance to make the estate whole in the future. It's a very efficient way to do it. Assuming you're healthy and young enough. I mean, even people 50, 60. But you have to be healthy.

And you have to be able to grasp the concept. The concept works well though. Well the concept's in interesting enough, but what are the premiums on something like that? Huge, enormous. On a three hundred million dollar life insurance policy, it could be, I don't know, fifteen million a year? 10 million a year? Five million? Whatever it is. It's still five million for 300 million, right?

And the best deal on this is if you drop if you drop dead day after you take out the policy. The next day, yeah, that'd be the best deal. That's the best deal. Not for you. No, no, no, not really for you. But for a state it's good.

Bitcoin has been in a route. Gemini said it was axing as much of a quarter of its staff. This is the winklevice. They're getting rid of about 25% of their staff and exiting the UK, European Union, and Australia entirely. What happened? I thought this was uh what happened. This is supposed to be the best thing ever.

Gemini was supposed to be well, it's not enough business. They're not they're not making money. This week it also parted with his chief operating officer, chief financial officer, and chief legal officer all in a single day. Its stock has fallen more than 80% from a post-listing high last year, collapsing its market value from a peak of about$4 billion to a lowly$700 million. This was one of the first exchanges out there. Obviously, there's a lot more that came into play, and they beat them out.

Your Coinbase being the most well known. Over to Greenland. Uh US is sending a hospital ship over. Seems that Uh in Denmark's joint Arctic Command Center said that it was evacuating a crew member who required urgent medical treatment from a US submarine in Greenlandic waters, seven nautical miles outside of Greenland's capital, Nook. Greenland said thanks, but uh no thanks. I don't exactly know why we had to send a hospital ship, or is that a quote unquote hospital ship?

Is it like a ship that Uh, we're calling a hospital ship. But it may be actually a military-based ship that we're trying to show them who's boss. Because I don't know what happened what happened in the whole Greenland discussion. We were taking it over, buying it. Comes and goes. It's a cycle.

Uh US investors are pulling money out of their own stock market in the US at the fastest pace in at least sixteen years. Sixteen years we haven't seen this kind of withdrawals as big tech returns fade and better performing overseas markets look more attractive, which is interesting because now it's happening the don't forget the chasing returns is a favorite pastime of the average investor. People who go to the church of what's happening now.

They're looking at emerging markets and it sounds like, hey, let's put our money there. So There always looks like opportunity. Grass is always greener over the septic tank. You know that, right? In the last six months, US domicile investors bought more m pulled more than seventy five billion dollars from US equity products, with fifty two billion dollars flowing out since the start of two thousand twenty six alone.

The most in the first eight weeks of the year since at least 2010. Now, what is that doing to the markets? Absolutely nothing. Everything is fine. Well, it's putting money on the sidelines, which is gonna possibly boost the market more eventually. Yeah, they're moving into Europe. European companies' earnings growth is also picking up.

There's a reporting uh this earnings season that uh sees a tentatively improving backdrop and companies representing about fifty seven percent of Europe's market cap have reported so far, achieving earnings growth of three point nine percent in the fourth quarter, by the way, which is nowhere near The earnings that we have here in the US, the the earnings growth rate.

But it's getting better. And I think there's a consensus out there that we're gonna slow here. So at least there's something growing there we're happy about. So estimates were expected to be about a 1.1% reduction, came in 3.9. Sounds like a 5% spread to the better. That's that's a big number. You know, when you look at what the estimate was, that that's a big number.

Uh let's see what else we have here. Two more interesting stories. Uh Iran. We're hopefully gonna get some kind of deal. Energy, mining, aircraft. Uh, I don't know if the plan, what's the plan? Is it regime change? Is it get some more oil? Um I don't know. There's uh some talk of US going in, we're building this military presence. Do you know what's happening there?'Cause I don't. Yeah, nothing from what I can tell. We're just what do we do? We're just just Save the red ling.

And then finally, what's this? Uh the Supreme Court on Tuesday ruled that Americans cannot, and I uh repeat, cannot. To the United States Postal Service, even when employees deliberately refuse to deliver mail. By a five to four vote, the justice ruled against the Texas landlord, LeBine Conan, who alleges her man her mail was intentionally withheld for two years. Two years is a long time. Withholding mail.

Like is there a pile of this person's mail somewhere in someone's house? I mean, it doesn't make sense unless she had one male carrier that just hated her. She's black and claimed racial racial prejudice played an important role. In the postal employees' actions. Now what they do with the mail, I don't know.

But Justice Clarence Thomas, writing for the majority of five conservatives, justices said that the federal law that generally shields the Postal Service from lawsuits over missing, lost, and undeliverable mail, includes the intentional non-delivery of mail. Now let me tell you something. As Al Pacino would say, I'm gonna tell you something. So I'm feeling the vibe.

Of ballots just being thrown in the garbage for mailing ballots for one party who's willing to throw out the other parties if they know who's Democrat and uh Republican. What do you think about that? They should have mail ballots. Aside from that. Yeah, it's a possibility. I personally like mail in ballots. Well, yeah, because you're lazy. I'm I'm not lazy. There's a few things I don't like to do. I do not want to. Oh come on.

No, but I I do it because uh I like to see what systems they're using so I could talk about them. In Florida, we have those Chads. Do you still do? You haven't been in the voting. You've been mailing your ballot and you don't know what it's like anymore. So Yeah, I I do. I went last time I went, I w voted the machine. It was a Dominion machine and I uh examined how it works and the whole nine yards. I got a good feeling for it. Uh I was very impressed.

Florida no longer uses the punch card voting system that causes the hanging shads controversy in the two thousand election. By the way, that two thousand election cost me a spot on CNBC. That day I was in New York and uh I was ready to go on with Bill Griffith at lunchtime, whatever this is called, lunchtime break or whatever.

Uh they were doing a countdown after I was all made up. I was in the chairs ready to go and they said look there's something a lot of things happening here. We gotta stay tuned for what's going on. All right, we're going live in ten, nine, eight, okay, five. Halt. Preemption. There's an answer on the hanging Chad's vote in Florida. So you got bumped back in two th twenty five six years ago you got bumped on C N B C and you're still irked about it. I g I'm I I I I

I've been on the show many times. I have not I've been on the show many times since, but I just remember that very, very plainly. I used to go on CNBC all the time and I was always up against coming up against Jim Kramer. I was supposed to f I you'd follow that guy and he'd take up all your time. Yep.

Crazy. Crazy. All right. Uh let's get to the uh the fun part of the show here, shall we? This is a game that we play. It's not a solicitation to buy or sell any security. It's not a recommendation of any kind. Nothing on the show should be considered investment advice or a recommendation. If you choose to invest in any of the stocks mentioned, you should know that it may carry risk.

along with the risk of a loss of principal. You should also seek out professional financial advice for your particular situation. We assume no risk as these are not to be considered recommendations. Horowitz a company, myself, or John C. Dvorak may invest in any of the securities mentioned, and we'll disclose that on the website under the weekly stock picks section. You can go to dh unplugged.com and see all the names we discuss in the segment along with the performance information.

from the date discussed as well as any additional important disclosures. So things I I don't think things are looking uh that much different. They're kind of about the same here and there. Your pick last week. Uh of Spyglass Pharma. Up 4.7, which is great. And your your boldness deal is up eight and a half percent. Your Skywest interesting plane opportunity.

That no one knows who the hell they are is up five and a half percent. I like that pick. Yeah, that's great. I like it more and more. Yeah, you're short on into it, this is the gift it keeps on giving. Up forty six percent. Defense keeps on going, up fifteen percent. Even Baidu now is up uh five point eight percent. So things are cruised along. The best thing on the whole entire list is uh is it L3 Harris, I think?

No, it still is that no, it's actually the short for Intuit. Intuit of forty six percent. Boy, that's that's something right there. It can still go up another fifty percent. Yeah. Still be uh in a good shape. I have one pick this week. Uh I'm going back to I'm going to a uh utility, which is a value play, which also has a lot of exposure to you uh

Uh new w new new styles of energy, particularly nuclear, new clear. Good stock. Constellation energy, C E G. Yeah, isn't that getting a little bit involved? Isn't this group it's getting a little bit involved in fusion? Fission, fusion, whatever you fusion. It's not this is a dog.

This fusion thing is not gonna work. I mean, I was watching a special on Bloomberg about this today, as a matter of fact. And they're going on, they had there's twelve stocks out there that are getting involved with this fusion, and they then the whole thing is they're they're building it out.

And it's only been shown in the lab twice in history that they could even make it work. And those two examples could be lies. I mean, you stuff you never hear about something working in the lab and then working in the field. uh the same way y it's not gonna be well almost works in the lab, but it's gonna work in the field for sure. That's that's never happened.

This is not this is a this is a money killer. Is this the special on Bloomberg where they showed you those really big uh like magnet based Yeah, it's a magnet based. It's all magnet based. Yeah. Yeah. Pretty cool. Pretty cool. Uh it is cool. I'm not saying it's not cool, but it doesn't work. And most of the metals couldn't withstand the heat, so they have to get special alloys and all right? I mean uh w I'll believe it when I see it. Classic.

I'm going with KKR. Really? And what is the reasoning for that? Oh, the inside the people that work there are buying up buying, buying, buying, buying. There's like two or three or four people uh th within the C suite that are all buying into the KKR and I like the fact that it's depressed. And uh private equity's, you know, on the run. They people hate it. Oh, you know, it's good it's gonna ruin everything, it's no good.

It's got all the negatives going on. It's a buy low, sell high thing possibility, it seems to me. So can we I'm in B a P E P E um rebound? Can we call it that? Private equity rebound or what? Yeah. Or does inside the yeah. Yeah, what should call yeah, private equity rebound, not a P yeah, P E I was thinking of price earnings, but does private equity rebound? Yeah. So it's 25th. This is the last show of the month.

Yeah, it is already. It's unbelievable. February's done. We're into March. I mean, I know that sounds stupid, but sheesh. I mean, I don't know it's it's too fast. It's too fast. Things are going too fast. Well looking at our our stocks here and the weekly picks, there's like a lot of green. A lot of green and in in and this is in very Uh, I would say confusing times, and this is the mark of some experts here.

These these are when there's a book that I started that I just got in the mail today about uh you know the the classic investors of all time, the masters, masters of investing. Don't ask me why they didn't call us. Ha ha ha. I make a good book. You wanna ca he'cause some stock pick competitions, I think the T V ones in the N C N B C Yeah. No good stuff. Yeah, I I I that's where I learned from I learned from you. Oh, there you go.

Well, thank you so much, and I learned from you. We'll talk to you again uh next week. All right, see you then. You've been listening in on a conversation with And Andrew Horror.

Hope to be with you again soon. Sub indo by broth3rmax Yes, sir. In my pockets there's a desk. All my dough is nearly spent, but I got a dollar. My last dollar. Small buck fortune left me by chance. Now here's a hint I feel like a miss. No millionaire can't give me the ISIS staff, cause I got it.

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