Cancer Vaccines & Data Center Drama

(upbeat music) - This week, data centers became the enemy. Motley Fool, Jim's investing starts now. (upbeat music) Welcome to Motley Fool, Jim's investing. I'm Travis Hoyam joined today by Lou Whitman and all the way from Canada, which ironically is south of me, so we can have a geography discussion if you want, but Jim Gilles, Jim, welcome to the show. - Thank you, it's been a while, Travis. - We've got a lot to talk about. There's a lot going on in the market. We do want to get to the news on data centers, but this is sort of a quiet time for earnings. So it's an opportunity to take some bigger picture looks. And one of the interesting things this week was what's going on with interest rates. And I want to start before we get into kind of some of the drama. Lou, why do interest rates matter particularly for investors in the economy? - Wow. - Big question, Travis. Is that the only way to start this? I love that one over to you. - So why do interest rates matter or why do the current, it's interest rates matter because look, interest money is the lubricant of the economy and what you pay for money at the end of the day determines what you can, how much you can do with the money. So that's why we follow this stuff. Look, right now there's a lot being made about interest rates being higher than they were. They are higher than they have been, yes, for a while, but look, they're still way below where they were in the 70s, 80s and 90s and somehow companies and consumers and everyone found a way. I think some of the current panic about current rates is overdone because money should cost something. Money shouldn't be free. And as you mean the 2010s in early 2020s was not normal? - Well, and as an investor, I think we, I found out, we collectively found out the problems of what happens when money is free. A lot of bad ideas get going. So in a way, you know, a nice four or five percent rate does provide you some sort of, I don't want to say BS filter, but I think I just did. But look, right now everything's going on. There's kind of an audience of one here that would like to, that needs to see everybody trying to bring rates down. And so we're kind of going through serious things. So we should discuss like what all this means, but a lot of it is just panicking over a line and not zoom in the line out or not, I think. - Yeah, Jim, it seems like interest rates are like an easy topic to talk about, but they do flow down into the economy in a very real way. If you get a mortgage, it is tied to interest rates typically the 10 year. When companies raise money, they have to pay interest on that debt if they're taking out debt. Stocks are valued, at least in part, based on what those interest rates are, the risk-free rate if you're doing modeling. So there is a reason if you are, you know, the president or if you're running the Fed, you would maybe want lower interest rates to help the economy. So how do you think about that as an investor? I mean, does that something that plays into your modeling or is this just sort of noise in the ecosystem? - Oh boy, I can't open worms everywhere. So a couple of things. First off, people who have seen my prior work, we've probably heard a very version of this, well, about to say, but I'll say it again, because, you know, just hit the hit, play the hits, right? Most people ask most people what your largest lifetime cumulative expenses? Okay, when I've done little talks in public or I occasionally talk at high schools or universities or even on full live, we, full 24, sorry, ask that question. Most people say, "Well, how's your education or kids?" And I'm like, no, most people's largest lifetime cumulative expense is actually interest. Interest on your house, interest on your student loans, on your car loans, on your credit cards, pay off your credit cards, kids, and so on and so forth. And when you realize that, you can start doing things differently because it's within your can to not pay high interest, you can buy a smaller house, you pay your mortgage down, you could buy a used car, blah, blah, blah, okay. So, you know, this is a way you can avoid paying interest in your personal life. That's number one. And I would encourage most people to do that because I don't like throwing money away. The idea of where interest is going, though, is, as Lou mentioned, it's a lot cheaper, but as I understand what's going on from this move, and I, by the way, may very well not understand fully, okay, I want that out there. The US Treasury, and again, Canadian here, so I'm not my country, not our fiscal policy or monetary policy, I should say, but we are keen observers. They are upping the sales of short-term debt using the extra proceeds to buy down the long-term debt and tamp down rates at the longer end of the curve, right? And doesn't that suggest a little bit of risky behavior? Like if the whole game, which I've been told by multiple smart fools and people not employed by us, has been to, hey, look, government debt's large, federal government debt in the US just passed the $40 trillion mark. Sounds like a lot. Interest on that debt is already sucking up about 20 cents of every federal tax dollar coming in. Sounds bad. And now we're going to issue more short-term debt, which comes with a lower coupon. Like, isn't that maybe going to require more refinancing fairly near-term? What guarantee is it that that works? And far be it for me to suggest that the bond market might be able to see through that collectively and go, hmm, tariffs are inflationary. Dets elevated and growing and the present government is kind of, and this is not America quote, I mean, I could point you to, if you other government's not living within their means, including my own, you know, but like, sometimes eventually things break. And so here in Canada, as I call it, the land of the frozen chosen or as Travis is you point it out, I am a little south of you actually, which is kind of fun fact, don't look this up, fools. How many US states have territory above the most other, most point of Canada? Most, the answer will surprise you. The answer will surprise you. But, you know, like Canada in the mid 90s got up to like almost like 80% debt to GDP. And they kind of went austerity. You know, they off, they cut a bunch of services, they offloaded a bunch of services to the provinces, you know, and today we're running at about 60, 65. And I'm just going to point that the US is kind of running at, you know, 120, I think. So I mean, now you guys have something we don't have, which is, you know, the reserve currency. The global reserve currency, yeah, that feels important. For now. So what is the market trying to say about that debt? Because what I think is so interesting in this, with this is, so the short term, what has happened this week is the treasury is buying back some long-term debt because they want to reduce those interest rates on the long end of the curve as we were such 30 year bonds. But the treasury does not, or even the Federal Reserve does not set interest rates. The market does. Oh, the bond market does, that's why I say the bond market is going to see through this. Right. So the bond market is, the way I was thinking about it is they're communicating with you. If you're a company and you're going to look for debt, of course you would love to have a lower cost debt. But the market is communicating to you. No, I want a 10% interest rate to take that risk. I want a 12% interest rate. And then you have to adjust to that and adapt to that. And so what is the communication that's happening from the bond market, which by the way, is 10 times the size of the equity market. So the bond market really runs the world. Yeah, the bond market doesn't like the state of debt, I think, in general, in terms of like the rates will go up as they start to perceive that there's a bad situation. And I'm not smart enough to know if there's a bad situation in the US or Canada or anywhere else right now. I just can say, well, on a relative basis, this is getting worse in terms of the amount of debt, in terms of the ratio of debt to GDP. Can it be reversed? Of course, it could be reversed. But right now, the bond market's going, eh, we're not really sure about this. The other thing is going on, and this is just true of every market is, is that all prices are just a simple measure of supply and demand. And there is just a lot of supply of debt right now. We've talked about the hyperscalers and everything they're doing. This is hardly a US thing too. As Jim said, there's a lot of countries, Germany, all over the world, we are running budget deficits in New Zealand, so there is just a lot of paper out there. You have to make yours pretty. And you do that with rates. So, you know, I mean, that's just kind of how rates work. To Jim's point, and I said, I think it's for an audience one, but buying back four billion in bonds when your deficit is $2 trillion, is like switching to low-fat milk and saying, okay, I can still eat 8,000 calories a day. - I saw a video of somebody using a squirk gun to try to put out a little bit of the house fire. I think that is another thing. - The analogy. - It's just not gonna work, but I think someone was told to do something, and so they wanted to show they're doing something. That said, look, this is a lot more sustainable than we like to admit. At some point, the government is gonna have to do something about it, but we do print our own money. We are, at least for now, we might be doing our best to try to ruin that, but we are the reserve currency. There is a stable market. This makes everything hard, and it sticks future generations with the bill. So I am not saying it's a good thing. Every. Every dollar the government has to spend on interest is a dollar that could be going. The obvious ones is sell defense stocks, because they'll be able to afford that, but think about everywhere the government invests from healthcare to infrastructure to be just all over the world. Every dollar for interest is a dollar they can't spend there. This is a serious problem, but it is a long-term problem as investor. I don't worry about everything going flipsy now, but it does make just everything harder as an investor. Just as an investor, because this is what I don't like talking macroeconomics, because I'm dumb and going to be wrong. That's the general economist, but as an investor, Travis, you talked earlier about investment models may be based off of the interest, usually the 10-year, the so-called risk-free rate, and the higher that goes, it should impact. The basic way you do a discount rate for a model is the risk-free rate, plus some sort of a risk premium, five or six percent, and historically, or more recently, if you follow any kind of the valuation gurus out there, ask what the motor and a few others we could name. You're seeing discount rates in the 8-9 percent range in some of the models, and I personally have never agreed with that. I've never agreed with take your cue from there. My whole thing is always when I build a model, my default assumption is, look, I know, historically, the stock market has returned with dividends included, about 11 percent annualized. That's my opportunity cost, if you will. I can go out and buy an S&P 500 index-traded ETF, index ETF, and over the long term, assuming that the future looks a lot like the past, I'm going to make about 11 percent annualized. I had the lazy insight that, well, if that's my opportunity cost, I want to discount the cash flows of any company I'm looking at. At my opportunity cost, I don't particularly care if the capital asset pricing model tells me, I should be using 8.25 percent, which is what the motor and value of the SpaceX IPO bet. I think that's insane, frankly, but he's athwath to motor and I'm not. I just run with 11 percent, and then in my modeling, if an 11 percent model, when say interest rates and finance theory should tell me, oh, you should be closer to 9, if I still think it's a bargain at 11 percent discount rate, then you're going to be a winner. Yeah, because if you don't know, the higher the discount rate, the lower the present valuation will be. That's how that's one reason I get around this and why this is interesting news when you talk about it, but to your point or your question earlier, Travis, it doesn't really impact my process because I have my process and I understand why I have my process. Well, this is something that is going to get a lot of headlines and I think at the end of the day, the companies that are taking out debt are going to have to think about this the most because if interest rates do continue to go up, those debt costs are going to continue to go up. When we come back, we are going to talk about maybe the most exciting healthcare news in the last couple of decades, you're listening to Motley Fool, Hidden James Investor. Trading at Schwab is now powered by Ameritrade, unlocking the power of thinkorswim, the award-winning trading platforms loaded with features that let you dive deeper into the market, visualize your trades in a new light on thinkorswim desktop with robust charting and analysis tools. 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This seems like, and we're not doctors or pharmacists, but this seems like one of those announcements that could be really, really big news over the course of the next decade or two. Right. Exactly. We don't know. I'm glad you said could, because headlines on medicine never work out, but potentially, this isn't just great news for Moderna share holders. This is great news for humanity. It is early, though. As you say, I'm not inclined to rush in here. I wish I would have bought it 30 or whatever, but I do think it's kind of quote unquote priced in. This is just an amazing stock, guys. If you bought on, I think it was May 24th, 2024, you're still underwater here. By the way, if you bought during COVID, you're still way underwater. Jim, we talk about biotech being hard, and we talk about just, it's a crazy market, but this doesn't even, this is just a special own case. It lingered for years with potential, got an amazing boost because it was able to end a plague. Lost momentum when investors realized that hopefully new plagues don't come around every so often, ended up a political target, like a political whipping boy, which where it got, honestly, really, really stupid, cheap, and hindsight. And now here we are. This is just, they don't make them like this. Forget biotech. This is just different. Yeah. I mean, I like to say biotech is hard, as we hit a couple of times. And I am certainly not smart enough to call winners and losers in the space. Well, actually, I am smart enough to call losers, as in every time I've played in this space, I've ended up with a loser, you know, but yeah, I want to go in on what you're talking about with Moderna itself, like, you know, like the problem with biotech, whether you call Moderna, I may stay away from the politics stuff, because again, Canadian, what do I know? If you bought with the hype, this is a hype story during COVID, right, because it's going to, as you say, end of plague, or at least that was, that was the marketing. It was hype, but there was to be clear, there was real revenue and profit there for a short period. And so, but the problem is if you were, if you bought Moderna during the last big hype cycle, even after the big run up this week, you're still down probably 50 to 70 percent. Okay. You don't even get Travis's 13 percent over how many years. And the meanwhile, yes, like over the last five years, okay, like I'm just called up the five-year chart on my screen here. Last five years, Moderna is down 60 percent. The market is up 73 percent before dividends. If you, if you are inclined to play in the biotech space, the advice I receive, the advice I will pass along is that maybe seek out a broad sector ETF focused on biotech, because and I'm just going to pick one randomly here. The state streets spider S&P biotech ETF, okay, just there's a bunch of these out there. You can go look at them up the rules, but this one state street spider S&P biotech, it is up 36.5 percent over that same five years. So you didn't match the market. If you want to plan biotech, maybe it's best to spread your bets around because you don't know when a good news story like, I mean, like we can all agree, a cancer vaccine is amazing. If this works, it's still time to come to market. It just works. I mean, it's a net positive for humanity, obviously. But by the time you can't predict unless you're a biotech expert and I am certainly not, you really can't predict which companies and which molecules are going to strike, and you really can't predict when they're going to strike. And so spread your bets around and we live in an era when you can spread your bets around by just simply buying an exchange rate of ETF that focuses on that sector. So anyway. So really quick, do you think that we're entering with AI, with data, with all these sort of advancements? Are we entering a new era in healthcare where these kind of huge, seemingly huge things are coming more regularly than they did in the last 100 years? I wish. I don't think so. I think we're always improving. But AI knows English, AI doesn't know biology. That's going to take some time. So I think we're just to be grateful for what we get and hope it continues. Yeah. So this will be fascinating to watch and hopefully it works well for investors and for humanity like we talked about. We'll be back in a moment. You're listening to Motley Fool Hidden Gems Investing. As a podcaster, my voice is heard by thousands of people. And now with Vanguard Investor Choice, I can be heard by the companies I invest in too. Vanguard Investor Choice makes it easy for eligible Vanguard fund investors to have a say and how their funds vote at company shareholder meetings. 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Welcome back to Molly Foolah and Jim's investing. In this segment, I'd like to have a little bit of fun with investing. I wanted to, Jim is a value investor, famed for buying GameStop before everyone else knew that GameStop was even a public trade-in for them. Ah, that's going to be, that's going to be your legacy. It's also Canadian. Those are the two things. That's it. GameStop, Canadian. But, so we're going to play a game and I like to call, "Take my money." So if you've seen the meme, at what price does a stock or a company need to be where you go, "Take my money, this is so cheap, I have got to get as much as I can." But we're going to start with the Anthropic IPO. Anthropic is, the date keeps moving up. I've now heard that they may release some of their documents this month. So in the next week and a half, they seem to be rushing towards public markets. At what market cap would Anthropic be incredibly compelling to you as an investor? Yeah. Did you blame them for rushing to the markets, by the way? I mean, you get two trillion dollars. Yeah, you don't, hard to say no. The best time for them to have done it was probably six months ago. So look, I honestly don't know, but I want sub trillion definitely, maybe with hype, $600, $700 billion market cap, I might at least have to give it a look. But here's the thing. They're winning right now. We're too early to know. I mean, a year and a half ago, it was OpenAI was just going to rule the world. I think the lesson is, we don't really know which one of these businesses is sustainable long-term. So I would be very gun shy almost at any valuation if I'm honest. Jim, any any valuation that is compelling for you for Anthropic? I'm tempted just to say two votes and point what Lou said. I'm going to give a standard answer for what I do in any valuation situation. When the sum of future cash flows discount back to the present at an appropriate rate, when that is higher than the then current market cap, the calculated value of the company. And I also have this weird habit where I insist on valuing things like options and restricted stock and warrants and all these things that sees value leak out to insiders. I was told that's not real money. Yeah. Well, they're just wrong, but I respect their right to be wrong, which is my favorite line when my wife and I are having elevated discussions. I respect your right to be wrong. But yeah, when it makes sense from a valuation perspective, conservatively calculated. So assuming they're losing money and there is no, I think the hard thing with some of these companies is there is no necessarily projected time that they're going to turn profitable. But if they turn profitable and they become Google, they become, you know, even in Uber, there is value there somewhere. So sure, but Google came out wildly profitable. Right, right. They did. But they were nowhere near who they are. Yeah. And a throw pick and an open AI, I guess, I mean, they're not going to. And, you know, and even Uber had to go through the wilderness, frankly, before they could put all the taxi companies effectively at a business and steal their share. So, you know, and also to just the general warning with IPOs is there's a lot of hype. Obviously, people get very, very excited. And the academic literature, the academic finance literature is pretty unequivocal on this thing that most IPOs underperform for the first couple of years of going public. I realize that's a very state and boring answer. You probably want to avoid playing an IPO space until, you know, there is cash flows and there is no ability. And the hype goes away. Well, I'm going to assume your answer is the same with open AI. Correct. Do you have a similar number with open AI, where you say I was hoping Jim was going to go first and I was going to do the prices right thing and say $1. Honestly, guys, I don't know if they'll, I mean, I'm guessing they will because they have to, but I am not 100% convinced they will ever be in open AI IPO at this point. Would you be more interested in anthropic or open AI at the same price at the same price right now anthropic? Okay. That's probably my answer to actually. All right. Let's go to the hottest asset on the market. Jim, I'm going to start with you. Any price that you're interested in Bitcoin? No. Look, I'd probably take a flyer at lower, just because I wouldn't put much strength into it. My problem with Bitcoin is, is that it doesn't do anything. My, the bullet case for Bitcoin is, we've played whack-a-mole with the use case for a decade now and they're still coming up with sums, which does speak to its pliability. So maybe one of these hits. So I was probably a price, but it's a quarter or if not more of, you know, maybe, maybe in the 15s or so, I'd probably just throw money at it. How much money laundering do you want to do? Well, let's use case. Yeah. I think I'd probably be compelled at that point too. Okay. This is where things get a little more interesting. Disney stock. Disney has gone nowhere for what, a decade, 15 years at this point, but there is a business there. There is a company there. People do pay real money to go to the parks. Lou, at what price or what price earnings multiple? It would maybe be another way to put it. Are you interested in Disney stock? And it's current form. I don't know if I can be talked about it. I am convinced myself that they need to just spin out the parks and the experiences. All of that, the cruise ships as an independent company, sign a perpetual license forever to keep the IP, but just get all of the media off the books. I love my idea of, like, just merge with Netflix. But I don't think this business works. Guys, I was actually kicking the tires on Comcast, not because I like it better, but just because at least it was cheaper. And then they had to go do that split, made it to. But Disney, I don't think, I just don't think the collection of assets as stated works the way they hoped it would. And I don't think spinning off the legacy things will work for what will save them any more than it saved Comcast. Jim 14 and a half times forward earnings. Is there a price, Bob Eiger's gone. By the way, I brought this up because Jim has strong opinions on Disney and Bob Eiger and is a Star Wars super fan. So maybe not tell with some of the stuff behind here. Maybe not the biggest fan of the way the company has handled the last decade or so. But is there a price where it becomes compelling? Sure, the price where every asset becomes compelling. I'm not sure it's now. I mean, Disney, yeah, Travis is right. I'm a known Bob Eiger skeptic because Disney has been used as a Bob Eiger enrichment scheme for much of the last two decades. You know, and I do not have a high opinion of Mr. Eiger or his management style. But we'll leave it that. The problem with Disney as I see it is cut something of a what more world's to conquer problem. You know, they already own childhood. Okay, Pixar, Star Wars, Marvel, Marvel's on the lag. If you ever look up at, you know, you can find this stuff. It's out there. The inflation, the pace at which going to Disney parks has outpaced the rate of inflation by about 10 percentage points for some like three decades. You know, there is a what more world's to conquer problem here. And, and so where can they go with that? I'm not sure 14 times earnings forward earnings really matters all that much to me. You know, in the last, like the most recent fiscal year, they did about $10 billion in in free cash flow. Okay. But they spent about six billion of that on buybacks and dividends. So that's money that's lost, it's not money that's not going to go back into the company. In the over the past 12 trailing months, they're actually at about $9 billion in free cash flow. Most of that's gone to accelerated buybacks. Generally, I like buybacks if they're done at a decent enough price. I'm not sure Disney's there, and I floated, I think I first wrote this about 12 or 13 years ago, and it was the Washington Post asked the Motley Fool a bunch of analysts to come up with a wacky acquisition prediction. A bunch of us had little write-ups, and my write-up was that I think Apple should buy Disney, because it's content for their army of devices that people are increasingly staring at rather than interacting with their fellow humans. I thought that would be a pretty great thing, and then to lose point, you could off-gas the parks to something else and just take content. But yeah, I mean, again, it's going to be the same. I'm not playing a game right, I know, but at a valuation where it makes sense, probably not at this level. I think it's about 30 times, 25 times free cash flow. That seems a little excessive to me today. I've got to say, as the one here who has young kids in the house, we went to Disney last year. It is incredible how institutionalized Disney is as a brand for parents, and we went to the universal theme parks as well, and they're just not the same. They're just not, they're not done as well, they're not nearly as good. That Harry Potter land would argue that point. Well, my kids aren't quite that old, so we're going to go to the Harry Potter. But Nintendo was well done, but even that was, that's a couple hours. That's not an entire day. Travis, the thing about that is that's been true for a long time, and you already mentioned the stock price over the last 15 years. Two things can be true. The brands are great, and it hasn't worked for a long time. I will remind investors too that Disney goes through these decade-long cycles of being in the abyss in the early 80s, and then having a massive comeback, and then another abyss in the late 90s, and then a massive comeback, and now we've had an abyss maybe we're ready for a comeback, but that's probably going to happen for another show. All right, quickly, I wanted to get a quick idea of there is a price gem that you are interested in Tesla stock. We currently have more than 1.4 trillion dollar market cap. Price earnings multiple on a forward basis to be the most generous is 190. Is there a price that you would buy? There is a price for any asset. I really do believe that. The price that I would pay for Tesla, and most people don't know this. I am a former Tesla shareholder, and I'm probably one of the larger bearers of Tesla at the Motley Fool. I'm a former shareholder, made money on it, didn't make enough money on it, apparently, but yeah, with Tesla, growth is gone. Elon is distracted by some other companies just recently taken public. The operating margins, the profitability margins have cratered, that gone from 19% a couple of years ago to, I think, the most recent quarter is 1.4. Most auto companies with margins at that level trade for 7-10 times earnings, not 300. My price where I would buy Tesla, because I think it offers an above market return going forward, the price probably starts with a 3 or a 4, and there's only two digits in it. Lou, quickly, what's your answer here? I'm going to be the bull here just for fun, and we'll still get letters, okay? I am going to say that Tesla is so much more than General Motors, and so as there's serves, let's say six, a 6x premium on valuation in General Motors. General Motors trades for about 0.4 times sales, so we'll give them 2.6 times sales, and my market cap is at 275 billion would be my fair value. I don't know if I really mean that, but it's a way to say lower than here. I will also offer the clarification. I have a, I'm a big index fund guy as well, and about half of our personal money in my family's index funds and other half's individual stocks. I own a lot of the S&P 500, so on a look-through basis, I actually ironically own a lot of Tesla. I will also note that they shut down their solar roof, which was one of the big reasons that they bought solar city, one of the things that shocked me, me crazy, more than a decade ago. But when we come back, we are going to get to the stocks on our radar, you're listening to Motley Fool, Hidden Jokes Investors. Support for the show comes from Fundrise. Investing in companies already in the S&P 500 can sometimes feel like you're being served someone else's leftovers. 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To see our full advertisement disclosure, please check out our show notes. All right, Lou, I wanted to get to some of the drama around data centers that we've seen really take off over the last week or so, but there's been some new polling about how unpopular data centers are. The reason that this is so important is I could make the argument that the AI build out is both holding up the market and the economy at this point. So it has the tech world just gone too far with this build out and just wanting to build anything anywhere. Is this a political problem? Where does your head go with the risk factors with this becoming now a political football? Yeah, this is a bipartisan just nobody likes this, right? I think there's a ton of things going on here and none of it's really great for AI. I do think that look, there's been a lot of promises on economic development that Foxcom Apple plant that never got built. There's just a lot of like recent examples and these are ugly, big just humming centers. They're not pretty, but look, there's two big things I think that the AI industry has to confront arrogance and a lack of just usefulness right now for their products. When arrogance, this is a big one. The messaging has been far too dismissive of complaints. Maybe they are water neutral, but to laugh at someone who's asking the question and say, you must be an imbecile. That's not a way to win hearts and minds on a local level, okay? Big tech has a messaging problem. It's basically the message on this is, if you're too stupid to understand we're saving the world, that shouldn't keep me back. You should do better, okay? Somewhat related though. If the Apple plant was coming near me, I could say, "Ooh, I like iPhones." I'd say with an auto plan or whatever. For now, for most of us normals living in flyover country, AI is just fancy search. And if you want, you know, for all the back padding and silicon valley, AI has done a terrible job of convincing consumers. This is something that's necessary, interesting, world changing, whatever it is. I think it's just a simple problem of why me. And yeah, it's most of it's just arrogance and messaging. Is there a solution here? Is paying, you know, I've heard about replacing property taxes with revenue that comes from the data center? Is there sort of like a bribe that is going to work for some of these? Or is this just, is this just so unpopular that it's going to become nuclear? Put them in space. Yeah. There you go, Gem, I can't say it better. Maybe, maybe that is the solution. Maybe Elon Musk is ahead of the game already. It is fascinating because it does seem like one of those times where the conversation on Twitter, the conversation in Silicon Valley is very different than the conversation that we have, I'm living in the Midwest in that flyover country. And, you know, we don't talk about AI. It just it doesn't come up. So something that I think is looking value needs to get their head around. Okay, let's get to the stacks on a radar and bringing in Bart for his thoughts from behind the glass. Jim, you're up first. What are you looking at this week? I'm going to go to a COVID era, darling throwback. I, it's a stock that's down 95% from its COVID area time. Most people assume it's, you know, it's a debt business and why would you ever want to go here? And they have completely missed what's going on under the hood. And I am talking about peloton. Yes. Okay. So peloton, it's a razor and blade model, right? You know, it's like we're going to sell you an expensive treadmill or an expensive bike with an iPad strap to it. It's a little more involved in that, of course, but, you know, I was always the dismissal. And, you know, during COVID, the very, very smart people running it said, you know, hey, it's a razor and blade model. The, the razor is the, the equipment and the blade is the subscription. And if you know anything about razor and blade models, you sell the razor for as cheap as possible because you're going to get that sweet, sweet stream of blades, always sold on top of it. They said, but what if we focused on the razor instead and, and spent $3 billion on inventory and blowing ourselves up because we're geniuses and everyone's going to flock to us? Spoiler didn't happen. They paid with their jobs stock nearly, the business nearly went, what nearly went bankrupt. They had to save the company via a really expensive finance and made a few years ago. Replace the executive suite and a funny thing happened along the way. The CEO came over from Apple and Ford where he'd worked on subscription businesses before the new CEO Peter Stern. They turned from a cash furnace into a cash gushing. Like, does anyone know that Peloton and their most recent fiscal year produced $378 million in free cash flow, which was on top of the $324 million they did the year before. Those two years, Peter Stern's been there for about, I think, 18 months. And all they've done is they piled that cash up on the balance sheet. They paid a little bit of debt off. They, but as of the most recent quarter, they have 1.2 and changed billion dollars in cash and 1.3 billion dollars in debt. They have screamed from the pulpit. We are going to do a mastery financing probably in September because no investment banker wants to work and work in August. They're almost debt neutral guys. And it's good to go away. They're they're promising at quote unquote at least $350 million in cash flow. This year, you're going to see a refinancing probably within the next month or two. And the stock today is trading for less than seven times trailing free cash flow. You don't need a lot of growth at seven times free cash flow. And it's about to clean up their balance sheet for good. So peloton is my horse. All right. We got to jump to Lou Lou. What do you got this week? Bar real quick. I'm looking at Union Pacific. UNP is the ticker. Best known is one half of the US West Coast duopoly. It's also the train set I had as a kid, but Union Pacific is trying to buy Norfolk Southern established the first US coast to coast this week. The surface transportation board kind of kicked off the clock. The good news here for Union Pacific is that means it probably could get done by the end of 2027 for political reasons. That's good. The bad news is that's a long ways way done right. This deal could really change the economics. I'm on the sidelines here, but I'm watching close. All right, Bart. You have stationary bikes that act as close hangers or model trains, which stocks go on here to watch this this week. Trains I know not. I think peloton is still an innovative company. And I think there's a lot of room for growth, but I can't help but think their board meetings always center around. Guys, if we could just hang on till the next pandemic will be good. All right. I like it. That's all the time we have for today. Thanks for listening. We'll see you here tomorrow.