Speaker 1Good morning, Los Angeles, and good afternoon, New York, and to everybody in between, welcome to Market Hang. I am Ross Gerber. I'm the host of the show for another 60 minutes until I will end my hosting of the week. Hopefully I'll be back at some point in the future, but I hope you had an enjoyable week of me entertaining you with a wonderful group of guests and getting through what I consider kind of a painful market week with all the volatility, which was mostly down, the AI trade down. I don't think many people made a lot of money this week in the stock market. Maybe things will reverse today, but we're going to talk about the stories that I know you want to know more about, and it starts off with Tesla. So we've got some great, great guests today. I'm like super excited, probably one of my best financial friends, I guess you could say. Um, we've done a lot of business together. We, uh, have done a lot of shows together and I'm super proud and honored to have Kevin from meet Kevin on the show today. I, I, I, I need one of those round of applause things, you know, and like the Yahoo guys could just push the button and it's like the round of applause. I, I was, I was going to tell them that I wanted to add that to the show. Um, I don't know if they have that handy, like the applause thing, like from the old Johnny show. No, they don't have it. Okay. So, um, uh, then we have Lynn, uh, Lynn is an investment strategist who also has a newsletter and a very, uh, how would I say, adept at equities. And so we're getting, she's going to be adding her insight into discussing the different, you know, stocks and investments that we will be discussing today. And then we have Connor from the housing frame founder. Um, so we're going to do a deep dive a little bit into real estate today, how maybe AI is affecting real estate, but more importantly, if you're trying to buy a house, you're going to be able to buy a house in 1875 with your own wood than it is to just buy a house today. So we're going to try to help some people because we have Kevin and Connor who are really housing experts. I mean, Kevin's probably just, just Kevin and I alone have probably bought 60 houses together recently. Um, so we're going to try to help some people because we have Kevin and Connor who are really housing experts. I mean, Kevin's probably just, just Kevin and Connor who are really housing experts. And so it's great to have his insight because he's out in the market every day looking for, for buys and renovating houses and knows the costs of doing all these things. And just in case you're looking to rent a house in the Ventura area, a house hack is a wonderful place to go because we rent these houses to people after we fix them up. So let's get into it. You know, I had a tech week event here last night. So we had about 150, 200 people in the tech industry here at the firm. And I, I wasn't expecting that the Roadster event was going to happen at the same time our event was supposed to happen, but we decided to watch the Roadster event before and then do our event after. And yesterday on the show, Gary Black was pretty, you know, negative about what to expect and expected to be disappointed. And I have to say, Gary, you were way wrong. Okay. I don't think anybody thought we were going to see a car just fly over a bunch of other cars. And flip and land, even if it's just a gimmick, just to do that was pretty incredible. So I want to dive into it with everybody because I had a lot of thoughts about this and I was like super excited. And then it ended with, by the way, this isn't coming out till 2028, which in Elon speak means never. And so I was really disappointed at the end of the presentation that I wasn't able to say, like, I can place my order now and get my car delivered. So, so that was, I went from like super excited and amazed and wondering how much this would cost and whether I would die in it to like, you know, when is this, it's never going to be built, you know? And then the Tesla fanboys attack me because I'm annoyed that it's another Elon year, year and a half away. Oh, Ross, you're so negative. No, I want the car. I've been promised this car for eight years, Elon, eight, eight, eight years, maybe nine. I have pictures on my, and then what happened to the roadster? It doesn't even look like the roadster. Now it's a Lambo. It looks like a Lambo. I don't know if you've seen that, a Lambo, but it kind of looks like a Lambo. I have no problem with that either. But I fell in love with this red roadster car that you gave me for eight years, this prototype that you dangled. Oh, my, my kid said like, Elon taunts your dreams. And I was like, yeah, he was like taunting me. Oh, here's the car. Ah, sorry. Now it's completely different. By the way, it's another year from now. So I want to get your thoughts. Let's start with Kevin. Kevin, dive in here. I mean, I know you want this car, but what are your thoughts? Where do you go with this?
Speaker 2You know, I've gotten so used to being sick and tired of doing any kind of driving because my butt's behind FSD. I feel like I don't even know what it's like to drive a car anymore. So come on, not driving a car anymore. Thanks to Elon. And after being a. Pilot, I'm honestly kind of over driving. I just want to hang out with my family. So I'm OK with it from the car point of view, because I agree with you. It's probably never going to come. And that's why I'm rationalizing. I ain't waiting for it. But I will tell you, this does two things. Number one, you're keeping your Cybertruck. And no, I'd like the Cybertruck, but I don't drive the Cybertruck. I sit in a Cybertruck. Great. The backseat is, by the way, the best in the Cybertruck. I feel like I'm in a limo back there. It is great. Now, here are the two things that this Roadster event actually did. And I haven't seen anybody talk about this first one yet. Not even on X. This was a hiring event. Yeah, for sure. To get the best engineers who want to work on beautiful suction nozzles and blowing nozzles for space. That's what this was. This was the future of space. A. And B, last thing, this was merger marketing for SpaceX and Tesla. That's it. It's not coming. It's not coming. It ain't coming anytime soon. And Sawyer's $50,000 deposit was probably gifted to him by Tesla. I was excited.
Speaker 1I would hope Sawyer would disclose that he was given the money, that he's not going to get back for years and maybe never get a car like all the other people. But that said, you know, I appreciate Sawyer and his posts and keeping us all up to date and his enthusiasm for giving Elon money for no return. So what did you think, Lynn? You know, I was wondering a woman's perspective. I mean, this was kind of like a very. It was a very masculine, heavy launch. You know, it felt very testosterone driven. Elon clearly looked like he was on a special mission, you know, and so he was pretty buzzed looking and happy. And what did you take from this? I don't know if you watched the event, but what do you take from all this?
Speaker 3Well, I think for sports cars, it's probably the right approach to take. I think there's the market for it. And, you know, I agree with Kevin that, I mean, this was primarily a marketing event. This was it was. You know, kind of signaling in a potential mergers, attracting engineers, attracting investors. It's more of a display to say, look at what we can do more so than here is a reasonable car that will be on the market in a reasonable timeframe. And, you know, they could get something like this out. It won't have the thrusters on it, you know, that you can read just the regulation itself and make something that's truly legal. But it's more of just a display because anyone who watched that thought it was, you know, super cool. And then, of course, it's all anyone talking about. Whereas if they just had a more routine demonstration.
Speaker 1That's right. If it was an Apple.
Speaker 3So I think it makes sense that, you know, they're not talking about being able to deliver this anytime soon. It's less tangible and it's more just a flex, which which can be valuable. It was definitely a flex, huh?
Speaker 2It's the greatest. Nobody knows flex better than Elon Donald and Elon's one hundred fifty billion dollars to Ken Paxton. So we could. Get more juice.
Speaker 1Right, right. We want to talk about Elon turning Texas blue. I mean, I bet you never thought that, you know, I was in Austin the other day. And honestly, it's the same as Santa Monica now. And I'm laughing because I'm like, yeah, all these people in Texas, they move California here and now it's going to turn blue. So, Elon, you can spend all the money you want, but it's not going to,
Speaker 2you know, he just this is exactly why Elon just conducted the next greatest Louisiana purchase because that's right. Republican governor in the back.
Speaker 1Moving to Louisiana. That's right. Come on. And you can do anything in Louisiana. There's nobody stopping you there. Steps ahead. So that said, that said, Connor, I don't know what kind of car you drive. I don't know if you even like cars. I'm kind of a car guy. Oh, great. You know, I have a Rivian, too. I love the Rivian. Are you an RS one or two?
Speaker 4The one I got the original pricing. So it's hard to say no.
Speaker 1Right. So so the R2 is out. I haven't been in the car. I've heard great things about it. I have. An R1, too. I love that car. I don't like it as much as my Cybertruck because the Cybertruck's faster and and kind of like more rugged to me. But it's Rivian's a much more beautiful car. You know, people don't, you know, spit on you when you get out of it. You know, things like that. So what did you think of this event? I think we're kind of distilling that this was just a marketing event to get people talking, which makes me sad because I actually wanted the car. What did you think from the event?
Speaker 4It's objectively a really full done. Demonstration like you, I don't care how much of a hater you are. It's just really cool to see a flying car no matter how they did it. And if you're a fanboy or a dreamer. didn't seem real right i know yeah you can dream bigger about what the company can be in the 2030s but if you have a spreadsheet for 2028 2029 i don't know how you change that at all so it's kind of the typical tesla story of you won't see it in the numbers but you can dream bigger about what the company will be in the future
Speaker 1yeah and i think that's one of my favorite things about elon is you know what's possible you know like whatever you thought was possible he's like let me show you something else and then it's kind of what kevin's saying elon's always like way you know his thinking is so far ahead of what he's trying to do and i don't even think he cares anymore whether it makes money or not he's just like i agree it was like a total flex of technology but but kevin said is 100 true because we were talking about this last night in our tech event we had this wonderful guy from american funds out here who's been managing money for a long time manages a ton of money and we were talking about how he surrounds himself with the top engineers in the world that basically if you're a top engineer in the world you kind of want to work at tesla or spacex because that's where the top people go and the the team at spacex in particular and this is what this guy was saying to this guy david um who works at american funds and and and and he spent a lot of time at spacex and we have a lot of spacex employees as clients and i've also spent a decent amount of time it is an incredible group of people and that's why i think it's so important that we have a lot of people that are working with us and that's why i think that's what this event did is it solidifies that if you're a young engineer it's like i want to go work there but if you're a car guy that's been waiting for eight years for a roadster it was actually really sad i was right and if you're
Speaker 4an investor saying where's the 2028 ebitda you didn't get any answers last night but that hasn't been driving the stock for a while right
Speaker 1and and i think connor ebitda is like a bad word at tesla right now like you're not allowed to say it you know because it's a negative negative ebitda company now and so we went from a positive cash flow company in the 20 billion dollar a year profit range to now a negative ebitda company as they invest a ton but another sad thing happened to me last night is i realized that tesla's done making cars like they're done making cars for us they're gonna make cabs and robots and that's what they want to make autonomous vehicles and robots and i do see a world where that might happen and i think that's a good thing because i think that's a good thing but i just don't see that world anytime soon yet the demand for ev vehicles have never been greater we're seeing huge demand for rivians the r2 is selling out okay if if and now it feels like tesla's just seeding the whole ev market to somebody else if they want to make a car and i'm like so the only car you can buy is a model y basically right like do you like this strategy i don't i like selling evs and doing the other things and i'm not bullish on the stock for
Speaker 3the reasons you just outlined i mean it could there could be a time in the future that i become bullish uh but in the in the moment i think they're in this kind of um stall pattern um and 100 like yeah and and i mean like their markets never like they have a ton of competition on the on the kind of lower priced uh ev front uh it's gonna be very hard to you know sustain the market cap that they have if they're primarily you know a car company in the lower end uh so i think it's in their view they kind of have to you know uh shift toward these other types of vehicles and if anything i mean their their bread and butter can be a high-end car i think they actually would be uh lucrative to the bottom line if they actually do focus on the roadster you know putting aside the the flying aspect for a second uh and if they just kind of focus on the sports car business i i think that could be a really serious uh driver for them uh until we get to that phase where we're able to get to that phase where more autonomous vehicles um you know that that's a bigger part of their
Speaker 1their market so so gary did some numbers on twitter about what that looks like economically for them if they because remember high-end cars you're only going to sell like ferrari sells 7500 cars a year you know and then like the the bugattis and all those they might only make like a thousand cars a year you know and so the higher end the car the more exclusive it is the less you make you know what i'm saying so it's like yeah so if you figure they sell 3 000 of these this is what gary did they sell 3 000 a year with a hundred thousand dollars profit in each car it's like six cents a share difference so it's not going to move any economic needle compared to the model s and x they used to sell in the old days 80 to 100 000 cars a year with a probably twenty thousand dollar profit margin you know and and i loved that business you know so so for me i don't think the high-end car business is going to replace what they were making on the s and x which were great vehicles and somewhat affordable you know and and then now you you're going to have competitors coming in on the low end so god forbid the chinese evs entered the u.s market tesla would be destroyed and that and now they're seeding that market to byd and other players eventually eventually and that's
Speaker 2already happening the question is
Speaker 1how long is the transition to autonomy and that's the question i'm going to ask you because i'm going to ask you that's the question so so i want
Speaker 2to jump on that affordability thing i think i think there's a big point getting missed here on tesla uh an opportunity at least they should be selling the cyber cab with a steering wheel and a hundred percent 48 kilowatt battery car for us a hundred percent possible and they should be leaning into affordability and ev now they can show a hundred percent growth the stock goes up and guess what happens when the stock goes up they could actually fundraise on for spacex and tesla optimus programs and the tariff app they need to raise probably half a trillion dollars for this tariff fab and all the projects that they want with their 10 10 gigawatts alone of data centers is half a trillion dollars at least it's probably closer to 600 billion so i've been saying
Speaker 1this too kev have you been in the cyber cab yet no i mean who cares it looks so i don't know i was in it no i was in it so i went to austin two weeks ago i took cyber cabs for days and i like the car it's it's kind of what you're saying like i would buy that car like it like put a steering wheel on it sell it for 25 000 and you're gonna sell a million units like right away and even if you make 5 000 a car you know you've got a huge market you got billions of dollars in profits there and people would buy that car it's a cool car but like i so what i kept hearing was like well can i just buy one at like a cyber cab and it would just be my cab so maybe i don't need a steering wheel at all and i could just buy one it would be mine and they don't even really have that model baked into the idea you know so basically that's why today because like
Speaker 2you know this we we basically don't drive with fsd it's like 99.9 percent of the time i feel like i'm just not driving well
Speaker 1you live you live in a different area than i live kev your your area is so much maybe you're at 98 percent of the time no i'm at 35 percent i'm at
Speaker 245 percent it's it's the ross bear the sunshine the sun no my eyes
Speaker 1kevin kevin you bring that little truck of yours down here and i'll take you to where real people drive and it's crazy over here okay it's la not all of us live in you know boring you know ventura county we live in the action he's jumping in front of you she's going that's right mobile taxis that's right she's got like homeless people diving in front of your truck okay so you know i i wish it worked better i tested autonomous vehicles extensively in austin waymos and um teslas and i think there's there there's still a long way off from full autonomy level five both companies both companies i i think they're doing a good job in a geofence location in an easy city to drive in that i think you think that's what they're doing is they're just i know what they're doing i know it for a fact i did it i i figured out their little tricks okay they're programming the cars okay number one trick is program the car not to go where it's very hard okay so like there's certain intersections that are really hard and so the car just won't go there so it takes not the quickest route to your destination so what you do is if you route it in google to where you're going and then you look at the route it wants to take you it's like a whole way around they don't want to
Speaker 2be on freeways you're saying they're optimizing for easy as opposed that's right
Speaker 1that's right and so some of the rides were taking three times longer than it would be if i just took an uber you see what i'm saying and so so what they're doing and it's disingenuous and waymo's doing it too is they're programming the cars to avoid for example left turns versus right turns it's way easier to make a right turn than a left turn okay so on my route i was like why am i making like seven right turns and no left turns it was literally like like all the way around and then i'm like okay i'm gonna make a right turn and then i'm gonna make a circle you know and and so they're trying to optimize in each city the way the vehicles work so that they work with the maximum safety and efficiency okay because they don't want accidents and to do that they have specific drop-off points they have avoidance areas and they also essentially won't drive on freeways and it tries to avoid doing things that are a little bit more dangerous and with that your ride might be anywhere from 10 to 300 percent longer You know, so- How many rides did you take? They haven't matched. I took like 10, 15 different rides because I was in Austin all weekend and I was going all around the town.
Speaker 2How often did you feel like you were getting sort of ripped off on the timing?
Speaker 1I didn't feel ripped off on the price. I felt ripped off on the timing like half the time.
Speaker 2Yeah, half the time. Half the time, you think it took an easier route basically.
Speaker 1Well, basically what ended up happening is I ended up using Uber two or three times more than the cyber cabs because it was faster and it was just easier to get to where I'm going because they could like drop me off. See, humans have an ability to like adjust to things. You know, once it sets its route and maybe that, like the Waymo will just sit in a traffic lane forever. It won't just like go around it, you know, like it'll just get behind the next car and it'll just sit there because there's traffic. Well, in LA, that could be the. It could be the rest of your life, okay? You have to like go around. And so the Uber drivers, cab drivers in New York, for example, these are hardened veterans of like crazy driving and they'll drive on the sidewalk. They don't care, you know? And so the interaction between humans and autonomy, which will happen for at least another decade, is part of the problem. You know, humans are really bad drivers, many of them. So the cars have to like work with these people, you know?
Speaker 3And that's why there's flying cars because they want people talking about the flying cars more than the nuances that you just went over. All right, so let's move on. Driving and the inherent scalability challenges of what you just described. I'm sorry? I was saying that that's why there's flying cars. I mean, that's why that demonstration, I think they focus it that way is because it's, you know, what most people are discussing right now is how cool that looked at the flying car. It's a marketing stunt. Whereas I. I think what the company doesn't want people focusing on right now is the discussion that you just had about the limitations of self-driving, at least at the current time, the scalability challenges of self-driving at the current time, you know, the robo-taxi push. And so I think that, I mean, that's why they focused on the marketing angle more so than the substance. There you go.
Speaker 1Lynn just hit Elon's favorite trick on the head, which is when our autonomy isn't really working, let's get people focused on something else, right? And boy. He did a great job of that last night. I look forward to the day, my car, I call it pretty great self-driving or pretty good self-driving, but it is not full self-driving yet. And one day I hope it will be, I do use it for a substantial amount of the time, but I still am disengaging way too often to avoid the hazards of I consider the most difficult place to drive in the world. So when it can master my life, my driving, it will master everywhere because you also have to remember, I live in the Palisades. It's a construction zone. And so everywhere I go, there's mayhem, okay, like in my neighborhood. It is crazy. And I'm contributing to it too.
Speaker 2That once they fix all that, it'll all be priced into the stock and maybe it's cheap now because it's not 100% in the Palisades yet.
Speaker 1Well, you know, once again, if you hang out with some private equity guys and you use the term EBITDA, all valuations are based around EBITDA in the private world. So we can play in the stock. We can play in the stock market. Like this valuation makes sense because Elon just deserves a trillion dollars because he could even do a flying car. But it's just like, that's Tesla and SpaceX. That's just what I tell people. It's a trillion dollars for Elon. If Elon came to GK and wanted to work here, my valuation would be a trillion dollars plus. You see what I'm saying? And so it's just, I think part of that is warranted. The guy's a great inventor. You know, he's an amazing engineer. Part of it is warranted, but part of it is also absurd. And that's why I don't own a ton of the stock. I don't own it. In my ETF, I own it personally. Many of our clients still own it. They're fans or employees or whatever. But, you know, it's hard to justify the price. Now let's move on. Let's move on to price of CoreWeave. You know, CoreWeave comes out. Oh, it's this great, you know, data center play. It went public for like, I don't know, $39 or something. It's still trading well above its IPO price. And it's just getting hammered with the AI trade. Nobody. Nobody likes AI this week. And so CoreWeave is the devil stock, right? So you got yields, you know, surging on CoreWeave. You know, you get the headline today at the Wall Street Journal. It's the riskiest corner of the AI trade. They're trying to make the CoreWeave sort of the countrywide credit of the AI trade. But CoreWeave actually owns a lot of great stocks. And Grandpa Jensen isn't going to let its baby just die. So I don't see that. But, you know, you can have a great business and real bad financing. And have a lot of problems. What are your thoughts on CoreWeave? Do you think this is a big risk? Or is this a big opportunity? Why don't we jump in?
Speaker 4I think for housing, the worse it does, the better it is for housing. So I'm not trying to be a hater. But the story in markets this year has been about AI crowding out everything else. And external financing and AI making interest rates go up. And making it more challenging for housing. And what we've seen this week is that we got really hot inflation data. And yet yields are down because Cori's struggling. And people are really struggling. And people are wondering about its financing. So the best short-term fix for housing would be CoreWeave going bankrupt.
Speaker 1I thought it was like inflation that caused rates to go up. I don't know if it was the AI. The AI is part of that.
Speaker 4Well, I'd say it's AI people who don't want the party to end. So they need to say it's oil, it's deficits. Please don't take away our punch bowl.
Speaker 1I don't think the AI people's party is ending.
Speaker 4If AI could only spend $800 billion a year instead of a trillion in a year, we'd have a little more money left over for housing. And so that's kind of what we're seeing. That's kind of the way I'm thinking about it.
Speaker 1So your real feeling is this battle for capital between AI and the government, basically. Because we can't forget somebody's borrowing over $2 trillion extra every year. That now, because these companies used to be distributors of capital, and now they're taking in capital to use, that it is creating a more difficult or higher interest rate environment. But if you actually look at relevant of CoreWeave at like MetaBonds or Google Bonds, they traded basically the same. It's the same as Treasury bonds, you know? So, you know, I don't know if it's per se like crowding it out. And then you have the CoreWeave trading at like a 15% yield right now. So the market's clearly getting like risk correctly, right? But housing, in my mind, has its own set of issues, you know? So when you look at a stock like CoreWeave, is it high risk? Yes. Does it own great assets? Yes. Will the cost of compute revenue offset the debt payments? We don't know. And that's what the market's saying. But as far as housing, I think there's many factors that make housing hard right now. And one of which is that housing really hasn't gone down in price much, despite higher rates and despite a bad environment for housing. Housing prices really are still pretty high. So why do you think that's happening, Connor?
Speaker 4I think three reasons. One is that a lot of people have low mortgage rates that they got before interest rates really went up. 40% of people don't have a mortgage at all. Another large chunk. A large chunk have a sub-3% or sub-4% mortgage. I think it's
Speaker 1about 20% or 25% have sub-4%.
Speaker 4Right. And then people still have jobs. So the unemployment rate's 4.1%. So they're not being forced out of their home by unemployment, which is a good thing. And then the stock market's done really well. So the high ends, certainly in San Francisco, it's like, I can just pay for homes in cash. I don't need to worry about mortgages. So you're really left with entry-level housing in maybe second-tier cities where people need mortgages. That's struggling. But everything else can kind of just tread water.
Speaker 1So basically, I also think there's a lack of supply, right? So there's been a lack of supply of housing underinvested since the financial crisis. And then, you know, Kevin, you see a lot of this. What do you think is holding up? You're handling a lot of houses at the same time. What's holding up housing prices? Obviously, you're not worried about it collapsing because you just bought another house the other day. So, you know, what are you seeing in the market and how do you feel about it?
Speaker 2What's holding up housing? Democrat policies. Democrat policies are the best thing to keep homeowners rich. So if you want more unaffordable housing, you want Democrats. And so that's why I try to buy almost all my real estate in California because they are really bad at allowing builders to build. More houses. Yeah. Yeah. If you go to unregulated, essentially over-the-counter home builders.
Speaker 4Well, one of the largest apartment re-examined property trusts just sold their entire California portfolio, and they're going to redeploy it in the Sunbelt. And so as much as Democrats talk about building more housing, the policy they're putting in place is actually chasing developers out of their states.
Speaker 1Multi-family is different than single-family in California, because in multi-family, they have 1,000 rules that you can't evict people and stuff, so it sucks. In single-family, those rules don't apply. So it's like kind of – it's much – you know, when Kevin bought an apartment building, I called him and I was like, what are you doing? You know, like, we don't want apartments. We want single-family homes. And I think the value is much higher in having land than multi-unit personally. And we're seeing the prices and rents kind of coming down even in L.A. Yeah, I think a lot was covered. I think the – I mean, the background
Speaker 3deficit is also a factor. So obviously, you have the supply-side limitations that are very, you know, state-specific. You know, you have these other dynamics. But, you know, the fact that they're still running $2 trillion deficits provides kind of a run-it-hot environment. And so generally speaking, on average, people who were either too bearish on equities or too bearish on – on housing, I think a huge factor has been that deficit side that they underestimate. It's very hard to be bearish on things when there's kind of a 7% of GDP structural deficit year after year after year. It just – the whole thing's higher. I mean, anyone who, for example, invests in emerging markets and sees some of those dynamics, it can be often hard to be bearish on things in their local currency. And obviously, that's a more extreme environment. Basically, you know, when a country is, you know, 100% of debt to GDP, when it's running, when it's running 7% of GDP deficits, when it has the demographics it has now and it's kind of running it this hot, it has kind of emerging market-light characteristics. And it's just hard to be bearish on things in dollar terms unless, of course, you're at extremes. And so there's this – there's this uplift that happens. And then, of course, we layer all those other reasons why, for example, housing can go down more in Texas than it can in California. But basically, it's just a very different environment in 2008. And so all those factors come together in kind of this run-it-hot environment. So it's basically,
Speaker 1you know, these are sort of, like, we're a big emerging market now. Yeah, I mean, in some ways, we are actually, yeah, I feel like
Speaker 3we're an emerging market, you know, it's not like, you're not literally like Argentina or something, but you have some of these characteristics and kind of learning from those types of markets and applying them selectively in the U.S. has actually been, I think, a reasonable way of doing things.
Speaker 1I mean, if you're a young couple today, I mean, is this a good time? Is this a good time to buy a house? Like, let's say you're about to get married or have kids and you and your husband or wife, and is this a good time to do that? I mean, or should you just rent and wait it out?
Speaker 4I would probably still rent. I think one dynamic to think about for the next year is that, to Kevin's point, prices and rents have corrected in the places that built a lot. And Austin now, just over the past month, is seeing positive rent growth again. And so even though it's still a much better deal to rent in Austin than to buy, if rents are going to go up 5% next year. At some point, do you say, well, if rents are only going up from here, are home prices at some point going to find a level? And then if I want to stay in Austin, maybe I just buy because prices aren't going to go down anymore.
Speaker 2I think that's a really good point. And I think that might be why Camden sold in Cali. And I think they're almost buying the dip and trying to find that floor and that stability in pricing in Texas or Florida. Because you could also get a higher cap rate now that you have seen prices come down so much. Which helps them, especially when yields on the 10-year treasury risk free or 5%. So I can't blame them if they're trying to fish for a bottom. I think that's strategically what they're doing. As far as buying, buy if you can minimize your monthly debt burden. But otherwise, yeah, rent. I'm taking on a 3.5% down loan right now at 7%. I don't see how that's good for anybody.
Speaker 1Yeah, I agree with you, Kevin. Lin, what do you think?
Speaker 3I'm in the rent buy house right now. It's very marketable. It's very market dependent. But I do think this is still a better time to rent in most markets than to buy.
Speaker 1So we got a bunch of renters here. I'm with you guys on the rent thing over home at this moment. Especially if you can rent a nice house and you get a multi-year lease. This is what I recommend. I've done this many times. Don't just get a one-year lease. Get an option for another year or two years from the landlord and lock in what rent expectations so you have some certainty in your life. And so a lot of people don't realize. You're like, when you do this. When you do a commercial lease, it could be like a five or a 10-year lease, right? So why can't you do that with a landlord in a house that you might want to stay in for more than one year? So you get an option for a year if the landlord stinks, whatever, you get out of there. But if you like the house, now you have an option to renew maybe for one, two, three, four more years or annually renew, but lock in those payments for your rent and then you have certainty in your life. I think the worst part of renting is the uncertainty when your lease renews. And the landlord can jack up the rent. So that's something you can do right now by negotiating with the landlord at a time like this and say, look, I want to stay here for up to five years. So I want to do something so we can both agree what my rent's going to be over the next five years. Now, landlords aren't really into this because they never really do this, but they will to get a good renter. And so I highly recommend, you know, if you're going to rent, try to lock in longer-term leases that you have options. And if you're going to buy right now, boy, I would be playing hardball, low-balling on properties if I was going to buy because the cap rate has got to be 7%, 8%, you know, percent on a rental right now at least. And so, you know, if I'm buying, you know, the prices are too high. Well, especially it's October.
Speaker 4A seller might be thinking, if I don't sell it now, I'm not going to sell it until at least January, February. That's right. And so if you're a buyer, you can take advantage of that.
Speaker 1And nobody thinks rates are going down. So it's like, you know, let's be real. If you want to sell your house, I'm the guy. This is how I got one of my houses. I just said, if you want to sell your house, I'm the guy. You better do this now because you might not sell it for a long time, you know. And so you play hardball. It's been a long time since it's been in buyer's market. So take advantage of that, too, if you have capital to put to work and you have enough money. But I would not be taking out a 90% loan at 7.5%. That's for sure. So let's move on.
Speaker 2We finished CoreWeave. Just a quick note just on finishing CoreWeave. They have like $18 billion of bills to pay over the next 12 months. And they have 10 in the bank after their receivables are considered, which to me makes me think—
Speaker 1How much money do they have in the bank?
Speaker 2Like 10 after their receivables. So assuming everybody pays, they got 10 in the bank and they got 18 in bills. They're upside down, man. It's not good. So I kind of get it.
Speaker 1Right, right. Yeah, you know, once again, financial engineering can take even a great business and blow it up, right? And that's the unfortunate thing. Maybe if things get bad, they can start mining crypto. You know, like what happened to those people? You know, there's nothing more interesting— They became data centers.
Speaker 2Right. Like CoreWeave was a crypto miner.
Speaker 1Nobody cares about crypto. Crypto's gone. They'll go full circle.
Speaker 2They'll go back to crypto mining.
Speaker 1It was like Trump was going to like legalize crypto or I don't know what he was going to do. And all these people got all greedy and happy and then Trump made all this money and now crypto's dead. He killed it.
Speaker 2I think he got exactly what he wanted. He wanted to make billions off of crypto and he succeeded.
Speaker 1He definitely succeeded. And all the crypto guys who thought they were going to make billions off of Trump, they succeeded to learn what it's like doing business with Trump. It's like what your
Speaker 2favorite guy says, Mr. Karp from Palantir, your favorite guy. He says, if you don't know who the mark is, you are the mark.
Speaker 1Unfortunately. That's an old saying. And, you know, he didn't invent that. If you don't know who the sucker is at the table, it's you. But Alex Karp didn't invent that statement. That's a poker thing. And that said, so many of the Bitcoin miners have turned into AI data centers because it's the same GPUs. And it's obviously much more profitable to use your compute to do AI work than the GPUs. Just do proof of work for Bitcoin, right? And so they've all made a fortune getting out of Bitcoin and being AI data centers. But what happens to Bitcoin next? Like the only catalyst I see is the halving, which isn't for another couple of years. So what catalyst would get Bitcoin back to 150,000 other than microstrategy guy making weird videos all the time? Iran. Oh, you think like the war would get Bitcoin going again?
Speaker 2A hundred percent. It's a risk asset. I think you're going to get a deal with Iran between the 20th and the 27th, because right after that's the Fed meeting. I think Trump is on the phone with Kevin Warsh, and that's why he had a dovish speech last night going, just give me a few more days. We're going to strike a deal. I could be wrong on this, but I think we're going to get a deal before the next Fed meeting. Then rates are going to plummet. An Iran deal? It's going to slowly come down. Absolutely. And you
Speaker 1think we're about to have a peace deal with Iran? Hell yeah. I don't know what information. You're looking at, but I hope you're right, because that's not what I think. Why not? Why would Iran give Trump a victory right now? Why would they do that?
Speaker 2What would be the advantage for them strategically? Well, I mean, look at Iran. What's happening? you've got the naval blockade, but it's not just the naval blockade that's shutting down their economy. It's a border blockade. You've got trucks that are sitting stranded on the border between Iran and Pakistan. They don't mind dying. You're right that maybe the Ayatollah doesn't care deep down inside, but the economy is suffering and it's not just supply for people to survive. These are ingredients for them to actually manufacture their drones and their weaponry. That's why they feel bad. All right, let's go back to crypto
Speaker 1because we're not going to solve the Iranian war. And I hope you're right. I'm a big proponent of peace. But Len is a Bitcoin follower. Let's go back to Bitcoin because it's more fun than this war stuff. So what do you think, Len? Is Bitcoin going to 150,000 if the war ends or if it doesn't?
Speaker 3I don't think it's going to go to 150,000 within the next year would be my guess. I think it'll get there eventually. I don't think it's going to go to 150,000 within the next year. I don't think it's going to go to 150,000. I would generally separate Bitcoin from the rest of crypto. I think most of crypto's problem is that there's no there there. They've ran through all the narratives of alternative Bitcoins, of DeFi, of NFTs, of meme coins. Right, ETFs. Yeah. And they've run through the whole gamut. They're kind of out of narratives now. And a lot of that was kind of a zero rate phenomenon. And so I think that that whole industry is kind of just gradually melting. And it kind of leaves what's left, which I think is, I think Bitcoin is still structurally interesting. I think stable coins are still structurally interesting. You know, tokenized real world assets are interesting. So I think part of the problem is there's this big melting overhang still that this project can unfold for a while, the great stagnation in crypto. The great stagnation. Which I think is rational. And, you know, what could be a catalyst for Bitcoin? One is I think we just talked about the quarry this year. I think that once AI gets kind of saturated and starts to, like, put in some bad numbers, I think some capital can go back into Bitcoin as kind of a volatile trade to entertain. And sometimes it's just things stop going down because all the fast money's out. Like, I think basically just the interest in the space is super low that the money that's going to leave has already left. Are you a buyer? Are you buying Bitcoin? Should we buy Bitcoin?
Speaker 1I'm bullish with
Speaker 3like a three-year view. You know, I think it still probably chops around for the next six months or so. I mean, maybe that does come down to what happens in Iran. I mean, I'm with you that I'm not very optimistic on the Iranian peace situation. What, the 5,000-year war that's still going on? But I think we'd probably chop around for months still in Bitcoin. I think the bottom's in would be my guess. I think, you know, we're well off the bottom. I think that that bottom's probably in. But I think it's more about how long does it take to start the next true bull run. My guess would be, you know, in the years ahead, I think we'd see another bull run. And I would separate that from most of our.
Speaker 1Well, we have the halving. The halving, in my mind, has to create, you know, a higher price because you have less Bitcoin being printed, you know. And that's in two years, I think. And so I think if you have a three-year view, I think you're right. Maybe it'll do well. But I don't. What you're saying to me is you're not buying it right now. And so, you know, essentially, we're in a wait-and-see mode with Bitcoin. And maybe that's a low. Now, I don't know if you follow this, Connor. But. But I've been looking at Circle and the USDC. You know, we've got a core group in our investment committee that really likes this idea of stablecoins. And I'm less entertained by it. But do you think there's something to stablecoins becoming sort of a standard money market for people who want to hold capital?
Speaker 4It does seem like eventually someone's going to make some progress on one of these non-bank solutions. And I've been waiting for it for a while. It's not really what I do. But I feel like at some point, someone will crack it. And maybe it sort of speaks to what Lynn was talking about, where right now, AI is taking all the interest, all the good engineers. You know, why would you want to work on crypto when you can go build flying cars for Elon? That's right. If they're
Speaker 1going to shift. Yeah. Are you looking at Circle, Kevin? Do you look at Circle?
Speaker 2Well, right now, I'm looking at the power staying on out here. I think I've had the power go off three times already while I'm here, thanks to Gavin Newsom. I can't keep the power on when the wind is going. We haven't had power problems down here. You said, Kevin, I heard the battery going off again and like half my lights went off. Ah, thanks, California. It's maybe. Hey, you know what? It's really hot today.
Speaker 1We got to turn off the power because it'll start a fire. That's what they're doing. So they turn off the power.
Speaker 2Yeah. You were asking about Circle. Look, I used to be really excited about stable coins. I thought that stable coins would basically become the basis for banking because we could have that instantaneous settlement and we would just have a public blockchain, you know, a financial, you know, accounting. Everything could essentially be done through a blockchain. But I think now what's happening is the DSTC, DTCC, whatever, the depository corporation, they're moving already to, we've already moved to one day settlement. I think we're going to get to T0. And I think they're going to do it outside of the stable coin framework. So I think the banking industry saw stable coins as a threat. And then they said, all right, what can we do to just get that same speed without actually. Being on stable coins. So that's where, if you look at the FedNow real-time money transfer payment system, it's really fast. It's faster than ACH or wire now, 24-7. So, you know, on nights and weekends, you can now instantaneously send this. Yeah. I've been doing instant transfer too.
Speaker 1I've been doing instant transfer too between my banks and it literally happens instantaneously. So maybe these companies force innovation on the banks because they actually make money holding your money for two days. And it's a nonsensical way to make money. So congratulations, Circle. I want to move to a topic that I love talking about. I love the entertainment industry. I grew up here in LA. I've been involved or an investor in the entertainment business my whole life. I've seen massive shifting in the winds here of what's happening in Hollywood. We all know the story about how difficult it is in Hollywood right now. I mean, there's lots of reasons why, but we're starting to see some interesting things happen like Disney, like Disney just did a deal with Dude Perfect. Now, if you have young kids, you might have seen these YouTube streamers because they're some of the biggest ones, but they're really a sports-focused YouTubing, I guess, crew. And they have their own production facilities. They're highly advanced. They raised over $100 million to build their production. And now they've got this Disney deal that's massive. Disney's also doing a banana ball tournament at Disney World. And then Disney, confusing to me, is licensing content to Netflix now because probably Netflix is paying up for it because they haven't made anything good in a long time. So then Netflix fires everybody who's in charge of content this week because they suck and a thousand other people. And then Skydance, right? So then Skydance is now this merger between every sort of mediocre company in Hollywood all together as one now. And although HBO, I do like, I will shout out HBO. And so you've got this whole shifting of the entire landscape of entertainment as the YouTube gaming effect of taking eyeballs away from traditional media content is really starting to eat away at even streamers. So where does Hollywood go from here? I'm a big believer that we're seeing this. Hollywood's now realized they need to get YouTubers. And just the same, YouTube is trying to be more like a streaming platform. And so they're trying to get more of a streaming like Hollywood with shows and YouTube TV and trying to offer enough content to keep people on YouTube. And we've got this existential battle for eyeballs. What are your thoughts on this battle? Who wins? Who loses? Netflix is awful cheap right now. Should it be this cheap or is it an opportunity? What do you think? Let's go around the horn. Let's start with Kev.
Speaker 2Oh, wow. Well, okay. First of all, I think Disney is desperate for growth. And so anything that they can do, they're going to be desperate for growth. And so anything that they can do, they're going to to strike deals and grow again is what they need because their stock has been stuck. And one of the reasons it's been stuck is because people have not seen growth. There's this whole thesis that Disney went woke in COVID and went broke after that. And so they need to dig themselves out of the hole. Can they do it? Probably. I actually think it's a good company. But the sad thing is they even though they charge you $10,000 for the bottom basement suite or like a cabin on a Disney cruise for seven nights, even though they somehow charge you ridiculous fees to go to their parks, they still only bring 10% to the bottom line. So they got to get their margins up. They got to get growth back and they got to undig themselves like Target did from the go woke, go broke thing. Target was offering a 5% dividend yield at 85 bucks because that was sort of the bottom of the woke problem where they started verging like little kid boys clothing with little kid girl clothing together. And my wife's like, we got seven children. Like, where do I find? Anyway, they recover. They're 140, 40 bucks now. So it'll happen, but they're desperate for growth. That's what's going on.
Speaker 1I love how you just like spit out. You have seven children. Like it's nothing. Okay. You know, most people don't do that, Kevin. I'm comparing myself. Five of them are the same age. Okay. So like, I don't want to get into your personal life here. We got to get to Elon. Okay. So you spent a lot of money on Disney. You spent a lot of money at Disney. Clearly you're bitter about it. I think I think we're going to see a lot of layoffs at Disney, unfortunately. because they need to make margins work. I think the streamers are profitable now, finally. I think the parks are profitable, but they're highly capital intensive with low margins, exactly what you're saying. They've still got a declining business that they've got to spin off in the networks. ESPN has the Super Bowl, has all this stuff, but they've paid a fortune for all this stuff. So they've got to make all this stuff work. And right now it just doesn't feel like the wins are in their favor. But I'm more looking at Netflix as an opportunity as they try to move more like YouTube and they're swallowing up more sports assets. And like, is Netflix like really a cable channel as we move forward with multiple types of entertainment that you can do and gaming and it becomes a multimedia type platform? Maybe Netflix is cheap because every time we look at Netflix when they're struggling, they seem to figure this out and seem to win. So, is this an opportunity for Netflix? What do you think over there, Lynn?
Speaker 3I do think Netflix is probably the play here. I'm generally pretty bearish on this kind of the centralization that we've seen in media. And I think, I mean, especially with things like AI tools, that's going to make content creation easier for a lot of people. I think there's going to be just so much like media created outside of that, that they have to compete with all of that now. So structurally, I'm not very optimistic on this space, but at a certain price point, Netflix gets interested. And I think we're roughly at that price point. Yeah. Like 17, 18
Speaker 1times forward earnings seems like very cheap for Netflix.
Speaker 3Yeah. Especially given, given, you know, they're overall model. So I, you know, I, at much higher price points, I've been bearish on Netflix, but I find it harder to be bearish now, even though when I look more broadly, I had trouble getting excited about names in the space, but I do think Netflix is interesting.
Speaker 1Well, I think also, I don't think people are canceling Netflix just because the content isn't bad. I think it just makes it harder for them to add to it. I think it just makes it harder for them to add new subscribers, but it's not like-
Speaker 3Yeah. They just coast through it.
Speaker 1Yeah. Right. Right. And it's a reoccurring revenue model.
Speaker 2I think people are nervous. Nervous that agents are going to go cancel all these subscriptions or whatever, but I don't think people are going to cancel their entertainment, right? Like Netflix. I agree.
Speaker 1I don't think that's what they're canceling, right? And then secondly, if I'm going to cancel entertainment, there's other things that I would cancel before Netflix, you know? Yeah. And so it's like, I, I, so I don't, Yeah. I, I, I kind of see YouTube and Netflix as the core, like entertainment streamers that will never go away. That's the way I look at it.
Speaker 3On YouTube. Yeah.
Speaker 1And I think Disney will still be here. You know, like, I don't think they're going to die. I just think they need to radically transform their business in a way that they're not prepared to do. Okay. And, and then you've got Paramount Skydance. Okay. What happens with Skydance? Do you, Ellison's putting a lot of money. He's got a lot of smart people. He's trying to do a lot of things. I mean, I mean, have you handicapped whether this is going to work or not? I, I kind of feel like some of this could be awesome. And some of this is a disaster. Any thoughts on Skydance? Next topic. Yeah. Next topic. I mean, that's kind of at the hub of the centralization. Nobody cares. We don't even have time for another topic. Nobody cares about Skydance. Well, I do because, you know, I have lots of clients that work in the entertainment industry, you know, and, and I want the entertainment.
Speaker 2Michael Taylor's going bankrupt. That's when you buy Bitcoin. When Michael Taylor goes bankrupt? When Michael Taylor and his stretch Ponzi goes bankrupt.
Speaker 1So, so Connor, you don't care about Skydance either?
Speaker 4I think it's interesting. I listen to Matt Bellany's podcast, The Town, all the time, but it's just, you're, you're putting together a lot of stuff. And is there any synergy there? Or are you just going to do like every other legacy Hollywood consolidation and just cut costs?
Speaker 3That's the issue. He kind of hired the cost cutter. And I don't think media scales as well as people think it does.
Speaker 1Media scale is perfectly fine if it's good. You know, the problem is, is making good media is not like a, like a, you know, X, Y, Z thing. It's like you, you have hits and you have misses and that's part of making movies and shows. Yeah. And so that process is, is not quantifiable really. You know, it's like.
Speaker 3I agree. That's what I mean by like quality scales. But I think like you mentioned before, like combining a lot of mediocre assets. I don't think there's a real, there's not a good case. I don't think there's a real, there's not a good case to do that or why I should kind of expect it to be more successful than the sum of parts is the. Well, then you layer. I would have there.
Speaker 1Right. And then you layer $80 billion of debt on it and you've got the core weave of the entertainment industry. Right. So maybe it's a good set of assets, but then you put it all together with bad financial engineering and you get a bad financial outcome. Right. And that's what I'm scared of.
Speaker 3I think it might be interesting for buyers if some of this gets spun off in the years ahead at fire sale prices. I think that that's where an opportunity is potentially.
Speaker 1Well, yeah. I mean, I, I would buy. I would buy some of this Warner Brothers secured debt, and then you can take Warner Brothers back once he can't pay the debt. Right. Because I think the best asset there is HBO of all the assets. But that said, I agree. I think this will involve more layoffs. So you got layoffs coming at more at Disney. You got layoffs at Netflix. Now you're going to have layoffs at Skydance. Right. Comcast already broke into 17 pieces. Right. So my whole premise right now is the entertainment business is just fundamentally changed and Grand Theft Auto is going to come out in November. And nobody's going to do anything but play that game for like a month. So that's going to be like a whole nother thing that you're competing against, which is how gaming has become so amazing over the last couple of years. So, so I think the entertainment industry is vastly changing. I think there's opportunities there, but I think there's also a lot of pitfalls and risks. But I also want to thank everybody for being on the show today because we're coming to the end of our hour. I know it was the most fun hour on financial television today. I want to
Speaker 2talk about job loss.
Speaker 4I would have thought that a year ago, but it hasn't happened this year. So it's like, when's it going to happen?
Speaker 1All right. We're going to have to do this on the next show. We're going to have to do it. We have to do it. We've run out of time, guys. They're tweeting me in my ear that we have to end the show. Thank you, though, for making this a great show. I really appreciate everybody coming on it. Hopefully you learned something today and feel free to tell Yahoo how much you enjoyed having me as a host and reach out and maybe I will be doing this again sometime. Other time. So thanks for hanging out with me all week. I really appreciate it.
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