TRANSCRIPTION 🔗
WEBVTT
00:00:00.400 --> 00:00:02.080
And now introducing Mr.
00:00:02.080 --> 00:00:03.200
Keith Lanton.
00:00:03.680 --> 00:00:04.320
Good morning.
00:00:04.320 --> 00:00:07.040
Today is Monday, August 3rd.
00:00:07.040 --> 00:00:09.439
We made it to August.
00:00:09.439 --> 00:00:11.839
The full month behind us.
00:00:11.839 --> 00:00:15.199
In the midst of summer of 2026.
00:00:15.199 --> 00:00:22.160
Historically, summer has been perceived as a slow time, but I can attest this morning that we have a lot to discuss.
00:00:22.160 --> 00:00:26.879
There's a tremendous amount going on, so we got a lot of ground to cover this morning.
00:00:26.879 --> 00:00:34.399
, we're gonna be discussing the Federal Reserve, keeping interest unchanged last week, the market reaction to the Fed and what they had to say.
00:00:34.399 --> 00:00:36.960
We also are gonna talk about big tech earnings.
00:00:36.960 --> 00:00:42.320
Last week we got earnings on Alphabet, Microsoft, Apple, and Amazon.
00:00:42.320 --> 00:00:49.920
So we'll discuss some of the implications and takeaways from what we heard from from those companies.
00:00:49.920 --> 00:00:56.079
And this morning we are getting significant intervention from the U.S.
00:00:56.079 --> 00:01:00.640
and the Bank of Japan and the currency markets, , and we'll talk about that.
00:01:00.640 --> 00:01:06.959
And of course, every week we have a discussion with what's taking place in the Middle East and what's going on with Iran.
00:01:06.959 --> 00:01:24.400
And we see this morning once again, , as we see on several different weekends in the last few weeks, that there is some optimism, and hopefully that'll carry forward into actual action with respect to whether or not there was some sort of agreement that is in agre in alignment with U.S.
00:01:24.400 --> 00:01:40.000
and Israeli and our Middle Eastern partners' interests and whether or not we can come to a resolution and decision, especially with respect to the Iranian nuclear stockpile, as President said obviously that is a key critical to have a nuclear weapon at this.
00:01:40.000 --> 00:01:42.959
So we've got a lot to unpack this morning.
00:01:42.959 --> 00:01:45.280
Last week was a super vol volatile week.
00:01:45.280 --> 00:02:05.920
We had a hedge fund, mini I would call it a blow-up, um, perhaps more than mini, but at the end of the day, there was some liquidity for the remaining positions, , and that was one of the driving factors behind market last week, and arguably what situational awareness was doing, perhaps causing some of the euphoria and froth preceding last week.
00:02:05.920 --> 00:02:17.280
So we'll also delve into that and try and understand how some of these forces can influence markets and hopefully make us all more intelligent, wiser, better investors.
00:02:17.280 --> 00:02:26.719
And when we talk about becoming better investors, we're gonna start out this morning before we dive into all of the different news and events that have taken place over the last several weeks.
00:02:26.719 --> 00:02:39.360
We're gonna talk about taking a look at our leaders and taking a look at if you want to predict where a market or a leader is heading, you can't just take a look at the current events, the current quarterly reports.
00:02:39.360 --> 00:02:44.479
As we've talked about before, you have to go backwards, you have to look at yesterday's blueprint.
00:02:44.479 --> 00:02:50.080
And as investors, our ultimate edge doesn't come from reacting to real-time headlines.
00:02:50.080 --> 00:02:52.560
Everybody sees those at the exact same time.
00:02:52.560 --> 00:02:56.719
It comes from understanding the psychology of the people that created them.
00:02:56.719 --> 00:03:04.879
And to decode how leaders handle risk, leverage, and narrative under pressure, you have to understand the crucibles that forged them.
00:03:04.879 --> 00:03:06.400
So we're gonna take two leaders.
00:03:06.400 --> 00:03:16.639
One, our current president Donald Trump, who decades before he was in the Oval Office, his playground was the cutthroat world of 1970's Manhattan real estate.
00:03:16.639 --> 00:03:28.080
It's where he learned to wield the media as a weapon, using the high-stakes New York City tabloid culture to build a brand out of leverage and seek dominance in terms of public attention.
00:03:28.080 --> 00:03:41.280
And then if we take a look at another leader who preceded President Trump by about a hundred years, about a century earlier, that was Winston Churchill, who created his playbook in two distinct firestorms.
00:03:41.280 --> 00:03:44.479
One on the battlefield and two in the press.
00:03:44.479 --> 00:03:50.479
Churchill, as a young cavalry officer, rode into direct combat in Cuba, India, and the Sudan.
00:03:50.479 --> 00:03:58.400
He developed a tolerance for risk and command and control instinct under fire, served him well as World War II emerged.
00:03:58.400 --> 00:04:00.560
He also worked as a war correspondent.
00:04:00.560 --> 00:04:04.719
Again, here we go again is a you know similarity between him and President Trump.
00:04:04.719 --> 00:04:25.199
As a war correspondent, he mastered using his literary craft, using the power of the pen, so a different way, but nonetheless being able to be able to you know stroke the narrative that was important to him to write his own myth, to shake, shape public sentiment, and to help him finance his political ambition.
00:04:25.199 --> 00:04:40.240
So we have two men, two vastly different eras, two totally different media and risk playbooks, but both were both of these men were forged, were created, their their methods were set up way before the world was watching.
00:04:40.240 --> 00:04:52.160
So today we're gonna break down how analyzing the formative histories of leaders, past, present, and future gives investors a deep
Load full transcript
psychological edge that financial models often miss.
00:04:52.160 --> 00:04:56.959
So let's go back to Winston Churchill going back almost a century.
00:04:56.959 --> 00:05:10.399
And in 1940, he famously wrote, I felt as if I were walking with destiny, and that all my past life had been put had been but a preparation for this hour and for this trial, is what he said when he became prime minister.
00:05:10.399 --> 00:05:17.600
His past life was shaped by two careers, an army officer on the front lines and a war correspondent from conf conflict zones.
00:05:17.600 --> 00:05:29.680
So these experiences created his strategic mindset, helped him become a master of communication, and helped create the distinct leadership style that he was as a wartime prime minister in Great Britain.
00:05:29.680 --> 00:05:40.879
Now, Winston Churchill graduated from the Royal Ministry College in 1894, and he saw combat, as we said, in India and Sudan, and in the Second Boer War.
00:05:40.879 --> 00:05:50.480
During World War I, he personally commanded a batil a battalion, the 6th Battalion of the Royal Scott Fusiliers in the trenches on the Western Front.
00:05:50.480 --> 00:06:03.600
So unlike many career politicians who viewed war in the abstract, high level terms, Churchill understood terrain, he understood logistics, he understood tactics, he understood troop morale firsthand.
00:06:03.600 --> 00:06:13.040
So when he became fine minister, he took the unprecedented step of appointing himself Minister of Defense, giving him direct oversight of the British Chief of Staff.
00:06:13.040 --> 00:06:22.879
Having witnessed and experienced the stagnant trench of trench warfare in World War I, Churchill was obsessed with tactical mobility.
00:06:22.879 --> 00:06:34.560
He was an early proponent of the tank because the tank was the greatest weapon to avoid trenches going forward, the tank being developed as a result of the trench warfare in World War I.
00:06:34.560 --> 00:06:38.879
He championed radar because he understood how critically important it was.
00:06:38.879 --> 00:06:56.639
He championed amphibious landing craft, he championed specialized military technology, and because he possessed real military experience, he challenged his generals, he challenged his commanders, he distrusted pure military consensus, he questioned troop deployments, he questioned strategic plans.
00:06:56.639 --> 00:06:59.360
Now let's take a look at that journalistic experience.
00:06:59.360 --> 00:07:17.920
Before entering politics for full time, Churchill was a celebrity war correspondent for the Daily Telegraph and the Morning Post, and he was captured in an armored train ambush during the Boer War, and he made a dramatic escape across enemy territory, which helped him become a household name in the United Kingdom.
00:07:17.920 --> 00:07:26.000
So journalism taught Churchill how to capture an audience, how to condense complex situations into compelling narratives, how to write with urgency.
00:07:26.000 --> 00:07:32.879
He used language as an operational weapon to sustain civilian and allied morale during the darkest days of the Blitz.
00:07:32.879 --> 00:07:40.079
So having worked in the media, he understood how headlines were made, similar to President Trump, and how information could be leveraged.
00:07:40.079 --> 00:07:48.319
In the 1930s, he used newspaper columns to warn the public about the threat of Nazi rearmament, the dangers of appeasement policy.
00:07:48.319 --> 00:07:56.720
When he became prime minister, he knew how to manage press censorship, shape news coverage, maintain close working relationships with the press.
00:07:56.720 --> 00:08:00.959
His newsroom habits followed him to the prime ministership to 10 Downing Street.
00:08:00.959 --> 00:08:05.040
Churchill was famous for demanding short, punchy, brief memos.
00:08:05.040 --> 00:08:12.720
He wanted everything summarized on one sheet of paper so that it was simple and it could be condensed down to something that the public could understand.
00:08:12.720 --> 00:08:21.040
His instincts made him intolerant of bureaucratic waffle and forced his war cabinet to focus focus on actual intelligence.
00:08:21.040 --> 00:08:41.200
Now if we move to the current situation with the President Trump as our commander in chief, and in the White House, if we take a look at his history, well long before entering national politics, President Trump mastered the art of media in the ruthless ecosystem of New York City tabloids in the 1970s, 80s, and 90s.
00:08:41.200 --> 00:08:50.480
While conventional public figures were afraid of the press, Trump recognized that in New York City, attention and visibility equaled leverage.
00:08:50.480 --> 00:08:56.000
He came to understand that bad press was significantly better than no press.
00:08:56.000 --> 00:09:08.000
His time navigating the New York Post, the Daily News, page six gossip columns, local broadcast TV served as his media laboratory where he refined techniques that later defined his political playbook.
00:09:08.000 --> 00:09:17.919
While most Manhattan real estate tycoons hid behind public relations firms, Trump himself made himself extremely accessible to reporters, columnists, and editors.
00:09:17.919 --> 00:09:26.799
When he wanted to plant a story without attaching his name or spin his financial and personal standings, he used pseudonyms, posing as his own spurks spokesperson.
00:09:26.799 --> 00:09:29.360
He talked about this in his book Art of the Deal.
00:09:29.360 --> 00:09:35.360
He would call journalists to brag about his business deals, high-profile romantic pursuits, and general status.
00:09:35.360 --> 00:09:41.120
He created an illusion of overwhelming demand and glamour around his personal brand.
00:09:41.120 --> 00:09:52.000
In 1990, during his high-profile divorce from Ivana Trump and Public Affair with Marla Maples, Trump broke the standard public relations rule of laying low.
00:09:52.000 -->
00:09:53.759
He leaned into the spectacle.
00:09:53.759 --> 00:10:06.559
When the New York Post ran its famous and also famously embellished cover quote, which was Best Sex I've Ever Had, Trump used this sensationalism to cement himself as a larger-than-life tabloid king character.
00:10:06.559 --> 00:10:12.960
So he leaned into the sensationalism that he didn't necessarily create, but he used it strategically.
00:10:12.960 --> 00:10:33.039
He learned that the public enjoy drama, that salacious personal coverage could keep his name on page one for weeks at a time, and he learned that if he could control what was on page one, and he focused on the salacious salaciousness, that it would eclipse his business setbacks like his Atlantic City casino bankruptcy.
00:10:33.039 --> 00:10:46.159
So in 1987, in his book Art of the Deal, Trump coined the term truthful hyperbole, explaining people want to believe that something is the biggest and the greatest and the most spectacular.
00:10:46.159 --> 00:10:49.360
In the New York City press he mastered the use of superlatives.
00:10:49.360 --> 00:10:54.720
Every building project, you've seen this probably now today as president, was the most luxurious in the world.
00:10:54.720 --> 00:10:56.879
Every delay was ahead of schedule.
00:10:56.879 --> 00:10:59.600
Every financial setback was a brilliant deal.
00:10:59.600 --> 00:11:07.679
By constantly repeating extreme assertions, he forced journalists to react to his framing of reality as opposed to setting their own.
00:11:07.679 --> 00:11:14.639
Even when reporters sought to debunk his claims, they had to quote his claims first, ensuring his narrative dominated the headline.
00:11:14.639 --> 00:11:20.240
So President Trump learned that generalists run on tight deadlines, have a constant hunger for fresh content.
00:11:20.240 --> 00:11:22.559
So what he did was he made their job easier.
00:11:22.559 --> 00:11:32.960
He provided quick, colorful, aggressive quotes on pretty much any topic, real estate, city politics, celebrity gossip, thereby guaranteeing himself a permanent spot in the news cycle.
00:11:32.960 --> 00:11:41.679
And he learned that if a story started to turn against him, he would immediately introduce a fresh distraction or launch a sharp counterattack to reset the media focus.
00:11:41.679 --> 00:11:49.519
This strategy of constantly overwhelming the news cycle with new plot lines became a cornerstone of his later political style.
00:11:49.519 --> 00:11:53.600
So by going backwards, we can look forwards.
00:11:53.600 --> 00:11:57.279
Alright, so let's look forward to what's taken place this morning.
00:11:57.279 --> 00:12:09.440
This morning, news from Iran that President Trump is calling off his planned attacks, as he said that Saudi Prime Minister had reached out to him and sought restraint.
00:12:09.440 --> 00:12:11.919
The Iranians wanted restraint as well.
00:12:11.919 --> 00:12:17.120
Iran in a Reuters article saying that no contact with President Trump.
00:12:17.120 --> 00:12:27.120
But nevertheless, headlines this morning are on the optimistic side that we are once again working deal in the Middle East, and oil prices are reflecting that.
00:12:27.120 --> 00:12:33.360
Oil down this morning five cents a barrel or about six and a half percent lower.
00:12:33.360 --> 00:12:39.200
We're seeing strength in Dow futures in particular, up over one percent over to 81 points.
00:12:39.200 --> 00:12:49.200
SP futures are up about half a percent, NASDAQ futures are up about 40.5% enthusiasm currently in the NASDAQ, seeing more the Dow.
00:12:49.200 --> 00:13:00.720
So stocks coming off a mostly higher volatile week, strong earnings from Microsoft and Amazon, which helped reignite some enthusiasm around the AI build-out cycle.
00:13:00.720 --> 00:13:07.600
This week we will see a sizable chunk of SP companies reporting earnings, including several large chipmaker names along with SpaceX.
00:13:07.600 --> 00:13:14.240
On the data front, we will get the final SP Global Manufacturing PMI at 9.45 a.m.
00:13:14.240 --> 00:13:22.080
this morning, followed by June construction spending and July Manufacturing Index coming out at 10 a.m.
00:13:22.080 --> 00:13:26.320
Some individual companies in the news this morning.
00:13:26.320 --> 00:13:39.919
AstraZeneca, symbol AZN, is down about seven points or a little over four percent, and reports that they are in discussions combined with Bristol Myers, which is up about three points or five percent that coming out of the Financial Times.
00:13:39.919 --> 00:13:48.799
So markets , at least from AstraZeneca, the acquirer's standpoint, not enthused with this acquisitional discussion to continue.
00:13:48.799 --> 00:13:53.120
Alibaba, symbol BABA, is moving higher this morning.
00:13:53.120 --> 00:13:58.000
They used a new AI model according to Bloomberg, that stock up about percent.
00:13:58.000 --> 00:14:01.840
Marriott was out with earnings this morning.
00:14:01.840 --> 00:14:20.000
they beat expectations by 11 cents, but missed on revenues and third quarter earnings per share below consensus, but said fiscal 2000 above consensus for the year above for the next below stock voting there, investors voting to the downsides down about percent.
00:14:20.000 --> 00:14:35.200
Taking a look at the overseas markets, the Korean Cospi, which is taking the mantle as the most volatile market region with SK Heinox and Samsung index, that market down five percent, but that was on the heels of some big game Friday.
00:14:35.200 --> 00:14:37.120
The Nikkei is down about one percent.
00:14:37.120 --> 00:14:46.559
We'll talk about what's going on in Japan and then the currency market, the Hong Kong market down, I'm sorry, up a half a percent, the Shanghai in China down about a percent.
00:14:46.559 --> 00:14:49.360
Speaking of that Japanese intervention, U.S.
00:14:49.360 --> 00:15:02.480
Treasury confirmed that it
took point part in a joint intervention in the foreign market with Ministry of Finance, and Treasury Secretary Besson called for increasing the size of the facility that would conduct that, and we'll talk about the implications in a bit.
00:15:02.480 --> 00:15:17.600
Major European markets trading mostly higher with the one market there, market where Britain AstraZeneca and weakness in that stock, Bristol Myers, the German DAX, the strongest of the European percent.
00:15:17.600 --> 00:15:27.759
President Trump saying that we have just been asked by Iran and other Middle Eastern countries to hold off any attack, and the perimeters of a deal have been agreed to.
00:15:27.759 --> 00:15:34.240
He said this would include the immediate, complete, and total opening of the Strait and Hormuz and an end to the Iran nuclear threat.
00:15:34.240 --> 00:15:36.480
But react warning at this time.
00:15:36.480 --> 00:15:41.120
Iran says it's close to reaching a deal with Oman to manage shipping through the Straits of Hormuz.
00:15:41.120 --> 00:15:44.159
That deal is critical to prevent the U.S.-Iran war times.
00:15:44.159 --> 00:15:45.840
CBS News saying the U.S.
00:15:45.840 --> 00:15:50.000
is investigating if Iran was responsible for a cyber gun water system in seven states.
00:15:50.000 --> 00:15:55.039
Politico talking about the implications of a salacious in Ohio.
00:15:55.039 --> 00:16:06.639
The senator there talking about his son-in-law, who is a Republican congressman in Ohio as well, saying that his son-in-law Max Miller should not serve, and that's following abuse allegations.
00:16:06.639 --> 00:16:17.600
Close house race in an area that leans Republican, so with the senator coming out opposed to his son-in-law taking another term, this could influence the outcome of that race.
00:16:17.600 --> 00:16:20.559
political pundits will be watching carefully for months.
00:16:20.559 --> 00:16:33.200
The Wall Street German journal Wall Street Journal saying that the Fed chair Kevin Walsh has floated the idea of having fewer Fed meetings, but say topic of discussion, not a formal proposal.
00:16:33.200 --> 00:16:39.679
New York Fed President John Williams said that he expects inflation will decline, but the Fed will act if not decline.
00:16:39.679 --> 00:16:45.200
The Senate this week will vote on a continuing resolution to extend government funding from September 30th, December 11th.
00:16:45.200 --> 00:16:50.000
The Senate will also vote on a bill this week that allows President to impose up to Russian energy.
00:16:50.000 --> 00:17:02.960
And there are reports this morning that attorney acting attorney General Todd Blanche has given writtenness to Senator the anti-week terminated that according to Politico, and that it is yet to be determined if this and alone will put the senator forward.
00:17:02.960 --> 00:17:08.079
Tillis and Cornyn that nominate this concession gets moving forward.
00:17:08.079 --> 00:17:17.200
So
far, 60% of SP five companies have reported results, 90% have beat earnings per share estimates, three-quarters surpassed revenue expectations.
00:17:17.200 --> 00:17:21.200
This week we have a plethora of earnings reports out.
00:17:21.200 --> 00:17:37.119
, Palantir announces earnings today, AMD, , Caterpillar, McDonald's, Merck, and SpaceX tomorrow, CVS, Eli Lilly, Sandisk, Uber, Walt Disney, West Digital on Wednesday, , Thursday sees AirB and Bo Phillips with earnings, not to name a few this week.
00:17:37.119 --> 00:17:43.279
Um, I mentioned later today we will supply management releasing its manufacturing and services purchase index in July.
00:17:43.279 --> 00:17:49.200
For manufacturing, we're looking at 53.9 reading while for service, we're expecting 54.5.
00:17:49.200 --> 00:17:56.559
Markets will be very focused on the jobs report on Friday when the Bureau of Labor Statistics releases that report.
00:17:56.559 --> 00:18:03.759
Economists forecast an 83,000 increase in non-farm payrolls after a 57,000 gain in June.
00:18:03.759 --> 00:18:07.759
Unemployment rate expected to hold steady at 4.2%.
00:18:07.759 --> 00:18:14.400
Fed chair Kevin Warsh last week described the labor market solid and steady.
00:18:14.400 --> 00:18:21.440
So one of the big events this morning is the intervention in the currency markets, and this is significant impact in dollar yen.
00:18:21.440 --> 00:18:29.119
we're seeing the yen now trading at about 157 the dollar, as the yen is appreciating against the dollar.
00:18:29.119 --> 00:18:33.039
And this is having a significant impact in the bond market, what in the stock market?
00:18:33.039 --> 00:18:40.319
We are seeing the 10-year down about eight basis points, 4.67, the 30-year treasury six base to 5.1.
00:18:40.319 --> 00:18:42.160
And why is that the case?
00:18:42.160 --> 00:18:53.519
Well, this is perhaps one of the big incentives on why the USB intervened in the currency markets along with Japan, is because the Japanese are largest single holder of US Treasury.
00:18:53.519 --> 00:19:01.200
A lot of folks think Chinese, but in fact it is the Japanese that own the most, and the Japanese have been trying to thwart the decline in their currency.
00:19:01.200 --> 00:19:04.160
And in order to do that, they have to buy their currency.
00:19:04.160 --> 00:19:07.599
In order to buy their currency, they have to sell another currency.
00:19:07.599 --> 00:19:11.680
So that currency is the reserve currency, which is to sell dollars.
00:19:11.680 --> 00:19:13.440
What are their dollars invested in?
00:19:13.440 --> 00:19:15.279
Well, their dollars are invested in U.S.
00:19:15.279 --> 00:19:17.519
treasuries, so they need to sell treasuries.
00:19:17.519 --> 00:19:24.640
One of the factors behind some of the weakness of treasuries and the pickup in interest rates is the Japanese sellers of treasuries in order to buy their currency.
00:19:24.640 --> 00:19:25.759
So by having the U.S.
00:19:25.759 --> 00:19:28.079
help them, and early reports are that the U.S.
00:19:28.079 --> 00:19:32.720
is helping them not by helping them with selling dollars, but the U.S.
00:19:32.720 --> 00:19:37.279
is selling their euro reserves to help prop up the Japanese currency.
00:19:37.279 --> 00:19:38.160
So U.S.
00:19:38.160 --> 00:19:42.400
participation potentially changes the game in terms of market psychology.
00:19:42.400 --> 00:19:50.720
If you are a trader and you expect that the Japan decline against the dollar, you're willing to suffer some short-term pain with the action that you'll have more gain.
00:19:50.720 --> 00:19:51.839
, but when you have the U.S.
00:19:51.839 --> 00:19:57.200
join in alongside the Japanese, that bet becomes a little bit less comfortable.
00:19:57.200 --> 00:20:10.480
So this action warning shot across the bow to some speculators, with the US and Japan taking the unusual step of acting in the country markets together in order to stop the decline of Japan.
00:20:10.480 --> 00:20:15.759
And the Japanese, of course, have an incentive to stop the decline in there because it causes inflation at home.
00:20:15.759 --> 00:20:19.759
So at this time, if you is weak, well, your imports become more expensive.
00:20:19.759 --> 00:20:30.160
And that's something that the Prime Minister is starting to grapple with as the Japanese inflation for the time and her approval rating is starting to waver as goods start to creep higher.
00:20:30.160 --> 00:20:31.359
And of course, the U.S.
00:20:31.359 --> 00:20:39.200
has its own incentives to try and stop the increase of bonds here, 30-year treasury at its highest at 2007.
00:20:39.200 --> 00:20:44.160
So we are inserted effort, and this is significant to an ion.
00:20:44.160 --> 00:20:48.480
Last week, very volatile market, very volatile in the markets.
00:20:48.480 --> 00:20:51.279
we we saw the SP up about 1%.
00:20:51.279 --> 00:20:53.920
This was the Dow and the NASDAQ.
00:20:53.920 --> 00:20:59.359
We had three significant factors playing into the market action next week.
00:20:59.359 --> 00:21:05.680
We had those tech earnings we'll talk about, we had the Fed, we'll talk about that, and of course we had in the Middle East.
00:21:05.680 --> 00:21:19.759
So, in addition to the big four tech companies reporting last week, the calendar also included second quarter domestic gross domestic product, June personal consumption expenditures price index, and the Federal Reserve's interest rate decision.
00:21:19.759 --> 00:21:30.079
And on schedule, not part of the calendar last week, there was a meltdown of the artificial intelligence trade as highly leveraged bull positions were liquidated.
00:21:30.079 --> 00:21:48.160
The iShare semiconductor ETF was down 12% over three days, and one of the most successful AI investors, hedge fund situational awareness, saw margin calls and forced sales, and at the end of the day, basically liquidation, no longer hedge fund.
00:21:48.160 --> 00:21:51.440
But on Wednesday afternoon the skies cleared.
00:21:51.440 --> 00:21:54.160
A couple of events met up.
00:21:54.160 --> 00:22:03.759
One was that Citadel Ken Griffin had agreed to purchase the remaining positions from Situation awareness for somewhere in the range of eight to ten billion dollars.
00:22:03.759 --> 00:22:08.640
This $45 billion sometime a few weeks ago, if not beginning of last week.
00:22:08.640 --> 00:22:13.920
And then we also started to get some of the earnings that we saw last week giving the market some comfort.
00:22:13.920 --> 00:22:23.680
So the latest earnings that we saw, large public clouds like Amazon and Microsoft Azure takeaways were that they were on fire.
00:22:23.680 --> 00:22:28.000
Their results confirmed the success from Google Cloud, which reported results a week ago.
00:22:28.000 --> 00:22:34.720
So all three cloud segments easily beat expectations for revenue and even more crucially for operating margin.
00:22:34.720 --> 00:22:41.039
Clear message this earnings season is that there is real profit to be had from all of the capital expenditures.
00:22:41.039 --> 00:22:48.880
These companies have been marring their pristine balance sheets and cash flows, but their income statements are now seeing a clear benefit.
00:22:48.880 --> 00:22:53.599
The company saying that the capital expenditures will continue at least through the end of this year.
00:22:53.599 --> 00:22:59.359
Google and Amazon raised their 2026 capital expenditures guidance while Microsoft held their steady.
00:22:59.359 --> 00:23:05.119
Some it's rewarded with a second increase, Microsoft share price, largely as a result of the fact it's steady.
00:23:05.119 --> 00:23:14.000
These three companies, Alphabet, Amazon, and Microsoft, will spend about $600 billion on AI data, and they are hint next year.
00:23:14.000 --> 00:23:18.880
And as nice as Microsoft's cloud quarter was, its best results may have come in business software.
00:23:18.880 --> 00:23:27.920
In the latest quarter, Microsoft business software segment beat expectations for both sales and operating margins, and that defied out there who are expecting some weakness.
00:23:27.920 --> 00:23:37.680
Also encouraging was the sign that the Microsoft's flagship AI Software through Pilot is finally starting to gain traction after a slow start.
00:23:37.680 --> 00:23:40.559
Some say it's a common pattern for Microsoft products.
00:23:40.559 --> 00:23:52.000
Company first revealed paid user data six months ago, and markets were underwhelmed by finding out that there were 15 out of 450 in Microsoft, 365 subscriptions in Copilot.
00:23:52.000 --> 00:23:56.480
The latest number is still small, but it has doubled to 30 million.
00:23:56.480 --> 00:24:08.799
Alone among the big AI spenders that does not have a cloud unit to directly monetize all of its data centers was the one of the Mag 7 stocks that was not a strong performer last week, and that
was Meta.
00:24:08.799 --> 00:24:15.200
In its earnings call, Meta said that their capital expenditures will be up to about $145 billion.
00:24:15.200 --> 00:24:36.160
The street was not happy with Meta's continued increase in spending on capital expenditure, especially as they saw that the effects of all that capital taking place over the last few years have added up to mounting depreciation in AI research expenses, and that has sent Meta's profit margins to the downside.
00:24:36.160 --> 00:24:47.759
So without a clear path of monetizing those CapEx expenditures, seeing the pain there at Meta, the street wants to see Meta perhaps set up a cloud segment and sell some computing capacity.
00:24:47.759 --> 00:24:50.960
Meta has indicated that at the moment they need all that capacity.
00:24:50.960 --> 00:25:02.880
So at the moment, unless there's some sort of pivot or some sort of change of heart with respect to Meta's strategy, the street is questioning Meta's and Mark Zuckerberg's decisions, at least at this time.
00:25:02.880 --> 00:25:07.200
Something we've seen before, and we have seen Mark Zuckerberg pivot before.
00:25:07.200 --> 00:25:10.079
, we don't know if that'll happen, but something to be on the lookout for.
00:25:10.079 --> 00:25:12.720
And then we also had Apple report earnings.
00:25:12.720 --> 00:25:16.400
Stock was down about 7% after earnings.
00:25:16.400 --> 00:25:50.400
The concern there is that Apple is perhaps no longer the most important buyer of tech components that they buy all these components for their and many of us's iPhones, and therefore Apple's had a lot of leverage with suppliers, but now they're getting competition from AI server makers, swallowing up lots of memory products and components, and therefore Apple not as important of a customer, certainly a super important customer, but perhaps not the only super important customer anymore, meaning that Apple has less leverage with respect to price, which you have to raise their prices.
00:25:50.400 --> 00:26:03.200
It also means that they may not be able to get the supply that they're at the end of the major factor behind the drop in the stock price was that perhaps Apple was experiencing supply shortages, and they talked about that on the call.
00:26:03.200 --> 00:26:07.839
Street is also looking for Apple and what their AI strategy will be.
00:26:07.839 --> 00:26:40.640
The Street has rewarded Apple after initially punishing them for not spending heavily on the capital expenditures, and Apple is just spending $2.5 billion when they just compare that to the Metas and the Microsoft $50 to $200 billion of the year, and you know, Apple somewhere in the $10 to $15 billion range, that they are maintaining a balanced cash flow state are pristine, but nevertheless, while Wall Street is rewarding Apple at the moment for not an AI infrastructure, they do nevertheless want to see results, and that's something of attention.
00:26:40.640 --> 00:26:47.759
So stepping back to the other big event last week, and that was the blow up at Situational Awareness, which is a tech hedge fund.
00:26:47.759 --> 00:26:56.240
They were forced to liquidate their holdings, and perhaps we can learn some lessons from the meltdown at Situational Awareness.
00:26:56.240 --> 00:27:02.640
Main lesson is that trading with borrowed money works the same way on the way down as it does on the way up.
00:27:02.640 --> 00:27:05.200
You can be right on the fundamentals and get crushed.
00:27:05.200 --> 00:27:12.799
Important to understand, important to keep in mind if you're ever trading on margin, it's the same concept as what was going on at Situational Awareness.
00:27:12.799 --> 00:27:25.200
You are operating with leverage, situational awareness founded by a young former open AI engineer with a now familiar thesis by AI hardware stocks and short software.
00:27:25.200 --> 00:27:26.720
He was absolutely correct.
00:27:26.720 --> 00:27:31.519
The returns were magnified by leverage, but then came July, a rapid sell-off.
00:27:31.519 --> 00:27:37.519
Semiconductor index was down 27% over the course of roughly 30 days.
00:27:37.519 --> 00:27:45.839
Margin calls ensued, and situational awareness was forced to sell its public company shares to Ken Griffin Citadel in a block sale.
00:27:45.839 --> 00:27:58.480
The good news was at the end of the day there was liquidity in the remaining assets, and situational awareness, though, had taken on too much risk, going too close to the sun, and was not able to survive an episode.
00:27:58.480 --> 00:28:03.519
So we talked about the tech earnings, we've talked about Iran, let's talk a little bit about the Fed.
00:28:03.519 --> 00:28:19.599
Last week we had a Fed meeting, we had the new Fed chairman Kevin Walsh explaining his decision to keep rates steady, but at the end of the day, analysts decided that his message was contradictory, confounding, and perhaps overly confident.
00:28:19.599 --> 00:28:35.119
And at the end of the day, analysts and stock market investors, and more importantly, bond market investors, decided that perhaps they are losing some confidence in the new Fed chair, and bonds sold off significantly after the Fed meeting.
00:28:35.119 --> 00:28:43.279
, we've seen a significant sell-off in two-year treasuries, ten-year treasuries, although the two-year treasury did see a little bit of a bounce and change.
00:28:43.279 --> 00:28:48.400
So why are we talking about the sell-off in treasuries and why are we at the Fed?
00:28:48.400 --> 00:28:53.279
Because you had Chairman Walsh saying that he's deeply committed to a two percent target.
00:28:53.279 --> 00:28:56.480
But the takeaway is that you've got to take some action.
00:28:56.480 --> 00:29:10.400
If you say that you're deeply committed to a two percent target and you see inflation above two percent, well, Fed Governor Waller said
earlier this month that if you sternly stare at inflation until it melts before our withering gaze, well, that won't get the job done.
00:29:10.400 --> 00:29:21.359
Bloomberg's Michael McKee put the point to Walsh in a post-decision press conference saying that while the chairman promises to bring down inflation, he said all you've talked about today is talking about it.
00:29:21.359 --> 00:29:27.599
Despite the the great value he put on his wars, Walsh did not give guidance about future actions.
00:29:27.599 --> 00:29:30.000
So what is the market telling you?
00:29:30.000 --> 00:29:45.759
Well, it's telling you that if if you're talking about bringing inflation down to 2% and you really mean it, and you're saying it unequivocally, well, then you've got to take some action to get it there, or you're going to suffer credibility where we are at least this moment in time.
00:29:45.759 --> 00:29:46.400
All right.
00:29:46.400 --> 00:30:04.559
Last thing I'm gonna talk about is an article in Barron's, and we're gonna talk about perhaps the second biggest thesis taking place in financial and artificial intelligence, and that is obesity drugs, something that some refer to as GLE1s.
00:30:04.559 --> 00:30:15.440
Barron's saying that the next wave of these drugs are going to potentially treat a lot more than obesity, so there might be an even bigger opportunity here than was originally thought, and the opportunity was originally huge.
00:30:15.440 --> 00:30:24.640
Artificial intelligence might be Wall Street's current favorite profit story, but the runner-up is gaining ground quickly, and it might actually change human health forever.
00:30:24.640 --> 00:30:26.880
We're talking about GLP1 drugs.
00:30:26.880 --> 00:30:32.079
What started as diabetes and weight loss treatments are fast becoming what analysts call an everything pill.
00:30:32.079 --> 00:30:46.079
Today we're breaking down why this blockbuster drug class is shattering records, where the tech is going next, and how the battle between Eli Lilly and Novo Nordisk, the two big makers at the moment of GLP1 drugs, is playing out.
00:30:46.079 --> 00:30:54.319
For years, the GLP1 space has been a duopoly between Denmark's Novo Nordisk and India's Indiana's Eli Lilly.
00:30:54.319 --> 00:30:56.640
But sales estimates are blowing through old ceilings.
00:30:56.640 --> 00:31:07.440
Morgan Stanley recently projected that 2035, about eight years from now, GLP1 sales for obesity and diabetes drugs alone could hit $190 billion.
00:31:07.440 --> 00:31:14.880
Put that in perspective, Pfizer's peak COVID vaccine sales hit $40 billion, and top cancer drugs bring in $50 billion.
00:31:14.880 --> 00:31:17.359
Nothing in pharmaceutical history comes close to those.
00:31:17.359 --> 00:31:19.680
Why the explosive growth right now?
00:31:19.680 --> 00:31:25.440
Expanding coverage and a game-changing shift in delivery, the rise of oral pills.
00:31:25.440 --> 00:31:36.480
Pills promise to open
the floodgates by reaching needle-averse patients, lowering costs, conquering overseas markets where refrigerated injectables are difficult to bring to the masses.
00:31:36.480 --> 00:31:41.039
By 2030, oral GLP ones are projected to make up a quarter of the market.
00:31:41.039 --> 00:31:44.559
Crucially, pills aren't cannibalizing injectable sales.
00:31:44.559 --> 00:31:49.279
Over 75% of new pill users have never taken a GLP1 before.
00:31:49.279 --> 00:31:52.720
When it comes to oral options, the competitive dynamic shifts.
00:31:52.720 --> 00:31:59.119
While Lily leads in injectables, both companies' pills focus on a single GLP1 receptor.
00:31:59.119 --> 00:32:08.799
Novo's Oral Wagovy has actually shown slightly higher weight loss in trials and holds an early eight an early 85% pill market share.
00:32:08.799 --> 00:32:13.039
However, Lily's pill wins big on daily convenience.
00:32:13.039 --> 00:32:14.880
That pill is called Found AO.
00:32:14.880 --> 00:32:18.880
Because Found AO is a synthesized small molecule.
00:32:18.880 --> 00:32:22.960
It's shelf stable and can be taken at any time with or without food.
00:32:22.960 --> 00:32:36.079
Novo's pill is a delicate peptide that requires precise daily ritual, taken immediately upon waking with a small sip of water, followed by a strict 30-minute wait before having breakfast and coffee.
00:32:36.079 --> 00:32:39.119
That difference in flexibility could be a deciding factor.
00:32:39.119 --> 00:32:40.160
Long-term glad.
00:32:40.160 --> 00:32:44.640
Beyond pills, Lily is pushing performance even further with its pipeline.
00:32:44.640 --> 00:32:52.160
Their next injectable is called retiturtide, retitrutide, nicknamed triple G.
00:32:52.160 --> 00:32:55.039
It targets three distinct receptors.
00:32:55.039 --> 00:33:06.160
In trials, patients lost an astonishing 28% of their body weight, approaching the results of bariatric surgery by increasing baseline energy expenditure so patients burn more fat while resting.
00:33:06.160 --> 00:33:13.680
Lilly is also developing an amylen-targeted drug to signal fullness while preserving critical muscle mass.
00:33:13.680 --> 00:33:18.240
So from an investment standpoint, right now Wall Street is favoring Eli Lilly.
00:33:18.240 --> 00:33:23.039
Lilly's patents run through 2036, a five-year advantage over Novo Nordisk.
00:33:23.039 --> 00:33:30.480
Analysts project Lilly could double its earnings per share over the next five years, generating $62 billion of cash flow by 2031.
00:33:30.480 --> 00:33:42.480
While Lilly trades at a higher valuation, about 35 times earnings, compared to Novo's 16 times, its innovation is at the moment giving it an edge and a formidable moat.
00:33:42.480 --> 00:33:45.839
Beyond stock tickers, the real story is where these drugs go next.
00:33:45.839 --> 00:33:49.839
GLP ones act as powerful inflammation modulars throughout the body.
00:33:49.839 --> 00:33:59.759
They are being studied for kidney disease, drug addiction, Alzheimer's, Parkinson's, alcohol addiction, and heart disease, to name just a few of the applications.
00:33:59.759 --> 00:34:02.000
We're already seeing some of the impacts.
00:34:02.000 --> 00:34:02.480
U.S.
00:34:02.480 --> 00:34:05.440
obesity rates dropped this year to 40.7%.
00:34:05.440 --> 00:34:09.760
That has sent ripples through the big food and medical device stocks.
00:34:09.760 --> 00:34:19.199
McKinsey estimates that global health improvements from this drug could boost the world economy by $5 trillion annually by 2050.
00:34:19.199 --> 00:34:22.400
So if you thought GLPNs were just a weight loss trend, think again.
00:34:22.400 --> 00:34:37.280
The next wave is on the horizon and it has the potential to rewrite medicine, perhaps portfolios, and we will see where these development innovative accomplishments take us and personally and the financial markets.
00:34:37.440 --> 00:34:39.039
That's everything I've got.
00:34:39.599 --> 00:34:41.199
Thank you for listening to Mr.
00:34:41.199 --> 00:34:42.239
Keith Lanton.
00:34:42.239 --> 00:34:48.719
This podcast is available on most platforms, including Apple Podcasts, Spotify.
00:34:48.719 --> 00:34:57.119
For more information, please visit our website at www.heroldlanton.com.
00:34:57.519 --> 00:35:02.159
Opinions expressed herein are subject to change and not necessarily the opinion of the firm.
00:35:02.159 --> 00:35:05.519
Best performance is no guarantee of future results.
00:35:05.519 --> 00:35:12.719
The information presented herein is for informational purposes only and is not intended to provide personal investment advice.
00:35:12.719 --> 00:35:16.079
It is important that you consider your tolerance for risk and investment.
00:35:16.079 --> 00:35:18.400
But making investment decisions.
00:35:18.400 --> 00:35:22.639
Investing in security is not important for equity and the potential of losing money.
00:35:22.639 --> 00:35:27.360
The material does not come into research investment advice or trade recommendations.