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Yesterday was the worst day in digital credit history. Michael Saylor's STRC traded down to almost $82 when it's intended to trade at par at 100. Competitor Seda traded down to the low 90s before also bouncing. Today we're going to discuss what happened, why it happened, and what it means for the market. Let's go. What is up everybody? Welcome to the Daily Wolf on Yahoo! Finance. I am your host Scott Melker, also known as The Wolf of All Streets. As you know, we take 15 minutes every single weekday to dive into the news that's moving crypto and macro markets, and we try to discern what is signal from noise. We have a lot of noise in the market right now, a lot of bad takes what about what's going on. So, we're going to try to dig in and figure out what the actual signal is and what's actually happening. Now, as I mentioned at the beginning, we had a pretty bad day yesterday for preferred around Bitcoin. Now, to be honest, Bitcoin trading kind of sideways, slightly down. We all know that it's trading around the 200 MA, which is historically been a great bottoming signal. So, Bitcoin itself remaining resilient, but it's hard not to notice all of the noise around the products that are built around Bitcoin. Now, as I mentioned, we had the STRC and Seda crashes yesterday. We have a great tweet here from the CEO of Strive, Matt Hougan. His product is Seda. Now, you'll remember there's been a rotation into Seda. It's been trading near par. Matt is a long-time bond trader and portfolio manager, has never underperformed the market. He really knows exactly what he is doing here. As I've told you before, Seda and Strive is the only product that they have right now for buying Bitcoin. They don't have the luggage that many people perceive strategy to have. They don't have all of the other debt and the other products. So, people are viewing this potentially as a superior product. This is what he said. Today was the most difficult day in the history of digital credit. STRC traded as low as 8250, SATA traded from par down to the low 90s before rebounding. Both of them rebounded massively, which is a pretty interesting tell. Now, here's what he had to say that I find even more interesting. What happened today was a leverage liquidation event, not a deteriorate deterioration in underlying credit quality. There's an old saying in income markets that the road to hell is paved with carry. When investors discover an asset that offers attractive yields, relatively low volatility, and strong underlying credit characteristics, many eventually decide that owning it is not enough. They borrow against it, they lever it, they attempt to enhance the carry. That works until it doesn't. Now, anybody who is crypto native, who has ever watched price action on Bitcoin, knows exactly what they're talking about here when you see a liquidation cascade of leverage. Most famously in crypto when Bitcoin broke below $6,000 in March of 2020 on the COVID scare, we saw Bitcoin rocket down to almost $3,000. The main exchange at the time for swaps was BitMEX. They literally turned the exchange off and said it was for maintenance because their order book was firing liquidations into no buy orders. So, the price of Bitcoin would have literally gone to zero on BitMEX that day if they didn't turn the exchange off. It was liquidating into an empty book. We've seen this not to that dramatic level in markets since the beginning of time, even with treasuries, which are viewed to be stable, but that doesn't mean that the Treasury all of a sudden is bad credit. It's the trading and leverage that is around it. So, the question is, if this was a liquidation cascade, who was likely doing it? We have another take on that here from Jesse Myers. Who says, "Strategy is fine. If everything stays as is, they can pay S T R C dividends for 32 years. So, anyways, why the sell-off? This appears to be a liquidation cascade." Same idea. "Over the last 6 months, the narrative became that S T R C volatility was reducing and price began to spend all its time in 99 to $100 range. This invites leverage. If you expect the price to always be north of $95, you can take on 20X with your portfolio to buy more S T R C and dramatically increase the yield on your portfolio. This works great until it doesn't. Seems familiar, right? This is the killer, though. S T R C is designed as a free-market asset. When attention shifted to S E D A and S T R C price flagged, it may have raised the attention of opportunistic short-selling hedge funds. By shorting aggressively, they could push the price down and start triggering margin calls and liquidations from folks who aggressively levered up their S T R C positions. Same idea from a different voice, and we know that Wall Street's favorite short on the planet for a very long time was M S T R or strategy, literally the most shorted stock stock on Wall Street for a very long time, and taking the same playbook to S T R C. Now, the favorable view of that on the other side is that if they short it down and cause a cascade, they're also usually the buyer at the lows. And if they can short it down to 8250, buy it 8250, it goes back to par, they've captured $17.50 on that move and the yield that's on top of it. Now, a lot of people proposing different solutions. I've talked about this one before. I am going to highlight it here from Jeff Dorman from Arca. Now, I will say that I was an investor in Arca and they went all in on Luna during the crash as it was crashing, so not sure that this is the best person to speak on risk management. But, he basically believes that they need to sell an enormous amount of Bitcoin and MSTR to help bring STRC back up near par and at least buy some time, continue to watch every part of your cap structure melt because of the uncertainty you've created. So, basically saying they should sell off a few billion dollars worth of Bitcoin, shore up their cash reserves, send STRC back up to par, and start again. I don't think that's what's going to happen. I don't think it's going to be needed. I do think that STRC will slowly float back up to par, but as you can see, this has become the hot topic right now. Now, some of the bad narratives, obviously, people are saying this is just like Terra Luna from 2022. Run. I mean, Terra Luna was backed by vibes and prayer and random bag of Skittles. Right? I mean, STRC here is backed by 846,000 Bitcoin. This is not the same disease. Now, we may have a fever, but it's not the same disease, and comparisons like that are complete and utter and absolute nonsense. So, moving on from that, we're going to see what happens with STRC and what happens, of course, with SEDA. So, the next story here, we have US agencies seek stablecoin customer ID rules akin to banks in new genius act pitch. Now, this is pretty wild. This is the Fed, Treasury, OCC, FDIC, and FinCEN jointly proposing a rule requiring US stablecoin issuers to identify customers like banks, full Bank Secrecy Act treatment here. So, that means they will know exactly who uses a stablecoin with full KYC and AML, what they did with it, full transparency into your wallet. Crazy here. We spent a decade terrified that the government would build a coin to spy on us with a central bank digital currency. Instead, what we did effectively was build it ourselves, handed a copy to Visa and Tether, and called it freedom. We didn't dodge the surveillance state here. We basically franchised it. Right? Now, this is interesting because we cheered the GENIE Act as an industry. Even I was a part of that until I talked to former CFTC Chairman, my friend Chris Giancarlo, just a few months ago. I'm going to play a video for you of exactly what he said about the GENIE Act. >> However, I will say, and I supported the GENIE Act, I'm disappointed in it, however, in that it doesn't address the issue of privacy. In fact, the word privacy doesn't appear in the GENIE Act. Unfortunately, with the GENIE Act, we got the w ...[Transcript truncated for size]...
Grock. Grock. You're not supposed to be making a right-hand turn. Hey, Grock. Hey, hey, Grock. You're supposed to be taking us on a navigation down Broadway, and you just tried to turn me onto West 57th Street towards the West River Drive. I'm still in a legal legally proper position to go straight down to Broadway. Can you make sure that's what happens next? >> Route still to Columbus Circle. I'll update it now to go straight down Broadway to Financial District. Continue straight on Broadway, then southbound all the way. >> Okay, please proceed. See, mistake. It's not working. >> Yeah. >> So, that's a great illustration of how you can become overly reliant. >> Uh-huh. And and this is one of your concerns with Grock and with this software more broadly. People get lulled. >> Well, especially if you're you're a tourist that don't know your You do not know your way around New York. Then you got to All these pedestrians, you got people on food delivery bikes, jaywalkers, all the rest of that stuff. This is the big leagues. And so, I'm comfortable with the technology, but here I have to be even more vigilant. >> And then there are some other features some owners might want to know about. >> NSFW means not safe for work. Content that's explicit or adult-oriented. I'm good with that if you are. No restrictions here. What's next? >> So, Grock, if we wanted to go crazy and start talking about some really risque stuff, would you do that with me? >> Sure. I'm game for risque chat if that's the vibe. No limits on adult topics. What's on your mind?
ANNOUNCER: BLOOMBERG TECH IS LIVE FROM THE HEART OF SILICON VALLEY WITH ED LUDLOW IN SAN FRANCISCO. >> THIS IS BLOOMBERG TECH. COMING OUT, PRESIDENT TRUMP POSTED A CHIP AGREEMENT BETWEEN APPLE AND INTEL SENDING INTEL SOARING. PLUS, WE SPEAK WITH THE CEO OF ANDURIL AFTER THE COMPANY WINS A PRODUCTION CONTRACT FOR AUTONOMOUS FIGHTERS FOR THE U.S. AIR FORCE. AND SPACEX SHARES FALL FOR A SECOND STRAIGHT DAY AFTER A 49% JUMP STILL IN HIGH ORBIT AS THE COMPANY CONCLUDES ITS FIRST FULL WEEK OF TRADING. THURSDAY, JUNE 18, BLOOMBERG TECH. INTEL IS AT A RECORD HIGH AFTER THE PRESIDENT OF THE UNITED STATES POSTED A VERY LONG TRUTH SOCIAL WHICH INCLUDED A REFERENCE TO AN AGREEMENT BETWEEN INTEL AND APPLE FOR CHIP DESIGN AND CHIP MANUFACTURING. SIMPLE STORY, THERE IS SOME BACKGROUND TO IT THAT BLOOMBERG NEWS HAS REPORTED IN THE PAST. IT ALSO TALKED ABOUT NVIDIA, AND A LOT MORE. BUT IT DID FOCUS AND IAN IS WITH US AS WELL AS MANDEEP SINGH AND WE ARE GOING TO START WITH IAN. AN AGREEMENT? WHAT DO WE KNOW? WHAT DO WE NOT KNOW? IAN: WE'VE PREVIOUSLY REPORTED THAT APPLE WAS EXPLORING USING INTEL AS A SECOND SOURCE FOR MANUFACTURING SOME OF ITS CHIPS, AND WHAT THE PRESIDENT IS SAYING AND WE HAVE TO BE CAREFUL BECAUSE NOT EVERYTHING HE SAYS IMMEDIATELY COMES TRUE, THAT THIS IS ACTUALLY REACHED A FIRMER STAGE AT DEFENSE THE CASE, THAT IS CLEARLY A BOOST FOR EFFORTS TO BECOME A MANUFACTURER FOR THE COMPANY. >> REALLY QUICKLY, HE REPORTED WITH MARK AND BRIAN IN MAY THAT APPLE WAS LOOKING AT HIS OPTIONS. EXPLAIN THE BASICS OF THAT. IAN: RIGHT NOW APPLE IS COMPLETELY DEPENDENT ON TSMC FOR MANUFACTURING. OBVIOUSLY THAT IS SOMETHING THAT THEY WOULD LIKE TO HAVE A SOLUTION TO HAVE A SOLUTION TOO, HAVE OPTIONS. SO YOU WOULD LOOK AT SAME SON YOU WOULD LOOK AT INTEL AS POTENTIAL BACKUPS OR POTENTIAL SUPPLEMENTAL MANUFACTURERS, AND THAT IS WILL HE UNDERSTAND IS GOING ON. >> THAT IS THE REPORTING AND THE DETAILS, LET'S GET THE ANALYSIS. MANDEEP SINGH, WHAT ARE YOU MAKING OF THIS? HE OUTLINED IN MAY THERE WAS A SENSE THAT APPLE WAS LOOKING AT OPTIONS. YOU HAVE THE PRESIDENT OF THE UNITED STATES SAYING THERE WAS AN AGREEMENT. HOW MUCH CAN YOU MODEL FOR THAT, THE PRESIDENT'S STATEMENT? MANDEEP: THERE'S NO DOUBT THAT INTEL IS NOW WELL-POSITIONED TO BE A DOUBLE-DIGIT REVENUE GROWTH COMPANY, EVEN WHAT WE'VE SEEN SO FAR WITH CPU DEMAND THAT HAS TAKEN OFF WITH AGENTIC AI, THE FAB SIDE OF THINGS WOULD GET A REAL KICKER. WHEN YOU HAVE ONE DESIGN WIN, IT FOLLOWS WITH MULTIPLE COMPANIES THAT WANT TO USE YOUR MANUFACTURING. THAT'S WHERE IT COULD BE VERY EXCITING IF ACTUALLY APPLE ENDS UP RAMPING UP. >> I KNOW THAT APPLE SHARES ARE UP 1%. OUTGOING CEO, SOON TO BE EXECUTIVE CHAIRMAN GAVE AN INTERVIEW WHERE HE SAID THEY ARE GOING TO HAVE TO RAISE PRICES BECAUSE OF THE COMMODITY ENVIRONMENT. BUT WHAT DID YOU INTERPRET HIM ON THE APPLE SIDE OF THIS STORY WITH INTEL, THEIR ABILITY TO KIND OF RE-INDUSTRIALIZE HERE IN AMERICA ON THE CHIP SIDE? MANDEEP: RIGHT NOW WHEN I LOOK AT TSMC CAPACITY, NVIDIA HAS ALREADY PREPAID 100 $20 BILLION FOR TSMC CAPACITY, SO EVEN IN APPLE, WHICH USED TO GET PREFERENTIAL TREATMENT AT TSMC RIGHT NOW, I THINK THEY ARE FEELING THAT NVIDIA PROBABLY HAS A BIGGER LOCK IN IN TERMS OF TSMC MANUFACTURING CAPACITY. FROM THE APPLE STANDPOINT I THINK DIVERSIFICATION MAKES A TON OF SENSE. SO FROM THAT PERSPECTIVE, I THINK TSMC'S MONOPOLY IS A PROBLEM FOR A LOT OF THEIR BIG CUSTOMERS, INCLUDING APPLE. IT MAKES SENSE THAT THEY ARE LOOKING TO DIVERSIFY HERE. >> AND FINALLY, THIS KIND OF TWO PARTS TO THE FOUNDRY STORY. THERE'S THE PROCESS, TECHNOLOGY PROCESS, AND THEN THE SORT OF SOLIDITY OF WHETHER THEY HAVE ANY CUSTOMERS. WHERE ARE THEY ACT WITH BOTH OF THOSE THINGS? IAN: WHAT THEY SAID IS THAT THAT PROCESS IS GETTING CLOSER AND CLOSER TO THE INDUSTRY STANDARD. THE AMOUNT OF GOOD CHIP TO MAKE FOR A PRODUCTION RUN. IN TERMS OF CUSTOMERS THEY SAID WE ARE NOT GOING TO TALK ABOUT IT. WE ARE HOPEFUL, WE'VE GOT A COUPLE OF FIT ITEMS IN THE FIRE THAT MIGHT COME TO FRUITION BUT WE ARE NOT GOING TO TALK ABOUT IT, WE DON'T WANT TO GET AHEAD OF OURSELVES. >> NEITHER INTEL NOR APPLE HAVE COMMENTED SO FAR. THEY KEY BOTH VERY MUCH. LET'S BROADEN THE CONVERSATION BEYOND CHIPS. THE NASDAQ 100 PUSHING HIGHER. KIND OF TRADING YOU THOSE RECORDS OF RECENT WEEKS. I WOULD SAY THERE'S A LOT GOING ON IN THE MARKET. SEMICONDUCTORS ARE A BIG PART RIGHT NOW. THERE IS THE SPACEX PART OF THIS MARKET, AND THEN THERE IS THE RETAIL INVESTORS. THE AI TRADE HAS BEEN EXPANDING. INVESTORS ARE LOOKING ACROSS SOFTWARE INFRASTRUCTURE, THE NEXT GENERATION OF TECH LEADERS FOR THE NEXT GROWTH. SO MUCH TO DISCUSS. I ALWAYS SAY THIS, ONE SESSION A MARKET DOES NOT MAKE. REALLY INTERESTING HOW WE'RE ENDED THIS SHORT TRADING WEEK IN THE U.S. WITH SO MANY FACTORS. FOR YOU RIGHT NOW WHAT IS THE MAIN DRIVER OF PSYCHOLOGY FOR THE TECHNOLOGY SECTOR? >> GOSH, WHAT I FIND THIS PEOPLE ARE FINALLY UNDERSTANDING HOW SIGNIFICANT THIS AI TRADE IS GOING TO BE AND THAT IS WHAT IS BEING REFLECTED IN SOME OF THE NEWS YOU ARE SEEING IN THE MARKET. THE IMPACT OF THE SHORTAGES OF THE SUPPLY CHAIN ARE ALSO BECOMING VERY OBVIOUS, WHETHER WE SEE WHAT IS HAPPENING IN MEMORY OR THE OPTICAL SUPPLY CHAIN. I FEEL LIKE THE MARKET IS FULLY UNDERSTANDING THE SUPPLY CHAIN IMPLICATIONS AND THE DEMAND IMPLICATIONS. YOU ARE GOING TO HAVE EIGHT CEO ON LATER WHO RECENTLY COMMENTED THAT TOKEN PRICING FOR HIM WENT UP TO X, IT WILL GO UP TO X IN THE NEXT SIX MONTHS. THAT IS AN INDICATION OF SUPPLY-DEMAND BALANCE. CLEARLY, WE ARE SIGNIFICANTLY, WE NEED SIGNIFICANTLY MORE TOKENS AND WE HAVE SIGNIFICANTLY MORE DEMAND FOR INTELLIGENCE THEN WE HAVE SUPPLY. >> IT'S INTERESTING THAT THE ANECDOTAL DATA SET IS SO DIFFERENT NOW TO WHAT THEY WERE AS RECENTLY AS LAST YEAR OR TWO YEARS AGO. I WANT TO TALK ABOUT SPACEX. HOW BIG A FACTOR HAS THAT IPO BEEN FOR YOU AND YOUR TEAM, AND HOW HAVE YOU RESPONDED TO IT? >> IT'S NOT NECESSARILY A FACTOR BUT CLEARLY INCREDIBLE SIGNIFICANT COMPANY THAT HAS A VERY OPEN-ENDED STORY ALONGSIDE IT. WE'VE NEVER REALLY SEEN A BUSINESSLIKE SPACEX BEFORE IN OUR CAREERS. I WOULD ARGUE HUMANITY HASN'T SEEN A BUSINESSLIKE SPACEX. SO WE HAVE FOUND A SIGNIFICANT PLACE ON OUR PORTFOLIOS FOR SPACEX. IN PART BECAUSE WE DO SEE INCREDIBLE APPRECIATION AS WE LOOK AT THREE AND FIVE YEARS. THE TRAINING ON IT, WHO KNOWS, THERE A LOT OF THINGS THAT AFFECT THAT TRADING. BUT WE ARE VERY BULLISH ON THOSE PROSPECTS. >> WE SPOKE TO CHARLES SCHWAB'S CEO EARLIER. >> THE RETAIL INVESTOR WHO HAS ALLOCATED ROUGHLY 20% OF THE DEAL WHICH IS AAA TYPICAL IPO, SO IT IS GREAT TO SEE RETAIL HAVING A MEANINGFUL SEAT AT THE TABLE. IT CREATED TREMENDOUS ENGAGEMENT WITH OUR CLIENTS AND BROADLY WITH RETAIL CLIENTS. DEMAND WAS OFF THE CHARTS AND THAT DEMAND CONTINUES. WE'VE SEEN IT IN THE THREE DAYS FOLLOWING THE IPO, NEARLY $7 BILLION OF ORDERS COME FROM OUR CLIENTS. >> CHARLES SCHWAB CEO. IS IT THE RETAIL TRADER DRIVING TRADING RIGHT NOW? ANKUR: I'M NOT SURE WHAT DRIVING IT. THERE'S A LOT OF DIFFERENT ASPECTS. >> APPRECIATE THE HONESTY, I DON'T THINK ANYONE KNOWS WHAT IS DRIVING IT. ANKUR: I DON'T KNOW. ALL I CAN SAY IS THAT SOMETIMES THE MARKET KIND OF THINKS ABOUT THE NEXT DAY OR THE NEXT WEEK AND FOR SOMETHING LIKE SPACEX, I THINK WHAT YOU HAVE TO DO IS LOOK AT THE LONG ARC OF TIME TO UNDERSTAND WHAT THEY ARE DOING AND THE SIGNIFICANT THEY HAVE CREATED WITH STARSHIP AND THE REUSABILITY OF STARSHIP WHEN IT COMES TO FRUITION. THE DIFFERENT BUSINESS MODELS THAT WOULD GET UNLEASHED. AND IT IS INCREDIBLY EXCITING TO SEE THIS COMPANY NOW BEING ACCESSIBLE TO NOT ONLY RETAIL, BUT ALSO INSTITUTIONAL INVESTORS LIKE US. >> HOW DO YOU ASSESS THE ROLE THE UNDERWRITERS PLAY IN IT, AND GETTING THE STORY OF THE PERSPECTIVES ACROSS TO THE VALUATION AND ECONOMICS OF THIS COMPANY? ANKUR: I THINK THEY DID A FANTASTIC JOB. I DON'T THINK IT COULD HAVE GONE ANY BETTER. YOU LOOK AT JUST HOW THEY MADE THE MANAGEMENT AVAILABLE, SEVERAL DIFFERENT KNOWLEDGE ZOOMS THAT INVESTORS COULD GET ON TO UNDERSTAND THE STORY M ...[Transcript truncated for size]...
Market commentators and big investors often talk about the state of the market. They specifically describe the market that we're in as a bifurcated market. Bifurcated meaning that it's split into two different branches. Another way of describing this is the K-shaped economy or the K-shaped market. In the economy, this means that we have we have the wealthy people doing all the spending and then we have people that are struggling to get by. But we've heard the same thing now for the market over and over again. For example, CNBC says that in 2026, the stock market is looking a lot like the bifurcated market that we had in 2025. If you tune into the financial news, you'll hear this point reiterated over and over again. >> Throughout the better course of the last couple of years now, the K-shape really prevailed, which means that that top end of the K-shape has propped up the consumer at large. >> We have that K-shaped market with the top end propping up the returns. We have Bill Ackman just recently noting the same thing. >> I think it's hard to make a statement on the overall market because it's really a bifurcated market. We're finding a lot of really cheap stocks in a market that's hitting new highs. >> It's a K-shaped market, a bifurcated market. One where we're hitting all-time highs at the same time that there's many cheap companies, according to Bill Ackman. Now, we can even see this illustrated visually of how these returns are playing out. There are winners in this market and they are almost solely the AI beneficiaries. These have been the winners over the past year and a half. As we know, they've pushed up the market to dramatic new highs. The AI beneficiaries go up while the AI exposed, the software companies go down. And then we have the AI insulated stocks or the global stocks that are simply being left out of the party. Now, amongst those big winners, of which we can name many, all these AI stocks that investors are currently very excited about, those are the ones that are pushing up the markets. The valuations are becoming stretched, investors are piling in, every last dollar is being pulled from everywhere else to spend on these groups of companies. And while that party is going on, I'm focused on a different group of companies. And in particular, I'm focused on one company that I believe is being left behind. That stock is Meta. Meta is a broken stock, and it's a broken company, or at least that's the impression that you would get if you looked at the news. Meta stock is now down to $582 per share. To put this in context, it is currently down 10% year-to-date. Over the past trailing year, it's down 16%. And then over the past 5 years, half a decade, Meta is only up 76%. That's notable because it's both being outperformed by the S&P 500, so broadly by the market itself, it's becoming outperformed. Then when we look at the tech index, which it's more closely related to, it is being crushed. The tech market's up 114%. And meanwhile, every day it looks like things are getting worse for Meta. In fact, it's down 3.16% on the day. And this is a case where I believe investors are getting it wrong. This is a case where I believe that investors are focusing on the wrong things. And it's very predictable why this happens. When we look at the history of the S&P 500, it is very common for investors to focus on the companies that have recently done well. This is a very well-proven, well-observed, and studied phenomenon. It's called recency bias. Basically, investors look at the market, they look at where all the excitement is, the dollars are flowing to, where all the money's going. And those are the stocks that get the most eyes, they get the most focus, and they get the most capital. Because investors buy them, the stock prices go up, which encourages more new investors to buy, forcing the price up even more. And this is also described as momentum investing. See, momentum investing puts a nice face on this phenomenon, which would be called a bias, but now it's a factor. You can focus on momentum and simply buy stocks moving upwards. The danger with this strategy, as we've looked at throughout history, is momentum works until it doesn't. Momentum is a well-proven factor in the market. It can push stock prices up quickly, but just like it pushes them up quickly, momentum investing is invariably followed by sudden and dramatic drawdowns. We've seen that many times in the past, and I've warned about this same thing before. 5 years ago, this is 2021, I published a video titled A Warning to Arc Investors. Now, we don't have to go over the entire thing, but we can just take a look at one aspect of it. This is at the time in 2021, in the trailing 10 years, you can see that the S&P 500 in blue, that was up 111%. The QQQ in yellow, that was up 232%, and then you had Arc Invest that over the trailing 10 years had trounced both indices. It's up 615%. Cathie Wood was the hottest investor ever at that time. She was on fire. Everything she bought went up. Everything was noted to be innovative and disruptive and the new companies that you had to own. They're going to change the world. They're going to revolutionize everything. I heard all of these arguments. And looking back, you may say, "Well, that was obviously flawed. The valuations were unreasonable. Investors should have known that it would come back down." But they didn't. Many investors were bought into this. Lots of investors owned Arc Invest. That's why the fund went up. It went up because both institutional and retail investors were buying it hand over fist. Since that was published, Arc Invest stock has crashed. It's still down 50% from its all-time highs. And the S&P 500 and the QQQ have raced away with the lead. The investors that bought into Arc Invest were devastated, of which there were many. There was a lot of capital in this fund. It wasn't some small niche fund. This was massive and mainstream. In fact, Arc Invest topped the list of Morningstar's wealth-destroying ETFs. It destroyed over 14.3 billion dollars, primarily of retail investors' money. Now, the reason that I bring this up is to show that human behavior does not change. The circumstances change, the companies change, the big time investors promoting promoting everything changes, but overall investor and human attitudes do not change. Back in 2021, it was ARK Invest, it was disruptive innovation, it was companies that were working with technological disruption. These were the platform category changers and the killers. These were the companies that everybody needed to own to get the best returns. And investors flood into them. The marketing was accepted. Today [snorts] there's a very different group of winners. I believe today's winners are stronger, fundamentally speaking. Many of them have real fundamentals and real capital behind it. But we're seeing a lot of the same attitude of investors chasing returns with recent winners. And that recency bias, I believe is taking hold in this market. At the same time, while the rest of the market is chasing all these recent winners, it's leaving opportunities. Companies that are being left behind that are fantastic companies. Meta being what I believe is the primary one today. When I look at Meta, this is a company that I believe strongly enough that I have over just the past 6 months, I've added $182,000 to this position, okay? $182,000. My average share price is 684 bucks. That currently makes me around $28,000 in the red on this company. It is my biggest loser uh by far. Meta's the the biggest one that I'm in the red on. You can even compare it to the Duolingo, right? Duolingo's down 70%, but because that was a much smaller position, that's only down around 15,000. It's actually moving upwards. Uh we're getting closer to break even on that one. But when we really look over my entire portfolio, Meta sticks out as a sore thumb of a company that continues to go down. And there's a number of r ...[Transcript truncated for size]...
A comment that I often get is, "Sven, what do you think about Pepsi?" Then I look at the business, people are attracted, dividend yield 4%, P/E ratio 22, Pepsi strong brand. Is it a buy? The stock is at 52, close to 52-week lows, downward trend. Should we start accumulating?" First and foremost, I have to say that Pepsi is not the business it was in the '90s, 2000s, and 2010s. Now, the game has changed. So, we have to look at what kind of investment this is. The business, the outlook, the capital allocation, which is key here. Make a valuation on our template, put it on the investment quadrant, and then you can see whether it is a buy for you. If you look at the business, a lot of brands, Cheetos, Doritos, Pepsi, 94 billion revenue, 15 billion operating profit. Looks nice. The brands, they are there. Quaker. Probably you drink or eat something of that. And then if you look at the growth, look, 7% growth. If they keep on doing that, add the 4% dividend, that's an 11% return. Sven, what's wrong with that? Isn't that a good buy? They have been growing steadily, 8% earnings per share. They must be good. Look at all they are doing as they combine things. They are constantly on the verge of growth in the sector. But then I look at organic revenue growth, 1, 2% net revenue growth. They have to do some acquisitions. And if you look at revenues, actually, those are stagnating, a little bit declining. Profits, now we are at 8.7. This is now 95. Acquisition, okay. But if you look at the numbers, the numbers are not good. You see, something that's growing is the debt levels, which means that they are using more and more debt to keep the business afloat. We look at cash from operations, what they said, and then we look at capital allocation. Capital expenditure, 4.5 billion per year. This is what they have to invest to keep things afloat. Cash acquisitions, look again. A few billion now lately. When you add this and this, exactly what is left is 6 and 1/2 of free cash flows. They're doing 1 billion on buybacks, 7 billion, so 8.7. They are in the red 2 billion per year. That's the dividend and the business is not sustainable. However, let's make a valuation to see at what price even a declining non-sustainable situation is worth it. Because if you look at the dividend, if they keep on growing at 7%, that should be also the return. But the market is thinking differently. What's priced in? So, I have added it to our value intrinsic value template. You can download this on the free course in the link in the description below. Also, check out Interactive Brokers. Click on the link to support the channel if you want the cheapest broker. But then again, I have put here the Pepsi stock, the price, and let's now calculate our return. Dividend per share, 5.86 per year. And then, if they keep on growing at, let's say three 3% per year, discount rate 10%, terminal multiple 20, which is a 5% dividend yield, then the intrinsic value is therefore a 10% return. If they keep on growing at, I don't know, 5%, which is lower than the 7% historically, but still 5% is more conservative, 10% discount rate, terminal multiple 25, which represents a 4% dividend yield, there you go. It is close to the stock price, and you can expect a 9% return from Pepsi going forward. However, if let's say they grow 3% in the first 5 years and then they decline the dividend by 5% per year, the dividend yield goes from 4 to 7% the terminal value is 83 down the road, which is 50% down over time. If we put scenarios, I don't know, 30, 40 for the growth and then another 30 for the negative one, the stock price now doesn't offer a margin of safety. It's valued for a 5-6% return. The thing is that it's the capital here. They need to constantly acquire, pay a lot of money to acquire new brands, to develop, to push, to push, to marketing, to this, to that and that business model is not the same business model when they were expanding globally 10-20 years ago. Sugar, this and that it's getting ugly and the ugliness is shown in the fact that they are spending 2 billion more on rewarding shareholders than they actually make to keep the business afloat. Little bit of inflation, that is their revenue growth. There is no real growth. At best, this is flat for the next decade and you get a 4% return from it. Therefore, Pepsico, if I would look at our table, I would put it here. So, the reward is low. The risk is relatively high compared to others. Therefore, it's not an investment that I would say, "Oh, wow, this is it." Perhaps in a basket of 4% yielders, but I think we can find better and we'll keep on looking for better. Subscribe for that. Check what I do on my research platform. There is something better.
The Federal Reserve has been trying to get the rate of inflation down to 2.0%. That was their target. That was their goal. And as you know, they've been doing um you know, a really good job of failing for the past 5 6 years to getting it down to 2.0%. So what they did is now they changed their goal, you know, their target from 2.0% to 2.9%. That is a big difference. Now I just want to say what's crazy is that mainstream media outlets have not picked up on this. It's as if mainstream media did not watch the Federal Reserve FOMC press conference at all. So, in today's video, I'm going to show you what's really going on because apparently mainstream media, in my opinion, is being dishonest or just negligent. So, the Federal Reserve had their meeting on Wednesday, June 17th in the afternoon, and this was the first meeting with Kevin Worsh as the new chair of the Federal Reserve. So, we're going to begin with the official press release by the Federal Reserve, and then we're going to move on to the press conference right after that. So this is what they released 30 minutes before the press conference. I know the text is very small so I'm going to read it to you. It says the committee decided to maintain the target range for the federal funds rate at 3.75%. So this simply means that at this meeting the Federal Reserve did not lower and they did not increase interest rates. So they basically kept interest rates the same. Okay. So this is page two of two of the press release. And don't worry, I understand that the text is small. So I'm going to be zooming in and reading as well. So here it says that the Federal Reserve decided unanimously to keep interest rates the same at this meeting. Okay. So listen, the media is saying that the Federal Reserve is acting hawkish under the new Fed chair Worsh hawk. So hawkish means that the Federal Reserve they're going to be tightening monetary policy by raising interest rates and or draining money out of the system, right? However, not a single Federal Reserve member voted to raise interest rates, which in my opinion, that's not hawkish. Well, you could say it's not dovish either, but it certainly carries no indication of being hawkish. At least that's my opinion. Now, I want you to take a look at this. It says, "When appropriates, the Federal Reserve will print money and expand the balance sheets." Like, does that sound hawkish to you? Like, you know what hawkish would be? if it said the complete opposite of what's written in their press release. Hawkish would be if they wrote that they're going to shrink the balance sheet, they're going to drain money out of the system, not when appropriate, they're going to print money and expand the balance sheets. Like if you want to argue with my interpretation, like how do you argue with what's written right there straight from the Federal Reserve? Now, if you want to take a look at their summary of economic projections, their SCP, which is the Federal Reserve's projections, then you can find the full PDF right here on the Federal Reserve's website. All right, so let's take a look at the SCP. It's 17 pages long. So on page four of 17 is the dot plot. So this is the source of the mainstream media labeling the Federal Reserve as hawkish. So the dot plot shows that nine of 18 Fed members projected that the Federal Reserve's interest rates going to be higher by year end compared to today. And the other nine projected that rates will be the same or lower by year end. But I must remind you that these are just projections and they change wildly from SCP to SCP. Okay, so mainstream media and institutions are saying that, oh my goodness, Kevin Worsh is so hawkish. But I find that funny because you're going to see in the press conference that he even got called out by multiple reporters for not being hawkish. You know, apparently the media outlets, again, they probably skipped over this part, but I'm going to show it to you because I don't have an agenda. Now, allow me to show you the highlights of the press conference. I'm going to show you five video clips, and you're going to see everything for yourself without the media's twist. So, we're going to go straight to the source. So, listen. Coming into the Federal Reserve, Kevin Worsh promised to reform the Federal Reserve. But that's not going to happen. No, instead, he's going to try to improve the Federal Reserve with task forces that he's going to create rather than just reform or revolutionize the Federal Reserve. So, in this video clip that I'm going to show you, my best guess is he's talking about a task force. You're going to see it for yourself, but he's talking about changing the methodology to calculate inflation. My best guess is they're going to use favorable data so that inflation appears lower than it really is. So, please take a look. The third task force, the one on data, will evaluate new information sources and consider methodological changes to improve data gathering with the aim of giving policymakers more accurate, relevant, contemporaneous, and perhaps most important, actionable information on the state of our economy. >> Okay, now I want to show you this next video clip. And I found it very funny because the reporter asks, "You want to improve the data? like, have you not been looking at all the data this whole entire time? And Wars says no, they want to improve the way that they calculate the rate of inflation because a lot of it it's done through surveys, outdated surveys, bad questions, etc. So, the question is, okay, well, how are you going to improve the data? And then Worsh says, and you're going to see it, he says, I don't know. I got to make a few phone calls to figure that out. Okay, but you got to think about it like what does improve the data really mean? It could mean manipulate the numbers through the calculation to make inflation, the rate of inflation seem lower than it really is. >> Well, great. And then just on your the data task force and everything else. I mean, generally speaking, uh I think people feel the feel the Fed looks at everything already. Certainly that was the sense from before. Uh what's is there data that you feel is not given enough weight? Uh I mean you mentioned the trimmed dean in the past, but again that's well known to certainly most Fed members. So, what is that task force looking at and and what what might be the I mean, I know you don't want to prejudge the outcome, but are there examples of data that you expect might be given more weight? Thank you. >> So, you're answering my question, so let me say I don't want to prejudge the outcome. I also don't want to say too much about what they're going to do because I still have a phone call or two to make before I've nailed down the people that are doing that. Um, I'm interested in what the outside experts view is on the subject. I'll say this generally um most of the data that central bankers and other government officials in the United States consume come with old-fashioned survey methods u a national accounts of the what the US economy looks like that looks very little like the US economy in 2026 um survey methods that don't have response rates that we need asking questions that might have been quite applicable a generation ago that are less applicable now. So even inside of official statistics, I would be open-minded if the task force and our own best thinking had recommendations how those official statistics can be brought up to a standard of of our time using new analytic methods. Now I want to show you this video clip. This is the important one where Worsh says that the new inflation rates like the targets their goal is to get inflation down to 2.9% rather than 2.0%. 0%. And that's a big deal because that's going to give them the excuse to start cutting interest rates when the rate of inflation is closer to 2.9% rather than 2.0%. So it'll be much, you know, much easier to achieve. And of of course you have to keep in mind th ...[Transcript truncated for size]...