The Tesla Recession & Cutting Tesla | Confronting Gary Black

hey everyone welcome back to another

episode of the meet Kevin show today we

have the honor of being here with Gary

black in Gary Black's office the future

fund ETF thank you so much for inviting

me into your office thanks for coming

out so we have to start with uh the

elephant in the room when are we getting

stimulus checks again

hopefully not a lot of people are

talking about that and I do want to

start about the recession and we'll get

into Tesla of course uh but a lot of

people have this mindset that if the

Federal Reserve stays higher for longer

that there will end up being not only no

worries about the debt ceiling but

actually potentially bipartisan support

for supporting maybe lower income

individuals or uh you know uh benefits

for unemployment extended benefits again

what do you think about that yeah I

guess I'm more of the camp that we're

not going to have a deep recession I

think it's going to be you know six

months and it'll be over

I think the FED is smart enough to know

that they already broke something you've

seen a couple banks already go under you

might see First Republic go under which

would inspires me and at this point I

think they're going to do one one more

one and done one until we raise rates in

May by 25 that's next week and then I

think they're just going to sit here for

a while and see what what the impact is

and as you've seen with the economy

today GDP was up 1-1 not not a big

number

um fourth quarter was revised down to

two six you still see claims coming down

so there's still strength and inflation

has has really retreated if you look at

don't look at a year Rolling numbers but

look at say six month numbers yeah

you're down to about three percent

annualized inflation wow and so I don't

think that the FED really needs to keep

pushing rates up so my bet is we're

going to get to next week they'll do 25

they'll probably signal that they're

going to want to pause and I don't know

how explicit they'll be yeah and then I

think that'll be enough that the economy

can kind of and I don't want to be

Goldilocks about it or pollyanish about

it but I think we can float down to

about a zero Maybe minus 1 for the

second half and then it'll be over

because at some point the fed's going to

start cutting rates if we're in a

recession right so so maybe we get in

other words a quarter where we've towed

the line at I think what the next

quarter's estimate for Q3 is maybe a

point uh 0.2 I think uh and then you

think maybe negative for Q4 but you're

not seeing a signal that with certainty

will be negative for two quarters in a

row or more huh I don't see it and look

I talked to business owners just like

you do I'm a business owner nobody can

get any help if you go out to any

restaurant here in Chicago everybody

says this is there's not a recession

unemployment is the lowest it's ever

been they can't get help and so at this

point we clearly are not in a recession

now okay the question is is the Fed

going to be smart enough to stop before

it breaks something else and I think

yeah look they're they're they're smart

people they've got a lot of research

they've got a lot of data I think

they're going to basically say you know

things are slowing we the banks are not

in a great situation right now because

you still have deposits being

disintermediate because you know people

can put money into a treasury bond or

money market fund and earn you know 200

basis points more than they're earning

in their savings accounts right and I

think the FED is going to be smart

enough to say we can't keep pushing

rates especially if inflation is is

really coming down which to me I think

the bigger risk is deflation and

inflation right now from where we are

but some people though they talk about

well what if we have a wage price spiral

I mean if Walmart's raising wages or

Starbucks or Chipotle if they they keep

having these margins and they're able to

pass on these prices like we saw in the

Chipotle earnings or the Nestle uh

earnings isn't that a risk that if the

FED pauses too soon people try to see

through this tighter Period start

spending even more again and just

reignite inflation it's a risk it's a

risk and look we follow all the consumer

names we own Chipotle it's our third

largest position and nice they pass

through nine percent pricing last year

yes and you look at Coke Pepsi

McDonald's Starbucks you know they're

Nestle they're all pushing through

pricing so that is the risk but I still

believe at the end of the day if the

economy starts slowing dramatically and

I don't I'm not smart enough nobody's

smart enough to know how bad it's going

to be in a second or third quarter but

we did have as you've pointed out before

we had two quarters last year of

negative growth you know small numbers

well like minus one or so yeah but I do

think that that's going to cause the FED

to say you know what let's hold off

let's wait because they have a Fed

meeting next week and then they have

another one in June and the big question

is what are they going to do in June are

they going to raise rates again are they

going to say let's hold and see what the

impact is and if the economy is truly

slowing which again first quarter slowed

to 1-1 down from 2 6 in the fourth

quarter will the FED say you know what

it doesn't make sense for us to to to

raise again let us just sit let's assess

the impact and can they navigate this

the so-called soft Landing where GDP

doesn't you know go that negative I

think everybody's which is scary

everybody's kind of agreement will have

some sort of recession right I just

don't think it's gonna be that deep and

I don't think it's going to be that long

because I do think the FED will start

cutting rates later this year ah okay so

you are in fed cut Camp yeah yeah okay

because the economy is going to slow and

and it will go negative at some point

this year I believe so you do think we

are going to Trend towards negative it's

coming right so when I look at you can

look at CPI

um X food and energy you can look at the

pce which the FED likes we'll get a

March number

um tomorrow

um but the PC if you just look at the

last six months it's about three you

know it's not it's not a huge number

it's not that's why I don't like this

look back of let's look back a whole

year sure because you're basically

dealing with the the the ratification of

what happened in covet where the Fed was

stimulating so much and the money supply

was growing so much and there was all

this stimulus going on you couldn't help

but have inflation but but since that

time you know you you see a lot of

people looking at M uh M2 M2 is is for

the first time in I guess it's 90 years

it's declining but if you average it as

you've pointed out and others have

pointed out you average what happened

the last you know year with today yeah

it's not really it's normalization it's

not really that bad when you think about

it that way now would you say that when

we look at inflation there's potentially

this risk that we'll see that Goods

deflation inventories have built up so

heavily Freight is supposed to be in a

recession already that if the FED senses

stickiness in in Services

Hotel well stickiness in other words

prices

um businesses like restaurants the

Chipotles hotels being able to continue

to raise prices do you think they would

hike us further into a recession just

for that part the the travel and the

hotel and the food that seems to be so

sticky right now you know I don't think

so because you know rents and home

prices which are still the biggest part

of CPI yeah are coming down and we don't

know you know how quickly they're going

to come down in the next six months so

yeah you could see the consumer package

Goods maker others raising prices

because you know their costs are going

up but I mean you know this better than

me you you're you're you you buy homes

oh you know you see home prices coming

down you know pretty sharply and rents

are starting to come down so I think

that's going to be the bigger Factor

yeah there's a big debate about you know

our investors being dumb here or are

they smart and

you know it's it's I don't have a

crystal ball like Elon says he doesn't

have a crystal ball but I do believe

that the FED will cut rates and I do

believe while we're not in recession

today if the FED keeps pushing rates up

because you have some companies as you

say they're being sticky about prices

they keep praising them

we will have a recession but I don't

think the fed's that dumb I think so

we'll stop if we have that even shallow

recession why not wait until then I mean

won't stocks bottom closer to the

recession usually and so you know when I

look at stocks today you know I see a

three and a half percent 10-year

treasury you know the PE uh on the s p

is about let's call it you know 17 18 on

next year's earnings so if you look at

the what I call the E over p ratio

versus 10-year treasury yeah stocks are

still offering about 200 basis points of

extra and if you look at that

historically that's a big spread so to

me stocks are more downside then well I

look at his stocks are pretty cheap oh

really okay relative to the 10-year term

the earnings risk premium so small

though or you still think the 200 is yes

okay okay so risk premium still high

right now doesn't that signal though if

we go into a recession I think that

should spread down and tighten if we go

into a recession you can see earnings

come down a lot and so that's that's the

risk but I go back to I just don't see a

high risk of a deep recession if you

have a you know one let's call it a one

to two percent GDP decline yeah and it

lasts for six months

you're not going to see earnings

revisions that are that dramatic so I

still think that the Market's still

relatively cheap okay but if you're

trying to time the market and you're

getting in and you're getting out based

on you know what the physical it's hard

to do that it's just you and I know

that's why you have to stay you know

fully invested unless you think there's

a Calamity coming where we're going to

have like a really deep recession like

you know 19 uh you know 78 79 or you

know we I wouldn't call the coveted

recession deeper said it was over in 30

days yeah 30 days literally yeah but if

you if you believe we're going into a

you know 1930s type depression yeah

you're pulling your money out but I

don't see that it's interesting 30 days

to slow the spread was really 30 days to

slow the declining stock market

uh but so okay so then what percentage

of a downside do you see I mean if you

had a diversified portfolio now where

you were in the Spy or the NASDAQ

um you know Technologies would you be

thinking okay maybe if you invest now

for the long term you got a 10 20

downside or are we facing potentially a

50 to 80 because you're not going to

have a deep recession the FED is going

to stop before things get too bad so I

could see another 10 to 15 percent

downside from here okay

um remember the markets are up this year

so we've had a good year so you get a

buffer yeah last year wasn't great as

you and I know but but you know this

year I could see a 10 to 15 decline

going into recession but what you've

normally found is once the FED pauses

and people conclude that there's no more

rate hikes that people start discounting

that the fed's going to cut and so the

question is if they signal they're going

to wait they're going to raise rates in

May and then they signal we're gonna you

know we're not gonna one and done we're

gonna wait a while and see what the

impact of this is

and then people will start anticipating

they're going to cut the next move is a

cut and that's usually the time you want

to be in the equity boot you know you

want to be in equities when the FED is

cutting and back to expanding money

supply because they're signaling that

the next move is no more going to be an

increase it's going to be declined and I

don't think they're going to signal that

I think they're just going to Signal

they're going to pause next week oh so

you wouldn't wait for that sort of pivot

so to speak you would want to be in

before that because of their signaling

to that and we're all in right now I

mean we we keep our ETF you know pretty

much you know maybe 96 invested you know

always keep a buffer of cash just to

have it so we could buy something if

it's down a lot and we really like the

name

um but we're we're not we're not bearish

about the economy and we're not that

bearish about stocks because again when

I look at e over P relative to the

risk-free rate yeah I still have a big

spread meaning Equity is still cheap to

make relative to the history no Kevin

O'Leary I spoke with him yesterday he's

at 30 cash right now do you think that's

wild is that a big opportunity cost it's

probably because he believes we're going

to have a deeper recession than I do I

just I don't I don't know if the FED is

as stupid as everybody thinks that they

have been stupid sure but they were

printing in March of 2022. they were

printing cash like there was no tomorrow

because of covid and then you know

they've been fighting this this

Boogeyman of inflation which was caused

by all this money printing from 2020 and

all this excess stimulus from the

government yeah but when you average it

you say okay I've got inflation of let's

call it six and now you know the

marginal inflation as I call to take the

monthly and then multiply it by 12. sure

of one or two you're kind of back to the

norm of two to three and so I don't know

if that's something the FED thinks about

but I do believe they're going to stop

doing what they've been doing which is

hiking links every month yeah I find it

fascinating the in the after the 82 Paul

volckering the the rugging it seems like

the FED took this path they even said it

of opportunistic disinflation where they

would just let inflation run a little

hotter they'd just be at nine and eight

and just slowly wait over time as it

went they took 20 30 years to get it

down to two percent why doesn't your own

Powell just do that I mean why not just

be okay with three to four for a little

bit let things keep expanding unless he

doesn't want inflation expectations to

get into people's you know psyche

whether to your point from before you

know they're going to their employer and

saying I want a you know three and a

half or four percent raise yeah

um I think he he doesn't want that

inflation expectation which right now

let's call it two and a half to three to

you know gravitate up into the mid

threes because then people are gonna

then you do have a wage price type

spiral risk right where you know

employees which again you know there's

no unemployment right now they can say

hey you want to keep me uh you know you

got to pay me more you got to pay me

three and a half four percent Peter

Schiff had this idea that everybody uh

like economists and analysts and I do as

well we look at these inflation

expectations whether it's the five year

or break evens or the University of

Michigan surveys Peter Schiff had this

response to me he said Kevin nobody when

they go out and actually buy stuff

thinks about inflation expectations

they're like can I buy this or not it's

in your psyche it's just meant deep in

there you don't even know it's there no

it's there you're just thinking about it

and I see it here you know our rent you

know this where our offices are it's

about about 90 percent full you know it

used to be when we first started running

it was like 30 full oh wow it's like you

know are you early our lease is up and

they wanted a a seven percent bump in a

rent I said you're out of your freaking

Minds I mean there's there's vacancies

all over the city yeah and office real

estate you know they try but then you

know people have got to say in my mind

I'm not paying that but again if I'm if

I'm an employee and I know that you know

everybody's begging for me to come work

for them because nobody nobody can get

help right you might be in this mindset

because your inflation expectation

whether whether you quantify it or not

uh is is higher now you might say you

want a higher increase in order to stay

put yeah I just I don't know I don't I

don't I don't see that that that's

happened yet okay but we'll see the next

six months I guess so so you have

um I guess now would be perfect time to

bring up then Tesla if the economy isn't

normally I know do we have if if the

economy is uh not going to do so

horribly uh you did just cut a little

bit of your Tesla position after a price

drop right before earnings good job

um your thought I mean is this something

you would look at increasing your

position or exposure to again in the

future or is this you know why we're

going to keep it here and see if it

grows look when I look at positions and

especially at the top of the portfolio

because as you know that's what drives

your performance sure we always look at

probability weighted upside downside and

so before I could calculate the downside

because I thought you know the odds of

them bringing their gross margins below

20 percent were very very low yeah they

even said that in their first or their

Q4 earnings column but I don't know

because and it's not like Elon is saying

that we're going to bring margins in a

zero he's saying you know technically we

could and we're the only company in the

industry that could do that and he's got

a lot of margin to play with but they've

already brought their margins down from

where they were leading the industry to

now they're the average oh really yeah

they're average now and you know there's

reports out there's one from Bernstein

that posted and I actually posted this

table on Twitter where you know they're

they're at 19 gross margin in the first

quarter we're looking at it bottoming it

out about 16. oh wow I think it'll get

close to that 15 here because they took

prices down again yeah well that's true

so I'm using 16 for second quarter and

you know earnings estimates have come

down

um since they took this last price hike

which was right before earnings uh

earnings estimates have come down about

11 for this year about 10 for next year

2024. and so that's why the stock has

fallen Falls with earnings and people

haven't really

um taking the multiple times there's not

been a re-rating of the multiples

although they could have said well now

that margins are going down and you

interestingly enough you haven't seen

volume estimates go up we haven't taken

our volume estimates up right which in

theory if there's a good elasticity of

demand sure price down volume up but

nobody's taking estimates of volume up

yeah so yeah which is kind of an

interesting phenomena which I I would

you know love to ask Elon that question

why why people aren't and why they

didn't take up their volume forecast

that's true they kept it at about 180.

yeah so

you know back to why we took it down we

just look at upside downside and we just

thought there was a lot more downside

than before because you know margins

could be sick gross margins could be 16

but they could be 10 they could be five

yeah we just don't know and what I'm

interested to see is what are

competitors going to do with their gross

margins over the next three to six

months are they going to follow Tesla

down and Does Elon want them because

that makes especially on EVS that makes

EVS more affordable and Moss right in

the whole industry you're staying down

so EV adoption in theory should go

higher or do they as most of them seem

to be indicating say we're gonna we're

gonna try to hold the line on prices and

keep our margins where they are and I

think they'll probably do the latter and

then the question is will Tesla gain

market share when everybody else is

holding their prices where they are and

elon's down you know 15 to 25 prices

since the beginning of the year and so

for what I've seen is you get this and I

call it a sugar high you get some volume

increase when you first announce a price

site because everybody who's looking at

a test as well and and I see it you know

because I always pretend I'm looking to

buy a Tesla I have the

Tesla store here on Rush Street

hopefully they're not watching this they

always call me up say we just took

prices down okay you know and the

question is are you getting people new

who are not going to buy a Tesla but

they were thinking about buying Tesla

and then they pulled the trigger because

now the price is lower it's on sale and

of course you got the media screaming

Tesla has taken six price declines even

though they've taken three right

um and so

I don't see volumes really responding

that much to the the price hikes because

I think you get the short-term Sugar

High you accelerate people who are going

to buy a Tesla anyway as opposed to what

you want are the people who are driving

ice Vehicles you know transitioning

traditional and saying you know what I I

want to buy an EV now whether it be a

Tesla or a Maki or a ID for whatever it

is because Tesla's going to get its fair

share and the us are going to get 60

globally they're going to get 20 and so

I wish what they would do is rather than

use pricing which is a short-term tool

it you know does drive volume in a very

short term but then you know and you

heard Elon on the first Court he said

well uh orders are coming at twice the

rate of production right well that

didn't happen by the end of the quarter

so some something changed sure and I

think you're going to see the same thing

in this quarter because when you

announce a price cut you get a lot of

news people go into the store they buy

but then you are for some people you're

pulling you're pulling volume forward

and there still is this effect where

people are still waiting for a further

price cut because they've heard the

media say the sixth price cut that Tesla

has taken this year well let's just wait

for the seventh one or the eighth one or

whatever it is I wonder is it possible

that you could have people who say well

if prices are trending down I'll wait

what you're actually creating is are

negative inflation expectations for

Tesla vehicle prices right and in theory

when the time comes that the Federal

Reserve begins to cut and we start

seeing interest rates Trend down

perhaps people might have this

impression that oh it's the bottom and

we've now pent up a lot of that demand

could we go back to weightless or would

that be unimaginable we could and so the

biggest question I get from people you

know and I talk to a lot of Institutions

and I talk to retail people on Twitter

but you know the institutional Community

probably the single biggest question is

why is the elasticity of demand for

Tesla solo why is it is it can you give

us a reason and I've tried to list you

know four or five reasons that I think

it is one is just you know the early

adopters who wanted to be climate

friendly Green whatever you want to call

it make a statement to their neighbor's

head or self-driving whatever maybe I'm

favoring the environment they've bought

and you know now what you got to do is

get the people who they have the money

but they're afraid they're going to run

out of charge and I hear that all the

time so that when you see these surveys

about why why don't you buy an EV number

one is cost which is a perception issue

because operating costs are lower

because yeah very low you don't have to

you know fill it up with gas or oil and

your maintenance is lower I don't think

people will rescue once once they're in

V I can't imagine no you don't go back

once you go either you stay easy but the

number two reason is because of fear of

range anxiety they're afraid they're

going to run out yeah and I think what

what this is my view and I know it's

controversial but rather than cut model

Y which is the best it's going to be the

best selling car in the world this year

rather than cut that by another thousand

dollars so the bottom price now is 46.9

that's the standard range the long range

is 49.9 rather than cut that by another

thousand dollars that costs tests of 500

million dollars spend 50 million and

educate the non-ev users of why EVS are

better advertising we'll call education

I know advertising is a dirty word it's

a bad word but but let's call it

education and again I think what what

they could do is they could talk about

lower operating costs they could talk

about well we'll call it near autonomy

because FSD doesn't allow you to just

curl up in the back seat and read a book

or play a video game we'll call it near

autonomy the idea of not having to go to

a guest station which stinks and smelly

it's dirty you know in most States

including this one you have to pump your

own gas yeah yeah sure and to be able to

just go to your garage and plug it in

like you plug your iPhone in that's like

a huge selling point resale values are

much much higher on AVS than they are

traditionally and you're helping to save

the planet yeah and you know to me if

they just did that and when after they

they can show Tesla because Tesla's the

hero of the ad so you show Tesla's

accelerating and the beauty of the Tesla

yeah you're going to get your fair share

of anybody who decides to go EV as you

said once you go Evie you don't go back

so they'll get 60 share in the U.S and

20 around the world and to me that would

be a worthwhile expenditure of 50

million dollars as opposed to let's just

use a blunt instrument called price cut

and slash 500 million dollars at the p l

which to me it's like why you're not

going to get much out of it is it

possible that the model 3 will be the 25

000 car it's possible with these price

Cuts it's interesting when you look at

there's a lot of people who track

inventories out there and now Tesla

actually has it on their website you can

go in and you can actually you know

build a model for tracking inventories

model 3 is the one that seems to be

model X is struggling the most they have

the most inventory Model S second model

three is is is if you if you just look

at what model 3 inventories are doing

it's gone up pretty dramatically yeah um

in fact you know Troy tests like Kauai

have a lot of respect for he's great

he's on Twitter you know he will say

that the inventories now and tests are

the highest they've been even before the

January 12th price Cuts but and it's not

model y model Y is actually kind of

rolled over a little bit it's model

three it's Model S model X the model 3

is the interesting thing to me because

to your point you know the starting

price is 39.9 you get 7 500 EV credits

you're down to 32 and yet it's not

selling yeah and so the question is why

and so one reason is because that 399 is

for a rear-wheel drive model 3 and half

the country not you but here at the

country it still snows so you don't want

a rear wheel drive car you want an

all-wheel drive car and then there is no

model 3 long range and enters the

performance now what's interesting about

the performance and I pointed this out

the other day model 3 Performance is now

priced at 52.99 and then you get a y and

model y's at 53.95 so you've got a

thousand dollar differential for

something that's clearly much bigger oh

my gosh much more powerful why would you

just spend a thousand dollars and get a

model y so I can understand why model X

is not selling because model X you don't

get

um the 7500 EV credit price is about

forty thousand dollars more and you know

all the effort to to cut price has been

in model y oh yeah whereas model X I

mean they actually increase price I

guess a Week Ago by twenty five hundred

dollars yeah so I understand why model Y

is not selling model three I don't know

why Tesla is being so called stingy on

cutting price on model 3 Performance I

don't know why there's no model 3 long

range yeah people say it's because

because they're revamping into model 3

there's going to be a you know there's

this highland project and they're going

to introduce them maybe that's why and

the model 3 rear wheel drive really

should be an all-wheel drive vehicle

because again half the country it still

snows in yeah

then again that would be throwing in uh

well unless you moved it to the front

that'd be throwing in another engine to

make it all wheel essentially or another

motor people get mad when I say engine

electric motors but you have the

technology obviously the standard Range

model Y is all-wheel drive yeah yeah and

look most cars today are all-wheel drive

so you got to be competitive if you know

you're going to spend 40 000 on a car

sure I think you would probably expect

that it's going to be all-wheel drive

it's going to function it's by view yeah

yeah exactly huh uh okay so uh what

about

um I mean cyber truck coming up this

project Highland are those just hoax for

test lines yeah and is that why

potentially you've cut some of your

position or are you going getting

frustrated with Elon musk's leadership

or maybe lack thereof no I think Elon is

brilliant he's a great CEO he's a

Visionary and he's brought the company

to where it is and there's always been

naysayers with Elon Elon is going to

um continue to drive the company forward

with his great leadership and I I you

know sometimes I come across as a

complainer which I do but but we still

own five and a half percent of our

portfolio is in Tesla it's our number

two position Chipotle actually passed a

little bit yesterday because it was up

so much but yeah but you know we're

we're we're still comfortable owning it

at you know five to six percent weight

in fact your original question would we

take it back up maybe if the price goes

down a little bit more I mean it

continues to drift down today is having

a nice day but um what's the floor

what's the the worst case floor you see

I think it's 150 and I've told people I

think we're in a 150 to 200 trading

range okay and not back to 100 or 69

unless they bring margins down to zero

which again he has not said they're

going to do that he said technically we

could yeah and I don't know if he was

trying to send a signal to the rest of

the industry that it's coming or but but

he's I don't think he's going to do that

and so back to your question we hold

Tesla to the five and a half percent

position because of what you just said

before cyber truck to me is the most

important Catalyst I have a cyber truck

tri-motor on order I can't wait to drive

it around here in Chicago and valet as I

told people in front of Nobu and I'll

watch it from outside you'll have all

these crazy kids taking pictures of the

damn thing because it's going to be

different it's going to be spectacular

it's going to be one of these things

that when people it's going to be a

walking billboard is people see the

Cyber truck in cities all over the

country and hopefully they get it out at

the end of the third quarter you know

start deliveries

it becomes a draw to go to the Tesla

website and go to the test store you may

not buy a cyber truck but it's going to

be a way to bring people to your website

and be bringing people to your store

that's an apple with model white it's an

ad exactly and it's different and it's

Unique oh yeah so so well I'll drive

mine because to me that's like the best

truck best car truck in the world and

I've I've always been an SUV person I

went through my phase probably when I

was you know my early 30s where I had

911s and sports cars but you know as you

get older you know it's not that you

don't like speed anymore but you like

room yeah I like having an SUV or a

pickup and I love just driving that

thing around my biggest worry is will it

you know fit in the garage across the

street where I live I don't know I hope

I hope it does but I think that's a huge

Catalyst for the whole franchise not

just the you know we're assuming you

know there's a million three pre-orders

we're assuming I think three or four

hundred thousand of cyber trucks

delivered next year 2024 which may be

high but that's our assumption and then

the other big callus is the 25 000 EV

back to your question I wouldn't be

bringing model 3 down to 25 Grand I

would really try to step up uh bringing

out we always used to call the model too

we've been talking about this for a

couple years because you expand the Tam

you know you you you increase the the

the the the pie of people who can afford

a Tesla so at twenty five thousand

dollars you're expanding the pie by at

least 40 or 50 percent from where you

are today and I wouldn't wait for Mexico

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Mexico they're saying you know it won't

be ready and cranking out these 25 000

Vehicles till the end of next year I

would build something right now in China

and you know because that's where it's

the most competitive reviews maybe share

China is up to 22 percent get a model

two over there in other words yeah and

get it out so you can compete with byd

which is super aggressive at bringing

out you know these 20 to 25 000 cars and

I'm not sure what the reason is that

they can't do that I mean China they got

that whole plant up and running in about

nine months yeah why can't you get a you

know uh we'll call it an M2 Factory a

dedicated M2 Factory up in China you

know in nine to 12 months and so at

least you can compete and get an

affordable car out to the masses in

China which is the most competitive

market in the world what's your price

Target going forward 24 25 long term

yeah so longer maybe you know and we've

taken our numbers down but we didn't

take our out your numbers down because

it's cyber truck because of the 25 000

vehicle because we think Tesla will be

able to solve FSD at some point we don't

we don't add Robo taxes and we think

that's foolish but having a we'll call

it level four autonomy

um FSD will sell more Teslas you know

it's it's a reason to buy a Tesla and

you know the question that I always says

why are you charging fifteen thousand

dollars for FSD which is adding you know

250 a month to your car payment if you

roll it into the price or you can lease

it for one 99 if you want

so to answer your question we're using

320 dollars as a price Target which we

use we serve in the next 12 months and

the way we it's a theoretical number and

when when an analyst gives you a price

Target no it's not where they think the

Stock's going to go in 12 months it's

based on some discounted earnings or

discounted cash flow we go out to 2030

so we take a long-term view which is

what seven years from now we have

earnings of about twenty four dollars a

share

um you know this year earnings estimates

are down to 350 yeah down 11 12

next year you know the streets at about

510 so we're 24 we're 24 in 2030 because

we have 10 million Teslas being sold in

2030 which again the way I do this I

look at SAR I look at EV adoption and I

look at that dreaded Tesla EV share

which you know that he talking about but

that's the way people model yeah of

course of course you try to find a 24

bucks though in 2030 at even a 20

multiple volumes

30. so you're at 600-ish bucks 720 right

and then I discounted back I use a three

and a half percent 10-year treasury

there's a you know a six percent equity

risk premium versus bonds that's a

60-year average and then we we risk

adjusted Tesla still got a 1.6 beta

might even be higher now but it's up

there so you know you basically have to

risk it just so if I'm trying to figure

out what the discount rate on Chipotle

is it's a much lower number because you

don't have a 1.6 beta you got like a one

one beta or apple or you know any any of

the picture pulley is going to keep up

this pricing that they have I mean I

mean when you look at being able to

raise prices and still sell yeah but I

mean that's impressive I mean how do you

why would you are you I mean you're now

more heavily weighted into Chipotle than

Tesla no not intentionally yeah we we

we've kept Tesla as our number two

position and we actually after yesterday

I mean you'll see this in our the nice

thing about ETFs every night you can see

what we do transparent

um you know we you know when when a

stock is up as much as Chipotle was

yesterday and it was up again today we

took our position down by about 50 basis

points but but I do believe that

chipotle has great pricing power and

they continue to you know if that's

let's call it you know six percent a

year yeah

um I think the uh the comps Were Ten and

a half for first quarter I think they're

guiding to mid to high single digits the

rest are so let's call that seven that's

great if you can get six percent pricing

and one percent more transactions they

can do seven yeah and if you can do

seven in in comps you can do 15 earnings

growth and then the question is what do

you pay for a 15 earnings grow or long

term yeah and so one of the jokes I made

yesterday and I posted this was that

chipotle now has a higher PE than Tesla

yeah for earnings yeah no kidding and

you know is it deserved probably not

because unlike Chipotle

um which is getting a lot of its growth

through pricing Tesla is getting all of

its growth through volume so do the math

I just said I'm using uh 10 million is

my forecast for 20 30 units I take SAR

which is about 85 million in 2030. I

take a sixty percent EV adoption and I

give it what a CV shares now which is 20

percent so you take 85 times 60 times 20

you get about 10 million units okay and

you can do it by country you could do it

U.S Europe China rest of the world which

is the right way to do it but I think

you're going to come up with a number

that's close to that and one of the

challenges is that you know Elon and his

team are telling people 20 million units

by 2030. but I don't know how they get

to that number to be honest with you

right it's EV share growth and they

don't like TV show they like total share

but you know to me you take the you know

the most the smallest most measurable

metric that you can find and do the

research on it to figure out what and

it's got to be something you can monitor

every quarter and I can monitor review

share every single quarter

so if I have 10 million units and then

you have to make some assumptions about

your average selling price which I have

mine coming down although cyber truck's

going to bring it up but model uh 25 000

vehicle is going to bring it down and

then the real question is gross margins

yeah do you want to take gross margins

up from if it bottoms at 16 in the

second quarter where do you want to have

it be by 2030 and I'm going back to you

know low 20s and in energy which we

haven't talked about energy is going

through the roof because of Mega packs

I can get to 24 in earnings so the

question is how quick is the growth rate

going to be from 20 30 on right and so

at this point you're at 60 percent EV

adoption you only have 40 left to go so

law of large numbers the growth has to

come down it's not like going from 10 to

60. where if you figure out the math on

that over seven years that's about 30

percent growth rate going from 60 to 100

you're not going to get 30 volume growth

anymore right so I bring my uh earnings

estimate you know now I'm doing back of

the envelope uh from 2030 on to about 15

to 20. so putting a two times growth

rate which is kind of what a big cap

company like you know a an apple or

Microsoft Trader two times growth put 30

on it that's how I get my 720 discounted

back that's how I get to answer your

question from 10 minutes ago that's how

I get 320 Chipotle you know it shouldn't

trade it the same multiple as Tesla

because they're getting a lot of growth

in pricing you're not getting you know

thirty percent volume but that's high

quality growth when you're doing it

through volume right so to me Tesla

should trade at a much higher multiple

the reason it doesn't is because people

are afraid that Elon is going to keep

taking gross margin down right and

that's why I go back to it you read what

he actually said

um on the conference call he didn't and

a lot of people give me grief about this

and I but I know this he didn't say he

was going to take the margins down and I

fight with PMS about this all day long

he said technically we could do it we're

the only ones who could do it

technically he's right the question is

will he do it and this this is the heart

of the investment question if volumes

don't respond which I don't think they

will right because what we talked about

low elasticity of demand people may be

worrying about a future recession lots

of competitors out there you know

ubiquity when everybody's driving a

Tesla you know and you're driving

through the neighborhood and dropping

off your kids and everybody's doing the

same thing and they have a Tesla you

know you may not be as likely to own a

Tesla because Tesla's still an

expression of how well you're doing and

if you're just doing as well as

everybody else you may not drive a Tesla

you may go back to your Porsche

especially if they're electric or

something that's a sort of flip on this

side of oh I see so many Teslas that

company must be doing well you're

actually suggesting there's this level

of it could be doing too well think

about it if you had a I don't know a

special watch Texas this is still a

luxury good do you want to be wearing

the same watch as everybody else do you

want to be driving the same cars there

but did you want your house to look like

everybody else's and you know people say

what about iPhone iPhone is not you're

not you're not expressing how you're

doing in life by using an iPhone you're

using an iPhone because it's functional

it's easy you know you can use it

quickly I think a Tesla is still an

expression of how you see yourself doing

with life and that's why you know the

ubiquity factor I haven't yet figured

out is it good or bad yeah yeah it's to

me when everybody owns it yeah and it's

the most popular corner and you've only

got four models that's why you need some

more models maybe you need six or seven

or eight I just worry that without

um you know more models your cars look

too different that's why I like the

Cyber trucks so much yeah that's why

yeah even when cyber truck came out

there are a lot of people saying

shouldn't you make it look more like a

model y or a model 3 and I don't think

that's true I think having the Cyber

truck look very different is the right

strategy and then you know maybe for all

the you know we'll call them baby

boomers who want a pickup truck that

looks like a normal pickup truck you

bring out a more traditional looking

truck one cyber trucks out there but I

don't want them getting distracted again

yeah I want that cyber truck out and I

want the 25 000 vehicle out and if you

know they want to bring out a

traditional looking pickup truck for you

know people my age let them do it then

what about this this mention that you

made about quality growth being volume

versus just price is that a way of

saying hey just because you can raise

price like a Nestle or maybe a Chipotle

that's not a way of actually growing

your your market share and therefore

it's not as as quality or or you can

clarify that as an analyst yeah you know

when you look at elements of growth

you've got to decompose into volume

pricing margin and then I look at cash

you know what do you do with the cash

sure okay sure build more factories or

dividends or whatever so you look at

some marginal return on invested capital

and you know those are the components of

your growth rate the most high quality

and most correlating with stock price

performance is growth that comes from

volume people prize unit growth when you

see a company that's growing units that

and units can be you know Subs units can

be

um

you know traffic for instance like

Disney subscriptions or Google searches

Subs is a normal one for you know like

um you know Google or uh you know some

tech company

um but but unit growth is the most

prized because you can do that year

after year after year if you've got a

really good position with a good moat

High entry barriers not that much

competitive intensity all the you know

strategic stuff that they teach you that

you're supposed to look at pricing is

the most fragile because if you raise

prices too high at some point the

consumer says no I'm not going to do it

sure there's another option there's a

substitute and I learned this because I

used to cover the the cigarette industry

back in the day in the 1992 and you're

not old enough to remember this but

there was a time called Marlboro Friday

very famous in consumer lore it was

April 2nd of 1993. this is I'm dating

myself and Philip Morris after taking

prices up eight nine percent a year in

the stock price would go up they finally

decided they would have to cut price

because the consumer finally said no it

was during a recession but it was also

once the price of a pack of cigarettes

got above is way back when two dollars a

pack versus the cheap generic cigarettes

were like 80 cents a pack so it's two

versus one and Philip Morris took prices

down and I think everybody learned a

lesson that time you can't just raise

prices at eight or nine percent a year

because at some point the consumer is

going to say no and I don't know where

that price point is on Chipotle if you

go into Chipotle today your average

check is above ten dollars and so well

above ten dollars now is like 17 bucks

for a burrito I don't know right avocado

oh my gosh or the guac so they get you

so so I believe

and you know back to your question about

quality of earnings growth you want to

find unit growth that's why Tesla is

still very compelling to me but you got

to be willing to put your neck out and

say no margins aren't going to you know

have a downside of 10 gross margins or

you could look at operating margins too

you know you've got to be able with

great confidence if it's going to be

your number two position say here's the

bottom of what I can see on margins and

I don't have that confidence right now

I'm not so sure what elon's going to do

yeah yeah I believe he will keep margins

kind of where they are now

and this then becomes a catalyst because

I think he's going to realize that he's

pushing a little bit on a string that

when you take model y low price is now

46 9 in the U.S to say 45.9 he's not

gonna that doesn't drive affordability

the people who are driving model wise

are not going to say oh wow maybe I

should go get one or the ones who wanted

to buy one that doesn't really do it

that much especially if they're saying

I'm going to wait for one what drives

affordability is the 25 000 RPM and

you've got to differentiate between the

two and even if you read master plan one

two and now three

when when he talks about

um you know driving affordability it's

always about new products yeah called

flanker products sure okay so you know

Netflix understands this Netflix now has

a tier if you don't want to pay you know

15.99 or you don't even want to pay 9.99

you could pay 6.99 that's supported them

and that's that's a flanker product and

you've seen through the history of you

know luxury goods and you've seen a new

automotive industry oh yeah you have you

know Mercedes and BMW have practiced it

for years where you bring the a new

product out and to me that's consistent

with master plan one master plan one was

Roadster to Model S model S to model

three yeah and now we're going to bring

out model two well it's like BMW they go

they have the five and seven series

first then they bring the three then

they bring the one series now exactly

yeah

yeah so okay well now you mentioned you

don't want to include any kind of Robo

taxi Revenue uh Brett Winton from

arkhamvest was a little upset the other

day on Twitter because he called it dumb

not to include at least some Revenue

because his argument is you have to

assign some probability to the fact that

there will be Robo taxis and if that

probability is 25 then you should give

25 of the revenue to your number what do

you think I mean is Robo taxi if it

happens great it's icing on the cake or

or should you look at it that way I

can't I can't I can't model it Kevin I

can't I can't put a number on it and if

I can't put a number and I can't put it

into my evaluation model how do they do

it they make it up let's just assume

it's like you said they just assume it's

going to happen but you know look we've

had Elon promising Robo taxi since 2019.

it's next year it's actually and they

did it again on the first quarter coins

as well by the end of the year yeah and

it may happen and if we can get to the

point where where and let's define what

it is you can sit in the back seat and

from a liability standpoint you're

willing to put your neck on the line and

say we're going to be a level four

autonomy product where we're going to

we're going to assume the liability if

the car crashes which I don't think

Tesla's willing to do that no no they

won't do that so if you're if you're

willing to put your neck out and say

we're level four autonomy where it

drives itself

and and they do that then I would be

willing to put it into my model but then

you got to say okay who else is going to

get there yeah and you know what the

we'll call them the Uber Bowls the Uber

bowls will say well Tesla's the only one

who can do it because they have a

general solution that works anywhere

Vision versus mapping right yeah as

opposed to you know if you look at

Queens you look at waymo they're

geofenced and I get it I get it you know

and they're trying to connect their

geofenced areas but in China That's not

how it works and you've got you know

three or four competitors that are all

spending as much as Tesla on trying to

solve autonomy with vision then with

anything I mean with anything yeah some

useless a combination of vision and

lidar some use as Tesla's doing vision

and radar you know they all have HD

mapping and they're all spending a lot

of money on this to try to get there

sure a lot of using Nvidia as well yeah

like I think uh Neo that's why that's

why Nvidia it's one of these besides IA

AI yeah the Nvidia has done so well but

I'm not smart enough to know who's going

to be the winner in three to five years

when Tesla's willing to put their you

know live their liability neck on the

line and say okay we're willing to

assume the liability if this thing

crashes right what about that's what

that's what's protected them so that's a

good point what about positioning though

is it possible that today people are

just very bearish on Tesla like maybe

they were about uh Facebook at eighty

dollars uh is and and now everybody says

well the food ones uh the Staples are

doing well like McDonald's I think

they're flat out here every year yeah so

say so you got McDonald's chipotle

Nestle Ulta these some of these

companies are doing absolutely

phenomenal is it possible that this is

just a partly or a lot cyclical War

people are moving into the Staples

because they're worried about recession

when the worry about recession goes away

they go back into Tech and growth and

and then these look really undervalued

like Tesla looks underground right now

investors are pricing pricing power if

you can show you've got PP yeah

you're paying extra in multiple points

for that to me that's also a sugar high

because you can't and I say remember

Marlboro Friday and if you want to look

at Philip Morris ticker ammo back in the

90s it was great every year they took

eight or nine percent pricing every year

they made their numbers and then every

quarter or at the end of every year they

would buy down the inventory and you

know it was all a mirage sure and they

finally had to pay the piper on April

2nd 1993. that's going to happen with

all these companies taking this access

person you can't take eight or nine

percent pricing every single year and

expect the consumers just going to stay

with you so so so I would say about

Tesla Tesla's definitely you know on its

butt right the the sentiment on Tesla

very low I I've not seen it this low in

a long time Gordon Johnson's very happy

yeah his and he's he's out there I see

him tomorrow by the way of good luck

with you I hope I hope he doesn't you

know like you know go crazy on you if

you're bullish because he's a little bit

out there and I'm not gonna say I'm bad

about court I've done Gordon a long time

but I would just think that if Tesla can

come to the realization that hey we've

got to edu if we want to grow our volume

what we need to do is convert more of

the 90 who don't drive EVS right in the

world to to choose EVS how do we do that

we can either keep taking pricing down

until the 25 000 vehicle comes out in 24

25 or we could try educating on why they

should want an EV versus a traditional

car right and I don't think that's that

hard so challenge question then who in

the short term if let's say Chipotle has

more pricing power today who would you

say has more pricing power in 10 years

Tesla versus Chipotle I would say Tesla

does because I think what's going to

happen is Elon is going to discover how

great advertise

and funny and you know intelligent and

educational and he's gonna he's gonna

get into it right I mean I've done

advertising you know what he should do

he would just love doing it if you tried

it Ryan Reynolds mint mobile ads Ryan

Reynolds did all of his own in front of

a green screen or what a super low-cost

production ads but because it was Ryan

Reynolds and he had some wittiness to it

people loved it and he just sold mint

mobile for I want to say about half a

billion no it might have been over a

billion dollars somewhere between 500 ml

to a billion bucks to T-Mobile

I mean remarkable he did all his own ads

for it see I I had an idea where I would

let the Tesla Twitter Community which

you know it's you and I both belong to

it we both have a lot of followers

just come up with a 30 second order

we'll say 60 second commercial maybe you

come up with both and whoever comes up

with the best commercial by the Twitter

you know is judged by the Twitter

Community gets a Tesla plan you know

Tesla S plan has exports it's good

motivation and I'm telling you you first

of all you get great PR because

everybody'd be fascinated by it sure you

get these intense competitive juices

flowing and then Elon and his team could

pick the best one

and then you know they could shoot it

professionally instead of you know we're

doing it in you know some makeshift

Studio I just think

I've seen CEOs and I bet Tim Cook is

like this when they put an ad out and

then you know the Ad Agency comes in and

they show them their you know their

their their work you know everybody gets

excited and they all you know say well

this is what this is going to accomplish

is what that's I think it would be

really exciting for Elon to do that and

it's a very different side of him than

what you know the engineering side yeah

he worries about today well I thought he

would really get into it what about the

side of Twitter what's been your take

about uh the Twitter uh ownership is

this a distraction for Elon is I mean

obviously we know he overpaid for

Twitter he knows that himself it's not a

secret we knew it at the time too that's

why he wanted to back out but I think

the biggest question that looking

forward now is is he distracted is I

don't know I and look it's it's it's

hard to know because he's always had

boring gnarling SpaceX and he's got CEOs

who run those firms so to me he invented

those he put the management teams a

place they are made after his like this

with the lack of a better word Twitter

is different he is in Linda yaccarino

coined a phrase at this event this

advertising event I went to Miami two

weeks ago and she asked Elon this

your other companies you invented

something Twitter you're Reinventing it

ah and you're you're dealing with the

cards that may not be so good and you

have to fix them as opposed to build it

from scratch and I think there's an

element of Truth to that Twitter you

know he's gotten rid of I don't know 70

to 80 percent of the staff but he's got

a woo the advertisers back for this to

make money from and to your point you

know if you paid 44 billion he just put

a valuation of 20 on it is because a lot

of the advertisers have not come back

and he should look to Apple and Disney

who's he's mentioned have basically

stayed with them through it so yeah and

he brings up good points is they must

find it working or they wouldn't keep

advertising so you know to me and this

is the number one question I got because

I wandered around this conference there

were 800 advertisers there and I talked

to people at dinner and talk to people

during the conference number one

question I get is why does Elon think we

should be advertising on Twitter when

Tesla doesn't even believe in

advertising nobody knows that everybody

knows they don't advertise sure yeah and

so the question is if you don't if you

can't tell people why advertising is

great if you don't do it yourself you

don't do it yourself how are you going

to convince these people to come back

funny so so here's here's here's what I

believe yeah I believe he'll figure out

an answer for that and I do believe and

this becomes a catalyst for me he will

realize that the the price cuts are

sugar high they're not getting a much

and he will try advertising my my

prediction by the end of the year wow I

don't know if it'll be 5 million 10

million 50 million but it won't be 500

million which is what it cost them he

cuts prices by a thousand dollars oh wow

and if it's three thousand dollars it's

a billion and a half wow and so I

believe he will try it and then I think

he's going to get Twitter people to come

back to him because he's going to

discover what you and I both know that

the power of advertising is immense

especially as you go into an election

year and you go into Olympics here

that's true and I mean he's got the

platform Twitter so I think you know and

it's funny because you know Linda yecker

you know where we're talking about this

he loves Twitter I mean you can tell

he's just it's like his baby and as much

as he complains about it he loves the

CEO of it so so back to your question is

he distracted I think with Twitter you

know he he spends maybe a third of his

day maybe on Twitter and maybe spends

two-thirds of his day on Tesla and the

other companies but he really doesn't

have to spend that much time in the

other companies he spends a lot of time

on SpaceX because they're run by CEOs

that he's put in place that's a good

point so he's distracted a little bit

but look the guy is a machine he works

24 7 and I don't know when he you know

goes on vacation or eats or sleeps or

yeah you know has time for a

relationship I I don't I don't know what

he does but he seems to have time for

his kids you know so what do you say

about uh AI then you know a lot of

people have linked Tesla with the dojo

supercomputer and thought okay maybe

there's an AI future are people just

looking for too many places to try to

make some money out of Tesla or is is

this whole AI thing just a fad and a

bubble uh what's your thing is a fad I

think metaverse is a fad and I think you

know Zuckerberg is learning that and you

know you if you watch his tone he's

talking more about AI than he is the

metaverse now oh yeah in the conference

call uh I guess it was last night yeah I

think with Tesla you know they've always

gotten the best engine they can hire

great Engineers they can hire great uh

you know people who think you know about

autonomy and think about AI because it's

Elon Musk and everybody wants to work

for Elon Musk and you know it helps that

they can put them in San Francisco which

is where a lot of people are in Palo

Alto which is where a lot of people want

to be so they can attract good talent

yeah I don't want to build like bot

though into my evaluations because I

again I can't model it because I don't

know what it's going to look like and I

don't know who's going to be competing

with them in four or five years well I

think that's such a big question too

even for companies like Google or

Microsoft is who's actually going to

profit off of AI is it the companies

that are providing the bot or is it

every business that is using it to make

their employees 20 more ingredient AI is

an ingredient so if you think about

Google and Bing and know anybody who

uses Bing as a search engine I mean I

just don't I mean maybe it's there maybe

recently a little more maybe and look

what's interesting is Microsoft said

under conference call that their market

share went up but they didn't give any

details no they didn't

they were very optimistic about AI but I

think that I mean their company though

almost all of their segments except for

Windows OS was up substantially and the

clouds up like 28 they're doing very

well they're doing well and I give them

a lot of credit for taking a business

that was kind of sleepy and nobody was

that excited about and now you know

people are putting a pretty high

multiple on it relative to its growth

like almost three times which is where

Apple trades yeah yeah that's true um

where Google you know Google has a same

PE as as uh meta which I guess so I

still 12. no 17. seven okay uh but it's

only growing it you know 14 15 years so

it's PE to G which I like to look at PEG

ratio exactly ratio it's only about 1.1

which by the way is about what Tesla's

is it is

uh no MPS is still pretty high but but

they've come down after it's 25 percent

again but with Google I don't think you

should write them off I don't think you

know they could still uh attract great

talent they've been working on AA for

years yeah and they don't talk about it

as much as Microsoft yeah but you know I

still use Google all the time for search

yeah and I don't use Bing and so getting

me to switch to Bing just because you

know maybe I'm going to be able to ask

the uh bot you know well the AI driver

of it something and I may get an answer

that I like I have found when I use

um chat GPT

now it's not that it's that fulfilling

it's interesting I mean I'm sure it

makes people's lives easier who are

authors or songwriters or whatever

because they don't you know they give

them a head start for somebody like me

as an analyst it doesn't help me yeah

that much so I don't necessarily believe

that Google is now suddenly dead just

because Microsoft has I think they'll be

able to figure it out and they'll be

able to catch up and they'll be able to

build it into their you know their

Google search engine which still has 85

share and I don't think people are going

to just suddenly just you know drop

Google and go to Bing I just don't

believe that

the banking crisis your take I mean you

had mentioned early on that maybe First

Republic maybe not is this systemic or

is this just The Fringe

it's hard to know I think if the FED

stops and says we're going to break

something more if we keep raising rates

then it can become systemic so far it

looks like a couple banks let's call it

the handful I'll put FRC in there you

know that just had way too much leverage

and too much risk relative to their

uncertain deposits and look the

challenge is

if on your deposits you're paying two or

three percent and a mar and a money

market funds rate is four to five

percent you're gonna have this this risk

of the outflows not being sticky or the

deposits not being sticky that said you

know I I don't I don't see a lot of

these big Banks whether it be Wells or

city or Bank of America or JP Morgan

running into trouble because they don't

they don't take the big risks that these

other Banks were Silicon Valley Bank you

know had way way too much

um we'll call it you know both long-term

deposits that were in you know

treasuries and mortgages and and in

loans especially with FRC they just they

didn't they didn't balance their risk

very well right and the question is do

all banks do that do all banks have this

issue yeah I don't think so I think you

would have seen more Carnage out there

so so you would have already seen it in

other words I think so and again if I

believe the Fed was just going to say

you know take rates up to six percent

yeah right now the federal funds rates

four seven five to five if they're going

to go to six or five and a half yeah you

could you could have more issues but I

don't think the fed's that stupid I

think the fact that we've broken a

couple banks yeah and I'm going to put

FRC in the broken Bank

you know what whatever it's 550. here

today yeah it's it's probably going to

be the same as Silicon Valley Bank and

somebody's going to take it over when it

hits a dollar and buy up the assets and

it'll be a great buy for them yeah as

long as they can keep some of the

deposits you know it'll be a great

franchise they have to figure what to do

with it so I don't I don't see it as

being systemic as long as the FED stops

it's so see we stop say it's hiking main

go away

Marshall really I wanted a commercial

real estate I mean it's not supposed to

be the big next to Gary bubble or or

de-dollarization I mean aren't there

things to be concerned about sure are

those mostly uh so yeah commercial loans

are still not great the growth rate is

negative and you know but but the

question is once the FED starts cutting

rates and the economy you know I suppose

it gets to negative one in a fourth

quarter let's call it and then once the

FED starts cutting rates and maybe the

um you know the QE starts up again

because right now it's you know the QE

doesn't is not there right now it's

negative right

um

I think you can start stimulating the

economy again and look you've got an

election next year which is the other

thing we haven't talked about stimulus

checks well I don't think Biden's going

to resort to that but but there's a good

chance that if if it's Trump versus

Biden Biden wins again not the santis I

don't think the Santa's is going to get

in I don't know do you oh wow it just

seems like he recently fell on his face

a little bit with Disney's it was like

some people on both sides are a little

upset about that and I mean after the

Trump indictment it seems like he just

shot up in the polls I mean polls are

what polls are but anyway during the 24

election you know you don't usually see

restrictive fiscal policy it's just it's

not good for getting your candidate the

elected I don't think Biden's going to

do it you know you do have a split

Congress now so it's gonna be hard to

get anything done between now and then

but I don't I don't think you're going

to have you know restrictive fiscal

policy I think if anything you'll have

some sort of Promise of stimulative

economy uh I don't I don't I'm not a

trump fan I mean I think what he did on

you know January 6th is he's going to

get indicted for that somewhere somehow

yeah but I don't I don't know who's

going to come out of the woodwork and

and challenge him it's just sure it's

just odd that he's still leading in the

polls and I know most Republicans don't

trust him it was interesting you just

mentioned that it might come down to

what somebody decides fiscally for the

2024 election in other words the

promises that they make to the

electorate what what are we willing to

spend

is it possible then we see this 2024

election cycle turn into one about who's

going to do more stimulative effects

maybe wouldn't that be bizarre it would

be bizarre now if we're in recession

yeah when November 24 rolls around that

is a good scenario that could happen but

again Republicans hate the idea of you

know helicopter money yeah helicopter

what if it gets in the election yeah

maybe I mean think about it it's so

interesting I think back to uh Biden had

won uh uh November 2020 and then we got

to 2021 you're coming out of covid

coming out of covid Biden promises hey

I'll give you that Roundup that 2400

stimulus check just elect my guy in

Georgia because they needed control of

the Senate to do it right and they got

it it was the night before the maybe two

nights before the election Biden makes

that promise we're going to do the 20 or

1400 vote

yeah yeah you can see it and I'm not I'm

not gonna deny what you're saying

there's going to be games played in 2024

so you may see a lot of stimulative you

know promises made oh yeah 24 campaigns

and it'll be interesting to see who's

really Republican because again the old

adage is you run to the right you run to

the left to get the nomination and you

head toward the middle yeah you know if

we're in the middle of a recession are

you going to see some Republicans run to

the middle why because they want to

promise that they can be summative I

don't believe that I think it's going to

be hard to get the nomination unless

you're running to the right as a as a

republican ah okay so further away but

Trump trump you know all bets are off he

could do whatever he wants I mean and he

will say he could promise you know

dropping bit you know all kinds of

bundles of money from the helicopters

they could Tucker Carlson is VP

yeah I don't even want to go with the

Tucker Carlson because he's he's look I

used to watch him he's entertaining I

know he probably made you know more

money on Fox than any other you know

um any other host

but I don't know enough about like why

he got fired there's got to be something

more than what fox is telling us because

you don't fire a guy who mints money

like that unless unless he wasn't unless

there was something else that we didn't

know about and maybe there was a lawsuit

maybe there was you know something that

just makes me wonder imagine if you had

a a company like a Disney come in and

say hey we'll sign this tens of millions

of dollar advertising campaign with you

if you ask so and so and then that

potentially softens some of that Revenue

loss look advertisers by their nature or

a more liberal bunch and again when I

went to this Miami thing I I guess I I

know that advertisers are liberal I just

didn't realize how liberal and when you

hear people talking about brand safety

that's a big thing big concept and it's

why they don't trust Elon on Twitter

they want to make sure if they're going

to advertise their product it's not

going to be adjacent to some sort of

hateful language from somebody and so

you know back to what you just said it's

possible you know we all watch

succession you know and it's it's

possible that you know some advertisers

said hey look if you get rid of this guy

who we worry about you know we'd be much

more willing to give you some

advertisement maybe it's possible oh

well it will ink this contract or

whatever it's possible interesting

um what about this uh this Bud Light

advertising debacle since he just went

to an advertising conference what what's

what is the advertising Community say

about uh like how do Brands position

here do you just stay away from these

sort of issues or

that's a tough one I mean I I think you

you what we've all learned over in this

woke you know Society we're in you can't

go near you know race you can't go near

um you know being gay you can't go near

um advocating violence of any sort and

you know the the whole what's called you

know transgender movement yeah

um you know you stay away from that you

don't you don't you don't you don't get

in the middle of it because it's just it

causes and with Bud Light

you know it's a macho brand it's it's

for guys you know who are trying to you

know not consume as many calories it's

it's it's somebody should have known

better than to do what they did it's an

inconsistent

um

using a transgender person is

inconsistent with the brand that's not

the audience and somebody should have

realized or somebody should have

questioned it and look I've worked in

big companies before

you know and and look this is one of the

challenges I have about Tesla you know

do you surround yourself with people who

tell you what you want to hear and you

would hope that somebody at

Anheuser-Busch raised their hand and

said are we sure we want to be doing

this right you know and look I've I've

always had a big mouth I've got in

trouble and I used to work at J you know

the most

you know the the Tylenol the brand that

hospitals favor most and you know they

have babies and you know and baby powder

all kinds of stuff and so when you raise

your hand and you bring up a question

like that

people don't like it you know and and I

remember you know vividly we had uh we

had a we were trying to go younger on

infants because if you could have a

six-month-old screaming but not being

able to talk about their and you knew

they had a fever that to the people

higher up I was a junior person at that

point that would get people's attention

and yes I said do you really want to be

having a six-month-old who can't talk

screaming and getting everybody you know

upset right because then people feel bad

yeah and they're helpless the point of

the order the the ad was when your baby

is is is screaming like you don't want

to be Taking Chances with a generic

acetaminophen that was that was it was a

oh it was that was that was the ad but

isn't it all the same anyway yeah of

course it is and so but I remember

bringing up the question and people

looked at me like you know what are you

talking about you don't you don't have a

right to bring that question up and

unfortunately I think a lot of companies

have this issue where you know the

people get to the top want loyalty first

and if somebody brings up a question

that doesn't

alive yeah align with your strategy and

I hope this isn't true of Tesla do those

people get bounced out and I don't know

I've not worked at that so I've talked a

lot of people used to work there and you

know there might be an element of truth

that I don't know I've never worked

there well Gary what did I miss I mean

this has been really insightful and make

sure of course I want you to shout out

your socials but what did we miss

nothing um one thing about us is we have

a long only product future fund ffnd

trades on a New York Stock Exchange

um it's it's an active ETF it's very

active meaning it's highly concentrated

30 names

um you know and we do on the ground

research as you can tell we don't we use

the street but we try to do our own work

we talk to customers we talk to the

company we talk to suppliers we talk to

competitors and it's that's my

upbringing as a research analyst and

we're going to be launching a long short

ETF it's ffls 30 shorts 30 Longs and in

this choppy Market that we're probably

gonna be in over the next 18 months we

think it's going to do really well wow

when's that uh expected to hit June 1st

June 1st wow so we're getting excited

about that and you know I love spending

time trying to figure out you know

business models that are going to be

disrupted or they just you know aren't

going to work and I was watching mobile

eye today I've never liked mobileye you

know stock was down like 20

um you know I hated Nikola and it was at

60 a share Bed Bath Beyond I'm thinking

of all the stocks I posted on Twitter

yeah that I hated at the time and you

could assured it and no but and people

gave me there's a there's such a loyal

following there's such a loyal following

to Bed Bath Beyond because they brought

a new CEO in and people were you know

yelling at me and you know that's the

challenge with a short that you got to

have balls to you know to do it to short

a stock it's unpopularly shorted and I

remember Bed Bath Beyond was you know a

meme type stock and you know people

loved it and look taking our Tesla

position down to 5.6 or whatever it is

it's not been popular I've seen it I

mean your the amount of tweets that I've

seen you respond to just trying to

defend that decision it it was a lot

there's a lot a lot of hit but but again

when you're running a fund it's not

about looking short term everybody says

well you're short-term not short-term I

look at things very long term

pricing is a short-term tool advertising

has a long-term Roi when we when we

Advocate BuyBacks you know if you do the

math on a buyback you got to look at the

E over p ratio versus you know what

they're doing with the cash yeah and

right now it would be negative if they

did a buyback from an earnings

standpoint sure so you're looking at it

long term you're looking at irr so when

when we make a decision like that we're

looking at upside downside and we just

couldn't in good conscience for our our

investors keep Tesla at a nine or ten

percent what is our biggest position

when I didn't know what the downside was

on gross margin now if I could get

comfortable that you know 16 is it in

the second quarter and it's not going to

below that I'm going up from there maybe

we would probably buy some okay we need

to see some signal from management

that you know there is a floor and

management is going to stick with the

floor instead of what did in the first

course said well the floor is kind of 20

and then well it's 19 and here's how you

define the floor and it's you know and

it might be zero yeah it might be zero

but but but I need to get some

confidence or I it shouldn't be my large

position you know a three or four

percent look your top positions have to

be the ones you have the most conviction

about yeah or the ones you have the most

upside versus downside and if Tesla took

its gross margin down to zero and I'm

saying they will but if they did it's

got a lot more downside than what I'm

using is 150 today yeah yeah sure so

yeah but yeah that's uh so look for that

and if you know if folks feel that we've

done a decent job trying to help them

understand Tesla and look we try to say

the positives and say the negatives

we've been mostly bullish you know but

there are times that we're bearish like

when they bought Bitcoin and when they

brought out the Yoke steering wheel we

thought that was bad because you're

taking the choice out of consumers and

there's a couple other things that you

know even FSD we never believed that it

was going to come out a year later right

so he's been dead they brought the

choice back on the steering wheel though

and so if you think we've added some

value

um you know check it out good ffnd and

and help us out and and the ticker so

people can look this up and to be clear

it's actively managed which you get

the actively managed tax benefits of as

well and all the others it's ticker ffnd

right yeah we have a website you can go

to the FF and ffnd website future fun

website and every night you can see the

positions we have and the changes we've

made today you'll see that we bought

some um

um what do we buy there we've got some

Lily because we're talking about Manjaro

and you sold little Chipotle

Chipotle and um you know we we like the

idea that every night people can see

what we do and you respond on Twitter we

try we try can't get to everybody but we

try to let people know what we're doing

and we try to let people know what we're

doing even before we do it sure so you

know people could tell that we were

getting frustrated with Tesla before we

took the position down and you know

hopefully it'll do the right thing going

forward Gary this has been a blast thank

you so much for inviting me out here to

Chicago so hello from Chicago I should

have mentioned that at the beginning but

either way thank you so much it was a

pleasure good to see you thanks

on Twitter I love it when you interact

with day Traders squawk Square oh yeah

you have any thoughts on yeah um look uh

there's all types on Twitter there's

people who are long-term investors who

will never trade a single share

and there's people at squawk Square he

could be long and short on the same day

and you know I can having been a a hedge

fund manager before I can appreciate

both sides of it you know I'm more

long-term I don't like to trade we don't

trade that much in our ETF but I can

appreciate there are people who think in

squox square I think is pretty good at

figuring out like what the Stock's going

to do on any given day so I like to have

a close relate so I like to know what's

going on yeah sure and you know if it's

going down I want to know why it's going

down and I try to figure it out and

sometimes you can make money on that

because if the market is wrong and you

know blasting a stock you want to be

buying it and so that's why I try to

Citadel rigging the market I don't know

our hedge funds are the suits running

everything

it's gme going back to the Moon a GM

he's definitely not going back to the

Moon I'll leave it at that one that

death Beyond is bankrupt and

um look I hope Tesla doesn't go back to

100 I hope it goes close to 200 you know

but it could well we're at 156 last

night it was up three or four bucks

today so it's probably 159 but it's

still closer to my 150 than 200. what do

you think

uh yeah yeah I don't think we'll see

another 102 but we'll see fingers

crossed that was too low yeah that was

too low exactly