Ep.114: Is A US Debt Ceiling Deal Actually Bad For Stocks?!

Hello and welcome back to The Trading Floor, the Friday show where I'm joined by co-founder Piers Curran and we talk all things global markets. And this week on the agenda, we've got 3 topics we're going to go through. Now a US debt ceiling deal has been struck, what comes next is the big question, and there are far-reaching implications as Piers will explain. And then secondly, stocks still going up. Seems like we're on a bit of a rinse-repeat cycle at the moment. Keep hearing all the bearish commentary and we just keep going up. And right now the S&P is just clocking in its highs as we speak, now trading at 4,245. When it wasn't that long ago, people talking about the 4,200 level being pretty big from a technical perspective. We are well above that at the moment. So we want to talk a little bit more about this concept, an idea of the narrowness of the equity rally. There's been a lot of commentary on that in various financial media. We want to explain what exactly that means and what does it indicate for the future, for the equity direction in the short term. We definitely can go back and punch the numbers. So the third thing, Apple's next big product, the Reality Pro headset, was expected to be announced at the Apple Developer Conference on Monday. And we'll have a bit of a discussion about what to expect there and implications really for— seems like the VR thing has gone a bit quiet. It kind of like broke out. It was like the hot topic momentarily. I guess this was pre the kind of Meta euphoria in terms of metaverse, not Meta the company. And it's sort of taken a back seat, a few false starts, it seems, on the virtual reality front. So it'd be interesting to see whether they can deliver a lot of excitement around that event. But yeah, let's kick it off then, Piers. I know we just spoke about the order of play here. I wanted to put stocks up first and talk about the narrowness, but you said, look, I can make Treasury bills sexy.

Yeah, I'm kind of regretting committing to that task, but I'm going to give it a go. Let's do it.

Okay, well, let me just get everyone up to speed then. So the Senate late Thursday So that being the 1st of June, passed the House-approved bill to raise the debt ceiling and cap government spending for 2 years. And the next process there is kind of a foregone conclusion. The legislation lands on the desk of President Joe Biden. He signs it essentially. So he's expected to do that today, which is the 2nd of June. He'll then, of course, address the nation and talk up the deal. And it comes just 3 days before the US risked its potential than cliff-edge scenario. So we've averted a lot of the discussion we've been talking about the last couple of weeks. But I guess the bigger question now, Piers, is, well, what next?

Yeah, let's definitely talk about what next. I got— you know what's going to happen. Biden's going to stroll out having signed his bit of paper. He's going to stroll out into the Rose Garden and start claiming that politics is the winner and that we've avoided the biggest economic disaster in the history of mankind and whatever. Just, just really dull. You, you, you—

there's one thing you just— you've made a, uh, an assumption there.

Go on.

He said he's gonna stroll out. I saw a video where he fell over yesterday, right?

He's gonna be wheeled out, um, I should have said. Um, just really dull. Yeah, I mean, we said it on the podcast last week, we We were selfishly hoping for a little bit of drama, a bit of government shutdown action. So yeah, it's all been a bit boring. So let's just put that behind us. What's next? So what you've got to understand is the actual borrowing limit, the debt ceiling, which defines the borrowing limit. They actually hit it in January. OK. So you might ask, well, what's been going on since January through to June then? And they've been paying for stuff using what they term extraordinary measures. Now, they're two words that carry no detail whatsoever. I don't know where they get the cash from. To cover the bills for the last 5 months. But that is the fact, right? The borrowing limit was hit in January. Ever since then, they've been muddling through. I don't know, cash down behind the sofa. God knows where they get the money from, but all seems a bit odd. But it's quite an important point because now the debt ceiling bill is passed, then it means, right, the government can start borrowing more again. Right, but they've got to make up for 5 months of no borrowing first to kind of refill those extraordinary measure coffers, to reload the back of the sofa, right? So they've got to make up for the 5 months that they've missed, then they've got to start borrowing for the remainder of the year, right? And basically all this winds up to What analysts are expecting is that in the next 4 months that you're going to see a massive spike in Treasury issuance. It just means there's going to be a huge deluge of new bonds being issued by the government so that then they can borrow money and refill the coffers. They reckon it's going to be $750 billion worth of issuance in the next 4 months, then borrowing obviously through to the end of the year. They reckon actually by the end of the year, so in the next 7 months, we'll see $1.1 trillion come to market. Okay, now what does that mean? I mean, obviously that's a huge sum of money just putting to one side. I don't want to really talk about is it right that they borrow more? Is it right the debt ceiling goes up? Is it right their debt clock continues to spiral out of control? Let's park that. What's it going to mean for markets in the next 7 months? And there are, yeah, there are some hazards ahead, I would say. Um, so what happens here if they issue $1.1 trillion worth of bonds? Well, number one, someone's got to buy them. Now, this is normally, it's the primary dealers. So these are the biggest banks. They've got the big balance sheets. They've got the sufficient amount of liquidity and cash to operate in this environment. Because if a government wants to sell $1.1 trillion worth of assets, you're going to need some pretty big buyers. So the 15 biggest banks are the only ones who can operate in the primary market. That's when the bonds are being issued and sold for the first time. The banks buy them, then the banks kind of just farm them out to their clients. They, you know, so they'll sell these on to their clients, not only financial institution clients like hedge funds and asset management firms and all the rest of it, but also then maybe in their wealth management division, they'll start parking some of this stuff in their high net worth, you know, client portfolios and so on, right? So these big banks operate as a bit of a conduit for all this issuance, but The point remains they need $1.1 trillion worth of cash. So where are they going to get the cash from? We're not quite sure, to be honest. They're going to probably have to sell other stuff. Okay. Um, now, like, maybe stocks. Some people are worried that perhaps this is a negative for the equity space because people are going to have to sell their stocks in order to raise cash to then buy that— buy these new bonds, right? But I think That aside, I think the most important thing here is the liquidity conditions in the market will drop. This is sucking $1.1 trillion worth of cash out of the market, okay? And with that then comes secondary and tertiary impacts. Um, firstly with banks, right? If they're having to use a lot of their liquid reserves to buy up these bonds, that means there's less liquid reserves, which might alter their appetite for lending money. So it may be it might curb lending out into the system. And just as we're worried that maybe we're inching towards the recession that never seems to want to start, well, this is further tightening conditions that might kind of, you know, just grease the wheels to that recession actually beginning. I think more importantly though, you've got to think about a supply issue here. So just very simple economics. If the supply of something goes up, well, then the price goes down. Okay, so you're going to get a big spike in supply, which is likely going to drive Treasury prices down. Now, what happens if Treasury prices go down? Well, the yields on these bonds go up. And the problem with that is Treasury yields are one of the world's, you know, go-to benchmarks for setting borrowing costs, you know, across the entire system. So if Treasury yields rise, borrowing costs rise. It's like a pseudo rate hike. Again, that's a tightening condition on an economy we're worried is already losing momentum. So I think that's probably the biggest issue, the biggest risk. Now, what can be done about that? Because obviously you might think, well, okay, What do the Fed do? Because I mean, the Fed, I mean, it's kind of still in the balance. Are they going to hike? Are they not in June? We're not quite sure. But if they're worried about tightening conditions as a knock-on effect from this massive issuance of treasuries, they might not be able to hike. But there's something else that's happening at the Fed that people have forgotten about. There's this thing called quantitative tightening. So back in the pandemic, uh, the central bank stepped in and rolled out a massive quantitative easing program. This was a stimulative policy where they effectively increased the money supply. Okay, well, they've been trying to reverse that over the last few months, and really you've got to go back— and I say months, you've got to go back 12 months, really, I would say So for the last 12, maybe 14 months, the Fed have been reducing their balance sheet. So that means they are sucking cash out of the system. They're reducing the money supply by not reinvesting the cash that they get from maturing assets. Okay, so they're basically reducing the money supply to try and reverse all of that stimulus from COVID A lot of that stimulus, of course, is being blamed for the inflation crisis that we have today. There was one little blip in the, uh, quantitative tightening trend, and that was the SVB banking crisis, which saw them actually increase the money supply again, um, quite sharply. But we've been back on the downward trajectory for money supply, you know, for the last sort of month or so. So this might lead to the Fed— you know, I would say it could be that this Treasury issuance could have the biggest influence on Fed policy than anything else out there. Forget about inflation, you know, forget about whatever, the jobs market, forget about a looming recession. It actually could well be this factor alone that is the biggest influence on the Fed. And that's because the Fed might think it will have the biggest influence on the timing of when the recession might start.

No, this is a robust theory.

Yeah, go on.

I can tell you're pretty hyped for this.

Let's go.

But if so, why is the S&P still rallying then?

Damn it.

Uh, yeah, so your thesis, your thesis, like, I, I agree with, um, on every point.

Well, I'll tell you what, markets is about timing, but at the moment.

So, well, as a trader, how do you then— so you have this view, let's say, that's well constructed, but the market is moving, um, against that view at the moment. So how do you, how do you play that?

So you either play it by basically the market's telling you you're wrong the thesis is invalid. Well, I firstly, yeah, you've got to go, okay, well, that's a thesis, right? Obviously the market, stock market's not behaving in line with that thesis. So what are the other factors that are at play? And then we've got one in a minute. Well, this rolls nicely into the tech stocks.

Oh yeah, I see what you've done here.

Yeah. But before we delve into that, I think it's quite important from a sort of bias point of view, there's this thing called confirmation bias, which is dangerous. This is where you have an opinion and you are so bought into that opinion that you, um, at best discount information that is contrary to that opinion. At worst, you entirely ignore it. And so you're just left with this idea that nothing in the world can persuade you is wrong, and then you plow on stubbornly with this thesis. And, and in the end, it can be really expensive if you're wrong. I mean, obviously your thesis is right, then fine, happy days. But, you know, there can be scenarios. You've got to be— I'd say, to, to avoid confirmation bias, you've got to really start to, you know, mentally go through an exercise which might be, right, I'm going to take the exact opposite opinion. This is a thought experiment, right? I'm going to take the exact opposite opinion and can I back it? Can I come up with some convincing arguments as to why the opposite opinion might be true? Um, see, I think you've got to go through— or in the real world, you might buy research from analysts that are taking up the opposite opinion. And so that would be a healthy way of getting a kind of 360 set of opinions on a situation. Then with the full 360 set, fine, you can then pick and choose which way you want to lean. Right. But I'm going to—

having said all that, I was going to say, hit me with your confirmation bias then.

So yeah, the stock market is going up. I'm going to give you two reasons why the stock market is wrong. Yeah, dangerous words. Number one, well, the debt ceiling, it hasn't been lifted yet. Sleepy Joe's got to sign off his bit of paper today. So actually, until that's signed, the debt ceiling isn't raised, and the Treasury can't start this deluge of new issuance. Okay? The bonds haven't hit— the spike in supply of bonds hasn't hit the market yet.

What probability are you assigning to him not inking that piece of paper then?

Zero. I mean, yeah, zero. I mean, 100% he'll sign it. Yeah, I know what you're saying. You're going to say markets would be pricing in that he's signing it and they'd be pricing in already this new issuance and Well, that's kind of a big hole.

Please go for your second point though. You had a second point.

Yeah, just, just pipe down. Um, that's point number one, which is very weak. Point number two, which is a stronger point. Yeah, why is the stock market rallying? And we mentioned this, I think, last week, or maybe it was the week before, briefly, and I thought we'd just dig into it in a little bit more detail. Um, this rally, talking of like the S&P 500, is incredibly narrow. Um, you've got 500 stocks in that index, but actually the vast majority of the rally is just based off 6. 6 of the 500 are responsible for the vast majority of the rally. The 6 being the big 6. I mean, it used to be the big 5, but we've now got We've got a new big dog in town. So the original Big Five— Apple, Amazon, Google, Meta, Microsoft— have been joined, of course, by Nvidia, who have now launched and briefly did break the $1 trillion club this week. I think, uh, I think— did they tick back down?

And they did tick back down, but they could well be ticking back up now.

Um, so you've got these Big Six, right, that are leading the charge. And it's kind of crazy if you kind of took the Big Six Like you're talking about the S&P 500 index right now, it's trading up at levels we haven't seen since August last year. Okay. Um, but if you took the Big Six out, then we're trading well below the levels. In fact, we're trading— you've got to go back to 2021 to find the last time we were here, right? So without the Big Six, the index is down on the year 2023. The index is down on the year, even though with the Big Six— I'm not sure what the stats are, but it's definitely up on the year, right? So it's very narrow. Now, what does that mean? Is that a problem? I mean, historically, a lot of analysts would point to the fact that if there's only a few little stocks that— or not little, sorry, it's the exact wrong word— a few large stocks that are, um, the rally is dependent on just a few large stocks, it means that it's not sustainable Um, and therefore there's a risk, and it's normally a signal that maybe the top of the rally or the momentum of the rally is running out. Now you'd look at the market now though and go, well, this has been the story for the whole year, so, and it looks like the momentum's not running out. And look, the AI revolution has been an anomaly in this particular narrow rally. I think so this narrow rally is different to others. It's not, you know, because you've got this what is potentially the beginning of a long-term secular kind of new trend, right? But ignore that point 'cause that's not helping my thesis. So there were a couple of analysts who have done some digging on this and got some technicals out. So there's a guy called Adam Turnquist uh, who is an analyst at LPL Financial. But he was looking at historically stock market rallies and narrow rallies, and he, he's using— he's using— he's basically looking at how many companies in the index are trading above their 200-day moving average versus how many are trading below their 200-day moving average. Okay, and he's tracked back on the S&P 500 back to 1991 And he's broken the, the periods up into quintiles, right? So 5 segments. And we're right now in the most extreme 5th quintile, which means you've got less than half of the stocks in the index trading above their 200-day moving average. This is then the extreme scenario where it's a narrow rally. His analysis says that on average for the next 12 months looking forward, once you've got into the 5th quintile, on average the market drops 1.9% in the first month, it drops 5.5% in the first 3 months, it drops 8% in 6 months, and then over a 12-month period on average it's down 6.8%. So his thesis based on the 200-day moving average analysis is that you almost certainly get downside in the index over the next 12 months. That's his thesis. I will counter it. I'm playing my confirmation bias technique here. There's another guy called Brian Belsky. He works for BMO. He's looked at this differently, um, and he's looking at stock outperform— he's, he's saying, right, what happens to the stock market if the top 5 stocks have reached a peak relative performance. That's when the top 5 have rallied more than one standard deviation above the average, which is definitely the case we're in right now. So he's used a slightly different way looking at narrowness, and actually his analysis shows that over the next 6 to 12 months, actually the stock index performs as normal. You wouldn't say that now there's a higher probability of it going down or up. So he kind of counters that analysis. But look, this is all the technical, so you can spin any argument you want. I mean, why are tech stocks rallying and will they continue to rally is, I guess, the crux of it. And I think that I've already mentioned one reason, the beginning of this secular long-term AI boom just so happens to have happened. In this kind of narrow stock market rally. And you could say that's currently, and I think it's probably incorrect, but right now in the short term, analysts think that it's the big tech players that are going to be the, basically the only beneficiaries from the AI boom, which, which is obviously nonsense. But there's a stronger argument, and that is in times of uncertainty, we've got a new safe haven.

So this was going to be my point as you were explaining.

Take it away.

Well, it was that— so I, I've, I've followed LPL Financial Research for quite a while, and they, they do put out some really great, um, backward-looking historical data sets. Um, but as you said, they're like absolute, like, perfect fodder for confirmation bias because you can basically look at a single scenario and backtest that. But as you are kind of going through that, and as much as that makes sense, um, I'd like to see what does that same time period look like when it's post-debt ceiling agreement, or in this moment of the Fed cycle, or there's like— it's a, it's a multi-layered thing when you're trying to backtest it rather than a singular, because then it can be a bit dangerous, I think. And particularly because media gets hold of it I'm assuming you read this in the FT or Bloomberg, and then it's like citing something that feeds a narrative, which is always quite, quite dangerous. But the point you were saying at the end, I mean, you pretty much just summed it up. I find it hard when I think backward looking, the tech stocks are different now.

Yeah, it's true.

The vol— the size of them, the diversification of their business, the ownership of their business. I mean, they the, the corporate bonds that are out there now that weren't there before, the— just on every level, I think that, as you said, I think big tech, it goes up when rates are low, and it goes up through that pandemic period. It goes up when people are uncertain because it's just a safe place to park your money at this point. They've kind of gone above— they're at the summit now, and it's Yeah, it's like, yeah, you say that.

So tech stocks go up when rates are low, definitely, right? And that's— that— this is what we call the long duration trade, and that's about the, you know, discounted cash flows, and, you know, future earnings become more, uh, worth more today when rates are low, right? We get that. But tech stocks have also gone up when rates are high. So, and so that then comes back to, I think, Big Tech goes up when rates are high, right?

I should clarify. Yeah.

And this is about massive, you know, strong free cash flow. I mean, it's— yeah, monopolies, right? The barriers to entry to compete, it's just literally unreachable. And, you know, obviously all their products have a key central place in the modern economy, and they're just all powerful. And I think that's the best argument to explain what's happening here in 2023. Now, will that continue though is the big question. And yes, the AI, AI stories come in just to give it a little bit more of a boost. But I still think whilst this tech rally I definitely didn't predict at all, and I'm kind of staggered by it, to be honest. But, um, I still think there are, on balance, more negative factors on the horizon than positive.

Yeah, yeah. I mean, when the stock market goes up pretty consistently, I mean, that's the general conclusion, right?

But then, yeah.

So, okay, so look, talking of tech, let's then, yeah, transition into Apple. And I was just thinking, you know, we're talking, it's almost like we were on the conference calls and it was like, how many times can we say AI on the podcast? I think we've managed about 20 so far.

AI.

AI. So yeah, Apple, it almost feels like even though we're gonna talk about the Reality Pro, the VR headset, Reality headsets, a bit boring though, like a bit mistimed, it feels, right? This, this narrative of, um, virtual reality, um, I actually remember it back in the mid-'90s. Pierce Brosnan and the Lawnmower Man, if anyone, if anyone's old enough to remember that. Wow, that was when that's I'm pretty sure that was even before my time. This was when Pierce Brosnan, the former boss—

yeah, I think it was not like Arnie.

No, no, no, you're thinking of, um, a different futuristic one. That was the Running Man.

Ah, the Running Man.

Talking about the Lawnmower Man.

Okay, sorry, sorry.

Come on. Yeah, anyhow, so we had this kind of like— I think that was when it was like complete infancy of like technology. It was like this kind of conceptual idea of virtual reality and it turned out to be this like horror show basically. Yeah. As it does in the early phase. And then we had the kind of a few years back pre-metaverse, big talk about virtual reality and it was like AR, VR, everything was AR, VR. How many times can you say in your conference call to juice your stock price? Then it pivoted to metaverse. Crypto kind of like littered in.

Yeah.

And now we've arrived at AI. So it's a bit slow now. I mean, to get actual, like, I think immediate bang for your buck, I think is going to be, just to say right now, very limited on this.

Yeah.

Because they're just not hitting the right spots of what, um, I guess the broader investor community is really latching onto at the moment. And I was just looking at Bank of America citing this kind of, quote, baby bubble in AI, and tech funds attracting an all-time high of $8.5 billion in the week through to the 31st of May, which is like huge. But they're certainly not— that's not in anticipation of the Reality Pro headset, I don't think. Um, so yeah, that just, just a point on timing there. But I thought what we could do is just talk a little bit less about the technology and more about, I guess, the, the business case for this type of product. So a couple of things and I'll run through. So enhanced communication. I think one of the things that we have had is that behavior has changed somewhat. And although we're getting more return to work in person situation as things have normalized, there is still now a belief that there is some idea behind being able to still be productive and have flexibility in your workforce to a certain degree. Sectors dependent in that way. So that being said then, how do you optimize that experience of being able to participate in virtual meetings, view shared content, collaborate in projects in real time? And yeah, that could be well, uh, constructed within that environment. Is what some would say. Then improve customer experiences. And I think this, I think actually think this is a really big area, if not one of the biggest. And this is the ability to provide real-time information, virtual overlays, and immersive experiences. So think particularly retail, so shopping. I mean, I was only on the Adidas website the other day looking at a new pair of trainers, and I thought, you know what, I'm going to try these on. I just sat there on my sofa and like zapped some AR sneakers on my feet and had a little walk around. Pivot your foot.

So what, using your phone?

Using your phone. Yeah, I thought about that.

You put your phone camera at your feet and it lays on—

But it moves with your foot. It's just augmented. And I thought, okay, so if you think about that customer experience.

Yeah, I get that.

For sure.

Yeah.

And then increased productivity. So this was more focused on areas like manufacturing, construction, healthcare. The idea here, productivity being providing workers with real-time information, virtual assistants. So think of if I'm a car mechanic and I'm working on an engine and I'm not quite sure how to tackle this particular issue, I can virtually augment then a secondary visual which then can go into and explain a product in a kind of real-time instruction manual sense.

Yeah, and can make the Matrix, or kind of, yes, teach me how to fly that helicopter.

It's kind of like taking— yeah, taking YouTube but making it much more, you know, I've done that before when my, my pram's broken and you're like watching YouTube and you're like, ah, what did you do? And you go back again and again. You can't see the nut that you're turning. What is that like? So yeah, that alone, I would buy one of these things to avoid that. Watching YouTube for the same 5 seconds about 100 times. So that's one thing.

Yeah.

And there's new business models. So this whole kind of immersive experience is talking more about Entertainment venues. So think about, they've already really started to do some of this type of thing, but, you know, boxing, basketball, football, these types of things unlocking then a global audience outside of your physical stadiums, things of that nature. But then, you know, you could talk about museums, historical sites, then that starts to move into education as well. Could you improve that, optimize that experience? For learning languages, cultural differences, things like that, informative stages. I, I do say that, that schools are funded by the government, so there's no way they're buying one of these puppies at $3,000 a pop. But the idea, let's say. Then there's, um, better data visualization. So this idea of making data more engaging, intuitive, interactive, um, meaning that Finance, logistics, operations, you know, can by having things like 3D models overlays just help make more informed decisions. And then supply chain logistics sector, could there be a quicker, more accurate inventory management system? Warehouse workers visually queuing things, feeding back into the data centers rather than just actual then movement of goods. Passage of goods. So this was like quite a good article that I saw, and it was kind of like, that's talking about not Apple, but just, right, the, the business, um, kind of case for these types of, of products. So yeah, any, any thoughts on any of those?

Yeah, well, I mean, yeah, all that sounds great, but there's a big but here. In Apple's product. Hmm. Two— there's two big buts, and they don't lie. Um, $3,000 is the first one. That is the price. I mean, come on, $3,000. I mean, I know they've been working on this thing for years, um, you know, trying to perfect it. And has it taken them too long? Because actually now you've missed the boat because that, that ship sailed and has— and sank, and the AI juggernaut's just coming through over the top. That's, that's one argument. But my biggest point, certainly in the short term, two words: headset. So Apple's mixed reality headset. That's where it's not going to work in the short term. No one wants to wear a headset. We've seen it. Facebook have already tried it. Yeah, I've got— I mean, I've literally got one on my shelf. I bought it. What was it? That, um, Oculus— can't remember the name of it now. Anyway, Oculus Quest, isn't it? I think that— so I bought one. I think it was like A lot of money, but 3, 300 quid or something like that, not 3,000. So I bought one, it was great for like 6 months and then it's been on the shelf for the last 2 years. No one's ever used it. So I think right now the technology isn't good enough. People aren't gonna wear this massive headset on their face and walk around in society. So until the technology gets so good where it can be embedded in your glasses or even, I mean, I guess eventually in your contact lens, but when it gets that good, fine, there'll be potentially mass adoption right across the planet. But I think in the meantime, a big chunky headset on your face is ultimately— plus the price is going to be a barrier. Like, for example, Meta's Quest 2, their new latest version, that only costs $299. And you know how many VR headsets got sold last year? 8.5 million, which isn't very many. So the market for big chunky headsets, even at $300, isn't there, never mind 10 times the price.

Okay, so I get that and I think you're absolutely right. I mean, if you think about putting on a physical headpiece which restricts your actual viewing, unless you have an ability to transition from the virtual screening to actual like glasses view so that you can move with this thing on, but then it's a physical impediment having that on. Yeah. However, You just mentioned the Oculus and Facebook is not cool. Facebook has the worst brand and face— having anything to do with Facebook, um, has no prestige. It has no premium value. And we know that young people specifically, and also certain geographic locations of new affluency, i.e., China, uh, can't get enough of, uh, showing their ability to purchase and consume these products regardless of, um, their actual use application. So yeah, it's interesting. And you talk price point. I mean, I was just having a quick think about this because most people that I know will own an Apple product, and I was thinking about it, but do they own I own a Apple product or that I own a few Apple products. And I was just having a look. I was like, okay, how much are the ear— the earbuds, the Pro version now? And they're like $300.

Yeah.

And I was like, well, what about— you see a few people with actual headphones, full-on headphones, and they're like $800. And I was like, what's an Apple Mac Pro nowadays? Okay, so that's $2,000 going up depending on what model you get. The iPhone talking dollar-wise, is knocking $1,500.

Yeah.

Then you've got, um, I'm not even going to go into the iPad. I don't know, do people even use iPads anymore? I don't think so. So let's leave that off the list. Apple Watch.

Yeah.

So I, I guess the most common being people have to watch, have the phone, have the buds.

Yeah.

But we're talking about a couple of thousand dollars there. Plus then you've got additional cloud storage that you normally have for now high-res photos, which is another $5 to $10 per month. Plus then Apple TV, you get it for free with your mobile contract. Oh, I'll keep it. That's another $10 a month.

I get your point. Look, I don't think this isn't a— well, I'm not saying that this is a complete disaster. It's going to bomb and the whole Apple mixed reality thing will be a complete fail. I'm not saying that. I'm saying that they're not going to sell many of these for a long time, and I think they're okay with that. I think what they're doing here is positioning themselves in this race for the long term. Like, little things like, you know, who's gonna buy it? Well, okay, the diehard Apple junkies, plus developers. So actually, did you know there's 34 million software developers that are registered to work on Apple's devices? So they're going to be buying this to build software so that can go into these devices. So actually, I think this product will accelerate the software development cycle. That will mean this software will get better quicker. But so I think this is the beginning. These are baby steps. I think it, you know, and as I said, can they be first to the contact lens version in, I don't know, 5, 10 years' time? Fine. Then it plugs into their entire suite of products that all of their customers are going to want in on.

So I guess perhaps the best conclusion here is just the difference between the AI situation right now and something like the concept of a virtual reality product in the fact that AI is transformative almost immediately to—

Yeah.

Tens, if hundreds of millions of different people across sectors, which has an immediate impact on usage, cloud storage, chips, the supply chain, whereas with virtual reality there's a lot of barriers ahead. So yeah, it's interesting. So let's wrap it up there. That's it for this week's episode. Um, as I said, I think in the last one with Steven, don't forget, um, there is, I think, a Q&A function now on Spotify where you can leave us any questions, comments, so on, please do. Always happy to take them and get your thoughts and views, um, on Piers's confirmation bias about shorting stocks. This is educational material only, I must reinforce that point. And also, if you're listening, you've made it to the end, you've been enjoying the shows with Piers and I or Stephen, please do rate and review the show on your preferred podcast platform really helps get it out to as many people as possible to try and make hopefully finance a bit more interesting, um, and also real with some real life stories, uh, than perhaps what you're studying at school. So yeah, enjoy the weekend. Thanks, Piers, and catch you for next episode.

See you later.