Ep.47: Is UK 'Plan C' Coming & Why Alphabet Will Win The Race

Okay, welcome to episode 47 of The Market Maker with AmplifyMe, myself, and head of trading co-founder Piers Curran, and what's going to be the last episode of the year. And don't worry, if something really does go down in markets between now and the end of the year, I'll endeavor to jump on and I'll do a kind of breaking developing story, if there is one. Hopefully that won't be the case for everyone to have a well-deserved rest, I'm sure, over Christmas. But in terms of the episode for today, really wanted to focus on 3 different areas, those 3 areas being Boris Johnson. He's got a bit of a rebellion on his hands at the moment after announcing Plan B amid discontent I'm sure everyone has read by now over his handling of Christmas parties, apparently from last year. While we were all in lockdown, of course. And we'll talk a little bit about that in 3 sections: the kind of Omicron update that then led to this Plan B strategy being deployed, the political stuff that he's facing at the moment, and then ultimately for markets, what does this mean for the Bank of England and interest rate expectation timing. Then we'll pivot and we'll talk about inflation. Probably the biggest event of the week has just come out at the time we're recording this on Friday afternoon. London time, and that was US CPI, just came in at its highest level in 40 years. Stocks, bonds rally, dollar drops. So go figure. But yeah, we'll explain the reason why you've got a really counterintuitive move to what you would think if you're not following markets day by day. Then the final thing is we're going to talk a little bit about a question I put out to the YouTube community. If you just search AmplifyMe on YouTube, you'll find our our channel. And on Thursday, I was talking about Apple, which is on the pursuit of becoming the first $3 trillion company. And what I asked our community was, if you had just a X number of cash, but you had to invest it in one company for a 10-year hold, and it's out of the tech titans. So I'm talking about your Apples, your Amazons, Alphabet, Tesla, so on. Which one would you choose? Now, the audience said resoundingly Tesla. Whether the people listening now agree or not, I don't know. But what we're going to do is after we've talked UK Plan B, after we've talked US CPI, Piers and I, we're going to pitch you a stock. We're going to pitch you what we think is the best one for a 10-year hold. Not going to tell you who they are now. We've both chosen a different one and we've both not chosen Tesla.

Well, I think, yeah, I think I was going to say, I think it's pretty obvious that mine's not going to be Tesla based on what we've been discussing on the podcast in previous episodes.

Yeah, but we'll, we won't give away any more than that yet. You'll have to stay tuned and we'll get around to that as the final segment. So Kicking things off then, let's talk about what's been going on in the UK because the British pound against the dollar actually hit its lowest level in a year earlier today. Not actually on the announcement, but when the rumors were circulating on the morning of that evening when he announced it midweek. And what it broadly covers, this Plan B, is masks are now mandatory in certain settings, working from home is advice again, vaccine passports needed for big events like clubs. So I know you're a big clubber, Piers, you have to get your vaccine passport out now.

Ruined my weekend.

So why has all of this happened so, so promptly? Well, there's a couple of things. Let's just talk about Omicron first, and then we'll talk about the kind of optics for Boris and what his strategy likely is. We never know for sure, of course, but SAGE's emergency meeting happened early in the week before this announcement came out, and they warned ministers that Omicron hospital admissions could could breach 1,000 a day by the end of the year unless they adopted some form of tighter restrictions. And this comes as this new variant, Omicron, is now behind around 8.5% of all of the UK's coronavirus cases. And that was compared to around 4% at the beginning of the week. And what the UK government was saying in their press conference when Boris delivered this was that it's around 2 to 3. So every 2.5 days, the numbers double, double up. And as far as how transmissible that is, it's far more transmissible than what we've seen with the most dominant current strain, which makes up most cases, which is the Delta one still. A couple of things then. From a health perspective, one of the things that I saw out of a good friend of ours, Jim Reid at Deutsche, was saying. And this is one of the things I was commenting on in a briefing earlier this week, because I get a lot of the sense that the market is kind of, oh, it's, it's mild, the signs we're getting are it's not going to be a problem because it's not to the same severity, the lethality is low. We talked about this previous episode. This is what Jim Reid said. He said, ultimately, the issue from a health perspective is that even if Omicron does prove to be less severe, which the initial indications so far have pointed to, a rise in transmissibility could offset that. That could mean that more people are in hospital even if a lower proportion of them are severely affected. The idea being here is that case rates in Britain at the moment are around 50k a day. This is about the same as the double top peak that we've had in the last kind of 6-month period, but Omicron hasn't really taken shape yet, and it's going to get a lot worse before it gets a lot better, and that's probably going to happen over the coming weeks into New Year. So it's a proportionate amount of people. Yes, it's less severe, but if that number's great enough, obviously it's going to put more pressure on infrastructure, the NHS, and so on. And there comes then the rationale behind the government kind of pulling the trigger. Um, so then we move on to, say, the politics, because Boris has had a tough week. I think he's— has he just had another baby as well?

It is, yeah.

Yeah, I mean Is this, is this the 9th or the 10th?

I lose count. I know it's number 2 with his current wife. Are they married or not? Actually, I can't remember.

I think they're married now.

They get married in—

yep. So he, he's, uh, good. I mean, he's prolific, but, uh, oh, he's been busy in many ways. But Boris Johnson, then he's had a few different things, so He's had this big debacle over what's coming out, and you know, he keeps coming out of the woodworks now that I'm super interested to see what he says. Dominic Cummings. Oh yeah, you know that guy has, has all the WhatsApp messages. He's got some inside photos. You know he's gonna drop those right over Christmas. If I was Dominic, I would leave it. I'd wait until Christmas Eve and then I'll be like, poof, drop it into the Daily Mail, The Sun, and then just say, look what, look what Boris was doing. There'll be Boris on top of everyone's shoulders at Number 10 with his sombrero on. Oh, but that, that was, that's obviously been a big one in the papers, and this unrest comes at a particularly problematic time politically because there's a by-election Not sure how many people are aware of this, but North Shropshire are having a by-election. Okay, now why are they having a by-election? Well, the Conservative MPs have already been aggrieved by the way the Prime Minister has dealt with a sleaze scandal that culminated in a guy called Owen Paterson, and he had to quit, and he was the Tory MP for North Shropshire. So last time they had this by-election was in 2019. So it's had to be held now, and actually the Lib Dems, who came third in 2019, are tipped to take it, and they've got to overturn a 23,000 Tory majority, right? So not that North Shropshire is particularly important in a sense of itself, but the way that politics typically works is that if you start to see big shifts on the ground It gives you early kind of litmus tests then of the sentiment more broadly changing. And one of the things that came out overnight was the latest YouGov poll, and that now shows Labour with a 4-point lead at this present point in time in terms of Westminster voting intentions. Now, I wouldn't get too carried away with this as yet. I don't think Boris Johnson's at risk, but certainly there's just a lot happening at the moment that he's having to contend with. Um, and yeah, the next thing then is like, what does this mean going forward? We've discussed Omicron, we've discussed the politics. A lot of people have asked me about, well, what's Plan C? Because, you know, we weren't expecting to go to Plan B so quickly. And I read even people like Rishi Sunak and others were pretty surprised when he pulled the trigger on Plan B so soon. But this is what's called in politics the, the dead cat strategy. If you imagine a dead— the sight of a dead cat being flattened in the road is quite a shocking thing, right? So you make enough noise over here to deflect the optics and, and attention to over there. And so, yeah, a lot of that partly playing in, you would say. I'd say though that Plan B was inevitable. Plan C might well be inevitable. It's just timing, I guess, and how stringent that is. And Plan C, all we know at this point is sources at Number 10 say it's very likely care home residents will be banned from seeing more than 3 visitors over Christmas. Probably the most problematic one, vaccine passports. They could all be extended to basically a more broad amount of venues. There'll have to be check-ins, NHS COVID app reintroduction if you go to a pub, if you go to restaurants. The other very controversial and divisive one is face masks. You'll then need to start wearing those in all indoor spaces again. So it's not, you know, this whole idea of lockdown, we're not in kind of lockdown per se. These are just the steps that are happening at this point in time. So yeah, that's the summary of it. But any feelings or thoughts for you, Piers, and just what's been going on this week in the UK?

Yeah, I mean, well, so Plan B, I mean, I definitely agree with your dead cat call. I mean, for sure the trigger has been pulled on Plan B way sooner than Boris would have done it normally if it hadn't have been for this massive sort of uproar about Christmas parties at Number 10. I don't know, I think what's kind of— what happens, what's happened this week is kind of everything I hate about politics. I mean, I get the argument about this whole parties in— Christmas parties in Number 10. Did they happen? Did they not happen? I don't know, right? But personally, I just couldn't care less. I just don't care what happened in Number 10 in December 2020. All right, I entirely get the point about that you can't set rules for everyone and then break them yourself. I get that. But it's just, just there's so much more important stuff to be dealing with. I'd rather have the government focusing on what is still a monster health crisis and trying to deal with that instead of a lot of their capacity having to go towards fighting fires about something that happened 12 months ago. I'm not defending the government. I'm not saying they're right and they should have had parties. Of course not.

But so, hang about, you're saying that they should be serving the public and not their own Agendas? Is that what I'm hearing?

And the other— the other—

the other—

one of the— the other things that I really hate— I don't hate many things, but one that really riles me is Keir Starmer on TV crying about something that Boris has done and something that can— that guy. I mean, you were saying the Lib Dems are on to win North Shropshire. And by the way, don't belittle North Shropshire. That's where, that's where I'm from, nearly, just on the border at least.

So are you running?

Come on, big up to my North Shropshire massive. Um, but the fact that the Lib Dems are maybe coming from third place and overturning a 23,000, um, majority— if they do, we'll have to, I'll have to wait and see— is, is actually just because the Labour opposition, I mean, they might as well not be there. It's, it's so bad. And I think anyway, it's kind of a reflection of the leadership kind of candidates in this country, in America, in loads of places. I think there's a kind of big failing on that kind of quality of candidate when it comes to leadership these days.

So Goldman Sachs, JP Morgan, their economists have all been out, revised their Bank of England call the BOE meeting, the final one of the year, is on Thursday next week. And if you were to have looked at market pricing a couple of weeks back, hike in December, that's now been pushed out till February. The rationale, February is when the next monetary policy report comes out and they issue their projections for things like updated growth, um, inflation, obviously inflation as well, where probably be a little bit more closer towards that peak, but they've already forward-guided towards, um, hitting around, I think, March, April time. And you had one of the biggest hawks this week, Michael Saunders, came out and he was basically saying, oh, Omicron, yeah, not so sure now. And he's one of the outstanding hawks. So December off the table now?

Yeah, definitely 1,000% off the table. And actually, if you want— I think I might have mentioned this a few weeks back, but I'm going to say it again. If you want accurate Bank of England monetary policy predictions, don't listen to Goldman Sachs. Don't listen to JP Morgan. Listen to Mr. Anthony Cheung.

I did call this, didn't I, about 5 episodes ago?

You've called it several times now. And you've been— well, we'll see. You're going to be right. Yeah, I mean, there's no way they're going to pull the trigger now. Absolutely not. Especially when Plan B's in. But now everyone's going, what about Plan C? I mean, whether Boris has got another kind of crisis that he's going to have to pull Plan C out of the bag just to deflect attention from, we'll have to wait and see. But Yeah, I mean, obviously sterling has been incredibly weak. And as we've gone through this kind of realization over the last couple of months, we've kind of come from above the 138 handle just now down— well, almost down to the 132 handle.

Right.

And that's just pivoting because obviously not only has the expectations on the Bank of England side become more dovish, it's happening at the same time that expectations on the Federal Reserve side has become more hawkish. So you get this monetary policy expectation divergence. And that's when you really see exchange rates shifting because you've got a weak currency and a strong currency at the same time. And so, yeah, I mean, cable, that's literally just this month, in the month of November, it's gone from 1.37 to 1.32. If you take the November high right at the start of the month, I mean, that's 500 pips. That's a very, very big move. And look, there's more to go. I mean, even though we've come off quite sharply, this puts us back at levels we were in like December— well, let's just say Q4 last year. So it's only 12-month lows. I can see us getting down to 130 or lower. There's a good level I'm looking at. This is 127 on cable, which is actually the September low from last year. So there's certainly— and I guess what puts that view at risk is Omicron in the US. We're not quite sure. I mean, it hasn't quite got there yet in the same way that it's here in Europe and really starting to cause concern. So I guess we'll have to— I mean, you've got to assume it's going to be a similar thing in the US in terms of Omicron starting to kind of take over. So it'll be interesting to see how, you know, what the policy moves are, you know, to deal with that.

Yeah, and I was talking to one of our colleagues, Saif, about this actually, about how he was, he was explaining about how on a broader global concept you have developed and underdeveloped economies and the vaccination rates are wildly different. So South Africa has a vaccination take-up of say 30% And so obviously you're going to see much higher hospitalizations at the moment because one of the things that the vaccine— although you might catch COVID because things like Pfizer-BioNTech's efficacy rates are diminished by this new mutation, this variant— the idea is we don't go to hospital because we don't get that severe a symptom. Whereas if in there, and you know, other underlying issues in that area— Southern African nations account for half of the world's HIV cases and things like that— those numbers are going to look quite bad. But there's a big divergence between the vaccination rollouts, is the point. And he was saying about in America— America is like this one nation where there's high vaccination areas like the East and West Coast, and then there's spots in America where there's very low vaccination take-up. And it's almost like that's quite a— you can imagine quite a tricky proposition to handle, because when you're talking about the flow mobility of people within a singular nation, not even outbound, coming into within your borders. Although yes, there's perhaps then degrees of travel might be limited between states and different federal setups. But yeah, be interested to see how the US can cope because there's some areas that could be highly susceptible to Omicron cases going forward. And yeah, for sure, I mean, the US rates are still like 60-ish percent. I mean, in mainland Europe, a lot of countries are up in the 90s as comparison. So one thing that has happened, I read this week though, is the booster shot take-up in America has actually picked up now that Omicron's hit the news. It's incentivized people to get the booster shot, and they were doing about a million a day. They're on, they're on pace at the moment, which is the fastest it's ever been since boosters have been introduced. So yeah, there's a lot to play still on that side of things. But I guess it's a good hook. You were talking about policy divergence. And a big trigger point, of course, for the setting of policy in America at the moment, as much as Omicron's an emerging risk, is the labor market and inflation. And we've just had US CPI come in for November at 6.8%. So you thought last month was high, 31-year high. it's now 40-year high. And so the core reading year on year, 4.9%. Numbers extremely high, but the market rallied, equities and bonds. The dollar fell and gold moved higher. So Piers, perhaps you could just talk us through the rationale for this type of activity and what otherwise is a contradictory move.

Yeah, I mean, it's about expectations and how reality matches up with expectations. That's how markets behave. So we go into an event with a certain thing. So traders will head into an economic data release, certainly the big significant ones like US CPI, and they'll have an expectation of how this is going to play out in their head. Okay. And that expectation, it depends. Is based on— it can be a huge sort of range of factors. And it very much depends perhaps where you are, where you sit in terms of your job or who you work for. I mean, it goes from, let's just say, a big kind of hedge fund or a big asset management firm or a big bank. You know, those expectations are coming from a huge team of people, analysts who are crunching all the numbers and using models and coming out with an a predicted number. That's on the one extreme. On the other extreme, you're going to have individual traders who are perhaps a little bit more emotionally driven. And what happens when Biden earlier in the week comes out and starts talking about inflation and that it's going to be really high, and then all of a sudden you're like, oh my God, it's going to be— hang on, if he's coming out and talking about it, well, hang on, this is going to be It's going to be a really high number. On that end of the spectrum, it's a bit more emotional. What tends to happen is people, they worry. As human beings, we worry, what's the worst-case scenario? The worst-case scenario for these inflation numbers is that inflation is much higher than expected. You go into the event thinking, what happens if it's really high? What happens if it's much higher than expected? What happened today is it wasn't higher than expected. It wasn't lower than expected either. It was bang in line with the official forecast. Now, from that kind of emotional reaction, it's relief. Oh, God, thank God it's not massively higher than expected. Okay, it's only in line. Okay, fine. Let's now react. And I guess you position yourself for the worst case, and when the worst case doesn't happen, you reposition yourself back. So you've got a relief because inflation hasn't come out much higher than expected that some people were fearing. So yeah, stocks have gone up, the dollar's weakened, etc.

Yeah, and Biden coming out, I mean, his exact phrase yesterday, so of course very timely, he said Friday will not reflect the recent decline in some prices, and that includes energy prices. And of course oil's had a big move lower after the specific period of which this inflation report measures. So this is quite a tactical approach. It's deployed not only by politicians but by corporations as well, where if you know there's going to be potentially harming news, it's a human psychology kind of management in a sense of you're better to come clean quick let the markets know about it rather than be blindsided, which tends to exacerbate the initial knee-jerk emotive type reaction. And yeah, it's quite a regular thing that we see on a frequent basis.

Yeah. And on that energy point you said, oil had its big sell-off on the 26th of November. So the point being, right at the end of that month. And so, and it sold off from $78 and we bottomed out at $62. I'm looking at WTI crude, $62 by the 2nd of December. Right? So basically, on average in November, the average price of WTI crude in November was probably up around $80, whereas so far for December— and all right, we're only a third way through the month, but the average is more like $70, if not maybe a touch lower on average. So that's a big step down. But yeah, so that big drop, you won't see that until we get the December inflation figures. Which won't be reported until mid-January. So that's kind of what Biden was saying. So people off the back of this number today, it's like, okay, relief, okay, it's in line. And actually we may get a drop next month when this, factoring in this energy price decline.

So either way, it remains high, it does drop, reflecting a bit of a pullback in energy, the Fed are going to just go ahead and accelerate taper. In January. Would that be a fair assumption? With the risk factor being the development between now and I guess— well, the problem that the Fed have is the meeting is Wednesday.

Yeah.

So if you're the Fed, Omicron, you're right, hasn't really started to materialize in the US yet. The Fed can't wait. The meeting is Wednesday.

Yeah.

The conditions are ripe to do it.

Yeah. They definitely go ahead next week. They definitely go ahead with acceleration of tapering. And it's that end of quarter meeting. So we've talked about this where it comes with their updated dot plot and their updated forecasts and projections so they can use those figures to better justify and explain their action. So it's all lined up for next week for sure. Obviously, as you said, that Omicron thing. I think the Fed, they have to take action now and adjust things later as they're going along if warranted. And it might not be that it's warranted, in which case, fine, great, carry on with that accelerated tapering timeline.

Right. So this is just like your understanding of Fed language. It'll be one of those where they roll out that kind of, we'll continue to review incoming information of the variant as it develops and make a decision accordingly. Yeah, one of those types.

Absolutely.

Yeah, I agree. Okay, cool. Well, let's move on to the, the final segment, which as I said came around because a lot of people were talking about Apple this week. And the reason why is it's only about 6% away from becoming a $3 trillion market cap company, the first ever. And a couple of things, I mean, Apple One thing I had read, there's been an increasing amount of options interest in Apple, particularly in the retail market. And usually the retail crowd have been more focused on companies that they can turn around. I mean, I was putting together a review of the year, Piers. GameStop. I mean, GameStop, we were talking about, it was actually the beginning of this year. It feels like a few years ago.

Yeah. Yeah. Was it February, wasn't it?

Yeah. It feels like a long time ago. But that was when we were talking about 1,600%. Now Apple, you're not going to get that type of spicy return on an Apple investment. But the idea is that people have been getting quite into it from a more broader perspective. One thing earlier this week was Morgan Stanley. They came out, they upped their price target. I think it was to $200 from around $164. They were talking about the idea that a lot of the things that Apple have not yet brought to market. One of these being their kind of move into virtual reality space, and the other being self-driving vehicles, electronic vehicles. And so that not being baked into the share price was the view, and they still remain quite bullish. And one thing that's happened is, although markets, the volatility has died down, when we were going through that volatility bout last week, Apple, it was like Apple is the flight-to-quality play. It's gold, it's treasuries, it's Apple shares. It's like rewriting the textbooks a little bit because it's such a monster now. It's impenetrable by negative developments, it seems. Well, at least that's the perception, it would appear. But I know on the latter point of autonomous vehicles and things like that, you wanted to mention. So What have you got for me?

Well, yeah, I mean, this guy at Morgan Stanley thinks that Apple's got a lot of potential upside because of the fact they could win the race on this kind of driverless vehicle situation. I just can't understand what he's looking at. I don't know what information he's got. But all the information I look at, they are losing the race. In fact, they've probably already lost it. I mean, look, so basically in 2015, this is what Tim Cook said, um, and this was part of a Wall Street Journal conference, right? And he said, um, we want to, we want to deliver an iPhone experience in a car. And that was really the first moment where Apple hinted that, right, we're going to start making a car, and it's going to be a driverless vehicle. Ever since then, it's been super secretive. They've kept it very, very, very much under wraps. Their project is called— it's rumored to be Project Titan, right? The problem is they've hired a load of expert people along the way to come in and head up this kind of section. And they just kind of— they're just dropping like flies. So Doug Field is the latest one that has just stepped down. So he was the former Tesla executive. And he came in to head up Apple's car project. And so he's just kind of left. And actually, he's the fourth head of the project to depart in the last 7 years. And then on top of that, you've had 3 other very senior executives leaving in the last few months. So it looks like the wheels are coming off Apple's kind of Project Titan. See what I did there?

Yeah, I like that.

Here are a couple of stats. Well, actually, who's in this race anyway, right? So in terms of the tech giants, Google, they've got this thing called Waymo. OK, this is their robo-taxis. Amazon, they're in all in— they're in amongst this as well, obviously. Theirs is called Zoox, Z-O-O-X. Apple, Project Titan. IBM are quite interesting. IBM snuffled up an Israeli company called Mobileye back in 2017. What's interesting about Mobileye is slightly different to the others. All the others, they're like, right, let's try and build a driverless vehicle. Let's try and build that. Mobileye is actually— they develop advanced driver assistance systems. So it's actually an add-on to— they're not trying to build a car, we're not car experts, we're good at AI and that kind of stuff. So let's just stick to the system. And their actual plan is to then license that system to the giant automakers. So actually, in terms of the rest of the industry, the automotive industry, there's quite a lot of incentive for them to kind of go with Mobileye, and therefore not get trampled by someone who manages to hit the jackpot with their driverless vehicle and they take over the world. So Mobileye is a slightly kind of interesting one on the tangent side, but that— but there are other automotive giants who are all over this as well. Obviously it's a big threat. So you've got GM and Honda, they've teamed up, they've got, um, projects they're calling Cruise. Uh, Ford and Volkswagen, they've teamed up, theirs is called Argo. Hyundai, there's Motional. But look, I guess the point I want to make about driverless vehicles is where are they? Because I don't know about you, but for years and years and years and years and years, it's like they're coming, we're there, it's going to happen. And it's like, well, where are they?

Hold on, let me just go and ask my Tesla humanoid. OK. Oh, sorry. No, it doesn't exist.

Yeah, exactly. Well, here's another good stat on that front to prove— make a very good point there. Google— so that— well, they're considered to be the market leader. I'm going to talk about Google in a minute. But their Waymo Robotaxi is considered to be the market leader when it comes to trying to win this race. But even them, right, in 2018, they ordered— 80,000 vehicles for their robo-taxi driverless units. And it was like, 82,000, wow, OK, they've cracked it. They've done it. But here we are now, 3 and a half years later, and they're still only running a couple of hundred cars. So it's like, what's going on here? Because it never quite seems like— any of these lot deliver on their aims. And there is one thought, and that is, why is it not working? And it's around actually the way AI works and the way it kind of went down a tangent in the early '00s in terms of the direction that AI was developing in. And that tangent's been the path that's been followed. And it's like, actually, Was that right tangent? Because basically, it's all about data. So people who incorrectly think— well, hang on. In my opinion, incorrectly think Tesla have got a huge advantage here because of all the data that they can harvest from all of their vehicles. But actually, all this data is fine, but it's quite Basically, the way AI works in a vehicle at the moment is it's basically whatever the vehicle can see in terms of its cameras and its radars and stuff, it can then account for. So it can see white lines. It can recognize signs. Like, for example, so machine learning is part of this AI process. So if you want to program a car to be able to recognize, hang on, there's a stop sign. Coming, then your little programmers behind the scenes who are doing all the code, they're not coding in— they're not writing code to describe every single different type of stop sign on the planet. They're writing code to say, look, a stop sign can look a bit like this. Here's a million pictures of stop signs. You go away, machine, and have a look at all these pictures. And find out the common elements. And then when you see something that has the common elements, bang, that's a stop sign, right? I'm going to hit the brakes. OK? What AI can't do at the moment is they can't operate like a human in so much as there's this thing in human beings that's called object permanence. Now you learned this, Anthony Cheung. You learned object permanence by the time you were 7 months old. OK. Here's an example. You get a toy when you're 7. OK. And your dad is waving it about. Oh, you're really excited, smiling, smiling. And then you put the toy under the blanket. So you can't see the toy now, except you know it's there because you're human. Now, if you translate that into a driverless vehicle AI system, take a bike. Right. Let's say you're driving along. There's a lorry. and then there's a bike. Okay, you can see both, you can see both, but then if the bike goes behind the lorry, can't see it now, and the AI system can't see it and can't account for it. And I think perhaps one of the reasons why we've always had false dawns on driverless vehicles is because of this kind of shortcoming. Um, but there's a clever dude in Norway that's trying to come up with a, a system that kind of gets around this where, where actually it can account for things that go behind other things. And they've had a small amount of success for it. So I think the whole driverless vehicle pot at the end of the rainbow thing, the race is still on. It's just Apple are losing it spectacularly. Do you want to know the number of miles that Apple's car drove last year? In testing, 19,000 miles. Do you want to know how many Waymo, uh, Google's one did? 630,000. And Apple's 19,000 last year. That was less than 2018. They're doing less and less miles, and the others are just— they're way off the pace.

Is this just one of those situations where A lot of these companies are doing it because everyone else is doing it. And to keep up with the Joneses, you have to do it. And they're not really that vested into this. They're just kind of like, let's just do it and keep the market content that it's a thing. Keep your feet around it like Titan.

And I think when you're such a massive company like Apple, who've got just cash coming out of every pore in your body, and you're just not quite sure what to do with any of it, never mind all of it, right? So you— and then I guess there's perhaps probably— there's probably shareholder pressure coming in from some of the big shareholders, like, come on, why aren't you innovating? Hang on, great, this iPhone's great, but, you know, what's next? Come on. And so, you know, I think these big tech giants have to be getting there, dipping their toe in all of these kind of trendy things. Things, even though for Apple it's a massive waste of money.

Well, I can hear the PR agent of Tom Cruise calling up GM and Honda soon. But look, let's get back to your pick then, back to the original question of—

Yeah.

Out of all of these big stocks at the moment, and Tesla's one of those, As I mentioned, that's the kind of crowd favorite in our community. But for you, you've talked a lot here. You've talked a bit of a game for Alphabet.

Yeah.

So tell me a little bit more about what you think about Alphabet.

My money's on Google, baby. If you want to invest in one of these things for the next 10 years, excluding all other companies on the planet, if it has to be one of these, It's got to be Alphabet. Just a couple— can I just give a quick bit of history before we properly dive in? Have we got time? Basically, there's always these trends, these cycles, let's call it, of this— whatever you— I don't know— the celebrity stocks, the stocks that smash it out of the park in terms of growth. And there's always a cycle. And it's been the FANG cycle. OK? But this cycle has been going on and on. It's interesting that— so if you go back to the 1900s— I'm going way back here now, like literally the first decade of that century, 1900 to 1910— you had the leading stocks then, which was kind of primarily about railroads and stuff. Won't have heard of any of them. So Union Pacific, or maybe you've heard of that one. But Atchison, Topeka, Santa Fe, Western Union, Sugar Refinery, these were the FANGs 100 years ago. They've got vanished, right? You're going to hear my point in a minute. In the Great Depression, end of the '20s into the '30s, it was Container Corporation, Bulova Watch. Zenith Radio. Ever heard of any of those?

No.

No. 1950s. So here they— the fangs, this is when they started to get cool names. And this is an investor thing, by the way. It's investors grouping together certain stocks.

What, like Amplify Blockchain?

Absolutely. So in the '50s, they were called the Nifty Fifty. Actually, the stars of that market were— now you will have heard of these— Xerox, McDonald's, Coca-Cola, IBM, JCPenney, Polaroid. Now those lot, I just want to say, because there's a probable misconception that FANGs can only go up. These things have gone up and up and up. Oh my God, they've gone up again. Oh, they've gone up again. Oh, wow. Now they're going to go up definitely. Well, after all those companies I've just listed off, the Nifty 50, they came crashing down in the early '70s. So some of it, like Xerox, dropped 70% at the start of the '70s. Disney dropped 82% at the start of the '70s. So I'm just saying these are cycles. There is a down part to a cycle, right? So even though these FANGs only ever go up, it seems, they will come down. Some of them, a lot more than others. But anyway, then we go into the 'noughties, right? And actually, I didn't realize this as I was reading up on this. So there's a guy called Jim Cramer, who you obviously have heard of. Yeah, crazy Jim. But our listeners may not have done. But he's a kind of very sort of famous guy on, well, CNBC, but also a kind of journalist, a bit more broadly, financial sector journalist. But yeah, mainly stars— on CNBC. So he came up with an acronym at the start of the '00s. And he said, look, Google, eBay, Research in Motion, a.k.a. BlackBerry, Qualcomm, and Yahoo. He said, those are the ones. And he gave it a name. He called it GURKWI.

Catchy.

Now, That bombed because I'd never heard of Gherqui, even though I was trading back then, but I can't ever remember that. But anyway, obviously Google were in that bunch. They're the first— well, I guess Microsoft as well. I mean, Microsoft are the oldest FAANG, even though they're not in the FAANG, by the way. I'm going to give you a new acronym now in a minute. What was interesting though, Do you know who came up with FANG as an acronym? Jim Cramer, which I didn't know. 2017. And he said Facebook, Amazon, Netflix, Google. There's a notable absent from that list, Apple. Apple was not in the original FANG. It was Facebook, Amazon, Netflix, Google. It wasn't until Oh, sorry. No, that was in 2015. I think in 2017, Apple then was added and FAANG got its double A, right? But Netflix really does not deserve, in my opinion, to be grouped together with those other companies. I'll give you a stat on that in a second. But there's a new acronym. Because look, all right, if we want to bow down to pressure, we need to put Tesla in there. Obviously Microsoft. OK. So if you take the N out, that's Netflix, you're gone. Bring in an M and—

and it's like the Christmas quiz or something.

And a T. Hang on. Change the Google to Alphabet, so you've got another A now. And believe it or not, you get Fatman.

You heard it here first. Here's Curran, the FATMAN.

FATMAN, that's F-A-T-M-A-A-N. So it's the FATMAN Index. Now, of the FATMANS, who's going to take it in the next decade? It's Alphabet, and here's why. Firstly, well, in short, YouTube growth, Google Cloud growth. They've got a big advantage on the AI race. And if anybody is going to win the driverless vehicle, currently it looks like Google with their Waymo robo taxi. But as I said, jury's still out on that whole driverless vehicle thing. But look, here's some figures for you. I mean, Google truly are quite an extraordinary company. They generated $65 billion in revenue in Q3. Of this year, right? 65 bil. Now, whilst that's not as big a number as the likes of Amazon, right? But their growth rate is just sensational. So even though they're a behemoth of a company, they grew at 41% year on year. 65 billion in one quarter at a 41% growth rate. Now, of that $65 billion, advertising obviously is their core. $53.1 billion came from advertising. Then there was $4.9 billion from Google Cloud. And then others, right, making up the rest, which was $6.9 billion. OK. Now, YouTube obviously falls into the advertising part. So how much of the $53 billion was YouTube? But it was actually $7.2 billion. Okay, so in one quarter, uh, Google generated $7.2 billion in revenues from YouTube. Um, that puts it on— for 2021, we're looking at a $20.2 billion revenue, uh, from YouTube compared to $12.9 billion from last year. That's a 57% growth rate. So YouTube advertising is running at a 57% growth rate. Why does Netflix not deserve to be in the FAANG? Well, basically Netflix posted $7.5 billion in Q3. Okay? So YouTube, $7.2 billion. Netflix, $7.5 billion. So pretty much the same, right? But Netflix growth rate 19%. So YouTube growth rate is 57%. So basically YouTube is bigger than Netflix and growing 3 to— yeah, 3 times faster. So Netflix, get out. You don't deserve your spot here. Let's talk about the cloud. Because here, AWS, and maybe you're going to talk about Azure, I don't know. But With the cloud business, they're only generating $4.9 billion in Q3. Okay. Obviously Amazon's got— Amazon and Microsoft have got the lead here. But in terms of worldwide spending on public cloud services, this stat's a bit old. In 2019, it was $243 billion. Okay. Total for all cloud services, Amazon and Microsoft taking the biggest shares of that. But that whole market is expected to grow from $243 billion to nearly $700 billion by 2025. So it's going to triple. So the point here is who's going to— I guess Google is growing and will win more market share of a market that's going to triple in size. And so I think the potential for their cloud business to grow is definitely particularly interesting. So I think, and overall, if you just strip all of it out, what are the growth rates of these FAANGs? And if you can compare them, then here's how it stacks up. Microsoft, Q3 growth, 23%. Amazon, Q3 growth, 15%. Amazon, 30%. Alphabet, 41%. So Alphabet is growing at nearly double the rate of Microsoft and triple the rate of Amazon and will win the race over the next decade. Case closed.

OK, well, look, I'm going to keep Microsoft short. And one of the things that for me is a really a quality that I look for in people, in workforce, in life, in team sports, is consistency.

Yeah, right.

I know there's guys out there who could drop 50 points a game for playing basketball, and the next night he drops 5. You can bang in a hat trick one day, not score for 7 matches in football. I don't want that guy. I want consistency. I want to know that day in, day out, decade after decade, in the case of Microsoft, literally clock it up. Look at the biggest weighted companies in 10-year segments. It's always there. Consistency is boring. Most of the time.

Yeah. I was going to say that.

People don't like consistent people. They hate consistent people because we always win. We just go about our business and we just—

Like the Lewis Hamilton. The Lewis Hamilton of stocks.

Right. And British people hate a winner, right? Yeah, I mean, you've talked about the cloud, you've talked about the percentages, the year-over-year growth. I mean, Microsoft, if it's not for Alphabet, Microsoft's right up there as number 2 spot on that front for sure. The Azure cloud computing, productivity, business process, personal computing, these are all their main kind of key facets of their business. Microsoft's closed the gap between itself and Amazon by reporting cloud revenue bigger than that of its rival in all of the recent quarters. Because I was one— there's a misconception— I just thought AWS was light years ahead. But as you correctly said a few podcasts ago, it's not the case, actually. As you said, this is an area that's going to boom because it really has to. This is the way that technology is moving and infrastructure is happening. And When you talk about then Microsoft's where they're placed, they have this kind of unique position where kind of the on-premises Microsoft environment shifting to now this cloud-based approach. That's a structural advantage that they have in terms of the available clients that they have, both individuals and corporations. And the areas here, when you start breaking it down, that drive the company's growth huge categories of IT spend. So there's one called IaaS, and that's infrastructure as a service. And this is things like cloud, cybersecurity, productivity, all these types of things. Ability to further monetize strong positions they hold in multiple end markets. If you think about Microsoft now, they pivoted. Now subscriptions And so here you've got enterprise packages. You might have seen you've got E3, E5, Microsoft 365, all tailored down to individual unique situations, whether individuals or enterprise packages scaling up and so on. And then the financial profile, um, durable growth with margin expansion. They've gone from 30% to 42%. Operating margin over a 5-year period. Um, so a couple, couple of different things here. The thing that, that I like overall is Microsoft subscription-based software offerings, cloud computing services, durable profile in terms of growth. Um, additionally, investors appreciate, I think, their strong free cash flow generation, returns to shareholders in the form of dividends, share repurchases, Everyone got super excited, wet at the whistle for metaverse, for Meta, specifically Zuckerberg. Forget Zuckerberg. He's a nobody. He's a crook. He needs to go to jail because of what he's doing to young people. Microsoft is going to dominate in the metaverse in the race to get there. The reason why is they've got, just like I think you said, Intel with Mobileye, or one of the systems you mentioned about a bit of a service-based human kind of bolt-on to make us better, not completely autonomous driving. Like, we're talking realism now. We're talking you're going to deploy and deliver rather than have this endgame vision that's very hard to achieve. And here's, here's some numbers for you. So Microsoft last month outlined plans to introduce 250 million users of its Teams software to the virtual world, i.e., the metaverse of what most people have seen, what Zuckerberg kind of showcased. Microsoft said in the first half of next year, users of Teams will be able to start appearing as avatars in online meetings that they're, they're going to attend. The fact is there's 250 million people using Teams at least once a month. You know how many paying users are using the same type of systems that Facebook have released that could do the same virtual meeting?

Well, they've obviously got a few billion users, but, uh, but obviously it's only a tiny fraction of those. Well, didn't they, um, didn't they launch a video conferencing?

I did, yeah.

And then they pulled it, didn't they? Or it just didn't take off, or maybe it's still there and it just flopped a bit. But yeah, so I'm gonna say, I'm gonna say 10 million.

You're not far off, but you're too optimistic. Oh wow, 7 million.

Right, right.

So when you're talking about audiences who are preset ready to go. And you talked about data points, driving the car, like the Google car, doing exponentially more mileage and more data points then coming in to feed the system than say Apple's Titan is doing. Similar kind of case here really. And so, yeah, I think Microsoft has a much more kind of an easier route in to that emerging space as well. Again, perhaps this old dinosaur becomes more sexy, but in a covert way. And that can unleash then a whole new potential for that firm. But again, it goes back to the fact that I'm an old school kind of guy. I just like the way the company's performed. And that's why I don't like Tesla, because that absolutely speaks to the opposite of every sinew of my body, of what that whole company represents in terms of the way it's run, the way that it's traded and invested in. I just can't, I just can't get on board with that. No critique at all though about people who do like it, because everyone play— everyone, you know, takes their own race.

I like your angle with Microsoft. They have been able to evolve and adapt and innovate and always be there through the decades and decades and decades, and all the other FAANGs haven't yet been tested on that. As I said, this cycle, it's like a 20, 30-year cycle. So Microsoft have been through a few of them already, whereas the others haven't. I guess just with Google, it's just like Google do everything. They do everything that all of the other rivals do, but all under kind of one ecosystem. They've got the ads, like Facebook, let's just say. They've got the cloud, like AWS. They've got hardware, phones, like Apple. They've got operating systems, like Apple and Microsoft. And then they've got the lead on AI, just because they started first. And if anyone's going to win that driverless vehicle race, it's probably them. So yeah, whilst nice pitch, I'm still going off.

Well, slight little insider secret. When you and I were going, yeah, okay, so which one are you going to pick? And we both said, right, show your hand. We both went alphabet. So, you know, given, given you're the, uh, the senior in the, in the partnership, I thought, yeah, I'll heed to the, to, to you and you take it. But I agree. I think you win, but I think I'm second.

Yeah, I'll take that. I'll take the win.

All right, cool. Well, look, we'll wrap it up there. Um, don't forget then, this is the last episode likely then for, for this year. So huge, huge thank you. We, we started this podcast at the beginning of the year, um, thoroughly enjoyed it. It's growing, I'm happy to say, at a really Great rate, not quite Alphabet yet, but that's for 2022's mission. You know, we asked to help us get over the line on the ratings as well, and we smashed that up to 111 now on Apple. So thank you again. And yeah, I hope you found it useful. We'll have some more other micro series like the career one we did a few months ago. We'll come back in 2022 as well. Um, if anyone's got any other suggestions they'd like to hear, and please do drop me an email, anthonycheung@amplifytrading.com. And to finish, I've got a little teaser for you for January 2022 in the new year. So you might have heard of a podcaster called Joe Rogan.

I have.

He's just the biggest podcaster on the planet. So there's something that, that we and Joe have in common. So anyone who follows Joe Rogan might have seen that you can get videos of Joe Rogan's podcast via Spotify, and we are now being approved by Spotify to be a video producer on Spotify's platform. The only people I've seen is us and Joe Rogan. So I mean, if that's not arriving at the party, I don't know what is. So look out for that. We're going to do some— you might see some testing happening over the Christmas period. But the likelihood is that hopefully we can start bringing things like my macro briefings, things like that might be able to come down the Spotify channel for you as well.

I'll get you some makeup for Christmas.

Gonna need it. Um, all right, that's it then. Pleasure, Piers, as always. Absolutely amazing Christmas, everyone, and thank you very much.

Enjoy. See you guys.