New Constructs' Live Podcast: Intelligent Capital Allocation - 20 October 2023

Welcome to New Constructs Intelligent Capital Allocation, our live podcast. We've got a great group for you this week. There is David Trainer and Hakan and Kyle and myself as usual, but we also have a new guest from our analyst team, Cole Bush, who will be talking to us a little bit later.

Hi, everyone.

Here's our disclosures and disclaimers and our agenda for the day. Please do continue to reach out to us on Society with your topic suggestions, companies that you want to do some further analysis on. It's been a great conversation. That's the easiest spot for our analysts to get back to you as quickly as possible. Tons of research came out this week. Last week was sector ratings for ETFs and mutual funds, and this week is style ratings. So I did not link to every single style rating topic, but I did link to 2 articles there, one the recap and one the preview, so you can get to all of the other style rankings from both of those places. Interesting zombie update, and Kyle did the Danger Zone podcast. Which is always one of my favorite things to listen to because it's brief and funny and interesting. And those are always lovely things to be able to say about finance. The long-short performance came out as well as a long idea Italo wrote up, photo masks and microchips, and the safest dividend yield model portfolio, as well as the exec comp and ROIC model portfolio featured stock came out for October. Lots to catch up with out there. You should be getting the In Case You Missed It email that'll have links to all of that in your email today as well. We'll be headed out to society in a second. We'll be doing the headlines out there and David will be taking over. Then we'll go out to Cole, who's going to talk about analyst notes and suspensions, which is one of the things that we get a lot of questions about. So I'm really glad that Cole's out here to chat with us about that. And then Kyle will go into the reverse DCF case study for the day, which is C3 AI. And do you guys, any of you guys know how they actually say their name? Is it C3 AI or do they say C3.ai? I, I have questions.

I looked it up.

It's C3.

C3PO. Yes. That's how they say it.

C3.ai.

It's C3.ai. Okay. I will try to remember that. And then Kyle will end up with our stock picks for the day.

So I think we had a lot of really great posts this week in particular. My favorite one of the week was what Panaki did here on corporate bonds and loans. And what I see increasingly as really the most interesting headline of the week, of the month, of the year, and maybe of our generation is at what point does loose money, ultra loose money, deficit spending, at what point does that begin to matter? What are we adding? $50 billion of deficit a day now or something ridiculous. And, and what we're seeing playing out in the bond markets is some warning signals that like, this is a problem. The stock market seems to be shrugging it off. Which market is right? Who knows which market is smarter? There's been long, long-term debate about that for a long time, but we're seeing the rates go up quite a bit. And I think there's a lot of reason to be concerned. That as a lot of folks have to roll over their debt or their debt comes due in the next couple of years or the next couple of months, what are those businesses going to look like when their interest rates are 3 or 4 times higher? This is a great, a great, great question. And I spoke a little bit about it, responded to it a bit in this comment. It's a fascinating time. Who knows for how long we can kind of get away with Extreme levels of deficit spending. Interest rates have come up a good bit. Have we reduced the balance sheet at the Fed? Not a whole lot. Has the fiscal stimulus in many ways offset whatever tightening the Fed has done? Yes, it has. Every time we see a rally in the stock market, you can look and see money supply is growing at the same time. And I think in many ways our government and governments around the world have become pretty much addicted to or overly reliant on the fact that They can solve almost all problems in the near term by just printing more money. And I think solve is maybe the wrong word because it's not solving any problems, it's just delaying them. We're seeing the fact that the problems are not solved, only delayed, starting to emerge in new ways, including the Middle East, right? That problem's not been solved. Has it been delayed possibly by giving out some money? Billions of dollars. Yeah, delayed. Has it been probably made worse long-term by giving certain countries a lot of money? Yeah. It's not a good situation. And I think this, an avoidance of facing up to problems and papering over them by handing out money probably means there are a lot more situations that we may not see quite yet on the surface as bad as what's going on in the Middle East out there. There are other places, other situations that are boiling beneath the surface and are potentially at risk of blowing up in our faces in the way that we're seeing things in the Middle East. That's not the only place where problems have been put off and effectively papered over with just writing checks. Doesn't work forever.

David, when I was looking at quotes for this week, one of the ones that I ran across that was also South Klarnan Was maybe we should start thinking about the way the markets were in the early '70s when we didn't bail everybody out and what interest rates were like then and what that situation—

Oh yeah. I mean, Tamara, from your lips to God's ears, right? I mean, we're bailing people out all the time. And it's not just when someone goes bankrupt, it's when they have a business that doesn't deserve to be funded by the capital markets. Those are the zombie stocks. Those are bailouts. Those are wealth transfers, really. You're bailing out people who can't make money the real way. They make money the Wall Street way or the private equity way, which is, oh, I'm going to come up with a PowerPoint presentation that's really great and people are going to give me a whole bunch of money whether I deserve it or not. And my business may, may, may never make a dollar of profit. But guess what? I got rich. That's a bailout. And that has become essentially so socialized and even institutionalized. That's part of the reason why I feel like Panaki's article and a lot of talk around this is so important because this can't go on forever. You can't build castles in the sky and expect them to last forever. At some point, you know, the bubble pops because there's no substance there. And you can't just keep inflating and pretending that as it inflates, the price is all that matters. That's why we created a zombie stock list because we felt like as interest rates were rising and investors became more discerning, there would be a lot less capital going into these businesses that didn't and couldn't create value. And we've been right about a lot of zombie stocks. We've been right about all of them in terms of like stock prices going down for the most part in general. Like the zombie stock list since inception has outperformed really strongly. There have been times when it underperformed. There are a lot of stocks that are now under a dollar. We got to think about taking them off because they're about to go to zero anyway. There's still some that need to come way down. And this is why I think Panaki's question is so important. This debt reckoning and what Tamara's saying, look, you know, how much prosperity was built on the '70s and the pain people went through? I mean, that was, that was like, hey, there's a bottom line. You got a good business, it gets capital. You got a bad business, We're going to kill it and we're going to recycle it back to someone who has a better business. That is the fundamental concept around which our capital markets are built. Moving capital from lower utility to higher utility. That's all that matters. That's how you keep— create prosperity. If you move capital from higher utility to low utility, you destroy your market, you destroy your society. And that's what happens when you take money from good folks and give it to executives and Wall Street executives and Wall Street salespeople and Wall Street bankers for bad IPOs, for zombie stocks, for overpriced IPOs. Doesn't even have to be a bad company. It could be like SoftBank and Arm. Company makes money, but when you sell it for twice what it's worth, that's just money going from A, a good investor to SoftBank and Wall Street and Arm executives. That's destruction of value, and destruction of value can only go on for so long before everything crumbles. That's what the stock market's all about, and that's what New Constructs is effectively here to serve, to give people the truth about those businesses that are making money and are priced appropriately so that more people can make intelligent capital allocation decisions. that will ultimately improve their standard of living and those of everyone else. The original title of the New Constructs business plan was Improving the Integrity of the Capital Markets. That's what we aim to do, and that's what I believe we're doing. And I think our ETF, which will hopefully be launching in the early next year, will be a great way for people to really lean into that directly. I think being a customer of New Constructs is a great way to lean into that concept, And being able to invest in a fund that leans into that concept is another great way. So what Trent put in here around Birkenstock and the current IPO market is a great example of wealth transfer. Great example. Birkenstock, way overpriced. And thankfully we saw that IPO go down from the outset so that maybe they won't do it anymore. But what we saw with Instacart and Arm, Those pops, great for Wall Street and great for keeping the stock at least somewhat elevated so that there's time for the insiders to sell out after the waiting period, which is, I think, ultimately what these IPOs are all about. It's about helping the insiders cash out, dump this asset, overpriced asset onto the public markets. But yeah, we've seen Instacart and Arm crash post their their successful IPOs. And then Berkshire never really— Berkshire crashed from the outset. Maybe that means there's no more nutty IPOs. I think it's also really important to point out that we used to have a lot more time to get our IPO research into the market. And it feels like the time between the company filing its financials or its S-1 and us publishing a report and the IPO coming out, the worse these IPOs tend to do. WeWork being the poster child, which got canceled altogether. It's a lot of time for our research to circulate and combat the Wall Street narrative. Oftentimes we've got just a couple of days, right, Kyle? Like, I mean, the S-1 comes out, we get the data, we build a model, we put together a report, we get it out there, and they're IPOing before anyone has a chance to read our research and get warned as to how expensive those stocks are.

Yeah. Sometimes it's 7 to 10 days from when we get the latest S-1 and sometimes just a few days before. When we get the actual updated price range and everything.

So, yeah, that's right. You know, a lot of times we won't have enough information to build a model to say, oh, we're going to go for this target market cap. But if we don't know how many shares they're issuing, we can't get a sense of what the value per share is. So, you know, I'm not a conspiracy theorist, but there are definitely some, some questionable things that go on.

Yeah. The difference between collusion and conspiracy, right? We've got one more minute, David, before we head over to Cole.

Yeah, I think Microsoft and Activision is a great story. Look, Microsoft has been doing what a lot of really big, super profitable businesses do, which is start diversifying. Now they're into LinkedIn, now they're into gaming, they got Xbox. What's the future for Microsoft? What's it hold? You know, that's potentially some existential questions for the management of a business that's making so much money that they need to do something with it or they need to give it back to investors. That's not always a good position to be in. That money burns a hole in their pocket. And they sometimes do bad things. It's an interesting time. This point that, that Julio, a really big important one, which is what happens to stock markets when you can actually make a good return, a higher return in putting your money in debt because the yields are so high than you can from dividends and stocks. Typically the dividend yield in the S&P, whenever that's higher than your bond rates, People will put money in stocks. When that dips below bond rates, people will put money into bonds. And it's dipped below, and that's typically a major and huge turning point. Again, another reason for us to be mindful of the fact that this super bull market we've seen for the last 20 years in stocks might be nearing its end.

Thank you, David. Folks, as you have questions, please don't hesitate to use the Q&A feature. We will answer questions as they come through. We don't want to wait until the end. want to make sure that we get your questions answered on the topics as we're talking through them. Cole, analyst update for this week.

Yes. Thank you for having me on this week. Happy to be here. Let's talk about analyst notes. What are they? They are a means for us to provide additional insights to stocks and our ratings on them. And they can be seen in both the portfolio and rating sections of our website. Which is super convenient. And then why do we use them? It's to alert you about corporate events or disclosures that cause us to question the validity of a company's financial reporting or the efficiency of, of the market for any stock. We have 3 general types of analyst notes: suspended ratings, which indicate that we feel the company's latest reported financials are no longer reliable; And we have 32 different types of rating suspensions. We also have inactive stocks, so if a company no longer trades because they're bankrupt, they were acquired, they were taken private, we still show our model from their last trading date and we will switch their ticker to have a colon and a number. If some of the original tickers were reused multiple, multiple times, it could be Uh, colon 1, it could be colon 2, colon 3. I think the highest I've seen is 5 for, for a ticker. And then we have other analyst notes as well that don't include a rating suspension, but we still want to convey information that we think is important— changes in the ratings, new coverage, make— making sure you understand if a company's primary or premium, as well as some portfolio lists. So let's hop into some examples here. These are 2 examples of inactive stocks. The first is very recent. We have Activision Blizzard, who was acquired— finally the deal closed— by Microsoft. You could see that on the analyst notes we had actually suspended the rating in March 2022 because that is when the news broke out that Microsoft was targeting them For an acquisition, and then we have the date that was set inactive as well, October 12th. And then on the bottom we have X, formerly Twitter. I I included this because I typed Twitter TWTR into the ticker setting, and it gives us a really helpful pop up that hey, we don't cover this. Here's a similar ticker. It's Twitter colon one. That's, you know, now inactive. And again, that was an acquisition target and later inactive. Some examples of other analyst notes. We have GOCO, which is GoHealth Inc. We added it to coverage in September of this year, and it's a primary coverage company. So we wanted to make sure everyone understands that we're covering the core financial statements for companies like that. As well as Scion Bancorp, which I'm sure Kyle has talked about and written about a lot. It has been added to the Most Attractive Stock Model portfolio just this month, and then as well as the Focus List Long. I want to dig a little bit more into suspended ratings. As I said before, we have 32 types of suspended ratings. Here is a grouping of a couple of them. We've seen it before that we have acquisition target, large acquisition, large divestiture. These are put into place to suspend the ratings because the company's financials or the stock price is not necessarily indicative of the company's financial anymore— financials anymore. For a large acquisition, or if they're an acquisition target, it'll depend on how the proceedings of the acquisition go. Rather than where the company stands on that day. And then on the next line, we got bankrupt, bankruptcy threat, going concern. In a lot of cases, bankrupt and bankruptcy threat will be the last analyst note before a company goes inactive. And then some fun ones are always fraud risk and litigation. Fraud risk One of my favorite ones was Luckin Coffee last year, I believe, or within the past couple of years.

What are the triggers there that make companies go inactive?

It is typically when they stop trading, either they're— so they're in Activision Blizzard's case, it was the date that the, that it was closed.

Okay.

The deal was finally closed. You can't buy or sell their shares anymore. That's when we switch it over to that colon 1. Okay. One of the common ones that we see a lot is weak internal control, and then adverse auditor's opinion as well. And then we also have suspended ratings for companies that are annual only, their data is obsolete, so they were slow on filing, old stock quote is not dissimilar to— it's a position Where we are unsure if they're inactive or we're unable to, to get a new quote for that company. Some over-the-counter companies are like that. And then finally, transition companies, which they're changing their period end date for the year. And then on the top right of the screen, you can see an example of what a suspended rating looks like on our— on both the portfolio and ratings pages of our website, we have that note suspended. And just to make it even more clear, we use that dashed line over the rating itself just so everyone understands that, hey, here are the financials, you take them with a grain of salt. Now let's go into some, some examples of different suspended ratings that we've seen. At the top, and as we discussed today, Birkenstock, they had disclosed weak internal control just last month. We want to have a model out there for the company, but we need people to understand that they might not necessarily have the best controls over their reporting. And then we also have an added coverage note, a credit rating downgrade. And a stock rating upgrade as well. And then one below that is Kenvue, which was a spin-off of Johnson Johnson. It was a pretty recent add to coverage, and we just did not have enough filings to build a TTM model for them just quite yet. So I would suspect that rating suspension would be removed over the next No, 6 to 9 months.

So things can be suspended for quite a while.

Yeah, depending on the suspension, it can be suspended for a long time or a couple of weeks. And then I have a couple more examples here just to show you some other stuff that we commonly see. We have Turnstone Biologics. They had a going concern for their company. With those, it's the auditor stating the company may no longer be able to operate in the foreseeable future. So having that auditor's opinion on the financial statements is kind of indicative that we— you have to be careful when looking at their financials. And then the last one is for a certain sector of energy companies. We have NLPs. Master limited partnerships are operating under a general partner and then owned by limited partners. So when the company makes money, over 90% of it has to be distributable, but you don't know how much of that can go to the general partner and at what times and how much is due to the limited partners. So it's hard for us to accurately assess the the economics for someone investing in it as a limited partner. So pretty much anytime you see an MLP or we cover an MLP, the rating will be suspended because it's hard to evaluate the economics for that company.

Any questions on the analyst notes before we hop over to Kyle? Some of them seem like, oh my gosh, this is worrisome, the company is about to blow up, and some of them seem a little bit More informative, like it just went on a particular list or something like that. Are there particular ones that you find give you a lot of pause if you see them?

Oh, anytime I see fraud risk, bankruptcy, some of the major things that will kill a company, it's hard for me to be confident if I'm looking to invest in something like that. But others, I don't have as much pause with it. These are, these are my own opinions at this time. Generally, if we do suspend the ratings, I personally am hesitant to do more of my own research and make a decision about an investment.

Not enough information.

I can jump in from our research side. On the danger zone, weak internal control is always one that we like to highlight. Because it means not only are their financials, in the case of a danger zone, trending down, but they also may have problems with the reporting and the gathering of that information. It's something that can't be trusted as much as another company. It's another risk to investing in that, you know, danger zone pick.

Yeah, weak internal controls is pretty bad. That's when the auditor says, by the way, we're not really confident in our opinion about the financials because we don't trust that the company's own internal accounting controls Have integrity.

And usually with weak internal controls, we'll see a lot of amendments for that company come out over the next 6 months to 3 years that will, that we would have to restate their financials.

Yeah.

By amendments, you really mean a restated financial, correct?

Yeah.

Yeah.

That's, it's not a good sign. I mean, you need to be able to trust that the management team is faithfully reporting. The performance of the business. That's a big one.

All right, folks, let's move on over to Kyle then. Thank you, Cole. Appreciate it. I love the analyst notes. I get a lot of questions on them over in support and success land. So this is really helpful. Thank you.

We got a couple questions real fast that maybe we'll jump on here from an anonymous attendee. How valuable are earnings calls? And would there be an earnings call that we as a society could listen into and collectively come up with a rationale for the company. I don't think earnings calls are valuable at all. I think earnings calls are simply commercials for selling stock. We don't listen to them. We occasionally will look at transcripts or some investor presentations when there are contradictions in the financial disclosures. But yeah, I mean, there may be a couple of good earnings calls out there every now and then. I'm not saying they're all a waste of time in general. I consider them a waste of time. They are commercials for selling stock. That's just about it. And then on technical analysis, you know, I think technical analysis is a nice complement to fundamental analysis. I think it's very, very, very dangerous to use on its own because the technical analysis is effectively just saying, hey, this historical pattern I've seen in this trading of the stock is going to repeat in the future without any relation to fundamentals. So technical trading, I think, is a nice overlay to fundamental, but on its— on a standalone, I think technical is really dangerous. All right, Kyle, talk to us about C-3PO. Yep.

We'll get into C3.ai. We can look here, a pure-play enterprise software AI platform. Rating doesn't look great, but if we go down to the bottom of the ratings page here, stock's up 126% year to date. Come down a bit the past 3 months, but still a huge performance. Clearly a disconnect going on between fundamentals, stock price after that big jump this year. We can quantify expectations in that new stock price. We'll jump out to the model here, put up our company model. We can jump right into the forecast. Company trades around $25, $26 a share. It might be down a little bit today, but these scenarios are built around that $25.50 share price. So to justify that current price, they need to get margins, NOPAT margin to 25.5%, which is actually 2 times the weighted average of all software companies under coverage. And there's 198 of them. I also looked at what's the average of just the profitable companies, software companies, because right now C3.ai's pre-tax margin's negative 107% in the last fiscal year. And the TTM, it's negative 101. So any improvement there is going to be substantial, but to justify the current price, you're looking at negative 101 on the TTM to 25.5% next year and out through the next 10 years. On the revenue growth side, they have to grow revenue 29% compounded annually for a decade while achieving those 25.5% NOPAT margins. We can look at the DCF review of what that means for revenue, NOPAT, ROIC, and the like. The results are pretty staggering when compared to the software industry. To justify the current price, they've got an almost 13x revenue to $3.5 billion. Profits need to go to $889 million. And while on their own, that might not seem like much, that profit number would be the 14th highest NOPAT in the entire software Again, industry under coverage, 198 companies. C3.ai is currently 186th out of 198. And so the current stock price implies they will get to top 15 of all software companies under coverage. So big expectations in profit growth to get to that $25, almost $26 a share price. The overall profit made, hey, you know, $800 million. That's obviously huge. But again, context, it's one of the most profitable software companies out there. The scenario implies ROIC would go to 85% in that year 10. Um, you can look at the ratings page, the current ROIC is -28%. So with that huge stock price increase this year, there are massive expectations baked into that stock price. Um, profits going from, I think, -$287 million to $889 million, and then revenue increasing to $3.5 billion just to justify the current price. Got to do more for any upside. And so when we're evaluating companies like this, it's always about what do they have to do? And then what if they do a little bit less? You know, how much could that downside risk be? Let me look at a neutral scenario here. Margins of 12.8%, which is that weighted average of these software companies. And then consensus growth for the first 2 years of revenue and then continued out through 10 years. So we've got 20% revenue growth for most of this period here, and we can see what that means for stock price on the DCF review page. And even these expectations, as you see with a lot of our danger zone and short picks type thing, these expectations would look very optimistic. Again, negative 101% margin to almost 13% would be a huge increase. But we can see what that implies for the stock price. And there's a lot of downside here in that scenario. 13% margin, revenue grows 20% compound annually for a decade. You're looking at $3 a share on a company that currently trades, you know, $25, $26. So huge downside, even in a pretty optimistic scenario. It would still imply revenue gets to $1.6 billion, profits at $204 million. Which again, for context, that profit would be around 28th out of the 198 software companies. So still one of the most profitable software companies in our coverage universe. Revenue would be about 50th. And so still huge improvement. And we see a stock that could be worth as little as $3 a share. And so when you've got massive hype around AI, the stock can pop significantly. And increase those expectations to a level that seems unrealistic. And even in an optimistic scenario, you've got 80, 90% downside. Not a stock with great risk reward, which is why you see these ratings here, very red, unattractive, and then unattractive overall rating.

Hey Kyle, if you have negative ROIC, it means that you invested and you didn't get back as much as you invested.

Yeah. If you've got $100 in invested capital and you have negative NOPAT, be looking at a negative ROIC. You know, the money you're spending and putting into the business is resulting in losses essentially.

Yeah. A bad return on capital is anything that's below your cost of capital. So if your cost of capital, which would include the cost of the debt, right? The cost of debt is the interest rate you pay. So if your interest rate's 5%, your cost of debt is 5%. Your cost of equity capital is not as easily quantifiable, But it's typically between, you know, 6 to 10 or 12%. It's gone up a lot here recently. I should say it's more like 8 to 12% because when rates were zero, the cost of everything was cheaper. And you can see here the cost of equity capital for this company is 13.58. That's really high, high beta stock. That's part of it. So you average those 2 sources of capital, get the cost of capital. And if your return on capital is not higher than that average cost, here we're talking 13.4, you're losing money because your investors aren't getting enough effectively cash flow or payment to cover their cost. A negative return on capital, Tam, you're basically burning money. You gave me $100 and I took that $100 and I lost $5 of it. That's a negative return on capital. Like, I can't even make you whole, much less provide you an appropriate return for holding your money. Okay.

Because you'd have to give me back $108 or whatever it is in order to cover.

That's right. Every year, you know, it would compound. So the first year, if they had an 8% cost of capital, I need to give you at least $108 back.

And that just gets me to even. That doesn't get me to positive.

That's right. That's right.

Thank you, guys.

So the whole idea is that there's the only reason to ever invest in a stock is if you're going to get more than that 8%. With an appropriate level of risk. And so you take your money from one stock to another to get a better kind of return.

That's the idea. And you can see C3.ai, the profits and losses have only gotten larger throughout the years. You've gone from negative 35 in 2019, ROIC was a negative 20. We're now up to negative 287. ROIC is at, you know, negative 27, 28% of the TTM.

It's very alarming, right? And that's part of why I love those charts that Kyle puts together where you see the historical NOPAT and you compare that to what the future NOPAT has to be, and you get a real sense of just how high expectations are. We're talking about a company going from destroying value to generating tons of it, and it's not like they're not trying to do that now, right? So when you're buying a stock that's already pricing in that kind of performance improvement, you're like, where's the upside? All the good news is priced in and then some. That's the beauty of reverse DCF.

Yeah, Tim, if you want to pull that up in the slides, we can take a quick look.

These slides— this is a tremendous chart, right? Like, look at the NOPAT negative going down. Okay, what's implied by the price? Huge increase to positive, and it's got to keep going and getting more and more positive just for $3. Then do you see what you got— what it's got to do to justify $26? I mean, if that doesn't give you pause, I don't know what does. The way to read this is that in order for that— in order for you to own this stock, to want to own the stock now, Tamara, you got to believe that the future cash flows, profits are going to be even better than what that blue line shows. Otherwise, there's no fundamental reason for the stock to be above $26.

But there's lots of stocks like this where people are investing and For no, for seemingly no good reason if they're looking at any sort of fundamental numbers. Do people win every once in a while and that's why they keep doing that?

I think we live in an age of rampant speculation and they see prices going up and they're chasing performance and they're only looking at technicals. FOMO, MOMO, YOLO, right? These are all anti-fundamental investing strategies.

Okay.

And they chase the performance up and they scoreboard, look how much money I made. And they can get lucky and people can do really well. I mean, look at Tesla investors over the years, right? They've gotten so lucky, you know, and done so well because the stock keeps going up. Is it all based on potentially a bubble and misinformation? And are the underlying fundamentals there to support the stock price? We don't think so. But as Warren Buffett says, markets can stay Irrational for longer than we can stay solvent. We're not here to say that the markets are rational. We're here to give you a tool to show you where the markets are rational or irrational, so that you don't have to be at risk of making investments on irrational terms. Does that mean you can't make money being irrational? You can. When the music stops, we don't know. That's why I was making a big deal about Panaki's post before, because I think we're all been trying to figure out when the music's going to stop. Because the, the degree to which government is willing to just keep pouring money is, I believe, unlimited. They don't care. There's no discipline there. It's all about being reelected. They don't care about the consequences. To hell with the consequences. So what is it that's going to force them to pull back on deficit spending? That's what's going to happen. It's going to be some exogenous event that's going to unfortunately probably make us all suffer a little bit. And the bond market may be a better indicator as to when that would happen than the We got a comment in the Q&A.

I was going to jump in and say, you said people are investing, but they're actually speculating on these companies. It's not investing.

It's a different thing.

That's right.

If I got those 2 mixed up, shame on me because—

Oh, I think it was me. I think it was me.

Yeah.

People are speculating. They're not investing. That's right. That's right. That's a technicality for sure. But that's one of the original posts on our blog. I think the second or third one. I say there's a difference between speculating and investing, and the world would be very well served to remember that. And that's not original to me. That was Ben Graham wrote a long time ago. He actually mentioned that it would be good for Wall Street to remind people of that distinction because if Wall Street just keeps leading them down the speculative path and this stuff blows up, people lose trust in the capital markets. They lose trust in the integrity of the capital markets and the capital markets implode. We don't have a capital market anymore. It's all based on trust. And if the investors realize they can't trust, they do things like meme stocks. Even worse, they just leave. And if we don't have capital markets, we don't have an ability for high— for low, lower return capital to move to higher return opportunities. We lose the primary engine of increasing prosperity. in our world. So it's important.

Well, thank you guys. I appreciate, uh, your time. Thank you, Cole, for joining us. We hope that you'll come back again soon, and I hope everybody has a great weekend. We will see you guys later.

Thank you.

Bye.