Is A Recession Coming?

November 7, 2022
Market & Industry Analysis

Every single Friday we host a live discussion in our Discord Channel at 12:00pm EST.

This gives you the opportunity to personally ask us any questions you have on the markets, the economy, crypto, etc.!

Here are the 4 key things we went over for this week:

  • Why rising interest rates won’t bring down inflation
  • What 3 stocks we’re still buying more of
  • How midterm elections will affect the markets next year
  • Where the economy will go after this week’s major CPI print

If you’d like to listen live and ask us questions throughout the next live session, just join the weekly Friday afternoon session at 12:00pm EST.

Check out a broader summary & transcript below!


Peter Starr:
From Moby.co. This is the Flagship Pod, a weekly live podcast about the stock market, the economy, and the various market forces powering the world around you. As always, I’m your host Peter Starr, bringing you this time, the end of just a wild week. The Dow is up. What is it? We’re at 200 points up right now. Things are looking pretty solid as the economy is weighing the latest interest rate rise from the Federal Reserve. There are a lot of really interesting things happening in the market right now, trying to figure out exactly what we’re doing in terms of inflation. Is the CPI going to come out next week and be a little bit lower? What’s going to happen with the elections in America next week as well? Lots to discuss, and lots to imagine here as well. And as always, I am joined by Justin Kramer, CEO, co-founder, and chief analyst here at Moby.co to understand better what’s happening in the markets. Justin, dude, what’s good man? How are you doing today? But how are you making sense of the markets right now?

 

Justin Kramer:
Yeah. I mean, it’s pandemonium. People are finally starting to get back involved, which I like to see. We looked at Robin Hood’s most recent earnings report. The numbers haven’t ticked up massively, but they’re starting to see an increase in AUM and an increase in downloads again. So people are starting to get back, more involved in the market, more reading what’s going on, which makes sense for this time of year, it gets colder, and people aren’t outside, but I think there are more eyes on the market than probably ever before this year and there’s also much more going on than ever before. So to be informed, to know what’s going on, to make sense of it, I think now is a really, really good time if you’re just starting to dive into it.

 

Peter Starr:
And that’s really important too. We’re seeing so much energy in the stock market. What I have loved about this, this has never happened before, right Justin? The last time you and I were involved in any kind of downturn was 10 years ago, was 2008 more than 10, 13 years ago, whatever. We saw so much oxygen has completely exited the market. And what’s really amazing to see is that we’re getting that interest back. We are getting a lot of people staying with that interest despite that we have been in this bear market situation for more than a year. So my question is, as we roll through this, we are looking at earnings season this week too. Tech earnings were still down really bad. How are we feeling about tech earnings as we move forward? For instance, one of our top tech stocks from before Twilio is down bad after another earnings miss, how are we feeling about the pressures inflation is putting on the stock market right now?

 

Justin Kramer:
It’s interesting right now, that different parts of the market are feeling it kind of all over the place. You have for tech stocks specifically, we’ve obviously seen a large downturn this year. And for other sectors of the market like energy, like utilities, they’ve actually done incredibly well. ConocoPhillips reported earlier this week, they had an amazing earnings report and the stock skyrocketed. It’s actually at right now, an all-time high, which is the news telling us that everything’s going down. Energy names are rallying hard. One of our favorite picks that we’ve talked about for years now, it’s on our site TPL, that’s up 90% this year. So if you look in the right spots, there are opportunities. However, the names that have historically taken the headlines, and tech names are getting absolutely decimated this year. So to your point about the tech sector, it’s just really tough right now.

So most of their cash flows are in future projected periods. So for any growth company that’s going to be huge in a decade from now, they’re not going to really start making money five, 10 years from now. So what you have to do is figure out how much money those tomorrow’s dollars are worth in today’s dollars. So what I mean by that is a dollar today is not worth the same as a dollar tomorrow. Just how $100 100 years ago was very different, from what $100 is today. $100 100 years ago was worth a ton of money. Today it’s relatively negligible. So that’s the same phenomenon we’re seeing in tech right now these companies are going to be making tons of money five or 10 years from now, but what is that worth in today’s dollars? And then how do we value that?

So when interest rates have been relatively low, you just basically discount… The figure, that is, you discount it back in today’s dollars, you’re basically just dividing it by the interest rates. So $100 in 10 years from now if rates are super-low, is close to $100. But for every you know percent you increase interest rates, that $100 becomes worth less and less and less. And so, with increasing interest rates, those future cash flows are worth less. And then, ultimately those companies are valued less and the companies that have more or less, most of their cash flows in projected periods are typically high-growth tech companies. So that’s why we’ve seen those stocks get absolutely crushed. Pair that with just they’re not making money. So it’s kind of compounding right now when the market cares about profitability and the tech sector is just a tough place to invest in a rising interest rate environment. Like we said, look at energy, look at utilities, those are names that are going to make more money in high-interest rates environments or at least more money in high inflationary environments.

So it’s a lot to unpack, but basically, there are certain sectors that are not going to do well right now, but there are other sectors that are actually doing absolutely insane. So we just need to make sure that we’re investing in the right opportunities over the right time periods to understand where we can be capitalizing the most.

 

Peter Starr:
And the major way we understand where we are in those time periods, where we are in the market is interest rates where we think the Fed is going to be going. And this week we had literally 15 minutes of euphoria during the FOMC press conference or Jerome Powell for 30 seconds said, “Hey, yeah, we’re probably thinking about softening.” And then immediately backtracked for the 15 minutes around that moment where he said, “We’re potentially thinking about slowing the rates rise,” i.e. For December going 50 basis points as opposed to 75 we’re in the Fed, thinks they have it under control. You have the Dow spike for 300 points and then instantly give it back. So you see this market is just eager to get some good news to know that we’ve slowed down the economy sufficiently that we can stop beating the crap out of it.

How do you feel about all this market interest and just jumping right back into the bull run here, Justin? Is that just like hedge fund delirium or is there some actual thought there, where people are looking at the fundamentals of various companies and saying everything’s fine, I’m just worried about interest rates going up more and pushing a further recession?

 

Justin Kramer:
A lot of it is just driven by expectations, unfortunately. So the last rally we’ve seen over the last week or two is due to the fact that people thought the Fed would be slowing down the increase of their interest rates. At the last meeting, which was two days ago, they kind of alluded to that.

They said they could see themselves starting to slow down, whether it be the next meeting or the meeting after, but sometime soon. And then past that, they didn’t give any indication of when they would start cutting. But that is the expectation is that rates will start increasing at a decreasing pace and then eventually level off and come back down. At that point, our economy is very, very heavily financed by debt, especially in high-growth names outside of their valuations. It costs a lot of money to run their operations and so they use debt in order to run the operations.

If debt’s more expensive, then it becomes harder to run these operations. So you kind of pair that with this valuation conundrum. We’re running into interest rates and even the expectation that rates are going to fall, it just sparks bull market rallies or just anticipation. So you see that money, that sideline capital just waiting to be injected. So I think it’s still a bit early and I still think there are definitely more headwinds to come. We are definitely not out of the clear by any means, but what promise I am seeing is that there’s a lot of capital on the sidelines that’s waiting to be injected. And I believe once it becomes more clear that we’re on the other side of this thing, we’re going to see an absolutely massive rally.

So for us, the market could fall another easily five, 10, or 15%, but I’d rather take good valuations now, and invest in companies that have solid fundamentals. So when that rally does come, whether in 6, 12, or 18 months from now, we can at least have a lower cost basis and not try and time the absolute bottom, but get close to it as much as possible.

 

Peter Starr:
And to be clear, audience, it’s not just oh valuation down, so buy stock. For instance, we’re still trying to figure out if it’s now the time to buy meta or not. And meta is very much a speculative play. Even the meta has completely left the spotlight as Elon Musk has literally lighted Twitter on fire in an effort to, honestly, I don’t even know what he is trying to do with the $44 billion he’s on the hook for and the $1 billion a year of interest he’s got to pay. 50% layoffs look like it’s currently happening at Twitter right now. We’re still in the evolving sort of layoff spree there as advertisers are beginning to pause revenue against the backdrop of people worrying like, “Well, what’s going to happen at Twitter?” So you don’t have to worry about that anymore, because if you were a Twitter shareholder, you are now going to get compensated from that buyout.

But do not buy meta. Just because no one’s paying into Mark Zuckerberg anymore, doesn’t mean that he’s still burning so much cash to make this metaverse happen. So you’re trying to find companies with solid fundamentals that are just getting depressed by economic conditions, which is why we put out our updates on both Microsoft and SoFi this week. Microsoft is getting just hammered by reductions in revenue from Azure as companies sort of pull back from the high growth mode that would necessitate cloud spending. And in the same breath, SoFi is experiencing a lot of headwinds from just being a tech company that had to spend a lot of money to not win. What we saw this week though was the SoFi report earnings and demonstrate EBITDA that was four times expectations. They’ve managed to cut costs and make money work that much better, which is awesome to see.

And so, that’s what you’re going to be seeing from us in the next couple of months as we continue to find these companies with solid fundamentals who are just getting absolutely hammered by the market at large as we think about what’s happening here in this economy. But Justin, we’ve been talking about this a lot in the Moby office and we kind of briefly alluded to it in the last podcast, and therefore it’s been kind of coming up in the sidelines of the Moby-verse. The last time we had a significant rates increase like this to get stagflation under control was the eighties and there was essentially a very, very small debt-to-GDP ratio. The debt-to-GDP ratio right now is absolutely insane.

Is there any sort of ripple effect that comes out of this where the Fed raises rates enough to lockdown what’s happening in inflation, which then causes a further slowdown that outlives the inflation situation, because of how high rates are and the lack of access to capital?  We can’t keep the money flowing since everybody’s in so much debt and the debt is just cyclically flowing from one entity to another. Does that make sense? Are we just going to see another ripple effect moving forward? Is this going to keep cascading given our current situation?

 

Justin Kramer:
Yeah, I mean I think what people aren’t talking about is the fact that rising rates necessarily won’t slow down inflation in some parts of the economy. So for other discretionary parts of the economy, it definitely will, things that you don’t need but want. But in other parts of the economy, to your point, because debt is such a high part of GDP. If anything, it’s going to make things more expensive. So let’s look at food for example. People need to eat food and the farming sector is financed by over 500 billion worth of debt and the debt to GDP ratio, in general, is over 100%. So when you increase the price of debt by raising interest rates, the price of food is just going to become more expensive. Farmers need to buy fertilizers, seed tractors, and land, they don’t necessarily have that cash in on hand. And if it’s big corporations, even if they do to finance growth and to finance further operations and not use all of your liquidity, you take out debt.

So if debt becomes more expensive, they’re not going to just stomach and swallow those costs. It’s a low-margin kind of sector to be in as it stands. What they’re going to do is pass on those costs to consumers. So if fertilizer and seed become more expensive, when the farmer sells their goods to a corporation, that corporation then is going to sell their goods to supermarkets at a higher price. The supermarkets are then going to raise their prices and sell it higher to consumers. So rising rates is going to not necessarily have the effect the Fed wants. Back in the seventies and eighties when they were raising rates, the world was in a very different place. The world was not financed by debt to the same extent it is now. As I said, it’s over 100%.

Back then, it was around the 30 to 50% level. So even if they raise rates, it didn’t necessarily affect the end consumer as much. So in sectors of the economy, like utilities where people have to spend money on utilities, in energy where people have to buy oil in food where people have to eat, yes, there might be some sort of slow down in demand, because some of it is excess. You necessarily don’t need to go to restaurants, you don’t necessarily need to go on a plane all the time and use gas and energy, but there’s going to be some sort of threshold that if they raise rates past it and there’s a baseline level demand that we can’t go beneath, there’s ultimately going to be this area where rising rates doesn’t slow down inflation in core parts of the economy.

So that’s something that people aren’t talking about that I really think could be scary if rates get to a certain rate where we’re almost in this stagflationary period where inflation isn’t coming down now, unemployment is starting to creep up, because companies can’t afford it anymore and we start moving into a very serious recession and that’s what people are starting to get worried for 2023, it’s yet to be seen how this will ultimately play out. But that is something we are definitely keeping our eyes on and is something that could be a pretty big issue.

 

Peter Starr:
And this is something you can keep an eye on, audience as you sort of look forward to the week ahead, we’re going to see a lot of major events in the U.S. economy just kind of smash into this week. First of all, there’s going to be the midterm elections, which largely don’t have a huge effect on the economy. Lots of people pretend it does. People think that the government and the party in power and Congress can do something about inflation, which is the principal issue we have when they really largely can, especially since we’re in a supply slide inflation situation. But after that, on the 10th, the actual moment that really judges how we will be doing for the rest of the year comes out, which is the next CPI print. We’ve been saying this literally monthly for a year now. The CPI print is absolutely gigantic.

And this one in particular, since the Fed has hinted that they’re a little bit like the teeniest bit more confident that inflation’s more under control. If we see the CPI stay within the range that analysts are suggesting could be, or even beneath that, we’re going to see a lot of really, really positive motion. The thing is that the last two CPI prints, the one for September, and sorry, the one for August and September, which came out in September and October, that’s complicated. Both came in slightly higher than anticipated despite the fact that if you look at the actual inflation curve right now, it’s very flat. You can say, oh, inflation has peaked. But if it ticks up a little bit again, then we’re just seeing, okay, higher interest rates, they’re much higher, but they’re not knocking down the market as much as it needs to, which means the Fed needs to stay aggressive into 2023, which is how we get into this strong worry of a full-on recession where in the market goes down 15 more points.

If you see the CPI go down next Thursday and the larger market, whatever happens in the midterm elections, you’re going to see mayhem, actual fake bull run mania in the stock market. The way we saw it in August when it a way more positive than should have been, CPI came in on the back of really cheap oil prices in July. So as you watch this, just keep in mind what you’re seeing is just the echoes of things that have already happened. It’s going to be just wild to see as we move forward, who in all is going to be affected by inflation moving forward. And as we kind of think about that, again, Justin, we’re getting towards the back half of this conversation too. As we think about this sort of macro side of all this, obviously, our audience is, we do a lot of analysis on the economy and everyone says that the number one factor affecting all of the elections is the economy.

And so, next week we got midterm elections up FiveThirtyEight says there’s an 83% chance that the House is going to flip to the Republican party and a literal 53% maybe chance that it’s going to flip. Also, the Senate will flip also. Just looking at that, do you have any views on what do you think will happen with the midterm elections? Do you think it’s just a classic midterm where the president’s party gets washed in Congress and we get a full Republican House again and we just get, I don’t even know, gridlock mania or how are you thinking the elections are going to play out based on what you’ve been seeing from the economy from your viewpoint as a financial analyst?

 

Justin Kramer:
Yeah, I mean it’s probably to your point, going to be a little bit of an overhaul where Republicans take more seats. It’s interesting, because from an economic perspective, a lot of investors like what Republicans do, but from a social perspective people have issues. And then vice versa, people socially, well not everyone, but some people like socially what the Democrats do, but then other people don’t economically what the Democrats do. So there’s kind of give and takes with both parties. I think to your point, there’s usually a turnover this time a year or so, wouldn’t be surprised to see that. But I think it’s going to be really exacerbated given what’s going on in the markets. We’re not commenting on whether or not this is Biden’s fault, but the situation is that the economy has a pretty poor outlook, and the markets are pretty poor.

So when that happens, typically that will make voters want to go more Republican or more of the opposite of whatever parties are currently in power. So if more of them come in more Republicans, I think it’ll help stabilize the market in the short-term. But what we’ll really be looking to is then how does that affect the elections two years from now? Way too early to start making predictions on who will be our next president and how that will affect the markets. But ultimately, this does have a really short-term impact on what’s going on. If more Republicans come into the market, we’re going to see more separation and we’ll see more just conservative policy get pushed, which should help the economy. It could help down help slow down spending, which will help slow down inflation. But ultimately, the effects of it from my perspective is hard to fully grasp right now. Not sure if you have thoughts of your own.

 

Peter Starr:
And just to give an additional perspective from our jaded analytical perspective audience, a lot of you are kind of curious, “Okay, well why you’re not commenting, whether or not it’s Biden’s fault, shouldn’t that matter?” And the issue is that it’s impossible to say whether or not Biden’s policies have helped or hurt inflation, because it’s supply-side inflation, and supply-side inflation’s kind of goofy honestly. And furthermore, it really doesn’t matter if it’s Biden’s fault or not. If there’s inflation during your presidency, you’re going to get blamed for it regardless of whose fault it is or not. To give you the flip-side example audience. Legitimately, the main reason we had eight years of Bill Clinton when I was a child is because there was a teeny tiny little hiccup recession that happened in the last six months of George HW Bush’s first term. Mr. CIA himself could not hold on for a second term just because it was I’m talking the babiest of baby recessions in the middle of the end of the kind of Reagan boom we saw in the late eighties. So tiny recession, George HW Bush doesn’t know how much a carton of milk costs, and then boom, Bill Clinton’s president for eight years. So politics can be very finicky. You’re dealing with the minds of 200 million individuals. And so, it’s frothy, it’s mayhem, and I understand there’s a lot more polarization in our politics right now and a lot more important social issues, but sometimes it comes down to the smallest, dumbest things that are outside of our power. So keep watching that as well as we think about this moving forward. But largely the market’s probably not going to react positively or negatively to the midterm results, because the market largely tries to, it only positively reacts if you have all three Houses within the Republicans, because a Republican House, Senate, and presidency means a lot of short-term gains.

So the market just floods the market with capital in that time period. Whereas triple Democrat control means long-term gains, but kind of short-term slowdowns, which the market doesn’t like, because the market does extraordinarily present tense. So a complicated way of thinking about that. I’m not here to tell you which one’s better. I’m here to call balls and strikes in the economy, not necessarily on that side of things, but moving on forward here Justin, you talked a lot about the other factors playing into inflation. It used to be energy, but now you and I are kinds of watching food drive the bus too, a little bit. Specifically, the price of wheat, which has been on the dumbest rollercoaster in the world in the past seven days as Russia, exactly a week ago today, threatened to bail on a deal, on a Ukrainian grain to be exported over the Black Sea, then came back in and then two days ago said, maybe we’ll go a back out. And then this morning said, “Okay, maybe we’ll go back in.”

I’m literally watching wheat futures shift, ludicrous 10% swings, and be kind of up 12% on the week no matter what with all this volatility. With the world’s largest wheat exporter kind of beating up on the fifth largest wheat exporter that is Russia versus Ukraine, how are we doing with food prices after a year of this bullshit? Because what we’re seeing obviously is a lot of our most important farmland literally in the world getting wasted on a pretty dumb invasion. How are you thinking about inflation kind of becoming stickier as we see food prices begin to drive the bus after energy prices were kind of in charge for the larger part of this year?

 

Justin Kramer:
Yeah, I mean, it’s a good question. I mean, Russia and Ukraine together make up about, I think 13% of the world’s wheat production. So obviously, what’s going on there massively affects food prices paired with the fact that Russia exports also 10% of the world’s energy, how do you think wheat gets to us? It has to be shipped and then ultimately it’s shipped through energy. So it all kind of interplays together. It’s still an ongoing issue. Yes, wheat prices have fallen from their all-time high, and energy prices have fallen from their all-time highs, but we’re still kind of in this supply crunch. This is by no means towards the end of it yet. We’re still going to have more of a commodity-related issue as this moves forward. I think the biggest thing we need to look forward to right now is understanding how this conflict gets resolved in Ukraine and Russia.

There have been talks, but so far it’ll be interesting really to look at the winter and see how that affects the war. Obviously, Russian Ukraine is pretty cold in the winter. If there’s a shortage of food, a shortage of energy, there’s going to be potentially a forced resolution that has to come to play if the army can’t be fed where they can’t be produced or transported. I think past food prices, you also look at the price of natural gas and oil in Europe relative to America. Right now, it’s significantly cheaper for natural gas prices here in the U.S. where we don’t have to rely on Russia as much where we can do it mostly in-house, whereas the price of natural gas in Europe is just so much more expensive. I think it’s eight times more expensive. So for people in the winter to heat their homes or just use all the other outputs of natural gas, I mean we’re just going to get to a point where we have to come to a resolution because it’s affecting the world so much. So we’ll see how that affects Russia positively or negatively.

But this is an ongoing saga, which then will affect the resolution of that war, then affects the resolution of the markets and so many other things. With less volatility there. We’ll definitely help the markets for sure.

 

Peter Starr:
An audience, as you look into that too, as you kind of examine that. One really important thing too is to watch the various industries that you’re watching in your various stock picks that you’re building your portfolio around this–make sure you’re watching the development that happens. Are people still finding ways to grow and develop during this time period? One that we’ve been kind of quiet on is this kind of very mild crypto bull we’ve been seeing. Our crypto narratives, were pretty bullish on long-term Bitcoin, Ethereum, Polygon, ICP, a little bit of smaller plays, and maybe Solana if they can finally stop getting hacked for Christ’s sake, please, God almighty. Lots of things like that. And one of those, one part of that portfolio, again, is going to outperform a little bit as MATIC is finally up 20% this week on new partnerships with Instagram and JP Morgan. Is there going to be an infrastructure play for these smart contracts?
So keep that in mind too. Make sure you’re keeping an eye on development too. This is the time to watch the news, not so much the market movements as market movements are really driven by capital being injected into the space. And as Justin said, there’s so much capital sitting on the sidelines waiting for indications that it’s not going to get chewed up by high inflation and high-interest rates. VCs have amassed the greatest amount of dry powder I think ever, Justin. We’re watching VCs just kind of sit on the sidelines and just accumulate all of this dry capital waiting to deploy it. So once we get an indication that things are going to be better, at least in the short-term afterward, we’re going to see an absolute explosion of investment that can drive a lot of positive movement within a lot of these markets, be they crypto or stock.

So the main thing is to stay the course. Keep dollar cost averaging, and make sure you’re maintaining your portfolio. Never become a forced seller. Especially. Don’t put yourself in a more risky position right now audience as you think about this, and you’ll still be fine. That’s the main thing, you’re thinking long-term. You are putting money into your system that you don’t expect to see for decades unless you know you’re at the end of your journey and you’re just managing it at this point. The main thing is don’t be a forced seller. You can only lose the game by leaving the table. Stay on that table, keep your chips in the pot and see how it all plays out.

So a lot of really cool things to see from this market, obviously audience, but again, we see a market just eager to get out of this year’s long cycle of bear nonsense and the fear of rising rates and the fear of capital getting chewed up.

So again, next Thursday, the CPIs, the only news that actually matters. You don’t even need to know what happens in the midterms. You need to know how bad inflation was in October, which can go either way. Things are getting colder. So energy prices are going to be going up in October, at least it’s starting to. So you might see other factors drive the bus in inflation and we’re just kind of stuck there for a bit. Or you’ll see various factors driving inflation back down as destroying demand finally help out. Of course, consumer spending is undefeatable. We’re also seeing wages increase, we’re also seeing job openings increase. A lot of confusing signals in this economy, honestly, audience. And so, a lot of things are just pushing and pulling against all of this energy in our system as we are just desperate to keep the money flowing, given the amount of debt everyone is in. So really exciting to see how that all plays out. Justin Kramer, CEO, co-founder, and chief analyst here at Moby.co.

We ran the gamut here today dude. Anything you wanted to cover before we go ahead and read the credits here? I have no idea. We keep running over time. It feels like we talk about nothing and we talk about everything.

 

Justin Kramer:
Yeah. Now, I mean obviously at least wanted to talk about more, right? I don’t think we had a chance to talk about the Twitter stuff. Doesn’t really affect the markets. It’s just honestly humorous at this point.

 

Peter Starr:
50% layoffs, it’s looking like right now. Yeah, 50% layoffs and ads are just dead.

 

Justin Kramer:
The only thing I guess, I mean it’s just there’s not, again that much from an investment perspective to analyze. Actually, the only funny thing I would say is right now on a risk-adjusted basis, buying a Powerball ticket isn’t the craziest thing in the world. It’s the 1.6 billion–highest payout of all time. You do the math. I mean, it doesn’t not make sense to buy one. And that’s obviously life-changing money. So we always talk about investing and buying things that make sense. And it’s ridiculous to talk about the Powerball, but with the payout versus how much it costs, listen, you’re not going to win. But for the one person in the U.S. who ultimately does win, that’s talk about creating wealth overnight, that is one way to do it.

 

Peter Starr:
Even if you create a Powerball, even create a Powerball pool audience, get your company of 300 people together and just go for it. Even on that-

 

Justin Kramer:
Yeah, if you want to throw us in there, go for it too. I won’t be upset.

 

Peter Starr:
This is the most amazing investing podcast of all time because it lets you know just how interesting the market position is right now. How it’s like, “Yeah, just invest in the Powerball, see what happens.” Your odds of course are one in several million. Audience, so you’re basically throwing that money away, but you may as well get the dopamine rush of spending $10 on five entries or whatever. So either way, audience, just keep that in mind. That’s where the market is right now. If you want short-term gains, Powerball’s your best bet. If you want long-term gain, take that $10 and throw it into, I don’t know, SoFi right now. SoFi seems like-

 

Justin Kramer:
Yeah. I mean, so the odds of winning the Powerball are I just looked it up, 1 in 292 million. So if it costs $2, that means that your breakeven point would be around 550, 600 million. So anything over 600 million, in theory, makes sense.

 

Peter Starr:
Wait, is there a legitimate way, could I go to a VC right now against 600 million and just spend that on Powerball tickets? There’s no way they’re going to let you buy in bulk.
Could I honest to God, deploy 600 million of capital to buy Powerball tickets just to get a 50% return?

Justin Kramer:
Yeah. I guess by the odds in theory you would win, but I mean at that point you’d kind of just break even if you spend 600 million on Powerball tickets, or to your point, I guess you’d have a 50% return. But then after taxes, I mean, listen, you have 600 million to deploy, I think there are smarter ways to do it with significantly less risk, also with significantly less upside. But do you want to risk 600 million for a 50% return or do you want to put in 600 million and get a guaranteed 6% return with i-Bonds let’s call it? I mean, you only do 10K. But stuff like that, I mean, when you start talking about risk-adjusted returns for 50% return, $600 million, it’s not worth it. For $2, the upside of $0.5 billion when you figure out how the chances of it happening, in theory, do make sense from a math perspective.

 

Peter Starr:
And the audience, in case you’re wondering what happens to analysts a year into a bear market, you’re watching this life as we kind of degenerate into thinking, “Okay, I just need some short-term returns just for the sake of — For the love of God. I’m just buying Powerball tickets and dipping as much money into DraftKings as humanly possible because I just need some hit, man. I need a hit real bad.” This is what happens. It’s been an exhausting bear market, but you go through the exhaustion, you go through the anti-serotonin hit of buying low, what you think is going to be low watch, you could go lower dollar cost averaging your way in and five years from now you’ll be a far, far more robust investor for having done so. So power through the exhaustion, power through the years of seasonal depression. And you’ll do fine.

And over here at Moby. co, we’ve got a lot of exciting things coming on our product side as we think about a lot of things we’re developing over here and that’s another part of the exhaustion you’re hearing. So we’re really excited to share some sick news with you moving forward. We got a lot of cool stuff potentially coming in Q4, but definitely, in Q1, we’re going to be expanding a lot potentially. So we’re really excited to give that all to you, the audience. But we appreciate you being here during the bear period in a lot of ways. So we appreciate your patience as we continue developing. A lot of our resources are going toward that development right now. And if you have any questions for us, you can always prefer to hit us up here on Discord or at hello@moby.co. Anything at all audience, there is no direction too wild right now, especially given the way the market is behaving, so to speak.

So audience, thank you so much for being here with us. Justin Kramer, CEO, co-founder, and chief analyst here at Moby.co. Thank you so much for all of your perspectives today. The audience, anything else for us, you can hit us up at hello@moby.co. Find us over on Instagram, TikTok, or even here at Discord or where podcasts are sold. We really appreciate your time. But for now, audience, just so you know, this podcast is produced, hosted, and voiced by me, Peter Starr. All the intellectual value from this podcast, customer analyst team led by Justin Kramer, CEO, and co-founder here at Moby.co. Any questions for us, hello@moby.co. Otherwise, thank you so much for listening folks, and as always, we’d like to leave you with peace, love, and incremental gains. Everyone, be well. Thank you so much.

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