 Hello and welcome to episode 42. I'm joined by co-founder of Amplify and head of trading peers Curran and we're going to go over in this episode the surprise in the Bank of England that we had just yesterday. We're going to talk about the commencement of tapering. It finally arrived after what seems like a lifetime of conversation of tapering and we'll talk about next steps and how the market reacted to that. Then we're going to flip over to politics. Talk about Joe Biden who's having a really rough time of it at the moment in the polls, struggling with the passage of various different types of legislation as well as OPEC plus just saying no thank you. We're not listening and we'll explain why that's occurring and then going to look at some single stock news. Can't go an episode at the moment without talking about Elon Musk obviously and Tesla. They're up again irrespective of some negative midweek news. How's that Tesla short going? Well we'll talk about that. That Tesla short is increasingly painful. I just cannot work out Tesla stock. All I know is that you need to clear the deck and not touch it with a barge pole but the other company as well not to touch specifically today is Peloton after market they released their earnings and they were down nearly 30, 30, 30%. So I have a chat about those and then we're going to have a talk about tech stocks in general. The NASDAQ as I'm speaking record highs again nine straight days higher, the longest winning streak since December and they said growth stocks were dead. So we'll talk about that but let's kick it off with the shock from the Bank of England. Well not a shock for me I must say but a shock for the marketplace. Yeah I'd say and to give you credit for all of the bad calls on Tesla they've been easily made up by the very very good calls on the Bank of England. I mean you called it yesterday morning if you're not watching the daily market briefing guys then you're out of the loop here Anthony Chung's got his finger on the pulse called it on Thursday morning said they wouldn't hike even though the majority of well certainly the market and economists were calling for a hike and Anthony Chung showed them show them different. Yeah and the vote split actually was even more resounding than I thought the actual vote split. So just to explain with central banks when they have their meetings this is a very unique feature of the Bank of England that they release then of the nine members that form their monetary policy committee or the NPC there's nine of them and you get an account so you get a kind of granular level feel for the kind of shape of the discussion and where people reside in terms of do or don't take action or policy and the vote split was 7-2 markets were kind of more on the fence of it's either going to go 5-4 one way or the other and a lot of the rationale with the Bank of England was because rates markets had really aggressively priced in hikes and a lot of that came on the back of commentary from the governor Andrew Bailey last week who was talking about well essentially this rate pricing had occurred he had the opportunity and platform to push back against it to say well you've got a little head of yourself there it's not a done deal yet and he chose not to do that and then there was an FTPs from the newly appointed chief economist who came out and said you know what inflation is actually going to go to 5% and that just accelerated that that belief that they were going to hike but yeah I mean the main things were I guess the uncertainty on the for me it was it was too it was a twofold thing it was the uncertainty around furlough and they they commented on that they said oh just over a million jobs are likely to have been furloughed immediately before the coronavirus job retention scheme ended and that's significantly more than what they were forecasting when they previously issued their gross inflation forecast back in august that and covid covid didn't really get mentioned much at the meeting but not even a whisper really but I actually think we're far from done with covid particularly the dynamic of the situation that we're in at the moment which is the seasonal time of year the weather change the efficacy decline the rollout in the youth so I still think there's challenges and why not wait I mean why would you not wait to me and then it came a day after the fed yeah who basically have said inflation is transitory and so and that's exactly what the bank of england did in their forecasts they said inflation would peak at 5% or that level in april of next year and then it's going to come back down again so yeah that was that was my my kind of take on it but did you have any well I guess for one there's a lot of tweets about is bailey the new unreliable boyfriend but what what I like about this is no one actually has said that in the press it's funny how because mark carney was you know you know I'm you know I'm I'm gonna say he's a good looking guy and because bailey is perhaps not quite as so stunning I love the way the media don't use that phrase but they did for carney I mean that's a bit a bit of sexism yeah accusing someone of being good looking yeah that's fine accusing someone of being but ugly probably not fine yeah bailey I mean I have to say this has just been a bit of a joke I think I think he's handled it really bad and my confidence in him well I'm not sure I had much anyway to be honest but I it was he was a bit of well he's not an underlying quantity he's obviously been at the bank of england a long time and on the npc but yeah I mean just a bit I'm a bit I'm a bit embarrassed for him I'd go as far as to kind of say that I mean he's got it so badly wrong on the communication front I mean it was only literally last month basically saying guys were hiking were hiking were hiking inflation inflation were hiking were hiking everyone alarm bells alarm bells like a month ago and no well they're not hiking and I mean he was I think I was reading a piece in the ft after the meeting and the guy summed it up quite well and he basically said that bailey tried to say three contradictory he tried to deliver three contradictory messages in that meeting and to try and really not cover up but really make up for the fact that he'd cocked up and that he got way too ahead of himself a few weeks back with his rhetoric and he needs to rein it in but without making himself look stupid and therefore kind of undermining his his own sort of credibility but on the one hand he was saying that they need they need to continue to give that message that they're concerned about inflation so he actually said we're much more concerned about inflation that than previously and interest rates really are going to rise you know so they still want to talk about the fact that conscious of inflation being higher for longer that transitory thing you know it's not as transitory as we thought so you know like other banks you know other banks are making moves and you know there's been some hikes going on so it's not like the bank of England would have been the first they would have been the biggest to have hiked so far in terms of economic size but they're certainly not the first but so they're saying like inflation is there we're probably going to hike but then at the same time you know now they're saying actually it's good to wait which is your point and really and and I guess if you can compare them to the Fed the Fed have stayed absolutely true to their words throughout this whole piece absolutely consistent it's transitory fine it's not quite as transitory as we thought but it's still transitory and so whilst we're tapering and we'll get onto the Fed in a bit more detail in a minute whilst we're tapering you know we're not going to hike and that's been throughout this whole last few six months that's their line that's their line and they're right and the bank of England had been flip-flopping oh my god panic inflation and then oh actually no we should wait and I think they're back so we should wait and you know taking the Fed's lead I think but then of course Bailey was also trying to I guess trying to give us confidence in himself I mean he said that you know people should continue to heed my words and basically acknowledge that his comments last month about taming inflation had been truisms I think was the word he used but I've got like two things to say about Bailey one negative one positive oh yeah I'm an analyst I told the total middle ground I'm interested to find your positive yeah yeah so for the negative he actually appeared on a Bloomberg interview as an exclusive yesterday afternoon so after the event and do you know what he said I don't know if you read I didn't see that no he said I quote it's not my job to steer markets on interest rates how can you say that I mean what planet are you from you already nearly blew up the fca in your previous job and now you're doing your you're down hardest to do the same at the bank of England but I mean that that's probably if there was a job advert for a central banker right that's probably the one line to summarize what is your job surely they need to get this guy out of that before he does some serious damage but I think the other thing as well there's one thing a loss of credibility there's another thing here come on it's just a loss of respect I mean if he balls it up you fess up that's it and the market will forgive you for that I think you know it but the way he's acted in the aftermath of this and perhaps he'll seek counsel and he'll come out next week and say something like rolling it back a bit saying perhaps you know he shouldn't have said that comment a balloon like yesterday he should not have said that you make a very good point right we all make mistakes definitely and you know just man up just just take take it look hands up I definitely made a mistake and error and you know we're correcting it now and you know we're moving forwards that's definitely the way to deal with the mistake that you've made rather than just trying to wiggle out of it and pretend it didn't happen or try and make excuses as to why actually you were right and it wasn't a mistake and yeah so the positive yeah go on he's resigned rumors are yeah um the positive that that I think is that because of the how acute the energy crisis was in the UK specifically just a few weeks ago I reckon behind closed doors he would have been on under incredible pressure for multiple different forces particularly the government yeah to do something and so I reckon even though he should stand as an independent you know organization by his own economic analysis and decision I think at the time he was just reacting and buckled to those pressures and hence the conversations about inflation I mean I don't know if I mean suppose you don't because you've got your electric vehicle but for us for us um you know regular folks still you're on the gasoline yeah we're planet polluters yeah but you fill up your car it makes me think because I mean the last couple of weeks it's like was there a problem in the first place rather than people just going stir crazy I'm not so sure um now uh but yeah that's that's a positive and I'm giving the benefit of the doubt to Bailey here that perhaps then that was you know something that was happening at the time he doesn't deserve that benefit of the day I mean look we talked about on the podcast at the time when gas prices were spiking and all right there was the fuel prices that you know but the the central bank can't that that's out of their control that was a supply side price spike you know them raising rates actually it's going to do more harm than good in that particular isolated sort of inflationary situation um but I think the only thing here that's changed is that job retention scheme and I think they got as you said massively surprised by the one million people that suddenly got added to that just before it closed and I think I mean yeah I think that's a signal that that they hadn't factored in between meetings I'm talking about that because that the end of furlough happened just after the last meeting I think I'm right in saying the last meeting was end of September and it was the 30th of September which is when that scheme ended so anyway yeah I think it's just been a bit embarrassing the whole episode and you know we're back to and markets have been you know they got they got sold but dummy you know if you've seen how bond markets have been behaving and actually if we kind of move this on and also bring in the Fed and what happened there on Wednesday where do you want to just kind of cover off the details just to kind of conclude with the Bank of England for context going forward and then move into the Fed the market's now pricing a 66% chance of rate hike in the deck meeting a full 100% priced in hike now for the BOE is not until February of next year and obviously that would coincide with the updated next monetary policy report forecast so yeah but talking about the I think the the good connection between talking Bank of England and Fed was the comments that both the chairman and the governor said Powell said inflation is elevated largely reflecting factors that are expected to be transitory the Bank of England said upward pressure on CPI to dissipate over time and so I think that yeah that whole transitory argument we've kind of we've gone it's definitely transitory so it's not so transitory to it's not transitory at all so now perhaps it's just a little bit more sticky but still transitory so where we go next I'm not I'm not so sure but yeah that that was the commonality I think and I think obviously this has been a a key variable that's helped this equity move continue particularly US equity striking record highs pretty much every day of the week underpinned by what I've been referring to as a as a measured approach by the Fed you said it right you know the one thing that as much as people criticize central bankers I think Powell is up there he's definitely a team quality because he just does what he says yeah right yeah he definitely don't like us in September in their statement in their meeting in September they said inflation is elevated largely reflecting transitory factors now this time on Wednesday inflation is elevated largely reflecting factors that are expected to be transitory so our expected to be were the kind of words that they kind of added in there but ultimately the really key thing I think from the Fed's meeting was that Powell made it clear in the conference that transitory was consistent with inflation that doesn't start to normalize until the second half of next year so his and that's kind of what he's been saying that inflation is really high but it is going to drop not now and actually it's still going up right but once we get past that spring kind of hurdle spring of 22 that's when the year on year kind of factors will kick in because that's when prices spiked and so you know that well hang on it goes back two years because it was spring of 2020 which is when COVID hit you had that big collapse in economic activity and prices dropped off spring 2021 as prices normalized and you got supply strain supply constraints then prices had gone up but that year on year comparison was super high so you've got massive inflation kick to the upside now when you get to the spring of 2022 that massively low spring of 2020 figure drops out of the equation and so inflation is expected to drop back to like two and a half if it's five percent now by the time we're in quarter two of 2022 it should drop back to two and a half percent just because of these year on year factors but look I think there are underlying inflationary factors that do remain and that we've seen wages going up and you know we've seen some housing costs also increasing so I think you know it's not as transitory as as perhaps we thought it might have been six months ago but still you know it warrants the Fed tapering and it's been spot on I mean he's been flagging this taper for months and months and months he's been saying exactly what he was going to do and he's done exactly what he said he was going to do and I think the equity markets if you were to kind of measure the trading success here I think equity traders I've got it spot on I think bond traders have had a bit of a nightmare what's happened in the bond markets is that really in the in the kind of run-up like in the last couple of weeks we've had what you call a bare flattening of the yield curve and this is where because we were expecting oh my god the Bank of England are going to hike you know the Fed are tapering you know maybe the Fed are going to have to start talking about hiking rates sooner and so the short end of the curve that's that's the kind of shorter duration bond yields were going up pricing in this more hawkish expectation on the rate hiking front okay because they're panicking a bit about inflation at the same time on the long end of the curve yields were dropping because bond traders thought well hang on they're going to make a mistake here they're pricing in a policy mistake they're saying aren't they the central banks are going to have to start hiking they're going to have to be more hawkish that's going to be an error it's going to actually have an overriding negative impact on the economy so let's start buying longer duration bonds as a bit of a safe haven play and that drives those bond yields down okay so you get this flattening of the curve because the bond markets were pricing in a hike and that's going to be an error the equity markets were like whatever they're not hiking and it's not going to be an error because they're not going to do it let's buy buy buy all time highest right and even growth stocks through the roof as we'll talk about so the equity markets have definitely they've been listening to Powell they've been ignoring Bailey let's let's just ignore him he's doesn't know what he's talking about whereas the bond markets have definitely been caught out by this and are now you know now they're correcting back and we've got the yield curve steepening again but yeah bond traders not a good not a good few weeks for them and then just to wrap up the Fed the one thing that the Wall Street Journal was talking about last night was the fact that Powell had a had a secret visit to the White House yesterday and their earlier reports were suggesting that the White House had asked certain Democrat Democrat senators to come and meet Jerome Powell for a private conversation and obviously this is fueling belief then that at some point Biden's got to pull the trigger he seems to have been dragging this out forever I mean I'm pretty much locked in Powell get reappointed I don't know about you yeah I mean definitely and another another reason why the bond markets messed this up because Powell's so he's he's a very dovish chair okay he's definitely in the very dovish camp and secondly his vice chair Richard Clarida's really dovish and the third most important person at the Fed the New York Fed chief John Williams he's dovish as well so you got the three amigos the three most powerful people at the Fed super dovish right and then you've got your your your hawks the embarrassing hawks that got kicked out so Kaplan and Rosengren for for kind of inside a trading essentially they they were the hawks they've been kicked off so you're left with this super dovish and with pattern sorry with Biden's approval rating just being shockingly bad he definitely needs a dovish Fed chair definitely and so for sure he's going to be desperate I think to keep Powell in place okay well there's our hook let's move to Biden now and that's another good reason that you've just pointed out nothing like juicing the equity market with with a stimulative environment but a couple of different things here gonna start it off with oil because that that ties in the US and the reason why is that oil fell to its lowest in a month and this week yesterday and Thursday we had the OPEC plus meeting where absolutely as expected and again as I said in the briefing it I thought it was pretty clear that the OPEC plus group so namely Saudi Russia and others were going to stick to their plan supply increases of 400,000 barrels per day and they're absolutely not going to listen to the Americans and the thing I've been saying peers is that in the briefings is that for America I don't think they they think that OPEC will respond to their requests that's not the objective in my point of view if I was a strategist in the administration I'd be like we have to deflect attention and pass accountability to the Gulf and African producers to then just take some of the heat of us from the consumers at home at the prices at the pump so the US even went further and said yesterday it's encouraging oil producers to stabilize oil prices didn't go into specifics but kind of what that's trying to again it's fitting the same agenda I guess I'd described and in the second one the White House is said to be considering a range of tools to deal with oil prices now that range meant that yesterday was dominated by rumors of SPR the Strategic Petroleum Reserve being tapped to flood the market to counteract some of the prices but before I hand it to you there's a few other points here one is American crude inventories have now risen to their highest level since August Iran said nuclear talks this week are going to resume after what has been a quite lengthy hiatus of those negotiations I must stress I absolutely as I said before do not believe they will do a deal anytime soon and equally I do not believe that Iran's going to flood the market do this crazy move that a lot of people have speculated I think that's that's not a reality that's worth a high probability factor but UBS said a good comment UBS said the OPEC plus decision may prompt the US to release the strategic oil reserves although that would only fill the gap during a temporary production disruption and not fix structural issues such as underinvestment right and rising demand which I know is something that you've talked about before as well yeah yeah I mean it's it's it's a really difficult spot here Biden for a number of reasons one of them on this kind of the cost of petrol at the pump and he can't do anything about it because especially in the week of COP26 you know this is what makes it just hilarious he kind of just can't come out and say right let's get our kind of oil producers firing because obviously one way to get the price back down is to just give some kind of I don't know tax incentives to the oil industry to pump more but obviously COP26 I mean it couldn't be worse timing so he can't do that so they're like right let's tap these emergency reserves but that's a ridiculous concept and if if if he did that it would set a very dangerous precedent for the future I've got up the US Department of Energy webpage where they talk specifically about the SPR and I quote their website the SPR exists first and foremost as an emergency response tool that the president can use should the United States be confronted with an economically threatening disruption in oil prices this is not that what we have at the moment $80 is is not an economically threatening oil price I mean I people listening to this maybe aren't old enough or maybe weren't watching markets back in 2008 oil hit $150 in 2008 you know here we are at 80 whatever that's not economically threatening if if Biden if Biden taps that emergency reserve I mean that would be a spectacular error and I think would come back to haunting so he can't but he's talking about it and he's talking about OPEC and as you say it's all about trying to get his approval rating up because we've got midterms next year and he's needs to set about really recovering that approval rating big time and there's these little political kind of maneuvers that it's purely geared towards he's just talking to the US electorate he's not talking to OPEC you know he's not talking to oil traders you know it's purely an internal game that he's playing nothing more yeah and then with this there's also been a little bit of movement but again it's taking what seems a lifetime which is the reconciliation bill this 1.75 trillion and then trying the democrats to wrap that up with the one trillion dollar infrastructure measure there was some talk last night that US House of Representatives are expected to vote today on some of these issues to put them forward and so then they can get this kind of wrapped up by Thanksgiving is what they're kind of aiming for politicians love to pick out these these calendar dates particularly things like Thanksgiving as a little gift I'm going to go on a limb and say they're not going to deliver that thanks Thanksgiving I don't think that's too much of a risk for me to say that but this is obviously another factor that's hurting Biden at the moment it's kind of a I guess to be perceived by a regular person on the street it's a lack of authority if a president to be able to deliver something forget all the specifics it you know because you know a lot of people Aon interested and B and I couldn't really be able to I think understand the nuances of it to really care and so it's just about he delivers a deal the headline figure is key we know that headline figure has got income entity smaller again and again and again which waters it down his potency and then he can't even deliver it so all of this is obviously politically harming and now moving on Republican newcomer Glenn young kin I don't know why struggle to say that but young kin the former co-chief executive of private equity group Carlisle as one Virginia this week which was an area of which Biden won by 10 points not that long ago and I know you mentioned to me offline that has been another other areas of well being hotly contested and what does this mean just going forward because at the moment it's looking quite troubling going into midterms but even beyond the midterms for his his his term at the moment well maybe we should slap on the table a question that we'll deal with not right now but you know who's going to run for presidency in 2024 not let's not talk Republicans yet but is Biden even going to run I'll just put that out there but hang on at the moment Biden I mean it's been a disaster I would say it's summing up his performance so far I think he's just just had a shocker and that's because he it's the first two years of his presidency right that's key because he's he's a Democrat in the White House he's got a Democratic majority in the house he's got a Democratic majority just with his vice president's extra vote in the Senate right the Democrats control all three this is where they deliver on their Democratic agenda and get all of their bills through Congress and this is their legislative window to get stuff done and Biden has spectacularly failed to do that he's a Democratic president with a Democratic Congress who's got nothing done and the problem is that he basically got chosen for the for the kind of the Democratic representatives because he's more centrist compared to let's say Bernie who's who's two left wing right so Bernie Sanders so you know Biden came in as a bit more of a centrist Democrat okay but now he's taken office his policies have now swung way further to the left so these massive spending bill you know so all right the infrastructure one was a smaller one great that's ready to get through but no no no we don't want to put that through let's attach this second massive spending bill to it and try and kind of force the Republicans to allow us to get it through and then that was and then how are we going to pay for that and then these kind of tax sort of ideas they were coming up with to pay for that was just kind of so left and I think actually two left even for the Democrats and so they didn't have the support amongst the Democrats he's been too left leaning he needs to come back to the center he's running out of time because they will lose their majorities next year in the midterms and then he's stuck so it's literally so you you don't think they'll get it done by Thanksgiving I think they have to get it done by Thanksgiving otherwise they'll lose their chance I mean I literally think Biden has to get something through here otherwise it's just going to be an absolute disaster of a presidency which is why I bring up who's going to run in 2024 and he might be so spectacularly bad and way too old anyway by the way that that maybe you might have a scenario which I can't remember when last happened you might have to look this up when did a sitting president not run for a second term I'm not quite sure yeah I don't even know on top of my head but it could happen anyway I just think he's he's that's why his approval rating is so low and look he was at the COP26 I don't know if you've been seeing any of it and all the leaders are up there speaking God he's dull Biden is so bad at talking it's just the most uninspiring leader or orator I should say and obviously oratory is a key part of being a leader and it's just Jesus who is this guy well there's there's one man who's the complete opposite of that very specific point you just made and he's got an app that you'll soon be able to download called Truth Social and of course I'm talking about the Donald who's been making some some noises in the background Eddie and I talked about in previous episodes about his SPAC deal and it was really interesting actually when I was reading about that at the time he actually incorporated this company this I think it's like Trump technology and I think it was his part of it entertainment and it was apparently in the days after he lost the election yep so you know with these matters Trump's a smart guy when it comes to this maybe not real estate and things of other business areas but he certainly knows how to navigate these instances and yeah he's definitely going to run and it's going to be interesting I think just with the Democrats because I'm just looking right that the if you think about I think they still got it completely wrong so the demographics of America it's quite a yeah it's actually quite a young and very diverse country which you think okay that's perfect for the Democrats right that that kind of younger more diverse category surely wouldn't like Trump okay so the median age in America is 40 and only 60% of the country identifies as white okay so you've got 40% non-white which is hugely diverse so you think great for the Democrats but actually the electorate because obviously not all these people vote so when you take the demographics of the people that actually vote then this is quite a lot different and you typically get 75% of voters will be white even though only 60% of the country is white and then the average age of people voting is 53 so the electorate's older and whiter than the actual demographics of the nation which is why Donald you know come on in and it is Donald going to run in 2024 and I think you're probably right and he just won't be able to help himself but the only way he wouldn't is if this new platform he's basically just engineered via this this SPAC is a hugely powerful platform by the way you know in terms of a kind of media entity it's actually valued at 10 times the New York Times in terms of its value Trump has just from nowhere created a media platform that's valued at 10 times what the New York Times has valued at now in terms of a media platform it's monstrous right it's massive and depending on how successful that is in the next couple of years I think will determine whether he bothers to run for president or not but I think it's a really Trump is back in in a in a form and it'll be really interesting he's raised so much capital that it's actually really interesting to see what he does with it and does he mess it up or not but he can if he invests this capital raise and he can raise a lot more as well by the way if he invests it properly then actually he could he has a chance of building an interesting kind of media platform where he can shank from and maybe it doesn't have to shank from the White House but yeah it'll be interesting to see but he's really old as well by the way I mean imagine if it's Trump and Biden 2.0 I mean Christ it's the oldest people in America and it's just let's get some let's get some energy in there Trump Trump is 75 yeah by Biden's not that much older what he said was he 78 is he 78 yeah so they're about the same they're the same age basically yeah but in three years time Biden will be 81 you know you can you have an 81 year old running for president when he already looks too old to be president how old was David Cameron when he became PM he was pretty young right he was young yeah 50 max I think maybe in his 40s yeah definitely 40s he's 55 now yeah the youngest leader in the world do you know democratic leader no Greenland I was listening to him at the COP26 he's in he's like 32 or something or 30 35 was it anyway yeah we need some we need some youth in you know I know you need life experience as well and I get obviously being old that gives you you know means you have that but you just had your your birthday you're still pretty young birthday week yeah is this still fancy it thank you on the challenge PM well thanks for saying I'm still pretty young first I'm more down as my Gordon Brown though in my political party okay that's probably the biggest insult I've ever received being compared to Gordon Brown right that's a new low we'll move on well let's talk some single stock news and just going to throw numbers out there Tesla up just shy 40% in now two weeks Musk did say earlier this week I've not signed by the way I've not signed the deal yet with Hertz haven't seen the paperwork yeah so I'm not sure if that 4.2 billion dollars and pump that our stock is seen well he he said basically hasn't signed it yeah I'm gonna ask you a question what was Tesla's market cap at the start of 2020 oh start 2020 well I know um well it's now well what is it now 1.2 trillion 1.24 trillion is what it currently is what was it just two years ago it can't really it can't be more than 10 10x can it so I'll go I'm gonna go I'll go 120 billion not not bad guess when I say not a bad guess you're still 50 billion off but 75 billion high 75 billion yeah let's love it it was only 75 billion that's the heart of 2020 it's now 1.24 trillion that's just absolutely phenomenal it is and I actually wanted to talk bring something up about the last the last leg to the upside in the last two weeks ever since you called the top two weeks ago this big boost to the upside I want to talk about it and what's driving it because clearly it's not fundamentals clearly because the one reason for it to burst higher was the hurt steel but then Musk said well actually it hasn't been done so if it's off fundamentals yeah go on by by the way he also had to recall about 12 000 vehicles across all models of the last five years because of computer glitch that meant that the brakes I think just automatically came on so I just wanted to make that point as well so fundamentally some fundamentally two really bad pieces of news okay but stocks gone up so you've got to obviously we know it's not being driven by fundamentals because we're talking about bubbles and stuff right so it's clearly not being driven by fundamentals even more evidence of that over the last couple of weeks which what makes it hard to trade this thing because well for us at least where we're usually using our kind of fundamental assessment to kind of make judgments but I want to talk about options I want to talk about Tesla options and actually talk about meme stocks and we talked about this when GameStop were up through the roof earlier this year and one of the drivers was actually what's going on in the options market so just a few stats for you here the um notional value of outstanding puts and call options in Tesla is 600 million uh dollars worth of notional outstanding put and call options okay that is almost double the amount of outstanding put and call options in the entire NASDAQ wow it's it's there's more outstanding um the notional value now there's more outstanding in Tesla than there is in Amazon Apple and Facebook combined and basically what I'm saying and if you think about Apple um Apple has 2.4 times the market cap of Tesla but a fifth of Tesla's option volume so my point is very clearly the evidence is that the options volume trading at Tesla is just off the scale now what happens there is you get market makers who are making markets in these options and as price rises these market makers have to hedge off their risk by having to actually buy the underlying stock so a big part of the move in the last couple of weeks at least is actually been driven by uh market makers being forced to buy the stock to hedge off their options exposure which is what's been driving this price higher um if you're a Tesla fan you've already bought Tesla you know you bought it a while ago right you know so if you're a Tesla fan then you've already bought it so you're not buying if you're not a Tesla fan well you're just sat there scratching your head going what uh is going on right so who is buying you've got to have buyers to drive something up so so it is the market makers yeah and then who how do fund managers deal with that type of move because I read an article in the FT as a headline that was talking about this Tesla stock market rally has inflicted the worst month of performance on growth focused US mutual funds in 20 years yeah how does this this price movement of their stock specifically impact that side of the business well these fund managers will be they have benchmarks so their performance is measured against a certain benchmark and it might be the NASDAQ let's just say as an example or it might be the S&P 500 okay let's just take the NASDAQ so it might be if you're investing in you you know if your fund's a US tech equity fund then you know what are you returning compared to what the NASDAQ index is returning and as you're saying active fund managers have had their worst what did you say the worst month worst month of performance for growth focused US mutual funds in two decades yeah since 2002 so yeah here's the stat only 9% of growth orientated US mutual funds have outperformed the benchmark only 9% that's the lowest since 2002 one of the biggest or the biggest reason is that then they don't own Tesla and they don't own Tesla because the fundamentals do not justify buying and owning Tesla shares at this price so they don't own them but unfortunately Tesla then burst higher 20% and Tesla is so massive now and it's such a huge part of the index that that Tesla move drives the index up sharply which is why the index is performing really well and if they don't own Tesla they don't have that exposure and they're underperforming the index so you get this really quite I mean almost unique problem where you're these meme stocks if you want to call them that are so gigantically massive now from a market cap point of view that not owning them is is a massive risk from a relative performance point of view and you and you've seen that this month yeah the index waiting in a NASDAQ 100 of Tesla is 6.3% and that ranks them four behind Microsoft Apple Amazon yeah do you know who's number five uh it's not Alphabet Alphabet uh well I guess they're split in two it's not met it's not meta meta no god tell me NVIDIA oh yeah okay because remember NVIDIA has got caught up as well and a lot of kind of what you've been talking about that's been another in fashion name another one this week was did you hear about Avis budget group yeah I did yeah car rentals yeah it's just insane yeah so the later one the latest meme stock but it's so interesting it's because you know it started off with a you know a deep rooted kind of mission against the suits but the biggest kind of payoff here was the activist hedge fund SRS investment management they've got the biggest stake in Avis and apparently they made they made five billion dollars this week on the back of that meme stock pump in Avis alone yeah it's a bit it's made in in some ways it's kind of made investing a bit of a lottery I mean that that fund would probably sat on an absolute dog there in Avis I don't know how long they've owned back 10 years oh right fine so there's their nursing massive losses there and all of a sudden flip for no reason from a fundamental point of view it suddenly becomes the lottery ticket and their numbers come in and wow our performance is amazing I think what you do as a fund manager now if you're an active fund manager and you don't know Tesla's not in your portfolio I mean what do you do now it might be that you're now actually forced to buy it which of course then just inflates the bubble even more because your your clients are calling you going why the hell are you underperforming the index I mean what am I paying you for so you've almost kind of forced maybe into buying it but then of course if it is a bubble and obviously we can debate I mean I think we're on one side of that argument there are plenty of people on the other side of it if it is a bubble then you know you obviously don't want to be exposed to it if it ever does come back down right because if it does come back down at any point it's going to come back down fast but yeah you're kind of just caught between a rock and a hard place here do you buy it or do you just stick to your guns say look it's a bubble bubbles last for longer than you can possibly imagine that's the problem okay so for another stock that's kind of had a soft bubble moment Peloton shares were down nearly 30% last night posted wider than expected last they slashed their full-year outlook they said that came amid softened demand for its exercise equipment and ongoing supply chain challenges and as someone said to us on twitter overnight perhaps they mispriced how lazy people are but here's some interesting stats for you so sales and marketing expenses in the last quarter were up 148% and sales and marketing expenses represent roughly 35% of revenue in terms of proportionally so they I mean I see the adverts I mean they're super slick adverts and they've got big big names involved I think it's the same bolt that I saw on the last one although I think he I see his face on every product these days he's definitely coining in on his Olympic triumph but the other thing was Peloton's gross margins last quarter fell 12% they were around 40% just the year ago they're now down to 12 and they obviously cut the price of the bike that had a boost I think SEO said but not didn't hit quite the heights that they were expecting and then the other element of this says because I know you have some of these products in your house tonal hydro the mirror all winning customers in that home market exercise space so between when you're looking at yourself in the mirror while it's playing to you my morning briefing and you can buy you can buy a Peloton mirror for you is that what you say no these are these are competitors I see so what does the mirror I think the mirror if I'm thinking of the right one it's like a it's like a it's like a digital screen that's a mirror but you can turn it on like a tv it's interactive internet connection and oh yeah it could do workouts and things but it doubles up as like studio mirror right got it interesting um yeah I mean I just think it's so difficult that obviously they're one of the absolute classic kind of coronavirus case studies of course and so we know that as corona becomes less of a thing it's obviously bad news for this company like it was good news when corona hit but I think you've got to in some ways so to kind of to get your head around Peloton from a share price point of view an evaluation point of view I think you've kind of got to ignore coronavirus because that was a a unique or hopefully unique situation um so you got almost discount that so I tried to do this because actually did you know that Peloton they IPOed in in 2019 so pre obviously pandemic um and even with this massive sell-off we've seen in Peloton shares so the trading well they're probably going to open around about what 60 yeah 62 ish maybe somewhere around there we'll see when they open but um that was based off the aftermarket sell-off last night but um their peak was up just around 150 right the height of the pandemic they're down to let's just call it 60 let's round the numbers okay so even at that price there's still kind of market cap is still about 20 billion right even after this massive sell-off and this post-covid hangover 20 billion a IPO their market cap was 8.1 billion so there's still more than doubled the market cap from IPO I know that when you get that massive spike in the middle and then back down it kind of distracts you from the underlying fundamentals but actually what was really interesting from their their call was that from their subscription users so there's now 2.49 million connected fitness subscribers who typically pay about $39 a month okay so that actually that's $97 million a month of reoccurring revenue then you've got um paid digital subscribers who basically subscribe but they don't have the equipment um and they typically pay about $13 a month and there's about just shy 900,000 of those so that's another 11 and a half million so net net from a subscription base point of view they've probably got about $110 million per month of reoccurring revenue which is a pretty solid base now obviously the growth rates look shocking when you've come off the back of COVID and that's what investors are mostly looking at they can't get past that they can't get past that oh my god it's collapsing you know but at some point you're going to get a stabilization and you've just got to kind of put that COVID thing out of the window you've got to discount that entirely go back to 2019 and try and just draw a growth trajectory without the big COVID spike in it and figure out where's value you know this isn't a bad company they're not going to go bankrupt unless they spend too much on marketing trying to trace the dream that they can get back to the COVID spike demand that that could be an error that they make and maybe they've tried a bit of that in recent months which is why their margins are down and they've lost money but I think they need to quickly realize that's probably or get back reality check maybe yeah that's a tough battle to fight off the shareholders when your lifespan of your company more well two-thirds of the lifespan of your company has been in this unprecedented era it's a tough sell from the board to keep the faith like you're suggesting it'll be hungry won't they they'll be hungry for those returns but most like it's all about it's all about a platform it's all about a community these days I mean generally if you've got a platform and you can get subscription revenue and that's the golden ticket right and they've got it but now what what what the growth rate of that platform is obviously that's what's being questioned but you know 110 million dollars a month reoccurring revenue that's a good base I'm sure I saw a churn number the subscription churn right okay yeah I don't know which was which was quite high though I think I was reading it right it might be I assume churn being subscriptions coming on an off monthly basis rotating but it was like 70 percent or something very high because I reckon a peloton customer probably it's one of those things that you try you do it and then you drop it I don't think it has the stickiness of like because you were the values although they're low that you're talking about subscription particularly the digital product without the equipment but it's still a lot comparatively the subscription revenue in quarter three 2021 was 94 percent higher than quarter three 2020 so I remember quarter three 2020 I mean I guess we were pandemic there surely that's where unit sales were through the roof for them but I don't know maybe did you get a did you get a certain amount of subscription free period if you buy a bike possibly possibly cool all right well look we'll wrap it up there thanks everyone for as usual listening and please do leave us a rating and review I really need to give that shout out earlier in the podcast because I fear we keep saying we're 85 so you've got 15 more to go to target and we've got a couple more weeks to run so if you've made it this far into the episode well done and go and go and leave that rating it'd be much appreciated but Pierce thanks as ever and I'll catch everyone next week see you