Bond Investors Are Panicking — And They May Be Right

That's the percentage of Americans to say they'd be willing to have a job

“where their direct supervisor was an AI program.”

I'm Ed Shustoy.

My first boss died in untimely death,

and I went to his funeral with an open casket and I leaned over and said, "Who's thinking outside the box now, Randy?" (laughing) (upbeat music)

- How are you Ed? - I'm doing well. - Doing well, very excited for our show happening. In two days, we're heading to San Francisco to kick off the property markets tour.

With a fully sold out show, I can't wait to go live for the first time. Take it's still available for LA this Thursday night by the way Netflix is co-sitio Tetsurado so joining us there to break down the future of media.

He's gonna tell us whether Hollywood is dying, or if it isn't dying, or how it isn't dying. I'm sure that'll be an interesting and spicy

conversation, and then we've also got Miami,

which tickets are still available for on Saturday night and then Chicago and June 1st.

“We are speaking with Governor JB Pritzker.”

It's happening. It's finally here. I can't wait. This is our big moment. The moment's right.

- And I just found out that literally I'm exaggerating. Like when people ask me who my role model and hero is, I mention this person, and I found out literally 30 minutes ago that this person is a fan of the show

and it's going to come to one of the shows and be an on-stage guest. And I'm not allowed to say for security reasons, but this person is going to show up to one of our shows. So I'm just super, and be an on-stage guest.

So I'm just super excited. - That's right. - We're not gonna reveal who it is. And we're also not gonna reveal which city that individual is gonna arrive at.

All you do need to know is the thing Scott that just said, which is that if we were to reveal it, it would be a problem for security reasons. I mean, boom, you gotta buy ticket. - There you go.

Which city are you most excited about it? - You know, I was LA, but I'm increasingly excited to end the tour in New York with the mooch and just sort of celebrate in our hometown. By the way, the next are gonna be playing as well.

Next are in the conference finals. There's just a very positive, exciting mode. The city energy going on right now. And we're gonna ring that bell live in New York at Town Hall. So I was kind of excited about LA

because LA feels sexy and cool and Hollywood. I still am, but I'm slowly kind of getting more excited about New York City. What about you? - I would say LA because a lot of my friends

from college are coming, and that's nice for me. So that will be nice. - Probably, yeah, probably LA. - Very exciting. Well, if you wanna get it, take it's head

to profftumarchitstour.com. We can't wait to see there. We'll see you very soon. Shall we get into the show Scott? - Let's get into it.

(upbeat music) ♪ No, it's been time to fly ♪ ♪ I hope you'll have plenty of the railroad hall ♪ - Inflation fears drove the yield on 30 year treasuries to its highest level since 2007, last week.

And certain yields weren't just an American story, 30 year bond yields in Canada, Germany, France, Spain, Portugal, the Netherlands, and Switzerland. Also hit, 12-month high. It's a big part of the spike is owed to war-driven inflation.

And the resulting probability that the federal reserve may need to hike interest rates sooner rather than later on calcium, the odds of a fed rate hike before year end have climbed from around 15% a month ago to above 40% last week.

So it appears Scott that the bond market is finally reacting

to inflation in a serious way. The 10 year yield hit almost 4.7%, it's highest point since January of last year. And they said 30 year yield hit, five, almost 5.2% on Tuesday.

It's highest level since July, 2007. This is what HSBC is calling the, quote, danger zone. Meaning that yields have risen to levels where they will actually start to cause some stress in other parts of the market.

“This is why it's important for investors to be aware of what's happening”

in the bond markets. Meanwhile, Bank of America just published a survey. They found that 62% of fund manager respondents expect that 30 year treasury yields will hit 6% this year. If we hit 6%, that would be the highest level since 1999.

In other words, despite the relative calm that we've been kind of analyzing in the stock market and trying to understand what we're now seeing is that bond investors are looking at inflation. They're looking at our prospects in the Middle East

and Iran, what gas prices and oil prices will do to overall inflation in the rest of the economy and they are as a result, freaking out.

Loads to get into here, what are your initial reactions?

“- Well, the term we used when this tariff nonsense”

went crazy any back to way was that it ends up at the bond market is the adult in the room and was last April with tariffs. And now it appears that the bond market is sort of unfortunately, not unfortunately,

putting pressure on Trump's decisions. What that results in though is that every time I hear President Trump threatening the IRGC in Iran, it's so obvious he has no card supply because he desperately wants out,

but he can't get the terms he wants unless there's a credible threat that he's going to stay. It's literally the definition of a quagmar. 'Cause right now the IRGC is supposedly rebuilding,

they've survived, so their attitude is, this guy's telling his party in the nation

that this was supposed to be over four weeks ago,

his popularity is plummeting. He desperately wants out, but he quote unquote, "it's threatening to do more." So the bond market is stepped in and said,

“"Okay, with energy going up, we have greater inflation”

which is pushing bond yields up and increases the odds of the federal raise rates." Typically when the bond market goes up, it draws market out. Money out of the equity market

because people can get a better yield with what they feel as a safer investment. And also fewer deals get done because it gets more expensive to buy things, it gets more expensive.

Everything in the economy, your auto loan, your mortgage, your credit card goes up. And the yield on the 10 year treasury kind of sets the bar for interest rates across the economy, right?

And higher yields also increase the cost of servicing our debt. In 2026, you also spent a trillion dollars on interest payments.

That's 88 billion a month,

roughly what we spend on the fence and education combined. And Neil Ferguson is named this Ferguson's law and he great power that spends more than on spends more on debt service

than the fence starts to decline. And then the question is, could this trickle down to software and AI who've taken out private credit loans, or typically floating rate?

So what happens when the AI shell companies that are built on debt? What happens when their debt service costs go up? And then they hit a bump in the road where their capbacks continue to go up.

But the revenues don't scale in line with their capbacks, which according to the FT and everyone, every other analysis, it'll be nearly impossible for revenues to keep up with capbacks at AI companies.

“So you could have shavings of shit on a shit salad here, right?”

You could have cost go up, so consumers take their spending down, and then the companies that are most levered or who have been tapping the credit markets, see their cost explode while may be registering

decline in revenue growth that can't, that there's no way they can live up to their expectations. So we keep saying the deficit doesn't matter until it matters. It feels like that mattering may be starting.

- Yeah. - Yeah, and it all goes back, I mean, I'm glad that you lay out some of the downstream effect, or maybe we'd call it sort of the chain reaction that happens as a result of inflation,

because this is relates to our conversation last week, which is that rising inflation has generally been almost ignored by equity investors. Investors don't seem to be that worried about the inflation. And there are all these reasons

and these arguments as to why inflation doesn't really matter and some of them are quite compelling, but when you kind of model this out over the long term, and you think about what rising prices actually means for all of the other parts of the economy,

we had inflation, which rose to 3.8% last month, the PPI rose to 6% gas prices are up, more than 50% year of a year, airline fairs are up, more than 20%, et cetera, et cetera, et cetera, one of the main implications of these rising prices

is that it probably means that we will have a rate hike from the Federal Reserve this year. And in fact, if we look at the odds on calcium, the chances of a rate hike have risen to 40% at the beginning of the year, those odds were less than 10%,

you'll remember heading into the year, we thought we were gonna have a rate cut. In fact, the odds of a rate cut on calcium, at the beginning of the year, were 96%. We just assumed that this was gonna happen.

And so what happens when you do hike rates, which it increasingly seems that that's potentially gonna happen here, or at least it's a very real possibility getting closer to a probability, it means that you just have higher interest rates

across the board, it means that consumers are spending more on their interest payments, on their mortgage payments, on their auto-learn payments. And then as you mentioned, the cost of debt rises for companies too, everyone has to pay higher borrowing costs.

What might that do to earnings expectations?

What might that do to the AI build out?

“Which to your point is increasingly dependent on debt.”

We look back to October of last year, AI related debt, balloon to more than a trillion dollars, as you point out, a lot of the private credit, in there is floating rate debt, which means that if the interest rates rise,

that it's gonna cause real problems for the servicing costs of the AI build out. And so we can see how this all kind of funnels down through the economy and results in the thing that investors are very worried about

and don't want to happen, which is stock prices go down. I just think that this is becoming a more and more of possibility, closer to a probability. And it seems to me that investors are kind of downplaying the negative impacts of inflation, specifically on stocks.

And I've been wondering about why that is, like why on investors, as worried as you might think, that we're seeing historically very, very high inflation that doesn't appear to be set to come down any time soon. Again, we've had no indication that this war is gonna end

because every time Trump says, it's about to end two days later, he reverses course. And that's happened probably like seven or eight times in the past few weeks.

“So I've been thinking like, why aren't they worried?”

One idea that I have in my head is maybe they're just optimistic by nature. Maybe that's just what it means to be an investor. Who defaults setting is, things will work out. It's a better bet to just bet on the outcome being a good one

because as we know, you don't make that much money shorting the market, you certainly don't make much money, not being invested in the market. That's one reason. The other reason though, is I wonder if inflation

has just become inherently politicized. And the politics are skewing investors perspective where to believe that inflation is an actual problem is to believe and to admit that Trump made a mistake that he won shouldn't have raised tariffs, as an example,

but two that he shouldn't have attacked Iran, that he shouldn't have invaded the Middle East, or at the very least that his strategy in doing so was a fumble. But I wonder if investors just don't want to admit that.

And we should be clear, we see this from investors on the left. I'm not from investors on the right, but it seems it's happened to such a degree where to admit that we're seeing structural issues in the economy is to admit that the president

who has become this sort of larger than life personality in the minds of many investors is wrong about something that his strategy was flawed. And I wonder if that's inherently pushing investors to try to downplay or ignore or put their blind is on and think,

no, it's not a problem, everything's fine. Yeah, we'll just leave in a couple of weeks. Yeah, it's gonna be okay. And that might be a real problem over the long time. It seems that the bond investors have decided,

no, this is a problem, but over in the stock market, you're not really seeing that. - So despite the fact that I worked in fixed income,

I always have a difficult time other than saying,

your auto loans are gonna go up, trying to explain why interest rates are so important for the economy. And so the first thing that happens when interest rates go up is that the first casualty

is speculation.

“And so growth companies which have been driving the market, right?”

94% of the SMP gains have been from AI companies or AI related companies, and it's all about growth. And essentially, these companies aren't making a lot of money right now, but they're potential because they're growing so fast is that in five, 10 years,

they might be generating more top line revenue than Microsoft. But revenue five years out with higher interest rates means that that revenue isn't worth as much now. So growth stocks get hammered.

Because they're all about projecting huge cash flows in the future, which when reverse engineered or valued back to a dollar in 10 years, when interest rates are 2% is worth 90 cents now, a dollar at interest rates of 6% in 10 years,

is worth 45 cents or 55 cents, right? So it's the speculative stocks get crushed, right? So translation, the economy, the fantasy economy,

goes into recession first.

Housing gets hit next. Monthing mortgage payments explode, affordability collapses, and this really, as most economic shocks, takes a toll on the people who can't afford to pay cash for their house.

especially hard hit, it also hits leverage.

“So private equity, commercial real estate, regional banks,”

anything dependent on rolling over cheap debt starts, starts sweating, right? And then consumers finally pull back, because of credit card debt, auto loans, and financing costs suddenly become real,

instead of background noise. And businesses cut hiring, laughs, follow, and you kind of enter into this little bit of a doom loop.

But the reality is, and this is why he capitalism

is such a gorgeous organism, rate spikes are painful because they're supposed to be. They're kind of the economy's way of destroying access, repricing risk, and reminding everyone that capital actually has a cost.

It's basically the ruler wrapping on the knuckles of the Trump administration's reckless economic policy, and waking people up from this fever dream that AI is going to create 10 different Microsofts in the next 24 months.

It's the alarm clock going off, saying, no, your dreams are over, my friend.

“It's the cold shower that we've all been needing”

to take for a while. - Which would be just devastating to the markets, if that were to actually transpire.

And I think, I mean, you made the point

about how the bond markets going back a year ago to Liberation Day and the tariffs. The bond market was the adult in the room. Trump issued these tariffs. He came out with his stupid billboard in the garden,

and everyone freaked out, stock market investors freaked out. Bond investors, particularly freaked out, where you saw the 10 year yield jumping more than 50 basis points in three days. It was the biggest three-day jump in more than two decades.

It was huge. And Trump admits, oh, the bond market's freaking out here. And then he tacos, and he puts the tariffs on pause. And the learning from that was, okay, the bond investors, the bond vigilantes, as they call them,

they're the ones who are gonna sort of steer Trump sort of wacko policy in the right direction. If he starts to do things, they're gonna have real serious consequences in the markets. So the question then becomes like,

is the same gonna happen in the current situation? Will Bond yields today change Trump's economic policy like he did with the tariffs? The trouble is, the new policy is a war in Iran, which is a lot more difficult to just turn off.

I mean, we've already spent, I mean, according to Pete Heggsett,

more than $25 billion on the war.

That was a month ago that he said that. So it's probably a lot larger. Trump's already requested $1.5 trillion for the defense budget for next year. We've already lost 13 lives, nearly 400 wounded.

Many other lives have been lost. I mean, the costs here are a lot more significant and a lot more personal, a lot more sensitive. And so the idea that the bond yields are gonna go up, and then Trump is just gonna be like,

okay, I'm gonna turn off this war and we're gonna open the straight back up and just concede defeat to Iran. That's just not gonna happen. So the difference between today and last year

is that you don't have that same wrapping on the knuckles mechanism as you just put it. Because there's so much more to lose here. It's so much harder to get out of this one. As you say, it's a quagmire.

That wasn't the case with the tariffs. So I just, I wonder if we're actually in potentially a more difficult situation than we were last year, where it was kind of easy to steer him in a certain direction.

But with this, when it's a hot war, when you're firing weapons, firing missiles, when you're sending ships over physical ships over to attack a nation, and now we're in the midst of this thing, I'm just not sure that the bond markets

have the power that they used to have, which to me suggests that yields will only continue to rise, which increases the likelihood that all of those dominoes will fall in the way that we just laid out.

So this is something to certainly keep an eye on. I don't think it's, we should ring the bell right now and call it, okay, now the bell mark is gonna happen. I don't think that's the right takeaway, but certainly what we should be doing

is keeping a very close eye on those bond yields, keeping a very close eye on inflation. And understanding, I'm being realistic about how long will we stay in Iran,

“how long will the straight continue to be blockaded?”

Because that is the thin that is driving all of the inflation that we're seeing, not just America, but around the globe, and what you're seeing is bond yields rise in other nations as well.

they create the illusion of genius. - Yeah.

“- And that is, okay, my economy is doing great.”

I can spend $7 trillion in five trillion and receipts and juicy economy and keep stock prices high. And then all of a sudden what you find out is do you have a real economy? Do you have sensible economic policies

and do you have a real business? And I hate to say, and unfortunately, again, it hits earners more than it hits owners because if you own real estate, the wealthiest people in Argentina

will have a change much because despite massive inflation, the wealthy families are bot land and they bot hard assets. So inflation hits earners. It hits people who get typically

during inflationary periods, wages don't keep pace with the cost of goods. So everyone's prosperity goes down whereas owners, if inflation goes up and asset values go up, typically.

Not always, sometimes if you have stocks, they get hit hard.

But inflation is it really attacks the society because one of the things or one of the myths about society is that everyone talks about unemployment that when people aren't working, they get antsy and angry. And that's true, but where they get violent

or chaotic is when they're working and they're still hungry. And that's what inflation does. It attacks your prosperity where you feel like, okay, I'm working two jobs and I can't afford, I can't afford to buy diapers.

And that's exactly what we saw last month where wages real wages fell because inflation outpaste wage growth. And it's likely that that's gonna continue. We'll be right back off for the break.

And by the way, we will be taking a break from the feed while we travel for the tool and on Friday, for I'll show live from San Francisco. - Support for the show comes from Delete Me. Have you ever thought I should really be doing something

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And a member FDIC additional terms and conditions apply. NMLS-696891. We're back with profG markets. One of the most anticipated IPOs in years is finally happening. SpaceX officially filed to go public last week,

giving investors their first detailed look at the company's financials ahead of the company's planned debut on June 12th.

The company is reportedly looking to raise at least $80 billion,

which would make it the largest IPO in history. And it could be just the beginning of a major wave of blockbuster offerings with OpenAI, also reportedly preparing to file in the coming weeks. So Scott, the SpaceX numbers are finally out.

I cannot wait to dig into this with you. Let's just look at 2025 revenue, $19 billion. It's Q1 revenue, $5 billion. Q1 net loss, $4.3 billion.

“So much to talk about here, what do you want to say?”

- I want to start with the Iowa Skate Trip. (laughs) So the first 14 pages of the S1 include pictures of rockets. AI was mentioned over 1,200 times in the S1. For context, it's longer than the great Gatsby

or the Catch from the Rye. And here are some direct quotes from the filing. These are my favorite. We do not want humans to have the same fate as dinosaurs. Well, thank God you're here, Elon.

For decades, it's another quote. For decades, a reality where humanity travels between the planets and the stars has felt tentalizingly close, but still locked in the pages and screens of science fiction, okay?

The sun contains approximately 99.8% of the solar system's energy and, as a result, we believe it is the only truly scalable solution

“to terrestrial energy constraints in the age of AI.”

Jesus Christ, put the fucking pipe down. We believe the next paradigm shift for humanity is the creation of a resilient, perpetually expanding, space-faring civilization, ultimately preparing us to cartasheb, type two status,

defined in the filing itself as a civilization that harnesses the full energy output of the sun. Okay, now give me $1.8 trillion. And effectively what you have here is you have a core business that is genuinely excellent.

Starlink generated $3.3 billion in revenue

in the single quarter with $1.2 billion in operating income. That's a 36% operating margin on a monopoly satellite internet business with no serious competitor in sight. Let's give them that totally. If this were the whole company,

it would be one of the great businesses of our era. Yes, but it's not the whole company. Stapled onto this rocket ship is XAI. A business that is clinically speaking, a money furnace. In 2024, XAI lost $1.6 billion on $2.6 billion in revenue.

By 2025, losses ballooned to $6.4 billion on $3.2 billion in revenue. Revenue went up 22%, losses went up 310%. And by the way, just to interject there, let's look at 1/4 of 2026 AI, the AI units losses

for one quarter alone, are up to $2.5 billion.

So if we're going to annualize that out, we're up to $10 billion, but of course it's going to be even more because it's actually growing exponentially. You look at the net loss for the whole company for the 1/4/2026.

Their losses grew by 700% year over year in one year. So these losses are insane. Like totally, totally absurd. And to your point, it's not coming out of the connectivity business, which is the satellites.

That is a profitable business. That is a great business. Starlink is amazing. We've said that for a long time. It's coming out of one, the space unit,

which, by the way, it's not that bad. It's a $600 million loss in Q1. But mostly, it's coming out of AI. AI is the money and generator in this business. It has gotten way out of control.

And it's all because he's decided to merge that company, Ford X AI into SpaceX, which is, as you say, sort of the bag of shit that's been staple to the actual business in order that he can come on this ridiculous valuation. - Or find the cheap capital, I need to continue to be the money

furnace in Q1, 2026 alone, net loss of $4.3 billion on $4.7 billion in revenue,

7.7 billion of that was for AI.

“Cash on the balance sheet cratered from $25 billion”

at the end of the year to $16 billion by March 31. So they've earned $9 billion in cash in a single quarter. That's 100 million a day. So I don't even see them as investing in the future at this point. They're kind of, it's like the future is billing them in advance

and total debt on the balance sheet is $29 billion. I mean, this is a great company. - It was a great company. - It was, and then they staple X AI into the thing. And now it's a bullshit company.

- Well, let me bring this back to me. When my mom, after my parents split up, and my mom was living in Westwood, my mom was trying to find the next dude in the next guy and she's to date.

And I physically remember opening the door. My mom would go to dances and she'd meet somebody and they'd want to take her out of the date. And someone would knock on the door and open it and be a man and they'd see an eight-year-old kid.

And I could physically see them like, you know, comfortable and disappointed. And this is hard for me, this is very hard for me. - I wanted to do daddy so badly at, anyways. (laughs)

- And this is, you meet Snow White.

“And you're like, this is gonna be amazing, you know?”

- Space X. - And then you find out the seven dwarves are just these awful psychopathic borderline, maniac children. (laughs)

- I'm so sorry. - You're not so sorry. - So Snow White, Snow White is SpaceX. But the dwarves, you get the dwarves too. And the dwarves are Chucky and Kujo.

And these companies that were he is trying to use the unbelievable modes and technical sophistication and monopoly power of SpaceX to find cheap capital so that he can catch up to open AI which he's still fucking furious he gave up ownership in.

- Yeah. - So, and then my favorite part, my favorite part is that, my favorite line in this whole thing, the favorite Easter egg here, was that it came out in the S1

that he bought $131 million.

“He spent $131 million of the company's capital”

to purchase recalled trucks.

Basically, he spent $131 million

to buy back cyber trucks that were recalled. How's that gonna help SpaceX shareholders? So, if you look at the valuations here and you compare it to even if you gave, even if you said XAI was worth as much as open AI

in a multiple basis. If you took Starlink and compared it to the best telco and you took the rocket company and compared it to another rocket and you come up with about $600 billion in valuation,

let's double it because of the Elon effect. That's 1.2 trillion. But this is our buddy asks what's the motor and it's valued the thing at about $1.2 trillion. But they're talking about they're leaking

that they think it's gonna go out of $2 trillion. - Yeah. - I don't think so. - That's the problem. - What happens in a company like this over time

is that people find the shittiest asset and assign that valuation to the whole thing. In addition to every telco and this is kind of a company, a telco attached to a rocket,

those companies ultimately, their earnings growth have trouble keeping up with their capex demands. So this feels like a company,

an amazing company with like you said,

bags of shit strapped onto it. At a valuation where they're assuming everything has the same potential and luster of the core property of SpaceX. - And the bags of shit all designed to inflate

the valuation of the company and indeed that is what they have done because they're gonna raise $80 billion and they're gonna target a $2 trillion valuation. And let's just look at what that valuation actually means.

We know that they generated $19 billion or less than that in 2025. So this means that this company is valued at 106 times sales. So I wanna compare this to Nvidia.

By the way, they're Q1 revenue, which is $4.7 billion. The revenue was grew 15%. So this company is the next hot company

that's growing 15% and is valued at 106 times sales. Let's compare it to Nvidia. Nvidia just reported their earnings. They grew their revenues by 85%. They generated $58 billion in net income.

That's gap, net income. Up to 111% year of a year. They are trading at less than 22 times sales. So the multiple there is a five X difference

Despite the fact that Nvidia is growing

more than five times as fast as SpaceX.

“And also it's generating billions of dollars in cash flows.”

This is a losing money business. And now let's compare it to some of the other previous hot IPOs that we've seen when they've gone public. Meta, when it went public, it was growing at 88% or traded at 28 times trailing revenue.

Google was growing 240% or traded at 10 times trailing revenue. Saudi around co, maybe we don't want to make the comparison. But let's just make it anyway, traded at five times trailing revenue. And it was growing faster than SpaceX.

This is the thing that I don't think people really understand here. Now that we know these financials, this company's business actually isn't growing very fast at all. 15% in the world of AI and the world of big tech

is nothing.

You cannot be demanding a two trillion dollar valuation

who should make it the seventh most valuable company in the world. It's going to be more valuable than Meta, broad calm, book, shahath away. And it's revenues are going to be lower than Macy's. So it's not, it's not taking a dig out the business itself.

“And I think it's cool that we're building rockets.”

And I think it's cool that we're trying to go to space. But the idea of asking for two trillion dollars is completely insane, not even a debate, not even a conversation, that makes actually no sense at all. But the reason they're going to get away with it

is because they're going to sell the Elon story to the retail investors. Because they've reserved 30% of the allocation for retail, which is about three times higher than the average IPO. Because they know that they have to sell this to the Elon fans

who will pay whatever price, because they don't care what the financials actually say. They just love Elon. And they think that we're going to go to Mars. And I hate to sort of patronize them, but I'm sorry.

That is the reality of what's happening here. You cannot argue that this valuation makes sense. If you reduce it to maybe $1 trillion or lower than that, reduce it by 60%, maybe we can have a conversation about whether this is a reasonable investment

that makes any sense at all. But it $2 trillion, like now that we know the numbers, very clear here, stay away from this thing. Do not invest at a $2 trillion valuation. It makes no sense at all.

So Palantir has the highest-trailing price to sales multiple in the S&P 500. It trades at 67 times sales. Number two is CrowdStrike at 34 times sales. At a 1.8 trillion-dollar valuation,

which is the low-end supposedly of the range, that their targeting, SpaceX, would be trading at 94 times Trailing 12 months revenue. And like you said, the valuation just makes no sense. If you look at the sum of the three business lines,

based connectivity and AI, and assume that each segment will command a multiple that is twice what their competitors are at, you get to one trillion. So the bankers here are tasked with telling investors that the total addressable market is the size

of the entire U.S. economy, $28 trillion. By the way, that was my favorite quote from the thing. They said quote, "We believe we have identified the largest actionable total addressable market in human history."

And then it's a giant ball that's $28.5 trillion. And as you say, that's the GDP of America. Like that's the pitch. And that's what's going to get-- the sad thing is I think it's actually going to work.

“But that's how they're getting there with this dumb,”

hand-wavy. I mean, it's very we work. You're an expert in it. Well, we work to be clear. We work to have a great business.

But some of the, some of the, you know, but the feel of the messaging. Yeah, let's take mushrooms and elevate the consciousness of the world and the planet. There's, there's a lot of that.

I don't know, and this, this company gets out. But I'm, and I've been so wrong on Tesla and Musk companies. But I just wonder, is there enough cultists to show up for this thing at $1.8 trillion?

That's the question. Are there enough people that are just, you know, suspend, suspend disbelief just to pile into this thing because they, they think, oh, Musk, it's Musk. The numbers aren't going to do it.

Let's be, but this is what we've learned here.

We finally have the numbers.

We now know the numbers are not very good. It's all hope and hype. Is there enough? We'll be right back. And there's still time to get tickets

for some of our tour dates. Head to profgmarkitstor.com to secure your seat in LA. Miami, or Chicago, we hope to see that. Hi, I'm Maria Sharapova, host of the Pretty Tough podcast.

to discuss the pursuit of excellence without apology.

“This week on the show, comedian and best-selling author, Chelsea”

Hamler, gifts or tips on independence and aging gracefully. I would argue that 50 now that I am 50 and I understand life more than I did when I was 30 or 40 is that you get so much more wisdom and you get so much more experience that you actually feel like you're beginning again.

Check out Pretty Tough. New episodes on Wednesdays, you can watch it on YouTube or listen in your favorite podcast app. We're exactly the US China Relations stand. The Chinese side came in feeling as if they had figured out how to work

both with and against Trump. He was inclined to try to create moments of crisis. And then if they stood up to him, they were almost uniquely capable of making him back down. I'm Pretty Barara.

In this week, Evan Osnos of the New Yorker, joined me to discuss the Trump she summit, which he reported on from Beijing. The episode is out now. Search and follow stay tuned with Pre, wherever you get your podcasts.

This week on Network and Chill,

“we're joined by Danielle Robay, the journalist Forbes”

called the Queen of Questions and the host behind Reese Witherspoon's Book Club podcast and her own show, question everything. We're exploring a skill that can transform your career, relationships and bank account,

knowing how to ask the right questions. Danielle breaks down the art of getting real answers in professional settings from coffee chats to career pivots and shares the money conversations we should all be having but aren't.

Get ready for heart-hitting advice on defining success beyond the dollar signs, asking better money questions with partners and friends and the mindset shifts that separate people who stay stuck from people who keep growing. Listen wherever you get your podcasts or watch on YouTube.com/yourrichbff.

We're back with property markets. There's a shake up happening in the media industry that hits a specially close to home for us. James Murdoch is acquiring the Vox Media Podcast Network along with New York Magazine and the Vox News site

“in a deal reportedly worth around $300 million.”

And who is at the center of this very exciting and a hot new media deal? Scott Galaway and kind of Ed Elson, this show. We're part of this in a way. Scott, I mean, what do you make of this deal?

What do you know? What can you share? Is this gonna change our business? Any thoughts? - So James Murdoch, which is sort of the,

I know the software cutler, moderate Murdoch, has decided using his he-owned stakes in Tribeca Film Festival, the Bull Work Art Basel.

He's basically purchased New York Magazine

in the podcast, the Vox Media Podcast Network. The third part of the business, which is some of their sites, Vulture, Eater, S.B. Nation, they do well, but it's a difficult business.

Those are gonna remain independent for now. My guess is they'll get sold off pretty soon. So kind of the story of Vox was 10 years ago, eight years ago, people thought, these digital media assets alternative media

were the future, and these guys raised a lot of money and went out and started kind of this new generation of hip media, right? And people were excited about it. So Buzzfeed, Food 52, scene advice, Mike Mashable,

and just to give you a sense, what's happened is basically, Google and Meta decided erected these toll booths and basically sucked out the auction out of the room by diverting traffic away from these sites

or charging them a lot for it. And these slowly, but surely these alternative media companies have become less economically viable. Buzzfeed went out of business. Food 52 sold some assets.

Food 52, lost 96% of its value is seen at 94%. Vice, Vice, ultimately declared bankruptcy. Mike, lost 95%, Mashable, lost 80%. And essentially what Jim and the CEO of Oxstead was said, I'm going to aggregate some kind of great assets

and then I'm going to spack it and take a public

at a billion dollar valuation, which was the peak valuation

there. It didn't work. The market's soured on these assets. And basically, Vox, to a certain extent, was a company that aggregated assets

that had negative synergy. And Jim is a smart guy. What he did is he decided to kind of bust a company into three units, one was New York Magazine, which I described, I would describe as a trophy asset.

It does okay. It bunches well above its weight class. It's kind of the HBO magazines. It does well.

and the editor and chief there. David Haskell is a very bright guy.

“And as always, finding amazing new reporters.”

But it's in magazine business. It does better than most magazines. But it's like the jets. It doesn't make any money.

But there's always someone who wants to own it.

His way I would describe it. Trophy asset, the websites do okay. But it's a difficult business. They do, you know, okay. And it ended up that the business that Jim Murdock wanted,

or James Murdock wanted was the podcast. And the podcast are essentially growing. Podcasts are growing about 17% a year. As a, they grew 18% year over year, reaching 2.9 billion. That's a 27 x growth over the last 10 years.

In 2024, you saw ad revenue growth at 26%. And now 70% of Americans age 12 plus have listened to a podcast. And 51% of watch one in 55% are now monthly consumers in two thirds of 12 to 34's, which advertisers love, have listened to or watch a podcast.

The average podcast listeners, 34, versus the cable news. The business is actually going as fast or faster than some of the tech titans we talk about. And it's ad supported. So it's the fastest growing ad supported medium outside of meta

and alphabet. And essentially, supposedly, when Murdock paid the most for what drove this value, I don't know this, but supposedly he paid about 300, somewhere between 300

and 350 million for the magazine and the podcast.

But supposedly the crown jeweler, what he really wanted was the pods. And so this is, you know, I've gotten to know him a little bit. I knew him before. He seems like a, you know, I'm not just saying this because he's a, you know, he's technically the owner

or the boss now, you know, proffes an independent company. We have a deal where we sell our advertising through Vox and they take a percentage of the revenues. But we're essentially an independent company. Pivot is co-owned by Kerascott and Vox,

which means no one has control. Everyone just has veto authority. We're like the European Union with. We had, you know, I don't mean to sound self-important, but we could have vetoed this transaction.

And we didn't, because we like Jim Benkov. I would say we like the Jims and we like James Murdock.

And we wanted to see this deal go through.

And we think it makes a lot of sense. But, you know, this is, this is Jim and Vox were kind of on the last helicopter out of Saigon. And that is our peer group has been crushed. And Jim, to his credit, make a bid to big investment

and podcasts, which have grown really nicely. I don't know what else to say about it. Do you have any questions, Ed? Any thoughts on the snacks or any questions? Yeah.

“Well, I think one big question for a lot of people”

is who is James Murdock? We know he's Rupert Murdock's son. We know that Rupert Murdock is the infamous notorious owner creator of some of the most iconic conservative media companies.

And his son is now the owner of the company that is our advertising partner, who is James Murdock? I'm trying to figure out which kid he would be. I think he's-- well, OK. He's-- I hate to assign him this way, but he's

kind of the lefty Murdock kid. I would describe him as a center left. I think he's the only person that could get this deal done at Vox, because I think the others are kind of squarely seen as pretty right leaning or loffling

at the keys of the kingdom at Vox. I think the daughter Elizabeth Murdock is off just in join or self in producing films whose talented she's a creative. But James is-- he wants to make a name

from self. He's about New York Magazine. He's about this podcast. He's about great assets, try back a film festival. He's a good asset.

“I think it's a little bit dusty, but I think”

he's going to try and rejuvenate it. And I think that our Basel is a global brand that my guess is probably a bigger brand than it is a business. But I would imagine that as all sorts of opportunities. But he's considered-- he's got a good reputation.

He's known as being someone who's smart, digitally savvy. And you get the sense. I've known him for a couple of years. Quite frankly, you get the sense that he understands his good fortune and privilege

and is a nice man, so I don't know him well. I know him. But if we were going to ask for, what would you want? You'd want to benign billionaire. And that's what this guy is.

And he's smart. So we had an all-- not at all hands, but we talked to some people at PropG. And people obviously understand we're concerned and want to know what this means.

Because nothing is going to be as far as I know, got different. But he wanted to make sure we were happy with Vox, because we're a big component combined, private, and property are a very large, important part of Vox.

And when I talked to Reuters, and everyone was calling me,

“I'm like, you know, guys, I think Karen,”

I probably could have fucked up this deal. And we didn't, because we liked Jim VanKoff. And we liked James Murdock. And we were told that everything would be the same. And the economic interests were aligned here.

We have a great partnership. Things work. Is there some synergy?

We always overestimate synergy.

Maybe we do-- I don't know if Ed Alson does a live podcast from our Basel. I don't know. But maybe maybe not. That's the same thing.

Maybe Jim Murk, do you hear that? Live from Alt-Bozel, PropG markets. Yeah, I don't know. I'm pretty sure it means I get to meet Brett Bear. Or where my next wife is Megan Kelly.

There's something-- Yeah, something's going to happen here. Money in that, in some way. Something's going on. So like, I mean, just so people are clear,

this guy James Murdock, Karab put it the other day that he's going to describe as the woke Murdock, which is, I thought, it's quite funny. This guy is not kind of in the same camp as the rest of the family, which sort of is,

I probably interesting to people, because a lot of people

probably think that similar to what we saw with Paramount and David Ellison, maybe this guy who's sort of in the Trump camp is taking over all of these historically more left-leaning or maybe just less conservative media outlets.

That's not what's happening here, despite the fact that his name is Murdock. In terms of what it changes for our business, it actually changes nothing, because it's got mentioned. We're an independent company in Vox Media

is our advertising partner. So they help us sell our ads. And this guy now owns the company that helps us sell our ads. It also means that we're going to be in the same studio.

I mean, so far, what we've been told is that literally nothing is going to change.

“I think the question that is worth exploring”

is why is James Murdock interested in this? Why does he want to buy this advertising company,

essentially, which is Vox Media?

There's New York Mag, which is a trophy asset, so maybe that would be fun. And then there's the Vox Media Podcast Network. And the question is really, is he buying it? Because it's fun, as we often talk about,

with media assets, because as you talk about David Ellison, if you buy those assets, then maybe you get to go to the Oscars off to Panty, et cetera. Or is it that the Vox Media Podcast Network is a genuinely good business

and there is opportunity that he sees there, something that he could do to the business, maybe stepping as kind of an activist and turn on some revenue that didn't exist before. I don't know.

What do you think? Well, he bought it because he has daddy issues. I mean, he sees a future in podcast. (laughing) Look, okay, there's two assets here

and they're totally different. New York Magazine does a trophy asset. It's ego. But I don't think he wanted that. Unless you know on the one side, he wanted it.

He wanted it. He wanted it. Yeah, he wanted it. And I think they would have sold. There's three basic businesses here.

There's the online digital media property businesses, Eater of Ultra, that stuff. And then there's the podcast and there's the magazine. And James wanted the magazine and the podcast. And he might have a vision.

I can see maybe New York Magazine combining, you know, there's probably something there, but I personally think anybody who buys magazines right now, it's ego. I just think these are trophy properties.

I have a hard time believing in New York Magazine is gonna be a big business. It continues to be a great, you know, a great property doing really good journalism.

“I think that James is actually quite civic-minded.”

So he was probably drawn to their ability to punch out really relevant stories that have influence, you know, Lorraine Powell jobs. The Atlantic probably isn't a fantastic business, but I think she gets a lot of psychocrat war at around.

You know, financing and running a good business that also has a lot of cultural relevance. But it's not from a shareholder perspective. My guess is, like I said, billionaire Republicans by football teams,

billionaire Democrats by media properties or magazines or newspapers. Because this is not, you know, God, I really want to get into the magazine business said no one ever right now.

But when you show up in New York Magazine, you're kind of relevant. His father used to own it. So I think there's a little bit of like, what comes around goes around.

It's a good business. You can sort of see some synergy with Tribeca Film Festival and our Basel. The crown jewel here is the podcast business because podcasting is growing.

He's kind of built in a factory if we would want to buy the business. Jim sticking around, which we're happy about, Jim is like, the nicest, I mean, I mean, this may come as a surprise to you,

but I'm not easy to manage. And, you know, not once. Think about all the stupid shit I say on this show, the offensive shit. How much I get it wrong?

Jim has never called me once and said,

hey, dial it back or try to avoid shipposting, zipper crewter or maybe you don't need to, or maybe you don't need to make fun. I'll have to look for it as much. I just got you straight, you know.

- That's fair. - Maybe don't, you know, say that the show of Samburg is done more damage to young people than any person in history. Like maybe don't do that, right? So he has not once ever, his attitude as he calls

and he says, how can I be helpful? And so I just wanted to, you know, when I talk to James, you wanted to make sure we were happy with Vox and the relationship was gonna continue. And I said, yeah, I'm really, I'm really happy

until, you know, that isn't till Comcast ranthropic, agreed to buy us for a crazy amount of money,

then I'm out of this fucking taco stand.

- I mean, I'm super committed to the relationship. - Right, I'm super committed to the relationship. - All right, let's wrap this up. Any advice to James Murdoch? What could he do to make this not just a trophy asset,

but an extremely profitable high growth asset?

“What's the secret source that he needs to inject”

into the Vox Media Podcast network? - I have such a, if I were James Murdoch, I'd been at Beath the right now with a bunch of Eastern European women. If I had those billions, I'd be living a much different life

ed for fans. So I can't tell him what to do 'cause he's clearly much different than me. What would I do? Make sure that I would probably use this as a platform

to go roll up a bunch of other podcasts, such that I think the plan podcasting is what Martin Surrell did in the ad business in the '80s and '90s. And that is, there are a lot of good businesses, you know, even around these businesses,

but Martin Purah started a company, Oglevian May, their Fallen Magellancott, Wing Kennedy, which remained independent, all these little agencies in Jay Walter Thompson, and the problem with these things

was they weren't scalable assets

“because there was too much key man risk.”

If Martin Purah's left, Omurati Purah's, and they had one big account BMW, if you bought the company, it was just too much risk. And so what he did was he went to all these companies and said, "I will give you seven times your EBITDA."

He will sign very honours and employment contracts. And if I sign up enough of you, I'm gonna be able to take a public and it'll trade at 12 times. So those were an arbitrage, because you could say to the markets,

Martin Purah's and Shelley Lazarus aren't the business because I own 12 or 15 of the agencies. And if anyone leaves or the biggest client goes away, we're still okay because we've got 12 or 13 other agencies. The play here is the following.

Go get a bunch of podcasts, whether it's Heberman Lab or Modern Wisdom, or Plain English, or Mel Robbins, or SmartList, and roll them up, such that there's no key man risk or key woman risk. And you can get some synergy on the back end,

although you always overestimate that.

And then either take the thing public or sell it for a lot of money or just have the cash flows. But this is, it's a business that's growing, it's a business that, you know, the thing about podcasting is that there are 1.6 million

podcasts, 600,000 produce a podcast every week, generously 600 make money. So what you're talking about is 0.1%, 99.9%, unemployment and podcasting. Now, granted, a lot of people do it for psychic income,

or they do it to drive business to the McKinsey business transformation groups, so they have a, you know, pouring a shit podcast with someone with a Northern European accent and a PhD. But the top 50 podcasts are the top 100.

He should try and start two or three with celebrities. And he should go buy five or six of the top 50 and say, you really have no liquidity strategy. Unless we go WPP here and that is, we combine scale and get big.

That's, I would use this platform right now as a platform to go roll up a bunch of other podcasts. And see if I can find synergy between New York Magazine and try backup film festival and art bosal. And, you know, and also just be really, really, really,

really good to the talent.

“That's what I would do and I would invite them on your yacht.”

I would invite them to every premiere at the Tribeca Film Festival, you know, that's what I would do if I were.

to be very kind to the talent 100%.

Otherwise they leave. Well, they just stop doing a good job. Well, that happened a while ago. Um, it's take a look at the weekend.

“Well, see consumer confidence for me and inflation data”

from the personal consumption expenditures index for April will also see earnings from salesforce, mobile and Dell, any prediction Scott. Oh, God, I'm going to hate this one. This thing does not price at $2 trillion.

At some point, people have got to put the crack pipe down. Yeah, my prediction was going to be similar. My prediction is that SpaceX start collapses within 12 months of the IPO. I don't know when it's going to happen.

Oh, that's a, that's an easy one. But claps as to what? I don't know. I just think it will collapse in a big way. That's not, that's not, that's not specific enough.

No, no, no, collapse in a big way. It's not very specific. And why people come to the show for that type of robust analysis. Well, well, well, collapse in a big way.

“You think are you applying numbers to each of your predictions?”

I don't think so.

I think this thing is a $600 billion company.

If you look at generously at the wind of all of it, I think they're going to have to cut back on the capbacks at XAI. I wouldn't be surprised if they end up closing that thing down at some point. Yeah, I think this, I think it's safe bet is within six or 12 months. It's up at $ trillion.

And if interest rates keep going up, and we finally, you know, as Buffets had the tide goes out for the first time. Yeah, this, I mean, as saying it crashes to 500 billion, that would make it what the ninth most valuable company in the world. So, yeah, I look, every time the thing that,

because we've had such a bull market for 17 years, people forgot that almost every one of the companies that we look to now, and the magnitude is in 10, as at some point,

been down 60, 70, 80 percent in a 24-month period.

“And so I think it's a fairly safe bet, assuming that if interest rates”

maintain the trajectory, the quackmire and Iran, the fact that we're just so do for some sort of correction, that if this thing manages to get out, at anything close to $2 trillion within the next 24 to 36 months, you see it at some point peak to trough down 70 or 80 percent. Okay, this episode was produced by Clay Miller and Alison Weisen,

engineered by Benjamin Spencer. Our video, I'd say, is Jorge Coltty. Our research team is down to the lawn. Isabella Kinsel. Christian Adona, you and me are so very old Jake McPherson.

Our social producer Drew Barris, the Technical Director, and Catherine Dillins, our executive producer. Thank you for listening to Prophecy Markets from Prophecy Media. If you like, give us a follow and tune in on Friday for a fresh take on the markets live from San Francisco to tour is happening.

It's on, baby. Role models showing up. My role model, Ed. My hero. [Music]