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Around the Desk: This is where we at Avory think out loud, challenge narratives, and look for signal through the noise. Each episode, the Avory & Co. team dives into what’s moving markets, how companies are performing, and where opportunities may be forming. We break down earnings, macro trends, and investor sentiment — all from the lens of a concentrated, high-conviction portfolio.
*** The views expressed on Avory Podcast: Around the Desk are those of the hosts and guests and do not constitute investment advice. This podcast is for informational purposes only and should not be relied upon to make investment decisions. All investments involve risk, including potential loss of capital. Avory & Co. may hold positions in the companies discussed.
Sean Emory: we are back.
You're listening to Avory's around
the Desk podcast, where we dig
into markets, companies, ideas,
shaping what is coming next.
I'm Sean Emory, the founder,
chief investment Officer
here at Avory & Company.
Today I with Seth Golden.
He doesn't need necessarily an intro,
you know, if you follow him on, you
know, x um, you know, all the type of
work that, you know, he puts out there.
He is market strategist, you know,
founder of Phenom Group, and, you
know, one of the most followed
voices out there on the internet.
I'd say he's actually under followed,
even though he has a lot of followers.
Uh, a lot of great work over there before,
you know, just bringing you on here.
You know, as always, the conversation
is for informational purposes only.
Should not be to considered
investment advice.
We may hold positions and some of
the companies discuss, if we even
talk about companies, uh, do your own
research and do not make any investment
decisions based off what we say.
So Seth, what's up man?
It was good seeing you in central Florida.
Orlando, you know, not that long ago.
Oh,
Seth Golden: that was a great venue.
Um, I had ever actually been there,
you know, I live like 45 minutes
outside of Orlando and you know, and I.
Been to Orlando millions of times
growing up here in, in Florida, so
to never have an, was that a newer,
newer, uh, bar and grill place,
because that was pretty awesome.
I love the, the walkup with the
secret, the secret lever that
you have to pull to get inside.
That was cool.
Sean Emory: Little speakeasy.
Speakeasy are all the
Seth Golden: Yeah.
Sean Emory: my, uh, you know, Orlando
people, we went to a Mathers, um, you
know, kind of like a speakeasy library
type vibe, you know, pretty cool.
Um, you know, Seth and I got together,
uh, you know, shared some time, , with
a couple others, uh, but very, very cool
to see you kind of on your own turf, I
guess, , you know, closer to you than me.
, I'm here in
Seth Golden: Yeah.
You're,
Sean Emory: Seth is, you know,
from South Florida, but you know,
you moved to Ocala horse country.
Um, so definitely independent
research going on in Ocala.
Seth Golden: yeah.
Yeah.
No, nobody, you know, nobody's
like, Hmm, I, I live in Manhattan.
Where can I find the best
research in North central Florida?
Oh, Cala.
Yeah.
Sean Emory: there it is.
Pinpoint.
Yeah, man.
Well, well, good stuff.
Yeah, obviously good seeing you.
You know, we, those that obviously
listen to our podcast or on x, you know,
see us obviously comment, you know,
communicating, you know, quite often.
He's often on the show, ironically, he's
more on the show and, you know, we have
these, uh, you know, moments in time
where people are incredibly nervous.
Uh, I think, uh, you know,
Seth is a good voice of reason.
Uh, I would say myself and our firm, you
know, is a good voice of reason as well.
You know, we tend to share
similar-ish, you know, uh, ideas.
Um, for whatever reason, uh, we,
we, we tend to go down the same
path, but today I think what we
wanna do is go down those paths.
We're starting from a different point
to some degree though, um, and really
go down, you know, the state of, the
economy, but also the state of, business
and, you know, opportunities, I think
and risks that present themselves.
The fed just cut last week, since
then rates have gone up a little bit.
Not too much in the grand scheme of,
you know, life, you know, in theory
they're just kind of been range bound.
Um, but in general, we were just talking
about mortgages, houses, real estate,
I keep flickering here, so, you know,
if you, uh, if you, um, if you're
watching, you know, don't mind me.
Um, but in general, so
what's your thoughts?
Like, you know, let's start with , what
the Fed did last week, you know,
what were your thoughts on it?
Should they have cut it more?
Cut more?
Did they cut, you know, just
uh, enough, you know, did you
think they shouldn't have cut?
What's your thoughts?
Seth Golden: Yeah, so I, I, I've
had this longstanding view leading
up to the recent cut that, you
know, the economy was stable.
Uh, you know, we didn't necessarily
need, we didn't need a cut,
however, at the same time.
So you, you have to look at
it through different lenses.
Did we need to cut based
on economic trends?
I would have said, no.
Were we too tight?
What's monetary policy?
Too restrictive?
Um, the housing market says yes.
The two year treasury, uh, note says yes.
So yeah, they're too restrictive.
Uh, so I was forecasting at least one
rate cut, and as we got closer and
closer to that rate cut taking place,
uh, I started to develop the notion that
this was gonna be a trial balloon cut.
Um, you could look at it
as a risk management cut.
Uh, an insurance cut, if you will.
And, uh, eventually that's exactly
how Jerome Powell framed it.
You know, this is kind of a risk
management cut, given that the dual
mandates are intention at the same time.
Um, we revert to the labor and employment
market, so they gave an insurance cut
and, um, I, I was on board with that.
However, when I say I developed this
thesis that it's just gonna be a
trial balloon, it has more to do with
what's the bond market's reaction
going to be over the next 30, 60 day
period, or the window in between.
Uh, the FOM, the next FOMC meeting.
Uh, my concern was the same concern
that I think a lot of market
participants would have had.
Are we gonna see the same,
uh, bond market reaction?
To the rate cut like we did in September
of last year, whereby, you know, the 10
year treasury launched some 80, 85 basis
points over the next couple of months.
Um, so when you say you know, the
bond, you know, so far the bond
market has had, uh, you know, some
degree of movement to the upside.
It almost mirrors exactly within
the, you know, the first week of
September, 2020 fours rate cut.
It almost me mirrors exactly what happens.
So it makes folks look
that much more nervous.
As long as, you know, we ceiling, if
you will, uh, we hit a ceiling in that
10 year of four and a quarter, uh,
you know, a basis point above basis,
point below, no harm, no foul, but as
long as we have a lower ceiling than
the 2024 cut response, it's fine.
And I think we should have a
lower ceiling because of the.
Yeah, the, the landscape for labor and
employment, uh, I think that's enough to
keep, uh, investors in a healthy nervous
position as it pertains to the economy,
and that should keep the bond market,
uh, with a lower ceiling than 2020 fours.
Rate cut response.
Sean Emory: Healthy, nervous,
you know, I love that.
Um, you know, cautiously
optimistic, I think is the phrase
Seth Golden: Yeah.
Sean Emory: Um, so I like
the new version of it.
'cause Yeah.
I think the other one's,
you know, played out.
Um, you know, in general, like when we,
when we look at, um, you know, how much, I
guess , weight do you put to, some of the
more real time indicators of inflation.
Um, and, you know, using that as
kind of like the bridge to, you
know, say that the Fed's dual mandate
is on one side actually, you know,
fairly close if you're using, you
know, true inflammation or even, um.
, Just supplementing, you know, CPIs
real estate component with, you know,
some of the other, uh, you know,
real time indicators, you know, that
alone takes you to the low twos.
Um, if you use Tru Deflation,
obviously you get to 1 9, 2
10, um, something like that.
So, I, mean, on one side, the, in the
real economy, you know, some would
consider or suggest that inflation is
where it needs to be, and therefore
the other side of the mandate isn't.
Now, we all know that we work
off Wall Street and we work
off, you know, economists and we
work off, you know, PCE and CPI.
So until that mandate actually
changes, the Fed's gonna do what they
do based on the data that they're
ultimately using as their, as their,
um, you know, marker, let's say.
So like, but, but how much, you
know, validation, you know, weight
do you give to these realtime
indicators because they do suggest
that then, we should be cutting, you
know, for the sake of the economy.
Seth Golden: I I wanna say that
I give the real time or the high
frequency data more relevancy than
the monthly Census Bureau and.
You know, government agency data,
but you know, there's some nuances
with the high, high frequency data
that, uh, void my ability to do so.
So I, I try to look at
them both in the same lens.
Uh, you know, speaking to true, um, that
has its, um, shortcomings because it's
mostly, it's mostly, uh, internet prices,
IEE, you know, con e-commerce prices and
three entities make up 75% of e-commerce
tra transactions in North America.
So if they're not raising prices, if
not lowering prices, um, it skews that
particular set of high frequency data.
Uh, but when it comes to, you
know, owner's equivalent rent or
some of the, you know, apartment
rent data and things like that.
Absolutely.
And that's a big part of the government's.
CPI basket.
Uh, and that's been coming
down really nicely steadily.
And if you, you know, measure by that
standard, uh, we we're like at 2.2,
2.3
on, on PCE.
Unfortunately, that's not the
weighting from CPIs, owner
equivalence rent and shelter, you
know, into the, into the PCE data.
So it's hard to, it's hard to
pin down, you know, what's more
important and, and, and what you
should give more relevancy to.
Uh, and at the end of
the day, does it matter?
Um, I've been of the opinion
since 2020 that we should be in a
higher neutral rate environment.
So not getting down to
that target level of 2%.
And, and regardless of which
data sets we're looking at, um.
We are in this environment coming
out of COVID, we've been in this
environment and it's been screaming at
the Federal Reserve that the neutral
rate or the target rate of 2% I is,
is less an op, a lesser optimal level.
Um, at the same time, prior to COVID,
you had the Fed already changed that
target level to an average, right?
They came in at an average
of 2% back in 2018.
So what's the harm on, uh, of looking at
a, a higher neutral rates somewhere, you
know, around 3%, which is effectively
where we are, and thus nullifies the
idea that, you know, um, both mandates
our intention while at the same
time recognizing, if not validating.
The Fed cutting because of their
nervousness around labor and employment.
So hopefully that, that I know is a long
winded way of answering the question, but
Sean Emory: the way I'm thinking
about it is on one side, I guess
you have the real time data, uh,
which I do think has validity.
Uh, you know, sure, I think
it's scraping internet prices.
But if you take Walmart for, you
know, example, the majority of their
sales are coming from kind of brick
and mortar through their stores.
Yet the online.
And the in-person prices, I
think they match up and they're
pretty, you know, identical.
If you're, you know, you're looking
online, even produ produce to some degree.
Um, so I think the numbers still
reflect what people are actually,
you know, paying even if the data
isn't, you know, scraping conversion.
Uh, and it's just scraping price.
Now when you compare something like
FL data against traditional measures
like owner's equivalent rent.
You still land on something fairly
similar in terms of the path and you know,
stopping there, but looking ahead, you
know, spinning it back to you, you know,
the market is pricing in roughly another
1% of cuts over the next 12 months.
Firms like Apollo, I believe, and
KKRI know for sure KKR, uh, maybe
Apollo, but I know Goldman and some
others are aligned with that view.
The real question is the path.
So.
Question for you.
You know, do we, do you
think front loading, uh, rate
cuts makes a lot of sense?
Call it October, December, January,
uh, you know, type of, uh, path,
or do you think the Fed should, you
know, in theory, spread these things
out in back end, load this over,
you know, the next 12 to 18 months?
Seth Golden: Uh, I think it
should be backend loaded.
Um, again, I'm, I'm coming from
the, from the premise that the
first one was just a trial balloon.
Let's see what the bond market says.
Uh, and so when, when we speak to, you
know, the market has already priced it,
you can still make the argument that the
two year treasury, which is more closely
aligned with the fed fund rate as well as
fed fund futures, um, yes, that has priced
yet at least two more 25 basis point cuts.
Um, so I, what I think is that, you
know, the Fed is just as uncertain.
Every Fed member that has come
out since the Fed meeting, shy
of fed President Myron, uh, the,
uh, the supplant if you will.
Um, they're showing their anxiety just
over what they did, um, suggesting
that it was just a management cut.
You had boss to say management cut.
He used those words.
Uh, I think it was, uh, I forget yesterday
you had two more suggest that it was a
management cut, uh, risk management cut
and, um, Goolsby, Austin Gouldsby, you
know, wouldn't have been of the opinion.
They, that they need a cut,
but for the sake of consensus.
And, you know, the, that, that
two year treasury gave a cut.
So I'm more of the backend loaded.
You know, I, I'm of that view right now.
But just like the federal, you know,
federal governors and the voting
members, um, every meeting's live.
Uh, so I, I don't think it's good
practice right now to cement, you
know, where you think the Fed is going.
I mean, the data has been,
you know, pretty darn good.
Whether it was industrial production,
jobless claims, uh, PCE data just
today coming, coming in very well.
So, you know, does the Fed need, we'll
probably have a better indication of
that, uh, with the, you know, coming
monthly non-farm payroll report data,
the way that I, I've seen the economy and
forecasted, uh, 2025, uh, economic growth.
I didn't think we needed any cuts.
Uh, you know, going back to July when the
unemployment rate started to rise, when we
started to see these material drop offs.
In the number of jobs being created
and the labor force participation rate.
I said, you know, this is
not a weak labor market.
You know, you're, you're printing less
than a hundred thousand coming from
a hundred plus and 200 plus thousand
prints and everybody's freaking out and
July, and I'm looking at the labor force
participation rate, and I'm saying, of
course, this, this should be, this is a
match, you know, sub a hundred thousand,
75,000, uh, is a match for where the
labor force participation rate is going.
This is not a weak labor market.
This is a balanced labor market.
It's just balancing to lower numbers
that people aren't accustomed to.
And so everybody gets nervous.
Even the Federal Reserve, um, for
which they've obviously responded,
uh, even vocally, you know, they're,
they're, they're, uh, conceding to.
You know, uh, risk management on the
side of their, the, the labor mandate.
So will they go in October?
More than likely.
More than likely.
But I, you know, if I was a voting member
and I see that, you know, August payrolls
are decent, 75,000 to a hundred thousand,
and I'm expecting a good revision as well.
I'm sorry, September.
But a good revision to the August
data, you know, uh, you can only be
cutting because you're too tight again.
I mean, that's the real issue.
They are still too tight and the housing
market says they're still too tight.
So you cut.
Sean Emory: Yeah, yeah.
No, the um, so then.
You know, the Fed historically has
been reactive versus proactive.
Seth Golden: Which is not what
Fed Myron, uh, spoke to yesterday.
Another, you know, that's a huge descent.
And I'm sorry to cut you
off, but this is literally.
Something I've been talking
about for months on end.
The Fed is not a proactive
entity, nor have they, have
they ever been for good reason.
Sorry, go ahead, John.
Sean Emory: Right.
So then, you know, I guess the, then
the overarching question is, you know,
do you want them to be proactive?
Especially now that we know some of
the data itself that the Fed tracks
is, you know, flawed or even lagged,
you know, both to some degree.
Um, that's really the rationale
behind, you know, the fed's consistent,
uh, you know, reactivity, I think,
you know, they're not getting.
You know what they need in real time.
We saw this play out in 2020 and
2021, and ultimately that led to
a Fed that was once again late.
So the question back to you is, you know,
if there are two sides to this mandate
and policy is restrictive, uh, they need
to think about this in a different way.
You know, are you actually worried about,
I guess, inflation picking back up?
Is that your view?
You know, because if not, then the path
is a moderate, you know, progressive,
you know, cutting cycle, moving closer
to neutral, that would support housing.
You know, those spreads do take time,
you know, to tighten and also help
ease some, uh, of the pressures.
I think we're seeing in more of
the short term credit markets.
You know, think credit cards, think, uh,
car loans, HELOCs, that's where lower
income consumers are, are tightest today,
and a cut would give them some relief.
So I think, you know,
the bigger debate is.
You know, can the Fed be proactive here?
Uh, that's what some were
saying for a 50 basis point cut.
And if not, you know, I think the
other side, or you, you know, those
that are saying no to that to some
degree are somewhat implying that
they're worried about inflation.
So, you know, back to you on that
Seth Golden: yeah, I, I'm not
99.9%
of, uh, material inflation, uh,
comes from exogenous or endogenous
events, uh, akin to what we
experienced post COVID initially,
which wasn't a major inflation spike.
I mean, you know, prior to 2022.
You, we had just gotten to 4%.
Um, but getting to 9% took
a supply another, right?
So we already had a supply chain issue.
Um, you know, we compounded that with
the Russia, Ukraine, uh, war, which
brought about different sanctions
that further disrupted the, the
supply chain, uh, getting us, you
know, from 4% all the way up to 9%.
So that was an exogenous shock.
That's not what we're dealing with here.
Tariffs are not an exogenous shock.
Um, you know, I agree with the notion
that there are one time, uh, you know,
rate of change, step function in price,
even if that rate of change takes several
months, if not sometimes several quarters,
depending on how they're implemented.
So I, I'm not concerned about,
uh, you know, another inflationary
spike of sorts, uh, but normal
and to be expected reflation.
Um.
That's not fearful either.
'cause I don't even, you get
nervous when you get to 5%.
Right?
That was basically the average
CPI reading throughout the whole
decade of the 1980s was 5.3%.
Right.
That's a problem for consumption.
That's a problem for all manner of
housing, which just creates this slow, you
know, um, stagflationary type environment.
So I'm not worried about inflation, uh,
as it pertains to, you know, what the
Fed should do and how that will impact
economy, how that impacts consumers.
Uh, you know, so far as the fed, you
know, cutting rates again, uh, to
possibly because they are too tight.
It does restrict some
degree of consumption.
Um, but, you know, credit card
rates and things like that, no.
Delinquency rates no normal and to
be expected, literally every single
expansion cycle, you see the delinquency
rate from the lower left hand corner
to the upper right hand corner, it
literally validates your expansion cycle.
It doesn't detract from it.
Uh, we are also in this interesting
dynamic that we've never had before in
history whereby in the post pandemic,
and it doesn't matter what decile
income you look at, uh, whether it's
the low income decile, middle or
upper income deciles, uh, they average
40%, you know, savings and checking
balances above the pre pandemic level.
And so when you look at that, you
look at a full labor market, right?
I mean, we are at full employment,
and you say to yourself, then why are
the de delinquency rates going up?
Uh, and we've had a, you
know, pretty decent spike here
in the middle of the year.
You, you recognize, and I've been
saying this for a long time, I
actually said this in 2022, don't be
surprised if in the coming years we
see large jumps in delinquency rates.
If you think about the time period,
2021 and 2022, I mean, just, we
were growing jobs 300,000 a month.
We did that for six months.
We averaged 300,000 jobs.
We were averaging 8% wage growth,
eight per, you we're never gonna
see that in our lifetime again.
Right?
8% wage growth for a 12 month period.
Yeah.
And, um, since then, it's
come down to about 4%.
So we've been growing wages
above the inflation rate now
for three consecutive years.
That's more free cash flow
for the average consumer.
I said, don't be surprised.
You're gonna see a spike in
delinquency rates periodically
because of these factors.
One, I already have the job.
Two, based on all the homes that were
bought post COVID, and through 2022.
I already have the car, so I've
got the job, I've got the car.
What's left?
I'm sorry, I got the job, I got the house.
What's left?
I got the car.
So if you got all those three
things, and we know layoffs, right?
They don't wanna lay me off, right?
I, I, I go to work, I slack off.
Sometimes they still won't lay me off and
they're still paying me above inflation.
And I've got the three pillars
of my life that I need.
Uh, one second here.
Gotta plug in my, sorry.
My charger.
Sean Emory: It
Seth Golden: Uh, I got the three
pillars of my life, but I got this
pesky credit card bill, right?
Because I took a few vacations,
you know, and whatnot.
I got this pesky credit card bill.
I'm gonna do my cost
benefits analysis here.
My cost benefits analysis says I've
already got the house, I've already
got the job, and they don't wanna lay
me off and I've already got the car.
What do I need your credit for?
I'll default.
So it goes on my credit score
for the next seven years.
I don't need another house in
the next seven years, maybe
another car, but got a good job.
And my wages are above inflation and loan.
So, and I've got 40% checking,
savings account balance
above where I was pre COVID.
So the Fed has all this data.
I mean the, the household,
uh, debt and credit, you know,
comes out every single quarter.
So they know the, they know the whys.
This is normal to be expected when you
have a consumer with the best balance
sheet that they have since the 1970s.
So.
I don't worry about inflation.
If we were gonna worry about
inflation, it would've long been sank.
The economy in the consumer back in
20 22, 20 23, we're no closer to that.
We have record level retail
sales, inflation adjusted, you
know, consumers in great shape.
And so long as the consumer's in great
shape, we have to take some of this
data when it comes to the delinquency
rates and things of that nature.
Uh, somewhat with the grain of
salt, uh, you know, do the grocery
bills and eating away from the
home hurt, even eating at home.
Yeah, I mean that, that
stuff is still a bug.
Um, but that's more
political than anything else.
A as you know, the former administration
found out we're doing fine.
We are doing fine.
As consumers, as households,
we are doing fine.
But when the consumer goes to the
store, when the consumer goes anywhere,
basically they remember 2019 prices.
Versus today's prices, and
that's what they vote with.
So that's why I say it's more
political than anything else.
Sean Emory: Yeah, yeah.
No, I'm with you.
I'm, uh, I mean, we've been big
proponents that the consumer's in
pretty good shape, um, or good enough
shape, let's say, for a stable economy.
Um, and you know, as time goes
on, you know, the, you know, the
idea of rates coming down can help
support further expansion, uh,
Seth Golden: It can be a tailwind.
Yeah, it's a tailwind.
Yeah.
Sean Emory: yeah.
To tailwind, to what's happening both on
the corporate side and the consumer side.
But, you know, $40 trillion of home
equity sitting inside of homes today.
You know, their balance
sheets are, are fairly robust.
I mean, you know, there's a chart
out, I don't know if you put it,
but, you know, 30% or 40% now of,
of, um, you know, assets are, you
know, one of that is, is housing.
But the other is, you
know, equities, right?
And, you know,
Seth Golden: Yep.
Sean Emory: you're in
Seth Golden: Yep.
Sean Emory: fund, you know, is, you know,
sitting around, you know, all time highs.
Um, and therefore, you know, you have
kind of like this 60% component of your
balance sheet in, in somewhat volatile
shape, but also, um, you know, the
highest it's ever been to some degree.
And, you know, most people in the
US are home owners, so the price
of your home has been supportive.
There are a lot of renters as well.
Uh, that's actually coming down.
Um, or sta at least stabilized.
And again, if wage growth, like
you mentioned in adjusted for
inflation is actually positive, then
that is very supportive as well.
So, you know, I agree with everything,
you know, on the consumer side and
ultimately that's what drives the economy.
Um, and you have a stable
jobs market stable enough.
Um, again, you know, people were getting
accustomed to two, 300 jobs being added.
And when you go down to a hundred and
then you, you go sub a hundred, you
know, the digits start changing and
then you have these massive revisions.
You know, it can be a a,
a scare of some sorts.
My, my thing on the jobs though
is just simply that when you are
on this kind of like frac, you
know, fractured point where you
Seth Golden: Right.
Sean Emory: positive to negative,
Seth Golden: Mm-hmm.
Sean Emory: you should try to do
your best to keep it positive,
Seth Golden: Yeah.
Yeah.
Agree,
Sean Emory: you know,
potentially igniting.
I don't know what you ignite
'cause I don't think there's enough
capacity in the economy to really
Seth Golden: right?
Sean Emory: inflation.
Seth Golden: Yeah.
There's not enough slack in my, yeah.
Sean Emory: And consumers are, you know,
don't wanna get involved with that at all.
Right?
If, you know, you start raising prices,
you know, I think companies, uh, have
realized, you know, at the tail end of
the inflation spike, some of the ones
that we're raising prices got dinged.
Um, you're seeing that
with Starbucks, right?
I think Starbucks.
is the ultimate,
Seth Golden: Nike, I've long since said
when, when Dollar General did what they
did, they're going to, they're basically
slapping their customer base in the face.
And it took them three years to bottom.
Sean Emory: Yep.
And Walmart was rolling back, right?
Uh, in the
Seth Golden: Yeah.
Sean Emory: And therefore
Seth Golden: everybody laughed at Walmart.
Sean Emory: Yeah, they won the, they won
Seth Golden: Yeah.
Sean Emory: slash, you know, pricing game.
Seth Golden: Mm-hmm.
Sean Emory: and now they're taking,
you know, checks from, you know,
higher income brackets, which,
Seth Golden: Yeah.
Sean Emory: will say
Seth Golden: Yeah.
They brought in their user base.
Yeah,
Sean Emory: some look at that as
like, um, as like a negative, right?
Like, oh, look at the
high end is coming down.
It's like, no, actually they just
Seth Golden: yeah,
Sean Emory: product.
Seth Golden: yeah.
Well, they,
Sean Emory: now.
Um.
Seth Golden: literally did exactly
what they did in the 1980s.
And the 1980s was high inflation,
high, you know, capital cost intensity.
And what did they do?
They did nothing but
expand, expand, expand.
Essentially, that's what they did
through, you know, the 2022 inflation
spike, which was just, we're gonna
keep our prices, you know, we're
gonna expand our store account.
And that hopefully by keeping maintaining
our price structure, will expand our
user base, our, our customer base.
Sean Emory: Yeah, Um, let's spin to
tariffs just for like 30 seconds.
Um, your view on, on tariffs, obviously,
you know, I know the, the overarching
takeaway is you're not fearful of
inflation, so that is a pretty good
signal of what you think about tariffs.
But in general, why don't you
think tariffs, uh, are inflationary
or have been that inflationary.
Seth Golden: Yeah, they
haven't been that inflationary.
They, they are to some
degree inflationary.
We can't, you know, deny, you
know, that we have already reflated
to, you know, to a, a, a modest
degree over the last four months.
If you're just looking at, you know, uh,
the CPI headline and you're just looking
at PCI drifting from, you know, 2.6%
up to now 2.9.
There is an element of reflation.
Um, but I, I don't think it's enough.
Right.
We've gone from a national
tariff rate of like.
Less than 2%.
Uh, now low double digits, slightly,
maybe even teens depending on, you know,
which reporting agency that week and how
much they're actually collecting, you
know, from the Customs and Border Patrol.
But again, you have to repeat it, right,
because these are one time price hikes.
So you have to repeat it constantly if
it's going to have the same rate of change
month after month and year after year.
Um, so it's just a one time or one
period if you will, uh, you know,
step function higher in price.
I, I'm, I'm more concerned myself when
it comes to tariffs, you know, how
that presents the American economy
and fiscal policy on the global stage.
Um, that's what concerns me more.
Uh, you know, if you combine.
Tariffs with where we are.
You know, just thinking about where
we are in the labor market, you, you
know, you, you do have this kind of a
push and pull situation that you hope
resolves sooner rather than later, right?
So if we've rebalanced the labor
market to a lower level and we're just
starting to see the impacts of tariffs,
uh, in the economy, flow through the
economy, flow through the price, it
makes you wonder, you know, where is
the exact tailwind for the labor market?
'cause it's, it's, we're not gonna
get it from price structure, IE
tariffs and the new, you know, higher
price structure regime that we're in.
So what does that do to the
labor market going down the road?
So, while I'm okay with a balanced labor
market, I also have to recognize that
at some point, like what the customers
have said to Starbucks, like what the
customers have said to uh, um, dollar
General, like what they've said to a
lot of these, uh, middle income, you
know, uh, consumer spend, retail places,
kava, Chipotle, Mexican grill, right?
They're not McDonald's.
Um, that middle income consumer
speaks and it's just a matter of
when that has trickled down effects.
So, as it pertains to tariffs and where
the middle income consumer has already
spoken quite loudly to these, you know,
businesses that have hiked their prices
for, you know, a number of years now,
uh, that makes me nervous because.
You know, it's a big, you know,
the middle income is the, you
know, a big part of the economy.
And if they're not spending,
that'll impact total retail sales,
total consumer spending data.
And at some point we go from not
hiring if we can't generate year
over year sales growth to layoffs.
So we are kind of in this window
where that, that's, you know, why
I say something has to give either
the consumer is that strong, the
balance sheet is that strong.
They can suffer this through that
window until we get the tax incentives,
you know, from, from our tax returns
and everything in the first quarter
of next year, or they're not.
At the end of the day, I err on the
side of positivity and what I see
in the trending data and a belief in
both the corporate balance sheets as
well as the consumer balance sheets.
You know, again, it didn't
disrupt them at 9% inflation.
I don't see why it's gonna disrupt them
with these tariffs going into, look, the
consumer's balance sheet is so strong.
Sure they're not buying houses to
the extent that they had been, but
they're buying everything else.
Maybe they won't go on trips this month,
but they're buying more crap from Walmart
or they're buying more stuff on Amazon.
So I don't think these tariffs, the,
the consumers basically said to tariffs,
okay, if, if coffee bean prices are going
up that much, and Starbucks's prices are
this much, I'm not going to Starbucks.
That just gives me more money to
go buy a coffee maker for me to
make at home or go to Dutch Bros
where it's a little bit better.
So, uh, the consumer
is in such good shape.
I don't worry about
inflation from tariffs.
And they're savvy.
They went through, uh, my last word on
this, uh, from the great financial crisis,
they deleveraged their balance sheet.
For some 10 years to get into
a position that is now better
than it's been since the 1970s.
It's why we were able to get through
2022 and why we're still with
these tariffs, seeing GDP of 3.8%
consumer spending month over month,
up five, five tenths of a percent
in retail sales at all time high.
So I'm not afraid of tariffs.
I don't, I don't personally, you know,
for Seth, if I, I wanna go to Starbucks.
I like the vanilla bean latte,
but I'm not paying $10 for a small
vanilla bean latte, you know?
Sean Emory: no, I'm with you.
I'm with you.
They've obviously faced competition now.
Now you, you said opportunity,
so I wanted to spin there.
Um, you know, you step back, you
look at, you know, not couple months,
but you know, uh, really next year,
the year beyond, um, you know, Seth
Phenom, like, you know, you guys are
looking for opportunities as well.
And, you know, you know the landscape,
whether it's macro, but then, you
know, bottoms up stuff as well.
You know, what, what are some
opportunities that you're, you're
seeing and you can, you know, again,
these aren't investment iso, you know,
take it for, for a grain of salt.
But, you know?
what are your, you know, kind
of opportunities that you
see today, uh, going forward?
Seth Golden: Yeah, I, I come at
it from various different angles.
As a portfolio manager, you know, I, I'm
looking at, you know, where can I find,
where's my money gonna be best treated
going forward over the next, you know,
uh, six to 12 months, where's my money?
Plus, I'm looking at what
has already happened, right?
The trailing 12 month.
24 a month, uh, performance
for the s and p 500.
And, you know, what does
the data tell me there?
I was literally just talking about
this with a phenom group, investors
and traders this morning, seeing
the, uh, reaction to Costco.
You, you wanna talk about a, a lower left
hand corner to upper right hand corner
in perpetuity and always, um, there's a
stock that is, you know, nothing but that.
And every time the stock has corrected and
or participated in some kind of broader,
uh, bear markets situation, uh, the SOC
has rebounded to new all time highs,
their runway for, you know, expansion.
They have 500 plus stores, uh,
you know, around the world.
And a business model
that is just so sound.
Uh, even when you know competition comes.
Comes to them, uh, you know, it doesn't
seem to be any kind of a headwind.
That's how sound the business
model and operation is.
So, I, I, I like Costco.
If I can get it under that $900
handle, I, I'd love to do that.
I've been saying that for a year now.
A year, and you've had one opportunity
on an intraday basis to get it as
low as $881 and that was it, it was
one day and it launched from there.
So that's one kind of, and I know that's
kind of a, well, that's the easy, you
know, it is lower left hand corner as you
said to upper, but, you know, hey, may,
we don't have to make this difficult.
Right.
I think a, a lot of investors and
traders think that if it's difficult,
uh, it, it's gonna be better.
Sometimes the easiest investment
ideas are the best investment ideas,
and they don't tax you on a week
to week or quarterly basis as well.
So I, I like Costco for
thinking longer term,
Sean Emory: Nice.
Seth Golden: some other mm-hmm.
Sean Emory: Yeah.
No, keep going.
Keep going.
Seth Golden: Uh, I had mentioned, uh, kava
and, and Chipotle Mexican Grill earlier.
Uh, I had actually bought Kava
last year when it did a, uh, an
after hours earnings dip reaction.
I had, uh, bought it, yeah, in the, uh,
$69 and it subsequently launched to, uh,
like $140 after an earnings result, uh,
earlier this year, I wanna say in Q1.
Um, so I, you know, you, you
double in less than a year.
You, you take your profits.
Um, so I took a bunch of profits
in the one thirties and it's been,
you know, tumbling since then.
Uh, they had bad guidance, uh,
good results overall, even though
they missed on same store sales.
But, you know, here's
another company, I'm sorry.
Sean Emory: I think it was low
single digits, uh, comp on a,
Seth Golden: Yeah.
Right,
Sean Emory: to be a growth,
uh, you know, restaurant.
Seth Golden: yeah, low single digits
on some of the same store sales, but
because they're opening, you know,
the mix shift was still, uh, net,
I think it was, uh, 18%, uh, total
revenue growth for the quarter.
So yeah, it's still a high growth
company because fundamentally they have
a long runway, if you think of them as
a Chipotle Mexican junior, simply on a
business model basis, other than, you
know, the Queens cuisine is just a, you
know, Mediterranean as opposed to that
Tex-Mex style that Chipotle Mexican,
uh, offers their, their customer base.
Uh, you know, Chipotle is what, I don't
know, over a thousand, uh, locations,
uh, you know, around the world in,
in North America, mainly, even if
Kava just has a runway of 600 stores.
Uh, you know that that's revenue growth
over the next decade plus that is hard
to ignore, assuming that their cuisine,
you know, that this Mediterranean,
Greek cuisine has the same appeal and
or market, uh, addressable market.
That a, that a Tex-Mex style, uh,
restaurant like, uh, Chipotle does.
Um, but both of them right now, their
target demographic, you know, is that
demographic that has said, you know,
prices, guys, you know, it's a quick
service restaurant, you know, uh, a
date, you know, a single, a single man
and woman, they're gonna spend $50 at a
quick service restaurant at, at kava or
Chipotle around $50 with your beverage.
Um, you know, that's where that middle
income, um, showed itself in both
Chipotle's results as well as Cavo.
So.
Yeah, I think this is a hiccup there.
I think they'll do some things, uh,
some innovative things on pricing
if not sourcing so that they,
you know, don't lose that margin
aspect, uh, while continuing to
expand and open up new locations.
Uh, so I, I see a long runway way there.
I'm, I'm contented with, you know, selling
in the one 30 is a portion of my long-term
investment, uh, and being able to, you
know, repurchase shares back to where I
originally took a stake in the company.
So I like kava longer term as well.
And, um, so far sectors maybe, um, I, I
like financials, but I'm not in them yet.
You know, if you believe that the Fed
is going to cut rates, if you believe in
this, uh, nervousness or growth scare,
you know, that, that folks have, uh,
you know, fashioned, uh, narratives
around the, the, the labor data lately.
Um, we have a lid on that 10 year yield.
I think we'll get some, uh, transactional
volume here in 2026 when it comes to the
housing, because that, that's what it is.
I mean, we've been in a housing recession
transactionally now for two plus years.
We haven't been in a housing
recession when, you know, houses have
still gone up, even though they've
gone up in price single digits.
Um, but it's been a
transactional recession.
So I think that turns around in
2026 and can benefit, uh, you know,
all your big money center banks.
Uh, I think that's what they're pricing
in here over the last couple months
is the fed cutting, creating somewhat
of a tailwind for the housing market.
IE more mortgage, uh, more
lending as well as refi.
Uh, you could get a refi boom, uh,
in 20 20 26 that adds yet more cash
in the pockets of, of consumers.
So I like financials, but
I also like healthcare.
I've liked healthcare for three years,
but because I'm an active portfolio
manager, I've done a lot of trading
and, um, you know, been able to maintain
a very good cost average speaking
to just the healthcare sector ETFs.
Sean Emory: On a relative
basis has been crap.
Seth Golden: Well, it's been awful.
Yeah, that's, yeah.
But if you, if you can actively,
Sean Emory: space.
And yeah, that's, um, you know, kind
Seth Golden: right?
Sean Emory: sitting around, you
know, given that you kind of have
this overhang, you know, it comes
from United Healthcare down, um,
Seth Golden: Yeah.
Sean Emory: uh, impacting,
obviously it's before even that.
Right.
But, um,
Seth Golden: Mm-hmm.
Sean Emory: uh, there's a lot
Seth Golden: All these regulatory mm-hmm.
Yeah.
Sean Emory: it's hitting the space
largely and, you know, all, all, you
know, the chain, um, is being impacted
whether it's actually impacting their
business, but, you know, at least
sentiment wise, it's hitting them.
Seth Golden: Yeah, big time.
And you know, about a month ago I
saw this just huge volume spike, uh,
whereby the healthcare sector ETF
drop down into the one 20 sevens.
And we haven't seen a volume spike
like that, uh, since the bottom in,
in 20, in, uh, in 20, uh, April.
In April.
Uh, and subsequently, like I recognized
that being a bottom took a trade.
And, um, you know, it, uh,
so it's the, what is it?
The XLV is the ticker symbol, jumped
from one 20 sevens all the way up to
one 40, you know, with that volume
spike told me basically, you know,
that's your flush, you know, that's
everybody basically jumping ship
and probably a good opportunity.
On a, on an absolute valuation basis,
um, you know, it's, it's terribly
attractive, but you could have said
that for each of the last three years
on a relative basis relative to the
s and p 500, it's at an all time low.
Um, you know, there's a scenario
where if I think 12 months forward,
or continue to think in calendar
year terms, um, what's my risk reward
that I, I look at it as risk reward.
So you get your dividend, you
get your dividend income and the
risk reward set up, you know, it
looks like a bridesmaid trade.
Uh, at this point, I call
it the bridesmaid trade.
You know, it hasn't been the
bride for several years now.
Uh, and the bridesmaid is, is, has
the potential, the setup is there to
finally, you know, be a bride in 2026.
Yeah.
Sean Emory: Yeah.
shout out to all the bridesmaid out there.
Um, the, you know, I agree, uh, with
the, with the bank thing in real
estate, you know, if there wasn't
any other evidence than, you know,
rocket buying, Redfin and Compass
Seth Golden: Mm-hmm.
Sean Emory: uh, that is
signal, that is evidence.
That is them basically putting the
money where their mouth is saying
that they think the real estate market
is more than likely, uh, going to,
you know, resurface to some degree.
You know, we're doing 3.9,
4.1
million homes existing, uh,
Seth Golden: Mm-hmm.
Sean Emory: you know, again,
you, you turn, you see those two
large transactions, which are
transformative to both of 'em.
Um, you know, I think
that speaks to, you know,
Seth Golden: I agree.
Yeah.
Sean Emory: seeing, and then we're
tracking, uh, you know, demand, right?
We're tracking, uh, you
know, visits and tours, uh,
Seth Golden: Mm-hmm.
Sean Emory: time.
Uh, tours are actually above the last
five years, uh, at this point in the year.
So there's a lot
Seth Golden: See, I, I can't,
Sean Emory: the very
Seth Golden: yeah, I can't look at that
because I'm, I have a bias situation here.
You know?
This is where it comes to, I'm in Ocala,
Florida, literally the second largest.
Population growth city per capita,
uh, in the entire United States.
When I saw the data come out from Bank
of America, this was about a month
ago, I'm like, are you kidding me?
Little Ocala.
Now I know it has been growing by leaps
and bounds, but I didn't think our growth.
Sean Emory: what
Seth Golden: No, no, no, they're not.
That's funny.
But well, what the Economic Development
Council has done here over the
last 10 years is just amazing.
Um, they've brought in a, a FedEx,
um, uh, you know, uh, shipping and,
and warehousing and that whole center,
they brought it here, chewy.com
headquarters.
They brought here just a lot of retail.
And, uh, ha has come here.
Uh, your nars, your Dr.
Hortons, all the builders have come
here over the last decade as well.
I mean, we literally have a, a 300,
uh, home community development start.
Three years ago, it sold out and
completely, you know, finished
in less than three years.
It was amazing.
Um, so the growth here, that's why
I, I, I'm biased when I look at
those kind of, you know, data 'cause
I don't have the right perspective.
All I see is amazing
growth here where I live.
So I, I kind of excuse my
understanding of that kind of data.
Sean Emory: Yeah.
No, you gotta, you gotta take
yourself outta the bubble, um, and try
Seth Golden: Yeah.
Sean Emory: figure out, speaking of
bubbles, um, you know, everyone's,
uh, you know, worried, you know,
kind of on pins and needles.
I, I hear more and more, you
know, are we in a bubble?
Obviously, you know, I, you know, I saw
the same data you saw, which was, you
know, trying to compare and contrast.
You know, 2000 versus today.
And, Uh, I think the long story or the
short story, uh, short version of the
long story here is that it's different.
Um, and, you know, I would let, I'll
leave it to you to, you know, explain
the differences, but, you know, what
are some of the differences between,
you know, call it 2000 and, you know,
the world we're living in today.
Seth Golden: Uh, I would say number
one, free cash flow margins, baby.
They're just no compare.
Uh, you, you, you can't have the earnings
growth, the free cash flow, growth record
high, you know, forward gross profit
margins and compare that to the.com
era where you didn't even have revenues.
You know, some of these business
models didn't even have revenues.
We don't even have any stocks.
You know, that, that's the other really.
Um, you know, interesting
thing, you had so many just
ridiculous IPOs during the.com,
and I know people are
like, wow, look at the IPO.
Pace has picked up dramatically,
so we must be closer to a bubble.
We're not even in positive territory
when it comes to year over year
shares you can purchase, right?
Like available shares of
the entire stock market.
We're in negative territory.
We've been in negative territory,
meaning we've had fewer and fewer shares
that we can purchase as investors,
you know, uh, basically since the.com
period, but, you know, yeah, yeah.
I mean, it, we're, we're, we're
looking at an asset class that has ever
decreasing supply with ever increase.
So when they show that data point
about, well, the average household
is now at record level, you know,
equity, market exposure, I'm like,
yeah, because they've been smart.
They see what's going down
and down is the share count.
So you have ever decreasing
supply and ever increasing demand.
That's what my father always told me.
Get in that business.
You know, if you can find something
with ever decreasing supply and ever
increase, that's the asset you wanna hold,
Sean Emory: This
Seth Golden: so,
Sean Emory: thesis, but
you have real businesses,
Seth Golden: right.
Exactly.
Exactly.
Sean Emory: Bitcoin, maximalist,
but you know, I have my point of
views on there and, you know, some
of it's constructive for sure.
Uh, but just from a supply demand
perspective, if you have less supply
of equities and you, you have 4 0 1
Ks, you know, in buying, in perpetuity,
um, and retail investors that are, you
know, that crowd has, you know, came
outta nowhere the last five years,
Seth Golden: Yeah.
Sean Emory: a larger and larger
demand environment for a supply
that is, you know, contracting.
I mean, almost every company in our
portfolio is buying back shares,
um, and reducing, you know, the,
the share counts, uh, therefore in
increasing earnings per share, uh, and
Seth Golden: Right,
Sean Emory: lowering your,
Seth Golden: right.
Sean Emory: base to some degree
and or the valuation, uh, you
know, as we sit here today.
So,
Seth Golden: Which get in and
Sean Emory: to tell.
Seth Golden: Yeah, in and of
itself, that always has a negative.
People always look at share buyback
or repurchase programs with through
the negative connotation, uh,
because they think, well, that's
just their way of, you know, white
washing, uh, poor operating results.
But if you look at it on
the whole, yeah, yeah.
Since 2010, Sherry purchases
only account for about 3%, three
to 5% of s and p 500 returns.
It's, it's nothing.
It's, you know, actual profits
is what drives the market.
Um, but yeah, in 2019 99, 2000 we created
with all these IPOs and whatnot, we
cr and the debt that, you know, came
through that, uh, that era, we created
this massive overhead supply of shares.
That just doesn't exist today.
We're going the other way,
which is just a beautiful thing.
And when people think about, you know,
we, we ne we don't even have double,
we can't double bottom anymore, right?
No, no Such thing as w recoveries, right?
No.
When you don't have the shares,
people, I mean, they gotta
get in when they getting in's.
Good.
So you, all you get are
V-shaped recoveries.
Every recovery is a V-shaped recovery.
Why has the market been
so resilient since 2010?
We've had only two years where
the share count has gone higher
on a year over year basis.
And that was 2020.
That was CO.
Like that's it.
So that's a major reason.
This is not, that's one of the
major variables distinguishing
today's AI cycle versus the.com
cycle.
Um, some others are just
price trend, very basic.
Price trend.
If you look at the three year trailing
average of the s and p, or more
appropriately probably the nasdaq, um,
you're looking at half of the gains,
almost exactly half of the gains over that
trailing three year period in this 23 to,
to present day versus 1997 to 2000 half
of it we're e the, if this is a bubble,
we have to redefine what a bubble is.
So, you know, that's, that's
another way that I look at it.
Price is not validating.
It's a bubble.
Free cash flow is saying, no, this
is just genuine operating strength.
Um, and, uh, you know, the, the dis just
the difference in the market structure,
you know, the, the, uh, the float, the
outstanding float and the instrumentation.
I mean, you get bubbles when you
don't have instruments as well.
I mean, if everybody's got a
funnel into this one asset class
in this one stock or, or what have
you, uh, it can create a bubble.
Nowadays we have all, you
name the ETF you want.
We got it.
Sean Emory: Yeah,
Seth Golden: the instrumentation,
Sean Emory: right.
Seth Golden: right.
So I, I just don't, don't get me wrong.
There can be bubble stocks.
I, I would say, you know, if
we get down to a real, yeah.
If we get down to a really basic
level, are there individual
bubble stocks out there?
Yeah.
I, I, I can't, I, and, and I'm not
trying to dis you know, I'm not
trying to denigrate the business model
of, uh, a Palantir, but it's hard
for me not to look at, I know we're
gonna get a lot of hate mail here.
I apologize for you.
Uh,
Sean Emory: Great
Seth Golden: look, if.
If you're in Palantir,
folks, you did quite well.
But as I often say, when it comes to
these parabolic moves in parabolic,
just like bubble, they have definitions.
There are defined characteristics that
let you know if you're in a parabolic
stock or in a bubble market environment.
Uh, when it comes to Palantir,
it checks all the boxes so far as
a parabolic stock, and literally
throughout the market history, no
stock has survived a parabolic move.
Uh, we'll go back to 2021, right?
When we had the whole main craze and
NFTs and, and that kind of stuff.
Ford.
Ford, I mean, how basic of
a company can, can you get?
And Ford went parabolic.
I told, I, I remember posting this
thing on X at the time, saying.
If you've been in Ford for the
last 40 years, now's your time.
Take the money.
You're finally getting your moment.
Sean Emory: new truck.
Seth Golden: Buy a new truck with
that money and have a nice day.
'cause it's the only
opportunity you're going to get.
And sure enough, it just collapsed.
But the the point being is that
there's not a single parabolics, uh,
move in a stock that has survived.
You've always given back every single
time you've given back some 75% of that
move in the coming 12 to 24 month period.
Um, so like, you know, the, I think his
name Dan Ives of We Bush, who covers
a lot of these big tech and AI names,
uh, expresses, you know, his beliefs in
stocks like Palantir from a fundamental
perspective and is always having to
push back on the valuation issues
because the stock has gone parabolic.
What I say is.
If you're in it, you know, you
gotta have an exit strategy.
Um, because I said this about Shopify
also, and I, I, I'm long Shopify,
uh, Shopify was my 2021 bubble.
So I literally called it my.com
stock.
And you said, well, Seth, that doesn't
look at how well they're doing now.
What do you, no, no, no, no, no, no, no.
That's my.com
stock from the good.
In other words, it's my Amazon,
it's my second chance as Amazon.
I mean, don't you wish you
bought Amazon during the.com
period, right?
So this is your second chance on Amazon,
except what had to happen to Amazon first.
It had to, it had to blow up.
And that's what I believed in
2021, you know, was what was
taking place with Shopify.
Shopify was in its.com
moment.
Wait for it, wait for
it, wait for it, boom.
Here's 2022.
The stock had just blow it up.
And so that was the opportunity
to pounce on it, which I did.
Um, and kind of dovetails into why I
have expressed interest also in kava.
This is your Chipotle Mexican
grill, you know, second opportunity
with just a different company.
So I believe that the Shopify was gonna
turn into an Amazon stock, but you got it.
You had to wait for it to blow up.
So it had its parabolic move in 2021.
It blew up in 2022.
Palantir has its parabolic move
here over the last 12 months.
No parabolic move in the
market has ever survived.
Sean Emory: I'm with you.
I think it's more
educational than anything.
It's the fundamentals can be strong,
the valuation can be excessive, and
you could be right at the same time.
Uh, you go back to Cisco, right?
I like to bring that up, you know, in 20,
Seth Golden: Yeah.
Sean Emory: 1999, 2000, you know,
you just got back to those levels
20 something odd years later.
Seth Golden: Right.
Sean Emory: your thesis was right.
Cisco was gonna be a great, great company.
Yet your valuation and
Seth Golden: Hold forward so much.
Yeah.
Sean Emory: was wrong, and therefore,
you know, you didn't make much money.
So the question is, is can
you find these, you know.
Uh, secular winners that are gonna be
here for the rest of time and try to,
you know, take advantage of those moments
when, you know, they get hit hard.
The question is, is, you know,
when the dust settles, you know,
how long does it take for the dust
to settle to then reinvigorate the
story, the narrative, the sentiment?
'cause at that point in time, you
know, a lot of people got washed
out and therefore, you know, we know
human sentiment is once you, you
know, once you, uh, you know, you
get hit once you don't look at that
thing again, you're like, I'm out.
Um, I think we're seeing that with,
you know, a company like Zoom, Right.
Uh, which is starting to
Seth Golden: Mm-hmm.
Sean Emory: back
Seth Golden: Yeah.
Sean Emory: you know, something, you know,
full disclosure, we're investors there.
But it's, it's a very similar story where.
You know, we saw it ride all the way up.
We thought it was gonna be, you
know, pretty transformative to, you
know, the way we all work and play.
Um, and now they have two and three,
you know, legs to their story, which,
you know, one of them has to be ai,
but, you know, you know, their phone
and their contact center and all of that
is reinvigorating growth once again.
And, you know, potentially, you know,
um, you know, no, uh, no guarantees,
but we think, uh, you know, this is a
good story, uh, in general with that.
You know, I'm gonna look, before
we wrap up, you know, risks.
I wanted to make sure we touched on risks,
and we kind of just touched on it there
with, you know, some of the bubble talk.
Uh, you know, is that a risk?
Is there other risks?
You know, what is really keeping
you up at night where, you
know, um, that you're, you're
Seth Golden: Right.
Sean Emory: looking at or, you
know, you think is potentially, you
know, on the horizon that could,
uh, you influence negatively to the
consumer, in theory, the businesses,
to margins, to anything like that.
Seth Golden: I, I guess what, uh.
All things created equally.
This economy is in a, uh, you know, a
lot of the economists have said this
before, uh, if not strategist, um,
you know, we're in the sweet spot.
We're in the sweet spot where we're
showing the re yeah, we're showing such
resilience, um, economically, and yet we
have a major Q1 tailwind, uh, that you can
only imagine what that's going to provide.
Sean Emory: people don't even know,
Seth Golden: I gen, I, I only, I, I
generally concern myself with, in the
same way we talked about some of these
bubble stocks, not fully being able
to quantify how much of the forward
strength we're pulling forward.
Sean Emory: right.
Seth Golden: Um, so that, I
think, you know, when we talk,
we talk about multiples, right?
You know, the, we're,
we're trading@xthe.com.
The highest forward multiple in history.
So, you know that, that makes me nervous.
Um, but I know the mechanics about,
you know, when it comes to, uh,
price to earnings or price to sales.
Uh, but me knowing that doesn't, you
know, I don't dictate Wall Street orders.
I don't dictate fund flow.
So just 'cause I might have the right
thesis, um, you know, that, uh, we
may be pulling too much forward, uh,
in the, well at the end of this year,
trailing three year returns, double
digits, double digits, double digits.
And we've only done four years
consecutively of double digit returns.
One other time.
Um, that's not the best setup going
into what is also a terrible, uh,
four year presidential cycle year,
which is the midterm election year.
Right?
Midterm election years are the worst of
a, of a four year presidential cycle.
And that all is before, uh, some of
the, um, I don't know, volatility
in fiscal policy or, you know, the
White House administration, right?
Uh, we seem to, you know, find something
new in the headlines, uh, or, or being,
uh, preempted in the way of fiscal policy,
you know, month after month after month.
Um, so that's, that's a risk, that's
a risk that business spending may
not be as robust, even with the
incentives because nobody's, we haven't
seen in mass the economy, right?
We haven't seen the economy push back
on fiscal policy initiatives to date.
Um, so I don't know if that
happens, if things get too volatile
when it comes to fiscal policy.
If business spending will curtail.
You know, anymore, you know, in 2026.
So I think those are risks to the
economy, which would otherwise
be also risks to the market.
Uh, and, you know, is the AI build
out going to deliver a meaningful
ROI uh, in the coming year, right?
Because we've been in this build out,
we've been in this CapEx spending cycle
for now 24 months, or it'll be 24 months.
Whereby the ROI is very limited
and everybody's accepted that
because of all the wild numbers
that are being thrown about.
Um, but we still don't see a roadmap
to a consumer driven AI platform.
Something hardware, something you've touch
feel that has mass adoption where you get.
The biggest of the ROI when we talk
about enterprise space and corporate
space, things like that on the commercial
level for AI application, that's all
good finding and great, but it's the
same thing when I talk about, when
people talk to me about, oh, uh, apple
and their heart monitor, why don't
they just sell that in the medical?
You know, why doesn't that get more
traction in the medical device?
Blah, blah, blah.
I said, uh, that's a whole nother beast.
And that would be like saying, why
didn't fit fit fitness trackers?
Go the medical device route.
Why didn't they just sell them
in, you know, your physician's
office and things like that?
Because it's this small, the
consumer market is here, right?
That's your big boy.
The commercial market's this, and
so you go where the consumer is,
and that's what I'm looking for when
it comes to all of this AI spend.
How do you get that platform?
Where you have to, like, if it doesn't
get in the consumer's hand in some
way, shape, or form, we're not talking
about meaningful, uh, uh, ROI in the
commercial, in the commercial space.
That's concerning because I, I
came from the consumer packaged
goods industry as an analyst.
I, I covered most of your consumer
packaged goods stocks, including Apple
and back then, your research in motion
and other, um, you know, handset devices.
And I can't get to a place where I see a
meaningful AI implementation in hardware.
And I've been on PR, product
development teams with some of these
big corporations, um, you know,
back then helping them or creating a
roadmap, uh, for a hardware device.
And I can't necessarily come up with one.
That gets mass, distri, distri,
you know, is is, is like, is like
a cell phone, you know, where
you just can't live without it.
It, it does actually change.
Sean Emory: yeah, I mean, I
would say chat, GBT is obviously
the consumer product, uh, at
least that is winning today.
Um,
Seth Golden: What's the
revenue stream there?
Like how do we make that a platform
other than advertising display, you know.
Sean Emory: gonna be
what they eventually do.
I mean, it's pretty, I, I was having
this conversation the other day and
we'll, we'll wrap up here in a second,
but the, um, you know, I was having
this conversation the other day where,
know, we shared a data point the other
day where on chat, GBT, uh, is higher
than that of direct traffic to websites.
And, you know, it converts at like 12.9%
and that just tells you, you know, chate
is gonna take their cut right if you're
com if you're converting goods and sales.
Um, the natural instinct
is how do I monetize this?
And I think the
monetization is either one.
It's, you know, a, you know, quasi add
sense type of product that whatever's
routed to you and converts, you
know, there's some sort of a, you
know, kickback to that or, you know.
Currently the monetization is charging
all of us some sort of subscription,
and I'd argue for 20 bucks or 200
bucks, is still really low relative
to what you get, uh, out of it.
And therefore they'll, they'll
be able to push that price up.
They just have to continue to
wrangle up more and more, I guess.
Um, now I don't gonna even say
like verticalized use cases, but
more purpose built use cases.
They launched Pulse yesterday,
which is interesting.
It kind of like services, a
bunch of stuff that is, you know.
relevant to you, um, almost like
your own little like feed that's
relevant to you and it's more
proactive than, than just responding.
Um, we'll see if that catches on.
But if I think over the years,
if, and the question is do
they have enough time, Right.
Because a lot of this is expensive
and they're burning a lot of cash.
Is do they have time to, you know,
you have your chat GBT kind of your
context layer where you just, you
know, you, you speak into it or you,
you type into it or speak into it.
But can you have, you know, these other
different buckets that you and I are.
Um, you know, fully immersed in it
where three things are happening on
that platform, whether it's news,
social communication, blah, blah,
blah, you know, checking emails
assistant or something like that.
Uh, all of a sudden at that, that
point you and I are locked in and
then, you know, 20 goes to 50, 50
goes to a hundred, 200 goes to 500.
Um, so I could see the ramp, but I
think it's, my worry is everybody else.
And it's also the build out itself.
You know,
Seth Golden: Right.
Every, yeah,
Sean Emory: $600 billion of, you
know, probably by, you know, a year
or two from now, um, a trillion
dollars if they stay at this pace.
We'll see if we get there.
But if we do, you know, a trillion
dollars is depreciation's gonna flow
through the mega caps over time?
And we're going from asset,
uh, light to asset heavy.
And you're kind of going back to
19, you know, seventies, sixties,
fifties, eighties, um, where the market
actually got a lower multiple in that
environment because you had a lot more
fixed costs and you had depreciation
flowing through these income statements.
pretty high rate.
And God forbid you run into
a, you know, macro event.
You know, all of a sudden you
have all this fixed costs.
You know, consumption inference
that everyone talks about starts
to come down a little bit.
Um, look, we're probably still years
away from that, but the second, you know,
the market starts to sniff at, you know,
depreciation, accelerating while revenue,
you know, potentially decelerating.
I think that's the point
where people start to get
concerned at the mega cap level.
I still think small caps, you know,
trading, you know, in that 22 percentile
of historical valuations, uh, you
know, mid caps and the 33 percentile,
you know, I think that's where you
want to, you know, play around in.
But back to your healthcare story
is, you know, it's kind of been, uh,
lagging, you know, for quite some time.
And, you know, the question is, is what's
gonna, you know, be that catalyst and
all the points you made to next year,
you know, tax refunds, um, you know, some
of the more economic oriented stuff with
jobs and rates, you know, all that is
catalyst to, you know, small mid-caps.
The question is.
You know, when do you get that ignition?
We got two here in the
last two months, right?
Jackson
Seth Golden: Yeah.
Sean Emory: then, you know, not that
long ago where, you know, portfolios in
small midcaps were up, you know, six, 7%.
But,
Seth Golden: Mm-hmm.
Sean Emory: so it shows you
what the market wants to do
when it believes that the story.
Seth Golden: Right.
Sean Emory: story is kind
of this broadening slash you
know, mega cap to everybody
Seth Golden: Follow through.
Yeah.
I need follow through.
Sean Emory: the question is, can you
get this sustainable where you flip back
to small mid caps trading at a premium?
Um, time will tell, but
Seth Golden: Yeah.
Sean Emory: Seth Golden,
we could talk forever.
Seth Golden: you Sean.
Sean Emory: I'm gonna
have to see you again.
I'll be in Orlando in a little bit,
um, and maybe we get back together,
have some dinner or something.
But anyways,
Seth Golden: Absolutely.
Sean Emory: seeing you.
I know, you know, if anyone wants
to follow you, you know, on x Seth
Golden, you know, your website,
I think it's phenom group.com
or phenom.com.
Seth Golden: Yep.
Sean Emory: Um, go check his stuff out.
I'll put it all in the show
notes to make sure it's there.
But if you don't follow him,
make sure you follow him.
He's one of the better
Follows online, uh, with that.
you get back to, uh, you, know, business
Seth Golden: you, Sean.
Sean Emory: weekend, man.
Seth Golden: You too.
Thank you.