00:02:52 · Mike Wilson, S2, S1
[00:02:52] S0: We had the. [00:02:53] S2: Meta $ 90 billion follow-on offering announcement. We didn't even talk about the fact that the Fed's meeting. And, I mean, we're going to have a Fed meeting tomorrow. I mean, should we be paying attention to that? [00:03:03] S0: Well, sure. But I think the reason why is because the expectation is there's nothing going to be done at this Fed meeting. That was done last meeting, and now they're kind of on hold. That's the presumption. I think that's right. I mean, I'm not saying that that's wrong. But it's going to be more about the tonal interpretation of the press conference and all the Fed watchers scribbling afterwards. But at the end of the day, if I look at the last three or four Fed meetings, this is probably the one where the least amount of change is sort of expected. [00:03:32] S1: Mike Wilson with us. He's Chief Investment Officer driving all of equity at Morgan Stanley this morning. Whitney Tilson darkened the door on Friday on Bloomberg Money. And he framed this out, and it was perfect for Mike Wilson. I own the Mag 7. I got lucky. I've made a lot of money. I've never owned them. Massive regret right now. Or that group that bought them then sold them. And you've been so good about being patient. Discuss Mike Wilson's buy and hold. The blind holding is a phrase associated. Discuss buy and hold as a trap or is that a positive construct?
00:03:32 · S1, Mike Wilson
[00:03:32] S1: Mike Wilson with us. He's Chief Investment Officer driving all of equity at Morgan Stanley this morning. Whitney Tilson darkened the door on Friday on Bloomberg Money. And he framed this out, and it was perfect for Mike Wilson. I own the Mag 7. I got lucky. I've made a lot of money. I've never owned them. Massive regret right now. Or that group that bought them then sold them. And you've been so good about being patient. Discuss Mike Wilson's buy and hold. The blind holding is a phrase associated. Discuss buy and hold as a trap or is that a positive construct? [00:04:10] S0: Well, generally, stocks over time go up. And the S & P 500, of course, is a great index. It's a high-quality index that is self-regulating, right? You have names go in and out. Now, what we've had in the last 10 or 15 years has been pretty unusual. You have basically monopoly businesses. That's what these are. [00:04:26] S1: Thank you. [00:04:26] S0: At least monopsony, which is a whole different discussion. [00:04:29] S1: 100%.
00:04:29 · S1, Mike Wilson, S2
[00:04:29] S1: 100%. [00:04:30] S0: And they're in different lines. I mean, you have one that's feeding the hyperscalers. The hyperscalers are then feeding the other ones. So It's kind of a circular thing, but it's all being funded mostly by equity and cash flow for the most part. Yeah, they've been borrowing more money lately, but the markets have adjusted for that. I like to remind people when they say, oh, my God, the stock market's up 10% this year. It's like stock investors are idiots. They have no idea what's going on. Can't they see all this stuff that's happening? The multiple for the S & P 500 has gone down almost 20% from a year ago. So don't tell me that the market isn't paying attention. [00:05:01] S2: It is. [00:05:02] S0: The question is, is that enough of a discount? Yeah, I think the multiple now is cheap enough to basically feel comfortable that it's discounted a lot of these risks. And when you have these monopoly-type businesses really driving the bulk of that, it's hard to argue that this trend of earnings growth doesn't sustain. [00:05:17] S2: Yep. Earnings growth, you just mentioned, I mean, the first half of this year was just extraordinary in terms of the earnings growth numbers. Third quarter coming in, I think, pretty strong as well. But if nothing else, the comps next year are going to be tough. How does a market deal with a 20%, 30% growth rate down to a mid-teens, which we would kill for at any other time?
00:05:17 · S2, Mike Wilson, S1
[00:05:17] S2: Yep. Earnings growth, you just mentioned, I mean, the first half of this year was just extraordinary in terms of the earnings growth numbers. Third quarter coming in, I think, pretty strong as well. But if nothing else, the comps next year are going to be tough. How does a market deal with a 20%, 30% growth rate down to a mid-teens, which we would kill for at any other time? [00:05:37] S0: How does a market deal with that? It deals with it by the multiple going down by 20%. So, in other words, like last year, in October of last year, a year ago, we were trading at 23 times earnings. And people were pulling their hair out. They were screaming, like, what is going on? [00:05:50] S1: Where are we now? [00:05:51] S0: Well, now we're at 18, 19 times, depending on how you measure it, equal weight, market cap weight. [00:05:55] S1: So, we're going to be at 16 times earnings. out there on the x-axis. Maybe.
00:05:55 · S1, Mike Wilson, S2
[00:05:55] S1: So, we're going to be at 16 times earnings. out there on the x-axis. Maybe. [00:06:00] S0: I don't think the multiple has to come down much further from here. In other words, the market is discounting the deceleration that you talked about. A year ago, don't forget, a lot of people were very bearish on growth. If you talk to most economists and strategists, they were all bearish. I was looking around going, why are people bearish on growth? You have all this fiscal stimulus. You have all this cap access going to become. It's going to be a boom next year, and that's what the market is forecasting. Now what the market's forecasting is that boom is is going to decelerate. Could that turn into something more significant, like a real growth scare, recession? It could, but right now, it's way premature to make that call. [00:06:37] S1: Paul, can I ask the rude question? [00:06:38] S2: Sure. He can handle it. [00:06:39] S1: Okay. He can handle it. Mike Wilson is with Morgan Stanley, and some would say he is Morgan Stanley with all of his driving of equity and optimism. Now, I assume you're getting anthropic shares. I mean, we just assume this. Are we going to see you top-tech Stephen Ross with a $ 101 million gift in athletics to the University of Michigan? Are we going to see the Mike Wilson North Complex? [00:07:06] S0: Let's talk about $ 100. How about $ 100? That's my annual gift. [00:07:12] S1: To migrate from that quickly here, Mike Wilson, the wealth generation of this era, we don't really understand. No.
00:07:12 · S1, Mike Wilson
[00:07:12] S1: To migrate from that quickly here, Mike Wilson, the wealth generation of this era, we don't really understand. No. [00:07:19] S0: I mean, it's funny. People are talking about these big numbers and shows on recently, you know, the size of these offerings. [00:07:25] S1: Okay. [00:07:25] S0: I go, well, what about the cost of these stadiums? You know, we're going back to sports again. You know, that's just inflation, Tom. So these numbers get bigger and bigger and bigger. A lot of the reason why the stock market has done so well since COVID is inflation. And we've written about this extensively, as you know. So we live in a nominal world. Okay. And you have to be honest, to be honest with yourself and say, am I really getting ahead of myself? I mean, are you getting ahead of the world with my investments or am I just sort of keeping up?