The Compound and Friends
00:52:08 · Josh Brown, Daniel Clifton
[00:52:08] S2: Now they could wait this guy out. [00:52:09] S1: There was regime change in Texas before there was regime change in Tehran. Alright. Well Okay. Right? Like, think about that. Right? And so their point is... The IRGC's point is It's true. I mean, sad but true. We can't be attacked. If we are attacked and don't respond, it's existential for them. So they're willing to get totally suffocated economically and not do a deal. The civilian leadership of Iran need to do a deal because the blockade is working, all but since sanctions on them are working, they're caught... And to me, that's where we're we're gonna be in the status quo. We could play the games of doing these deals back and forth, but literally, they just need to straight open for five days. We need it open every day. Yeah. And that's a that's a very asymmetrical [00:52:50] S2: We also don't know what the what the DNC presidential candidates are gonna be saying about how to resolve whatever we started. Like, we... It's way it's way too soon. Yeah. But does that keep oil somewhat elevated then, that uncertainty? [00:53:06] S1: I've been higher... I've been in the higher for longer camp. Okay. And and by the way, if I get lower oil, I'm all for it. I just need to see a plan to get us there. Is Trump going to completely capitulate and give them tolls on the Strait Of Hormuz? The market will love that, but I'm not sure that Trump's ready to do that position
00:53:06 · Daniel Clifton, Michael Batnick, Josh Brown
[00:53:06] S1: I've been higher... I've been in the higher for longer camp. Okay. And and by the way, if I get lower oil, I'm all for it. I just need to see a plan to get us there. Is Trump going to completely capitulate and give them tolls on the Strait Of Hormuz? The market will love that, but I'm not sure that Trump's ready to do that position [00:53:21] S0: right So, Dan, are the questions that clients are asking you more longer term in nature, like what does this mean for data center earnings, or are they like when will this sort of when will the market come down? [00:53:31] S1: So all the above. So my email box today is, what do you think the governor of Texas is really going to do? [00:53:37] S2: Should I buy Micron? Right? But that's That's what they're asking. [00:53:40] S1: That's what [00:53:40] S0: they're asking. Yeah. [00:53:41] S1: Yeah, exactly right. And so it's very short term, but it's, Hey, can you bring your economist in? We have a great economist, Don Ritholtz. We need to know how this is going to impact his capex forecast and his GDP forecast. [00:53:53] S2: Is she that powerful? So here's Is that seat, whoever sits in it, that powerful?
00:53:53 · Josh Brown, Daniel Clifton
[00:53:53] S2: Is she that powerful? So here's Is that seat, whoever sits in it, that powerful? [00:53:58] S1: I wasn't going go into the governor of Texas isn't as powerful as most governors, but the dynamics here are very important. There's a moratorium on Texas data centers right now that Abbott put in place. There's an audit that's coming out on December 10 about the energy in Texas. And then there's a public hearing on December 17. So the idea was he pushed this out to the election. We were going to do this audit. He lifts the moratorium. Maybe we make some modest changes, it's off to the races again. She's now got that audit, Okay? And her point is, I'm keeping the moratorium in place until the legislator actually comes up with taxes and regulations for the data centers. [00:54:39] S2: Okay. [00:54:39] S1: Okay? And this is very important. In Texas, they're only in session for six months of a two year session. So, it goes from January to June. You want to see a circus, Austin, Texas, from April to June, when they're just trying to jam all these bills through. I'm probably gonna be live from there doing, like, a podcast like you guys with all the stakeholders for my clients. [00:55:01] S2: Somebody... Somebody's gotta be whispering to her, look at all the jobs. I know Oracle built big shit there. They're running TikTok out of a Texas Like, data somebody's gotta be whispering to her, hey, this is not as black and white as maybe you made it sound on the campaign trail. [00:55:17] S1: Absolutely. And by the way, that always
00:55:17 · Daniel Clifton, Josh Brown
[00:55:17] S1: Absolutely. And by the way, that always [00:55:19] S2: And she seems like smart. She seems smart. She's very smart. Okay. [00:55:22] S1: So, she's going to come in. And if she didn't win the legislature, it wouldn't be a big deal, but now she's got the legislature. So, she's going to say, I want to put a tax on there. I'm just asking that... They're flowing with money. I'm just asking them for a tax. [00:55:38] S2: I'll just a trillion dollars. They pay a higher tax. [00:55:40] S1: And there's a new type of negotiation happening between some of the leading environmental groups and some of the leading business groups, which are basically funded by all the hyperscalers. And the idea is to come up with a set of environmental standards that the data centers are going to abide by. So, that [00:55:58] S2: sounds productive, if people believe in it. [00:56:02] S1: It's going to take some time for all this stuff to work itself out. But my sense here is that you're getting to a point where you're going to be able to come up with some sort of negotiation. Virginia did it, and it killed Northern Virginia data center construction. We're still doing data centers in Richmond and outside Charlottesville, but we killed off the entire Northern Virginia data center.
00:56:02 · Daniel Clifton, Michael Batnick, Josh Brown
[00:56:02] S1: It's going to take some time for all this stuff to work itself out. But my sense here is that you're getting to a point where you're going to be able to come up with some sort of negotiation. Virginia did it, and it killed Northern Virginia data center construction. We're still doing data centers in Richmond and outside Charlottesville, but we killed off the entire Northern Virginia data center. [00:56:23] S0: So we're at the closing bell, and the market is LOD'ing to the close. The Qs are down 6.4. The S and P is down 4.4. It's so rare for this type of event to happen. Most of the time, there... It is very hard to draw a straight line between a political outcome and a market moving event. Absolutely. And this is this is A to fucking B. Holy But [00:56:45] S1: midterm elections are usually about sectors and sub industries, not about macro issues. So we get very granular. We know exactly what stocks are going to get earnings benefits and earnings hits from midterm elections. That's what we do. We're very tactical for midterm elections. The problem is that these data centers represent 90% of GDP. They're the largest market cap stocks. [00:57:07] S0: The whole story. [00:57:08] S1: So you're getting this sector issue, but it's the weight of our economy and the weight of our [00:57:12] S2: stock 75% of the expected GDP growth next year and maybe 60% of the expected earnings. Yeah. Or it can't completely go away. [00:57:22] S0: Yeah. You know that chart?
00:57:22 · Michael Batnick, Daniel Clifton
[00:57:22] S0: Yeah. You know that chart? [00:57:23] S1: Exactly. But you could see why it can have an outsized effect. A political outcome can have an outsized effect just because of that weighting. [00:57:29] S0: So, the chart that shows it's data center construction, I think office construction. Yep. You've seen that floating around? [00:57:34] S1: Yeah. [00:57:34] S0: So, that topped, right? Or bottomed, depending on which way you're looking at it? [00:57:37] S1: Yeah. And I would expect that you're going to see more. We go through the lobbying disclosure reports of every company, and you have to see the non AI companies that are lobbying on energy permitting reform and R and D tax incentives. It's Kimberly Clark, a sleepy consumer staple. They make diapers, but they're now building factories in America. So, you're going to start seeing some non AI building data coming in, [00:58:04] S0: not Okay? Just office And [00:58:06] S1: let me give you this other issue. What Warsh wants to do with the Fed is very important for real estate. He's literally saying, look, the model since the financial crisis has been to increase the balance sheet. When you increase the balance sheet, it increases the money supply, and that increases inflation. He's literally going to start in the next couple of weeks deregulating the financial service sector. Very big financial deregulation coming out. The idea is to start having the banks buy the treasuries by unlocking their capital and start to bring down the Fed balance sheet.