President Trump announced that a deal

had been reached with Iran and would be

signed Friday. As a result, futures

soared and the market experienced a

strong rally on Monday. Fox is buying

Roku, the streaming company. The market

was not amused by this deal. There was

some really bad news for Anthropic over

the weekend. This effectively shuts down

Fable 5 and Mythos 5 completely, which

are Anthropic's latest and most

sophisticated models and hurts the

future of Enthropic. Over the past few

months, the negative arguments about AI

have sharpened. So, let's explore them.

Hi, this is Steve Eisman and this is

another edition of the weekly rap. This

is a shortened week because of Junth.

This rap is for the week ending

Thursday, June 18th, but recorded

Wednesday night, June 17th. On this

week's rap, we will discuss the war in

Iran, the SpaceX IPO, private credit

news, bad news for anthropic, a summary

of the bullcase and bare case for AI

mailbags, and oh, by the way, a little

bit about the Fed. Before we get to the

rap, on Premium Wednesday, June 24, we

will post an interview with the

management of Glass House Brands, a

cannabis company. The reclassification

by the Trump administration of medical

cannabis from a schedule one to a

schedule 3 drug will improve growth and

earnings. I own the stock and on

Wednesday, July 1st, I will share my

long positions in my personal portfolio

and how I think about managing my

investments. This is for educational

purposes only and is not a

recommendation. Now, let's go to the war

on Iran. On Sunday, President Trump

announced that a deal had been reached

with Iran and would be signed Friday. As

a result, futures soared and the market

experienced a strong rally on Monday.

Oil prices declined by 5% and the

10-year yield fell back below 4.5%. But

let's not get too carried away. This is

not a treaty and it is not a peace

agreement. What it is is a memorandum of

understanding to negotiate the terms of

a broader agreement over the next 60

days. All the hard issues like Iran's

possession of nuclear fuel are to be

negotiated. The only tangible benefit of

thisou is that the straight of Hormuz

will supposedly be opened for the 60

days. Moving on, Kevin Walsh presided

over his first Fed meeting. The Fed kept

rates unchanged and made it clear that

there would be no cutting of interest

rates, but raising rates is now a

possibility. This happened on Wednesday.

The market did not like it. On Friday of

last week, SpaceX went public. I've

spoken about SpaceX many times now. I'm

sure there will be a lot more to say.

The IPO jumped 19% on its first day of

trading. Frankly, that's not

particularly impressive, but it did go

up another 20% on Monday and another 5%

on Tuesday. The stock now has a market

cap of 2.5 trillion and is now valued at

well over a 100 times trailing annual

revenue. The IPOs of Anthropic and Open

AAI are up next in the fall.

Homebuilders have had a bit of a run of

late. As I've said before, homebuilder

stocks are always sensitive to interest

rates. There is no way to get away from

that. The combination of some M&A by

Bergkshire Hathway and the 10-year

getting back below 4 and a.5% has caused

the group to rallied. Take the stock

I've recommended, Meritage. I

recommended it in the low70s in January.

The war and higher rates caused it to

decline to $62. It's now 74 and valued

at 1.0 times tangible book value. Recent

M&A transactions have taken place at

1.25 to 1.3 times tangible book value.

In private credit news, Black Rockck

capped redemptions from its HPS

corporate lending fund at 5% after

investors sought to pull 13% of their

shares. And that is higher than the 9.3%

they sought to redeem in the first

quarter. There was some really bad news

for Anthropic over the weekend. If you

will recall a few months ago, Anthropic

tried to limit the usage of its models

by the Department of Defense. The DoD

was not amused and classified Anthropic

as a supply chain risk. Things have now

escalated. The US government issued an

export control directive to suspend all

access to Fable 5 and Mythos 5 to

foreign nationals, even Anthropic's own

employees. This effectively shuts down

Fable 5 and Mythos 5 completely, which

are Enthropic's latest and most

sophisticated models. Apparently, the

government was made aware of a method to

quote unquote jailbreak or bypass

security restrictions on Fable 5 and

Mythos 5, which are intended to limit a

customer's ability to abuse the product

for hacking or other potential harms.

The lesson here is that it's not a great

business strategy to go to war with the

United States government. Now, how did

the US government magically become aware

of a jailbreak methodology? Because

Amazon told them. And why would Amazon

snitch? Maybe because they invest in

open AI. We are now at a sixth grade

cafeteria level of snitching with

monstrous impact and consequences. The

development of AI is packed packed with

fascinating twists and turns every week.

Until now, the Trump administration has

taken a very regulatory light approach

to AI. This shutdown is very

heavy-handed and hurts the future of

anthropic. Secretary of Commerce Howard

Lutnik's announcement seemed to come out

of nowhere and suggested more than a

hint of panic, if only to be a fly on

the wall when Amazon alerted the Trump

administration about the risks embedded

in Anthropic's most sophisticated

products. Now, we've been discussing AI

for many, many months. The story is

constantly evolving and sometimes not

for the better. We will be exploring

these arguments for the foreseeable

future. And in fact, I have Todd Sone,

the chartist specialist from Strategus

on the pod on June 29th. Some of his

stock charts show stress in certain key

AI stocks. For now, relying on the work

I have done and the amazing interviews

with the experts we have had on the pod.

Here is my snapshot where we stand on

the baretob curve. On the positive side,

there is no sign that AI capex is

weakening. Quite the opposite actually.

Every major company that reports still

ups its AI capex and Nvidia is the

bellweather of the group. It's 1Q26

revenue growth was an incredible 85%

which is an acceleration from the 65%

growth a few quarters ago. As long as

Nvidia's revenue growth remains

elevated, this story is not over.

However, and it's a big however, over

the past few months, the negative

arguments about AI have sharpened. So,

let's explore them. One, capital

intensity. Google announced that it was

raising 80 billion since upsized to 85

billion in new capital, all from equity.

Historically, software has been a non-

capital intensive business. The last

time Google raised equity for the

company was June 2005.

Why is it doing so? Because the table

stakes of participating in AI keep

increasing. In 2025, Google spent 80

billion on AI capex which it funded

mostly from its enormous cash flow plus

a bit of debt. In 2026, Google will be

spending 180 to 190 billion on AI capex

and that is just too much for its cash

flow. There are also stories that Meta

and Microsoft will be doing similar

transactions soon. Oracle increased its

capital raising plans by 20 billion

recently. This all goes to show that

certain non-c capital-intensive large

software companies have now become

capital inensive hardware companies.

This is a sea change. Before the

hyperscalers were funding their capex,

their AI capex via a combination of cash

flow and debt. Now, now shareholders are

being asked to foot the bill. Number

two, are there any moes? There's a big

one. Last year, the hyperscalers spent

400 billion on AI capex. This year, it

will be close to 1 trillion. Let's

assume for the sake of argument that AI

and AI agents are in fact transformative

technologies. And yet, there seems to be

little difference between them. One week

Gemini is on top and the next it's

anthropic and the next it's open AI.

Despite the money being spent, there

seems to be little differentiation. No

moes. Trillions are being spent for what

looks increasingly like a commodity.

Number three, and speaking of the

commoditization of AI, last week an

article appeared in the Wall Street

Journal stating that Open AI is

considering lowering the prices it

charges customers. The company is

considering cutting what it charges for

tokens. This is pretty astonishing news.

Trillions are being spent for a product

with no MOEs and prices are already

being cut. Number four, token pricing.

The cost to use an LLM or an Aentic AI

app is measured in tokens, which is

roughly equivalent to a word. One token

per word, more or less. And Aentic AI is

a much heavier user of tokens than LLMs.

Until this year, companies like

Enthropic and OpenAI charge a

subscription for their LLMs and Aentic

AI apps. Those subscription prices were

much, much lower than the actual cost of

the tokens. hook them with the cheap

stuff and raise prices later. This year,

Anthropic and OpenAI changed the pricing

to a token usage methodology, which is a

much higher pricing methodology.

Microsoft moved to a similar pricing for

its GitHub co-pilot on June 1. There is

already push back. Uber went through its

entire AI budget for the year in 4

months. Reddit boards are filled with

complaints about the new pricing

systems. It's possible possible that

customers will start using AI less as

they become more costconscious. Stay

tuned. Number five, return on investment

ROI. Despite all the hype, there is

still no evidence or very little

evidence that the ROI for using AI

justifies the trillions that are being

spent. And number six, power

constraints. Even the bulls admit that

this is a risk. AI data centers are

physically enormous and have insatiable

needs for energy and water. Communities

are starting to push back. I'm getting

the impression that the level of AI data

center construction is slower than the

bulls are hoping for. This risk bears

tracking. The AI story has definitely

changed because of the capital

intensity. That's what's new. That means

I believe that for investors who remain

bullish, they may shy away from the

capital inensive hyperscalers and focus

more on power generation,

semiconductors, and tech equipment

companies like Arista and Cisco.

However, if companies start backing away

because of the increase in token pricing

or power constraints really start to

bite, all bets are off. This is an

evolving story that seems to change by

the week. One analogy that I now found

helpful is to look at airlines versus

the airline suppliers. Airlines are a

notoriously bad business. It's very

capital intensive and no airline has any

pricing power. However, companies like

Transdime that supply parts and services

to airlines are great businesses. Just

compare the 10-year charts of American

Airlines and Transdime and you get the

point. It's possible that the

hyperscalers and large AI players are

becoming like airlines while their

suppliers are becoming like transstein.

Something to think about. Moving on,

there was some very intriguing news

about Fiserve, the payments company.

Fiserve is a payments company that's

been around for a long time.

Institutional investors owned it for

years as a steady Eddie play on

payments. However, the company has been

losing market share for years and that

culminated in a dramatic drop in the

stock in May of last year. The company

admitted that it had been over earning

and that the game was up. Management was

fired and a new CEO, Mike Lions, was

brought in. Lions was a senior executive

at PNC Bank. He has been trying to turn

the company around, but not very

successfully. He reset earnings

expectations for no growth in 2025 and

slightly negative growth in 2026. The

2026 PE is six times. So clearly the

market does not believe in the

turnaround. This Monday morning, Fiserve

announced that Lions was leaving Fiserve

to become, get this, the CEO of Truist

Bank. Leaving in the midst of a

turnaround is not very nice and the

stock was down 11% on the news. I'll

just reflag my views on the payment

space. It's a brutal space where

competition is intense and the only

impregnable franchises are Visa and

Mastercard. Full disclosure, I own Visa.

In other news, Fox is buying Roku, the

streaming company, and a large deal that

values Roku at 22 billion. Fox has

little streaming presence. So, this is a

way for Fox to jumpstart its business in

streaming. As Roku reaches a 100 million

households worldwide, the market was not

amused by this deal. Fox's stock price

declined by 15%. Why? Because Fox has a

2026 PE of 10 times and it is valuing

Roku at a 2026 PE of 57 times. Good

luck. And now for the mailbag. Our first

question is from Moritz who asks quote

question. So if you're already more than

60% in broad equity ETFs but worried

about inflation and longer term a

recession what are the alternatives? Not

bonds given inflation, not cash for

sure, real estate, gold, utility stocks.

End quote. There are not a lot of places

to hide in a world of inflation that

might also lead to a recession. That

world existed in the 1970s and the

market was flat. Bonds are obviously not

a good investment. Utilities aren't

either as they are partially dividend

plays. Gold is definitely an asset class

that attracts investors in an

inflationary world, but of late, gold

has not acted according to that thesis.

It's been flat when inflation fears have

climbed and I'm not sure why. In terms

of what sectors in the market that might

do well, I'd look at traditional energy

and healthcare. Our second question is

from time management investing, who

asks, quote, "Swing addiction models is

a slippery slope. Should TV

manufacturers be held liable? Netflix,

where do you draw the line between

personal and parental responsibility

versus outsourcing responsibility?" End

quote. Great question. Before answering

it, I want to flag what's been happening

on our premium service. This past

Wednesday, June 17th, we posted an

interview with law professor Ben

Zaperski of Forom Law School. We

discussed the addiction cases that have

been lodged against social media

companies. Professor Zaperski discussed

the legal theories that underlly these

cases and which cases he thinks are

strongest. I think the point of these

social media addiction cases is that the

social media companies are being accused

of intentionally addicting consumers via

their algorithms and are causing harm. I

don't think Netflix operates under an

addiction model. However, I'd also point

out in the recent California case, I

believe that the level of damages was

lower than expected because the jury did

think that the plaintiff bore some

personal responsibility. And our final

mailbag is from Grio who asks, quote,

"Greetings from Italy." Greetings right

back to you. Soon I'll start my first

investment portfolio. Wish me luck. Good

luck. By the way, do you think there is

any usefulness in investing in European

assets, stocks, bonds? End quote. I have

no opinion about European bonds.

However, my opinion about European

stocks is to generally stay away. I

think that Europe is overregulated and

its economies are slow growing. Germany,

the largest economy in Europe, has

barely grown its GDP in years. Tech is

where the action is, and tech is

relatively small in Europe. In the US,

infoch is 38% of the S&P 500, and if you

add in stocks like Google and Amazon,

which are not technically infoch, but

are certainly techreated, you get to

50%. In Europe, tech is only 18% of the

euro stocks index. Now for viewers who

are watching, I am putting on the screen

two tables that show the largest five

companies in Europe and in the US. The

first thing to notice is that no

European company has a market cap above

1 trillion. ASML at 750 billion is

getting there, but only ASML of the five

is a tech company. After ASML is Roach

with a market cap of 330 billion which

is a farmer company. Then LVMH 295

billion and a consumer discretionary

luxury company. Then Nardis at 290

billion and a farmer company. And number

five is Nestle at 260 billion and a

consumer staples food company. By

contrast, the market cap of the top five

stocks in the US range from 2.7 trillion

to 5.1 trillion. And all five, Nvidia,

Google, Apple, Microsoft, and Amazon are

in info or techreated. Investing in

large cap in Europe means not much tech

exposure. I like chocolate as much as

anyone. So Nestle sounds like a good

company, but it's hardly a compelling

investment story. You might think that

investing in Europe is a hedge to the

US. But I don't think it really is.

Europe is heavily dependent on the US

economy. If there is a recession in the

US, hiding in Europe will not help. Last

Monday, June 15th, we posted an

interview with Tom Gallagher, the life

insurance analyst at Ever. We discussed

the impact of private equity and private

credit on the life insurance sector.

These are illquid and opaque

investments, and we looked at the real

risks and the size of those risks. So

check it out. This coming Monday, June

22nd, we will post an interview with

three consumer analysts from Evercore

who cover the entire gamut of consumer

stocks from restaurants to department

stores to the big retailers like

Walmart. We examined the health of the

consumer at the upper, middle, and low

end and how the various companies they

cover are doing in this environment. So

tune in. Be sure to check out our

website realismanplaybook.com.

Thanks for joining. And that's the

right.

This podcast is forformational purposes

only and does not constitute investment

advice. The hosts and guests may hold

positions in stocks discussed. Opinions

expressed are their own and not

recommendations. Please do your own due

diligence and consult a licensed

financial adviser before making any

investment decisions.