Rate spikes are painful because they're

supposed to be. They are kind of the

economy's way of destroying excess,

repricing risk, and reminding everyone

that capital actually has a cost. It's

basically the ruler wrapping on the

knuckles of the Trump administration's

reckless economic policy and waking

people up from this fever dream that AI

is going to create 10 different

Microsofts in the next 24 months. It's

the alarm clock going off saying, "No,

your dreams are over, my friend." It's

the cold shower that we've all been

needing to take for a while.

Today's number 15. That's the percentage

of Americans who say they'd be willing

to have a job where their direct

supervisor was an AI program. Ed, true

story. My first boss died an untimely

death and I went to his funeral with an

open casket and I leaned over and said,

"Who's thinking outside the box now,

Randy?

How are you, Ed?

>> I'm doing well. Doing well. Very excited

for our show happening in two days.

We're heading to San Francisco to kick

off the Profit Markets tour with a fully

soldout show. I I can't wait to go live

for the first time. Tickets are still

available for LA this Thursday night. By

the way, Netflix's co-CEO Ted Sandos is

joining us there to break down the

future of media. He's going to tell us

whether Hollywood is dying or if it

isn't dying or how it isn't dying. I'm

sure that'll be an interesting and spicy

conversation. And then we've also got

Miami, which tickets are still available

for on Saturday night. And then on

Chicago on June 1st, we are speaking

with Governor JB Pritsker. It's

happening. It's finally here. I can't

wait. Um,

this is our big moment. the moment's

arrived

>> and I just I just found out that

literally I'm not exaggerating like when

people ask me who my role model and hero

is. I mentioned this person and I found

out literally 30 minutes ago that this

person is a fan of the show and is going

to come to one of the shows and be an

onstage guest. And I'm not allowed to

say for security reasons, but that this

this person is going to show up to one

of our shows. So, I'm just super and

being an onstage guest. So, I'm just

super

>> That's right.

>> excited.

>> We're not going to we're not going to

reveal who it is and we're also not

going to reveal which city that

individual is going to arrive arrive at.

But all you do need to know is the thing

that Scott just just said, which is that

if we were to reveal it, it would be a

problem for security reasons. I mean,

boom, you got to buy a ticket.

>> There you go. Uh, which city are you

most excited about, Ed?

>> You know, I was LA.

>> Mhm. But I'm increasingly excited to end

the tour in New York with the mooch and

just sort of celebrate in our hometown.

By the way, the Knicks are going to be

playing as well. Uh Knicks are in the

conference finals. There's just a very

there's a very positive, exciting New

York City energy going on right now and

we're going to ring that bell um live in

New York at town hall. So, I was kind of

excited about LA because LA feels sexy

and cool in Hollywood. I still am, but

I'm I'm slowly kind of getting more

excited about New York City. What about

you?

>> I would say LA because a lot of my

friends from college are coming and

that's nice for me. So,

>> that will be nice.

>> Yeah, probably. Yeah, probably LA.

>> Very exciting. Well, if you want to get

the tickets, head to profarketsour.com.

We can't wait to see you there. We'll

see you very soon. Shall we get into the

show, Scott?

>> Let's get into it.

>> Hey everyone, if you haven't already,

please subscribe to our ProfS YouTube

channel. And if you want to get

notifications of all of our latest

episodes, just click the bell icon as

well. Inflation fears drove the yield on

30-year treasuries to its highest level

since 2007 last week. And surge in

yields weren't just an American story.

30-year bond yields in Canada, Germany,

France, Spain, Portugal, the

Netherlands, and Switzerland also hit

12-month highs. big part of the spike is

owed to war-driven inflation and the

resulting probability that the Federal

Reserve may need to hike interest rates

sooner rather than later. On Cali, the

odds of a Fed rate hike before year end

have climbed from around 15% a month ago

to above 40%

last week. So, it appears Scott that the

bond market is finally reacting to

inflation in a serious way. The 10-year

yield hit almost 4.7%,

its highest point since January of last

year. As I said, 30-year yield hit five

almost 5.2% on Tuesday, its highest

level uh since July 2007. This is what

HSBC is calling the quote danger zone,

meaning that yields have risen to levels

where they will actually start to cause

some stress in other parts of the

market. This is why it's important for

investors to be aware of what's

happening in the bond markets.

Meanwhile, Bank of America just

published a survey. They found that 62%

of fund manager respondents expect that

30-year Treasury yields will hit 6% this

year. If we hit 6%, that would be the

highest level since 1999. In other

words, despite the relative calm that

we've been kind of analyzing in the

stock market and trying to understand,

what we're now seeing is that bond

investors are looking at inflation.

They're looking at our prospects in the

Middle East and Iran, what gas prices

and oil prices will do to overall

inflation in the rest of the economy,

and they are as a result freaking out.

That is what we're seeing with yields.

Lots to get into here. What are your

initial reactions? Well, the term we

used when this tariff nonsense went

crazy and he backed away was that that

it ends up that the bond market are is

the adult in the room and was last April

with tariffs and now it appears that

um the bond market is sort of

unfortunately not unfortunately

fortunately putting pressure on Trump's

decisions. What that results in though

is that

every time I re I hear President Trump

threatening the IRGC in Iran, it's so

obvious he has no cards to play cuz he

desperately wants out, but he can't get

the terms he wants unless there's a

credible threat that he's going to stay.

It's literally the definition of a

quagmire cuz right now the RGC is

supposedly rebuilding. They've survived.

So their attitude is this guy is telling

his party and the nation that this was

supposed to be over four weeks ago. His

popularity is plummeting. He desperately

wants out, but he quote unquote is

threatening to do more. So the bond

market has stepped in and said, "Okay,

with energy going up, uh we have greater

inflation, which is pushing bond yields

up and increases the odds that the Fed

will raise rates." Typically, when the

bond market goes up, it draws market

money out of the equity market because

people can get a better yield uh with

what they feel is a safer investment and

also fewer deals get done because it

gets more expensive to buy things. It

gets more expensive. You know,

everything in the economy, your your

auto loan, your mortgage, your credit

card goes up and the yield on the

10-year Treasury kind of sets the bar

for interest rates across the economy,

right? And higher yields also increase

the cost of servicing our debt. In 2026,

he also spent a trillion dollars on

interest payments. That's 88 billion a

month, roughly what we spend on defense

and education combined. And Neil

Ferguson has named this Ferguson's law.

Any great power that spends more than on

spends more on debt service than defense

starts to decline.

And then the question is, could this

trickle down to software and AI who've

taken out private credit loans? Private

credit loans are typically floating

rate. So what happens when the AI shell

companies that are built on debt, what

happens when their debt service costs go

up and then they hit a bump in the road,

uh, where their capex continues to go

up, but the revenues don't scale in line

with their capex, which according to the

FT and everyone every other analysis

I've read says it'll be nearly

impossible for revenues to keep up with

capex at AI companies. So you could have

shavings of [ __ ] on a [ __ ] salad here,

right? You could have costs go up, so

consumers take their spending down, and

then the companies that are are most

levered or who have been tapping the

credit markets uh see their costs

explode while maybe registering a a

decline in revenue growth that can't,

you know, there's no way they can live

up to their expectations. So, you know,

we keep saying the deficit doesn't

matter until it matters. It feels like

that mattering may be may be starting.

>> Yeah. Yeah. And it all goes back I mean

I I'm glad that you lay out some of the

downstream effect or maybe we'd call it

sort of the chain reaction that happens

as a result of inflation because you

know this is relates to our conversation

last week which is that rising inflation

has generally been almost ignored by

equity investors. investors don't seem

to be that worried about the inflation

and there are all these reasons and

these arguments as to why inflation

doesn't really matter and some of them

are quite compelling but you know when

you kind of model this out over the long

term and you think about what rising

prices actually means for all of the

other parts of the economy we had

inflation which rose to 3.8% 8% last

month. The PPI rose to 6%. Gas prices

are up more than 50% year-over-year.

Airline fairs are up more than 20%.

etc., etc., etc. One of the main

implications of these rising prices is

that it probably means that we will have

a rate hike from the Federal Reserve

this year. And in fact, if we look at

the odds on Cali, the chances of a rate

hike have risen to 40%. At the beginning

of the year, those odds were less than

10%. You'll remember heading into the

year, we thought we were going to have a

rate cut. In fact, the odds of a rate

cut on Cali again at the beginning of

the year were 96%.

We just assumed that this was going to

happen. And so, what happens when you do

hike rates, which it it increasingly

seems that that's potentially going to

happen here, or at least is a very real

possibility getting closer to a

probability. It means that you just have

higher interest rates across the board.

It means that consumers are spending

more uh on on their interest payments,

on their mortgage payments, on their

auto loan payments. And then, as you've

mentioned, the cost of of debt rises for

companies too. Everyone has to pay

higher borrowing costs. What might that

do to earnings? What might that do to

earnings expectations? What might that

do to the AI buildout, which to your

point is increasingly dependent on debt?

We look back to October of last year, AI

related debt ballooned to more than a

trillion dollars. As you point out, a

lot of the private credit in there is

floating rate debt, which means that if

the interest rates rise that it's going

to cause real problems for the servicing

cost of the AI buildout. And so,

we can see how this all kind of funnels

down through the economy and results in

the thing that investors are very

worried about and don't want to happen,

which is stock prices go down. And I

just think that this this is becoming

more and more a possibility closer to a

probability. And it seems to me that

investors are kind of downplaying

the negative impacts of inflation

specifically on stocks. And I've been

wondering about why that is. Like why

aren't investors as worried as you might

think that we're seeing historically

very very high inflation that doesn't

appear to be set to come down anytime

soon? And again, we've had no indication

that this war is going to end because

every time Trump says it's about to end,

2 days later he reverses course. And

that's happened probably like seven or

eight times in the past few weeks. So

I've been thinking like why aren't they

worried?

One idea that I have in my head is maybe

they're just optimistic by nature. Maybe

that's just what it means to be an

investor. Your default setting is things

will work out. It's it's a better bet to

just bet on the outcome being a good one

because as we know you don't make that

much money shorting the market. You

certainly don't make much money not

being invested in the market. That's one

reason. The other reason though is I

wonder if inflation has just become

inherently politicized

>> and the politics are skewing investors

perspective where to believe that

inflation is an actual problem is to

believe and to admit that Trump made a

mistake that he one shouldn't have

raised tariffs as an example but two

that he shouldn't have attacked Iran

that he shouldn't have invaded the

Middle East or at the very least that

his strategy in doing so was a fumble.

But I I wonder if investors just don't

want to admit that. And we should be

clear, we see this from investors on the

left and from investors on the right.

But it seems it's happened to such a

degree where to admit that we're seeing

structural issues in the economy is to

admit that the president

who has become this sort of larger than

life personality in the minds of many

investors is wrong about something that

he his strategy was flawed. And I wonder

if that's inherently pushing investors

to try to downplay or ignore or put

their blinders on and think no it's not

a problem everything's fine. Yeah, we'll

just leave in a couple weeks. Yeah, it's

going to be okay. And that might be a

real problem over the long term. It

seems that the bond investors have

decided, no, this is a problem. But over

in the stock market, you're not really

seeing that.

>> So despite the fact that

I worked in fixed income, I always have

a difficult time other than saying your

auto loans are going to go up, trying to

explain why interest rates are so

important for the economy. And so the

first thing the first thing that happens

when interest rates go up is that the

first casualty is speculation and so

growth companies which have been driving

the market right 94% of the S&P gains

have been from AI companies or AI

related companies and it's all about

growth and essentially these companies

aren't making a lot of money right now

but their potential because they're

growing so fast is that in 5 10 years

they might be generating more topline

revenue Microsoft, but revenue 5 years

out with higher interest rates means

that that revenue isn't worth as much

now. So growth stocks get hammered

because they're all about projecting

huge cash flows in the future which when

reverse engineered or valued back to you

know a dollar in 10 years when interest

rates are 2% is worth you know 90 cents

now a dollar at interest rates of 6% in

10 years you know is worth 45 cents or

55 cents right so it just the

speculative stocks get get crushed,

right? So translation, the economy, you

know, the fantasy economy goes into

recession first. Housing gets hit next.

Monthly mortgage payments explode,

affordability collapses, and this

really, as most economic shocks, takes a

toll on the people who can't afford to

pay cash for their the house. So

first-time buyers, young people get

especially hard hit. It also hits

leverage. So private equity, commercial

real estate, regional banks, anything

dependent on rolling over cheap debt

starts start sweating, right? And then

consumers finally pull back because of

credit card debt, auto loans, and

financing costs suddenly become real

instead of background noise. And

businesses cut hiring, layoffs follow,

and you kind of enter into this little

bit of a doom loop. But the reality is,

and this is why capitalism is just such

a gorgeous organism, rate spikes are

painful because they're supposed to be.

They're they're kind of the economy's

way of destroying excess, repricing

risk, and reminding everyone that

capital actually has a cost. It's

basically the ruler wrapping on the

knuckles of the Trump administration's

reckless economic policy and waking

people up from this fever dream that AI

is going to create 10 different

Microsofts in the next 24 months. It's

it's it's the alarm clock going off

saying no,

you know, your dreams are over, my

friend. It's it's the cold shower that

we've, you know, we've all been needing

to take for a while,

>> which would be just devastating to the

markets if that were to actually

transpire. And I think I mean, you made

the point about how the bond markets

going back a year ago to liberation day

and the and and the tariffs, the bond

market was the adult in the room.

>> Trump issued these tariffs. He came out

with his stupid billboard in the in the

garden and everyone freaked out. Stock

market investors freaked out. Bond

investors particularly freaked out where

you saw the 10-year yield jumping more

than 50 basis points in three days. It

was the biggest three-day jump in more

than two decades. It was it was huge.

And Trump admits, oh, the bond market's

freaking out here. And then he tacos and

he puts the tariffs on pause. And the

learning from that was okay, the bond

investors, the the the bond vigilantes

as they call them, they're the ones who

are going to sort of steer uh Trump's

sort of wacko policy in the right

direction if he starts to do things

they're going to have real serious

consequences in the markets. So the

question then becomes like is is the

same going to happen in in the current

situation? Will bond yields today change

Trump's economic policy like he did with

the tariffs? The trouble is the new

policy is a war in Iran which is a lot

more difficult to just turn off. I mean

we've already spent

I mean according to Pete he more than

$25 billion on the war. That was a month

ago that he said that. So it's probably

a lot larger. Trump's already requested

$1.5 trillion for the defense budget for

next year. We've already lost 13 lives,

nearly 400 wounded. Many other lives

have been lost. I mean, the costs here

are a lot more significant and a lot

more personal, a lot more sensitive. And

so, the idea that the bond yields are

going to go up and then Trump is just

going to be like, "Okay, I'm going to

I'm going to turn off this war and we're

going to open this straight back up and

just concede defeat to Iran." That's

just not going to happen. So the

difference between today and last year

is that you don't have that same um

wrapping on the knuckles mechanism as

you as you just put it because there's

so much more to lose here. It's so much

harder to get out of this one. As you

say, it's it's a quagmire. That wasn't

the case with the tariffs. So, I I just

I wonder if we're actually in

potentially a more difficult situation

than we were last year where it was kind

of easy to steer him in a certain

direction. But with this, when it's a

hot war, when you're firing weapons,

firing missiles, when you're sending

ships over, physical ships over to

attack a nation, and now we're in the

midst of this thing. I'm just not sure

that the bond markets have the power

that they used to have. Um, which to me

suggests that yields will only continue

to rise, which increases the likelihood

that all of those dominoes will fall in

the way that we just laid out. So, this

is something to certainly keep an eye

on. I don't think it's we should ring

the bell right now and and call it okay,

now the bare market's going to happen. I

don't think I don't think that's the

right takeaway. But certainly what we

should be doing is keeping a very close

eye on those bond yields, keeping a very

close eye on inflation and understanding

and being realistic about how long will

we stay in Iran. How long will the

straight continue to be blockaded?

Because that is the thing that is

driving all of the inflation that we're

seeing, not just America, but around the

globe and why you're seeing those bond

yields rise in other nations as well.

Low rates not only create the illusion

of prosperity, they create the illusion

of genius.

>> Yeah.

>> And that is, okay, my economy is doing

great. I can spend $7 trillion and 5

trillion in receipts and juice the

economy and keep stock prices high. And

then all of a sudden, what you find out

is, do you have a real economy? Do you

have sensible economic policies? And do

you have a real business?

And you know, I I hate to say and

unfortunately again, it hits earners

more than it hits owners because if you

own real estate, the wealthiest people

in Argentina really haven't changed much

because despite massive inflation,

the people the wealthy families there

bought land and they bought hard assets.

So inflation hits earners. It hits

people because typically during

inflationary periods, wages don't keep

pace with the cost of goods. So

everyone's prosperity goes down. Whereas

owners if inflation goes up then asset

values go up typically not always you

know sometimes if you have stocks they

get hit hard but inflation is

it's it it really attacks the society

because one of the things or one of the

myths about society is that everyone

talks about unemployment

that when people aren't working they get

an antsy and angry and that's true but

where they get violent or chaotic is

when they're working and they're still

hungry and that's what inflation does it

attacks your prosperity where you feel

like, okay, I'm working two jobs and I

can't afford I can't afford to buy

diapers.

>> And that's exactly what we saw last

month where wages, real wages fail

because inflation outpaced wage growth.

And it's likely that that's going to

continue.

We'll be right back after the break. And

by the way, we will be taking a break

from the feed while we travel for the

tour, but tune in on Friday for our show

live from San Francisco.

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We're back with Profy Markets. One of

the most anticipated IPOs in years is

finally happening. SpaceX officially

filed to go public last week, giving

investors their first detailed look at

the company's financials ahead of the

company's planned debut on June 12th.

The company is reportedly looking to

raise at least $80 billion,

which would make it the largest IPO in

history, and it could be just the

beginning of a major wave of blockbuster

offerings with OpenAI also reportedly

preparing to file in the coming weeks.

So, Scott, the SpaceX numbers are

finally out. Uh, I cannot wait to dig

into this with you. Let's just look at

2025 revenue, $19 billion. Q1 revenue,

$5 billion. Q1 net loss, $4.3 billion.

Um, so much to talk about here. Where do

you want to start?

>> I want to start with the Iawaska trip.

Um,

so the first 14 pages of the S1 include

pictures of rockets. AI was mentioned

over,200 times in the S1. For context,

it's longer than The Great Gatsby or The

Catch from the Rye. And here are some

direct quotes from the filing. These are

my favorite. We do not want humans to

have the same fate as dinosaurs.

Well, thank God you're here, Elon. For

decades, this is another quote. For

decades, a reality where humanity

travels between the planets and the

stars has felt tentalizingly close, but

still locked in the pages and screens of

science fiction. Okay. The sun contains

approximately 99.8% of the solar systems

energy. And as a result, we believe it

is the only truly scalable solution to

terrestrial energy constraints in the

age of AI. Jesus Christ, put the [ __ ]

pipe down. We believe the next paradigm

shift for humanity is the creation of a

resilient perpetually expanding space

fairing civilization ultimately

preparing us to cardv type 2 status

defined in the filing itself as a

civilization that harnesses the full

energy output of the sun.

Okay, now give me $1.8 trillion. And

effectively what you have here is you

have a core business that is genuinely

excellent. Starlink generated 3.3

billion in revenue in the single quarter

with 1.2 billion in operating income.

That's a 36% operating margin on a

monopoly satellite internet business

with no serious competitor in sight.

Let's give them that.

>> Totally.

>> If this were the whole company, it would

be one of the great businesses of our

era.

>> Yes. But it's not the whole company.

Stapled onto this rocket ship is XAI,

a business that is clinically speaking a

money furnace. In 2024, XAI lost 1.6

billion on 2.6 billion in revenue. By

2025,

losses ballooned to 6.4 billion on 3.2

billion in revenue. Revenue went up 22%.

Losses went up 310%. And by the way,

just to interject there, let's look at

first quarter of 2026.

AI the AI units losses for one quarter

alone are up to $2.5 billion.

So if we're going to annualize that out,

we're up to we're up to $10 billion. But

of course, it's going to be even more

because it's actually growing

exponentially. You look at the net loss

for the whole company for the first

quarter of 2026, their losses grew by

700% year-over-year in one year. So

these losses are insane. Like totally

totally absurd. And to your point, it's

not coming out of the connectivity

business, which is the satellites. That

is a profitable business. That is a

great business. Starlink is amazing.

We've said that for a long time. is

coming out of one the space uh unit

which by the way it it's not that bad.

It's a $600 million loss in Q1 but

mostly it's coming out of AI. AI is the

money incinerator in this business. It

has gotten way out of control and it's

all because he's decided to merge that

company, fold XAI into SpaceX, which is,

as you say, sort of the bag of [ __ ]

that's been stapled to the actual

business in order that he can command

this ridiculous valuation

>> or find the cheap capital. He needs to

continue to to be the the the money

furnace. Yes. In Q1 2026 alone, net loss

of 4.3 billion on 4.7 billion in

revenue. Total capex 10 billion in the

last 90 days. 7.7 billion of that was

for AI. Cash on the balance sheet

cratered from 25 billion at the end of

the year to 16 billion by March 31st. So

they burned 9 billion in cash in a

single quarter. That's 100 million a

day. So I I don't even see them as

investing in the future at this point.

They're they're they're

kind of it's like the future is billing

them in advance. And total debt on the

balance sheet is 29 billion. I mean I

mean this is a great company.

>> It It was a great company. It was. And

then they stapled XAI into the thing and

now it's a [ __ ] company.

>> Well, let me bring this back to me. When

my mom after my parents split up and my

mom was living in Westwood, my mom was

trying to find, you know, the next dude

and the next guy and she used to date.

And I physically remember opening the

door. My mom would go to dances and

she'd meet somebody and they'd want to

take her out on a date and someone would

knock on the door and I'd open it and be

a man and they'd see an 8-year-old kid

and I could physically see them like

be uncomfortable and disappointed

and and this is hard for me, Ed. This is

very hard for me.

>> I want I wanted a new daddy so badly,

Ed. Anyways,

this is you meet Snow White and you're

like, "This is going to be amazing." You

know, SpaceX

>> just saying.

>> And then you find out the seven dwarves

are just these awful psychopathic

borderline maniac children.

>> I don't like this analogy. You're not

>> Snow White. Snow White is SpaceX,

but the dwarves have are You get the

dwarves, too. And the dwarves are Chucky

and Kujo and these companies that where

he is trying to use the unbelievable

moes and technical sophistication and

monopoly power of SpaceX to find cheap

capital such that he can catch up to

open AI which he's still [ __ ] furious

he gave up ownership in.

>> Yeah. So, and then my favorite part, my

favorite part is that my favorite line

in this whole thing, the f the Easter

egg here was that it came out in the S1

that he bought $131 million. He spent

$131 million of the company's capital to

purchase recalled trucks.

Basically, he he he spent $131 million

to buy back Cyber Trucks that were

recalled.

How's that going to help SpaceX

shareholders?

So if you look at if you look at the

valuations here and you compare it to

even if you gave even if you said XAI

was worth as much as OpenAI on a

multiple basis if you took Starlink and

compared it to the best telco and you

took the rocket company and compared it

to another rocket and you you come up

with about $600 billion in valuation.

Let's double it because of the Elon

effect that's 1.2 trillion. But this is

and our our buddy Aswata Motorins valued

the thing at about $1.2 trillion

dollars, but they're talking about they

they're leaking that they think it's

going to go out at $2 trillion.

>> Yeah,

>> I don't think so.

>> That's the problem.

>> What happens in a company like this over

time is that people find the shittiest

asset and assign that valuation to the

whole thing. In addition, every telco,

and this is kind of a company, a telco

attached to a rocket. Those companies

ultimately their earnings growth have

trouble keeping up with their capex

demands.

So, this feels like a company, an

amazing company with, like you said,

bags of [ __ ] strapped onto it at a

valuation where they're assuming

everything has the same potential and

luster of the core property of SpaceX.

Yeah.

>> And the bags of [ __ ] are designed to

inflate the valuation of the company.

And indeed, that is what they have done

because they're going to raise $80

billion and they're going to target a $2

trillion valuation. And let's just look

at what that valuation actually means.

We know that they generated $19 billion

or a little less than that in 2025. So,

this means that this company is valued

at 106 times sales. Just want to compare

this to Nvidia. By the way, their Q1

revenue, which was $4.7 billion, the

revenue was grew 15%.

So, this company is the next hot

company. It's growing at 15%. And it's

valued at 106 times sales. Let's compare

it to Nvidia. Nvidia just reported their

earnings. They grew their revenues by

85%.

They generated 58 billion in net income.

That's gap net income up 211%

year-over-year. They are trading at less

than 22 times sales. So the multiple

there is a 5x difference in that

multiple despite the fact that Nvidia is

growing more than five times as fast as

SpaceX and also it's generating billions

of dollars in in in in cash flows. This

is a losing money business. And now

let's compare it to some of the other

previous hot IPOs that we've seen when

they've gone public. Meta when it went

public it was growing at 88%. It traded

at 28 times trailing revenue. Google was

growing 240%. It traded at 10 times

trailing revenue. Saudi Aramco maybe we

don't want to make the comparison but

let's just make it anyway traded at five

times trailing revenue and it was

growing faster than SpaceX. This is the

thing that I don't think people really

understand here now that we know these

financials. This com this this company's

business actually isn't growing very

fast at all. 15% in the world of AI in

the world of big tech is nothing. You

cannot be demanding a $2 trillion

valuation which would make it the

seventh most valuable company in the

world. It's going to be more valuable

than Meta, Broadcom, Burkshire Hathaway

and its revenues are going to be lower

than Macy's.

So, it's not it's not a I'm not taking a

dig at the business itself. And I think

it's cool that we're building rockets,

and I think it's cool that we're trying

to go to space, but the idea of of

asking for $2 trillion is completely

insane.

Not even a debate, not even a

conversation. That makes actually no

sense at all. But the reason that

they're going to get away with it is

because they're going to sell the Elon

story to the retail investors because

they've reserved 30% of the allocation

for retail, which is about three times

higher than the average IPO because they

know that they have to sell this to the

Elon fans who will pay whatever price

because they don't care what the

financials actually say. They just love

Elon and they think that we're going to

go to Mars. And I hate to sort of

patronize them, but I'm sorry, that is

the reality of what's happening here.

You cannot argue that this valuation

makes sense. If you if you reduced it to

maybe $1 trillion or or lower than that,

reduce it by 60%. Maybe we can have a

conversation about whether this is a

reasonable investment that makes any

sense at all. But at $2 trillion, like

now that we know the numbers, very clear

here, stay away from this thing. Do not

invest at a $2 trillion valuation. It

makes no sense at all. So, Palunteer has

the highest trailing price to sales

multiple in the S&P 500. It trades at 67

time sales. Number two is Crowd Strike

at 34 time sales at a $1.8 trillion

valuation, which is the low end

supposedly of their range that they're

targeting. SpaceX would be trading at 94

times trailing 12 months revenue. And

like you said, the valuation just makes

no sense. If you look at the sum of the

three business lines, space,

connectivity, and AI, and assume that

each segment will command a multiple

that is twice what their competitors are

at, you get to 1 trillion. So the

bankers here are tasked with telling

investors that the total addressable

market is the size of the entire US

economy, $28 trillion.

>> By the way, that was my favorite quote

from the thing. They said, quote, "We

believe we have identified the largest

actionable total addressable market in

human history." And then it's a giant

bar that's $28.5 trillion and as you say

that's the GDP of America. Like that's

the pitch and that's what's going to get

and the sad thing is I think it's

actually going to work but that's how

they're getting there with this like

dumb handwavy. I mean it's very we work

which you're an expert in. Well, we

work, to be clear, Weiwork didn't have a

great business, but the some of the some

of the, you know,

>> but the feel of the messaging.

>> Yeah. Let's take mushrooms and elevate

the consciousness of the world and the

planet, there's there's a lot of that.

Um, I don't know. and this this company

gets out. But I'm and I've been so wrong

on Tesla and Musk companies. But I just

wonder is there enough

cultist to show up for this thing at

$1.8 trillion? Is

>> that's the question.

>> Are there enough people that are just,

you know, sus suspend

suspend disbelief just to pile into this

thing because

they they think, oh, Musk, it's Musk.

>> The numbers aren't going to do it.

Let's be very This is what we've learned

here. We finally have the numbers. We

now know the numbers are not very good.

It's all hope and hype. Is there enough?

We'll be right back. And there's still

time to get tickets for some of our tour

dates. Head to profarketsour.com

to secure your seat in LA, Miami, or

Chicago. We hope to see you there.

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We're back with Profy Markets. There's a

shakeup happening in the media industry

that hits especially close to home for

us. James Murdoch is acquiring the Vox

Media Podcast Network along with New

York Magazine and the Vox News site in a

deal reportedly worth around $300

million. And who is at the center of

this very exciting and hot new media

deal?

Scott Galloway and kind of Edson. This

show, we're a part of this in a way. Um,

Scott, I mean, what do you make of this

deal? Uh, what do you know? What can you

share? Is this going to change our

business?

Any thoughts? So James Murdoch, which is

sort of the I don't know the softer,

cuddlier, moderate Murdoch,

um

has decided using his he owns stakes in

Tribeca Film Festival, the Bull Work,

Art Basil. He's basically u purchased

New York Magazine and the podcast, the

Vox Media Podcast Network. the third

part of the business uh which is some of

their sites vulture eater um

SB Nation that do well but it's a

difficult business those are going to

remain independent for now my guess is

they'll get sold off pretty soon so kind

of the story of Vox was 10 years ago

or eight years ago people thought these

digital media assets alternative media

were the future and these guys raised a

lot of money and went out and started

kind of this new generation of hip

media, right? And

people were excited about it. So,

Buzzfeed, Food 52, CNET Vice, Mike,

Mashable.

And just to give you a sense, what's

happened is basically Google and Meta

decided erected these toll booths and it

basically sucked all the oxygen out of

the room by diverting traffic away from

these sites or charging them a lot for

it. And these slowly but surely, these

alternative media companies have become

less economically viable. Buzzfeed went

out of business. Food 52 sold some

assets. Food 52 lost 96% of its value.

CNET 94%. Vice Vice ultimately declared

bankruptcy. Mike lost 95%. Mashable lost

80%.

And essentially what what Jim, the CEO

of Vox, did was said, I'm going to

aggregate some kind of great assets and

then I'm going to spack it and take it

public at a billion dollar valuation,

which was the peak valuation there. uh

it didn't work. The market soured on

these assets and basically Vox to a

certain extent was a company that

aggregated assets that had negative

synergy. And Jim is a smart guy. What he

did is he decided to kind of bust the

company into three units. One was New

York Magazine, which I describe I would

describe as a trophy asset. It does

okay. It punches well above its weight

class. It's kind of the HBO magazines.

It does well. They consistently are kind

of water cooler conversation. and the

editor, the editor-in chief there, David

Huscoll, is a very bright guy and is

always finding amazing new reporters.

Uh, but it's a magazine business. It

does better than most magazines, but

it's like the Jets. It doesn't make any

money, but there's always someone who

wants to own it is the way I would

describe it. Trophy asset. The websites

do okay, but it's a difficult business.

They do, you know, okay. And it ended up

that the business that uh Jim Murdoch

wanted or James Murdoch wanted was the

podcast. And the podcasts are uh

essentially growing. Podcasts are

growing about 17% a year as a as a you

know uh they grew 18% year-over-year

reaching 2.9 billion. That's a 27x

growth over the last 10 years. Uh in

2024 you saw ad revenue growth of 26%.

And now 70% of Americans aed 12 plus

have listened to a podcast and 51% have

watched one and 55% are now monthly

consumers. and 2/3 of 12 to 34s which

advertisers love have listened to or

watched a podcast the average podcast

listener is 34 versus the cable news you

know the business the business is

actually growing as fast or faster than

some of the tech titans we talk about

and it's ad supported so it's the

fastest growing adup supported medium

outside of meta and alphabet

and u essentially supposedly where what

Murdoch paid the most for what drove

this value I don't know this, but

supposedly he paid about 300 somewhere

between 300 and 350 million for the

magazine and the podcasts, but

supposedly the the crown jeweler, what

he really wanted was the pods.

And so this is, you know, I've gotten to

know him a little bit. I knew him

before. He seems like a, you know, I'm

not just saying this because he's a, you

know, he's technically the owner or the

boss now. You know, Prof is an

independent company. We have a deal

where we sell our advertising through

Vox and they take a percentage of the

revenues, but we're essentially an

independent company. Pivot is co-owned

by Cara Scott and Vox, which means no

one has control. Everyone just has veto

authority. We're like the European Union

with We had, you know, I don't mean to

sound self-important, but we could have

vetoed this transaction. And we didn't

because we like Jim Bankov. I would say

we like the gyms and we like James

Murdoch and we wanted to see this deal

go through and we think it makes a lot

of sense but you know this is um this is

Jim and Vox were kind of on the last

helicopter out of Saigon and that is our

peer group has been crushed and Jim to

his credit make a bit made a big

investment in podcasts which have grown

really nicely. Um I don't know what else

to say about it. Do you have any

questions, Ed?

>> Any thoughts on the snacks or any

questions?

>> Yeah. Um, well, I think one big question

for a lot of people is who is James

Murdoch? We know he's Robert Murdoch's

son. Uh, we know that Rupert Murdoch is

the infamous, notorious owner, creator

of some of the most iconic um,

conservative

media companies. And his son is now the

owner of the company that is our

advertising partner. Who is James

Murdoch? Uh, I'm trying to figure out

which kid he would be. I I think he's

Well, okay. He he he's he's I hate to

assign him this way, but he's kind of

the lefty Murdoch kid. I would describe

him as center left. I think he's the

only person that could get this deal

done at Vox because I think the others

are kind of squarely seen as pretty

right leaning or Laughlin got the Keys

to the Kingdom at Fox. I think the

daughter Elizabeth Murdoch is off just

enjoying herself and producing films.

She's talented. She's a creative. But

James is he wants to make a name for

himself. He's about New York magazine.

He's about this podcast. He's got great

assets. Tribeca Film Festival

is a good asset. I think it's a little

bit dusty, but I think he's going to try

and rejuvenate it. And I think that

um our Basel is a global brand that my

guess is uh probably is probably a

bigger brand than it is a business, but

I would imagine that has all sorts of

opportunities. Uh but he's considered

he's got a good reputation. He's known

as being someone who's smart, digitally

savvy,

and you get the sense. I've known him

for a couple years. Um, quite frankly,

you get the sense that he understands

his good fortune and privilege and is a

nice man. Um, you know, and his uh, so I

don't I don't know him well. I know him,

but if we were going to ask for what

would you want? You'd want a benign

billionaire, and that's what this guy

is, and he's smart. Uh, so, but we had

an all, not an all hands, but we talked

to some people at Prop G, and people

obviously understand were concerned and

want to know what this means. quite

frankly doesn't mean a lot for us

because

nothing is going to be as far as I know

that different but he wanted to make

sure we were happy with Vox because

we're a big component um you know

combined Privet and PropG are a very

large important part of Vox

and when I when I talked to Reuters and

everyone was calling me I'm like you

know guys I think Cara and I probably

could have [ __ ] up this deal and we

didn't because we like Jim Bankoff and

we like James Murdoch And we were told

that everything would be the same and

the economic interests are aligned here.

We have a great partnership. Things

work. Is there some synergy? We always

overestimate synergy. Maybe we do I

don't know if it Edson does live podcast

or Bosle. I don't know. But maybe maybe

not. Um

>> the synergy.

>> Maybe.

>> Jim Mug, do you hear that?

>> Live from Art Basle ProfG Markets.

>> Yeah. I don't know. I don't know what

I'm pretty sure it means I get to meet

Brett Bear or or my next wife is Megan

Kelly. There's something something's got

to happen here.

>> Money in that in some way.

>> Something something's going on.

>> So, look, I mean this just so people are

clear, this guy uh James Murdoch Carb

put it the other day that he's been

described as the woke Murdoch, which I

thought was quite funny. this guy is is

not kind of in the same camp as the rest

of the family, which sort of is I

probably interesting to people because a

lot of people probably think that

similar to what we saw with Paramount

and David Ellison, maybe this guy who's

sort of in the Trump camp is taking over

all of these historically more

leftleaning or maybe just less

conservative media outlets. That's not

what's happening here. despite the fact

that that his name is Murdoch. In terms

of what it changes for our business, it

actually changes nothing because as

Scott mentioned, we're an independent

company and Vox Media is our advertising

partner. So, they help us sell our ads

and this guy now owns the company that

helps us sell our ads. It also means

that we're going to be in the same

studio. I mean, so far what we've been

told is that literally nothing is going

to change. I think the question that is

worth exploring is why is James Murdoch

interested in this? Why does he want to

buy this uh advertising company

essentially which is Vox Media? There's

there's New York Mag which is a trophy

asset. So maybe that would be fun. And

then there's the Vox Media podcast

network. And the question is really is

he buying it because it's fun as we

often talk about with media assets

because as you talked about with David

Ellison if you buy those assets that

maybe you get to go to the Oscars after

party etc. Or is it that the Vox Media

Podcast Network is a genuinely good

business and there is opportunity that

he sees there something that he could do

to the business? Maybe step in as kind

of an activist and turn on some revenue

that didn't exist before. I don't know.

What do you think?

>> Oh yeah. Well, he bought it because he

has daddy issues. I mean, he sees a

future in podcasting.

Look,

okay, there's there's two there's two

assets here and they're totally

different.

>> New York Magazine is a trophy asset.

It's ego.

>> Yeah,

>> it's

>> but I don't think he wanted that unless

you know otherwise he did.

>> He wanted it. Yeah, he wanted it. And

>> I think they would have sold There's

three basic businesses here. There's the

online digital media property

businesses, Eater, Vulture, that stuff.

And then there's the podcast and there's

the magazine. and James wanted the

magazine and the podcast and he might

have a vision. I can see maybe New York

Magazine combining with there's probably

something there, but I personally think

anybody who buys magazines right now,

it's ego. I I just think these are

trophy properties.

I I have a hard time believing the New

York Magazine is going to be a big

business. Uh it continues to be a great,

you know, a great property doing really

good journalism. I think that James is

actually quite civic-minded. So he was

probably drawn to their ability to punch

out really relevant stories that have in

influence. You know, Lorraine Pal jobs,

the Atlantic probably isn't a fantastic

business, but I think she gets a lot of

psychic reward around,

you know, financing and running a good

business that also has a lot of cultural

relevance.

But it's not from a shareholder

perspective. My guess is,

like I said, billionaire Republicans buy

football teams, billionaire Democrats

buy media properties or magazines or

newspapers because this is not, you

know, God, I really want to get into the

magazine business. Said no one ever

right now, but when you show up and you

own New York magazine, you're kind of

relevant. His father used to own it. So,

I think there's a little bit of like

what comes around goes around. It's a

good business. You can sort of see some

synergy with Tribeca Film Festival and

Art Basle. The crown jewel here is the

podcast business because podcasting is

growing and it's the fastest growing ad

business. He's kind of built in a

factory of who we would want to buy the

business. Jim sticking around, which

we're happy about. Jim is like the

nicest.

I mean, I'm this may come as a surprise

to you, but I'm not easy to manage and

uh you know,

not once. Think about all the stupid

[ __ ] I say on this show, the offensive

[ __ ] the the how much I get it wrong.

Uh Jim has never called me once and

said, "Hey, dial it back or try to avoid

ship posting zip recruiter or or maybe

you don't need to or maybe you don't

need to make fun of Tesla quite as much

recruit just

on this.

>> Maybe don't you know say that that

Cheryl Samberg has done more damage to

young people than any person in history

like maybe don't do that." Right? So he

has not once ever his attitude is he

calls and he says how can I be helpful

and uh so I I just wanted to you know

when I talked to James he wanted to make

sure we were happy with Vox and the

relationship was going to continue and I

said yeah I'm really

I'm really h happy until you know that

isn't until Comcastic agreed to buy us

for a crazy amount of money then I'm out

of this [ __ ] taco stand. I mean, I'm

super committed to the relationship.

>> I'm super committed to

>> I'm super committed to the relationship.

>> All right, F. Let's wrap this up. Any uh

advice to James Murder? What could he do

to make this not just a trophy asset,

but extremely profitable, high growth

asset? What What's the secret source

that he needs to inject into the Vox

Media Podcast Network?

>> I have such trouble. If I were James

Murdoch, I'd be in a bea right now with

a bunch of Eastern European women. If I

had those billions,

>> I'd be living a much different life, Ed.

>> Profound.

>> So, I can't tell him what to do because

he's clearly much different than me. Uh,

what would I do? Make sure that I would

probably use this as a platform to go

roll up a bunch of other podcasts such

that I think the plan podcasting is what

Martin Sell did in the ad business in

the 80s and 90s. And that is there are a

lot of good businesses you know uh you

don't even remember these businesses but

Martin Purus started a company uh Oglev

and Matherther um Fallon Miguelott uh uh

Wayne Kennedy which remained independent

all these little agencies Jay Walter

Thompson and the problem with these

things was they weren't salailable

assets because there was too much keyman

risk if Martin Purus left Amirad Purus

and they had one big account BMW. If he

bought the company, it was just too much

risk. And so what he did was he went to

all these companies and said, "I will

give you seven times your IBITa. You

will sign very ownorous employment

contracts and if I sign up enough of

you, I'm going to be able to take it

public and it'll trade at 12 times." So

there's an arbitrage because he could

say to the markets, Martin Purus and

Shelley Lazarus aren't the business

because I own 12 or 15 of the agencies

and if any one leaves or the biggest

client goes away, we're still okay

because we've got 12 or 13 other

agencies. The play here is the

following. Go get a bunch of podcasts,

whether it's Huberman Lab or Modern

Wisdom or Plain English or Mel Robbins

or Smart List, and roll them up such

that there's no key man risk or key

woman risk and you can get some synergy

on the back end, although you always

overestimate that. And then either take

the thing public or sell it for a lot of

money or just have the cash flows. But

this is uh it's a business that's

growing. It's a business that you know

that the thing about podcasting is that

there are 1.6 million podcasts, 600,000

produce a podcast every week. Generously

600 make money. So what you're talking

about is.1%

99.9% unemployment in podcasting. Now

granted a lot of people do it for

psychic income or they do it to drive

business to the McKenzie business

transformation group. So they have a,

you know, boring a [ __ ] podcast with

someone with a northern European accent

and a PhD,

but the the top 50 podcasts or the top

hundred, he should try and start two or

three with celebrities and he should go

buy five or six of the top 50 and say,

"You really have no liquidity strategy

unless we go WPP here." And that is we

combine scale and get big. That's I

would use this platform right now as a

platform to go roll up a bunch of other

podcasts and see if I can find synergy

between New York Magazine and Tribeca

Film Festival and R Basle and uh you

know and also uh just be really really

good to the talent. That's what I would

do. And I would invite them on your

yacht.

>> I would um invite them to every premiere

at the Tribeca Film Festival.

>> You know, that's what I would do if I

were if I were James Murdoch. very

important to be very kind to the talent

>> 100%.

>> Otherwise, they leave or they just stop

doing a good job.

>> Well, that happened a while ago. Um,

>> yeah,

>> let's take a look at the week ahead.

We'll see consumer confidence for May

and inflation data from the personal

consumption expenditures index for

April. We'll also see earnings from

Salesforce, Marll, and Dell. Any

predictions, Scott?

>> Oh god, I'm going to hate this one. This

thing does not price at $2 trillion. At

some point, people have got to put the

crack pipe down.

>> Yeah. My prediction was going to be

similar. My prediction is that SpaceX

stock collapses within 12 months of the

IPO. I don't know when it's going to

happen.

>> Oh, that's an that's an easy one.

But collapses to what?

>> I don't know. I just think it will

collapse in a big way.

>> Collapse in a big way.

>> That's not that that's not that's not

specific enough.

>> No, no, no. Collapse in a big way. very

very specific and why people come to the

show for that type of robust analysis.

>> Well,

collapse in a big way.

>> You think are you applying numbers to

each of your predictions? I don't think

so.

>> I think this thing is a $600 billion

company. If you look at generously at

the wind up of all of it, I think

they're going to have to cut back on the

on the capbacks at XAI. I I wouldn't be

surprised if they end up closing that

thing down at some point. Um, yeah, I

think this I think a safe bet is that

within 6 to 12 months it's sub a

trillion dollars and if interest rates

keep going up and we finally, you know,

as Buffett said, the tide goes out for

the first time. Uh, yeah, this I mean

saying it crashes to 500 billion that

would make it what the the ninth most

valuable company in the world. So yeah,

I look every time the thing that because

we've had such a bull market for 17

years, people forget that almost every

one of the companies that we look to now

in the Magnificent 10 is at some point

been down 60 70 80% in a 24-month

period. And so I think it's a fairly

safe bet assuming that if interest rates

maintain this trajectory that quagmire

in Iran the fact that we're just so due

for some sort of correction that if this

thing manages to get out at anything

close to $2 trillion within the next 24

to 36 months you see it at some point

peak to trough down 70 or 80%.

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tour is happening. It's on, baby. Role

models showing up. My role model, Ed.