Speaker 1: Zach Gabraham joins us and I have a whole series
of questions for Zach, such as this insane world. You
operate in the separate country of Washington State. They ran
a poll about ice enforcing immigration laws there. We'll talk
about that. Plus Zach posted the most curious thing there
are now more ETFs in the United States than there
are individual stocks. And Zach said, gosh, what could go wrong?
We'll talk with Zach Gabraham about your chances of retiring
comfortably in a nation on the precipice of either greatness
or ruin. We'll do this with the help of Renew
dot Healthcare. Go to join stem cell talks dot com.
Coming up of the eleventh September, me and the docs
from renew We're going to talk about stem cells and
everybody who attends, goes through the whole thing is entered
to win a free week stay at beautiful Hotel Meal
in Nuevavarta. It's joined stem cells talks dot com. Now,
thank you God Almighty for time to have wise counsel.
Speaker 2: Disapproved, but big pharma technocrats and tyrn s everywhere from
the high mountains of Free America. Here's the Emerald city
exile tied to her man.
Speaker 1: Today is the day the Lord has made, and these
are the times to which God has decided we shall
live in. Joining me is the Cheat investment Officer Bulwark,
cap of the management. It's my friend and brother, Zach Abraham. Zach,
welcome back to the program. Good salute to the people.
Speaker 3: How are you doing good? Doing good? I feel like
we haven't done this in a while.
Speaker 1: No, we did it last week. But we did have
that long break when you went up to Alaska and
then you right.
Speaker 3: Might be where it was.
Speaker 4: And you know, I only used I only used one
of my helicopters to get up there.
Speaker 1: Lock, you are really slowing down, you guys want normally
you take your helicopter and each of the boys takes one.
Speaker 4: Well, yeah, and then we have a yacht come up
as he's got a helicopter pad on it. Yes, I mean,
you know you've got a helicopter. You can't be without
your helicopter pat.
Speaker 1: Yeah. And just so everybody knows, Zach he's being a
little bit sarcastic. He's actually very responsible with money. Do
you know the genesis of the helicopter jokes with me?
Did you ever tell you that why I joke about helicopters. No, oh, okay,
So back in the dot com era, I was having
dinner with the CEO of a of a web publishing
firm that you would know, very famous. It still exists,
been through a number of sales, but it had been
a public company and it had never earned a profit.
It had never come to earning a profit. You remember this.
Speaker 3: Story, Yes, I remember this right? Yes? Yeah? Yes.
Speaker 1: The guy says, so I bought a helicopter and I said, why,
goes well, Steve jobs as one and he was actually
actually being flown into the office and landing on top
of the roof in a company that never earned a profit.
And by the way, Zach, it never has. I mean
it's part of a bigger company now.
Speaker 4: Well yeah, but I mean the efficiencies you pick up
see no, yeah, if anybody, yes, right, that's that's where
you head for the door. But but uh, that being said,
there's Did you ever see that show Silicon Valley on HBO?
Speaker 2: No?
Speaker 1: Is it something I should watch?
Speaker 4: It's hilarious and especially because of your experience there, you
will laugh so hard because it's a parody, right, they're
making fun of it. But people don't realize how similar
it was. Like, for instance, they're talking to this guy
that is an amalgamation of a bunch of the CEOs
down there right he represents a bunch of them, and
they're like, yeah, and it's gonna be great because if
we do this, we're gonna post the best earnings.
Speaker 3: You know, we've ever had any earnings?
Speaker 1: Are you out of your.
Speaker 3: Mom post earnings? The investors are going to be expecting
it every quarter. Don't hear post earnings. Then you're gonna
make it real. We do that, Like, the guy.
Speaker 5: Just flips out, and I was laughing so hard because
I'm like that, that is so oh that is so
eerily close to reality in a really funny, you know,
parody type.
Speaker 1: Oh my gosh, yes, I got I got just almost.
This guy wanted to whip me. He wanted to like
pimp slap me. We were in the garage at our
building in Seattle and I said something about I was
talking to one of our first investors walking him into
his car and said something along the lines of, man,
I'm really getting a lot of pressure to look to sell.
Well the bubble still exists, and he goes he stops,
you stop there is no bubble. Never say bubble, never
acknowledge bubble. There is no bubble. This is all value.
This is a new economy. And Zach, you know, Zach,
I'm in my mid twenties listening to this, looking at
this man, realizing he's been an investor most of his life.
He was in his fifties. And I didn't say to him, Alan,
are you kidding me? We all know this is a bubble.
I shut my hole and just played along with that
to my shame. So no, it's called Silicon Valley.
Speaker 3: Yeah, and yeah, and it's it is. It is hilarious
if I'm if I'm thinking of it.
Speaker 4: It's not too it's not too inappropriate. It's not like
a risk a show at all. It is just it's comedy,
and it is if people don't know how Silicon Valley works.
Speaker 3: It's not a perfect representation.
Speaker 4: It's a parody, but it's one of those parodies where
it's also not very far right. It's pretty like and
people don't realize that if they're not there, what a
ridiculous place it could be, like you know what I mean,
Like I know you know what I'm saying. Yes, And
it's hard to explain because you're sitting there thinking to yourself.
Mark Andriesen put it perfectly that he left his home
in Nebraska, growing up on a farm, and he gets
Silicon Valley and he's like, these are the smartest people
in the world.
Speaker 3: I need to adopt their worldview.
Speaker 4: And he said it wasn't until years after being there
that I realized, well, these people are brilliant as it
relates to this one thing, yes, but when it comes to.
Speaker 3: The rest of it, they're idiots. Yes, and that's the reality.
Speaker 1: Yes, it's a town of my epic focus on making
money from code and then code related things and it
sort of stops there, or business there, some some business
in general. So speaking of business, you invested in a
company that we've been talking about here and I've had
so many interesting conversations with people, and it's Visible. I
got a note from a guy, Zach. His business has
been in place for fifteen years, fifteen stinking years, and
he heard me talking about Visible and so for the
fun of things, he went and looked at his founding documents.
He had to page back three. I had to go
to his gun safe page back through to founding documents,
and he went back and he looked and it was
all based upon his personal credit. And he realized, so, Zach,
this guy has offices in Cordelane, he's got offices in Boise,
he's got offices in Wyoming. It's insurance. All of those
insurance firms are owns under an LLC or this or corporation.
None of it is divorced from his personal credit. All
of it's based upon that. So he said, Okay, can
I get in touch with Bisible. I'm like, yes, it's
go bisible dot com. Will put me in touch. No,
you can click the website right, you can do that
on your own. So what Bisible does and you invested
in this, I want you to say why. They'll look
at this case and obviously he knows he doesn't have
corporate credits and in seven easy steps they'll solve this
for you. So you can be as sophisticated as you
want or new as you want. And also if you're
forming a business, do it right, like get that thing
set up and then get with Bisible and then have
them make sure you've got corporate credit. The website is
go bisible dot com with the Z go bisible dot
com and real quick why did you invest?
Speaker 4: Yeah, because I was in the exact same I was
in the exact same shoes that that guy was in.
And a good buddy of mine that I went to
college with and that lived played football with me called me,
and so there was a personal interest in it for me.
So I'm a silent partner. I've got nothing to do
with the day to day activities. But it was something
that had been plaguing me for a long time in
the back of my head that I knew I was
not doing. And so he called me with this business idea,
and I went, well, yeah, hey, I'll be a client,
but also, uh, you know, do you need some help?
And so I offered help him, you know, get it off,
get off the ground, and get it rolling. And I
just it's something that is so simple to fix, and
so people don't and so so few people have done
it and taken those steps. And it's kind of like
it's kind of like in the concept of investing.
Speaker 3: And it's not free, but it's relative.
Speaker 4: It's really cheap, especially for a business owner, and and
you it's it's in investing. We have these scenarios where
when you can get effectively free insurance, your answer should
always be yes, right, And so many of us in
the business world that owned businesses are passing on the
free insurance that's offered by you know, the veil, the
corporate veil of an LLC and and and we're piercing
that veil because because we're financing it with our own
personal credit and therefore nullifying the advantages. So anyway, yeah,
it's it's a no brainer in my opinion.
Speaker 1: Yeah, same with me. It's go visible dot com. I
want to get to this immigration poll you posted because
it's fascinating and I think people are weirded out by
where you continue to live in the separate country, although
albeit you live in a far better area there. But
I wanted to get to this because this you have
been warning us about this. Can I see it this way?
Like the ryal fok do nie on four years? It's ye,
I've spent nine on four years. There are now more
ETFs electronic trading funds the United States than there are
individual stocks, and you wrote something in regard to gosh,
what could go wrong? A are you freaking kidding me?
There's more ETFs than individual stocks and no one is
calling an alarm bell on this.
Speaker 3: Oh well no, because it hasn't There hasn't been any
negative outcome.
Speaker 1: Oh good, so let's move on.
Speaker 4: So getting past yes, well, because we I mean, look,
we all know how this works, right, As long as
number go up, nobody cares.
Speaker 2: Right.
Speaker 4: It's one of the reasons that we refer to regulators
as firemen, meaning they never act preemptively to stop a fire.
And and and I don't mean that in pure criticism.
There's a lot of different reasons why that's the case.
But but here here's the issue. But let me also
sit there and go, this isn't all about fear and
and and being freaked out about it and impending market collapse.
Speaker 3: But but what it tells you is that something is
inherently unstable.
Speaker 4: Okay, So you ETFs by definition have to be made
of stocks. If you're looking at a marketplace where you've
got more ttfs than stocks, pretty good sign you've kind
of overrun the usefulness, right, or you've just overdone it.
And so what you've got now is you've got a
market and you can see it like this on a
daily basis. You've got a market where securities are trading
and not all the time, but frequently securities are trading
completely divorced from their underlying you know, idiosyncratic details, right,
meaning they're just trading with the other group of stocks
because there is more money going in and out of
ETFs than there are stocks. So by definition, you've got
this setup where the tail is wagging the dog. So
a company can come out and announce really bad earnings,
but if people are dumping money into the ETF, the
stock could go up, right, And a perfect example of this,
in my opinion, Now I can't tell you one hundred
percent this is the case, but if you will, if
you look at the S and P five hundred right now,
and you look at the Nasdaq, for instance, there's some
obvious anomalies, but one of them is kind of hiding
in plain sight.
Speaker 3: Apple, Right.
Speaker 4: Go look at Apple and look at the fact that
Apple is trading at thirty six times earnings, Okay, and
then you look at how bad their performance has been.
Speaker 3: Their growth rate has fallen off.
Speaker 4: You're looking at five six percent growth, margins are down
at fifteen percent. You look at a bunch of other
the companies that are valued at that level, and they're growing.
Speaker 3: Way faster, multiples faster.
Speaker 4: Take a company like Google, which we've been talking about
that's undervalued for a long time. It's getting an eight
and a half nine percent pop today because, like we said,
a lot of this stuff about Chrome being illegal was
a lot of overhype nonsense. But one of the reasons
in our opinion, and again I cannot prove this, but
if you look at a stock like Apple, where you're
looking at the underlying performance, Costco would be similar. Their
performance isn't falling off, but you're looking at a company
growing at seven and a half percent a year trading
at fifty four times earnings. Just mind boggling, right, and
then Costco is a great company growing at eight percent
a year with two point seventy five percent margins.
Speaker 3: Right, So, and you're going you're gonna pay fifty four
times ear any for that doesn't make sense. But what
is happening is that as money goes into these indexes,
the money that flows into the indexes is awarded to
the stock based on that individual stock size, not how
it's performing, not how the profit. So when you put
money into the.
Speaker 4: Nasdaq or the S and P five hundred ETF six
and a half to seven cents of every dollar, you're
putting in is going into Apple regardless of how it's trading.
Why because it's the one of the two biggest companies
in the index. So what happens even though the performance
of Apple falls off, the stock keeps going up. So
it's it's met some resistance lately. But at the same time,
it's one of the reasons that you see so many
of these head scratching valuations because you're looking around going,
wait a second, these two companies are in the same sector.
How could this mark could be telling me that this
company growing at fifteen percent is worth half the multiple
or the valuation that we're putting on this company that's
going at five That doesn't make any sense, right. Meanwhile,
the company growing at fifteen percent's got thirty percent margins
Apples at fifteen and you're sitting there going, nobody would
pay for that?
Speaker 3: Well, how do we explain it?
Speaker 4: You look around, look at ETFs, and you go that
that's got to be it. So here's here's the bright side.
And you and I were talking about this. The value
fund that I run on the year is up twenty
three percent plus on the year. Okay, and we've had
bad years too. I'm not sitting here saying we're always right.
But one of the reasons that's driven that out performance
is by us going through a lot of these indexes
and picking out the companies that are just artificially too
cheap and not owning the ones that are artificially too expensive.
And a lot of that has to do with international markets,
because international markets are even more divorced from reality than us.
Speaker 3: And then you throw in precious me which still amazingly
nobody seems to be nearly that that interested in, which
is crazy to me because those stocks are still dirt cheap.
But but you look at all these opportunities out there,
and you're looking at a scenario where, like I said,
there's things we need to be aware of, and there's
concerns about that whole ETF situation.
Speaker 4: At the same time, right dangerous opportunity, meaning what does
that mean you got a bunch of overpriced stocks. It
also means you got a bunch of artificially undervalued stocks,
and that has got us licking our chops and you know, I,
you know, we'll have to see the way it goes.
But based on you know, a lot of the stuff
that we hold, I'm sitting there looking at our years
so far going.
Speaker 3: Man, this is just the beginning, because there's just a
but this.
Speaker 4: This has created a bunch of overpriced nonsense, but it's
also created a bunch of underpriced bargains too.
Speaker 1: Okay, I have a probably stupid man question, and I'll
ask this stupid man question in a second because a
metaphor came to me trying to understand one dynamic of this.
Me concerned more t ETFs than individual stocks. So I'm
going to provide a metaphor here in just a second.
Because there's got to be a war coming on this.
I'll explain what I mean. My friend Tim Krukshank knows
what it's like to fight a real war. So in
that Hunger Game scene where President Snow says to Catnus,
tell me, my dear, you've been in the Hunger Games?
Would you like to be in a real war? And
she doesn't want to do that, Tim knows what's that like.
So he also knows the war in business is nothing
like being actually deployed, as he was three times as
a medic attached to the seal teams. But it has
been a bit of a war, bit of a battle.
Getting bone Frog to where it's at. First, of all,
Tim Krukshank Navy seal and physician's assistance in the real world.
He didn't understand coffee. He just knew wanted to start
a coffee company. He knew he wanted to honor fallen
Navy seals. Hence ten percent of proceeds go to support
the families of fallen Navy Seals, often through the Navy
Seal Foundation. Knowing that, he knew he wanted to have
an indelible logo in a statement, so he chose the
bone Frog. He didn't want to steal the work of
the artist who created the bone frog, who is a seal.
That image stands for the body of a fallen seal,
so he changed it slightly honors the artist. He wanted
to honor God. Every beg says God, Country team on it,
and I think this is why God has blessed the company.
And God blessed the company with the presence of a
guy named Dave Stewart who took a liking to Tim
and took him under his wing. Dave started Seattle's Best
Coffee and he tutors Tim and mentors him on the
coffee roast. In fact, Dave makes some of the roasts.
This is why I think Bone Frog is still fighting
the battle. They have it won completely, yet they're on
the precipice. So when you subscribe the bone Frog Coffee,
you're joining God Country Team, the team. You're getting excellent coffee.
You're supporting a company that hires veterans whenever they can,
works with veteran owned companies. Tim just had to replace
two team members because they went to join the Navy Seals,
and I got to check with him to see if
they made it through buds and if so, if they're
under the next stage, you're becoming seals. So go join
the Godcountry Team. Family. At Bonefrog Coffee dot com slash todd,
use promo code Todd when you check out, you'll get
fifteen percent off subscription coffe. Forget all that stuff about
trying the coffee. Just trust me and trust the taste
and trust the heritage. It's Bonefrog Coffee dot com, slash todd,
promo code Todd when you check out and subscribe to
your favorite roasts. So Zach, this occurred to me and
you mentioned Apple is one of these stocks. And then
you also, I know you had a chat with a
lead code on Microsoft's AI team. I want to get
to that. So if I were to come to you
and I were a and I were to pitch, let's
and I'm just making this up, but let's say I
was to come to you and pitch a whole bunch
of bowling alleys. Okay, So I came in and I
showed you this design, and look here's what we think.
You know, this is the data play, Zach. It's not
just the bowlding. These are people who like you know,
they like these family sports. And you know, we're gonna
have meals there, but then we're gonna be able to
try meals and sample meals and maybe send some of
these meals home. And you know, we're got of an app,
but that apple also help us track people where they
go and what else did they buy. So we're pretty
sophisticated on this. And so we want to build four
million bowling alleys. Look at me and say how many
active bowlers are there in America? A million? Your likelihood
of investing in me building four million bowling alleys for
for for one million bowlers would be what.
Speaker 3: Well, I mean, are they AI? O?
Speaker 1: My point?
Speaker 3: Are these going to be in Nvidia brand. Yes.
Speaker 1: As a matter of fact, today I look over to
my CTO, aren't they Yeah, then I mean yeah, oh yeah,
it's Zack. It's all Ai right, it's all So. My
point is this, Zach, if there are more ETFs than
individual stocks, some of these ETFs.
Speaker 3: Have to die. Yeah, no, no, yeah they yeah, they do.
Speaker 1: What happens to your money? If this is your ETF
and the ETF dies, that's got to be in the
terms of service somewhere what happens.
Speaker 4: Well, so then it then would be based off liquidation
value of the underlying securities. So the so if so theoretically,
if that were to occur because of lack of volume,
which which has happened. There have been multiple ETFs that
have gone out just because there wasn't enough volume enough
people were training them. But what it does do is
it creates an automatic liquidation and and you the investors
would be given back. So for instance, you know, let's
say the ETF goes no bid, but it sells off
the underlying stock, the investor would get the value of
the shares of stock.
Speaker 3: In that day. So that wouldn't be that really wouldn't
be a huge horrible event.
Speaker 4: Okay, okay, where where it could become where where where
where things get kind of interesting is if you think
about it, it's really it's impossible determine tops and bottoms
and things like this.
Speaker 3: Okay, but but go with me for a second on
this path.
Speaker 4: If we are are investing via an ETF that only tracks,
that allocates money based on the size of a company,
So we're buying more shares of Apple, not because it's
doing better because it's bigger.
Speaker 3: Right, That is not the way markets are supposed to work.
Speaker 4: We're supposed to discover this discover value, right, that's a
discovery of value discovery mechanism. So the real issue here
is not so much the ETFs blowing up. But let
me give you a prime example. Look at the baby boomers.
If you look at the average baby boomer portfolio, they
use almost exclusively ETFs with some individual stockholdings. Okay, baby
boomer class it owns by far and away the most securities.
At some point, baby boomers will you will have and
you're probably already there at.
Speaker 3: The tipping point.
Speaker 4: But at some point, when you look at how much
of stock's baby boomers own, they will become forced liquidators
of stocks. The number one thing they all own is
SMP five hundred ETF. Okay, So this endless buying that
has been financed by all of their four oh one
ks and their personal accounts. Right when they quit working,
they've got to start pay taking money out.
Speaker 3: So what was this.
Speaker 4: Beautiful reflexive cycle of no matter what happens, Because remember
you're putting money into your four oh one K every
two weeks, no matter what happens, right, it's just getting
sucked out of your account, and then it gets automatically
allocated to the S and P five hundred. So that's
why you'll see markets take a short term dip and
then you'll see them just start ratcheting back up regardless
of news. Why money flows well, at a certain point,
the baby boomers are going to tip over where the
amount you're pulling out every month so they can pay
their bills will exceed the amount that people are putting
into the ETF. And when that happens, you'll yet a
reflexive cycle that was much. You know, it'll be the
inverse of the way it was on the way up,
where you're sitting there looking at companies going wait a second,
why is it dropping it had a good quarter. People
are selling it, right, and more of the and more
of the stock is held via the ETF than individual right,
So if the ETF starts selling, there's not enough buyers
on the other side to hold the price of that
stock out.
Speaker 1: So this is when the perpetual motion machine stuffs moving.
Speaker 3: Yeah, I mean, and look it's it's again.
Speaker 4: Exactly what triggers it or how it happens, I'm not
going to pretend to know. But anytime you see what
we call a reflexive cycle, a cycle that feeds on itself,
which is think about the Triple ques the NASDAC. Okay,
everybody wants in it. Why, well they're gonna take because
they own the best companies in world. Yeah that and
it's been the best performing index over the last fifteen years.
Let's not pretend like that doesn't have something to do.
Speaker 3: With it, right, But we just keep pumping money into that.
Speaker 4: Well now you so, now you've got a situation where
the vast majority of money that owns the Nasdaq is
via the Triple QETF.
Speaker 3: Right, So when those people have.
Speaker 4: To start liquidating to pay their bills every single month,
and that amount of money is greater than the amount
of money that's going into it, you will just get
the inverse.
Speaker 3: And that's the way every reflexive cycle works.
Speaker 4: It's not different from anything, right, the same thing you
enjoy on the way up will eventually become its opposite,
and you'll have to endure on the way down. Anybody
that's an adult knows that that's true in all aspects
of life, and it's through in investing as well. But
like I said, where my biggest thing. Here's what I
think will happen eventually, and I think that this year
is a microcosm. We have been so blinded by the
largest and longest bull market in the history of the
United States that people think it's the only market left
in the world. And they go, that's not true. And
I go show me your portfolio. You're ninety eight percent
US equities. You can say you don't think it's the
only market in the world. Your money says something differently, right,
And so what we're trying to tell people's look, nobody
can tell you whether this is going to create some
big market collapse or anything like that. But what I
do think will happen in some way, shape or form
to some magnitude and we'll see it. And like I said,
I see it happening so far this year. All of
a sudden, you look at it this year and out
of the forty top performing markets in the world, the
US ranks like thirty fourth or thirty fifth, Right, So
why I just think the valuation spread's gotten way too big,
And I think there's a lot of low hanging fruit
out there and everybody is so bold up on US
equities that in my opinion, they're not seeing the forest
for the trees. Now at the beginning of the year,
I would say that that was more of a prognostication
on my part. Look at US this year, you know,
outperforming the market by almost fourteen fifteen percent, so it's
clearly working. And the thing we're excited about is the
valuation gap I see is just as stunning as it
was in the beginning of the year. So you know,
I think this opportunity is in the first inning. And
you know, worst case scenario, like people are like, how
bad could it be? I don't think it'll be this bad.
But a good example of this would be Japan, right,
Japan had a similar market dynamic. Everybody in the world
was dumping money into Japan in the eighties. Their market
topped out the nik at forty and nineteen eighty nine.
It didn't get back there until a year ago. Yeah,
thirty five years later. Right now, Again, the US is different.
I don't think the US is going to underform you know,
much of the rest of the world for the next
thirty five years, but for the next five to ten
it probably should, and it most likely will, given you know,
looking at history, so you know, looking at a lot
of people. When you consider inflation, the prospects of inflation
going forward, and you think about US markets underperforming, that
could create quite a problem. Let's say the US market
averages four percent a year for the next ten years,
which would be actually really good performance considering the run
it's tattle of the last fifteen Well, if inflation's running
at six average over the next ten years, you're making
four you just got smoked.
Speaker 3: You got smoked. Right. Oh.
Speaker 4: Meanwhile, you look at all these opportunities you've gotten other markets,
precious metals, commodity stocks, and nobody wants there's plenty of
ways to avoid that, and I think there's plenty of
amazing opportunities out there.
Speaker 3: They're just not in the places everybody's looking.
Speaker 1: Great way to put that. And if you like what
you've heard from Zach Distrom of Analysis, know that he
has a podcast. Go to Know Your Riskpodcast dot com.
Sign up for that. These all over social media as well,
but you can get this with them on a pretty
regular basis Know Your Riskpodcast dot Com. Speaking to that,
Zach talked it's one of the top coders at Microsoft.
And about the Apple AI. We need to talk about that.
We need to talk about housing. I saw an analysis
that the average age of the first time home buyer
in the United States of America is thirty five, and
the average age of any buyer is fifty six in
these sets of America and what that means. And Jadvance
talked about housing prices. Hey, quick reminder, we're trying to
do something really, really important for the people who run
Alan soaps. And this is what we mean. There's no
secrets that Alan's not They all due respect to the family.
I love John, He's a very good friend. They could
not afford to purchase slots on this podcast. They don't
do the amount of money that renew does or Visible
or Bulwark or Angel Studios or optimizers. We give them
the slots and they pay us. But because I love
the mission of Alan's, which is to employ people like
Alan who is nonverbal, because it's expressed by his placement
on the autism spectrum. He's got these physical challenges. His
brother Ian is impacted by autism. That's the genesis of
the soap company, and it exists to employ people like that,
and that's what we do. The soap is made in America.
It's all natural. I challenge you to find a better family.
Three generations of soap making expertise the family they partner with.
Here's the special thing we're trying to do. John was
kind enough to share with us that he has decided
to stop fighting cancer. He knows he's going to Jesus.
He's trying to focus on these last however month many
months the Lord gives him with his family. I want
you to just examine your heart. You've heard us talk
about Alan's. If you haven't tried this soap yet, all
I ask is you try it and if you love
it or like it, it's as good as what you buy.
Now convert become a subscriber to the soap. This a
way when John's wife starts running the company. She comes
in with predictable revenues. But I please, I beg you.
If the soap is not what you want, do not
buy it. This is not a charity. Okay, go to
Alan soaps dot com slash todd. That's Alan Soaps dot
com slash todd. So you zach I had a conversation
with one of the lead coders at Microsoft's AI team,
and among the things you talked about, you asked him
about the story Apple quietly builds chat GPT rival with
new answers search term and he laughed in response to this,
So talk about that laughter, but also this conversation about
Microsoft and AI and where that's all headed.
Speaker 3: Yeah, pretty fascinating.
Speaker 4: As a matter of fact, we're gonna have an interview
with him that we're recording this Friday, so we're gonna
have it up on our podcast, and we're gonna really
dig into the a I.
Speaker 3: Think because he's yeah, he's he's at the nexus of it.
Speaker 4: So first, as it relates to Apple, it's kind of
funny because Apple is really diverged from its perception, meaning
you know, we all see Apple as this titan and
kind of think it's a, it's at the center of
all this stuff.
Speaker 3: It really isn't.
Speaker 4: They've fallen out and and and there was the announcement
about them creating their own rival to chat GPT. Within
about a week or two they came out and said
that they were now considering using Gemini via chrome cast
in concert with Google. And and I just think that
that's from what he was saying. He just said, look,
in the industry, nobody takes them serious whatsoever, and nobody
even considers them to be in the race. So and
he goes, quite honestly, unless they were to buy somebody,
they're too they're too far out, they're too far gone,
and they don't have the cash pile advantage that they
used to. I mean, Apple was the first of those
tech companies to really build that that crazy amount of cash,
you know, in the hundreds of billions on the balance sheet.
And when you look around today, even if they want
to buy somebody, it's not a clear solution about whether
they'd be able to. Meaning you've got antitrust issues that
they'd be running into, and then there'd be competition. Like
I said, they do, they do. They are not the
giant behemoth on the block. Anymore that nobody else can
contend with, you know, like, for instance, you know I
was telling you not too long ago. You know, most
people are not aware of the fact that Google produces
substantially more revenue and profit every year than Apple does, right,
And most people are not aware of that, yep, And
so anyway, I just just it's more clue to My
biggest thing about bringing that up is that I look
at these retail portfolios all the time, and a lot
of people have owned Apple, and a lot of people
done wonderfully with Apple. Then you look at it and go, okay,
because they've done wonderfully, They've got this huge chunk of
Apple stock.
Speaker 3: It's just a too big a portion of their portfolio.
Speaker 4: And our biggest message to them is, look, nobody including me,
can tell you exactly what the price of the stock
is going to do in any given period of time.
But what I will say is that all the reasons
that you owned Apple for they're gone. Okay, it's not
the same company, it's not doing the same thing. They
are seeding market share to Samsung, they are seating market
share to Huawei, They're seeding market shared to the Google Pixel.
Speaker 3: Okay, and they when you look at.
Speaker 4: Their company, they're a one product company, so seating market
share is kind of a problem. I don't think they're
going away anytime soon. I'm just looking at a company
that just does not justify or earn the current price
it's trading at now. On the flip ai side, talking
about AI in general, the the you know, everybody is
up on the AI conversation. I don't think anybody realizes
how fast this trend's coming down the pipe. So, like
we were talking about where we use, you and I
have discussed this before, but you talk about Moore's law, right,
the doubling of compute power every eighteen months.
Speaker 3: These LM models are doubling their compute every three to
four months, and people are like, well, what does that mean.
Speaker 4: I'm like, this is one of the tough things to
convey because human beings are uniquely bad and understanding exponential growth.
What that means is you're looking at the capability of
LMS doing what they're doing today, and you're looking at
just three years in the future of that being. You know,
eight to ten x what it is right now, eight
to ten x what it is right now.
Speaker 1: And maybe just two to three years maybe one way
to compute this for people is to understand that with
each exponential growth right cycle, there are new industries that
can eat, there are new jobs it consumes, right, And
you think, well, AI is never going to compete with
you know, you're never going to have an AI air
conditioning tech. It's not never, it's when, it's when. And
you could say, well, that's that requires robots and stuff
that can come into people's house. That can't happen for
a long time. Yeah, when you look at exponential growth, No, no,
that's not true.
Speaker 3: Yeah, grow growth.
Speaker 4: The growth curves that we've all looked at economically need
to be thrown out the window.
Speaker 3: Right, it's no longer bound by that.
Speaker 4: And here's why you're going to have these lms that
are getting massive compute gains and function functionality gains on
a daily basis, and they're going to be working on
these problems twenty four hours a day without blinking. Okay,
So to give you an idea of what this means,
he was telling me that a year ago they were
looking at lms one year ago and saying, and for
those of you that don't know large large language models,
all these things are LMS all these AI programs. A
year ago, it was on par with a junior code,
a new coder.
Speaker 3: Low on the Totem Paul pull.
Speaker 4: Fast forward one year, it's the best coder they've gotten
in the company.
Speaker 1: And that's in one year, right, And now a year
from now, it's not even a race.
Speaker 3: No, So, and I thought this was another interesting thing.
Speaker 4: You know what he told me. He told me that
his daughter was taking coding classes.
Speaker 3: He took her out of the class. Yeah, he said,
it's pointless.
Speaker 1: So, and I'm I can't stand AI for many reasons.
And yet I got to tell you I'm looking into
taking AI classes because I'm thinking about, Hey, if this
stuff's all widely available and it's just prompts and cues,
like God's given me a relatively decent creativity, Yes, why
don't I just sit down and think about some problems
that AI could solve and create something like this? I
also talk and we could do this. We could take
enough of these shows and feed them into an AI
and that AI could analyze them. And I'm relatively certain
that we could have let's say, half of our shows
per week done by AI. And Alex is nodding his
head we're actually, Zach, we're actually thinking about doing this,
just to see what an AI would do with enough
Todd Herman show is fed into it. Do it Todd
Herman Show, based upon here's the news items produce one.
Speaker 4: Yeah, I look, look, if it wasn't a if it
wasn't I think it could produce I think it could
produce probably surprisingly good results.
Speaker 1: That scares me.
Speaker 4: It scares me too. But here here's the flip side
of that argument. You are you are multiple steps away.
And and there are some people that question whether it's
even attainable, which is remember these lms, no matter how
crazy it is what they do, there's a huge gap
between what they're doing now and creativity right totally, and
and that and and and the exponential growth on the
compute side may not lead to the emergence of creativity.
Speaker 1: I don't think it can because I think creativity is
a bridge to God, so I would agree. I've often
said our conscience is a bridge to God's. I think
creativity is that because God creates, Satan can't create, so
he can distort it, he can depress, he can distract.
Computers can amalgamate code come and malgamate large language models
are looking at everything ever written by humans and then
eventually by machines. All roll into that. But it couldn't say,
invent a new flavor of ice cream. I mean it
could take all sorts of flavors of ice cream and
say this. My daughter's an artist, and she's recently started
selling a lot of her work, and I'm begging her,
in your art studio, make sure it's always on camera, right,
I mean, yeah, have a place where you can leave
and not be on camera, but let people see you
creating your work. Create a form of art you can
create in front of people, you know. And I'm thinking
for me, I think God's telling me to go out
and do more live events. You know, we can go
put you know, you've seen it. I mean, we can
put a lot of people in a row, praise God
because the lords of the audience. And I was just
in two below and you know with American Family Radio
we had two or three thousand people show up for
that event. So wow, Yeah, I want to go do
more of that because a I can't shake a hand, right,
it can't do these things et.
Speaker 3: Cetera, like a like a Todd Herman road show. Yeah, right,
And and and I would be a happy sponsor.
Speaker 1: Well i'd be. I want you to come, well.
Speaker 4: I mean yeah, I mean I would love to come too,
especially somewhere like too.
Speaker 1: I've always wanted to go to Tupelou Dude, you're on. Okay,
We're going to arrange just to go to Tupelo, Mississippi.
We'll take you down there for that. It is and no,
that's and like Elvis is all over that place. You
can talk to people to this day who knew the
Presley family and you could actually run into them like
you can run into people who knew the pro Oh yeah, yeah,
knew the Presley's. And it's it's you know, it's it's
a pretty interesting place. I got to get to a
couple of different things. Is I feel like time is
fleeting all the sudd and it's just gone so quickly.
We have we sold this from you free live webinar,
and I know that the lice I got to note
from your IP people, your patentrol people, thanks a lot.
Speaker 3: So yeah, we're gonna give you the pins.
Speaker 1: Yeah, we'd be shelling out some. So we're doing a
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So Zach, I got to get to the thing about
the immigration stuff in your city there, but on on housing.
A mutual friend of ours, in fact, you've we've had
dinner with Tom. He likes to look at charts. His
name is Tom Shaeffer. Dear friend of mine. Tom posted
this on Facebook. If you want to see a national tragedy,
look at this. The average age of first time homebuyers
the United States is now thirty eight, and for all
buyers it's fifty six. Part of this is demographics. The
boomer generation swamped with everything. They're primary holder of all
asset classes from houses. You just said this zac to
the stock market, but they also sat back and questionally
supported the stupid, ridiculous Fed monetary policies centralized banking lots
which have artists wild drive, been up the cost of
hard assets and consumer goods, and it made regional banks
somewhat of an anachronism. That children of boomers, my children
and their peers are faced with just getting by paying
rent and meeting their basic needs, even with good paying jobs,
not being able to save or invest. That is not
a beautiful future. Jadvan said, A had a conversation about this.
But first of all, what you responded this because Jadvan
said something about housing markets. So in that scenario, Tom paints,
it's not a pretty scenario. Is there a way to
turn that around?
Speaker 3: I mean, yes, there is.
Speaker 4: It's it's gonna be tricky, and I and I'm I hesitate,
and I'm not looking forward to what I think the
solutions will be, because I would assume the solutions are
going to be more formed or more embodiments, more forms
of handouts, more forms of subsidies, which one only make
the problem worse over the long run. It and it
actually points to something that I would really like to see.
It feels to me like the administration is kind of
lost focus on this a little bit recently, which is
the peeling back of regulations. They've done it to some degree,
but it feels like we've really hit a roll in
that process recently. I think that you need to start
doing things like they're doing despite certain parts of the
legal system fighting them, which is you got to start
holding individual states in cities responsible for their own policies.
Speaker 3: In one way, shape or form.
Speaker 4: I mean, because you know, you look at what they're
enacting up here in Seattle, and it really.
Speaker 3: People.
Speaker 4: You know, I think people have a hard time understanding
it because it really is not a political issue. It's
been made a political issue, but it's not. And what
I mean by that is, take away who you want
to vote for, who you think, remove all political ideology,
and when you look at the proposals to address quote
unquote expensive housing, anybody that has even a baseline understanding
of economics just begins laughing because you're like, that's going
to do the exact opposite of what you're talking about.
And it's just like it's this broken thing in the
minds of so many people in this country, particularly on
the left, where it's like they have this faith in
these socialist policies that have never worked at the expense
of capitalist policies that always have Now like, can those
capitalist policies get overplayed and people who take advantage of Yes,
But the answer is not to go grab something broken
off of the trash.
Speaker 3: Heap of history, right, And that's what we keep doing.
Speaker 4: And you know, people just need to wake up and say, look,
these things have been tried.
Speaker 3: They don't work. Like you look what mom, Donnie's doing
in New York.
Speaker 4: Every single thing he's proposed is going to increase the
cost of real estate.
Speaker 3: I mean it's not there's no secret.
Speaker 1: There was just this study that finally wrapped up. They
tried these universal basic income tests, right, and did you
read the study yet?
Speaker 3: Ah?
Speaker 1: Okay, so it's studies save dot org, great websites. The
people who around the study are shocked and they're wondering
if they did the study the right way. People who
got universal basic income reported more depression, more sadness, and
a loss of a sense of meaning. Cocker right, cocker right,
Just the checks showed up in the mail that you
did nothing to earn.
Speaker 3: Yeah, no, it's it's it's it's a shocker.
Speaker 1: Here.
Speaker 4: Here's the other thing that we have to deal with,
and this is a this is a really unpopular thing
to bring.
Speaker 3: Up, but it is what it is.
Speaker 4: The issue that we have with young peop people being
able to afford housing or even be able to afford
their lives. It is not purely economical. Okay, you've got
to You've got a batch and I'm speaking about mostly
around the kids coming out of college. Right now, you
have you have a group of college kids coming out
and and a fairly large group, right it extends.
Speaker 3: It's not just one year, but you know, they're a
fairly large swath.
Speaker 4: But I will just tell you as an employer, you've
got kids coming out of college that are less capable
of doing the job or managing in the adult world
than any group of kids we've ever had come out.
Speaker 3: Do I think that there are a lost cause? Absolutely not.
Speaker 4: They'll figure out eventually and they'll become productive like every
other generation in history has. But one part about it
you don't hear anybody discussing. Is part of this, part
of this housing problem, and part of this you know,
expensive life and inflation problem. Part of it goes back
to our educational system being completely broken.
Speaker 1: Broke an educational system teaching people to work right at
jobs anymore in ways that are not helpful anymore, and
further and further and further not even that teaching them
to be good liquors of the party boot, Yeah that way, well,
and look at look.
Speaker 4: Like I mean, for instance, let's take a look at
AI right now, and look at the fact that none
of their attitudes toward college have have been updated. If
you listen to these people talk like they think that
all they have to do is get people in college
and everything's fine.
Speaker 1: Why so I can compete with a supercomputer that can
do the work that would take me a year, that
it can do it in five seconds, or.
Speaker 3: Basket weaving or whatever, right right, like, whatever it is.
Speaker 4: And you hear these people go and every kid will
have a college education and that's the way the world
should be. And you go, look, that is the stupidest
statement on the face of the earth. First of all,
if everybody has it, it's not elite a b What
is the cost of that? Right yeah, If it didn't
cost him anything, great, glad you had a good four
years eating bad cafeteria food and drink it too much beer?
Speaker 3: Right well, what is the upside of that? Does it
help you earn anymore? Does help you do anymore.
Speaker 4: No, and like it's do Some people still need to
go to college, of course, but the vast majority, especially
with the emergence of LLMS, I'd sit there and go
learn how to think, learn how to work, get like,
you know, pick up some Socrates and some Aristotle, read
some Machiavelli.
Speaker 3: Let's teach you how to think. Let's teach you how
to you know, give you a better understanding of history
in civics. Let's teach you some trades. Let's teach you
how to be an entrepreneur.
Speaker 4: Now we're just gonna keep pumping you through the same decrepit,
broken system that's creating these kids that come out more
confused than they went in, with no real prospects, and
meanwhile they're a quarter of a million dollars in debt.
Speaker 1: It's yeh to travel or maybe go back to the
Bible and make your life about building the Kingdom of Heaven.
I well, maybe that's going to be part of this.
I promise I would get to this, So I'm going
to pay this off. The EVP said about housing. This
is jd Vance and it's related to Zach something you
said about your air of the world and housing, getting
more expensive to fix the rig system.
Speaker 6: You asked that question, You've got to understand the root
causes here. Why did housing get so unaffordable for American citizens?
Speaker 1: Two big problems.
Speaker 3: Number One, I.
Speaker 6: Already talked about interest rates were too high. Number Two,
you had way too many people in this country who
are competing against American citizens for scarce homes, and that's
the illegal immigration problem. Why is housing leveled off over
the past six months.
Speaker 1: I really believe the main.
Speaker 6: Driver is you've had negative net migration into the United
States for the first time in sixty years in this country.
You cannot flood the United States of America with twenty
thirty forty million people who have no legal right to
be here, have them compete against young American families for
homes and not.
Speaker 1: Expect the price to skyrocket. It's a simple as supplying demand.
You increase the demand, you're going to increase the price.
Speaker 6: And the final thing I want to say here is
we're working on issues right now in the White House
every single day because we want to make it easier
to build homes too. Because in the same way that
getting illegal aliens out of this country means fewer people competing.
Speaker 1: Against young American families.
Speaker 6: We also want to increase the housing stock in this
country by making it easier to build.
Speaker 1: So we're working on all this stuff. But man, we
got to be honest.
Speaker 6: The system was rigged against Americans, especially young Americans, for
a very long time. We're making progress to unbring it,
but it's going to take some time.
Speaker 1: That's not given enough attention what Jadvance says there about
net migration, first time in sixty years we've seen a
negative in your part of the country. Not only are
there housing guarantees. Housing is a right. Everybody gets to
have a house, even if your house is a tent
and an RV until we can move you into building.
Not only that, they use COVID to basically steal hotels
move people into that. The appetite for that still exists.
They're doing this with illegal immigrants. And then there's this.
You ran this poll, and this is what I wanted
to ask you about. My contention is that drives up
housing costs. You put this on your own Twitter, my friends,
your friend Ari Hoffman, successful talk show hosts in Seattle
at five seventy KVII, the affiliate for my weekends national
show on radio America. He posted this from Como News,
and by the way, Como News is pretty leftist, not
as bad as most of them, it's it's actually probably
the most decent there. How do you feel about ICE
increasing operations in the Seattle area? Seventy three percent approve,
twenty five percent disapprove, two percent say each case is different.
And this was three thousand and seven hundred and five votes,
even if some people voted twice, that's a decent sample size.
So in your part of the country, your separate country,
people are approving of these raids by ICE and this
housing dynamic sits they're fiating right there in the background,
And I wanted to ask you this, are those things
connected in your mind? Jd vance about moving people out
of the country and housing. Do you think those are connected?
Then a follow up question about immigration there.
Speaker 3: Yeah, I think that the housing.
Speaker 4: I think that the housing issue is abnormally complex because
of what we've gone through over the last five years.
So what I mean by that is, at no time
in the history of our country have for a variety
of different reasons, a greater percentage of the population been
strongly motivated to move right. So meaning you basically took
like probably four to five years of typical housing activity
and crammed it into a year and a half. So
naturally you're going to have a lull on the other side. Then,
when you look at interest rate dynamics, interst rate dynamics
are playing a big role in this as well, because
one of the reasons you've got unaffordable housing is because
you have so many people based off of the interest
rate differential meaning the price that they're currently financed versus
what they'd have to pay to get something else. That
is keeping an abnormal amount of people locked into their
current house.
Speaker 3: Yep.
Speaker 4: Now is the immigration situation helping any of that, No,
it's contributing it as well. But like many things, this
is a multi pronged deal. You've got normal inflationary pressures,
which is putting pressure on housing, so just everything is
sort of pushing. Here's another one that nobody's going to
talk about, but it is true, meaning you you underbuilt
housing for a decade. Now, you didn't really underbuild it
because what you were basically doing is absorbing the overbuilt
that happened in eighth nine. But bottom line is this,
you did not have as many new homes going up,
especially toward the back end over the last you know,
when you look at demand, you didn't have quite as
many houses going up anyway. You got a bunch of
these different things, and and and and and a bunch
of things kind of culminating and all pushing those, uh,
those price of housing, that price of housing up. But
but what I would say to jad Evance is that
for the people out there that think pushing rates down
is going to make housing more affordable, it probably won't.
And the reason it won't is because interest rates are
a function of price. Meaning if they artificially push rates
lower and somehow manufacture lower interest rate loans, I would
expect to see housing prices resume pushing higher.
Speaker 1: Yeah.
Speaker 4: Right, So that's the other thing. I think we've pushed
this whole monetary policy thing about as far as we
can totally agree, and I just I think that we're
kind of at a place where we're gonna have to
make some more decisions.
Speaker 3: And you know, everything does not always go up into
the right.
Speaker 1: Last question, and it's a pretty simple one. Thinking back
over the past let's say sixty days. I mean, you
meet with a lot of people, you meet with clients,
you meet with prospective clients, you sit on boards, you
coach youth sports, youth football, You and your wife go
to things. You go to church. I'm sure you attend
other kind of philanthropic things. You get invited to people's houses,
You play golf, So you're not a hermit. Honestly, in
any time in the past sixty days, if you had
anyone in any of those circumstances say to you, man,
can you believe what this ice is doing in Seattle?
I mean, this is literally hitler. If you had a
single person expressed a single worry about ice.
Speaker 4: No, but here's the one thing I will tell you
that's concerning to me. The most concerning thing about that
pole is how misrepresentative it is to what you'll hear
on the street and what you see in the news.
Speaker 3: And here's the other thing that it infuriates me so much.
Speaker 4: If that translaw was explained in plain English and put
on the ballot in a way that the ice pole
was put out there, I think you'd probably have about
seventy seventy three percent of people in the state would
have voted against that too.
Speaker 3: It's it, it.
Speaker 4: It is so infuriating to me that people do not
educate themselves so more and will do not have the
courage to speak up. That poll in Seattle tells you
everything you need to know in my opinion, and I
just people quit.
Speaker 3: Be in candies and speak up.
Speaker 1: I Y, yeah, I just saw this from Malcolm Glodwall,
who everyone thinks he's this brilliant guy. He wrote a
book called The Tipping Point, and everythin said he's now
mister soothsayer, mister prophet of our age. Malcolm Gladwell recently
said he's ashamed of having said in a previous panel
discussion that so called trans women have a place in
women's sports. He said he was cowed into saying so
now he says so called transit. He says the word
here's his exact quote, trans athletes have no place in
the female category. Says you know what, He's still cowed.
He's still saying that word. Yeah, you just wants argument.
You Malcolm Glogwell years ago with the Tipping Point alone,
and then his follow up to that, I can't remember
the name of the follow up to that, and then
the follow up to the follow up, and his consulting
and his speeches and his ted talks come on is
that worth twenty million bucks or something?
Speaker 3: Will look, I just think it's no. Yeah, one percent cowed.
Speaker 4: I we're at a place right now where it's controversial
to say that somebody with testicles and a penis shouldn't
be in women's sports.
Speaker 1: Yeah right, yeah, yeah, Well that pole does say that
all about your separate country, and I know you live
in a better part of that separate country. Always great
to have you here. We'll make the twopole thing happen.
We'll go back there and you can see this this
home district. Sound good? All right? This is the Todd
Herman Show. Zach abramises, I guess know your Risk podcast
dot com. Now, please go, be well, be strong, be kind,
make a decision today to walk in the light of Christ.