No Limit with Krzysztof and Luke: Ep. 25 - 7investing 7investing
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No Limit with Krzysztof and Luke: Ep. 25

September 5, 2023 – By JT Street

In Episode 25, Luke and Krzysztof compare Nvidia (NVDA) to the days of the early internet and debate whether we are in a new bubble. Was Zoom as an investment during COVID an obvious bubble or is that just hindsight bias? How do the China-Taiwan geopolitics factor into Nvidia’s valuation?

We elaborate on the framework behind selling SentinelOne (Ticker: S) and encourage investors to reflect on their own selling criteria without short-term biases based on near-term price action.

Luke meanwhile takes us deep into the world of computer-brain interfaces and the possibilities of mind-reading! And since Krzysztof can’t go two weeks without commenting on the Eos Energy saga (EOSE) we discuss whether CEOs of public companies engaging with retail investors on X is a wise strategy or whether that’s just something Elon Musk can do without consequence — have we really have entered a new era in investing where access to the a company’s top management is just a click away and ought to be taken advantage of by retail investors? The knife cuts both ways.

And in the Trivia game, Luke attempts to find out just how well Krzysztof knows his market caps. Enjoy this beginner friendly look into the wild adventures of investing in the stock market where there are no limits.


Luke: Hi and welcome to the latest episode of No Limit with Krzysztof and Luke. Episode 25 and it’s August the 30th. We find Krzysztof in his beautiful Texan back garden. The, uh, the birds raining hail on you. What’s happening out of the

[00:00:57] Krzysztof: while I’m in the bug house, which is, uh, my netted protective space, but very ironically, Luke, so late spring, as I sit in this, you know, netted house, the mosquitoes were swarming , they’re a foot away from me swarms, literal swarms, like disgusting since the August heat, well since the summer heat, June, July, August, not a mosquito was in sight.

 I have never before encountered a time when it was too hot for the mosquitoes.

[00:01:30] Luke: Oh wow, is that the reason? Crikey.

[00:01:32] Krzysztof: Yeah, I mean, well, either too hot or too dry or hot and dry, whatever. But anyway, not complaining. You are back from your, uh, adventures. The last time I heard news of your exploits, you were in Amsterdam.

[00:01:49] Luke: Yeah, I’ve, uh, I think it’s all behind me now. I did like three half week trips all back to back and I’m kind of, got back last night and I’m very glad to be home now for at least a month and chill out before I head out to Asia for the next adventure. Yeah.

[00:02:04] Krzysztof: A whole month at home, sitting still.

[00:02:08] Luke: that’s right. Oh, the wife’s been traveling with me, so she’s probably bored of me, looking forward to get rid of me when I head off to Hong Kong.

But, uh, yeah, we, we both went to Amsterdam with a couple of friends. Hey, I had a chance in Amsterdam to meet up with a, uh, another Prolific Fintwit name. Um, one of the two brothers, Vincent from Future Investors. Um, fabulous guy. We had, we had coffee, caught up, compared notes on some of our favorite growth companies.

Uh, yeah, it’s always really good when I travel to just meet people in real life, uh, get behind the, the Twitter, , avatar and see what they really look like and what

[00:02:45] Krzysztof: You’ve been exceptionally good at this, Luke. Like an investing ambassador. You’re very diplomatic by nature, so this is one of your strengths, but that’s fantastic. I think maybe, uh, you know, there’s one way of looking at the market, which is like a zero sum game type of thing, where for every winner, there’s the loser, and it’s kind of this competitive, uh, space, but I’m not sure I entirely agree with that.

Uh, maybe on the edges, but people in general on the retail side, especially working together I talk about this ad nauseum, right? Like, people you trust and kind of begin to get to know on a personal level make a huge difference. And so you’re making these connections. It’s fantastic.

[00:03:29] Luke: totally agree, right, we all make each other smarter, um, and you don’t have to meet people in real life to, you know, benefit from their insight and share your own insight, but it’s nice to do that, you build a bit of a stronger relationship, so, um, yeah, it’s good to be part of a community of folk who are just interested in this kind of weird endeavour of investing in growth companies.

[00:03:50] Krzysztof: What’s your top insight from your conversation?

[00:03:52] Luke: So it’s he and his brother are, his twin brother, are the future investors. Go check them out on Twitter, they’ve got, uh, their, uh, Stock of the Year awards running right now, they’re doing like a whole bunch of Twitter polls, , and evidently there’s not a massive…

Uh, culture of investing non domestically in the Netherlands. Most people, if they do invest, it’s either indexes or it’s like big kind of national giants, companies like Royal Dutch Shell, companies like that. So probably Vincent and, you know, his brother are somewhat unusual, looking much more broadly at some of the same companies that I look at in the States and, you know, that we all look at as ThinTwit and 7investing members.

So, um, uh, it’s nice to kind of compare notes. I won’t share any of the company names that came up over coffee, but we did both share one or two of our… Interesting off the radar stocks with each other, so I’ve got a couple in my back pocket to go research now before, uh, maybe before my next 7investing recommendation.

[00:04:51] Krzysztof: Right on. What’s their Twitter handle? Future7?

[00:04:54] Luke: They are @FTR_investors, and if you go look at my follow list you’ll find them on there somewhere too.

[00:05:00] Krzysztof: Okay. So. Maybe the biggest news in the stock market was since our last conversation two weeks ago, I believe we were on the eve of NVIDIA’s earnings report

[00:05:13] Luke: Yeah, yeah.

[00:05:15] Krzysztof: uh, the stock price right before was already up massive, massive amounts. And from my own explorations, uh, there was a pretty clear bull case and a pretty clear bear case.

of, in both camps. So what is it that ended up happening?

[00:05:39] Luke: The company put in incredible results and just completely blew outta the water.

Any analyst expectations, including my. Not only is the revenue they’ve delivered up massively, not only is their net income up massively, nearly 50% net income margin. Now it’s kind of crazy for a hardware company essentially. Um, but their guidance is looking pretty stellar as well.

So like these guys are the rocket ship that kind of every other company is riding as they build their AI capabilities. Um, really, really remarkable stuff.

[00:06:11] Krzysztof: So here’s the question, uh, that I want to talk through with you. First let’s talk about the price action just a little bit. I think right after earnings, the stock bounced up quite a bit hit 500 something, uh, the euphoria of the, you know, the great numbers. And then maybe I don’t know if it was a day or two later, I think there was a big red macro day, but, The stock actually went down to about four fifties, so lower than before earnings.

So you kind of had a little bit of the pri multiple compression thing going on. That’s maybe neither here nor there in the long term. But the most interesting maybe framework that I was trying to parse through is thinking back to the internet bubble era. Okay, we knew the internet was going to be a thing, but we didn’t know who the big winners would be, and the stock prices were rising in these massive exorbitant amounts that, you couldn’t believe your eyes, and in the end, in hindsight, most of those companies We’re in fact bubbles, uh, the ones that weren’t provided massive returns from that point, but people lost their shirts more times than not. My question here for all investors in NVIDIA and I guess any company that’s AI related, is what do we have to do for ourselves as investors to become confident in the probabilities that they have? The stock and company we own is not a bubble stock.

[00:07:54] Luke: think there’s a big difference between, um, Like the, the early 2000s dot com bubble and maybe the AI bubble right now. And to me, like the big difference is real results. I wasn’t an investor at that time, like way back at the start of 2000, but you have like companies like pets. com.

Crazy valuation, not actually having, you know, any material revenue growth to back that up. Here now you’ve got a company, NVIDIA, who’s generated just in its data center segment, the largest segment, but to one of four segments, over 10 billion in the latest quarter. They’ve sold that much stuff, and that’s up from like 3.

8 billion a year ago, so nearly. Tripled their revenues just in that segment. That’s real growth that you can stick a pin in.

[00:08:47] Krzysztof: So let me maybe, uh, this is not quite analogous, but I think there’s something there. Here, um, I’m still thinking in terms of bubbles. When Zoom began its ascent. And every human on the planet, like more or less, was forced into this company’s sphere of influence. The stock went to an exorbitant huge amount.

And those were real revenues. Real product, real revenues, life changing mission, can’t live without it, name becomes a verb. But that too turned out to be a bubble because in the end when you… Sell so much of the thing, you have no one left to sell to, and the, call it the, the next phase, the optionality of the company is limited beyond its, its initial product, right?

The stock just got way ahead of itself. If I’m gonna put on a bear cap here, bear outfit rather, not a cap, if I turn into a bear, sharpen my claws a little bit,

the thing that worries me is at some point I think, well, GPUs as a hardware, As as hardware will reach some kind of saturation point and are those expectations already to some large extent built in some extent or large extent built in. My own bull case is and I’ve this is funny. If we go back to our 7investing slack channel…

When I was deep in my own NVIDIA research, I think I posted something like, Be aware that NVIDIA is as much, is going to be as much a software company as a hardware company. And people were like, what the hell are you talking about? Right. But I think that’s going to be the, my bull case that this is a way more complex company that is building architecture and The design and languages on top of that and it’s only accessible through the hardware and yadda yadda, right?

So that’s my bull case, but I get ahead of myself, Luke. Are you at all, with regard to Nvidia, worried about hardware saturation?

[00:11:05] Luke: I’m concerned about the valuation. I’m not concerned about hardware saturation. , there are so many applications for this hardware and so many industries clamoring for accelerated computing. I think we’re a long way away, probably we’ll never hit saturation, we’ll always find some other use case, some other way of extracting value from, um, increasingly fast computation.

I am concerned about the valuation though, like, it’s much more reasonable now. I always said to myself, okay, I’m going to trim, because it was, I trimmed when it was like 180 times free cash flow, and I said to myself, I’m going to take a hard look at this again if it comes down to 100 times free cash flow, and because free cash flow has jumped through the roof, even though the valuation is still, or at least the share price is still high, the price to free cash flow ratio has come down materially, because the free cash flow has gone up.

Um, so I’m going to start taking a look at this again, and maybe justify adding to it again. 

[00:12:04] Krzysztof: What if that despite obviously the massive demand, no one’s denying that, and I’m fully on board with everybody needing these things and there being a shortage, but if I try to think forward, even, I don’t know, two years from now, and is there a point, you know, where, Invidia comes out and says, yeah, many of our customers have what they need.

[00:12:29] Luke: Yeah, I don’t think so. But, uh, I do think, like, there’s always the risk that a superior solution will be found. Maybe… Tensor processing units maybe quantum computing and we’re looking at quite a long way ahead now for this stuff to be like at scale commercial reality. But with NVIDIA as a GPU guys, that’s one way of approaching high, high capacity computing.

There are other approaches that perhaps they have much less expertise in. I think your point that they’re building software as well is important because that potentially could sustain them even if the hardware Sales start to slow because the software drives the use of the hardware, um, but there’s a whole hundred ways this company could still come undone.

[00:13:11] Krzysztof: Yeah. And it’s history does not give one, uh, you know, it has this, if you, if you want to see a horrific stock chart that has like palpitations and like massive drops, like take a look at Invidia’s, right? Like you need to have, uh, cojones, the titanium to, uh, you know, have just held.

[00:13:32] Luke: I think we, none of us can argue, right, that the valuation is more reasonable today than it was last week, so yeah, that’s one key takeaway. Whether it’s reasonable enough to justify adding to your position, that’s a tough question that every investor needs to answer for themselves.

[00:13:46] Krzysztof: so did Jensen just prevent World War III or accelerate it?

[00:13:51] Luke: That was my, uh, probably my terrible take tweet. What was I trying to say with that? And I’ll pose the question to you. So, um, my, my random thinking here was like, the world is potentially on the precipice of World War III. Necessarily because of Russia, Ukraine, perhaps because of China, us. And so like I’m not smart enough to understand the geopolitical dynamics, but Jensen has just demonstrated yet again that the demand for. GPUs, the demand for all this stuff that’s primarily coming out of Taiwan is much higher than the market and than anybody expected. And so this is my random take, like that’s going to justify the US investing even harder and faster in building domestic, uh, And you can see that Companies like Intel and others, but, and Taiwan Semi building like domestic plants. But this is, the NVIDIA results can justify doing that even harder and faster to a higher scale. So does that turn down the tensions with China, Taiwan? Because China just have to kind of take a breather for like a two years maybe.

And then the U. S. suddenly. Uh, no longer need to leap to Taiwan’s defense, they might only do that justified by moral grounds rather than, uh, uh, you know, the ability to keep the lights on effectively and their own society functioning. Or does that ratchet up tensions? I’ve got no idea. What do you

[00:15:23] Krzysztof: Well, you’re lucky because I know all the things and I know exactly how this is going to play out. I’ve, I’ve read one, I’ve read exactly one book on the geopolitics of semiconductors. I have a bad feeling about this. If I’m going to, if I were a betting man, I would say. Everything I’m hearing about China’s domestic troubles, real estate troubles, uh, the one time I know humans can start acting, uh, I don’t know if irrationally is the word, but desperately, it’s when things are falling apart at home.

And on top of there basically being a rich GPU category and a poor GPU category, if you find yourself in poor… That is being now poor in your military and your national security. And so, a dangerous animal backed in the corner, I think has increasingly higher odds of waging war.

[00:16:27] Luke: So NVIDIA has pushed us closer to the precipice, have they?

[00:16:30] Krzysztof: Yeah, I guess hearing myself say it like that, I think the odds increased.

[00:16:35] Luke: I’ve prompted Peter Zahan to have an opinion, but I think this is too small a topic for him to opine on. I’m not sure. I kind of hope that maybe it’s turned down the tension a bit.

[00:16:47] Krzysztof: Well, maybe the counter to my own argument is that in complex systems theory, you don’t know.

[00:16:53] Luke: Yeah.

[00:16:55] Krzysztof: Because, because, uh, because, yeah, I don’t want to get into all that, but too many variables in short, and what

[00:17:02] Luke: about the stuff we can, uh, worry about the stuff we can control, not the stuff we can’t.

[00:17:05] Krzysztof: Exactly.

[00:17:07] Luke: something you are in control of, and a bit of a worry for you though. I understand that you very recently sold your first, or sold one of your seven investing recommendations.

[00:17:18] Krzysztof: That is true, Luke, uh, and it was a tough decision, because I still believe in the company for the most part, and it’s a, it, it, the news hit the wire that it’s shopping itself for, and it’s being acquired. 

[00:17:33] Luke: Tell us who they are, well, you know, what’s, what’s going on, we may as well talk about the company if we’re selling it.

[00:17:37] Krzysztof: Uh, yeah, it’s a cyber security company named Sentinel One, and, uh, when I made the recommendation, what I saw was that it seemed to me to be neck and neck with the dominant player, Crowdstrike, uh, both companies featuring AI as a way as opposed to a legacy foundation makes it It’s easier for new cybersecurity violations to be found, recognized, and reacted to. So it’s a next generation type platform. And I saw in Sentinel 1 a competitor that had, in all kinds of metrics, either as good and sometimes better tech platform than did Crowdstrike.

It was also smaller. And because it was smaller, it was closer to the hypergrowth phase. as opposed to Crowdstrike, which had a bigger base. So I thought, wow, this is a large pie, a large total market. Why not have two winners? And the valuation I thought on Sentinel was more appealing than Crowdstrike. The problem is that, uh, I think what we’re finding out is that my principle of not investing in the second best is becoming slightly more and more likely in Sentinel’s case.

And so they forecasted massive deceleration of revenue for the upcoming quarter. And so the earnings will be released tomorrow after, after this recording. And I’m sitting, I’m sitting with this news thinking, One, if they do sell themselves, there is a good likelihood of getting a nice little premium pop.

And so, is it wrong to hold in anticipation of that kind of event? I don’t think it’s wrong. However, as a long term investor, at the end of the day, I either want really, really favorable asymmetrical risk in my favor, so that I could make out like a bandit for the risk I’m taking, or I want to sleep well at night, knowing I don’t have to worry about this company’s future because it’s the best in class and breed.

[00:19:46] Luke: Yep. Right.

[00:19:47] Krzysztof: Currently, my recommendation is down 25% from its original… Recommendation price, and so that’s not great, but then the fallacy is kicking. Let me just get back to zero, right? Or there’s a little bit of shame in watching your recommendation go down 25% minus 40 against the S& P. But that is the hindsight bias I think afflicts too many investors.

And I forced myself to think, is this a company that can beat the market going forward? And in order to justify that. Things would have to get way better than current expectations. And given the, the facts on the ground that I was seeing, I didn’t see necessarily how things would get easier rather than harder for Sentinel One.

So I, in the end, Luke kind of dug deep and thought, you know what? Some of the great investors in business minds, they, they have what I think of as a killer instinct. This is something I kind of got out of the show Succession, if you haven’t watched that, you know, it’s, it’s, uh, oh, Luke, side tangent, you have got to watch the show.

This is, this is your new mandatory homework assignment like the wire was, uh, earlier. Anyhow, you know, it’s, it’s business people and, and they’re vying for the top and, and, um, there’s one scene where the, uh, patriarch of the family looks to his potential heir and says, you do not. Have the killer instinct.

That’s why I’m not giving you the reins to the throne. And I think this is one of those cases where that’s what I tried to tap into.

[00:21:28] Luke: Yeah, I think it’s good. I think it’s a good sell. Um, I, I like the company. I’ve, I’ve been a shareholder, at least had options on the companies after you recommended it. Uh, and I’ve, I’ve exited that position along with your sell recommendation. I agree. Like they’re, great company, but in a tough market, in a tough economic climate, I’m a huge fan publicly.

I’m a huge fan in Crowdstrike, who are the number one in that industry, and a lot of my, conviction around Crowdstrike is they’re going to prosper in the tough economic climate because they’re… So, free cash flow positive, like they’re generating money, they have a ton of cash in the bank, and they’re going to go out there scooping up some bargains, um, you know, whether they buy Sentinel One or not, I don’t know, but there’s 700, no more than that, there’s several thousand cyber security companies out there, I think there’s 700 just doing endpoint security, which is like the specific domain both these companies operate in, like, lots of opportunity to…

Do some tactical acquisitions there. If you’re on the other side of that though, you’re the one potentially in jeopardy and at risk of being acquired, like Sentinel 1 now are. You know, they’re out trying to court an acquirer if you buy the news. Well, it’s not a great position to be in. And you’re a bit of a coin flip on whether you make money here, versus the market, I think.

So, it seems like , most emotionally… So, the easy way forward is just to exit the position at a small loss and kind of take it on the chin.

[00:22:56] Krzysztof: And I would like to point out, though, that based on our conversation from last week about the complexities of selling, I was making the argument of never sell as weirdly defensible. Over the long period. What I ended up doing in my own personal portfolio is, uh, this is a slightly new strategy, but I now have a bunch of companies that I own only one share of and that is, uh, I’ve, I’ve retrained my mind because I like when things are clean in my portfolio.

So I’m more of a concentrated portfolio guy where. Most of my bets are between 8 and 12 companies that I know backwards and forwards. And, but since, since the big decline, I now has have this long, massive tail in my portfolio. That’s almost like its own little index of companies that I have one sharing.

And that allows me to, as opposed to keeping a company on the watch list, I get to see in real time if I’m wrong about this cell, and Sentinel three years from now is 300% more?

That’s kind of like a journalistic opportunity to reflect on the decisions and so forth. So something to consider for yourselves as a portfolio management trick.

[00:24:15] Luke: yeah, very good. Hope that proves to be the right thing. I think they’re probably going to end up being acquired, which is why I exited it too, but uh, let’s see.

[00:24:24] Krzysztof: Yeah. Hope is not the best of investing strategies.

So, uh, you want to talk to us about the brain computer interfaces.

[00:24:33] Luke: do that. Uh, yeah. Interesting piece of news I ran into, , in the last week or so. So you’ve heard of brain computer interfaces, right? This stuff’s been around for maybe a couple of decades in primitive forms where we’re, you know, Basically, if you’ve got, you know, poor patients, perhaps unable to communicate, uh, with some form of motor neurone disease, for example, then we’ve increasingly sophisticated techniques to allow those individuals to communicate with friends and family and, uh, essentially to speak. Well, incredible breakthrough I saw a news article on just in the last couple of weeks. Evidently, in a pioneering study, two patients who were essentially left unable to speak due to motor neurone disease and a stroke, both, you know, both, sort of quite advanced neurological impairments, uh, suddenly can communicate at 60 to 70 words per minute, essentially just kind of talking, uh, at the same pace I’m talking now, which is a new record for brain computer interfaces.

So the technology here is really interesting. This is not something you do lightly. This is a very, uh, complex operation. You have to open up the skull, uh, apply essentially, like, lots and lots and lots of electrodes to the speech motor, uh, part of the brain, and then a pretty long… Several months, I imagine.

Training regime, where the doctors had the patients essentially visualize saying around a thousand different words and sentences, and then with AI, studying their, the readouts from all these electrodes and knowing what the individual was trying to say, essentially has been able to piece together, a close enough guesstimate of what they were thinking that essentially.

They can talk with a pretty broad vocabulary at almost a normal pace. There’s, I’ve read some really interesting, uh, kind of concerns that, you know, is this mind reading, is this gonna lead to, you know, dark technologies and, you know, strange, uh, strange things? I think probably not. So, um, this approach was like looking specifically at the speech motor part of the brain.

So almost the patient has to visualize themselves saying the words. If I’m just thinking, man, that guy Krzysztof’s an ass, right? If I’m not visualizing saying that, you’re not going to be able to read my mind of that. But, uh. Uh, but pretty cool. And, uh, you know, super early, only two patients, tiny study, but, uh, this is an incredible bit of technology perhaps.

And, you know, one day if we can put the kind of electrodes on the outside of the skull, you know, stick it in one of your hats rather than, you know, something inside the skull, maybe, uh, you know, maybe we can all suddenly dispense with our keyboards and just kind of think what we want to say.

[00:27:26] Krzysztof: You just described a nightmare scenario, like knowing what Luke really thinks about my gatherings. is there a connection, is there an obvious connection here to project? Did that come up?

[00:27:45] Luke: It didn’t come up in what I read, um, but knowing a little bit about Neuralink, um, I get a similar, similar kind of approach. I don’t know that they’re specifically looking at the speech motor sensor of the brain. I think they’re looking kind of more generally and that if my, my loose understanding of Neuralink is, um, you know, trying to have a high bandwidth connection into.

Uh, the whole drain, so, but yeah, similar, very similar technologies, I suppose.

[00:28:12] Krzysztof: fascinating I just can’t I the rate at which things are happening right now is just absolutely incredible and so to be an investor at this time is like there’s just too much to even parse through so thanks for bringing this to our awareness off the top of my head I know there’s a stock that I had looked into two years ago it’s a biotech company that helps bridge the gap between hardware and the mind, uh, for surgeons.

Uh, very speculative. ClearPoint Neuro. Check it out if you’re interested in this broad category.

[00:28:52] Luke: Hey, how’s your, uh, talking about, uh, stocks specifically, you want to tell us a quick update on what’s happening with EOS, your EOS saga?

[00:29:01] Krzysztof: Yeah, the, uh, there’s a bunch of, I think, really good news on the horizon. One of which is that the, uh, company saving Department of Energy loan. is is uh, according to the CFO uh, they have high expectations to receive it before labor day which gives us three more market days. Though that’s a, you know, loose, loose, I mean that’s with, you know, given the Department of Energy and government, uh, you never know.

But, nonetheless, they are in the At least on paper, there’s a thing called the 30 day window once the loan application is received by the U. S. Treasury. And that was, as per the last earnings call on August 14th, they said we are definitely in that 30 day window. So, uh, September 15th looks to be maybe the literal hard deadline by which,

if the loan were not to be revealed by then and something had gone haywire, maybe on the 30th. And literally, anyone can enter any this information into have to 7investings. com. at a certain offering and it’s now doing its thing. But in the case of EOS, when you get companies that are struggling and might need to raise capital, having a higher stock price makes all the difference. Because if you issue new shares, you’re not diluting its equity holders by nearly as much. So all companies want their share prices to accurately reflect the value of the underlying business.

We know that’s not… The case a lot of the times the market, I subscribe to the inefficient theory where because the market is psychological and run by humans, it has all these exaggerations to the extreme and to the, to the pessimistic. EOS is, is a fascinating case because it is in danger of bankruptcy.

That’s why they need the loan. But what’s happened since I would say I, I began researching this company in February. Uh, and then over the months, the investment case became more and more clear to, to a wider and wider group of people. So now if you go on, on X slash Twitter and you type in EOS, you’re going to see a pretty large ish community of people that have become invested in EOS, both literally and in terms of the story.

The fascinating twist. Is that the company’s c e o Joe Malo recently started conversing with this crew investors in answering, I think some good questions. So if we take a public figure, like Elon, as, as an extreme case out of the what, what can we expect, uh, you know, what the norm is to have all of a sudden, maybe I’ll put that in quotes, direct access to a C E O.

Who is willing to engage with its investors on the retail side feels to me like a new thing and it feels like a success.

[00:32:41] Luke: Can I pitch a, a counter view to that? Because I suppose it’s nice if you’re one of the retail investors who suddenly has access and has a conversation. Like, I want my CEOs and CFOs managing the company, not managing shareholders. Surely the former is more important.

[00:32:58] Krzysztof: Yeah, that’s I think the obvious rebuttal to that and he himself addressed that point many times over. Uh, I’m not here to, you know, the work I need to be doing is on building this company and manufacturing and all that. But it does not take him many minutes to reply to some questions that are Uh, you, you could say investment basic to the company, and this is the bigger point I’m trying to make that I haven’t stated yet.

At the time that retail got involved in EOS, the stock was about a dollar, call it 50. The stock is now at 350. So a over 100% something gain, and it’s hard to say with accuracy the extent of the influence that it, that retail has had. But I would say, I would venture to say it has been significant because the details were buried, the, the, the catalysts were buried deep down and you had to really do a lot of work to figure out what the true story of this company is.

So my, what I’m saying is, , it seems to me that the likelihood that the company became stronger both on a financial footing and potentially in the eyes of, I mean, this is maybe overstating the case, but. Oh as investible to larger institutions. That should be it. but they do tend to sort of get zoomed people talk about like businesses having made big investments, and they then also talk about like beginners thinking about

Oh, institutions really need to start looking at this thing, which creates a whole new category of, um, um, it being investable.

[00:35:00] Luke: But nothing fundamentally changed though, right? Just because these guys are out there telling the story. Um, you know, the company, It is what it is in terms of its own internal books and its finances and its ability to continue operating and the legitimacy of its order book and things like that. I hear what you’re saying though, like, suddenly for this kind of penny stock territory, kind of weird things tend to drive the narrative more so than, like, material, real stuff.

I don’t, I kind of don’t like that sort of thing personally, but, um, yeah, okay, I can see the benefit in EOS’s case, if it essentially, if it keeps them afloat, uh, for a little bit longer, so they can hit this binary event, I guess that’s not a bad thing for investors.

[00:35:45] Krzysztof: Yeah, and I mean, I think maybe, yeah, that’s absolutely true financially speaking. I think the point I’m making is, um, it’s a little bit different. It’s a little bit more like, you know, compared to what being an investor is like 20 years ago, to what it could be like now. We have this, in this particular case study, Luke, Before people became wise to the story, EOS was forced into a bad predatory loan situation called the SIPA vehicle and the rates at which they had to borrow money to bridge the gap between getting the loan.

It was a bad situation. Now we learned just a couple weeks ago that they got rid of that agreement. The stock price is higher. They could sell shares at a higher price, lower dilution, more capital. Now they have more, like basically the health of the company is significantly increased and I’m just saying this is in part due to regular average Joe investors for varying degrees getting involved which leads to direct, almost direct access to the person who knows most about the company who is now willing to engage in various, on various levels with investors.

That kind of thing Would be unheard of,

[00:37:07] Luke: Sure. Yeah.

[00:37:09] Krzysztof: ago, and of course it could be abused, and of course it could be, there could be red herrings, and of course, in the end, the fundamentals are what matter, I’m just sitting here looking at the whole story from my perspective over the last six months, I’m like, this has been a hell of a journey, uh, and it seems to be at its strongest point now, from an investment standpoint.

[00:37:32] Luke: Yeah, fair enough. I guess it could be a double edged sword, like every time you, if you’ve got like a CEO on Reddit, right, and you’ve got a bunch of, uh, sharp minds, but also like a bunch of keyboard warriors. Possibly, if the CEO is unwise, might get baited into saying something that materially damages the company.

So they’ve got to be careful. Like they’ve got to be, that’s just why they have very structured communications with whole investor relation teams around them. but maybe it’s no bad thing. Maybe it is the evolution of how, how kind of the information asymmetry starts to break down a bit more.

Um, you know, we all get more insight into. You know, the true value of the companies we invest in.

[00:38:12] Krzysztof: It’s such a fascinating gray area, Luke, and you know, the, uh, the obvious example is Elon, and there have been, you know, it’s, I don’t think this is a rebuttal to what you just said, but I know back in the era where Tesla was pre Model 3, or maybe inching toward Model 3 production, there are many investors who sold their shares because they did not think Elon’s behavior and, uh, call it filter that he had no filter on on media platforms.

They found him precarious, untrustworthy, and not suitable for CEO. And of course, what does the stock do? It goes up massively, uh, because in the end, I think it becomes about fundamentals. So, there’s a double edged sword cutting in all the directions. This is triple edged swords. 

[00:39:06] Luke: Here’s a slightly deeper fear then, just thinking aloud, right? So if, as a consequence of people like Elon and EOS’s CEO getting in the public, if you create an incentive for companies to have, like, Uh, meme worthy, you know, highly sort of polished, smart ass guys who just kind of get out there and they, you know, they try and seize the narrative, there’ll be certain, uh, human characteristics that go along with being a guy like that.

So are you perhaps creating an incentive to have a certain kind of CEO who might take your company perhaps in a suboptimal direction?

[00:39:47] Krzysztof: probably.

[00:39:48] Luke: the mild, the mild mannered, the great quality mild mannered leader, if you disincentivize that kind of leadership, you know, the coaching type leader, yeah, maybe there’s a bunch of high quality companies out there that might suffer otherwise,

[00:40:02] Krzysztof: It’s always a balancing act, isn’t it? And it’s rarely binary.

[00:40:06] Luke: yeah,

[00:40:07] Krzysztof: know, I, I, I, I venture the truth is somewhere between increasingly between just being completely invisible, uh, and being unfiltered and, and, you know, shooting your mouth off inappropriately. But for me as an investor, I rarely think access to more pertinent information is ever a bad thing.

[00:40:32] Luke: yeah, okay, that’s fair. I think takeaway, yep.

[00:40:35] Krzysztof: Okay, it seems like I’m on the hot seat this week for the trivia game, I don’t know what the, what the tally is. What’s the tally? How are we looking? Are we both idiots, Luke?

[00:40:49] Luke: I think I’m still on zero. You might have one point. Let’s see if we can, you could extend your dramatic lead this week. Uh, you didn’t give me much to work with in the, uh, the prep for this week. So, um, I’ve gone with something adjacent to the NVIDIA news because, uh, as of a little while ago, they’re a trillion dollar company.

So, uh, I got a bunch of questions about a trillion dollars for you. Okay, let’s go, uh, so apart from NVIDIA, actually because you mentioned Elon, this kind of comes into play too, apart from NVIDIA, there are six other trillion dollar companies today. Alphabet, Amazon, Apple, Microsoft, Saudi Aramco, and Tesla. Truth number two. It would take a military jet flying at the speed of sound reeling out a roll of dollar bills behind it 14 years before it reeled out 1 trillion dollars.

[00:41:47] Krzysztof: say that, say that one more time.

[00:41:49] Luke: Military jet, speed of sound, pooping out 1 bills in a trail behind it. It would take that jet 14 years before it pooped out a trillion 1

bills. In 2011, facing a national debt crisis, the US government floated the idea of minting a trillion dollar coin as a potential alternative to raising the debt ceiling. There were several high profile proponents of the idea, but it was eventually rejected by the Treasury Department and the Federal Reserve. One of those truths is a lie.

[00:42:26] Krzysztof: Yes, I know exactly which one it is. Thank you for taking it easy on me. I happen to know that Tesla is not a trillion dollar company. So you tried to squeak a sneaky one in there with your number one.

[00:42:42] Luke: They were a trillion dollar company.

[00:42:46] Krzysztof: They were, they were. And they will be again.

[00:42:50] Luke: They will be again. Success though. Correct. You’ve extended your lead. You’ve doubled your lead to two points. Correct. Tesla’s market cap today is 2. Sort of high 700 billions, uh, down from a trillion dollars a little while ago. I think you’re right. They’ll be back in that club before long.

[00:43:07] Krzysztof: right on. Okay, it was fun, Luke. I hope folks learned a thing or two. If you are inspired by our conversations, spread the word. Because, uh, there’s a lot of beginning minded investors, even, even advanced investors, I think that could gain some, uh, some insights from us. So, we are 7flyingplatypus on the Twitters, and 7lukehallard on the Twitters, and 7investing. com on the interwebs.

[00:43:42] Luke: Rock on. And if, uh, if you’ve got like some random topic you think we should pick up on, I just want to nitpick our debates, then, uh, yeah, drop us a line on Twitter and let us know.

[00:43:51] Krzysztof: Until, until September.

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