The Razor’s Edge

China Stocks and Boeing, And Whether To Venture Into Troubled Waters

Our second podcast of this week and 2024 covers companies not priced for perfection, but that instead have struggled.

We start with China stocks, and the question of whether China is uninvestible. We go into Akram's July 2023 Alibaba trade views and how that was also an investment thesis. We also talk about the connected nature of global economics now and in history.

From there we jump to Boeing's travails and how much of those travails should be pinned on Boeing, and how much of them are part of doing business, and capitalism generally.

Related posts:

The Razor's Edge: China is Uninvestable??

The Razor's Edge: Boeing and Regulatory Capture in Capitalism

The Long and Short of the Markets: Boeing's Bad Week, and Going Beyond the Headlines

• 2:05 minute mark – the stakes with the China trade
• 6:20 – Restarting with Baba’s position and Akram’s July 2023 thesis on Alibaba
• 13:00 – The Baba buy case
• 19:00 – China’s import beyond China-based companies, crypto and politics asides
• 24:00 – China’s lagging performance and frontier market experience
• 34:30 – The concept of too hard
• 37:30 – Getting into Boeing’s issues and past regulatory stories
• 48:00 – Boeing’s track record in context of other industries, and shared responsibilities
• 59:00 – Boeing too big to fail?
• 1:07:00 – The capitalism angle

Semiconductors: The Hottest Commodity On Earth (Or At Least Trading Like It)

The chip sector has been Hansel-level hot to start 2024. AMD and Nvidia have jumped 14% and 21% respectively in 2024, the SOXX ETF is up 8% in the last week, and the AI theme of 2023 is still driving things to start 2024.

What does this say about the sector, and why is it like being a favorite to win the Super Bowl? We discuss the excitement, the build out of AI, the usage, and how that all converges into questions for chip stocks.

This is the first of two episodes this week, with the second on a couple different topics, watch for that Thursday or Friday.

Referenced article: https://the-razors-edge.ghost.io/razors-edge-nvidia-pide-piper-baidu-bumblings/

Referenced presentation/tweet: https://twitter.com/akramsrazor/status/1745029272140456325

Topics Covered

• 6:00 minute mark – Chip party
• 10:30- AMD’s spark
• 16:00 – The internet bubble comparison
• 21:00 – Feeling Peakish
• 24:30 – Hyperscalers data center build out and what could go wrong for Nvidia
• 34:00 – Apple’s Siri as an example of how AI will benefit us, vs. a new hardware assistant
• 45:30 – Are there any winners in a great AI software convergence
• 52:30 - Why it matters for chip stocks

2023’s Big Finish: Where do we Stand? Is this another 2021? What makes sense?

Hey! We're back! It's been a while, but with 2023 finishing in such a one-direction flourish, we wanted to pick up the mic again. Akram and Daniel talk about what to make of the market's triumphal 2023. We cover the overall vibes in the market, but also get into the weeds on stocks like Nvidia, Micron, Docusign, Zoom, and even Alteryx and Roku, as well as a few older names.

The plan is to publish more in the year ahead. Hold us to it, and enjoy this episode.

Topics Covered

• 2:15 minute mark – A triumphal year for the market – justified?
• 9:00 – Financials as an example of shifting momentum and sentiment, as well as thematic trading and the speed of change
• 13:30 – End uses of AI – where are we at this point
• 20:00 - Nvidia as the locus of various tech hype cycles
• 28:00 – What does semiconductor cyclicality look like now?
• 34:15 – Are we in normal yet? For software or otherwise
• 51:00 – Speed of moves in the last quarter of 2023

The AI Rally: Sorting out Heft from Hype

It's been a while since we've posted a Razor's Edge episode, and a lot has happened! A whole banking crisis came and went and apparently is all resolved (?). More relevant to the sort of things we talk about, the Nasdaq has returned to full bull market mode, powered by the excitement around generative AI, as best embodied by Nvidia's smashing earnings report of late May 2023.

There's a lot to be legitimately excited about with this trend, and at the same time, like every exciting new thing, there's a lot to be suspicious of. Is generative AI going to generate us right out of what was still a re-centering, declining tech market? Can generative AI be good for every publicly traded tech company except CHGG? When does chat GPT replace us as hosts?

That's what we cover on this week's episode, more or less.

Topics Covered

• 3:00 minute mark - The macro backdrop for this bifurcated rally
• 7:30 – What we learned from NVDA’s report
• 15:30 – How this AI compute trend plays out across the semiconductor sector
• 24:00 – AI uses and AI losers or trade-offs
• 34:00 – Bear market rally, death of permabears, and the many crosswinds
• 46:00 – How the cost-cutting rally collides with the AI investment rally
• 53:30 – How does anyone get an edge using AI

The 2023 Market’s Squeezy, Trashy, Inevitable Start to the Year

It’s been a funky start to the year, as a dash for trash rally has extended into a not as bad as expected earnings rally, and now it’s easy to be wrongfooted.

We dive into this market, including how markets don't go straight to zero, no matter what December felt like; how recessions take a long time to play out; what we can learn from moves in Twilio and Meta; and why the rise of AI has complicated narratives.

Docusign, Zoom, MongoDB, and the SaaS Circle of Life

On this week's The Razor's Edge, we talk about software as a service and how the market seems to repeat the same patterns over and over. Those patterns include:

• Taking the last three months and the next three months and extrapolating far into the future
• Ignoring valuation until it's too late to ignore valuation
• Searching for silver bullet explanations and one-size-fits-all theories

This time around that means that some of the first Covid winners and first Covid hangover victims are starting to look like interesting post-hangover recoveries; that usage based business models are just business models with their pluses and minuses; and that profitability matters, whether its actual profitability or easy to see how a company cuts to get there.

Compound248 on Twitter’s New Era and the SBF/FTX Meltdown

All-star guest Compound248 joins us to follow up on a wild week in the markets. We talk Elon Musk’s high volume start as owner of Twitter and the SBF, FTX, crypto crisis. Akram's Razor and Compound go back and forth on the import for the cryptosphere, why Elon and team could have taken easier shots on goal, and break down what breaking the buck means, among other topics.  It's a story of the Hindenburg and the Titanic, and we see how things got to where they are and what might change.

5:00 minute mark – Twitter – the Twitter turmoil in the Musk era, and what Twitter could/should be doing now, the power of direct messages, Elon’s core thesis and the voices in his ear, the timing; Twitter’s data business and a SaaS digression

44:00 minute mark – FTX – the building blocks that lead to FTX’s and SBF’s rise; where things went wrong; the importance of staying silent as a levered brokerage business; the Lehman and other parallels; SBF’s use of Twitter; Binance’s checkmate move and whether it was proximate or definitive; breaking the buck; the final takeaways for crypto and for bitcoin – bull or bear?

Meta’s Crash And Tricky Position, and the Slowing of AWS and Public Cloud Growth

Last week was a big week in tech, so we’re back with an episode on two of the biggest stories. First, (2:40 minute mark) we break down Meta Platforms’ bummer of an earnings result and why it shouldn’t have been so surprising. What choice does Zuck have and where is the business heading?

We then (57:00) get into Amazon and AWS’s disappointing quarter, and the future of public cloud. That opens up some space for talking about the generals no longer leading and what a downturn in VC funding means for big tech.

We wrap up with a few minutes on Twitter (1:30:00) now that the Elon Musk deal is done and dusted.

Check out Akram’s post on these matters.

 

The Latest SaaS Turns: Okta, MDB, Veeva, and Twilio and the Challenges for SaaS 2.0

Q2 earnings season has delivered many surprises on the one hand and continuations of trends on the other hand. For SaaS companies, that has meant continued drifting.

Last week, Okta, MDB, and Veeva reported, and we break down each of those companies on this week's the Razor's Edge (you can also read Akram's take here). We get into the challenges each of those companies face, but also the broader difference between "legacy" SaaS companies like Salesforce and the newer all cloud products like Okta.

Topics Covered

• 2:30 minute mark - Okta’s earnings – what went wrong and what differentiates the Oktas from the Salesforces
• 10:00 – The value of “the suits” and the challenge of building a microservice-based business model
• 23:00 – The presumption that software is a great model
• 28:00 – MDB’s earnings
• 40:00 – Cutting to profitability amidst the tech recession
• 52:00 – The consolidation calvary is not about to arrive, and what else to watch
• 58:00 – Notes on Veeva
• 1:04:00 – Docusign preview

Roku’s Wipeout and whether the Black Box will Open

Roku's dud of a quarter echoed both Snap's report from the week earlier and the start of the pandemic as the sudden advertising slowdown hit them as well. The issues with Roku go beyond the quarter, starting primarily with how much harder it is to understand the details of their business. Will this quarter force a change? And what else does the advertising slowdown mean for the market? We discuss on this week's The Razor's Edge.

Topics Covered

• 3:30 minute mark – Breaking down Roku’s wipeout
• 11:30 – How important is the advertising wipeout in general
• 19:30 – Whisper numbers and the Roku black box
• 31:30 – Will this force Roku to be more transparent? The Twilio example
• 39:30 – What makes Roku more interesting?
• 55:00 – The death of never sell

Twitter Trial Breakdown

It’s all happening: Elon Musk filed to terminate his deal to buy Twitter, Twitter sued him for specific performance, and now the trials begin. Today, not a trial actually but a hearing to see whether the trial should take place on Twitter’s requested timeline, in September, or Musk’s requested timeline, in February.

Still, the two sides are starting to show their hands. While much of this ‘negotiating’ has been done in public, the filings were still revelatory. So, as we approach the endgame of the endgame, Akram's Razor and Daniel talk about what we learned, what happens next, and who has a stronger hand; though I don’t think you’ll be surprised by our conclusions if you’ve listened to us before.

 Topics Covered

• 3:30 minute mark – Initial takeaways from the filings
• 12:30 – Twitter bot approach and response
• 15:00 – Breaking down Elon’s breach filing
• 23:30 – Takeaways from Twitter’s filing
• 29:00 – Recutting a deal and the Anaplan parallel
• 48:00 – Musk’s motivations and laziness
• 1:00:00 – What happens next?
• 1:09:30 – The “the court wouldn’t risk being ignored” argument
• 1:14:00 – The prisoner’s dilemma result of an actual acquisition
• 1:18:00 – The size of the deal

1:28:30 – Last thoughts

The Bear Market Is Here: What Next?

On this week’s The Razor’s Edge, we talk about the bear market. It’s here, it’s real, so now what?

Neither Akram nor Daniel are in an apocalyptic mood, so we explain why we’re not, what green shoots there are on the supply side, what risks there are on the demand side, how this echoes 2020 (or not), how much crypto contagion worries us, and why it’s tricky picking individual names.

Topics Covered

• 2:00 minute mark – An apocalyptic moment? Maybe not
• 10:00 – Is supply solving itself just as demand is weakening?
• 20:00 – The energy pullback – why was it predictable
• 23:00 – The echoes of March 2020
• 30:00 – Crypto contagion and its risks
• 38:00 – Opportunities in the current market
• 48:00 – What if inflation doesn’t slow down?
• 52:00 – The challenge of individual names and the hopes for a quiet summer

The 2022 Whipsaw Market and the Hedgehog: Retail Stocks, Tech, and More

This week's episode picks up where last week's The Razor's Edge episode left off. We talk the current whipsaw/whiplash macro environment, where a smaller, often over optimistic social media company can trigger a panic, and then news that is no worse than expected can fire up a bear market rally.

We discuss tech stocks, retail stocks, and whether it's possible to be too bearish or too bullish as the winds shift.

The Twitter Endgame, Again: Logic & Legality

In part two of our recording this week, we get to Elon Musk and Twitter. Both because how can we not at this point, as the drama continues to unfurl, and also because Akram makes the case for this as a good merger arb play given the strength of contract law. We talk about whether Musk can work his way out of this and why Akram thinks he can’t, and what the next steps of the saga should be, along with a whole lot more.

Topics Covered

• 3:00 minute mark - The logical aspects of the Twitter case
• 13:30 - Twitter's setting up to go the distance, and the bots issue
• 30:00 - How material is the bots case
• 35:00 - What are the next steps, and the role of the equity partners
• 43:00 - Past precedents
• 50:00 - The outstanding risks to Twitter as a company and to Tesla as a stock
• 1:00:00 - Quick comments on the retail sector

Growth Stocks Approaching a Bottom?

Markets are in turmoil, and we almost busted out the siren. But instead of commemorating the second bear market in the Razor's Edge's lifetime, we focused on whether, actually, growth stocks might have bottomed. In an episode recorded Sunday, May 22nd, we talk about the growth stock washout, whether sentiment or operating momentum has bottomed, whether ZoomInfo makes sense as a short and Zoom Video makes sense as a long, and the peer pressure that a lot of investors, famous or not, have faced in the past couple years.

This is the first of a two-part episode, as we'll get to the Twitter story tomorrow or Wednesday.

• 3:00 minute mark – The pending bear market, and have growth stocks already washed out?
• 8:00 – The ZoomInfo short and picking on the last high flyer standing
• 14:00 – So is this a bottom?
• 21:00 – Sentiment bottom vs. operating momentum bottom
• 33:00 – The recession/slowdown shoe to drop
• 38:00 – Zoom’s “soft landing” problems
• 43:00 – The two Zooms
• 52:30 – The turning tide among big-name investors and the peer pressure market

The Changing Story At Juniper, A Rare 2022 Tech Winner

Tech as a sector has been a theme of the Razor's Edge from the beginning. Tech as a sector to avoid has been a theme of the Razor's Edge for at least the last few months. While there have been exceptions and nuances to the sector, the market has shown little interest in nuance, as this week's earnings have made clear.

Juniper Networks, an old dot com bubble victim and survivor, has been an exception to that rule. A name Akram's Razor wrote up as a long thesis late last year, Juniper is up for the year as it has a few points in its favor: an upgrade cycle, a reasonable valuation, and operational momentum in the Wi-Lan space thanks to a winning acquisition.

We discuss the company's prospects and why it is an exception to the tech rule, and also the legacy of tech sector sentiment shifts and a lot more.

Topics Covered

• 2:30 minute mark – The upgrade cycle driving Juniper
• 7:30 – Why the company has stagnated for so long and why that is changing
• 13:00 – The Wi-LAN opportunity and kicker
• 18:00 – How is Juniper handling the backlog
• 21:30 – Relative performance for Juniper and its risk/reward
• 27:30 – The dot.com legacy and the recent momentum
• 31:30 – How the networking and virtualization corner of tech fits into a broader tech bucket
• 35:30 – Tech shifts in sentiment, and a Microsoft case study

Twitter’s Endgame

We planned to do another episode this week, but on a different tech stock. We did indeed record that episode, but at the same time, with all the developments around Twitter - the board's adoption of a poison pill, Elon Musk's discussion of his bid during a Ted talk, and Jack Dorsey's subtweets of the board, among other things - we decided to discuss the situation.

Akram's Razor posted a case for why Twitter's Endgame is at hand. Daniel had questions. And with this being a fast-moving situation, we are sharing it quickly. The second half of the discussion, on a different tech company, will come out later this week.

Topics Covered

• 3:00 minute mark – How the surrounding situation has changed and the case for the Elon Musk offer
• 15:30 – Why the current price of offer is ok and avoiding anchoring
• 28:00 – The private company angle and Twitter’s needed transformation
• 40:30 – Jack’s presence in all of this

 

The Consumer Goods Cliff, and also Elon Musk and Twitter

A lot has happened since we last published a Razor’s Edge episode: the outbreak of war, increased Fed hawkishness, and continued market volatility.

We pick up the thread we’ve been following for some time, though: how to understand ‘normalized’ earnings power and behavior amidst the Covid-19 pandemic, the global response, and all the knock-on effects. We focus this time on the consumer goods sector and whether the cliff facing companies like RH and Best Buy is buyable, and what it says about the current market.

We also, because how could we not, discuss Elon Musk’s investment in Twitter (though this was recorded a few hours before the news came out that he would not in the end serve as a director on Twitter’s board).

Topics Covered

• 4:00 minute mark – Recent ups and downs
• 7:30 – Whither online spending
• 13:00 – The Consumer’s health and the consumer goods cliff – BBY, RH
• 23:00 – How much has the market already considered this all?
• 36:00 – Backlogs to save us
• 40:00 – Dive in or stay away? Revisiting travel
• 49:00 – The complicated consumer picture
• 54:00 – Twitter and the Musk situation
• 1:03:00 – The value of a corporate jackhammer
• 1:09:00 – The security analysis challenge

Reading List:

• Akram's Razor's Edge: Covid Cliff Comes to Consumer and Fast's WeWork Moment
• Freight Waves' Why I believe a freight recession is imminent
• Stripe's Annual Report

The Tail Wagging the Dog: Big Tech Earnings And the 2022 Market

Last week was a wild one. Given we’re not in a period of acute crisis, and that the market finished higher on the week, the swings from Wednesday to Thursday to Friday were especially pronounced, even before you throw in Monday’s comeback rally. The triggers to those moves? At least on the surface, big tech earnings.

To figure out what’s happening there and what these outsized moves say about the companies involved and the market as a whole, Akram’s Razor and Daniel break down Google, Amazon, and Facebook’s earnings. We talk about the market set up, whether this is as good as it is going to get for these companies, and why no one predicts a massive growth slowdown in their compounding business line.

Topics Covered

• 2:00 minute mark – Initial reaction including the muted note with Google
• 7:00 – What explains the outsized moves
• 14:00 – The nature of Amazon’s segments
• 18:00 – Facebook’s issues and how they might overcome it
• 30:30 – Peak online time
• 36:00 – AWS’s future growth
• 46:00 – Is this what slowdowns look like
• 1:00:00 – The market set-up

New Year, Same Trading? Breaking Down The Bumpy Start To 2022

Happy New Year! Though this week’s The Razor’s Edge touches on what may not be the happiest start for people investing in software names or tech more generally. So what’s going on? We throw together a bit of recent and longer-term history, a bit of market sentiment analysis, and some opinions on what might still work, to see why a shift has been coming for a while and why there might be more to come.

Topics covered

• 2:00 minute mark - Did the first week mark a change or a continuation?
• 10:00 – The momentum juggling game
• 13:30 – What’s triggering the shift?
• 20:00 – End of a software cycle and finding an investor base
• 28:00 – Tracking companies’ evolutions
• 36:30 – Consensus buys vs. taking a leap of faith
• 48:00 – Multiple gravity has changed towards the slow and steady
• 57:00 – The 00s shipping bubble as a parallel
• 59:30 – Navigating the factors and the importance of getting the cycle right
• 1:11:30 – Sectors to watch
• 1:17:00 – Importance of perspective
• 1:21:00 – The nature of competition when all eyes are on a trend
• 1:35:00 – Not quite validation for permabears either