today's number 885 that's the percentage increase in sales of adult fantasy novels in the first half of 2024 Ed I took my cousin to see a sci-fi fantasy movie the other day but the sex was way too graphic everyone in the theater asked us to [Music] stop you saw that coming didn't you yeah I'm sort of used to it welcome to propy markets today we're discussing the fall of night and Britain's economic future but first first by the way we just did two jokes and they were so profane and inappropriate and not funny I think the word is cringe yeah it's the Synergy right there there we go but first but first speaking of cringe here with the news here with the news is propy analyst Ed ellson Ed what is the good word I've got three words for you it's coming home that's all I have to say to start this episode I I'm literally beside myself well I was in a beer garden last night I was an American living in London in Munich watching Team England play the Netherlands in a beer garden and I thought life is so rich epic we with your kid uh of course yeah yeah and we went and got a kit today and by the way we went and bought him these new Jude Bellingham cleats at the Adidas store the Adidas store or the byon Munich store and and yes so I'm just we're just thrilled to be here what's your prediction this is going to come out the day off to the the final so I'm going to get proven wrong maybe but I don't know I I'm going to say uh 2-0 to England it's my prediction Spain looked pretty damn good they look good they look good but I have to have the money on England I mean oh yeah what do you think oh GL I got I got to go I mean you're talking to someone who's ordering paying a ridiculous My AG I have two you know England kits shipped to me in Berlin on a Sunday so yeah we're I'm even trying to I'm trying to find how I can find someone to to to paint our faces but by the way uh you went to the Munich store do you still have the shirt that I bought you from the from the Bayern Munich store a few I want to say a year ago I got you a a Bayern Munich shirt with Prof G on the back you still have that oh of course and I love it what you bought me a no no yeah oh yeah we love it we love it I knew it when we were in Munich year ago we got you a Bayern Munich jersey with Prof G on the back presented it to you on your plane uh and of course you don't remember but that was the douchiest sentence ever muttered on a podcast we bought you a Bayern Munich that's right kit so I have a closet full of kits and it's it's one of those things you know those things are pretty perishable it's not like I'm headed out for dinner one night and I think oh I'm gonna I'm going to wear my Byron Munich kit you should have framed it and put it up on the wall this is the momento of how much your employees love you these things have a shelf life of like the game the shelf life of the game I always buy it and I take a bunch of pictures at the game in the kit and then it it doesn't get a lot of use a lot of you out of that thr in the bin with Your Arsenal jersey and your Spurs jersey and your Chelsea jersey as well anyways enough of this get to get to the news just one note before we move on we'll be recording and ask me anything episode in the coming weeks so if you have a question for me and send us a message to office hours atrg media.com or you can tag us on X or threads Prof gpod or if you're watching on YouTube just drop a comment below let's start with our weekly review of Market vitals the S&P 500 closed above 5600 for the first time the dollar fell Bitcoin climbed and the yield on tenure treasuries dropped shifting to the headlines open ey will no longer have board observers after Microsoft relinquished its existing Observer role and apple scrapped its plan to take up a similar position Regulators have become increasingly concerned about Microsoft's relationship with open aai and its dominance in the industry CNN announced it's cutting 100 jobs and launching a new digital subscription product CEO Mark Thompson said CNN is working to create a billion- dooll digital business built mostly through CNN.com Venture Capital firm Andre Horowitz is collecting thousands of AI chips to help secure deals with AI startups The Firm has already started giving some startups access to those chips in exchange for equity and plans to build an arsenal of more than 20,00 th000 gpus and finally talks for a Ser deal between Oracle and Elon musk's AI startup xai have reportedly come to an end as we covered in a mayor episode xai was prepared to pay 1010 billion to rent AI chips from Oracle bit musk now says xai will build a system on its own Scott thoughts well I want you to take a little bit of a Victory lap here because you first highlighted to me how just incestuous and concentrated um the kind of current incoming players were around dominance around AI so anyways what what are your thoughts around the first story yeah well what I said was that the mic the Microsoft board seat on open AI was illegal and that there was just no way that this could lost and and that's what happened I think we have the clip I guess we might as well play it right now I can name you three illegal board positions in AI right now name them you high IQ nominated for best co-host name them I'm calling your bluff name them m moft Microsoft is on the board of open AI it's you know they say it's a non-voting board seat but that's still a board seat and Microsoft is also an investor in mistr and inflection which are both AI companies that directly compete with open AI all I can think is what's going to happen when the doj launches a full-fledged investigation into this thing because I would bet that no AI company is safe I mean this was bound to happen sooner or later and you know if you have that level of influence Ence on three major AI startups it's going to allow you to manipulate and control and tilt the marketplace in your favor so Regulators are finally catching on to this and Microsoft got scared it's now sort of jumping before it gets punished here's the problem though I would argue that the damage here has already been done and the example I would give is what happened with that other upand cominging startup AI startup INF you might remember within weeks of when I first made those comments CEO and founder of inflection this guy Mustafa suan we learned he was ditching the company and where was he going to go Microsoft and who else left with him his co-founder Karen sanan and most of the staff they all work for Microsoft now so think about what that means open ai's biggest competitor was somehow convinced to just aband ship and climb aboard open ai's biggest backer Microsoft which owns 49% of open ai's profits so yes Microsoft is leaving the board but we should be very clear here Microsoft has already gotten what it wanted it embedded itself in the AI scene it quietly formed all of these strange alliances between all these AI startups that should have been competing but we didn't really keep track of it and now the stage is set for Microsoft to get exactly what it wanted which is for The Golden Child open AI which it more or less owns to go out and take over the industry and that's exactly what's happening so this may look like a win for competition it really isn't you were precient in your comments around this and there's a few things here one it reminds me of what God I had this fantastic lawyer Red Envelope guy named Josh I'm blanking on his name now but when there there was so many conflicts like Sequoia was on our board and they would have a failing portfolio company and then the Sequoia represent would show and say I have a great idea Red Envelope should acquire this company andd be like so obvious that they wanted us to acquire this the failed products of seoa portfolio companies and then this scy I think his name was Josh Green he said to me he said Scott also keep in mind he's like you got to be mindful of conflicts but keep in mind conflict or the valley is run on conflict and that is having a board member who has vested interest and influence over other companies can be really helpful that you want you want connections you want you know he says the valley runs on conflict and the person at the center of what you were just talking about the founder of inflection was Reed Hoffman or is Reed Hoffman who is on the board of Microsoft who owns and controls open AI so it is all sort of a you know a Kentucky wedding if you will and what's quite interesting here is that they've both said oh just kidding we don't want to be on the board we don't need to be on the board clearly either the lobbyists or somebody from the FDC and the doj called these guys and said just to be clear this is not Kosher it's no accident that they both decided they're not going to be quote unquote in their Observer board status at the same time this is the most valuable and the second most valuable company in the world sitting on the board this Observer board status thing is just ridiculous so just an example my Venture capitalists at L2 two of them were on the board really super impressive guys and they kept showing up with their associate who had done diligence on the deal for the board meetings and the first time they did not even say anything and the second time I'm like why is he in these board meetings and they said well he's done a lot of the work and it's really good learning for him and I'm like well that's all fine and good but I didn't give you guys three board seats and what a shocker every time the two of them said something he would chime in and agree and here's the thing about boards they never come to a vote that scene in succession where they go and vote go board member by board member and vote on the acquisition and it ends up being you know seven to 7 to six that never happens I don't think I've ever seen what do you mean it's sort of like everyone has a conversation you come to a decision and you kind of unanimously agree on a path forward it's you don't take a vote until it's unanimous and so you work it out the way you come to an agreement is one who owns the most shares that person always has the kind of the loudest voots because they're the ones that have put the most money in and quite frankly they're the ones you might need to go back to and ask for more money but the number of voices in the room everyone has an equal Voice voting or non- voting it doesn't matter so the fact that they and not only that if if the guy from Apple and the guy from Microsoft both say we'd rather you not do that do you think they're going to do it I mean it's like okay we control Android and iOS we control access to the Tire of any company to anyone if they said you know if open a I said we think there's an unbelievable opportunity to do something with Spotify you know Apple music is a competitor of Spotify we'd really like to develop music and we think the best partner for some sort of AI relationship around generating music would be Spotify do you think the guy from Apple's going to go that's a great idea you're about to see an FTC and doj investigation launched here because and you pointed this out early I didn't recognize the most seminal technology of the last 20 years probably since handhelds is more concentrated than any new technology in in terms of concentration and benefits acing to the incumbent specifically the most valuable company in the world I think today is at Microsoft and the second most valuable company in the world have way too much influence uh across this emerging technology but the the the idea that the notion they both got out of Dodge on the same day means they both heard from the same person or people and realized okay shit's getting real we need to to try and create a misdirect and try and take the temperature down it's not going to work you're going to see an FDC or a doj investigation here but also if you think that by them leaving the board that's somehow going to relinquish their influence over open AI then you're not grasping what humans are like I mean they're friends now they're all friends now and they have G all of the all of the companies that were supposed to be competing that should have made this a competitive landscape it's it's just it's one team now so it's a huge concern we should move on to these other headlines any thoughts on CNN and this CNN plus 2.0 well I think CNN plus I think a scripted an original scripted offering from CNN is just an outstanding idea um for the 1% of people listen to this podcast who don't know I had a show on CNN Plus and on a Tuesday night five or four or five episodes in my producer this guy named Scott Scot Matthews I want to say oh Scott yeah and either Scott called me or the other producer called me and said I've got great news this is Tuesday night I'm in San Diego for a speaking gig and they said we're the number one most viewed weekly on CNN plus there were daily shows like CNN 5 five things or whatever and then there were weekly shows Anderson Cooper on parenting Jake tapper's book club I mean what is Jake Tapper reading this week oh God that's page turn wa Game of Thrones Bridgerton Euphoria or what is Jake Tapper reading this week let me think that's a toss up by the way I love Jake Tapper um I'm serious I do love the man and so super excited send out an email to everybody were the number one show on CNN now they didn't tell us how many people were watching I don't know if that meant like 85 people were watching okay that's the that's the key detail that was the key question that no one would answer and then I wake up Wednesday morning and I check my text messages and obviously New York's three hours ahead and I got a text message from Caris swisser saying are you all right and I got so panicked because car's pretty measured and I'm like am I all right what did something bad happen and I go I text her back I'm like why what's up what's wrong and she sent me the article New York Times CNN plus being unplugged anyways it kind of died in unceremonious uh death my understanding here and I'm not sure how much research you've done is that they're going to put the wall or the pay wall they're going to bring it increasingly forward every day and CN needs to do something its viewership has declined 15% with people age 25 to 54 which is the only people advertisers care about because once you hit my age you start getting smart and stop spending money on stupid like clothes and coffee and things like that total Prime Time viewers in that demographic for May for CNN were 96,000 whereas Fox had 199 9,000 so thing about this fox is doing double the viewership in that core demo and MSNBC had 110 so MSNBC is now beating CNN so it's pretty ugly at CNN right now they're going to have to figure out something and and uh by the way no one's called me Ed no one's called me that was going to be my question would you say yes I think you will say yes yeah a I don't think I'm going to get that call and B I have firmly decided uh figured out that I have a a face for podcasting yeah you say that you say that a lot I don't I don't really believe you I think if Netflix called you up and wanted to do some sort of Scott Galloway series on the story of Scott Galloway's life I think you'd probably say yes within I say three milliseconds UCLA failed startups and erectile dysfunction there you go let's turn it into an original scripted series by the way do you know you know there's a term for when you you play a recording of yourself on your own podcast as you just did a few minutes ago you know there's a term for that it's called Megamania [Laughter] I I'm learning from the best though oh my god I've been infected with that virus for a while I will I will when I'm speaking show a video of me above me and I'm like watching a video of me on top of me speaking is like shavings of on a salad but anyways you have gone full full egomaniac I love it I'm loving every minute of it anyways xai and Oracle ending talks over its $10 billion server deal this is you want to talk about confirmation that Elon Musk is unreasonable the person who runs Oracle is his mentor lar Ellison they are very close so for Larry Ellison to back away from this just says one thing that musk's demands he just must be so he must have been so difficult here do you have any thoughts well this is what he does I mean if you read Walter isakson's book that's one of the main conclusions is he's obsessed with rushing these production schedules and pushing up timelines and and whenever someone says hey man like you know we we want to do this too but we just don't think it's possible he erupts or he fires them or and crucially in some cases he says figure it out and they do and it works so I've always been a little bit ambivalent about this management style and how unreasonable Elon is because it's rude it's disrespectful and it's kind of lazy to just say you know without knowing any of the details of the technical details of how to get it done you say oh just do it faster but at the same time it's also very effective it's evident from what he's done at Tesla and SpaceX so we'll see if it's true at xai as well we'll see andreon harowitz buying gpus to get AI deals I feel like this is an incredibly smart move your thoughts so it used to be there were a small number of venture capitalists it was a small industry they made a ton of money and then everyone realized technology was the future and there was a lot of money to be made and the amount of capital these guys were able to raise went up exponentially and then Junior Partners would split off and start new companies new Venture capitalists and the entire Venture Capital Community and as an asset class has just absolutely exploded over the last you know couple decades and the key now is how do you compete against each other and they compete on brand Andre and horwood Sequoia General Catalyst they just get more deal flow what they also do is they compete on Downstream services or what you would call verticalization and that is some of the deeper pocketed VCS now have uh value out of services for their portfolio companies so they'll say we'll we'll share or rent you a CFO we have very strong contacts with Venture debt firms uh we will help you recruit Talent we have a full-time recruiter if you take our money we have a full-time recruiter that will help you build out your team and this is going even more vertical this is saying hey cool AI startup uh you have great IP you have smart people maybe who knows maybe you know you might even have quote product Market fit with your limited beta testing or whatever but the gating Factor here is compute and these chips are expensive and hard to find so we have bought a bunch and you can use our compute until you get out of the nest so this is going very vertical I think it's very smart and not only that it separates them it basically creates pretty tangible differentiation from the other Venture capitalists who don't have the money or the vision to go ahead and aggregate these gpus so I think it's super interesting else think it's super smart we'll be right back with a look at Nike we're back with profy markets in a terrible earnings report at the end of June Nike lowered its full year guidance and slashed its sales projections for the current quarter by 10% that report sent the stock down 20% in a single day wiping out $28 billion in market value it was the company's worst day on record but the pain has continued Nike was The Biggest Loser on the Dow last week as it slumped to a new 52- we low and year to dat the stock is down more than 30% Scott Nike's downfall here has been slow and then quite sudden in the past three years the stock has been cut in half what do you think is happening here to Nike I have some personal history with Nike because Nike was one of our biggest clients at L2 and it's talked about him it's an outstanding firm it's got smart management it's obviously got arguably Nike is one of probably the 10 strongest Brands not only now but over the last 30 or 40 years they made a very strong transition into going vertical it just has a history of innovation and they also got out of the kind of the brand era and said all right we need to be direct to Consumer and I have a bias towards them because when after Gartner purchased L2 and I gave the acquiring firm a list of the most talented people in the company and within about 6 months 11 of those 12 people had left I mean three of the most talented people at L2 Daniel Bailey who was probably one of my best students ever Ashley Tolbert super talented young woman and Moren Mullen who in many ways kind of built L2 all three of them went to Nike and I think worked in the director consumer group and so I know that they have extraordinary Talent there they have an unbelievable brand they're saying that they overinvestment of covid they didn't have the same amount of shelf space I think most of it is that there's a they're they're struggling with the same headwinds in China as like an Estee Lauder is and also they say that these is it the Hoka brand and on- running have have eaten share these two kind of cool upstarts have gotten huge traffic and are now kind of Billion Dollar Plus Brands but at the end of the day to have this kind of erosion in market capitalization and for the company to be trading at what is I think a multiple of 17 versus an average of 28 over the last years to have its stock cut in half versus a doubling of the S&P at that time I think most likely the CO's days are numbered because what this looks like is that to have this kind of implosion I think their stocks off I figet what there their stocks off substantially this year 30% year to date year to date it's off 30% but I think it Adidas is up 20% that's right so it's not the whole category right this is this is specific to Nike so I would bet that uh I think it's John Dono is his name name y I think he's on the Green Mile his background is very interesting he was the CEO of eBay then he was the CEO of service now he's been the chairman of PayPal so he's kind of this software Tech Guru and it was I think people were excited but also a little ambivalent that Nike would bring him in but I think the thesis there was that he would digitize the company he sort of fixed the supply chain you know he do all these things to bring the company into the future what looks like has happened is that during that process he has neglected the brand I think bringing in a tech guy to run what is the largest or most you know arguably one of the most important consumer Brands ever is probably in this instance just not paying off he's been there a while he he owns this performance now and and the performance has been such a disaster from a shareholder standpoint you know he's going to have to outline pretty serious a pretty serious changeing Direction here and give investors confidence or like I said there's going to be there's going to be a switch of the talk this feels to me just like Taylor Made to make us to switch the CEO because this just hasn't worked that with a brand like this with the human capital I know they have I I remember I think I worked for a woman named Heidi royen and she was so talented and I remember when they brought in uh Dono I remember thinking the hard thing about sexism or anti-Semitism or any ism is it's subtle no one's going to say no one's going to say oh you know we'd rather just have a white guy running the company but I remember I met several Executives in Nike who are women in their 50s who I thought were just incredibly impressive who I thought we're going to be the next CEO and then boom pops up a white guy from Silicon Valley at the end of the day this the reason the CEO can makes so much money is he or she the buck stop stops with them and so he's I think got three months to outline a vision and he's got 12 months to show some traction against that Vision uh otherwise I think he's out as a matter of fact I bet the board is having several what I call parking lot conversations and that is there's two board meetings typically there's one that happens during the board meeting and then there's a second one and the two or three most important people on the board kind of get together in the parking lot or downstairs or they talk or whatever or they meet up and they're like hey what do you think's going on here like do you think Bob is the right guy and then there's a bunch of kind of oneoff calls once those two or three people come to a consensus decision there's a few more calls and then in executive session at some point they'll do a call where they think you know we have some concerns what do you think and then they'll make a decision and then they'll go about trying to affect the decision but right now I can't see any reason for why all roads don't lead to a leadership change cuz it's nothing obvious to me that you could blame this on yeah it's it's interesting you say that I I don't think it's obvious but just at a very simple level sales growth is declining and they are giving up market share to other companies other brands that we've mentioned on Lululemon aloe hoker you these are all great Brands and the stocks of a lot of these companies are way up this year on running is up almost 40% this year I think very simply it wouldn't be unreasonable to say the Nike brand is just falling out of favor and that's what they have had to depend on and just as a consumer I don't know if you've been to a Nike store recently it used to be like going to the Apple Store when I was a kid it was like the coolest experience going to Nike Town in London last time I went into a Nike store it feels cheap it sort of feels like a English listeners will know this a JD Sports I don't know what the equivalent would almost beginning to feel like a Dick Sporting Goods or even worse Big Five where I bought my first boogie board in Culver City it's becoming Big Five sure um it to me it feels like this is plain and simple a brand issue so I I just want to return to brand again if you were advising Nike today what would you do to sort of revitalize this brand that at one point seems to own the premium luxury athletic wear market and whose market share has just been diluted down by these other companies like on running who are now the sexy sports brands I don't think it's a big bold strategic move here again you're right it's a brand thing and what you just said about the stores that bubbles up to the CEO um this is the C that means the CEO has the wrong guy or gal in charge of retail operations and I don't think there's what I'd call like an obvious Quick Fix here uh I don't think it's you know fire the agency and have a new Ad Agency I don't I don't think it's Buy on running which is now probably too expensive to buy I think this is unfortunately very boring around supply chain trying to increase the pace of innovation with new products to get people excited about the brand again you know this is just it's to me this is just blocking and tackling and bringing in a CEO who's going to make a lot of hard decisions I'd be very interested to know what is the employee to revenue headcount you know is this in fact a company that's sort of fat but this is the boring stuff of of daily day-to-day operations and and what it sounds like is that the CEO has the wrong people making the wrong decisions across the strongest brand or one of the strongest brands in consumer history but if I'm a shareholder here actually I am a shareholder in my 401k I have Nike and Oracle although it's not a big it's not a big position but I'd be pissed off that the three the I just mentioned my three colleagues that went to work for them five years ago I mean eled we were purchased by Gardner and it was not a cultural fit but you just have to give it to the management team there and a lot of people left and some of the most our most talented employees went to Nike Gardner's up 160% and Nike is down 20% so you got to think there's a lot of people internally who are just saying okay so my stock options are worthless the I everybody all of my buddies you know I graduated from whatever the University of Oregon and I took a job here and I had an offer with Google I maybe I'm very talented I had an offer with sales force or I had a chance to go to work for for adidos or I mean name the company those people have made a lot more money than people at Nike the stock is the stock has been cut in half I mean that's just that's just crazy and at the end of the day that the only real litmus test or metric that matters for the CEO is the stock price 17 times I EV to multiple of 17 uh for Adidas that number is 29 for on running it's 48 Nike is almost three times cheaper than on is it a good time to buy I think comparing it to on is unfair because on is a hot new growth brand and by the way I'm wearing a pair of on um it's literally how you know tell me you're a douche bag without telling me you're a douchebag like every VC in the world is wearing on I haven't seen you not wear ons for the past two years yeah it's true I sleep in them I shower in them now I love this brand I absolutely love the brand anyway uh that's not fair because it's a hot upstart brand that's growing fast the the better comparison is Adidas which is a 29 times and the even better comparison is Nike's average over the last 5 years has been 27 and now it's at 17 but to your question I don't like to make stock recommendations I think everyone should invest in ETF or index funds but I think yeah the answer is I think Nike is a buy because this brand is so strong and the depth of human capit Capital there is so deep that they can survive headwinds some exogenous shocks and even a bad CEO I think we might look back on this and think it was a buying opportunity okay well Scott I'm going to give you your own megalomaniac moment two years ago in October of 2022 when Adidas was dealing with this crisis management with Kanye West here's what you said about Adidas stock the stock actually even looks cheap and I think that's kind of a a learning here is that there's when you have bad news and you have dislocation you have tumml no obvious answers um a lot of unknowns that usually spells opportunity uh and that is there's just a just a perfect storm of bad things right now at Adidas this loss of this hugely lucrative partnership their Core Business is weak so as a result Adidas market cap sits around 19 billion for an iconic Century old brand that has real aspirational value and it's probably it's a maybe a distant number two but it's a solid number two to Nike Nike on a relative basis is trading at about 3x the valuation of aidos so I would argue that the opportunity here from an investment standpoint is actually with adidos and by the way the stock has doubled since then so Scott your reactions to your own prediction oh Ed I hate it when you do this I I just you know Ed I don't I don't I don't like to draw attention to myself and I think it's it's just it's just inappropriate to talk about your wins daddy my but the truth is my nipples are hard my nipples are hard thank you Ed thank you we'll be back with a look at the road ahead for the [Music] UK we're back with profu markets in her first speech as Britain's new Chancellor of the exch Checker Rachel reev said the country's labor government has inherited quote the worst set of circumstances since the second world war she cited new analysis from the treasury which showed that if the UK economy had grown at the average rate of other oecd nations in the past 13 years the economy would be40 billion pounds larger we went over why the UK is struggling on our May 27th episode but now the labor party needs to get out of this mess and Reeves laid out the government's plan to do that it includes increasing public sector investment by5 billion a year launching a national wealth fund for green sector investment building one and a half million homes over the next five years and letting the world know that quote Britain is a place to do business in short Labor's economic agenda today is growth growth growth Scott do you have any reactions to Labor's first week in charge in the UK and the road ahead for the country everything here makes a lot of sense to me and the thing I found really refreshing around these elections was I feel like they trying to govern from the center and that is they said no to the far right and the far left and I like this kind of leftward Breeze that's coming back from Continental Europe France figured out a way to bind together to to kind of body check or or or you know stiff arm the far right which I thought was very encouraging although the far left in France is not as crazy but they're still crazy uh so I like this and I'm rooting for them and I think everything they've outlined here makes a lot of sense for green sector Investments now people would say the government shouldn't be shouldn't be picking winners I think a better investment would be to come up with some sort of tax scheme or subsidization of venture capital there's for every for every startup in Europe there's 1 million in Venture Capital available in the US it's 5 million so a lot of this is just we need they need to free up the pur strings to encourage more investment in startups I think increased public sector investment makes sense more housing I think that's a fantastic idea we desperately need that in the United States and the price of housing is outpaced inflation and also just being more kind of open for business and trying to encourage foreign investment the only thing I would suggest and I don't think if it's possible is what I'm deeming or labeling backs it and basically say brexit was the stupidest thing we've done and let's undo it to basically say a lot of the stupid here where we made things more expensive it made our own our own s less appealing and made our own economy less productive we're going to try and counteract these things but anyway I'm I'm hopeful you're the Brit do you have any thoughts yeah I think directionally speaking the whole labor Manifesto makes a lot of sense for all of the reasons that you just described and I agree with them my concern though is that I looked at the actual numbers and the numbers that they are proposing for this big National turnaround are shockingly small so I'm just going to give some examples here they want to boost public sector investment by5 billion a year that's not a lot of money that's as much as Google spends on capex in a single quarter and if you look at the Tor proposals what were the tor's proposals to cut spending over the next several years this plan would only undo a fifth of those cuts so this is actually a very incremental change in public sector investment we the other issue that's happening in the UK right now is the NHS the National Health Service is in crisis there are 7.6 million people on the waiting list right now to get treatment now labor has a whole plan they've promised 2 million Hospital appointments per year an extra 2 million per year which again that's only a 2% increase from the year before and even if everything goes to plan it's going to take five years to clear that weight list you mentioned Home Building they want to build 1 and a half million homes over the next 5 years that's 300,000 homes a year back in the' 60s England was building 600,000 homes a year double what their plan is today so these are all directionally the right changes in my view but numerically they're so small and it does make me wonder if the UK can even bounce back from this because it just feels like they don't have enough money there's just not enough money in Britain they don't have the capital or the credit they're now at 100% debt to GDP to dig themselves out of the hole and it does make you think you know if you're American you should feel lucky to be American because yes America has its problems but at the very least America has the option to spend its way out of those problems and I'm looking at what's happening in the UK right now and these very small incremental changes and I'm wondering if the UK has the option to spend its way out as well you may be right but it's definitely classic half glass half empty British thinking it's the south gate the south gate analysis I don't care we're in the finals you suck um look the second greatest self-inflicted wound in geopolitical history of the last 50 years uh beyond the invasion of Iraq was brexit and there's something about the culture there that does not inspire a lot of organic value creation having said that the quality of the educational institution specifically the universities the fact that London is the new luxury item globally what do I mean by that uh I don't want to say I started a trend I was part of a trend but some of the wealthiest Americans with the most opportunity are moving to London you started it I'll give you credit yeah yeah I started it but if you're if you're opening a business an American business or a an Asian business in Europe I think you put your headquarters still in London there's all this talk about oh we're going to France all I I have a lot of friends in Britain who do very well and all this at two months ago the non-dom thing I'm moving back to Hong Kong no you're not so people are saying that and and give give us a brief explanation of what this non-dom thing is well basically my understanding is the UK essentially had a a tax status where you could be a non-domiciled resident of UK and pay taxes is from your resident taxable place and now they're basically saying sorry if you're not paying taxes here you can't stay here and and there's this issue where you had all these rich people who have houses in the mives or wherever and they basically weren't paying taxes in the UK and it was it was a big problem I have several friends who do really well and pay no tax right so if you were a resident for whatever for tax purposes out of Hong Kong or or Portugal and you can live in London you can pay effectively no tax and so this thing came through and I heard a lot of people bitching and moaning that they were going to leave the UK and Comm has asked for a UK but here's the thing they want the UK especially London is one of the world's great cities and when you get to a certain point of wealth I mean if we wanted to avoid if you wanted to avoid taxes if you're wealthy I could move to Puerto Rico right now and basically not pay taxes they have this deal it's totally legal you can go and you can pay I think 2 or 3% tax rate it's either two or three or 7% but dramatically decrease your taxes but here's the thing you got to live in Puerto Rico and supposedly what's different about the Puerto Rican tax evasion is that you actually have to live there for 183 days a year you have to prove that you're living there for 183 days and supposedly not supposedly it's reported several billionaire hedge funders move there and supposedly almost all of them have move back and that's the thing that London has it will always attract a disproportionate amount of capital because it's an outstanding city to live in and I still think it's the capital of Europe everyone says eventually oh it's no it's not it's it's Berlin or it's or it's Frankfurt or it's startups are headed to per no they're not it's still I still think the center of Europe is in fact London your point is an interesting one and that is you're saying the tagline for all these initiatives should be the following think small what you're saying is it's just it's just not that dramatic it's not that it's not that interesting the other signs of life here are Raspberry Pi going public there I think Shen going public there on the LSU is going to be a big deal but the the the nation with the best players wins and I do see a trend towards wealth and human capital continuing to aggregate in London you've been predicting ever since she in said it was probably going to list in London and then we had this development where Raspberry Pi listed in London you've been predicting that we were going to see a Revival of the stock market in London I want to flag a new report from Black Rock the note said quote we are now overweight UK Equity Market valuation is attractive it has been the case for a while but now we have a catalyst of potentially perceived political stability that could act as a trigger for international sentiment to warm up is it time to start reinvesting in the UK so again if you're going to do this I would say put it in an index fund but if you look at the multiple on earnings uh for stocks in the footsy it's it looks cheap and the markets are cyclical and just about the time everybody says it's all about America and it's all about tech and just throwing in the towel you see other markets outperform and at some point any Market gets so cheap that it's irresistible to me it looks like the UK has been beaten up so badly for so long you're right it probably is a a decent buying opportunity right now let's take a look at the week ahead second quarter earning season continues with the banks golden Sachs Charles Schwab Bank of America Morgan Stanley and US Bank are all reporting and we'll also see earnings from Johnson and Johnson Netflix and American Express do you have any predictions Scott I think you're going to see an activist at Nike um it's just too juicy a Target I don't think it's hard to imagine and these are famous last words that this company is going to trade that much lower than it's already on but the numbers here are just striking I got to think that some of the bigger players uh who have a lot of capital to put to work have their pencils out and are looking at this thing so my prediction is in the next 90 days you're going to see an iconic activist firm pop up and say we're here and we're concerned we're here and we're we're here to help is how they'll position it thank you for watching this version of propy markets check out our pod feed for office hours on Wednesday and we'll be back with a fresh take on markets every Monday [Music]