AI Is Booming. What Is the Market Pricing In? | Mike Khouw

Are there risks building up in AI companies and their stock valuations? Because there's a lot of hype on AI. And at the same time, is inflation getting more sticky? Today we sit down with Mike Coe, who's an options expert. He'll tell us what he's seeing right now in the markets. We are in a pretty interesting time because that businesses that have historically been quite cyclical are now trading as if there is no more cycle. Micron Technologies is in the memory space. It's one of the hottest spaces of the year. It's forecast to have gross profit margins next year of 86.9%. So almost 87% gross profit margins. Net income margins. So the adjusted net income is going to be around 70%. That's after tax. 70% net income. 70% net of tax. That's the kind of profit margin that a free market will tend to erode over the course of time. I'm Siamak. Welcome to Market Insider. Mike, it's great to have you on. Welcome. Thank you very much for having me. We want to talk to you about the markets. And you are someone that has a lot of experience with trading and options and you understand what risks mean in the market. What are you seeing right now? Just as a little bit of background so that people have some sense of where I'm coming from. I've kind of seen a lot of different aspects of the financial markets over the years. I'm a former floor trader. As you pointed out, I've traded options. I've traded futures. I've traded commodities. I worked at a long short hedge fund that had sort of a deep dive fundamental view on getting long and short stocks. We are in a pretty interesting time because the build out that we've been seeing in AI and data centers and things like this is a larger one than any I've previously witnessed. And I lived through fiber optic rollout, the internet boom, the dot bomb, all of that. I lived through the GFC much later and the pandemic. So this is a pretty extraordinary period for sure. You know, it's interesting because the thing that worries me the most, I'll talk about that first. Because I think every bull market climbs a wall of worry. It's a trite saying, but I'll tell you what some of mine are. And we'll start with that while I add that we're net long the market, right? By a good margin. And we have a lot of tech exposure as most investors probably do now. So what are my biggest concerns? My biggest concerns are that businesses that have historically been quite cyclical are now trading as if there is no more cycle. So let me give you a more concrete example. Take a company like Micron Technologies. You're probably familiar with it. Micron Technologies is in the memory space. It's one of the hottest spaces of the year. So we might as well start with the things that have really worked out and really worked out lately. Micron Technologies is a poster child for this. As are names like SanDisk and Korean company SK Hynix and Western Digital, all of these companies. So here's some statistics that I think your viewers might find interesting. Micron Technologies is forecast to have gross profit margins next year of 86.9%. So almost 87% gross profit margins. Net income margins. So the adjusted net income is going to be around 70%. That's after tax. 70% net income. 70% net of tax. That's the kind of profit margin that a free market will tend to erode over the course of time. By no fault of the company, and not even the cycle itself, because I think people who believe that this cycle is just a camel's hump, think about it and compare it. I think the most common comparison I hear is that people talk about this buildout the way they did about previous big buildouts in U.S. history, like the railroads. You've probably heard that this buildout is analogous to that one. And in some ways, of course, it is. It's transformative. And as a percentage of U.S. GDP, it's utterly enormous. The hyperscalers call it a trillion dollars worth CapEx in full year 2027. We have a $32.5 trillion U.S. GDP. So we're talking about solid percentage points, plural, of U.S. GDP is being deployed in this space just by the hyperscalers, right? So that's a remarkable statistic. The difference is, though, that things like data centers, things like GPUs, things like CPUs, things like memory, don't last as long as steel rails do, as railroad ties do, as railroad beds do. So some of those components might last 10, 20 years, but the data center equipment will not. And so the good news for investors is that that equipment has to be replaced. And if you believe that AI is a part of the future, and even ignoring all of that buildout's participation in robotics, which I think is going to follow very quickly, people are talking about it, but it's going to be enormous. That's the good news. But the margins, I don't think you can preserve 87% gross margins. And also, I don't know that Micron's going to own the space. Because when you see an opportunity like that, you're an entrepreneur yourself, what do you want to do? You want to go into the business. You want to go start talking to electrical engineers and saying, how can we get in on this, right? And so that's what everybody's trying to do. And I think that effort is ultimately going to bring those margins in a bit. So you can't price those companies as if those margins are going to be preserved indefinitely. In 2023, I think Micron actually had a net operating loss. And I'm not saying it's going to go back there, and I'm not saying it's going to go back there anytime soon. But people need to expect that this is halcyon days for a lot of these companies. Is that why the market is valuing them at six times earnings? Because we have had a lot of people tell us that this AI is not valued correctly, because the market doesn't want to value these companies. So yeah, I mean, you have NVIDIA trading 17 times. You have Micron trading at single digits. One of the things I think that people need to remember about cyclical companies, and it doesn't matter whether it's technology, it could be anything. A cyclical business is very likely going to be trading at what appears to be the cheapest multiple at when things are best. And it's going to be the most expensive multiple you can imagine, or maybe no multiple at all when things are at their worst. And you can think about it this way. If you are in the tractor business, you're John Deere, what drives your business? Well, one of the things you would love to see is that you have high crop prices, right? So if agricultural products are trading at a very high level, and farmers are flush, and interest rates are low, they're likely to invest in new equipment, especially if the fleet age of farm equipment is old. And so in that circumstance, you're going to see that they're buying lots of, and you're going to see that Deere is going to have a banner profit year. And people are going to say, look, this is ridiculous. John Deere is trading at 10 times earnings. And look how good it is. Well, that's because investors have at least enough foresight to recognize that it isn't always like that. And so you will see circumstances in the future when John Deere's profits are smaller or maybe non-existent. And so if they're much smaller, maybe it's trading 40 times. If there's no profits at all, you can't even throw a multiple on it. So cyclical businesses, this is a pattern that we would expect. So I think the market's doing an OK job here. And you're going to see some choppiness as people try to handicap. Whenever new technology comes along and people get fascinated by a new toy, they'll start wondering, oh, maybe that's going to take some of this business away. And then there are other businesses where there isn't necessarily a good analog just yet. And they will tend to trade at a slightly higher multiple. I think that's why NVIDIA is 17 times and Micron's trading in the single digits. What do you think of this space like Antropic and OpenAI? They're not public yet, but they're kind of the forefront of this technology. And then they are spending a lot of the money on the infrastructure. Some people say that if OpenAI doesn't work out, their business model doesn't work out, then a lot of the funding might get cut into the whole AI space. Well, it's interesting you ended on OpenAI because one of the things that people are concerned about in this space is the circular nature of some of the money flows that are going on. And in OpenAI's case, Open has a lot of financial commitments towards Oracle. And Oracle is borrowing a ton of money to build out their capacity. Now, the reason that's interesting to me is because there are a lot of companies spending a lot of CapEx. So Microsoft is doing it. Amazon is doing it. Alphabet is doing it. Meta is doing it. All of them, we're talking about hundreds of billions of dollars a year. Oracle is probably in the 60-ish neighborhood, but it's more meaningful for them because they don't have the organic free cash flow that those other companies already possess. So one of the things that I've pointed out, and I think Meta is kind of an example of this, you may remember several years ago that Mark Zuckerberg, in fact, they renamed the company because of it. He was all into the Metaverse. And he started investing in this like crazy. There was a lot of CapEx going in that direction. And investors got hugely disillusioned with him, with the company. There were complaints about excess voting rights. Multiple share classes so that you could have founders maintain control of their company. There were people who were arguing, you have to do something about this. We need to be able to throw out the executives when they get a bee in their bonnet about something like the Metaverse. Well, Mark Zuckerberg is not a dumb guy. And he was willing to deploy capital to that longer than investors wanted him to. But eventually, he changed his mind. And he reigned in the CapEx on the Metaverse spending. And Meta just went back to being the free cash flow generating giant that it had previously been. And the stock recovered enormously. Think about a company like Alphabet or Microsoft or Amazon or Meta for that matter. And you look at these huge CapEx numbers that they've got this year and next. And Alphabet said that their full year CapEx this year is going to be bigger than they had previously forecast. They said that in their most recent quarterly earnings release. You look at this and you say, well, what if this is all for naught? What if AI doesn't exist? This is all made up. I mean, anybody who's played with a large language model, there's no wizard behind the curtain who's answering you in a chat. So we know there's something there. And everybody's using it. I mean, we've got Stanley Druckenmiller drafting op-ed pieces in the Wall Street Journal using it. So everybody's using it. It is a thing. But even if it wasn't, those companies that I just mentioned, they could drop an entire $200 billion. Like Alphabet could drop $200 billion on this. And that basically is one year of adjusted net income. So, oh, whoops, what happened there? They could afford to make the mistake. Oracle, on the other hand, has been levering its balance sheet to do this. And it's levering it to meet the needs of its agreements with Open. So if that starts to not turn out to be everything that one had hoped, companies like Oracle, I think, are more vulnerable, I'll put it like this, than some of these other companies are. These other companies, they can afford to make some mistakes. But I think if investors want to be cautious, don't chase Oracle for some of the reasons that I think people who are proposing that you should do that. Because that is a levered bet. And it's getting increasingly levered each and every day because they're taking on debt to do it. You mentioned you're long and you're kind of, but you're cautious. There's caution. You wanted to talk about the caution first. How do you see, where do you see the turning point? Is there something you're looking at and saying, this is the time we're going to change or we're going to get pessimistic? We actually launched a fund earlier this year that focused on a rotation. And we've seen some of this rotation. So investors are already pivoting. And I don't know how many people you've spoken to have mentioned this. The big pivots that I think a lot of people have been talking about were, for example, from software into hardware, middle of last year. And more specifically at the tail end of last year and into earlier this year, focusing on things like memory. But there's another rotation that's been going on. And that is towards really traditional old economy types of businesses. An example of that, the Dow Jones US 100 dividend index, which is as you would expect, dividend paying stocks. This is Kimberly-Clark. This is Verizon. This is Coca-Cola. This is Procter & Gamble. So we're talking about soda, toilet paper, staples. As a basket of stocks, that's outperformed the S&P, which is still having a great year. The S&P is having a great year. But that basket of stocks has outperformed by about 10% full year. That's on a very good year to begin with. And that whole basket actually is not trading at an obscene multiple. Not as cheap as it's ever been. About 15 times. 15 times forward. And I think that's one of the other things that people often forget. As they focus on, you know, they're like, Micron's trading it six times, seven times. Is that too cheap? Is it too expensive? It's not the only stock that's trading, you know, with a forward earnings yield that's quite solid. There are other companies too. Now in terms of the positives, what are you seeing out there? I think one of them is that, you know, everybody isn't leaning completely on one side of the boat. It's one of these things where if everybody's looking up, you might want to look down. You know, if everybody's getting on one side of the boat, start heading in the other direction. At least a little bit. So I think that's the good news, right? And there is another thing that might surprise you in terms of good news. And that's sort of the geopolitical issue. So we have a war going on in the Middle East. We have a major war going on in Europe. These are pretty dismal, dismal things. And a lot of people are concerned about them. If you're going to be Pollyanna about the market in this case, one thing you might consider is that we could find potentially some resolution. I think that's what people are not expecting, right? People are looking at what's going on in the Middle East. And the sort of conventional wisdom is that this is a problem that's not going to go away anytime soon. And I think that's the more probable outcome. This is a really thorny problem. Little that we're doing right now seems on the precipice of solving it. It also appears that the challenges between Russia and Ukraine, those don't appear to be getting solved anytime soon. But that's the kind of thing where you have participants involved that they're not winning with what they're doing either. And, you know, we have seen these things play out for a number of years. Ukraine's been going on for a number of years now. But at some point, you know, the surprise outcome would be that we do find some resolution. And what happens to equities then? You know, that's an upside potential shock. If we can get Russian refineries back online, you know, we keep talking about the Middle East in terms of oil. But on the product side, Russia is a big refiner. And that's really where a big part of the problem lies. I mean, we've lost refinery product coming out of the Middle East simply because, you know, we've seen shipments of crude oil go down through the Strait of Hormuz. But, you know, product has gone to zero. No one's putting tankers of gasoline out through the Strait. So maybe some crude, but no diesel, no gasoline. And then we probably lost, what, three and a half million barrels a day coming out of Russia. That's a big problem. And if we can, you know, see those things calm down a little bit, that's a big, big tailwind. What was a headwind becomes a tailwind. Takes some time for that to play out. But, you know, that's kind of like that little outlier that people ought to think about. You know, if you're going to play a game of what if, you can't play a game of what if about a war starting. We've got them already. So the what if, you know, the outlier has to be, well, what if it stops? So you mentioned those upsides. Is there a lot of upside? You think that if these wars stop? Because the rates have been going, like the treasury rates have been going up. That has been. Yeah. Well, that's, yeah, that's a whole nother kettle of fish. A lot of people talk about inflation and they talk about rates. And, of course, part of the inflation problem that we're experiencing right now is this exogenous factor. If energy prices are going up, that means logistics prices are going up. So it's not just because you're feeling the pain at the pump. Everything else goes up with it. Fertilizer costs go up, shipping costs go up. So this is sort of proliferating throughout the global economy in general. That is not something you can fix by changing the Fed target rate. That doesn't solve that problem. I think what most people are focusing on, on the rate side, is a little bit different. It's probably more fiscal. I think that's certainly one part of the concerns. Certainly, I think that's what Bessens is concerning himself with. Is the interest rate that we have to pay on the debt for that? Well, yeah. I mean, so the important thing to remember is that if we go back a few years, one of the things that treasury did, this was when Janet Yellen was treasury secretary, we borrowed a lot at the short end of the curve. Even when 10-year rates were less than 1%, if you were borrowing at the short end, you weren't paying anything at all, right? So they were able to save 30, 40 basis points by selling 2-year instead of 10. Well, the problem with that was that as that matures, you have to obviously reissue to satisfy that debt. Plus, we're borrowing more each day. And if rates go higher, that creates a huge problem. And over the last couple of years, we've something like $15 trillion rolling off that had a blended rate that was 2-ish. And now what's the prevailing rate on the high side of 4? Well, $15 trillion, 2% incremental interest expense. And you kind of see where we're going. You start seeing the interest expense, which everybody's concerned now because it exceeds the defense budget because it's on the high side of a trillion dollars a year. When the interest rate that you have to pay on your debt goes up by 1% or 2% on a debt this big, the incremental interest expense becomes enormous. So roll $5 trillion in a given year at an incremental 1% interest. And what do you get? Significant amount more. Exactly. It's a real problem. It's a budget-busting type of a problem. And it's a compounding one because the more you borrow, you're putting excess demand on those that would be lending to you. So you have to pay higher rates because you have to. And how do you see that impacting the markets? It's interesting because we're going to have the FOMC. People are all getting worked up about whether or not they do raise rates. A 25 basis point rate hike from Warshid and the FOMC is, I think it's probably more likely than not. The market right now is implying about, depending on which metric you look at to assess that probability, just shy of 60% probability that we got a nominal rate increase. And I hear a lot of people complaining about that. I don't think it has a huge impact. I think it's more of a gesture, a signal to the market. We are serious. The Fed wants to have that target. And the interesting thing about that is that, everybody says, well, we don't want to have higher rates. It raises borrowing costs too high for the government. It raises borrowing costs too high for individuals. But actually, I don't think it's likely to be that impactful. If you took the short end up by 25 basis points, that does not necessarily mean that 10s go up by 25 basis points. In fact, if you took the front end up hard enough, other than arbitrage opportunities out at the long end of the curve, you actually are going to reduce future inflation expectations. You are going to reduce future growth expectations. I mean, if you did a bulk crazy thing and just, OK, the Fed Fund's target rate is now 20%. You did something like that. And so that wouldn't necessarily hurt home mortgages and stuff like that. And also, don't forget that the 10-year is probably not a bad proxy for how you should discount long duration equity as well, right? So as long as the long end doesn't blow through six, I don't necessarily see equities coming completely undone. There's another aspect to that, which is that if you also believe, as I do, that we're probably in a pretty sticky inflation situation, as an investor, where do you want to put your money? I don't think you want to put it in treasuries that mature in 10, 20, 30 years, right? So equities are probably not a bad place for you, along with other forms of real assets. How are you seeing this sticky inflation? What are you seeing that you're concluding we're in the potential, we potentially will have sticky inflation? Well, I mean, there's a lot of different components that go into the inflation calculation. I'm always a little bit annoyed, I have to say, that when it comes to policymakers, we have a tendency to keep chiseling away at how inflation is measured, so that it suits the needs of those who are citing those statistics. We'll talk about core inflation. We got to get rid of volatile things like food and energy. Well... Which is something we always need. Which, well, it's not only... It is... The funny part about that to me is that those are the two places that most people will immediately go to when they talk about inflation. So man on the street versus man on Wall Street versus man in D.C. The guy in D.C. who's making these decisions is saying, we're going to exclude the two things that the man on the street says are inflation. I go to the grocery store, I can't believe the bill. I go to the gas pump, I can't believe what it costs. That's what they see. Why? Because if you live in a house, your mortgage payment isn't going up and down with inflation. So that's why I think there's such a huge gulf that exists between Americans and the people that lead them. It's because of this kind of nonsense where you're going to say, well, inflation is... And then you throw a number out. And the person who's watching this is, what are you talking about? Have you bought a steak lately? $36 a pound? The prices have doubled or actually the sizes have shrunk. Yeah, or it's a combination of both, right? But yeah, I mean, if you go to the grocery store where I live, that's what a steak's going to cost you. It's $35, $36 a pound. I had to drive my son's stuff to college. I have to put premium gas in my car. And it's a long way from Northern California to Southern California and back. At six and a half bucks a gallon? You know, you notice in an SUV that doesn't get very good gas mileage. So that's the things that I notice. And I know it's what most Americans notice. Regardless of whether you're working at an average salary or even if you're upper middle class, that's the pain that people feel. Do you think it will continue in the long run? So I think one of the principal reasons that inflation tends to be persistent... First of all, we don't have a very high unemployment rate right now. So one of the things that ends up happening is that there's sort of like a cyclical wave effect, or at least this is my reading, which is that if you work in a job, and let's just say even if you're an hourly employee and you know that there is a lot of demand for hourly employees in the neighborhood where you are, there's a help wanted sign outside of almost every restaurant and every retailer in Marin County where I live, there's a lot of that. Those workers are going to demand higher wages to meet the higher cost of living that they're encountering every day. So it doesn't happen instantly. You don't go to the grocery store, find out that the steak's $35, $36 and then go back to your boss and say, I need a raise today. But when you're getting your review, when you're negotiating your next contract, when you're driving around and looking at the help wanted signs, those are the things that are occurring to you. And so now, eventually you will ask for an increase or you'll switch jobs. And as that happens, those small businesses have to do what? Raise their prices. They have to raise their prices. And that is why it's kind of like a wave. You know, you get some pent up demand for higher wages and then that ends up pushing through. People start losing employees. And you know, again, you're a business owner, so you can appreciate this. You probably anticipate it, right? If you have employees, you don't just assume that you're going to pay them the same amount year after year after year without giving them an increase. And what are you expecting to give them at the end of the year? Is there a way for this cycle to stop? Does there have to be a recession? Or do you think this cycle has kind of, the gap is so much, the employment gap between the jobs that are open that even a potential recession may not stop? Rates of change matter a lot. Meaning that if you can slow inflation, then you can slow the pace of, you know, increased wage demands and everything else. So I think if we can, I don't know that we can get it sub two. I mean, ideally, you would see inflation rates fall sub two, just so you could get back to trend. And you'd probably have to run, you know, what, 1% inflation for a decade to get back to where we would have been if we had not had, you know, the big spike in inflation that we did see. Because what people often talk about is they recognize inflation, it's price levels though, that do not revert. You would need to have deflation for prices to revert back. So if you expect to see, you know, the price of gas at $3 a gallon or something, those things actually can change because we can solve some of those problems we previously talked about. Other things won't though. In and out in my town is not going to go back to paying people $18 an hour. That's, that's gone. It's out of the barn. So that's one of the things that you hope you can get down to a pace. Could you get inflation down? Of course, there are a lot of things you could do. They'll never happen though. We're not going to have Paul Volcker in the Fed again. No one's going to come in and say, we're going to take short-term rates to 20% for a couple of months and then drop them down just as violently and then take them right back up again in response to an assessment about what has to be done. We're not going to go back to some form of non-fiat currency. Of course you could stop inflation. You could just stop creating excess money. It's not a difficult problem to solve theoretically. It's impossible one to solve if you live in the real world though. You think we won't have somebody like Paul Volcker. Why do you think that's the case? Is it we don't have enough patience or the markets don't demand? It is interesting because we do need to remember, and I think it's an important thing to remember, that Paul Volcker existed during the time of Jimmy Carter and into the Reagan administration. During the Carter years, I think the United States also had this fairly helpless and hopeless view of a lot of these types of problems. I was a little kid at that time, but I remember aspects of it. I remember the energy shortage. It was like this vague thing that was going on, but it had a really concrete impact. My dad installed a gas pump at our house. I mean, they were so concerned about gas prices. An excavator came to the house one day. They dug a big hole. A tank went in, a gas pump. So he was selling gas in Europe? No, we were not selling it. You were just hoarding it or holding it? There was concerns that there was going to be a shortage. The prices kept going up. What if you had to get someplace? We lived in a rural area. If you didn't have gas, you were out of luck. So they put in a gas pump. There was a little thing there, I can remember my mom would say, the car's low on gas, go put some gas in it. I mean, in the driveway. Stick the hose in, and that was that. I don't remember how many years later it was that that thing got pulled out. We were not the only one, by the way. I knew of other people's families who did similar things. They were concerned about this kind of stuff. Inflation also seemed untameable, and yet it was. It was actually tamed for a long while. The reason I think it's undoable right now is I'm gauging what I see the political demands are from the electorate. The demands seem to be we want more stuff, and that's a difficult need to satisfy while simultaneously doing the things that taming inflation would require. That's why I think it's kind of undoable right now. But I also feel that all of these things are like a pendulum, they're cyclical, and eventually people begin to realize that inflation is a very regressive form of taxation. The very people who are complaining and are hoping that their government will do more for them will probably come to the conclusion at some point that government has a lot to do with the inflation problems that are the source of a lot of their woes. I think this is something that we see in Europe, actually. What you're seeing there is that every single time somebody gets elected, they barely last. And then they're out. Look at how many prime ministers the UK has had. Every year they have a new one. They're not there long enough to solve any problems, but it almost doesn't matter who gets elected. They are to blame. And I understand the frustration because if you're looking at the world that a lot of these people are graduating from college into and things like that, it's a difficult circumstance. So the public is actually demanding more benefits and they're not demanding the cut to inflation yet because probably the public doesn't know the impact of more inflation. Here's the thing, is that a lot of the inflation that we've experienced it can come from excessively easy monetary policy. So something like QE, that's inflationary. But it also comes from fiscal policy. So if you run big fiscal deficits, that can contribute to inflation. And some of the things whose prices have risen the fastest are areas where the government already has a hand. So healthcare costs have consistently outpaced the rest of the economy writ large in terms of inflation because the cost of healthcare is getting out of control. Nobody can afford it. So they're saying, well, it should be free. Of course, it's not free. Nothing is free. It's just simply, who's going to pay for it or how are you going to control how much of it is doled out? And I think right now, the pendulum as I see it is much more on the, we want free stuff rather than saying that there steadily becomes a recognition that actually there's a deeper fundamental problem at work. I'm sure in the Bolshevik Revolution and for much of the early days of the Soviet Union and in other places too, that the expectation was the government was going to solve their problems and that they were going to get what they needed when they needed it for free. Decades later, it became clear that it doesn't really work out like that. And then it took even many more decades for that system to ultimately go where it was always going to go which is to failure. And I think these things take time and it does not feel like we're moving in that direction though. What do you think people should do with their assets and investments? Should they go more towards hard assets? Should they stay away from bonds, stocks or do you have any thoughts on how they should position themselves? I certainly would not go towards long-term bonds. So anything that's really long duration in the fixed income side, I think that's fairly risky. I think three to five year in terms of duration for fixed income is probably not a bad place to be for... Look, most people, especially retirees... My parents are in their 80s. My dad actually will be... Yeah, he's gonna be 89 in October. So these are people on a fixed income. It's what their investments provide for them plus their social security payment, whatever that happens to be. So most investors are hoping at some point that what they're saving is going to support them in their old age or it is going to put their kids through college or something like that or that they're saving for a house. And saving for a house does not work if you invest in bonds and the dollars that you recover from them, if it's a down payment, have gone down by more than the price of everything. You can see that in real estate. The price of the house goes up by 50% in between when you start saving for it and when you take that money out to put the 20% down. The 20% isn't what you thought it was originally. It's 30% of what you had in your head. So you need really good returns from that investment for that to really work or you're losing ground as you go. Some measure of hard assets, I think, is important or exposure to them. So you can have exposure to hard assets without, say, buying physical gold. And actually, this was something you and I were talking about before we even got going on this. But you can invest in mining stocks. Mining stocks can have exposure to precious metals, gold, silver, platinum, copper. Copper is at an all-time high right now. So Freeport, McMoran, big copper miner, but they also have exposure to silver and gold and precious metals, but also mining for other things. Uranium, stuff like that, right? So rare earth. There's a lot of things that we need. To commodities, but mining. Commodities, right, but you can get companies that are actually making money doing it, right? You can buy futures that give you exposure to refined products from a barrel of crude or to crude itself. Do I recommend that for most investors? Oh, you should go out and buy crude futures? No, that's not the way. You can get exposure to the space by buying oil companies, whether it's integrated oil companies, and for people who don't know the oil business very well, integrated oil companies, they do everything from the upstream stuff, which is exploration and production. They have some midstream business, which is logistics and transportation and the downstream stuff, which is the refining and marketing of the products. But the refiners right now are in a pretty sweet spot and it is not something that gets solved immediately because Russian refining, Ukraine's knocked out three and a half million barrels a day. You don't stand up a refiner overnight. It takes years to build regulatory issues, environmental issues. Exactly. And then if you take a look at the refiners that are along the Gulf in the United States, the deals that are going on in Venezuela right now, so for people who don't know, Venezuela was a really meaningful oil producer for a long time, maybe three and a half million barrels a day. And for perspective, the world is using about 100 million barrels a day of oil. So just we'll keep the numbers in nice round numbers. It makes it easy to figure out. So call it three and a half percent global oil production is coming out of Venezuela. That dropped to less than a million. I think at its low, it was about a half a million. I don't know what they're up to now, 700,000 barrels a day or something. It's not just that there is some proximity between Venezuelan oil production and refiners on the Gulf in the United States. There's another component, which is that the United States refining capacity for sour grades of crude, which are high in sulfur content, harder to refine grades, is better than anybody else's on the planet. So if their production does, it's going to take some time, but as their production gets back up, the grades of crude that they produce are the kinds of grades of crude that we're better than everybody else at refining. And we will be well positioned to do that. So I think, you know, the refining space is also a good place to be. So what are those types of companies when we're talking about the marathons and boleros and stuff like that? What about the international markets? How do you see them? So there is a little bit of a risk here on the international side that concerns me somewhat. I feel like it was getting more play before the war in the Middle East really broke out, which was, how often do you hear about Taiwan now versus how often we were hearing about it before what started going on in the Persian Gulf? Which is interesting to me because I think that, to me, I had always felt that if we got too entangled in too many places around the world, that China might take advantage of that situation and say, this is a moment of U.S. weakness and that whatever their designs are, and they have articulated, I think, their designs pretty explicitly. Yeah, I mean, they've said that they believe that this is part of China and they believe that they should have it. So I might have expected, but I will also say I'm not an expert in the geopolitics of the region. I will mention with respect to China, and this is partially because we've got actually some news. Apple, I think, it's a big U.S. company we haven't spoken about much, but their sales in China actually have been doing pretty well, better actually than I had expected. And part of the reason that I hadn't expected it to be quite as good is I always had this lingering suspicion that Chinese consumption habits were, if not guided by Chinese policy explicitly, that they do put their fingers on the scales a little bit. And I kind of felt that there was a preference to move away from U.S. companies and maybe from Apple, although it seems like the demand is pretty good. So I think in terms of international markets, I think an emerging market exposure, broad based, would probably be a pretty good place to be. Europe, it's a thorny one because the EU generally always had this huge economic engine in Germany that could basically... Bail them out. Yeah, bail them out of every problem. And Germany has not really been growing so well of late. What I would really like to see Europe do, and Germany in particular, would be to reverse their energy policy. When they decided that they were going to move away from nuclear power and became increasingly dependent on natural gas, they ended up paying a very steep price for this. And I think that if they change that policy, first of all, it's a big project, it's big construction works, infrastructure build, I think that could be hugely beneficial. Energy is critical to any growing economy anyway. I think that would be hugely beneficial. And it would reduce their geopolitical risk considerably. France gets most of their electrical power from nuclear, and for all of its problems, it does insulate them a bit from some of the afflictions of other countries in the region. So I think we kind of have to monitor that situation a little bit. But I think if we have some political problems, I feel like theirs are even a little bit worse. Most of your viewers are probably in America, so you're in the best neighborhood, I guess. That would be my read. Mike Koh, it was great to have you on. Thank you for coming on Marketing Insider. Thank you so much for having me. Tell us what you think about this conversation with Mike Koh, and tell us what else you want to learn in this specific field. I'm Siamak, this is Marketing Insider. We'll see you next time.