Latest / The Curve / TCW47: Big shorts, big bounce-backs and big red flags.

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TCW47: Big shorts, big bounce-backs and big red flags. · The Curve

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  Hi and welcome to the Curve Weekly. The podcast that keeps you up to date with all the money,
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  business and stock market tea. Everyone should experience for us class at least once in their lives
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  and Annie shouldn't miss out just because she can afford it. Help me. Are you excited to come
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  home babe? I'm excited to be in the same room. The timed references slow to the day.
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  Where is it? We recording? Are you there? Just like so many tentacles? Yeah yeah I'm excited to
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  like a white Christmas here though. Yeah it's snowed the other day in London so I'm secretly
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  hoping it's snowed on Christmas. It's a bit of a mind-fuck having a summer Christmas you know all
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  the story books you know as you go up where's the kid all the movies everything's a white Christmas
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  and then we're sitting here and you see like going where's the snow? Yeah it's just raining. Yeah
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  so true oh my god do you know what's funny so the other day I was at this event it was just on
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  Monday actually so last week and I got speaking to it was like a founders event but they also had
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  people who fund or invest in companies and I felt super awkward by the way this does have a point
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  and it does relate to Santa and Christmas. It was kind of a networking event and it was one of those
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  weird things where people would kind of like pop on in to a conversation and be like hi I'm Sarah
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  from blah blah blah and like it was just really awkward you know like there's a few awkward moments
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  where I was like oh I should be promoting the kids. Like real networking? Yeah like networking
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  burning commas anyway I was talking to this guy and this girl comes up and starts and goes hi I'm
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  did exactly that and basically straight out asked him like would you invest in this company and I was
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  like oh like just like so awkward hadn't even told him what I did for work she went straight in like
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  literally up until that point me and this random guy had been talking about Santa and how his five
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  year old son had apparently gone to school and ruined father Christmas for all these kids but not
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  told his parents that he knew it was fake so like they had a 10 year old son who still believed in
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  Santa. They thought the five year old did and then they got this like snarky call or email from
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  another mother being like can you please go and talk to little Johnny tell him that Santa's real
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  it and to go back and talk to us like it was a full thing. Yeah. Oh my god remember believing in
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  Santa. You're like one man doing every house in the world. You start to caught mine. You're
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  like no no no that can't be possible. And five though that's quite a revelation. I think it took
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  me till I was probably about 10 but also like starting your life off with somebody lies like the
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  tooth fairy Santa. I remember the same time I was so desperate for the tooth fairy to take me to
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  fairy land like I was so desperate for it and I wrote them I wrote always wrote a letter being like
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  please take me to fairy land like tonight I promise I'll be good for it I like see this like
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  huge thing we just see that honestly with every inch of my heart believed I was going to be taking
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  to fairy land that night and when I'd wake up and I hadn't gone and mum was like did you go on your
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  dreams? I was like I don't want to find my dreams mom. I'm tired. Yeah. Then you're like oh okay maybe
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  this shit isn't real. Yeah yeah maybe it's not real. Most of us are telling me this he said many
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  few was being pushed in the push chair. Long pants to be rode and he saw this like home this guy
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  with this long white beard and for context magnifuse about one and a half and he just yells out
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  Santa. Santa. I feel like that's a viral moment you know like if that had been caught on camera amazing
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  anyway so a little november wrap up so we had the second best november ever since 1980. Well I
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  wasn't even born so that's like 40 yet. Yeah yeah yeah so very very long time so amazing. Oh wait can
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  I guess yeah can I just throw a few things out there. Is it has like oil done really well or like
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  is it something like that? It's more we had a pretty terrible September October and then it kind
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  of was just a bit of a bounce back in November things not looking as bad as people had hoped
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  Black Friday sales doing well all of that kind of stuff just I guess less bad news but the market
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  was up about 9% and it's up nearly 20% this year so pretty good you know 20% return on your
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  investment if you invested in the S&P 500 is I'd be like yep thank you very much. And speaking of
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  the S&P 500 we had a new addition announced last week. Oh my god there was a new member to the
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  party. Yeah new member to the club. Oh welcome. Yes and it is. Is it shine she in? No no no there
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  isn't IPO yet no no no it's over. Was it not in the top 500 company? No oh my god so there's a lot
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  of rules and regulations that you have to abide by to order to stay in the exclusive club that is
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  the S&P 500 and for anyone who doesn't know what the S&P 500 is these are the top 500 companies
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  well in America but also kind of the world these are some of the the biggest companies that you
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  can buy shares in. So for example Uber is a public company which means you can buy shares in it
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  and everything if you were to Google S&P 500 there'd be a bunch of companies you'd recognise right?
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  Oh totally they're all pretty household name brands yeah Amazon Tesla Google the biggest company
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  Mastercard visa yeah tons and tons of them but in order to stay in that club you have to remain
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  the top 500 companies in the US and so if your share price does does badly the and someone else
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  does really well then there's going to be like a natural swap out of someone that's doing really
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  well versus someone who's not oh my god it's like a leaderboard yeah yeah so every quarter there is
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  what we call a rebalance where the computers sit down and they go okay which companies you have
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  have done terrible and need to be axed and which ones outside the S&P 500 have actually done
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  really well and can be included and if you're included in this exclusive club it's pretty good
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  for your share price because you've now gone into the index which is the S&P 500 index and there's
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  so many ETFs that are created on that index so an ETF is like an exchange traded fund and
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  why I don't know sorry we've just got to give context so we're recording this podcast via
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  like this app and every time Vickers either on the screen like it could be a meeting with someone
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  super like high up in a company whatever it is and she does these she's like set off some
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  automatic thing in her screen we're like she kind of gives a semi thumbs up and like there's big
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  thumbs up we'll like pop up and reverberate across the screen or like love hard so in a
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  reprehensive so there was one time I said like birthday or gift and all these balloons started
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  bubbling up around me and I was like oh sorry sorry that's a real boom review it's like
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  it's time you didn't use your computer it's like when those people that turn their faces into a
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  cash and they can't undo it so yes anyway so in order to be included in the S&P 500 index
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  you have to have had positive earnings and over the last four quarters and Uber has had that
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  so it's been included and what happens is you get it gets announced who's being included and who's
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  being dropped and then the actual inclusion happens a few weeks after that so the announcement
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  happened last week Uber's share price jumps everyone was like who you're now in the S&P 500 this
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  is really great news it's also just a kind of a validation of you're a big growing company you've
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  kind of got that validation of being in the top 500 companies it's kind of a big a big tick
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  of a pride in a book it's a bit of an ego boost you know like it doesn't maybe do and then
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  like it's not super game changer in terms of it's all of a sudden going to be the most
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  profitable company in the world like a book is good but it's not going to be a super money maker
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  but it's a little bit of a panel but that's like yeah yeah yeah I think it would be terrifying if
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  you were 499 imagine if you were right on the cusp and you were always like dropping out of
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  the S&P 500 and then just make it and again you know like you were really just clinging on for
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  their life yeah yeah that would be quite funny you're like come on guys we've got to have positive
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  earnings growth this quarter all we're going to be out of the S&P 500 it's honestly kind of like
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  my gymnastics career I went to the world champs when I was like 16 and it was in Greece and New
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  Zealand is notoriously pretty bad at gymnastics comparative later Russia and Ukraine and stuff and
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  you know we're there we were at the competition but did we come second to last yep
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  it's like you can kind of claim it but it's like you'll kind of like the worst of a good bunch
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  you know yeah yeah but the cutoff for getting into the S&P 500 is having a market cap
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  which is the size of the company of at least 15 billion dollars so these are big big big companies
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  and Ubers is a hundred and twenty billion so it's ticked that criteria of size and now it's
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  ticked the criteria of the earnings growth each quarter so it's in there woo go over I actually
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  would just like to you know flex the fact that I went to an event on Monday one more time
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  and just say that so it doesn't get me up much all of a sudden I've gone to an event I'm like
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  I've got some news I've got some news yeah but I was sitting there and one of the workshops they
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  were talking about how to get funding as a a lot it was I basically all around females and female
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  empowerment and entrepreneur stuff sorry this reminded me of like you know that in American pie
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  she's like this one time at Bangkok you're like this one time at an event that I went to okay the
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  point was I was there and they were talking about market cap which you just mentioned without
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  giving any explanation by the way and they were talking about it and I was like understanding
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  everything they were saying all of their variations they were talking about companies and they
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  were definitely talking about them in quite high level there was some really intelligent people in
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  the room and I was really stoked that I was understanding what they were talking about like
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  market cap for is you don't even really need to know exactly how it's figured out but essentially
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  it's just the size of the company so yeah I sang they had a big market cap it just means it's
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  a big company basically but I was sitting there being like mm-hmm mm-hmm I thought this I'm
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  following no I'm done that was my whole story so I wanted to give an update on Michael Burry so he
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  was the big short guy yeah in the big short movie who predicted the global financial crisis so he
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  put on big bets that the stock market would fall in 2008 and it did and he made a lot of money
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  so he made a bet back in August again that the S&P 500 so the US stock market would fall
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  and then when it falls he supposedly if it if it's correct would profit a lot so it's kind of like
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  end of the world chat you know like is it going to happen do we need to get my boat and grab all
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  the animals or not yes exactly and the thing is that it can be quite dangerous because you can have
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  infinite losses oh yeah if you've got if you're betting that the the stock market is going to go
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  down when it goes up you're going to make losses so if it can keep going up and up and up and up
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  and up and up forever whereas if you buy something and you want that to go up and you profit so say
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  you buy shares in Tesla and you're like you know what I'm buying this because I think that she
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  price is going to go up if it doesn't go up and it goes down you can only lose 100%
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  because it only goes to zero whereas the opposite way if you bet that Tesla's share price
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  was going to go down and it went up there's no limit it can keep going up and up and up and up and
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  up and up and up and up it can double it can triple it could do so you can make oh my god the big
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  shorts that's why the movie is called the big short because they short start yes yeah oh my god the
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  penny just dropped yeah so this is why shorting is really dangerous it's really for I guess sophisticated
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  investors anyway he bet in August that the S&P 500 would fall and just wanted to give you an
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  update but he closed out that position so he kind of gave up and said you know what this hasn't
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  worked I'm going to cut my losses here because the S&P 500 yes it fell a bit in September
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  October but we just spoke about how it's gone up massively in November and it's actually done quite
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  well overall for over that kind of three four month periods so he's kind of put his hand up and
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  said you know what okay sorry I made a wrong call here and didn't get it right which is kind of
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  what happens in investing sometimes you get right sometimes you get wrong but in order to make these
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  big gains or these big profits you have to take big bets and that's what he did to make a name
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  for himself with the big short is that he was like you know what I'm going to take a massive bet here
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  back in 2008 he tried to do it again it didn't quite work so good on my phone like putting his hand
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  up and saying okay I'm working out because he could have been like I'm doubling down you know and
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  just like yeah fall and further and further yeah instead of coming up and saying you know what I've
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  got it wrong I'm going to try something else people do get so head in the sand and they're like no
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  I'm right I'm right and then it just they just get worse and worse and worse in terms of their losses
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  so there's kind of part and parcel investing is knowing when to be like you know what I got
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  wrong and that's fine but he's also made another bet now very bold he's okay quite likes making
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  all these these big shorts are on the semi conductor industry so he's shorted a whole lot of semi
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  conductor eating what he thinks they're gonna go down yeah and I think the reasoning for that is
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  that they've just done so well over the last you know 12 months 18 months like Nvidia which is a big
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  one is you know one the best performing stocks in the S&P 500 so I think his his understanding is
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  that if something's done really well you know it has to come off a bit or fall back a bit because
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  it's just things get bit up so much or people gets way too excited that they have to kind of come back
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  down to earth at some point uh in other news we have Mark Zuckerberg from meter is selling stock
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  for the first time in two years yeah what do we know about this ladies and gentlemen boys and girls
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  reflect yeah so he is selling about 600,000 shares so about a hundred and 19 million US
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  which is a lot but not a lot in terms of what he currently owns and that's what you've got to look at
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  is like you might seem like a lot in a dollar value but how much does he still own or or how much
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  as a percentage is he's selling if he was selling 90 percent then yeah I'd be a bit concerned so
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  he still owns 120 billion so what percentage is that of the 190 million he's selling
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  and he owns 120 billion oh okay tiny tiny tiny yeah yeah so he still owns 13 percent
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  which is massive and he's only 39 years old I'm like gosh what is he spending his money on
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  can he please divest some of that money to save the planet imagine what he could do with that money
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  him and his wife are Priscilla Chan so they have pledged to give away 99 percent of their wealth
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  to fill in separate causes to help cure diseases so oh my god oh if you want Zuckerberg was
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  like a little bit of an asshole that's great yeah I know after watching the social network I'm like
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  you're a dick yeah yeah yeah yeah yeah yeah but so this is the first time he sold shares since
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  November 2021 so the first time in two years and I mean fair enough Facebook share price is
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  up 180 percent in the last 12 months so it's done done pretty well and in other news we've had
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  some news of TikTok so bite dance which is the company that owns TikTok is actually a private
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  company so with private companies because they don't sell shares to the public they don't have to
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  release a whole lot of public information so whenever we hear news about private companies
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  sometimes you have to take it with a grain of salt because they could just be like
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  lacking to the media you have no idea totally or people are like speculating or or anything like
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  that so it's you got to take it with a bit of a grain of salt but they have announced that they're
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  buying back five billion dollars worth of shares from their existing investors so remember it's
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  a private company so all their investors are probably you know private equity or venture capital
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  or family and friends you know they'll be they'll be investors but they don't trade on a stock
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  exchange like we normally would would say meter for example so they'd have to go individually to
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  everyone and say hey we'd like to buy back your shares so the share price that they're supposedly
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  buying back their shares at is $160 which values the company at nearly $300 billion which makes it
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  the third largest company in China and the 40th largest company in the world so this is kind of
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  all because you don't really know the size of it and then until there's a transaction like this
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  or an announcement like this is so people are like whoa it's massive that is massive yeah
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  yeah it's not even that old is it so it's better else it's 2017 and it's now nearly 300
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  billion dollar company which is just wild and that's all off the back of TikTok pretty much
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  it actually went to IPO at one stage and then there was a big crackdown on Chinese internet companies
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  and people overseas not been able to invest in them and then it kind of they put that all on pause
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  but like India for example is one of their TikTok's biggest markets and they've banned the app
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  there's talks of US banning the app so we have to see what happens it's so dramatic they're not
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  going to ban the app I know I think it's I think it's more appearance to be like you should you
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  should be looking there so you shouldn't be looking at that I just think that chat is so redundant
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  like there's no way that they're banning that globally well I don't think so I think I think they're
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  just trying to scare younger people all like play down the idea of how big TikTok is it's like
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  taking over the world you know yeah and it's just the US and China just having a freaking
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  cock off to be honest for sure put the penis in the way would you and lastly I think you're like this
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  I actually read this news and I was like I want to do this so you know how we always say
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  this and what you know this and what you use all of that well have I got a deal for you
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  so travel companies now are giving perks to people if they're shareholders so if you buy shares
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  in certain travel companies you can get like additional perks like gold status at hotels or room
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  upgrades or yeah yeah which is quite cool so it's kind of like a loyalty program from being a
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  shareholder yeah so there's like royal Caribbean cruises which is a cruise company their share price
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  about $110 and if you buy one share of their stock you can get like $1,000 worth of benefits
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  when you're on their cruises so it's quite cool so clearly I'm kind of conflicted in terms of
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  but you want people to buy shares because they're invested in the growth of the business so like
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  a core for example the hotel company in Europe we should actually do this this would be quite cool
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  if you buy one of their shares which is like 35 euros you get gold status which you could really
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  only get if you stayed 30 nights in one of their hotels during a year oh so if you think 35 euros
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  versus 30 nights staying hotel kind of a no-brainer oh let's do it let's start some good investor
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  totally invest in all these travel companies and then just go up to the reception be like hi
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  I'm a shareholder can I please get a room upgrade I just cannot wait to experience business class
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  I can't wait you know I used to give you so much shit for it and I was like oh yeah
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  I'm bare a second of hang for business now I'm just like I can't wait like absolutely
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  fangin at the bit I reckon I'll just I there's no way I'll take a sleeping pill I'll eat
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  everything I see they bring around this basket of like do you want like a chocolate bar cookie
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  musy bar apple or sandwich you want a croissant or a piece of bread or garlic you
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  will all of the above thank you so much for listening to the curve weekly make sure you hit the
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  week and see you next Monday bye bye sweet yeah see you next Tuesday well see you next Tuesday I mean
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  Monday