YouSaid · the spoken record

Michael Cembalest

lines on the record: 64
first: 2025-05-29
most recent: 2025-05-29
sittings or episodes: 1
sources: podcast

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“working, you know, deeply on some of these topics. And energy as an example, I needed to learn about energy from somebody that understood energy better than anybody else. So 15 years ago, I made a pilgrimage to Manitoba in February, right? Which was can you prove yourself? Because it was cold. And I established a relationship with Vaklov Smil, who for over a decade was my personal Sherpa on understanding and learning about energy.”
2025-05-29 · Odd Lots · Michael Cembalest on Why AI Is the Stock Market Bet of the Century · IDENTIFIED FROM THE TRANSCRIPT · source
“I can call just about anybody and say hi, the chief strategist on the asset management business is JP Morgan. I'd like to talk to you about something. Would you talk to me? I can count on one hand the number of times that somebody has just flat out said no. And one of those people was the bundler for Bernie Madoff. And that's the great thing about the Halo effect that Jamie has brought to JPMorgan. And remember, I worked at JPMorgan for many years when there was no Halo. And, you know, that halo effect is very powerful and benefits me and a whole bunch of other people, the company. And I recognize that every day. So I spent a lot of time.”
2025-05-29 · Odd Lots · Michael Cembalest on Why AI Is the Stock Market Bet of the Century · IDENTIFIED FROM THE TRANSCRIPT · source
“Think you have to budget your time. And my most important thing is reading about 2000 to 2,500 pages of research each week. So that comes first, other than spending time with my wife and my dog. That's the most important thing I do because that's where whether it's on energy topics or politics or healthcare or biotech, like it's an information laden world. And the great thing about JP Morgan is.”
2025-05-29 · Odd Lots · Michael Cembalest on Why AI Is the Stock Market Bet of the Century · IDENTIFIED FROM THE TRANSCRIPT · source
“All right, go on. A couple reasons. One, I think it's become clear. And I wrote a piece at the time. They were not completely transparent about how they accomplished some of their goals. Imitations, the sincerest form of flattery, they actually used, I think, open AI models to train their models. And so they did a lot of piggybacking that isn't necessarily a sign of some kind of productivity breakthrough. Also, the price at which they are willing to sell something is not necessarily reflective of its true cost. And so there is some loss leading that's going on in there that, again, is different. That said, Cheaper AI models, if that's where we're going, is probably going to make adoption even easier. So if this can all be done with less energy at lower token cost, that's a bullish story for AI, not a negative one.”
2025-05-29 · Odd Lots · Michael Cembalest on Why AI Is the Stock Market Bet of the Century · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, and I think rent is the right word here. And for reasons both good and bad. You know, Amazon requires, if you want to be, if you want to sell to prime customers, you have to agree to use Amazon shipping. If you make an in-purchase app in some kind of a game like Fortnite on an Android phone, you have to make that purchase through the Google Play Store. These are some of the issues that have been litigated in some of you. And so I'm not 100%. In favor of some of the tying that essentially they get. If JP Morgan said, if you want a credit card, you got to do your mortgage with us. We get slapped down pretty fast and for good reason. And so there's a lot of product time that takes place in big tech that a lot of companies are beginning to challenge and the DOJ is looking at as well.”
2025-05-29 · Odd Lots · Michael Cembalest on Why AI Is the Stock Market Bet of the Century · IDENTIFIED FROM THE TRANSCRIPT · source
“Financials and consumer staples. And so the US is really the dominant player in large CapTech. There's an amazing chart. Mario Draghi, you know, who he is, obviously, wrote a piece at the beginning of the year. What can we possibly, I'm paraphrasing, what can we possibly do to reinfigure entrepreneurship in Europe? And he had a chart in there that we recomputed in our own way. And it's a bubble chart that shows the number of new companies created in the US versus Europe since the year 2000. And again, it's like East and West Berlin, they are completely different”
2025-05-29 · Odd Lots · Michael Cembalest on Why AI Is the Stock Market Bet of the Century · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, well, it has to do with the digitization of the economy and how much technology is at the core of how companies run. You know, JP Morgan right now is a firm. We've got 300 different language model and AI projects going on. And all of that requires in one way or another a lot of these MAG 7 companies. I think we have to put Tesla aside for a minute for reasons that we didn't discuss. But technology is really at the foundation. And I think a lot of times when people compare and they say, oh, US stocks are expensive relative to the rest of the world. They're missing a couple of important things. They're missing the fact that the US has a massive weight to technology. And in Europe, basically it's a value market, right? It's a lot of energy. Yeah.”
2025-05-29 · Odd Lots · Michael Cembalest on Why AI Is the Stock Market Bet of the Century · IDENTIFIED FROM THE TRANSCRIPT · source
“Hard to go back in that. There's some Wilshire data, but it's difficult, very spotty. So if you're looking for things like earnings growth, if you just want stock price growth, sure, of course. But if you're looking for earnings and margins and things like that, that's hard. So we can't find any comparable period where the bigger companies are growing faster. And even within the private equity universe, your theory holds true. The generally smaller and mid-sized funds usually are going to outperform over long periods of time, the larger funds. There's negative size bias. So this is pretty unique. And, you know, over the years, I've always thought that the biggest risk to all of this was going to be some reinterpretation of the Sherman Act and, you know, antitrust. And while Epic Games has won a lawsuit here or there and the Department of Justice is picking away at Amazon, Apple, and Google for different reasons, there really hasn't been a fundamental rethinking of antitrust law that would get in the way of this.”
2025-05-29 · Odd Lots · Michael Cembalest on Why AI Is the Stock Market Bet of the Century · IDENTIFIED FROM THE TRANSCRIPT · source
“You can't find it. I mean, stock market history on a security level basis goes back to around 1980. There's a variety of databases through FactSet, through the University of Chicago. That's about as far back.”
2025-05-29 · Odd Lots · Michael Cembalest on Why AI Is the Stock Market Bet of the Century · IDENTIFIED FROM THE TRANSCRIPT · source
“I think earnings growth for the MAG 7 over the last 10 years is close to 20%. It's 6% for the S&P 493. So it's almost like two completely different universes of companies. Wow. And so they are extremely profitable. They're spending somewhere between, depending on a quarter, 25 to 40 percent of their revenues on capital spending and R&D. Those numbers are unprecedented. And in the history of the markets, even going back to the 1960s mainframe here and things like that, we've never seen anything quite like this. And what the hyperscalers are doing, I would describe, I know we're only 25 years into the century, but this is the bed of the century that you can spend this much on AI infrastructure. you know depressed”
2025-05-29 · Odd Lots · Michael Cembalest on Why AI Is the Stock Market Bet of the Century · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't think you can overstate the importance of this stuff. When you decompose the evolution of S&P profit margins and you strip off the MAG 7 versus the rest of the market, it's like East and West Berlin, right? I'm dating myself, right? But that's how different, that's how divergent those are. If you look at earnings growth,”
2025-05-29 · Odd Lots · Michael Cembalest on Why AI Is the Stock Market Bet of the Century · IDENTIFIED FROM THE TRANSCRIPT · source
“Right. And actually, you know, if you're managing money other than kind of a fast money macro hedge fund, you don't have the luxury of changing your asset allocation every time a new narrative comes along. So to some extent, you have to kind of choose your poison, make your asset allocation decisions, and then be either rewarded or punished based on the outcome.”
2025-05-29 · Odd Lots · Michael Cembalest on Why AI Is the Stock Market Bet of the Century · IDENTIFIED FROM THE TRANSCRIPT · source
“And everybody else was getting slaughtered. So, you know, being behind the fiduciary wall allows me to kind of call it like I see it. And the eye on the market is the external presentation of our thoughts and views on an internal basis. I'm participating in our investment committees dealing with asset allocation and security selection and everything else that goes along with managing money for endowments, foundations, pension plans, insurance companies, sovereign wealth funds and individuals.”
2025-05-29 · Odd Lots · Michael Cembalest on Why AI Is the Stock Market Bet of the Century · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, yeah, there's a huge difference. First of all, thank God for the Chinese wall ERISA rules and things like that. Because I have the independence and what our clients want is for me to share what I'm thinking. The best example of that is in February 2021, the investment bank was making money all investment banks were making money hand over fists in the SPAC market. And I published two really scathing pieces on SPACs. The first one was called Hydraulics backing the next one because it was during COVID was called Saxine Hesitancy, where I kind of pointed out that the sponsors were the only ones making money and that their break-even threshold was something like an 80% decline in the merge stock price was their break-even.”
2025-05-29 · Odd Lots · Michael Cembalest on Why AI Is the Stock Market Bet of the Century · IDENTIFIED FROM THE TRANSCRIPT · source