00:00 Brian Sozzi
Now time for some of today’s trending tickers, Lou Basenese from Prairie Operating Company is here with me. We’re going to take a look at crypto, at Gap, at Apple. But we’re going to start here with crypto. Ethereum leading crypto gains following Fed chair Powell’s speech at Jackson Hole. Risk appetite rising as Powell does open the door to a September rate cut. So, it’s interesting, Lou, ’cause crypto we’ve been talking about digital assets on the show this week. Of course, we had the rally in bitcoin. We hit the record on August 14th and then heading into Powell’s speech though, Bloomberg pointing out Lou, you actually saw spot bitcoin E3 ETFs in the US. They had logged four straight sessions of outflows, but I’m looking at bitcoin nicely in the green.
00:49 Lou Basenese
No, I think I look at these cryptocurrencies as not a crypto guy first. Now I’m coming around to the adoption as a risk on barometer, right? You have the fear index and the VIX, bitcoin’s the greed index. But I think something more structural and foundational is happening. I sit on a couple boards and the amount of institutional demand to turn into companies into crypto treasury companies is really remarkable. I’m seeing it firsthand and I think it’s because it makes it frictionless, right? Now, if you try and buy crypto on a traditional exchange, you can’t trade the derivatives around it. But when you get it into the equity markets, it can be custodied by any type of investor now and they So I think this is really driving demand, taking supply off the market and then you get just the increase in speculation as well leading to this rally.
01:52 Brian Sozzi
Are you Are you in the camp that says, hey, I know we dipped, I think it was like a 112 and I heard folks saying, hey, maybe we’re just kind of consolidating here and they’re saying, listen, we’re going to move higher into year end and don’t complicate it, they were saying, it’s just a friendly regulatory backdrop and to your point they’ll say, yes, strong institutional demand.
02:21 Lou Basenese
Yeah, seasonality comes into play here. The other thing that I’d look at, the data point that’s interesting is what’s the marginal cost to mine the next bitcoin. It really closely tracks and highly correlates to the actual market price. So obviously, electricity prices are going up, the cost to mine the next bitcoin is going up, so we should expect the market price to go up. Otherwise, the miners are going to come out of the business.
02:52 Brian Sozzi
All right. Here’s another one I want your your take on. Gap, as that one got hit with a downgrade of Barclays, the firm lowering its rating on that stock from overweight to equal weight. So, they they moved to the sidelines. They said the previous bullish scenario, Lou, for double-digit operating margins by 26 off the table. Previous blue sky scenario, they say, diminished by tariff margin pressure, macro uncertainty. Their target goes to 19.
03:20 Lou Basenese
I think they might have been a little too aggressive because I don’t hear any other analyst comments in the retail and apparel sectors talking about blue sky, uh, you know, optionality. If you look at Gap’s last quarter, it wasn’t terrible. They had about three, 3% comp same store sales comps. Uh, Old Navy showed some strength, which it hadn’t, and athletic division showed some weakness unexpectedly. So, um, and even earnings were up 24% quarter over quarter. So it looked like a solid enough report in a in a market and economy where the consumer has been a little stretched and everyone’s worrying about this. So I think they were a little too aggressive. Makes sense to step to the sidelines ahead of the report and then maybe come back in.
04:05 Brian Sozzi
Next earnings announcement, August 28th, Lou, we shall see. Apple, let’s finish up there. In early discussions to use Google Gemini and a revamped version of Siri. Now, this is according to Bloomberg, Lou, and they’re saying Apple is considering using Google Gemini AI to power or revamp version of Siri. The report saying Apple approached Alphabet’s Google to explore building a, what they say, is a custom AI model that would service the foundation of this kind of new Siri next year. What do you think?
04:36 Lou Basenese
I’m deeply conflicted because I own Apple and Alphabet, but I would say this. It makes strategic sense. Apple has been behind. They’re used to being a late entry but and then leading eventually. But here’s the argument I’d make. Both Apple and Meta, what is the benefit of originating your own AI? You’re not doing cutting edge compute for what your product lineup is. Meta is simply advertising, digital advertising, Apple is consumer products. So, I think it makes strategic sense for them to outsource the the the brain behind their AI and then just leverage it in and incrementalize it into their business. So for me, it’s a smart move.
05:20 Brian Sozzi
Bloomberg saying there’s Apple still several weeks away from making a decision whether to continue using their internal models for Siri or move to a partner and then they have to decide if they go that route, which partner it would be. We’ve heard a few different names. And of course, then we have to find out, Lou, what what even the the financials of such a deal would actually look like.
05:42 Lou Basenese
Yeah, and you saw, you know, last week we heard the rumors that or the the clamoring for Apple to buy Perplexity, right? To just bring it in house. And guys pound the table on that on the set.
05:55 Brian Sozzi
I know, but Apple’s never made acquisitions that big. They’ve always been very small.
06:00 Lou Basenese
Biggest was three billion ever for Beats. Right. So, they’re not going north of 10 billion. I think that again, it makes sense, vertically integrate and what you can and then outsource what you need from AI.
06:13 Brian Sozzi
When Tim Cook takes that stage, you expect in September those new iPhones, exciting, you think, for consumers, for investors?
06:23 Lou Basenese
He doesn’t have There’s hot talk of a thinner iPhone. He does Is that that I mean, does that get you excited? It’s form factors. They tend to excite people. Tim Cook is an incrementalist. Steve Jobs was an innovator. I think that Apple really just has to just iterate to really stay relevant. They don’t have to innovate that much. I wouldn’t expect fireworks from Tim Cook. That’s not his MO. He doesn’t have that same gravitas. I think they just have to show that they have a plan that is getting put in place for AI that’s going to monetize it.
07:13 Brian Sozzi
All right, we’ll wait and see.