Prof G Markets: Is Breaking Up Intel The Right Move? + The New Gold Rush

Key takeaways

Despite a dip in housing starts, the underlying demand for housing remains high, and there is potential for a future rebound.
X's high valuation at $44 billion may not reflect its actual worth based on recent assessments, raising questions about market sentiment and Elon Musk's influence.
MicroStrategy's Bitcoin investment strategy shows both risk and potential, highlighting the need for companies to have solid fundamentals beyond speculative investments.
Intel's management challenges and the possibility of splitting the company suggest that a strategic overhaul is necessary for any chance of recovery.
While gold is experiencing a surge due to global uncertainties, its long-term value compared to stocks raises important questions about its role in investment portfolios.

Summary

Housing Market Insights

Ed and Josh discuss January's housing starts data, where new residential construction saw a significant decline of 9.8%. The drop is attributed to factors such as harsh winter weather, high mortgage rates, and supply shortages. Josh expresses concern about the impact on affordability, highlighting the median home price of $420,000 and the median age of homebuyers as 56. He believes the solution lies in increasing housing construction and offers a slightly optimistic view on future homebuilding possibilities if weather conditions improve and labor costs stabilize.

Valuation of X (formerly Twitter)

The conversation shifts to Elon Musk's social platform, X, considering a funding round at a $44 billion valuation, consistent with Musk's initial purchase price. The discussion revolves around skepticism regarding the valuation given recent reports valuing the platform much lower. Josh suggests that the interest may stem from Musk's influence and the changing attitudes of advertisers willing to return to the platform. He notes the potential new investors may be looking for proximity to Musk's innovative ventures.

MicroStrategy’s Bitcoin Strategy

Josh raises his concerns about several companies emulating MicroStrategy's strategy of heavily investing in Bitcoin, which he perceives as a tactic for struggling companies. He reflects on previous waves of companies labeled 'blockchain' or ‘Bitcoin treasury’ and questions the sustainability of this approach. Josh speculates that amid rising Bitcoin interest, these businesses could become vulnerable to market shifts if not underpinned by solid fundamentals.

Intel’s Struggles and Potential Breakup

A significant portion of the podcast focuses on Intel's lagging performance and its potential breakup. Josh outlines Intel's management troubles since 2018, tying its decline to missteps in corporate strategy. With TSMC and Broadcom potentially acquiring Intel’s chip design and foundry segments, Josh emphasizes that a visionary leader is crucial for a tech company. He believes a split may ultimately be beneficial for shareholders, considering Intel's current state and market realities.

The Gold Surge and Its Implications

Ed and Josh discuss gold's current record high prices, attributing the trend to geopolitical concerns and inflation fears. Josh argues the move towards gold is often reactionary and can lead to speculative bubbles. He weighs the historical performance of gold versus stocks, noting that while gold serves as a hedge during crises for some investors, stocks tend to outperform over the long term. Josh expresses doubt about gold’s value as a direct investment, highlighting the potential limitations when faced with worst-case scenarios.

Show notes

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Ed and Josh Brown, co-founder and CEO of Ritholtz Wealth Management, open the show by discussing January’s housing starts data, X’s latest funding round, and the growing wave of companies emulating MicroStrategy’s approach to bitcoin. Then Josh unpacks the potential breakup of Intel. He breaks down how Intel’s leadership struggles led to its decline and explains why having a true visionary at the helm is crucial for a chip company. Josh and Ed also break down gold’s record-breaking surge and explain why banks are rushing to fly the commodity into the U.S. Ed questions whether gold is really a smart investment, while Josh explains why owning it outright might not be as valuable as people think.
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