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Hello, and welcome to the TLDR podcast, a show about the culture, gossip, and business of money. And this week, the AI company that lost $50 billion. ♪

I thought we were not going to bring that up on the podcast.

What have they hated the most?

You basically had all of the big companies come out and not show that big of an increase in profits from their AI investments. We're talking Microsoft, NVIDIA, Meta. It's hard to know what exactly to make of it. Investors were not thrilled. Something to keep your eye on.

Sarah Rieger, the business and markets correspondent for the Webby Award-winning TLDR newsletter. And we are going to add another award this week. Sarah was named one of the 40 under 40 most influential people in the universe by Avenue Magazine. Is that right? Yeah, in Calgary, but let's go with universe. That sounds much more impressive, so I'll take it. Well, Calgary is the most important place in the universe. You sort of, you win Calgary, you win the universe. Obviously, that's how it goes. ♪

We have a fantastic show for you. We are going to talk about what happens if the stock market goes into a perma-freeze. We're going to talk about AI. And then we have a special guest. If you are on Twitter or the internet and you follow at Dye Workwear, the

foremost publication discussing clothes and culture when it comes to men, you will know Derek Guy. He's going to join us at the end of the show to talk about money and clothes. But we are going to start with a question that we always ask.

Sarah Rieger, who is making or losing money that's interesting to you right now? An AI-related company that, as of this summer, had bigger stock gains than NVIDIA has lost $50 billion U.S. dollars from its valuation and is actually at risk of being delisted from the NASDAQ. That's a, I mean, you know, like stocks go up and down. That's a pretty, that's a pretty crazy nosedive, $50 billion. Yeah.

What is this company? Tell us more. So the company is called Super Micro Computer. They're based in California and they build servers for AI data centers. And they're one of the biggest server makers in the world. They brought in more than $7 billion in revenue last year. And

Just to kind of contextualize like the hype around this company, I'm going to read you a little chunk of an article from VentureBeat about Supermicro from this summer. So the headline is, NVIDIA gets the glory, but Supermicro is the unsung hero of the AI revolution.

And they said analysts are breathlessly predicting that the company's top line might double over the next fiscal year or two, while enterprises are just pounding on their doors demanding AI servers, which sounds very dramatic and very exciting. So they make good stuff. It's needed for AI. So when do the fissures start to appear in this company and their financials? So the company has had a lot of sketchiness over the last couple of years.

They've been accused of selling servers with Chinese spyware embedded inside them. They've been temporarily delisted from the NASDAQ before for not filing financial statements and charged by the SEC for accounting violations.

But all of that, I think, has been kind of ignored by investors because they make these really fast and powerful servers. So all the momentum around AI seems to have overshadowed this kind of messy history. It sounds like from what you're saying that people were so caught up in AI fever that they were like, we need to make sure that we invest in the winner and like, let's ignore AI.

Some weird stuff. What happened to change that narrative? Well, Hindenburg happened. They're these activist short sellers. They've been around since about 2017. What do you guys know about Hindenburg? I'm going to let Matt handle this one. They do in-depth research into companies to try to expose frauds and other malpractices.

So, yeah, the company has kind of made a name for itself by basically publishing like what I would call investigative financial journalism, except the reports are much more scathing than like an unbiased journalist would do because they are raking in cash by short selling against the companies that they're taking down. Right. So it's sort of legal insider trading in the sense that you are

doing a bunch of research, finding out bad stuff, placing bets on that bad stuff, and then publishing that bad stuff so that everyone knows about it and your bets come true.

So Hindenburg starts looking into Supermicro. What do they find? So in August, they dropped this report with two big points. The first is that Supermicro apparently never stopped with that bad accounting that they got in trouble with before. They hired back executives from that old scandal. They had suspiciously circular sales, like possibly putting money back into their own pockets. And the

The second point, which is they might be bypassing export bans by selling products they're not supposed to to countries like Russia and China. Its stock dropped almost 9% at the news. It briefly bounced back a little after the company denied the claims, but that wasn't the end of it. When does the other shoe drop? So about two weeks ago, Supermicro announced that its auditors, Ernst & Young, quit the

stating that there were a lot of red flags in the company's books. So for context, auditors check books, make sure everything is on track, make sure everything is accurate and accounted for. And it's kind of assumed that with most of them, they're a little bit in the pocket of these companies because the companies are paying them to check their books. So there's an incentive for them to keep the contract to kind of be like, okay, your books look good. It's solid. So they're not usually companies that make a lot of noise.

So this was really unusual. It was just like a huge red flag. It's that like boring accountant guy saying, excuse me, tapping on the mic, excuse me, we're quitting. Something bad is going on here. Yeah. And literally that day, the stock dropped 33% and has continued to drop since then.

The stock is down 80%. Like it looks like a black diamond ski hill right now. But I zoomed in and you know, what's wild is the AI boom has been like such a big support for the company that even after this 80% decline, it is still up 5% on the year. So basically what investors are saying is like, you know, maybe they have all these accounting scandals and stuff like that. But like, even like with all that risk, you know, it's possible that there's still like a pretty good business here, a better business we thought existed at the beginning of the year.

Which is kind of wild because it's under investigation by the DOJ. Well, there are people who are under investigation by the DOJ who could be president. So, you know, it's not the kiss of death necessarily.

I guess the other thing I'm wondering is like, is there like a bigger takeaway here than don't cheat and have your auditors quit? I think that what this tells me is that whenever there's a boom, you know, you do often see people trying to skirt the rules to get ahead. Like you saw this in the crypto boom. You saw this in the dot com bubble. And what I think is that like this actually seems like the market and the economy like

working well. Like people are incentivized to expose that fraud and they're getting freaking punished. Matt Levine, Bloomberg's resident financial wonk, has an interesting theory, which is that having a fraud every now and then

be really public is actually probably good for society because it encourages people to become accountants. And being an accountant is very important, but it is not the sexiest job in the world. And you could actually see like an uptick in people wanting to become accountants and signing up for accounting courses after Enron. So, you know, on the bright side, I'm glad that one of these things is happening. You know, hopefully we'll get some more good accounts out of it. Department of Labor statistics indicate it's one of the fastest growing professions. All right, Matt Karras, you are up.

Please freak us out. Who is making or losing money that's interesting to you right now? So Goldman Sachs dropped a bombshell report that basically said the party's over in U.S. stocks and U.S. stocks are headed for a lost decade. The report was written by their chief equity strategist, a guy named David Koston. And he's saying things are not going to be as good over the next couple of years as they were in the past.

It's obviously a really big deal, if that's true. People who invest hope that they make gains, and people tend to think they're going to make similar gains to gains that they've made in the past. And of course, that isn't necessarily always true. I have a lot of questions. Should I listen to this person? Is he an outlier? Are there other just as smart people saying he's wrong? What should I do if he's right?

But I guess I'll start with, like, can you dig a little deeper on, like, what is his prediction and what is it based on? So the main reason comes down to valuation. There's a whole lot of complicated math behind this. But, like, one simple way of thinking about it is that, like, stocks have returned an average of 11% for every 10-year period since the early 1930s. And over the last couple of years, they did even better than that, averaging 13%.

But everything in investing is a question of not only what you get, but how much you're paying for how much you're getting. And, you know, basically, like what Goldman's argument is, is that if you look at the companies today, people are paying a lot of money, a lot more money than they historically have for those stocks at a time when over a 10-year period, you can't expect the companies to be that much more profitable than they ever have before.

That brings their return expectation down from like the average 11% to something closer to 3%. Okay, if I'm going to boil down what you said, the simple thing is stocks have a very high value right now. And in order to keep going up, they would have to get even more valuable. So somehow there needs to be a pause where

How much money these companies make has to catch up to how much value they have. 10 years is just such a wildly long amount of time to look ahead. Like, I think if you'd asked me in 2014 if I could guess the way the markets would go or world events over the next 10 years, I would get 0% of it right.

Yeah, and by the way, even with like very complex analytical methods, it's not like these estimates are perfect. There was actually a lot of backlash to the report. And basically everyone else, you know, including JP Morgan and BlackRock, you know, all of them came out and they were like, man, this is way too pessimistic.

But even though they said that this number was too pessimistic, they all do agree with the basic premise that like the next 10 years of U.S. stock returns are very unlikely to be anywhere near as good as the last 10 years. If this guy is right, if Koston is correct in his prediction, let's say I'm 30 years old. I use my retirement calculator. You put in your numbers and you're like, oh, great. I'll have this much money in 38 years.

And I'll be able to retire and live comfortably. How does what Kassan's saying change that math?

Basically, like what Goldman's report is implying is that if you save $100 in your account right now, at the end of 10 years, the base case is that you'll have $134. Right. You get a 34% return over 10 years. Compare that to what we've experienced over the last 10 years is that if you start for every $100 in your account, you've found yourself today with something closer to like $250. Right.

So, you know, to put it in perspective, what this report is implying is that the next 10 years for the U.S. stocks would be

one of the like handful of worst decades ever since like the early 1930s. You know, a lot of people have been complaining about how much worse Canadian stocks have done than U.S. stocks over the last 10 years. This means that over the next 10 years, U.S. stocks won't even be close to what Canadian stocks have been performing over the last 10 years. And so if you think the last 10 years in Canadian stocks were bad, this report's implying, man, you know, the next 10 years in U.S. stocks is even going to be worse.

It's interesting because some Canadian investors are really trying to make the case that this is a reason to, like, look to invest in Canada. David Rosenberg of Rosenberg Research went on BNN Bloomberg the other day to say basically, like, everyone needs to move their money from New York to Canada. Just making the case that, like, we're on a discount right now. And he was saying that he thinks Canadian stocks will be, like, outperforming the U.S. into next year. Yeah, I mean...

On the other hand, like, there's just a lot of concern about Canadian profit growth. And so even though they're cheaper, you know, the companies haven't been able to produce nearly as much profits over the last couple of years. And so there's broad concern that even at these lower valuations, they'll be able to generate enough profits to make them a good investment. What should you do as an investor if you think Koston is right? The biggest thing you should do is think about how much money you're going to need in the future.

And when you're figuring out how much to save today, save more than you think you need. So if you're using that proverbial retirement calculator or even real retirement calculators like we have, take a look at the assumptions for future returns and make sure that they're reasonable. Get more conservative. Humble them, so to speak, is how we talk about it. Don't think about the best case scenario. Keep in mind the cost in case scenario. Yeah. And-

In addition to saving more, you know,

Probably just another good reminder to like spread your money across different types of assets, whether that's different stock markets or different asset classes. This just brings you back to like that old Charlie Munger line that like the only way to get rich is to save more than you earn. That's not my philosophy. My philosophy is spend more than you make, cross your fingers and do all the retirement calculators as if you're going to make the highest possible returns.

We know who will be shaking the penny can. Well, like I always say, money's only something you need in case you don't die tomorrow. Isn't that right, Carl? Coming up next, we are going to welcome a guest on the show. Derek Guy is a native of Vancouver, Canada. He is an expert on fashion, the semiotics of fashion, and stuff like why Matt Keres wears a quarter-zip sweater. He runs the blog Die Workwear and writes for places like The Washington Post and The New York Times.

But because this is the world we live in, the most important thing is that he is the Goliath of menswear and menswear commentary on Twitter. So why are we having a guy who writes about menswear on the show? Well, first of all, of course, Matthew's wardrobe has been a long topic of conversation for us here on the show. We're talking about spread collar shirts. We're talking about quarter zip sweaters. We're talking about finance bro chic.

We want to know, like, what are people saying when they wear things? What economic messages are we sending out by claiming to belong to different tribes? Derek is an expert on all that. Derek, welcome to the show.

Thanks so much for having me on. I really appreciate it. So I have to admit that we brought you on for a very specific reason. I want to introduce you to Matt Keres. He is a former hedge fund trader, early 30s, often wears a quarter zip sweater. He prefers spread collar shirts. You know, I would say an APC, a raw denim jean, maybe. You pay very close attention to my legs. I mean, I worked at GQ magazine, not

Not in the fashion department, but it rubbed off on me. So what we want to talk about a little bit is the finance bro outfit. How do you explain it? Where does it come from? I think that uniform is just part and parcel of the general dressing down in the United States. So finance as a sector, if you go back, you know, a couple of generations, often involved a coat and tie, white shirt, tailored jacket, a suit, essentially, and a dark silk tie.

Over time, the forces that brought the suit into society, which I view as the developments of liberalism, also kind of ended up killing the suit. Nowadays, it's almost something that people only wear to like weddings, funerals, court appearances. And then especially after the rise of the tech millionaires and the rise of the digital economy, it became sort of a status symbol to dress very casually. It was to say that I don't care about

dressing up and performing this kind of like respectability. I only care about merit and I only care about work. The problem is that even in professional offices, you're still expected to perform some level of professionalism. So you're not really allowed to wear sweatpants or pajamas or cargo shorts or even sometimes in some offices, you're not even allowed to wear jeans or

So what that typically means is that we're stuck in this middle ground that is now loosely called business casual, which is a button-up shirt,

at least trousers, but not tailored trousers. So something like a chino, can't wear shorts. In the finance world, there's also this use of a tech vest. It's this vest that's made from maybe like a worsted material, or it's got like some features that make it look a little bit dressier. And all of this is just to ride the line between trying to look casual, not wearing the suit jacket, but also trying to dress in a way that signals professionalism. And I'll be honest, I just

don't think it looks very good. I feel that you give up the flattering architectural shapes of tailoring, and then you are also stifling the creativity that's possible in casual wear. Matt, what do you think? I've always liked my dress jackets. I usually get the feedback when I wear them that it looks like I'm going to interview at another firm.

So I'm not supposed to wear them. Derek, are sweaters ever acceptable? What? I'm wearing a sweater. It's so goddamn acceptable. I've seen that you don't love quarter zips. Are they worse than other sweaters? I'm phoning in for a friend here. No, I think that if you're dressing for the office, layering a quarter zip is better than wearing just chinos and a button-up shirt. I do think that if you're going to wear a quarter zip, there are ways to...

make it even a little bit more interesting. For example, there are quarter zips that are made from a very smooth kind of like dry fit fabric. Anything with a little bit more texture is going to make it a little bit more interesting. There are also companies that make really interesting quarter zips. I think of like Capital, Isabel Marant. I love it. We'll take a Wealthsimple TLDR shopping trip this weekend. I want to talk a little bit about the sort of white collar sneaker thing.

Tell us a little bit about the rise of the so-called dress sneaker. What's interesting to me is that if you go back to the 90s or early aughts, people in like knowledge intensive professional service sectors were

looked down on sneakers. It was considered not a respectable form of dress, specifically in offices. And it was right around the early aughts where you start to see the emergence of luxury sneakers. So Common Projects, for example, made an all-white, minimalist sneaker that was branded only with a bit of gold foil on the hindquarters of the shoe that said some numbers. And if you knew you knew, you'd say, oh, those are Common Projects. And

From that period all the way up until today, you start to see the development of this luxury sneaker, the development of sneakers that telegraph. I'm still a member of the middle class. I'm not wearing like Air Force Ones to work. I'm not wearing Converse to work. I'm trying to dress comfortably, but I'm choosing something that says I'm still dependable. I'm still reliable. I'm still professional, kind of like bourgeoisie mores.

Something I just find so interesting about your writing is how good you are at noticing people who are really trying to pursue specific status signifiers that actually often give away what class they're in. It reminds me of being in junior high and wearing hand-me-down clothes and saving up to try and buy the right pair of jeans that other kids wouldn't notice, but getting it wrong because I had no idea what the people in the rich circles were wearing.

wearing, you know? You know, an interesting thing in the early 20th century, when the suit was worn in those kind of like white collar offices, there was a moment where the suit was to some degree a way to hide class. So the people that owned the factory, they wore the same uniform as the people who managed the factory. But there were still sometimes distinctions like the number of

buttons on a cuff or the placement of a dart would signal that someone went to a prestigious school, for example, and that someone else who shopped outside the stores would be wearing an imitation. And I think that's true also of today is that you can kind of sometimes tell that someone is shopping at Cuccinelli and even though it's a hoodie, it's not like the champion hoodie that someone who is packing groceries might wear.

Those distinctions are increasingly more subtle. It's harder to tell between classes, but there are sometimes subtle differences that says something about someone. You know, we've talked in the show about the Zuckerberg makeover that he either someone gave him or he gave himself.

Can you talk a little bit about who wears being a billionaire the best or how they wear it in different ways? You know, Zuckerberg, Elon Musk, Jensen Huang. Who has the best billionaire style or the worst billionaire style?

I think NVIDIA's CEO, Jensen Huang, is actually pretty stylish. There was a period, if you go back to old images and YouTube videos of him, where he's dressed pretty like he's just wearing like a normal polo shirt, chinos, jeans kind of guy. And then all of a sudden he has a black leather jacket. It's often made from a heavy cowhide, black T-shirt, black jeans, and I believe most of the time black boots.

I think it's interesting because, one, it solves the decision fatigue that sometimes people talk about. So it's kind of Steve Jobs-ian in the sense that it's a uniform. But I think it's more stylish because it confers a certain silhouette. It's interesting in that it's all one color and the clothes fit him pretty well. Jeff Bezos is, I think he dresses better than he did

when he started Amazon, certainly, it does sometimes read as midlife crisis. I call it blood boy chic. Yeah. I'm careful of labeling it that because I always want guys to experiment more with clothes and have fun with clothes. But I'm just being honest. There is something about Jeff Bezos' look that's a little bit

Just a little bit too slick and sleazy for my taste. Okay. Last question we have is one thing people can do to dress for the so-called job that they want. Obviously, a million jobs out there, but you have one piece of advice. One thing you can do to dress for the job you want is...

I always encourage guys to at least wear a tailored jacket because a tailored jacket confers a nice silhouette. It broadens out the shoulders, making the waist look slimmer. And I would try to wear it with a button-down collar shirt

because that's easier to wear without a tie. And, you know, just wear it with jeans and chinos. A Navy sport coat, I think, is a very useful item that you can use to dress up the business casual office uniform that we discussed earlier while not going to office in like a full suit. That is excellent advice. Tailored suit jacket, button-down shirt,

Also, things that I happen to own, so I'm in favor of that. Thank you so much for joining us and teaching us about stuff. If you want to follow Derek Guy on Twitter, he is at DieWorkwear. Derek, thanks for coming on. Thanks so much for having me on. I really appreciate it.

Okay, that is it for this week. Sarah Rieger, tell us what we learned. We learned that if a company's auditor quits, it's a very big red flag. We learned that the stock market may or may not do great over the next decade, but you should probably just save some money either way. And we learned that Matthew's quarter sip fits into a very long history of how finance and fashion intersect.

Thank you so much for listening. This show is sponsored by Wealthsimple. It is made by me, Devin Friedman, Matt Karras, Sarah Rieger, with Matilde Erfolino, Leah Fetter, Kat Angus, and Jared Sullivan. Help from Tom Johnson and Allison Hopkins. Fact-checking by Vernon Doherty. Theme music by Andy Huckvale. Engineering by Emma Munger. Special thanks this week to Derek Guy.

The TLDR podcast is offered by Wealthsimple Media Incorporated and is for informational purposes only. The content in the TLDR podcast is not investment advice, a recommendation to buy or sell assets or securities, and does not represent the views of Wealthsimple Financial Corporation or any of its other subsidiaries or affiliates. Wealthsimple Media Incorporated does not endorse any third-party views referencing this content. More information at wealthsimple.com slash TLDR.