Josh Brown

And what they're pointing out in this piece is that historically, that's just not true.

More capex spending is bearish, not bullish.

Like for obvious reasons, it's less profit for shareholders.

And oftentimes, if you think people are sloppy with buybacks or with M&A,

You should see the history of CapEx bubbles, how bad corporate managers historically have been allocating resources.

And the reason why is because it's hard.

Especially in tech, you're trying to predict the future in real time and put the right amount of money behind projects that you have no idea what the ROI is going to be in advance.

So I want to just share a couple of quotes here.

You know, one of the reasons why tech has done so well over the last 15 years or so is that we've always looked at them as high profit margin, low assets, like not capital intensive, not heavily industrialized.

They were like these kind of software information technology businesses.

And as a result, we gave them systematically higher multiples than many other areas of the market and deserved it.

Because they earned a ton of money from whatever their revenue was.

More of that became earnings than for most, if not all, other sectors.

Okay.

This is the journal.

It's a guy, Greg Fisher, being quoted from Quint Capital.

We know from this 100 years of data that CapEx is bad.

The lesson has implications for the hottest stocks on the market right now.

The Mag7 became magnificent because they made huge returns on relatively modest capital expenditures.

If Ford came out with a great car design or Boeing with a superb airliner, they needed to invest in factories to keep up with demand.