The Compound and Friends - Apple’s AI Explosion, Kyla Scanlon on the Economy, Roaring Kitty Strikes Out

Episode Date: June 11, 2024

On this TCAF Tuesday, Josh Brown and Michael Batnick are joined by Kyla Scanlon, Founder of Bread to discuss her new book In This Economy? – an illustrated guide to how money and markets really work. Then, at 36:40 hear an all-new episode of What Are Your Thoughts with Josh and Michael! Thanks to Rocket Money for sponsoring this episode! Visit: http://rocketmoney.com/compound and cancel your unwanted subscriptions today! The Compound x Tropical Bros: https://tropicalbros.com/products/super-stretch-the-compound-hawaiian-shirt Sign up for The Compound newsletter and never miss out: https://www.thecompoundnews.com/subscribe Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Instagram: https://instagram.com/thecompoundnews Twitter: https://twitter.com/thecompoundnews LinkedIn: https://www.linkedin.com/company/the-compound-media/ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Ladies and gentlemen, welcome to The Compound and Friends. On tonight's show, so much to get to, but before we do that, I want to tell you about Rocket Money. With Rocket Money, you have full control over your subscriptions and a clear view of any expenses that you are incurring on a regular basis. Rocket Money is a personal finance app that finds and cancels all unwanted subscriptions. It monitors your spending, helps lower your bills so that you can grow your savings. Rocket Money has over five million users, has saved a total of five hundred million in canceled subscriptions, saving members up to seven hundred forty dollars a year when using

all of the app's features. Stop wasting money on things you don't use. Cancel unwanted subscriptions now by going to rocketmoney.com slash compound. All right, we are talking to Kyla Scanlon today. Kyla has a new book out and it's called In This Economy? And it's just a really terrific look at the way economics affect the markets and investing and consumers.

And she really unravels a lot of the mystery about how the whole thing works. And the best part of it is it's written for everyone. You don't have to be coming out of an econ class to understand the terminology or the connections that she's drawing. So we love talking to Kyla on the show. She was fantastic. And I think you'll really enjoy that conversation. And then to another all new, what are your thoughts?

Michael and I react to the huge worldwide developers conference that Apple put on this week. We look at stock market concentration. So many other things happening this week. A mystery chart. Michael makes the case for a new stock that he's buying and why, and I think you'll have a lot of fun. So without any further ado, I will send you there now. John Duncan, take it away. Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick and their cast mates are solely their own opinions and do not reflect the opinion of Red Holes Wealth Management.

This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Red Holes Wealth Management may maintain positions in the securities discussed in this podcast. Compound Nation. Welcome. Welcome to the compound. My name is downtown Josh Brown here with my co-host, as always, Mr. Michael Batnick.

Michael, say hello to the folks. You're too kind. Hello, folks. We have a special guest, friend of the show. I think we could say that, right? Absolutely. I think so. Friend of the show for sure.

Yeah. Kyla Scanlon is here. Kyla is the founder of Bred, a financial education platform. Kyla puts out weekly financial related content on her YouTube, TikTok, Instagram. She has a newsletter focused on human-centric economic analysis.

We're about to find out what that is. Prior to founding Bred, Kyla was an investment partner at OnDeck and an associate at Capital Group. Kyla has a new book out. It's called In This Economy, which I love, and it's an illustrated guide to how money and markets really work. That's a cool cover.

I love it. Could you come up with the concept of like the ball of string that needs to be unraveled? Was that you? Well it's a chart. That's a chart. That's meant to be the line go up on a chart. But yeah, came up with the colors.

It's also, it's a very unique shape. You don't see a lot of books shaped like this. Is that a perfect square? No, but it's just, you know, it stands out from the rest of them in a good way. Yeah, that was the goal. I wanted something that when you walk into the bookstore, you're like, that book looks wild.

And then you go and hopefully pick it up and then buy it. So. Very cool. I love the color. I love the design. So it's your it's your first book, but you're a writer. You write a lot. So what did what did you want to do in terms of taking the writing that you're normally

doing anyway? I know you have a big audience and we'll talk about that in a moment. What did you want to do differently that the format of a book enabled you to do? Yeah. So I post social media videos like on TikTok, Instagram, LinkedIn, YouTube shorts about once a day. And with social media, the news is something that you're always having to respond to. And so it can be a little bit difficult to do education. And so I really wanted to have something static that people could go to outside of all the noise of social media platforms and just have something that's fun and accessible and talks about the economy. So there are 60 illustrations.

Each chapter can be read all by itself. And that was the goal. It's just like, I think books are really important and I wanted to make something that people could read to have an accessible overview of the economy. Kyle, I don't think I've ever read a book. And by the way, I love the book so much. I hope everybody buys it. Thank you.

I don't think I've ever read a book that tied together money, markets, and the economy in one. Who are you hoping, when you sat down to write this, who are you thinking is the reader? I mean, it's really anybody who wants to know the economy, which is such a cop out answer, but I actually don't like that question because books should be for anybody, in my opinion, in my very opinionated opinion about books. So it's for anybody. And I guess the target audience would be the people

that I make content for. So 25 to 40 probably watch social media, have some interest in the internet. It's really meant to be this thing that isn't scary and overwhelming. Because I think that's oftentimes like how we approach the economy and economics education, is it something so dry and so boring when really it can be like totally fascinating. And so that's who the book is for.

What got you started talking about the economy on if it seems like it's a daily basis, right? Yeah, you've got something up each day. What got you started down that path? I think it's probably a pandemic era when a lot of people realized they had something to say and they had a lot of attention from a lot of people all of a sudden. Do you think that was like the genesis of you saying, you know what, I got to explain

these things? Well, so actually, no. I started a blog in college about my options trading. Nick Medjuli actually found it very, very early on. He was reading some of my stuff when I was in college. And so that's kind of when things began for me with economics education was 2018, 2019. My last two years of college, I was like, people need to know about options trading, which retrospectively they don't.

But yeah, that's how I started. And then yeah, during the pandemic, I had worked at Capital Group, had worked at On Deck, and then left both of those companies during the pandemic because I was like, what's happening? And then that's when I started talking about the markets was with GameStop. And so it kind of took off during that time, but I was like, what's happening? And then that's when I started talking about the markets, was with GameStop. And so it kind of took off during that time. But I've been doing it forever. We live in an attention economy.

And unfortunately, one of the best ways at getting attention is to be negative. And you've been able to break through. You're a shining star, and you have a big audience, and you're not putting out negativity the opposite. You're putting out context and facts and opinions. And so when you see the tidal wave of bullshit that's that we drown in on a daily basis, I'm sure it drives you crazy. What do you think are some of just the biggest misconceptions about either how money or the economy or the market works that you're like, I can't believe I still have to repeat myself and debunk this nonsense.

There's like one thing, what is it? That we're not in a recession. That's a super big one because people think that we are. A recession is largely semantics at the end of the day. It's defined sort of loosely by the National Bureau of Economic Research, but they're still defining it. And we're also nowhere near one based on all the metrics that they look at.

And so I think that's like one of the biggest things is that people often perceive the economic circumstances as much worse than they are. And that's oftentimes something that I have to talk about. And that can be not hard, but it's just like, how do we work through this? It's weird to think that there are so many people, that there are so many people, especially young people,

who, and maybe it's not really like this in real life, and it's only like this online, I'd love to hear what you think, but it's so weird that we could be in a situation with sub 4% unemployment and rising wages and record high stock prices and essentially for a lot of this period of time, two job openings for every one person searching and still have conspiracy theories spreading all over social media that actually we're in a depression. Do you think that that's just people spending too much of their time online and allowing the negativity of others to feed on itself?

What is causing this? Yeah. I mean, I think it's two main main things. Like number one, structural affordability. You can't discount how people feel because like there's elements of truth to it. Like there is a housing crisis, you know, childcare costs are up 32% since 2019. Eldercare is $10,000 a month.

So like there are real economic pain points. You know, inflation has been a pressure for a really long time. People feel like they just can't get ahead. But then on the other side of all that, like how people feel relative to like how the economy is actually performing is like the discrepancy is huge. And I think a lot of that has to do with media headlines.

Like there's a study out there that says that a negative word in a media headline increases the click-through rate by 2.6% and a positive word decreases it by 1.9%. And so people are out there like really, you know, not maybe searching for negativity, but that's what they're fed. Yeah, they are. Yeah, they are. You think so?

Well, Derek Thompson talks a lot about this. They're being fed it because that's what they want. Yeah, that's fair. The media is incentivized not to scare us. They're trying to make money. And the way that they make money is by giving the audience what they want. And the audience wants that activity. That's a really interesting point.

And Kyle, you famously did an op ed called the vibe session that went viral. I think it was in New York times. Yeah. Okay. And because it just so perfectly encapsulated the moment, like it doesn't have to be a statistical recession in order for millions of people to feel badly about their own situation. I think that's really, there's a big element of that.

I think we need to make up a new word because recession is not applicable right now, but it's also true what you said that a lot of people are not in a great situation and largely because of affordability. So we'll brainstorm. We'll come up with a word to describe this and hope we never see it again. But to Michael's point, if your first job out of college is $75,000 a year and it costs you $50,000 to pay rent, fill your tank, pay your utility bills and cover Netflix. And then like what you have left over is $20,000 before tax.

And then you get a flat tire and it blows your budget for the month to get a new tire. Like you don't want to read articles about how great everything is. That's not what... So you are in search of confirmation bias. You want to hear that other people are as pissed off and deep in the struggle as you are. So I think that's a really valid point. Well, this is like outside of the realm of finance, but Gene Twingy, who wrote the book iGen, talks about how like we've kind of shifted from an internal locus of control to an external locus of control. So instead of being like X and Y is my fault,

it's like everything is everybody else's fault, and everything is happening to me all the time. And I think that has something to do with it too. Like people, you know, circumstances are hard. Nobody's like doubting that, but also we're looking for places to place blame, rather than having an element of agency and fixing some things for ourselves, I think. The conversations online, it's funny, there is a lot of nuance in economic data.

There's a lot of economic data, reasonable people can disagree, but we are not in a recession. That much is clear. But I think that a lot of the conversation online is not people arguing about data. It really is feelings. And even though there is a housing crisis, and I would agree with you that the unaffordability is like a massive, massive issue for first time home buyers.

The vibes are better than they were. Where do you think the, and I'm like asking you to like make up how like the average person feels, but where do you think we are today versus where we were say a year ago? I can't tell. I actually spent a lot. That's such a good answer. Yeah. I mean, I can't, I spent a lot, like I spend a lot of time thinking about this because I do think like how people feel ultimately really matters. Like, you know, expectations shape so much of what actually ends up happening, so it's important that we pay attention to how people feel. I think in some aspects people are feeling

better, but now we're getting weird prints in the labor market reports. Joltz is no longer at all reasonable to look at. It's just like the survey response is too low and there's too many holes in the data. So I think people are feeling better, but now we kind of have this funny thing where it's like maybe the data is saying that things were worse than it was and so it's kind of a weird time as always. It's always weird. I want to read you something from the Wall Street Journal over the weekend. The title of the article is Americans really, comma, really over the weekend. The title of the article is Americans really, comma, really hate inflation. Yeah. And the gist of the piece is like people would, I know it's not true, people would almost rather

lose their job than pay up 8% on their groceries every week. Like, obviously, nobody is saying that. But like, that's what it seems like. So this is what I want to read you. Before the pandemic, John Steinsen, an economist at the University of California, Berkeley, was sympathetic to the idea of setting the inflation target higher. Now he isn't. And the reason is simple. He's come to realize that Americans detest what economists like him thought of as relatively modest amounts of inflation. Consumer sentiment remains extremely low despite low levels of unemployment and continued wage growth and the inflation experience the past few years seems to be a major reason. Even as the Fed's favored inflation measure has moderated from 7.1% in June 2022, prices are far higher than they were before the pandemic.

And this is, so now I'm not quoting anymore. This is just it's pissing people off and they don't want to hear. Well, you've just experienced the highest wage growth in the last four years that any generation of Americans has had since the 70s. That doesn't make anyone feel better. They definitely don't want to hear about stocks. If they're in their 20s. The hell does that do for them? So I totally get it. I'm really sympathetic to it. But one thing that our colleague, Ben Carlson, would remind us is like every generation has

their challenges. So housing affordability is this generation's challenge. A prior generation graduated college into an economy where nobody was hiring 15 years ago. Me. And like, would the graduates of the class of 2009 trade places with people who are in their early 20s now? I think they probably would.

Yeah. And I think the problem with all of this is that the negativity is amplified by social media. So like all of those generations had the negativity is amplified by social media. So like all of those generations had their own crises, of course, like life has never been easy. And I think now it's just everyone's talking about it all the time. And the flow of information is like breaking people's brains. And so I think that has a large part to do with it. And there's also this idea that it's your point of like, you know, you're spending all

your money on everything. And then if you have a flat tire, you're screwed. There's no social safety net in the U S and that can be really tough. The uncertainty of that, I think. So, but not to beat this dead horse, but it's just, it's so important because I think Josh's point earlier, like when you go and talk to people, are people as pissed off as it seems like they are online? I don't think so. They're not. They're just not. And the reason is- I think it's an internet thing.

It is. And the reason why it's so important is because internet people can shape the mood, and the mood can shape policy. And if it's not accurate, it has serious ramifications. Yeah. I've been thinking a lot about that, too. And the theory isn't fully flesh,

but there is this kind of bifurcation between the online and offline. And even when you meet somebody who's off, or who's online and you meet them offline, you're like, oh, this is fine. So it is definitely an internet phenomenon, but you're right, that's where discourse happens, that's where policy is shaped,

that's what policymakers are paying attention to. The Fed has a Twitter index, right? Kyle, I've met people I'm sure you have, whose Twitter persona is, let's just say, of the negative bent. And then you meet them online and they're totally lovely. And it almost makes me mad. It makes me more mad.

Yeah. Kyle, are you in Brooklyn? No. Oh, you're not. OK. She's in the Brooklyn of the West. Wait, are you still? In Brooklyn? No, are you still. Okay. She was in the Brooklyn of the West. Wait, are you still? In Brooklyn?

No, like are you still in Denver? You're in Denver. Okay. So I feel like one out of every two people who's extremely online is from Brooklyn. And then the other one out of two people is from San Francisco. And like without a doubt,

what you're saying is so important. You have an over-representation from people that work in certain industries. Obviously media, journalism is one part of it, and tech is the other part. So for the tech people, they're doing really well personally, but if they live in Northern California in the suburbs of San Francisco, it really feels like end of the world times in some respects, just given the state of the city they love. And then if it's the Brooklyn cohort, who again, very overrepresented amongst media and journalists.

The prices that they have to pay just to stay alive on a daily basis are absolutely insane. And like I do agree, like it's not a real snapshot of how the consumer feels, but it's also not not a snapshot because these are influential people. The things they say and believe end up on TV in articles, in policy papers, being discussed in Congress. Like they're important. They're influential. Yeah.

And they're loud. Like any, you know, I'm loud. I can't, you know, well, no, it's like, it's a different type of loudness. It's very much a self-serving narrative that I think can really mess with people. But I do think it obviously bleeds into the populace. We don't have to get into politics, but you just see that. Reactionary wings are popping up all over the world. Look what's happening with Europe and France right now. I think there's something, people are uncertain and they're afraid and so that's transitioning

into this underlying fear that is very prevalent. Do you think that- Why is it important? Oh, I'm sorry, Michael, go ahead. Kyle, do you think that we're ever, so we've spent the past 15 minutes discussing the feelings and the data and the disconnect. Do you think that we're ever going to move past this where we could all agree,

like, okay, we're back to normal? Like, is that ever, are we kidding ourselves? It's just going to be like this, no? I think so. So Conor Sen has a theory on this from Bloomberg Opinion, where because we have the internet, everybody can kind of go into their little corners and all of the discourse is like, how do you say, like separated, it's divided versus everybody listening to like one radio show in the 1950s, right?

The fragmentation. We're never going back. Yeah, exactly. It's probably just going to get worse. There's only two things that like we all agree on and even that we don't all agree. Like we all agree on Taylor Swift, but like not all of us. Like we like her. Don't.

Well, it says, no, I think, I think it's, it's something that unites everyone is that they're aware of her. Oh, sure. Yeah. Like, you know, like in a way that like everyone living on the planet in the eighties was aware of Madonna and Michael Jackson. And what's the other, the Meg? Yeah.

The Meg. No, I, like, I don't think we have a shared pop culture anymore, which is fine. We don't need to. I think fragmentation is fine. We don't really have the three news networks that we all get our news from. Nobody watches those channels really. Nobody's watching those channels. When you wrote the book or when you were thinking about the idea for the book, or just in your daily broadcasting,

why is it important for the regular investor who's not trying to manage a hedge fund to understand the way the economy works? What do you think is so important about that connection? I think it's people's civic duty, actually, which is a a big take and obviously like very opinionated. But I do think like if you're going to exist within an economy that you impact by like having a job by spending money, like it's your responsibility to understand it. And I just think that like my theory is that if people understand the economy, they'll understand what's happening around them a bit more.

It'll sort of reduce the fear, the fragmentation that we're seeing, help enhance certainty. And I just think it's really important. The thing I always say is we all know that mitochondria is the powerhouse of the cell. And I feel like we should know how the Federal Reserve operates in that same way. Okay. And do you think people will make better decisions with their investing if they have a better understanding of the economy in which their investing is taking place in the like, like, is that connection going to make them do smarter things with

money? I would hope so. I mean, I think that like the biggest thing is mortgage rates, right? Like if you understand what mortgage rates are doing and why they're doing what they're doing, that'll really help. If you can understand the cyclicality of the economy, like what businesses might do well when that also really helps. I just think any sort of baseline understanding, any sort of foundational knowledge, like what businesses might do well when, that also really helps. I just think any sort of baseline understanding,

any sort of foundational knowledge, it should help investing. Like even if it is science or something like that, like just having the basics is good. How do you explain to people what the economy means for the stock market? Also the economy and the stock market are not the same thing, right?

You all know that. So I just say like, you know, what the economy is doing can impact how businesses function. Like if the economy and the stock market are not the same thing, right? You all know that. So I just say, like, you know, what the economy is doing can impact how businesses function. Like if the economy goes into recession, like that's going to hurt some stocks, it'll help other stocks. But how you think about the economy and what it does is ultimately going to influence how most companies hire, how they fire, how they pay people. So it's all tied.

Like, you know, the thing I always say is people are the economy in the same way that people are the stock market. It's all composed of the same base layer. ED HARRISON Do you think that the biggest source of conspiracy theories around investing are based on the Federal Reserve and it getting a lot of things wrong in recent years. Obviously skepticism about the Fed is well founded. No institution or government agency is infallible.

But do you think that that's ground zero? Or do you think, as evidenced by the recent relaunch of the meme stock wars, do you think it's Wall Street that people distrust more? When you talk to your audience, which one of those two things do you think is it? Or do they conflate them? I mean, I think people see the Federal Reserve as a black box. They're not really sure what it does or why it exists or, you know, how it takes direction from Congress and what it ultimately does. And the big meetings are really confusing because it's like, you know, Jerome Powell

and a tie saying things and then stuff happens. So I think that's just confusing because it's like what's happening and it's so theatrical. But then Wall Street, I think people are just frustrated with Wall Street and maybe like some thoughts around greed, etc., profit-taking. What elements of Wall Street are they frustrated with? Because you could throw darts and double your money over the last couple of years without much of a problem.

Well, I'll give you one that keeps coming up. Like the private equity companies are buying all of our houses. Okay, that's a good one. It's not true though. I know, how many times have you debunked? Yeah, well even when I debunk it. It's true that they're buying houses, it's not true that they're keeping other people

from buying houses. And like as a percentage, it's very, very low. But then you get called a liar, or an agent of the state. What do you all see? Like what do you see with people talking about the Fed and Wall Street? Well, the people doing the craziest shit with their money are the people who seem to be the most likely to say the market is rigged. If you just bought the Nasdaq 100 and didn't f*** with it for the last 10 years, you're compounding it like 26%.

It's almost like winning the lottery. If you just did that and weren't buying weekly call options, your impression would not be the market is rigged. Your impression would be, holy s**t, the market has just increased my wealth while I ate, drank, slept, and went on dates. How did that happen? That's one area where I just, drank, slept, and went on dates. How did that happen? So, that's one area where I just, I don't understand. It's like, oh, I'm gonna trade all day long

and do really reckless things that are so reckless that I'm actually taking screen grabs of my phone just to show people how crazy I'm being. And by the way, the system is rigged. What? Yeah. It's like driving like a hundred miles an hour and crashing and then blaming like the government for the road. Road. No, the highway.

Like the highway. There was a bump in the road. External locus. Yeah. The highway was rigged. Yeah. No. I think what was rigged. One of the things that keeps coming up over and over, and this is just a human condition

will never change is that when you're online, you're talking to people who share nothing in common with you. Oftentimes, they could be different socioeconomic, different geography, different age, different motivations, different everything. And one of this, one of these pervasive feelings is that I'm doing okay. You feel better about the local level, but the national economy is going to hell. And that's not unique. That's not unique to now. Like that's always been the case, but it's especially true today, now that we have access to more people. We have more access to each other. Yeah, yeah. So do we think we should ban online interaction or

would the more pragmatic solution be to figure out a way to filter everything that we're hearing and seeing and maybe like remind ourselves that there's a bigger picture that maybe we're not hearing about online all the time. And maybe that's what your book is really meant to do. Yeah. I mean, I'd be a hypocrite if I said that we should ban online because that's my job. And that's how I got my start. Like was literally just through Twitter. No, but I think it's a super important caveat

because I'm aware of the stance I have and how it can sound hypocritical and I'm aware. But I do think like, I'm getting on a soapbox just for a second, but I do think social media can be a tool and you have to go over the bad things are to make them better. And that's what I try to do with economics education is like, people are going to be scrolling on TikTok regardless.

And so if you throw in an econ video in between the scroll, like, hopefully that'll help just a little bit. But yeah, I mean, I think it's like a beautiful thing that we've created. And I don't know if it's just human behavior has made it kind of a cesspool. I'm assuming that's it. And I don't know if it's just human behavior has made it kind of a cesspool. I'm assuming that's it. But I think we can continue to build on top of it. But man, I think it's kind of the responsibility of the platforms just to fact check stuff, because there's so much misinformation and bad information flowing around, even about investing, where it's just like,

we probably should have somebody saying, hey, this guy is like totally full of it. Well, I wouldn't hold my breath waiting for the responsibility of the platforms. There's like 12 fake Josh Browns running around selling penny stock chats and crypto, and they don't seem to respond to take down requests. What was the most challenging part of the book to write? What did you have to like really research the most to make sure that you were going to nail it?

So I have a problems section at the end, which is kind of similar to what we've been talking about throughout this podcast, where I talk about social media, you know, I talk about immigration, talk about health care, talk about education, like all these various crises that we're facing. And even at the beginning of the chapter, I say this was the hardest chapter to write because it was. And then I go on to talk about the opportunities, but like those two chapters for the problems and the opportunities were extraordinarily hard because it's

hard to talk about the issues that we're facing and it's even harder to come up with solutions. What are you most optimistic about in terms of your generation coming into their peak earnings and investing years, which is not yet, but right around the corner? What gives you the good vibes versus the bad vibes about how things are going to go or what could happen? Yeah, so I'm 26, so I'm a Gen Z cusperer, so I'll speak to that.

But I mean, I think that people are- That's the term, Gen Z cusperer? Yeah, well I'm like an old Gen Z, like I don't relate to some of them, but I am technically that. I mean, I think that like there's a lot of people working on really cool stuff, like a lot of young founders

who are doing a lot of really interesting things. I think that, I wrote this piece for Fast Company about a year ago now talking about how the younger generation was going to approach work. I think you just see people following their passions, which might be good and it might be bad, but they're much more likely to quit a job that doesn't serve them and to go and seek out something that will. I'm hoping that it'll be a generation that's pretty satisfied by the work that they're doing because of that flexibility.

The hybrid work situation, home and office has been incredible for a lot of people, myself included, but it's been really challenging for others and especially young people. One of the ways that you improve your professional situation is an older person will recognize you and the way that they recognize is by being around you. It's really hard to show off in front of a computer screen.

What are you hearing from some people that are in that situation? Is the hybrid work a good thing? Is it bad? Is it mixed? Well, it is definitely frustrating. When I graduated six months later, the pandemic happened. So I was in my first big job,

like trying to make a good impression and it's really hard. And so I do think a lot of people are feeling that where it's like, I can't get ahead. People are also not retiring at the rate that they used to, like staying in jobs much longer. So there's not as much turnover and maybe not as much opportunity.

And what's actually interesting about this is you see young people turning to trades. Like the Wall Street Journal had a big article about Gen Z being the tool belt generation and maybe not going to college as much. And so I think that's like a big thing is that people are, you know, maybe it's a more entrepreneurial mindset, not approaching the beaten path so often, but it's totally hard. And it's also super isolating as young person because you can't pick up on social cues if you're doing all your work from home. And then when you're like at a conference, you're like, Oh my God, how do you like speak professionally? It's tough. Yeah. Yeah. It's also all these moments that are unscheduled and not part of

a meeting. And you just, you bump into a colleague in the hallway and they share something with you that would not be slacked. And, uh, you know, there's definitely some elements of that. My daughter graduated high school, uh, yesterday and yeah, thank you. And the, what's not the valedictorian, what's the, like the runner up, the vice valedictorian. What is it? Salutarian. Salutarian? All right, whatever. The vegetarian said, well, reminded us all, not that we needed reminding because we were

the parents, but reminded the audience this graduating class was the class that started high school in the fall of 2020 with masks on. Wow. And not only that, at the high school, they put plastic dividers in between because you couldn't separate the desks any further because the classroom is only so big. So they had like half the week off, like literally if there was a scare, if somebody in the community tested positive, they sent everyone home for two days.

I don't even understand where any of this stuff came from. They had plastic in between their desks, but that's this. So they're not cusp Gen Z. This is hardcore Gen Z. But these are the people going to college and they'll be in the workforce before you know it. And I do think that there's some element of like, they've survived a lot of stuff that none of us had to survive when they were 15 years old. Like they had to like just deal with the bullshit

of their Gen X parents and Boomer grandparents to a degree that we just didn't. So I'm hopeful because like these are not kids that have gone through nothing. They really had to adapt. So hopefully they'll be a very adaptive generation and they'll have that as one of their tools in the tool belt. What do you think about that? I mean, I think it's true. And even with the older gen Z's, like I was born right into the tech bubble. So I don't remember that, but like, you know, I was 10 when the great financial crisis happened, so I wasn't graduating into it, but I did see how it impacted my parents.

And so that's super formative as well. And then of course, the pandemic, graduating college. But yeah, I think the younger generation has shown a lot of tenacity. What they went through at such a young age was extraordinarily difficult. And so I do think they'll be adaptive and they'll think through things and they'll just sort of take the punches as they come. I do worry that there's a sense of nihilism and like maybe a lack of hope.

And that's kind of something I worry about. But yeah. Well, they'll get past that when they figure out that they want to date and start families. I hope so. There's no nihilist families being formed. So I think they'll go out of that. Michael, hold up the book one more time.

Yeah, I would just say buy the book. If you don't think the book is for you. Well, I don't know why you're watching, but if you don't and you'd have somebody in your life younger or older who you think this would help, I can't recommend it highly enough. I learned a lot and I just, I loved it and congratulations. Thank you. Kyla, it's on sale, bookstores everywhere. Yeah, yeah.

Okay. And audio book is narrated by me. Well, of course, who else could do it? And I hear it's rocking. I hear people are buying it. You're getting great feedback. Yeah, everybody's been really kind. It's been, yeah, and thank you all.

You all have been super supportive since like the very, very beginning. So thank you. We haven't asked for it. We haven't since the very, very beginning. So thank you. We haven't asked for our favor back yet. So don't... Anytime. And Kyla, I followed some of your early options training strategies. So thank you very profitably.

Did you lose like a million dollars? Kyla, we're huge fans of yours. And when I'm scrolling Instagram and Kyla Scanlon pops up to break something down that happened with the economic data that day, I watch, I favorite. I think you do an amazing job. I think you're an awesome representative of your generation and want to wish you all the best with the book. Hope our audience grabs a copy of it and wish you all the best with it.

Thank you. All right. Cheers. Hey guys, that's been Josh, Michael, and Kyla Scanlon. Thanks so much for watching, for listening. We'll see you soon. Ladies and gentlemen, traders of all ages, welcome to another new edition of What Are Your Thoughts? My name is Downtown Josh Brown with me as always, my esteemed co-host, Mr. Michael Batnick.

Michael, say hello to the folks. Hello to the folks. I love how hard you're repping the brand today. Appreciate that. You should see my undies, I'm going all out. Ha ha ha. We have a sponsor tonight. What's the name of the game here?

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That's pretty insane. Stop wasting money on things you're not really using. Cancel those unwanted subscriptions by going to rocketmoney.com slash compound. That's rocketmoney.com slash compound. Shout out to Rocket Money. Salute. All right. The big story this week, possibly this month, is the reaction to the Worldwide Developers Conference that Apple put on yesterday. Did you watch the whole thing?

It was almost two full hours. Did you watch it? No, I watched reviews of it. When I watched, I saw clips. I watched the whole thing and I watched it on my phone while I was running errands with no AirPods in. I was in the UPS store blasting that shit like I was watching my kids communion.

Like nothing was gonna keep me from seeing every frame of this thing. I thought it was really interesting and curious to get your take. We have this weird situation where it was like a delayed reaction because it almost feels like nobody really knew if it was good or not until Wall Street weighed in with research this morning or late last night. And so the stock kind of like did nothing yesterday and then it exploded today. So I attribute that to people just being like, okay, they said all this shit, was it good? Like, does it matter?

And then Wall Street emphatically this morning said, oh yeah, this is what's up. So last week with Kantrowitz and Eric, we were talking about like, OK, because Dan Ives was saying that it's going to add $30 to $40 per share to the price. We're saying, what's the monetization story for the iPhone? Is it a software? I don't get it. Is Microsoft going to pay them to be on the phone, I don't get it. Is open AI, is Microsoft gonna pay them to be on the phone? I don't get it.

And you know what? We're dumbasses, I'm a dumbass. Maybe it's just as simple as it's like a hardware upgrade cycle. People are gonna buy more phones because there's all this cool shit. So here's JP Morgan. They said WWDC showcased enough to assure us

of the expected upgrade cycle. And maybe, and that's it. That was the key thing they had to convince everyone of is that this is going to make people buy phones. That's it. That's the whole kit and caboodle. That's it. I think you're right. Let's put this first chart up. So this is showing that today is the best day for Apple stock since November 10th, 2022. is the best day for Apple stock since November 10th, 2022. And I assume that was coming out of the tech crash. But tell us what's going on here.

Yeah. So this is, as you mentioned, it's the second best day in the last couple of years. Up 6% on the day. Over 6%. If you had told me like yesterday, hey, like the odds that Apple would be up, the shares would be up 5% today, I would say, I don't know, plus 5,000. Why would it be up 6% today given that we heard from them yesterday, the market was open yesterday, shares were down 1.5% or so, and the fact that it's up this much, I'm

candidly shocked. I thought that the products that they unleashed that they're showing were cool. I think some of the stuff that you're going to be able to do on the iPhone in terms of moving your more customized interface of your home screen is cool. But I'm shocked at this reaction. I really am. You know, there's always this element of like, well, what did the stock price do? And that colors how people feel about what they just heard.

And I'm really glad I wasn't on Closing Bell last night with Wapner at 3 o'clock because I know Dan Ives was on and he was crazy bullish about it. And of course, he looks smart today. But I don't know that I was reading this stuff two and three times until I saw what the stock was doing today. And I'm like, you know what, let me look back at what they really announced. And I got confirmation bias out the ass between the stock price and my second and third readings of this stuff. And we're going to talk about some of the Wall Street research, but I want to get to, let's get to this Apple outperformance chart from Morgan Stanley.

So what is it showing us? Let's get to this Apple outperformance chart from Morgan Stanley. So what is it showing us? So it looks like it's a longer fuse is what I want to say about this. That delayed reaction that I was just talking about, so the blue line is the day of the Worldwide Developers Conference. You could see you really just have not had a huge one-day move out of Apple based on this, just like we did yesterday. But then when you look at 90 days later, stock rips 13%, 14%, 15%. last time was 5.5%.

Or today was this last June? Last June was 5.5%. So today is only day one of a three-month period, but we probably don't know what the full potential of this rally is going to be yet. Yeah. So in the short term, listen, this thing just broke out to an all time high on monster volume. So what I'm about to say has nothing to do with the short term performance of the stock price.

I wouldn't fade this. I certainly wouldn't short it. It's an all time high. It's the biggest stock in the world or one of the second biggest stock in the world. It's probably going higher. OK. That being said, I will take the other side and I might be very wrong. I don't think that this is going to cause a massive upgrade cycle amongst the

average consumer. I don't think it's that big of a leap for the average person. We'll find out. I might be wrong. I just don't. So according to the research, the thing that gets people to buy a new phone is never a killer app. So yesterday, was there a killer app? Maybe time will tell. Well, no. On the surface, nobody was like, holy cow, did you see this one thing? But the research shows that it's actually, when they announce a whole lot of things at once is what generates the upgrade cycle. So that's one.

Let's put up this price chart. So this is the spike that we're talking about. And it's notable because to Michael's point, it's the third largest stock buy market cap in the world. And it's not like people don't already own it. So there is new incremental buying coming into this name to the tune of tens of billions of dollars. It is without a doubt a meaningful move.

One thing that has nothing to do with AI before we get into AI, I really love this might be a killer app for me, the iPhone mirroring on the Mac. That's cool. Because I'm every I'm on a I have three different Mac desktops and one Macbook laptop. And if I could control my phone from there, that's pretty cool stuff. And yeah, I really like that. All right. iOS 18 is the story here. And then Apple intelligence is going to be a part of that. I want to talk about Craig. Did you even know this guy existed? Put this picture up. So he doesn't come out to talk about Apple Intelligence until one hour and five minutes in.

And the stock had been selling off the entire time until this guy came out. And at first, I thought it was Bill Ackman. This guy is a star. Craig Fedda. Kiddie? Fedda's a lot of great stuff. I don't know. This guy's a star. And here are some

of the things that I really thought were notable. And I wrote these down as I was watching on device data versus servers. The pitch is you should not have to warehouse all of your user data and everything you do on your phone in some third party cloud computing center in order to make use of AI and in fact that's exactly what Apple announced. They're gonna a lot of this compute is gonna take place right in the device and then anything requiring more than that will happen in a private cloud. So your data is not stored, it's only used for your requests. And Apple is saying that they are going to set a brand new standard for privacy with

AI. They are the most trusted name in privacy. It's part of the strength of the brand in the mind of the consumer. But computing on device is, Apple has this ability to make its own hardware and they make the software and they marry the two things seamlessly. And that's why even if they haven't innovated and invented something, they always end up with the best, most consumer friendly version. So doing this on device plays to Apple's strength as a device maker.

This is something that OpenAI can't do. This is something that OpenAI can't do. It's something that XAI can't do. They don't make the device itself. So that's going to be a really big differentiator. What do you think about that? I don't know that I agree with you. A differentiator for maybe for like enterprise solutions. Whose version of AI will the installed base of Apple trust more?

A third party software maker or the one that's built into their phone? So you're right. It matters a lot more on the enterprise level. On the B2B level, it certainly matters. I don't think the average consumer necessarily is thinking about their privacy issues when they're doing AI searches. Okay. They might not be now. They might later. Well, they might never. I don't know. We don't really care as much about privacy as we care. But it matters from the business point of view because Elon threw a hissy fit. Elon said, I won't allow an Apple device to enter any of my working areas.

You're going to have to put your iPhone. Well, no, that's a separate issue. That's because of open AI. But we're going to get to that in a second. This is what JP Morgan said. User privacy to stay uncompromised. AI models running on either on the device or on private cloud compute will not store user data and would rather fetch and use context specific data as and when required for sending

data to third party AI models like ChatGPT. There'll be explicit user permission. So before they send something to OpenAI or to ChatGPT, it's going to say, we're about to send this request. OK. The second thing, no additional subscription costs for users. That's wild. So Apple has highlighted, this is JP Morgan,

all the AI features unveiled in the keynote will be available to users for free, other than the use of the integrated premium version of ChatGPT. This is in contrast to Samsung, which launched AI features free until 2025, hinting at possible subscription charges beyond that. This is why OpenAI would do a deal with Apple.

Just getting this size of a user base utilizing their tool is incredible. And Apple is not going to put any gateway up in front of that to stop you from trying it. And to me, that was a pretty big deal. What do you think about that? Yeah. I wonder if there's any economic relationship there because Google, as we know, pays Apple $20 billion a year. It's a good point. On AI-powered Siri, this is the other thing that I think is a big deal. Siri currently processes 1.5 billion voice requests per day, and it sucks. It's not conversational.

It's too much of a gap. It doesn't conversational. It's too much of a gap. It doesn't know shit. Siri is dumber than a dog. But that's going to change now. And now you can ask a question the wrong way and it will intuit what it thinks you're trying to ask. More importantly, you can ask a follow-up question without repeating the original question. And it remembers the context of the whole thing you're trying to do.

Now it's like, Suri, what's that Chinese restaurant we went to in San Francisco last month? If you went to two of them, you don't have to say a follow-up. You can say, no, the one we went to after. It will have a conversation with you, and that's a really big change. Now, wait a minute. This a minute, wait a minute. This is what it's saying it's going to be able to do. Right? We're going to find out this fall.

But I'm saying the demos always look good. When iOS 18 comes out and the new hardware comes in the fall and the new hardware comes out probably around Thanksgiving, that's you're going to find out for sure. Oh, what else did I want to ask you that? Oh, here are some of the things. probably around Thanksgiving. That's, you're gonna find out for sure. Oh, what else did I wanna ask you about? Oh, here are some of the things, tell me what your thoughts are on these. These are some of the things that Citigroup said were key from the iOS 18 upgrade, which again, we don't have yet.

Key focus are customization and privacy. Allow users to customize app icons, widgets, control centers, changing in controls on the lock screen. The new lock and hide an app feature will give users more control with privacy. Photos get a big redesign with a unified view. New collections and customization. Message updates, expanded tap backs, scheduling that.

You could schedule a text now. Text formatting, bold, italic, make the text jump. Finally, finally. What else? Mail app will now have on-device categorization. This is something that you're paying a personal assistant for right now. Will pull relevant emails together from each business. Safari upgrades, game mode, which will stop other apps from interfering

when you're playing a game, a new password app to store passwords all in one place across all your devices. Did they just kill one password? I mean, they might've killed a lot. They might've murdered a whole bunch of things that they're just going to build in for free. A few other things that I saw, you know how on your phone you can, you have the flashlight and then you have the photo, the camera on your lock screen. You're going to be able to, if you want to put Spotify there instead, you could do that. That's pretty cool. Another feature that

they're doing, you know, you always see on the Samsung or on the Droid commercials, that magic photo thing where you could take people from the background out of your photo. I don't know from Droid. I'm upper middle class. But you see, geez, but you see it on the TV commercials. Apple is now allowing you to do that on the camera, which is pretty cool. So there are a lot of neat features. All right, JP Morgan, this is a three-year upgrade cycle story. So here's the case for what you were saying before. Tell me if they can convince you, okay?

In terms of key features that will stand out to consumers, we expect the integration of control over native apps to Siri to access AI functionality seamlessly as well as access chat GPT, more partnerships to come. They'll allow all the models on there. This will drive interest, particularly as it supports features in relation to call recording, transcriptions and summary, suggestions and summaries for text across emails and messages, classification and categorization of photos and videos. We continue to expect the start of a device cycle upgrade for iPhones later this fall, which means largely fiscal year 2025 for Apple, with the upgrade cycle likely

peaking with the launch of iPhone 17 in 2025, which will mean fiscal year 26 volumes for Apple. So this takes years for that upgrade cycle to run its course and multiple devices. That's the case. Well, here's why it matters. So going back to the first fiscal quarter of 2023, this is the iPhone year over year revenue change, okay? Down 8%, up 2, down 2, up 3, up 6, negative 10 in the most recent quarter. So the iPhone desperately needs a super upgrade cycle and maybe this is what does it. And if it does, then the stock is going to go much higher. We did a What Are Your Thoughts on April 16th, which is not even a month ago, and we titled

the episode, is Apple in trouble? Question mark. No, I guess not. Not today. Did you like how they, you didn't watch it. So Tim Cook standing on the roof of the new compound they built out in Cupertino.

And then he's like, all right, thank you all for coming or whatever he does. And a f***ing airplane flies over his head, like over the building and the belly of the plane has the Apple rainbow logo. And then they're playing Motley Fool Kickstart My Heart. And I was just like, that's how they ended it. And I was like, oh, I'm fired up. I don't, you know, like I don't, not fired up for the stock, but for the products. I don't know.

I, the budget for this thing looked like it costs more than most Netflix shows. No, it's exciting. It is because Apple, not that AI needs to be legitimized, but there does need to be a way for them to be AI. Yeah. So this is it. Two more things. John, play this video for me. That's Craig. He did that in the video yesterday. I told you,

this guy's a star. What does that do with anything? That's Craig. He did that in the video yesterday. I told you this guy's a star. What does that do with anything? That's the, I don't know. Just all of a sudden. Getting the iPhone turns you into Spider-Man. I like it. I think he's obviously a stunt double, but whatever. Craig is.

Craig. Okay. I'm telling you, you gotta watch, you gotta watch like this guy. You gotta watch his moves. Okay. Go find that. Go find a clip of Craig at the WWDC. This guy was doing back flips down step pieces. What's the last thing?

Put this Nvidia thing up. This is AI as it is currently. No. There we go. Yeah. This is an AI generated headline from Twitter. Nvidia stock splits. Analyst bullish despite 90% price drop.

And then it said, Nvidia completed a 10 for 1 stock split, resulting in a significant drop in its share price from 1200 to 120. Listen, not entirely untrue. This is a kernel of truth. I wouldn't worry about your job right now. Okay, you're up. The Wall Street Journal wrote a big article on a topic that we've been talking and debating a lot about.

The title is Americans have more investment income than ever before. The TLDR is that in the first quarter, we, the American people, earned $3.7 trillion from interest and dividends, which is a lot of money. That's 3.7 trillion with a T. They said there is debate about some analysts as to whether higher interest rates might actually be stimulating the economy. Again, a beat that you've been on. Economists disagree over the extent to which the so-called wealth effect from rising prices encourages consumers to spend. I think my contention has been that people that have income out the assets are not necessarily spending more money on vacations or home renovation, but they are doing some things.

For example, they're giving their kids money for a down payment, which obviously is stimulating the economy to some extent. But where I think the economy is really being stimulated and a source part of the inflation, and there's a million sources of it, is the person that spends their entire paycheck. Chart on on please. So this is the household wealth gained by income percentile. And look at 80 to 99%, which is the bright green line. It's these people- This is the bottom 20% of households by income. So it's these people that are spending way more than they had in the past.

And listen, I'm not saying these people are- What does it say? They're spending 45% more than they had in the past. And listen, I'm not saying these people are- What does it say? They're spending 45% more than they spent in the same time. No, no, no. This is their household wealth gains. This is their household wealth gains. Oh, I see. So when I say that they're a big part of the inflation, I'm not like disparaging or blaming because I think it's a wonderful thing that finally, for the first time in forever, people

in the lower rung are actually having income gains exceed inflation. But I think this is a bigger contributor to inflation than people that have a million dollars earning 5%. Yeah, no, I think it's both things. So I don't think it's one. Yeah, I don't think it's one or the other. I am obviously a bigger proponent of the wealth effect than you are. I think people will have a higher propensity to shop for things they don't need when they feel rich. And when they open up their 401k statement or they're on their online brokerage account, or they see the income that they're getting in their bank account these days, I really

do think that it leads to incrementally more consumer spending at almost every level. That bottom 20% though that you were just showing, that has nothing to do with that it leads to incrementally more consumer spending at almost every level. That bottom 20% though that you were just showing, that has nothing to do with that. That's purely on wage gains and job security because they don't have investment income. And they're spending all of it. So I think it's both. Yeah. And I think it's both too. And I think that it's almost circular logic in a way that you say people open up their form when case statements to see all-time highs, that by definition

only happens in a great economy. You know what I mean? Yeah, that's fair. Maybe these two things are maybe it's less causal and it's more reinforcing. The two phenomena reinforce each other, but I talked to people about how they're spending and what they're doing. And I know they wouldn't be doing this shit if they didn't feel as wealthy as they feel. And I think the stock market and home values are obviously the two biggest components of

what makes them feel that way, more so than a salary increase when you're at a certain level of income. Oh, you think so? Yeah, at a certain level of income. Yeah, I do. I think because middle management, not middle management, professional management, so people that are not working on assembly lines, but people that have white collar jobs or involved in management are spending at the same elevated pace as everyone else, and

they are not seeing the equivalent wage gains. You know what they are seeing? The stock options they own in their company just exploding to all-time highs. They're seeing record high 401k balances. And I just think they feel more comfortable and confident in their place in the economy. And so I think there's some mutual reinforcement going on there. Ben did a post about the bottom 50% of the income distribution. I wanted to just roll through some of his charts. John, can we put this on screen? Yeah, John, just scroll through the pages. All right.

So the chart that you just shared is the top one that he used. Let's get to the next chart. Yeah, this is monstrous. So this is crazy. This is the bottom 50% have seen the highest growth in net worth since 2020. The bottom 50% by wealth, that's the lower half of the country, have seen an 87% increase in the growth of their wealth.

Now obviously, it's coming off a lower base, but the top 0.1% have seen a 47% rise in their wealth. And then there's like a belly in between those two bars, which I find really fascinating. But seeing that the bottom 50% did twice as well than the top 0.1%, I think it's really nice, don't you? Yes, for sure. This next chart is showing here, this is the bottom 50%. This is the bottom half of the country. This is the growth in their wealth in trillions of dollars. It's three and a half trillion dollars. Next one,

I think is cash in the bank. Yes. All right. So this is all right. So we kept hearing about bank. Yes. All right. So this is all right. So we kept hearing about the bottom 50% or the bottom 20% are spending through their cushion, their pandemic era wealth. It just isn't true. It's at $280 billion and it's a hockey stick from prior to 2020.

And so the bottom 50%, checkable deposits are up three times since the start of the pandemic. They have not spent through this cushion. What do you think about that? I think that, as I said earlier, a lot of this is cycling back into the economy. And it's funny because there's a lot of talk from companies like McDonald's, which we'll talk about later, that are saying that the consumer is making more choices or being more deliberate. And they're calling it macro pressures. And I think that it is a bit of that, but it's just consumers saying, well, I want this

instead of that, or I'm going to spend money here instead of there. But a lot of that money from the bottom 50% is not being saved, it's being recycled through the economy. RAOUL PAL, BOOTH, MEDICAL, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS,

CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, CREDITS, C the Fed is tomorrow, about where the stock and bond markets are headed. It is they who are increasingly providing much of the thrust behind the US economy. American household net worth jumped by 5.1 trillion or 3.3% in just the first quarter, not back to the pandemic. In Q1, American household net worth jumped 5.1 trillion. More than half of that gain was accounted for by the increase in equities and mutual fund holdings. They earned 3.7 trillion annualized in Q1.

That's versus 770 billion in Q1 2020. That's some context for that number that you shared at the top. 770 to 3.7 trillion is an insane annual rate. And that's really the story of why the stock market should be at record highs and why the Fed can keep rates higher than you otherwise would suspect that they would need to. They have no choice. What do you mean they have no choice? The rate at which we're accumulating assets is fueling continued spending, which is keeping prices for everything growing faster than we want them today.

Like 3% is great, but it's not 2%. Let me ask you a dumb question. If Fed funds were at 3.5% instead of 5%, do you think people would spend more faster? No. We had a 15-year experiment with ultra-low rates. They're financially repressive. They don't lead to rapid economic growth because we never had any. This is the whole point that I'm trying to make.

If you want to grow the economy, throw money at everyone. We just did that. It really worked. Unfortunately, it worked too well. If you think dropping rates to zero is going to accelerate GDP, ladies and gentlemen of the jury, may I please present Exhibit A, the year 2009 through 2019. We had a 10-year period of effectively 0% rates, and it did not stimulate the economy, and it won't next time either. This is better, high income bursting out of people's bank accounts. It's better. It's better.

All right. Yeah. Crab strike joined the S&P 500. Friend of the show, George Kurtz. Salute. I wanted to run through some of the things that took place in the index week constitution. KKR is now in the S&P 500. That was a surprise.

I just didn't think it was that big of a stock, but apparently it's big enough. All time high, going vertical. Wow. Yeah, vertical. So it joins Blackstone. And are there other private equity names in the S&P? These might be the only two. I'm not sure. I probably should have looked that up. GoDaddy joins the S&P. Who knew that still existed? Barry definitely. Barry loves URLs.

I wonder if Apollo in the S&P 500. It must be. It's a $66 billion market cap. So I feel like it's got to be. It must be. It's definitely bigger than KKR, right? Oh, wait a minute. No, no, no, it's not in.

It says potential additions include Apollo, Palantir, Coinbase, Aries Management, Workday, Snowflake, Dory, and ShareDesk. You know, there's one interesting wrinkle with that. I don't think it applies anymore, but the delay might have something to do with the fact that initially these companies were not set up as corporations. They were partnerships and the S and P 500 doesn't include partnerships. And I think they all went through this conversion, like a shareholder vote to convert from being a partnership to a corporation, but that might be why these companies are first getting in now.

I remember that being the future. That name that I just mentioned, Apollo, Coinbase, Palantir, and Workday, and Snowflake, those are big names. They're pulling out Robert Half, Comerica, and Illumina. There's no rhyme or reason there. None of those things have anything to do with each other. Illumina will, some of those will now go into the S&P mid cap 400. And Illumina has been tough.

It peaked at 80 billion dollars. It's now down to 18. Here are some new names added to the S&P mid cap 400. Texas Pacific land, TPL, which is a stock I follow Warner music group made it in pen entertainment which was and no longer is Barstool. Hertz Global is in the S&P 400. Wasn't Hertz a meme stock? Yes, it was.

Four years ago. Four years ago. All right. I thought that was interesting. What do you got? All right, we are going to, ah, stock market concentration. Topic that we have not been discussing at all. All right, here's Evercore. We think it is not out of the question

that Nvidia can ultimately become a 15% weight in the S&P 500. What? Does the rest of the market fall by 10%? There's a chart in here. Market capitalization of stocks as proportion of S&P 500 market capitalization. OK, there's an hour going up. So there's that.

Wait, what is it saying? So they're showing like Nokia in 2000 when the phone came around and then Microsoft in the PC era and then Apple. Wait, stop. Stop. Nokia was 2% of the S&P 500. It wasn't even in the S&P 500. What is this bullshit?

The company is from Viking land. Maybe they're just saying the size of it, it was equal to 2%. Anyway, I don't know. I didn't read the note, but could you imagine what if Nvidia got to 14? So next chart, please. So no stock at least going back to 1950, no single stock has ever been 15% of the S&P 500. I don't know.

This sounds like somebody smoking dust over there. But anyway, what's the what's the reason why they're saying that could be the case? I didn't I didn't. Hey, I didn't read the note. So why are we talking about this? Uh, oh, 17. Wait, what's the thing that you did about what's the thing that you did? I'm just not talking. I got this. All right. Throw this chart back on, please. So the top three stocks in the S&P 500, Nvidia, Apple, and Microsoft, not in that order, are now 15% of the S&P 500. Combined.

Combined. This is the highest concentration of three stocks since the 1960s. It's the same story when you expand that to 10 stocks. Trudeau, I think a natural reaction that I fully empathize with is, uh-oh, this isn't good because if those things get taken down, they're going to drag the entire market down with it. I totally get it. The problem is the data doesn't really support that to be the case with the exception of 2000. You talk about like, I don't know if that's recency or availability bias.

When you think about concentration going bad, we know how that ended. Before we get to that, this chart that you're mentioning, and all this comes from a great paper from Mike Moebeson and Dan Callahan. So there's exhibit two shows that stocks with the largest market capitalization in the US from 1950 to 2023. And the crazy thing is, I think this is the top 15, only 17 are on the list since 1950. And only 11 stocks have held the spot in the top three for more than two years. Only 11 stocks have held the spot in the top three for more than two years.

Would you have guessed that that would be the case? That there would be so few companies that have ever been the largest companies? No because oh. I might have. Like if you said, if you said Josh, going back to 1950, how many companies have ever been in the number one company? I might have said like 10, because I think I could name them. I wouldn't have thought there would be that much of a change.

You have dominant companies that stay dominant for a long time. Nokia, that example is like an outlier. Most of the time, it's like a GE or an Exxon. So, interestingly, yeah, I think you're right. I don't know what I would have guessed because now I know the number. But interestingly, if you look at stock market concentration outside of the US, we look fully diversified compared to the rest of the world. So there's a chart of Switzerland, of France, Australia, Germany, South Korea, and they are far more concentrated in the biggest stock, the top three and the top 10 than the United States are. What do you think France is,

those top three? It's like LVMH, Total, and maybe a bank? I don't know. It'd be interesting to see what the names in those countries are. I didn't realize that every country was as concentrated as we are or more so. That's definitely news to me. You can't talk about concentration and how big the market caps are without talking about the fundamentals. They show the top 10 by market cap.

They look at the economic profit that is generated by the top 10 versus the rest of the universe. It's massive. It's massive. It was two-thirds of 2023 for the top 10. Why shouldn't they be a big percentage of the index? When they say economic profit, they're saying like the earnings of the companies. No, it's not just earnings. It's like return on invested capital minus something. I forget the formula. So this last bar is showing the blue part of this last bar is basically showing like, these are the top

10 companies by market cap. They're more than half of the economic profit of the rest of the market. By that standard, their relative size does make sense. It does. It's less ludicrous. Here's what gets people nervous. Todd Sohn created this chart. Nvidia has contributed 35% of the gain of the S&P 500 this year, which is the highest

of any single stock during the year when the index has been positive. Yeah. I mean, the thing just doubled. It's I mean, it's, it's really, it's like every superlative that we, that we throw at Nvidia, it's like not enough to like how important this thing has been. So it's true that if the AI story turns, yes, the market, it will take the market down with it. But there's been. Or the money rotates and goes somewhere else.

Well, so that's what I was going to say. Over the years, there's been plenty of examples of the largest cap company struggling. In fact, earlier this year, Apple was down almost 20% year to date. And guess what the market did? It was at an all-time high. Apple was in a 16% drawdown two months ago. It was the worst of the mags, the worst of the mag seven other than Tesla. And you're absolutely right. The money went from Apple to Nvidia, the market kept on ticking. The NASDAQ kept on ticking.

So you're absolutely right. But I thought the case that you made in your post that concentrated markets are actually a feature of bull markets. They're not a feature of bear markets and they're not always a precursor of some sort of vicious sell off. That's really what investors want to understand that. This is the single biggest takeaway. They show a chart that shows the S&P 500 annual returns during periods of rising concentration and falling concentration.

And the stock market overall does better in periods of rising concentration, which is exactly what we've seen for the last decade. John, scroll down a little bit, please. More and more and more. More and more and more. More and more, more, more, more, more, less charter. It's the last chart. I think there we go. There we go. Boom. Here it is. Right. So what this is showing is the return is rising as the market gets more concentrated. And of course, there's a tipping point eventually, right? But you don't know,

you don't know when you're at it. Nobody, Nobody knows when you're at it. But to say, uh-oh, all the money is concentrating into the big winners, it's a nonsense statement. That's exactly what happens while the market is rallying. It's nonsense. Imagine you- Leaders are leaders. Right. What would you rather see? Aluminum stocks leading? So in 2015 or maybe 17, when did Fank first come about? If you were like, oh, we've got a name, we have an acronym for the biggest stocks in the world, I'm going to do something else.

Guess what? You got left in the dust. Remember that guy who was pitching the inverse S&P by market cap. He wanted to reweight the S&P stocks in reverse. So the smallest stock in the S&P became the largest holding, and the largest stock became the smallest holding. How'd that go? Yeah, I like it. I like it. But in hindsight, that didn't work out so great. So that's a great strategy for somebody that wholeheartedly believes in the small cap premium, which disappeared in 1986.

But if you're a diehard small cap premium person, and you want to have exposure to the S&P, that would be how you would weight the portfolio. But small caps have not acquitted themselves well, nor have mid caps relative to large caps, nor have large caps relative to large caps, nor have large caps relative to mega caps. So maybe there's an environment in which that makes sense, definitely not a long term strategy. Not today. OK.

We could do this as quickly or take as much time on this as you want. We can't not bring it up. This is what was going on in the market on Friday. Was it Friday? It was Friday. Some bullsh**. So I had CNBC on my TV. Here's my friend Scott Wapner with this exhibitionist gentleman roaring kitty in the corner of the screen. It's the Yahoo Finance in Roaring Kitty in the corner of the screen. It's the Yahoo Finance real time price chart behind him from his live YouTube. It's just, here's my question for you. I understand the stock market nihilism. I understand people like hate the system or whatever. I totally get all that and the reasons

why. But is anything this guy does like comedically, like is it funny at all? I guess it's a spectacle, but like, is he funny? Is Warring Kitty funny? Do you laugh out loud when he talks or play acts at being injured or whatever? No, I thought it was- Am I old? Is it funny if you're younger? It's not like, it's not knee slapping, ha ha, you're younger? It's not, it's not like, you know, it's not knee slapping. Ha ha.

You're not laughing. I thought it was, I thought it was amusing. Is it amusing even what like where he's like in a cast with like band-aids on his like, I don't get, I don't get any of this shit. I don't maybe it's me, honestly, I understand millions of people think this is like the funniest shit ever. I honestly don't get any of it. But I also I don't get MrBeast.

I don't get a lot of YouTube stuff, internet stuff. So it might be me. Look, this guy did like one of the most legendary trades of all time, and obviously has just gigantic cojones and no disrespect whatsoever. But what I'm trying to understand is who is the audience for this? And how long will he be able to hold their attention? Wait, 600,000 people tuned in? How many dropped off after the first five minutes of him doing his shtick?

I lasted like 10, but I was in a car on the way home. I tapped out after five and I really wanted to be into it. I wanted to be part of the moment and I just don't, it just doesn't make any sense to me. I think it's amusing in the sense that this guy's got hundreds of millions of dollars on the line in a company that he thinks is a long-term problem story. But he's got two week call-out, he's got call options that expire two weeks. It's amusing. He's a long-term investor with a short-term time horizon.

What's wrong with that? Much like myself. So I read all the recaps after. Was it weird that you put on this whole stunt and then you have nothing prepared to say? Supposedly, he was like noodling on like, you know, Ryan Cohen's going to figure it out, stuff that he was saying three years ago. Was it weird to have no new material? Imagine paying to see a comic who you love and you go there and they're kind of rehashing

stuff they did three years ago and they had no material prepared, it would be weird. I guess no one's paying him to perform for them, but I thought that was weird too. S1 C1N3T1R0 I don't know. The whole thing is strange. I agree. It's definitely odd. S1 C1N3T1R0 Guys, it might be me.

Maybe I'm a loser and I don't get it. All right. S1 C1N3T1R0 All right. Jay's Macintosh had a good article. Beneath the calm market, stocks are going haywire. Only once- You understood this well? A bit. I didn't understand it. Only once in the past 25 years have stocks swung about like this while the overall market stayed so placid. Try it on, please. This is just the three-month average of the one-day change and it's been quiet, which

is a feature of the market. This is the VIX? No. I mean, it looks like the VIX, but it's the one-day change. It's the average one-day change. Oh, for the S&P 500. Very placid, almost on the lows. Yeah, which is great.

However, the implied dispersion, I don't know how this is measured exactly, but the implied dispersion of stocks within the S&P 500 over the next 30 days is at its highest since day two began in 2014. So it's just weird. It's showing the spread of market implied S&P 500 dispersion above implied volatility. That's a mouthful, but in other words, Charloth, please, you're seeing this in the stock market. There are individual stocks going all over the place, swinging rapidly. Problem is, as we mentioned earlier in the show, the market is so concentrated that if

Dix does whatever, if Dix is down 20%, it doesn't move the index at all. Oh, okay. So that's just an inverse way of talking about the concentration. If the giant stocks are not in and of themselves being volatile, it doesn't matter what the next 200 stocks are doing as much as it might have used to matter. Correct. All right. Listen, I'm a James McIntosh fan.

I read all his stuff. This one seems like he's doing surgery on the wings of flies. I don't really think that there is much of a takeaway for investors. Without a doubt, there are individual stocks every day my whole career that were doing weird things, crazy things. I don't ever really remembering that stuff mattered to the market, to be honest with you. I don't think the market- I think it's just, I think for people that own individual stocks, if you think that the stocks, your stocks are going crazy, the market isn't, you're not crazy.

Oh, OK. That's an interesting point because everyone has those two or three stocks that are doing wild things. I just don't think that it needs to matter to what the S&P is doing, like that one day change. It's just interesting. That's all. All right.

I'm going to make the case for a company that I just started a starter position in. This company is McDonald's and the stock has been getting the crap eat out of it for a couple of reasons. McDonald's is a fast food company. They sell burgers. They also sell French fries, pretty good chicken nuggets. My kids eat it four times a week. All right, so the stock has been in a downtrend.

They missed earnings on their most recent report. It's in a 15% drawdown. They missed same store sales growth. They had a lower check size even after raising prices by 10% in the last year. So that's the bad. Chertoff, this is actually a great example of the consumer being choosy. You saw that bogus stat that 70% of Americans consider fast food luxury. That's obviously not the case.

But they pushed it too far. And I think this is what corporations do with the prices. They're way more likely to go over the line and apologize and walk it back, which they're doing, than not squeeze every last cent out of inflation as they possibly could. And they did it. So as a result of all that, the stock is in trouble. But the good thing is that the forward PE ratio is at around 21 times forward earnings for the next 12 months, which is lower than the five and 10 year average. The company's doing okay. Free cash flow per share and earnings per share are doing just fine. and earnings per share are doing just fine. And so anytime I have the opportunity to get into a world-class blue chip stock

at these levels and maybe you're putting in a higher low, we'll see, it's a little bit premature to say that. Do you have a stock price chart? I didn't put a stock price chart in. It doesn't look good at all. Okay. It doesn't look good at all. All right, it's hard for me to judge whether or not I want to buy in with you.

What do you think, what do you think of this stock versus, cause the one I'm watching is Starbucks and I'm not either. I know you do. Yeah. What would you, if, if, if you were to buy one of the two, do you like McDonald's better now than Starbucks because it's come down more? Well, I think, listen, McDonald's is in a downtrend.

So like, if you're thinking like longer term or shorter term, like the wind is in the face of McDonald's. It's in a downtrend. So it's gonna take a while for this to heal itself. But they're making changes. They're introducing $5 value meals all over the place. Like longer term, I have zero concerns about McDonald's. Yeah, no, of course.

I don't think there's nothing going on with McDonald's that should cause anyone to have a longer term concern. I think for most people looking at a stock like this, the real question is like, all right, but when? So I don't, you know, I don't know. I'm trying to avoid buying more downtrends because I just bought Warner Brothers and Pfizer hoping to see them break their downtrend. I don't want another one of these in my basket right now,

but we'll keep an eye on it. We'll keep an eye on it. Put me down for, put me in your tickler file. Call me back in 90 days. I might be a little bit more liquid then to make a move. Mystery chart time. We talked a little bit about Nvidia. This is a different chip stock. It is a chip giant. It is one of the best stocks in the market and one of the best stocks not only in the short term but over

the long term. And we don't talk about it enough. And it's my fault. I don't talk about it enough. And I just watch this thing crush it. And I'm curious to see if you can guess it. It's in the SMH. It's a very, very large cap stock. It's not something weird or obscure. What would you say this is? I'm giving you the share price. Oh, that's the share price. Okay. That's what I was going to ask. It's not AMD or Micron.

It's not Intel. I'm not, I'm not, I'm not confirmed. Wait, are you scrolling through chip charts? I don't know what you're allowed to do that. Maybe, maybe. Take your fingers off the keyboard and take a guess. Taiwan Semi? No, not a bad guess. Not the one.

You want one more? Oh, let me give you a clue. The first letter is A. Applied Materials? Attaboy. We got it. Applause for Michael. $310 stock. is A. Applied materials? Attaboy. We got it. Applause for Michael.

$310 stock. This stock last summer was about $170. The summer before, it was trading about summer at $22 at the lows. The fall of $22 was like $90. So this stock has effectively tripled off that low. I want to show you a couple more charts. I don't know any individual semis.

What a loser. Look at this beast. So I'm showing you applied materials underperforming the SMH over the last three years. So if you think you missed it, now obviously I would attribute almost all of that outperformance to Nvidia being a big weighting in SMH, right? Let's do the next chart. This is the long, long, long, long, long term in AMAT. It's never look at a chart like this

if you're thinking about buying, because you won't. Never look at a 40 like this if you're thinking about buying because you won't. Never look at a 40-year chart of a semiconductor stock because you're just not going to want in for the most part. Is this incredible? Yes, amazing. Let me show you one more. If you think that's hot, the yellow one is Lamb Research, which same sector as applied materials, this is semiconductor capital equipment. So this is the stuff that all of the semi companies have to buy the equipment to make the chips, to test the chips, fabrication, et cetera. What did you say?

Picks and shovels? Yeah. Dude, Lam Research, LRCX is one of the sickest charts. One more time. Put that back on one more time. This is why we play the game, guys. If you bought this stock, if you bought either of these stocks, quite frankly, I'm showing you this in dollars per share.

I'm not showing you this in percentage gains because you jump off a bridge. But this is why we do what we do. These have been absolute home runs, but Lamb Research is up like thousands of percentage points. Josh, not to brag, but I bought this stock in 2014 when it was like 60 bucks and I sold it at 70 bucks. Which one, AMAT? AMAT, and now it's at 1,000. Well done, sir.

Hey, everybody. Did you know tomorrow is Wednesday? That means an all new Animal Spirits on your favorite podcast app. Video later that day right here on the Compound YouTube channel. Thursday, another all new edition of Ask the Compound. New Compound and Friends on Friday and Jill on Money this weekend, Saturday.

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