The Compound and Friends - Apple’s Vision Pro Sells Out, Netflix Grabs WWE Raw, Welcome to New All Time Highs

Episode Date: January 23, 2024

Join Josh Brown and Michael Batnick for another episode of What Are Your Thoughts and see what they have to say about the biggest topics in investing and finance! On this episode they discuss: Apple's Vision Pro, all-time highs, Netflix and WWE, Snap stock, and much more! Thanks to Future Proof for sponsoring this episode. Register for the festival at: https://futureproof.advisorcircle.com/ Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com 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. Wealthcast Media, 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. I am in Las Vegas this week. Michael Baddick is here too. We are at the T3 event, and we have a great show for you regardless. So much going on in the markets this week. We get into some stuff on the Apple Vision Pro. Netflix just picked up the WWE Raw program,

which I think is a huge deal, and we'll get into why. And we do a whole ton of stuff about new all-time highs. One of the questions that people like Michael and myself always get when the market is making new highs is, did I miss it? Or should I wait? Or is there going to be a better opportunity to buy in? And rather than answer that question with gut feelings and superstition and nonsense, we like to answer that question with data, and we're going to do exactly that. Stick around. You're going to love the show. I'll send you there right now. Welcome to The Compound and Friends. All opinions expressed by Josh Brown,

Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Redholz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Redholz Wealth Management may maintain positions in the securities discussed in this podcast. Compound Nation. Welcome to the show. It's me, downtown Josh Brown. I'm here with Michael Batnick, as always. And we're going to play What Are Your Thoughts?

Is it Compound Nation or Compound Kingdom? Which do you like better? Universe? Well, the Kansas City Chiefs, they say Chiefs Kingdom? And they say Raider Nation. We're in Vegas.

Raider Nation? Yeah. All right. I think we have to standardize on something. Anyway, how about all the folks? Well, they also said the Nation. We're in Vegas. Raider Nation? Yeah. All right. I think we have to standardize on something. Anyway, hello to all the folks. We'll say the MCU. It's the MCU.

It's the Countdown Universe. It's the Riddholtz Cinematic Universe, the RCU. Yeah. I've heard that one before. Say hello to all the folks. Thank you guys so much for joining us. Michael and I are staying in the same hotel. Hey, everybody.

Hey, everybody. We're at the Cosmopolitan. Hey, everybody. We're at the Cosmopolitan in Las Vegas, and it's beautiful. And they have awesome restaurants here. And my room is definitely better than Michael's, as you can see. You can see the double beds behind him and very little depth of field. He's got about eight feet behind him. There's just a cavernous space behind me, multiple rooms. And my view

is overlooking the Bellagio. I didn't say to do this. This is just how I'm treated at T3, which is the event we're at. But I will say, I wanted to start with this. Batnick is the star here. This is one of the first times that we've

been to an event where he has way more things lined up, way more people looking to talk to him. Not to brag. I'm up in the suite like Kevin McAllister slapping on aftershave. Yeah. What? What are you even doing here?

I don't know. I have no idea. Honestly, I haven't seen anyone yet. So in about an hour, I'll grace the place with my presence. But Michael's a stud here. What are you doing here? You having like a million one-on-ones? Not a million, but it's quality over quantity.

You know what I'm saying? So we're at the T3 conference, which stands for technology tools for today. Is that right? Yes. And this is an industry event for WealthTech and WealthTech customers and vendors and advisors. And if you want to know what's happening in the industry, you got to be here. So what's interesting is that we have companies here that we are clients of because we use their tech. But then we also have portfolio companies because of our own little in-house venture fund.

And potential companies. Yeah. And some companies are both. So it's a great moment for you and me. I don't know if anybody really cares. I'm going to go on stage with you, though, in a couple hours, and we'll see if we can tell a story and make some people laugh. We're going to tear the roof off. Tear the roof off, please.

All right. Anyway, we're sponsored tonight. Michael, tell us about the sponsor. All right, so here's the deal. Everybody knows Future Proof. We've spoken about it a lot. Last year, I think we made the mistake. As much as we hyped it up, I think we failed to explain to the audience just how sick of an event and why you should have been there. So I'm not going to make that mistake again this year. I'm going hard and I'm letting you know that you have to be there. that mistake again this year. I'm going hard and I'm letting you know that you have to be there.

And in addition, for the first 500 advisors, we're going to pick one of you and you're going to get a future-proof banded bonfire 2.0 solo stove. Josh, are you familiar with what these things are? No, I want one though. That looks cool. There it is. Look at that. Look at that. What is this? A solo stove? No, that looks cool. There it is. Look at that. What is this? A solo stove?

Yeah, dude, it's sick. It's like a, it's a fire pit. It's like, you know, it's, it's, it's the 2.0 fire pit. You get that if you register by January 31st as an advisor, the first 500 advisors only. Yeah, yeah. So when you apply, make sure that you select either hosted advisory firms and limited partners or financial advisor firms. You have to be an advisor, register as an advisor to be eligible to get this

pretty sweet giveaway. So we'd love to see you there. It's Huntington beach, California, the weather, the, this, the, that. It's going to be amazing. Last year was 3000 people. And this year they're shooting for somewhere between 4,000 and 4,500. I'm trying to picture what that's even going to be like. It's going to be like the event that you cannot say you weren't at if you work in our industry.

It's just going to be nuts. I think because the space is so giant and outdoors, it's not going to feel overwhelming. You know what I mean? Yeah, no, it's not 4,500 people. It's not 4,500 people indoors. We're on the beach, babe. Right.

So, all right. Anyway, thanks to Future Proof. Is there a specific URL we're supposed to tell people to go to? Do we know? It's in the show notes, but it's futureproof.advisorcircle.com. Futureproof.advisorcircle.com. All right. Let's get into the shit.

You're up first. Are you ready to talk markets? Yeah. You're up first. Ready to talk markets. Yeah. So we did it. We did it. It was over 700 days. And when I say it, the S&P 500, the People's Index hit an all-time high, all-time closing

high. As far as... It's not the... The Dow Jones is the People's Index. Well, not anymore. Not anymore. Okay, fine. Say more. As far as historical bear markets go, they're all different. They're all unique. They're all their little different idiosyncrasies, but this is pretty run of the mill in terms of the depth and the duration. It was a pretty ordinary bear market just from the point of the stock market. Wait, why was it ordinary?

I just said in terms of how long it lasted. Oh, this is the typical length of time of a bear market. And how severe the drawdown was. It wasn't that bad. Okay. So what are we saying? The bear market started in November 21 or January 22? No, January, the first day of January 22.

Was the high. Was the high. It's crazy how it worked out that way. Okay. And then the low, the ultimate low, I think for S&P was, what was it? 27? The max drawdown. Oh, it was 27 for the S&P. It was 35 for the NASDAQ. Okay. JC would tell you the bear market, the bull market started in July. Love JC. I'm not having it. The bear market. Why are you starting this shit? The bottom, the S&P 500 bottom in October.

I understand what JC's point is. You're getting the tax not me. That's all I know. So the question now is what happens next? And bull market, like all-time highs are weird in that sometimes, and we're going to talk about this later, people like don't trust it and like think that they're going to get rugged. And that's just not what happens at an all-time high. Look at the market today. It's a slow grind higher. There's very little in the way of volatility that fixes that. What? 13. There's

just, uh, so, so anyway, the question now is so, so what's next, right? Like that's what everybody wants to know. And of course we don't know, but we could, we can lean on historical data and it's not perfect, but nothing can tell you what the future holds obviously. But Ryan Dietrich, um, showed what happens when the S and P 500 goes more than a year without making a new all-time high, and then it makes one. So that's exactly what just happened. It took 24 months. Historically, what is this? 11, 12 times? Historically, the market is higher one year later, 92% of the time, One year later, 92% of the time, which is higher than I think the market is higher. There are no slam dunks in what we do for a living. But if you can give a client that level of certainty, it's as close as you get to, hey, man, you want to be in the market after it makes a high.

So obviously 2007 is the outlier and that got a lot worse. But all else equal. And the reason why I love data like this is because that's market behavior data and past behavior data is a fairly reliable indicator as far as indicators go because it's market psychology. And when you go a year or more without hitting an all-time high and then you finally get one, it stands to reason that, yeah, you're not making an all-time high for no reason. It's because things are generally pretty good. Yeah. So I love that you said that and I agree with that take. There are a lot of people that want to mine historical data for things where the past just doesn't match up with the future.

So if you use the example of, hey, I'm going to bet that there are only 10 three-pointers in tonight's NBA game because if you look back over the last 40 years that we have data, that's the average number of three-pointers. It's like, well, that's not how the game is played anymore. Now it's going to be 25, and that's a normal night. And throw that out. What you're describing is a situation where the world has evolved and it doesn't work that way anymore. What you're talking about, when you're looking at 50, 60, 70 years worth of bull and bear markets. People don't change. Exactly. The instinct of when to buy, when to sell, fear, greed, missing out, that stuff is endemic to our species.

So yeah, the markets change, the stocks change, the CEOs change. Yes, of course. change, the stocks change, the CEOs change. Yes, of course. But the way people react to prices probably will never change. And that's including algorithmic trading. Guess whose money is on the line with the algorithms? We're not robotically dispassionate about stock prices just because there's software in the middle. If anything, you could say the algorithms are making us more crazy. So I totally agree with that take. And I think there's more value in studying what doesn't change with human behavior than focusing on all the stuff that does change, which we know is endless. Totally. Totally. An interesting nugget, however, as we are painfully

aware and we talk about all the time, not every market is at an all-time high. And there's a really interesting phenomenon occurring right now that Jason Gebhardt, a sentiment trader, picked up. So the S&P closed at an all-time high, but the Russell 2000, which is a small cap index, is still down more than 20% from its high. And that's never happened before. And that goes back to the idiosyncrasies of this current market environment where the S&P 100, the Apples and the Microsofts of the world, we learned interest rates do not impact them. And I mean, sure, on the margin, but a 5% two-year treasury rate does not impact their business or the behavior of their consumers. Now, small cap companies, it's a completely different ball of wax. That's right.

That's right. as far as I can tell, like euphoria or people behaving foolishly, is that it really still is the mega caps that are leading us higher. I have historically been an internals guy. I believe that there's a lot of signal in understanding which stocks are working and the quantity of stocks. And JC is in that camp too. That being said, I don't let that kind of thing affect my thinking to the point where it's like, uh-oh, this doesn't conform to what I want to happen. And the reason that's so important is everybody was underweight small caps going into last year and everybody was right. That was the right thing to do. And they underperformed that not as a result of everyone being underweight, maybe that contributes. They underperformed because they should have.

The biggest fundamental change that's taken place in the market over the last 18 months is that interest rates went from zero to 5%. And everybody on earth understands that smaller companies have higher role risk with their debt. They are more reliant on bank loans. They're more reliant on selling bonds to the public than Apple and Microsoft. If you don't understand that, you probably shouldn't be managing your own money. So I'm okay with that divergence because of how explicable it is. If that weren't the case, if we weren't in this situation where we didn't have such an obvious disadvantage for the Russell 2K and they were trailing to this extent, I might be more alarmed. But given how completely explicable and logical it is,

I'm willing to like be okay with that divergence of performance between large and small. Right. Your thoughts. I completely agree. Another topic that we brought up a lot last year was if the rally was thinning out and the majority of stocks were rolling over and the market was being held up by just four stocks, yeah, that would be cause for concern. That's not what's happening now. So the equal weight index, while it didn't hit an all-time high, it's only 4.5% from its all-time high. So the rally is broadening out and it still is being led higher by the mega caps. Both of those things can be true. Right. Now, what you really need to have happen

this year is you're going to need some kind of like noticeable uptick in Russell 3000 earnings X the top 50 companies. Because I just don't think this would be sustainable into another year. I understand the rally last year was predicated on the end of interest rate hikes and the falling of inflation. And you got a re-rating in tech for AI. OK. All these things were obvious in hindsight. None of them were necessarily obvious at the beginning of last year.

This year is a new year. And I do think the market can sustain, but it's going to be really hard to do that if the broadening out doesn't continue, because you're just not going to get the earnings growth that I don't think you're getting 14%, which is where analyst expectations are. You could, but it seems really, really tough. And you're definitely not going to get it if you're relying on two stocks to deliver it. Right. So the last year, the S&P earnings were flat and the multiple went up by 25%. Yeah, that's not going to happen again. I mean, I doubt it.

All right. I want to go through just a couple of things Ben Carlson did on the same topic. It's not really duplicative of Dietrich's work, but it is reinforcing some of the stuff that we put up in that earlier table, and I think it's interesting. So Ben noted – I think this is yesterday or today – 746 days since the last new high before the new high reached this year in the S&P 500, which again, to Michael's point, is not at all out of the ordinary in terms of that period of time it took to retake the old highs. Ben notes that the average bear market since 1950 has seen a drawdown of 35% and has taken 381 days to bottom and more than 1,100 days to go from the prior peak to new all-time highs. I can't see. Do we have this table up? Okay. Ed, what do you want to say? I was just going to say, why is the recent bear market not on this one? Oh, it is. I'm sorry. I'm sorry. I'm sorry. It troughed, my bad. It troughed October 22nd.

He has 25%. Okay, whatever. I guess we're using different data. But okay. So anyway, my point is that in terms of this being- Wait, wait, wait. Let me round this out though. So Ben is saying, if you go back to the 1950s, which is the inception of the S&P 500, the longest period of time, which I lived through and traded through, 929 days it took to go from peak to trough. And that's the March 2000 to October 2002 bear market. And that one was grueling. Another grueling one was the great financial crisis. October 9th, 2007, you peaked.

And then you didn't bottom out until March 9th, 2009. That was 517 days. This one was 282 days, which it doesn't really compare to those two, but it was no slouch. It's longer than some of the bear markets that you see in this table. And I think we should take a deep breath and be somewhat thankful that we got through it and we're pretty much all intact. Just chart back out. And we're pretty much all intact. Nothing major. Nobody's life was destroyed. We didn't have job losses, individual job losses. But in the aggregate, we didn't blow a hole in the side of any particular industry.

It's pretty okay. Go ahead. So as I mentioned, the 25% drawdown was relatively shallow compared to previous ones. Some of the notable differences is, as you mentioned, Josh, the economy was pretty okay throughout this time. But the big challenge of this particular one, in my opinion, was that you got zero help from bonds. In fact, they added to the fire.

So that is what makes this particular bear market different and in some cases more painful than just the 25% correction in the S&P. What sets this one apart from recent bear markets is that the Fed wasn't running around like a firefighter throwing buckets of water. The Fed was actually going the opposite way. Yeah. The Fed was tightening, which we haven't seen since. We haven't seen the Fed meaningfully tightening into a bear market literally since the 70s, early 80s. They just normally don't do that. And there's obviously a good reason.

The bear market was caused by, I think, sentiment surrounding what the Fed had to do to bring prices back in line. And so it was an interesting bear market where you did not have the Fed trying to bring about its end. In fact, you had the Fed engineering it. And we haven't been through one of those in a long time. And I think that's something worth keeping in mind. Are all-time highs a reason to be nervous or are they actually a reason to be bullish? Yes. I think the answer to that question, both questions, is yes. You should not be – let me work backwards.

You should not be bearish because we make a new all-time high. Most new all-time highs throughout history have been followed by more all-time highs. They tend to cluster together. It's very rare you get a stock market crash from an all-time high. But that being said, a lot of money has been made. Valuations have gone up. And at some point, it will be the last of the all-time highs being printed. I think an interesting way to illustrate, though, this concept of buying on all-time highs, because, Michael, in our line of work, one of the things that we're going to hear

from prospective, we have customers who they're sitting in cash. They're not our customers yet. They're people coming to us. They're sitting in cash, or they have an advisor that overloaded them with alternatives. They missed a lot of the rally or whatever the case may be. And so now they'll come to us. They'll say, okay, I should have been working with you guys, or I should have left my advisor to work with some other advisor or something, but here we are. And now I'm making the decision. I want to do something different with my money. The problem is I don't want you to buy me stocks.

We're at an all-time high. Like we've been answering that. We were answering that in 2013. Yeah. We started the firm. The market made an all-time high in May. I love you guys. I want to work with you.

Just I can't buy stocks right now. Okay. Meb Faber did something where he came up with a hypothetical switching portfolio where a switching strategy – I thought this was really, really interesting. He said, okay, here's a hypothetical strategy. We could keep this table up while I'm reading. Here's a hypothetical strategy. It's a system. You look at the S&P in the beginning of the month,

the first day of the trading day of the month. If it's within 5% of an all-time high, buy it. You hold onto it every subsequent month until it falls out of that range of being within 5% of all-time highs. Then you don't buy it back until the next time it's back in an all-time high. So when you're selling the market and you're not in stocks, which could be years at a time, you're sitting in 10-year treasury bonds. And again, you will not buy back in in this system until you're back in an all-time high. So you're making 12 decisions a year, every month. Is the market at a high? No. Okay. I'm not buying. Is it at a high currently and I'm in? Okay. I'm going to hold it. Michael, chart off for one sec. Michael,

you follow me on the logic of the system? I'm with you. Okay. All right. Chart back on. What Meb found is that- If it's high, you buy. If it's high, you buy. What Meb found in this hypothetical system, If it's high, you buy. What Meb found in this hypothetical system, the returns for US stocks from 1926 through 2019 would have been 10.07% if you did nothing, 9.61% if you did this switching system. But here's where things get really interesting. The volatility of US stocks over that time period, 18.65%, I guess that's standard deviation

a year. For the switching strategy, it's 10.8, so less than 11%, which means, oh, and the max drawdown in the buy and hold, do nothing, 83% drawdown. In the switching strategy, the worst drawdown you would have experienced was 29%. We all know when that would have been. So, uh, chart off. So this is not necessarily an alpha strategy, but what Meb is demonstrating is not only are all time highs a good time to buy, actually, they're a great time to buy. And an investor who only held stocks while they were making highs kept pace with the market with almost half the volatility.

Then he, we don't have all this stuff and it's too much to go into, but he included, he did foreign stocks. Then he did a mix of US and foreign stocks. And it turns out, and he even did a commodity one. And it turns out this switching idea is highly robust, which tells you that markets trend and markets that are at all-time highs are not necessarily on a sell signal just because they've already gone up a lot. It's a really poor way of thinking about investing, that breaking out to a new high is like some sort of a signal to get out. It sometimes is, but rarely. Is that a fair way to characterize that relationship? Okay.

Anything you want to add to that? Shout out to Matt Faber, by the way. Yeah, let's move on. That was long. Okay. You did a piece called Lessons from the Bear Market. Yeah. And I just want to have you react to your own words.

Okay, sure. I thought this was so good. Really? I thought this was mediocre, but thank you. Are you doing a Barry? Are you doing a Red Holtz? It's a throwaway? No.

I mean, kind of. All right. Stocks don't fall for no reason. So tell me about you. I mean, you're looking at a market that really was cratering in 22. Amazon was 55% off its high. Meta lost two-thirds of its value. So stocks were down for a reason.

They weren't doing that for no reason. I think that's important because you're like, why would I buy stocks now? And they'll give you A, B, and C of what's going wrong. There's always something going wrong during a bear market. That's why it's happening. I think it's really easy to look backwards and say, oh, I should have, or I would have, or next time I will, without contextualizing that. This doesn't, they don't just give you, they don't just give you fat pitches, right?

Because when the market bottomed in October 2022 or June or whenever, when most stocks bottomed, who wanted them? Yeah. Nobody wanted to be low. When stocks bottom is when the news is the worst. And so it's easy to delude yourself into thinking that you'll be the one. I'm going to be breeding when everyone else is fearful. No, you're not. We're all fearful when everyone is fearful. That's how it works. Okay. You point out businesses are good at creating value for their shareholders. Yeah. So it's easy to get despondent and nervous and I can't take it anymore.

I don't want to lose any more money. But what you should really focus on is the long-term trajectory of corporate earnings and dividend growth. And those charts move in one direction, and that is up and to the right. And you should never lose sight of that. These companies, these companies, we were just looking at Adam Parker's top 20, for example, they have compounded earnings at 13% a year for the last five years. It's remarkable. And that doesn't mean that stock prices can't go down violently. Of course they can and they will, and they're going to again,

but you're not just owning like pieces of paper. These are, you're actually owning corporate America. Why would you ever sell corporate America? You people take for granted how easy it is to invest in the greatest companies in the world. easy it is to invest in the greatest companies in the world. Like, there's another universe that exists where Apple is privately held because we don't have as robust of a stock market. And only people in Cupertino that grew up with Steve and Woz can get in on it. And they just mint money forever in a public vacuum. Like, there's a world where that exists too.

You know what's funny? There was people clamoring over venture and private investments. Private investments? You could invest in the best companies in the world, the best products, the best management for basically free and it's liquid. Why would you do anything else? And I know that sounds ridiculous. I don't actually mean that, but we do take for granted how amazing it is that we get to invest in Google. Like you're allowed to be a shareholder, an actual owner of Google. It's pretty cool. Yeah. Uh, and if you live in another country with a less developed stock market or with fewer investment opportunities, because there's only four or five large cap companies that dominate the economy and they're government controlled and blah, blah, blah.

You don't have that opportunity. Chinese nationals cannot open US brokerage accounts and trade Apple. They simply cannot do it. They can get exposure through other means. But as American investors, we have just like literally thousands and thousands of investable companies. And I think we treat them like pieces of paper sometimes and forget we have access to amazing businesses. It's a really good, it's a really good takeaway. The lessons that I was trying to convey are hopefully evergreen that you can take with

you for the next one. So what else did I say? All right. You had one more here. Uh, no, your risk. Oh, you had two more. All right. No, your risk tolerance. I think this is self-explanatory. Uh, people probably have more risk tolerance than they think they do. Yes. And they should try to remember that. Uh, uh, what I mean, your invest was interesting. I believe very, very strongly in this. What do you want to say on that? I think that knowing your risk tolerance is just like touching a burning stove. Your past behavior is the best indicator of your future behavior. And if you overextend yourself or overestimate how much risk or drawdown you could take in

a bear market, you're probably hopefully not going to make that mistake again. And if you do make that mistake, then you should probably remove your emotions from that, which is automating your investment decision. And it's so easy to do. With our 401k, every two weeks, your money's going in. It's buying. With my brokerage account, every month I'm buying. And if I had to do that manually in September of 2022, in October of 2022, how about January 23? How about April 23? After we already bounced much, I'd say, you know what? We already had a 20% bounce. I think I'm just going to maybe just see what happens. It's so easy to automate. Why would you do anything else? The less decisions you force yourself to have to make by virtue of your investing strategy,

the better. Because you don't want to be forced to make a decision, buy or sell under duress. The second thing I would say is more Americans are automating their decisions than you might think. 529 plans, pretty much I think across every state, the most popular option is the option where the mutual fund changes based on a target date. So if your kid is going to go to college in 2031 and you're investing right now in 2024, the portfolio five years from now will have grown less volatile by virtue of the fact

that you're getting closer to that date. That's automated investing. You don't think about it. It's a Vanguard 529 plan. It costs one basis point. You're getting a tax benefit for doing it. That's an example of automation. My daughter's headed to college in the fall.

Her 401k is huge. Do you know when the first year we started putting money in? 2006. Two years later, it was the great financial crisis. It's like, oh my, and we put lump sums in. It looked horrible, but it was automated. And in the end, that's probably what saved us from making all these decisions that we should not have been making in those days. So I think that's a good point. All right, let's keep going. You're up next. So the National Association of Active Investment Managers, I think I got that right. The N-A-A-I-M has this exposure index that I actually, I just want to read how they describe because I think it's important. They say it is important to recognize that the exposure index is not predictive in nature and is of little value in attempting

to determine what the stock market will do in the future. The primary goal of most active managers is to manage the risk-reward relationship with the stock market and stay in tune with what the market is doing at any given time. So I completely agree with what they said, that it is not predictive. There's no signal here. Nonetheless, I think it's really interesting because, chart on please, John, when I said earlier, it doesn't feel, and it's hard to measure euphoria or quantify it, but it doesn't feel like there's euphoria. Look at that tiny little dip that we had. So Joe finally tweeted this. This is from, I think, a week ago. Look at that tiny little dip, Josh, in the S&P before it went on to make new all-time highs.

And look how quickly the exposure, the N-A-A-I-M number came down. I think people still have one foot out the door. I think there's still a lot of worries out there, which is very healthy. Yeah, this is not – look, there is definitely, there's definitely a raging bullishness out there. I just don't think that it's like so pervasive that everyone has been infected by it. Like, I mean, we're going to talk about wrestling in a second. The Rock rang the opening bell of trade today

on the New York Stock Exchange, which I wish I were there because I love him. But like, that's's the kind of thing that knee-jerk bearers would be like, oh, look, they brought out the pro wrestlers to ring the bell. Yeah, that's so clever. Look how clever. Look how fucking clever you are. Wow.

All right. So I agree with you. When you actually look at what people are doing, uh, professionals, what they're doing with their portfolios, they've definitely gotten more bullish or they at gunpoint, they've put on more exposure, but they feel super jumpy to me,

dog. Like they, like they're not like, they're not like, yeah, bring on the dip. I'm ready to buy even more. Nobody's talking like that.

No, Josh, the market places that I go, the market just closed um and it went out basically at the highs so another new all-time closing high and yeah it's just this is it's a slow grind it was 30 basis points today all right um let's keep going division pro pre-orders sold out. This should not come as any surprise. I would guess like the vast majority of these things went to people for whom money is no object and or developers. Yeah. Media developers,

Japan, people that buy the first of everything. It's not like they're trying to sell 10 million of them. Right. So like, I'm not, I'm not wildly surprised. I've done an about face on these.

I know Nicole pulled up a clip of me saying I will never wear a pair of these ever again, but this might not age well. I think it was like a year ago. Oh, we're going to wear them. You're going to wear them. I'm so all in. Oh, my God. Dude, on that airplane, imagine that we had these things. Yeah, yeah. I'm so all in. Okay. God. Dude, on that airplane, imagine that we had these things. Yeah, yeah.

I'm so all in. Okay. Let me just, let me read this. Apple's Vision Pro quickly sold out after pre-orders for it opened Friday. There's an analyst saying, okay, but that's just the first wave. Don't get too excited. All right. Thanks.

We get it. Shipping times for all models of the Vision Pro increased to five to seven weeks in a matter of hours, indicating a rapid sell models of the Vision Pro increased to five to seven weeks in a matter of hours, indicating a rapid sellout of the product. Apple sold – this is an analyst – guessed that they sold 160,000 to 180,000 Vision Pro units over this past weekend. Did you see the Vision Pro commercials during the football games, during the playoff games? I did.

Okay. during the football games, during the playoff games? I did. Okay. I have to tell you, I don't know if this is a version three or a version four story. I just can't picture anybody not having these. I just, I feel like if you're in the Apple ecosystem,

you're just in. I think you're just going to be in. And they might, I don't know what the use cases will be. I don't picture them being useful for business. I don't think people are going to sit in a board meeting virtually sitting in a room with a goggle on their head. But I think the use case, there are entertainment related use cases that are just so obvious that eventually it'll filter through into our business. Josh, I agree. I don't think people are going to be sitting in a board room together wearing these headsets.

I think they will be remote, which will transport them into the boardroom. Maybe it's a little ready player one. And all right, let me just get to this. The analyst that's talking, it's this guy Coe. And I don't recognize the firm that he's writing for, but he says he expects Apple to ship 500,000 units this year. He previously forecast that they would only produce 60,000 to 80,000 units. Analysts at Morgan Stanley just predicted that they'll ship 300,000 to 400,000 of these with further upside depending on initial sell-through feedback.

It's not a revenue generator. It's not a needle mover, but it could be the introduction of a brand new computing platform. They're calling it spatial computing. They have already laid the groundwork for this term spatial computing via Apple Music. They started converting a lot of songs into a spatial audio format. And that's just a fancy way of saying you're listening to music, you turn to the left and the music stays put, you turn to the right. So it all sounds like it's coming from someplace. And the relationship that you have to that sound is being manipulated so as to present itself as spatial, they're going to do the same thing now for vision,

combine the two. If this is the start of spatial computing, focusing on the $3,000 price tag for these is the wrong thing to focus on. What are your thoughts? Yeah, I agree. I think it's going to be a monster. And we said last week,

the first version might be a dud. There's not going to be an app ecosystem on day one. But I think it's going to get better. It's going to get less cumbersome. It's going to get smaller. It's going to get cheaper. It's going to get better. Apple doesn't miss. And maybe this will be the miss. I don't think so. I want to focus a little bit on the marketing. This is very deliberate. Apple is sending a signal, I think, aimed at the consumer more than at financial analysts in saying like, this is not like, hey, something we're just tossing out. We'll see what happens. The intention, the intentionality of comparing this to the iPhone was not lost on a lot of people, myself included.

So what I want to do here is I want to play the original iPhone commercial from 2007, and then we'll play the brand new 2024 commercial, which is launching the Vision Pro. All right, John. Hi. Yo. Hello. Hello. Hello. Hello. Hello. Yo, yo. Hello. Hello. Hello. Hello.

Hello. All right. So if you're listening to this and not watching it, that was a montage of Hollywood movie stars and TV stars from the last, I don't know, 50 years picking up the telephone. And then they say iPhone coming in June. That was in 2007. And people were mocking the phone, its price tag, its lack of compatibility with Verizon. It was only AT&T. I'm not a thousand percent sure. Were we still calling Verizon Bell Atlantic? No, no, no. I don't even know. All right. Anyway, the first person I

knew to get an iPhone and bust it out in the wild, believe it or not, is JC Peretz. He had the iPhone one. And I remember standing in front of the Helmsley building on 42nd Street and Park Avenue and him doing FaceTime or some version of that for the first time. And I was just like, my BlackBerry is better. But all right. Let's play the Vision Pro, which they just released the last week or so to coincide with the launch. Get ready. Let go your conscious self and act on instinct. Roads where we're going,

we don't need Rhodes. All right, so I'm all in. I'm so pulled up. So that, if you were listening, that is a montage of famous scenes in films where the characters put goggles over their eyes for some reason. They show Jory LaForge from Star Trek Enterprise. They show Doc Brown from Back to the Future. And yeah, and I think you heard Obi-Wan Kenobi tell Luke as he's putting

the helmet over his head. So it's literally, it's almost a shot by shot. It's almost like a complete remake of that 2007 iPhone campaign. And again, it's not accidental. They are doing this very deliberately to let you know, like, this is the new shit and you better get, you better get ready for it because they're not doing this as, as on a lark. They are doing this. So I'm pretty excited. So the question is, or one of the questions that I have is, is there going to be competition? Obviously, Meta already has their thing. Is Alphabet going to come up with their own? Is Microsoft going to pull it out? Or is it going to be, is Apple just going to dominate? Yeah, Meta already got ahead of this. Meta is doing augmented reality with the,

uh, with the Ray-Bans and I think they're, I don't look, I don't know how many they're selling. Every time I've been in a, in a sunglass store, which I'm in very often for some reason, there's people trying them on. So I don't know if that's translating into buying, but, uh, yeah, I look, I think a lot of the, I think there'll be a lot of companies that hold back their own apps from the Apple Vision Pro store because they don't want to just hand this over. Because if you own the user interface, then you have almost monopolistic power over all of the app providers who want to be on that platform. Look at iOS. Does Netflix want a rerun of that? They want to just say, oh yeah, sure, we're building Netflix for Vision Pro. Why not? So I think that this time around,

Apple's going to face more resistance than they faced in the past when introducing a new category. With the watch, everybody just said, all right, yeah, I guess we'll make a watch app. I don't think this is going to go that way. But eventually, look, the Beatles held out, literally held out from being available on iTunes for the first 10 years. And then it was like, all right, we give in. Like at a certain point, this is just what it is and you can't hold out any longer. So don't be surprised if there are some skirmishes in the first year or two of this thing. But Apple has a way of getting into enough people's hands where eventually the competition just folds. All right. This is a good segue into the next topic, which is the growing trend of the largest players in Silicon Valley, Microsoft, AWS, I'm sorry,

Amazon, Nvidia, and Google, and the investments that they're making. And this is going to have massive ramifications for the future of technology. The chart that we're looking at is just the total deal flow or the total deals that they're doing and the percentage of the total VC investments that are being made by these companies. And last year, the spike was ridiculous. A combination of VCs pulling back and them leaning in. So last year, Microsoft, Amazon, Nvidia, and Google, that foursome, they made $25 billion in venture investments, which looks like it is 25% higher than the bubble in 2021. And that represents 8% of all total deals were funded by these four companies. The year prior, I don't know what the number is,

The year prior, I don't know what the number is, but it looks like 1% or less. So not only are the dollar amounts drastically larger last year, but their percentage of the funding market overall is the real story. I don't think they're crowding out other VCs. I think they're just in better shape to take advantage of deals. And it's a combination of those two things. So Apoorv Agrawal at Altimeter did this research. Their deals, which was $23 billion in data and AI, was 30% of that entire market. Wow. And so we were talking with Parker, like, is there going to be a company that's born today?

And forget about OpenAI, that already exists. But is there going to be a new company that's able to get to scale without just being gobbled up by one of these companies and invested in an early stage? I don't see how that happens. That's a good question. The other question is, we know all the famous venture capital firms and they raise new funds and they raise a lot of money. But something about AI, you can't write a $100,000 seed check for AI and seriously think that you're in the race.

No, it's huge. Huge checks. It's huge checks. And like Amazon can do that all day. Can you? So you can build software that's a layer on top of existing AI, you know, LLMs or other AI platforms. But to create something at the platform level requires a check size that only a handful of companies can seriously write. that only a handful of companies can seriously write. And that, I think, is what's going to separate AI venture from prior waves of venture investing. This is not like, let's throw up a website

and get a bunch of engineers in Bangalore to bang through code. This is like a whole level step higher. And I think it's going to separate, I guess, real VCs from people that started the fund in the last two years with their uncle's money. We were talking to Howard last night, and I said, I think there's going to be so much money burned chasing AI. Of course. That's the nature of it, though. It's an 80-20 rule, but it's probably 90-10.

Yeah, but I think that a lot of the gains are going to go to corporate America and not venture investments, not traditional venture investors. The other thing is that the gains may not come about in the form of equity returns. The gains may come about in the form of cost savings. And that argues for multiple expansion perhaps, and maybe even margin expansion again in the coming years. If the promise of the promise of this stuff is, is real and we're augmenting existing workers and hiring less unnecessary workers, then by definition, this should be margin expansion. This is, this is you know, it's, it's still up in the air. It's too early to have like a really strong opinion about, you know, how big this could be.

But that's directionally where I think things could be headed. So exciting times. I want to just do the last thing I wanted to do today. The Netflix WWE Raw announcement is, I think, a pretty big deal. And we talk a lot about these media companies. Thank you, John. I guess, is Raw like their marquee property? WWE?

Yeah. Not the events like SummerSlam and stuff. But I mean like the regular ongoing. Is Raw and then what's the other one? SmackDown. SmackDown. I'm not in this world, so forgive me. But I know it's a really big deal.

I know it's a really big deal. Huge deal. All right. This is directly from the company. Hang on. Okay. WWE, part of TKO Group Holdings, and Netflix today announced a long-term partnership that will bring the flagship weekly program Raw to the world's leading entertainment service. This is, by the way, it's amazing for WWE because it's a big dollar amount, but it's huge exposure and it's global.

and it's global. Beginning January 2025, so that's a year from now, Netflix will be the exclusive new home of Raw in US, Canada, UK, Latin America, and other territories. All right, that's enough of that. And then just some commentary on this. So look, Netflix has not aggressively gone after sports.

And some of the other streaming services have made fairly big sports deals. YouTube did Sunday Ticket. Amazon now owns Thursday Night Football. NBC made one of the playoff games, Peacock Only. And we'll see what the success of that is if they can keep those new subs. Apple did a huge deal with a major league soccer and was bringing the messy games to fans all over the, all over the world. Uh, when he was playing for, uh, Miami, but Netflix has really sat back and they haven't done much. This is an, I think this is an amazing deal for them because of how loyal the fans of this sport are.

If you're into this, you don't miss anything, and you will never cancel it so long as it's on Netflix weekly. It justifies the $15 a month and then some for that cohort of people. So I think this is a brilliant deal, and I think it's so great for TK as well, which we'll talk about in a second. What do you think? I think as a Netflix shareholder, I'm very happy about this. They just, actually, they just crushed earnings. It's up 7% in the after hours. They added 13 million new subscribers. This is a big, this is a big, big deal for the reasons that you just mentioned. Wrestling fans are fanatics.

There are no casual wrestling fans. They're all going to subscribe. It's a brilliant move by TKO's part. They have a great partner. They're going to be able to get access to a bigger audience. It's all good. And what was I going to say? I'm losing my train of thought.

Oh, yeah. so to me- It's a $5 billion deal too. It's a really big deal. It's $500 million a year. So here, okay, so here's what it signals to me. I mean, not profound. We know this cable is done. And then when I say it's done,

it's a gigantic ice cube that's going to be melting for a long, long time, but it will never be bigger than it is today or it was yesterday, the day before. It is a secular decline, much like the traditional publishing industry is in secular decline. You saw Pitchfork and Sports Illustrated go the way of the Dodo. Cable is, it's done. There's no turning back. So I don't know. I think obviously live sports is the crown jewel. I am very keen to see how Amazon competes and some of the numbers that are thrown out when

they go after CBS and Paramount and Turner. And it's going to be, get your popcorn ready. It's going to be wild. John, chart on. This is the reaction in shares of TKO. And for people that don't know, TKO was spun out of endeavor. Endeavor is like a big entertainment, uh, uh, agency in Hollywood who had bought, um, William UFC. Yeah. So they bought UFC and they bought World Wrestling and they smashed them together

into one entity and they floated it as TKO Group Holdings. And look at, I mean, look at the reaction in the stock. It went nuts. And I want to read a quote from the COO, Mark Shapiro, who's very well known in Hollywood.

This is a super game changer, said TKO president and COO, Mark Shapiro, who's very well known in Hollywood. This is a super game changer, said KO president and COO Mark Shapiro in an interview. When you look back at the chapters of sports media history, new chapters are driven by extraordinary new paradigms. ESPN and Turner bringing NFL to cable in 1987. Rupert Murdoch bringing football to Fox in 1994. When new histories are written, Raw on Netflix will be such a chapter starter. Okay.

So this guy's very good at doing what he just did. 250 million global subscribers that we're talking about. It's amazing. It's 260 now. 260 million subscribers around the world, many of whom will have access to WWE Raw. Think about how many little boys and some little girls, but how many little boys around the world for the first time are going to have this shit pop up on their screen and just fall in love.

The way that I did in 1982 and the way that you did probably in 1992. This is just, it's that big. And it's really amazing. Actually, 1982 might be the year. I remember seeing Tatanka win the World, or not win the World, anyway. It's been on USA for 31 years. This is like a watershed moment.

This is- Well, that's why I wanted to ask you, what are your reaction is like if you are at Turner Broadcasting, like TNT or USA Network, and you hear that WWE TKO group is in negotiations with fucking Netflix? Then what do you say? Like what is even the conversation? Can we maybe show the highlights later in the night? Like what are you even doing at that?

You're doing nothing, which I think speaks to why we have such a topsy-turvy stock market. Like we're in a place right now where there are a small handful of companies that are just bulldozing everything in front of them. And that's why the stock market looks like it does. It's reflecting the reality on the ground. So, all right. Um, I don't know. I don't know. Like what a Warner Brothers did.

All right. Didn't do much. Um, whatever, dude, it's, it's, it's going to be, it's the bottom line. And this is why I can't get bullish on Disney. It only gets harder from here for ESPN. And you can't – look, you could point to all the shit they're doing, documentaries, blah, blah, blah. Nobody wants any of that. People are willing to pay for ESPN because they do a really great job with live sports.

And if they don't have those live sports, there's nothing else on the channel that anyone will pay for. We know it. They know it. That's the difficulty because so much of the earnings and revenue over the last 15 years have come from sports at Disney.

And it's just not ever going to be the same again with new competition, with frankly unlimited resources. Everything ESPN does has to earn a profit. Almost nothing Amazon does is facing the same level of shareholder scrutiny. And that's just it. That's just the reality. I don't know how else to put it. All right, let's wrap up. We're going to make the case, and then you have a mystery chart for me. I want to do Snap again.

Put this five-year price chart up, John, if you would. I just want to remind people, I understand the stock is up 70%, 80% since last year, but this is where it's come from. It was $80 a share. It went to 10. Now it's at 16. I'm not saying it's going back up in a straight line or it'll ever be 75 again. I'm just saying if there is a fundamental improvement underway, there is a lot of room.

And you see the stock consolidating here because nobody's really sure if there's a true fundamental turn. Nobody believes this management team, quite frankly. And there's no reason ever that they should just yet. So what I wanted to say is they report earnings on February 6th. I think they'll come out after the close that day. I don't want to own any more than I own, which is not that much going into that earnings report because every time they report, or not every time, many times throughout history, they report after the stock has gone up a lot,

they let you down. They've had massive issues with stock-based compensation. They've had huge problems with the advertising business last year, especially. It's just so hard to believe in these people. They have done nothing but fail. But I do think the subscriber product is a game changer. And 400 plus million daily active users is something that almost no other company can claim. And you can't tell me that anyone is so pathetic that they could continually find a way to not monetize that correctly year in, year out. So the bet that I'm willing to make is that maybe it's not a great company, but maybe it's just not going to be as bad as it used to be. And if they can come out and say they're at 10 million Snap Plus subscribers, they were at 7 million last quarter.

I don't care what they did on the advertising side. I think the stock goes up. What do you think? Yeah, I might buy it. I might be so bold as to buy it before earnings. You're right. It's almost a joke that seemingly every time Snap reports, they go down another 25%. Yeah. It's a joke. Let's put up the one-year chart really quickly. So if you're short-sighted,

you're looking at this and you're like, oh, it's over and maybe it topped. I think it's consolidating because there's no trust in this company. The thing that you can't replace with Snap very quickly, and Sean put this together for me for something, uh, I did last week, the demographics here, and I have two teenagers in my house. Um, the most popular age group for snap is 15 to 25 years old outside of fortnight. There's no other company you could think of that has this much of a hold on that generation of people. None. That age group, 15 to 25 is half the users. 26 to 35 year olds are 30% of the users. 36 to 45 is another 18%. So like literally 85% of this company's users are under 45. That is YouTube-esque quite frankly. Okay? All right. They have 250 million current users on a daily basis utilizing Snap's augmented reality.

They're adding things to their photos, their snaps, or they're augmenting their video in some way. And they launched an AI powered chat bot. Over 200 million people have used it so far to send 20 billion messages. That makes this instantly as highly used as chat GPT. So like seriously, it's in a league of its own from an AI chat bot standpoint, other than the most popular companies that we talk about every day. Two more things. They're getting better at advertising. They suck at this. But 64% of the ads on Snap

are now being viewed with the sound on. Snap has less than 2% of the digital ad market. They don't have to be as good as Meta. They just have to be better than Snap was last year for the stock to work, in my opinion. And then again, I talked about daily average users, 406 million, up 12% last quarter. But Snap Plus, the premium product, it's $3.99 a month. 99 a month. It grew 40% last quarter from the year prior. It's at 7 million. To put that into perspective, Twitter premium only has 750,000. So it's 10X Twitter premium subs. And the company's own guidance is 14 million by the end of this year. If they raise that guidance, the stock's going to work. So I'm not telling anyone to buy the stock and I'm not adding to it ahead of

earnings because I don't trust these people. But if they have a great earnings report, the stock goes up. I'm not going to be afraid to buy more. So that's, that's my make the case. Good case. Good case. Okay. We spoke earlier. Watch, watch. Gap down, gap down nine and a half dollars a share. If we do that, Duncan, if we do that, we have to cut the, uh, the curb your enthusiasm music on top of that. Okay. Um, we spoke earlier in the show about, about market internals. And I think there's definitely a lot to that risk on risk off things. Like you just know that there are certain sectors of the market, not always,

but generally speaking are lower beta sectors. And there's sectors that are higher beta that you want to see leading the market higher. We just know this to be empirically true. So with that said, mystery chart on please. Does this chart look bullish or bearish to you? There's a five-year view. I would buy it. You would buy it. So would I.

Okay. Okay. So we would both buy the chart. It's a ratio chart. Yeah. Okay. So it's one index versus another. Sectors.

Sectors. Okay. Can I, can I solve the puzzle, Pat? Yep. Okay. I'm going to say, wait, wait, before you say it, it's just like the most basic one. So keep that in mind.

Okay. Consumer staples is the denominator and consumer discretionary is the numerator. You won. Did I get it? Yes. I got it? What do I win? I get one of those personal stoves? You win nothing. Speaking of personal stoves, I just want to make sure that we didn't say anything out of turn. One person is going to win.

So not everybody who registers will win. There will be one lucky winner drawn at random. And it's me. Are you impressed that I just did that? No. I gave you great. I literally told you that this is intermarket sector analysis, that I just did that? No, I gave you great. I literally told you that this is

intermarket sector analysis and I said it's the most basic. I mean, I'm impressed with my ability to hand feed you clues. That's what I'm impressed by. All right, egg slut. Hey,

hey guys, thanks so much for tuning in this week. We really appreciate it. Hey everybody, tomorrow is Wednesday, which means all new Animal Spirits hitting your favorite podcast app. Animal Spirits, the video, will appear on YouTube later in the day. Thursday, Ben's doing Ask the Compound.

And then Friday, Michael and I return from Las Vegas. We have an amazing guest coming up for an all-new Compound and Friends. So stick around. Stay with the Compound. We love So stick around, stay with the compound. We love you. We miss you. We'll see you soon. Whether you're just getting started as an investor or you're managing a multi-million

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