The Compound and Friends - Bad feeling, weak internals, confidence collapse, Nvidia breaking out | WAYT?

Episode Date: September 29, 2026

On this episode of What Are Your Thoughts, Downtown Josh Brown and Chart Kid Matt discuss Nvidia breaking out and its massive new buyback plan, rising Treasury yields and the bond market’s demand problem, how the AI spending boom is reshaping both stocks and corporate credit, and whether weakening market breadth is finally flashing a warning sign. This episode is sponsored by Betterment. Get started at https://www.betterment.com/advisors Please take our 2026 audience survey ⁠HERE⁠. Sign up for ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Compound Newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and never miss out! Instagram: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://instagram.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Twitter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://twitter.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ LinkedIn: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.linkedin.com/company/the-compound-media/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ TikTok: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.tiktok.com/@thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ 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

Yep, here we are. You asked for the best. I brought you the very best. Ladies and gentlemen, ladies and gentlemen, I got Chart Kid Matt here today. Matt, I feel like everybody left me this week except for you. Never leaving you. That's it. We're here. We got a pack doc. Let's do it. I got Michael Battenick on a flight to Austin right now. Shout to Michael.

Nicole is in Paris Living out her Her shopping fantasies Right right Ladies and gentlemen We got John Grayson In the background controlling the show tonight John's going to crush it for us

Because we have charts on charts on charts For those of you listening on Spotify Two things. Number one Just click the video button and you can watch Or don't worry about it Because whatever's on the screen that you can't see. We're going to make sure you understand

the points that we're making. And tonight, we are going to bury you guys in insights. It's going to be unbelievable. All right. So first things first, let's pay the bills. Huge thanks to our sponsor, Betterment Advisor Solutions. The longer you wait to break away,

the longer someone else is building the relationship that should be yours, Betterment Advisor Solutions gets you independent faster because someday is too far. away. Starting your own RIA can be a lot until you have the right part of behind you. Betterman pairs you with transition specialists who've done this before, so the move is simple, not stressful. You get a tech staff built to scale with you so you won't quickly outgrow it. You get to offer an experience that a million customers already love and you get a full

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investors investing in a brighter future together. Visit janice henderson.com. All right. I do want to say a couple of quick hellos in the chat. I got Benjamin Lupu back. Shepans is here. He gave me the, uh, the strong arm emoji feeling that. Luis, J.B. Bro, where's Michael? I just told you. Pay attention. He'll be back soon. Uh, what is this? Josh, when the, one of the braids coming out? No, dude, it's not a transplant. This is my, my literal hair. Thanks to Dr. Keith Scheinblum of Shine Bloom Medical. I'm actually, I'm growing this.

Biff Grebel's is here, KPS Fred, says, Can't Wait Till Josh has a Man Bun. It's coming, my friend. Any day now. All right. All right, so chart, let's start here. Invidia looks like it wants to, I should, let me phrase this. Let me phrase this correctly.

Invidia looks like it wants to break out. A couple of things struck me about, the recent trading and activity in Nvidia. Let's just do the technical chart. Let's jump right to that. So I'm just going to narrate what I see here. This is a stock that had a massive run-up in May when all of its customers,

the hyperscalers, were reporting not only earnings, but forward guidance and their CAPEX plans. And basically they ratified what we all already know, which is that not only are the... spending this coming quarter and for the rest of the year. But as far as the eye can see, because the investments they've already made demand that they continue to spend. And we've talked at length about replacement cycles and, you know, you build the data center 50% of the expenses, the chips. Nvidia, although there are other chips available for data centers, there are other components, there are ASICs, there are CPUs.

The GPU clusters are still going to be the workhorses for the data centers for as far as the eye can see. And back to the chart. So basically, it ran up in May as those reports were coming out. And then we sort of had like, I think, a pretty orderly pullback to the 200-day moving average, which at that time was $199,200. bounced off at that level twice, came right back into the 200s, and then it's been biding its time, pretty much consolidating below that 235 breakout level. Today, the stop closed around 228, and the longer it knocks on that 230, 235 breakout level, the longer that testing process takes place, the more powerful, I think, the eventual breakout

would be. Just at a glance, what are your thoughts on the table? technicals for invidia. So when I look at the chart, I see an ascending 50-day moving average, ascending 200-day moving average. We dipped right below the 50-day and surged right back up after Muse came out and, you know, shocked that, yeah, immediately. And I think it's a great price reaction to that news. And obviously, we'll talk about the buyback and we'll get into that and what that means for the stock. I have thoughts there. But just purely on the chart, if you hid the name, this is a buy to me.

Yeah, last thing on the chart, that bottom pain is relative strength, RSI. And we're not going to get into like the calculation that goes into it, but effectively what we're looking at is momentum for the stock, relative. And, you know, people, it's not science. Like people have this shorthand where they're like, okay, 60s is perfect.

When you have a stock making a new high, you want relative strength to be at least the, the 60s, which tells you, like, momentum is confirming the move. And then people think about 70 plus as sort of overbought. Like, it's a technical term. It's not overbought, like, oh, I feel like it went up too much. They will look at a momentum reading at 72, 74, 76 and say, okay, not a great entry point.

This thing has to cool off. We're at 58. Like, I don't, I can't think of a bet. If, in fact, this stock is going to make a new high. I can't think of a better momentum reading to go along with that than an RSI moving from the high 50s into the 60s. It just gives you so much space for that eventual breakout to take place in. You follow me on that? Yeah, I'm following you.

And I'm looking at the volume too. It's not like it's a super low volume move. I'm always looking at RSI divergence. So when the stock is making a high and the RSI is not making it high, that is always something that I'm looking to see. Oh, hold on a second. and why isn't momentum confirming the move? But here, you see a lot of relative strength in the name. Again, purely based just on the chart, it looks like it's ready.

Yeah, and we don't have that divergence. We have confirmation. And at a new high, if we can get RSI coming along for the ride, which obviously would probably happen if it really breaks out with conviction, like that's what technicians are waiting for. They're looking for those moments. I also want to show a 10-year chart, Matt. So, like, this is just price.

And I pulled out, there's no volume, there's no moving averages, there's no bullshit. This is like, so people are like, oh, Nvidia's boring or, you know, the stock doesn't like poke the meme where you're poking it with a stick, do something. Guys, this, like split adjusted. This was a $10 stock at the beginning of 2023. It's $2.28. Like, relax. Give it a minute. Right, right.

And the insane thing is that if I charted the forward P ratio on top of this, it would literally be making 2016 lows. And I know we could talk about forward earnings and the estimates being wrong, and we can speculate on that. But I went back and looked. The actual forward earnings tend to be very close to the actuals. And it's not my opinion. It just is what it is. This is a company that this fiscal year is going to do something like $96 or $98 billion in free cash flow. Next year, it could be $360 billion in free cash flow on $680 billion in revenue.

Again, not just based on the company's own guidance, but based on the CAPEX plans and Nvidia's share of that CAPEX spend, that we're getting from 50 other sources. And you think about a company that is growing earnings at this rate, it would be shocking if the earnings multiple were going up. If it were flat, it would be understandable. It's actually plunging the multiple on the earnings. And let's go back to the buyback thing. So Matt, you have a chart here.

Tell us what's going on. Yeah. All right, guys. So, NVIDIA announced that $150 billion buyback. Jensen dropped this like two weeks after Dario came out and said to slow the pace. So like LOL, he essentially turned around and said I'll do the opposite. And so let's just, all right, so there's some assumptions baked in here. But let's just say Nvidia's price stays flat for the next year and a half, okay?

I got to make it simple when I'm doing the chart. So it stays flat, okay? If you take $150 billion and you add the $85 billion that it already has in its buyback plan, you get $235 billion of buybacks through Q1, 2028. So that would theoretically reduce the shares by 4.3%. And I guess we could chart off. Like if you just went down the laundry list of things that you would want to see as an invidia bowl, as a market bowl, as an AI bowl, I think at the top would be the most important CEO in the world,

at the most important company in the world, saying, screw slowing. Let's buy back $150 billion of stock. I'm not going to go speculate buying a company. Let's use the capital to reduce our share count. Yeah, turn down for what? So most important CEO, I think, is accurate at the present moment. There's nobody more important. But he's not important and then hiding in a bunker.

This guy is literally everywhere. He's popping on podcasts. Like, he's, I saw the seating chart for the AI dinner or meeting or whatever it was at the White House. He was next to Trump. Like, think about all the people that were there. that theoretically could have been next to Trump, it's Jensen One. Right. And he knows how to manage the relationship.

It's like how Tim Cook was. You know, he knows what he's doing. And I think that it's overall, you want the administration on your side. It's like a double thumbs up. You need that. Yeah. He's on top of being a genius and out innovating everyone and seeing the machine learning trend turn into augmented reality, turn into virtual reality,

turn into, oh wait, actually. we should be using these for LLMs and AI. Like having done all of that in his time since founding the company, I don't think people should be second guessing. His instincts, his public statements, scrutinizing his capital allocation. One of the big things is like,

oh, Nvidia's like giving money to their customers, and then the customers are turning around and buying more chips with that. What do you want him to do? Did you hear the number? I just trotted out $360 billion in cash flow potentially over the next year. You want him to throw pizza parties for his employees? Like what if you want him to buy back $500 billion worth of stock between now and 2030?

I mean, it's possible if margins hold up and revenue continues to grow. But like, he's supposed to be making these investments into the ecosystem. him. Well, and George E.D. in the chat is saying, now he sucks up to the orange man. It's not about that. It's what's best for the shareholders. Right. He needs legislation on his side to do what he wants to do. And is that something that's baked into the price? Sure. Can that change? Absolutely. But right now, he's managing the relationship well. It's another reason why you want to bet on Jensen. I mean, he's a complete, he's a badass. Yeah, it's a sucks up to the orange man or understands that Trump is a mercantilist. So this is very important actually for the audience. It's not fascism, it's not really capitalism the way the Trump administration thinks about the intersection of government and business. It's mercantilism.

And for any of you who remember social studies in high school, mercantilism is a economic system where companies are given a high degree of free reign so long as their aims are in concert with what the government wants. And obviously the most prominent examples of that are things like the Dutch East India Company, the South Sea Company. And I know some of these didn't end well, but just this idea of like, yes,

we're going to allow corporations, or what they used to call joint stock companies, to pursue their goals of dominating trade around the world and producing profits for their shareholders. But those things have to work hand in hand with what the government wants. In the case of the Trump administration,

they want massive GDP growth, they want to onshore industries that are currently manufacturing or hosting their facilities outside of the United States. They want the first hiring inclination to be toward hiring people right here at home rather than somewhere else. Like that's the aim of the Trump administration

and Bessent and like all of their policies. And so Jensen has found a way like Tim Cook before him to ingratiate himself with the administration and say, okay, I get it, you want to build fabs here, you want to make semiconductors here, you want USAI to dominate the world

and not Chinese AI, of course, who wouldn't want that? Like, okay, we can do business, we can work that way. That's mercantilism. That's the nature of the administration. I'm not telling you it's good, it's bad. I'm just explaining to you the mindset.

If you're a shareholder of NVIDIA, what do you want them to fucking be an enemy of the people who control both houses of Congress, the Supreme Court, the military, like, are you kidding yourself? Like, this is about making money in today's day and age. This is how you make money. It'll change.

This is where we are. He's aligning with the administration. They want it. They need it. They need to place jobs in areas around the country, and he's helping with that. InVVDivya's trailing 12-month operating earnings, okay? Forget the private investments, okay?

The operating earnings are now, above apples. It's legitimate actual earnings. These are not estimates. This happened over the past 12 months. Right. Right. So can we talk about treasuries? Let's go. Let's go. Okay. So yields are ripping higher. It feels like literally every day. I brought this chart. 75% of the last 24 trading days saw a higher 10 year yield. I don't know if you feel this way, Josh, but like I check every day, the CNBC 10 year yield. Explain that one more time. Okay.

So, all right. 18 out of the last 24 trading days, the 10 year yield had a one day change that was positive. So it's going up almost all the time. Almost all the time. And also, by the way, this has happened 11 times since 1965. I went back and counted.

It doesn't happen very often. Okay. I built the table. I didn't add it. I can paraphrase it. The idea is what happens to yields after? And I can tell you that 80% of the time... After they march higher to like this often on a daily basis.

Yes, correct. When that happens 80% of the time over the next 12 months, you see yields that are lower. And obviously we've lived since 1965, we did have a run-up in yields, but we've lived in like a descending yield environment for a long time. So, you know, there's a caveat there. But it's like 90 basis points on average that, the 10-year yield falls one year after. You have this many positive, you know, up days in the 10-year yield. And all right, so then

my question is, why is this happening? And I think I found at least part of the reason why in this Odd Lots episode. John, can we play this? Foreign central banks have had all that they need and they're not buying more. And it's mostly domestic, discretionary investors that are being asked to take this additional supply and they just need more compensation. So that's that's Daryl Duffy. He's a professor of finance at Stanford. We hope that's the reason why. Okay. That would be the best, right? Like that would be the, of all the reasons people are

floating, that one would be the best case scenario. It's just an asset allocation thing. It's the idea that foreign central banks own too many treasuries. So there's no bid from them. Who's the next buyer? The next buyer is a pension fund or an endowment or a macro hedge fund, but how are they going to explain away the macro hedge fund to their clients that they just, you know, slide at $10 billion of the 10-year treasury on their balance sheet when Nvidia just announced a $150 billion buyback? It's like, you know, that's not why we're paying you. And so, you know, treasuries, it's a stretch to say they've gone no bid, but there's just according to Daryl, not as not enough buyers in the system at this level. They would require

higher yields. So Ed Yardin is a friend of the show. We've had him on recently. And And he's the guy that coined the term bond vigilantes. I think he did that in the 80s or the 90s or something crazy like that. But the idea of bond vigilantes is they are enforcing discipline on the treasury by refusing to show up at the auctions at prevailing rates. And so like rates go higher because they just, they refuse to buy because they don't like how we're running our budget or they don't like the deficit or they think they like insurmountable political problems that are going to introduce potentially credit risk to the

he's not saying that's what's happening now ed is pretty constructive he still thinks his roaring 2020's decade is going to end uh to the upside for the economy and stocks um but he was kind of this oh i think this over the weekend he kind of like was all right here are all the reasons why we're seeing the rates climb to the extent that they are, like Matt showed in his chart. And he's talking about, like, corporate debt issuance has doubled in a year. And, you know, we were accustomed to a world where corporations were basically funding everything out of cash flow, especially on the AI-Cap side. And now they're selling tons of bonds.

That becomes competition for the U.S. Treasury at roughly equal rates, not even. equal risk, but like all things being considered, if you can buy alphabet paper at a 5% yield or slightly higher, right? It's a better option. So there's a lot of that. There's a whole thing with the Japanese unwinding their negative interest rate policy. And a lot of people were doing this carry trade where they would borrow in yen terms and then go around the world and reinvest that money at higher rates as the yen appreciates

and the bond yield in Japan goes positive. It makes it less appealing to pull that carry trade off, where you see people unwinding. So that's like a mechanical thing that U.S. investors don't pay any attention to, but it could be part of what's driving yields higher. That's that less incremental buying from overseas that the professor was talking about. So there's like, it's like you ever play a little game clue when you were a kid? Yeah.

It's like a who done it, and it's like, well, who, who did it in what room and what was the murder weapon. There's a lot of that going on. And probably like the truth is some mixture of all those things. I know you wanted to throw inflation into that mix. Yeah, I think, I mean, yeah, not that I know, not that we can pinpoint the specific reason, but we can pinpoint what it is not. And that is inflation expectations ripping higher.

You can see, it's a financing term, inflation break-eavans are well anchored, okay? So the idea here is that if you see the break-even inflation rate surging higher, that is going to filter into the nominal 10-year yield. What we see on the screen when we type in 10-year yield. The reason for the rise in interest rates is not coming from this expectation that inflation is going to surge higher. Right. So that would be another nightmare scenario that, like, the Treasury is ripping in response

to this, like, insurmountable inflation problem that we can't get control over. And yes, it's true, like, oil prices are elevated. I don't know if people realize we're like in month four of a war overseas, and literally the war is now over the passage of oil. We don't subsist on Iranian oil, but, like, it isn't a relevant, getting oil from the Arabian Peninsula through the Strait of Hormuz is relevant to the global prices, which have a read-through into WTI,

crude, et cetera, et cetera. So like, yeah, there's like an inflation issue, but it's based on a war. And not like saying we're going to get a real ceasefire. But oil is flowing through the straight and Hormuz again. It's not, it's not ideal, but it's not as bad as it was. And you're saying that it's inevitably temporary. We, theoretically, you know, it's something that can change. Right. It could change for the worst. Show me this last 10-year treasury chart.

All right, this last chart on this. So what I'm doing here is I'm taking the 10-year yield, the nominal yield, and I'm subtracting the 10-year break-even inflation rate. This is hitting highs going back all the way to 2008. So there is a legitimate alternative for investors when they're looking at, okay, let's say they're, let's say, we could chart off. Let's say theoretically they are withdrawing 4% of their portfolio. their retirement, their financial advisor says, hey, look, you know, you could get a legitimate 2.85% real yield after inflation. That's an alternative. And this is filtering in, at least some point, to valuations in the stock market. So if we want to flash the next chart, John.

So Josh, you have me make this. This is different buckets of the 10-year treasury yield, and then the median 4P for both the S&P 500 and the NASDAQ. And as you said, the breaking point is 7%. What is the, in other words, what is the breaking point for stocks where the yields get so high that people's next $50,000 they deposit into their account? Like, more of that is going into bonds and less into stocks, and we feel that on mass. Like, that's the question that we're trying to answer. And I saw somebody do this with the S&P.

So I asked Matt, show me that with the NASDAQ, which increasingly is becoming, like the focal point of the stock market and frankly the driver of almost everything. All right. Now let's put that chart back up. So tell us what your conclusions are. The conclusions here are all you have to focus on are the two bars all the way to the right. And you see the median. Above 7% bars.

Above 7%. So above 7% yields, the S&P 500 median 4P is 13.6 times. The NASDAQ 100 is 12.6 times. That is the lowest. among any other bucket from 0% all the way through 7%. You know what's interesting? You would think, given the media's hysteria about rate hikes, that like the best PE ratios we get for stocks are at a 0% or close to 0% yield for bonds.

But that's not actually how it works. Chart back up. When we have 0 to 3% on the 10-year, Like not always, but it's usually because we're responding to some sort of like economic problem. Like zero to three percent became normal for 15 years after the great financial crisis, but it's not actually normal. And that is not actually where you get the best multiples for stocks necessarily. It looks like three to seven is a better sweet spot for the NASDAQ at least,

just eyeballing it, than $5. 0% to 3%. Well, at 3 to 7, you're actually, you have an alternative. You have to be disciplined about your capital where it goes. And so investors might actually assign a higher multiple, because the companies have to think. They can't speculate. They can't just, you know, they have,

there is actual yields that you can compare to versus at zero. You know, you could go out and speculate all you want. Three to seven, investors are assigning a higher 4p because there's discipline involved. The thing I want to leave people with as we switch out of this topic is that 5% is not the breaking point. So, I mean, it's, for somebody that's been doing, somebody that's been in the markets for 30 years, you wouldn't have to say that out loud. But for somebody that started investing sometime after 2020, and they've never seen rates really do this outside of 21 and 22 when the Fed was aggressively fighting inflation, like 5% on a 10-year. your treasury is not a breaking point for multiples or for for the stock market and I

understand like there if you haven't really seen this you know you can kind of be like whoa rates were just three and now they're five it's really not historically not that abnormal right right all right let's let's do this thing from Alliance Bernstein so Alliance Bernstein has a guy named Enigo Fraser Jenkins who confession I've reached out to He doesn't seem to be at all interested in talking to me, but that's okay. I don't agree with a lot of stuff that he does. I think he was one of the guys saying index investing is Marxism.

But every time he drops something, well, not every time, a lot of times he drops a piece that grab a lot of people's attention. He's very thoughtful, very well written. And last week he put this thing out called the Everything Trade. And I just want to give people the conclusion, because we're not going to. going to go through everything in there, and then Matt pulled some stuff out of here that's worth spending a second on. The big idea here is that, and this is not a bearish note, and this is not a sell-everything note, the core argument is that AI's appetite for capital has now gotten so large that it is tying together equities, credit, the dollar, and foreign flows, and it's basically

made everything into all one big bet or one big trade. And what he's saying is that, That makes it harder for an investor to diversify away from AI risk. So they're keeping their equity overweight and they're overweight on the US intact and they actually said calling the top is pointless. But the point of the note is that portfolios urgently need to hold up in case this whole AI freight train stalls, whether that happens through choppy returns going forward or a big crash. And it's increasingly harder to do that.

And a lot of this, we talked about this, Big Tech was paying for their investments out of free cash flow. Free cash flow is now zero and they're borrowing, which is not necessarily negative. I mean, it might be, but that debt is flooding the bond market. So if you want to own a plain vanilla bond fund, you're quietly buying yourself more AI exposure, whether you mean to or not. Foreign investors are pouring money into U.S. stocks. So if you are investing in foreign currencies or foreign markets or foreign companies, you're putting on that shadow exposure to USAI. The buyback angle, corporations were the biggest buyers of U.S. stocks for 20 years via share repurchases.

Now AI is eating up a lot of that cash. Some companies are still doing both, but it's another factor that removes a layer of support from stocks and adds to potential volatility. So they conclude by saying health care and energy are two sectors that investors have abandoned, plus gold, maybe value stocks, maybe the Japanese yen, and maybe some actively managed bonds versus passive.

Those could be the portfolio hedges for the modern era. And I just thought it was really thoughtful. What were your takeaways? I thought it was very, thoughtful. It took me a minute to get through, honestly. It's dense, but it was very thoughtful. It made sense. If we could throw up the first chart here, I pulled two from the piece. If I could show you two as a summary, it would be these two. Okay, so we're here we're looking at

expected sources of funding for the AI CapEx buildout between 2026 and 2028. So where's the money coming from for all of this? Okay. This is not a pie chart. You're seeing the absolute levels here. the $1.5 trillion is coming from equity capital. That's the biggest segment of funding. And then there's everything else. It's basically companies taking their cash and plowing it into AI plus maybe selling additional stock in the form of a secondary. Yeah, and it's money the company theoretically has, right? And then so 45%, this is not a pie chart, but imagine, okay, 45% is from equity capital and the rest is everything else.

private credit investment grade bonds a Bs CmbS high yield and loans I have a question for you Josh like when you look at a breakdown of 45% equity capital and the rest being from you know private credit and debt like is that like prudent level of debt versus equity you know is that or is that is that too much debt we I can't so I can't answer that because I don't think we've ever seen an opportunity set this large. Like it might be the right amount. It might it may turn out that people are under investing. Like I'm looking at the news that open AI just made today with their dots product, which is it's going to be like an enterprise version of Muse. So they're actually going to sell this to their premium business customers before they're going to release this on regular

chat GPT. But it's like an incredible. incredible increase in capability for AI agents. And I guess they're calling them dots and they're saying like, these things can reason on their own. They don't need to check in with you every second. They'll ask you permission to access things when they need to, but like completing multi-step projects

in the background. What will corporate customers be willing to pay for that? Not just this year, but for the next 30 years. I don't know. It could be, like, theoretically, it could be unlimited. So, like, when we're looking at product launches like that, I don't know what the right amount of debt for companies to take on in order to invest in this technology is.

Like, we'll know in five years, I guess. Well, the good thing for the debt holders, and John, let's skip one of these charts and go to the next one. The good for the debt holders is that if you look at the credit default swaps on the different bonds for these hyperscalers, they are not blowing out. They are flat. In some cases, they are actually trading below the 10 year. Higher is worse. This is like golf.

Yeah. Higher is bad. Okay, you don't want to see a blight. You can see meta tried, but it's kind of stabilizing. We can chart off. And so I think overall the takeaway of the piece is that investors in outside of equities are getting exposure to AI, even though they might not realize it. And as you're thinking about your exposure, be aware of that. Okay, we're going to talk about stock market breadth. This is one of the other big topics of the week. People are going crazy on this. Breath is interesting. Like most of the time it doesn't matter because it's not a new stream in other direction.

And obviously people always feel good when the market is at a high and breadth is at or near a high. Like you'll hear people cite the advanced decline line or they'll trot out the equal weight S&P to show that it's not just the max seven. but like a lot of stocks are making highs. Like there's all different ways to look at breadth. And Matt, I know this is your topic, but I actually want to set you up. So Barron's got everybody talking about breadth this weekend and Monday, even the non-technicians.

They did a piece citing that five stocks have contributed 93% of the S&P 500's gains since July. That's like sort of notable. You can guess what they are. Microsoft is 181 points of the benchmarks 330 point advance since the end of July. Meta, Apple, Alphabet, NVIDIA, no shit. The percentage of constituents trading above their 200-day moving average has now fallen from 73% to 51%, which is a notable deterioration while the index is like 1 or 2% off the highs. I sort of agree with that.

And just anecdotally, all of you guys, if you look at your brokerage accounts, you would probably guess that breadth has fallen off to that degree. Just by like the number of stocks you have that feel like they were green all summer and now they're red. And what happened to the great, what were they calling it? The great broadening, which was the theme of the summer. It seems to like that. Yeah, I was calling it that, yeah. All right. Matt, take over.

Tell us what's going on. Okay, well, okay, before we get into it, and also, by the way, I'm not here to poo-poo the breath, right? Like, I get it. It's breath has fallen, and I acknowledge that. But I'm trying to find the nuance in the numbers, presents to the audience, show them the things that they're not seeing as they're doing. You're doing what Michael would do if he were on the show tonight. All right, I love it. We need this.

Okay, that's big shoes to fill. All right, so let's first throw up this, speaking of Michael, this quote from Michael. So Michael slacked me this this morning. He said, hey, Shark Kid, throw this on the show. I want people to know my thought here. So he says, I love the breath washout. The bearish case for an S&P catchdown is obvious and intuitive. But almost every time we've seen something like this in the last decade,

it's been a great buying opportunity. That's the one known that's Michael Batic. So, all right. So Michael is exactly right. And I made a joke on our internal slack. I said, I used to care about breadth, but then I realized I like money. This is like. I laughed at that, yeah.

Well, because this is like one of the things, one of the most prominent ways the bears have tricked you out of your holdings, out of your portfolio, is they've put up these, periodically this happens, where five stocks are making highs and everything else is falling. And they say, you see? And the, like, the assumption is, or what they're trying to convince you is about to happen is a catchdown that the index is going to fall. to match what the majority of its constituents are doing. But the thing is, in the last 10 years, it's been the opposite resolution, pretty much every time, to catch up. So the breadth metrics fall, and everyone gets nervous,

and then all of a sudden, boom, like, you get a broadening trade, and they catch back up to the AI trade, and it's like, I can't believe I sold stocks because of market internals again. So it doesn't mean every single time it works this way forever. But Michael is right. This has been the history.

Right. And I'm kind of asking this rhetorically. But if you think about what you constantly bring up is like the money has to come from somewhere. So if Muse launches in the Mag 7 rally, the money has to come from somewhere. So what are people selling? They're selling staples. Why would I want to own Kraft Heinz company when I could own Nvidia after $150 billion? buyback.

They're clearly selling treasuries. Right. And so to verify Michael's exuberance, we have a tweet from Tom McClellan. Okay. And so Michael's right. You're looking at new lows in the NYC on the bottom. And new lows surge, new low's surging tend to correspond with S&P 500 bottoms. It's just it's there in the data.

And this has been the case. It's the opposite right now. And it doesn't make sense. Right. Well, it's like the beauty of indexing. We can talk about it at knowledge of people know. But it's the beauty of indexing. The weightings change.

Finds the flows. It's really a beautiful thing for investors. Put that chart back up. I mean, this is starting to look scary though. I mean, the chart is showing three years, right? Or two years. It's like going back to 20 years. 24, but it's a big, it is a big spike in New York Stock Exchange, new lows.

And we're going to, I know we're going to get into like, what's in that? What are the, what are the stocks or what are the sectors? We'll do that in a second. But like, it sort of is starting to become notable. Yes, absolutely. You cannot just pass it off. I agree. I agree.

You cannot just pass it off. People need to be aware of this. Okay. Let's talk about where the breath is actually coming from, the negative breath. And so, John, if you want to throw up our large. cap breath dashboard. Okay, here you're seeing all of the S&P 500 sectors based on their breadth score, okay? It's something that we made in-house internally. And so we're showing things like percentages of stocks above different moving averages, the percentage of stocks making

new highs, new lows, et cetera, et cetera, by sector, okay? But where I want you to focus, because there's a lot of data here, okay, where I want you to focus is at the bottom here, utilities, okay? So utilities, three percent... I like how you did that. I like how you did that. 3% of utilities are trading above the 50 day moving average. All right, let's throw up. Next one is Staples. 27% of stocks within Staples are above the 50 day. These are horrible metrics.

Breath in these defensive areas is terrible. And understand, these are defensive sectors, right? Now let's go to the top and let's look at tech. This is arguably the most important sector to the market. Maybe financials is a close second. You need financials in bull market. But tech has 66% of the top. stocks trading above the 50-day moving average. Seventy-three percent are above the 200-day.

10 percent of these stocks just made new four-week lows. So again, I'm not, and we could chart off, I'm not poo-pooing this. I just think that if you dig in, it is nuanced. Well, it is, and chart back on, staples and utilities are not just considered defensive. They're also interest rate sensitive. the primary allure of these stocks, at least historically, has been their dividend yields. And so when we talk about higher treasury bond yields representing competition for the stock market, this is the area of the stock market they're competing with. And people who say, should I, I'm making these numbers up, should I take a 3% dividend from Johnson and Johnson, from that's a pharma should i take a 3% dividend from from a company that sells ketchup and mustard

right or should i take a 5% interest rate from the federal government and so unless you you have reason to believe that you're going to get a good total return because you know the the ketchup and ketchup and mustard company stock is going to go up 15% fuck it give me the 5% on the bonds And so I think that partly explains the weakness and staples and utilities. And you didn't show this, but the third worst sector is real estate. So, you know, also zero percent of real estate stocks are above their 50 day. This is competition from treasury bonds because real estate is interest rate sensitive and yield sensitive sector.

That's the buyers of those stocks historically have. been looking for like the return of capital in the form of an interest rate or a dividend. Absolutely. Let's look at this differently. Let's look at overtime since September 2025, the S&P 500's expansion of new 52 week lows. So this is the percentage of stocks within the S&P 500, all 11 sectors, and what percent of those stocks are making new 52 week lows? So again, this is not nothing. There's a recent expansion here. But now I want to show you the next chart, which is two of the most offensive sectors in the market and you only have and it's tech and financials and you only have 1% of tech stocks making new 52 week lows you have literally zero financials

making new 52 week close all right this is so important i'm not like a sector obsessive where like i view the market through the prism of like because it's gotten so hard to categorize a lot of really big and important companies what sector is tesla belong in i don't really know anymore It was a car company that's now making robots. Where do you put SpaceX? Is it industrial? Is it tech? Is it communications?

It could be all of those things or none of them. Like some, I don't get crazy with sector classification because of how muddled things have gotten. But Matt's point here is key. If I told you that financials and tech have no stocks making 52-week lows, which is what we just showed, that should make you feel a lot better about the headline number of the overall number of stocks making new lows or the percentage. Forget about that. Which stocks?

We're showing you like the most sensitive, important companies to the growth story for the economy, financials and tech, there were no lows in sight. It could change. We're telling you this is a snapshot right now. That's pretty much what you'd want to see if you want to be constructive and stay bullish. Right. And we have one more here, John, that we can throw up. And this is the new lows in utilities and staples. So utilities, 45% of utilities stocks are making new 52-week lows and 15% of the staples are making new 52-week lows. I don't have the names right now here. But the idea is if you wanted to get bearish on the market, you would probably want to see the stocks in these sectors actually catching some sort of a bid right now.

And they're getting hammered. And so I'm not like, invest. Masters are choosing what they want right now, and that's rotation, which is bullish. Okay. Now, all right, so we did enough coping and explaining away the internals, and I agree with all that. But I do have to introduce a little bit of negativity here, and not that I'm believing in this, but this is what people are starting to say and notice and talk about. And, you know, I think the mark of intelligence is being able to balance two opposing thoughts in your mind at the same time. The conference board put out their consumer confidence survey,

which has been falling for years and really is not a great signal for the stock market. But it's at extremes, it is something that people are going to start to take notice of. I don't care about the monthly. I want you guys to observe the trend. We have just slammed down to a 12-year low. The overall index just fell 6.7 points to 81.9, which is the lowest level since 2014. That is reflecting, this is Axios, reflecting drops in both survey respondents assessment of current conditions and their outlook for the future. They are referencing prices in the economy again, the high cost of goods and services, oil and gas in particular, which hit new highs. And then they start talking about politics and trade and employment. You know, they're talking about Palestine and all kinds of shit that has nothing to do with anything.

But the fact remains this is a horrible moment for consumer confidence. And it could change maybe like the midterms come and go and all the political stuff calms down and people feel a little bit better. Because the labor picture is great. I know that not everybody is happy, but like for the most part, this long into an expansion, it's pretty good. So it's a lot of headline stuff that is not economic, but it's making people just feel pessimistic. And I mentioned we're at war, we don't have to do that whole thing again. But basically the setup here, Matt, is you have narrowing breadth, which we just spent 20 minutes on. You have an air pocket of a few weeks before earning season, right?

We're not going to get those great reports from. KLA and Lamb Research and all the stuff that we're looking forward to. It's going to be a minute. Not to mention you have the typical October surprise seasonality. September is not a great month for stocks. October can be a good month historically, but seasonally. But it's also been a month where crazy things have happened without rehashing the whole litany of 1929 and 1987

and the TARP votes during the financial crisis and Lehman Brothers and all this stuff. Like, it's, you know, people have, like, a little bit of muscle memory around October being a wild time. I want to show you the breadth from the perspective of Barclays. They have this quantitative team. They call them the bets guys. And I thought this was interesting.

So they're showing similar to you, cumulative NYSE bread, falling by minus 5,300 over the past 21 trading days. They screened for instances in history since 2004 where this has happened. And they point out that the S&P on average has fallen 9.6% at the same time. Today the S&P has done nothing. The only precedent to today is October 2014, which saw a similar negative price spread divergence, and that resulted in the S&P falling by more than 5% in the subsequent week. Barclays is writing this research for people that are putting on trades that they are looking

for immediate gratification for. So just giving you that context. The second chart, I'll have you react after this. They're showing the combined New York Stock Exchange and NASDAQ stocks trading at a 52-week high versus those trading in a 52-week low is at the same level as the nadir of the Iran war

back in March. This is when there was like Max fear about the attack on Iran. For context, it's 1990. SPX, the S&P, has currently fallen by an average of 670 basis points when this has been the case historically. If we screen for instances where the S&P was unchanged, with this number of stocks making a 52-week low, the average peak to trough drawdown over the next 21 days is minus 520 basis points. So historically, this does lead to an eventual drop in the market.

What do you think about that? Yeah, I think that's the historical analog. We are also living through a period where this is the Teflon market. Truly, what is going to bring stocks down? And, you know, like even this, there's literally, like you said, 90% since, what was it, June, have been contributed by the Mag 7, the rally in the S&P 500. Yeah. That's crazy.

That's nuts. Like, I want to saw a pause on that for a second. That's crazy. But it truly is, like, if you show me just, if you show me just the, you could be throwback up, John, Just the red line on this chart. So just the breath. I would guess that the market is in a 20% drawdown. Yeah.

And it's literally not. That's what it's consistent. It's consistent with a minimum of 7% from the highs and usually worse. And it's just, it hasn't happened yet. You ask me like what stocks are even going down or, I mean, like right off the top of my head, these are like very specific stories, mortgage stocks, anything related to. like borrowing to buy a house, of course. Mortgage rates were at 7% on their way to 8.

Of course those stocks are down. Ride share, again, very specific. Uber and Lyft look like shit. They're both down year to date. They're down over 12 months. These are pretty substantial drawdowns in these stocks. I'm personally long Uber, so I'm feeling it myself. But like, when you look at like what stocks were at the lows

in addition to the staples and the utilities, it's explicable. It's not like J.P. Morgan and Wells Fargo are making 52 weeks close. Like that's such a different story to me. I'm looking at Builder First Source right now, Home Builder, down 45% year-to-date. Yeah. It's like, and also, we were talking about lower rates before Warsh. The entire narrative has flipped, right?

We were talking about there's going to be this pressure. How many cuts? How many cuts? 100%? Yeah, yeah, but also now imagine if we had reality at that time, and you knew that the picture was going to flip, and it was now cuts, wouldn't you guess that the market would be down 15%?

I would have. It's, even with earnings. So you're right. The correct interpretation is, look how many things have gone wrong or flipped, and look at how stocks are acting, and the right move is to take your signal from the resilience of the market, not extrapolate out all these negative stories, like,

how much worse can they get? But I am going to throw one more on you. ORA just postponed its IPO, not to any specific. Not like, oh, we'll do it tomorrow. Like, I think it's $11 billion evaluation or something, and they were going to go this week. And actually, I don't even know what the valuation was. Yeah, 11 billion was the last year's funding round. So I guess they were hoping for at least somewhere over that, like some premium to the last funding round.

Here's the journal. ORA is the black ring that people wear that reports like your health metrics back to your phone. And I don't like dislike the product. I don't know anything about it. You know, it's a higher likelihood of me wearing a fucking onion ring around my finger than an aura personally. But don't take that to mean anything. I want to just say, first of all, rooting for it, I hope it goes public. I will not be buying this.

I'm doing this a long time. I have never seen anyone make money from buying a health tech kind of gadget IPO. It just, like it just, especially when it's one product. But you have Peloton, you have GoPro, you have Fitbit. Soul cycle. I was here for all of it. They all go to zero. Right. Like, like GoPro effectively went to zero. Actually, so GoPro is a good case in point. Not that it's a direct comparison to aura. But it's like for outdoor like physical activity enthusiasts. Revenue peaked in 2015 at 1.6 billion and it had gone public in

2013. It was a disaster from day one. It opened that a, It opened at a ridiculous premium at like 100. Went to basically zero. Revenue peaked in 2015, a year after it went public at $1.6 billion. Then it hit $651 million last year. Its stock price went from 50 or 60 in mid-2015 to 60 cents. On September 1st, this year, announced they're merging with an optical photonics company. Of course.

They're getting $1.14 in cash for that stock. and a tiny amount of equity in the new company. Like, that's how these things end. We're not going to talk about Peloton and Fitbit and all this bullshit. I was at the exchange, though. Yeah, I guess we are. I was at the exchange when Fitbit went public. They erected a giant Trojan horse-sized treadmill

in front of the New York Stock Exchange on Broad Street, and they had like 50 guys running on it with Fitbits on. Zero. You know what I mean? It's down 95% since at IPO. I don't understand. Town Sports, which was like New York Sports Club, Philadelphia Sports Club, like gone.

Bally's total fitness, goodbye. Soul Cycle is a joke that tells itself. Weight Watchers on its way to zero in the age of chat GPT. Oh, let me show you this chart. Here's Planet Fitness. I'm not going to say it's zero. I don't know anything about the company. I just know the better bets are Americans staying sedentary and fat.

Like the better long-term bet is McDonald's and Ultria and Netflix. To me, like those are those are the better bets. So any fitness-related thoughts? I mean, I do see a lot of people wearing these rings. I also saw a lot of people on the Peloton bikes during COVID, and we saw how that went. Sure. So, like, I think from a human perspective, it's very easy to believe in the story.

But they're saying in the chat, Lily is the better bet. GLP 1 is the better. Yep. Yeah. Yeah. I get behind that. 100%. Yeah.

And I think, what's stopping Apple from doing this? You know, meta is going to have an amulet around your neck that you can talk into, whatever the muse accessory is. What I'm saying is that people are thinking about hard. where. I'm thinking about wearables, sorry, think about wearables at these companies. And let's say that, you know, Peloton started having some success, Alpha would probably wipe them out. Right. I spent four hours looking at Life 360. So we pay, we pay for this in my hand. I have two teenagers. You do it? Yeah, yeah, yeah. Yeah. Oh, yeah. I know when my kids are every second of the day. Like, unless they're throwing their phone in the back of somebody's pickup truck and then, you know,

like in the movies. Like, right? And you know their speed, right? Like, what's the, level. Dude, I might be, right, I know how fast they're going in the car when their idiot friends pick them up. I know what time they get home. I know if they're in a car or on a train. Like I'll probably pay for that until they're 40 years old because that's just we're part of this helicopter parent generation. Yeah. I spent all this time looking at the stock. I just, there's no escape from the idea that Apple just says, what is this bullshit? We could do that. Like I can't escape that that. I can't escape that that. Um, conclusion, so I can't afford it. All right, let's do your desert island charts. I can't wait to see what these are. All right.

Tell people what you mean by that. And then we'll talk about Exhibit A in general, in general. Okay, yeah, let me explain what I mean by this. So if you put me into a cave on a remote island, okay, and you gave me a ticker tape, you said, I'm going to let you out in 20 years, you could look at five charts for the rest of your life. Well, what would you, wait, whoa, what would you need the charts for you on a desert island? Like what?

I need to be reminded every. every day when the... Okay. So you have control of your brokerage account where you are? I can test. In this scenario. Okay, got it. I can hit sell and I can hit by.

I can get back in. So these are the charts that I would show to myself and constantly remind myself of, okay? And we could talk about why that's important for clients to see in that perspective. But first, I just want to rip through these, John, because we have five here. So first, this is a chart that shows the S&P 500 price back to 1950, and I'm shading. shading 20% and 5% drawdowns. When you look at this chart, almost the entire chart is shaded. So you are going through constant pain all the time as an equity investor. It is nonstop. So if you feel it, it is normal. 61% of the time the S&P 500 is in a 5% drawdown.

Wow, let's say that one more say that one more time. 61% of the time the S&P 500 is 5% or more off of its all-time highs. And people with you're in that 5% drawdown, number one, they think it's about to be 10. And number two, they act like it's abnormal. Like, what's going on? What's wrong? And I think the last 15 years have conditioned us to be even worse in that regard. The market doesn't make a new high every month. It's like something's going wrong. Like something's about to happen. I think there's a lot of that. You could see it in the sentiment numbers and how they've changed. Like we're Yeah.

AAI bears at levels consistent with like 2008 lows. It's kind of broken. All right, next chart. Yep. All right. So this, this is an idea from Michael. And his point was chart kid. He said, everyone wants to show the chart of how you extend your time horizon and how that

leads to the, like the odds of you gaining and the stock money. Yeah, making money. This flips it and says, okay. Over five-year periods, what's the likelihood of you experiencing a bear market? And the odds of experiencing a bear market over all 15-year periods is 100%. So you have to set the precedent with your clients for yourself that we are going to experience pain. I love this. Put it back up. So like in any given rolling three-year period back to 1950, the odds of experiencing a bear market,

which we define as the market falling 20% or more, was only 58%. was like a coin flip. So for every three-year period, for every five-year period, it's 78%. Every 10-year period, you have a 95% chance of experiencing a bare market.

So, right, this is such a great idea. It flips the idea of extending your holding period, extends the odds of you making money. Yes, it does, but it also extends the odds of you experiencing something really nasty. Get over it. You're definitely going to do.

be an investor for more than 15 years. If you're like most people, hopefully, if your health holds up, you could see five or six consequential bear markets in a lifetime. And it would not at all be abnormal. So yes, the longer you extend your time horizon, the more money you'll make and also the more shit you have to put up with along the way.

It's a great chart. Right. You got another one? Okay, next chart. Yep, here we go. So Josh, I heard you on CNBC. You were talking about the relationships and finance how there are almost no sure relationships.

I call them iron laws of finance. There are hard. Iron laws of finance. There's almost none. And here's one that we can almost point to that breaks that law. And we're looking at on the X axis, the 10-year starting yield. And on the Y-axis, the actual 10-year forward annualized return from those given yields. If you have a high starting yield on a U.S. Treasury, there is almost certainty, not 100%,

but almost certainty you are going to experience an actual return in the ballpark of that starting yield. Wow. So, right. So this is, the point is like, you can't really set your watch by anything in the investment market. Like, nothing works. P.

ratio doesn't work. Like, valuations in general, you can't time the market on or guess it. your returns are going to be, that doesn't work. So much has changed over the years. Can't bet on winning mutual fund managers because there's no persistence of performance, that doesn't work, like nothing works. This like almost always works.

Just like as a starting point for, well, how much am I actually gonna make if I allocate to bonds at today's prevailing interest rates? What other conclusion can you draw up from this? I think what you could look at is you could look at 10 year yield today and you could say, well, where do we land on the regression line, which is just pretty much a way of saying like, what's probably going to happen? That's your blue dot. Yeah, that's the blue dot there. And the blue dot there is saying, look, this is kind of where we are. And it's in the

ballpark of 6%. Right. Which, again, explains so much about which stocks are not working right now in the market, because this is your, this is your alternative. Right. I love it. John, can we fire the next one? Okay, here we go. So here we're looking at, the relationship between the S&P 500 return year over year and the 12 month forward earnings growth year over year. And so what you see here is that stocks historically follow earnings. And it's not always perfect. And as you can see now, there is a little bit of divergence here. We can extract whatever conclusions we want.

The idea is that forward earnings have grown 36%, 36.7% year over year, and the S&P 500 is up 17.9% year over year. So forward earnings are more than doubling the actual stock market return over the past year, which is incredible. That's incredible because I think most people would guess it's the opposite. They would guess that it's the opposite. And then when they see the stat, they would say, well, the forward earnings are hypothetical. You know, it's forward earnings. But I'm just, you know, if you go back, the forward earnings tend to be within 1% of the actuals.

It's the highest likelihood chance. I love that. So that's a good reminder if you're on a desert island like, what are we actually betting on? here. We're betting that. Prices will rise because earnings will rise and they go hand in hand. Right. Good one. And then last one here. You got one more. Yeah, last one, guys. So here we got the S&P 500 annualized return going back to 1950. And it's if you stay invested fully, you miss the best day of every year, the best five days of every year, and the best 10 days of every year. I just want you to focus on the bar all the way to the right. If you miss the best 10 days of every

year, obviously no one has perfect foresight, but just theoretically, your annualized return goes to negative 12%. If you annualized 100 bucks. From plus 8.4 to negative 12 just by missing the 10 best days of each year. That's sick. So people, these best, yeah, sorry. I was to say, people have been using some version of this chart since I got into the business to convince clients to stay the course. I like your version of it because you're keeping it much more simple than a lot of it with, you know, 50 different bars and diamonds and trend lines. Like, you're just like, guys, this is it. This is why you can't afford to swing in and out of the markets. You could miss the whole point of taking risk to begin with.

Something that I've learned in making charts, and it's probably the number one lesson that I've had to kind of come to the conclusion with is that if you, If you overcomplicate things, people get annoyed, they get frustrated. It's about simplifying the concept. It's not about looking smart. It's about getting someone to look at the chart and say, I actually get it. You connect the dots for them. You have taught them something that is going to hopefully, in the future, benefit them financially. And so it's about simplifying.

Matt, the crowd is going wild for you. I wish we could hear the sound of their applause because it would be rapturous. Let's tell people how they can follow you. There we go. Thank you, folks. Chart Kid Matt, ladies and gentlemen, I want to tell people, before we get into, we're going to do a mystery chart, and then I'll make the case, and we'll get out of here. But before we do that, I want to tell people how they can follow you personally and how financial advisors who are watching or listening can check out Exhibit A, which is your company. Yes, so this is our landing page here, Exhibit A4Advice.com.

If you are an RAA with, let's say, one to ten advisors and you don't really have a research team, there's two or three CSAs there, you want to look extremely professional in front of clients and prospects, deliver an A-plus first impression. Just give it a try. It's perfect. We're at the end of the quarter right now. You could come in. We have over 200 branded charts. They update every single day. Ben Carlson's doing eight monthly reports and four quarterly market and economic updates for our clients. completely ghostwritten. It's like literally having our content team and me as your analyst for a few hundred bucks a month. It's unbelievable. Like most, there's 20,000 firms in the country. Most of them don't even have one research person.

And their presentations to clients look like shit, no offense. Like they're doing what we used to do. They're grabbing charts from 10 different firms and putting them in an email and hitting send. Like you're building these charts as templates where they can use their corporate colors, their own logo. The compliance stuff is already baked into it, so they don't have to worry about.

Am I allowed to show a chart that says this? And people can pick and choose. They don't have to send 200 charts to the client. You might just say, I want to send this one chart because it'll resonate with my client. So it's an awesome product. And you're active on Twitter, LinkedIn. What do you do?

Yeah, my blog is chart kid, matt.com. I take some of the In the Weeds chart. charts that are a little bit past what the advisor would show to clients and I post them there. I talk about them. I write. I'm trying to be like you guys, honestly. So that's what I'm doing. Dude, you absolutely crushing on the show tonight. Let's do make the case. This will this will be just a reminder about some of the stuff we said about utilities. Put up the price chart. This is a State Street utility select sector, spider, ETF, or XLU. It's sort of shorthand for how the sector is doing.

I'm going to tell you, I will not buy this dip. I don't like it. I don't like what it represents. I don't like how it acts. It's in no man's land. And I'll just point out a couple of things. So to make the case I'm making is not every dip is viable. I don't like this one.

I think at best you have dead money. And at worst, this could get way worse. When you look at utilities right now, they've pulled back a lot this year. You might even call it cheap because it's a 17.3 PE ratio, and the five-year average has been almost 23. That would be short-sighted. If you zoom out to a true long-term 10-year historical average on the PE ratio for the utility sector, it's more like 12. So 17 is cheaper than 22, but historically not a meaningful discount. We had like a structurally distorted multiple in the space because of AI data center narrative.

And we were treating regulated utilities like they could be growth stocks. If you buy this dip, you're basically paying a 36% premium over the historical long-term PE. But it really does not look like that story is intact or going to hold up. The other problem here is the trailing data in yield is only 2.94%. historically people before AI data sent their power, people bought these stocks for the yield. And as we've said, 85 different ways, the 10-year treasury note is now at 5.5% and a quarter percent. So I think the smart money is going to opt for that rather than the risk of a utility delivering a capital return in excess of that. So I think it's a dip that you want to avoid rather than take advantage of.

Maybe if it gets much cheaper, we'll revisit that idea. I only have one utility name in the firm's Porterhouse concentrated momentum strategy. So out of the, I don't know, four dozen stocks in this industry, I have one. And it looks like it's about to get bounced out anyway on our next rebalance. Put this up. This is Entergy. Guys, did you know what I said? This is the best-looking utility in the market in order for it to make Porterhouse.

And since it got into the strategy that we run, it's looked like shit ever since. And I think we're about to kick it unless something radically changes. So if that's the best looking name in the group, it should tell you a little bit about how the rest of them look technically. So they're not cheap and the charts are pointing down into the right. So that's me making that case. Any pushback there or you're with me? What do you think? I'm with you.

Yeah, you don't, I mean, with yields rising, you don't want to, you don't want to. We're not doing you. Any of this. All right. You got a mystery chart, I'm told. I do have a mystery chart. Can we throw it up? Here we go.

Let's do it. All right. All right. All right. Hold on. I can hand. One hint at least. Okay.

It's going to be a good hint. This industry got destroyed in COVID. Destroyed in COVID. Okay. Is it? Hold on, hold on. We've talked about it before on the show. tonight Michael owns it

we've talked about on the show Michael owns it industry got destroyed in COVID it's a stock or it's a it's a stock should I do another one okay I have one okay we had the CEO on the show oh it's IMAX there it is this kid loves Michael Batnik

this is Michael's only long-term stockholding personally and all right good one Good one. I should have got, when you said got destroyed during COVID, I was thinking like after COVID when they beat up all the stay-at-home stocks. But you mean like during COVID? Yeah, I guess, yeah, I should have been more specific.

Like no one did this thing during COVID. Right. I inferred incorrectly. All right. Chart kid, Matt, you question tonight. Thank you so much. Guys, I want to let you know, despite the fact Michael's away,

there will absolutely be a new animal spirits tomorrow on all podcast platforms. and right here on the compound channel on YouTube. Make sure you check out Ask the Compound, as well as an all new episode, The Compound and Friends dropping at the end of the week. We are here for you. We are dropping bombs all day long on all channels.

Keep it locked. We'll talk to you soon.