The Compound and Friends - Biggest Week Ever, Surprises With Nick and Jessica, IPOs Are Back With Aaron Dillon

Episode Date: July 30, 2024

On this TCAF Tuesday, Josh Brown is joined by Nick Colas and Jessica Rabe, co-founders of DataTrek Research, to discuss how the market fares in election years, the seasonality of the Vix, and much more! Then, at 34:05, hear an all-new episode of What Are Your Thoughts with Josh and Michael Batnick with a special appearance by Aaron Dillon to talk IPOs! Thanks to Public for sponsoring this episode. Visit https://public.com/ to learn more about how you can earn 5.1% APY with a high-yield cash account. Sign up for The Compound newsletter and never miss out: https://www.thecompoundnews.com/subscribe Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Instagram: https://instagram.com/thecompoundnews Twitter: https://twitter.com/thecompoundnews LinkedIn: LinkedIn: https://www.linkedin.com/company/the-compound-media/ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Public Disclosure: Public Investing offers a High-Yield Cash Account where funds from this account are automatically deposited into partner banks where they earn interest and are eligible for FDIC insurance; Public Investing is not a bank. See https://public.com/#disclosures-main for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

Ladies and gentlemen, welcome to the Compound and Friends. Tonight's show is brought to us by Public. At public.com, you can earn 5.1% APY with a high-yield cash account. That's not just a good rate. It's literally an industry-leading rate. And the best part is there are no fees, like zero. So you can really maximize your interest. What's the point of earning a high yield if you have to spend a bunch of money?

Just to get it. So at public.com. It's five point one percent APY straight up. No strings attached This is a paid endorsement for public investing five point one percent APY as of June 17th 2024 and is subject to change full disclosures in the podcast description Okay tonight show Wow, there's a lot going on. We have, I don't even know how to describe how much we're doing, but we're doing a lot. First of all, Nick and Jessica from Datatrek are here. We talked about some really interesting stuff that you will not hear or learn about anywhere else. Nick and Jessica, walk me through how important seasonality is going to be in a year like this one. We take a look at VIX seasonality.

We take a look at the seasonality of calendar stock returns. We talk a little bit about the Trump trade 2.0, assuming that's where we are potentially headed. Then, it's an all-new What Are Your Thoughts with Michael Batnick and I. Michael and I get into so many things and we have an extra special surprise guest ringing the doorbell tonight. So stick around and we're coming right up. 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 Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Hello, and welcome back. wealth management may maintain positions in the securities discussed in this podcast. Hello and welcome back.

My name is Josh Brown and we are checking in with Nick Colas and Jessica Rabe here on The Compound. Nick and Jessica are the co-founders of Datatreq Research and the authors of Datatreq's morning briefing newsletter, which goes out daily to over a thousand institutional and retail clients. They're also two of the smartest people I know. Nick and Jessica also have their own YouTube channel, which you can find the link to in the description below.

Guys, are people asking you about political outcomes and the markets more than normal or less than normal this time of year? Would you say it's amplified or muted? It is much more than normal for this time of year. This is usually more of an October, maybe a September thing. Now it's been going on since we were in Geneva talking to clients weeks ago. It's just a relentless drum beat of interest. Well, it's not like there's been any news. No, I don't know what's going on. Okay. We are not hearing more than normal.

We're hearing the normal amount from our clients and we're doing a lot of work internally just to give people kind of the baseline of, you know, what normally plays out. But you guys have done a ton of work on this subject, and I'd just love to get a glimpse for the viewers slash listeners. What are you telling your clients when they ask you about the upcoming election? Sure. I think we've got a couple of slides to share with you today. The first one shows offshore gambling odds for the presidential election in the US.

This is what we use to monitor sort of a market-based approach to understanding what are the odds of somebody winning or losing. And the basic takeaway from this is the best former President Trump got was like in the low 60% range, and he's back down into the mid 50% range now. And Vice President Harris has obviously,

her odds have taken a big swing up because she's now verging on being the official the Democratic nominee. So the point of that graph is just to say, no matter how we think about this, what we're gonna talk about in the next couple of slides, these are always probability based assessments. No one's sure who's gonna win.

And even the day before election day in 2020, the offshore odds only had Biden at 63%. So there was still more than third potential outcome that President Trump could have won. So the most important thing to think about this is, you know, these trades we're going to talk about, or these phenomena we're going to talk about, they're probability based and they move back and forth. And no one knows for sure until the election is actually done. One of the things about that chart that you guys just put up is the variability and how much it moves.

This is not the kind of thing where it's 5149 and it's just a flat line right into the election. The volatility of the probability is with us pretty much throughout the whole thing for many of these elections. Would you say that's accurate? Very accurate. And we also want to dig down and understand this is not just about the White House. It's also about Congress. Who's going to win? Both chambers are effectively up for control.

The margins are so tight right now. So it's not just a president. It's also the entire legislative branch. OK. you know, a president, it's also, you know, the entire legislative branch. Okay, so let's talk about what people see in the data itself and what your comments would be when we look at this stuff. I think like the first Trump trade is, I guess, people are like, well, are we going to have that again? And not necessarily in a negative sense. But like, I think that's like a baseline expectation. Oh, if Trump comes back, what's the trade or, you know, how would you allocate a portfolio?

Sure. We've got two slides on that. The first one shows just the basics, some US equity market indices and rest of world and then China. And we've broken it down by election day 2016 through year in 2016, then all of 17, all of 18, all of 19, and the cumulative returns over that entire period. And just looking at the very near-term results right after the election through year end, very interesting trade happened because what happened is, yes, the S&P rallied, the equal weight was up a little bit more, NASDAQ was up a little bit less, the Russell just blew things out of the water of 13.6%.

Rest of the world was down. China was down 8%. The funny thing is, if you go off into 2017, things kind of reverse. The Nasdaq got its mojo back. China was up 50% in 2017, which you wouldn't have guessed at the very end of 2016. I would not have guessed that, no.

And then going off to the next slide, which shows sectors. The sectors that worked right after the election were financials, industrials, energy and materials, all the classic cyclical sectors. Again, we've got a lot of rhyming to the current market environment over the past couple of weeks in these two tables, small caps doing better, financials doing better,

industrials doing better, energy and so forth. But again, looking to 2017, some of these trades continued and some of them didn't. Financials continued to work, industrials continued to work, but tech really took the lead back again. So tech didn't work for a short period of time after the election, attention was elsewhere, but it came pretty much roaring back in the following year.

So it's interesting to show what we saw was a very fast trade into a bunch of things that look very similar to today, and then a lot of reversion to the mean thereafter. That rally in small caps between the election in November of 2016 and the end of the year of that year, like that six week, what is that? Eight weeks? That very compressed period and that huge explosion in small caps, you could point directly to the end of the election, maybe not because Trump won, but just the fact that it was over,

I think is supportive of companies that have a domestic focus like small caps. And then maybe there was some benefit in some of the things he wanted to do with tariffs and industrial policy and deregulation. But I could picture a scenario where if he were to win, that trade works all over again. I think the hard part is to figure out, wait a minute, did we do the trade before the election? Like Like will markets wait or will they front run it to the point where there's nothing left? What's interesting is you had that big rip in small caps initially. You had so much initial enthusiasm for small caps, but just after the election.

If you look at 2017, small caps actually underperformed the S&P. Ultimately, Trump's policies of lowering corporate taxes and encouraging repatriation of foreign earnings benefited large caps and tech stocks. Tech was actually the best performing group in 2017. But even if you look at from Election Day 2016 through 2019, small caps underperformed both the NASDAQ and the S&P. Right. And what's funny is a lot of the rhetoric that Trump used in the 2016 campaign was about reining in Facebook and going after big tech and companies that are earning profits overseas and keeping the money elsewhere, etc.

A lot of this stuff ended up being a benefit to the companies that were quote unquote in Trump sites. And as a result, can we put that table back up? So as a result, look at technology in 2019 of 47.9%, the best sector far and away. And then the entirety of this period, November 8, 2016 through the end of 2019, tech does 93%, which is almost double the next sector, consumer discretionary, which obviously we should point out includes Amazon. So you really had this runaway bull market for tech in the Trump years, which was not at all

in line with what people's expectations were. Yeah, there are only three sectors that outperformed from Election Day 2016 through 2019. And they were, as you just said, tech, consumer discretionary, and then lastly, financials. What do you guys think are the biggest takeaways about Trump trade 1.0 and how we should be thinking about Trump trade 2.0 if in fact it looks likely that he's going to win? That's a tough one because as we saw, there's a lot of reversion to the mean. So if you want to play sort of second derivative, people are now going to trade the after trade. But I think the bottom line is the outcome of this election is going to be too close to call definitively until we get all the votes in.

So whatever trade you've set up, you better be sure you have the outcome that you think you're going to get. Because otherwise, those trades unravel very fast. And we're always cautioning clients. As much as you want to focus on politics and they are important to some degree, you better be very careful positioning

your portfolio for a specific political outcome, because if you're wrong, you're gonna be very, very wrong in the outcome on your portfolio. Yeah, one of the things- Oh, please, Jessica, go ahead. Nick brought up a really good point in that you saw a lot of politically driven moves in late 2016 and even 2017,

and as much as politics plays a role, monetary policy is just as important, if not more important. You saw Fed policy play a much bigger role in 2018, as well as 2019 in terms of driving stocks higher or lower. If you remember, in late 2018, there's actually a bear market because of Fed Chair Powell's monetary policy mistake of overestimating the neutral rate of interest. And then of course, in early 2019, when he walked that back, we saw a big recovery in US and global stocks.

Yeah, the White House had almost nothing to do with the recovery. It was entirely Fed Chair Powell having an about face. But I think the reason why we were having those corrections that year was the Trump tariffs, which I think not a lot of people were thinking about in 2016 in terms of their effect on corporate earnings, but very much became a part of the sentiment overhang during the course of that year. I wanted to ask you guys about energy. One of the things that we're hearing Trump say, because I think it's a fun thing to say is drill baby drill. That's a great political slogan, but that also sounds like it adds up to a lot of

supply, maybe not necessarily great for all of the stocks in the energy sector. Maybe it's good for the services companies, but not so great for the companies selling oil. Any thoughts on what happened the first time around with energy and what that might mean this time? So energy, year for the entire period. There's only one sector in the red for the entire period. It's energy down 13%. Yeah, which is the opposite of what you would have thought. Oh, its energy down 13%. Yeah. Yeah.

Which is the opposite of what you would have thought. Oh, Trump's coming in, drill baby drill. These stocks did not do well the first time. Yeah. Okay. I also want to ask you guys, Jeff Summers agrees with, I think, your main conclusion in the New York Times this weekend. He wrote, leave the Trump trade for the pros.

And he points out some examples where we got a very counterintuitive result. And so placing trades based on who you think is going to capture the White House or Congress doesn't always work out. And sometimes it works in complete opposite fashion. So consider GeoGroup and CoreCivic. These are the two publicly traded prison traded for-profit prison companies. They each ran up 17% from June 27th through July 19th. And that is the period between when Biden got creamed in the debate through when he

stepped down. That's a pretty big rally for those stocks. Jeff points out over the entire Trump administration, GeoGroup and CoreCivic fell more than 67% each. What's even more hilarious about the situation is they did extremely well during the Biden administration. These stocks went up 87% each over the Biden presidential term. And of course, the Biden administration is not favorably inclined toward private prisons. So a lot of people look at what Trump wants to do on immigration and say, this is going

to be great for for-profit prisons. He's rounding people up, he's detaining people. But again, be careful because these things don't always play out in terms of share price exactly the way that you think they would. And oftentimes you get the opposite reaction as we pointed out with energy. Any thoughts on that? Yeah, it fits the thing we're talking about, which is there's more to life, there's more to markets than politics. And people get fascinated by politics for all the obvious reasons,

but they're only a portion of what moves stock prices and usually a smaller portion than people realize. Okay. I think that's, I think we could leave that there. Jessica, I wanted to get into seasonal market trends with you. We've had more volatility over the last couple of weeks than what we've experienced over the last few months. It is the summer. There are all the Wall Street adages about how the smart money's at the beach or it's

only the junior traders on the desk. I don't know how accurate that is these days, but what do you see happening right now? What's the takeaway for you? Yeah. So the first is volatility and returns are, are pretty seasonal. It sounds counterintuitive, but, um, they're seasonal, even if the, the band around average levels is wide. So, um, we have one chart, uh, that shows when the VIX peaks for the year,

uh, back to 1990, when the VIX was created and the VIX peaks, uh, for the year, the most in January, August, and October. So certainly in August, like you just said, there's light volumes because people are on vacation, which means any unusual events tend to have a large impact on stock prices. So we do expect incremental volatility over the coming weeks. At the other end of the seasonal volatility range though, the VIX bottoms the most in December and November also tends to be a low volatility month because US stocks tend to go up.

So as we get towards the end of the year, investors are adding to positions, which reduces volatility. So again, we're coming into two of the choppiest months of the year, August and October, but then things tend to calm down and melt up from November through through year end. In the column with high, these are these historic tops for the VIX. Like, just looking at the August example that you mentioned, 1990, 2002, 2011, and these are like 36 VIX,

45 VIX, 48 VIX, but then it looks like on the far right, you're showing what, is that the average VIX for the month? Oh, when it bottoms. Oh, those are the lows. So, yeah, so for example, like December, the VIX has hit a bottom the most in December nine, nine times out of all the years back to 1990. Okay, so these are, these are the highest VIXs and the lowest VIXs for each of these months. Yep, exactly. When it, when it peaks or

troughs for the year. Okay, so what's really interesting about this is you would think that people, uh, chart off, you would think that people are smart and they would are about like these, these VIX highs and lows. And ultimately everyone would understand the seasonality of it, trade against it, fade it. And we would kind of, uh, have a more even distribution. But in fact, no, we still have this very real seasonality. And even though everyone's aware of it, it persists. I find that to be really interesting. Yeah, I agree. We also another thing we looked at was what happens during presidential years.

And what's interesting about that is you would think that we would get more volatility around elections, but in the eight presidential election years back to 1990, the VIX has mostly peaked in the first half in five out of eight years. It's only peaked in Q4 out of three of those years, two were in 1990 and one was November 2008, which was of course for the financial crisis. So are you saying that all the people on TV saying, expect more volatility around the election time, actually don't know what they're talking about and it actually doesn't work that way? Well, August and October leading up to the election do tend to be more volatile, but ultimately the VIX tends to bottom in Q4 in November

and December. Okay. Let's go to what this could mean for returns for the rest of this year. I thought this was really interesting table that you have. So you're looking at how often the S&P 500 has peaked for the year each month since 1980. And you're just adding up all of these monthly peaks to come up with like a composite, I guess is that the right way to say it? Yeah.

So it just shows how often the S&P has peaked for the year each month over the last four decades. So just like the VIX tends to bottom in Q4, the S&P tends to peak in Q4. It's done so almost three quarters of the time over the last four decades. And when that happens, the S&P is usually up strong double digits. So far, the peak for the year has been in this month in July, but the odds for it peaked, that's just happened as you can see on the chart, just once back to 1980, it's only like a 2% chance of peaking in July, whereas the S&P has much greater odds, about 70% of peaking in Q4.

So that is a bullish sign for equities. However, there's a question though that some people might say, did we pull forward returns because we had such a strong first half? We also looked at that data and the S&P was up 14.5% in the first half, but it's actually common for the S&P to be up by double digits in the first half. It has a third of the time back to 1980. When that happens, it's up over three quarters of the time in the back half. It is up by less, only an average of 7% as opposed to up double digits. But the positive momentum

does continue to carry through from the strong first half through the back half. So for people that say things like too far too fast or we front loaded the gains of this year or we probably got a full year's worth of performance already in the first half, your answer is actually it doesn't work that way. Three quarters of the time when you have a double digit gain in the first half, you're going to see more gains in the second half. And by the way, 14 and a half percent in the first half is great, but we do that about a third of the time, one out of three years. So it's actually not aberrant

in any way. Yeah. One out of three years, you see the S&P up double digits in the first half. I want to go back to this table. So for the people listening, this is 44 years worth of data. So this is the S&P 500 back to 1980. In 23 of those 44 years, the S&P has peaked for the year in December. So 52% of the time, the market finishes the year out basically on a high. That is pretty surprising. I had no idea that it was that loaded in terms of where the best time of year typically falls. Were you surprised when you did that research?

I mean, it makes sense because it makes sense for the S&P to peak in December because again, you just have that positive momentum carry through. But I agree, it is a staggering number that half the time the S&P peaks in December. I also wanted to just reiterate June, July and August, it's less than, it's 4%, a 4% chance that you'll see the market peak during those three months. So a summer peak is extraordinarily rare relative to the last, I don't know, almost half a century here. So there's got to be something meaningful to that seasonal idea.

Yeah, if the S&P peaked for the year this month, that would be kind of an anomaly. Again, yeah, it's only happened one other time. Okay. Let's do some NASDAQ stuff, guys. So you guys are looking at the NASDAQ's 100-day trailing out performance versus the S&P this year. One of the biggest topics on the street is whether or not the small cap rally relative to large cap growth, large cap tech has legs.

It was a huge burst of small cap outperformance two weeks ago. It hasn't really followed through, but it's also not over yet necessarily. We won't know obviously. So is that what we're trying to figure out here, the NASDAQ 100 relative to the overall market? I think so. The first question is, are we seeing a bubble pop in tech? We don't think so.

We have the first chart is the NASDAQ's 100-day trailing outperformance versus the S&P 500 this year has been far below bubble territory, even at its peak. It was up at most by five percentage points versus the S&P earlier this month versus 77 points in March 2000. Now of course, the S&P does look a lot more like the NASDAQ now, given its outsized exposure to big tech. So we also looked at the NASDAQ's 100-day trailing returns relative to the equal weight S&P.

And it did beat the equal weight S&P by two standard deviations earlier this month. What's interesting though is when this happens, history shows the NASDAQ still outperforms the equal weight S&P over the next 100 days, just to a lesser degree. So ultimately, we do think that US large cap tech will remain under pressure in the coming weeks as investors continue to rotate into small caps. We think that trade still has legs, but we're still bullish on tech through year end. So somebody could say it got too, the rubber band got too stretched between NASDAQ 100 relative to the rest of the market.

And it snapped back to some extent, but that doesn't mean tech will necessarily underperform historically. That's not actually what happens. What it has historically meant is that the gains for tech are calmer relative to the rest of the market. It's not quite as extreme. So that makes it like a metaphor for that would be like a fever breaking. And it did feel like a fever in the first half of this year, an AI driven fever, where it was those stocks up to the exclusion of everything else. And coming back into balance this summer just feels healthier.

I don't know if it really is, but it feels more balanced, the way the market's been behaving over the last two weeks. Would you guys agree with that? Sure. Yeah. People like also when other parts of their portfolio participate, even people that have large positions in these tech stocks, it does feel good when they have, you know, a financial services stock rally 20% in the course of two weeks. It makes them feel smart. And I think it adds to sentiment. And maybe someday you guys will take a look at what happens to market sentiment after

one of these snapback periods where there's a catch up trade. I would bet that people in general feel pretty good about their own skill as investors after that happens. What do you think? Probably true, but we'll do the data and come back to you next time. Yeah, I'd love to see that. All right, Nick, you wrote about the power of surprise.

You talk a lot about surprises. I wanna quote you to you. Earlier this month, you said, "'Using just one word, describe why asset prices change.' That was a popular question when I was coming out of business school at the University of Chicago in 1991 and looking for a job on Wall Street. Surprise was the safest, most commonly accepted answer.

Every price in capital markets is set by the consensus expectations of investors. As new information comes into the market, it never exactly fits those expectations. That's the surprise which changes prices. I think that's a pretty good explanation for like a universal explanation for why market prices move every day. Why is there movement every day in the market? Because people are continuously being surprised by this development or that. That's a pretty good frame through which to view market activity.

But what did you want to talk about in terms of the power of surprise this week? Yeah, the point behind that observation was, as you said, that things move around because unexpected things happen. And as you frame your own view of the market, whether you're a trader or a shorter term investor, like maybe a year or a very long term investor, the fundamental nature of the work that you do has to be different. So if you're a trader, like I was at SAC working for Steve Cohen, and my entire process was to fill out a book every single day of every possible event that could affect my stocks and then grade them sort of one to five

as to how much impact they might have, because Steve would walk over at 345 and say, I wanna go along a million GM this evening, going into tomorrow, what do you think? And he wanted to see like every single possible event that could happen over the next day that would affect the stock in a surprising way, even if it surprises a quarter point.

It's still a surprise you make money on that trade. If you're a long-term investor, say you wanna own a stock for one or two years, you've gotta think about surprises that are gonna happen over two to three quarters. So what are earnings like? Look, Peter Lynch made his name in the 80s by basically having a team of analysts

call every company he owned and say, how's the quarter? How's the quarter? How's the quarter? Every single month, as long as he owned the stock. That's how he figured out surprise. If you are a very long-term investor, like your investment horizon's 10, 20 years, you're going to be looking for regions and sectors that can consistently surprise to the upside.

And that's why the US equity markets work better than the rest of the world. We have more innovation, therefore more positive surprise, and the technology sector has been the best performing sector for the last decade by far, because the power of human ingenuity leveraged through Moore's law basically creates a lot of upside surprise. So no matter what kind of investor you are,

surprise is the thing you're looking for, but you've got to think about it in terms of, okay, what's my workflow look like to capture those surprises more than the next guy? I have so many follow-up questions to this. It's such a powerful idea. So working backwards as a long-term investor, you're looking for the sector within the stock market where the most potential surprises are possible. So of course, tech would

be one, maybe biotech would be two, that sort of thing, but biotech has much more hits and misses than regular tech. So maybe that's what- Very idiosyncratic. That's what makes that tougher as a sector than tech. So just generally speaking, the most innovation is going to happen within tech and the United States has the most technology companies that are innovating and is itself the most innovative dynamic economy. Therefore, long-term bet technology in the United States. And it worked. Like if you possessed this insight 30 years ago and stuck to your guns, it was the right long-term trade. So I find that really interesting.

Yeah, and the question for the next 30 years is, okay, cool, that worked the last 30 years. Is there anything different about the next 30 years? And I don't see it. The US still has a deeper venture capital market. It still has the world's best universities. It still has the right process to get some of the right people into those universities and then give them capital

to start businesses. That it does better than anything else. Is the US system perfect? Absolutely not. But it's just, it only has to be better than the rest of the world. And it certainly is. Going back to the shorter term idea.

So Steve Cohen would wanna know what are the things that could affect GM? What are the possible surprises that could move? I'm guessing it would be very unpopular to give him the answer that random things could affect the stock price by a quarter of a point and would have nothing to do with surprises or fundamentals or news in any way, just sometimes stocks move for no rhyme or reason. Or did he not believe in that idea that there was randomness on the street?

Like what was his psychology about positions and stock price movement? The psychology was the best traders hit rate is 60% meaning they lose on 40% of positions. So you're always shading a bet basically to try to get from 50 to 60%. And so the more information you have, the better chance you have. He did not mind having a losing trade. He minded being surprised.

So for example, if GM CFO was going to be in Boston the day he was owning the stock, he would want to make sure he knew the hourly progression of those meetings, who he was meeting with, and this was all he was owning the stock, he would want to make sure he knew the hourly progression of those meetings, who he was meeting with. And this was all public information at the time, so it's nothing untoward. But he would want to know, OK, is the CFO in a good mood?

What did he have for breakfast? Who's his first three meetings? How much stock do they own? How are they predisposed to cyclicals right now? That's the kind of information he wanted to have, that he needed to have in order to juice returns from a coin toss to 60%. And that's how every great hedge fund manager makes their money. It's just tweaking things a little bit in their favor with information of so they can outperform. I think that sounds both exhilarating and exhausting.

To be a part of into have witnessed. But as you know, I absolutely love your stories from the SAC days and your takeaways. So thank you so much for sharing that. Guys, I want to make sure the viewers and listeners know where to learn more about Datatrek. So they can go to datatrekresearch.com as many people have and continue to do. And they can also watch you now on YouTube. So the YouTube channel, I think the address is youtube.com slash at Nick Colas and Jessica Rabe.

And they can find, how often are you guys going live on video these days? Oh, we've had a dry spell the last two weeks. We'll be back on this week. All right, get back in the saddle. I know it's summertime, but the people need you. Thank you so much, Nick. Thank you, Jessica, for joining us.

And thanks to all of you for watching and listening, and we'll talk to you soon. Thank you. Thank you. All right, gangsters. It's five o'clock in the East, which means it's time for another all new edition of What Are Your Thoughts? I'm your host, Downtown Josh Brown, with me as always, my co-host, Mr. Michael Batnik. Michael, say hello to the folks.

Shalom. I want to say a couple of quick hellos to the people here on the live chat. Akbar Mohammed, what up? Rainer Luther Shelley. What's up? Mike Russo is here. Brown Brown Dog says late. No, we're right on time.

Rainer Luther Shelley. Was that three people or is that one name? No, that's one person's name. Eric Steckler is here. Raw Dog. What's up, Josh? What's up, Raw Dog? Everybody's here. What can I tell you? Pam Hill is here. John Maria Malmezzi is here. Josh. Let's get started. Time is money. You're right. You know, we raw dogged it today. We did. What does that mean?

We were going to go jet skiing, but it was too windy. So we just went for a walk. So is everything raw dogging that doesn't involve AirPods? Is that basically? All right, let's raw dog this intro. We got sponsored tonight by Public, the Public app, and public.com. Michael, tell us about public.

Here's what I'll say. I hope you're wrong about your July rate cut prediction because I want all of that 5.1% APY that I'm getting at public. And you're trying to take it away from me. So I don't really love that. I'm getting it too. I move money over to my public account.

It's like two clicks on the app, right from my bank. Could not be easier. You can earn 5.1% APY with public right now, and it's an industry leading rate and there were no fees. There were also no minimums. It's pretty easy. Let me read the disclaimer. Is it liquid?

Liquid is water, my friend, treasuries. Listen, this is a paid endorsement for public investing 5.1% APY as of June 17th, 2024, and is subject to change full disclosures in the podcast description. Okay. I know we're doing earnings tonight and we have a big number out of Microsoft, which we're going to get into. Who could that be? Jerome Powell.

Oh, what's up, fellas? It's Aaron Dillon, everyone. There he is. Aaron Dillon and Cole. Aaron is our favorite IPO specialist and that's where we want to open the show. Some recent data makes it clear that we are back in a healthy IPO environment. Aaron specializes in companies before they come public, getting investors access to them, understanding them,

analyzing them, conveying information about them. So we're so excited to have Aaron here tonight. Aaron, did you know that according to Renaissance, there have been 82 IPOs priced so far this year? That is a 37% change from the prior year. Did you know that? Do we have that table? I've seen some stats, yes. Okay. It's good. It's up. 11% change from the prior year. Did you know that? Do we have that table?

I've seen some stats, yes. Okay. It's good, it's up. It's up and business is getting done again. I guess the table with the yellow bars, if you guys could pop that. So like, it's not like a barn burning or anything, but it's some activity, some light and some heat, right?

That's right. Also wanted to share with you the Renaissance IPO index, anything but it's some activity, some light and some heat. Also wanted to share with you the Renaissance IPO index, which we also have a chart of, is up on the year. It's not up as much as the S&P, but it's also not down. And this is a sign that recent IPOs are holding their price. And of course, this is the main condition necessary for other companies to want to come public. If everything that comes public just drops like a bomb, no one's coming out. So we have things moving in the right direction and we're about to raw dog ourselves maybe

another 80, 90 IPOs in the second half of the year. What do you think about that? Let's do it. Yeah, I mean, it looks better out there. That's do it. Yeah, I mean, it looks better out there, that's for sure. So I wanted to ask you what you see on your radar right now as somebody who is deeply involved in companies that are on the runway. Yeah, so I think there's several IP, I mean, we're looking strong, as you said. That said, there's no blockbuster IPOs, right?

The biggest one that I'm seeing, Josh, is Shien, right? Which is going to go in London. So it doesn't really help us here if you're a US investor. But that's the fast fashion company that looks like it's going to go at $66 billion valuation. That's big, right? What the hell is fast fashion? Like Zara or H&M. It's companies that they see a trend on TikTok or Instagram. They have it in the stores two days later. Ah, okay. You got it. And it's like, it's like disposable clothing, very terrible for the environment.

Yeah. It's not good. Uh, Uniqlo might even be higher quality. This is like a $9 skirt or a $25 sweater. It was trending on Monday. They have it in the stores by Wednesday and it'll be replaced very quickly with whatever's next. So Zara is probably the best example of this or H&M, which is Nordic.

And then Xi'an is China's version of that. Aaron, I know you mentioned that this one is going to be listed in London, but perhaps the best barometer or metric of IP activity is the NASDAQ, the equity. Josh has been talking about this for a while now. NDAQ, another 52- Josh has been talking about this for a while now, NDAQ, another 52 week high, stock looks really good. Yeah, I mean, things are holding up. I mean, just looking at, I mean, Josh mentioned earlier, like IPO's holding up, just to name a few.

So Astera Labs was one that came out earlier this year, that's up 17% since the IPO. Reddit is up 70%. Tempus AI was another big one, that's up 26%. I should have bought Reddit, I knew. I should have bought. No, you didn't know shit. I did. Roll the tape, roll the tape. is up 70%. Tempus AI was another big one that's up 26%. I should have bought ready. They're holding in there. I should have bought.

No shit. Roll the tape. Roll the tape. You don't know shit. Bark and stock looks pretty good. Really good actually. You mentioned that, well first of all, let's get into some of these stats here. So 82 IPOs through July, that one annualized to like 142 full year. So in 2019 as a reference point, the last pre-pandemic year, we did 163. And I think people thought of that as normal. So 23 billion raise so far. Last week was the biggest IPO of the year.

We talked about it. Lineage, which is a cold storage REIT, but whatever. It was a $20 billion company. Let's get into some of Aaron's charts here. So walk us through what we're looking at these visuals. Yeah, so this is the total amount of capital raised per year. So before we were looking at the number of IPOs, this is the capital raise. So these numbers look even better than the number.

We're going to get very close to 10,000. This is the number of deals actually in front of us right now. Oh, I'm sorry. I'm sorry. Number of deals. Yeah. And then the next chart is the total capital rate. So 40 billion is what we're looking at and analyze this year. So we're halfway through the year. These other years are full years. So Josh, you look at these two charts. I think what's interesting is maybe some of the stuff got pulled forward into 2020 and 2021. right? You think those were good years and everyone pulled it forward. So that's why the last two years, maybe not so. In the movie industry, they're saying their motto is like, stay alive till 25. Is that sort of similar to the IPO market?

Because we've got a lot of big ones that are trying to come public. I listen, there are a lot of pre IPO stocks, Michael, very attractive companies, I think, that are still private. I don't know if they're going to go public anytime soon to be quite. Let's throw this table up. Let's go. Let's go through some of these. Let's go through some of these.

So your top 10 bite dance, which is tick tock, space X open AI, Stripe, Stripe spin on this list. I feel like for half of my adult life, um, data bricks, Revolute, Canva, X AI, Anthropic, and then core weave. Right. So there's a theme on this list. The theme is AI. Yeah.

I mean, X AI is, is Elon Musk's AI. And then he's also on here with space X, which is the second largest, 210 billion. They think ticktocks worth 293 billion. Um, I think it might be, uh, what, what do you think is the most likely of this top 10 list to be getting ready to do something in the second half of this year? Zero. Wow. So what's the reason for that?

They can raise a lot of money, Josh, in the private market, like no problem. The amount of capital that's being raised in the private markets and the speed in which it's coming at these companies is, I haven't seen anything like this in my 20 year career. All right. But so how do those investors find an exit? How do they get liquidity? The money that's coming in today? Yeah, so it's either hang in there for the IPO or the secondary markets liquid, Michael,

in the private stock space so they can buy in the secondary and sell in the secondary too before the thing even goes public. These days, it's almost like being quasi public to be through like a series B or C and just be sitting there. You almost like you can get liquidity for your shareholders. You can report earnings as though you already were public, sharing as much or as little detail as you want, quite frankly. What is the contingency though? You just have to stay below a certain number of investors. Is that the contingency though? You just have to stay below a certain number of investors? Is that the only constraint here?

I believe it's 2,500, but Josh, if you're a venture capital fund, that's one investor on the company's cap table. They can have, depending on the type of fund it is, if it's a QP fund, it could be 2,500. If it's a credit investor fund, you have 99. And of course, there's layers on top of that. So there could be thousands of end investors. Tens of thousands. What are all these tenders? Walk us through some of the tender, pre-IPO tenders and primary raises.

This is part of the mechanism by which these companies stay private longer. That's right. So just to lay a foundation, what's happening, and XAI is an interesting case. These guys raised $6 billion in like four months time Through venture capital funds non investment banks and venture capital funds, right? So 41 venture capital funds came in then there were layers of venture capital funds that came into those funds So there's an entire ecosystem that comes in right? So that's what happens with these tenders as well So a company like stripepe just did a tender. Right. Or Canva is a good example.

A billion dollar tender in January. There is the billion dollars in like three months. Venture capital firms came in. Other funds came into those. And it's all high net worth. RIAs, broker dealers. So this is what I'm trying to. This is what I'm trying to understand.

Who is selling stock on the tender? Is the company raising money or these earlier earlier investors just getting out or is it a combination? It's a combination. So sometimes you see just employees and existing investors and the company is kind of like controlling that tender, right? The valuation, who's participating at least directly in the cap table with the company. And then, you know, other times the company needs to raise capital too.

So it's a little bit of everything. How much visibility do these investors get into what's going on inside the company? So the folks coming into the venture capital funds that are directly participating with the company almost get no transparency. I'm talking about the venture investors, the people that are actually making the decision to invest. Yeah, full data rights. Right. But Michael, what would normally happen, making the decision to invest. Oh, yeah, full data rights, right? But Michael, what would normally happen, like if you imagine what this happens, it's almost like an auction. So you're the CFO of Canva, right?

You need to raise a billion dollars. So you go out to your VCs that are already investing to you. You say, who wants shares? I'm selling a billion dollars worth. People put their hand up and like take a tranche. And then they turn around and got to raise that money. So they go to other venture capital firms or existing LPs that they have and say, look, we're going into Canva. I got a $100 million slug, like who wants some? And then this process starts.

And in 90 days, they raise a billion dollars. You mean this pyramid starts. Well, Aaron, is it conceivable that we could have a generation of companies that go public after having cycled through multiple generations of investors in the private market. And if so, like these are companies presumably that are they want to come out at $10 billion valuation plus. Like otherwise, why would you wait this long if not for that outcome? Okay.

So, so, yeah, so I mean, so there's ample liquidity. Yeah, go ahead, Josh. Go ahead. No, well, so the follow on thought is if investors want to capitalize on the earlier stages of these companies' growth stories, they basically have no choice other than to have a pre-IPO sleeve in their portfolio. Yeah. I mean, Josh, I've been telling people there's two stock markets in the United States

now. There's a public stock market and a private stock market. All the growth, like if you look at the S&P 500, the top 10 companies, they're all tech companies. These were these companies that we just talked about 15, 20 years ago that are now the top 10 of the S&P. If you want that same experience, you're not getting in the Russell 2000 anymore. People don't go public at a billion dollar valuation and then you get to ride it as an index investor all the way through in the public

markets. You got to participate. So I think it's right. I mean, you could argue, is this venture capital? I don't know. I mean, no, the 20s. So the cutoff, I looked before we got on the cutoff from the Russell 2000 to the Russell 1000 this year is $4.6 billion. So I have 30 stocks in my research coverage, three pre-EPEO stocks. 26 of the 30 would be in the Russell 1000 if they were public today. Dude, some of these are mega caps that you had in your list. Yeah, for sure, Michael. So I read somewhere that there are 1,200 plus unicorns currently in the private market. So 1,200 separate companies that have a billion dollar valuation or more.

And it strikes me that there are no rush because the equity financing and the ability to get exits is so healthy in these private markets that you really don't have billion dollar companies with guns to their head. But it wasn't that long ago where like Airbnb almost had an open revolt among its employees. Like if you don't go public this year, right? I don't see any. I mean, I wouldn't know, I guess. Maybe you would know. But when I look at these names, Andoril, Epic Games, which is Fortnite, Databricks, Rippling, we're hearing about these companies, Figma, we're hearing about these companies

year after year, there doesn't seem to be a ton of desperation at any of these firms. The employees seem to get it. Okay, so Josh, here's the kicker. Last year, perfect example, last year, Stripe had a whole bunch of employees where they were terming out on their options. And this is where you get like revolts at Airbnb because employees that usually have 10-year terms on their options. So if the company hasn't gone public in 10 years, you have these like non-qualified options.

You have the huge tax bill if you exercise those. So you got to go public so you can do a cashless exercise, right? And Stripes in there, they raised $6.5 billion to basically reset their option pool so that they can continue to stay private. So they decided to not go public. They would rather stay private and they raised $6.5 billion in like four months time.

Right. It was wild. Goldman was big in that deal. So this is the kind of stuff that's happening. You can raise billions of dollars in a very short period of time in the private market. So what is the point of going public? Is it true that they call you the SPV King? Is that true?

Is there any truth to that? I'll take it. Yeah. I'll take it. So right now you are helping the wealth management and family office space who have clients that are trying to get into these companies. What would you say the demand side is like? I know it's not 2021 anymore. Yeah. But I'm sure there are five or 10 deals that people are like, I don't care what the valuation is. I just want in.

But then there's like another 20 or 30 deals below those that I doubt people are clamoring for. Correct. Buying. Okay, I mean, I would say, you know, kind of in simplest terms, if it's in the if it's on the front page of the Wall Street Journal or Bloomberg, right, people want to buy it. So it's funny how the private markets have their own mag seven. It's like it's funny how there are haves and have nots in the private markets just like in the S&P. It's like it's it's always no matter what is a great heuristic. It's always high school. That's right. So this is high school. You got the popular girls and guys and then everyone else. So Aaron, we're going to goodbye you, but I want to say thank you so much for

stopping by tonight. If people want to learn more about what Aaron Dillon does for investors, please visit the link in the description below. And Aaron is standing by ready to talk. Okay. Thanks, dude. Yeah, man. Good to see you, dude.

Michael, you're up. All right. Let's talk about our consumer. Has been coming up. Are we healthy? Are we delinquent? Are we more choosy? Spending indiscriminately?

What's going on? All right. So we're going to go through some companies. The Visa Chief Financial Officer said in the US, they reported last week in the US, while growth in the high spend consumer segment remained stable compared to prior quarters, we saw a slight moderation in the lower spend consumer segment. I pulled up a chart, John, chart on please. I believe this looks like an American Express 30 plus days past due and net write off rates.

And, you know, it's really not a ton. No, it's really not. There's nothing here. You have to really try hard to turn this into a story. OK, let's throw this. So turn to LVMH, which is a luxury brand. Josh, what is LVMH sell? Tiffany?

Well, start with the title. Louis Vuitton, Moet, Hennessy. So these are the biggest luxury brands. The only things they don't own, actually, are Cartier and Gucci. They put it on Versace. I don't think they own Versace either. But outside of those, they pretty much

own every other luxury brand, including the only luxury brand we have in America, which is Tiffany. Okay. So Tiffany and then all the leather stuff, they own all of that. 60, 70% market share in love. They own Sephora, which I know is not quite the same thing. But yeah, it's just, it's massive. Okay. It's incredible.

So let's stop this quarter just to flex for them a little bit. How beautiful this, this is, I'm going to read an interesting quote. Um, so they spoke about champagne and he said, as far as champagne is concerned, I think we have a severe demand issue in champagne. Champagne is quite like, this is interesting. Champagne is quite linked with celebration, happiness, et cetera. Maybe the current global situation, be it geopolitical or macroeconomic,

doesn't lead people to cheer up and open bottles of champagne. I don't really know, but the fact of the matter is, our volumes are down double digit. OK, chart off. That's Ozempic, dude. But I want to ask you this. That's not Ozempic. I want to ask you this.

Yes, it is. Ask me. What do you mean? Why is champagne ozempic? Because all alcohol, there was less demand for alcohol among the, let's say, one in 20 people who are currently on a weight loss shot. And it's going to get worse. I got to tell you, these people don't drink anymore.

They don't have nicotine cravings. They don't want to open champagne. They don't want to get worse. Got to tell you, these people don't drink anymore. They don't have nicotine cravings. They don't want to open champagne. They don't want to drink beers. They will drink one high noon and they're good. They don't want to eat. They don't want to snack. I'm telling you. You think volumes are down double digits because some people are taking Ozempic?

Well, what else could explain it? No, honestly, nothing. It's the only explanation. So I think the people, I think people, the people who were most likely to be big drinkers are also big eaters, you could take my word for this, and many of them have completely reversed this element of their lifestyle,

and it's now showing up in the volumes of bottles of champagne being purchased. That's it. Chardown with the wines and spirits. Well, just because you said that's it doesn't actually mean that's it. Come up with a better answer. Organic revenue down 9%. Profit is down 26%. So yeah, it's a big drop.

Okay. Well, I was going to flip it out. Chardown, please. I was going to flip it. He says that there's no need for celebration. What if it's the opposite? What if people celebrate, people are more prone to pop champagne when times aren't great because there's like reason to celebrate like, oh, we have this. Things aren't great, but we've got this. What if things are like sort of not too hot, not too cold that they're just like, not bad. And there's no, everything's sort of status quo. Yeah, that could totally be. I also would throw in, there's a generational element to this where for people under the age of 40, champagne is not associated with celebrating. It's associated with high sugar and headaches and hangovers. And these people would prefer to celebrate with weed

or high noon or non-alcoholic beverages. There are just there are new trends coming along in consumption that needs to be paid attention to. So I think that's it. I think champagne is just not hot anymore. Like who drinks champagne? Who drinks champagne now? Our generation, we had rappers that celebrated champagne. So much so that think, I think Christal, the CEO, said that he didn't like it. Like he didn't like that Jay Z was talking about Christal and Jay Z said, okay, fucking racist, I'll come up with my own champagne, Ace of Spades.

And then we saw, I think Diddy did a champagne. So like that, that era, the culture was about champagne, but that's, it's the 90s. It's the 90s. I don't think that the celebrities of today are like big on like champagne as the way that they celebrate. And you know, I just think it's like just think it's a declining thing. It doesn't mean it's dead or it's going to zero. It's just maybe not the best gauge of the economy. Well, good thing. We're going to keep it moving. Okay. So, fashion and leather goods.

Organic revenue up 1%. I mean, that's not great. Not great at all. I thought this part was really interesting. G-Graphic Mix. Next chart, please. So, a quarter of their revenue is coming from the United States. Not great at all. I thought this part was really interesting. Geographic mix, next chart please. So a quarter of their revenue is coming from the United States. Interestingly, maybe not. France, I guess that's in line with this market cap. 8% in France, 60% in Europe, 30% in Asia. But this is

the coup de grace within this report. They said, next chart please, you could see the incidents of Chinese customer purchases abroad with a very positive impact on Japan, up 57% in Q2, which remains one of the fastest growing destination for Chinese tourists. So the weakening yen had a massive impact on consumers. So rich people in China were going to Japan and buying the products over there. Oh, that's really interesting. That's so similar to how Americans go to the leather markets in Italy every summer and clean them out, which I witnessed firsthand two summers ago. So, I was in Capri and there was a line of, I don't know, like they could have been European,

but I felt like they were mostly American. Just a line wrapped around the block waiting for the delivery to come in that day. And the woman working at the store, this may be Chanel in Capri, or I don't know, I can't remember, but like Ferragamo look like that, Prada look like that, they all look like that. They're getting deliveries by the day and the store is getting cleaned out. So that's partly a phenomenon of just like how people are spending their vacations. But currency too. But currency too, 100%. So anyway, so the stock's been trading really shitty, down 30% thereabouts. But interestingly, Josh, Hermes, I don't know if I said that right,

percent thereabouts. But interestingly, Josh, Hermes, I don't know if I said that right, looks a lot different. You said it flawlessly. Thank you. Their CEO said, in the first half, Hermes posted a solid performance. Turnover stood at, so I guess revenue at 7.5 billion euro, up 15% driven by our loyal and new customer base. All regions recorded double digit growth. All the regions continue with the incredible momentum. Troll on. Wow.

So this is certainly serving a similar consumer, no? Yeah. I think there are some mix shift differences. Hermes will be probably more not just handbags, but luggage and things. But Josh, my point is it's not necessarily the products, although that's obviously a big part of it, but they're serving the same consumer, which goes to the main point is it's not necessarily the products, although that's obviously a big part of it, but they're serving the same consumer, which goes to the main point is that we keep saying the consumer is just being more pricky. They're spending money here and not there, not everywhere. Yeah. And the thing with these luxury brands is you always have to be careful about picking

the data from one and ignoring the data from the other when they diverge because there are just shifts in what's hot and what's not. So Gucci is ice cold and has been for three years. Chanel, Hermes, Louis Vuitton all on fire. And that changes. You never know. Next year it could be Fendi or it could be Bottega Veneta. It keeps moving.

So it's hard to look at one company and try to tell a bigger story. I guess Hermes right now is on fire in a way that some of these other luxury brands aren't. But to your point, there's somebody spending somewhere. And I think that's important. Conor Send did something at Bloomberg, and I'll just quote him. He says, demand is sagging, and the main thing keeping layoffs at, he's analyzing corporate conference calls so far this quarter.

Demand is sagging, the main thing keeping layoffs at bay is confidence that rate cuts will begin soon, and usher in a brighter outlook for 2025. So talk about survive till 2025. Companies are now openly talking about coming rate cuts on their conference calls, which is a new thing. The Fed now needs to deliver not just one but a series of reductions to maintain business confidence and ensure there's no further deterioration in the labor market.

About a third of the way through second quarter earnings season, the proportion of companies beating revenue is the lowest since 2019. The slowdown is apparent in parts of the economy tied to household borrowing and consumer credit. So that's the automobiles. Whirlpool, which owns Maytag, et cetera, is the last thing. Commentary from many hard-hit companies shows why we won't repeat the downward spiral that the labor market experienced during the financial crisis. If the Fed acts quickly, Whirlpool said during its earnings call it would benefit once interest rate reductions ease pressure in the housing market. Brunswick, which makes boats, same thing, rate cuts beginning in September would provide

a tailwind next year. Pool Corp, self-explanatory, swimming pool supplies, said orders haven't picked up yet, but increased inbound calls show customers are just waiting for confirmation on lower borrowing costs before making a decision. So basically, the economy is resting on the edge of a knife and we just need rate cuts to push us over into continued expansion. And companies are now openly talking about it. And I find that really fascinating.

So before we get to some of the earnings reports we got this afternoon after the bell, I want to talk about McDonald's because that has been just super hard hit. They said, we are confident that accelerating the arches is the right playbook for our business. And as consumers are more discriminating with their spend, we are focused on the outstanding

execution of whatever, whatever. The discriminating their spend is the important part. But they also said- Read the rest of that sentence. Strategic growth drivers like chicken and loyalty. I do like chicken and I'm very loyal. Here's another one. Chicken and loyalty is so fly.

That should be the new slogan of the brand. At the end of the day, we expect customers will continue to feel the pinch of the economy and a higher cost of living for at least the next several quarters. So McDonald's reported global comp sales down 1%, US down 0.7%, international markets down over 1%. And guess what the stock did? Stock responded actually pretty positively. And a similar story, which we're going to get to in a second with Starbucks, these stocks, the companies aren't doing great, but they're just not doing quite as bad. And by the way, I'm both these names. It's just not doing quite quite as bad as what has been baked in. And we could only know that you can only

know that after the markets reacts because it was fully conceivable that McDonald's supported the shit quarter and the stock could have been on 9%. Well if I believe in anything other than chicken and loyalty, I believe that a company like McDonald's announcing its first negative same store sales in four years and the stock price goes up, that's a buy. So I don't know if it's going to go screaming to the moon, but I would not be a seller here. I like that. I like that price.

The water's warm. Um, so I don't know what accelerating the arches is. It sounds like, what, what, what are the things that happened to orbit that? One of the things that came out on the call is basically the $5 value meal, which was necessary to increase foot traffic is cannibalizing their other sales where people would normally have spent more on higher margin bro but they do that as loyalty that's right and loyalty that's right that's right i get it i get it well i mean chicken and loyalty is really something it's a playbook any company can can focus on i think nike should pivot to chicken um i think they should not wait. So this is the biggest week ever.

You have a Fed Day tomorrow. So you have an FOMC decision tomorrow. ISM manufacturing readout the next day, Thursday. Jobs Report Friday. And the most companies reporting and also

the biggest companies reporting Microsoft, Metta, Amazon, Apple are all this week. I want to do the Fed odds first. So throw this up. Current odds 96% chance of no cut tomorrow. 4% chance. Oh look, that's you.

You're in the 4%. That's me. You contrarian son of a bitch. 25 basis point cut 4% chance. I still think that he wants to like reassert himself as the surprise guy. Maybe I'm wrong. You are gonna be insufferable if you're right. I'm standing on it. Well the best part is I don't lose anything if I'm wrong because I'm not betting. I'm not like in the futures market betting.

Alright so heads you win, tails out, go fk yourself. What does the market do if that 4% likelihood happens and they cut rates and say, we will remain data dependent. What does stocks do? They just fly. I know that there's like the, well, what if that goes up a thousand points. What if stocks interpret the rate cut as a negative surprise and, uh-oh, what's up? Stop. You're being too cute. Too soon. Too soon. Too cute. Stocks are going to work. I agree. Small caps up 7%. We got July non-farm payroll on Friday.

So let's assume the Fed has seen this number. The consensus estimate is 175,000 non-farm payroll jobs added and US unemployment staying at 4.1%. Put this table up. This comes from our friends at Yahoo Finance. This just gives you a sense of what the numbers look like in context. You could ignore the unemployment rate for right now. Just focus on the left, on the green.

It's a moderating but not bad jobs market, basically. If we come in at that number. We'll see what happens. Initial jobless teams, which are an obvious leading indicator, just nothing with nothing. We could get an upside surprise one of these weeks, but not yet. Look at the companies reporting this week. This is nuts. Apple, Microsoft, Amazon, Meta, Exxon, MasterCard, P&G, Merckx, Chevron, AMD, Lind, T-Mobile, Qualcomm, McDonald's, Pfizer, Armholens. What's Lind?

Lind, PLC? Do they make chocolate? Is that the company? That's what I was thinking. Is that what they do? No. It's a lot of billion. That's a lot of market cap, either way.

All I know is I don't know. All right, let's do Microsoft because they're actually out. What do we got here? Lind is the largest industrial gas supplier. I did not know that. Okay, Microsoft. So the story with Microsoft was, matter of fact, they beat. They beat top line, they beat bottom line, they beat, G Munster said they beat on 11

of 12 operating metrics, but the big one was Azure. Cloud growth. Was Azure was 29% and the street was expecting 30%. By the way, this is the type of thing where like, I said earlier. How dare you? I said a second ago that McDonald's,

if you just saw the report, you could have said the stock would be down 9%, it was up 4%. With this Microsoft, you don't know what's priced in until the market reacts. There was a great quarter. It just on that big, one very, very big important metric, the market didn't like it. So John, throw up this chart from Consensus Groovers.

Okay. Revenue up 15% year over year. Which is great. Objectively great. Yeah. Gross profit up 14%, operating income, all right, a little bit of margin contraction. And guess what? I think one of the things that the street might be concerned about is more margin contraction. Gene Munster tweeted, "'While AI stocks will likely be down tomorrow

on the Azure's miss, I believe the AI trade has attacked big tech infrastructure spending, continues to push down harder on the AI spring. Microsoft's critical capex number was $13.8 billion, up 55% year over year. Is that bullish for AI and all of these chips? That's so much money.

It is, but at the end of the day, you got a stock selling 30 times earnings. And what I said on TV today with Wapner was like, nobody thinks that Microsoft's gonna have a bad result, but we don't do good and bad. We do better or worse. with Wapner was like, nobody thinks that Microsoft's going to have a bad result, but we don't do good and bad. We do better or worse. This was not materially better than the existing expectations. It's a stock that's up a lot over the last year. A lot of market cap added, and it's a relative game. So relative to the excitement around the stock,

it was just not enough for the price to go higher. Where are we now in the after hours? You're right. 396, John, throw up the line chart of the stock performance, please. I think we're down, let's see, 6%, 6.5%. All right, so this is year to date returns from Microsoft and the yellow line is where it's gonna open if it opens where it is today. So this stuff- Oh, so this is year to date returns from Microsoft and the yellow line is where it's going to open if it opens where it is today.

So that's bad. That's a dude. The stock was up 24% and now it's going to open up, you know, 2% depending on how it's going to lose 2024 is gains. And again, it should be reiterated on great results. And this is the problem with everyone crowding into the same seven or eight stocks that have insanely high expectations. It's really hard to continue.

Like Nvidia has made it look easy over the last four quarters. Most of the time, companies of this size cannot do double digit earnings and revenue growth as far as the eye can see it's just not So it's not realistic to expect that so what happens so now what happens so Microsoft maybe? Gets a couple downgrades tomorrow stock goes into the penalty box downgrading Microsoft. No, I might never know never anyway I don't think they should we'll see what they say in terms of guidance on the call the call is not begun yet But what's interesting is that Nvidia sold off, I think, another 3% or 4% after Microsoft reported.

But then we got AMD's numbers. AMD reported very good numbers. And now Nvidia is up a couple percent of the after hours. See? All's well that ends well. We're going to get, who else do we get this week? We're going to get Meta and Amazon. Appleta.

These are like huge moments for the market. I feel like it's important. It's important. And I think, listen, I, the setup is better going into this earnings than it was last time. Like I liked it in videos down 23%. I liked it.

There's a little bit of doubt. Like the bar has been lowered. This is a good thing. Let's do Amazon. Put this graphic up, John, if you please. Thank you. This is the expectations for the Q2 earnings report. $149 billion in revenue versus $134 billion in the same quarter last year. That's

about 11% change. EBITDA, 32.7 versus 26.5 or a 23% jump. and earnings per share, $1.02 versus $0.65 in the same quarter last year which would be, ready for this Mike, a 57% jump. Nope, 56.9, nice. Okay, but I mean, nice. Amazon's down 3.5% though in the after hours because the cloud is there, that's their engine, that's their growth engine. So we don't know how to interpret Azure. Do we interpret that as AWS is battling back

and taking share from Azure? Probably not. Or do we interpret that as it's a cloud slowdown period and Amazon's going to repeat the same thing? The market is saying the latter because Amazon's down 3.5% of the after hours. Yes, there is a, let's see, Sean gave us some notes here. Analysts are Matt Garman took over as the AWS division leader. The original guy stepped down on June 3rd. This is his first

reported quarter at that role. In 2023, AWS was two thirds of Amazon's operating income, but only 16% of total revenue. So it's their best business, fastest growing business, and it's the one that everyone's going to be paying attention to, period, end of story. So all right, Metta, you want to just jump on this really quickly? Zuck said Metta could spend up to $40 billion in catbacks for 2024, 42% year over year. These numbers are insane. I didn't listen to the Jensen Wang Zuckerberg interview yet, but he said-

We don't have this, sorry, on screen, we don't have this chart labeled, but this is meta, 19.7% revenue growth expected, 60% earnings per share growth expected. Go on, Michael. Both him and Sundar over at Google, both said that they would rather be over-invested in AI and chips than under-invested in AI and chips than under-invested. I don't love that. Why? Rather overspend than under-spend?

Didn't we do that in 2021 on the metaverse? This is not that. Here's from the transcript they tweeted from AMD CEO, our AI business, and that's where all the spending is obviously, our AI business continued accelerating and we are well positioned to deliver strong revenue growth in the second half, led by demand for whatever these processes are. I don't know what they are. The stock's at 4% after hours.

That's all you need to know. Just the result and just the market is smarter than anyone else. And if the market interprets it as bullish, it will be bullish. Pfizer. So I've been talking about this name a lot. That's the only reason why we're touching it today. It's definitely not a fang stock. It's not as exciting.

But reported this morning, beat on earnings, beat on revenue, raised earnings guidance, raised revenue guidance by a billion dollars. And basically, we affirm the turnaround. This was the first sales growth quarter for Pfizer since exiting the pandemic. So they are COVID-related sales. Remember, that's Paxlovid, which is the treatment and the vaccines, down 87% year over year this quarter, but they don't matter anymore. They're in this bucket of other and analysts are not expecting any growth there.

And that business is just being managed down, maybe not to zero, but it was under 200 million this quarter. So, Pfizer is now back to growth overall. Nurtek, which I think is for migraines, heart stuff, oncology, blah, blah, blah. It was cool to see. And I think that's why the breakout is holding for this name. So Josh, I followed you into Pfizer in early June and I quickly sold it as it broke down. I said, nah, I don't really feel like taking a big loss on this. But then I bought it back last week. That's a professional.

That's how you do it. So I'm back. That's a professional. You know how hard that is for people to do, honestly? I took a small loss. Now I'm back. That's very hard. Are you glad to be back?

I'm thrilled to be back. Yeah, no. It's not fun to do that, but I thought it was the right move, the right decision. So far, so good. All right. One last thing. I just want to talk about Starbucks because they've reported after hours as well. Global comp store sales declined by 3%, driven by a 5% decline in comp transactions, partially offset by a small percent increase in average ticket size. Net revenues declined 1%.

Not good. Starbucks is in it. They're in a turnaround. But guess what? Again, what's the stock doing in the after hours? Up a couple percent. So that's what matters. Turnarounds can take a really long time. This thing needs more punishment. No, no, no. Dude, the stocks are 5%. More punishment. It's got f*****g annihilated. I'm going to buy this thing. I'm going to buy this thing. I don't think they're out of the woods yet. And a lot of it's outside of their control. Oh yeah, guess what? Well, a lot of that is in their control. The gap up at 87, it's getting filled. I don't know when it's getting filled.

You know what Starbucks should try? All kidding aside. Chicken and loyalty. Chicken and loyalty. Yeah, I know. Just give it a shot. I know, I know. What's the worst that could happen?

Okay, you wanna do this risk appetite thing? Yeah, okay. I love this market. I love what's happening. I love that there's a rotation out of tech and into not everything else, but the market's not falling apart. The, I know maybe, maybe famous last words, but Nvidia is in a 23% draw down and even the cap, forget about the equal weight, the cap weighted index is down 4.5%. Yeah. So, all right. What else could you ask for?

Look at credit spreads. Try it out, please. This matters to me. This is telling you, now you might say, this makes no sense. People are complacent. Okay, fine. I'm not talking about what will happen. I'm just saying today, risk appetite is strong. Look at the next chart. This is the rest of-

Wait, wait. Can we back up and explain to the audience what this is? This is double B rated bonds spread above treasuries? Yes. Okay. So why is this meaningful? Why is the line doing what it's doing? I can't tell you why investors are so calm right now. But the point is, this is a measure of risk appetite. And when these things go up, that means that investors are demanding more compensation because of either earnings or macro or whatever. And right now, they're saying, no, I'll take 1.69% nice over treasuries. And again, I'm not making a judgment on where this goes three months from now. But today, risk risk appetite is strong even with some of these big tech stocks selling up.

And to that point, would you believe that as of tomorrow, the Russell 2000 will in all likelihood be outperforming the Nasdaq 100 year to date? How about that? Oh my God. When just three weeks ago, the Nasdaq was up 20% of the year, the Russell 2000 was flat. How quickly things can change. How quickly the turntables turned. Yes. Well, these factor guys are going to be insufferable on Twitter. Good. I love it, dude. Thank God I'm not going to be there for that. I love it. It's been a lot of punishment. Remember we spoke about the percentage

of stocks outperforming the index had fallen to like a record low. This is when Nvidia peaked early in June. No stocks were outperforming basically. Now Kevin Gordon from Schwab tweeted, over the past month, 70% of S&P 500 members are outperforming the index over the previous month. That's the highest in 30 years. I love this.

Finally, a reprieve, the face bashing that these poor bastards pick up. Put that back up, John, if you please. Is over, finally, finally. Dude, look at this turnaround. Wild. Like from the absolute worst to the absolute best in terms of the percentage of S&P 500

components that are doing better than the index. It's crazy to turn around. I'm here for it. One more thing. It's so exciting. It's so exciting. Tech is again from Kevin Gordon. Tech is currently having its worst month relative

to the S&P 500 since April 2016. And before that, you have to go back all the way to January 2008. Trudolph, Josh, we've spent so much time over the years talking about how these tech stocks have deserved their multiple increase, their per share increase. It's all been deserved, but it's been the only thing that's working. And it's hard to imagine in real time, why would small cap stocks outperform Apple? Why would the hell would I own the Russell 2000 if I could own the best companies in the entire world?

There's only one answer, expectations. That's it. That's it. As great as Apple is, everyone who owns a stock already knows it. And as susceptible to higher for longer small caps are, everybody already knows it. That's what you need to produce the turnaround that we've

seen in the last two weeks, the low to the high for the rest of the market. You just need a flipping of expectations to where they've just gotten so ridiculously out of whack. But you know what? And for people who are listening to this on the podcast, they've already heard this, but I talked to Nick and Jessica this week, and they are not convinced that what we've seen in the last month means there's a new era of small cap outperformance. According to the data, what usually happens after a flip like this is that large cap growth continues to outperform, but at a much lesser rate. So there's not a lot of evidence that this necessarily leads

to this like Renaissance for Russell 2000, or even small cap 600. Yeah, that's my people. People should be excited, but like. It might be a blip. Listen, Nvidia might be at new ultimate highs in two weeks. Who the hell knows? Absolutely.

It's very, very exciting though. It's nice to say and I agree if anything else It's a sign of risk appetite people being willing to trade down in quality in cap size People willing to get away from fangs take some risk elsewhere I'm here for it. I want it. The equal weight S&P is for all intents purposes at an all time high It's it's half a basis point away even all of the destruction in Mega Cap Tech stocks. We've been waiting for this. It's finally here. All right.

Did you read my Bitcoin President thing this weekend? Yes, and I watched 40 minutes of that. I watched the whole hour. So basically, I've been all over this story this year that we're going to get to this moment where there's nobody left who's anti Bitcoin or crypto assets because the amount of money that's going to go into campaigns for both parties is just too much money. And all resistance to this asset class is just melting away. Well, there was no upside to being anti-Bitcoin in the first place.

Like you're preaching to the choir. You're not winning new votes. That's so that's the thing that I wrote about in June. And I basically said, no one's going to write you a check for getting on a, for getting in front of a podium and saying, I hate Bitcoin. Like that, there is no anti Bitcoin constituency. No, you're just antagonizing one set of voters who it's really important for. One set of voters, 175 million people. So there are anti crypto people, but it doesn't define them. And they

probably have things they care more about like abortion and guns and the environment and immigration. How many people you think are voting on crypto? For the pro crypto people. Well, that's my point. Is it like 5 million? For the pro crypto people, this animates them to the point where they will write checks, they will go out and vote, they will tell their friends, they will tweet their heads off. You don't see that really on the other side. On the other side, you have crypto skeptics who are just like, it's all scams. And maybe they're right. Most of it is,

but it doesn't matter. They don't go out and vote based on that. So I think the securities regulators have done the best they could, they can, over the last couple of years to try to choke this off, to try to stop it, to try to contain it, to try to make sure that these people conform to existing securities laws. And to some extent they have. The asset class was definitely chastened in 2021 and 22, excuse me, 2022 and 23 in the wake of FTX. But now it's swinging back the other way.

People who are still in the asset class, they have bumps and bruises they've been stolen from, they've been lied to, they've had manipulation, they've been rugged, but they're still here. And they don't want more regulation. They wanna just gamble. And stop telling me to stop gambling and stop shutting down the casinos that I gamble in. That's really where we've arrived. And this is animating people to the point where Kamala is now reaching out to

Crypto land and saying, who will appear on stage with me? Is it going to be too blame her is it too late No, I think it hasn't even started yet. I think when Kamala does her pro crypto event She's gonna like someone in her campaign is gonna quote unquote outline a progressive vision for crypto And you know the shtick it'll be like we're to bank the unbanked and look, look how many, um, people of color, uh, love the asset class. How could we ignore that? That's our constituency in this party.

There are going to be a lot of good reasons. It'll be as bullshit as Trump's speech. Well, it's, but it's all bullshit. But, uh, I think one is a couple of interesting things. Um, Kamala's husband, who I think will be called the king consort, I learned from House of the Dragon. Is that the title when she wins? Whatever it is.

He is a Bitcoin person, I think. Oh, yeah? That's interesting. The other thing, and Trump said this, this is now a thing, how much did Bitcoin go up during the president's term? So Trump said Bitcoin went from $800 to 35,000 during my time in the White House, and it's only up 50% during Biden's term. Dude, that particular part, there was like a smattering of applause.

There was like a couple of awkward claps claps because it's not his people. Trump said he will use the confiscated Bitcoin the federal government currently holds, 210,000 Bitcoins. To buy more Bitcoin? No, the strategic Bitcoin reserve, national strategic Bitcoin reserve. 210,000 Bitcoin is 1% of the 21 million that will ever be mined. And then we know a lot of them are lost forever. So the United States would end up owning more than 1% of the total supply of Bitcoin. Good idea or bad idea? I don't know, man. Can it be staked?

Can we make money from it? You don't know. What about when Trump said staple coins? Did you like that? I did laugh. I did laugh. Can it be staked? Can we make money from it? You don't know. What about when Trump said, staple coins? Did you like that? I did laugh. I did it. But he corrected himself. He corrected himself. Staple coins. That might be a better name. Actually, we have the most beautiful staple coins. There's no beautiful. Aren't they folks? They're beautiful. Yeah. My, my favorite part. This is not a political guys, you know, I don't care.

But when he goes, uh, Joe Biden, he's a, he's a wonderful guy. Also a terrible human being. How about the cities? We have the most beautiful cities that are on fire and going to hell. They're so beautiful and falling apart and terrible. Listen, I think that if, if crypto is going to be a thing that moves forward and there is innovation in the space, I'm a pro innovation guy.

I don't think it should be off limits here. Well, that's Trump's point is, well, we should be first in space. We should be first in AI. We should be first in, I don't think solar, but like, why wouldn't we wanna be first in Sol, you know, I don't think solar, but like, why wouldn't we want to be first in blockchain? I can't really argue with that.

I mean, I'm, I'm, I'm, I'm bored with that. Who will be Kamala's liberal or left leaning or central centrist crypto czar, Anthony Scaramucci or Mark Cuban? Who should she pick? I think I would pick Scaramucci. I mean, he's more of a crypto guy. Not only is he more of a crypto guy, he's also an attack dog against Trump. She actually kills two birds with one stone. Also he's a Republican.

So that would be somebody saying Kamala is going to unleash cackle coin. I haven't heard that one. That's kind of funny. I don't hate it. What about cubes? Put cubes up there as the cryptos are. I like it. He would love that.

He doesn't want to run for anything, but I feel like he would love to be tapped and he sold the basketball team, so he kind of could do that. Anyway, but here's the point. Both parties are going all in on crypto because this audience is ready to spend money and get rowdy. And that's what you need with one month left. If you would have told anyone in November of 2022 when FTX blew up that potentially the future of this election or the election results would rest on this demographic.

You would be like, what are you high? One of the things I wrote about, amazingly, the biggest applause line in one hour was that Trump's gonna fire Gary Gensler. Can you think of another time where the SEC chair was like this controversial to an audience of non-financial people? I don't think anybody likes Gary Gensler. But it's insane that that, it seems like this is one of the things that the election is going to hinge on, is who can get this army of fanatics on their side.

Listen, as a protect investor regulatory body, not allowing the ETF and then some of the other investment products are out on the market is really kind of disingenuous at best. Oh, RFK said he's going to instruct the treasury to buy a million Bitcoin, not a million dollars worth, a million Bitcoins. So fortunately, he's not actually running for anything and can't win anything. And even if he did, he couldn't get Congress to do this. But we're at this point where whoever can make the most outlandishly pro Bitcoin statement is getting a lot of attention, positive attention.

And again, nobody's on the other side. This is not like guns where it's pros and cons. This is either you don't care about crypto or you absolutely love it. Most people don't care. The people who love it are extremely involved in this election. And I thought that was really interesting. Okay. I'm going to skip. We could talk to the Morgan Stanley stuff another time. Jack Farley tweeted, Google is making over a billion dollars in interest income per quarter. Holy shit.

It's the problem with raising rates. I have said repeatedly, repeatedly, the only way to stop this inflation is by cutting rates. Not kidding. I'm telling you. Next chart. Sure. So sure word ran with this. This is phenomenal.

Net interest income for Alphabet versus total net income for other major US firms for the listeners. We've got Kroger, then Target. Again, all of these are smaller than the net interest income for Alphabet in a quarter, in a quarter. So wait a minute. Apple, Alphabet is making more money on cash in a quarter than Kroger, Target, PayPal, Kraft Heinz, Starbucks, Chipotle, Blackstone, Airbnb, and AMD make in a quarter on their

regular operations. I believe it's quarter versus quarter, but yeah, that makes sense. But again, like Blackstone, Blackstone's pretty good at making money. They make about half as much as what Google makes on their cash. Starbucks, Google makes more in its cash than Starbucks makes from its operations. Yeah, with 8 million employees in every airport around the world and Google is just sitting there. So, are you starting to agree with me that the, the rate of risk free return

on cash is inflationary? Like I really think it is honestly. I, you know what, how about this? That's so complicated. I just don't know. I don't know. I know. I don't think that's another example why it could be true. It's another example. Why it could be true. All right. Are we done? We don't make the case. Let's do it. The show is beefy. Yeah. It's an action packed super long show, but worthwhile. We had a lot to go to. So I want to talk about 3M. An amateur, I think, would look at the result today and say, I made money and take it off the table. What would a professional do? I think a professional is now looking at this like, all right, I want to accumulate on dips because I think the story has materially changed.

But we nailed this. I've been telling them at this on TV, you made the case on this stock. Yeah. Somebody in the chat was thanking you. I think you might have done this as either a make the case or- Oh, I did. I did. I did. I did. I was talking about post-its. Yeah, yeah. I remember that. Okay. Anyway, we spotlight this thing on multiple occasions as a breakout in progress at 103, 104. It punched through on the earnings, poetic justice. This is when, that's when you should get a breakout. And basically the story here, let's, we doing a chart?

Josh, I so agree. People would say I missed the move. No, no, no. This is the confirmation. Give me the one year, guys. Sorry. Give me the one year, guys. Sorry. Give me the one year price chart. So look, this is what a breakout looks like.

In case you're not aware, when we use this term, it's a technical term. It refers to price, not fundamentals. You got a spike in relative strength. You got a spike in the share price itself above. And it's in a new orbit, basically. And this is a long time coming. We have a three-year chart. I want to show you this, guys. Look how long this, look how much time this stock's spending in downtrend. So good. Yeah, you buy this.

So good. So it's above, it's 200, I believe that's the weak moving average, 200 weak moving average. I believe that's the weak moving average. 200 weak moving average. The numbers of the numbers earnings per share was 193. $1.68 was expected. Sales were $6 billion. $5.8 were expected. Full year estimate they raised from $680 to $730 to $7 to $730. They raised the floor. Operating margin expanded 17% to 22%. And the stock ripped 23% last Friday. Biggest day ever? It was single best day for 3M going back to 1972. So in half a century, this stock has not done that. And I want to, before I make the case for holding it, I just want to point out what we're talking about here. We say breakout.

So I think professional investors who have been around for a long time, of course, they want to bargain, but they're not looking to buy a stock at its absolute lowest price. I think they want to hang around the goal. When you buy a stock that's been consolidating below a specific level, and it just looks like a little bit of good news, and it'll pop through. That's what I mean by hanging around near the goal. I try to teach my kid this in sports, especially basketball.

When you hang around near the basket, you're gonna get lucky. You're gonna catch a rebound. No, he doesn't. He stays out on the wing, because the coach wants him there. But I'm like, the coach wants you to score. Don't listen to the coach. Listen to your father. Get under the basket. Use that big body to buy. He's a he's like a horse. You got to use that those hindquarters to box somebody out, put a body on someone and then jump up and grab the board and you will put it back and score. And the coach ain't going to say, why weren't you on the wing?

The coach going to high five you. With breakout stocks, stop looking at the 52-week, the all-time low list. You want to hang around by the goal. Look for stocks that are about to punch through resistance. My opinion, not everybody has to do what I do. But I got to tell you, like if you want to be in a position to score, be near the goal. This stock was consolidating just below the goal all year. I couldn't tell you the timing.

All I could tell you was it needs a little bit of good news and it's gone. And that's literally what happened. Josh, we had some great data from that chart kid pulled up on 3M's venture inside of the Dow Jones Industrial Average. Yeah, let's do it. What did he say? So we said, how long has 3M been in the Dow for? And it got in there- 50 years. 1976. Yeah. And it stayed in there the entire time. That's kind of crazy. It's been in there for that long. So I asked him how many companies were in the Dow back then that are still in there

today and he was able to go back to 1979. Only four. So aside from 3M, you have Procter & Gamble, Merck, and IBM. That's it. Now I don't know what that means, but it doesn't mean nothing. Well here's what it means. This is the second smallest company by market cap in the Dow. Now the Dow is price weighted, not market cap weighted.

That doesn't affect the weighting for the company in the Dow. I think it outweighs its market cap because it's $127 stock. They keep leaving it in here. They've had ample opportunities to remove it, but I think it's like a stand-in for all of these stalwart Midwestern manufacturing and industrial giants. I think you need at least one of them in there. And it's 3M. They leave it in there. They could have changed it out a thousand times. There's something important about this company that it remains in the Dow 30, regardless of the cyclical ups and downs. Hey, guess what? This that it remains in the Dow 30 regardless of

the cyclical ups and downs. Hey, guess what? This is the year of the Dow. Yeah, last thing on this. The catalyst here is not just the earnings, which were better than expected. There's a guy running the company now named Bill Brown. If you look up his history, and this is the reason I'm staying with it, even though I recognize it could pull back, Bill Brown ran a company called Harris Corp, which eventually merged with L3, became L3

Harris. Bill Brown ran that combined company. These are some of the best shareholder returns of all time. Prior he was at United Technologies. This is a guy that understands what makes an industrial company's stock go up. He basically did a reset for the company when he officially took charge this summer. They named him in March. I think that was the bottom when they named him. They basically kicked out this guy, Doug Roman, who had just presided over a complete failure.

They're cleaning up all these lawsuits. They're settling all these issues from the past. And now they've cleared the decks for growth. And I really like the potential here. Who knows what happens, but I am not selling, despite the fact that this is, I think, now the best or second best performer in the Dow year to date. I like it. Dude, the Dow's at $40,700. Word up.

No chill there. All right. Out of those units. My mystery chart, as I often do, it's going to be a layup. 40,700 word up. No chill there. All right. Out of those units. My mystery chart, as I often do, it's going to be a layup. I am a giver. Um, okay. This company that we're looking at, this is a long-term chart. It's a price. I like it. It's a Dow component.

It is the 27th largest market cap in the S&P 500. And next chart, please, John, I think we have one more. This is zoomed in a little bit. So that's good. It's an all time high. This thing just popped out. That's a beautiful all time high. I got to be honest.

I have no idea what's going on here. Can you tell me this? Can you just give me the sector and I'll give you the name? Yeah, it's consumer. It's probably a staple. What's going on here? Can you tell me this? Can you just give me the sector and I'll get I'll give you the name? Um, yeah, it's consumer. It's probably a staple. It's probably a staple. I mean, I guess it could be discretion, but it's more like it's closer to a staple.

What's trading at 67? That's a staple. This is harder than I thought it would be. Is it is it J&J? No, you put it in your mouth. Their products. I put it in your mouth. They're products. I put it in my mouth. That could be anything, Michael.

Is it chicken? No, but it starts with a C. Pete, starts with a C? Yeah. All right. They make the best syrup. Coca-Cola. Syrup? It's Coca-Cola.

What kind of clues are these? What do you mean? I don't know. You put it in your mouth. What do you want me to tell you? Do you know? They make the best syrup, you said? They do.

What do you mean syrup? Coca-Cola syrup. But you don't drink the syrup, you drink the soda. I extract the syrup. Wait, but anyway, do you? We've run long. Michael is extracting the syrup. Coca-Cola is at an all-time high? Like, I thought, okay, if you tell me that Ozempic is hurting champagne, then surely it would be hurting Coca-Cola. Coca-Cola sells water, Holmes.

Excuse me? They sell water. They don't just sell Coca-Cola. They sell Diet Coke. They sell water. They don't just sell Coca-Cola. They sell Diet Coke. They sell water. They sell things that are. No, but they sell water. They sell the sunny. Nobody drinks the sunny. It's a huge business. I only get the sunny at, at gas station rest stops. You don't. All right. Hey everybody. Hey everybody. Don't forget tomorrow is Wednesday, which means all new episode of animal spirits

coming at you. Michael Batnick and Ben Carlson, my favorite podcast on Thursday. Ben is back with ask the compound. They do that show live guys. If you have questions, you can send them to ask the compound show at gmail.com guys. Is that the right address? I don't know. We used to have a thing that we put on the bottom. Show at gmail.com guys. Is that the right address? I Don't know we used to have a thing that we put on the bottom. Anyway, get your questions for Ben and Duncan to ask the compound

We'll have an all-new edition of the compound of friends at the end of the week. And then this weekend, it's Jill on money Thanks so much for watching listening. Have a great night. We'll talk to you soon. Whether you're just getting started as an investor or you're managing a multimillion dollar portfolio, Ritholtz Wealth Management has the solution for you. It all starts with building the right financial plan to speak with a certified financial planner today, visit rdholtzwealth.com. Don't forget to check us out at youtube.com slash the compound RWM. Make sure to leave a rating and review on your favorite podcasting app. If you love investing podcasts, check out Michael and Ben every Wednesday morning on

Animal Spirits. Thanks for listening.