The Compound and Friends - Charlie Munger Passes, What’s in Warren Buffett’s Will With Gary Pulford, Year End Stock Rally

Episode Date: November 29, 2023

On this episode of TCAF Tuesday, Josh Brown is joined by advisor Gary Pulford to discuss Warren Buffett's philanthropy and how he plans to make an impact long after he's gone. Then, Josh joins Michael Batnick for an all-new episode of What Are Your Thoughts. This episode's topics include: Charlie Munger, market euphoria, record corporate profits, holiday sales, how Amazon jumped FedEx and UPS in the delivery game, and much more! Thanks to US Benchmark Series for sponsoring this episode! Learn more about F/m Investments and US Benchmark Series at www.ustreasuryetf.com. Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Ladies and gentlemen, welcome to The Compound and Friends. I'm your host, downtown Josh Brown. Very nice of you to join us tonight. It is Tuesday night. We have a great show for you. Warren Buffett put out a letter to his fellow shareholders. Warren Buffett has a net worth of about $121 billion, and he's trying to give all of it away, 99% of it away. And so we talk a little bit about what that's going to look like and how that works with our own in-house trust and estates expert, Gary Polford. And Gary Polford is a financial advisor at Red Holtz Wealth. He is very knowledgeable on the topic of how wealth is distributed philanthropically by families who have been very successful. And your family is going to be very successful someday. I mean, look at you.

You're listening to investing podcasts in your spare time. So obviously you are driven, trying to better your situation, trying to build your wealth. So someday, and maybe that day is soon, and maybe it's decades from now, you will be in a position to give away a lot of money. And so this is a really important topic, and I hope you enjoy the discussion between Gary and I. And then my buddy, my guy, my pal, Michael Batnick, my co-host for What Are Your Thoughts? We get into pretty much everything. We look at the collapse in volatility. We look at small cap tech, which is an area we really haven't spent a lot of time on. We get into the year-end rally or the potential for a year-end rally and so much more.

So stick around for that. And thank you guys so much for tuning in. If you're enjoying the show, if you like listening each week, the best way you can show us is by hitting the ratings and review sections of your favorite podcast app and tell everybody that you're down with The Compound. This is your show. Here's why you love it, et cetera. And if you do that, it really helps. Okay, guys, that's it for me.

Hope you enjoy the show. I'll send you there right now. 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. Hey guys, I'm here with Gary Pulford. Gary is a financial advisor at Ritholtz Wealth and one of our in-house trust and estates experts. Gary joins us from Orange County, California today. You're in Newport, right? That's right. Yes. All right. I love it out there. Hey, thanks for doing this. I wanted to talk a little bit about Warren Buffett because this week, or I suppose last week, fairly quietly, he put out a letter to his fellow shareholders.

This is a news release from Berkshire Hathaway dated November 21st. And he does this, I think he does this every year. And he's basically just updating everyone about the state of his will and his contributions that he's making to various foundations. So let me just set this up. Warren E. Buffett converted 1600 a shares into 2.4 million B shares in order to give these B shares to four family foundations. That's 1.5, uh, million to the Susan Thompson Buffett foundation, and then 300,000 each to the Sherwood foundation, the Howard G. Buffett foundation, and Novo Foundation. These donations have been delivered today.

But then he goes on to talk a little bit about what's going on with his children as the executors of his will and the trustees. And what were some of the things that you saw in here that jumped out at you, Gary? Well, I think he's certainly looking to get this money to work sooner than later. Rather than having to wait around until he's certainly looking uh to get this money to work soon sooner than later rather than having to wait around until he's long gone he's he he gave away close to a billion dollars last week uh to these four foundations yeah it's quite quite a lot of money he mentions that uh he says my three children are now and this is hard for their father to believe, between 65 and 70 years of age. For some years, their foundations have distributed substantial sums, occasionally to the same donee. Usually, however, the three follow different paths. It sounds as though he is paying more attention than before

to what his children are doing with their own distributions. Do you read it that way? Oh, definitely. Definitely. In fact, I went back and reviewed the 2006 letters that he sent to each of his children and he gives them guidance. And that was, we're talking 17 years ago. So he's been mentoring them all this time. And so he's finally figured out that they, he finally believes that they've got the knowledge and the experience to take over this process. Yeah. He says, my three children are the executors of my current will, as well as the named trustees

of the trust that will receive 99% of my wealth pursuant to the provisions of the will. They were not fully prepared for this awesome responsibility in 2006, but they are now. This is, I'm guessing, this is one of the all-time greatest fortunes, maybe the greatest fortunes ever to be given away. Warren Buffett is on paper worth $121 billion and plans to give away all of it effectively. So putting that in the hands of his three adult children is a pretty big responsibility. Well, and what also was interesting about this process is we're always telling our clients

they need to have a living trust, that a trust is an efficient way of distributing their assets. In this case, though, he's using a will, and he specifically states he's using a will so that this will be on record at the courthouse, you can run down to the courthouse in Omaha, look at his will, and see exactly what was done with his money. So he wanted to be very much full disclosure, sharing the information with the public. If you want to see where Warren Buffett's money went, you can go and read his legal

documents at the courthouse. Gary, he refers to this as a testamentary trust. Is that what you're saying? Or does that terminology mean something different? Well, testamentary trust just means it's a trust that was created by a will. Okay. So his will says, put the money in a trust and let my kids manage this money for 10 years or so, and then distribute all the money. Is this common? He says the three trustees, his children must act unanimously because of the random nature of mortality. Successors must always be designated.

The trust charter will be broad. Laws in respect to philanthropy will change from time to time and wise trustees above ground are preferable to any strictures written by someone long gone. So he's saying like things are going to change. Rules are going to change. That's why it's so important that the people that are living are calling the shots and not me from beyond the grave. You reading it that way too? Yeah.

He's saying that he trusts his kids to make the right decisions. I also like the fact that he required them to always name a successor because that's a case where sometimes somebody passes away and maybe you have to go to the court to appoint another successor. He's mandated that they always make sure that there's somebody there for the inevitable, which may happen at some point unexpectedly. This was interesting to me. I was not aware of this. The testamentary trust will be self-liquidating after a decade or so and operate with a lean staff. It'll be, to the extent possible, be funded by Berkshire shares. So what does that look like for, obviously in this case, but more broadly speaking, what does that look like for most wealthy people who are setting up their estate this way? Well, first off, we're talking about a $100 billion foundation, probably. Yeah, it's a little different from the average wealthy person.

And he realizes that they could put a staff of 100 people on there, but they don't need a staff of 100 people. He focuses on this money needs to be put to work in the next 10 years after I pass away. So he doesn't want this money to go on into perpetuity to be a dynasty. because the only rules are you have to give out 5% of a foundation each year. So if you give out 5% every year, you can have that money go on for generations, but then the generations tend to lose sight of the vision of the founder, which is Warren Buffett. Okay. So it's more important for him for this to happen quickly, relatively quickly, as opposed to his great, great, great grandchildren 100 years from now attending galas. I mean, his family will always be rich, but they won't be dynastic, per se, to your point.

Exactly. And he even points out in his 2006 letters to the kids that he wants this money to be given in large chunks to a few foundations. I mean, we talk about diversifying portfolios. I mean, you can see a portfolio with a stock portfolio with 300 different stocks in the portfolio. It's not going to have a lot of impact on one stock or the other. Whereas with this foundation, he'd rather see them put the money towards 10 charities that have needs rather than 100 charities. So he really wants them to focus the efforts, focus the results of this money.

When you're talking with wealthy families who are facing these issues and trying to make good decisions today that both keep the family focused on what they think is their responsibility, but also allow for some creativity in the way that money is used or given away. What are some of the issues that come up that maybe we're not reading about here, but that are worth getting into? I think one of the biggest things is to teach the family values to the younger generation. And in this case, Warren's been lucky enough, as he mentioned in his letter, he's kind of used more of his life than he's expected.

So the fact is he's had 17 years to mentor his children on this process, to share his knowledge and share his experiences. So I think that the biggest thing is just, it's one thing to pass money on to your heirs to have them handle it. It's another to have the time and take the effort to teach them how to properly handle it. It's a really good point.

And he's in a really lucky situation having lived as long as he has and I think having left behind a really great example. So it's not as though his children are all of a sudden going to start becoming amazing investors. That's not what their lives have been about. But there is this money and it does need to be used wisely. And so it's great that he's had that ability to spend this time with his adult children and give them that example to follow. spend this time with his adult children and give them that example to follow. And also probably in that process has taught other people with other foundations, much smaller, some of the core thoughts about how to run a foundation, the proper way to put that money to work. He even mentions about some things in his letter talk about giving the money to

causes rather than the people who ask for the money. Yeah. And making sure you keep that money local, too. You mentioned that it stood out to you that for the first time in a while, it looks like the Bill and Melinda Gates Foundation is not on the recipient list. And obviously, there's been some headline risk there. list. And obviously there's, there's been some headline risk there. I don't think that, I don't think that any of us would understand the relationship between Warren Buffett and Bill Gates and how things are these days, but maybe like when you're doing something that's charitable, maybe the smart thing to do is just avoid any potential controversy if, and where you can,

you see it that way. Exactly. But plus also too also, too, when he made that initial bequest to the Bill and Melinda Gates Foundation, again, that was 17 years ago. Maybe he's just decided it's not so much an issue of what's going on with Bill Gates, but more so a matter of just that I have more trust in my kids now, and I want to focus everything with my family rather than to an outside entity. From your experience, when in the life cycle is usually the point where this conversation gets started? Is it usually generated by, let's say, for a first-generation very wealthy family? Is it usually a sale of a business or a death of a matriarch or a patriarch

that sparks this? Or do you encounter wealthy families that are way ahead of schedule and talking about these issues even sooner than then? Actually, I think one of the biggest things you have to face is you need a family that's philanthropic. I mean, certainly there's tax benefits to this. The reason Warren Buffett's wealth is going into a charitable trust is so there's no estate taxes that can be paid on that money because it's all going to go to charity over time. But I think, yes, certainly it is a case when somebody has got liquidity, when they've sold a business, they've inherited money, but it's more so they have to have a deep passion for helping others. And that's something that not every

wealthy family is going to take hold of. Yeah, there has to be a belief system in place that they want to see the money do something other than just pay taxes when they're gone and sometimes while they're here. And that's got to be the underpinning of the whole thing. Otherwise, a lot of this stuff is just not going to be relevant. Correct. Exactly. Okay. Hey, I want to thank you so much for joining us today. And of course, thanks for all your expertise on behalf of our wealthy clients who are facing these issues and trying to do the right thing. You do an excellent job. We appreciate it. Thanks, Gary. Thank you very much, Josh. Always enjoy.

All right. Microphone check. One, two. All right, guys. Hey, we didn't know we were gonna have to start with this but a true true investing legend passed away i don't know like within the hour we we got word and uh we're still going to do everything that we were planning to do tonight but wanted to make a little space to talk about Charlie Munger on the Mount Rushmore, I would say, of investors, legends, 99 years old. He almost made it to his 100th birthday, which I think would have been January 1st. So just an incredible, legendary investor. We're going to talk about that in one moment. But first, Michael, let's thank our sponsor of this week's show.

So the sponsor for today's show is US Benchmark Series ETF. They allow you to target specific maturities, specific parts of the yield curve. And check this out. They roll each ETF to the newest treasury security as it's issued. And that rolling process realizes capital losses and defers any capital gains. To learn more, that's the magic of ETFs. To learn more, go to ustresuryetf.com. That's ustresuryetf.com. Very cool idea for a product. All right. So look, this was a day that everybody knew was coming. You're talking about a 99-year-old person who has lived and seen a century. And I thought it was interesting i was this weekend i was actually finally i finally got around to listening to the acquired podcast this might be his last interview

ever yeah so they had him so let me give people a little bit of background charlie munger has never been on a podcast before he did his first podcast michael i know you're friendly with andrew marks it seems like andrew marks put the acquired guys into Charlie's dining room to get this done in Los Angeles. And then you hear him in the background throwing out some questions. But Charlie spent, you know, had dinner, but spent like an hour or more talking about some of the greatest investments of his career, the relationship with Warren Buffett. So if you really want to do a deep, deep Charlie Munger dive, that's his latest thinking on everything from China to Costco to Home Depot to anything. So I would definitely point people there. What's the first thing that occurred to you when you heard the news?

What's the first thing that occurred to you when you heard the news? I guess, well, it's hard to be surprised when a 99-year-old person passes, but, you know, you just heard him a couple of weeks ago and his voice was a little bit tough, but certainly sharp as ever. Yeah. He had a lot of Yogi Berra-isms. He had like a lot of really great sayings that on their surface, they were a little bit silly or paradoxical, but the more people don't go there anymore,

it's too crowded. He had a lot of those types of sayings, but there was so much depth. I'll hold that up. Who got this for us? We each have a signed copy from Charlie Munger, which is pretty dope. It says for Mike, and he signed it.

Was this Ed Borgato? I don't know. I feel bad. Somebody sent that to us like a year ago. What an amazing gift. I feel bad that I can't remember who got this for us. Now, the problem is he thought he was signing it to Michael Jordan. So I don't know if you're upset about that.

I was thumbing through this, and believe it or not, I've never read this. I mean, it is definitely a tome. It's a coffee table book. It's not something that you... This is Poor Charlie's Almanac. So this is Poor Charlie's Almanac. This is the third edition.

I don't know when the first one came out, but I was just thumbing through it, and the foreword is written by Warren Buffett. And I won't read the whole thing, just the first two sentences. He said, from 1733 to 1758, Ben Franklin dispensed useful and timeless advice through poor Richard's almanac. Among the virtues extolled were thrift, duty, hard work, and simplicity. Subsequently, two centuries went by during which Ben's thoughts on the subjects were regarded as the last word. Then Charlie Munger stepped forth.

And it's only two short pages, but Charlie Munger wrote a rebuttal. Stop thumbing through that, by the way, because I don't know what that's going to be worth, the book. Maybe put on a pair of gloves. But listen, so Charlie Munger wrote a rebuttal. And again, I won't read the whole thing, just the first couple sentences. He said, I think there's some mythology in the idea that I've been this great enlightener of Warren.

He hasn't needed much enlightenment. I frankly think I get more credit than I deserve. It is true that Warren had a touch of brain block from working under Ben Graham and making a ton of money. It's hard to switch from something that's worked so well. But if Charlie Munger had never lived, the Buffett record would still be pretty much what it is. And what Munger is referring to is the credit that Buffett has given him for extolling the virtues of not buying a fair company at a wonderful price or a decent company at a wonderful price, the cigar butt style of investing,

but buying wonderful companies at fair prices. And that was a gigantic shift from what he did in the early days of his partnership in the 1950s. Yeah, right. So Buffett has given Charlie Munger credit for the unlock, whereby Buffett went given Charlie Munger credit for the unlock, whereby they went for, Buffett went from buying, the cigar butt thing is a very specific thing, which was really like, okay, we know this company is already dead, but there's a couple of puffs left, like picking up a cigar off the floor.

There used to be actual companies that had more cash, like literally more cash in the company than it was worth alive. And so those sort of inefficiencies obviously disappeared a long time ago. But when they did, Munger said there's probably a better, an easier way to do this. Right. So he gets the credit for that. And without that insight, there's probably no American Express investment, probably no Coca-Cola, definitely no Apple.

So Warren's strategy changed from the hardcore Ben Graham discipline of only buying the cheapest securities to something where, okay, you're willing to pay up akshire, but I've read my share, that unlock is the one that really made the huge difference and I think separated Buffett from a lot of the other value investors of that era, of which there were many. You say that Charlie Munger is, I guess him and Warren, probably him, the most quotable investor of all time? I guess him and Warren, probably him, the most quotable investor of all time? Yeah. Him and Peter Lynch probably are the two that in the popular parlance of traders, investors, et cetera, you'll hear somebody say something and not even realize that Munger said it first. I want to give people a little bit of a background. Charlie Munger, in addition to being the vice chairman, this is from CNBC.com's obit, was a real estate attorney. And he was the chairman and publisher of the Daily Journal Corp, which is a newspaper. He was a member of the Costco board. And I mentioned a podcast that he did a couple of weeks ago. He spent a lot of time talking about what made Costco so obvious and so special.

He was worth about $2.3 billion, according to cnbc.com at the start of this year, which we forget, it's a huge amount. Buffett's worth 120, so the two are not comparable, but 2.3 billion is a pretty gigantic number. And obviously, most of that is from the appreciation in Berkshire Hathaway shares. As I was thumbing through the book, here's just a great example of who is Charlie Munger. Somebody asked him a question, do you use a computer?

And he said, I don't. I do have one in my office, but I've never turned it on. In fact, I wouldn't even know how to plug it in. In my life, there are not many questions I can't properly deal with using my $40 adding machine and dog-eared compound interest table. He's like the only, when you think of investing wisdom, which has become sort of taken hostage and turned a little bit cheesy, he's really the founder of all that wisdom. Yeah, I also think he's a guy that never changed

and he gets a certain amount of street cred for that. Like this is not a guy that like in the 60s and 70s was saying one thing. And then when the 80s came along, started doing all these LBOs because it was fashionable. Like he never pivoted to becoming like a tech guru or a macro. Like he really just always focused on investing in great businesses. Hated. Always focused on investing in great businesses. Hated.

He has opinions, but he wasn't changing what he was doing based on the times around him. He really stayed true to what he always said he was about, which I think is very rare. An old soul, somewhat to someone described as cantankerous. I know that he hated Wall Street, but I don't think he cared much for investment bankers. Definitely hated consultants. Yeah. Yeah. And then some of the last comments that he made about investing people, you know, were, were asking him on a consistent basis. Like, has it gotten harder? He said it was never easy and it's harder now. Like that was a great, that was a great Munger quote. Like, like it was never easy. Yeah. And it's harder now. Like that was a great Munger quote. Like it was never easy and it's even harder now. So he doesn't think that there are no opportunities for investors, but I think he's been very circumspect.

His point is you cannot have trillions of dollars chasing opportunity and everybody getting a happy ending. There's just – the industry is bigger. The amount of hands in the pot are more plentiful. And it's just not going to be true that all these people who are claiming expertise are going to be able to deliver for their investors. I don't think that's an irrational comment to agree with. I think it's a pretty easy comment to agree with. It's not popular to say that on Wall Street.

His legacy will be that of the number two at Berkshire, the number two to Warren Buffett, and probably the greatest sidekick of all time? I would say so. I would say so. And I could only imagine what today and the rest of this week will be like for Warren Buffett. This is like somebody who's been a constant in his life as much as his three children. And it's got to feel like almost more than the end of an era. It's like the end of a lifetime given how long they've been working together. the end of an era. It's like the end of a lifetime given how long they've been working together. So our hearts go out to the Munger family and all of the shareholders who had gotten to know him

over the years and anyone whose life he touched, which of course is probably a million people, investors, business owners, et cetera, and Warren Buffett. So that's our brief but necessary encomium to one of the greatest investors of all time. We may have more to say on this later this week if we can get our act together. Okay, let's do the show. I think Charlie would have wanted it that way. Okay, year-end rally looking to me me like a slam dunk of course you know

anything can happen out of the blue um geopolitically but absent any kind of uh exogenous event i don't see why this year would be different from most years which is a lot of active managers in a position where they have to do something more aggressive than they've been doing all year. And what that ends up looking like is a race into the fastest growing, highest flying stocks. It's not novel. It's not unique to 2023. But that's my baseline. That's what I expect to see over the next four weeks. What about you? So what's happening? Why should this year be any different? Now, of course, who knows? Exogenous events happen all the time. But assuming no news that shocks the market, the chase is on. That's just what it is. Willie Delwich at Highmount said, for the

first time in 16 weeks, last week had more stocks making new highs than new lows. In bull markets of the past, greater new highs than new lows. In bull markets of the past, greater new highs than new lows was the rule, not the exception. This is like one of those statements that on its surface is obvious, but people like almost like drift past this. They shouldn't. This is really what it is.

This is what a bull market is. Can you say that one more time? For the first time in 16 weeks, last week had more stocks making new highs than new lows. So he's talking about 52 week lows versus 52 week highs. It's been negative that equation until last week. And in my experience, it's probably not likely to be a blip. It's probably going to be a sea change. And why that's great is there are a lot of stocks that have not had a good year, especially when you look at it relative to,

let's say, the NASDAQ 100. So that's what I think you're going to see. You know what we just had for the first time in a long time, in a relatively long time? We had a V-shaped recovery. The October 2023 low to today. Yeah. The October sell-off was straight down. Effectively, we were down like nine out of 11 days and we came straight back up. And it's the first time that's happened in quite a while. I really think that my mutual fund tax law selling idea was the reason why it looked that way in October. I mean, it's easy to say in hindsight.

But that's really what it was. I didn't think there was anything fundamental going on. We got a benign inflation print, so that was important. And maybe we got, like, softer rhetoric from a couple of Fed heads. But I think the real thing that happened was people stopped doing tax law selling toward the end of October and there were no sellers left when the month turned over. If you look at a chart, that's what it looks like. I mean, that is purely like fitting a narrative to what happened.

This is what I do. I'm one of the best in the world. You are very good at it. Ari Wald at Oppenheimer, one of our favorite technicians, talks about something that I think also gets overlooked or people really are not fully aware of. Technology almost always leads true bull markets. So before we pop this chart, let me just give you Ari's actual word. me just give you Ari's actual word. Our feel is that bearish investors that largely missed the S&P 500 gains in 2023 are gravitating toward the Russell 2000 in belief there's greater potential in lagging benchmarks. He disagrees, but he points out if you're going to do that, you might want to

do that in small cap tech. Technology has outperformed during 20 of the 23 bull cycles since 1932. This means that in a bull cycle, tech usually outperforms. That's why the S&P is benefiting. It's got 27% weighted toward tech. Russell 2000 has too small of a technology proportion to keep up. Hey, you know what? Go ahead. Are there any small cap sector ETFs? Nope. XLK is at an all-time high, right there. There's not. I looked. There is no explicitly

Russell 2000 tech ETF. Opportunity? You could launch it. I mean, it's going to be a collection of garbage. You know what I mean? Like small cap tech is super dicey. Like it's not going to be a great long-term investment strategy. Is it tradable? I think this is the environment where it is tradable. These are stocks that are involved in some of the hot themes, but they just haven't done anything. But we're going to show you some of these names right now. Let's pop. First of all, let's pop this first chart,

Russell 2000 Technology. So if you were going to build a Russell 2000 Tech ETF, this would be the index that you're basing it on. But on the bottom, it looks like it's breaking out relative to the rest of the Russell 2000. Or at least it's about to. That's what Ari's you showing coiled and ready to spring so russell 2000 tech versus russell 2000 um the next chart is some of ari's favorite

small cap software chart uh some of ari's favorite small cap software individual charts um i don't even know what these things are. Braze, B-R-Z-E. Couch Base. Okay. Freshworks. And Elastic. And none of these are in uptrends. These are all basing. These are all stocks that are basing, but look like they've cleaned up their sellers.

So let me ask you this. Let me ask you this. So assuming that the rally continues to the end of the year, chart off, please. Would you rather buy the leaders? I'm just talking for the next, whatever, 30 days. Would you rather buy the leaders or the losers that stopped going down? And who are the losers that stopped going down? Like, for example, like Target or Dollar General, like would you rather buy the losers or ride the winners?

So like not to be a dick but i'm already in the leaders like like i like i know do you own uber do you own uber yeah it's up 100 this year i'm in nvidia i'm in crowd strike i'm in apple like what i'm in the leaders you know what i'm saying all right but if you weren't if you weren't not to brag if you weren't. I'm just saying. Yeah, because here's the thing. Yeah, what? Yeah, what? Yeah, I would buy the leaders again if I wasn't. Or I'd buy the leaders that I don't own.

There are plenty of them. I'm not into everything. But I did buy. I bought Zoom and PayPal, which are two of the biggest laggards of the year, of the last three years. Zoom is such garbage. You're going to be so wrong on that, it's embarrassing. I bought PayPal. You and I talked about it. Time out. I'm not making any forward statements about

Zoom. I'm saying it looks like shit. You might be right. Yeah, it is shit. No, it's shit, but it's 14 times earning shit, so I think it's been de-risked. Oh, but at least it's not growing. It has that going for it. Dude, they have billions of dollars in cash. I know their big contracts are growing. No, no, no, but at least it's not growing. It has that going for it. Dude, they have like billions of dollars in cash. I know their big contracts are growing. No, no, no, no, no. Barely growing.

Barely growing doesn't matter. The balance sheet is great. They have time to figure it out. They have a new CEO. The balance sheet. Have you learned nothing from Charlie Munger? You poor son of a bitch. I've learned a lot from Charlie Munger. It's one of the first things I look at. All right. One thing that I'll say in the case of PayPal, Affirm and Shopify have

absolutely left that stock in the dust and they do the same thing. They're in the buy now, pay later business. Yeah, it's sick. Affirm, there might be a really big short squeeze underway in Affirm. I haven't really looked. Shopify has left orbit. PayPal is in a lot of the same businesses. And we could talk more about that later. I wanted to show you this. I had Sean put this together. So if you're asking like what are the Russell 2000 tech stocks that we're even talking about, here they are. These are the 10 – let me explain what this is.

These are the 10 highest volume in terms of daily trading in the Russell 2000, not the best or the biggest. So SoundHound, which is AI, and C3, which is also AI, no surprise. Those are trade – I think this is the biggest dollar volume, not share volume. That doesn't look right. Not to question Sean's work. $9 million? That's like $0. That could be more.

That could be in billions. $9 billion worth of stock changing hands? No, no, no. The market cap's probably not even that big. Either way. No, the market cap doesn't have to. The market cap is turning over multiple times in some of these stocks. Not a day.

Per day. No. No chance. We'll find out. All right. These are the highest volume. Be that as it may. That's the point that we're trying to make.

Go ahead. Do you know any of these stocks besides C3 AI? Do you know Array or Bakkt or any of them for that matter? I bought AI. Some power. So for example, I'm looking at SoundHound. Its volume today, it traded 7 million shares today. SoundHound is, I'm not like in the stock,

so I don't want anyone to take this and say, Josh is pumping sound. I don't know anything about recent fundamentals on it. I don't follow it. I know what the business is. SoundHound is like when you call a restaurant to order takeout. This is why I know this. When you call, uh, I called Anthony's coal fired pizza the other day. Dude, that place has great wings. Yeah. Great. That's,

that's what I eat. Low, low carb. When you call there, you don't talk to a human. You talk to, it's probably SoundHound. You talk to an AI. You tell it what you want and it asks you follow-up questions like, do you want the sauce on the side? Or do you want to give me a credit card number or pay in cash when you arrive? Your entire interaction is with an AI voice robot. And it's, I mean, you know how I feel about this. It's way better than dealing with a regular person. What if you said, what if's, I mean, you know how I feel about this. It's way better than dealing with a regular person. What if you said, what if you, what if, what if you wanted drumsticks only? Uh, Oh no flats. Are you calling flats? Yeah. What do you call the other part?

Wings? Oh no, but no, the whole thing is a wing. The wing is no let me teach you something that you clearly don't know the wing no this is the wing that's the wing that's the part that i eat please no no the wing is bisected that's not an actual drumstick that part that you think is a drumstick it's not its leg it's part of the wing it's part of the wing okay this is the flat and the they cut it in half and so that's how you get those two parts of the wing. Okay? So it's the flat and the – they cut it in half. And so that's how you get those two parts. Part of the wing. You're blowing my mind right now. You break it in half and you get a flat and you get a drum. That's the whole – that's – two of those put together is a Buffalo wing.

The more you love. Okay. All right. Moving on. C3AI. I predicted that this stock would be one of the big bubbles of the year this is i think tom siebel is the founder of this if i'm not mistaken um who's had another successful public company uh eponymously named um but c3ai is it's not a bubble it's not a great

bubble it's really not no it's it's not um This is a wild – so this is from Inception though. Look at this. Next chart. No, it's the other day. That's Inception. Yeah. Yeah, not a bubble. This has been a rock and roll stock.

This C3 AI is up 128% this year – excuse me, up 159% this year, which I mean, but still nowhere near the 2021 highs. Chart off. It's pretty impressive. Are we good? I don't think it's a bubble either. I saw their earnings results. They looked pretty good. This stock could be way more expensive based on how excited

people are over AI. They haven't really run it up yet. So I don't think I was right in that call. All right. So we got a volatility smash down. Where's the VIX at these days? Under 13? Right about at the lowest of the year? Kind of incredible. We hit 20 on October 7th. That's the last VIX spike. It was, no, October 23rd. Where it says Hamas attacks. That was the last big VIX up move. Yeah.

And nowhere near the peaks from the Ukraine invasion. No. So it's not just like the VIX is broken And nowhere near the peaks from the Ukraine invasion. No. So it's not just like the VIX is broken or it's measuring something different than what people are trading. The actual volatility of the S&P is pretty low. So next chart, please. This is just the 30-day standard deviation. And it's on the rise a little bit. But the stock market's been in terms of just like-

What is this S&P 500 30-day standard deviation 1%? So that's like the average move or the average move relative to the norm? That's just the average. That's the average 30-day move. So what the standard deviation says is if it's plus or minus one standard deviation from the mean on like a normal bell curve that 68 of all observations would occur within that time frame or that like that band yeah that's what that means so but that's looking at it on a 30-day basis on a 30-day basis uh

yeah i it's it's hard to get like it's hard to get too bearish just because vol is low. Like if that's your reason, it rarely works out, but you rarely want to buy like peak, like peak tranquility either. So I'm glad you mentioned that. It's a delicate balance. I'm glad you mentioned that. Like some people would view a low VIX as like, can't buy now, but people are complacent. And I feel bad.

I feel bad. I grabbed this chart and I wish I could. I grabbed it like five minutes before the show and gosh. Oh, here it is. Here it is. I was about to say, I forgot who tweeted it. All right. It's from Todd Sohn.

So Todd Sohn showed forward six and 12 month returns for the S&P when the VIX is in the second to lowest decile, meaning the VIX is low. Is that where we are now? So that's where we are right now. So he says the VIX currently sits in decile two. Complacency may be, but forward equity returns are often decent from here. So this is a scatter plot shown on the VIX level with the forward returns for the S&P. And looking at six months, it's positive 77% of the time with an average gain of 4.5%. Looking at 12 months, it's an average gain of 10.3%, positive 89% of the time. So this is not like the end will be all by any chance.

There's nothing there, though. There's no reason not to buy if that's your concern. No, a low VIX in and of itself is not a reason to be bearish. I mean, the VIX have been – we've seen low VIX regimes that lasted for like years, right? Yeah. So it's funny. So people are saying it's like calm, but then other people would take that and say, oh, no, actually, it's not even calm. It's all the way in the other direction. It's euphoria.

So it's like one man's calm is another man's euphoria so saying like one man's calm is another man's euphoria so i want to share this with you from chart storm the rally off both october lows meaning the 2023 october low and the original 2022 october low has triggered a return of euphoria reminiscent of what happened at the start of some of the most significant cyclical bull markets in recent decades. Meaning, meaning euphoria is sometimes how you kick off a bull market. And so this comes from top-down charts. And I want to give people a little bit of an explanation of what this euphoria meter is. It's a combination. I'd love to, I'm sorry, Josh, it's a euphoria meter. is. It's a combination. I'd love to. I'm sorry, Josh. It's a euphoria meter. Go on. I know. Dude, I'm joking. But I'd love to give people some idea of what's going into how he's calculating this.

He wasn't joking. So it's three gauges of investor sentiment. They're using surveyed sentiment, like Bull Bear, whatever. They're using forward forward pe ratio that's price versus next 12 month consensus earnings um what's what's being expected and then they're using the implied volatility or the vix uh so that's like weather conditions or in a panic mode or complacency and then they're creating a composite based on those three things to measure how much euphoria they see in the market. But they're not saying euphoria means the same thing as top. And I think that's a really big takeaway. So I don't know if I'd agree that we're seeing euphoria maybe in the AI-related stocks, some version of euphoria. But market-wide, I don't think that that's how I would describe qualitatively the situation

that we're in, even if there's a quantitative way to say that. It doesn't feel like euphoria. I don't think that that's how I would describe qualitatively the situation that we're in, even if there's a quantitative way to say that. It doesn't feel like euphoria. I don't feel it either. And when I talk to people, I don't hear it from anyone. All right. I think I'm up. I want to do this thing on record corporate profits.

We don't spend a ton of time on this. But here's a question for you. What should accompany record highs in the stock market? If you want to say, oh, this rally is justified, but not that we care about those things. Record prices in the stock market? Yeah. What should accompany that? Earnings? Record earnings. So we are back to challenging record high corporate profits. And I know we've said this before, but I want to say it again. We've seen the bottom in the earnings recession. So Axios did a thing, put this chart up.

You could see the change in S&P 500 year over year earnings here. So basically S&P 500 companies had shrinking profits in Q4 of 2022, Q1 of this year, Q2 of this year. And it looks like Q3 has put an end to that. Yeah, we did it. Yeah. Plus 5.6% earnings growth in Q3 of this year versus Q3 of 2022. So we had the earnings recession. We had three quarters of it. And I made this chart, so you'll hate it. Next one. Don't be soft. So here's the 2022, 2023 earnings recession

as reflected in US corporate profits, which are now 3.17 trillion. That's the top pain. The bottom pain is the S&P. So we paid for it. We corrected both in price, but also through time. And that entire three-quarter profit shrink was accompanied by a market-wide correction. What else do you want? Do you see it the way I'm saying it? We kind of front ran it.

And now we're back to that old price high. So I don't hate this chart. I love this chart. I was talking with Ben today on Animal Spirits. I think a lot of people sort of swept under the rug that we – that we're in a long bear market and had a really, really disgusting crash in 2022. Like Amazon and Google both went down more than 50%. I think, did Netflix and Meta do 70%? Like it was disgusting.

And so people just- Some of the biggest companies in America lost half to two thirds of their market value all at the same time. Like, oh, Meta's up 180% this year or whatever the number is. Yeah, it was down 70% last year. And then the other thing is this is the fifth longest streak since 1950 without new highs in the S&P 500.

The fifth longest. Yeah. So, I mean, we had the earnings recession. The bears were right. And we had the price declines. The bears were right too. You just don't get to be right forever. Like things change.

Things come to an end. Is there a story where you get another earnings recession in 24? Like a believable story? I suppose. The consumer really f***s itself up? Yeah. That's a thing that definitely could happen. There's no evidence of it.

And we're going to talk more about that right now. You're up next. All right. So speaking of no evidence of a recession, let's talk about the holiday weekend and retail spending and all that sort of stuff. By the way, since when does Adobe report on this stuff? This is like, everything was according to Adobe Analytics. Is that new? Feels new. They're very involved in e-commerce website design. So maybe this is like how they're doing their info marketing shit is they're reporting, they're doing analytics.

And you know what I mean? That's plausible to me. So here's what they said. Online retail sales increased 5.5% year over year on Thanksgiving and 7.5% on Black Friday. And you might say, well, of course, because everything is more expensive and it's all inflated. Actually, driven by deep discounts in categories like electronics and generally lower online prices, which were down 6% year over year. So Cyber Monday will be the biggest online shopping day.

Let's throw up this. And it was confirmed by MasterCard and Salesforce and other sites. It was confirmed by NVIDIA. It was confirmed by NVIDIA. Look at this next chart this this is the adobe chart so cyber monday online sales hit new records on big discounts how about that yeah yeah so that kind of shatters the inflation narrative and then you saw well

i mean you're just counting prices back to 2022 levels. You saw the TSA had the highest daily volume ever. People flying. The airports had the highest foot traffic ever. Record flying, record spending. You're getting the bubble. Record flying, record spending. Do it. No, but how do you get the whole, and why doesn't mine do it? Boom. There you go.

Fireworks. And these stocks are working. Shopify is up 110% year to date. Amazon's up 76. Look, all the data sources are corroborating this. MasterCard, anyone that's tracking the consumer is saying the same thing. So Josh, let me ask you this. People will not change their spending habits until they get laid off, until we have a recession. I mean obviously the unknown is like what causes companies to start laying off their employees? All right. Well, the bare case is that people are now using credit so that they don't have to downshift their lifestyle, which I would say is probably somewhat believable, but it's a huge, broad sweeping overgeneralization.

And if you adjust it, but if you adjust, if you adjust for disposable income, it's not like off the charts at all. It's very normal. Yeah. And I think we have very wealthy people who in the last three years have gotten wealthier at a faster pace than ever in history. And just when the stock market started to suck, all of a sudden, they had this bonanza with yields on their cash. And it's almost like a movable feast. And every year, they're making tons of money somewhere else. One year, it's real estate.

Their home prices can't stop going up. The next year, it's cash. The year after that, it's real estate. Their home prices can't stop going up. The next year it's cash. The year after that it's tech stocks. It's just like wealthy people and people at the top of the wealth and income distribution are going to keep doing what they're doing until literally a nuclear bomb goes off. And the problem that you have if you're a bear and you want to make the case that the edges are fraying and that there's this rising delinquency, whatever, you don't have even a hiccup yet in the labor market. And it's all well and good. You could tell me labor markets are like an indicator. It would be the last place.

All right. But you know what? Can you just wait till one person loses their job? Like one net person? We're still printing 200,000 jobs added every month on average. So that's why you're not seeing like the cracks appearing. It's just, it ain't going to happen until it happens.

And it will, but I don't know when that is. And you really are, are missing out on a lot if that's the thing that you're waiting on. So hopefully most people aren't waiting on that. Well, guess what? By the time you see the cracks, by the time you see the evidence that the economy is slowing down, what do you think will already happen to stock prices? Well, we had an economic slowdown. I'm saying.

And stock prices front ran that. And they front ran the recovery. Right. I think there are people that just mentally have gotten themselves into a state where not only do they need stocks to fall, they need them to fall and never rise. Like stay down forever. Yeah, let me in. Yeah. It's not going to work that way.

I wanted to take issue with the framing in this article. I don't like when they do this. Let me read you the – before we get into the charts or anything, let me just read you this article. I don't like when they do this. Let me read you the, before we get into the charts or anything, let me just read you this headline. This is Bloomberg, who should know better. And I know the reporter doesn't write her own headlines, so it's not a diss. Billions wiped out as stock safety trade on Wall Street misfires. What would you think that article is about? And then I'll tell you what it's really about. Just seeing that headline.

What would you think is going on there? Billions wiped out. Yeah. Like people buying like tail risk strategies. Just people getting killed and like never. Yeah. Okay. Here's the lead.

Wheeling from a bear market last year, beaten up investors decided to send more than 60 billion to ETFs focused on dividends. 11 months later, the trade is misfiring. Rather than give shelter in a stormy season, the largest dividend ETFs have been left behind by a tech-obsessed market whose biggest proxies have surged 15% or more.

At the bottom of the leaderboard is the $18 billion iShares Select dividend DTF down 5.4% on a total return basis after all in bets on utilities and financial stocks fizzle. There's just so much wrong with this. I don't even know where to start. All in bets on utilities and financial stuff. They're not bets. It's an index. There's nobody saying, hey, let's do an all in bet on financials and utilities. That's what the index is comprised of. Unless that's an active fund that I'm not aware. I don't know. Is it? Probably not, right? Okay. Is it billions wiped

out or is it stocks that just aren't up right now, but could at some point go up and then the billions return? What's the right way to frame this? Technically, billions were wiped out. I agree with you. That's ridiculous. Wiped out? Isn't that a lot? It's a lot. Never never to be seen again. When I hear wiped out, like FTX shareholders were wiped out. Or maybe not. Wipe out. It's strong.

It's strong language. I agree. I don't like when they do that. Listen, it's one of the biggest gaps between the performance and growth stocks versus value or dividend stocks of all time. The only one that even rivals it is the mania 1999, 2000. That's the only thing that outpaces it. Other than that.

2020. I don't think so. Yeah. I don't think so. I think you're wrong. I think you're wrong. I think you're wrong. Think about all the cruise lines and airlines and all those stocks rallied into the end of 2020. They did.

No, they didn't. Yes, they did. They had huge recoveries. Casinos, hotels. Yes, they did. Yes, they did. This year, it's like pretty much all tech on the leaderboard and a lot of casualties elsewhere. But that doesn't mean wiped out.

It just means – I agree. It's a lot. Yeah, you're in the wrong sectors this year. It's okay. Strong language. Very strong language. All right.

Go ahead. Go ahead. So Amazon now delivered more packages than FedEx, which it passed a while ago. And UPS, it's about to pass UPS. This is kind of incredible. Fred Smith, the founder of FedEx, scoffing at the fact that Amazon would never be able to get into that business and meaningfully compete with them. Yeah, I put that here. If you were an early Amazon shareholder or bear or whatever, there's no way that you could have foreseen this. That Amazon was one day –

That now they're the biggest logistics company in the world, shipping company in the world. It's like incredible. Yeah. And they're not only shipping their own stuff, but that's now, that's a huge business for them is third party shipping and logistics fulfillment. And that's one of the things that they're fighting an antitrust battle over. Sellers on the platform basically saying, or lawyers for those sellers basically making the case that like you almost have to use Amazon if you're selling on their platform, you have to or lawyers for those sellers, basically making the case that like,

you almost have to use Amazon. If you're selling on their platform, you have to use them for shipping. I like Ben Thompson's case on this. Ben Thompson's like, they built the system. Like why, why should, why should they take the chance that you're going to be able to, yeah, that you're going to be able to ship it effectively and ruin their reputation. That, well, that's what Amazon said. We, we tried to leave it up to the sellers and they couldn't do it as well as we did. And these are our customers. So kiss my ass. If you're selling on our platform, it's our job to make sure that the client gets their stuff. All right. What are the numbers here? Put this chart up. Amazon is in blue. It is crossing over UPS. It is long since crossed above FedEx.

This is in parcel volumes. So we're talking about in the 5 billion parcel range, I guess, per year. This is on 5.3 billion UPS shipped last year. And Amazon is now growing above that. That's insane. I mean, I see the vans all over my neighborhood. Shouldn't be that surprised. Did you know that this news to me, FedEx is up 48% year to date?

Yeah. I think it had a really tough year before, though. So did Amazon. So did Amazon. And Amazon's up 77. UPS is a shit stock this year. Throw up the next chart, please, the revenue chart.

So these are both, so we're looking at UPS and FedEx revenue quarterly. And these are both well, well off their highs. And I don't know if this is because Amazon is coming in there, but the journal said in recent

years, UPS leaned into higher margin parcels from other customer segments, including healthcare and smaller businesses. Mike, I think it's pandemic related because if you look at their revenue, 21.6 for FedEx and 21 for UPS, they are well above 2020 prior to the pandemic, like the end of 2019. Like that looks normal. What happened in 21 and 22 with everybody having to ship everything was like not going to be repeated.

Yeah, you're right. So I want to get into some really funny stuff though from 2013. Bloomberg, there were leaked documents from 2013 predicting this. Bloomberg got a hold of these internal Amazon documents 10 years ago. The project internally was called Dragon Boat. And this is them, said it's intended to launch a new business called Global Supply Chain by Amazon as soon as this year and would compete directly with companies like FedEx and UPS.

The document describes Dragon Boat as a revolutionary system that will automate the entire international supply chain and eliminate much of the legacy waste associated with document handling and freight booking. All right. So that actually did end up happening. This is a 2016 Wall Street Journal article where they got competitors to weigh in on how serious Amazon was as a threat on shipping. Memphis-based FedEx says it's spending

more than $5 billion annually on expansion and upgrades. I guess that was a lot of money back then. UPS says it shells out in excess of $2.5 billion. The two companies have managed to blanket the world with a total of 4,000 hubs and facilities. They operate 200,000 vehicles and 1,000 planes. Quote, the level of global investment in facilities, sorting aircraft, vehicles, and people to replicate the service we provide or our primary competitor provides is just daunting and frankly, in our view, unrealistic. That was the CFO of FedEx eight years ago.

Well, guess what? Literally, it happened. But totally reasonable thing to say at the time. Yeah, I agree. I totally agree. Um, yeah, the UPS guy, chief commercial officer said our network would be quote very difficult to match match how about exceed but but again the the idea that amazon would be able to disrupt the two largest and i don't know if they're the oldest shipping companies in the united states

seemed preposterous yeah and they did they did it. They did it. Zerp helped, but it happened. And we're seeing this everywhere, tech versus everything else. We're seeing this in pharmaceuticals, seeing this in automakers. Big rising stock prices are enabling companies to replicate things that 10 years ago we would have thought were unreplicable, if that's a word. All right, we're going to do, here's my big takeaway. There's always a bigger lion in the jungle somewhere.

And the other one, don't underestimate the potential for your biggest customer becoming your biggest competitor if the money that they'll save is meaningful enough. So Amazon was at one time. Yeah. Amazon was FedEx and UPS's best customer, but there was too much money to be saved by competing with them rather than utilizing them solely. And Jeff did it.

And he wasn't very stealth about it. He bought himself thousands of airplanes and trucks and built them. And here did it. And he wasn't very stealth about it. He bought himself thousands of airplanes and trucks and built them. And here we are. It's a pretty amazing moment. OK, you're going to make the case. What do you got? I am going to make the case that we, not just you, myself included, because I do buy individual stocks, we should be careful buying individual stocks. We should be careful buying individual stocks. And what I'm about to talk about has nothing to do with the psychology of battling yourself, the difficulty of riding

winners, the ease with which we just ride losers and hope for them to come back. Put all of that to the side and just literally talk about- Which are very real things, by the way. Which are very real. So hold that to the side. That doesn't even enter the equation for today. So this chart is showing the percentage of S&P 500 stocks outperforming the index. And this is year by year. And some years it's higher than others.

I don't know what the average is here, but most stocks do not. And this is just on a yearly basis. The average looks 48%-ish. That's the percentage of stocks outperforming the S&P itself. But if you were to extend this to two years, to three years, to five years, the number just goes lower and lower and lower. I wanted to share two pieces. Wait, hold on. Hold on. Last year, 58% of S&P 500 stocks outperformed the index itself. And everybody was so happy. Just kidding. Which was, yeah, everyone was miserable anyway.

But that was pretty high. This year, only 24%. So that's an apocalypse for stock pickers. Horrible. That's bad, dude. Horrible. This is a great chart, a really, really interesting chart from Morgan Stanley that Carl Quintanilla shared. I've never seen it put this way. What we're looking at here is S&P 500 companies, it's the years to spend their market cap on CapEx and R&D. And NVIDIA, as much as they're spending, it's 131 years.

Tesla, it's 69 years. Very nice. The S&P 500 average is 49 years. Look what Tesla, we spoke about this a couple of weeks ago. Look what Tesla did to poor Ford and GM. GM and Ford spend their market cap in 1.9 and 2.6 years respectively. I think you're reading this backwards. Tesla did not spend its market cap 69.4 times. That's not what I said.

OK. So maybe I don't understand it. OK. So it would take 69.4 years based on their current run rate for Tesla to spend this entire market cap, which is sort of a funky way of thinking about it. But Ford and GM spend their market cap on R&D and CapEx in 1.9 and 2.6 years respectively. This cannot continue. And this is what- No, it's unsustainable. This is what Nikola said about the market saying that Ford and GM will not be in business in 10 years. Dude, people get so angry at that idea because it's like a big piece of their lives.

Like Ford and GM and like people are like really invested in these brands and their daddy had the pickup and it's like a whole thing. And they just don't want to contemplate a world where those companies basically become IP providers and somebody else is making and selling their stuff for them. I'm not saying it's going to be like next year, but what you just put up there, it's

a pretty unsustainable situation. One more thing that I thought was super fascinating from, I think his name is Tom Reiner at Altimeter. He looks at public market run rate dilution. He looks at public market run rate dilution. And he broke it down looking at big tech and software and internet stocks and non-tech. And he said it's wild to think that Lyft is diluting at 9% per year. The market capitalization of the business would need to double just to keep the stock price flat over an eight-year period. Why are they doing that?

This is a compensation for employees? It's equity comp. So next chart, please. So this breaks it down, looking at software stocks, internet stocks versus large cap tech and non-cap tech. And even like face, he made the point that even Facebook, which is like got an air quote fit and a really right size. It's equity comp is still diluting. It's invested to the tune of 2.8% a year. And this is, again, it's something that really less chart. It's something that like when you're picking stocks and listen, this, this definitely doesn't matter over the short term,

like literally at all, but it really matters. Like if you're, if you're buying and holding stocks, this actually matters. So he's got a chart that shows the five-year market cap growth to offset the dilution. And if you're diluting at just 3% a year, which doesn't sound like a ton, that's a 16% market cap growth just to offset all the shares that you're issuing. So again- The tech bulls would say, yeah, of course these companies are diluting at that rate. Jack Bowles would say, yeah, of course these companies are diluting at that rate. How do you think they're able to hire AI talent? The average AI worker is a $5 million salary, a $5 million comp package.

What do you think that's like W-2 income? Are you kidding me? This is what we have to do in order for the company to survive. We're in the software business. So PayPal is 0.9% Etsy is 1.8% DoorDash is 4.7% Snapchat is 7%

like there are I mean that's crazy shit and most of those companies you just listed are not growing their market cap right like they're just not

they're just not and so then you think about Apple which is doing the exact opposite alright so just buying back gobs of stock. So we got to make the case from you and we got a couple of bonus charts. I love it.

Let's do a mystery chart and then we'll get out of here for the night. I feel pretty good about you getting this one. I do. I do. All right. Let's throw up. I have two of these. It's the same company.

I'm just showing you two different timeframes. Let's do, what is this one? All right right this is the three year or the five year rather um this has been quite a ride this is one stock it's not an index it's nothing convoluted okay this is uh familiar and i'm giving you prices too so i'm like really all right now give me the year to date. This is a really big story this year. This is percentage gain and price. So this is a stock that's gone up. It started the year at 30. It's in the 70s.

It's 112% gain. And we sort of alluded to the sector earlier in tonight's show. You want to take a guess? That is a ridiculous, ridiculous looking chart. I mean, so we alluded to the sector. You gave me the price. Can you give me anything else? I can. I would like to tell you that the news about Black Friday sales hitting a record, very relevant to what's going on with the price of the stock. Okay. Okay. I got you. I got you. I got you. Yeah, I got it. This is Shopify. Attaboy, look at this. Do we have confetti for young Michael?

All right, round of applause. That's good too. Chart off. Told you that I thought this would be a buy now, pay later Christmas. When you have credit card rates pushing 30%, people who want to buy things for their loved ones aren't going to stop buying things.

They're going to get smarter about how they pay for them. And that is what's powering some of the moves in a firm that we're seeing. Can I tell you something? And I think, yeah, please. Two things. Number one, if you look at it, I'm looking at a chart of Shopify. Yeah, it's up 100% or whatever you're to date. This thing is a disgusting dog of a stock.

If you look at the stock chart- Not if you bought it in January, it's not. Exactly. But tell me when you would have bought this just looking at technicals. This thing is so gappy and all over the place and massive drawdowns. Just an impossible ride. But anyway, I did my first buy now, pay later transaction. Actually, that's not true. I did it. The Peloton I bought now and I paid over, whatever, 24 months. I don't know why I decided to first buy now, pay later transaction. Actually, that's not true. I did it. The Peloton I bought now and I paid over, whatever, 24 months. I don't know why I decided to do it today, but I said, you know, yeah, I'll pay it over six weeks. Why not?

No interest. It turns out I am constantly using ShopPay without even realizing it. And I'm getting these alerts from them, like when things are being shipped, blah, blah, blah. And I click back on the link and it shows me like, I just bought 15 things this year using the Shopify pay feature, just because that was what was right in front of me on, on the website. So like shop pay, I don't know about like all the shipping and stuff. Like, I'm not going to get into that whole conversation right now, but like just the pay feature But isn't that what killed PayPal? There's something going on here.

It used to be PayPal. Now it's everything. It's Apple. It's Google. It's Amazon. It's not everything. There's going to be like four or five, but to a greater or lesser extent, they're disintermediating the credit cards that used to own the online commerce business.

And if more people decide to do buy now, pay later versus carry a huge credit card balance, that is somewhat of an existential threat to some of the credit card issuers. So worth keeping an eye on what Affirm is doing because it's not just hype. There's something going on there. All right. And we'll end with that. Hey, guys, did you know tomorrow is Wednesday, which means another all new edition of my favorite podcast, Animal Spirits with Michael and Ben? Check your podcast app. Make sure to listen. And then later this week, I don't want to overstate this, but oh, my God.

Michael and I, we're not going to say who. Michael and I have a very, very, very special guest. We are so excited. And that'll come out on Friday. Okay. Thanks, everybody, for listening and watching. We appreciate all the likes. We appreciate all the comments in the chat.

We'll see you soon. Whether you're just getting started as an investor or you're managing a multi-million 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 ritholtzwealth.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. Ritholtz Wealth Management is a registered investment advisor.

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