The Compound and Friends - Charts Out the A**

Episode Date: February 2, 2024

On episode 128 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Warren Pies to discuss: how stocks perform after all-time highs, the latest from the Fed, MMT, election year markets, Mark Zuckerberg: doomsday prepper, and much more! Thanks to iShares for sponsoring this episode. To learn more about the iShares Bitcoin Trust, visit: https://www.ishares.com/us/strategies/ways-to-invest-in-bitcoin 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/ iShares Bitcoin Trust (IBIT): This information must be accompanied by a current iShares Bitcoin Trust prospectus, which may be obtained by clicking here. Please read the prospectus carefully before investing. The iShares Bitcoin Trust is not an investment company registered under the Investment Company Act of 1940, and therefore is not subject to the same regulatory requirements as mutual funds or ETFs registered under the Investment Company Act of 1940. The Trust is not a commodity pool for purposes of the Commodity Exchange Act. Before making an investment decision, you should carefully consider the risk factors and other information included in the prospectus. An investment in the Trust may be deemed speculative and is not intended as a complete investment program. An investment in Shares should be considered only by persons financially able to maintain their investment and who can bear the risk of total loss associated with an investment in the Trust.Investing involves risk, including possible loss of principal. This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy advice.Investing in digital assets involves significant risks due to their extreme price volatility and the potential for loss, theft, or compromise of private keys. The value of the investment is closely tied to acceptance, industry developments, and governance changes, making them susceptible to market sentiment. A disruption of the internet or a digital asset network would affect the ability to transfer digital assets, and, consequently, would impact their value. iSHARES and BLACKROCK are trademarks of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other marks are the property of their respective owners. Learn more about your ad choices. Visit megaphone.fm/adchoices

Dude, we had you on like a long time ago. Oh, like 15 months ago or something. Yeah, it was the end of 2022. I think it was November. Yes, that's right. I forgot to ask you to get some notes from the last time we spoke. Did you do that anyway? I can tell you what I said.

When was that? It was a soft landing. It was, I did say, a 40% chance of a soft landing. All right, so it's like, oh, it was at the bottom say a 40% chance of a soft landing. All right. So it's at the time. So it's like, Oh, it was at the bottom. It was like October 22nd. And I, and it was the day inflation died. So everybody was hyped up.

It was the day that, uh, we, we had a really good CPI print and the market was up like 7% that day. Cause, cause CPI was only like seven and a half percent. Yes. And then we, we, we talked and the big takeaway, I mean, it was like pretty frenetic, but the big takeaway, the conversation, did you, we listened to it? Speaker 3 Yes. I listened to it like a month ago, but the big takeaway was like, is this off landing possible? And it was like,

Speaker 1 The day inflation broke. So this is, I'm sorry, Warren, finish your thoughts. Speaker 2 No, I just said it was like a 40% chance of a soft landing. And you said, I'll take that. Speaker 2 I would, dude, nobody was saying that at the time. It was pretty out there. So November 11th. So we bottomed like three weeks before that.

Yeah. Dude, stop calling that bottoming already. So, well, now the market's crowning. That's even more disgusting, honestly, of the two. It's dilated. How much do you bench, bro? Oh, man. Okay.

I've been seeing you making appearances with fucking like T-shirts on. You're like, this is a part. No, but I like it. It's part of your image. I mean, well, they say, here's the thing. I'm combining like multiple. And put these on while you say it. Where are they at?

You do calisthenics? Calisthenics, that's my base, yeah. No, you're not just lifting, I know. No, I don't lift heavy anymore. Okay, why? Paleo. I mean, I'm old. How old are you?

42. This fucking guy out of here. How old do you think I am? You're 46. Look at you. I do all my research I'm a researcher I remember every year Josh says

I'm 40 whatever years old like I can't do like that's my that's like my reason I can't do things anymore I remember when Josh said like I'm 38 dude I'm fucking 38

shut up you remember when I used to say I'm 38 years old I can't take this anymore yeah and then I was 42 now here we are so what

tell me what tell me what your me what you're like what's your week your workout week what do you do i actually put it on twitter a while back and i got a lot of people calling me like saying i was bullshitting like that nobody could do what you're doing or i mean that's what they said i mean i someone asked me what was it about that you did they said they called bullshit on well i i do 21 15 9 which is i do my body you're not speaking our language 21 15 9 is my reps i do body weight bench press uh or squats bench press pull up and i try and do it as fast as i can can you explain that one more time so i'll do 21 what is 21 reps 21 reps of squats with

like 185 on the bar which is your body weight Yeah, roughly. It's a little over that. But then I'll do 21 pull-ups and then I'll do 21 bench press reps with 185 on the bar. What's the significance of doing those reps with the weight that's your body weight? It's just something I made up. And then someone asked me like, is this

what do you do? And then I do 21, then I do 15, then I do a round of 15, then I do a round of 9. And that's like a workout. It takes like, you know, 18 20 minutes, but like that's it That's the workout. That's for me. That's like yeah, you had a breath after that. Oh, yeah. Yeah, so it's like it's also cardio It's yeah. Yeah, I do it with like no breaks and I feel like I'm gonna puke so I cross like a CrossFit workout Yes, I did CrossFit for a little while. I push up a 30 pound dumbbells on both flex I did CrossFit for a little while. I push up 30-pound dumbbells on Bell Flex.

Yeah. Sean told me that's what his warm-up is. So I hate working out. I hate it, I hate it, I hate it. I pay somebody to watch me on Zoom only because if I don't pay him, I won't do it. The guy that Michael pays, fun fact, is not allowed within 500 feet of his school. So he will watch Michael work out.

But he's a great guy, and I hate every minute of it. I really do. Is this like an accountability partner or something like that? I mean, technically... No, that's his wife. No, he's a trainer. And he just tells me what to do.

Like, I know what to do. I've been doing it for two years. I just hate it. So if I don't pay him, I will not do it. When you say, I don't lift heavy anymore, just because you got older or... I'm trying not to get injured you know i tore my hamstring uh

back in 2020 um and from what from running or renting i was doing like wind sprints and stuff so wind sprints yeah what are you what are you trying out for i don't know why i do it it's just all this pandemic people were doing crazy shit during the pandemic. Yeah. Yeah. They were either like my theory about the pandemic is it really revealed what you are. You either became an insane athlete or just an outright alcoholic. Like there was nobody in the middle anymore, the pandemic.

You had a green recycling box filled with bottles of wine or you were like buying equipment and just like turning your house into a gym do you call plunge i did i used that so i we moved like a year ago which was a whole nother thing but like before that we were on acreage had a cold plunge had a gym it was set up in like 2019 before the pandemic so it was perfect good timing for pandemic do you see peloton today? No. Before we talk about Peloton down 20%, I tried to take a cold shower the other day. I couldn't do it. How do these people do it?

See, well, I like when I come up north like this because I can take cold showers. Wait, what's the big deal? Just turn it on cold and walk into it? I slept in the city on Tuesday night and I had a terrible sleep. And so I wanted to wake myself up. And we had just been talking about a cold plunge the night before. I was like, oh, you know what? I I had a terrible sleep. And so I wanted to wake myself up. And we had just been talking about a cold plunge the night before. I was like, oh, you

know what? I'll try a cold shower. I was like, I couldn't do it. What about, yeah, you could do it after you run, you could get into a cold shower. So you could start the shower hot and then go cold and be fine. But getting into a freezing cold shower was not fun. Yeah. I just finish it off like that. Peloton had, it's after a string of really, really, really bad performance. Like a stock that's gone from 157 down to 6. Today it had one of its worst days ever, down 22%. It's a $4 stock.

It's a $1.5 billion market cap. You could just LBO it right now for probably less than $2 billion. The whole thing. I don't think it's worth it. I'd rather buy it than short it. Like, no question. Somebody will buy it. Nike.

Somebody will buy it. I'd rather short it the next time it rallies. I don't know. Why would Nike buy it? If they didn't buy it all this time? Has the brand gotten better or worse? What are they buying?

They're buying a company. There's $700 million worth of revenue, isn't there? It's not like nothing. I'm sure the guidance was horrendous.

It's expensive revenue. It's a bike with an iPad ultimately, right? It's a bike with an iPad and then they have like these trainers and what happens

when one of these trainers gets really famous what's the first thing they do? see you later Peloton do they have a lot of debt? I don't know what do I need this for? listen don't go by me on Peloton I'm just going to tell you one thing there has never

ever been a publicly traded fitness focused company that has been a long-term winner on the stock market. And I don't count Lululemon. I was about to say, but that's fitness adjacent. No, no, no. It's adjacent. Very adjacent. Never.

And I've seen them all come and go. I was on the New York Stock Exchange the day, not Peloton, Fitbit came public. That was a disaster. They set up a gigantic treadmill that like 10 people could run on at once in front of the New York Stock Exchange. I swear to God, on Broad Street. They set up this huge, this huge like spectacle.

It was like the Trojan horse. Like they were about to wheel it into the building. And I just remember one after another, the GoPro, I remember, which I think was kind of like a Trojan horse. Like they were about to wheel it into the building. And I just remember one after another. GoPro, I remember, which I think was kind of like a fitness thing. I guess. Sort of. Yeah. Town sports.

You know, New York Sports Club, Philadelphia Sports Club. It's a chain of gyms. Yeah. Disgusting. Bankrupt. Bally's Total Fitness. I'm trying to think what the – like I can go down the list. I think Planet Fitness is okay for now.

I wouldn't invest in that. What's the reason for that? I've never really thought about it. Because we're Americans. And in the end, we're fat and lazy. How about this? 50% of the float of Peloton is sold short.

So people are making money. Planet Fitness has a $6 billion market cap. It seems okay. Like relative to where it came public. I mean Peloton is just kind of – I guess it's just that that's the trade right now is high quality. I guess the thing is there's zero growth, right? Like they're not getting any new subscribers at this point. It's worse than that, sir.

There is a secondhand market for all the shit people bought that they don't need anymore. So how are they going to sell new ones? They're not. Yeah. That's a really big issue. And as for somebody buying them, I think Lulu bought Mirror, which was a competitor.

Do you remember Mirror? No. It was like a screen you put on your wall, and it's a mirror, but then it delivers fitness classes. Oh, yeah, yeah. I think they wrote the whole thing off already. That stuff's so gimmicky. I don't know. Right.

I think they wrote the whole thing off already. So I don't know who's… I get a shock in the ear. You get a shock. Oh, look at Duncan rocking the… I like it. Duncan, can you explain the Ferrari news to us before we get started today? The stock went vertical.

It sounded like Ratatouille was doing it. Who is Lewis Hamilton to racing? He's like the biggest thing in F1. But like of all, just F1 or like all of racing? He's like, how big is he compared to Earnhardt Jr.? F just f1 or like all of racing he's like consider like how big is he compared to f1 is the pinnacle of racing f1 is the pinnacle of of motorsport really and so yeah he's the biggest thing wow duncan says motorsport that's like is that like cinema for cars but isn't like verstappen more more dominant uh in the last in the last couple of seasons yeah

but but willis was won like, what, seven, eight championships? So he's like Kobe? Like Lewis Hamilton is Kobe? Is he American? No, no, no. He's British. British? But yeah, he's going to Ferrari in 2025.

I saw something earlier today about the TV time that Mercedes got because of, you know, Lewis being on the team. So this is big for Ferrari. I mean… Do you know how much market cap the stock just added on this news? Earnings. Earnings today. Also earnings.

Yeah, they also had positive stuff to say. Did you see the Michael Mann movie yet? I heard it had a larger market cap now than Ford or GM, which is… Well, I'm going to tell you. It's worth $70 billion, Ferrari, right now. And it looks like yesterday it was worth $60 billion. So they added $10 billion today on whatever the earnings

announcement was, plus Lewis Hamilton. You think Ford sells 100 times the amount of cars that Ferrari does? They sell like 3,500 cars a year, right? Do you want to know the market cap? Ford is $48. But tons of debt, I'm sure. Well, that's the problem. The enterprise value

is much bigger because they're loaded with debt. And GM is 45 billion. We coming in hot? Episode 128. Every week it goes up by one more episode. Holy shit. 128? Do you guys know that we have not just fans of the compound,

but there are fans of different people, and they kind of congregate together? And I learned today – you know there's a Duncan Hive? The people that are Duncan fans, they watch What Are Your Thoughts Live? You started that, by the way. Yeah, I know. We used to put you on screen. We don't do that anymore, but the Duncan Hive is still there for you. Today I learned of the existence of the Batcave and Batboys.

Alex told me he met a Batboy today. The guy has no interest in me at all and got to meet Michael Batnick and went crazy. How cool is that? Yo, shout out to all the Batboys out there. Alright, John, you look like you want to get started. Let's go.

What do you got, a hot date? TKM episode 128. All right. 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 Red Holtz 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. Today's show is brought to you by BlackRock.

Digital asset adoption has significantly accelerated with Bitcoin as the leading crypto asset since its inception. That's right, Michael. But for many investors, holding Bitcoin directly can be complex. That's why BlackRock launched iBit, the iShares Bitcoin Trust, an ETF that provides investors convenient access to Bitcoin. Here are three things to know about iBit. Access. iBit enables investors to access Bitcoin within a traditional brokerage account, just like stocks, bonds, and other ETFs. Convenience. iBit can help remove operational burdens associated with trading and holding Bitcoin directly, as well as potentially high trading costs and tax reporting complexities. Quality. iBit is built by BlackRock, a leading ETF firm with expertise across ETFs and a history of innovation. To learn more, visit iShares.com slash iBit or discuss it with your financial planner.

Investing in digital assets such as Bitcoin involves significant risks, including possible loss of principal. For more information on the iShares Bitcoin Trust, including a link to the prospectus, please see the show notes. Today is going to be a great show. I'm so excited excited We have with us a young man Who is making his second appearance on the show Absolutely crushed it the first time We're so excited to have him back He has traveled many miles To be with us here today

And you guys are in for a treat We're all going to learn a lot This is going to be a long one I'm predicting that we go 70 minutes 75 minutes We've got charts out the ass Charts out the ass That's what we're going to call the episode

Nick, what do you think? Love it, right? Warren, who is Let me say who's here I was waiting for you to get into the doc Ladies and gentlemen Warren Pies Is the co-founder and strategist at 314

Research, an investment research platform that provides weekly insights, asset allocation frameworks, risk management, and more. Welcome back to the show, Warren. We're so happy to have you. Thank you for having me. It's great to be back. Warren, I was reading your latest, not the Q4 Outlook, the one that you put out in January. I forgot what the title of it was. I love all your quotes and stuff that you throw in there. It's like super sophisticated. I was having trouble keeping up with all the QAR stuff.

Who's the audience for this? It's hedge fund managers? Our core group is global hedge fund, global macro hedge fund managers. So, I mean, that's the community that we serve. We do, I hate to like, I don't want to exclude anyone. Cause we do have like, I would say sophisticated RIAs on the service. I mean, I think you could easily be able to handle our stuff. So, I mean like RIA audiences is a big constituent family office. We also have, I mean, my background was in oil and energy. So we have some oil traders and corporate hedgers and stuff like that.

I usually don't say the types of clients or names of clients, but like Heineken, I know that they're cool with it, is a client on that side. Very cool. And so it's an institutional product. How big is the universe of global macro hedge funds? It's weird because it seems like there's a consolidation into these pod shops and then you have to like… Oh, where they're all at millennia yeah but i mean there's i i we have there's still a good roster out there and the ones that used to exist if if they get frustrated with outside capital they just turn into family offices and then you they still want the research because they're still

trading yeah same difference what's the difference between the work that you do and your partner fernando oh man fernando is back end and I am kind of trying to piece the story together. And so I started out at Ned Davis Research, like we talked about last time, and building charts, doing studies, building models. And I think you learn a lot that way. But at some point, you have to kind of – you can't do everything all the time. So at this point, I lean on him. He's way more's he's much faster than me at putting together those studies and things like so if you want to test something

you can fire up fernando and then the two of you can look at the results that he's come up with and try to figure out what it means he's like armadillo yeah i mean i can like peck away at a bloomberg or python myself but like compared to him it feels like a waste of time so if it's anything sophisticated like some of the stuff we do is like, I can, I, the thing that's great about Fernando, he, he is like our secret weapon. I know he was supposed to be here, but he, I can give him the most, what I think is the most complex study and he'll turn it around. And if he's, if he's dialed in, he'll turn it around like within like an hour.

It's crazy. Shout out to Fernando. Well, we read all your stuff in preparation for today and I actually had to turn it over to Michael because a lot of it was over my head. I think I have the, but you're going to explain to me. So today's going to be, I'm going to learn as much as the audience today about your outlook and what you think is going on right now. Want to play something.

There was a little bit of news this week you could say. Yeah. Well, so we're not, you know, it's to play something. There was a little bit of news this week, you could say. Yeah. Well, so we're not you know, it's not the pandemic. So we can actually rely on more more traditional forms. People are working. They're getting wages. And the economy is largely reopened and is broadly normalizing, as you see. So I wouldn't say we're looking at that that sort of more innovative data as much. You know, you point to rent so of course we follow the components of inflation very carefully which would be goods inflation i talked about that a little

bit you mentioned housing inflation so the question is when will these lower market rents find their way into measured grand stage as measured measured in pce inflation and we think that's coming and we know it's coming it's just a question of when and how big it'll be. So that's in everyone's forecast, I would say. So that will help. But at the same time, we think goods inflation will probably, it's been giving a lot of disinflation to the effort, and probably that declines over time. But it may well have some more time to run. You know, the supply chains are not perfectly back to where they were. In addition, it takes time for the healing process to get into prices. So there may be still a tailwind. We'll find out with that. So we look at the things that relate to our mandate very carefully,

and as you would imagine. I guess just as a quick follow-up, do you feel comfortable at this point saying the economy has reached a soft landing, or is that part of looking for more confidence? point saying the economy has reached a soft landing or is that part of looking for more confidence? No, I wouldn't say we've achieved that and I think we have a ways to go. Inflation is still, you know, core inflation is still Who is that, Lewis Hamilton?

That of course is Kansas City Chiefs head coach Andy Reid. Why won't he just say it? Alright, so here's my take on this week. And I want to hear you react to it. Basically, it seemed like Chair Powell expected somebody to ask about March explicitly.

And no one did. And he kind of got, like, annoyed. And he was just like, you know the meme where it's, like, no one and it's a blank space? And then whatever the response. So he's just like, so somebody was like, Chair Powell, thank you so much for joining us. He's like, listen, I'm not cutting in March. Yeah. If you take nothing else away from today, that is the headline that should be in the Wall Street Journal, the New York Times, Barron's, Fortune, Forbes.

Not cutting. I told you I'm not going to cut. We're probably not going to cut. Now, they'll probably cut anyway because somebody asked about a 75 basis point rate hike in May of 23. And he's like, we're not really thinking about that. And then a week later, he did four of them. Wait, you think he's cutting in March? They're not cutting in March.

There's still a 40% chance based on traders. People think that it's possible. Understand something. You have two more employment reports between now and then. One is tomorrow. And I think two more PCE reports. It's a lot of data. I'm telling you, it's not off the table. But there's not going to be any surprises in the data. He knows where

the data's going. It's trending. It's no shit. Yes, he does. What do you think? It's enough of us. If we've learned anything at all about the Fed, it's that they know absolutely nothing more than anyone else that's about to happen. It's kind of a do as I say, not as I do type thing, too. I mean, he, or do as I say, do as I do, not as I say. I mean, he's

been saying one thing and doing another for quite a while now. So I think the market is kind of catching on. So you saw that cut probability for March. it collapsed, and then it rebounded right back up to like 40%. I personally think they cut in May. And yields came down. Exactly. Well, yeah. And you also had the bank failure or bank problems yesterday. I think that was a little bit of a knee-jerk reaction. And there was also treasury refunding. And so I think we got through a bunch of potential hiccups for the bond market. And then you saw people flow into fixed income. And

so that was kind of a, that was, that's how I justify or rectify all that price action. But yeah, I, I think they cut in May. I think it is data dependent. I don't think, um, You think March is like totally off the table or it's still in play? No, I think it's like, you know, I think the market's priced about right, you know, 40%. So Warren, we do this thing in the media. So I listened to the whole call yesterday and I almost never do that. Never at one point did he say marches off the table.

What he says, it's not our base case. But again, there's two months to go. We did the same thing with Zuckerberg. All the headlines are Zuckerberg apologizes for social media impact. Not even once did he say I'm sorry or apologize to anyone. I actually listened to what people say. So I don't think it really matters if they cut in March or May, quite frankly. Apparently, it matters to some people involved in Nasdaq stocks or it matters to a few algorithms.

Do you think it's like so meaningful, the timing or not really? I think the fact of the matter is they're on the case and they've switched from the way we've described it. They've switched from a nominal policy regime to a real policy regime. And that was the big switch that happened last in December. And they're on the case and they've already said, so the big news takeaway yesterday was, we're not thinking about any more hikes. We've already kind of taken that as a given, but that's big news. In real terms, they're tight. They're tight in real terms. And that's how they're looking. I mean, Waller has said that. John Williams said that starting back in August. Then Waller said it in November, which I think was the key tell. And Powell basically said that

in December. Now, I think financial conditions, stock market, things like that got ahead of itself, and he wanted to just kind of push back a little bit. It worked for like one day, but here we are right back at rallying again today. So I think it's coming. I think that kind of the core thesis for us is that the soft landing required three things, a resilient economy, rapid disinflation, and a hyperreactive Fed. And we were pretty confident. And if you go back and look at the last time I was here in 2022, I said I think we'll get these first two things, but I'm not sure about the Fed.

Well, the Fed is now proving to be hyperreactive despite whatever Powell said yesterday. They're going to cut. That's the bottom line. March or May, they're cutting. Do you understand this mentality out there like, oh, no, the economy is not bad enough for the Fed to cut in March. What are these people thinking? I don't understand. I really don't understand the rationale.

Why would the bulls want them to cut sooner than later? I mean, I do think there's a nervousness around the labor market because the labor market is kind of – it's loosening. And right now it's a – Wobbling. Yeah, it's a benign loosening as I would call it right now. But I think they're just nervous that if you push it too far, if you know, but, but ultimately feed on itself. Yeah. I don't think 25 basis points, 60 days of 25 basis points of cuts isn't going to make a difference. If the economy goes into a recession, it was going there anyways. And if you look at the history of recessions, usually it's an external event that pushes it over the edge. So I don't think it's going to be that the Fed waited 60 days.

Yes. Yesterday, the stock market, Callie Cox tweeted that it was the worst Fed day for the stock market since March, 2023. It was the worst day for the stock market since September. Big deal. The market's gone straight up for the last three months. Heaven forbid it falls one and a half percent for a single day, which by the way, we took it all back. Market got back all those losses. You know what else was happening in March of 2023? Regional banks. Like a literal bank panic. The other thing, but I wanted to ask you, so the market, the stock market responded for one day, big deal, took it all back. The bond market though. So they're saying that we're not going in March and the 10-year said, I don't care. Like did the 10-year, how much is it? How much, how many cuts is the 10-year pricing in now down at 386? Yeah. I mean, I personally think that the

10-year is fully discounted a cut cycle at this point in time. And so to me, stocks are more attractive than bonds. And if you think about it, and that's been one of the hardest things as an allocator is that stocks and bonds have been connected, so connected since second half of last year. And so really stocks are, they're all, they're two sides of the same coin. But when I look at bonds and you think about the 10-year, usually it trades at about a normalized spread of about 120 to 40 basis points over the Fed funds rate. So then you look at the Fed's dot plot and what the Fed's saying. They say they're going to take rates down to 2.5%

when everything's said and done. Here we are at 3.8%, 3.9%. The 10-year is already at its normalized premium to Fed funds rate. If the Fed goes all the way back to 2.5%, I'm kind of skeptical that they get back to 2.5%. I think 3% terminal rate makes more sense. Will it stop them from getting back there? I think that inflation, so this is where we get into, there's like art and science and investing in market research and things like that. And there are these kind of like strangely emotional debates that you can get into. I think that inflation is probably going to be higher as you go out into the out years. Now, we've been-

Higher than what? Higher than the last 15 years? Higher than it has been post GFC. I think we're in a different regime. What does that mean? Three percent? Well, you know, let's just put it this way. The Fed struggled to get inflation up to 2% for like 15 years, and they're going to struggle to keep inflation below 2% for the next period.

What do you think is going to drive it? Well, everyone talks about globalization rolling back just incrementally. I think there's some truth to that. So that's a dynamic. Reshoring. Reshoring or reshoring. Makes everything more expensive. Right.

I think a little bit of that, but I think that's a little bit more story than fact, to be truthful right now. I do think that energy costs are going up. The shale revolution was a huge tailwind. We have this chart that we showed years ago. It's the price of oil and CPI. And we would do CPI versus the 2% target as a trend line. And you could see that CPI really fell off that 2% trend line target as soon as oil collapsed in 2014. And that was because we had the price war with the Saudis and U.S. shale.

So shale, I think that added a big disinflationary tailwind. It's going away too. That's not going to be with us for the next 10, 15 years. But more importantly is, I mean, we added so much debt. We printed so much money. What if I inject, all right, we lose the disinflationary impulse from the Saudi versus shale race to zero. AI.

But AI. I knew you were going to say that. Well, yeah. We're very predictable. No, I mean, nothing is not predictable. So, no, the truth is, I don't know. Yeah, no. None of us know.

But like- And inflation is like impossible to predict beyond like nine or, say, 10 months out. We still don't know what causes it. There's no textbook that says this is what causes inflation. Everyone agrees to. The Fed looks at the Phillips curve. If you do any kind of analysis of labor market inflation, there's like almost no relationship there. It's like, you know, you're grabbing the 70s and then extrapolating it out to a whole bunch of decades where it never worked.

Why is debt inflationary? That's my personal theory. I think that we basically – I think that's real money. Like the Fed did QE and lowered interest rates, and that's like they shoved reserves into the system. They basically changed the duration of the money outstanding. But when the government spins into existence in a massive deficit spending, pro-cyclical deficits like we've never seen before, this is the thing that we've all underestimated this cycle. When we talk about why is the economy so resilient? We raised rates 500 basis points and we haven't gotten into a recession. Why is that? It's because we're doing fiscal stimulus now. We're running pro-cyclical deficits like we never have before.

And none of us have properly accounted for how powerful that is. Well, Sean just shared a chart with me from Apollo. 89% of consumer debt is fixed. Yeah. I mean, but it always has been. When was it not fixed? I mean, they've heard- But it's a lot more than it used to be. Is it though? Same thing with S&P 500 companies. Way more fixed than floating. So, and your point on that is just that we,

why would that stop us from having inflation? It's more, it makes the- No, I'm saying that one of the reasons why all the interest rate impact, interest rate hikes didn't impact the real economy the way that we would have thought in a textbook is because two thirds of homeowners don't even have a mortgage.

And the S&P 500, there was more bond issuance in 2020 than ever. It was like a crazy amount of debt issuance. So yeah, rates are higher. Obviously that impacted Russell 2000 companies, which we're going to talk about it. You have a chart on, but I think that's why. The bottom line is right before we embarked on this massive deficit spending and spinning up all these dollars. The number one selling economics book in the United States, maybe in the Western world of 2020 was the deficit myth. Yeah. And the deficit myth is the story. It's in a, Stephanie, uh, Kelson, Kelton. Tough timing. Uh, tough timing, but it's the story of why there is no such reason that we should ever hold back from spending when we need to spend so long as in periods of surplus, we raise taxes on the wealthy to offset all that spending, which of course we'll never do.

I mean, there's a million reasons why that idea is now funny, but that was the book that everyone had on their nightstand in the policy world. And now, three years later, we all know, oh, wait a minute. There is a limit. No, no, no, no, no. I think she got a raw deal because we don't know because absent the supply chain disruption, we don't know. Well, I think that— So would you really say that inflation was all supply chain?

No, no, no. But I'm saying we don't know how bad it would have gotten if we, if we sent checks. Let me ask you this question. The fiscal package that Biden did a month after the inaugurated disaster, that's over a trillion dollars in public works projects and all sorts of giveaways and gimme's. And had we not done that, does 2002 end up as disastrous inflation-wise as it probably not? Like working backwards, what are the things you would take away?

That would be one of the first things. That's fiscal. That's not Fed. My point is this. The next time we get a recession, I think it makes sense to send out checks. Maybe. However, it will never happen because the last time we did it we got so much inflation but there was also a man the economy was turned on it's not just monetary it's the combination

of fiscal and monetary and the collapsed time frame in which i understand my point is i think that fiscal stimulus can fix a recession or end the recession way more effectively than monetary policy. Do we agree on that? Absolutely. So I am not like an MMT basher. Like I trade DMs with Warren Mosler, who I think is basically the godfather of MMT. And this was after the GFC. I had a mental model that was wrong when we went through the GFC. I expected QE to cause inflation back in 08. So I went down in- You're the only person who ever said that. Everybody thought that, but a lot of,

I haven't heard anybody say my mental model is wrong. I thought QE was inflationary and then I changed my mind. People are still saying it. If you're still saying that, then you really haven't, you're not introspective enough for this game. You know?

If you're still saying what? That QE is inflationary. That QE is inherently inflationary in a vacuum with nothing else. Credit to Mark Dow and Colin Roche especially, who were saying this in 2010. Colin was instrumental for me. He wrote a paper called MMR, and then I read a book from a professor named Randall Ray, and I passed that book around to people at Ned Davis Research, and it was all on MMT stuff. And I think they have a better mental model of the world. I think their policy prescriptions are totally divorced from reality. Colin's great on this because he understands how the world works and then he also can understand policy prescriptions.

Yeah, the MMT people don't love him because he injects like the realism of why a lot of this stuff can't work in practice. They're smuggling – some of those – like Stephanie Kelton is – I don't know her, but she's smuggling politics into economics. And everyone on the right does that. The left does that. And honestly, I'd rather just – you need to just – in this world – For the audience, Warren, MMT in a nutshell. I know it's not easy to nutshell it, but –

It was what? Spending doesn't cause inflation? It's more or less saying that the government... It's kind of like chartalism. Chartalism is that the government spends the money into existence and taxes are only used to create demand for that money. And basically, the Fed and the Treasury are all one entity.

And what the Fed does is kind of – Taxes create demand how? Because once you – like Warren Mosler has a little – because I'm not great at doing these things, but Warren Mosler has this little thing where he locks everybody in. He goes to like a college classroom. He says, okay, if I have a guy with a gun lock you in here, I hand out Mosler bucks and I have a guy stand at the door and he lock you in here i hand out mosler bucks and i and i have a guy stand at the

door and he locks you in here and i tell you the only way to get out of here is if you if you're able to give me x number of mosler bucks all of a sudden i've created demand for those and that's so they'll start trading with each other they start you know ultimately they'll start willing and dealing and that's what spins an economy into life is the need to pay off taxes. But speaking of politics, I guess my point is that we've learned that fiscal stimulus is much better-

Way powerful. Much better medicine than monetary. But the point is politicians will never send checks again because of how disastrous this cycle was.

And they won't talk about Russia, Ukraine. And they won't talk about the supply chains. They'll just remember stimulus, inflation, stimulus, inflation, f*** that, never again. And they won't talk about Russia, Ukraine. And they won't talk about the supply chains. They'll just remember stimulus, inflation, stimulus, inflation. F*** that. Never again. And I don't want to go too far down the rabbit hole, but—

Oh, I would say we're there. Okay. We're in. Yeah, I mean, if you look at just the—you can tell it's more than just a supply side thing. And Governor Waller said this here recently. If you pull up just a chart of CPI and you draw a trend line through it, and we bounced way off trend during this. And if you think about it, if we just had a supply issue where supply chains were shut

down, but we didn't spend all that money into existence, prices would go up. It would cause a recession. And you go right back down and you'd level out where you were before. But the fact that we've kind of just leveled prices up, and you just know the house down the street is 40% higher than it was previously. And will be forever. And it just will be. We've leveled it up. And that's the money we spend into existence. So let's come out of this and go back to your point, which is that bonds have priced in an entire easing cycle. So you have this great chart showing that the 10-year has already discounted a cut cycle. Warren, for people

that are listening and not watching, what are we looking at? Yeah, this is what I was saying, is that there's a spread that historically exists between Fed funds rate and the 10-year. And it's about, depending on when you start measuring it, 120, 140 basis points. Where the 10-year is above. Positive. Normally positive. Yes, positive. The term premium. Well, yes, you could call it term premium. You could call it whatever you want, but it's just a spread, you know? And we're, at the moment,

Fed funds rates 5.5%, 10 years at 3.8%. But when you look through this cycle and you look at the Fed's SEP and you look at what the Fed's saying, they expect to get back to 2.5% by like 2026. It's their long-term median dot within their dot plot. So at 2.5% and you put on that 140 spread that you're supposed to be at, that would give you a 3.9% 10-year.

So from that perspective, we've already discounted that entire cut cycle. So that's the market of buyers and sellers getting to that endpoint on their own in advance and just betting that that's going to be the longer-term outcome of whatever the Fed is about to do. Yeah, and the bond market has been more pessimistic this whole entire cycle. How so? I mean, the other side— We inverted and stayed that way. That's as pessimistic as you could be. Inverted, yeah.

We've inverted, but also like we don't have charts on it. But we look at – we would measure the spread between the one-year, one-year forward and the one-year, which is a whole mouthful. But it's basically looking at the bond market as priced in for month 13 to 24 versus the current one year. And that's another proxy for how many cuts are in the market. And we hit all-time lows in that spread. So basically, the implied yield from month 13 to 24 was like 170 basis points below the one year for all of last year. So we have a chart on it, but basically, we've never seen that going all the way back to the 70s. The two-year is significantly have a chart on it, but basically we've never seen that. The two year is significantly below the Fed funds rate too.

Yeah. That's how you imply this rate. So if you look at the one year versus the two year, you can basically imply from that spread what the two year implies for that. Where's the two year now? Four two. Which is crazy. Do you believe the adage that the Fed ultimately follows the two-year? Like Fed funds' overnight rates will get to whatever the two-year dictates? They usually do. We've done that study.

They usually do. But I don't think – But it's not that they're not looking at the two-year. It's the market. The market is telling them where they're going to go. The market is leading policy. But policymaker is not as fast as day-to-day action in the bond market. Why should it be? So it takes its time.

And the bond market's been – I mean the bond market was priced – and this pricing really got ramped up after the bank crisis last March. And so the fact that we've kind of come through that, the Fed put the BTFP in place, and we're all talking soft landing now, tells me that in this case, the bond market was not right. The stock market was right. So let's go back down the rabbit hole for a second. You have a chart where you say the Fed has become a permanent fixture in the bond market, and you're showing that the Fed will end QT balance sheet larger than when it was at the peak of QE3. I feel like this is, people talk about this all the time, like smart people, but could you—like for the regular person, what does this all mean? Like quantitative tightening, why does it matter, why does it affect the markets? Yeah, the balance sheet.

Why is that so important? Well, I mean, some people say it's not important. She's taking a picture. Okay. I want to make sure I'm smiling. All right. I'm not smiling at the cue tape. I was going to say, this is really—this is a great topic for— All right, I'm not smiling at the Q take. I was going to say this is really, this is a great topic.

Anyways, yeah. Some people would say it doesn't matter. I mean, that goes back to our last conversation. Some people say, who cares what the Fed balance sheet is? But what I'd say is, you know, and Waller talked about this here recently. He said, like, there's no known number for where the balance sheet's supposed to be. But what I would point to and say, something's changed in the economy. We started QE after the global financial crisis. The Fed's balance sheet exploded up as a percentage of GDP. And after each subsequent crisis, we add a bigger percentage of bonds to that balance sheet.

And at the end of the crisis, we're higher than we were at the peak of the last crisis. I thought QT was supposed to be bearish. It is supposed to be bearish, but we're it's... That's why. There's a whole bunch of reasons why it hasn't been transmitted, but that's another one of those debates. A lot of people, especially there's some smart rate traders who basically say you're

ridiculous if you bring up QT and this QRA stuff and all that stuff. Warren, the Fed's balance sheet just for context for the listeners, viewers was like 20%-ish of GDP prior to all the stimulus they did. So when you say it exploded, it goes almost to 40% of GDP. And we've since now retraced, and it looks like based on your chart, what is this, 30-ish? Yeah. 28-ish? Yeah. 28%

of GDP. So if you don't- But you're saying like there's no magic number or rhyme or reason why it should be a- So then why do we look at it as a percentage of GDP? I put it that way to just to, because you have to normalize it because the balance sheet's always increasing. So QE, they're buying bonds. QT, they're rolling bonds off their balance sheet. But the economy is getting bigger. The economy is growing too. So you have to kind of account for. QT, they're rolling bonds off their balance sheet. But the economy is getting bigger. The economy is growing too. So you have to kind of account for that. So those are the two – that's the two things we're looking at.

You can see QT because the line goes down. If you just did it in dollars, it's alarmist. If you just said, do you know the Fed's balance sheet is $9 trillion? People would be like, what? Because they don't know how big the economy is to account for that. Well, there's – this goes back to the rabbit hole we started on, which I think is going to prove to be really important as we go forward in these years, which is that there's something called fiscal dominance. And that's this could be a symptom of fiscal dominance. And that's what people are saying we've gone into.

And fiscal dominance is when you basically fiscal policy overwhelms monetary policy and monetary policy can't really do its job effectively. Don't you think that's the story of last year? It's looking that way, yeah. You have Biden talking about we're going to get inflation under control while doling out money to companies that are putting bulldozers out into the field to build shit. I'll put it another way. out into the field to build shit. I'll put it another way. And now the Fed's primary tool is hiking interest rates.

But when they hike interest rates, when debt to GDP is this high, they're basically spitting money out to wealthy people. Well, I've been saying that for months. Nobody wants to hear that. It's absolutely the truth. I said the only way to slow this down, inflation, is to cut rates.

You said it to Gumbach and he sort of laughed. I said it to Jeff. He laughed. Jeff said, hey, Josh, why don't you have another f***ing bacon, egg, and cheese? Why don't you leave this stuff to me?

Look, I would just say, I don't think that's a really big part of the equation, but it is one of those perverse things where people with wealth and no debt

are now like basically spending like there's no tomorrow because they have a geyser of money. I've said perversely that when they start to cut rates, people are going to think that they're tightening because they're getting less money in their savings account. Well, I mean, there's a whole argument you could make. It's like if hiking rates didn't kill the economy, is cutting rates really going to stimulate the economy?

I think it's really – it goes back to the – that's why I think QT is an important factor, QE, QT, balance sheet policy, because it works on theoretically at least the longer dated maturities where people borrow money, where the real economy takes place, where risk premiums are set, and where markets and assets are valued. And so that to me is where – that's where you get financial conditions loosening is when you see things like the 10-year drop from 410 to 380. What do you say to the person who says, think about how great the economy was in the 1990s? And our colleague Ben Carlson has been writing on this. Fed funds rate averaged 5% or something during the entire decade of the 1990s. during the entire decade of the 1990s, there was a huge round of cuts in the summer of 98 because there were some currency blowups overseas and there was a big hedge fund unwind here.

Okay, fine. But outside of that, in the 90s, we weren't sitting around pining away for rate cuts. It just wasn't part of the story and it wasn't necessary. I don't understand why it's all of a sudden necessary now. If you could tell me the specific part of the economy that's screaming for rate cuts, I'd be all ears.

The housing market has tons of demand. You may not like what your mortgage costs, but I promise you this, if we have mortgage costs fall by 50%, the price you're paying for that house going up, Charlie, like, is that what you really want? Like, you think you need stimulus there? Do we have a problem selling autos?

Does anyone have a problem selling a car right now? So I don't even understand. If you got a weight cut tonight, oh, what are you going to do now? All right, you got it. Now, who gets the benefit of that? I don't know who it is or who's calling out for it right now. Commercial re? Home sellers. Commercial re home sellers,

commercial or home sellers who are about to sell their stuff, their house for 80% more than they paid for it. That's who needs a rate cut. I'm sorry. You said yesterday's tightening is tomorrow stimulus. Yeah. Do you think that, so I guess like the million dollar question is okay. True. Yeah. Do you think that, so I guess like the million dollar question is, okay, true. We know that the market knows that you have this chart showing, uh, so coming into this year, analysts are again, optimistic consensus, 2024 earnings are for S and P earnings per share to rise 12% in 2024 sales will grow by 5% and margins expand by 80 basis points. The anticipated margin expansion is uniform across every sector. So the chart that we're looking at is margin estimates for 2023, 2024, and 2025.

And across every sector, it's higher next year, and it's higher the year after. So the trillion-dollar question is how much of the stimulus, future stimulus, is already baked into the pie? In the form of estimates. And asset prices. I don't, I think that there's a knee-jerk reaction to do that, to say that that's the case. But if you-

Yes, go on. I agree. Go on. If you zoom out two years, the market's barely up on a two-year basis, right? So we just made new all-time time. I'm sure we'll get into those studies too. And so, yeah.

And then if you look at, there's a chart I threw in there on strategist targets. So if everyone's so bullish, look at what strategist targets are doing. Strategists are at like for 2024 year in target is like 4,900 and they've, that's. I love the chart. We used to sort of, we used to a few weeks ago. Okay. Well, that's up from the start of the year. And so it started a year was 48, 33. And there's another chart that goes with this. I don't, I doubt you've shown before, but it's, if you look at the equity performance, whenever this strategist targets are within 5% of the S&P 500. Yeah. Rip. I mean, what you're showing, so I want,

so what we're showing for the people that are listening is we're looking at the strategist forecast divided by compared to the S&P 500. And normally, strategists expect the market to be higher, not lower. And right now, they're basically in line, which tells you that they're not expecting a lot. So I totally agree with you. I think what I just threw out is how much is baked in. I feel like that's the type of thing that somebody has been saying for the last 10 years

who never makes any money. For sure. It's already priced in. It's priced in. I even know the guys that keep saying it. They've been saying it forever. Yeah. Yeah, yeah. Well, it's not priced in. And that's what I'm trying to say that keep saying it. They've been saying it forever. Yeah. Yeah, yeah.

Well, it's not priced in. That's what I'm trying to say with this chart and what I've been trying to say is that there's a lot – there's going to be a chase. The average over – this is career risk. These guys are going to raise their targets. Or get fired. Yeah, or unless the market has an imminent collapse, which I don't think you're really trying to win the lot of. If the Fed follows the two-year, the strategist follows the 200-day moving average of the S&P. Yeah, that's a good rule of thumb.

So if it's way above where your year-end target is and it's August, you could either double down or you could say, you know what? My wife kind of likes the house in West Hampton and I actually – I'm going to go 49-50 S&P this year. I don't know. That's the mental math that goes into, I don't mean to demean every strategist or say it's all career risk, but there's a huge element of that to getting a price target.

I mean, look at the chart. I mean, they basically follow it. They're trying to stay 6% above where the market is. You can see the chase in the chart. Yeah. It's as clear as a bell. And we have a version of this that goes back 30-something years, and it's the same pattern

over time. And they always are about 6% above where the market is. Now, when people will make fun of strategists and they'll show this chart, I'll say, well, what do you want them to do? We're going to be contrarian 24-7? Like, in the end, they're trying to give investors guidance and a framework for how to view what's going on in the market. Well, the big money is made when consensus is wrong, but consensus is usually right. Well, I think that's a little bit of – that's true when consensus is bearish.

I've actually done this with like the AAII and the Senate. So nothing's more bullish than when everyone's bearish. Exactly. But if everyone's bullish, that's not necessarily bearish. Right. It doesn't work the same way. I've done that with the AI, you said? Yeah.

Yeah. So, I— Savita does that with specifically strategists. Yeah. And it's as reliable as anything she puts out. So, you learn a lot more when everyone is pessimistic— Yes. —versus when everyone is—yeah, I agree.

All right. So, we're going to do a lot more on the market. But before we get there, I just want to do one more thing on the economy that you wrote. You said, for soft-landing dreamers, the loosening of recent months is picture perfect. So walk us through this chart that's on the screen. So on the screen, there are four lines. And we centered this all on May of 2023. That's when the jolts job openings number peaked.

And so what we're doing is we're looking at what has happened in the labor economy since jolts the job openings number peaked. And so what we're doing is we're looking at what has happened in the labor economy since Jolt's, the job opening number peak. So job openings are down two and a half million. We've seen payrolls jobs growth of 5 million, and we've seen the labor force expand by 4 million. Uh, all the time while the red line, uh, is continuing claims is flat. Could it get any better? No, this is perfect. And if you go back, we don't have the chart here, but if you compare it to the other cycles, this is not a thing like a recession. It doesn't look a thing like a recession. So basically when job openings peaked in 07, you saw payrolls come down right with it and claims almost commensurate with jolts.

So even next post, how do you explain the strength of the economy? I think it's the power of fiscal spending and the deficits that we're running right now. And we've all underestimated. I throw demographics in. Everybody's 29 years old going into this. Now they're all 32. What do you do?

Everybody's 29. It's the most common age to be going into the pandemic was 29. And now the most common age to be in the United States is 32. What do you do between the years of 29 and 32 what do you do you get pregnant get pregnant again buy a house refinance a house uh you get promoted at work make more i mean i'm not saying it like most things something of this magnitude probably requires multiple variables to explain it. I think it's an underrated piece of the puzzle. The other thing is historically you've had a demographic handoff. The boomers are not going to die that way, the way that their parents died.

It's just not going to go that way. And not only are they not going to die, they're also not going to sell their assets. And you could take my word for it because I manage four and a half billion of them. And you could take my word for it because I manage four and a half billion of them. And I'm going to tell you right now, most of our clients are not going to spend it all and then die. They're giving the money away while they're alive. They can't spend it. They can't spend it. It's growing faster.

People with money can't spend it. And they can spend it. So what are they doing? They're making sure that the next generation can enjoy it so that they can watch that generation enjoy it. It's not like, oh, if you're reading this, I've passed away. Here's your inheritance. Nobody is doing, we don't know anyone doing that.

We have thousands of clients. So that element, I think it doesn't look like previous cycles, demographic cycles. Again, it's one variable, but it's a big part of the story. We're talking about what's the $70 trillion that has to be handed from boomers. And we think it's going to be linear. Like they're all going to pass away in the same three year period and, and, and leave it in their will. None of that is going on. And the third component of that same story is the propensity and willingness to borrow against securities portfolios. Again, there have always been securities-based lending, always. However, never in these numbers. And the multiplier effect on securities-based lending,

go pull up a chart of Brunswick. They make every popular type of boat you've ever seen. I think they make Seaway. I don't know. Maybe Crown Line. I'm not sure. That's not a recessionary chart. When the leading publicly traded boat manufacturer looks like that. Ferrari. You have to say, well, maybe it's different this time with demography. And maybe all these fairy tales I was told by Harry Dent about what would happen when the boomers turn 70

is not really how this is going to go. So I think, I think these things are get lost in the shuffle, but they're important. Yeah. I mean, I can't disagree with anything there. I mean, we talked about that. There is a housing shortage back in 2021 when we said, look, it's it, and that is a lot of that on the demand side, that's demographics and delayed household formation from millennials. And that's, you know, eventually that happens. And these homes, half of them are being bought in cash. How is that possible? That's not millennials buying houses in cash.

But the problem is, that's my story. Everything that Josh is saying, none of that is in the- You can tell me it's all priced in. None of that is in any of the historical data. So you could run models until you're blue in the face and you won't pick up on this current dynamic.

Yeah, and that's why I always say this is like kind of art and science. And there's only so many cycles. Like we're talking soft landing. There's been like, we count four soft landings historically going back. I mean, that's, you know, that's the first thing anyone says to me.

I think it's kind of like a little bit of like that, you know, you talk about memes, like the midwit meme is like, oh, what's your end count on that? Well, what's your end count on recession? Midwit is it's priced in everything is like, you know, it's like, of course we all that's like table stakes. We all know there's not a lot of data to work with. We get it. We get it. But this is what it says. Yeah. Uh, so getting back to this idea that the Russell 2000 obviously is more sensitive to interest rate moves. You have a chart showing the daily reaction to the direction of interest rate changes since the middle of last year. And it's

significant. So when- What's purple? What's green? Warren, you explain your chart. Okay. So we have S&P 500, S&P 500 equal weight, Russell 2000 in the mid caps. The blue bars are the average daily return for these four indexes when rates are up. Oh, this is great. And purple bars are average daily returns for these indexes when rates are down. On a one-day basis? One day. Just the average daily. So the knee-jerk reaction to rates going up is all of these stocks down to varying degree.

And then vice versa on days rates fall. But especially smaller stocks. That's just banks, dude. What do you mean? That's just over-representation of financials in the Russell 2000. That's the whole story. You think so? Yeah.

It has nothing to do with cap size. Nobody cares about that. So you think Russell growth? Of course it does. Cap versus banks. No, if you take out the banks, it'll be the same thing. Yeah, it will nothing to do with cap size. Nobody cares about that. So you think Russell growth? Of course it does. Cap versus banks. No, if you take out the banks, it'll be the same thing. Yeah, it will be. If you do Russell, pull up Russell growth and see what it's done.

Where's Fernando? Can I tell? No, I think it is cap size. Well, here's another good thing. Wait, wait. But this is a function of the borrowing, the need to borrow that small caps disproportionately have relative to large caps? I mean, that's a good theory. No, it's real.

90% of S&P 500 debt is long-term fixed. With the wealth of 2000, I think it's like 50%. So they are much more exposed to the carbon rate environment. What else would it be? I mean, I have no idea. I think it's just an interesting kind of way things are being priced. I think a little bit of just like it's also to me, it goes back to you said who's screaming for a cut in this environment. Well, these are the names that you'll see it.

In this environment, mega cap stocks are money good. They're basically the spread of a treasury bonds is nothing. Oh, you know who's screaming for a cut? New York Community Bank. Yes, exactly. There's a few people screaming for a cut. Just York community bank. Yes, exactly. There's a few people screaming for a cut. Just probably in the Russell 2000. You have a great chart, a great chart showing that S&P 500 stocks are attempting to break out of their relationship with yield. So you've got a

chart of the 10 year and the S&P 500, and you've got a scatterplot. And for a lot of 2022, these traded very much in line. And recently, recently, it's not the case. Yeah, to me, that's a really bullish thing. So our idea is that our base case is we're having a soft landing, that the first Fed cut is in May. Going back to those three ingredients, resilient economy, rapid disinflation, hyperreactive Fed, we think that's all in place. And that's the base case. So may they cut. If you go back to those four soft landings,

we can identify stocks rally 10% in the six months leading up to the first Fed cut. That takes us to like S&P 5200 on May 1st, which is when the next, when the first Fed cut would be. I mean, of course, there are a lot of things that go wrong and this is like targets are only worth the paper they're printed on. But I think that's a good framework. That's our framework. And you can look at what's happening in the rates market, and you can basically see a path to that because we've had this earlier price action where rates have gone from 3.8 to 4.2 until recently or until just the last couple days. And the S&P 500 has hung out there. It's broken out to new all-time highs.

It's gotten into like plus 4. Right. It's changing the pattern. Right. So now if rates, now what you, this is how you would control for it. So if rates pull back, let's say the 10-year goes to three, five, that's when the S&P 500 should advance. Yes. Would take that, make that really big. When you talk to a macro hedge fund, a hedge fund that utilizes macroeconomic inputs and they're more on the bearish side. What's their pushback to that story? The bear case has kind of been obliterated, but it, it, it feels a little bit like I'm,

uh, you had, you had Neil done on, uh, last. Yeah. Shout out to Neil. Yeah. And he, he's really great. I feel like I've, I followed him to a conference in California this year, so we've been kind of following each other. But he said he doesn't like indicator macro,

and it kind of does come down to indicator macro where it's like, hey, yield curve is inverted. Remember that? Yeah, he doesn't like any of your stuff. That's fine. That's fine. No, but wait, what do you mean by that? I mean indicator macro is something that you would hear from a bear.

So what is like a bear case is like's like, well, yield curve's inverted. We've never had a soft lane when the yield curve's inverted. I get it. You know, you can look at things like… Then you've just shown my chart of the boats. That's right. I mean, it's hard to argue. Right.

So, Warren, presumably Fernanda made a really sick chart. I've never seen this before. All-time highs are not bearish. I mean, we've said that a million times, been saying it, we'll say that forever. You have a chart showing the average performance in the year following a new all-time high after a prolonged period of time without an all-time high. This is crazy. Nobody would guess that it looks like this. This is absolute eye candy. So walk the audience through what we're looking at here. Yeah, I mean, there's this knee-jerk response

like you said. And I have this. I'm a pessimist and I think part of this is knowing yourself. So like, I'm pessimistic at heart and so you have to kind of like

do studies like this to teach yourself to get out of that pessimism. And can you? Dude, everyone is instinctively bearish at all-time highs because you're like, what's going to drop?

You're constantly looking around for what shoe's going to drop. No, you say this is too good. It can't last. It's not sustainable. There's some people who are—you have a lot of the positive people who come on your show. They're always positive. And in some ways, I wish I could be that way. It's not the way I am.

And so I have to use the data to kind of coax myself out of this pessimism. And this chart, it kind of goes to that point. So this chart, let's describe this. What you're saying here, and you're going out 250 days from a high, it literally goes from the bottom left to the upper right. This is the S&P 500 performance following an all-time high. Yeah, going back to 1950, if you've had a period of more than one year with no new all-time highs, you make a new all-time high, what happens next?

More. And basically, yeah, you keep rallying. When did we make the all-time high? Two weeks ago? Yeah. Nothing's more bullish than all-time highs. Nobody is under- But wait a minute.

No, but you know, people are afraid to say it because you sound like a donkey. Is this a composite or it's an average? It's an average. It's an average. It's not a composite. Of all the cases. This isn't what it looks like. I mean, this is not what the stock market looks like.

This is what the performance in percentage terms looks like. Of all average cases. This is the average of all the cases. Okay. So, I mean, that's… I have a table of all the different stats. Next table. So, he took all these tables and he mushed them together to get an average.

Yeah, yeah, yeah. I totally got it. So, let's give people the numbers. So, took all these tables and he mushed them together to get an average. Yeah. I totally get it. So let's give people the numbers. So, you know, basically… From an all-time high, go. From an all-time high, you're up 14%, 15% on average. When? For one year.

One year, you're up 14% to 15% average. And you guarantee it. And you're PGing it? What's that? You're going to PG this? What's a PG? Personal guarantee. Personal guarantee.

Are you co-signing? Yeah, I'm co-signing. All right. All right. But that's remarkable. Nobody would guess that. And there's only been one down case. What was the down?

What was the 2007? Which happened. This is the type of thing a bear would catch on to. That was also the only time we made a new all-time high when the yield curve was inverted. So this is the kind of stuff that holds you back. Oh, you got a sample size of two. So, and one other thing that people wouldn't guess is breadth is okay. It's okay. You say that 20% of the S&P 500 is making new highs, which is only slightly less typical, less than the typical 25% at the average new index high. So it's not just four names or six names. I've written on this topic. I wrote on this in,

I think in 2013, when we made the first new high from the great financial crisis. So the October 2007 was the S&P high. I think the Dow was 17,000 at the peak. Fell to 6,000, right? All right. When the S&P made its first high since the crisis in the spring of 2013, I think that's when I wrote this piece. But I wrote about the gambler's fallacy because this is the way we're mentally wired. When we walk up to that roulette table, it's red, it's red, it's red.

Okay, this time it's got to be black. We think that the world works that way when in reality, every spin is independent of the one before it. So we're making new highs in March of 2013. And it's like, all right, that was fun. That was a nice rally. Now it's got to turn. It doesn't have to turn.

And they built Las Vegas on this premise. Human beings are searching for patterns mentally. They don't even know they're doing it. But those patterns don't really exist. And that's why it's not a rickety shack in the desert. It's billion-dollar buildings, one stacked on top of another because of that human gambler's fallacy thing that we can't shake. gambler's fallacy thing that we can't shake. So I'm not saying that every new high has to lead to new all-time highs, but what you're demonstrating here is that almost all the time it does. Yeah, I mean, it just shows it's better than, I mean, the average 252, which is one market year,

is up 8%, and you're up 14, 15%. So it's better than your average 252-day period. And your pullbacks and your ultimate drawdowns in that period are lower than normal too. And so- Oh, that's interesting. Yeah. I mean, the only one down year. I love, we were talking about this earlier, that when all of the strategists and economists

and managers and et cetera, individual investors are bearish, that's a powerful signal. and et cetera, individual investors are bearish. That's a powerful signal. So you have a chart that shows what happens if you're long the S&P 500 when the strategist forecast is less than 5% above the current S&P 500 versus, so when they're pessimistic, versus what happens when you go long

when the strategist forecast is more than 5% above. And what happens for everything else? I assume you're in like T-bills or something? This is just flat. We don't even put it in T-bills or something? This is just flat. We don't even put it in T-bills because I don't want to muddy the water. Got it. So you're either in the S&P or out of the S&P, whether- Putting the money on your mattress, basically.

Based on whether strategists are bullish or bearish. Yeah. And there it is. I mean, for people that can't see this- You want conservative targets. Exactly. Because it allows them to chase like that. Because they only turn conservative after things hit the fan. Right. They don't them to chase like that. This is basically only turned conservative after things hit the fan,

right? They don't want to be underwater for too long. Cause it starts just like Josh had said, it's just, it's career risk. Ultimately. I want to move the ball a little bit. Let's do presidential cycle.

Uh, we're approximately, I would say like conservatively 10 months from an outright civil war. Um, that'll be fun. We'll have new data for all of our studies. But before we get there, can you describe what the typical stock market ride is like going into that election? We know year three is the best of the cycle. That was 2023 held up very nicely, plus 30%. How you doing? What do you expect in this year if we were to adhere to the pattern?

The traditional presidential year cycle is considered to be a positive. And it's a weak first half, strong second half kind of pattern. Okay. That's the traditional, what the cycle tells you. Okay. So not yet. No, not yet. It would be a weak first half.

And I feel like I've seen a lot of strategists come out with that. And like the least creative. When does the weakness come about? February? It's kind of like a reverse of sell in May and go away. We have a chart on it. It's like it's weak in February and you're weak basically flat and down choppy all the way to like. Yeah.

All the way to. Oh yeah, all the way to, oh, there you go. So this is, and then it bottoms in June. That's the 2016 example. You got the, in the summer of 2016, the two scariest things were Trump got the nomination for the GOP

and he was so unpredictable and Brexit. Brexit happened, then Trump happened and we were just off to the races from June on, almost with like no volatility. Yeah, that's – and so I think that last year was so unpredictable and so many people were wrong. And the recession was the consensus trade and it didn't happen. And so we come into this year and what's the – unfortunately, what's the human reaction reaction from the strategist group it's to kind

of adhere to the normal so i want an eight percent return um i think it's i go to the presidential election cycle and i see okay week first half that makes me feel good because we had a big end of the year rally so why don't we digest that for a little bit then we'll rally in the second half it's too easy it's too easy i think this market is is going to just force everyone in in the first half and then sell off if you want to look for a sell-off it's more likely to be in the second so i actually think march is going to be a disaster okay why the hides no well yes no uh taxes okay i think uh nobody wanted to sell and pay the taxes I think the rally caught people by surprise they didn't even understand how much money they made last year

and they're going to owe those taxes and I think people are going to access their portfolios for the money more so than usual I know they do every year I think that's going to be a pretty good buying opportunity You said that on Tuesday, January 2nd, when the stock market was down because of taxes. I was just joking.

Now I'm being serious. No, I do think you'll see fund redemption data prove me right. I think it'll be ahead of what it was last year. I just think that people made so much fucking money last year, like ridiculous amounts of money. Almost nobody expected to make that much. Duncan, how much do you own your Oatly? What happened?

How much went down? Are you even paying taxes on that position? I'm only down like 40% right now. Not bad. I think that this is one of those years. So, I don't think it means anything if you're a long-term investor. I don't think you'd do anything about it, but it's just what I would expect.

It's, I mean, I think that that would show up as a smaller deficit. And that's part of like what we've talked about is like, you would see that as tax receipts would go up, the deficit would contract. And so that would make sense to me. I mean, that shows up in that data. After huge years in NASDAQ stocks, my experience, this is how it goes. You had a flat market in 2014. The year 2000 doesn't need to be rehashed. That's after 1999. I feel like last year was one of those years for a certain type of investor, for a tech investor, an index investor, an ETF investor. They made more money last year than they ever thought they would. This is where the money market funds come in and how much of that will be-

Boom. We're going to hit that right now, actually. last year than they ever thought they would. This is where the money market funds come in and how much of that will be. We're going to hit that right now, actually. So $8 trillion in money markets and CDs. I keep saying that I don't think that's part of the equation. $8.8 trillion. Is that crazy? So, although I kind of am waffling on this because even though I think that most of the money is cash that will stay there, I don't think it's money that's going to come into stocks or bonds.

I think it's cash that went from, rightly, from checkings into high yields. But even if I'm right and only a trillion comes back into bonds or risk assets, that's still a lot of money. John, can you do this Wall Street Journal chart, 8.8 trillion? So what's your thesis on this one? Hold on. So this is saying money market funds is a little bit over 6 trillion. And to put that into perspective, in the year 2000, it was $1.5 trillion. Okay. But also, but also to put this into perspective, if you divide

this by the S&P, it's not a lot. I understand, but it's still a lot. The CD is another two and change trillion dollars. I don't think the CD money is coming into the stock market unless I'm really off to you. What was the meme, one does not simply want the bond market.

One doesn't simply walk into. Oh, it's the, it's from Lord of the Rings. It's a borrow mirror meme. When you kept saying the CD, I was reminded of that meme. I don't really think, I don't think the CD money is coming into a Tesla. I could be wrong, but 6 trillion bucks. What, what are you thinking? I think it's going to, I think it matters.

It doesn't have to all go in to matter. It's just prices are set on the margin. If the Fed starts cutting rates, reinvestment risk, all that stuff comes on the table. Then I had, I think it was Scott Wapner asked me about this and said, well, Gunlack says that's just going to go into the bond market. Well, okay, if it goes into the bond market, that just pushes – that liquidity goes into the system and then out the risk curve. It compresses term premiums, risk premiums. Ultimately, it supports equity. It's a ripple.

Yes. Morgan Stanley's Andrew Sheets, I guess he's a fixed income PM there or a strategist. He's saying we've added a trillion dollars to money markets over the last year. Quote, we expect the decline in money market yields to be significant on the order of 300 basis points this year. Returns for high quality bonds are historically attractive at the end of Fed hiking cycle or the beginning of cutting cycles. That sounds like a good trade to me. Out of money market into quality bonds. Yeah. Out of money market into quality bonds. Exactly. But that money will find its way ultimately into the stock market.

No, no, no. I agree. But I'm saying like, as somebody trying to, Alex, let's say you're in the group of people who took a huge amount of their money and said, give me five and a half percent. Now, what do you do this year? Cause you're not getting five and a half percent now. Yeah. Lock it in, lock it. You have to, you have to, so how do you do this year? Because you're not getting 5.5% now. Yeah, lock it in. You have to see if the- So how do you lock it in? You can do, what could you do? Investment grade corporates are fine.

I mean, I think that, you know, risk premium are compressed across the board. So nothing is jumping out as like the, as just screaming by, but, you know, necessity is the mother of invention. They're all going to move out. Do something. They're going to move out

because they're going to start losing. You don't think they are. Michael thinks that the money is going to be sticky in money markets. I don't think that people that move their money from Chase to a money market fund are thinking about reinvestment risk.

I think it was really slow to leave, and the money didn't leave because rates were so attractive. The money left because of SVB. That was the oil on the fire. And so I think that that money is just going to be slow to come out. I really do. Well, I mean, money market funds, we have a similar chart to the stat you're saying. It's not in the deck, but 1.2 trillion of inflows to money market funds last year, there were inflows to bond funds, outflows to equity funds. So I think that on a relative flow basis, you're going to end up with some reversing that.

But I think that you're right in that even if it's not, even if the majority of the 1.2 trillion that went in stays there, even if some of it comes out, pushes bond prices up, brings yields down, then people go looking for more risk in the stock market. I totally agree with that. The investment-grade corporate person then goes into a REIT. The REIT person then goes into a stock. And then blockchain, blah, blah, blah. All right. What does Mark Zuckerberg know that we don't know?

Oh, man. That guy's— How to build cool technology. No, dude. He is building a f***ing bunker in Hawaii on acres of land. It's fully sustainable, meaning he could ring fence himself in this property with his family. They could live off goat's milk and pineapples

and it's got its own fresh water source. Like this is the third richest person on earth. Amazon beat. Hang on. This is like maybe more consequential than Amazon's. No, up four and a half percent. What is, like, do you, when you see the third richest person on earth take his family and move to a Bond villain's lair on an island in the South Pacific and set himself up like a prepper – and this is not just a regular billionaire. This is a billionaire who arguably is in the center of all information flowing all over the globe.

Am I like being overly paranoid about this? And by the way, he was in Congress yesterday. He looks amazing. Can we put this up? Look at his hair. He's always had that like It's always been tight. He's always had like mom put a bowl on my head and cut it because I was in a rush. He's letting his Jew fur fly.

I like it. So he looks great. He's got a tan that's from Hawaii. Anyway, do you worry about this stuff? I've had this conversation. I'm not going to lie. I mean, what is going on with that guy? He spent a hundred million bucks on a bunker, which is kind of, but I guess it's all relative. No, it's not all relative.

He's living there. He's doing jujitsu with like an army of henchmen that he's building on a private island under a skull mountain. What would you do if you were 30? This is not theoretical. But he's – how old is he? He's 38.

38. So he's 38 and he's already at the top of the mountain. Now he's like, what comes next? So he's building an army of fist fighters? He's made a lot of people mad. About what? Oh, this is personal protection. This is not him worrying about the Earth.

Lindsey Graham said he had blood on his hands in this hearing. Oh, I thought there was something else. So you think he's there to just isolate his family from potential threats because of who he is? Maybe. This feels like it's bigger than that. Maybe it's warping Last of Us. I don't know. He's taking peptides and learning jujitsu.

I mean, I can't hold it. Are you taking peptides? I'm not, but I mean, I can't- What's the- Are you taking peptides? I'm not, but I mean, I had- What's a peptide? Peptides is like the new thing. Oh, you're not going to make it, bro. My neighbor's a doctor and he's like, he does peptides.

He's talking to me about them. Actually, the sponsor of this episode is a peptide. Does it help you grow your hair back? Because if so, I'm interested. Me too. It's not neutral. All right. Anyway, last thing.

New York Community Bank blew up this week. It's sort of – full disclosure, I bought the stock at five and changed today. Good for you. For a trade. I'm probably going to wait until it gets to three and then sell it. So I listened to the call. It doesn't sound like anything is like systematically, systemically broken. It just sounds like they made a bad acquisition that they weren't ready for.

But this is definitely now going to be the new bear. Cause you said the bear case got obliterated. Here's the new bear case. There's never one cockroach. And where the smoke, this fire and who else is holding onto something that they're about to tell us about? It can't just be New York Community Bank. But it can be.

I'm just, I'm giving you the bare case. Let me just read this. I don't see systemic issues within their loan portfolio that I'm overly concerned about, said Mark Fitzgibbon, head of financial services research at Piper Sandler. Quote, it felt like this was a cleanup quarter. The company said, we're going to rip the bandaid off all at once. JP Morgan said the same thing. They doubled down on the stock. They said, this is overdone. A few other analysts, I saw Chris Whalen, who really understands the banks. He's long the stock. He's like,

it was a stupid conference call, but it doesn't matter. So are you worried about this? Are people asking you about this? I haven't gotten the question. I had a conversation with someone who knows more than me on this. And they echo the sentiments that basically this was a cleanup quarter. And they're actually making a responsible move provisioning for losses. And I mean, I think that this is a little bit of the PTSD still from the GFC that's with us. Like we're going to go from commercial real estate is the new subprime. I don't know.

It's all, anything's possible. It's not my, it's not my focus, but let's play this for you. Jonathan Farrow. For the most part, everything's in the rear view mirror now. So there were a few idiosyncratic bank failures related to the business model and how fast those banks grew. And then the stress caused by the Fed raising rates very quickly. And so I think as the year went on, people could differentiate between the traditional regional banks and how well they've managed and been able to handle their interest rate risk. And so deposit pressures eased as the year went on. And so things are starting to feel a lot more normal. So yesterday's announcement on NYCB was a bit of a surprise. I think that's an outlier. The monster's under the bed. It spooked people, though. You know it did, Bruce.

Commercial real estate has been something that's been on people's minds for a long, long time. What an accent. It's Jonathan Farrow, folks. Do you think we have seen, realized the unrealized losses there? So they bought Signature Bank and that pushes them into a new tier. They now have $100 billion in assets. They also bought Flagstar

and they're digesting both. So they cut their dividend and then they took a huge reserve loss for future losses in their commercial space. It was like $500 million, a lot of money. There's another building they know they're going to take a loss on. That's why the reserve was what it was. The point is not knowing anything just based on what people are saying, it seems isolated to their particular situation.

Yeah, that's as far as I can tell, which is I don't have any this is not I have no edge here but you know I it's not it wouldn't scare me off my thesis any of my anything I've said or anything I've laid out for clients and so you know I kind of lean on those experts in this if you were to guess like you know how you were saying like it's it's going to be some like outside shock hitting the like it's not an earning story like the bear case. It's going to be, wouldn't this be the one though, where there's two more New York community banks in the next week.

And then all of a sudden, everyone's trying to clear their portfolio out of as much shit as they can. None of that bullshit matters because Meta's up 8% and Amazon's up 4%, okay? You are whistling past the graveyard, my friend. That's what I was about to say, are we whistling past the graveyard.

And we've got Apple coming up. You are whistling past the graveyard. And friend. That's what I was about to say. Are we whistling past the graveyard? And we've got Apple coming up. You are whistling past the graveyard. And, and, and we are doing, we've got this new show that we're doing where it's called Great Quarter, guys, where we're going to go deep on these, on the five big tech names that reported this week and last.

Yeah, look for that on our YouTube channel on Monday. That's on Monday. Super Bowl. You care? Absolutely. You got a horse in the race though, I'm saying? No, no, no. I'm just going to watch.

We're going to play some bets, and the next time we have you on, if you're right, we'll celebrate. Okay. Or whoever's right, we'll celebrate. 49ers versus Chiefs. The spread is San Francisco giving two. Who are you taking? I'm taking, I think it's a coach quarterback type of deal.

Plus, KC has a much better defense than people give him credit for. I'm taking Kansas City. You're taking Kansas City all day. Yeah. I don't understand. So, I'm a very conservative bettor. So, here's what I place. I place one bet.

I place one bet. So, I'll place 13 others. But here's the one that I did block in. So, I don't do like plus 300 or plus 3,000. Duncan showed me a bet that was like plus 28,000 the other day. It was totally wild. So here's what I do. I tease the Chiefs up to plus 8.5.

I tease the Niners up to plus 10.5. And I tease Patrick Mahomes and Brock Purdy, their passing yards, down to 200 yards. Oh, you think it's a defensive battle? No, no, no. That's not my point. My point is, so Chiefs plus 8.5, you think it's a defensive battle? No, no, no. That's not my point. My point is, so Chiefs plus 8.5, Niners plus 10.5,

Purdy and Mahomes over 200 yards, and that's even money. That's how I bet. Now, one of those might not hit, obviously, but I like those odds. Money line is San Francisco minus 128, Kansas City plus 108.

I mean, Kansas City has the value. I don't... So put up 108 to Kansas City has the value. I don't— So put up 108 to make 100 on Kansas City. I don't know how you bet against Mahomes in this situation. I hope the Niners win, but I don't know how you bet against Mahomes. What do you think the game comes down to? I think that—I just think it's going to come down to the coach and the quarterback. I mean, they've got so much experience, and you got Brock Purdy who's, you know, basically.

More so than how the defense is played. I think KC's defense is way better than people realize. I think the Buffalo-KC game was the real Super Bowl to me. I think those are two best quarterbacks, two best teams in football. It was so much fun. I love that run. I think it could be a big Pacheco game. Niners are soft in the middle.

They've got these great pass rushers. They haven't been playing well. They kind of skated by in both their – Well, Aaron Jones ran all over them and so did Montgomery. 49ers are 6-0 straight up as favorites in the postseason since Kyle Shanahan has been coaching. Kyle Shanahan is a great coach. Say more.

But Kansas City, Mahomes is 10-1-1 and gets to spread in his career as an underdog. So something's got to give. I would take the points without any hesitation. Maybe I'm missing something because I'm not a handicapper. I wouldn't know any better. I think that

Patrick Mahomes, by the way, if you're not from the Bay Area, I don't know how you would be rooting against Kansas City. Why would you be rooting for the 49ers? Why you be rooting for the 49ers? Why am I rooting for the 49ers? Yeah, what do you care about? I like the Brock Purdy story.

I mean, I don't— You guys, like, still live in it. He already—but he already made, like, far beyond anything that he should have done. No, no, no. People are not giving him the credit that I think he deserves. They say he's the system's quarterback. I disagree. And it's enough Mahomes.

I mean, he'll get four more rings. He could take a break. Well, I was going to say, let me give you the other side of that. Patrick Mahomes is the best living athlete currently playing his sport as he's playing it right now, meaning not his season four years ago.

What does that have to do with anything? How do you root against that in the moment? It makes no sense. He'll win four more Super Bowls. I just want... Do we like greatness?

I love greatness. Because, first of all, what's the hardest position to play in any sport? Quarterback. Quarterback, period. Nobody would disagree with that. Hey, I'm not hating on Mahomes.

I'm not saying you are. I want to give Brock Portnoy a chance. I'm making the point that if you don't specifically care about the 49ers, why wouldn't you want to see this guy get his third ring? Andy Reid get another ring. This is like true greatness we're witnessing. In the moment. Did you always root for Brady?

I've always rooted for Mahomes. I did not ever root for Brady. It's the same deal. I didn't ever root for Michael Jordan. I always rooted for the Utah Jazz back when I was growing up. But when you watch the last dance. I was a John Stockton fan. When you watch the Jordan Stockton.

He's awesome. Do you look back and say, man, I should have been rooting for him the whole time. But that's part of what makes it fun. I'm with you. It's fun to root against greatness. And you look back and say, man, I should have been rooting for him the whole time. That's part of what makes it fun is you get at the end. I'm with you. It's fun to root against greatness. And you realize like,

oh man, that was great. But I did like Brady, but I also think I could understand, I mean, Brady had Belichick in a defense

and I'm not 100% sure that Mahomes, like his, his, he finds a way. He will find the way. He's great. But if you're starting a team,

there's a but, I would consider starting my team with josh allen that guy physically to me is can you picture a world in which if you put them on swap teams he would have i think he'd can you picture a universe in which this doesn't end with taylor swift and kelsey kissing at midfield and patrick mahomes like being being carried to the podium like i can't i almost can't picture it after this whole season

it's almost impossible for me to picture like what they like sneak away into their limos I just can't see that's how it's gonna go didn't you see Kelsey

throwing away Justin Tucker's helmet before the game the other day I don't think the Chiefs are as likable as people are turning people are turning

in fairness Justin's a kicker. We accord these guys the same amount of respect as we do. He was being pretty annoying to you. And he was being kind of a dick from what I read. I wouldn't know. Best kicker ever. I don't know.

This just feels like it's going that way. So what's our bet? I'm telling you, follow the smart money. I don't even understand your bet. Your bet was. So I do alternate spreads. So then like. Real what is it? I don't even understand your bet. Your bet was- So I do alternate spreads. So then like- Real degenerate shit.

All of those things have to hit. But tell me which one of these doesn't hit. So the Chiefs are not going to lose by more than eight and a half points. They're plus eight and a half, okay? Unless it's like a disaster. I would take that. Is Patrick Mahomes going to throw for 200 yards?

Yes. Okay. So those I feel very confident in. They don't win if he doesn't do that. Now, can the Chiefs beat the Niners by more than 10 points? Yeah, I guess they could. There's a universe where they do. There's a universe where they do.

Could the Chiefs win 31-17? Sure. And then the fourth leg of that bet is Brock Purdy over 200 yards. He's going to throw for 200 yards. Why do you tease all those things? To increase the payoff or to reduce the risk? No, I'm not looking to increase the – I'm reducing the risk. So it's only – that bet is like plus 109.

Okay. All right. But what I'm not looking to do, I'm not looking for a plus 300 bet. Like I'm not an idiot. I'm only a moron. What's the over-under? Zero percent chance. What's the over-under on the –

It's 47.5 points. Well, no. I was going to say on the number of kisses at midfield between Taylor Swift and Kelsey, we could bet on that. 47.5 points over under. What do you take? I'm going to take the under. I'm going to take the over. Okay. That can be our bet then. Yeah. Not because I think Brock Purdy's

going to shoot the lights out, per se. You know what? He's had a rough... I mean, he had a great final drive, obviously, but he has not had a good playoffs. He hasn't. He really hasn't. But Debo will be in better shape than he's been in since, let's say, November. They should have lost to the Packers. Yeah, but low-key, I think McCaffrey hurt his neck last game a little bit.

He's a little dinged up. McCaffrey's a tank. Low-key, McCaffrey's a tank. He saw at the end of the game where he landed on his head. He spiked on his head and he never went back in. Do you think this is going to be a great Super—I think this is going to be one of the most watched ever, and I think it's going to be a good game. I'm excited for it.

I'm really excited. It's going to be a good game. You like my bet. I like your bet because you know more about all of the steps along the way in that bet than any of us do. I just like how excited you are. Very excited. Duncan, what are you thinking?

Points? I would do the over. Sean, do you like my bet? Do you want to take the over? No. I also, I just told Sean, I think Christian McCaffrey could have three touchdowns. What are you guys doing?

Your own podcast in the corner over here? What do you mean? Say it to the group. What did you say? How many? Three touchdowns for Christian McCaffrey. The thing about betting and the thing about the markets is everything is priced in.

So I'm going to the, so Christian McCaffrey scored touchdowns, like minus 250. I'm going to the Knicks game tonight. So when I go to the Knicks games, I bet on like player props and all that shit. Jalen Brunson to score 30 is like minus 300. There's no juice anymore. Markets are super efficient everywhere.

You don't see the odds in the market when you're buying at Amazon. You don't see the odds. You see the odds at games, but markets are very efficient. While you're at the Knicks game, you know what I'll be doing? Do you know? I don't know. I'll be doing? Do you know? I don't know. I'll be at Coco Dak. What's that?

That's the new hot shit Korean fried chicken place. Oh, how'd you get it? The owner of Coat. You going with Dan? Oh, better. Mrs. Dow Jones. Okay.

Better. Just kidding. Shout out to Dan. Going with Haley and whoever else, but we're going to do some fried chicken and champagne, it seems like. That's a good mix for me, right?

Top. Top. This is a fried chicken restaurant. I take it all back. I take it all back. This place, it's in Nomad because, of course, it is, and it opened with a red carpet premiere. Models, movie stars, rappers. It's literally fried chicken and champagne.

So before we get out of here, Meta's up 12%. 12%. What did they say? Amazon's up 4%. It's the presidential cycle, motherfucker. What did they say? All right. Hey, we want to thank our guest today, Warren Pies.

Just absolutely charts out the ask was an understatement. We so appreciate it. Where can people follow you and learn more about 314 Research, Warren? 314research.com. Enter your information. If you're an institutional investor, we'll get back to you on Twitter. Warren Pies, the Twitter 3F underscore research. I believe it's called X. X, sorry. Okay. What's the handle on X? At Warren Pies and then at 3F underscore research.

All right, dude, you're killing it. I love seeing you on TV. You're a volume up guy for me. Oh, thank you. When I see you on Yahoo Finance or CNBC, I'm volume up. Let's hear what this guy's thinking. So I so appreciate you coming. Shout out to Fernando.

We'll see him next time for sure. And hey, guys, thanks so much for listening. Make sure to leave us a rating and review. If you love the show, just know that we love you right back. All right,

that's it from us. See you next time. What's that? I've learned something. Oh man, you guys did. Was that good? It was awesome. Was that fun?

You want to do it one more time just to make sure we made it? Let's run it back. Yeah, let's run it back. One note to check. Let's just do the ESP. Let's just do it one more time just to make sure we made it? Let's run it back. Let's run it back. Warren knows your shtick. Let's just do the ESP.