The Compound and Friends - Congress Trades During Tariff Announcement, Oil Market Reaction to Israel vs Iran, OpenAI vs MSFT

Episode Date: June 17, 2025

On this TCAF Tuesday, hear an all-new episode of What Are Your Thoughts with ⁠⁠⁠Downtown Josh Brown⁠⁠⁠ and ⁠⁠⁠Michael Batnick⁠⁠⁠! This episode is sponsored by GrayScale. Curious about investing in crypto and not sure where to start? Visit: https://www.grayscale.com/ to learn more.   Sign up for ⁠⁠⁠The Compound Newsletter⁠⁠⁠ and never miss out! Instagram: ⁠⁠⁠https://instagram.com/thecompoundnews⁠⁠⁠ Twitter: ⁠⁠⁠https://twitter.com/thecompoundnews⁠⁠⁠ LinkedIn: ⁠⁠⁠https://www.linkedin.com/company/the-compound-media/⁠⁠⁠ TikTok: ⁠⁠⁠https://www.tiktok.com/@thecompoundnews⁠⁠⁠ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of ⁠⁠⁠Ritholtz Wealth Management⁠⁠⁠, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here ⁠⁠⁠https://ritholtzwealth.com/advertising-disclaimers⁠⁠⁠. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: ⁠⁠⁠https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Ladies and gentlemen, welcome to the compound and friends. This show is sponsored by our friends at Grayscale. Don't know where to begin in crypto. Start with Grayscale. More on Grayscale in just a moment. Tonight's show is an all new edition of What Are Your Thoughts? It's myself, it's Michael Batnick. We're going to start out with the recent events in the Middle East and the market impact as

a result of this weekend's conflagration. We'll look at oil prices, energy stock prices, and everything you need to know about how the markets are digesting the most recent round of attacks, bombings, etc. Then we're going to go into congressional stock trading. Look, if you're like most Americans, you absolutely love and support this. I think we can all agree there's absolutely nothing wrong with the people who sit in Congress and legislate and debate laws and make laws and make policy also benefiting from that very activity that taxpayers are paying them to do with

their brokerage accounts. Like what could possibly be more American than that? I don't know. So we are we fully support it and we've got some new data on how politicians were trading the events of Liberation Day. We're gonna look at market-wide sentiment, we're gonna do a whole thing on Nvidia, OpenAI, Microsoft. You're going to have a lot of fun. So without any further ado, I'll send you right into the show. Guys make it happen. Welcome to The Compound and Friends.

All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. All right, gangsters. It's time for an all new edition of What Are Your Thoughts? I am your host, Mr. Downtown Josh Brown with me as always, my co-host, Michael, Michael Batnick, Michael, say hello to the people.

What's up, people? Josh, how are you? It's good to see you. I'm doing OK, dude. I'm honestly having one of the best weeks of my life. I have to be very honest with you. I I'm just I'm just happy. I love it. You're happy. I'm happy. I will honest with you. I'm just happy. I love it. If you're happy, I'm happy. Thank you. I really think this Florida thing has legs for me. I think this is where I belong. All I do when I'm down here is eat healthy because my wife only eats healthy.

I'm eating more vegetables on a daily basis than probably ever in New York. Walking, like walking all day long. And yeah. You look slender. Dude, lifting weights, walking in the pool and working. And like, that's it. Like that, there's no commuting, there's no schlepping. The weather is incredible. Everyone I meet is like, I used to work in finance. I'm like a celebrity here.

Like everyone's like into like financial shit. Like it's just, it's amazing. I really don't want to leave. It was nice knowing you. I'm like, I know. I have a flight in an hour, two hours, and I'm seriously considering missing it. Okay, today's show is brought to you by, Great scale is the world's largest crypto-native asset manager and has been in crypto since 2013.

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Thank you so much, guys. If there's any such thing as a guaranteed buy signal for stocks, it's probably when the guys who sell options trading newsletters start going on TV, talking about the straight of hormones, I'm just going to tell you straight up. Like any time it gets to that point where like the traders are like talking about any kind of geopolitics, but when they go to this, did you know that the straight of hormones is responsible for 30% of all of the oil the world uses each day.

Like it's this thing where you ever meet somebody who just read a book and then every conversation is like about that book. Remember when Chris read or I should say, listen to the audio book of Robert Moses and then three years, it was like four years of, oh, that's just like this time when Robert Moses Those were the dark ages. Those are some of the worst years of my life So this is and he'd even read it. He listened to it shout to Chris But oh my god, don't tell me about a book you've listened to all right so wait a minute So this is one of those things like in the last couple of days. He's got and I know these guys

He's your guys that like I used to work on the Chicago Board of Trade or whatever. And I was like a pit guy. And then I transitioned to like trading my prop account and now I sell a newsletter. Okay, no disrespect. That's cool. Why the fuck are you talking about the straight of hormones with a straight face on TV? What what?

What are you geopolitical expert now? Well, if you think about how economically sensitive the straight of hor- I said, not the straight of hormones! Now what are we going to do? The minute that starts, it doesn't even matter what you buy. Just pick five stocks buy them, four of them will be higher within 48 hours. That is an automatic for me. Generally a good rule, but not when the fix is at 20. This straight of a whole moose. Are you mad? There's nothing going on in the markets. There's no volatility based off this event. It's just, can we, so I have CNBC on in my place and I'm like, not like watching it,

it's just on because it's always on. But every host of every show brings up the straight of hormones. Is that like in the, is that in the rule books? So the minute Israel defends itself against any kind of action by Iran, it's like, well, we have to mention the Strait of Hormuz during every hour just to remind people that that's the biggest risk. Is it the biggest risk? I don't know.

Let me ask you a question. Am I in the minority? Here's what's on my TV all day, every day. Let me say nothing. Yeah, that's weird. I think it might be weird. There's never anything on. I mean- You just raw dogged the day? All day. Let me see. Nothing. Yeah. That's weird. I think it might be weird. There's never anything on.

I mean, you just raw dog the day? All day. I never have TV on. Like once in a while. You don't want to ticker like just if there's breaking news or anything? I don't know. I think I'm probably in the minority. I never have the TV on.

Oh, one thing though. I turned off all my breaking news alerts on all my apps. Like nothing is breaking in my life anymore. Maybe that's why I need there to be something on the screen. Here's what I have on my other screen all day every day, never leaves the screen, is the stock tickers. So if there's anything going on, I'll turn the TV on if I have to. Okay. I think it's just background for me to just... and say, oh, they're talking about blank.

Yeah, I think it's normal to have the TV on. I think it's normal to have it on. Yeah. Yeah. It's very strange that you can get through a whole day that way. I might try it. Impressed? Strange, but impressive.

What's your take on the way the oil market, I was going to say, reacted. I'm so happy you would ask. But I said failed to react. As a former energy analyst. No, literally. I was going to say reacted. I'm so happy you would ask. But I said failed to react. As a former energy analyst, no, literally I know nothing. I know nothing. So I was talking, here's what I know. Nothing.

But I was talking about this with Ben today, just how it's interesting how little reaction there was in the market, even in the crude market. And there was obviously, was it Sunday night? The crude futures were up 8%, not nothing. Two days later, gave it all back. And the production import-export dynamics of our country today versus the past look radically different. So yeah, it used to be a lot more impactful. The energy companies were not 3% of the S&P 500.

They were 12% and 13% back when we were very dependent on foreign imports of oil. And from the, in the market view, it is not a giant story compared to what it used to be. That's the point. I was going to say, I actually was going to say 20 years ago, if this were 2005 and Iran had fired hundreds of missiles into Israel and then Israel retaliated to the extent that it did and they now basically effectively control the skies above Tehran,

which is a really interesting story that I know nothing about. I'm just going to tell you, you would have seen a massive reaction in the S&P 500 and you would have seen names like Exxon Chevron and all of the other follow on energy stocks up 10%, 12%, 15%. Like there'd be no doubt about it. And I don't know if that speaks to the massive increases in domestic oil and gas production here in the United States, to your point, or if the public, the markets at large have just contented themselves with this idea that oil price volatility is just a perennial, like this happens, something happens every year that either disrupts or potentially disrupts the supply of crude around the world. And it never seems to be the thing that wrecks S&P earnings.

And therefore, these market wide reactions are just going to be short lived. Let's do a chart. Yeah, go ahead. So three year WTI crude price, nothing. Like literally not that little squiggle at the very end, that little spike, I mean, again, compared to 20 years ago, even 10 years ago, it's almost as though nothing happened at all. Now, of course, Iranian oil is not particularly important to anyone other than China. There are sanctions, there are reasons why, but it's still part of the global supply. If you're buying oil from Iran, you need to buy it from somebody else if for whatever

reason that gets disrupted. One of the things that the non-market news sources are talking about is that Israel is very deliberately not going after export terminals, not bombing the types of assets that would ordinarily cause the type of price spike that we're talking about. That might be a big part of the story. Yeah, it might be in cooperation with the United States, might be a conversation between Trump and not Yahoo. Look, you can mostly do what you want, but don't cause massive inflation as a result of whatever you're doing.

That's probably part of it. Next chart is I own this ETF. This is just my shorthand for domestic US-based producer exploration and production companies, oil and gas companies. ConocoPhillips is like a third of this ETF, by the way, COP. But IEO is effectively flat over three years. It's done effectively nothing. This is my oil spike hedge.

This is like a permanent part of my portfolio where if something really drastically spikes the price of oil to the point where the whole market sells off, this is like the way that I'm hedging that risk. And it acts like a hedge. It's up 5.5% in total return over three years. Are you taking the hedge off? It's effectively down. Do you take the hedge off when it works? Never.

Never take the hedge off and actually add to it as the rest of my portfolio grows so that it's still an oil shock hedge commensurate with what the size of my overall portfolio is. The problem is I'm always in that buyer if I'm trying to keep it somewhat constant as a hedge because look at these stocks versus like anything I own that's software as a service or AI related. It's like a joke. Yeah So but you don't know you don't know if you're gonna need it till you need it. Here's the XLE I own Chevron, which is the second largest component of this but I don't own this ETF the XLE is the S&P 500 energy sector

spider We don't use the term spider anymore I said you do you okay no it's just the ETF spider so I thought you said you did on I thought you said you like no no no you said you said you were long no I just as long as son of a bitch yeah dance the drink over to me. All right. XLE up 8% in total return over

three years. Horrendous. You'd be outperforming this with a checking account. I don't know what... Do you actually need World War III for these stocks to go up? So, energy is the cheapest sector in the S&P 500 now, significantly cheaper than utilities, which are supposed to be the cheapest sector.

There's just nothing happening here. And I don't know what it takes for this to be a leading sector. It doesn't look like it's going to happen this year. We've got multiple wars going on that concern oil and gas supplies globally and nobody gives a shit. Nobody's worried about scarcity. And I think the market wide story is also interesting. Put this chart up.

NASDAQ S&P Dow, are you surprised at how quickly we completely erased the threat of World War III? Looks like it took about 12 hours. I am. Given the nature of the V-shaped recovery that we just experienced, you would think that the Bears could take a little bit back. You can make the argument that the momentum has stalled over the past week or so. We are maybe forming a short-term top here, but the fact that they can't even punch through,

they can't even make a lower high, it is interesting. It's also a fluid situation, Josh. Market's not done. We'll see what happens over the next couple of days. Gold fell. The US dollar rose. VIX fell 8% yesterday. VIX fell 8% yesterday. VIX fell 8% yesterday.

NASDAQ higher than where it was before this started. S&P rallying Dow. I don't even know what the market is reacting to at this point. Like what is, the market is rallying on what, honestly? A deteriorating economy? Yeah, I'll tell you what it's not reacting to. Geopolitics. It's just, it's not. It's not responding to a slower economy.

Like we got retail sales this morning. Not great. It's not responding to that. It's not responding to a deteriorating labor market. I don't know what it's responding to other than AI. I just. So the Fed meeting is tomorrow. That would normally be like one of the things over the course of the summer that the market

reacts to. They're not cutting. They're not cutting. They're not cutting. The market doesn't think they're cutting. Somebody was saying today, Steve Leesman was saying today on a half time report, the Fed's posture now is they're watching inflation, they're watching unemployment and whichever one gets worse first is the one they'll worry about. So that's the posture of the Fed this summer is on a chaise lounge.

Tim O'Rourke just wrote a similar article, obviously is the unofficial math piece for the Fed in terms of the media. He said the same thing, like they're not doing anything. Trillin. Okay. So stocks have fully discounted the opening stages of World War III, which I guess is bullish. Bank of America Global Fund Manager Survey is now, the sentiment is now back to pre-liberation day. Let me read this to you as Wall Street Journal. Investors' mood has rebounded back to the more

bullish level seen just before Liberation Day tariff salvo. Remember what that was like back then? February, March. Not great. No, right before. Everything was like all systems go. Yeah. The bank's global fund manager survey found that fears of a global trade war and tariff induced recession were receding. The proportion of surveyed investors expecting weaker global growth fell to a net 46%. You know where it was

in April? Wild. 82%. Yeah, unbelievable. Myself and Clam, I'm in that 82%. Investors are now holding less cash today than they were in April and are underweight the dollar, the highest level since 2005. A majority of respondents say international stocks will be the top performing asset over the next five years. Less than 25% say that US stocks will keep dominating returns. The contrarian trade amongst global fund managers is MAG7 slash S&P 500. That's interesting. The consensus is international stocks will be better over the next five years. What do you think? I've never been more confused by sentiment and how to read and register what the investor is

doing because there is no the investor. The investor at Schwab is different than the investor at Robinhood, is different than the global fund manager survey. I was talking about this with Ben today. Schwab has a proprietary indicator called Stacks where they are measuring the mood of the quantitatively, the mood of the investor, and they are looking at flows, actual dollars. What are people doing? The investor at Schwab, for the last four months, information technology has been the largest net sell sector.

Explain that one. I just don't know how to explain the investor these days because which investor are you talking about? So that's the retail investor at Schwab or is that the advisor? It's the retail investor at Schwab. Have been, Nvidia was the single largest net sale that they made in the month of April

or was it May, in the month of May? The only way to explain that. But it had been, but it had been. It wasn't just that they loaded up at the bottom and then let go. I was going to say the only way to explain that is it's just people selling what they have gains in so they could reallocate and buy something else. It's more than that. It's four months in a row.

So they were selling into the puke, whereas other investors were running into the building. Sentiments, survey stuff is more noisy than ever. Yeah. You know what? I think that's actually the best take. If you read a data point about quote unquote what the investor is doing and it's coming from any one particular platform, it doesn't alwaysate to like what they're doing across the board. You could credibly make any argument for what the investor is doing.

It's like in civil war, well, what type of American are you? Like that's how I feel. Like what type of investor, what type of survey did you respond to? Right. Uh, when did you respond? What date did you respond? What was the market doing on the day you responded? What's, what's the average demographic? It's so noisy. When did you respond? What date did you respond? What was the market doing on the day you responded?

What's the average demographic? It's so noisy. Unless you're talking about extremes that all line up, like they did in the sell off, they really did. Everybody was bearish. Absent that. What's the median age? Not what's the median age individual investor at Schwab.

What's the median age individual investor who would respond to a survey? 68. What's the median age individual investor who would respond to a survey? Yeah 68 so for the Schwab thing it was proprietary insights into behavior not sentiment stuff so that I value Don't tell me how you feel literally show me what you're doing because if you're bearish and buying I don't care Yeah, you know who's been super active lately Congressional stock traders I don't like this. That's a great segue, Josh. So the Wall Street Journal wrote an article, throw this up. This is disgusting.

For people that are listening, it's the trades reported by house lawmakers or their families and a spike in April. Go figure. Here's the journal. From April 2nd, when Trump launched the sweeping tariffs to April 8th, the day before they paused many of them, more than a dozen house lawmakers and their family members made more than 700 stock trades according to a Wall Street Journal analysis of disclosure filings.

Let me ask you this. I have somebody that I know who works at a bank, somebody I know that works at a hedge fund, and one of them is only allowed to buy ETFs. They have to hold it for a minimum of a year. And I think it's the same thing at the bank as well. How come the restrictions on banks, on bank employees are so tight, but these people literally controlling policy are allowed to trade on inside information? Who thinks this is a good idea?

I love. Stop. I've come full circle on this issue. I think it's terrific. All right. Let's hear it. Let me ask you a question. Do you know what the salary is that they pay these people? So pay them more. No, let them let them earn it out. I like it. I think it's great. I really think it's great. Listen, this has been going on since time immemorial. End it.

The Roman Senate was doing that. Do you know the richest man? I have no time for market for history right now. You give a history lesson. Every. I'll give you, I'll give you a quick one. This is important. The richest man in Rome, Crassus. No, no, no. It's important.

He had his own fire department and people would run and give him tips. Like, yo, there's a fire just broke out in like the slave quarter and, or whatever. Like a fire just broke out at this merchant's store his fire department would like race over there to the scene and he would arrive with them and he would say to the guy that owns the building all right uh this is this is how much it's going to cost you to uh for me to put out the fire the guy would be like i'm not paying you that all right no problem you'll pay it to me in five minutes. Five minutes goes by, the guy's like, all right, fine, I'll pay you. He goes, oh, I'm sorry, the price just went up.

This is what it is. Okay, okay, okay. You think these people are Girl Scouts? Listen, also in the Colosseum back in Rome, circa whenever, they had gladiators fighting sharks with laser beams attached. I don't give a shit. This is ridiculous. I'm just telling you it's never going to change people in a position of power. It'll change.

When? I don't know. When? It will never change. Okay, so stock... People in a position of power will exploit that power. Stocked with what's tweeted, in January, Nancy Pelosi with the high tip to quiver quant. Nancy Pelosi bought off 10 call options. That's now up 133% since her trade. Why the f*** is Nancy... Forgive me for all the f-bombs. Why is Nancy Pelosi allowed to 10 call options. That's now up 133% since the trade. Why the f**k is Nancy,

forgive me for all the f-bombs, why is Nancy Pelosi allowed to buy call options? Wait, what is Tem? She's buying tickers I've never heard of? What's that you're breaking up? I don't know what Tem is. No, come on. You have no idea what that stock is?

It's a, it's not a stock. Listen, there's a lot of stocks, I'm gonna follow all of them. Please, I need to know. Temppus AI? What the hell is that? OK, so see, like, why? Why are we accepting this?

Why is she buying call options? And maybe it's her advisor, Wink Wink, doing it. I don't give a shit. Why is this allowed? It's great. I love it. No, it's horrendous. Oh, it's so, it's, is there anything more American than that?

Come on. Listen, listen, all I'm saying is, don't we want a society where everyone strives to be a multi, multi, multi millionaire? I know you're sticking up. This is not good for us. It's a clown show. And this has nothing to do with the current administration. It's always been this way. It's just clown show and this is nothing to do with the current administration. It's always been this way. It's just enough already.

Tempest AI is an American health technology company founded in 2015 by Eric Levkovsky in Chicago, Illinois. Uh, all right, listen, part necessary. All right, let's move on. What's Johnson doing in Europe? Seeing the Coliseum. Here's how I want to frame this. Is Nvidia still the most important stock in the market? Yeah, right now.

I think so. No great. Yeah. It goes through these periods of time where people just forget about it. The stock is up 50% from its April low or something. Like the stock has just like recovered literally everything that it lost. What's that? I bought the law. What's that?

Bought the law. All right. So Jensen, Jensen Wong made a, made a run through Europe. He is a rock star in Europe. And my take is he is being seen very differently versus previous waves of US technology. All right. So the Europeans have always treated people like Mark Zuckerberg with a ton of suspicion. They've sued him.

They've tried to get Facebook ejected from their countries. They've created new laws just to screw with different things that Metta owns, like WhatsApp, etc. Jensen is not getting that treatment. He's sitting with Macron, the president of France, at technology conferences. He's being very well received in UK, Prime Minister Keir Starmer. He's got like rock star energy in London and Paris, everywhere he goes. And he's really bright. He's pitching this thing called sovereign AI, which I think is going to be like a new

investing trend as we see the, some of these defense tech companies like and are all start to come public. And we start to see more and more of what Palantir is selling all over the world. What's sovereign AI? Sovereign AI is this idea that every country should not only own its own data, but utilize it to bring about a safer security situation, a more equitable society, just like, look, these countries are collecting enormous datasets, bigger than most individual companies.

If companies are making this investment into utilizing their data to bring about higher profits, better outcomes for stakeholders, better work-life balance for employees, why would individual companies be doing that and countries not? Also, if you believe this is the AI age and everyone's gonna be empowered with all these tools, shouldn't the government, like shouldn't the government utilize what exists out there to do a better job at being the government of a country?

And then lastly, like as a way to preserve the culture, each country should have its own culture and the AI should reflect that country's culture. The whole world shouldn't just be operating on these homogenized data sets. So that's the pitch that Jensen Wang has been making as he attends all these events all summer. He was at this thing called the Viva Tech conference

in Paris. Here's what he said. We believe that in order to compete, in order to build a more meaningful ecosystem, Europe needs to come together and build capacity that is joint. Then he talked about … Here, Wang spoke a lot during the week about sovereign AI, the concept of building data centers within a country's borders that services its population rather than relying on servers located overseas.

European policymakers said that this was a very important topic. I don't know, it's a whole thing. I just think it's interesting to watch the rest of the world wake up to the need to not sit this one out the way that they did during the internet 1.0, the internet 2.0. They never, these countries never made big investments. They were super skeptical of the cloud, e-commerce, internet advertising. They kind of let the United States run away with it.

And it doesn't look like they're going to continue to do that. Thoughts? I was listening to Bill Simmons this morning bemoan the face of the league argument, which is funny because and I'm a huge Bill Simmons fan, but he that's sort of his thing. Like he's a big face of the league guy and now he doesn't like it. Whatever. My point is, I think Nvidia is the face of the market right now, and I think it probably has been for two years. Do you agree with that?

Like who would you think is the face in the market? It's not Apple anymore. No. It's not Meta. It's either Microsoft or Nvidia. It's got to be Nvidia. No, it's not Microsoft. It's Nvidia.

The S&P 500 is up 2.17% year to date. Nvidia is 0.58 percentage points of that. So in other words, Nvidia is 26% of the total return of the S&P. Put this chart up, one year Nvidia price performance. Look at this rebound off the lows. It got down to under $ bucks and now it's 144. So that's the thing. But it is interesting that we're talking about Nvidia with glowing

praise as it's earned. The stock's gone nowhere for the past year. And it's just gotten cheaper because the revenue and the earnings have just gone straight up. It's gone nowhere. Some would say it's digested. It's actually beautiful. Huge multiple that's now become a smaller multiple.

Listen, if you are a long-term shareholder, you would much prefer to see sideways than straight up and up forever. I agree with, I agree with that because if it does a vertical move, you just know it's like only a matter of time. Yeah. You're on borrowed time. Nvidia will contribute 17% of the total earnings growth being expected for the S&P 500 in calendar 2025. Is that a record?

I'd be curious to say it's got to be, no? It has to be. Not of the total earnings. This is important. Of the earnings growth. Of the earnings growth. It's got to be. Less.

That's insane. Drastic, but still drastic, right? In other words, do you think the S&P 500 will make its number this year? I don't know, but if Nvidia doesn't, then it won't. How many companies in history have you been able to say that about? Like on the growth side? One more. Here's the chips.

This is the SMH, the VanX semiconductor ETF, total return. So what do you see? What do you see, Sammy? Well, dude, all the talk this spring has been about software. What do you see? And this is going to make it, this looks like it wants to take out the February high. I mean, look at that. By the way, a cool Vonage reference.

A cool Vonage reference. That's a deep cut. It wasn't bad. That V-shape, that V-Rally is wild. The SMH is up 47% from its April 8th low. 100% of the S&P semiconductor ETF components, the individual companies, are above their 50 days and 71% are above their 200 days. So 70% of the holdings in the semi index are in their own individual bull markets. And now I want to show you. Well, can I, can I better one? Do you look up, listen to this micron. Have you seen that

chart in a while? Micron was at 60 bucks at the lows. Uh, I don't know a whole like whatever 60 days ago, it's now at 120. It's doubled in like two months. Broadcom might be one of the best, that's might be one of the best performing stocks I've ever seen. The run that Broadcom is on is just legendary. Even, yeah, and Broadcom AVGO looks like even AMD. Right, AMD rally 10%. Let's check on Intel. No, let's not do that. Oh, so everyone's been talking about software, though. So software stocks did not have the dip that the semis had. And the chatter was, all right, the way to play AI used to be the semis, but that's over.

And now it's going to be in the software layer. That's where all the money is going to get made. Where? Let's, like the workdays, the ServiceNow, the Salesforce, like those stocks held the market up. Salesforce looks like shit, but ServiceNow looks great. Put up the one year total return. This is the semis versus the software ETF, IGV.

Narrative violator. Yep. the semis versus the software ETF IGV. Narrative violator. Yep, so software is in way better shape taking the chart back a year, but the semis are coming back in a much more, look at how the software sector never even went negative this April on a year over year basis versus how badly the semis got hit. Yeah, interesting. I would not have guessed that.

So these stocks, like CrowdStrike's in there. CrowdStrike, by the way, about to break 500. That's a big component in that index now. You got your Palo Alto networks in there. You got, I'm not sure if Oracle's in there. Oracle's one of the best stocks of the year. So the software space has been better, but these semis are not asleep anymore.

Like they're coming back. Can I say something to you? I looked at this chart yesterday and I don't really want to buy it because there's so many other things that are working, but there's no more sellers of Intel. Like look at the chart. Pull that up right now. No, seriously, pull up the chart. It has been at 18, between 18 and 21 bucks since August of 2024. Anytime it gets to 18, like if you hadn't sold it at this point, I think this baby might be about to scream.

I actually might buy it. Look, it absolutely could. The problem for me is I have to understand the story and it's not necessary for all investors. I'm saying for me. I understand. I have to understand. So let me give you an example. Amazon had this huge PR blitz today.

And we're not going to spend a ton of time on Amazon because we're going to do that later. But like they have this laboratory in Texas called Annapurna, which is where they make their own chips. And the thing that they were doing this big PR blitz about was their new CPU chip. That is directly impinging on Intel's business. Intel is a CPU chip company and the Silicon that Amazon is now producing itself, creating and producing itself. It's like one more example of Intel's former customers just

making their own custom shit. And in that landscape, I need to understand why all of a sudden people aren't going to care about that. Okay. I, I hear you and you're probably right. Here's what I understand. There is a big juicy gap all the way up at 29 bucks. And I might, like Bill Pullman said on Independence Day, I might want another shot at it.

Okay, I'd also say though, it's been cheap the whole way down. I don't even care about cheap. I'm just saying there's no more sellers. That's all they are gone. I mean, it's Nike, it's Pfizer, it's, it's like a group of these stocks that just, they're just the narrative is so against it. Exactly. And the stock isn't going down anymore.

No, but they keep going. Some of them keep going. Some of them don't. You don't know which is which. I don't know which is which. I can just say that definitively until I stop going down for a year. All right. Here's where we could agree and then we'll move on. I don't want to short it. I don't want to short anything, but I definitely don't want to be short that.

Okay. What are we moving on to? Oh, okay. So you and I got into a disagreement last year. You were of the opinion that banks were going to have to raise our rates to be competitive. And I said, no. They know how we behave, and we don't move our money. Quite cool. Look at this chart from Torsten Slak. Truly wild.

What we're looking at for the listeners is the interest rate on checking accounts versus the Fed funds rate. And that entire time, I mean, I thought What we're looking at for the listeners is the interest rate on checking accounts versus the Fed funds rate. And that entire time, I mean, I thought it would move a little bit, like did not lift off the ground. So like if I were right, the savings account is the blue line. Yeah, you would have seen the rate on a savings account get off zero, get off and trend toward

like let's say 1% even. And it just, it's not. All right. So here's another face blower melter for you, Josh. Also from Torsten Slag. Wait, wait, wait. Is the implication of this that we're now at a point in society where we don't rely on our banks for anything other than in society where we don't rely on our banks for anything other than safety and continuity, and we don't think of banks as a place to have our money make money because that's reasonable. Another way that I want you to think about this is all the major banks that are probably over-indexed in that review. They have wealth management operations. And maybe instead of the banks having to raise the deposit rate, they have successfully convinced

the clients, no, no, no, we're not going to do that. But the money that you want to have invested, move it over to our wealth management business. Wells Fargo, Bank of America owns Merrill, JP Morgan has two different brokerage firms plus a whole private wealth thing. I think that's a component of it, but the reality is most people just don't have a lot of money in their checking accounts or their savings account. And even if it's not an insignificant

amount, like even if it's like 30 grand, like it just stays, it just doesn't move. So if you had a hundred grand at Bank of America and you said, you call them up and said, why aren't I making any money? I really think that Bank of America to say you have a hundred grand sitting in your bank account. What you should do is take 50 of that and move it over into your brokerage account. For sure. And we'll put a consultant on the phone with you who will sell you a T bill fund or something.

Like that's, that's what's, I think that's functionally what's going on with high balance. Yeah. Oh, no doubt. Those people are getting called. They're getting a call for sure. Here's another one. 21% of deposits. Now, again, these are probably tiny chunks.

I'm guessing these are like small dollar amounts, but nevertheless, 21% is not an insignificant amount of money. 21% of deposits pay no interest. No interest. Wild. Yeah, Mike, I'm telling you, I think people now are looking at the bank account as only safety and functionality and not

as a way to generate income or wealth or anything. And they're fine with it. They have other outlets to do that. All right. Here's sort of a non sequitur, but I didn't know where to put this. And I just wanted to talk to you about it quickly. This is another monster narrative violator. We're looking from Bank of America global investment strategy. The foreign inflow to US stocks year to date is annualizing for the second largest year ever.

Okay, excuse me. I was told that foreigners are no longer interested in our markets, our dollars, our markets, our stocks, our bonds. It's early, bro. Dude, stop. Where's all that capital flight? Where is it? It's the second largest ever. When is all that capital flight start? So just pump the brakes. I was told that foreign investors were angry at Donald Trump and tariffs and they were losing faith in the United States Treasury simultaneously because of our high debt levels

and they're buying the renminbi. We're going to repatriate to renminbi. Yeah. Yeah, not happening. Not happening. It's early. I maintain it's early. All right.

We'll do this one quickly. Another journal story today talks about the growing rift between OpenAI and Microsoft. And I'm not sure how much to make of this. Here's why it's important for investors because we're not a tech. We don't do like a tech podcast. Microsoft owns 49% of OpenAI. OpenAI is going to be, if not the most important, it will be among the top three most important AI companies in the world for the foreseeable future.

It'd be really hard for me to hear somebody make the case for why it won't be important a year from now, two years from now, three years from now. I think by the end of the decade, this will still be one of the most important players in arguably the biggest technology revolution since the internet. Open AI has incredible metrics. Any way you look at it, the partnership with Microsoft has obviously played a big role in that. But Microsoft has its own AI ambitions away from OpenAI. And one of the problems now here is that OpenAI is trying to make this conversion OpenAI is trying to make this conversion from a not for profit with a profit driven arm to a full on for profit standalone company.

And that transition is necessary in order for them to raise the money that they're supposed to be raising from SoftBank. So there's like $20 billion of capital on the line. They have till the end of this year to fully convert to a for-profit to get their hands on that 20 billion. And every billion dollars counts in this race to build out these platforms.

So basically this rift kind of exploded into public view over an acquisition that OpenAI is making. They're buying this, I forget what it's called, win something or other. They're buying this thing for $3 billion and it's got this proprietary data and OpenAI does not want to share the data that's going to come with this acquisition with Microsoft. Microsoft sees itself as the parent company and exclusive partner of OpenAI on ChatGPT. And OpenAI sees Microsoft as a 49% shareholder

who needs to back off and leave us alone. So it's a really interesting moment. And I think the longer that tension persists, the better it will be for other competitors like Amazon's Anthropic for example, that are trying to gain a foothold here. That kind of distraction could be meaningful in the stock market. One other thing I wanted to just show you. One other thing I wanted to just mention here that I think is important.

People need to understand how big open AI is going to be. I don't know when it's going to go public. It could be the biggest IPO in history. Why does it need to go public? Microsoft not looking for liquidity? It has to go public because it has to raise money. They're talking about trillion dollardollar build-outs for AI, period. It has to have the ability to raise its own money.

This is what we're talking about here. Open AI revenue growth as of June, annualized run rate of $10 billion. That's double the annualized run rate reported in December. 5.5 billion. It better be doubling. Okay. I'm just saying it's annualized run rate has doubled in six months. The company is projecting 12.7 billion in revenue for 2025. That would be an 82% year over year growth rate. As far as user growth, ChatGPT has 500 million weekly active users. Do you have any idea how big that is? Okay. Between December of 2024

and March of 2025, active users grew 33%. So rising from 375 million to 500 million. So this is a company that is sitting on the biggest user base, AI user base on the planet. It's not even currently set up as a for-profit company. It is struggling to make that conversion, fighting against its largest shareholder, which is the second largest publicly traded company in the world, Microsoft. This is a really fascinating situation and the implications for all of the other tech giants that are trying to compete in AI, I think are massive.

Like how this shakes out and what ends up happening. So I just, I wanted to put that on everyone's radar. Any thoughts? Uh, it is, did you say it's going to be the biggest IPO ever? Well, the only thing on the runway that potentially could be bigger is maybe SpaceX. What is the biggest IPO ever? I think at like at its time or in the days of Facebook, right? Or was Facebook even?

I don't even remember. I think at its time. Alibaba. I think Alibaba in its moment. Yeah. What? Anyway, this would be the biggest period. If this came public a year from now, which is conceivable, this will be bigger than anything that's ever come public. So I think the last valuation was $300 billion. It could come public bigger than Berkshire. I mean, I don't know. Yeah, no, it's, I mean, it's conceivable because if they have,

look, the thing that would hold it back from that is if we look at the expense side and we decide, okay, that's so much growth, that's great, but like you'll never make money. Yeah. I don't think that's what's going to happen though. Is there any even whispers of when an IPO would be? Probably not anytime soon, soon. It can't even, it can't even talk about it because they're currently not even set up as the type, the structure of a company that could be public. It's like that's how early they still are in there. It's it's a wild situation to have something like this 50% held by Microsoft. And then the question is how much of the growth and the valuation expectations for open AI

are baked into the Microsoft valuation? Right. Yeah. A lot of moving parts. How much do Microsoft investors expect them to get A, from the partnership and B, from the eventual share sales that might become possible. Right. You know, and what percentage would Microsoft sell in a public offering? Half their holdings?

And could this thing get to a valuation that's so big that like there's just no buyers for it? And what is 13 times 47? Yeah. All right. Okay. You're going to make the case? Or am I doing a mystery chart?

What are you going to do for us? I can't remember. I'm going to make the case. Amazon's going to 250. It's 217 today-ish, I think. Let me show you a chart. This is... I love this.

I love these types of charts. So very straightforward, wide charts. I'm showing you volume and RSI in the bottom pane. I'm showing you the gap higher after their earnings in late April or early May. And what you can see is that after this huge upside gap, not huge, but big upside gap, a very low volume retest of, that's the, is that the 200 day? This is a Fami special. Yeah, so look at this low volume retest that I have

in the top oval of that 200 day, gets below it for 10 minutes, springs right up off of it, and is now poised for the next higher high. And RSI, so relative strength during that little dip back to the 200 day held up perfectly. So we're not overbought. We're at about a 64, 65 RSI. You had the retest already, and now I think you could be off to the races. Amazon, from my perspective, has the ability to be the best performing name in the Mag-7.

The mean analyst target right now, 44 firms covering the stock, is in the 240s. So I'm saying 250. The way I want you to think about this, Michael, it's the stocks to 17. It's like a $21 stock going to 25. So I'm not saying like something crazy is about to happen. But the Trinium chips we talked about competing with Blackwell, it's not that they're competing at the cutting edge of tech. It's that they're competing at the power per dollar spent. It's a much

more efficient chip, the Neutronium chip, than what's out there in the market. I'm saying that AWS, Amazon's cloud unit, is the most important AI infrastructure company in the world. I'm also saying the market cap could be worth $3 trillion. AWS is a standalone business. If you remove this from the grocery store, this could be like a $3 trillion company, AWS. The entire market cap of Amazon right now is only $2.3 trillion. AWS has more cloud share globally than Azure and Google Cloud.

It's two biggest competitors combined. AWS has 29% of the, uh, the global cloud market and growing. Um, this is in my opinion, the fat pitch amongst the max seven. And here, let me show you one more chart. Okay. This is fascinating. The OK, this is fascinating. This is Amazon stock price versus forward earnings estimates for the current fiscal year in blue

and forward estimates for next fiscal year in orange. And it just continually updates, right? Look at the stair step pattern in this earnings growth off the bottom in July of 2022. So for the last three years, the current year estimates just move up and to the right, up and to the right in a stair step pattern. That's the blue and in the orange, the next fiscal year's earnings estimates, which are now at $7.36. And you can see from this pattern.

That dip is all CapEx. 100%. 100%. So I'm just going to tell you, I think the earnings here, like ultimately by the end of this AI build out, could be $10 worth of earnings, this stock gains staying at 200. It's just not. Well, it's just not

Amazon is I believe my second largest holding so I'm in with you 35 times PE ratio 29 forward whatever 17% expected earnings growth next year. That's what I'm talking about. Did you know that over the last five years, or despite of, or in spite of, I don't know, all of this growth, Amazon is up 65%, the S&P's up 106%. Yeah. So it's been, it's been smoked. Look, they had a horrific post pandemic period. Their earnings effectively collapsed. They did so much hiring and building and spending, but it wasn't a waste.

They messed up. Yep. They messed up, but a lot of that infrastructure spend is now converting to profit. Well, it's got a gush. It's got a gush. They were earning in 2020 in the pandemic year, they were earning 21 billion. The last 12 year, they were earning 21 billion. In the last 12 months, they've earned 66 billion.

Their earnings power has tripled over the last five years. Do you understand? Because I think I honestly think people are underestimating what's happening at Amazon. You and I are not. You're long. All not. You're long. All right. And svelte, right? You're long and svelte?

Yeah. Let's solve it. Okay. This is a company that, and it's also a stock. How about that? You mentioned it on the show. This is year to date, and it has springboarded off of the lows from one, holy mackerel, from 120 to 211.

John, if you'd please zoom out a little bit. I said the name of the stock today. You did. It's actually underperformed big league until, yes, and then one more zoom out. So this was the last clip. Look at this beast. So Oracle was, and good guess, Josh, credit to you.

Holy shit. Thank you. So Oracle was written up in Barron's over the weekend. Good timing. They said Oracle will be the number one cloud database company, Oracle will be the number one cloud applications company, and Oracle will be the number one builder and operator of cloud infrastructure. So that's exactly where you want to be.

They relate to the cloud, but they have more than made up for it. The headline was capital spending for the fourth quarter was $9.1 billion or nearly 60% of all of our revenue. And this is how shareholders are treating the stock. They don't care. In fact, they love it. Do you know who the CEO of Oracle is? I just mentioned his name.

I don't know. I doesn't ring a bell. Safra Katz. Who is that? It's a woman. What do you mean? I said, who is that? I'm saying nobody knows. Nobody who's casually follows tech knows who she is.

Tech people know who she is. Larry Ellison looms so large over this company still. Obviously the largest shareholder and he's like 80 years old. He looks great. But yeah, this guy, he's like, if you were writing a book about who are the people who have won the most in like in life, he's definitely like top 100 in history. This guy is just, I mean, he, he owns his own like Hawaiian islands. He's just, he does whatever he does, whatever he wants. Sons like that.

I want to run a, an entertainment conglomerate. Oh, okay. No problem. I'll just buy you Paramount. What, like what else should we do today? You want to have lunch? Like this guy is size Ola. And look at the stock.

He deserves it. If you're a shareholder in Oracle, you're not a Mag 7, but so what? Like you're doing as well as shareholder in any other stock that you could think of. This thing is just on fire. All right. That's it from us today. Guys, thank you so much for tuning in.

We appreciate those of you who attend the live premiere. Of course, I want to mention that tomorrow is Wednesday, which means an all new edition of my favorite podcast. Animal spirits with Michael and Ben tomorrow was a good one. Yep. By the way, guys, the merch store is open this summer. And it's idontshop.com. Look at this shit that we're... Dude, the towel is insane.

Look at that towel. You want to rock one of those at Catalina, right? I need it. I need it. Alright, Nicole, get Michael and I towels, please. New Animal Spirits t-shirt and the all new series 777. So so that's so hot that shirt available in two colorways. Check out on own shop.com to see see all of our compound merchandise. Shout out to the whole team. And guys,

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