The Compound and Friends - Does the Stock Market Know Something We Don’t?

Episode Date: August 15, 2025

On episode 204 of The Compound and Friends, ⁠⁠⁠⁠⁠⁠⁠⁠⁠Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠ is joined by Shannon Saccocia and Todd Sohn to discuss: the market narrative, the AI economy, ARK's big run, Circle's round trip, M&A, the labor market, and much more! This episode is sponsored by Grayscale and Apex Fintech Solutions. Find out more about Grayscale by visiting: https://www.grayscale.com/ Find out more about Wavvest’s planning engine powered by advanced AI and built on Apex’s AscendOS at https://www.wavvest.com/ Sign up for The Compound Newsletter and never miss out: ⁠⁠⁠⁠⁠⁠⁠⁠⁠thecompoundnews.com/subscribe⁠⁠⁠⁠⁠⁠⁠⁠⁠ Instagram: ⁠⁠⁠⁠⁠⁠⁠⁠⁠instagram.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠ Twitter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠twitter.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠ LinkedIn: ⁠⁠⁠⁠⁠⁠⁠⁠⁠linkedin.com/company/the-compound-media/⁠⁠⁠⁠⁠⁠⁠⁠⁠ TikTok: ⁠⁠⁠⁠⁠⁠⁠⁠⁠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

My dad sent me this this morning. He said, you were always destined for greatness or something like that. You are. Look at this. And that shirt, you always are. That's actually pretty. That's not bad. It's not a bad picture.

You should bring that back if you're able to. Yeah, I wish. Or I'm going to get you a wig. I wish. No, that ship's sailed. I can use before or after. When do you want this? Why now?

Do you want it now? Yeah. One's for Josh. One for Josh. Yeah. Oh, a physical book. I like giving them books. I finally, like, gave up on this idea that I would ever read again.

Like, not ever, but, like, right now. So, if not make Matt and Sean read it. I went to audiobooks. Did you? So I do a combination of audio or, like, I have stuff on my Kindle because I feel like it's like I always have my Kindle with me. So if I'm feeling like I want to read something that's really meaty, like, I at least have, like, I don't have to remember a physical book with me.

I'm a Kindle person. I just, I switched to the Kindle about a year and a half ago because I was, I was finding that I was trying to read at different times. And even with like my husband would be sleeping and I want to read and I'm like, annoyed. So I was like, so you need. Sorry. If you want to, I won't be offended if you need to like return it.

I'll give you the receipt. If you need the, it's a great little cover. The cover's worth it. Yeah, I'd buy this book for the cover. Thank you, Todd. Hey, my pleasure. Did Mike Tice? Oh, wait, Mike didn't sign it?

Tried. I tried. He wasn't at the Barnes & Noble. Thank you. doing a signing. Was there a period of time, in fact, there probably was, where Mike Tyson was one of the top ten most famous people in the world, maybe top five? Yeah, especially around the time when he was married to Robin Givens, and I think they had

that, like, I don't know in the world, but certainly in the U.S. Hulk Hogan, we were just talking about this. One of the most, so there's like people that are like globally famous where everybody in the world and every country doesn't matter where you are, knew Hulk Hogan. Tyson and Hogan, definitely. And there's probably, over the last 50 years, there's probably, like, 20 people on the list. That were, like, the most famous people in the world.

Like, it's not a long list. Jordan, Tyson. Ali. Like, there's not, like, a-hogan, Ollie, yeah. Tiger Woods. There's not, like, a big, mother Teresa. The presidents. Taylor Swift.

Like, there's not, it's not a long list. So. The Beatles. The Beatles. But only two of the four Beatles. The hoaxter. You know. Poor one.

We could have went to Somerslam, by the way. It was at the Garden. It was at MetLife. I've never been to a wrestling event. Should we go? We'll bring Shannon. I think that should have sailed. I have not been to a wrestling event either.

Interesting. Have you? It's been 20 years. It's been a long time. They're fun. Why not? Are you a PPI gal? You care about producer prices?

Yeah. Yeah, definitely do, especially when it's all services, like it was today. So how, what are, I was thinking about that, what are services within producer prices? That sounds weird. Yeah, it's like inputs into what ends up being like some of the stuff that came through in CPI, like motor vehicle and, and that sort of stuff. So service, like the kind of the goods to produce service that are going to go into services delivery. I saw the big one was fruits and vegetables or dry vegetables was up 38%. What a dry vegetables?

But the food stuff is like so, it moves. around a lot. Like, you shouldn't put a lot of emphasis on anything food related. Well, the market doesn't seem super bothered. Well, it did at first. And then it decided. But I don't know why they were expecting 50. I mean, like, such a pipe dream. What do you mean expected? Oh, oh. For a recut. That seems like completely unnecessary. S&P's down seven basis points. Equal weights down 70. And it's nothing. That's the, that's nothing. Defensive. Mecca caps.

Nothing. Where's the big guy? Josh is moving his daughter back into college. To Miami? Yeah. How old are your kids? Six and a half and three. Okay.

We got a ways to go. We got a time. All right, Shannon, you ready? Ready to pot? Oh. Oh, oh, oh. Can I do my Josh impression? Welcome to the compounded friends.

Ladies and gentlemen. All right. Time to up the energy. I'm feeling low energy, people. It's started from this side of the table, so it's time to turn up. Let's go. We're turning it up. The Compound and Friends, episode.

2.04. Whoa, whoa, whoa, stop the clock. Here's a word from our sponsor. Today's show is brought to by Grayscale. Curious about investing in crypto? I'm not sure where to start. Start with Grayscale. Grayscale is the world's largest crypto-focused investment platform and has been in crypto since 2013. That's a long time when you consider how early we still are in crypto adoption. Grascale also offers the widest selection of crypto investment products in the U.S. Over 30 different funds for investors to choose from. That's plenty of choice for both first-time crypto investors or crypto experts. You may not be considering crypto for your portfolio today,

but whenever you're ready, Grayscale can be your guide. Grayscale, invest in your share of the future. Investing involves risk, including loss of principle. For more information, visit grayscale.com. This episode is sponsored by ApexFintech Solutions. If you're a financial advisor, your real value is in helping people

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and establishing client goals. The Future Financial Advisors' Tools isn't coming. It's here. The WaveVest team will be giving live demos of their planning engine at the Future Pro Festival on September 7th at 4.55 p.m. Pacific Time. Welcome to The Compoundin' Friends. All opinions expressed by Josh Brown, Michael Batnik, and their castmates.

are solely their own opinions and do not reflect the opinion of Riddholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Riddholt's wealth management may maintain positions

in the securities discussed in this podcast. There we go. When did we start talking? Wait for music. Let's go out. All right. Excited. Shannon, it's been too long.

It has been too long. March of 23. I think I was on in like January of 23 Because I was on before Been too long, welcome back, welcome back And Todd, have you been on too much? Are we like overexposing Todd's own? You might be overexposing me.

Might be too much. All right, this is it for you. We'll see you in 2027. I want the next Olympics. Okay. All right, welcome back to the competent friends. My name is Michael Badnik and I am excited to have my friends back with me.

Shannon Sikotia is the managing director N-C-I-O. of wealth for New Burger Berman. Prior to New Burger Berman, ah, that's okay. We won't go there. We know. It's always up for discussion.

She's been on Wall Street for a while. All right. And Todd, of course, is an ETF and technical strategies at Stratigas Asset Management, an institutional research and asset management platform. Prior to Strategis, excuse me,

Todd has had several roles at both JPMorgan and SAC Capital Advisors. All right, so, It seems to be that one of the narratives around the market, and there's like a lot of different narratives, but one of the ones that keeps popping up is what's happening? Like, why is the stock market up?

Does anybody know why the stock market is up? There was an article in the Atlantic this week, and this was the headline. Does the stock market know something we don't? And here, this is one of the paragraphs. As the stock market soars ever higher, the theories of why it rises have suffered the opposite fate. One by one, every favorite explanation of what could be going on has been undermined by world events.

The uncomfortable fact about the historic stock market run is that no one really knows why it's happening or what could bring it to an end. Well, that part is true. Nobody knows what could bring it to an end. But I was thinking about this, like just taking a step back, zoom it out, as they say, why is the stock market up? And even though it feels like things are funky out there in the world, certainly there is some shenanigans going on that you don't like to see. but I don't think it's that complicated if we zoom out. All right,

you guys ready to zoom with me? Definitely. Let's zoom. All right, there's three reasons. Number one, most of the tariff uncertainty is behind us.

The VIX explosion that we saw in the spring, Liberation Day, like, it's not great, but it is, right? At least we have like

a better understanding of the range is not as wide as we previously thought. That's one A. And one B would be earnings. Now,

whichever way you slice that, if you're looking about actual earnings, which is what drives this market. If you're looking about earnings expectations for the future, which is also what drives the market. And then most recently, the gap between estimated earnings, John Chardin, please, and what we saw in the first quarter. So we've got a, we've got a gap that is as wide as we've had for the last 10 years in terms of what the analysts we're expecting and what the market delivered. Okay, so that's the earnings part of it.

Then we've got rate cuts are coming, right? The president is not too fond of the current head of the Federal Reserve. When he's out, there will be somebody else, rates will be lowered. And then number three. And maybe today, through a monkey wrench in the PPI, but inflation is generally all right. And so if you had those three things, earnings and Shannon's ready to jump out of it for skin. earnings at all-time highs, inflation, sort of on the right track and rate cuts coming. Why would you expect the stock market to be?

Oh, I haven't even mentioned the tailwind of the hyperscalist and the AI bubble. Where would you expect a stock market to be? So, Shannon, please. Well, I want to start with the tariff point because I do think that we don't have any further clarity or we have minimal clarity in terms of what the end game in terms of tariffs is. What I think we understand is that the implementation of that is going to be inelegant or, you know, inconsistent at best. And so I think if you were looking at all of the numbers, everyone's re-ratings in terms of GDP and inflation coming out of April 2nd, between April 2nd and the end of April, everyone was anticipating that whatever that top rate of tariffs would be across the board, that there would be very few exceptions to that, to those tariffs. But more importantly, that we as, that companies would be unable to actually deal with and digest those tariffs.

And that's the thing that I think, and we're going to, I think this actually bleeds into some of the earnings conversation. If you think about what management teams have had to grapple with over the course of the last 10 years coming out of the GFC, very low growth rate environment, sovereign debt crisis in Europe. And then you get to the point where, you know, we had tariffs that came on in 2019, following. what should have been, you know, a pretty stimulative tax legislation. And then COVID, management teams have figured out how to protect their margins and grow their earnings against a hugely difficult backdrop. So I think that there was part of that we didn't get the same type of direct implementation and transmission that perhaps we were factoring in as that worst case scenario. But we also, I think, very much understated company's ability to figure out

how to pass on some of these tariffs or shift things on the fly that, you know, we're essentially helping to soften the blow. Now, will we continue to see that? I think so. But I think the important piece of this is, is that I just think that we were underappreciating corporate America's ability to figure stuff out. Charts sex, please, Daniel. So I remember this, this line stuck with me. Savita said, I think this was during 2020. Like, never underestimate corporate America's ability to protect their margins. They are really, really good at that. And once again, we underestimated them because this chart from Goldman shows the frequency

of S&P 500 earnings surprises. So what the analysts were expecting and what companies actually delivered. And this was by far, by far the highest in terms of one. one standard deviation above consensus estimates. Like, the gap was huge. As big as what we saw during the COVID years where we're like, what's happening now? Like, it's that much of a surprise.

So again, and I didn't even mention deregulation and like the wild west nature of the IPO market opening. Like, it's all happening. Why would, where would you expect the stock market to be trading? It's higher to me. Listen, I think this was largely a sentiment rebound too, right? So Shannon eloquently put everything on the fundamental backdrop. And then in our work, it came into the year with the super aggressive sentiment backdrop, right?

That happens after back-to-back 25% years. Tariffs blew that up. And the recovery has been remarkable since from the technical landscape to breath and momentum. And even today, the sentiment data is not uber aggressive. That's the sense I get, at least from the survey data. Some of the quantitative data like options and VIX maybe skew a little bit complacent, but that's okay for now. I think one of the things that's confusing market prognosticators or pundits is there's a lot of different market participants.

And we've been talking about this. What do you mean? And what do you mean by that word? I'll tell you. Oh, pundits. No, I meant market participants, what pundits will take to. So here's what I mean. If you look at retail traders, if you look at people that are speculating and they're having a great

time and they're making a lot of money and there's a lot of silliness, you would say, you would say euphoria, right? Like, absolutely you would say euphoria. This was a tweet yesterday that was just a 10 out of 10. Mike Bird, the Washington Journal tweeted, shares of cryptocurrency exchange bullish, soared more than 150% in its initial public offering. Wednesday, highlighting the challenge of pricing an IPO in today's exuberant market,

to which Mike quote tweeted and said, and Mike's a journalist, he said, I'm not saying this at the top, but if you were writing a novel about financial exuberance, and you invented a company called bullish IPOing and rising 150% on day one, your editor would take it out as an unnecessarily theatrical flourish.

Don't gild the lily, I believe it's this phrase in literary parlance. So you have that part of the market, right? Which is like obviously balls to the wall, everything goes, whatever, whatever, whatever. Crypto, the treasuries, arc, which we'll talk about later. So you have that cohort of investors.

However, you also have older investors who are very confused, who don't seem to understand why the market is rallying. And I do think the sentiment is a huge reason why. But Schwab publishes their quantitative report on their investors. And Schwab is the largest or the second largest platform in the entire galaxy. And their investors, for like six months in a rub in dumping technology stocks, Nvidia has been the number one net seller up until July they finally bought.

Apple was the largest last month. They're not aggressively buying it. They have a sentiment measure themselves, which is quantitative. There's nothing squishy about it. And it is nowhere near, nowhere near where it was in 2021. So which investors are we talking about?

It's really hard to gauge. I mean, like, everyone's bullish? I don't think so. I've had the struggle of what is retail today. I feel like years, decades ago, maybe it was a certain type of person. Now it feels like it's 10 different things. Does that make sense? It does.

I'm trying to figure out how to parse that data, and I haven't quite figured it out yet. You speak to investors all day and advisors. Like, are they feeling exuberant? No, but I, so I think two things have changed. And I don't disagree with your point in terms of what does retail mean? Because I think if we go back a couple of years, we talked about the birth of, you know, the rebirth of the retail investor. And that was really, you know, gamification of our industry, you know, how much are we spending too much time online trading stocks versus being out in the world during COVID? I think actually what's happened is that there just has developed into sort of three buckets, which is it used to be just retail and institutional.

And now what I think is is institutional is there are portions of institutional that aren't big pools of capital that are run by pensions, that are run by schools, that, you know, are sovereign wealth funds. I actually think institutional is that increasingly advisors such as us, pointing to you, because you guys are in the same boat as I am, we've developed institutional frameworks and mindset that we're applying to the challenges for what have been traditionally retail investors. And what that implies is that there's been created some additional guidance around making good decisions. The thing that you're actually not hitting on, though,

is that what I think has changed a lot in the last two years is basically if you look at a portfolio and people are feeling like I want to invest in something that I feel can continue to grow their earnings, you can be in a position where I feel like a lot more sure about corporate balance sheets than I do about the U.S. Treasury right now. I think that people are feeling more comfortable investing in equities because they believe that there is a, there's the potential for those companies to continue to be much more disciplined than the U.S. government. And so I think it's actually what we're seeing is that we're seeing investors increasingly comfortable with maintaining larger equity allocations over time because

they feel uncomfortable with the lack of discipline in things like Washington, in the federal government. They feel more comfortable with corporate balance sheets and corporate management than they do with what's happening in Washington today. And so I do think that what you're getting is you're getting this creep of higher equity allocations that I think is going to continue to support buying in the equity market. The journal just wrote a piece today highlighting exactly that at every age cohort from young ins to the Xers to the boomers, everybody's allocation to equities within a 401 case at an all-time high.

And why wouldn't it be? Why shouldn't it be? There's also longer time horizons. I mean, we're not going to live less, you know, we're not going to live fewer years than our parents did. And that's going to continue with our kids and our grandkids, right? And so just that the longevity of that, the time horizon, has been pushed out. And so you're going to hold equities for longer and you're probably going to hold equities more of them.

So despite these periods where we see this pressure, why wouldn't I continue to buy if I'm in my early 60s and late 60s and early 70s? I have 30 more years for this capital of growth. Are you saying anything in flows that support that or disputed or? No, not dispute. Equity tips do $2 to $3 billion a day now. Equity what? Equity ETFs. Just in general, large-cap equity ETFs do two to three billion. They're going to...

ATFs in general are going to hit trillion-dollar in inflows, right? There's no stopping that. I get more interested when I start to see certain categories get kind of hot. And the only one that really screams, like, maybe put the brakes on is crypto. But the other side of that, the thing with crypto is, is it mass enthusiasm or is it mass adoption? The thing that's weird about crypto to me and that I think pisses people off, is like, still nobody owns it, which is this weird thing where the price is going parabolic and certainly any rational person would say like, all right, maybe like it's time to pump the

brakes on going on on crypto if you've never owned it. But who owns crypto? It is still largely owned by the early adopters and you're just starting to see institutional adoption in a real way. Harvard revealed, what was their investment? It was a silly amount. Not silly and it was a bad idea, but like it was a chunky. Was it 150 million? Yeah, it was definitely a one something. But I would say that investors in general, like, air quote, nobody owns crypto. I know it's not actually true, but it's very underadopted. I think the challenge, too, is that if you have been an early adopter in crypto or digital

assets or whatever moniker you want to apply, right, to what we're talking about here, you now are pointing at those ETFs as being a really inelegant way to access the enthusiasm and opportunity in that. And so what you're getting is you're getting this kind of barbell of, you know, people who have been in the community, in the industry, investing for a long time. And they've already moved on to other ways to potentially invest in that. They're looking at tokenization, for instance, as being like the next way that this is going to continue to grow, kind of.

digital assets as a true asset to be included in your portfolio. And so what you're getting is you're getting this, and you're also, it's compared and contrasted with, from an advisor perspective, the VAL on crypto continues to be really high. So how do you factor that into a traditional portfolio construction asset allocation? Well, you have to put the risk really high. And so you end up with a small position in the portfolio. And so even if you get the type of gains that we've experienced over the last couple of years, is that really going to make a difference? you want to have that conversation every time you meet with your client? And I think that that's the challenge is we've moved from a period where I think advisors

were very hesitant about this going to zero to, is this something I really want to have a conversation about every quarter? And I still think that they are feeling like at the sizes that these positions would be in, probably not going to move the needle. And they'd like to spend more of their time in that conversation on other parts of the allocation. So it sounds like your advisors and their clients are not like banging down their door for crypto. Because over here they're not. And like my friends aren't asking me about it. It seems to be like most people, even at all-time highs, don't really care. I think what we hear, and I'm curious to hear if this is what you hear, for those that are in that former category of people who have been immersed in the community and

have a meaningful slug of some sort of digital asset exposure, they would like us to incorporate that and be thoughtful about that in their allocation. But no, it's not something. And it's actually less than I have experienced during other periods where Bitcoin has gone up a lot. I'm hearing less interest now than I did than in those previous periods. That's an interesting observation.

I agree with that. I haven't thought about it that way. But I don't know if you see that in the flows, too, because it does feel like we should see, honestly, like more speculation, more flows into the asset class. I mean, especially around ether and the moves there. The flows are definitely hot. But the conversations are far less, which is a strain.

You'd think it would be hand in hand. Whereas 2021, let's call it, you couldn't really have access to Bitcoin spot ETFs. But everyone wanted to talk about it. All right. Moving back inside the market, because I could sort of feel people saying, all right, enough with crypto already. Nobody cares.

We just said that. And yeah, we allocated like how many minutes to it. I'll take the blame on that one. I kind of swir up there. All right. So inside the market, I think that. By definition, you're never going to have, especially never again,

with retail participation. And I think that people get distracted by this a lot. There will never be another bull market where you don't see insane behavior. Would you agree with that? As in you'll always see insane behavior? Yes. Yeah.

Oh, yeah. Like irrational ignorance. You will always see pockets of things that make you say, oh, this is the top. That's the information age, right? We're in 2470 cycle. And then I can go reflect that with basically any sort of.

of exchange traded product now with leverage. I'm wearing a Dan Ives shirt forgot soon. All right, but I think that a lot of the silliness, and I love the shirt, shout to Dan, a lot of the silliness is a distraction to like what is actually happening inside the market. So, Todd, you have a great chart. Chart A, please, fellas, talking about cyclicals versus defensives. And what we're seeing here on Tyler, give you the mic in a second. This is the underpinnings of a bull market.

that if you're talking about continuation and expansion, this is exactly what you need to see. So, Todd, what is this chart that we're looking at? This top panel here is just your simple cyclical sectors, industrials, financials, discretionary, tech, relative to the staples healthcare utilities of the market. On the bottom panel is a simple three-month rate of change, and we've had the best three-month rate of change

coming off of that April low in the last 15 years. This is what Shannon said earlier about the fundamental backdrop, right? corporate America figuring it out in a very bullish stance. Of course, can I make the case for a September pullback? Yeah. But the fact of the matter

is big momentum is risk on for this. You're in pretty good shape. This happens at every significant low these types of surges for offenses versus defense. We're also seeing, it's funny,

the market, like as soon as we talk about narrow breadth, and there is some narrow breadth and we'll talk about it in a sec. And concentration. Yesterday, Frank Capillary tweeted The SP 500 just logged back-to-back 80% breadth days for the first time since April. Even more telling.

And it's one day, but whatever. Tech had the lowest amount of advances stocks at 69%. And the equal weight outperformed by more than 1%. So maybe this is like the catch-up trade that happens every single time we seem to mention breath weakening. Yeah. Yeah. I think a lot of it's coming from discretionary, too, to be honest. Corners of discretionary have been off the field for a while

Durables. Homebuilders. Homebuilders back. Now they got hit today because rates popped again. But that's a been pretty important cyclical group that's coming back on the field. Some of the autos, they've been a pain trade starting to come back. Retail's are right. Now the restaurants are taking hit. But like discretionary's working, tech, semiconductors, industrials, machinery. So that's that breath right there.

It's the non-invideo Microsoft type stuff that's still pretty good. Equal Edison P is a day off of a new all-time high. All-time high, Shannon, you brought a chart, chart 11. So all-time highs are bullish. They are. Talk about it. So, I mean, I think this is the challenge is that

you generally tend to see in particular when, you know, the momentum factor is behind as a tailwind. And I am not a technician. I'm just going to say that right now. I listen to folks, you know, and and I, but I think why I pointed this out is that

the question I get the most is like, have I missed? Have I missed it? Right. And so every time we cross one of these all-time highs, what I continue to look at is if you actually break this down, and I didn't bring this in terms of all of the different periods where we have continued to set all-time highs, what you'll find is that there is a persistence in the performance. What's the outlier here is sort of that 18-month period. And that's really what has been happening over the course the last couple of years. So that's much higher than it was if we had drawn the same graph prior to, prior to COVID. And what you're saying is that, you know, in terms of this average gain after, you know, an all-time high, what we've seen is that the concentration that we're

experiencing over the last five years is moving this average gain higher. So if you take out this previous period where we've had some really strong performance that's been concentrated intact, these numbers are a bit more modest in terms of the percentage gain, but the persistence is pretty similar. And so I think that's an important point is that we're not, we're not necessarily saying that we're going to replicate this type of performance after an all-time high. What we're saying is that it tends to be kind of a persistence in that performance after an all-time high, and you kind of are set in that bull market run. Because if you think about what happens when when we get a big pullback, right? You know, you get sort of that spike back up too. And what's

happened over the course since the GFC is that those, you know, those lows have been higher and we've just continued to, we're cushioning the bottom now. So it's likely that this number in terms of the average gain is going to continue to grow over time because we're not seeing the sharpness of those bottoms. We're not seeing the depth in those bottoms because of the cushioning of all of these other factors that we've talked about. I was about to say, do we think that this is like a permanent feature of the market, which is the sharp declines and the sharp rallies, but I keep having to re-reminding myself that 2022 was a thing. And it wasn't that long ago. And the stock market topped on January, was it 21 or 22? 22, right? January, like 3rd, 2022. Okay. And it didn't

bottom until October. October 12th. And tech stocks bottom on December 31st. So that was a legitimate, It was a two-year bare market, and people act like that never happened. As much as I worry about, we'll get to it, the concentration stuff, the MAG 7 as an index was down 50% that year. Yeah, we're just acting like that didn't happen? It's a generational decline. It just happened. Meta, I keep saying it sounds like a broken record, but meta was down two-thirds, like literally.

Oh, yeah, I remember saying to some of my teammates, men is never going back to New High. It's it. It's done. And that was clearly wrong. All right, so this is not a thing that people like to hear. But a pause or a pullback is coming. And I think that pauses and pullbacks are healthy. A stock market that goes straight up is not healthy.

So, Todd, you have a chart that shows the best 65-day change since 1950. Is there anything special about 65 days or that's how long ago the low rate? Three months. Okay. Three months, quarter. So the best three-month change. And we got this chart time. So talk us to this.

What are we looking at? So now we're a little bit past it, right? April 8th was the low. And then second, third week of July was three months off of that low. So we just wanted to take stock of where we were. And that percentage changed, just on the index level, the S&P 500. We were up 25.8%. That's one of the best three-month percentage changes in the history of the S&P.

What does that mean, right? Every major market low has seen a surge off the low. the next one to three months, the probabilities are kind of a coin toss. You don't know. And so far, they've been a good coin toss. But it's also the,

don't be too surprised if you get a pause or consolidation we were just talking about. The more important point was the next six to 12 months, similar to Shannon's chart about new all-time highs if we get there,

is that the returns and the positive hit rate skew very much in your favor. So this is price momentum. Price momentum is extremely good for the long run. Of course, things overheat in the near term. it's not a shock to see things pulled back.

So the recovery off the April low was great on a price level and internally the rescues were good too. Warren Pius did similar work. Chart 12, please. Where he shows what happens when you've got the daily sentiment break above 70.

I think this is a proprietary indicator. I don't know if this is RSI or if it's something different. But anyway, he shows the path. And once you get that extended, extreme optimism, naturally. I mean, obviously, this shouldn't shock anybody.

Yeah. It tends to weigh in returns. And he's got one that goes a little bit further back, going back to 1980. And once we get these extreme readings, the compound annual growth rate above 60 drops to 1.1% versus 9% for buy and hold. So we are a bit extended. And if we go sideways, it should be nothing at all to worry that. Wouldn't be a shock. No.

It's not a hero call, I think, to say the market would consult me. It's definitely not, it's definitely not, definitely doesn't take courage to say that. I guess, I guess like my, my question with whenever, whenever we say that, and I've been guilty of saying that for like three weeks now, too. So I'm going to put myself in this camp is like, well, so what? Like, what are you going to do about it? Oh, no. I mean, and that's, but this is what I'm saying is like, I actually think that that is more critical. And what the August September timeframe over the last number of years, I mean, how much do we complain about like we used to be able to just take a vacation in August?

And that's completely off the table now in terms. of what's happening from a volatility standpoint in the market. But if you think about, you know, what does that period mean and how am I going to react to that August, September time period? The challenge with this year is that we've got a flurry of readings that are going to be really important from an economic perspective here in the U.S. We've got Jackson Hole. And after the last couple of press conferences, I don't know how much confidence you have in the messaging that's going to come out of Jackson Hole, but I'm a little concerned. And then we've got the Fed meeting. And then we've really roll into, I think in the fourth quarter, I think that investors are going to start to look at

something like the big beautiful bill and the deregulation that you talked about earlier. And they're like, okay, so when is this, like we're going to start seeing this transmit, right? And so this timing of this period of this normal seasonality that we experienced, coincident with all of this really market moving data. I mean, we look at last summer. We obviously had the unwinded the yen carry trade. But that was, you know, that was sort of the, you know, the push into August and some of the volatility that we experienced. I'm a little bit concerned that perhaps investors will not feel quite as constructive in investing in September. So I think we could see this as a little bit longer a period, maybe it lasts six or eight weeks where we get some squishiness in the equity market where we

feel like that sentiment is not quite there. And I just wonder how that could potentially manifest into like the fourth quarter when we're really looking for people to be reallocating and likely increasing their allocations to some of the laggards that that we talked about earlier. So this is a good point. It's like, all right, so what? We're extended. Who cares?

What's your point? So what? We should expect a short-term pullback in the next couple of weeks. And what do I do about it? Exactly. What am I supposed to do that? Right, right. So here's what I would say.

If you are fully invested or where you want to be, yeah, you're right. Who cares? Go live your life. Enjoy. Enjoy the gains. Say thank you. market can't fall for more than today. Even today, we had a gnarly PPI reading in the morning.

Yields shot up. Stocks fell at the open. Stocks are now flat. S&P's flat. Equally, who cares? Nobody cares. But here's what I would say. If you are feeling, like if you are underinvested and you're feeling like fear,

this market will not let me in. I can't believe I'm missing all those gains. If you're feeling those feelings and how could you not? If you're underinvested, then, I would say, just wait, just wait. And you might have to wait a week, two weeks, three weeks, a month, two months. You will get a, you will get a better entry, probably maybe. Is that fair?

I think that's what I think. I mean, that's my view is that, you know, we're looking down the potential for an entry point for people that feel like they've missed it. You'll get one. You'll get one. But we hear this all the time. And I think that's why, you know, the work that Todd does is like really important to thinking about.

It's kind of you. No, but thinking about how do we square that longer term, I'm a fun partner here to be a... That's a Seth Roga. It should bring out Setheroga. So I feel like there is a, I feel like there's an opportunity to square some of those, or overcome some of those objections with mirroring it with some of the technical data. Because I think that there are times when this is going to feel very uncomfortable, especially after the PPI reading, do we get another, you know, really lackluster non-farm payroll support?

then we start to hear about recession concerns and considerations. And that's not our camp. But I think being able to combine it with that technical work and that look, I think that that's where you can really push and catalyze that investment for people who are like, I've been waiting and I've been missing it. My teammate with Shannon, I think you know, Dan Clifton, is one of the best policy analysts on the street. He's the best policy on the street.

I've heard we should have him on the show multiple times. You should. He's amazing. I can't speak for his work but he's big on this kind of September to remember because there's just a lot going on here and there's a wild card in the White House that has a cell phone which has access to social media

Isn't it December? Is that an Alexis commercial? It is a Lexus commercial, yeah. September for all those people that buy cars. So Dan is big on that. We get tariffs, the bills, everything. I can't speak for his work, but that's his thing right now. All right, let's speak for your work, Todd. All right, so maybe something more tangible

in terms of what the short term can bring. So you have a chart that shows levered long versus inverse ETF's AUM. And to me, this is one of the best charts in terms of showing where we are in terms of people's feelings. And when you're sort of like in the middle, who cares? But we are basically at all time high.

So what are we looking at times? This is just so levered assets, they're getting big within ETS. because they're just, they're easy, they're access points for anyone, right? You don't need margin. You can just open up a brokerage account and buy 2x or 3X, whatever,

Tesla, semiconductors, S&P. So we like to track the assets in these products. There's 130-some-odd billion in levered long products. And that's an all-time high. Yeah, yeah, 100, probably closer to 135 billion today. And then inverse ETF assets have about 13 billion. So we take the ratio of them. That's at about 10 to 1 today.

We started the year out 12 to 1. I think the more, this is a new sentiment data point to me in the data set. These products really exploded in 2020, so it's becoming more important. If you're trying to get a feel about how aggressive investors are, traders, rather, I should say. This is the go-to chart. So, again, sentiment, not anywhere near where it was at the start of 2025, but if I'm putting together a list, this is at the top of, hmm, maybe we should worry about that. Isn't this just, like, to your point, is it just cheap leverage? Like, does it, you know, is the existence of an opportunity to have cheap leverage in an environment where leverage is more expensive?

Like, is this, you know, is there some, like, correlates, spurious correlation there in terms of... I think that's spot on, right? This is access. All right. So, do you think that 10 to 1 is a ceiling or is this going to go to 20 to 1? I'd be shocked if it stopped here. So, now it depends if the market all of a sudden pulls back 10%. That's going to clear, but I'd be shocked if this was the ceiling.

So we speak about this one a lot, NVDL. This is the Granite shares 2X long Nvidia. This peaked in assets. and five and a half, six billion, something like that. This peaked at $6.5 billion in November 2024. So the total AUM in this thing, and Nvidia is sort of the poster child of this recovery, of this bull market, not sort of it is, the poster child.

Total assets are down a third. So, I don't know, take that for what it's worth. The interesting thing for me is you're seeing these issuers come out with much smaller underlying now. So bullish is going to have 2X, the filings are already out there. The quantum computing name, Soundhound, Draft Kings.

All right. Listen, this is it. This is it. We're not coming back. They're going. We're not coming back. Yeah. All right. So, Jason Gepford, on Thursday and Friday, this is last week.

The NASDAQ 100 hit record highs with fewer than half its members trading above their 50-day moving average. Thursday's reading was the weakest in history. Chart 15, please. Fridays was the sixth weakest. out of 7151 days when this... Oh, I love a good distribution. When this happened. So, in English, all-time highs, not a lot of participation.

It's not new. This is nothing that we don't know. This is nothing that we haven't been speaking about for a long, long time. Maybe let's skip ahead a little bit. Chart 20, guys. So, Todd, you described this as the chart that keeps you up at night? Oh, that's my favorite. All right, this is...

That's a lot coming from a chart, guy. It's my favorite chart. I'm all the way in on the U.S. stock market. I'm bullish to infinity. But, and I'm not trying to be like sour, you know, glass at full, but we need to just take a beat and understand what the hell is happening. Todd, what are we looking at? So listen, I'm a broken record with this charts.

We've talked about it. You've shown it. I feel bad, but I think so the S&P 500 is our investing diet, right? You think about your diet. You have protein, carbs, whatever. That's the S&P 500. the diet of it is becoming more and more of less stocks, right? I guess that's an oxmorian. Less of more, more of less. Defensives have disappeared

in the SB 500. Health care, staples, utilities, energy. They're down to about 19% of the index. Nvidia's 8%. It's almost larger than health care and industrials. Two massive sectors in the American economy. And then if you add in Microsoft with just 15%, they're almost larger than all four of those combined. So there's just this wackiness going on with the index and what you're investing every day. So, NVIDIA and Microsoft. Yeah.

And there's a lot inside of Microsoft, right? Yeah, that's the argument that these are multiple companies. There's Slack and there's a million other things in there. But nevertheless, you heard that about financials too.

Oh, I like that. That's a good one. But nevertheless, Nvidia and Microsoft are almost as large, not quite, but getting there as every staple, every energy stock,

every health care, and every utility. Shannon, what do you do with this chart? So I also, I think it points to the concerns about index investing in general. I'm not going to disagree with you that the index is constructed this way. And so I feel like if you're really looking at this from a perspective of like, how do I diversify my risk? How do I think about how my portfolio is built?

Well, I think you need to figure out where all these defensives, where they lie, and how you can construct a portfolio getting more access to them. Because you're telling me that none of these four sectors, Staples, Energy, Healthcare, and Utilities are going to continue to produce growing earnings and that they're not opportunities there. You look at utilities and energy alone, and you think about the shift that we're seeing in terms of electrification and urbanization and a growing middle class globally.

You need both of those things. Healthcare? I mean, it's been a dog. It's been such a difficult road investing in health care. Were you about saying effing? No, I wasn't. I know better than to do that. It's been such a difficult road.

But I guess my challenge here is that this argument that there are these underlying exposures in these companies and that we need to be, you know, less concerned about them because of their kind of conglomerate status. I just caution people on that because we have seen conglomerates in the past. You fill in the blank of those names. those eventually get broken up, that value becomes dissipated. But what I view this as is like this should be the catalyst for you to look at how do the products that these companies are making, how do those become monetized outside of the tech sector?

And that is where you saw the growth, for instance, from 2001 through the financial crisis, right? You saw technology being integrated into everyday businesses and that shift coming out of the GFC in 2010. and what we saw in terms of the growth of technology socks, it was based on that fundamental shift where regular companies were incorporating technology to increase productivity and do their work better. The AI tailwind is much longer, but it's going to be much more pronounced

in terms of its impact in this breadth trade. So that's why I argue that breath is going to occur because it's the broadening out of the AI trade that is one of the major tailwinds for that to occur. So that's the optimistic take, and that's where I am. think. I don't think investors are dumb. I don't think that the index is dumb. Invidia and Microsoft and all of the MagS7 and the hyperscalers are responsible for so much

of the earnings of the index. There's not a giant disconnect between the earnings, their contribution to growth and where they are in the index. It makes sense. The optimistic take is that this AI industrial revolution is real and the productivity will advance other sectors, and you will see productivity expansion, margin expansion. Obviously, utilities are powering the data centers. And so you could see this nightmare scenario for the Dumers who say that this is going to end badly, where you see a catch-up trade where the S&P 493 starts to benefit from all of the advancements in AI. Yeah, yeah. Can I ask, Todd, I'd have a question for you. I'd love for you to say, I'd love for you to describe that pain point that's going to occur, though,

as the earnings growth decelerates for those top names, and you maybe don't have the re-acceleration to the same extent of the other 493. That would be an index issue then, right? Right. Because you're so overloaded to those names that maybe are not meeting expectations anymore, and then the rest of the index

is not going to be able to hold up the boat, right? So that would be the painful part. That's almost like a 2000-type scenario. Ideally, you don't want that to happen. I just think it's super fascinating how these names are just overtaking entire sectors. It almost feels like the market

is intent on breaking the 40 Act structure. Oh, in terms of the limits? Yeah, because you already see it in sectors, right? These sector ETFs can't track the tech discretionary type stuff anymore because of the Rick rules,

regulate investment company rules. And it's not going to happen for the S&P, but it's almost heading in that direction of, well, we're going to break this thing because it's almost 100 years old. You saw Russell getting in front of that by changing their index construction. So, I mean, I think this is, I think this is really where the challenge is. And I think that this concentration that we're seeing that we experienced, admittedly,

we've seen index concentration historically, but we didn't have as much money tied to index investing. And I think that that is, that's going to create this tension and this stress. And I think that's why you see the potential for like some pretty much. market drawdowns because there's so much tied to these indexes that, you know, it's, it's no longer an environment where you had prior to the GFC where you had a lot of active allocation. Now, it's very much index tied. But this idea that there's going to be like some sort of hard reset where the behavior investors. It's a slow bleed. But we, oh, you mean on the index active versus passive? Just that investors are going to start allocating

differently. We've, we've experienced several challenges. in the first quarter of this year, Nvidia fell 37%. Again, going back to 2022, what happened? Like, we did all that. So I guess the obvious bear case, like the real bear case, it's all in terms of like,

will all the spending translate into revenue and revenue that can be protected and expanded? So this chart, this looks like a Sack gen chart. I'm sorry, I don't have credit for where this came from.

But one of the bulk cases for these tech companies is how capital light they were. The margins were so incredible. We haven't seen businesses growing at 20% with gross margins of 60%, 70%, and higher in some cases. So this chart shows that the big seven, it's showing CAPEX as a percentage of cash flow, has, as we've known, gone straight up. So in 2015, it was 25%. And now it's almost 45%. And now it's almost 45%. Whereas the rest of the index, it is pretty capital intensive. Is the clock ticking?

Like, at one point, are investors going to ask, hey, where's the money, Lebowski? I think we have this period where we're experiencing, just like, you know, in Silicon Valley, where you just, you want to, you want to stay pre-revenue. You don't actually want to have to start reporting how much money that you're making on these investments. Because right now, you're still, you know, you're still investing for the future. you're still investing for growth. And so I think the longer that these companies who've spent this much money are able to push out that they're continuing to just build the foundation for growth

and they're not being pressed by investors who, you know, we've talked about the rationale by why those stocks get bought when they do. If they're not being pressed by their shareholders to articulate fully how this is being monetized, I think this can go on for a longer period of time because I don't think shareholders, I don't think investors are asking those questions. I think they are still in this, as soon as they start reporting, however, that this is translating. You've seen that in firms like Oracle, right, in terms of, you know, how is our AI spending being incorporated into sales and are we getting that land and expand approach and we're getting more revenue dollars per customer? The hyper-scalers don't have to answer those questions right now.

The companies that are using AI are having to answer those questions. I still use it to make cartoons. So the largest AI firms are now spending 1.3 times earnings on CAPX. That is a lot. And at some point, they're going to have to answer for this. And you're right. The longer the street gives them the benefit of the doubt, you don't want to disappoint. Because then it's a long way down.

That to me would be the catalyst for something to go wrong when they just stop meeting expectations and the costs don't take the ends meet, all right? There have been questions, though. I mean, you know, Meda's seen some periods where there's been questioning on their spending and, you know, how that was going to translate to their particular business model. You know, I think the other thing with this is that I just recall those periods where these same companies were under a significant amount of investor scrutiny for not doing enough with their capital, for sitting with cash on the balance sheet for extended periods of time,

before they paid dividends when they weren't reinvesting, when they were talking about doing everything internally from an accelerator perspective. So I don't disagree with you, but I just, I think that there is, there's also the opposite, which is they're just sitting with this cash on the balance sheet.

And I don't think that was tenable for investors either. Is this yours? Yeah, this is mine. So, I mean, this is the point that you're just making. Yeah, I mean, I think, you know, when you go back into the 2010s, and they were just taking out, you know,

big tech was. taking out low interest rate debt and they were doing buybacks. I mean, there was a lot of questions about why they weren't investing, why they weren't putting that money to work. And this is AI CAPX proxy. So, I mean, obviously we weren't talking about AI in the 1990s, but if you think about the companies that are investing in AI now, this shows you kind of the growth rate of that spend. And you could argue that the 1990s, you saw tech companies really benefit from that CAPX coming into the dot-com bubble. That went way in. way down in the 2000s, but it was picked up by the rest of the market.

So maybe, again, we're setting ourselves up for the spend has been done in the 2020s by these large tech companies. And then the translation of value of that sort of happens in the following decade, which I think is what our thesis is and why the broadening out trade has longer legs. So the boom and the bust, the boom in the 90s, the bust in the 90s, the busts in the 2000s, and then 2010 sluggish spending and now here we're all the way back. Remember it was like, I guess in 2013, 24, It was all just like financial engineering talk.

These companies just weren't spending, weren't reinvesting. I guess there were still a lot of PTSD from the crisis. I think that continued for tech and well into 2014 and 15. I mean, there was a very high bar in terms of tech company spending on innovation. And what was really happening then? You think about, you know, what was doing well during those periods. It was a lot of the consumer, right? It was ad spend.

It was iPhones. You know, it was consumer-related, which frankly probably doesn't require the same amount of spend as the innovation that we're trying to put into place today. Here's something. USCF filing. Oil plus Bitcoin. That made me, uh, okay. There's like a backstrayed a whole wheel of cheese. I mean, what in the world?

So, all right, just to reiterate. There's an ETF out there that is launching. And why not? Launch it. Who cares? Yeah. 100% exposure to crude oil and 100% exposure to Bitcoin. But who said, hey, wait a minute.

You know what I really need? This is where energy is at. And I'm going to put the bottom in energy here. Like, it's irrelevant, right? Count the table on that, Todd. I want to hear it. I agree with that. I can make a case for energy, but like it's opportunity cost.

So this is where we're at. We're just saying, all right, let's, let's do oil and Bitcoin. Plus Bitcoin. Yeah. I don't know. Maybe that's the bottom. I think this is like a, this is a geopolitical dobsday trade. What do you mean? Like Middle East, Russia, Ukraine, you, you know, just concern. Like, you know, Bitcoin store a value plus oil prices are going to shoot through the roof because of continue. I view this as like I could see some of my, I could see clients who are like, this world's going to hell in a handbasket. I can say hell, right? That's allowed. Well, you know, you're right. If that's your outlook, that's sort of what I think this is. I actually think that that feels, and I don't disagree with you on the energy thing, but this to me feels like somebody was like, we've got the bunker people.

This is for them. This plus NVDL. Here's another one from Bautchunis, where he gives you a hat to ptowed. Arc. Oh, yeah, yeah. You want me to do the tweet? Do you want me to recite the tweet? Yeah, what's tweet?

So, well, so, I love bantering, pestering Eric. He's one of the best. Ark, the other week, took in about $800 million in a day. And we were all like, huh, that's interesting. But then it turned out to be a tax rebounds. The money came out the following days, right? This is what you can do in ETFs. You bring money in.

Money goes out. It's a heartbeat trade. It's all for tax purposes. You don't generate capital gains. The last couple of days, they've really taken in a lot of money. And Eric and I are both like, this feels like they're rebalancing again. They're doing a bigger creation unit, and it's just going to come out in a redemption unit the following days. Because think about Arc, it's on a huge run.

Outside of Tesla, a lot of the stocks in there have massive gains. Roku, Roblox, or maybe not RoCublox, Coinbase, Pallantier, Robin Hood. They got it on Circle. So I think what's happening is there's money that's going in, but this is going to come right back out because of tax purposes. So it's not more, it's not sentiment. I think this is more them using the ETF wrapper to avoid capital gains. You know what happens all the time? you think about like stocks

that have just had a monster run and we talk about them on the way up and then when they fizzle out it's like who cares so I just checked Circle for example Circle is down another 8% today it's doing the circle of life

it was that's right that's right Todd it was a high of $299 it's now at 140 cut in half very quickly remember Figma a couple of weeks ago and they're like oh they got these bankers got the APR wrong

and they're ripping off their clients to enrich their other clients which never made any sense to me it popped to a hundred $143, it is now at a pre-IPO low of $76. So maybe whoever the bankers were actually got them as much money as they possibly could have. Did you know Roblox is bigger than Apollo in market cap? Do your kids play Roblox?

Not yet. Yours? Never. No, good for you. I held firm on that. Good for you. It probably saved me a lot of money based on how successful Roblox is. Just relating, it's back to the arc stuff.

like they're at the big holding and circle and whatnot. But can we talk about, but do you think that is, that's IPO specific to, I mean, what is your, what's your, I mean, I can give you my take, but I would love you guys's take on, you know, there's been this excitement around, you know, we're seeing IPOs again and they're coming off and they're successful and then, you know, we're losing part of that narrative. Like, do you think that, do you think that that the most recent IPOs have been successful enough to create this reaccelerate? of public market listing or do you think that it's still, you know, we're still further away from that? I think there's been a backlog. Not I think. There has been an absolute backlog for the past couple of years. The window was jamtight. And anybody that's been waiting to go, now is the time. And they've been waiting for a while, these ones. And I think I don't know if investors, all investors realize that these companies that have gone public more recently have been

waiting for a while to do it. It's not just, but it's not just IPOs. It's MNA. You brought some stuff. There's a lot of MNA activity going on as well. There is. And I mean, there's probably more discussion of M&A than we're actually seeing, you know, closed deals, at least in the last couple of months.

But if you look at, for instance, like Goldman Sachs announced that they weren't going to do their second round of layoffs because activity has picked up from an eye banking perspective. So, you know, you're seeing this tick. and this is M&A announced transactions, so obviously not closures yet, but I think it's an important graph. The challenge is that I think we're in an environment where some of this is going to be impacted by rates as well. So I think some of this tick up is also in anticipation of a lower interest rate environment. So I feel like a lot of these cross currents that you started the show talking about, this one, you know, this one could be impacted. Although I do think a lot of the

M&A at this point is going to be large companies with, you know, plenty of, you know, capital market access and cash stores to be able to do these acquisitions. I think that's going to pick up faster than some of the smaller companies. I, listen, I hear you talking about M&A. We're talking about IPOs. And if I'm looking to diversify away from big tech, just financials. Makes sense. Makes sense to me. They're working. Capital market names up and down the cap scale have been great. NASDAQ, I switch I own. Oh, the exchanges too. Yeah.

Yeah, the exchanges are interesting because they're data and they're getting into crypto. So that's another part of that segment. So if the financials are acting well, then the economy should be in pretty good shape, too, big picture. Does the economy, does it, does the look here? No, I'm not giving you a look. I'm going to let, oh, go ahead. Not you. No, no, no, no.

You go. All right. How much does the labor market matter to investors today? Like, there seems to be like a minute a couple of weeks ago where claims were picking up And then sort of people stopped Karen because they stopped going up, which is, which is a good thing. Can the stock market survive what is a slowing, albeit whatever, economy? Like, the economy is pretty fine, man right now. It's not great. I actually think that the, this is sort of just like what I've been trying to grapple with as I'm looking at payroll data.

I think July was so bad. And it was such a huge revision. I think investors are kind of taken a step back and saying, and really saying, okay, this is probably not, like, these are probably not the final numbers. Like, there's got to be, there's just so much noise in these numbers that I'm not going to base my decision making from an investment perspective on this particular print because I'm going to need to see more data because this is so counter to the data that we had already received. I don't think it's about data accuracy or there was manipulation of that data.

I think it just comes down to the data that we're getting is based on smaller, smaller sample sizes. It's extrapolated out. It's just not as quality data on a month-a-month basis that we used to have. In terms of consumers, however, you know, one of the things that we continue to look at is we look at the cohort between 16 and 25, and that unemployment rate is almost at double digits at this point. And so you can ask me what I think will, if investors are concerned about the labor, market. I think that companies that have more exposure to a younger demographic, I think should be more concerned because that's where we're really seeing the impact of a slowing labor

market is in sort of pre-30-year-old hiring. Well, you saw a lot of the fast food restaurants or the cook service restaurants get killed this week. Kava, sweet green. So the market is working. Like the companies that are missing, trade desk is being disrupted in a serious way by Amazon and others. The companies that are under pressure where their business models are under pressure are getting annihilated. So it's not like everything's going up. The opposite is true. Except for Cheesecake Factory. Well, Bespoke had a great charter there in the week showing that for whatever reason, like dine in restaurants,

even like the cheesecakes of the world versus the quick service. And I think that has a lot to do with people coming into the office or lack thereof. I think that there are some really interesting demographic trends that are, and I think quick service is a great example. I think some of some travel will be disrupted based on kind of lower, younger cohorts, you know, not being able to find jobs. I think that the type of retail from an apparel perspective, I think that certain stores will do better than others based on that, you know, target, is it fast, you know, I would be a little bit concerned about fast fashion. What's fast fashion? Like Lulu?

No. Like, um, like, um, like, um, H&M. H&M. No, no, no. Like very, very, you know, um, seasonal kind of churn and burn, low, low cost pieces that you buy from a seasonal wardrobe perspective and then you, you, you don't care about the quality because you're not going to wear them again next season. Party City. So. Or the Halloween, whatever those Halloween stores are. No, I mean, I think, but I, but I do think that that's where the labor market concerns are, are likely. The other thing, though, and I would be interested to hear. your view on this, is that if I look at the labor market and we've looked at this, I think that what investors are looking at is they're anticipating that, or they're attributing this weakness in the labor market to AI, that people aren't hiring because they're substituting those jobs for AI. I actually don't know that that's probably the cause of this, but I can see where that attribution would come. And I think it speaks to some of the things we talked about earlier in

terms of like the tail of AI because if you think companies are changing their hiring practices because they're becoming so efficient at implementing AI, why wouldn't you continue to invest in that? But I think that's probably not the rationale between around younger hiring, not happening. I think there's probably some other factors, just like businesses being more conservative and discerning in this environment. I think conservative is the right word. It's a politically volatile environment, right? There's all sorts of stuff going on. And I guess there's some fringe AI. I use cases, right? You can get a robot to make your salad at sweet green. So maybe that's also

part of it, just looking way out in the future. But I go back to the political volatility. I think it's just too much for certain companies to handle. And they're just going to say, you know, let's just dial it back for a few years. I think companies are using AI as cover to slow down their hiring. And I also think that it's real. I do buy it. I got a heartbreaking email earlier this week from a 25-year-old financial professional who is sitting for the second level of his CFA. He has a one-year-old, and he got laid off. He's an analyst. And he said it was 100% because of AI. And the employers didn't say explicitly to that, but they said, you know, with the tools that we have today, blah, blah, blah. I really don't, like, I hate being

alarmist, but I do worry about the entry-level rules, because that is, entry-level jobs are grunt work. And grunt work is the first thing that's being replaced by a lot of these tools. And there's already challenges, whether it's student loans or the cost of housing in terms of household formation of those individuals. And so we're exacerbating that problem potentially by having a bunch of people come into the workforce that were geared for these types of jobs. These types of jobs aren't there. That doesn't fix itself in two to three years. People don't go to trade school, you know, all of a sudden. It's going to take five to ten years and for a shift in some of these other trends that we're talking about, such as manufacturing,

reshoring or automation. That's going to change. That doesn't happen. overnight. Isn't a lot of the work that you do being outsourced now to AI stuff? Me? No. I don't think it takes a human to look at ETFs and what the heck is going on in them. Oh, you? Anything? I think that's funny because I actually, I think all of us. You can't be replaced. I think that. I can't know. Thanks a lot. No, I think some of the things that I would take up time for me, take up less time for me because I'm utilizing AI. But I think the, but I think everybody is going to sit here and say, my job can't be. disrupted by AI. I really, I really feel like we should all, I agree with you on that point

that we need to be introspective about what do we do that provides value that cannot be replaced. I think that is a conversation both individuals need to have with themselves, but also companies are going to have over time to think about how do we, because companies would also argue that they're looking to incorporate AI in order to maximize the value-added pieces of people's jobs. it's hard to add value when you're 22 years old and you don't know anything about the industry you're entering yeah um Shannon you have a chart showing us employment this is a big part of the story foreign versus native workers and I have to ask what are these charts where do you make these charts what are we looking at here I've never seen this before like yellow are these is this

excel what is this no this is our branding so I make them I make them at at MB private wealth we make them I should say it's not just it's not me it's our team what's the story here So one of the long-term things that we're watching is this shift in immigration and how it could potentially be inflationary over time. It got a lot of, there was a lot about this in November, December, January, that there was going to be this big shift in immigration policy. And then tariffs hit and everyone's like, oh, yeah, immigration on the back burner, even though we continue to see, obviously, pretty meaningful shifts in immigration. I look at this primarily from an inflation standpoint, longer term, in terms of foreign. born workers, decreasing as a percentage of the population, native born workers increasing, and the potential wage impact on that.

I mean, we have heard from industries. We hear from farmers. You know, we hear specifically, I mean, I don't know if you saw some of the news coming out of like Nebraska, for instance. Oh, sorry. So I think that one of the things that we need to think about is that if services inflation is truly what the Fed is most concerned about. And you think about areas like medical care services, which was hotter in the CPI report that we just received.

There's a lot of foreign-born workers in that. And ostensibly, they have accepted lower wages over the course of the last number of years, particularly in the last, you know, as you see this chart here, you know, seven, eight years where this has really increased in terms of those workers. I look at this as an inflation issue. and a labor supply issue, and we're continuing to see that. So I think this is something where, again, going back to specific industries, going back to specific sectors, companies, how many entry-level employees do they employ? How much of this could potentially be disrupted by AI, which could offset some of this decline.

But I think this is important when you think about, are we in a higher inflationary environment going forward? And I think that this is part of it because wage inflation is likely to, you know, to continue to persist if we're hiring more and more native-born workers. So since Trump presidency, foreign-burn workers shrank by 3% and, of course, their cheaper labor. Native-born workers grew by 2%. So, yeah, maybe some pressure on prices. That's a pretty short time period to see that type of decline.

Yeah. What was the Nebraska story that you referenced? Oh, you know, the inability to have enough workers to harvest and the fact that it's impacting state revenue collection because volumes are down. And the Nebraska governor, I think, came out saying that it was because, you know, there's a shortage of workers from a farm perspective. Okay. Todd, you have anything to add in Nebraska?

Well, our guest, Sam. Nobody cares about Nebraska. It was just an example. My teammate who's joining us in the room here, Samantha, she covers Nebraska. So she's got firsthand boots on the ground type experience here. All right. And I'm not wrong, right? No?

No. Todd and Shannon, thank you for hanging with us today. Before we get out of here, the new thing that we've do is, what are you most looking forward to? Shannon, what's up? What do you got going on? Like for the rest of the day? Or just. Anything.

What's up? What are you looking forward to? Leaving here. All right, Todd, what are you looking forward to? I'm going on a family trip next week. Where are you going? Utah and Colorado. Oh, hell yeah.

The wife, my two boys. Then Future Proof. That's right. And then the Neutron movie. Oh. You're into that stuff? I love that. Jared Lettos in it?

Well, yeah, that part, I don't know, but Jeff Bridges. Jeff Bridges is back. Yeah, it's Tron. And are you excited for Bluish Traveler opening for Bush? I will be, have left by then. Sorry. Where are you going? I've got to go back to Vancouver.

Get? I'm not joking. I'll be in Vancouver twice in a month. Unbelievable. Leaving. Okay. A Canuck. All right.

Shannon, what do you look forward to? I'm excited to, as I always do, eat at Land Ho in Orleans on. Labor Day weekend. Why do you always do that? It's just a thing we do. That's what we do. We spend our weekend down there. And my son starts high school in a couple of weeks.

So I'm really excited for him and him taking on that new challenge. And I'm going to try to figure out what he should be studying so that when he graduates, he can enter into this increasingly difficult job. Is he athletic? He is athletic. Maybe that's it. He plays golf and baseball. I can't replace athletes.

Not yet. Yeah. All right. This is fun. thank you so much. Listeners, thank you for listening. Josh will be back with us next week. We have a very special guest next week. It's not Dan Ives, but it's, let's say it's Dan Ives adjacent. Thank you for listening. We'll see you next time.