The Compound and Friends - Fear Has Rizz with Brian Belski

Episode Date: December 8, 2023

On episode 121 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Brian Belski to discuss: the golden age of stockpicking, what happens if there's no rate cut in 2024, what the bears are missing, the outlook for financials, and much more! Thanks to Dimensional Fund Advisors ETFs for sponsoring this episode. To learn more about the Dimensional difference, visit Dimensional.com. Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

We're good? Yep, we're live. We're live at the Jack and Rod show. Nobody will get that reference except for people that do. Okay, well, I'll take this. Okay, Oxford's 2023 word of the year. I stumped Michael on Tuesday by accident by using the term Riz. Are you familiar with this term, Belsky? Dude, he doesn't know what it is.

Riz. Just chill. He might. I almost got fired for saying shiz once. No, that's not it. My kids say this all the time. Riz? It's official. Oxford University Press, the world's second oldest academic press,

and the publisher of the Oxford English Dictionary has Riz. Or at least like the rest of us over a certain age, it's trying to get some. Riz is Gen Z slang for style, charm, or attractiveness, the ability to attract a romantic or sexual partner. It's like from charisma. It's a shortened form of charisma. So, all right. I got to be honest.

Just another way for this new generation to be lazy? Is that what it is? Well, the kid that plays the new Spider-Man, Tom Holland, gave an interview and he said about himself, I have no Riz whatsoever. I have limited Riz. I have tons of Riz.

He got that term from a YouTube streamer. So anyway, it exploded when he did it because everyone loves Tom Holland on the internet and now, whether or not you have Riz

is like... You ever heard like an actual interview with him? Who, Tom? What are you doing? No, Chris was called. Oh, of course he did. The dude is a cool dude. Yeah, he's cool. Every other word's Athenheimer.

I don't like that this is like the second time in like five weeks that you're trying to foist new terminology into my life. I'm trying to foist it on you. Nobody wants to know what the next generation is talking about in terms of slang. You're not cool. Stop. I don't say the term. I'm trying to foist it on you. Nobody wants to know what the next generation is talking about in terms of slang. You're not cool. Stop. I don't say the term.

I thought the next- You're trying to make it a thing. I'm rejecting it. It's a term in my household. I have two teenagers. You don't. Fair. Fair. There's a new sub-term I don't say that shit. There's a new sub-term for the next generation. It's called the Gen App. Have you heard that one? The Gen Appers. No. Yeah, like gen app.

Like the app. Their life is an app. Even Nicole doesn't know what a gen apper is. Well, you know what the runners-up were? Situationship as opposed to a relationship. Nicole, what does that mean? These are all your – this is your generation. What's a –

It's not a good relationship. But it's still a situation. But it's a switch-uation. Okay. It's a switch-uation. De-influencing. Do we know what that means? Anyone?

I feel like you can guess at that, right? Opposite of influence. All right. All right. Enough with all that. All right. How about this? Well, enough of that.

Belsky. Yeah. 2022. Yeah. Tough year. Yeah. Tough year for the Belskinator and enough of that. Belsky. Yeah. 2022. Yeah. Tough year. Yeah. Tough year for the Belskinator and all of us, let's be honest. So I had Sean, this guy.

That guy. Go back and listen to our episode from the last time we were here. Oh, September? Just to sort of- Oh, the one- February. Oh, February, okay. You sounded so young and innocent then.

And dude, you nailed it. You did. 2023 is a comeback year for you. Oh my gosh. Let me set the stage. Thank you. So at the time, you said the bear case was $3,600. The base was $4,300.

The bull case was $4,800. We're at $4,550 today, which, oh, by the way, happened to be your year-end price target. In your 20 years, 30 years on the street, have you ever gotten the year-end right? Every year. No, for real. It's impossible. You're throwing darts. But you did it this year. You just say plus 8%.

So this is danger. The year's not over. The year's not over. The year's not over, but 2022 was humbling. And we had a great opportunity to apologize to a lot of clients that we've lost the money. It just sucks. You didn't lose the money. The market did. Well, we did because those are the choices that we made. Okay. And, and we have, we have that responsibility and, you know, I've lost my job three times on, in this gig. It's my 34th year, May 3rd of 1990 is the first day in the biz Bet I got paid to do this job. I was doing side projects for people. But in 2004, I'm laughing. It's 2004 from the USA Today. I won the award for the stock picker of the year, meaning the strategist with the closest to the market. I got fired in 2005. So I don't need that right now in my life. But no, I mean, I think, you know, I've made this. Is that like the Madden curse?

It is. Like you're on the cover of the box? Or the Sports Illustrated curse. Right. But, you know, listen, we said this before. Stocks are up 7 out of 10 years. Bulls make you money. Bears are smart.

I'd rather make people money. And we've got, you know, we have a process, or we say in Canada, a process in how we do markets. I've got one guy that's worked for me for 17 years. God bless him. He took my models that I had before we started working together at Merrill in 2006 and supercharged them. We've had a remarkable consistency in terms of how we've called markets and in terms of being as tight as we are going to be this year again.

And so we're very blessed and fortunate. I remember I was at, the only time I've ever gotten called from a CEO, aside from Stan O'Neill not wanting to talk to me because I was bearish financials in 2008, is Bill Down, who was the former CEO of BMO, my very first year at BMO, 2012, and I f***ing nailed the target.

My very first year out of it, and I nailed the target. I'm flying to Cancun with my family, calls me on my personal cell phone, and congratulated me. And everyone was bearish in 2012. Oh, of course they were. Everyone. Everyone. Double dip.

It was the obvious thing to be. Right. Okay. Now, sentiment plays a big part in it. But remember the last time you asked me, the very first time I was on the show, you said, what's the best book, best financial book that you ever read? And I said, The Art of Contrary Thinking by Humphrey B. Neal. And you don't want to be different than everybody else just to be a dick or be cocky or say,

you guys are nuts. If you have the contrarian viewpoint that in, in the analysis that backs it up, be contrarian. And so I don't, and nobody reads my stuff, but on page two, we do in my prologue, it was kind of classic Belsky. Cause I went after the bears a little bit. I went after the bears a little bit, but I was respectful and I call them the yeah, but bears love it. And, and you know, this is a really tough gig, tough gig. Like, yes, the market went up, but it's only because. The yeah, but is the wall of worry. Yeah, but we're going to have a recession this year.

Yeah, but inflation makes stocks go down. Yeah, but it's only seven stocks. Yeah, but it's only seven stocks. No participation. Market can't go up, blah, blah, blah. But I'm going to be right this year. It's not I was wrong. It's not I was wrong, and I'm sorry that I was wrong.

Sometimes, though. Just not, I was wrong. It's not, I was wrong and I'm sorry that I was wrong. Sometimes though, not just not most of the time. Well, of the, if you take a look at the bears on wall street right now and have they come out and said, I'm sorry, I'm sorry. I got it wrong. No, they do a mid year up. Instead of saying you're sorry, you get to come out in June and look back at what you said in December and raise your target. No, you said- But they don't do that, though. They don't do that. What I said is still true.

That's what they say. What I said is still true. Exactly. It's just- The price changed, but what I said is still true. The market's wrong. The market's wrong. Yeah.

Anytime you say the market's wrong in this business, look out, sister. Yeah. Run for the door. You're all idiots. I'm right. Yeah. Oh, yeah. And there was a lot of that going on.

If you remember, Josh, back in 08, oh my gosh. Yeah. The market's got it. Market's right. Yeah. Oh yeah. And there was a lot of that going on. If you remember Josh back in 08, oh my gosh. Yeah. Markets got it. Markets got it wrong. You guys, this is, this is stupidity. And guess what? The market was right. Was the market wrong in 2022? No. No, because, and I got it. It was right. It discounted an earnings recession early. So, I'm on the channel. We know what it is. And I said, and I'm only on Twitter, by the way, just to see what people say about me because I can't say anything because I'm a registered animal. Yeah, that's healthy. Isn't that great?

What are they saying about you? Well, so I said, stocks lead earnings, which lead the economy. Stocks lead earnings, which lead the economy. We've seemed have forgot that the order of things. Yeah, that stocks are an efficient discounter of what's coming. Yes. They did that last year and this year. Yes. Thank you.

It's a golf clap. He's back. What show is this, John? Oh, shit. Give me my music. Make it louder. 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 Redholz 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.

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solutions are in many ways similar to index funds, but go a step further in that they take a more systematic approach to pursuing higher expected returns. So they're not active in the traditional sense, but they're not quite passive either. That's right, Josh. Their long-term track record shows the value their approach has delivered over indexing. Over the past 20 years, 70% of their funds have outperformed their respective perspectives benchmark compared to just 16% of the industry. To learn more about the dimensional difference, visit dimensional.com. the industry. To learn more about the Dimensional difference, visit Dimensional.com. Yo, shout out to all you Belsky haters

out there. Keep saying that shit on Twitter. He loves it. It fuels him. It fuels my hate fire. He's Canadian, but he's not going to be nice about it today. You know what I'm saying? If you hate Belsky this year, wait till 2024.

More reasons for hate. Nobody hates Belsky. No, just kidding. I don't really think you have that many haters. I mean, you used to, but now they all deliver for Amazon. Right? So, all right. Listen, I read your stuff.

I don't always agree with everything you say, but honestly, you make people money. I mean, it's not every year, not every quarter, but you give people a framework, and more often than not, directionally, markets go higher, and you give people reason for why they should go higher. Here's one of the things you said to me last time you came on

that I loved, and it stuck with me. You said, alright, enough already. I'm going to start rapping if you don't turn that shit down. I'm going to start telling you how my money don't jiggle jiggle. You said, guys, we're too hard on ourselves. We've been through a lot. You said this, right?

You were explaining like, because I was like, well, this and that and this other thing could go wrong. And you just said, we deserve a break. Like the things should work out okay. Now it so happens that that was true. It didn't have to be true. It's still a profound point. We shouldn't always be looking for why things are about to go wrong. They will from time to time, but that shouldn't be like the quest. I feel in the social media age, investors are very often searching

for the next thing that's going to go wrong. And it's almost like what they set out to do that day. Even if they're not shorting the market, even if they're long, they're still like, well, where's the danger? And it's natural, it's healthy to be skeptical of bull markets, but maybe that's overly so.

What do you think? Yes, I think the best way to put it is we're so afraid to be wrong, we don't want to be right. And I think it's a secular problem since the tech wreck that was accentuated during the credit crisis, which since the credit crisis,

things have not been normal. So then what, 06, 07? Since the Fed opened the window of August of 07, shit has not been real. Meaning, you can't have 0% to 3% interest rates or 0% to 2% interest rates. You just can't. That's not sustainable. And it's going to take a while to unwind from that, OK? And we have now reared an entire generation of investors that only think that stocks go up

if interest rates go down. It's not true. In fact, in our report, we talk about how there's actually not a great correlation between interest rates and stock market performance. There isn't. So we may think that. We have become so macro-dominated in our thinking. Remember, stocks lead earnings, which lead the economy. heard some person that we sometimes sit next to on the channel, the four-letter channel, that said, you know what? I'm going to buy once I know there's a recession. Good luck with that.

Yeah. Once they hand you the document affirming that we're in recession. Right. It's kind of like, do you run your life like a spreadsheet? And some of you probably don't know in the audience what double underline or Lotus 1-2-3 and all that kind of shit happens in accounting. Then I'll buy something when it all adds up. That's not investing and that's not life. No, you have to buy some degree of uncertainty. Sometimes it feels that there's more uncertainty than at other times. But there's always the same amount of uncertainty.

Right. We really don't know. So my very first mentor on Wall Street was William O'Neill. And he said, Brian, don't let anybody ever tell you that there's nothing going on in the market because there's always something going on. And we're always going to be complaining. And this was 1990. I mean, you go back to 1990, look what happened in the market there.

There's always something going on. We're always complaining. So we just have to deal with it. Now, given the age of how you started this diatribe with respect to social media and no one doing the work and bullet point analysis and so afraid to be wrong and they don't want to be right. Fear sells, right? Fear is sexy. The bears are seductive. I click on fear. Fear has riz. Fear has major riz. Fear has total riz. Hey, look, we just named the episode. Say we're done with that part, the market is more likely to be up 20% in a given year than it is to be negative.

Yes. More likely to be up 20% than down. And so the thing that we should be searching for that we never do because it's hard is what can go right? Well. AI. AI. Is that rhetorical? What if this riddle me this, AI. AI. Is that rhetorical? What if this riddle me this, Batman?

What if the Fed cuts rates because inflation goes down faster? Not because the economy slows. And that's what everyone thinks. Everyone thinks if we cut, it's because the economy is slowing. Yep. We're going to pump up unemployment. Economy's going to slow. We're going to have an earnings recession.

Fed's going to cut. They're not cutting. They're's going to slow. We're going to have an earnings recession. Fed's going to cut. They're not cutting. They're not going to cut. What if we go through all next year and they don't cut? Holy shit. You get a steepening

of the yield curve. Banks rip. You get participation across the board. Wait, you don't think they're cutting? Yep. So I think directionally

the next thing is a cutting cycle. But why would you cut? Why would you cut now? For what purpose? You literally have everything in the palm of your hand if you're a central banker. There's no reason to cut. Okay.

You have a job market that's great but moderating. You have like wage gains that are moderating. You have shelter costs that are moderating. Just – it's fine. Wait. Why is there no reason to cut? For what purpose? Because what if you say mission accomplished, they've done enough.

They've never said that. They've been restrictive enough. Inflation is coming down. Wage gains are coming down. It's all heading in the right direction. There's no need to be this restrictive. I think they cut if inflation really, really goes lower. Like we're talking 2% or lower.

What? What if that happens? They're cut. But for what end? Because they think it's going to get worse. When inflation hits 2%, what else is happening

in the economy to have that? The economy would have cooled significantly for inflation to get down there. Like, are we at 5% unemployment rate at 2%? Or are we still at 4%?

I think we're still at 4%. But the bond market's going to do most of the work for us. It's doing it. I know. But if we're maximizing employment, which is tenant number one, and then tenant number two is stabilized prices. If we do both of those two things without a rate cut, what's the necessity to cut rates? Brian, let me just tee you up before this answer. Please. So you said this in February 23. It was true today. It is true today. You said, we need to see a massive reversal

in labor trends to trigger a recession. That's what you said with us in February. It hasn't happened. So Mike, back to you. Yeah. Everyone's got jobs. And remember too, the other thing I said too, we have a massive amount of people that are underemployed and they're still kind of coming back. And you know what's interesting about the wage stuff is that white collar, it was a tough year on Wall Street because we had a lot of rifts, reduction in forces. A lot of people lost their jobs. We're in a tough, tough compensation cycle. It was comp day today at my employer.

Nobody feels bad for Wall Street. Well, the city does. Yeah. Right? And I think the high end is coming down the lower end is coming up from the marginal side though I mean you really have to come up but I don't see that

reversing anytime soon in terms of just how steady wages are how steady the economy is we're still spending money like drunken sailors we're just changing the way that we spend we're still spending the money ironically in the Joltz report that came out this week, one of the new trends is for the first time in a long time, leisure and hospitality hiring has now gone negative. So this was the

most bulletproof part of the economy was people traveling. That's now not in any major way. I think it's like minus 7,000 jobs or something, but just still, it's not up 200,000. It's because if you try to book something in December, the prices are astronomical. I'm guessing that within the next week or 10 days, those prices are going to drop because they need to fill those planes up. Counterpoint, JetBlue is up 15% today because

of the guidance that they delivered. Counter, counterpoint, it was a $4 stock having... Well, guess what? Delta, but Delta ripped too. The airlines all ripped. Counter, counter, counterpoint, was a four dollar stock having having oh well guess what delta i mean delta but delta rip to the airlines all rip counter counter counterpoint wasn't you can't just alaska by hawaii hawaiian airlines come on man put double stamp hey let me ask you this i've been asking a lot of our guests wait wait alaska air bought hawaiian airlines yeah can you imagine getting on a hawaiian airlines flight to alaska that's pretty funny that's's sexy. That's what that is. Brian, if we get a softening of the labor market

and a recession, which nobody wants to see, do you think that it's going to happen because of the interest rate increases? Or do you think that we can say that's behind us and it will come from something that we don't see coming? It's probably going to come from something we don't see coming. And I'm not saying we're never going to have a recession because that's stupidity, because we will at some point,

but it'll happen when no one's looking for it. And maybe this is a 25 or 26 theme. It's not going to be next year. That's such a good point. 2022 was the year that everybody saw the recession coming and the behavior that corporations made, in part, helped to maybe avoid a recession. Is that possible? Yes, it is. And I will tell you that— We all braced for impact, and there was no impact. If you go back to 2018, right?

Great market until Trumpy started fighting with Powell, right? And China. And China. Give him the finger. And then Powell raised rates one more time in December market got hit all the bears and you know who they are

taking the victory lap pulling their muscles patting themselves on the back and then January Paul pivoted January 2019 was 1995

all over again he did three cuts in 19 after a month prior saying we're nowhere near normal right and the market ripped

remember and coming into 2020 I'm like we're gonna have a recession I could feel it we're nowhere near normal. Right. And the market ripped, remember? And coming into 2020, I'm like, we're going to have a recession. I could feel it. We're going to have a recession in 2020. Well, you had an inverted yield curve in the summer of 19. And, you know, we don't talk about it now because it did predict a recession.

It predicted COVID. 2019 never happened for me. I have no memory of 2019. The pandemic sucked out all of my mental energy, honestly. I totally agree with that. I have no memory of 2019. The pandemic sucked out all of my mental energy. Honestly. I totally agree with that. I have no memory of 2019. It was a good,

I mean, it was a great year for stocks. Stocks were up 30%. Yeah. But you had an inverted yield curve for half the year. We don't even talk about that anymore. Because that, that got, that,

that, that omen came true, but in the form of COVID. Had we not had COVID, were we destined to have a recession in 2020? I don't know. Nobody will never know. Might have.

Of course. Let's do, let's get to Belsky's stuff. All right. So, Brian, I'm so glad that you're here because you put out your 2024 report. You've got some great charts that we're going to walk through. So, 2024, it's the second year of a bull market. And, John, let's put these charts on, please. What are we looking at here

average performance of the second year of a bull market is 11% going back to 1946 like not calendar but like the next 12 months after the first 12 months so on average a bull market the first year of a bull market and obviously I'm guessing that a bull market starts after a bear market

these are all bear market if you remember when we're here in February, we said, start of the bull, the start of the new bull market started in October. You son of a bitch. Thank you. But nobody believed us.

And then all of a sudden in June, we're in a bull market. I thought we, I thought we would revisit that October low back in February. Most people did. And in March, it looked likely with the bank shit. Yeah. But the way, the way that they rotated out of those And in March, it looked likely with the bank shit. Yeah,

but the way that they rotated out of those banks, man, and went into tech and then you had the three tech rallies, right?

You had the January tech rally, which we talked about in February and then the rotation and then the AI is coming. Dude,

the NVIDIA earnings call in May, that was the end of my bearishness. Like, that was like, oh shit, there's something else going on that's way bigger than Silicon Valley Bank. Sometimes you get really lucky. And we bought NVIDIA five or six years ago because of the gamers. Yeah. And then EV.

And then AI. And then you forgot to sell it. And then AI. Right. Oh man, listen, talk about 2022 and humbling. Yeah. If I had one NVIDIA email I had to reply to or one on Shopify, we held them the entire time. Dude, that stock fell 70%. I know. I was getting shit on TV. Like, ask Josh, how's NVIDIA doing when it was 120? So AI saved the market and it saved Josh Brown.

It really did bail me out. Thank God. Thank God for AI. Thank God. Thank God for AI. Thank God. I think though May was really the turning point sentiment-wise because it's when people revisited big cap tech again. They started to believe in it again because the amount of conversations that I was having

in the first couple three months of the year about, eh, it's just January effect. You know, it's saying, we need to go back into these stocks. Nobody believed it. And then it was the, then it was the May,

I'm sorry, the March rotation. Now, you know, where else are you going to go? I can't own these f***ing banks. This is in trouble.

What else are you going to buy? Oil's not working. Yeah. And energy, remember how people were so bulled up on energy. And, and I think I,

I said to you guys in February. Oh, you couldn't buy dividend. Oh, no, no, no. Rates were crushing dividends. Yep, yep, yep, yep. So then where else are you going to go? I got to perform because I'm underperforming. And then all of a sudden, boom.

Right back to Microsoft. Yep. And then everybody, then, you know, here comes AI and everyone's a believer. But there's, it's not just, I think what people are missing is, it's not just NVIDIA. I mean, it is an amazing company, but there's other parts of AI and other companies in tech that I think

could really play in this from a longer-term secular vision. So I want to get into the big moves thing. Can we do that? All right. This is one of your charts. Big moves are less common in second year of bull markets. So let's assume we're in year two. If the bull market started October, are we really in year two? Are we started October 2022? Yeah. 2024, but year two, yeah.

Yeah, we're in year two. Yeah, we're in year two. Okay. So what's the way that we said it was? So what's the average and then what's the second year bull market? Second year, the average. Or year one. This is the S&P 500 percentage of days with daily price change of plus or minus 1% or greater.

In year one, it's 26% of the time or 26% of days. And in year two, it's more like 15. Am I explaining that right? Yeah, that's exactly right. So what we said is this. 2023 was year one of the bull market, part of our 25-year secular bull market call that we've been out with because you can have flat years and negative years in a big secular bull.

Year two, year one is the welcoming back. Nobody believes it. You have the type of moves that we had, climbing the wall of worry, January, all the stuff that happened. Year two is we kind of get back into normalized trading. What I said last year as well, as I said, welcome to normal. The title of my report this year is normal for longer. I love it. A play on words for higher for longer because I'm so bored of hearing higher for longer. How about normal for longer? What's normal? High single digits to low double digit performance

and earnings growth together. PEs between- Mid-teens VIX. Yeah. Yeah. PEs, you know, 15, 14 to 18, 19 on the top. Okay, check. Some sort of a trading range. Now, I'm not a fixed income guy, nor do I play one on TV, not an economist, you know, whatever. I think we're going to have some sort of a range-bound 10-year treasury hovering around 4% the first half of the year,

3.5% the second half of the year. That makes sense to me because what would be the source of volatility in the 10-year this year? I understand what it was this past year. This coming year, What, theoretically, what would be the, what would introduce like, like an out of nowhere 6% CPI print? Like, I'm trying to think what would make the 10 year be as wild as it just was.

People ask me what I'm worried about. If you have some sort of a surprise to the upside on inflation. Yeah. But, but the other thing, you go back to the, of thinking contrar contrarian, the death of 60-40. I mean, come on, man. We do a blog post or a YouTube show like once a week debunking that. I mean, that was an easy call. That was an easy call. And you saw how—

Imagine saying that shit a year after the Barclays Ag falls 13% and the S&P falls 20%, imagine coming out then and saying, no more 60-40. Oh my gosh. Like of all the timing, this is literally the worst thing you could possibly say prospectively. And I think a lot of people, they give us a lot of guff for saying we're in a 25-year secular bull market, but people forget that we had a 40-year bull market in bonds. And the last two years, we had negative real rates return. We haven't seen that. And so you have a lot of people coming back in. Remember, too, that you had wealth advisors putting people in five, five and a quarter, five and a half money market accounts. Or in big firms, would they have the balance sheet, six, seven percent money market accounts. There's people sitting in cash still on the wealth side, and they have to put it to work.

Dividend growth has been crushed this year, and value is starting to come back a little bit with financials. But I believe that there's going to be money put to work both in stocks and bonds. Every year, I try to sneak something into the report. And this year, I love pop culture, if you haven't noticed. And have you ever seen the movie Semi-Pro? Will Ferrell. Yeah. Jackie Moon.

Basketball. Everybody Love Everybody? Honestly, when I talk about sector, size, and style, the title. What was the name of the team? Was it Detroit? No, the Flint Tropics. Flint Tropics. They're based in Flint, Michigan and they got palm tree.

Yeah. Everybody love everybody. The top of the page for sector size and style. Everybody love everybody. Brian, one of the other normal things that you have normal for longer going into year two is maybe the equal weight catching up a little bit. So on average,

in year one of a bull market, you see broad participation. You've got, on average, 280 stocks outperform the S&P 500. This year has been an outlier. Only 155 stocks have outperformed the index. You see that normalizing year two? I do. A catch-up trade? I do. Part of it is actually what we're seeing fundamentally. Let's just talk about the Magnificent Seven, which by the way, only

three of them are tech stocks, right? Technically. Because Amazon's consumer discretionary, so is Tesla. Google's communications. Google machine. And Medita. Yeah. Are both communication services. I mean, they are, though. No, but let's just. Google machine. And Medita. Yeah. Are both communication services. I mean, they are, though. They're tech.

No, but let's just, come on. They're tech. The S&P committee notwithstanding. If Google's not tech, I don't know what tech is. Yeah. Well. Anyway. Anyway.

We're starting to see differing earnings trends and valuation trends there as well. So what's that tell you? If you're starting to see disparity, dispersion increase, it's not, I don't think you have to own all the seven. And I think that's going to carry through in the other areas. If you look at just charts with respect to growth versus value, not only performance, but valuation and earnings growth. And oh my gosh, the small mid-cap stocks, oh, they look amazing. Not just because they're oversold. They had a big week. They had a huge

week. They had a huge month. Wait, what about them looks amazing? You mean relative to 12 times earnings? If you look at S&P mid, S&P small, and SPX, and we have a chart in the report that shows price to free cash flow and return on equity, it looks amazing. In my 34 years, I've never seen free cash flow like it is in the mid-cap stocks. Yeah. What's in the mid-caps? I know there's consumer discretionary there. There's healthcare. Does anything dominate the mid-caps or not necessarily?

It's financials, some tech, healthcare. There's hardly – in small mid-cap land, there's not a lot of consumer staples. Right. So that's the one thing that you can just not own anything. You're not going to get any tech in small cap, really. No, there's some REITs. There's plenty. There's some decent REITs, especially in small cap.

John, let's keep it moving with the charts because there's a lot of good stuff. I want to make sure that we get to it. Brian, we're looking at the, you're saying that the largest S&P 500 stocks, and we're looking at the top 10, traded at a substantial premium to the rest of the market. So you're saying right now it's 25 times. This is next 12 months? Yep.

It's 25 times forward earnings. The average is 19, yep. And then if you exclude, so you're talking about like, if you were to exclude this, this probably looks sort of similar to the mid-caps. You've got 15 times forward earnings on average at 16. So just slightly less. So again, top 10 expensive based on forward earnings

relative to average and the rest not so expensive. Yep, exactly. So that also bodes well for the value trade, the broadening out trade as people, who's to say we're not going to get some profit taking in some of these tech stocks that people don't want to be in? Our belief is, again, not all seven. You don't have to own all seven, but you should have representation in some of them. But I think given the fact that everybody says this, talks about a stock picker's market,

but I think we've entered into the golden age of stock picking again. Say more. This is what everyone wants to hear. Yeah, please. the golden age of stock picking again. Say more. This is what everyone wants to hear. Yeah, please. The golden age of stock picking. I mean, this year is like adding insult to injury for stock pickers. It's like, wait a minute. If I'm not at least equal weight and I better be overweight,

these seven stocks, like I didn't earn my salary this year. It's so bad right now for people. Well, that's why November happened, right? It was November. No-sell November? Yeah. People had to be positioned. And then that's why I think we could tread water.

I don't like making short-term calls. But remember, portfolio managers and all the marketing people have to write their stuff for the next year. They have to have sponsorship in this. Especially if they've underperformed, they have to show that they've been buying it to perform along with that. Brian, if you're not short, you're long. I mean, if you're not long, you're short is the new,

if you're not first, you're last. I don't hate that. Another Will Ferrell. If you're not first, you're last. Yeah. I actually believe that. All right. So relative price change of the largest 10 stocks versus the remaining stocks. I mean, this is obviously the story of the year, the mag seven, the top 10 versus the rest of the market. They outperform. I mean, this is hilarious. Now I've been making the point of nauseam that you can't look at 23 without looking at 22. So you have record outperformance of the top 10, not quite record underperformance, but last year obviously sucked ass for these companies. But the next chart that I really want to focus on is you say the S&P 500 can perform when large

stock leadership fades. People are thinking that if Apple, Microsoft don't carry the baton, that the S&P can't work. And that's just not true. No. And you have to also look back on those periods and what was going on. 92, we're coming out of recession. 98, we're coming. That was the nifty 50 where Greenspan talked about irrational exuberance, had nothing to do with tech stocks, had everything to do with General Electric and Procter & Gamble and Coke trading at 40 times. In 2009, that makes sense because people sought liquidity. Why did they seek liquidity?

Oh, because we were scared shitless. And that was the get back into stocks thing at the 666 lows of the S&P. 2013, that makes sense too. We talked about earlier that 2012, everybody was bearish. And so that was a bit of a ramp up. We had nice, I thought 2019 was a great year

because we had broader participation across the board. Yeah, so what is it saying? That the top 10 stocks only did 2.2% better than the S&P in 2019? Yeah. Oh, okay. So that was like one of those years that everyone's like, this is what the stock market should look like. Right.

Did people like the market that year? I don't remember. No. No. Of course not. Nobody was happy. You know, we spent so much time, rightfully so, talking about these big stocks. I'd be worried if RSP, the equal weight, if RSP was down six and the S&P 500 was up 20

because it was only in names, I'd be worried. However, the equal weight S&P is up like 8%. Yeah. It's not like the market is falling apart. The only thing that's keeping it up is Apple and Microsoft. It's just not the case. No, it's not the case. And I think that's why November, even though it was a period, let's go chase performance, we started to see the semblance of this broadening out already,

not just from small cap, but also into value and dividend growth actually did quite well. So you don't think we're cutting next year? Do you think that the rate hikes are over? Because if the rate hikes are done, that would bode well potentially for value, at least historically. Yes. John, next chart, please. So speak to this.

What are we looking at? What's the headline here? Value tends to outperform following end of ratings. The end of rates. So assume we're not getting one in December. Yeah, so let's go 12 months out. The average performance of the Russell 1000 value annualizes 20.6% following the end of the rate cycle, 12 months out. Versus 15 for- Growth. For growth. That's a big difference. Annualized. Do you think, I'm going to hold

your feet to the fire. You think that this happens this time around as well? You think value will outperform growth in the next 12 months? Wait, hold on. But other than three months out. It takes time. Every time period, though. Six months, nine months, 12 months. 60% of the time. Yeah. Because remember, when growth is scarce, growth outperforms. So they hold on to that as long as they can.

Yeah, that makes sense. That's a big part of it. Those are the last stocks that get sold. I'm going to talk about my book, Everybody Love Everybody. I think it's going to be closer than you think. I think at the end of the day, if we're back here in December, I think value will slightly outperform growth,

but I think it's good. I don't think it's going to be a massive outperformance, but it will all. I'm totally with you. So if we don't, you know, predictions are fun, whatever,

whatever. Yeah. Uh, I, if I had to guess, I think that we're too early in the AI trade for growth to not work next year. I think value is going to potentially do better, but I don't think there's going to be a huge spot where growth

underperforms dramatically. No. And I think that there's a way to look at growth at a reasonable price inside value because you don't want to buy a value trap. The other, when you're running value money like we do, there's also, there's always some sort of a contrarian play you want to play inside your value portfolio. So, you know, obviously the contrarian play heading into next year's financials. I think it's real estate. Dude, financials look good. REITs too. You know what?

We bought Boston Properties. I think mortgages have been crashing. The XP looks good. I think like REITs are going to have a moment. I don't know if it's next year, but. I think they're going to have a moment. I don't know if it's next year, but... I think they're going to have a moment. We also upgraded utilities. Anybody that knows me knows I hate utilities. I own utilities. Same trade.

I bought the bottom, not the break. Hand up. Well, we telegraphed that because we did a report late in October. If you guys are fist-bumping over utilities... This is exciting. But I was on with you when we were talking about NextEra, right? And they were giving you shit about it. I hope it goes to zero now. This is exciting. But I was on with you when we were talking about NextEra, right? Yeah.

And they were giving you shit about it. I hope it goes to zero now. I sold it. But anytime you have this huge disparity in terms of performance of the highest-yielding stocks,

which is utilities are a big component of that, it's like 1.125 standard deviations above, below what they normally sell off. That was the entry point. So that's exactly why I bought it. Bespoke to an analysis like that

showing that when the S&P outperforms the XLU to that extent, like 20-something, 25% over the previous 12 months. There's always a snapback. That's the buy signal. Let's do this margins chart. Wait, hold on. Lastly, I don't want to get off sectors real quick.

Yeah. Financials look good. Like, they're trading well. Oh, yeah. I'm not talking about fundamentals. I'm just talking about the charts. Always a head fake. They never. Like, they're trading well. Oh, yeah. I'm not talking about fundamentals. I'm just talking about the charts. Always a head fake. They never follow through.

They're trading well. What if- Captain negative. What if 2024, financials lead? Nobody's positioned for that. Nobody. They're just so cyclical.

They never follow through. You know, in the old days, it was as financials go, so go the market. Obviously, as tech goes, so goes the market. You think they could lead next year? You don't think so?

No. We're overweight. But if you take a look at where… What do you like? I own some. What do you like? I'm in Berkshire, JP Morgan. Okay.

So we made a bunch of stock changes last week. And I told the channel that… Because I was on Monday, the day that got printed. And I said, you might want to have me back on Friday because we're making a bunch of changes. And one of the big change we did is we blew out JP Morgan everywhere except for dividend growth. And the reason- It's the most expensive bank. Most expensive, number one. Number two, we already own Berkshire and Bank of America. And if you're stock picking, you want to diversify out. We bought a basket of regionals

because, I don't know. I don't know. I don't know what's going to happen there, but I think they're way under-owned. Well, if the hiking cycle is done, they should outperform. And I bought specific ones in regions where I thought the economy was going to be strong, like the Southeast, like regions financial.

I mean, I think that's a layoff. You know, I hit a 52-week high this week. Not 52, excuse me, all-time high. And this is not technically a financial. In fact, it's not really a financial, but visa. I kept my visa. I sold Ameriprise in my value portfolio and wanted to fund it.

I bought more Citigroup. Everybody hates Citigroup. Citigroup? Everybody hates it. What, are you trying to get fired? Everybody hates it. I'm telling you. Well, what's it like about it?

Management change. They're cutting costs. They're firing people. It's great. Chart's looking a little better. Mm-hmm They're cutting costs. They're firing people. It's great. Chart's looking a little better. Mm-hmm. Yeah. Cheap, cheap, cheap.

What are we saying about margins here? Brian, what are we saying? Margins have not collapsed despite macro pressure. This is the bear case, is that profit margins are peaking. Except the problem has been the bear case for 12 years. Yeah. And if you go back, I will, if you go back to 11 and 12, that was, that was the call. 11 and 12 margins suck.

They're going to mean revert. Right. Mean revert. And we think that revenue growth is going to be good. It's just like coming into, coming into last year in a 2023, earnings, I think are kind of surprised. They're going to surprise. People, all right, this is weird to me.

Everybody would accept this statement. If I make this statement, if I say making a film in 2023, like you can make a higher quality film on every front than you could have made in 1983. Like visual effects, sound, editing, cinematography, music, acting, like you can basically, not that every movie now is better than every movie from then, but I'm saying like technically everyone would

accept that premise. Why don't we, and we would say the same thing about like, uh, about like air travel. We would say the same thing, like things improve. Why don't we believe that margins could remain high because corporations have gotten better than what we're comparing them to? All of the people running companies now have the benefit of being able to look back at all the mistakes that previous corporations have made.

So it's not that corporations are infallible, but it would make sense to me that if a corporation's purpose is to maximize profit, they're probably better at it these days than they were 50 years ago. Is that controversial? No, it's common sense. But also it is. But nobody – everyone says mean reversion.

Like we have to go back to the profit margins of decades ago. We have to because we always do. No, it made sense. The argument I think made sense that the margins of some of these companies were so high that competition would come in and drive the margins down. However, what the bears could not possibly see in 2012 was that Google and Microsoft and Meta were going to have 70% gross margins and monopoly characteristics. They couldn't have predicted that.

So I don't blame them for getting it wrong. Talk about efficiencies and productivity. I think AI to the next 10 years to disinflation, what is what offshoring was to disinflation the previous 20 years. I don't think we understand that quite yet. I think that we have been- It's an argument for margin preservation. Correct.

It also is, going back to what I said before, we're so afraid to be wrong. We don't want to be right. It's been a secular change in terms of under-promise and over-deliver on Wall Street. And I think the vid, COVID, and not being able to sit down with company managers across the table, you're on the stupid screen. The art of being able to talk to clients and talk to company management and not know when they're lying, that's a really big deal. And so all we do now as analysts are we're lemmings. Okay, yeah, whatever you say. Congrats on the quarter, John.

Great job. Brian, what happens if in 2024, and I'm not asking you to like that, but what happens to the market if we get multiple expansion and earnings growth? Then we hit my bull case of 5,500, brother. What percentage is 5,500 from here?

A lot? No. 1,000 points? Are we 45? Is it 25%? Yeah, I'll take that. I think everyone would sign up for that. Then we get nervous about, then, brother, though,

then we start getting nervous about 2025. Well, of course. I will be very nervous. If we go up 2025, I will get very nervous. You spoke earlier in the show about this fallacy that higher interest rates means worse stock market performance. We've grabbed this chart that shows what happens when the US treasury yield is above its three-year moving average, which is what happened now, but that's not always so bad. Talk on it. It isn't. So that's why we boxed that. And we said, you know, above the three-year average and rising, okay?

Which sounds scary. Hold on. Sounds bad. If the rolling one-year price, if the 10-year yield is above 3%? No. No, above its three-year average. So let's take the last three years. What's the average 10-year treasury? I don't even know. And then is it falling or rising or whatever? So chances are it's been falling, right? I don't know. The average has been falling. Yeah. The average has been falling because they peaked in October. Yeah. So the average has been falling. That actually portends to strong performance. But again, we were not normal. You're saying in that period,

on a rolling one-year basis, the stock market on average has been up 10.5%. But what's interesting, it doesn't matter if it's rising or falling, if it's above the three-year average, meaning interest rates are higher than they have been for the last three years on average. That's not bad for the stock market. Because here's why. The majority of time that interest rates are higher is because earnings are strong and the economy is strong. That's why interest rates go up traditionally.

Because remember, we've been in a disinflationary environment since 1982. Okay? disinflationary environment since 1982. Okay. And so we reared an entire generation of investors that all they understand is that stocks go up if interest rates go down. The Fed has to cut for the market to go up. Because listen, they haven't read the history. They don't know about the 1950s when we're hiking rates basically every year to offset World War II era inflation. They don't know about that. They don't know that rates went up in the 80s and 90s, accompanying the second greatest bull market ever. They just don't, they're not aware because most people are not aware of what they

didn't experience. So if you came into the market in 2010, 13 years, all you know is that every five years, somebody screws something up and the Fed has to cut rates to bail out the stock market. Correct. So I get it. Like, I understand it. So that's why this- I would think that too. I just happen to have had

a little bit of history predating that where it wasn't that way. We weren't rooting for Fed weight cuts in 2003, 2004, 2005. That was not- The bull case was not, holy shit, this is great. The news is getting worse. Therefore, the Fed's going to come in and cut rates. Nobody wanted that.

That's why this, it's just crazy that we're looking at macro, macro, macro, macro, macro. We're looking at Fed funds futures that have been wrong, by the way, wrong. We're so, everyone's focused on that. Yeah. And they're not making decisions. Yeah. Right? Yeah. I totally, I totally agree. What's this presidential election stuff? Do you believe in this stuff? You like the election year cycle? It worked this year. We're in the third year of the presidential cycle. Supposed to be

a great year for stock market. Well, guess what? It really was. Coincident? I don't know. Causal? The stock market does great after midterm elections, historically. All right. So we got that. That's number one. Number two. It worked.

Look at this background. Great job, John. America. There we go. Yeah, that's good. So Democrats seeking re-election. That's Daniel. Mark, it's usually up.

Daniel, well done. Mark, it's usually up. So I remember— Is the president really seeking re-election or are the people that handle him just kind of telling him, yeah, we're going to keep doing this? Like, I don't know. Is he like seeking it? Does he really want to be re-elected?

He's not acting like it. He doesn't know. He doesn't know. He can't know. Listen, you know, we're – Somebody involved is seeking re-election on his behalf. Take it easy on the old man. Listen, I've said this publicly and I'm not showing my cards, but we have to be, honestly, let's just be some common sense here.

We have to be the laughingstock of the world, right? Two octogenarians running for president. One's an egotistical narcissist, and the other one has to be jacked up on Adderall, cocaine, and Red Bull just to talk. And me, no disrespect. Yeah, yeah. Come on. And it came through that way. And I've said this.

I've said this in print. Politics have nothing to do with the absolute performance of the stock market. And I wrote that specifically in my year ahead for 2021 because everyone's freaked out. The blue wave is coming. The Democrats are going to come in and they're going to tax everybody

and the growth is going to... Guess what? Zero interest rates takes care of all that, brothers and sisters. That's why the market went up in 2021, not because of anything politically. Politics is not quite the number one or even number two reason. Nobody's calling that the Biden bull market. It's not the number one or two reason

why people lose money, but it's up there. People make very bad decisions based on politics. Let's jump to S&P 500 2024 year-end forecasts. So you're on here. This is, this is my friend Sam Rowe shared this.

He, Sam does a lot of really great stuff at the end of every year, collecting everyone's outlook for the next year and then putting them into context of how hard it is to get the stuff right. But you and Deutsche Bank are at 5100. Yeah, I saw Benke down in Baltimore. Do you know that guy? Sure.

I don't know. I never met him. Is he good? He's a really nice guy. Okay. You should have won 5101.? Yeah, I saw Benke down in Baltimore. Do you know that guy? Sure. I don't know. I never met him. Is he good? He's a really nice guy. Okay, you should have won 5,101. I mean, you want to be Belsky the Bull, you got to earn it. All right. RBC's at 5,000.

Bank of America's at 5,000. I read, I don't know who comes up at the target, but I read Savita today. Do we know what the average is? Goldman, 4,700. Looks like the average is 4,200 of these Morgan Stanley 4,500 JP Morgan 4,200

which is interesting do you read other strategists rationale behind their calls or is that too distracting for you and you don't want that in your head because you've been in this seat for years longer than all these people I don't know if that's good or bad I've been in the seat for years. What is that like for you? Longer than all these people.

I don't know if that's good or bad. Wait, you what? I've been in the seat longer than all of these people. Yeah. I don't know if that's good or bad or indifferent. I think it's great. Unless you don't want to be in it, in which case it's not good. No.

Dude, you seem pretty happy. Listen, I love my job. Okay, good. It's a really, really tough job. It's a really tough job. And all of these people are great people, and they have different processes. And I know all of these people and how they got there and their background and everything. And I would never disparage them.

But. But. But. Let's just call it what it is. Do it. No, we're just kidding. We don't disparage anyone on the show. No, let's not disparage. But you've got to think about who the clientele is

that they're going out there with this, right? So who are the primary payers of commissions on Wall Street? Hedge funds. And are hedge funds bullish or bearish? Usually bearish. I mean- Enough said, drop the mic. That's like a drop the mic thing.

Isn't historically, don't strategists always get tarred with the term like, oh, they're always bullish? Now it's weird. Like last year, they were super bearish and wrong. Now they're not so bullish, but they're not so bearish. But I thought everyone makes fun of big investment banks on Wall Street because they're always rosy. Now they don't seem that way. No.

I mean, I think there's been a secular change. I mean, you go back to the 90s. Yeah. Well, everyone was a bull, but they should have been. Right. We're going up. But a lot of the strategists were late to roll over. And then analysts were the bad guys.

And then everybody started modeling their own. And they're looking at macro and looking at quant and kind of said no to the strategists and no to the analysts. So I think we're going back to old-time hockey. You have to pass the puck. You skate with the puck. You shoot the puck. I'm just a simple Minnesota kid. And I just think we're going back into storytelling. I really pushed my team when we had the bank issue in March saying, I want to look at every bank we own. I want to look at how long the CEO and CFO has been there. I want to see what's on their loan portfolio.

What's their track record in terms of earnings? What's their balance sheet look like? You were looking for sell candidates. Yeah. Are we wrong? Because the hedge funds are going after really great companies. And they came back to me and said, they said, because my team's like, we got to sell these. And I'm like, do the practice. Just like on the surface. Yeah. So let's follow the practice.

Everything I said is good old fashioned, roll up your sleeves and do stock picking and do the analysis. And I'm here to tell you that a lot of people don't do that anymore. And we kept all of our banks and those banks have tripled. JP Morgan is the most bearish, at least on Sam's list of 12 companies or 12 analysts that did this. They're at $4,200. And they're at $225 a share for the S&P 500. Here's a quote that Sam pulled with a step down in economic growth next year. U.S. growth slowed to 0.7% year over year, eroding household excess savings and liquidity and tightening credit. We see 2024 consensus hockey stick EPS growth

of 11% is unrealistic. Negative corporate sentiment should be a catalyst for sharply lower estimates early next year. I'm guessing you don't agree. Macro, macro, macro. Oh, really? There's nothing bottom up in there. No bottom up in there.

Oh, by the way, go talk to a company. Like I have the really good fortune of going around and talking to some of our commercial bank clients at BMO. They're bullish. Right? They're believing. Okay? We're America. But what?

CFOs or CEOs? Who's bullish? Connect. Both. Both. Yeah. It's so weird. The macro is always bearish.

But the macro is bearish and the bottom's up is bullish. Correct. Can I tell you something? I was looking at this McDonald's thing weird. The macro is always bearish, but the macro is bearish and the bottoms up is bullish. Correct. Can I tell you something? I was looking at this McDonald's thing today. Tell me. Speaking of bottoms up and bull. All right. McDonald's is,

they had a character in the late 80s, early 90s, cosmic. It was an alien that would land and like eat all your French fries or whatever. It's one of their McDonald land. So McDonald's has slam dunk this year. They did the Grimace french fries or whatever. It's one of their McDonald land. So McDonald's had a slam dunk this year. They did the Grimace value meal or something.

And I'm not going to deny that I had one. Anyway, they are launching this new concept, only 10 stores in Texas at first, called Cosmix. And basically they want to take on Starbucks and Dunkin' for that fourth day part. It's not breakfast, not lunch, not dinner. It's like that three o'clock. I need some caffeine and a snack. I need like a slushie

and like a something. What are they serving? So it's they're going to have ten of these, so that's not really going to move the needle. But just the point that there are companies will always find a new, can you imagine they capture a meaningful part of that day part? Probably it hurts Duncan more

than anyone else. Right. Uh, what do they start? I don't know shit that you probably should need, but it's like, um, it's an example, I think of a giant company that's done so well stock price near an all time high, but they're never satisfied. They're never not looking for the next way to grow. And I did see the menu. What do you think they would be selling here? Yogurts? Like slushies. What is slushies?

McDonald's? No, it's not a McDonald's. It's another concept. It's another store. Yeah, but it's a derivative. It's a smaller footprint. Okay, there we go. Thank you for that. It's a smaller footprint store, and it's like snacks and drinks.

It's not happy meals, not burgers. Okay. It's like an egg white wrap on a piece of bread, or they have little pastries. But I'm just making a point. This is how fortune 500 companies are thinking about next year. We're not retrenching. We're coming up with new things to do that will grow, uh, businesses. Slushies is the answer. Slushies. Slushies. Obviously. Caffeine slushies. Let's talk about something that happened inside of the market, uh, last week that I thought was a really good flag from Grant Hawkridge at All-Star Charts.

All right. He looked at the S&P 500 returns when there's a 20-day breadth thrust. And what we're looking at here is the percentage of S&P 500 stocks at a 20-day high. And that spiked. Historically, that is super duper bullish. If you go out, I'm going to pick one year, but we'll share the charts. If you want to see this, you could go into our sites. The percentage of times over, when did this start? Since 1979, this is positive. It's 96% of the time a year later. And guess what? There's not like three examples of this.

There's like a, I'll just eyeball this, like 25 times. 30 examples. Wow. So people get, JC always makes a point. How could an overwhelming demand

for stocks be a bad thing? Well, people are afraid to make money. They assume it's a bubble when a lot of stocks go up all at once. That's like, the assumption is like it's euphoria. Yeah, but that's a fallacy though because you can't-

No, we know. But euphoria, first of all, it's not euphoria. But I would, using that word, euphoria is bullish. Euphoria is not bullish. Heavy demand for stocks. When you see something like that, that is bullish. Just look at the numbers. It is.

It is. But the whole term of bubble and greedy and all that kind of stuff, you can't have that when you don't have the- Stocks can go up and that's not – just because things go up doesn't mean it's a bubble. It's a bubble when we get frothy and greedy and lazy. No, no, no. It's not the definition. The definition of bubble is when stocks go up and you don't own them.

That's when it's a bubble. One thing that I would say to that chart, you get those breadthrusts when there is an overwhelming amount of pessimism. That's when it happens, and that's bullish. Correct, and you're not going to have this massive bubble in tech until we have massive IPOs and lots of buyouts. We didn't get that this year. Nowhere near that. You need financials and tech to play with that. I'm so glad you said that.

A lot of people, myself included, thought capital markets would come roaring back in the second half. And they really didn't. We got three tentpole IPOs, really big deals. Arm, the spin-off from J&J, Kenview. And what was the third? Insta. Insta. Instacart. And then they said, here's Birkenstock. No? All right. We're done for the year. That was it. You didn't hear about deals after that.

That's true. The IPO window's not open. I mean, it's opening up. And remember, too, there's this theme. You buy scarcity and sell capacity. Buy scarcity and sell capacity. And so that's why I think, too, you're going to start to see investors go down in cap to mid and small for beta and also for growth because there's no IPOs.

Just one more thing on this topic. I just want to set the record straight. I'm not bullish on Euphoria. Euphoria is not bullish. But what this chart is, it's the- Too late, we clipped it for social media. It's the clearing out of pessimism. It's when you get excess pessimism

and you get that breadthrust, you're killing the pessimism. That's bullish. Yeah, I would agree. Okay, you're on the record there. Thank you. Let's roll through some of these really quickly because it's not that much to say,

but they are bullish. Net worth, Ed Yardeni says household net worth rose to a record high of $154.3 trillion during the third quarter, and that is up $37.6 trillion since Q4

2019, i.e. the last ever normal quarter of American life. Capitalism is in a bubble. It's clear. Look at this chart. Like, what? This is bearish. Explain how.

I don't know. I don't get that. Let me show you the second one, though. This is the composition. This is U.S. households, selected assets, and net worth. They're all at record highs or very, very close. This is equity shares, the stock market. Owner's equity in households is the red line.

Pension fund reserves, deposits of money, market funds, equity in non-corporate business, I guess private equity. Yeah. Debt securities, life insurance. They're all higher than ever or trending in that direction. The United States is very rich. A lot of money. All right.

Let's do this one. T-bills. I wouldn't call it a bubble. I'm buying T-bills. I'm happy. Not in replacement of stocks, but in replacement of cash. Morningstar had a great post. This is Amy Arnott, T-bill and chill.

She was talking about just people getting too comfortable, maybe a little bit too comfortable in cash. Eric Balchunas. What's that number, Mike? Hold on. Eric Balchunas grabbed a chart of money market funds. Holy shit. And Eric's-

Not bearish. Eric said- No. Imagine this comes off the side. This is real cash in the sandbags. Guess where that money's going. Exactly, back into the market. Is that $5.7 trillion?

So Eric said, listen to this. 14 money market funds have taken in over $20 billion each in 2022. I'm sorry, 2023. And 25 of the top 30 flow getting mutual funds are money market funds. Let me say that one more time. The top 12 flows into mutual funds are all money market funds. That's crazy, dude. And 25 of the top 30 flows for mutual funds are all money market funds. That's crazy, dude. And 25 of the top 30 flows for mutual funds

are money market funds. Are we going to look back at that and say that was one of the great contrarian signals of all time? Yep. You think so? Okay. We had some of that in 08, too late in 08. So you could say that-

Hold on. What happens the first Fed rate cut? How fast does the money come rushing out of money markets? I don't agree with that. I think it extends duration or it goes into stocks. I don't think it sticks there. I think that money, cash moves very slowly. I think it was slow to go in and then it accelerated.

I think it's going to be slow to come out. I do. You don't think so? No. You think it's a tsunami out of money market? Similar. We had a similar thing. That chart's not going to crash. No, no, no, no, no.

But I remember in the fourth quarter of 2008, and I was still at Merrill Lynch, and we'd go around to the offices, and I would talk to the managers, and they'd say this is the largest, this is the fastest buildup on a quarterly basis of money markets in Merrill Lynch history. And then the next quarter.

When was this? Fourth quarter of 2008. Then the next one. What was this? Fourth quarter of 2008. Then the next one. I remember that. And then the first quarter of 2009 was the fastest moving bonds ever into bonds. And then after that, I was gone already, but I was still talking to people there.

We had a massive flow. Merrill Lynch had a massive flow back in equities. What, after it bottomed in March of 2009? When was it this summer? So it woulded in March of 2009? When was it? The summer. So it would have been April, May, and June. Yeah. I think money is more likely to the extent that there will be a tidal wave of buying in equities. It's come from bonds, not money market funds. Come from bonds? Yeah. I just think cash doesn't move that fast. Cash doesn't move from money markets into equities. That's my opinion, we'll say.

But I think the decision to get 5% at the beginning of the year and miss out on a 20% gain in the S&P 500 was a rational decision. Depends on what you're using the money for. It's rational for some people. For other people, it was stupid. It was not stupid. If you were using the money,

it was smart because then you sat in cash and at the end of the year or whenever you were going to use the money, you didn't have anything at risk. If somebody was in a 60-40 portfolio and somebody said, you know what? I kind of want to take 10% of that and put it in just safe, 5%. That's not a dumb decision. No, I don't think so. But again, if you're 28 years old and you did that, why did you do that? Yeah.

Like to what end, right? Right. Four-day work week thanks to ChatGPT and Copilot. Jamie Dimon thinks so. Ray Dalio thinks so. I would take the other side. I cannot imagine people not doing stuff, not trying to make more money by working more. I'm sure there will be some subset of people that will,

but for the most part, societally, I don't see it. But I could be wrong. People used to work six days a week, right? Okay, what do you think? I know I used to work seven days a week. I work seven days a week now. Are we going to standardize a four-day work week because large language models are going to do all our work for us?

No way. I don't see it, right? No way. Now, remember last time, the very first time I was on here, I talked about going back to work. Remember that? And my son said, have you seen the comments on YouTube about your dad? Nothing about the market calls. Like, they're giving me shit about going back to work.

Yeah, right. Anyway, yeah. Jamie Diamond says, future workers will be at their desks just three and a half days a week. I mean, maybe at JP Morgan. Maybe there. Apropos of really not much, just maybe productivity and AI.

So Google was up 5.3% today. I wonder if this is Google's, this has got to be one of their bigger moves outside of an earnings day in a long time. Definitely. Right? Up 5.3%.

Oh, no. They had a day equivalent to this on the way down when they did a live demo of bars. That was a disaster. And it made a mistake in front of an audience. The stock got killed that day. Right? Killed. Are we looking at that?

It was early in the year. Yeah, right here. So this is the reverse of that. They launched an AI on Sundar Pichai's social media. Bomb. Where it can – no, now. Uh-oh. It can accurately tell the difference between a chocolate chip cookie and an orange.

I'm sold. Add $90 billion to Google's market cap. I totally get it. I mean that's what's going on right now whether you love it or not, right? That's crazy. That's crazy. All right. Last thing.

I think this is so cool. Uh, one of my favorite things about streaming music, Spotify and Apple, the digital streaming platforms is that my kids are developing really good taste in music because they are being exposed to older music and not even realizing how old it is or anything. Just saying, I like this. I drove my daughter to a dermatologist last night. She's like, dad, I'm DJing. We were in 40 minutes of traffic. So I was like, all right, you're a DJ. She plugs her phone in.

She does like, I don't know, 20 Jay-Z songs back to back. I'm like, how do you even know any of that? Like remixes that I've never even heard. It's all because of Spotify and Apple Music. And I think that phenomenon is a really cool thing. Kids might not buy albums anymore. Okay, so what? They are learning. And to that end, this week, the number one song on the charts is a Brenda Lee song, 65 years old, rocking around the Christmas tree. Wow. Yeah. So I think most kids know it

from Home Alone. That's where I know it from. Yeah. I mean, that's, but whatever. The point is that's the number one song on Billboard's hot 100 list is a song from the 1960s. Thank you, TikTok. 65 years ago. I don't know. What year is that? Probably before the 60s. Let me see. 1958. Well, if it's 65 years ago. It says 58. 1958. Alright. I think that shit is cool. What do you think? I think if you sent Brendon Lee, I'd say crazy. That's what I think.

Do you remember the meme of the guy riding a skateboard drinking like a cranberry, ocean spray cranberry juice, just like vibing out to stevie nicks yeah uh dream fleetwood mac dreams yep and then that song went to number one like that's what's that's what's possible with uh streaming music that would not happen in a world where kids are buying albums i think that's only possible now i think it's kind of cool like i hope it uh

i hope it continues um And maybe these kids know more than we think they do about taste. I don't know. Somewhat positive. I think it's really good that they're actually liking music, like real music. And I've said this for a long time that I'm obviously a huge Apple bull and I own a lot of portfolios, but we also own Spotify. What'd And I think from the- What'd you think of that layoff memo this week? I thought he handled it really well. I think so too. I think it was great. Okay. That's a lot of layoffs though.

Yeah. But I mean, again, when you write size, that's a good thing. But on the Spotify side, I do like the way that Spotify streams its music better than Apple. So do I. I use both, but I like Spotify. And by the way, they have better versions better than Apple. So do I. I use both, but I like Spotify. And by the way, they have better versions of songs. I think it sounds better. It does. Why do I think that? Is this like the Gary Vinyl argument?

No, because they have a lot of remastered content. More than Apple. And you can mix the songs together. You guys are delusional. No, come on. You know what? I'm going to teach you something later. I know I do this every week and I lecture you like I'm 30 years older than you.

I'm telling you right now, Zac Brown Band put out an album of all of their live covers. They do a cover of Baba O'Reilly, The Who. That is so ridiculously good. If you listen to it on Spotify versus if you listen to it on Apple Music, it doesn't sound the same. And I don't know why. I don't know if it's the Atmos or whatever

that tech... I don't know. John, why does it sound different to me? Am I tricking myself? Depending on the program and your settings, it can stream in a different way. It's my settings that make me think... Erase this whole section. I sound like an asshole. What's your favorite Christmas song?

You're going to make a holiday playlist. You could only have one at number one. Where are you going? Let Us Know, the Harry Connick version. Okay, why? That's the jam? Because it's just chugga-chugga-chugga. What do you got?

Cold Outside. What's the rapiest Christmas song of all? That's the one? I like that song. Have you ever listened to it? Yes. I would, yeah. It's bad.

I think it's canceled. Did that song get canceled? It did get canceled. It did, right? Did you see the comedic bit of a guy who said, here's a song that got canceled, and here's the number one song in America? A guy did this,

I don't know what comedy show, what comedy club he was at. He read the lyrics to Cold Outside. He read the lyrics to My Blank is Blank. Yeah. You saw that? Yeah, yeah, yeah. Christmas song, I think I have to go with Christmas and Hollis.

We're on DMC. Still a clap? You put that shit on right now, it still slaps. It slaps. My favorite Christmas song is Die Hard. Great. All right. Let's do favorites.

Did you have fun on the show today? I did. Thank you. It just occurred to me, we didn't introduce you. Oh, hey. Ryan Belsky is... You don't need an introduction.

Our audience absolutely loves you. By the way, thank you so much for having me. And I must apologize because I was supposed to be on in October. And the reason why I had to cancel was was supposed to be on in October and the reason why I had to cancel was my Minnesota Twins

were in the playoffs and they swept the Blue Jays and I was supposed to be here on Thursday and I could have been here but I was too... No, you made the right choice.

You made the right choice. Speaking of handouts, rest in peace, Ralph Sorella. Holy shit. Yeah, that's sad. Norman Lear this week too. I mean, it's always every week. I mean, Archie Bunker, right? I mean, come on. Yeah. I's sad. Norman Lear this week, too. I mean, it's always everywhere.

I mean, Archie Bunker, right? I mean, come on. Yeah. I looked at the list of shows, Norman Lear. He basically raised us all, if you think about it. Those are all the shows that you came home from school, my generation. We came home from school to watch those shows. I remember watching them on Saturday night.

Saturday night. Saturday night on CBS. Yeah, yeah, yeah. Live. I mean, Saturday night was the big night. He was a genius. All right, let's do favorites. What do you got for us?

You gave us Last of Us. I love that show. You ready for season two? It's coming this year, dude. No, it's coming out in three years. When's it coming out for real? This year. Is it?

Yeah. First of all, it's The Mandalorian, right? So he's badass. And I watched the first. Oh, Pedro. What's his last name? Pascal. Pascal. Yeah, he's going to be. He's great. Now he's going to be in The Mandalorian, right? So he's badass. And I watched the first. Pedro. What's his last name? Pascal. Yeah, he's going to be great.

Now he's going to be in The Fantastic Four, too. Yeah, he's going to be Reed Richards. Oh, they announced that? I missed that. I love it. Yeah. I love it. They're 0 for 3 on that, by the way.

They have not made a good one, but I'm excited. All right, so Last of Us has a killer soundtrack. We talked about that before. Yeah, I agree. A lot of my favorite TV shows also have awesome Spotify playlists accompanying them. The Bear is another example.

How good is the music in The Bear? Amazing. Amazing. Morning Show? Yes. Especially the first season. Really great music.

So I... There's a show called A Drama... A Murder at the End of the World. It's on Hulu. And I started watching the first episode and the show opens with People Are Strange.

Is that a show? The original version? It might have been the Spotify version. I don't know. Wait, who's in that? Nobody famous. But it's on Hulu. Did it start already? Yeah, it's getting some hype. Alright. Is that your favorite for the week?

No. Okay, give it to us. So, John Collison, one of the founders of Stripe, interviewed Charlie Munger on the Invest Like the Best podcast feed. And it was an incredible, incredible interview. And I want to read one thing. This is part of their conversation about crypto. And John Collison, it seems like is, no, it seems like he's bullish on crypto.

Obviously, Munger was not. What he said, I thought was funny and very wise. And it's not even specific to crypto. So John Collison said, it's not really a new currency. It's a new store of wealth. Charlie said, you can call it a store of wealth. I call it a store of delusion. That part made me laugh. But here's the part that I thought was very wise. Not specific to crypto. He said, I don't think it's good to participate in a delusion, even when it gets quite common. And that lesson is a very, very, very hard one to learn. And it's one that you can only learn- Unless it turns out it wasn't a delusion. It's the only lesson that you learned over decades of investing. Yeah. I go back and forth on this because Berkshire, like they admit they missed

Amazon. They should have bought it. And at the time, Amazon looked like a delusion. It was a company losing tons of money, telling Wall Street, we're probably not going to make money for a long time. And the stock price went up and up and up. And if you're an old school investor focused on cash flows, you probably look at that as a delusion. Tesla looked like a delusion. Until it's not a delusion. A lot of things do. It's harder than a catchphrase. It's not black or white. I just thought it was a great quote. Yeah. Shout out to... On an amazing episode. Shout out to Patrick O'Shaughnessy.

Alright. I have a bunch, but I'll do them quickly. The Time Person of the Year cover story on Taylor Swift is great. So the writer followed her around during the course of the Eris tour and checked in with her throughout the course of the year so really well done

it explains how for the first time in a long time the world had a main character she was the main character this year what's the last time? probably something political like Trump it's usually something political it's usually not a pop star

it's like very rare and they reference like Michael Jackson and stuff. But like this year, she was the main character. It's not that she was the most important thing. She was the common language we all had. Hey, did you see that thing about how the concert sold out in town or whatever? She was an economic event everywhere she went. The tour obviously is record setting. Probably nobody will ever do what she just did or at least not for a very long time. So I thought it was a good article worth reading. I also wanted to mention the Blog Era, which is a podcast series about a very specific era in hip-hop.

I know I don't have any rap fans in the room. So well done. It's by It's The Real. And it's just a document, basically. I think it's 10 episodes. They got all of the people, almost like an oral history. But it's this really specific era that really mirrors finance. So from 2008, let's say 2007, till maybe 2013, blogs were the tastemakers in rap. They replaced the magazines. They replaced the radio stations. They decided who would be a star.

If you think about who they broke from Kanye to Kendrick Lamar to pretty much J. Cole, Drake, Nicki, all the biggest hip hop stars now were broken by blogs. Like that's how we discovered these people. And it was really well done. I have a bunch of friends who were interviewed for it. So that's what made me listen to it at first, but I think people will be into it. Last one, Noah Khan. Noah Khan fan? No? Okay. It was on Saturday Night Live last week. He has one of the biggest albums of 2023. It came out in 2022, though. It's called Stick Season. You're a northerner. You know what Stick Season is? No.

Okay. So he's in Vermont. Stick Season is that period of time where after the foliage is gone, which is why everyone goes to Vermont, but before everything's covered in white, you got like a two or three week period where everything is brown and sticks. Okay.

All right. Anyway, that's the record. He was on SNL last week. He's like selling out Radio City now. He's a huge up and coming star. Great album. It was nice to see this thing have legs

and be popular for like two years now. And it seems like it's getting more popular. So I thought that was kind of a cool story. All right, that's all I have for this week. We want to thank John, Duncan, Nicole, Sean, Daniel. The list is getting long, right? Rob is here. You guys are awesome all week.

Thank you so much. Our special guest, Brian Belsky. Tell us where we can find you on X. You are Brian, at Brian G. Belsky? That's right. Okay. And you are? And on LinkedIn.

That's it. That's the only social media, LinkedIn and X. Brian G. Belsky. Dude, you crushed it this year. Oh, my gosh. Thank you. Amazing, amazing prescience to see what a lot of people couldn't see. Almost everybody was bearish.

You were bullish. And it looks like we're about to close right at your target. You're going to walk on water on the way out of here. That's all I could say. I'm going to float on here. Thank you so much for having me. Dude, thanks for sharing your time and your expertise with us. We appreciate it. All right, Compound and friends, we are out. Thanks for listening. We'll see you soon. Thank you.