The Compound and Friends - Finding the next Mag 7 stocks, Europe rallying with Drew Dickson

Episode Date: March 12, 2024

On this TCAF Tuesday, Downtown Josh Brown is joined by Drew Dickson of Albert Bridge Capital to discuss the rally in European stocks. Then, at 39:49, hear an all-new episode of What Are Your Thoughts with Josh and Michael Batnick! They discuss inflation, permabears, Nvidia, the next Mag 7 stocks, the magazine cover indicator, and much more! Thanks to Rocket Money for sponsoring this episode. Cancel your unwanted subscriptions by going to: https://rocketmoney.com/compound Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Instagram: https://instagram.com/thecompoundnews Twitter: https://twitter.com/thecompoundnews Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Ladies and gentlemen, welcome to the compound and friends. I had a party at my house to celebrate my daughter getting into college the other day. And one of the things that I guess girls from Long Island do is their moms and their friends, like dress up a bedroom with all stuff from from the school. And everybody takes Instagram pictures. And it's nice because it's like all your kids' friends come over and celebrate where they got in. So it was our turn, and it would have been too easy to just decorate a bedroom. So we decorated half the first floor of my house. And my wife did an incredible job. People are trying to hire her now after seeing the photographs. But one of the things that we were trying to do was put the logo of the school on the screen of the TV. And you would think that that sort of thing should be easy, but of course it's not. I have a TV that's a few years old. And I downloaded all these apps and all these things that were supposed to help me connect to the TV.

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rocketmoney.com slash compound. Okay, on tonight's show, we're talking to Drew Dixon. Drew is at Albert Bridge Capital, portfolio manager, overall intelligent guy. I love having conversations with him. It's been too long. We're going to talk about how overweight the indexes are, whether or not it should matter to investors when we're talking about big tech.

We're also going to take a look at opportunities in Europe, which is Drew's specialty, an area he has focused on. And after that, it's an all-new What Are Your Thoughts with myself and Michael Batnick. And we have a lot to do tonight. We're talking about stock pickers. We're talking about N versus Cisco. We get into a whole thing about just like where things stand with the broadening of the rally. The fact that there are a lot of other stocks going up besides just large cap tech. And we come up with a bench for the next magnificent

seven. So like where would the next seven stocks come from? How would you identify them in advance? We have a quantitative take on how to do that. Okay. Hope you love the show. I'm sending you there right now. Duncan, John, let's hit it. 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 Redholz Wealth Management may maintain positions in the securities discussed in this podcast. Okay, guys, I'm here with Drew Dixon. is albert bridge capital what you did you give yourself a

title are you founder and ceo cio yeah whatever you want to say josh cio all right uh and drew is based out of the west coast of florida how long were you in uh the uk for prior to coming back 22 big years besides Besides the food, what do you miss the most? I actually have to say the food did good, but when I got there, the food was terrible. By the time I left, though, the food was exceptional. Except Mexican. They can't do that, but they can do

everything else really, really well. Yeah, I mean, you've got international cuisines and chefs from around the world. It's not quite the caricature. Listen, I could miss a few world. It's not quite the caricature. All right. Listen, I could miss a few meals. It wouldn't be the worst thing.

You and me both, brother. You and me both. I ate well last time I was in London. I can't lie. So one of the biggest stories this year, it feels like the last few years, but this year is the Magnificent Seven. And now we're calling it the Sensational Six because Tesla dropped out. I think we're about to downgrade it again because Apple is acting

so terribly. Maybe it'll be the Fab Five by the time people hear this. So they're dropping like flies. But the index story dominated in January and most of February as those stocks continued to outpace every other segment of the market. I think we've had a resurgence in the last couple of weeks of, let's call it the S&P 100, and they're not all technology stocks. So things do seem to be catching up. But I wanted to just get your take on the debate itself. Yeah. Well, to me, the debate is the most fascinating of all. And it sort of goes back to

this Ben Graham notion of the market being a voting machine in the short term and potentially a weighing machine in the long term. And by that meaning that in the short term, you can have a lot of factors impacting pricing. And that has a lot to do with flows. And eventually, we should find an equilibrium. And I'm convinced, it's been my life's pursuit, I'm convinced that eventually, it is fundamentals and cash flows that are matched up to the performance of a stock. Right. They might be divorced in the short term. Exactly.

But you made the case on Drew's Views, which is your blog, that really, if you pull the lens back, you're going to see that the biggest stocks in the market have also had the biggest earnings growth. Not only that, Josh. I mean, you see, obviously, NVIDIA is the topic du jour. You can look back over longer-term time horizons, and if the stock's up 1,800%, well, so are the earnings. And you look at the same thing at Google or Microsoft or Apple or Netflix, all of them. Netflix has been a crazy story since Reed did what he did,

but it's very close to what the earnings expectations are for the following year, the change in those numbers. So that's what he did. But it's very close to what the earnings expectations are for the following year, the change in those numbers. So that's what really matters. But yeah, they can be divorced. I wanted to ask you to, let's just kind of go through these because this idea that there's some sort of mechanism being perpetrated by BlackRock and State Street to artificially drive up the value of these five to 10 stocks. If you actually look at earnings growth, it explains it almost perfectly what the gains in these stocks have been. Over the long term, but not the short. And Josh, I don't think it's necessarily a purposeful thing by BlackRock. This is a debate that we've had. Well, I'm not an

academic. I'm not smart enough. But those in academia have been having this debate since, well, since the beginning of finance, you know, how much passive investment is okay before it starts defecting flows. And from the days of, you know, Vanguard being a tiny little thing to becoming massive and everyone else, Fidelity, my old employer included, including these products which track indices. You have to ask yourself, well, if you're in the index, is your share price affected? My thesis paper I wrote for Eugene Fama at business school was addressing this question. Um, are, are,

is the inclusion in the index? I'm not just a one-time hit like, Hey, you got to go back to equilibrium, but does, does that affect things more than over this voting period that Ben Graham talks about, or does it affect the length of the voting period?

And that's the fascinating part to me is, is that sometimes it's fine. I mean, you saw it in 21, 20 and 21 during the whole meme stock phase, you get this AMCA GameStop moves. They weren't overnight. They didn't last a week. They lasted for six months and it was crazy. And, and so you start to ask yourself, well, if the tail starts wagging the dog, if there's a big enough real estate retail component, or if you're Tesla and you've joined the S&P,

or are there things that exacerbate this period or this volatility, which make it so that the voting period never comes? I have some very smart friends. Ben Hunt at Epsilon Theory. He says it's a voting machine in the short term and a voting machine in the long term. We have great debates about it. Well, can we break down what Ben Graham initially meant by that idea? So the stock market being a voting machine in the short term, meaning it's like a popularity

contest and the most glamorous stocks get bid up the most by investors who are excited. But longer term, it's really the best companies that end up being on top. And vice versa. It's just basically in the short term, whether there's a best companies that end up being on top. And vice versa. It's just basically in the short term, whether there's a lot of buyers or a lot of sellers, that impacts prices. And I mean, no one really talks about Ben Graham being a behavioral. I love behavioral finance. I'm a big acolyte of Richard Thaler. in a security analysis that, um, the market is a, is a voting machine. We're on countless individuals register their votes, partly the product of opinion or fact,

probably the part of emotion. So even he, even he recognized that emotion starts to affect things in the, in the short run. Um, and, and then he, when he gets to this notion of the weighing machine, he actually know Jason's why he's done a lot of work on this. He never actually said the market, he never explicitly said in Intelligent Investor Screen House that the market is a weighing machine in the long term.

But Buffett says in class he said that, that's what his implication was. Then the short term thing, you get these windows to buy stocks because people overreact to bad news, they underreact to good news. And that's your window. But you hold them for the longer term. Eventually, it's the fundamentals that drive things. And there's a lot of evidence to that. There's a lot of evidence that at the end of the day, it's the growth in the cash flows

or the deterioration that impacts the share price. The weighing part is about the way that investors, I guess, cash flows, assets, balance sheet strength, earnings power, stability, brand power, those are the things that weigh the most. And they might not matter in the short term, but they end up mattering in the long term. They end up mattering a lot. I think of it like gravity almost. In some ways, it is. Yeah. You can defy it for a while. You get a matter of a lot. I think of it like gravity almost. In some ways it is. Yeah, you can defy it for a while.

You get a bunch of flows coming in. Someone gets included in an index or the Reddit crowd's going crazy over the name and the institutions are afraid to get in the way because it might rip your face off like happened to Melvin. But at the end of the day, it is about cash flows and earnings growth

and whatever fundamental metrics you want to use that impact where the share price goes. But to your point, these other things that matter impact the quality of a business that all is worked in. And at the end of the day, it's very unlikely that over the course of the long-term, the weighing period, that they'll have a big disconnect. The question is, Josh, is how long is it? I mean, is that voting, is that a day? Hey, they just reported earnings. Goldman Sachs upgraded the stock. It's up 12%. It should only be up five. Let's trim some. It'll fall back down to equilibrium,

and then tomorrow we'll be back where it should be. Or is it AMC taking six months to rip people's faces off? Or is it Tesla, arguably, even still? So there's a whole lot of debate about it. So there are also cases where the voting will eventually affect the weighing. And there are- Yes. So let's use a technology company as an example. Like, for example, let's use a fake software company. We'll call it Dixon Software. If Dixon

Software is a hot stock in the market because its CEO, Drew Dixon, is a fabulous personality, does media, is on his private jet taping TikToks, et cetera, people get excited about the stock, the stock runs up, that share price enables Dixon Software to recruit software engineers who want to work at a company that is perceived to be a winner in the category and enriching other people. And there is some component of that in financials. There's definitely some component. I think it's even bigger, Josh, if you saw it in 08. But to me, the primary sector where the tail can wag the dog is in financials, financials. And as you point out in technology, I think it's definitely something that impacts things in the shorter term. But

if you have a great stock and a loved CEO, well, it's easier to recruit people, especially we're giving them big fat bonus packages and their stock's going up and so they get paid. And so that does affect things. How real or not that is, I don't know, but in terms of what really should matter, but it does, it is a thing. You have to be conscious of it. And so when you get momentum in software,

and I think about it this way, I mean, software was one of the first groups I covered way back in the day for Fidelity. It even mattered then. If you were beating numbers and everyone wanted to buy your software, well, you didn't have to push that hard in the sales process at the end of the quarter to close your license deals.

You just wait for the customer to acquiesce because they knew they had to buy it. But if you're struggling making sales, well, you start discounting, and it becomes this negative feedback loop or positive. And that can affect the actual fundamentals of the business in the second order. You would agree that maybe the greatest example of the tail wagging the dog in recent history is the stock market rescuing AMC from bankruptcy, which definitely happened. That was a chapter 11, if not for the furious stock

rally that enabled the CEO to sell more shares and keep the thing afloat. Yeah. I mean, it wasn't stupid issuing more shares after the rally. I felt sorry for those dissipating in the capital raise. It was basically a big shift of capital from new investors to old ones. And yeah, that, I mean, that's going to be a fun one to study when people have a little more time, a little more benefit of hindsight to go back and look at this meme stock frenzy, Josh,

that just engulfed the community. And also just, I wasn't upset by it. I mean, it is what it is, but they did a great job trying to place the blame on short sellers or big institutions or Citadel for, for, for the, for the, the stocks falling, not realizing that it was their behavior that took the stocks to these ridiculous levels in the first place. And of course, eventually the market is going to weigh. And eventually we're going to find out if this is a real business or not. And just because everyone wants to believe it or wants to stick it to the man or is convinced that what they're doing, it wasn't what they were doing, but they thought it was. So I went to a, believe it or not, this is a real thing that exists. I

went to a bankruptcy conference and I was on, it was all bankruptcy attorneys in New York. And I was on a panel with the, I think he's a lawyer, the lawyer who came up with the idea to lobby the regulators to allow Hertz to sell common stock during the bankruptcy process. Hertz to sell common stock during the bankruptcy process. There is a component of investor interest in stocks that absolutely can alter the fundamentals of a business. Yes, that's right. It's rare and it can't last forever, but it really can change things. And

that's a really fascinating thing. Well, and it's something that Josh, that's really featured for us since COVID started. I mean, in some ways, even since the GFC, when the policy changed so that central banks were much more of a political tool than they used to be, and there's money flowing in, and then we hit COVID and it makes the bailout in 08 look like peanuts and all this money's coming in and stimulus checks and people with time on their hands. And yeah, Hertz can be going bankrupt literally, but they have enough of a retail clientele that says, oh, this is so cool that they can raise money. Back to the index debate.

there was a headline a couple of weeks ago where somebody announced, I don't know how they figured this out, that passive investing has now become 51% of the stock market. I guess they totaled up all the mutual funds and ETFs and they figured out the AUM versus the amount of money in the stock market. And that was the big headline. This is what you had to say on the largest stocks in the index that really have been driving returns. NVIDIA in the last five years is up 1,700%. Guess what else is up 1,700%? NVIDIA's earnings estimates. You go through Amazon, earnings up 2,500% over the last 14 years. The stock is up 2,800%.

You looked at Google over the last 14 years, earnings up 885%, stock up 980. Microsoft, last 22 years, forward earnings projections have increased from 93% in February of 02, 93 cents in February of 02 to about $12 a share today. That's an 1150% jump. The stock is up over 1200. So you go stock by stock out of the largest cap names in the country and point out, actually, these share price gains match up really well with the earnings gains. To me, that's the weighing concept writ large. That's what it looks like. That's what it is, Josh. I've been self-serving in some ways. I picked starting dates five, 10, 15 years ago that- Good job with that. Where it showed that earnings mattered with with the share price

but it's not something that's a that works in the super short term it should it should i mean you buy companies they're going to beat numbers they're going to grow earnings or high quality but they can overshoot they can undershoot eventually we get to a point over some period which is i think undefinable um i've written another blog for Drew's Views just talking about what is the period that's the wave? Is it a week? Is it a month? Is it six months? Is it a year?

Is it three years? What is the waning period? I think what's happened since COVID is we've extended that voting period because of flows, because of stimulus checks, because of Reddit, because of stimulus checks, because of Reddit, because of social media, because of the evolution of the industry. And I talked a bit about in that piece, not only the impact of passive investment and being included in an index, and if there's more money flowing out of passive or active into passive, that just necessarily supports flows.

But then you have the behavior of even some of the institutions, you know, what are we going to do? Well, let's own this because all the retail punchers are going to buy it. Um, but if we start to lose money, let's bail kind of the opposite of what a Warren Buffett would do with a company he liked. Um, so I think it all serves to exacerbate the volatility of the market and extend that voting period. Isn't it rational, though, if you're an investor and you've lived through the last 15 years in the post-GFC period, what you have seen is two things that the pros told you shouldn't exist.

The first thing you've seen is the most obvious stocks were actually also the biggest winners. So most of us are taught just because a company is popular or its product is popular or it's well-known, that doesn't mean it's a good investment. Okay, wrong. The most well-known companies and the most popular products turned out to be the best investments. Apple's a poster child of that. They turned out to be the best, Josh, but that's, and this is what's kind of,

doesn't scare me. It's just a concern is since 08, I mean, if you're 33 years old or younger, maybe 35, you've never seen a market outside of that brief COVID slam in the first quarter of 2020. Markets just go up. You didn't go through 87. You didn't go through 91 or 92. You didn't go through just go up. You didn't go through 87. You didn't go through 91 or 92. You didn't go through the tech bubble. You didn't go through the GFC.

And so there's this notion that things go up. But believe me, I mean, I was covering tech stocks in 99 and 2000. Back then, everyone thought Cisco and Nokia were the bomb. I mean, they were the equivalent of Apple of Apple and, um, and Nvidia today. And yeah, no. Eventually the world changes. Um, especially in technology where you're a lot of disruption, but the big question um, now is we're getting to that point.

I'm, I don't want to have a huge debate about the, the valuation of the nifty 50, but you could argue, sorry, not the nifty 50 of the magnificent seven, but you could make the argument that it's getting nifty 50, of the magnificent seven, but you could make the argument that it's getting nifty 50 level of attention and flow. Many have. So I think it's probably the most overbought, overdone theme in the market right now. You hear half the people say these seven stocks, actually they're value stocks or actually they're defensive because if anything, God forbid, happens in the economy, these are the companies that are best equipped to deal with it because of how much cash they have. I've heard that argument. I've heard that

they're actually international stocks and you can't just compare their size to the US market cap. Oh yeah, that's a good point. I've heard all of the rationales and all the justifications for why Apple sells at 30 times earnings with flat year-over-year growth. I've heard it all. I want to talk a little bit about Europe, because this is a little bit closer to home for you. It is.

And an area of expertise that I don't really know a lot of people who know that market as well as you do. So Europe has been on fire, relatively speaking. It's not quite the Magnificent Seven, but there are some red hot stocks in Europe. And I can't remember the last time I've been able to say that. What do you make of what's going on there? Well, I mean, I've been saying this for a few years, JB. To me, outside of, yeah, sure, in Silicon Valley, within 40 square miles, you've got trillions of dollars of market cap. And that was because of this clustering that happened when Bill Shockley and the rest of them decided to settle out there and then build around Stanford and create this industry.

Great. It could have happened in Chicago. It could happen in New York. It could have happened in London. It could happen in Frankfurt. It just happened to happen in Silicon Valley. The rest of the world outside of this tech land, you have a lot of competitive companies kind of doing the same thing. Boeing and Airbus, Nestle and Mondelez, Ryanair and Southwest. I mean, very good businesses competing, often selling similar products in similar countries to similar customers and battling it out. And some businesses, obviously, the tech stocks in the U.S. are beginning all the attention. We do have ASML and Arm Holdings, although they listed in the U.S., which all the, all the attention we do have ASML and arm holdings, although they listed in the U U S, which was a smart thing to do.

SAP, um, those kinds of companies, but what is it? Six, 7% of our index in the embassy of Europe or over here, it's 26, 28. If you look at the tech guys and the S and P 500. And so naturally the U S has crushed everyone because of these guys, partly because of these guys. That's another point. Partly just because of, I think, maybe it's quantitative easing, maybe it's a central bank policy, just whatever it is.

People have been attracted to U.S. companies, and they've outperformed everybody. I have a bunch of hedge fund buddies in London who 40% of their book is in U.S. names just because that's what's worked. They're not European. But the fact is we do have companies in Europe which are just as high quality, just as well managed. And you hear a lot of BS about, oh, U.S. companies are better. They're better at risk taking. No, they're not. The Silicon Valley is awesome is what it is. Is there a political aspect to it where US companies maybe get a longer leash

to build and grow and invade incumbent's territory? And in Europe, possibly, there are political restraints on what companies can do that stop them from becoming Alphabet and Meta? Yeah. I don't think so, Josh. And this is a great question though. I think in some industries over there, we do better than we could ever do here. Luxury goods, Louis Vuitton, Hermes, all those guys. I mean, that's Richemont. We're known for doing a better job in those industries. But the tech dominate. Tech over here is fantastic.

It's game changing. It's a great point. We don't have a luxury goods giant. We had Tiffany, which LVMH acquired during the pandemic. The largest luxury deal I think ever. That was the closest America had to a true luxury goods brand slash retail. I guess we have Ralph Lauren is maybe the closest thing to that now. But to your point, LVMH is unparalleled.

It's arguably the meta or the apple of luxury goods retailing. That's one of the stocks that's powering. There's a new high in European stock 600 in mid-February. After the United States made a new high and Japan, Europe quickly followed. They're very similar. I mean, look at all this Ozepic-Munjaro business. Okay. There's Eli Lilly here in Indianapolis.

There's Nolan Nordes kind of doing the similar things. There's, Hey, look, there's Nike over here. There's Adidas over there or Adidas, as they would say in Germany. And even in the private sector, there's VTOL here. There's Cargill there. There's GM here, there's Volkswagen there, there's GE, there's Siemens, there's Pfizer, there's Roche. They're all similar companies doing similar things and competing against each other at a very high level and multinationally.

So to say that the U.S. businesses are just implicitly better or they're better at finding opportunities. I'm not sure. Yeah, in tech, they've been kicking butt. So in 2020, Goldman Sachs put out a list of the granolas, which is arguably the worst acronym I've ever heard. But these are the stocks that make up the granola's index. I don't know if it's an index. GSK, Roche, AstraZeneca, that's GRA, ASML, another A, why not? Nestle, Novartis, Novo Nordisk, that's three Ns in a row, great. L'Oreal, LVMH, LVMH, AstraZeneca, SAP, and Sanofi. Those are their granolas, but they're cheaper than their US counterparts for the most part. They're growing fast. They're growing profits. They're rewarding shareholders. And they're just not as well known here because people think of Europe

and they think of underperformance when they're allocating portfolios in the United States. Yeah. And that's just been a flow thing, Josh. And you have companies like Facebook or Google or Apple or now NVIDIA getting all the attention. People just generally think, well, I've got some extra money here. Let me invest in U.S. stocks. And let's look at it. If you're incentivized, if your year-end bonus is based on your performance versus your peers, and if you didn't own enough NVIDIA or you didn't own enough of these

US names, you would be penalized. Well, guess what gets happened? The baby gets thrown out with the bathwater. Not just in this whole value versus growth debate, which I'd love to have in the States, but in Europe, it's even more exacerbated. And yeah, so we have these granolas. And I did a tweet the other day looking at NVIDIA, Microsoft, Facebook, Google, Apple, Amazon, and Tesla, trying to say, okay, here's how much the stocks have moved. Here was the starting PEs three years ago before COVID hit or in the middle of it.

What multiple expansion was there? What upgrades were there? What were the stock behavior? And I did the same thing with, and so you go from total returns of these granolas since the end of 2020, Tesla's down 25%. That's the worst. Then Amazon's up a little bit. Apple's up 30.

Google's up 40. Facebook's up 80. Microsoft's up 80. bit. Apple's up 30, Google's up 40, Facebook's up 80, Microsoft's up 80, NVIDIA's up 580. Yeah. And then you look at these granolas. Roche is down 16%. Novartis is up 30. GSK's up 40.

LVMH is up 70. ASML's up 112. NovoNordisk is up 320. So a lot of our U.S. companies get a lot of attention. That's great from an american perspective but for us i mean and of course i'm biased jb i mean i'm investing in european companies so of course i want to i want to think that that's uh the opportunities there are incredible but it's really hard not to see do you view the race with the index as being as

existential amongst european asset managers as it seems to be in the United States? No. You don't, right? But at the end of the day, their flows, their bonuses, the way they get ranked, especially in the sort of more mutual funding sector, which is more diversified, it's going to be – they need to be in the top quartile, top decile if they want to get flows. So it still matters to everybody. And the tail does wag the dog. I think not to the same extent that it does for us here. I want to share with you that I looked at European ETF performance this morning in preparation for talking with you today.

for talking with you today. And I noticed something that I think really is telling a bigger story than maybe what a lot of people think. It's not just in the United States that the largest seven companies are pulling away from the rest of the index. If you look at the Euro stocks, 50 ETF, which is F E Z. Um, so this is the 50 biggest companies in Europe. Uh, that's up 64% in the last five years, the VGK, which is totally all of Europe is only up 47. Um, the I I shares core MSCI Europe ETF is only up 46. IShares Europe ETF only up 48. So even in Europe, the 50 largest stocks just have been exploding away from the rest of their peers. So this appears to be a global phenomenon. It's not something that's specifically US-based or MAG-7-based. What are your thoughts? Yeah, there's a lot of comfort in large caps. There's a lot of comfort in liquidity, and they have that everywhere. And the point I like to make when we compare the US to Europe is

this disconnect between the two, which has been prevalent for the last 12 years. There wasn't one in the 30 years before that. You looked at the long-term returns of the Embassy of Europe, the S&P 500, from December 31st, 79 to December 31st, 2009, it was precisely the same, 11.5% annualized returns. Same stuff. And then we get this disconnect. Part of it justified, certainly in the first half of the decade, the U.S. tech companies were just killing it.

But the last four or five years, it's been a lot more flow driven. Are we at that point? And this is, we kind of started talking about this earlier, Joss, are we getting close to that point where the passive flows are enough that they're making prices and not just in the short term? And that's the fun, but it's definitely certainly

worth the debate. Well, I think most investors that you probably talk to and that I talk to, the question is, yes, I understand that Europe is a few standard deviations cheaper than the United States. I understand they're high quality companies. All I want to know is what is the thing that makes the switch flip? And if you tell me European stocks are about to do well, it's inconceivable that US stocks won't at least keep pace with them. And so I know historically there've been periods of European stocks outperforming the US, but I also know those periods tend to coincide with a currency story and there are three to five years in duration. Yeah. I mean, we're not macro guys, JB. So I don't try to call where markets are going to go. We're very stock specific. I have no clue. I'm flipping coins if I said, hey, interest rates will do this or the markets will do that. I do know that if in the long term

it's cash flows and earnings and your estimates versus the street that are the things that really matter, if you can get past that noise and just find windows to invest, that if you don't let the volatility affect you, which can be a hard thing, you press forward. Now, the difficulty for a stock picker is if we're great at what we do, Josh, we get two out of three right. That's right. If we're great, if we're with the concentration we have, we get to generate 600, 700 basis

points of excess returns if we get two out of three right. That means not only does it mean that we're going to get one out of three wrong, but we should try to get one out of three wrong or we're not taking enough risk. So the question is, which of those of your 20 investments, which six of them aren't going to work? Which seven of them aren't going to work? And so you don't know. You buy something, you love this company, it's down 8%. Should we buy more? Oh, well, maybe they're screwed. Maybe you screwed up the analysis. Maybe you missed out what was going to matter for this thing. And so that's the difficult part. And so you get this, you know, I talk about the behavioral biases. You get this ambiguity

version, particularly if you're a U.S. investor looking overseas. If the U.S. has gone straight up, why would I invest in a place that just had Brexit or the Ukraine war or all this other stuff happened to it. I don't know this market. But the fact is, and arguably they're more resilient than anyone else. They get through these periods. They don't lose market share in their export markets where they're selling. I just think there's, I mean, opportunistically more, I mean, I've been there for a couple of decades. I've never seen it this out of whack in terms of, and we've had the sort of win in our faces, a headwind, I guess is the right way to say it.

Not just from the Europe versus the US, but also from the, we tilt a bit value-y in our investing. We'll still own some things which have big multiples, but we just think they're going to crush numbers and trade it even higher multiples. So even then, growth stock investing is value investing. But broadly, we're going to tilt value. And that's been tough, right? Oh, you have, right. You have the international component and the value component. And the value component, right, exactly. Well, arguably, though, those headwinds have started to become tailwinds as the rally has broadened out. You're seeing money come out of some of the hottest growth stocks, but not all of them. The money needs to find a home, and it looks like it's finding a home.

It feels like it. Yeah. Maybe we're starting to weigh, JB. Maybe we're starting to weigh. All right. That's a great place to leave it. Drew, where can people read Drew's views and hear more from you? What's the best place for them to follow you?

Our website is albertbridgecap.com. And inside there, you'll see links to Drew's views, which is our investor blog, to our media posts, which has the podcasts we do, like this one here with Josh and I. And then we've got a Twitter page at AlbertBridgeCap. Well, I'll either tweet links to other pieces I think are good or to some of ours or just make general comments about either financial markets or baseball or premiership soccer. Drew, it's been an honor to have you on the show. I don't know what's taken us so long to do this,

but I always learn so much from you. Five years ago, you and I did a, I remember we did one talking about timing of factors. Can you buy and sell at the right time? I was early in my podcast career, but that was, I think you were the first, maybe, way back in the day. Well, we won't

we won't uh we won't wait five years for uh for the next one and i'll get up there and you may be getting down here too which would be great now that you guys have a reason to come down for sure so sure all right see you soon josh drew thank you so much for doing this really appreciate it uh everybody follow drew on twitter that's atBridgeCap. Check out Drew's views where I always learn new stuff every time he writes. Thanks so much for listening, and we'll talk to you soon. Compound Nation. It is Tuesday, 5 p.m. in the east. That means we're doing another edition of What Are Your Thoughts? I'm your host, downtown Josh Brown, here with my co-host,

Michael Batnick. As always, Michael, say hello. Hello, hello. The chat is going wild right now. What's going on? What are we going off about? Everyone has spring fever, Mike.

We sprung back. How does the clock work? Spring back, fall forward? Spring back, fall forward? Horizontal and diagonal pull? No, is it backwards? I don't know how it works. You fall back and you spring ahead. Come on now. Fall forward. Horizontal and diagonal pull. No, is it backwards? I don't know how it works. You fall back and you spring ahead.

Come on now. Spring ahead. Anyway, it's beautiful out. It's like a summer day. I feel alive. I feel reinvigorated. Yeah. And markets are, listen, the stocks are stocking.

The coins are coining. Everything is going nuts right now. I think everyone has spring fever. That's kind of cool. I had a suitcase where the zipper broke, so I put it in my wife's trunk so she would go get the zipper fixed. I forgot.

Where do you get the zipper fixed? She goes to a luggage store. That's not the thing though. The thing is, I always put the air tag into the luggage. So she's getting notifications that she's on the move and she's being tracked for like two days. She's like, what is going on? Did somebody put an air tag on me? Why am I getting notifications that I'm being tracked?

Turns out everywhere she goes, the luggage tag is pinging and she's getting text. So it's a very disturbing but we just figured out what's going on and uh sprinkles i apologize if you're listening all right uh we have a sponsor tonight it's rocket money michael do you want to tell the audience what rock and money is all about do you want to tell the audience what you walked into before we came on camera you guys were talking about low-key you were talking about rocket money before we even came in to to do the show live you guys are really excited about it. I was doing the commercial before the commercial because there's nothing better than when I get an email that says refund

detected. You know what I got today? J.Crew. Is that still a thing? My wife returned close to J.Crew and refund detected. I wouldn't have even known. I wouldn't have even known. And you're getting that through Rocket Money? I love it. So when I log on, I see, you see like your recurring bills. So, okay, next week I'm paying Verizon, Netflix, Disney+, whatever it is. Like it's all right there. You can see past transactions. You can see your income versus your spending. Are you in a deficit?

I don't know. Maybe you are, maybe you aren't. You can do it all. It's super easy. And there's not like a million tags and it's a huge pain in the ass. They do it all for you. I love it. One of the main things we talk about Rocket Money about,

you know, that Rocket Money does is it helps you cancel subscriptions that you no longer want. But what you're saying is, even if you're not in the market for canceling anything that day, just keeping it, just keeping track and being notified of everything that's going on,

that in and of itself, if you never cancel anything for the next three months, just to have that vision of what's happening is worthwhile. Yeah. I don't cancel anything. I just, just let it roll. You double,

you tell, you tell rocket money, add more, add more subscriptions. All right. Stop wasting money on things you don't use. Cancel your unwanted subscriptions and track your spending by going to rocketmoney.com slash compound. That's rocketmoney.com slash compound. We had a CPI report today.

We talked so much about inflation. I just think we should touch on it. What was your reaction to the numbers? We're going to talk about this later, but I don't know how the Fed cuts right now. And I know they're not going to. I know the market doesn't think they're going to either. They won't. But Michael McDonough tweeted, an increasing segment of the US CPI index is growing at an annualized rate exceeding 4%. Subcomponents constituting over 63% of the total CPI index are climbing at a faster rate than 4%. So it's not great. It's not great. I mean, not to be alarmist, but it's-

What's the segment? My understanding is that's mostly services. I didn't dive deep into it today. But Jason Furman also tweeted, two months ago, the six-month annualized core PCE inflation rate was 1.9%. We'll get the February date in two weeks, but looking like this same metric will be up 2.8% or 2.9%. So is there reason to be alarmed? I don't think so. But the progress that we've made seems to have stalled that a little bit.

Okay. What's keeping the market from panicking is that it's happening in the context of a really strong economy where the core components of inflation, like not terrible. So like you're not getting the acceleration higher. You're just not, you're not getting that last mile to come down. That's like the hardest part. And you're just, you're not getting it. So that's what's keeping – here's core up 3.8 percent, overall up 3.2. Looks like energy was up 2.3 percent month over month. But like – Airfares were up 3.6.

After all of the cumulative price increases that we've seen over the last three years or whatever, like prices are still creeping higher. They are. Yeah. And one of the things that you're hearing from the political debates is the cumulative inflation. Like since 2020, what is Joe Biden's cumulative inflation? And it's a real number. I think it's greater than 20%. And that's average. So there are things that are up much more than that in that same period of time. Not to assign blame to anyone, but that's the reality. And people- Groceries are up a lot more than the regular basket. Yeah.

So I think this is the biggest observation, the most worthwhile observation to have, which is that people care more about the cumulative over the last few years than they care about this month versus last month. But on Wall Street, we're focused on this month versus last month because we think that guides policy. But politically, people care way more just about the overall situation they're in, and they're not tracking this month versus last month. I was having this conversation with Ben today, now that he's here to defend himself. And not that it was such a disagreement. Ben seems to think that inflation, we could declare victory, and I wasn't so sure. But the point that I was making, and this he agrees with, people are pissed off about the cumulative

price increases. There was a TikTok video that went viral about some dude complaining about the groceries. It's really expensive compared to what it used to be. And if you look at like, well, look at real wages and the data, it doesn't fucking matter. It doesn't matter. Data doesn't sway anything. It's how people feel and they're pissed off.

And I get it. It sucks. It's not fun. I was out at dinner Saturday night. I went back to Union, by the way, in Eisenhower Park. So I was at dinner and I was with the guy, he owns a business. And he's like, listen, all the guys I talk to I was at dinner and I was with the guy, he owns a business and he's like,

listen, all the guys I talked to, they think is the worst economy they've ever seen. So I said, well, all the guys you talk to, like our high school educated at best. And you know,

they're not like, they're like focused on what's annoying them that day. And they'll, you know, like they're, they're, they're not focused on like the actual situation that they're in. They're just focused on how pissed off they are in general.

He's like, yeah, that's probably true. They're guys that own businesses, and they think – they're saying their sales are softer. I said softer than what? Like 2021? Because that's a fantasy land that's never coming back. He's like, yeah, and it's just everything's a pain in the ass. I'm like, all right. Well, I agree.

But here's the thing. The economy has never been larger. 401k balances have never been greater. Home prices have rebounded. Everyone's working. Everyone has gotten a wage. Wage growth is now outpacing the growth of CPI. And all of that- The worst economy you've ever seen, really. Well, that's absurd. But all of the things that you just mentioned are superseded by the fact that every single week people go to the grocery store

and it's so much money. Yeah. No, listen, it's tough, which is why presidents don't win. When inflation happens, presidents lose. So we know that historically, these types of inflation spikes don't happen very often. And when they do, they upset whoever's in the White House because that's who's going

to get blamed. So anyway, really simple as that. So the Fed's not going in May. We have these rate cut probabilities. Let's do it. This is May. So this is, what are we, 20% probability of, why am I reading this this way? So, all right.

So all the way on the right. Shit chart. This is not a shit chart. This is a shit understanding of the chart. The 525 to 550 is where we currently are. Correct. That's the current target. It says it right there. There is an 83% implied probability based on Fed funds futures that there will be no

cut. Okay. Got it. Let's do, do we have June? And so June, it's obviously better than likely, better odds than not. Now, I should say, this changes every single day. But I guess what I wanted to see, did this change based on the reading today? And the answer is not really.

Well, that part of the chart, we don't have, we don't have in here. So if somebody was supposed to do that, then yeah, shit job. So, so like there really wasn't that big of a reaction today because I don't think anyone was going into the number thinking like rate cut was a slam dunk. You know what? Be funny. Gotcha right here. So CME, so looking at May, 86% chance. A week ago, it was only at 80. A month ago, there was only a 39% chance that they didn't cut. Only a 39% chance. Now it's 86.

So things change pretty quickly. Things change over the course of the month. Yeah, I agree. Well, you keep getting hotter than expected. Like that's where we're going to be. And guess what? People talk about like, what's the risk? What if the next move is a hike, not a cut? I'm not saying that it will be, but it's not impossible. It would be terrifying to the stock market.

That would kill the market. You will get your correction right then and there. And there might even be a circuit. If the Fed even hints at- Relax. You'll get your circuit breaker that day. How about that? I'm being honest.

You'll get a VIX 30. Yeah. And that'll be viable. But that's what's going to happen. You might cure inflation single-handedly. Crash the market. You won't have single-handedly, crash the market. You won't have to worry about inflation the next day. All right.

I want to just go through this Wall Street Journal piece by Greg Zuckerman, who I think is one of the best writers at the journal. And we know Greg. When Greg did his book, he came on the show. And he's talking about all of the people, very influential people, who warned of an economic disaster that never ended up happening. And it looks at Ray Dalio and it looks at Jamie Dimon.

So in mid-2022, Dimon was saying hurricane about to hit the US economy. It could be a minor one or it could be super storm Sandy, he literally said, which is crazy to say that in New York. Ray Dalio predicted a debt crisis and a perfect storm of economic pain. Jeff Gundlach, David Rosenberg, who's been bearish for 15 years. It's just – it's the usual suspects, but it's also like very respected people in high positions. And some of them are now saying, I got it wrong. Dalio said, I was bearish. I got it wrong. Dalio said,

I was bearish. I got it wrong. Okay, great. Diamond said, I would have thought some of the fiscal stimulus would have worn out. So I highly respect people for saying like, hey, that's how I felt at the time. Turned out not to be true. I think that that's something that maybe there's not enough of, but the bigger point I wanted to run by you, I feel like one of the things that I've learned in this industry, you're bet you're almost always better off, um, picking between one of these two things. If you want to get into the market punditry game, or you want to become an influential person in finance.

And I know them all. This is what I would say. The number one way is to just always be bullish. Some would call this the Tom Lee. Take your lumps during the bear markets. Take the ridicule. Take the shit people throw at you on Twitter. Understand that it's only going to be for three months or nine months. And never waver. Don't give an inch and eventually you will win. And Tom has made people a ton of money over the last 15 years because he has not wavered and he has endured those, those corrections that made him look temporarily foolish. He's been vindicated and he's been right in the long run. I think that's also a Belsky approach.

A lot of people that I respect very highly, they have cracked the code. They figured this out. Method two is also a fairly attractive way to go. Speak bearishly, but behind the scenes, stay fully invested. Like come on TV, talk about the coming economic storm, and then load your book up with NVIDIA calls.

Like, that works too. That's a way that you could do this. You don't get blown out of the game when the market is rallying. But during the corrections, you get to smugly remind people how cautious you are. Do you agree with that take broadly? Like, do you see both of those two avenues as being highly effective? I do, but I wonder how many people

that you just described in the latter bucket don't actually believe what they're saying and actually are heavy in cash and maybe even outright short. You think most are like- Well, that's the third way. This is the dumbest thing. These are what the dumbasses do.

Vocally bearish all the time and actually invested that way. There's not a lot of people in that category because they're gone already. They're out of the business. You can't really do that. You can't be pounding the table bearish and then manage other people's

money that way. You'll be redeemed into zero. Well, not on a bull market, you can't like be pounding the table bearish and then manage other people's money that way. No, no, no. You'll be redeemed into zero. Well, not on a bull market. You can't. There's one guy doing that. It's John Hussman. $300 million left.

Right. That's down from billions. So you can't really do that. So the people who are bearish all the time and investing bearishly at all times, they win once every 20 years and they lose the rest of the 19 years. And you can't actually stay in business that way. We know that right once, like really right once, you can make a career on TV out of that.

Well, they have, because there's still guys going on TV who have been wrong for 15 years and they don't really get penalized. But my argument is those guys aren't really invested investing that way. Do you understand what I'm saying? I understand.

Well, they're definitely not investing anybody's money that way. No shit. They're writing newsletters because if you were investing other people's money that way, you're already gone. There's no way. There's no way you have any AUM left if you've been bearish since 2008 or nine or 10. How? If you've been bearish since 2008 or nine or 10, how literally your accounts will go to zero. If you actually are investing based on the things that you're saying.

So I think if you want to be in this game and you want to be influential and you want to be successful on the street, pick one of those two lanes that I described lane one, I'm bullish all the time, no matter what and live it and invest that way and take your lumps. Or lane two, I'm always cautious. Can I see how you're investing your portfolio? Oh, what a surprise. You're all in S&P 500. By the way, that's Professor Schiller. That's Bob Schiller's approach and it works.

But there's a third lane. We're not in either of those lanes. I think we're not. I think we're closer to lane one than lane two. I invest as if I'm always bullish. But I'm not always bullish. Like, my portfolio is invested as if stocks will go up forever. Because that's what I believe. I mean, I don't really believe that.

But you know what I mean. But I'm measured. I'm, like, not always bullish by any stretch of the imagination. I did a thing for the LA Times during, I forget which panic, maybe 2018, prior to COVID. So whatever was the panic before then. And it ended up being the cover of the business section. And the gist of the article was,

pray to God for volatility. Because if you're a young person with barely any money, that's the only way you're going to build stakes in these companies and get a foothold in what the stock market has to offer. Like what's wrong with you? The market's down and you're rooting for it to go up and you have $10,000 invested. Like, are you crazy?

So I think I'm closer to lane one and I'm pretty sure I'll see Dow 100,000 in my lifetime, you know, beyond that. And that's how I feel. Do I feel that at times the market gets ahead of itself? All the time. And sometimes that's right. Sometimes it's wrong.

But I think if somebody had to categorize me, they'd probably put me in lane one. But you're neither because the last two episodes, you said that the NASDAQ topped for the quarter. Yeah, still think so. But I'm saying, but we're not on either of those lanes. We're in our own lane. All right, let's move on. So SPIVA, every year, this is an S&P, I don't know, it's an S&P report. And what they do is they look at the short-term and long-term performance of mutual funds,

both equity and fixed income. And what they showed us this year in terms of how large cap domestic funds did versus the S&P, it basically always looks the same. It's really hard. So 60% underperformed the S&P 500 this year. Sometimes they do better. Sometimes like 2021, it's impossible. They do much worse. But I have to say, credit to them. Next chart, please. The fact that 40% were able to outperform when fewer stocks have outperformed the S&P 500 over the last 12 months and basically ever, at least since 1990. It sounds like a big accomplishment. I almost think it's miraculous that 40% outperformed.

Well, how do you think they did it? You think they overweighted the MAG7 stocks? That was the only way. There's no other way to do this, right? Last year, the only way to outperform the index was to be overweight mega cap tech. So to the 40% that did so, credit to them. Okay. So the NASDAQ last year was up 50%. How much was NVIDIA up in calendar 23? 180?

I was going to say 200. Yeah. Monster. So like overweight Microsoft, NVIDIA, AMD, Apple. Yeah, you could definitely get that. You could definitely get that done. Question is, can you do it this year? Can you do it next year? The answer is no. Next chart, please. Of course not. So all large cap funds, 93% of them have underperformed the benchmark over the last 20 years. And this is the ones I should mention. This is the ones that even- Hold on, Mike. Can you back up? Can you say that again? You're saying 93% of the funds that were around 20 years ago? Nope. That's not what I'm saying.% of the funds that were around 20 years ago? 93% – nope. That's not what I'm saying.

93% of funds that were around 20 years ago and still exist today underperformed the S&P 500. And this doesn't include – So just by the 7%, what's the problem? Right. And this doesn't include all of the ones that cease to exist. Now, it's enough. We don't need to pound on the active industry. We know it's hard.

It's really hard. It is really hard. And this isn't even the hard part. The hardest part is that there's no persistence of performance. So if you identify five or six large cap managers that crushed the market last year, you have as good a chance of them crushing the market this year as you do of them underperforming and being in the bottom quartile.

Like the probabilistically, it's worse. Probabilistically, like there's just no way to know that whatever you just saw from an active manager can be repeated. The other part is predicting the future. Wait, wait, wait, wait, wait, wait, stick with that. So in terms of the ones that actually do win, I remember the study very clearly because it's just mind-blowing. So Vanguard did the study of the funds that did outperform over the long term.

And it's, I don't know if it's 10%. I mean, according to this, it's only 6%. 72% of the winners underperformed for at least three consecutive years. 72% of the winners underperformed for three consecutive years, which is a lifetime. These funds, for the most part, are evaluated every single year. So the idea that you're going to be able to stick with something that's down three years in a row versus the benchmark, because you know that they're going to perform, it's just nonsense. Well, this is what makes it really hard for a financial advisor. Because if you build a

portfolio of active managers and your value add in the eyes of the client are, I'm managing the managers and I'll fire the underperformers and I'll allocate more to the best performers, that actually doesn't work. because a really great long-term track record is built by underperforming for long stretches of time. And so how do you know when a manager has just lost his magic or her magic versus is just going through a temporary period of underperformance? So if you're answering for that to clients and you've positioned yourself as like, I'm the water diviner and I tell you like, who's going to be the best fixed income manager this year.

It's like a delusion of a dream. I don't even know how – how do you do that? That's a good description. It's tough. All right. Let's move on. Everyone's talking about this now. I don't know who started it is nvidia the

new cisco and the big question is is it 1995 if so you want to buy cisco or is it 2000 and if so you're seeing the top of of cisco so if you think there's an analog there where Nvidia and Cisco are acting like they did, then this question really matters to you. Do you agree with that? I do. And can I tell you something? I'm like, wait, I think I wrote about this. I said, is Nvidia the next Cisco as the title of a blog post in August, 2023. Yeah, you were right. You were right. It became, that's what it became. Anyway, this is the new thing. So just to bring people up to speed, Cisco became the largest stock in the world temporarily.

2000 was the peak. And basically, networking- What were they doing? Yeah, what were they selling? Same thing they sell now. It's telecom equipment. It's networking. It's the building of the internet. So the investor class said, I don't really care if Lycos is going to be a bigger search

engine than Yahoo. LOL, neither ended up mattering. The real play here is the picks and shovels. And Cisco makes the equipment that every single telecom company, government, internet company will need in order to connect to the World Wide Web, which is a term we used to use. And that thesis was right. It was the Michael Jordan of the NASDAQ. I swear to God that stock used to go up 10% a day five days in a row for nine months at a time.

It was a one-decision stock, and it acted exactly the way Nvidia acts right now. You had to be in Cisco. You might as well quit your job if you were in portfolio management and you weren't in it. And then one day, for no reason, on no news, it went in reverse and the stock still, still has not gotten back to the levels it traded at 24 years ago. And they've grown earnings since, they've grown revenue,

they've released innovative products. Wait, hang on. So not only did they grow revenue, I think O'Shaughnessy did a report on this. I think it was them. It grew revenue 20% a year for the next 15 years or something like that. Dude, this was not a piece of shit company.

The problem is we pulled forward so much demand into that stock valuation. Rob Arnott did a great thing on Cisco. You might be thinking of that, where he measured the valuation per employee. And I think he determined that every employee was worth like $70 million or something at the peak. Anyway, the problem was not with Cisco, the company. The problem was with the hopes and dreams that we pinned on it as being the picks and shovel play for the internet.

And we pulled forward 20 years and counting worth of demand into like one year of performance. And that's the NVIDIA comparison. Are we doing that again? Only substitute networking equipment with GPUs. Okay. All right. So that story, Warren pies at three 14 research did a piece comparing Cisco and NVIDIA in a couple of ways. You want to throw this first chart up, John, Mike, you want to tell us what we're looking at here? You want to throw this first chart up, John? Mike, you want to tell us what we're looking at here? So this is the price index to a certain level.

And yeah, NVIDIA has had a good run, but nothing really like what Cisco did. Yeah, Cisco is another totally different. So if you weren't there, and Mike, I know you were like in elementary school. If you weren't there, you could look at a chart like this, but you can't feel this chart. Like you weren't trading this stock and you don't remember the frenzy around it. And 20 years from now, when you tell somebody about – you talk about to somebody who just got started investing over the last few years, they won't be able to feel the NVIDIA mania that we're all living through. And so there's like a part of market history that I feel like you're required to live through to have a really strong opinion on it. So I don't talk a ton of shit about 1987.

There are people that do. I wasn't there. So I didn't on it. So I don't talk a ton of shit about 1987. There are people that do. I wasn't there. So I didn't feel it. I read about it. Right. Okay. What if we use percentage share of market cap instead of price? Okay. Oh, now we're talking. Now we're talking, right? Oh, now we're talking. Now we're talking, right? What do you think? So at the peak, March 2000, Cisco was 4.5% of the S&P 500's market cap. NVIDIA is already 5.1,

and I think it went up today, and counting. So is this a chart crime to all of a sudden shift the metrics, or is this a legitimate way to think about it? No, I don't think it's a chart crime. I also don't think it's super meaningful. How about that? So why isn't it super meaningful to you? It's just two lines in a chart.

Yeah, but it's saying something. Put that back up. It's showing that Cisco's percentage of the market cap of the S&P came really, went from nothing up to 5%. And NVIDIA has had a similar run. So, okay, fine. Here's what it says. What is the significance, though, of percent of market cap?

It tells a story about an investor mania and a dominance of a component of an index. Like, there's information there. The only thing is, there's no reason. Just using that chart, there's no reason to think that Nvidia has to follow Cisco's path. That's all I'm saying. We agree. It's totally legit, but it's not devoid of meaning. You have one stock that becomes this important to the whole stock market almost overnight. It's in rarefied air. This type of rollercoaster ride has happened only a very handful of times in the history of the stock market. All right. Give me this table, John. So back to the, is it 1995? Is it 2000? Is it 2024?

Anyone who wants can screen grab this, obviously. This comes from our friend Warren Pies at the amazing 314 Research. And on a lot of these metrics, Mike, and I want to hear which ones stand out to you, there's a huge similarity to the year 2000 Cisco on the S&P and on the tech sector. And then in a lot of ways, there are huge disparities. So the one that I want to just bring up first on March 24th, 2000, which was the peak of the.com bubble technology was 35.38% of the S and P 500. And right now it's 29.95%. And by the way, I don't know if that includes all of the giant Mag7 names that are not even included in the tech sector. But, you know, either – like Meta is not a tech stock.

So I'm guessing that's included in there. For that purpose it is. It is, right? Okay. All right. Do any of these things jump out to you as like – Table back on. Table back on.

Too close for comfort? Forget 95. Just the 2000 and the 2024. So let's look at the peak. So the trailing 12-month returns from the five biggest stocks lines up pretty nicely. 91% versus 87%. Now here's the, but here's a major, major difference. Here's a major difference.

The prior two-year return from 2000 was, I'm making this up, 150%. If you look at the last two years, these five stocks are basically flat because 2022 was a really bad year for tech stocks and they bottomed on December 30th. So if you pull it back two years, the story looks completely different. You understand? Yeah. This is not great. In March of 2000, earnings per share growth for the whole S&P was 11%. And it's negative right now. So it's crazy that we're having the 2000 comparison. So it's crazy that we're having the 2000 comparison. One thing about the year 2000 is we were coasting on pretty decent profit growth from 99 into 2000.

There was a spending frenzy around Y2K, and a lot of that growth would disappear later on in 2000 because people didn't need to spend on all this stuff after the planes didn't fall out of the sky. I don't know if a lot of people really understand what was going on. Spike Jones did a commercial for Nike, a New Year's commercial in 1999. It was a jogger who was running through his neighborhood. And it's a funny commercial. The planes are literally falling out of the sky. It was a Y2K hysteria themed Nike commercial. And it was like, just do it because the world is coming to an end basically. But that pull forward in demand, you had tons of CapEx because governments and corporations around the world were just loading up on computer equipment, worried that the old stuff they had was going to crash when the clock turned over from 99 to 2000. That sounds a lot like the GPU story.

Totally. Buy this shit now or else you're going to get locked out. So there's a lot of similarities with that story. And we mentioned a few weeks ago that Meta, Microsoft, whoever, they're an enormous customer of NVIDIA. I think five companies make up 60% of the spending. So the question is, how many chips does Meta need? You know what I mean?

Obviously, they're ramping up the shit out of their reels and all their AI stuff. They're really ramping. But are they going to spend the same in the next 24 months as they did over the last 24 months? It's hard to say that they're going to. I'll do you one better. A lot of the chips that are being bought now have to be NVIDIA GPUs because it's for training. And you need literally the best to train LLMs, to train AI.

But then later, once you've got your LLM and you've got your thing built, it becomes to train AI. Um, but then later, once you've got your, your LLM and you've got your thing built, it becomes about inferencing. And if you look at the types of chips that, uh, Amazon says they're building an alphabet and Microsoft, they're building their own inferencing chips, and they may not be an H 100 quality or caliber chip, but there'll be good enough. So it's not even how many GPUs total, it's how many training GPUs really need to continue to be purchased. Keep in mind that a lot of these AI things are just being given away for free right now. So my question is, if you look at the chart, and if you pull up a monthly candlestick chart of NVIDIA, it's insanity, right? It's absolutely wild. And

this sort of price action in a stock, like, yeah, it gives you reason for concern. It makes things feel unstable. However, you can't not talk about the fundamentals. Like, is Nvidia expensive? Yeah. Is it crazy expensive? I don't know. Like, if earnings estimates are way off, then maybe. Yeah. Is it crazy expensive? I don't know. If earnings estimates are way off, then maybe. But it's trading at what? It's trading at 25 times 2025 earnings estimates. That's not that much. Now, if earnings fall way short, then yeah, this thing's going to face plant. But it's not ludicrous. The stock is ludicrous. The earnings estimates- Speaking of ludicrous, let's quickly do this bespoke chart. the earnings estimates. Speaking of ludicrous, let's quickly do this bespoke chart.

Okay. So this is different. This is what's different right this second versus the dot-com bubble. In 2021, you had piece of shit companies. And what I mean by that is companies that are trading at over 10 times sales. So not piece of shit companies. I shouldn't say that. Super expensive companies. And let's be honest, most of them were junkie. You had a ton of them doubling year over year. That's not the case right this second. Well, we had that. We had an echo bubble in 21. Yeah, we did that in 2021. We're not doing it right. We're not doing it today. All right. That's a fair point. What's this next one from Carl Quintanilla? Just in terms of the enthusiasm or lack thereof for stocks. So Savita Subramanian at Bank of America said, equity allocations today are almost precisely where they

were in 1995, far from 1999's euphoria. So is this 95 or is this 2000? It's probably somewhere in between. John Authors wrote about Cisco versus NVIDIA at Bloomberg, and it was a really well-done article. And he is making the case that there is enough similarity here for us to be somewhat concerned. But the differences are more fascinating. So you just mentioned, look at what's going on with earnings. That's the point that he's making. He's saying, actually actually NVIDIA's multiple peaked last summer, the same way Cisco's did at the time of the dot-com bubble bursting. But what's strange is that NVIDIA's price earnings has since come down as much as Cisco's valuation did 24 years ago. Yeah, the stock is cheaper today than it was two years ago.

So using valuation as a yardstick, this is authors. There was indeed a Cisco style melt up in NVIDIA, but it's over. And now the valuation is actually crashing because the fundamentals are exploding. So let's do this first chart. This is earnings multiple. Okay. Earnings multiple. So if you looked at this chart, this is just showing the multiple itself. NVIDIA had a, what is that? A 200 times earnings multiple, I guess, what is that? Days ago? On the bottom? Yeah, days from the peak. Yeah. Okay. So three years ago, NVIDIA was at its max multiple, it looks like, right? 1,000 days-ish? Okay. So that multiple has collapsed, but the stock price keeps going higher because the earnings are going up.

Let's do this next one. John says, is PE the right metric? If we compare the two picks and shovels manufacturers on the basis of their multiple sales, we get a different picture. Look familiar? Judged by sales multiples, NVIDIA's rally looks a lot like Cisco's in 2000. All right.

This is a fair point, no? Okay. What about margins? We have margins. Do we have that? Yep. All right. This is nuts.

I mean, come on. This is nuts. I mean, come on. This is crazy. NVIDIA's profit margins are now 50%. They were below 20%. They were below 20%. How many quarters back is that, would you say? I don't know. I don't know.

It doesn't matter. This is a company that, as they grow sales, their percentage profit margins are actually expanding, which is obviously absolutely absurd. And it's something that we did not see with Cisco. And I think that's a fairly important point. Last one. Let me ask you this. Wait, hold on.

Let me ask you this. If in two years, Nvidia's price is roughly where it is today, plus or minus 10%, what would you say the likelihood odds are that it experienced a crash? In other words, can it go sideways and digest or does there need to be a crash? I don't know. Do you think it's binary? Yeah, because I think that most of the money in this is index money or momentum money. I don't think it's been a big stock long enough to have a long-term shareholder base.

Does that make sense to you? Yes, it does. It's only been a gigantic stock for 18 months. So it's not like Apple to me. I think it has to either be going up or it's going down. So when I, okay. How much of the stock do you think is froth versus fundamentally based? Do you think it's 80, 20?

Is it 50, 50? I think it's like the story and the fundamentals lining up. It's like impossible not to buy this stock. But there, but there's, there's froth here. Do we agree on that? Yeah. I mean, this thing is crazy. Yeah.

So is it 80%? You know where the froth is? I don't even know if the froth is. Do we agree on that? Yeah, no, of course. I mean, this thing is crazy. Yeah. So is it 80%? The amount of, you know where the froth is? I don't even know if the froth is necessarily in the stock side. It's the derivatives. Like it trades $4 billion worth of options a day, somebody told me. Yeah, yeah. Like there's nothing fundamental about any of that. And don't tell me that's people protecting themselves because I'm not stupid.

I didn't fall off the turnip truck. That's not fundamental activity. That's the froth. Last one. Can NVIDIA sales growth possibly be sustained, John Authors asks. No. No. Look, it's a vertical line.

No. It's just – it can't. Oh, we do have – we did the margin one already. All right. So look, it doesn't have to exactly be Cisco in order for us to agree that there are some elements to this that are Cisco-esque. Yeah, yeah. And then some that aren't. And that's why this is difficult. It's not exactly the same, but there's parallels for sure.

And I own it. So anybody that's telling me I'm trying to spread fear, uncertainty, doubt, I'm not. I'm just being realistic about what's going on with this stuff. I'm surprised that you haven't sold, just given that it's gone straight up. I've been selling on the way up, but I don't want to sell all of it. I took 20% of my position off recently. I took 25% of it off in May. And you got it all back three days later. You take 20% off and the stock goes up 20% the next day. It's like, honestly, it's like a beanstalk.

Anyway, just last thing. Just looking at this chart, it's so extended from its 200. It could fall back to 530, whatever, without its long-term uptrend being even remotely damaged. That's how extended it is. All right. Now, here's one of the things that make investing really hard. At the same time that's going on, the rest of the market is actually looking really good.

I wish it were so simple where we could say, nope, it's an AI bubble. And as soon as it bursts, everybody's screwed. Not really. If your story is that there's only six or seven magnificent stocks holding up the whole market, you need to get a new story because that is not true and hasn't been true for a while. Banks, industrials, materials, financials, they're all F52 guys. So this is the Wall Street Journal today. This is Apple, which is in gray, dropping precipitously. The blue line is the S&P and the pink line is right behind it, equal weighted S&P. And I thought this was a really well done article as

well. Almost one fifth of the stocks in the S&P 500 hit new 52 week highs on a recent day, the largest share since May of 2021, according to Bespoke. The S&P is up 33% in the last 12 months and many, many stocks are too. And that is what's very different from what tech stocks were doing in March of 2000. You want to pop this chart up, Mike, and tell us what this is? Pop it up. So we've spoken about this negative divergence a million times. As the S&P continued its ascent, fewer and fewer stocks were participating until the whole thing came undone. As you see on the bottom pane,

as you see on the bottom pane, that's just not the story today. So that's one thing that is very different between now and then. And guess what? If this rally starts to peter out and it's only the tech stocks and everything else rolling over,

we'll tell you. That just hasn't happened. I told you this story where I was a retail broker in late 99 to early 2000. And every single kid in the room was pitching a tech stock to new accounts. And every single kid in the room had a book of clients. And they were 100% tech. And every single kid in the room had a book of clients and they were 100% tech. And I remember vividly people saying, myself included, why would I ever buy a non-tech stock again?

The entire rest of the market was red, like selling off, losing market cap every day, steel stocks, apparel stocks, healthcare, you name it. And then you had maybe there were 500 of them, 500 tech stocks that were green every single day. And it was just like, why would I ever bother? How quickly would you have gotten fired if you sold Qualcomm and bought Alcola? It would be unthinkable. You wouldn't even want to do that. It would be unthinkable. And no one was doing that. And when you look at mutual fund flows from that era everybody was piling into like the munder net net fund and janice there were mutual fund families

whose sole line of business was we do growth tech and they were sucking in all there were no etfs they were sucking in a hundred percent plus of the flows and that was that was what Buffett was on the cover. Maybe it was Fortune. It was What's Wrong, Warren was the headline. Yeah, Warren Buffett lost his touch. Holy shit, what a bell ring. I mean, who knew? What a bell.

Yeah. What a bell. All right, next. Keep it moving? OK. So earlier in the show, we spoke about inflation. I don't want to say re-accelerating, but it stopped going down. Let's put it that way.

So Belsky's got a chart showing the financial market indicator. Now, in fairness, I'm sure the stock market is a fairly large component of this financial market indicator. But how do they cut? How do they cut right now with financial? Now the housing market is obviously, you know, anything but, but loose, but everything else is red hot. So what is the reason to cut? That's what I'm saying. What are you accomplishing with a cut? I think the, I don't know. I'm not a macro guy, but the only explicable thing is like,

if you don't have to, if you don't have to be in restrictive territory, then why? Well, I'll tell you why. What about if you lose it and create another bubble in two seconds? Yeah. Neil Dutta, who knows more about the stuff than both of us combined, put out a note today after the CPI report came out. And I didn't read the whole thing, but the highlight was the Fed should just get on with it. And based on the Taylor rule, you would be cutting. Does the Fed really give a shit about the Taylor rule? I don't know, but here's one thing they don't give a shit about. So you can look at the stock market and say, how could they cut now? Guess what? History shows they

don't care about the stock market. Warren Pies has a great chart. He says, one error that many have made the cyclist to believe the Fed worries about the equity reality. History shows that they do not. Seven out of eight initial Fed rate cuts came with the stock market within 12% of all-time highs. That surprised me. Yeah, I don't think I would have guessed that. Seven out of eight initial Fed rate cuts came with the stock market within 12%. I guess that's a pretty wide range. But whatever, but still. Yeah, the stock market, right.

The Fed doesn't wait for the stock market to start going down to cut. They're supposed to not be focused on that. They're supposed to be focused on unemployment and stable prices. Neither one of those are giving you a signal that a cut is warranted. Now, if you want to say money is tighter than it needs to be given the absolute level of inflation, yeah, that's true. But is any economic activity not taking place because rates are too restrictive? I can't think of anything. Full employment, credit spread super tight, stock market everywhere at all-time highs, and they're going to cut?

Yeah, and to the people screaming about inflation and, oh, but home prices, what do you think is going to happen if they start cutting rates? Mortgage rate will price that in same day, and then home prices are going back up. How does that help? help oh you get a cheaper mortgage but but the home price goes up 10 like how does that help anybody right so i'm

not really sure what the objective would be if if we're we're like trying to get six six cuts done this year it's just no one's screaming out for that to happen. Yeah, so I'm with you. Again, I don't pretend to know enough about macro stuff to know. Oh, you know who wants rate cuts? New York Community Bank. Correct. Real estate guys. Real estate guys.

Cry harder. All right. What else are we going to do here? Oh, the Mag7 bench. Okay. How do you find the next Magnificent Seven? I don't know, Josh. Well, I'll. Uh, how do you find the next magnificent seven? Obviously, Josh, well, I'll tell you, do it. Obviously there's a qualitative component to this that requires actually understanding the companies and their brand power and, you know, things that don't show up necessarily

in a, in a, in a balance sheet or an income statement. But it's probably not the worst way to start to look at the financial strength of these companies and use that as like a sifter, so to speak. So I asked Sean, what would be like the bench for the Magnificent Seven? And we came up with a few metrics that we wanted to break this down by. And I kind of like the list that we came up with. Let's pop this up. So basically we started with market cap. We wanted strong stocks. We wanted companies that had revenue growth.

Five-year revenue growth was important to this exercise. And yeah, like you could look at this and say, all right, should Pfizer really be considered here? Well, the answer is yes. They have the growth and they have the size and they have the potential total addressable market where they could be like much bigger and much more dominant. You could say the same for pretty much all these names. Is there anything on here that you just know for a fact could never be a mag seven stock? Not me. But I will say, no, I don't know that. All of these stocks look exceptional with the exception of team. Like these stocks are acting great because the fundamentals are great and it's a good market.

Look at the five-year annualized growth. This is the thing that knocked out every other stock, by the way. This was the end of the exercise. And when you asked for 25% plus five-year annualized growth, we ended up with nine stocks, I think. So that was like the knockout factor. But look, I mean- I'm mad that I didn't follow you into Uber. I said at the time, like, good trade. And I just, I didn't pull the trigger.

It's not too late. It's not too late. I agree with you. I'm not going to buy it, but I agree with you, which means you know it's going higher. The stock's trading wonderfully. Massive gap up after earnings. Didn't even get to the bottom of the wick,

and it's just gone sideways. This thing, this is trading like an absolute champ. You could buy here. Here's what I would do with this list. Not financial advice. Here's what I would do with this list. I would look at the business these companies are in, and I would just ask, like, is this,

could this be something that would justify a trillion-dollar market cap someday in the future? Not now, but is the business that this – now, when I look at Uber, I think transporting people and things and freight and delivering things, yes. That's a TAM globally big enough that could support a trillion-dollar market cap. That doesn't mean they'll get there. Not today. Right, of course. Doesn't mean it's tomorrow.

Doesn't mean they won't f**k up the execution. No, in 10 years, yeah, it's feasible. It's feasible. Another competitor could come along. I'm just saying that TAM could justify a mag-7-sized market cap. So that's the exercise that I think people should do if they're trying to find a stock that at least has the potential. One thing that's interesting, I asked Sean, take the existing MAG7, go back five years. So 2018 would be the start.

And which of the existing MAG7 names today would have even made the cut. And it turns out a 20% five-year annual revenue growth screen would have screened out Apple and Microsoft at the end of 2018. That's kind of interesting, right? Hmm. Um, all right, let's do these charts really quickly. Here's AMD. I'm showing you price up top.

Great job, Sean. And market cap below. So $200 stock, $320 billion in market cap. This is an incredible chart. Next. Full disclosure, I'm long Uber. I think it's consolidating, my opinion opinion before the next move higher. It's only 161 billion market cap.

Yeah, but what's the share price? Well, in dollars? 77. Next. ServiceNow. Do you know what ServiceNow does, Mike? AI. Sure.

It's the same category as like Workday and Salesforce. Enterprise sales, whatever, whatever. Who cares? Yeah, yeah, yeah. Who cares? It's going higher. 160 billion market cap. Bigger than I thought it was.

Next. Here's Fiserv. Holy shit. This is one of the fastest growing companies fundamentally, as JC would say. 88 billion market cap. That is not a lot considering the growth going on here. This stock looks like they're doing AI. Next is CrowdStrike, full disclosure.

I'm long. Best performing name in the cybersecurity group. George Kurtz, friend of the show, not to brag. Everything he said they were prioritizing and working on when I listened to the last conference call it just seemed like a laundry list of things they're executing on

and the TAM is expanding because they're doing a lot more than just cyber so it's $79 billion market cap here's Palantir I missed this one dude did you ever trade this? did you ever buy this? $79 billion market cap. Here's Palantir. I missed this one, dude.

Did you ever trade this? Did you ever buy this? Nope. Do you know anything about it or not really? Defense shit, cyber stuff, AOI. I don't know. AOI. $54 billion market cap, $24 stock.

Not at a new high. What do they do? It was higher new high. What do they do? It was higher in 21. What do they do? I'm sorry, I'm losing your connection. I would explain it, but I can't. It's data. It's whatever.

Atlassian, this is a team, T-E-A-M. I think it's named for its flagship product, basically. But this is $55 billion market cap, nowhere near the 2021 high. 2021 high looks like it was $450 to $200 stock. But if you think this thing is making a comeback, this is where you want to start getting interested, I guess. Wow, $55 billion for a wine company.

That's a lot. All right. Anyway, that's where I would start. Am I leaving anything out on? What else would you put in these metrics to try to find the next Mag7 name? What would you do? What are we missing? I'd probably throw like, I don't know, like an ROE or margin screen on top of it. Okay.

I don't know, but it's great. It's great. To get less companies in there or different companies? But you don't need to, because this screened out almost everything, right? This is like a screen of nine companies. So I think you're good. Yeah. We ended up with nine. We kicked out DoorDash. Or you could relax. You could dial down to 25% because that's insane. How much money would I raise if I launched this ETF, the MAG7 bench ETF? And we do 20 stocks and we equal weight them and we rebalance once, we reconstitute once every six months. How much money would I raise?

50 million in the first 30 days. 500 million. Well, when? Of what period of time? First year. $500 million. Yeah. Because you know I would sell it. Well, go ahead. As long as the market cooperates, yeah, that's fair.

I would be screaming about this thing if it started to outperform. I would be insufferable. I was about to say, you'd be impossible. A lot of my friends would never speak to me again. I'd be that impossible. All right, well, we're not going to do it. You're last. All right.

What do you got? OK. We spoke about this on the show with Todd Sohn. Jim Bianco created a chart. We're talking about NVIDIA, the double-levered one, NVDL. The cumulative fund flows, it's just hilarious. And listen, this is what investors do. So not to be entirely unexpected. So you've got this going on. You've got the magazine cover,

Barron's over the weekend, bet on the bull. For those listening, Barron's magazine cover this weekend. It's a white cover with two bull horns bursting through the front of it. And it says, bet on the bull in bold letters. So listen, you see this, you see the silly behavior, you see stocks up 16 in the last 19 weeks. And understandably so, it raises alarm bells. Listen, it does for me too. I'm not going to lie. I don't love seeing this. However, we have fine people on the internet that actually look at the data and say, is this meaningful? Does this matter? Is this in and of itself a sell signal?

And the answer is, it's not. Not saying that this one won't be, but just when you see a bullish cover in a bull market, it's not always the end of the bull market. So Sentiment Trader tweeted, so many are pointing to this economist cover as a contrary indicator because the economist is doing too. How high can markets go? I've tracked every cover since 1998 and graded each one that indicated a clear forecast of a tradable market. Their batting average is 47%. Over the next year, bullish covers led to a 60%

win rate and a 9% average return. So, okay, what else do you need to know? Not great and not terrible, but a few cherry-picked examples does not a strategy make. Our friend Ryan Dietrich added here, a lot of worry about a bull cover on Barron's this weekend, but note that Barron's has had many bullish covers and been very right over the years. In May 2013, I remember this one. In May 2013, when stocks were just breaking out to no all-time highs, they said this.

Trust me, most are still bearish after the great financial crisis. So in 2013, at down 15,000, this bull is room to run and people are losing their fucking minds. And guess what? It's been pretty good since then. So- More than doubled. So again, I'm not saying that markets on frothy overheat are due for a pullback. We are definitely due for a pullback, but don't make decisions based on magazine indicators. Magazine indicators are great for being a snarky asshole on Twitter. Could you imagine

you're sitting face-to-face with somebody who's managing your retirement money and his investment strategy is fucking magazine covers? Like you call yourself a professional, you son of a bitch? This is what you're doing? You're looking at cartoons of bulls and telling me to take some off the table because there's a bull on the cover of a magazine. Now, listen, it shows you where sentiment is. Yeah, things are frothy. We don't need a magazine to know that. We know things are frothy.

Yeah, we could just look at stock price. We don't need to know what an editor called an illustrator for their latest cover story. If you've been fading magazine covers since 2009, you're in big trouble. Similarly, put this Granite Chairs thing back up. Long NVIDIA double. So we had FAS before you people were even born. I was training.

I know you were. We had a triple bank ETF. Bear and bull. F-A- had a triple russell 2000 etf before you were even born so don't you show me double nvidia kiss my ass with this all right out chart off um who's making the case me or you i forgot i'm making oh yeah i'm just looking at fas is that Is that thing still? Let's see. $2.2 billion in FAS. That's the bull. The bear only has $160 million in assets.

So it's a bull market. It's a bull market. All right. I'm breaking my own rules because you got to know when to break them. Right? You got to know when to break them. Of course. The young man knows the rules. The bald man knows when to break them.

Am I right? Yes, I like that. All right. So charts on, please. These are two stocks that I bought recently. I think I bought Hershey two weeks ago, maybe. And I bought Bristol-Myers, maybe around the same time. You're buying below the 200 there? I said I wasn't going to do it.

I said I wasn't going to do it. But I also said that if I was going to buy a stock that was in a downtrend, I was only going to buy a stock that I was willing to hold if I was wrong. And these are two stocks that I'm willing to hold if I'm wrong. The story with Hershey is very simple. This is an Ozempic beatdown, and it's also chocolate prices, cocoa prices at like 400 You're going to start tracking cocoa prices now. At like 400 year highs.

Guess what? Hershey ain't going anywhere. Technically, the stock looks good. I feel good about the purchase. And Bristol Myers, quite frankly, I don't know what they do, but I'm sure they're not going anywhere either. And I see a double bottom and I bought the stock and I'm sticking with it. I don't really know what they do. You really made the case beautifully. Dude, I'm here to make money. I'm here to make money. I think you'll make money in both, actually. I don't hate it.

It's not for me, but I think- You fucking bought Pfizer. What do you mean it's not for you? You're literally in the same trade. It is for you. You're in the worst version of this. It's not the same, though. It's not the same trade.

Don't tell me your fundamental nonsense. Wait, it's the same fucking thing? Hershey and Pfizer are the same trade? No, Bristol-Myers and Fire. Same exact thing. It's not for me. You're in the same trade. We'll see.

We'll see. We'll see. Well, I do agree with you that they both are in a similar – both have similar-looking charts. Bristol-Myers looks better than Pfizer. At least it's picking its head up off the mat. Pfizer is still laying on the mat covered in blood. There's a gap at 56. That son of a bitch is getting filled.

I have a mystery chart for you. Let's do it. All right. Let's put this up. Ooh. Now we're talking. Yeah. Is this Bristol Myers?

No, dude. I'm kidding. Doesn't look too dissimilar. All right. Are you giving me a clue? Yeah. I just, I wrote down some clues. Let me just, let me see what i wrote that i wanted to do here

there's an audience you know no i know all right all right so what's up guys uh here's what's all right here's here's what's it here's what's interesting let me see this asshole here's something here's something about this and i have a few charts that i'm going to pop up after this is a left for dead technology stock. I don't even know if you would consider it tech anymore. But in its day, it was one of the hottest technology stocks. There have been activists in this stock that have walked away and given up. It's one of the longest running internet companies.

And I recently bought some. And I think technically there's something really interesting happening here. So I'd like you to guess, please. No, no, no. I need more. It's an internet company. Long running. Oh, it's long running.

Oh, it's long running. Okay, that helps. Tell me what you would want to hear about it. What would be a clue? Can you give me anything? Can you give me anything? I felt like I gave you. It's a long-term publicly traded internet company. How many of those are there?

How many of those really are there? That's what I mean by long running. It's been publicly traded for 20 years, okay? And it's an internet company. There's not 50 of those, dude. It's an internet company. What does 50 of those dude it's an internet company what does that mean what do they do they it's like a website i'm not even i'm not even messing with you uh all right we have some guesses in the chat somebody said netscape that's really funny

somebody said aol also funny it's like that era Okay. No, don't type it in to see if you're right before you guess. That's not how we play this game. What are you typing? Obviously, I'm looking at the charts. That's how I play. No, you have to just guess. That's how I play. Take one guess.

All right, I know it's right. You know what? No, how about this? I'm not even going to guess. I'm not even going to guess. Pathetic. I would have gotten this. With what I've given you, what no how about this i'm not even gonna guess i'm not even gonna guess pathetic but i would have gotten this with what i've given you i would have gotten this it's a it's an internet company that's been around for 20 years all right when i do the reveal when i do the reveal try not to jump out the window come on dude this wasn't that hard this wasn't that

hard now think about the clues i gave you ebay. Look at it. Yeah, it's an internet. Look at it. That's no, it's a, I said, it's one of the oldest internet companies. There's not that many of these. I like, I like the chart. I like the chart. Put it back up. What do you, what do you think, dude? I like it. I like it. This is an earnings. This is an earnings beat. Um, stock took a breather today. Uh, I don't really see any resistance here. This is like, to me, this is 10 times earnings. All right, so how are the fundamentals? Terrible.

I mean, they're fine. They're not great. They're not bad. They're paying a dividend, 2% yield. They're buying back stock. They're growing at 1% a year. You know what happened to eBay, honestly? Facebook markets came along and just sucked up all the users. So that's why the stock, that's why the company can't grow because their new competitor is Meta and Facebook users

are buying and selling each other's junk on the site instead of going to eBay. But eBay does really well in some interesting categories like sneakers and luxury goods like Louis Vuitton stuff and watches. And it's got some really big markets that do really well. I think the gap at 44, no offense, is going to get filled. Maybe. I have a stop-loss in on this. Next chart. This is eBay versus the Qs over, I guess this is the last year.

So it, it, it did nothing. It did nothing. It did nothing. And now it seems to want to play. Um, do we have one more?

Oh, throw this up. Yeah. So this is just one year. If I, if I took the ticker off this again and showed you the stock, you would say, buy it.

You would like, if I didn't, I didn't tell you what it is. I didn't tell you what they do. And I said, what would you do here, buy or sell? You would say this thing's going, right? Maybe. I wouldn't say sell it. All right, last chart. I'm showing you a golden cross here.

This is the 50-day moving average crossing above the 200-day literally yesterday. All right. Literally meaningless, but okay. You don't like golden crosses? What's the matter with you? Not a golden cross. I'm just, you know, I'm a data guy. The data doesn't confirm. Nothing. Hey, everybody. Tomorrow is Wednesday, which means another all-new episode of Animal

Spirits with Michael and Ben coming your way on Thursday. We will do Ask the Compound with Ben and Duncan. On Friday, Mike and I are back to Compound and Friends with another amazing guest. And Jill on Money this Saturday. We have a full slate. Make sure you keep hitting the like button. Make sure you leave us comments and reviews and all those good things.

And we'll see you very soon. right financial plan to speak with a certified financial planner today, visit ritholtzwealth.com. Don't forget to check us out at youtube.com slash the compound RWM. Make sure to leave a rating and review on your favorite podcasting app. If you love investing podcasts, check out Michael and Ben every Wednesday morning on Animal Spirits. Thanks for listening. Michael and Ben, every Wednesday morning on Animal Spirits. Thanks for listening. Ritholtz Wealth Management is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Ritholtz Wealth Management and its representatives are properly licensed or exempt from licensure.

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