The Compound and Friends - Fixing PayPal With Dan Dolev, Stop Crying and Buy Bonds

Episode Date: October 31, 2023

On this episode of TCAF Tuesday, Downtown Josh Brown is joined by Dan Dolev to discuss Paypal, SoFi, Affirm, and the latest in Fintech! Then Josh teams up with Michael Batnick for an all-new episode of What Are Your Thoughts. See what they have to say about a 4th quarter rally, the American economy, interest rates, dumb money, Apple's M3 chips, and much more! Thanks to Public for sponsoring this episode! Go to https://public.com/compound to lock in a historic 5.5% yield on your cash. Watch this episode on YouTube: https://youtube.com/live/p_l---n_Bhk Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Ladies and gentlemen, welcome to The Compound and Friends. I'm your host, downtown Josh Brown. On tonight's episode, we'll be talking to Dan Dolev of Mizuho Americas. Dan is covering some of our favorite names that we talk about all the time from the fintech world. And we're going to get into PayPal. We'll get into payments and credit cards and SoFi and all kinds of good stuff. Following that, it's another edition of What Are Your Thoughts?

It's me, it's Michael Batnick. Everybody's in the background doing their thing. I think you'll have a lot of fun. Thank you so much for listening. We'll see you soon. Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion

of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Okay, we're here with Dan Dolev. Dan is the managing director at Mizuho Group. Mizuho Capital? Mizuho Group? Mizuho, yeah. Mizuho Group or Mizuho Americas.

Let's call it Mizuho Americas. How long have you been there, Dan? Been here actually north of three years now. So I started it in the depth of COVID. Okay. And it's been a great run. Good for you. All right.

So you cover a lot of fintech, a lot of credit card, a lot of payments. These are some of the more interesting stories in our world. And I wanted to have you on. We're in the middle of earnings season and just run through some of the bigger storylines and some of the reports that you've seen so far and what you're thinking is going on. I just want to start from the top down, just the state of FinTech. It appears that multiples have come down. Not very surprising, given how quickly interest rates have gone up. And in the end, a lot of these companies are

deeply involved with finance and the consumer. And we've seen that away from FinTech as well. But what would you say is like the current state of the FinTech space for investors? I think it's a depression galore. So I think that good, huh? Which is the opportunity, which is things are great, right? That's the opportunity. I think we're, I think we're in like the absolute bottom or rock bottom from a sentiment perspective. Everything that could have gone wrong has gone wrong to these names. Higher interest rates, you called it. People hate the lending names.

Gap profitability, a lot of the names are not profitable. We'll talk about it in a second. Profitability is hitting them. Some names are structurally challenged, like a PayPal or Square. There's like some negative narratives on them. So I feel like with the exception of the networks, pretty much everything in this space is kind of in the, all the tourists have left and there's a lot of like, you know, in the sort of do not touch zone, unfortunately, because I'm bullish on a lot of those names. So I think some of this is also where these stocks started from. You know, they,

2021 was like the peak of just belief in disruptive technology in every, in every segment, financial services was just one of set. We saw this in automotive. We saw this, you know, pretty much across the board. So the starting valuations going into this period of challenging fundamentals made it worse. There's a lot of enthusiasm for these stocks. Some of it founded, some of it unfounded. And a lot of these things came in valued very highly where there was no margin for error. And so then you throw in all of these fundamental issues and it just, it was almost like double trouble for investors in the space.

I totally, I could not agree with you more. I mean, this is the way I think about it. We're experiencing a post COVID hangover. And for these names, there's so much capital have flown into these names in 2021. And because COVID is such a round trip, we're seeing the other side of it. And that's why I think we're actually at the bottom. And there's so many interesting opportunities from where we are today. All right, let's get into SoFi reported. It looks like the street was happy with what it saw, at least the last time I looked. I know things can change quickly. They did. Okay. So tell me what's going on with SoFi.

This is now a $6.82 stock. It's really remarkable where that stock has come from versus where it is today. Or maybe it's not that remarkable in your opinion. But this is a company that just reported it, and I think the results were good. What did you see there? The results were excellent. I mean, I think the title of our little flash this morning was utterly strong. I think this is everything you would have wanted to in a fintech slash bank stock, right? So deposits are accelerating to an all-time high.

They're having more and more people use them as their primary bank. By the way, people in my industry, when I go to host these dinners and lunches with the hedge funds, they use SoFi as their primary bank. Okay. Every product is accelerating. How many users do they have for core banking SoFi right now? They've got – actually, I have to go back and look into this. They have $15.7 billion in deposits. The difficulty with the users, Josh, is that they don't give you a MAO equivalent. So I think that number is a little bit misleading. Right. Not everybody checks their bank account every month. or Venmo, or one of these guys, or Coinbase, where they give you a monthly average user.

So I would look less at those number of users. I would look more into the inflow of deposits, which is going up. And so the breadth of their offering and their personal loans, student loans tripled. Literally, student loan origination tripled in the third quarter. So walk us through that. There was a moratorium on the need to make student loan payments that came from the pandemic era. And the Biden administration wanted to almost like wipe these loans out or some elements of the Democratic Party, but it didn't go that way. And as of this month, the need to make those payments resumed. And this has big ramifications for the whole economy. But what are the ramifications for SoFi with the student loan payments turned back on?

Yeah, exactly. And remember, we talked about it in August, I think, on CNBC. And you asked me about the opportunity. And I told you, listen, this is going to be a huge temp. So there's a few hundred billion dollars of student loans, which are basically have to be refinanced right now because people are starting to pay them back, right? And some of them are coming due. And then what you have to do is even though interest rates are higher, you have to sort of kick the can down the road and refinance them. And SoFi has like a double digit market share, I think somewhere in the 25, 30% market share in terms of their student loan refinancing market. So they're good at that. They're very good at this business.

This is one of their core businesses. A lot of people, even though student loans, as they see the payments resume and as they see the student loan that they have becoming due and then they have to pay it off, they're going to have to roll this, like kick the can down the road and refinance it. So they're going to SoFi and they're saying, hey, I need to refinance this student loan. And that's what SoFi does for them. So you literally saw volumes go from like 350 million to 900 million in the third quarter, just the sheer of refinancing volumes. Pretty remarkable. And I don't think we've even hit the real inflection point that's coming in 2024 in terms of that. So that's one catalyst that's already played out.

So a lot of people would look at this and say, well, why is it a six dollar stock? And I think the two obvious three obvious obvious answers are number one, the entire financial industry has stocks that look like this number, you know, for the reasons we've gone through. Number two, there's talk that SoFi will eventually have to raise equity capital and dilute existing shareholders. And I want to get your take on that. And then number three, you know, again, it's just not a gap profitable company yet. And they seem to get your take on that. And then number three, again, it's just not a gap profitable company yet. And they seem to be on the road to get there. But we've seen this in other sectors where you had companies with good growth and a great brand just not quite be at gap

profitability. And in this environment, nobody even wants to hear that story. But I think you're talking about when they get to profitability, that in and of itself being a catalyst. So let's start with the equity capital raise potential. You don't seem terribly worried about that as a negative catalyst. No, and I actually want to add a number four in a second. So remind me of that. But to your point, we've actually done very detailed work that shows you that for every $100 million of gap profitability, they can lend out another $800 million of loans because there's a very strict capital ratio. Remember, they're a bank, so they have to adhere to these strict capital ratios. They could have been almost gap profitable in the third quarter, nearly. I think they had

like a three cent loss if you take out a goodwill impairment charge that they had to take, which means that given that the incrementals, like the EBITDA incrementals are actually moving up in the fourth quarter, I could see literally almost zero chance that they're not going to be gap profitable. And as gap profitability in 2024 increases, it actually increases their ability to make loans. And this is like all these things are intertwined. And this is what I want to explain to you is because when they make more money, they can extend more loans. The worry about them heading into the third quarter was that they would not have enough bandwidth to continue to make loans because their capital ratios are getting too stringent. And what you saw here-

Borrow money in order to grow or raise money in order to grow. Or raise capital. Right. Exactly. Or raise capital. And the work shows you, or actually literally the work that we predicted, they still are above the 10.5% buffer, which is the capital ratio, the minimum required capital ratio. They're about 400 basis points above that. So even let's say worst case scenario that they don't turn GAAP profitable in the fourth

quarter, they still will not have to raise equity because they've got enough runway to continue to make loans and they're well above that minimum required capital ratio. This is a very, very important point to keep in mind, although I see virtually a 0% chance that they're not going to be get profitable in the fourth quarter. What would be so terrible if they came out and they were able to dilute, but immediately take that capital they raised and put it out there with an ROI attached to it? Would that be like the end of the world? It seems to me that that's already baked into the stock price anyway. Yeah, I personally don't think so, but people don't want them to dilute a stock that's at

like six, seven bucks. I think that's the issue. If we were sitting here at 15, which is my price target, I think it would be a different story. People would be like, bring it on. What's the other overhang on the stock you wanted to mention? It's all interrelated, Josh. I think you're honing.

What I want to say is that I think a lot of it has to do with SVB earlier in the year. Remember, they are a small bank and they're sitting right in between small banks that people hate because of SVB and fintechs because people hate that they're fintechs. Remember Screech from Saved by the Bell? They're getting hit. You know, they're getting like, you know, they're getting like a slap no matter where they go, they get slapped. They're in the war. Right. They're a hybrid of literally the two worst things you could be right now. You look at the banking sector, the regional banks, the thrift banks, they're all cut in half this year.

Even the big ones, nobody wants anything to do with that. SoFi has a little bit of that taint. And then there are FinTech and the FinTechs, all of them have cratered this year as well. So it's almost like to your point, if you consider yourself somebody that's a value investor, or you love to buy pessimism, this is it. This is ground zero. All they have going for them positively is the football stadium right now in the consumer's eyes. Okay. Exactly. Exactly. I mean, at least they're not involved with SBF. I think that's like the one thing that I'm happy about, right? Like this could have been the word. They missed the crypto bubble. Okay. They missed that one. Fortunately. Okay. I want to keep moving. I want to talk about payments.

PayPal is an incredible, incredible situation to me. Either that stock's going to 25 or it's going to 100. I feel like it's almost binary. It's either going to get cut in half or double, and I have no idea which bet I want to place. This stock is now on an enterprise value to EBITDA basis. It's literally cheaper than it has ever been. It's trading about our numbers nine times EV to EBITDA. Has that gone too far? Is that too much? I agree with it. And I think you said something really smart when we were on TV. You said, Dan, isn't it the IBM of payments? I think a lot of people think of it like that. That's how I think of it, but that could be dead wrong.

No, you can. I mean, look, there's a lot of people that think about it and there's, you know, if you think that the, what is the biggest overhang on PayPal right now? It's Apple Pay. Apple Pay on people's websites. Yeah. That's it. That's it. And I'm not saying that they're executing as such that right now the issue with PayPal is that there's a lot of misunderstanding. Let me just kind of like unpack it really quick in like 30 seconds and you'll see what I'm talking about. Part of the reason the take rate, which is kind of the revenue they earn on the volume, is coming down and a big part of it is because they have an ecosystem called a business called Braintree, which is basically a e-commerce merchant acquirer where the take rates are like 20, 30 basis points. That compares with the branded checkout where the take rate is like, you know, 200 basis points, right? So as that business grows like five, six times faster

than the branded checkout, not because the branded checkout is growing slowly, but because this business is growing abnormally high. The branded checkout is growing slowly, but because this business is growing abnormally high. So Braintree is like a B2B business that enables websites to take payments versus having the PayPal button on the site. So this is the interesting thing. Have you heard of a company? You've heard of it, but I don't know if the audience has heard.

Audien in Europe. It's a very Audien. It's a European merchant acquirer that just does e-commerce. They used to trade in an outrageous, I don't know, 30, 40, 50 time multiple. Basically, Braintree is competing with them. Braintree came in and is crushing Audien. Look at the Audien stock price. It's gotten cut in half just because of Braintree. Did you remember what happened with Worldline last week in Europe, when the stock was down like 50, 60%? I didn't see the news why, but I remember.

Same thing. I think it's also victims of Braintree. Braintree is at a price war with every e-commerce merchant acquirer, and they're gaining massive share, but that creates a near-term dilution in the take rate. What percent of PayPal's overall business is Braintree right now? Is it a quarter? So volumes, well, revenue, it's probably volumes are probably around, I think volumes are probably around a quarter, but it creates a big drag on revenue, remember, because it's coming in at a much lower take rate. It's a smaller take rate. Okay. So faster growing, but smaller take rate. Correct. But it's faster. But get this.

When they go on these websites that they're gaining share, and let's say Nike.com or Target.com or you name it, they're actually helping to promote the checkout button higher. So they're doing a bundle, a bundle between – so they're telling you, I'm going to give you a better deal for Braintree for merchant acquiring e-commerce checkout, but I want you to give me a bundle for the branded checkout. So they're protecting their share against the Apple Pay. So it's a smart strategy. So they're saying, we're going to give this bundle to you, but we want there to be a PayPal button

prominently featured. Higher up. Prominently featured. And that's a reason to get in charge. You want to hear the best catalyst for the fourth quarter and why I think this thing is going to rip? Timu. Timu is the Chinese.

Dude, I know a little bit about this. So let me just tee up the audience. My son says to me, dad, give me your email address. I have to put it into this app. I'm like, what kind of app is it? He goes, I don't know, some Chinese thing. I'm like, okay, so that's not going to happen. What are you doing with a Chinese app? He said, I'm trying to win this necklace. How do you win the necklace? I need like 50 people's email addresses and the people have to opt in. So he gives like grandma, grandpa, uncles, aunts, he gets them all to click on this link. It takes him hours to get 50 people because he's 14. He gets it so that they will mail him like a plastic gold chain or something. I don't really fully understand what's going on there. But he keeps saying my Teemu, my Timu. What is Timu? What is this?

Timu is like Amazon, just 80% cheaper. All you have to do is wait a couple of weeks. It gets shipped directly from China. My wife bought a bunch of stuff for our dog. You just have to have patience. It takes two to three weeks. It gets there, but you can get a wallet for a dollar. to three weeks. It gets there, but you're getting like, you can get a wallet for a dollar. It's like the 99 cent store of China, but it's massive. So I was in a meeting with the PayPal CFO in September and I asked her, she's great. And I'm asking her, you know, Gabriel, like what markets are doing well? And she goes like, China is really strong. And I was like scratching my head and I'm like, every news I hear out of China isn't good. Right. So then we went back, me and my team, we went back and, and, you know, Ryan, Ryan, Ryan Coyne and my team and I were sitting there and we're like, what could it be out of

China? And we found out that Teemu is a huge share gainer, gaining share from Amazon and PayPal is a huge partner for Teemu. So, you know, on average, like you have like 20, 20, 30% market share for PayPal on these e-commerce. So as Tmoo is growing vertically in the US exponentially, this is going to be, I call this the November surprise for PayPal, that branded checkout take rate, which is what Tmoo is getting, is going to accelerate in the fourth quarter. When do they report Q3? Is that out already? Pretty sure next week. Next week. Okay. But you're saying this is more of a fourth quarter catalyst

that will show up in February. Actually, sorry. I apologize. They're reporting Wednesday. They're reporting this week? No, you're going to see that Wednesday. Okay. This Wednesday, two days from now. All right. Where do you think PayPal should trade if and when these catalysts start to get priced in and people stop being so negative on the name? Does it belong much higher or should it just stop going down? Or what's your feeling? I think it should probably double. I mean, I have a $92 price target.

Okay, it's $51 right now. Yeah, I'm a huge bull. I think this is… What do you think of the new CEO? They have a new CEO. He's a guy that has done important acquisitions. Is it meaningful to you as somebody covering the stock? Does that mean the likelihood of a transaction is higher or not necessarily? I don't think so much of a

transaction. On our team, we actually surveyed 50 institutional investors and we asked them three important questions. One, do you think PayPal is fixable? 85% think it's either yes or maybe fixable, which is good news. And then we wanted them to give the two biggest things that they think you should do. So the first thing people said is combine PayPal and Venmo. Combine the networks. Not a lot of people think of Venmo. Everybody uses Venmo. People don't think of Venmo as combine the networks. Not a lot of people think of Venmo. Everybody uses Venmo.

People don't think of Venmo as part of PayPal. So if they combine the networks- I think they should change the name. Honestly, I think they should change the name of the company to Venmo. I said it six months ago. I agree. I totally, I could not agree. That's a bigger brand name right now than, PayPal has a big brand, but it's very narrowly used for e-commerce. Venmo is like a part of our lives every minute of every day. Yeah. Venmo is the U.S. Alipay, right? It's the Alipay of America.

You think they're even thinking about that? They must be. They must have considered it. That's why we put the survey out because what we wanted to do is basically almost sort of in that chess game, go to the new CEO and say, you know, before you say something that you were going to regret, take a look at what your institutional investors are saying. What were the other things that the investors said? Create a global digital wallet. So take that PayPal Venmo combined network and take it to create a global digital wallet.

network and take it to create a global digital wallet. And basically, you know, because if you think about it, if you're just a checkout, you know, like if you're just like a checkout machine, you're basically doomed to be a short forever. You're a commodity. Because take rates are coming down. Commodity, commodity, commodity. But if you are like a, you know, that's why I like. By the way, by the way, there's shop pay. There's Apple pay.

There you go. Theoretically, Google pay. everybody could have a button there. So why is your button better than someone else's button? Because somebody remembers their password for it? Exactly. It's only better if you have the form factor, which is Apple, but you can't. You're not going to come up with a PayPal phone. So if you're not going to do that, your alternative is to become people's financial center.

So think of Venmo and be like, I want to pay my babysitter. I'm going to send her Venmo. I'm going to pay you. We're going to split dinner. I'm going to Venmo you. Take that power of Venmo and just widen it globally. And that's the best competition. I think that's what Elon's trying to do with x.com. PayPal is a huge competitive advantage. So then they have to buy a few things they probably have to buy a brokerage firm and they probably have to buy a deposit uh and like a neo bank i mean they certainly could i don't know if they could buy a huge one but yeah they have a i mean they they have a pretty i would say their their execution when it comes to m&a has been pretty or their history

hasn't been good right i mean i remember they were floating a rumor like that they wanted to buy pinterest and i know people looked at each other like have these guys lost it i think the stock never went up a day after that oh it went down six percent it went down six remember when they bought when they bought Honey? So I didn't cover them at that time. Honey was like – it's like an e-commerce. So my – I never – I actually didn't cover them. But I thought if I had covered them at that time, I would have – the title would have been Honey, I Shrunk the Tam.

Right, exactly. Wait, so you think though that they're going to figure – they're going to listen to the street and they're going to figure it out? I hope so. I hope Alex does that. There's no activist in here anymore. Elliot came and left? There was. Yeah, Elliot came and left. Why did they leave?

It feels almost like they've – I mean I don't know, but it feels like they maxed out on – Yeah, they gave up. I mean you said it. Yeah, I mean because they were in out on the – yeah, they gave up. I mean you said it. Yeah. I mean because they were in there for the cost cutting, and I think that PayPal executed pretty well in the cost cutting. I don't think they were in it for the growth. And I think the next level – They got a new CEO though, so maybe they were involved in that too.

Yeah, yeah. And again, I don't think anything that Schulman did – I don't think Schulman did anything wrong. It's just that it was too good during COVID, and then they had to think about the next thing. So I don't really think it's Shulman's fault. I think this is something that- Yeah, the comps were tough, and then your primary competitor becomes Apple. It's just like, what do you want from me? Yeah, and I don't think Shulman did anything wrong. Yeah. One thing about Elliott giving up, though, that I said at the time, it doesn't matter anymore,

but I said, do you understand how bad this situation must be? Elliot is an activist that I think the government of Argentina owed them money on bonds and couldn't pay. So they like took a warship from them, like literally took possession of like a warship and a Harbor. I don't know if that's the true story, but something to that effect. So I said like, if, if these guys, this must be a terrible situation. I want to make sure that we, uh, speaking of warships, you know, I I'm from Israel and it's obviously terrible what happened in Israel, but you know, Netanyahu was indicted for stealing a submarine from Germany.

So I'm not surprised what you're saying. So these things happen. I want to make sure there's two others I want to get to. Let's do Coinbase. Sure. So it looks like a Bitcoin ETF is a fait accompli at this point. Like it's just really a matter of when. Okay, fine.

Coinbase is going to be the custodian or involved in custody in some way for the BlackRock product, which my assumption is will become the most popular Bitcoin ETF out of the gates and probably forever. I'm speculating on some of this, but follow my logic. Coinbase probably pops if and when that happens because they'll be affiliated with a really big product. But then I feel like people are going to look at it twice and say, wait a minute, this is going to cannibalize trading volume that would otherwise be a retail Coinbase trader. is now going to trade the ETF away from Coinbase in a regular brokerage account, Coinbase makes all of its money having retail buy and sell on its platform at what I would consider to be egregious trading spreads. So why would this be positive for Coinbase? I feel like the ETF is terrible for Coinbase. What do you think of my perception of that? I think two things. A, I could not agree with you. Three things. A, exactly my logic. And that's B, I think the stock already popped on it. So I think we're in the other side of the hill.

I think it's actually going to- Oh, wow. Okay. Yeah. It's everything you're seeing until now has already been, that's why the stock is in the 70s or it was in the 80s. And because of this huge, you know, the market already like discounted everything that we're saying. And as soon as the Coinbase or the Bitcoin ETF comes out, which I agree with you, it's fait accompli,

this thing's going to go straight down, hopefully to my price target of 27 and three. I mean, what Coinbase is doing is basically, they're in the business of selling ice baths in Alaska. Yeah. Like, you don't need that. You could just, like, dig a hole and jump straight into the ice, right? Yeah.

So they're selling you something you can basically get for virtually free on Schwab, on Fidelity, on BlackRock, wherever you want. And by the way – Exposure to crypto. You can now – or you will be able to do that anywhere. By the ETF. By the ETF. By the ETF. Yeah, by the ETF. And also like – and by the way, so they're saying we're the custodian.

But remember, the custodian fees are a fraction of a fraction of a fraction. Yeah, it's not a great – even if this is $100 billion ETF, that's not a great business. Exactly. Who's in that? Who's even – Bank of New York is in that business. That's like a plumbing business. Single digit. Yeah.

Single digit or low double digit take rate versus 200 basis points. What about the argument that the ETF, though, is going to begin the next renaissance for crypto digital assets and Coinbase will get the halo effect from just increased enthusiasm for the asset class. Even if they lose some of their retail traders to a Fidelity account and an ETF, that's fine. Because look, now the asset class is legitimate and institutional trades will take place as a result that have maybe been in hibernation since SBF and all this other shit happened? Like, is that a legitimate argument for Coinbase or not really? It is. However, I think retail investors have been so scarred by the Solanas and the Dogecoins of the world.

And I think retail investors are not as dumb as people think they are. And it's kind of going back to the dot-com bubble. It took people years to come back and trust some of those pets.com. And it's the same thing goes for those shit coins. It took the NASDAQ 20 years to get back. And it was different stocks when it finally got back. Exactly. Yeah.

So I think you'll have like a world of Bitcoin ETF. And again, I don't have personal views on Bitcoin itself. It is what it is. But the derivatives of trading off of Bitcoin, I don't think are going to work. And charging money for that is definitely not going to work. Uh, these are tough from like, I guess the question here is not, do you buy or sell the stocks? I know you have an opinion there, but like the bigger question is, is there any evidence in anything that either of them have said that we're really seeing this long awaited consumer slowdown or is the consumer just moving one type of spending into another type? And there really isn't any sign, uh. Because this has ramifications that go beyond the stock prices of the credit card companies. This is really just more about the overall

environment. What do you think based on this last couple of reports? Yeah. So they just reported last week. And a couple of things I have to say. First is it's all beta. There's no alpha in investing in these two names, right? It's just a macro call right now, basically. That's the feedback I'm hearing from investors. There is literally, I mean, things have- Sorry, meaning they're going to rise and fall with what the economy does, period. Exactly. Yeah. That's why I like Affirm because there's beta in it, or you could debate Toast because there's beta in it. Here, there's no beta. It's just alpha. So that's the first thing. The second thing is,

there is no evidence of any broad slowdown whatsoever. And I've asked the CEO of MasterCard on the call because there was rumors about like slowdown in Germany, and he kind of refuted it. So things are maybe a little slower, but there's no evidence of like the R word coming anywhere close to where we are based on the commentary from either Visa or MasterCard as of last week. Okay. Let's do Affirm. So this stock has absolutely cratered. I think part of it is it just came out at the wrong time. Like it came out into a bubble and the expectations were, you know, outrageous in order to justify that valuation. But that's a long time ago. Has this lost 70% of its market cap? How much of the market cap has been lost since the peak on Affirm?

Yeah, I mean, it's down probably 70, 80. I mean, it was crazy in 2021. I mean, you can't even compare 21 to, I mean, Coinbase was at 300 bucks, right? So it's a $5 billion market cap now. Right. Tell us what the latest in Affirm is and why you like it.

Yeah, let me tell you. So people view Affirm and they think of like a buy now, pay later company. I don't think of it like that. I think a firm is doing, a firm is like the next super successful digital wallet in America. So what, what Max is doing, and I'm a big fan of Max, I'm a big fan of the firm. What they're doing is they're getting, they're doing what, for example, the cash app failed to do. They're getting into these, they have a card now, which is a hybrid debit slash credit card. No one else has it.

So you could decide real time if you want to finance it over time, or if you want to actually debit it from your account right away. So it's like a cash management. It's called the Affirm Card or Debit Plus. They're offering you more and more banking services. So I think what we were, we're sitting here talking about what Alex Chris can do at PayPal. You know, Max is not sitting idle. He's actually doing it. So he's doing, he's creating the Alipay of the US from a point of a

disadvantage because he doesn't have the brand or the breadth of Venmo, but he's working on it. So I think that's like one of the best idiosyncratic ideas. It's stock that could double or go even higher because they're so active at pursuing. What's the risk in a firm right now? It's 15 bucks, the stock? Yeah. Where is it traded?

Yeah, it's right around- 17. 17, yeah. I think the risk in a firm- Not profitable yet. And we don't know what the valuation should be. Higher interest rates. Yeah, I think the risk in a firm- Not profitable yet, and we don't know what the valuation should be. Higher interest rates. Yeah. I talk to them. Look, people are worried about delinquencies. I track them every month, and you see that in my research. Delinquencies are fine. The ABS is fine.

I think the biggest worry right now is that the higher for longer is going to crush every lender. That's the key risk, right? Even Anthony Noto was talking about it today. For everybody in this space. For everybody. But if you're like JP Morgan, it's not as big of a threat to get the flu than if you're already like a small company. So I think people are worried about that. I am not. I've done the work.

We've done the work, and it shows you that at 5 and change percent, that's not a worry for their profitability. So they can continue to make those loans and underwrite better than anyone else. Now, if rates go back to like the 70s era, then we should have another podcast. That might be a game changer. Then you'll be watching Bank of America blow up and what happens to a firm will be beside the point. Exactly. Then it won't matter. Then probably I won't have a job. So we're going to be- We could do, right. In that situation, in 18% Fed funds rate, you and I could do podcasts all day. It'd be nothing else. All day long. Exactly.

Hey, Dan, there's so much else I would have asked you, but I want to be respectful of your time. Love to have you come back. Thank you so much for checking in with us. Where could people follow you outside of the research from Mizuho? Are you active anywhere on social or do they keep you under wraps? I'm under tight control, usually on LinkedIn. I post everything we put on LinkedIn and I should get better with like Twitter. Okay. No, you're good. LinkedIn is better for you. I crush LinkedIn. Better audience for you, dude. I'm a LinkedIn troll.

All right. Dan Dolev of Mizuho you, dude. I'm a LinkedIn troll. All right. Dan Dolev of Mizzou Hello America's, ladies and gentlemen. Thanks so much, Dan. We'll talk to you soon. Thanks, Josh. All right, all right. Welcome to the What Are Your Thoughts Halloween Spooktacular. Starring Michael Batnick and me, Fetty Krueger. I almost went with Count Spacula. Would that have been funnier?

Oh, man. Count Spacula might have that have been funnier? I never. Oh, man. Count Spacula might have been better. All right. We'll save that for next year, though, right? I spent 10 minutes trying to come up with something, and I was just drunk blanks. Very blanks.

You should have called me. I had extra names. All right, guys. So nice to be here with you all. Big shout out to the commenters. Thanks for everyone who joins us every Tuesday evening at 5 p.m. for the live. We really appreciate it. We have so much to do today, still in the midst of earnings season.

We do have a sponsor I want to shout out as well. But before we do anything else, I just want to remind you, parents, check your children's candy before, right? What's the thing that you're supposed to tell people on Halloween? Check the candy. And what's the other thing? That was like a thing in the 80s, right? Why? Nobody's messing with the candy anymore?

I don't know. Well, it's all a trap. Nobody gives out apples anymore. I have a confession to make. I never check my kids' candy. Not even one time. You check your candy. Welcome to the real world.

Check your own candy. All right. Michael, would you like to tell us who the sponsor of the show is today? It's public.com okay same thing yields the yields are getting extra spooky uh i just thought that made no sense so the title of today's show is what what are we calling this thing stop crying and buy bonds yeah all right well i'm crying buy bonds what about, that's right. All right, well. Stop crying. Buy bonds. What about bills? I'm standing on that. Treasury bills.

Buy bills too. The good news is you don't have to choose. You can do both. I do both. Yep, me too. Do I own bonds? No, but I own bills.

I'm a bill guy. You can get, what is the six-month yielding these days? Five, five? Yeah, five and a half percent. Now, here's the good news. If you log into the public app and you're on a regular basis,

you're just shooting cash over there from your bank. You're earning five and a half percent, give or take, on six-month T-bills. And public will roll them for you automatically. So you don't know when they mature. You don't have to think about it. You know how much my checking account is paying on my cash? Nothing. Yeah, me too. I'm with one of the big four banks. I got it out there. I sent money to my public app I think yesterday. So listen, five and a half percent and it's not forever. And at some point, T-bills will go down in yield.

But this is where it is right now. So get it while the getting is good, I guess. One last thing. Public.com slash compound. But one last thing. Just so everybody is hearing us loudly and clearly. These are annualized yields. So you're not getting 5.5% over a six-month period.

It's annualized. All right. Let's talk about a fourth quarter rally, question mark? Yeah. I don't know. We're running out of time. Tomorrow's November. Okay.

So if we're going to do this, let's do this. So here's Mike Wilson. He's not in the fourth quarter rally camp. He said, over the past month, we have been arguing that the chances of a Q4 rally have fallen considerably. Our observations are narrowing breadth, cautious factor leadership, falling earnings revisions, and fading consumer and business confidence tell a different story than the consensus,

which sees a rally into year end that's based mostly on bearish sentiment and seasonal tendencies. Let's pause here. Is consensus for a year-end rally? How do you measure that? Yeah? Yeah. I mean, we had one last year. It was the worst year ever,

and we still ripped into the end of the year. Okay. So we were down. How much was the S&P down at its low October of 2022? Was it down 25%? Yeah, and did it what? Down 17? Down 18.

And by the way, everyone went into the end of the year bearish. You remember, we were live at the NASDAQ with a whole audience full of it. But the market had already started went into the end of the year bearish. You remember, we were live at the NASDAQ with a whole audience. Super bearish. But the market had already started ripping into year end. So, yeah, I feel like there's a lot of muscle memory in this period of time during the year.

It's where a lot of the source of a lot of the gains historically happen in this window. And I do think like even if people don't say they think there's going to be a year-end rally, they kind of know there is. Well, I'll put my hand up. I expect a year-end rally. Sorry. That's just how I think. He said Q3 earnings season is eliciting even, this is interesting, is eliciting even weaker performance post-announcements than the sell-the-news reaction

during the second quarter earnings season. The median next day price reaction so far is negative 0.7%. Yeah. It was 0.5% last quarter. So I thought that is negative 0.7%. Yeah. It was 0.5% last quarter. So I thought that was pretty notable. So hold on. So this is, so the next day, the median stock after earnings, good or bad, has been down almost 1%.

0.7. That's right. I mean, that's horrible. That's a horrible earnings season. That's not great. Median. The percentage of positive reactions is also lower at 45% versus 47% last quarter. And then he says, most importantly for the index, most of the mega cap leaders that have reported so far have not traded well post. Well, this is sort of mixed.

Try it on, please. All right. So this is Amazon, Microsoft, Meta, and Google. Amazon up 10%, Google down 10%, cancel each other and microsoft up a little meta flat uh and then we've got apple but wait mike but the important point is on four all four of them beat sure it's not like it's not google down 11 it's not like they missed numbers true so that's that's not that's not a lot of fun to get the earnings call right and then lose 10% of your capital the next day is not fun. Let's talk about breadth. So it is what it is. Breadth is not great. The percentage of stocks above their 200-day moving average is under 30%.

Matter of fact, I saw a stat, something like, there's a weird divergence where less than 30% of stocks are above their 200 day and the market is only in a 10% drawdown. I feel like that's very shallow. Usually when it's that bad, the index is doing much worse. You're not in a 10% drawdown, you're like a 15% drawdown. This is back to the AI. It's AI versus the S&P 490. And nobody can convince me otherwise at this point. This is what's going on. And then if you look at the percentage of stocks above their 50-day moving average, this is pretty much washout levels.

That's in the sewer. What is the reading on this? Percentage of S&P stocks above their 50-day. It got down to 10%. 10%. It's horrible. Yeah, and over the last decade, it's done this, I don't know, half a dozen times. It's pretty much a washout. Pretty much a washout.

However— That's where the rally should start from, like if it's going to happen. That degree of washed out in kernels. You could easily make the case that, yeah, breadth is horrible. None of that's actually bullish. That would could easily make the case that, yeah, breadth is horrible. None of that's actually bullish. That would be sort of a ridiculous spin, but maybe.

But maybe it's not a ridiculous spin because we already had the bear market. Well, I don't want to say that. We already had a washout. Wait, wait. But hold on. But you have to decide, are you a catch-up guy or a catch-down guy? We had Dubravko Lekos on the Halftime Report today. And Scott was asking him, just walk us through why you're bearish.

And he's been bearish all year. He's been saying – I'm a Heinz ketchup guy. I'm a Heinz ketchup guy. He's been saying like cash is king all year to his credit. He missed the stock market rally, but he also missed some losses in bonds, whatever. But he's basically saying like look how bad the typical stock is. Most of the market is already selling off and it's only a matter of time before the index rolls over.

That's a catch down guy. Somebody else could look at this same setup and say, here comes the catch up trade. The mega caps held us down all year, held us in all year. And now the S&P 490 are going to have their chance to rebound. And by the way, historically, that would coincide with the end of this. We talked about it last week, the mutual funds ending their fiscal year on October 31st, and a lot of this tax law selling being in the rear view mirror. I'm sorry. Look how bad the average stock is doing. The median stock, well, the equal weighted S&P is down 2.6% year to date. That's not so bad. I'm sorry. Look how bad the average stock is doing. The median stock, well, the equal weighted S&P is down 2.6% year to date.

That's not so bad. Yes. No, compared to the index return. That's all he's saying. I know. Well, it is. Let's look at a chart from Sutmeyer. Zoom me out a little bit because we were all the way zoomed in.

All right. We're looking at a weekly chart going back to 2011. And Suttmeier says, based on the rising 40-week, I'm sorry, 40 and 200-week moving averages, the S&P remains within cyclical and secular uptrends. The July to October drop below the 40-week represents a correction within these bullish trends. If stronger seasonality can take hold in November, reclaiming the 40-week moving average would confirm the view of a correction within an ongoing cyclical and secular uptrend.

And I know it's easy to get there. He found two moving averages that make it look good. That's pretty impressive. The 40-week and the 200-week, great. Is this an uptrend? Is this an uptrend? Yeah, no, it is. I'm just breaking balls.

But I don't like the way it looks on the 31-week and the 176-week. Dude, whatever. It's an uptrend. Whatever. It's a long-term uptrend. All right, fine. Fine. No, listen.

I want him to be right. If he's right, we all get our stocking stuff this year. You know what I'm saying? Any long-term moving average. Here's a chart that I wanted to share from Jason Gepford, a sentiment trader. The economic surprise index. It's weird. It's this weird, strange thing. We spoke about this with Tom Lee that the leading economic indicators have been negative for a long time. And yet the economic surprise index from Citi has been higher. So I'm not sure how to square that circle, but it's above 50.

And when it's done that for any period of time, I forget what the exact number is. The S&P 500, hold on, let me explain. The S&P 500 is up 75% of the time over a three-month period and 85% over a six-month period. That's pretty meaningful. Now, the gains, the average gains aren't that much higher than normal, I don't think, but the percentage of time that they're higher is pretty notable. The win rate. I want to ask you, when you say, I don't know how to square that circle, economic surprise index doesn't really have a lot to do with leading economic indicators. I mean, I know you know this, but for the audience's benefit, leading economic indicators are like measuring the things that are the most urgent or the most recent as opposed to the lagging economic indicators.

Surprise index is what the actual news is relative to what the consensus had been expecting. So to square that circle, everyone is still pessimistic, but things are just not as bad as they thought they would be, hence a rising economic surprise index. Am I explaining that well? Yes. So when I said I was expecting a fourth quarter rally, honestly, the truth is there's not a lot of, in my opinion, I think the evidence, the weight of the evidence, I think you have to give it to the Bears into the year end. Like, I don't know what a bull can hang their hat on

for the last 60 days of the year, other than people are bearish, there's a washout. How about, I don't know, I'm just spitballing here, Spirit of Christmas? Santa? I mean, what the hell's wrong with you? Nobody has to hang their hat on anything. The news doesn't have to be good. It wasn't good last year. Once again, there's a mechanical selling that takes place because of tax losses and it exacerbates prior trends. It hits the stocks that had already been down the most, the hardest. That's a lot of pressure on the market outside of the Magnificent Seven. Okay, everyone's aware of that phenomenon, but still, when that selling lifts and there's

an absence of other, quote unquote, bad news, meaning we will have gotten through earnings season, even if you don't like the reactions in certain individual stocks, the overall earnings picture is just not horrendous. It's just not that bad. It's not. And economic news is not that bad. And so if the selling is behind us, the bad breath resolves itself, this thing could change on a dime, right? There's no reason why bad breath needs to persist. We're still adding 200,000 jobs a month. Everyone that wants to work is working. Yes, there are layoffs in specific tech and media companies. Okay. We all read the newspaper, but in the end, the hiring picture right now is incredible. And if inflation is falling,

but everybody is keeping their salary, guess what? That's how you thread the needle. That's the way out of this. I'm not saying you're going to get it, but there is a bold case to be made. Everyone that wants a job can have a job. Salaries are staying high. They're decelerating in terms of the rate at which they're increasing. But people are making a lot of money. And if costs start to subside, all of a sudden, we're talking about back half of 24 rate hikes, and we're probably rallying into that absent some sort of a financial event.

So, yeah, you could have a financial event. You just haven't yet. I just feel like what you just described is more economic news and less stock market news, right? market news, right? Well, I'm not sure that you can really disassociate the two because remember what the driving factor was behind how the stock market did this year, XAI. These stocks were being led around like a dog on a leash by what the 10-year treasury did. So if we've seen, if we, if we are currently right now seeing the peak in inflation expectations, having already been a year ago, which I think is reasonable, right? Last June, July, September. So we're a year out from those ridiculous inflation prints and the fed is going to say higher for longer until they cut. They're not going to be like, all right, we're not going

to say higher for longer anymore. Like we they're not going to be like, all right, we're not going to stay higher for longer anymore. Like we're getting into that zone where rate cuts could be in sight. And, you know, with the stock market, the stock market's going to react well in advance to when the rest of us say, oh yeah, this is obvious. That's, that's why the stock market is smarter than we are. So that's, that's where I am with it. All right, move on. Of course it could all go horribly wrong. The stock market is smarter than we are. So that's where I am with it. All right, move on.

Of course, it could all go horribly wrong. Ben did a really good post last week. Everyone has more money and nobody's happy. There have been a bunch of versions of this. Noah Smith did this on his excellent sub stack as well. And basically, the gist of this is that the Fed and Treasury released their 2022 data from the Survey of Consumer Finances. They do this every three years. And what they've come up with is that from the 2019 through 2022 period, the typical American family got about 37% richer. And it's important for me to tell you

that this data actually is inflation adjusted, if you can believe that. So I don't specifically know how that's possible. We're going to roll through some of these charts from Ben though, because I think they're important for people to understand the big picture. I know how it's possible, Josh. I think they're important for people to understand the big picture. I know how it's possible. Josh. Real estate and stocks. But I'm saying like it's still surprising. It's still surprising is my point.

Let's do this net worth by all families. Guys, this stuff is like off the charts. This is not getting back to the pre-pandemic hot. This is now eclipsing the 07 period, which was the pre-grade financial crisis high. This is what the change in that, this is like, this is going back to 1989. And so this is every three years. Each dot is every three years. And you can see that we are off the charts. The next one looks at the three-year change in real U.S. household net worth. Again, inflation adjusted.

This jump is off the charts, up 37%. It is by a factor of 2X the biggest three-year jump for U.S. household net worth. And again, net worth, so incorporating the debt that people have as well. And there's no close second to this last three-year period. One more, percentage change in U.S. household real net worth by age. I mean, people under 35 are just absolutely killing it, up 143%. So it's 37% across the board. People under 35 having gotten the biggest benefit,

which makes sense. They're starting from the lowest base. Fine. People 55 to 64, Michael, that's like the bulk of our clients up 48% in the last three years. Would you have guessed that? No, I wouldn't have either, but here it is. This is the last one. I'm sorry. No. How do we get out of this situation with high rates and earnings falling and et cetera? There's like a demographic backdrop to this where the people that we need to spend more money and to have that multiplier effect, those are the people that have seen the biggest increase in net worth over the last three years. And that might be the way that we pull through this whole thing. What are your thoughts? Ben and I went deep on this today.

I don't think there's any correlation whatsoever between net worth and happiness, especially at the lower end, because your net worth is not your income. Your net worth is, okay, what is my 401k worth? Well, I can't spend that. Your net worth is your house. Well, okay, I can't spend that either. And so even though real incomes also might be higher, people adjust, here's where I've landed on this.

People adjust very quickly to their higher wages, but they don't adjust very quickly to higher prices. You can't believe that sandwiches are $17. Like you just, you can't wrap your arms around that. We have those conversations at dinner with other couples all the time about how expensive everything is. And so it's not some giant mystery why there's a gap between soft data and hard data. Higher prices are really, really, really messing everything up. So this is a really key point. Like when you,

when you go to buy something and it's significantly higher than you remember it having been the last time you bought it, whether that's a high-frequency thing like a lunch or something that you don't buy until like a few years go by like an appliance or whatever, you don't remember in that moment that you yourself just got a 10% raise. Correct. That's almost irrelevant. Yeah, of course I did. I deserve it. Yeah. Right. 10% raise. That's almost irrelevant. Yeah, of course I did. I deserve it. You forget that there's a reason why we're in this situation. And that is there's been a big jump in comp

for a lot of people and they're spending more. And that's why prices are able to not just go up, but stay up. We're not talking about supply chain shit anymore. Now we're just talking about this is what people are willing to pay. So you really don't have a choice until that changes. And it's notable everywhere. Coca-Cola prices are up 25% over the last three years. I went to the garden and Robin got a double Casamigos and it was $47. That's the wrong place to be looking for rational, whatever, but I can't believe it. And it's not just the gardens everywhere. Yeah. I can't believe that. Can we back up for a second? Robin is drinking double Casamigos.

She's drinking like doubles of tequila now. Is that what's going on? I mean, it's two shots instead of one. How are things at home, Michael? Pretty bad. Okay. I listen. I get, it's two shots instead of one. How are things at home, Michael? Pretty bad. Okay. Listen, I get it. All right. We're great. You really are.

That's why it's one of the things I hate about you most. All right. So you. But look at this chart. Throw this chart on. So this is the chart. It's the. So the.

Okay. So this is a chart of the index of consumer sentiment and it's showing the actual. So how did people predict they were going to feel versus how they actually felt in it? It tracked very well. When the economy was doing well, people felt good. And when the economy was doing shitty, people felt shitty. That is no longer the case. Objectively, the economy in aggregate is doing well and people feel shitty.

Now there's definitely people that are being left behind. Inflation is absolutely hurting people. Subprime borrowing costs are punishing people on the lower end, even if they've been a huge beneficiary of rising incomes. It doesn't matter. It's all being eaten up by the higher cost of capital. And this break happened during the pandemic and it happened during this inflationary period. That is a gigantic spread. So one thing, I don't know, I don't think we made the chart for this, but one thing from Noah's blog, I think his big takeaway is just how widespread this improvement in net worth is. It's literally every group. But when I go through like some of the specifics.

It's erroneous. Well, it's not erroneous. Do you not know what that word means? It's not relevant. It's not relevant. That's not what erroneous means. Erroneous means it's an error. Like it's false information.

Oh, f**k off. It's not relevant. You know what I'm trying to say? Don't grammar check me. It's not relevant. Well, no, grammar is not the same as vocabulary. I hate you. I think that this part is relevant.

Personally, I think this part is relevant. Net worth is not relevant to people's happiness. It's just not. Oh, I agree. I agree. But what I was going to say is, doesn't it work the other way around, though? If everyone's net worth declined by 37%, don't even bother telling me how much their income is up or down because that would be irrelevant or, in Batnick speak, erroneous. So it might be what you're saying might be true, but the reverse is not true.

You agree with that? I agree with that. Okay. So all things being equal, people should be happier, even if they don't like the prices they have to pay. I don't agree. Because if this were the reverse, it would be, well, think about it. Dude, if your 401k went from $51,000 to $65,000, should that make up for the fact that your borrowing costs for a mortgage are through the roof and you can't afford a house? Should that make up for the fact that your groceries or whatever everything's, the prices are crazy? I don't think

so. No, no. And, and it doesn't. And that's, that's, and by the way, that, that probably explains things like the surprise index. Like things are just not as bad as people feel like they are. And the economists are human and they live normal lives. And maybe that taints their own estimates or their own approximation of what the data is actually going to come out as. And maybe that's part of the stew. Now, we spoke about in the stock market about the catch up or catch down. What do you think catches up or catches down here? Do you think how people feel catches up to reality? And when I say reality,

listen, people that feel shitty, there are people that are doing shitty that feel shitty, right? Like that's normal. But do you think that in aggregate, and of course the economy is very personal, but do you think in aggregate, the economy catches down to how people feel?

Or do you think that things continue to get better and people catch up to how the economy is performing? I guess I just don't remember a time where I could have said with a straight face, people seem happy. I think in hindsight, we go back and look at like 1997 and 1998. And I was an adult during that period of time. And it's obvious now that there was much more reason to be happy than not happy if you were around back then. But I just don't remember it that way where everybody was walking around with a giant smile on their face, high-fiving each other. And I don't know what the survey data from back then was saying. But I can't think of a time where there was like this just universal, hey, things are good.

universal, hey, things are good. I know we've had those stretches in the last 10 years, but they, they don't, I don't feel like, like 2013 might be a really great example. I did a blog post that year called everything is awesome. And you know, the song from the Lego movie that came out that summer, things like basically seemed good for the first time since the financial crisis, that was five years post crisiscrisis, but that didn't last very long. But we do have those periods. I think I reject the notion that people are any happier or unhappier than they were in the past. I think people are people. And I think a lot of this is our exposure to social media, unfortunately, just how frequently and how we measure these things. I think people are people.

You think the average or median person is any happier or unhappier than they were in the 60s, 70s, 80s? People are people. You know why it's also bullshit? Somebody could be happy financially, but unhappy in their marriage, or maybe they got a kid locked up in juvie, or maybe their dad got a cancer diagnosis and it's like, hey, how do you feel about the economy? Like you're not going to get an untainted – you guys have it mostly right. The surveys are garbage, almost a complete waste of time if you're an investor. Other than – and I hear people say, oh, no, at extremes they're important. Yeah.

They've been pretty extreme for a pretty long time now and I really don't know what you do with that. I'm not 100% sure what you do with it. So I like the anti-survey mentality. I think I'm getting there myself. Credit to us. We were early to that. All right, let's talk about interest rates. So we've spent a lot of time talking about why interest rates haven't impacted

the Fortune 500 companies or the S&P 500 and why smaller stocks are getting hammered. This is such a great chart from Mayhem for Markets. It's showing the effective interest rate. So what are the borrowing costs for the top 10% of the S&P 1500? And it's very, very low, as we've spoken about in nauseam. Then it shows you the middle 40% of the S&P 1500. And then it shows you the bottom 50%. And the bottom 50%, these are the subprime borrowers and the subprime companies. And it's no wonder, next chart please, John, why the S&P 500 is up 10%, but the mid caps are down 1.5% and the equal weight, same thing. And then the Russell

2000 is down 5%. And then the micro caps are down 14%. It is very much- Size order. down 5% and then the microcaps are down 14%. It is very much, I feel like this is, yeah, this is very much, we're seeing this in the real economy and you're seeing this on Wall Street too. I just thought of the greatest idea for a chart for you and Sean, if you could do it, take this first chart, put that back up, John, take this, turn it upside down, overlay it with the next chart. Let me say it. Yeah, it's the same thing. Well, no, it's like the reverse. Yeah. So like, like another word. So, all right. So in the first chart, we're saying the top 10% of the S and P 1500, so these are the 150 largest companies.

They're paying an effective interest rate around two and a half percent. And then we're saying the bottom 50% of the S&P 1500 is like five and a half to 6%. That's a huge disparity in interest rates. But then when you look at stock market performance this year, it reflects exactly that. The worst stocks are the ones that are being hit with these higher effective borrowing rates and with good reason. higher effective borrowing rates and with good reason. This is one of those years that's like, but it shouldn't be this symmetrical. It's too perfect. This is another reason why there's a disparity in different cohorts feeling the impacts of interest rates differently. So prime borrowers for car loans, I can't say that word, borrowers. Prime borrowers are paying 5% for a new car and 7% for a used car. Subprime

borrowers are paying like 21%. Massive gap. that so that cohort just got themselves a huge raise uh we know that people at the bottom of the income distribution um had the biggest increase yes but it's but it's all being eaten up it's all being taken away by the way the bottom 20 uh sorry um this this is from noah uh people the bottom 25% of the wealth distribution saw the increase in their net worth up 900%. 900% in three years. But those are the people now paying the 20% borrowing rates. So of course they're not thrilled. And okay. So their net worth went from 7,000 $26,000 for money that they can't spend. So that's it.

All right, let's move on. Okay. Where are we going next? Who are you calling to stop crying? The people in your LinkedIn mentions? No, this is – dude, this is barren. This is not even me. That was the title of their cover story?

I didn't say this. I think it was. Oh, shit. Wow. Wow. It's time to stop crying. I don't tell people not to cry. I think it was. Oh, shit. Wow. Wow. I don't tell people not to cry. I think people should cry more.

It's time to stop crying about bonds and buy them instead is literally the Barron's cover story. Wow. Now, a lot of people would look at that and say, go the other way because it's Barron's and blah, blah, blah. No, I don't think so. I don't think so either. I don't think so. blah, blah, blah. No, I don't think so. I don't think so either.

I don't think so. So in the third paragraph, they get to Bill Ackman, who very notably tweeted out shorting the long bond and then covered six weeks later and nailed the trade and said the world is, like something like,

paraphrasing, the world is too f***ed up to be short treasury bonds. I agree with him. I agree with him. But let's get to, I think, let's get to some of the points here that I thought were interesting.

Dan Iveson, who took over at PIMCO as a portfolio manager, chief investment officer from Bill Gross. It's about 1.74 trillion in assets, a lot of it in fixed income. I think he summed it up very nicely with his quote, it's been a rough journey to a much better environment. We're much more optimistic at this point going forward. Yeah, no shit. You've had a pretty big de-risking in terms of

rate hikes this year. So the long bond, I thought this was interesting as well, is a case for significant gains with far less downside risk based on bond math. Bond math is like how much you could lose versus how much you could make given a move in interest rates. So on the 30 year, the 30 would gain 13% over a 12 month period if yields just dropped a half a point. And that's based on current levels right now. They would lose less than 3%, however, including interest, if rates rose by a half a point. So there is an asymmetric – it's not to say that there won't be volatility in the TLT, for example, but there is an asymmetric situation now in longer-dated bonds

precisely for the reason that people already got killed and we've already seen a lot of the damage of higher rates. So, look, you've seen money piling into the TLT, which is the 20-year treasury bond ETF for my shares, 12 billion of net inflows in the last six months. And that's as it's literally dropping like a falling knife. So I think that's the smart money that's able to fade that sell-off, understanding how bond math works. What do you think? I do think that. We did a whole segment on this last week on this very show where we spoke about the asymmetric math in terms of the path of interest rates. And there's been a lot of people

saying, well, that chart is bullshit because a lot of it is the short trade. And that's not true. If you look at the TLT, I think 10% or 12% of it is held by shorts. So it's not nothing, but a lot of that money that you just mentioned flowing in are real buyers, real actual buyers. One more thing on this. I should make a list of these things where nobody pays attention to them ever. And then all of a sudden

they become the single most important thing that everybody watches like the Superbowl. What's on that list? So I think in like, think in 2015, 2016, it was rig count because oil prices had just got cut in half and literally were wrecking economies around the world. Remember the Baltic Dry? The Baltic Dry Index? The Baltic Dry Index. Let's do that one day.

But for now, let me add another thing to this list, which is the quarterly refunding report from the treasury. So this comes out, we're recording this on Tuesday. This comes, I know, and you never will again in six months. This comes out tomorrow morning. We're recording this Tuesday night. So it'll come out at eight 30 in the morning. Treasury gave a little bit of a, a little bit of a glimpse into what to expect. They said, hey, we'll probably be selling less bonds than what we had been expecting to sell. And that obviously led to a rally in bond prices and a cooling off in bond rates as a result of that. Tomorrow, when they put out this quarterly refunding thing,

they're going to announce the composition, which means how much of each maturity of treasury bond are they selling? Like, can you imagine like even, even a year ago, anybody giving a shit about this ever? Nobody. This has been coming up. Wait, wait, wait. This, this survey has been coming out for a thousand years and not one equity guy has ever paid one second of attention to this. For some reason today, it's all I'm hearing about. Well, wait till we see the composition. Well, what the f*** are you going to do with that? Absolutely nothing productive.

What is that going to tell you? Is that the Rosetta Stone now for why you're underperforming FANG stocks? The composition, moron? Anyway, this is like the new thing. So you're going to see people lose their minds over this thing that they never even heard of until a week ago. This is not the new thing. But to the point of this being the new thing. It's the new thing I'm saying for right now.

To the extent that this is the new thing. Don't f*** with my erroneous. I will continue to use it as I've been using it. Demotoring was on O'Shaughnessy's podcast. He's like, there's too much – too many people combing through economic data. Like this is not – Yeah. It's all nonsense. Wasting their time. It's all nonsense. Speaking of nonsense –

This is – Hold on. Yeah, just one more remark on this, okay? Tom Lee had been talking about, he wrote about this. He said, our macro clients note that the treasury quarterly refunding is arguably more important than the FOMC meeting. And how the treasury announces its coming mix of bonds, this will be market moving. So far be it from me to argue with Tom Lee, and he's probably put a lot more thought and research into this topic. I don't think anybody really cares.

Well, let's just stipulate that it is super important. Fine. Good. I don't need to outperform based on what my – whatever. All right. I just saw I have no bandwidth for that. Let's talk about dumb money. All right.

This is from the Wall Street Journal. Van right. This is from the Wall Street Journal, Vanda Trach via the Wall Street Journal, Vanda Research. The average individual investor stock portfolio has risen about 150% since the beginning of 2014. That beats the S&P 500, which did 140% during the same period. So Vanda calculates the average portfolio by analyzing individual investors' brokerage accounts in US-listed single stocks. So we exclude mutual funds. You exclude ETFs, which kind of makes sense for this analysis because if you're holding the S&P 500, you're not trying to beat the S&P 500. This is interesting. The typical small investor, next chart, please. The typical small investor holds an outsized position in mega cap tech companies. Apple, Tesla, and Nvidia alone make up about 40% of the average

individual stock portfolio performance. So I heard a joke from somebody about a husband and a wife who went to Vegas. And in this case, the husband is the professional stock selector and the wife is the retail investor where the wife made $500. She says to her husband, I won 500 bucks. How do you do? And he said, I lost $2,000. And she got mad at him. He's like, yeah, but I know how to gamble.

Yeah, yeah, exactly. Right? He has a system and he's a pro and she just put it on black and the results are the results. Yeah. So I think the entirety of the last decade with all the frustration, which I am very sympathetic to, all the frustration on stock pickers who cannot perform these, I'm using air quotes, dumb money, because the dumb money bought the most popular stocks for the last decade, the Apples, the Teslas, the Nvidias, and that's all you had to do. And in the eyes of the underperformers, it shouldn't be that easy.

Well, no. Yeah, that's exactly right. It's such a great point, Michael. One of the first things that you're taught is not to buy glamor stocks and not to buy things just because they're popular and you know name just because something is a great product that doesn't mean it's a great investment throw all that shit out the window and you actually win big over the last 10 years and it's not supposed to be that way because i was so i'm again i'm using air quotes because i was so smart my brain got polluted with that shit like Like, oh, yeah, Apple is such a great company. That's why it's the biggest stock in the world. Everyone knows that it's already in the stock.

Yeah, yeah. Yeah, guess what? It wasn't. It wasn't in the stock. Second order thinking. Far from it. Second order thinking failed spectacularly over the last decade. Second order thinking is like, oh, no, you know what?

I'm going to build a portfolio of all these MLPs trading at three times cashflow. All right. Good luck with that. How'd you do? Yeah. You're so, you're so look how, look how sophisticated you are, asshole. Where's all, where, where all your, where all your clients go. So yeah, that's very frustrating. And I think that that lends itself to a lot of the nastiness on online amongst professional investors. Oh, you think? No, I know. I think. And I get it. I get it. I know for sure. Yeah, I get it. I really do. So again, Demodaran had this great comment that I wanted to share with the audience from Patrick O'Shaughnessy's podcast. He says, when you say that private equity and venture capital benefit from low interest rates, they did. But collectively,

it wasn't a good decade either for either. The average VC investor, the average PE investor made about as much money as the average S&P 500 investor. Of course, there were winners. There was a selection bias with PE and VC when you look at the winners. One of the talks I gave is who put the quote smart in smart money? Because I looked for 40 years for the smart money, money that presumably gets in before everybody else and gets out before everybody else. There is no group of investors that I can point to and say that money is smart money. It's just greedy money that ultimately runs into a wall sooner or later. So I think there's going to be more accountability. Okay. He said collectively as a group, I don't see groups benefiting or paying a price because the average is still the average. I thought that was really, really well said. It is. I have so many caveats to this though.

There are, there is smart money. It's just that you don't get to stay the smart money forever. You have a market environment where winners keep winning because they are the smart money and they have their, their era, but their era doesn't last 40 years. You're not the smart money for 40 years. You could have five years. Like I, I know you like love like the Andreessen Horowitz guys, and I have a ton of respect for them. So no disrespect intended, uh, and tiger and all these dudes, they were the smart money of the, of the 0% interest rate era. And I'm sure if they were in a room and there were no media and no press, they would look at each other and say, yeah, we really did benefit in large part

because money was free and people were willing to go out on a limb and take equity for companies that were not earning anything. There were no cash flows. People were willing to dream big and we were in the right place and we had the right connections and we deserve to have won. And that's a big part of why we won. I think intellectually, they understand that they were the smart money. Are they the smart money where rates are at 5%? Um, and, and you, you don't automatically get an exit whenever you feel like it. And there aren't bidding wars for series b's and like are they still the smart money remains to be seen i don't know yeah i don't think so just for the record i don't know why you're saying that i love the andreason guys i don't have

respect for what they've built everyone does but i'm i'm making the point like it's you could you could look at them they've been spectacularly successful and they know technology and they're experts and they have great networks can't take any any of that away. But they also happen to have been in this era where their type of investing made them look like the smart money given what the environment was handing out. It's undeniable. Nobody would say, I don't think anybody would be like, nope, I would have done this anyway. Really? You would have? You think every company that you invested in that 20x-ed would have been able to if there were a, I don't know, positive sloping yield curve? I'm not 100% sure that anybody from that world would say that.

I think most of them would say we're good, but also the getting was good. Well, guess what? Here's a guy. Here's a guy. They were smart. They were the smart money. I have a ton of respect for Brad Gerstner. I remember the first time I heard him was on Patrick O'Shaughnessy's podcast again, like in 20, I don't know, 18. And this was one of the few guys that does what he does that was very aware of the tail winds of zero interest rates. I was like, you know what? I have a ton of respect.

Like nobody's saying that. Nobody who's winning big is saying that. And guess what? He's still got his, you know what, chopped off. And you would say, if he's not the smart money, who is? And he still got annihilated, overstayed his welcome. So my caveat to Demodarin is, there is a such thing as smart money.

It's just not permanently the smart money. He would agree with that. Yeah. The cohorts change. Like you look at the icon generation in the 80s, the corporate raiders, they were the smart money. Now, a lot of being the smart money involves making your own alpha. And I think this is an important point too. We don't have time for it right now.

But when you look at the investors who dominate these particular eras, one of the things that you find is that they are so powerful in those moments that just by virtue of them getting involved with the stock, they can make the stock become a winner. They can convert enough other buyers to pay up. And that applies in VC, in private equity, in a lot of areas where just like by virtue of me saying I'm involved in this thing, that creates a sort of alpha. It's almost like a celebrity alpha and Buffett has benefited from that at times. So there is always a smart money group. They just don't typically pole vault themselves out of one boom into the next one. They usually have to go away for a little while and not be considered smart as a new group takes over. I think it's a fair statement, right? Yes. Okay. Let's do this

Apple thing quickly. Did you watch any of what they released last night do you have a chance to see no but i did laugh at what you said on slack uh yeah well they're coming for that gpu money my friend so john said that apple just unveiled the nvidia killer i think the stock is up one percent today yeah i know it's not one percent i'm sorry you're right um well actually nvidia is down because of uh china whatever the all right what did apple unveil i thought this was important apple's macbook pro laptops are going to be supercharged and they will not include intel chips going forward apple launched the m1 line of chips and people said oh that's cute apple's doing its own silicon who cares um you know it's a You know, it's a side project, whatever.

They are now launching three nanometer chips. They are on the very cutting edge of silicon. And they launched three versions of the M3 chip last night, M3, M3 Pro, and M3 Max. M3 Pro and M3 Max. And when you watch this presentation, you recognize the similarities between when NVIDIA put out its H100 or puts out some of its GPU stuff. They're using the same terminology, and they're showing the same type of video to demonstrate the capability.

But when you look at – these are video games that look like movies, basically. And you look at, like, the ray tracing and the resolution. Oh, that's a video game. Yeah, dude. Wow. That's animated. So, um, this looks a lot like when Nvidia is showing off their, their chips and Apple is rapidly, uh, catching up. Um, so the, look, it's the combination of CPU and GPU in a MacBook Pro. And what you're really going to be able to do with machines that powerful, I think, is catching some people by surprise. And all of the large, all of the large – so Apple has become one of the most sophisticated chip designers in the world in a fairly short period of time. All of the large cap technology companies that we talk about are making their own chips. All of them, Google, Microsoft, Meta. And I think that there's like some big ramifications for the semi space. Intel's up 2% today. Yeah. Qualcomm

has had disputes with his customers very publicly. Intel has blown it. They've had a few customers that they've let down in the fabrication process. Now they have their former customers out here running circles around them. This is a different world now. And I think it begs our attention. Do you ever think you would see Apple releasing chips of this capability this quickly? No, but I will say, I kind of, famous last words, I'm going to say that I like the Apple setup going to court. I feel like expectations are fairly low. I think it's kind of weird that they did this thing before earnings. I don't know if they normally do that, this presentation that they gave, but Apple is in,

I don't know, what sort of drawdown is Apple going into earnings on Thursday? What sort of drawdown is Apple going into earnings on Thursday? It's enough. I think it's maybe 9%. They want to make sure that these MacBooks are selling during Christmas, and they've got the iPhone 15 at the same time. Apple is in a 13% drawdown. 13. Heading into earnings.

Yeah. But I think they have the right mix going on sale this holiday season to pull out the fourth quarter. I mean, of course we'll find out. I want to, I want to do my, make the case and then we'll hang on. Last thing, last thing we had spoken last time Apple reported, it was, I think the third consecutive quarter of year over year revenue declines. Of course there hadn't been a new iPhone. We did get the new iPhone this quarter. So this is an important earnings call. Yeah. I think there was like 10 days worth of iPhone sales bleeding into the prior quarter, but this is the full quarter effectively of the 15. And I agree with you. I think it's important. All right. What are you

making the case for? So this is a stock I sold and that's how you know it's going to keep working. Remember I did a risk to networks here as my mystery chart. Yeah. Not long ago. Yeah. And I, it was, it wasn't a fair mystery chart because it's like an off the beaten path name, but I was pointing out it was the best performing stock of the year or one of the 10 best performing stocks of the year. Uh, this thing continues. So they put out earnings last night and I would tell people to get on the quarter app and go listen to that earnings call and learn the story. I'm not telling people to go buy the stock right now. I will not buy it back because I just sold it in

the 180s and I'm very stubborn. And so I'm absolutely convinced that so long as I stay out of it, this stock will continue to levitate right in my face. But I would just make the point here. NVIDIA is not going to have AI to itself. It is really hard to build GPU accelerated data centers without the correct communications equipment. And that's Ethernet and that's Arista networks. They are the pure play. They're not the

only, you know, Cisco is in this game as well, but Arista is being bundled with NVIDIA in design wins. So like at the enterprise level, if you're going to do data centers and cloud computing with the express purpose of AI workflows, you need a communications network built in. Otherwise, I don't care if you have 10,000 GPUs, if they're not talking to each other and connected to the network, you have nothing. So that's the backdrop behind which this stock continues to crush. They beat on the top line. They beat on the bottom line. Earnings were $1.83 versus $1.58. Revenue was 1.51 billion. That was up almost 30% year over year. Operating margin 63 versus 62 expected. So this is just, for me, this is like the one that got away. I was in it. I got spooked

out of it by the overall market. Look at this gap higher, John, throw this up. This makes me want to, this makes me want to kill myself, honestly. Um, but you've got, uh, let's do the analyst real quick. So there's a lot of coverage here and most of it is obviously bullish. The high target on the street is 232. The low target is 180. So even the neutral people, like they're not significantly lower than where – or the sell rating, not significantly lower than where the stock is now. And I don't know. She's knocking on 200.

Want to throw this chart up? Last one. She's knocking on 200. This, I mean, this reminds me of Nvidia, honestly, where like people were like, all right, I'll buy it when it goes down. And then like it triples and then it goes down. So I don't really know what's going to happen here. I'm not in the stock and I'm not telling people to buy it, but I really feel emasculated by this whole situation.

Anyway, I made the case for Arista. Where's my mystery chart? Wait, before we get there, I just have one data point that I want to share that Barry actually just sent to me. So Jonathan Harrier tweeted this. This is really interesting. We spoke about the washout. All right, so yesterday, he tweeted yesterday, these two criteria happened.

The percentage of S&P 500 stocks above their 200-day moving average crossed above 25%, so low but rising, and fewer than 20% of S&P 500 stocks were above their 50-day moving average. So pretty much a washout. This has happened- He had a huge up day yesterday. This has happened- This is a huge update. He had a huge update yesterday. This has happened 500, 14 times since 1985. So pretty rare. Yeah. And it happened in July, 2008, two times. And you know what the forward returns were for that, right?

It was really not good, obviously. But if you take those out, so of the, of the 15 times you take away 2008 2008 it was positive every time a year later and what you're just basically saying is we just had a washout that's what it was like I said it's weird that the washout only resulted in a 10% drawdown in the S&P or 13% but interesting data point nonetheless that's from Jonathan Harrier if you want to get more information on that

I'm in the washout camp my mystery chart is, it's funny, I almost brought this up last week that if this chart breaks, it looks like it's going down a lot. And this is sometimes why technical analysis works. You look at the, I don't know, what is that? Like $11? Just how much support there was. The buyers came in every time for over a year. And then one day they didn't. Yeah. Like in a big way. And then one day they didn't and it broke and it broke spectacularly. I mean, that's a big break from 12 bucks down to under 10. This is an individual stock?

It's an individual stock. So I'll give you one more. Give me one other clue. One more chart. So this is a long-term view of the market cap. And this company has traded in a long, sloppy, disgusting mess for the better part of the last 25 years. It had a market cap as high as $60 billion in 98, 99.

Market cap of, I don't know where that peaked, around $100 billion in 2021. And now it's down to 40. Just a real awful piece of shit mess of a stock. $40 billion market cap, and it's trading at $9-ish. Yeah, and it's probably one of the most heavily traded stocks in Robinhood just because of its share price, and it's a brand new-

Is it Ford? It is Ford. Wow. Yeah. I'm i'm pretty good for you good for you uh this has always been a piece of shit my whole career so the start of this long-term chart that john has up that's like when i that's when i got my series seven it's unbelievable so really and we used to pitch ford because it was like out of favor like we used to pitch this to to prospective like out of favor. Like we used to pitch this to, to prospective clients. Like here's like five reasons why you should probably buy some Ford right now. And if they had a Ford in their driveway, they were like, yeah, all right. Eight bucks. I'm in. And they would, you could have held it for 25 years. It's back at eight.

I want to make one more point. I don't remember that ramp though in 21. Do you? No, I don't. But I, I guess it was following Tesla. I don't even know, but I want to make one more point. I want to make one more point. I don't remember that ramp though in 21, do you? No, I don't. But I guess it was following Tesla. I don't even know. But I want to make one more point. I want to make one more point about that chart. Chart back on please, John, the long one. So this type of stock, the Bessminder study that shows that 98% of all gains come from 2% of the listed companies, whatever that chart is. But that also misses the point that like, and I'm not saying that it's easy. There was plenty of opportunities to get long forward, right? Like within this 25 year period. And make tons of money. Of nothingness.

There were several really huge spectacular runs. Just wasn't a stock to buy and own. Look at this. Look at this rally off the great financial crisis low. GM actually went bankrupt and Ford didn't. But Ford's equity price was probably like $4. That's like a 15X. Again, General Motors filed for bankruptcy in 2009 and Ford didn't. And then when things bounced, Ford went crazy to the upside.

So there were plenty of trading opportunities along. But just because you have diamond hands doesn't guarantee you a long-term reward in any, any stock. I don't care how much you love the product or the brand. Like most, and when I say most, like almost all, most stocks are not worth buying and holding forever. Yeah, the apples of the world. Right. So that's so controversial to people

because of Warren Buffett. He happened to have picked five or six of the best long-term stocks of all. He picked American Express in the 1960s. Is that really what you think you're going to do? Right. You think you're going to buy a stock that 60 years from now is still in business, let alone successfully in business. Like it's really, really hard actually makes what Buffett did so incredible. And he's had losers along the way too, but like him picking Amex Coke and a handful of other names that happened to have turned out to have been some of the greatest companies of all time. that happened to have turned out to have been some of the greatest companies of all time. That's not the example that we should be trying to follow because it almost can't be done.

Here's the data point. The data point is from a report by JP Morgan called The Agony and the Ecstasy of Stock Picking. 70%, seven out of 10 companies in the Russell 3000 have had a 40% decline from which they never recovered. 70%. So they fall and then they never come back to where they were. 40%. Yeah, that's the number. You said 70% of the companies? 70% of the companies have at least a 40% decline from which they never recovered. More than two thirds of companies never get back to an old high after a decline like that. That's incredible. I mean, we should – it's intuitive also. We should understand that because businesses are perpetually competing each other out of business.

But still, just hearing it that way, that's pretty amazing. And on that up note, we're going to remind everybody that tomorrow is Wednesday. Stocks are spooky. Stocks are spooky. Stocks are spooky. Tomorrow is Wednesday, which means when you wake up, another all-new edition of Animal Spirits. Get it wherever fine podcasts are played. Later this week, we'll have an all-new Ask the Compound with Ben and Duncan on Thursday afternoon. And then we'll finish the week with an all-new edition of The Compound and Friends on Thursday afternoon. And then we'll finish the week with an all new edition of The Compound and Friends

on Friday. We're going to have a special guest and a lot of fun. So stick around, stay tuned for those shows. You got anything else for us, Michael Myers? Nope. Happy Halloween. All right.

Happy Halloween, everyone. Have a good night. Whether you're just getting started as an investor or you're managing a multi-million dollar portfolio, Ritholtz Wealth Management has the solution for you. It all starts with building the 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. 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. Nothing on this podcast should be construed as and may not be used in connection with an offer to sell or solicitation of an offer to buy or hold an interest in any security or an investment product. Past performance is no Thank you.