The Compound and Friends - Hall of Fame Bull Market

Episode Date: May 10, 2024

On episode 141 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Brian Belski of BMO to discuss: S&P price targets, financial indicators, the housing market, BREIT, unemployment, the possibility of a hall of fame bull market, and much more! This episode is sponsored by WisdomTree. Visit wisdomtree.com/dgrw to learn more about the WisdomTree U.S. Quality Dividend Growth Fund See https://www.wisdomtree.com/investments/etfs/equity/dgrw for more information on fund facts and disclosures. Sign up for The Compound newsletter and never miss out: https://www.thecompoundnews.com/subscribe Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com See https://www.wisdomtree.com/investments/etfs/equity/dgrw for more information on fund facts and disclosures. Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

So, my ticket broker hooked me up. I sold my tickets for more than I paid for the game last night. Oh, you didn't end up getting screwed by it? No. Well, how did you resolve the other thing? I got f***ed. There's no resolution. It's D40. So you lost seven grand on that?

No. They only charged me $1,500. It was motherf***ers. F***ers. Did you watch the game? Of course I watched the game. He's a f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing f***ing Yes, I play a very aggressive style of tennis plate. I started I did the pickleball thing. Yeah, no, I don't do that I'm not old enough for that. Yeah. Are you good? in tennis Yeah, I'm spectacular

I'm not even you know, like three people you could ask right now. I'm asking no I'm not like I'm not like technically good, but I could play okay. You know what I do. I Outwork everybody else. I'm a mess at good, but I could play. You know what I do? I outwork everybody else. I'm a mess at the end. Just like everything else in your life. I'll throw my racket at a ball to just like try to make enough contact with it. No, come on.

I'm very distracting also to play with. I'm told. What does that mean? I'm just like extremely vocal and I distract. It's part of my game. It's part of my game. It's part of my game. There's a little Kyle Lowry stuff going on with me. I'll get in your line of sight when you're serving.

I was watching Kyle Lowry, that's funny. It's a good cop. I'll annoy the shit out of you. I was watching the roast on the flight here. Yeah, I've heard a lot of Ivan. I've not gotten into that, yeah. Seeing Bel Belichick genuinely laugh... Smiling the whole time too.

I had a smile on my face the whole time just watching it. It was, unsettling is the wrong word. It was just, holy shit. Did you watch Dynasty on Apple TV? No, I saw the first episode. My daughter watches it. She loves it. You will hate Belichick if you watch that.

Why? Oh, we're talking about two different dynasties. I thought you were talking about like the show. Well, when you say your daughter watches it. Oh, the Tom Brady, Bill Belichick. Yeah, why do they bury him like that? I didn't watch it. I hate the Patriots. No, wait, because Kraft produced it, didn't he? Or am I making that up? Well, that'll do it. You might be right. Oh, there was an awkward moment where Kevin Hart's like, he got Belichick and Kraft to do a shot together on the stage. And it was one of those things where it was like the momentum of the evening, like you

couldn't say no. Like a shot? Yeah, like get up and do it. Yeah, like get up and do a shot together, like a toast and a shot. And it seemed like Kraft was way more willing. Belichick was like... Well he's got a younger wife now so he's, you know. Well why would, not just to consume the alcohol,

but like to just like, kind of like, you know, make amends. There's no reason for Kraft to have beef with Belichick. No, he actually said, the toast for the shot was, to the best coach in NFL history. Thank you for everything. But Belichick, like he had comedic timing, it was adorable. best coach in NFL history. Thank you for everything. But Bellatrix, he had comedic timing. It was adorable.

So it's worth watching. Gronk was a really good sport. They acted like his IQ is like 60, when it's probably 80. But every other joke was about how dumb he is or what a giant baby he is, like a child. Kim Kardashian got booed. So they took that out of Netflix. They should, it's not nice.

They took it out. I'm glad they took it out. So this thing's on Netflix? Yeah, it was live. So on the live showing, she got booed. But why do you think she got booed? That's an audience. The Swift thing, right?

That's it. Totally. That's an audience in Los Angeles, though. Is that like Swift country? Everywhere, Swift. Everywhere. But I though. Is that like Swift country? Everywhere is Swift. Everywhere is Swift. But I would have said that's Kim country. It's the LA forum. I don't know.

I was a little bit surprised by that. They should take it out because it has nothing to do with the event. Right? I thought she was funny. I thought she was good. Tom Brady was really funny. Really? Yeah.

And you wouldn't like think that he has a great sense of humor because why would he need to? So in my lived experience the funniest people are like the biggest the biggest mutants who like had no choice but to develop a personality because otherwise who would invite them to anything? I did not get up to him. He doesn't seem to have had that problem so it was weird that he was also funny. I heard did you see the Drew Bloodsoul quote too? He was funny too. Yeah. Yeah. Drew was like rolling with the punches.

He was very good. He is the punchline of the night. Yeah. There's two things you'll never have that I have. Somebody did like a, so you can't repeat any of these jokes in real life. They are only contextually okay in a roast, which is really interesting.

It's almost like it's encapsulated away from the rest of the world. Some of the things that these people were saying on stage, if they tweeted them, they would be like... Sued. Sued. They would literally be canceled for life. But it's interesting that in the safety of a roast

on Netflix, it's still 1997. It's a safe space. You could say whatever the f*** you want. I love that that exists. Thank God that exists. No holds barred. I was on a flight yesterday morning to Chicago. And I don't think this ever happened to me.

It was delayed by four hours. The flight is like an hour and a half. Ununited? Delta. And Delta's great. I've never had an issue. I only fly Delta, and I've never had an issue. Oh, were you flying out of Midway?

No, LaGuardia. There was some. Oh, two. So there was like a maintenance issue and it was a redundant flap, they said, but then the paperwork was filled out improperly and there's the FDA and they had to come back on it. It was just a...

At some point people just started getting up and leaving the plane. But I got to watch an elite airplane movie. The Beekeeper. Yeah, I saw that on the Delta thing. Is it good? Yeah, it's an elite. Was that made for airplanes?

It's made for airplanes. Really? It's, it's, it's. You mean you can do one of these and then come back to it and go, oh hey. Yeah, it's completely absurd. Poss, one of the dumbest, but it's, it's wink wink. They know, they know what they're doing.

That's, you know, it's over the top, but it's a great airplane movie. It's like, it's like an hour and a half. So I watched it's Wink Wink. They know what they're doing. It's over the top, but it's a great airplane movie. It's like an hour and a half, so I watched it before the plane took off. What do you want from Statham? Sense and sensibility? Exactly. You know what I mean?

No, it was perfect. This is the guy's gig. It was great. It's the best in the world. We good? Nicole, you clapping us? Hey, we're shorthanded today. Yeah.

No Duncan. How dare Duncan take a vacation? I have to say, though, in Duncan's absence, John has just been stepping up major, right? John is owning this week. So Duncan, we're in good hands, sir. How's everyone looking? We're looking good.

Do I have any poppy seeds in my teeth? Too late. Let's go. You might have a couple. First, I'm having pop-up bagels. Pop a couple. First I'm having Pop-Up Bagels. Pop-Up or Pop-Em? Pop-Up Bagels. Delish.

All right. Hype is real. Hey Nicole, what episode is this? ["The Compound and Friends"] 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. Today's show is brought to you by Wisdom Tree. Josh, a lot of investors when they're looking for dividend stocks, they look for the highest dividend yielders, which is not such a great strategy. Classic trap. Because these are often are like accidental high yields, high dividend yields. No company wakes up and says, let's pay an 8% yield that happens because the share price

is dropping. Right, exactly. So probably a better strategy for screening out dividend stocks if you want to own them is quality dividends. Dividends that are growing and you've got all sorts of flavors of these, but WisdomTree's got it in a package. So when DGRW, which is WisdomTree's quality dividend growth ETF launched 10 years ago, the bigger dividend ETFs of the time were backward looking and they were trying to find Wisdom Tree's quality dividend growth ETF launched 10 years ago. I remember that. The bigger dividend ETFs of the time were backward looking and they were trying to find companies that were consecutively paying dividends 10 years in a row.

So you hear the term achievers, aristocrats, etc. Some went back even further. So that would not have owned Apple like ever. It would have taken 10 years. Right. You would have missed the stocks that are currently high quality, paying dividends and growing those dividends. We don't want to live in the past, we want to live in the future.

Anyway, for important information including objectives, risks and performance, make sure to visit wisdomtree.com slash DGRW. 141, ladies and gentlemen, you are in for a treat. We have a returning guest, fan favorite, returning champion, Mr. Brian Belsky. All right, Bels, you just turned 36 years old last week. Happy birthday. Hey, thanks a lot. Well, so what'd you do for your birthday? Charts.

I did some charts. Did some stock screening. Did some Lotus 123 backslash. Yeah, good weekend? Yeah, it was great. Michael pointed out how golden brown you are. You look rested. I flew back to Minnesota to see some family.

And then I went to Naples where I live for 36 hours. Okay. Then I'm back here in New York. Did you go to the Timberwolves game while you were there? I didn't, but I did. Oh, they were in Denver. They were in Denver. What are the vibes in the Twin Cities?

Oh, people are freaking out, right? Yeah, but I was listening to, I was doing my workout this morning and I was listening to Twin City Sports Radio and they're like, if we lose tonight, it's over. Yeah. Because it's Minnesota sports, right? Don't lose. Yeah, I mean, we won 14 out of 16 in the Twins.

They lose at home? Yeah. Like they're going to lose the first game at home and then that's it? So it's game three. Yeah. And so you have to understand the psychology. Just mentally.

Yeah, you got to understand the psychology of a Minnesota sports fan. OK. You guys aren't destined to... No, destined to nothing. Like the twins of 114 out of 160 and they're like, yeah, whatever. The Vikings had an amazing draft. Whatever. We'll end up screwing it up. And the Timberwolves... That's Jets fans. This is Jets fans, basically.

Yeah. More Cleveland Browns fan. Yeah. Same mentality. I mean, he's deserved. Or Maple Leafs fan. Yeah, same mental. It's I mean it's deserved or maple leaves I feel like some of the smoke between Glenn Taylor and a rod and his partner have abated recently You haven't really heard a lot now. I think they've I think they've basically said let's not deal with this right now No, wait till the offseason right shut up. Just shut up during the postseason But Taylor said wait a minute this franchise is worth more I sold it for how much?

Time out. You know what's crazy? This guy's like 80 years old. He's the richest man in Minnesota or something. It's like enough already. How much money do you need to live in Minnesota? Like this is over finance or do you just feel wistful that like you're going to lose your team?

He has sellers remorse like me with utilities. No, I know, but what are you doing with the money? Like what's, all right, so you get, what does he get? One and a half billion and he wants three? Is that the issue? Yeah. Yes? Isn't he worth like 10 though?

Oh, is he? I think it's something like that, right? Yeah, more than that. And here's what's really interesting about this guy. The irony. The way he made his fortune, he bought the business, somebody he worked for, he bought it for almost nothing. And then I think the guy he bought it from had sellers.

I think there's like a full, I have to Google it again. I read the story. I think, anyway, look, he has the new Michael Jordan on his team and actually Carl Anthony Towns is playing good basketball and I totally get why he doesn't want to sell now. People talk about it outside the Twin Cities, like he's the next Michael Jordan, but nobody in the Twin Cities will talk about that because they don't want to change it.

It's a curse. No, he's going to leave. Yeah, well it's the same national media thing. Why would you ever want to play for the Wolves? I mean, when's he going to leave? What if he stays? You know what? They said Giannis is going to leave all this time. He never left. It's not guaranteed that he's going to leave. Ant is got the personality. He's destined to. He's destined for greatness. He'll be on the next soon. All right. Brian Belsky is the Chief Investment Strategist and leader of the Investment Strategy Group for BMO. What does BMO stand for? Bank of Montreal. Brian has held various senior strategy and research roles including positions at Oppenheimer & Co,

Merrill Lynch, and Piper Jaffrey. Brian also oversees 10 actively traded equity portfolios and two quant ETFs for U.S. and Canadian wealth clients of BMO. Brian Belsky, welcome back to the show. Thank you. You've pretty much been right about everything over the last, let's say, six to 12 months. How do you feel about your own performance in this moment? What is it about the way you look at markets

that has you in this position that you're in? What are you getting right? Thank you for that. I'm very humbled, but I'm- No, you're not. Yeah, I am. I'm actually quite, I'm scared shitless right now because the market is kind of going our way.

I mean, we became a little bit more cautious the end of February. And if you take a look at where markets were then, 5100 and now we cross 5200. I don't know if we're going to close or not there today, but it's not a lot hundred points since then. And there's been a lot of conjecture about interest rates going down, interest rates going up, we're in the bull market. You talk a lot about that, I know. We remain resolute. Our call remains resolute. 25-year secular bull market within secular bulls, you can have cyclical bears and cyclical bulls.

We are in year two of the cyclical bull that started in October of 2022. We need some sort of a pullback. There's never been a bull market in the second year that has not had a pullback more than 5%. We need more than 5%. So I still believe we're going to get some sort of a pullback more than 5%. I think the little pullback that we had and everybody said it was cute. Thank you very much. I mean, you can accuse me of being cute, but I don't want to be cute. I want to be right on this. I want to have the opportunity to buy stocks a little cheaper. I think we can. That does not change my longer-term view.

It's so funny, Josh, and like that. So I become a little more cautious. People think I'm bearish. It's crazy. I'm not bearish. I'm an investor. You being cautious is... That's like when they say a neutral is a sell rating.

Exactly. Like a Bellsky neutral call is like, holy shit, sell something. Exactly. Okay. So no, we're resolute. I think what's super annoying to me is I don't understand how people thought

that the Fed was even thinking about raising rates. I don't know where that came from. It's like a narrative that came out of the pixie dust. That's kind of number one. Wait, in December when you were on you said the Fed should not raise rates. No, I said they probably won't, right? No, no. You're saying two different things. You're saying they should not cut rates. I apologize. Yeah.

No, you're talking about this 10-day stretch during early April where the the numbers were just scaring the shit out of people. Right. And then all of a sudden it was like, are rate hikes back on the table? No, of course they weren't. That's a very near term. And as I said, I'm scared that, you know. But that's my number.

I just don't get it. That's number one. But I think I always want to think about things that people aren't talking about. We have this monumental shift going on, monumental shift. And I joke about it when I do public speaking. We've rooted an entire generation of investors that all they know is that you buy stocks because interest rates go down.

The silliness started in August of 2007 when Bernanke opened the window and essentially started QE. We're not in that type of environment I don't think for the next three to five years. I think we're in an environment where rates are going to be very tight, very tight. And performance is going to be high single digits, low double digits more this year because we're still in this kind of catch up phase, right? We're believing in equities again. You put out a cool chart recently about the bear market and bonds. I mean, where do you- Shots of Ben Carlson. Yeah.

Where do you, where are you gonna put your money? I think the believability of equity investing is coming back, but more than anything, I think that we're entering the golden age of stock picking again. I really do, I really do. Part of it's AI, part of it's themes. You were joking earlier about utilities.

Utilities could be the next sleeve of AI. I mean, there's all this kind of stuff that I think we're not really talking about. But more than anything, folks, I just think that this whole notion of stocks only being driven by interest rate policy, I think it's over. I think it's over. We're going to get to your you have a great chart in terms of showing the correlation breakdown between individual stocks. Before we get into some of your stuff, I'm just curious to hear your view. So you said that we're in the midst

of a 25-year secular bull market, in your opinion. Before we zoom in, let's zoom out, and 30 years from now, looking back, what would be the main themes of the secular bull? Like the next leg. The next leg is clearly going to be AI and productivity and strengthen North America and really believing that and the consistency of earnings growth that I think people are

understating. This whole bull market started because we were so massively negative post the great financial crisis. If you take a look at what's happened since 2009, we've had several different market cycles. We had the negative to positive. We had the Japanese situation. We had commodities. We had the stupid committee, as I like to call it, in 2011. Then we had the election in 2012, where people thought things were going to go wrong. Then we had this really nice period for a few years.

Then we had Brexit. Then we had the Trumpy stuff. Then we had the tariffs. Then we had the one quarter bear market in 2018. Then we had Goldilocks in 2019. I contend, by the way, that we probably would have had a recession in 2020 if the vid didn't come around. Because I think we were kind of getting over our seats. Like a real one.

Like a real one, like a traditional one. But now we fabricate, now we had COVID and the zero interest rates and we've had these several different market cycles. I think 30 years from now we're gonna be going, what kind of white paper is the AI guy gonna write for us or the computer gonna write for us? I don't know what's gonna be on a tablet or what.

But I think looking back at the last, 30 years from now at what happened, I think they're still gonna have a hard time trying to figure out exactly what it was. Well, everything's gonna have a hard time trying to figure out exactly what it was. Well, everything's going to have a star next to it. Because you can't look at economic data from the last five years and not laugh your ass off at the first two quarters of 2020. Like, the unemployment rate is so off the charts, you almost can't make a chart and see anything else.

There's a lot of aspects of the last few years that everything has to be ex-COVID. You just said something really interesting. So the asterisk, think about Hall of Fame, right? This could be a Hall of Fame bull market with a lot of asterisks, right? Steroids. I don't hate that. You're not the most bullish strategist on the street right now, which is... I like that.

You like that, right? Yeah, I do. All right. So bull base bear case for 2024 and we're four months through. Your bull case is $5,500 target for the S&P on $260 in earnings. The gist of it is US economy defies the yield curve indicator, avoids recession, inflation declines more rapidly than expected throughout the whole year, 10 year declines getting closer to 3%, this leads to multiple expansion,

earnings growth above average. Okay, that seems not that, like the 3% part might be the thing that's least doable there. That's the deviation there. That's the difference. Okay, so you no longer think that that's likely? I don't think 3% is in the cards. I don't either, but who knows?

Brian, for these different, I'm curious how you come up with these price targets. So you've got the EPS for the bear, for the base, and for the bull. And the ultimate price target depends on where earnings are going to come in. Do you ascribe a higher multiple in your bull case than you do for the bear case? Because you would think that if we have lower earnings than you would think, not only you're going to have lower earnings, but you'll probably have people not willing to pay as high a price for those earnings. Right. You're going to have a higher multiple assumption.

And with this model when you're talking about, because we published this in November, obviously the risk premium is going to be changing, right? If I think what's going to happen going forward, you may attain, like we think markets are higher at year end than they are now. You will attain a similar type of price target, but with a different multiple assumption. So when we build our targets, we run three models, dividend discount model, P.E. regression model, and earnings model. And we come up with the median price across the board in terms of prices. We do the same thing for earnings so bottoms up in the PE regression and earnings regression. And so I think right now

earnings are tracking 241, 242 something like that. When we put out our $250 earnings number in November, people thought we were crazy. Yeah. 260 we really need to get, I think to get to 260, you really got to get financials going. And I think financials are still the most under-owned asset. Still, people hate them. They're not there yet.

And I think with higher, remember, with higher rates, these guys can print money or higher than normal rates. And so you have to, I always have to be careful I think about careful higher rates will interest rates going up higher than two three percent four and a half five percent higher than two to three percent BMO has learned math Well the number the number one impediment to the financials Other than the mini bank crisis that never was last year Yeah, is this idea that it's an inverted yield curve and that'll in some way

Curtail bank lending which will hit but none of that is true. No, thanks are not funded that way. It's not it's not 1989 They lend based on credit not the shape of the curve. They don't follow the shape of the curve But loan but loan growth we just learned from Bank of America Loan growth is now growing so that can step that theoretical constraint of the yield curve inversion and what it does to the supply amount. It's just not applicable right now. There's nothing but money sitting at the banks waiting to have something to do.

Now that's true. Now is there too many banks? Probably. I think there's a big theme that nobody's talking about in the banking industry in general and it's I think you want to own the really big ones and the really small ones. Why the really small ones? Service relationship. Okay. But are they going to run into funding problems as time goes on?

No, I don't think so because they're going to have a different clientele than Bank of America, JP Morgan City or Wells Fargo and the Canadian banks. And oh, by the way, private equity companies like Blackstone with the private funding and things like that. So I think the trouble spot, the trouble Barney Rubble area is. The KRE names. America. Looks OK. The chart looks OK. Yeah, I mean, because there's a bit of a game of ketchup

But I think if you're gonna buy a basket and we did by the way, we bought a basket of some of these regionals In November kind of guessing. Okay, I can't own one of them. I want to own five or six of them Yeah, can we do your bear case? Yep, the condom are 4100 on the S&P. What would that be from here Michael? We're at 5,200 now. So percentage-wise, is that 11%? I don't know. You tell me. Not worse.

The money? Yeah. Economy has something more than a mild recession. Fed underestimated the lagged effects of its policy. Unemployment accelerates. Risk off comes back in full force. Yeah, all the bad stuff. All the bad stuff.

Earnings growth stalls. So you kind of have to have a bear case. But like it seems like you phoned this one in. Yeah. $230 in earnings, $4100 as in pay. I've been saying this for a long time. It's not going to be, it's going to be, if that were to happen, it's not going to be because of something that has happened already on a leg.

It's going to be because something happens that we're not anticipating. That we're not thinking about. Right? I mean, it's kind of like a Ghostbusters one analogy dogs and cats living together. It'll be anarchy. Yeah, right. No, I just don't see that happening And the part of the the path of the market has had several different FOMO type of Rallies, there's probably more FOMO to come. These EPS numbers, they don't come out, you're not pulling them out of thin air.

Where do they come from? No, so we have... You just add 8% to whatever the last year's was. Yeah, we're just marking the market. Why is it so hard for you? So we have a tremendous database of information that we use through FACSET and we spend a lot of money for actual constituents of the S&P 500 and all of the company's estimates we build in bottoms up and a top down number. And then we kind of marry that with what's happening for every company.

And so we've been pretty good on earnings estimates the last five or 10 years, especially when we avoid and ignore our macro part of the model, because the macro part of the model has been really wrong. Yeah. Well, nobody expected. So I think earnings for this quarter with like 90% of companies reporting, I think we're running 8% ahead of expectations. And analysts actually spent the last month raising estimates,

which usually it's the opposite. Usually as the quarter goes on, they're cutting estimates. So I don't think anybody, macro or otherwise, thought that they would see this level of strength. I still think that the quote unquote COVID hangover is affecting this because I don't think analysts are, and I'm an old school guy, I've been doing this 35 this because I don't think analysts are, and I'm an old school guy, I've been doing this 35 years.

I don't think that you're seeing analysts fly out to the company anymore and meeting with the investor relations. You can't, they got one guy covering 30 companies, it's just not feasible. But I think they're doing it on the Zoom machine or whatever and you can't really tell when someone's lying to you unless you're seeing,

looking at them in the eye face to face. Get a good look at a bull, at a butcher, at a cow. Yeah. Let me tell you what I'm a little bit nervous about in the short term. And this is sort of tongue in cheek, but I'm also not entirely kidding. Stocks look really good right now.

And there's about 30 that I want to buy. Can't buy everything. Netflix, let's see, Netflix, which is a stock I own, that filled the gap after earnings, it gapped down 10%. JP Morgan had a really ugly performance after earnings. That just filled the gap. Meta had a monster gap down. That's almost filling the gap. The stock market looks really good right now. Like really good right now. Uber did that this week. It was 63 yesterday, it's 68 right now. Like really good right now. Uber did that this week. It was 63 yesterday. It's 68 right now.

Like these companies, even the companies that didn't have great forward guidance or whatever, it was a one day phenomenon. The sellers came out and buyers came rushing right back in. It's an either or, right? They come out with great numbers or they have good guidance. If you have both of them, you're the winner, winner, winner, chicken dinner. But I think Mike's point is like holy shit

there's what that what is that not even negative for like a week. My point is what's the bear case right now and stocks look so good and so like it sort of feels like too good to be true a little bit. Yeah I think that I think the bear case still is the inverted yield curve. Come on. Yes. That we're going to have a recession. You're still banking on employment rolling over and inflation, one more, two more spikes. You know what's funny? I get a lot of emails from like macro people

or people that are like very like economically oriented when they think about the markets. But then they pay attention to earning season like everyone else Yeah, and they cherry pick they find like five companies that said something about the consumer and that's the email It's like did you hear this call last night the guy with you know, McDonald's. Did you hear that? Did you hear Starbucks? All right, you showed me those for every can I show you William Sonoma? You know what I mean? Like you want to play that game? You want to go you want to go like tit for tat? Like you show me five CEOs who are saying that

like the consumer is fraying at the edges. Look at Wingstop. Chipotle. Uber just said there's literally nothing in their data. They're searching for it, indicating that anybody is taking their foot off the gas, no pun intended, on the consumer side. I was talking with our consumer analyst that covers Walmart and Target today Kelly being an amazing analyst So we're talking about talk about stock picking right look at the differences between Target and Walmart now, I mean Costco's you know Costco's on a whole other plan

I mean if you don't own Costco just close your eyes and buy it was top 25 company in the world anyway Walmart and Target. Walmart's just crushing it. Amazing. Yeah. Right, crushing it. How can that be so different? Groceries.

Well, it's groceries, but it's price point. It's the digital side. It's the delivery side. Target completely missed the boat, plus they got into some other issues. Oh no, but one is like 70% groceries, one is 30. Isn't that like the, one of them is considered a staple, the other considered discretionary. But Target is now a consumer staples. Oh, they moved it? Yeah, they moved it.

Okay. So that, I mean, think about what we just said in terms of stock picking. Yeah. Right? Or you think about Ford versus GM, right? Think about the Google machine versus the Facebook machine. I mean we're starting to see this differentiation across Industries obviously sectors but industries and I think that's that's what I think it's great I have a we have a rotation in the magnificent seven. Yes, we do. We got three up four down That's quite love that I think it's great or four up three down now Just one more piece of data on this on the spenders

Bank of America came out today and said total card spending this from Sam Rao total card spending per household rose 1% year-over-year in April following a rise of 0.3% year-over-year in March It's accelerating worse. We're spending more John. I want to do some of these charts Yes performance has been strong, but this bull market is still lagging versus historical norms What are we looking at here? Is that a cool chart? Yeah What are we looking at here? Is that a cool chart? Yeah. So this is historical S&P 500 cumulative performance during the first two years of bull markets, which is what you think we are now finishing up.

Why are you using this? Why are you using October 12 as a start date? Was that the low? Yeah. Okay. So what you're showing here is that we're up 41%, which sounds like a lot, but the first two years of prior bull markets have, for the most part, been better. So what else is there to say on this?

Well, again, I think so many people are so short-sighted, they're looking at what happened, what we've already established in this broadcast with respect to COVID, right, 2020. And I remember the 1990 market where I was working at Bill O'Neill and William O'Neill and company and we thought we were coming out of recession. Yeah. That's where I met Warren Buffett. It was amazing. That was an amazing time in my life. Anyway, and then if you think about the 2002 market, which nobody believed, right? And there was still we're talking about climbing the wall of worry. I think that there's still room for this to go. Now again. Go before what though? Like, because this is two

years, but you mean go before the first 20% cyclical hair? But wait, not to be, Dick, it's not even been two years though. Yeah, no, that's his point. But you're showing that this is during the first two years of the... Within the first two years, yeah. So this means we have some more catch up to go for average. See where I'm going with this? We're not extended. It's 18 months.

So if this were to go two years, for it to be average, it would be 55%-ish. So 15% before October 12th. In fairness, I think 09 and March 09 and March 2020 are doing a lot of work here. They're probably pulling up the average a little bit. Of course. Yeah. I'm not a mathematician.

Well, you go back to, I mean, math's my life. We might want to pull those two out just because of how extreme those circumstances were. Right. But I broadly speaking, I agree with your point. The meter is not running as though like, oh, this is as good as it's supposed to be. This is still a secular bull market with room to go based on longer term holding periods. So this is a good pull the lens back chart. Tell us what we're looking at here.

So this is you're looking at 10 year holding periods which you know someone probably just had some complex PTSD just try to understand that you actually can hold an investment for 10 years. I know. Let alone 10 days whatever. But this is not extend this move is not extended. In fact Michael and I've talked about this before. Look at it. If you look at just the path. What's on the left? Are those annualized return numbers? Yes. Yes. Okay. So look at that chart on the right hand side. It looks like a cup with a handle. Yes. Right? A cup with a handle is one of the most powerful charts. I'm sorry, Brian. I love you. Yellow card. You can't do a cup and handle on 10 year annualized return. I'm

just saying the chart in general. Okay. The chart in general. Nicole, do you have a yellow card for balance? Yellow card? You can't do technical analysis on tenure holding periods. Why not? My daughter was well known for yellow cards playing soccer when she was a kid. The only rules are there aren't any rules. Yeah. Alright.

I don't hate the concept. You don't hate the concept? Minus the pattern, I'm already doing this long enough to have been around during two, and possibly this would be the third, distinct, secular bull markets, each of which had its own bear markets within it. But you know what I said earlier, like I was half kidding about the market being too strong? That's like the Midwood meme, where the geniuses and the dumb people are both like the market's strong by the market.

And the air quotes smart people like, well, we're extended and there's a recession coming. Like people are afraid to just say things look bullish and it won't be always be that way forever. But people are afraid to be bullish because they don't want to be naked if we were to get blindsided. I think, well, I think the strategists that were bearish last year and missed most of it and the ones that are become kind of bullish this year, they're almost like reluctant bulls when you hear them talk about things. And I know it's really hard to be bearish when the market's running. But I think, to your question, it really speaks to on why the market's been able to be so resilient.

I hate talking about that, but you talked about those individual companies when they've been selling off and then rallying again. It speaks to how much people want to own stocks. Yeah. To my whole thing before. How is that bearish? It's not. And why wouldn't they given the lived experience of the last couple of years. Okay, so think about, I was at Merrill Lynch in 05-07, 05-06, 07-08, 09. And I mean, you talk about trying to buy a stock then?

I mean, redheaded stepchild of investing, right? And it's taken, nobody believed the first half of this move, right? And then we've had so much change that I think we're ready now. We're ready to embrace. I want to skip ahead to this consumer market indicator chart, John. So... It sort of looks like we're in no man's land. Now this chart is noisy. It oscillates all over the place. But what's in here? Yeah, what goes into this?

Well, disposable income, non-farm payrolls, jobless claims, consumer confidence, consumer credit, oil prices, oil prices have gone up so it's the negative side of it, home prices, which the same thing. How do you use this? Stock prices. Is this a gauge more than an indicator? It is a gauge. I want to see, we also do a financial market indicator as well. We're going to do that one next.

Oh, sexy. Should we jump to that and then you'll explain? No, no, no, no. This is no different than looking at any other kind of oscillator. Like we look at a lot of revisions worked, right? Earnings revisions or relative price. When you see those types of massive moves in either direction, you want to go the other way.

So if we're getting too hot on the consumer, go the other way. This is highly mean. The definition of an oscillator, like you want the mean reversion. Highly mean reverting. Highly mean reverting. Well right now we're at the mean, so there's not much to do.

So it's like, hey, like you were talking about earlier about these consumers. For every three to five companies that are doing great, I'll give you five companies that are not doing very well. Financial market indicator is not the same. This one looks like it wants to mean revert down the drain. Well the interesting thing about this chart is it is more way more extreme on the downside. Yep. Than the upside. Wait I want to say the more interesting thing about this chart is it doesn't stop in the middle. No it

no it flies right through it. In both directions. Yeah yeah. So what are we to take of this? We're just moving back to more neutral, but do you think about some of the parts of this, like especially like let's call it Ted spreads and gold, I think have been some of the factors that have maybe lent this to become more neutral. I'm curious what in here is pulling us down. That's what I'm saying. I think because it's higher gold prices, right? Because the VIX is below 13 again.

I mean, the stock market today is looking highly accommodative to higher prices. Valuation composite. Does this one surprise you guys? How quickly we got back to close to prior highs? And let's be honest, prior highs valuations are stretched It's it's surprising to me because of how much valuation has been able to endure on the interest rate side Yeah, this is a z-score. So we're taking that across. We're in we're taking all companies

Okay, okay from a bottoms-up basis all equal weighted. So this is not weighted. This is all equal weighted. It's not market cap weighted. No. No. All right. And the most important thing about that is, I think, from an inverted dividend yield side of things, because I think, especially with given the increased dividend exposure and

the capital usage. And capital usage and enterprise value debited and some of those metrics have been some of the better performing metrics in terms of factors this year. I think people are missing it. People, you know, if I hear momentum one more time, I think I'm going to die, honestly. But it's the old fundamental stock picking stuff that's actually working. Is momentum the term that's used the most where you know for sure the person saying it doesn't know what it means?

Yes. Okay. I would agree. What do you think, so longer term, what is the case for valuations remaining at these high levels? Would you say it's the abnormally high ROE? Well, couple things. ROE looks amazing.

John, throw that chart on when you get a second. Like amazing. Right, for the market in general. Can you define this for the audience and me? Return on equity? Yeah, no, like why is it relevant as an indicator to you right now? Well, it's relevant for... It seems super like pro-cyclical. So this was mean reverting too over time and it's the same thing with like with operating margins. Companies are so much better today than they were, and they deserve the multiple expansion. From an efficiency standpoint,

and from a productivity standpoint, and how they're operating their business, American companies look amazing. And if you take a look at free cash flow, it looks even better. I'm sorry, but this seems to peak right around the time the stock market, right before the stock market peaks.

So look how shallow the pullback was. This is like the CAPE ratio, where when we got the CAPE ratio pullback in 2009, even after it got destroyed, it only went down to its long-term average for a second. We're at, I don't want to say a permanently higher plateau, but the return on equity for companies today is a lot higher than it was in the past,

and maybe investors are right to pay a higher multiple than they had in the past. I think too that don't underestimate the negativity in the bad performance of bonds and people coming back and becoming more comfortable with this notion of being an equity investor again and believing what this is. Yeah. I think that's right. I also think this very shallow dip in ROE, I think because in 2002, everybody did a fire drill getting ready for a recession that didn't happen,

but they're still laying people off. Like Alphabet is still making layoff announcements. So companies just like figured out that they don't need as many people and they don't need to pay people working in fake jobs, et cetera etc. And not on a small scale, on a very large scale. So that's my point. The trough here, the pullback on the return on equity is at previous peaks. Even after the pullback. It's also easier to let people go these days because the job market is really good. Like

I'm saying emotionally, you don't feel terrible letting somebody go right now because you know they can get a job really quickly. There's no unions to deal with really in a lot of the companies that make up the S&P now. That's definitely different versus 20 years ago. Well, that's why if you take a look at small mid cap companies and the kind of momentum that you're seeing in the operating performance side, and then cash flow and earnings, it's off the charts amazing. It's amazing. And so that's what has us remaining very, very bullish on small mid cap.

But when you're taking a look at an all cap kind of portfolio, you're still obviously going to be more biased toward large cap. I want to do one more with you of these charts. I want to take a look at the S&P 500 performance during rising interest rates. John, it's the last one. It's a bar chart. So what you're showing us here is, I guess, interest rate regimes. Yep.

All right. So walk us through the categories here and which one is relevant. This is a narrative violation. I thought it wasn't supposed to be this way. Walk us through it. Well, wait. That's what I'm talking about. So this is the thing that I found interesting here.

Number one, S&P 500 rolling one year performance based on year to year change in 10 year treasury yield during both falling and rising interest rate periods.&P 500 rolling one-year performance is positive correct okay almost nobody who started invest in the last 10 years would believe that no they have to be shown this yeah they think like oh let's get bullish because the Fed is cutting let's get even more bullish because the Fed is hiking which means things are going really well It goes back to the fundamental argument before so it's a ten year. It's not the Fed. This is the tenure okay, but to some extent there's a correlation the The ten-year yield falling is a six and a half percent average annual or not annual but one year rolling

Return for stocks. Yep, the The 10 year yield rising is 14%. So it's the opposite of what most people would expect. Okay. So again, Minnesota common sense. We've totally forgotten this, the narrative. The narrative is, you gotta buy stocks because interest rates are going down, free money, and blah blah blah blah blah blah blah.

Right? Why do you cut rates? Because shit's coming to the, I agree with that. To the economy, right? It's medicine. Right. You rise, you increase interest rates. Yes. Because things are good and you can handle it. Or things are super inflationary, as was the case in late 21. But the 10-year rises when we're growing. Correct. And it falls when we're not. It's very simple.

As if they were seeing Fed funds in 10 years. In our view is we've entered this new paradigm where rates can remain in a range or higher than they have been and stocks can do very well. 10 year treasury is like 450 right now. Yeah, it's falling. 445. Guess we better sell some stocks.

It's over. What's funny about that, Ben Carlson did like a 50 year chart. That's like the average 10 year. Yeah. Is like five. 5%. Okay, so we're below the 50 year average and people are freaked out about bond market,

and its impact on stocks. I mean, I hate to throw this number out here again, bond market and its impact on stocks. I hate to throw this number out here again, but if I look at the average age of an institutional salesperson. Yeah, 32. His name is Zach. He grew up playing video games. Or Allison. Ashley. It's Ashley's. It's definitely Ashley video games. Or Allison. Yeah. Ashley. It's Ashley's. It's definitely Ashley's now.

It's definitely Ashley's. Less Chads, more Ashley's. Correct. I think we're making progress. We are. They don't know this function on a phone called voicemail. Yeah, I don't either. Yeah.

They're DMing. They don't know how to talk to people anymore. Oh, because you weren't on Bloomberg Messenger? Correct. Okay, come on. Come on. And so, I get, I'm sorry. You have two of them, right?

Right. I have two of them. Yeah. All right. So, 10 years experience, what have they seen the last 10 years, right? Yeah. And they went to college or university or business school

during the Great Recession. Right. When the world was coming to an end and the academics said, during the Great Recession. When the world was coming to an end and the academics said, we're f***ed. We're going to zero. Why would you ever want to get in financial services? And so I had the good fortune of going to college in the 80s and that was a pretty great time. You had to fight for your rights party.

You did. We did. We did. We did. All the Beastie Boys did. That's right. So where are we going with this? Yeah, what are we talking about? So what we're talking.

Brian and I just wanna go back to the 80s. I don't know. I wanna go back to the 80s. So what I'm talking about, there's no perspective. Yeah, I agree with that. And the majority of what they know about the market was out of a book, okay? And they didn't live through what some of us were able to live through in the late 80s,

early 90s, where if we got gassed in the 90s, it was tough to get a job. It was tougher to get a job in the 80s, where the employment situation is much different. The strength of the United States in terms of the percentage of global GDP is much stronger than it was. And people are forgetting this. You had double digit unemployment in the 80s. Nobody's ever seen that. That's in their 30s. Does the free cash flow yield falling, meaning stocks are getting more expensive based on this metric? Or do you think that there's going to be like a fundamental thrust where we get a big increase in earnings and this chart looks much more normal. Yeah, I think we're gonna I think we have a fundamental

We have a fundamental thrust of increased earnings and again, I think the biggest surprise is gonna come from financials I really do I think if you if you look at the majority of aside from a couple people on Wall Street You look at a majority of financial sector, especially the big bank research. They're all Negative man. I love it. Dude, even Citi looks good. Bank of America's breaking out. Well, I think my theme last time I was on,

I was gonna say- Wells Fargo looks good. I was gonna say I'm gonna rob from Jamie and give to Jane. It's been a pretty good trade so far. Who's Jane? Jane Fraser, the CEO of Citigroup. There's a theory that if there is a thrust in S&P earnings it's coming from the industrials.

Yeah. Because nobody truly understands what it's like when the whole world is trying to get ready for AI and like reshoring and these like mega, these mega trends that are gonna be with us for a while. I'm not against that. I think you've had, because of the strength of emerging markets, you've had this recent strength in internationally focused industrials, where I think a lot of the domestic, the machinery companies.

Some commodities too. Yeah, and commodities, I think they're coming back. And the defense contractors have not done great. If we have a regime shift in the United States, defense contractors are going to see more spending there as well. You put out a note that real estate has become oversold. I feel like these stocks are all up. Exciting, isn't it? spending there as well. You put out a note that real estate has become oversold. I feel like these stocks are all up. Exciting, isn't it? But what's oversold in real estate right now? Am I thinking the wrong?

It's about REITs? Well, from a sector, yeah, REITs. If you look at REITs as a sector, it's the worst performing sector. And according to our work, it goes back to the interest rate side of things. If you look at the interest rate sensitive areas, right? So REITs, utilities, the old telecom stocks as part of communication services and financials, REITs are actually some of the best performing assets

in a rising or higher interest rate environment. It's not happening so far. Just not this time. Just not this time. So I'm like, okay, so what's going on here? Nobody thinks they have pricing power. Well, everybody has this preconceived notion of commercial real estate is going to zero.

Well, just drive down Park Avenue between four o'clock and seven o'clock. Yeah, that's wrong. I mean, come on. B buildings and C buildings are in trouble. They're going to have to reprice lower or sell. Well, what happened... A buildings are great.

There might be some... Well, so I think what could happen in REITs, similar to what happened post the financial crisis, you had some consolidation in REITs. Yeah. similar to what happened post the financial crisis, you had some consolidation in REITs, right? And so I think that could happen this time around. And so we own, including some of our Canadian holdings, we own 16 REITs in all of our portfolios, but more of it is because of the way that we run value and dividend growth money.

So we think it's massively oversold and there's an opportunity there. I mean, it's 2.5% of the money. John, you have this chart, real estate sector weight is the lowest ever in the S&P 500. When did we invent the real estate sector? Well, it was part of financials, but it got pulled out in 2016.

So, all right, so this is from 2016 until now when it became the 11th sector. Yeah, it's just kind of a cool chart to just say, hey, look at. So wait a minute, so it's 2.2% of the S&P 500 and for context in It looks like in 19 and 19 it was closer to 3% so that's not that big of a Delta is it Well, it's like a third. Yeah, it's a third. It got cut. Yeah, take a third of it

I guess so. Okay, I guess in the context of small numbers versus big numbers, right? Yes What was the New York realty? Who owns Empire State Building? ESRT. Oh, that one. Yeah. Most of those stocks have come back. They look good.

SL3 looks good. It's hanging high. Where do you see the opportunities in real estate? Select names. We talked about Prologis on the cube. I love that idea. Prologis on the cube. Prologis should mimic Amazon in my opinion. The Amazon warehouse one?

Yeah, everyone's warehouse. Boston properties, right? Can we talk about B-REIT? Have you been reading the story about this gigantic, it's not publicly traded, but it's kind of like a big liquid alt that a lot of wealth managers allocate to. Have you been reading about this?

No, no, what is that? All right, so Bethany McLean, who a generation ago broke the Enron story, working with Jim Chanos, who was short the stock. She, you know, she like, it like made her career. I think she was a writer at Fortune and we know Bethany. She did a story this week for Business Insider and I'll just read you this one segment.

The returns, so B-REIT is like a real estate investment trust but it's private real estate and a lot of people are allocating to it who can't put their own money directly into private real estate. Because it's like a fund structure. Okay. But it's a fund structure where you can get money directly into private real estate. Because it's like a fund structure. Okay. But it's a fund structure where you can get money out

from time to time. It's a Blackstone product. Okay. Quote, the returns the fund claims it has delivered depend almost entirely on B-REIT's own estimates, which skeptics believe are wildly inflated. What's more, when B-REIT faced a flood of redemption requests from investors, do you remember that? Do you remember that? That's 2022, B-REIT, yeah flood of redemption requests from investors, do you remember that?

Do you remember that? That's 2022. B-REIT, yeah, they had to get there. They had to get it. They had to say, no, we don't have the money to fulfill all these redemption requests. It only fulfilled all those requests after raising cash from new investors, including one that received a sweetheart deal from Blackstone to invest in B-REIT. I think it was CalPERS, no?

Yeah, so this is bad. Quote, it is the absolute definition of a Ponzi scheme said Nate Kapakar who runs a hedge fund called Orso Partners that has shorted Blackstone stock because of concerns over B-Wheat. Unless the real estate market comes roaring back, analysts warn B-Wheat could end up shrinking to a fraction of its current size leaving the funds investors holding the bag. I find that to be a problematic conclusion to draw because you can't short B-REIT itself. So you could short Blackstone, which owns it, of course, and think that there's going to be a big negative fallout from it.

But I guess that's the closest you can get to betting against something like this, but it's fairly indirect. I think that shorting Blackstone because you're bearer of Sean B. Reid is tough. Yeah. Because they do a lot of other things besides this. Of course they do. It was—the New York Times wrote a post about this, the big questions hanging over Blackstone Fund.

I don't know if I've ever seen this before, there's seven authors on the article. Yeah. Sorkin and a bunch of other people. I think that the marks, the asset value of B-REIT, not knowing the details, probably are on the high side. I don't think that they marked anything down. But this idea that it's a Ponzi scheme and it's going to blow up, I would say that that was 2022. So we're almost two years removed from,

I think it was the winter, we're two years removed and there is still so much money sloshing around, waiting to buy distressed assets and absent a major global credit event when liquidity completely dries up, I think that there's still going to be a lot of demand for these assets. So I don't think this is about the assets, I think that there's still going to be a lot of demand for these assets. So I don't think this is about the assets,

I think this is about the structure. This has become really popular with people working in our industry. Yeah, because people want to be lied to. Well, wait a minute. Seriously. Because clients like the idea of, let me get this straight,

I can own private real estate, like all the billionaires who come on TV. That sounds good. And I can have liquidity. I could own buildings but pull money out when I feel like it. Potentially partial liquidity. So there's only a certain amount of liquidity per quarter. So that's one issue.

So that's why I was gated. But here's issue two. And this is the this is what Bethany is really getting at, which we're not going to resolve this today, but I think this conversation will be ongoing. which we're not going to resolve this today, but I think this conversation will be ongoing. Blackstone decides what the portfolio is worth, which is maybe the thing that's going to have to change. So there's a third party auditor

that determines the asset value. And BlackRock, I'm sorry, Blackstone ultimately has ultimate say. They said that they've never overruled, but now how close is the relationship between them and the third party? Who the hell knows? They've never overruled this third party evaluator that they themselves pay.

Right. No, I get it. So the thing is, there's no mark to market. And people want to be lied to. Like, fine, if the bill hasn't changed hands and it's not publicly traded, then market, you know, just... One of the points put out in the article is that B-Wheat has, this is not my data, this according to the story, has paid something in the neighborhood of like $700 million in brokerage fees and commissions all over Wall Street as it's raised all this money. It's a giant asset machine.

Huge product. The thing is, when they're down, and I'm not saying B-Wheat specifically, but when a private real estate fund is marked down 5% giant asset machine. Huge product. The thing is, when they're down, and I'm not saying BWI specifically, but when a private real estate fund is marked down 5% from its high water mark, and publicly traded REITs are down 37%. Everyone knows what's up.

It looks so bad. We know. What do you tell people that ask you what the right way to invest in real, you just tell them publicly traded REITs good enough? If it's, well, if in the public markets, yeah, but you've had so much of total asset allocation coming into private real estate, right?

Especially since 09. Advisors want to do it because it makes them look more sophisticated to their client, as opposed to saying just buy the Vanguard REIT. Well, so that's what I'm saying. There's an endless demand of money for this product, these products, not just BEWIT specifically. Well, there won't be if these headlines keep coming.

If there's smoke, there's fire, honestly. But hold on. Absent a global credit event, but there was smoke and fire in 2022, and it seems to have abated. Is it possible to say that maybe some assets just shouldn't be in a publicly held vehicle with quarterly liquidity?

Yeah, probably, but I go back to... Like, venture shouldn't be invested in this way. So why should physical buildings be, I don't know. Well, but it works. That's why there's partial liquidity. And I think most investors understand that. Well, I think the public must go back to believing in stocks again, because a lot of this private investment stuff came out as a result of the hedge funds crushing people in 2008.

And what did the hedge funds own in 2008? They own credit and a lot of them own stocks, too. So they absolutely got crushed. So then they were looking for other alternative assets, private equity, real estate, all of these other private investments. So I think 22 was way more influential for this private boom that were,

all the private credit guys and private equity guys became gods coming out of 22 because they weren't marking to market and bonds fell 18 percent, stocks fell 20 and of course they eventually marked their portfolios but later and when things were calmer and they just alternatives look like a really great diversifier. So that's the thing it's a great story for the advisors and I think the clients some are more sophisticated than others some don't get it some do but for the advisors and I think the clients, some are more sophisticated than others, some don't get it, some do,

but for the advisor to tell the client, like yeah, no, it's 98 cents on the dollar, we're good. It's good. It's good. And I know the queues are down 12% this month, but guess what? Our reads haven't moved. And they're kicking out income.

Well, that's where your point is. People just want to be lied to. Yeah. Initial unemployment claims kicking out income. Well, that's where your point is. People just want to be lied to. Initial unemployment claims came out today. You could tell me if this is a blip and meaningless. John, we have a chart from Fred. So, nine months high for initial claims and a, is it called an upside surprise or a downside surprise when it's higher than expected? It's an upside surprise to initial clients. It's an upside negative surprise.

Upside negative surprise. There you go. Okay. Yeah. Initial jobless benefit... Looks like it's a blip. Dude, the numbers are so small. Initial jobless benefit claims rose by 22,000 to 231,000 in the weekend of May 4th. That's the highest level since last August.

Ooh. Economist Paul by the Journal had expected 214,000. Last week's claims also rose by 1,000 to 209. So, I don't know. It doesn't look like the start of a trend per se. No. Bears watching? No.

Do I get my rate cut quicker because of this? Or... Okay. Alright, if there's nothing there, you could say there's nothing there. Wait, we skipped one chart that I want to get back to. And by the way, just the, it is the absolute definition of a Ponzi scheme for the Be With Me. That seems a bit, I don't know if that's a definition of a Ponzi scheme.

You know the editor at Business Insider was so excited when Bethany got that quote. Love that quote. I had to use that word. Make that the headline. So, Brian, we glossed over your comment that it is a golden age for stock pickers. Well, it doesn't really look like that based on the percentage. Which art do you want to pull up? John's got it.

The percentage of stocks outperforming over the last 12 months, it's been difficult. Outperforming the index has been only 30%. Now we bounce a little bit. But the more interesting thing, and I'll let you talk comment on both of these, the more interesting thing is that it's not risk on risk off.

Stocks are not all moving together. The correlation over the last 126 days within the S&P 500 is very low, which means that there should be opportunities for astute stock pickers, talented stock pickers, to outperform. What say you? So chart number one is that should excite you, right?

Because that tells you you have to be in the right stocks. The other chart in terms of the percentage overall, in terms of the dispersion, if performance is all over the place, that means you really, really have to focus more on stocks. And I think that's the key, key feature. And so again, even going back to the Magnificent Seven, do you need to own all the Magnificent Seven?

No, you don't have to. Josh, look at this chart. So the correlation within the S&P 500. So like- Falling dramatically, right? In 2021 is a great example. Everything was moving together. Yep.

And everything was moving to the upside and to the downside. Right? They were all moving down and then they were all moving higher. Yep. Now they're not all doing the same thing. They're marching to the beat of their own drum, which is the way that it should be. This is not what the market should be doing for the most part. This is why it's super healthy.

Yeah, I like it. This is super healthy. And that's all going back to our major theme that we've been talking about for two years, the return to normalcy, because the stuff that happened in 2020 is not normal. The stuff that happened in 08, 09, not normal. So we need to compress this, improve more than anything, that we can make money in this normalcy type trade. And we are clearly making money because the markets going up

So speaking of stock picking we don't have to spend a ton of time on this But I just love to get a comment or two from you about Some of the high-profile earnings blowups of this season. Of course, we have them every season Yeah, we tend to forget but this time these are companies that really seem to be very central to consumers lives So I think they were getting a little bit more attention. I bought Starbucks today. Disney, Starbucks are two big ones. When I say blowups, they didn't like melt completely melt down.

But like, I think more of their comments seem to have rung out more loudly. Just about, they have these consumer segments now that for the first time in a long time are showing some signs of spending fatigue. Does this concern you? Is it something that bears watching in your view? Or will it just be another set of companies next quarter and it's just the way things are? No, we've been big believers in Disney since Bob Iyer came back. Just from an operational perspective on what they're doing with their products.

On the Starbucks side is interesting, my team started to look at that stock again because we sold it three years ago because of internal stuff going on there. But what I want to start hearing from Starbucks, I don't know what was the catalyst for you that you bought it just because it went down. I'll tell you, but finish your thoughts. I want to hear the- He likes catching falling knives. That's his strategy. God bless you.

I want to hear that they're starting to cut stores. That would actually excite me. No, no, no. They just said the opposite. Really? They want to grow stores more? That's all they want to do. Yeah, well, that's not what I thought.

So the problem, Howard Schultz wrote an open letter to the whole company, which is wild shit on LinkedIn on a Sunday night, and he's not even on the board anymore. So he's just like, hey everybody, listen to me. I'm Howard Schultz. And it was like, you, talking to the board and management, need to go spend more time in the stores and you need to refocus on the culture of this place. Because I think the prices have gotten so outrageously

out of control at Starbucks, the consumer is bucking. So I think it's so bad it's good. Their comp store sales were just awful, down 7%. Just really bad. Nowhere to go but up. Really bad. And you had the CEO, you had a CEO on CNBC just getting abused. Oh, I saw that.

Just abused. So listen. He wasn't ready. He was not ready for prime time. He was not ready for that. I don't quite claim to roll this guy up in a rug and kick them off the bridge. I don't think I've ever owned Starbucks in the past, the stock. I have. But to me, this is an impenetrable brand name that deserves to be experiencing the pain it has.

It's mismanaged and misoperated and just hiked prices way too much. But the stock is down so much. And I just think that the stock has been so de-risked. I'm not saying that this is the bottom. It can't go down another 10%, 15%. If it does, I'll buy more. So I just think that all of the bad news is more or less broken down. And I think that the stock has been so de-risked. I'm not saying that this is the bottom,

it can't go down another 10, 15%, if it does I'll buy more. So I just think that all of the bad news is more or less pricey as far as I'm concerned with and comfortable. So the anvil needs to get heavier and then you'll pick it up from there. No, I bought it. I bought it today. I'm going to tell you that I've witnessed personally like five turnarounds at Starbucks. Like three of them were Howard Schultz himself. They don't happen after one bad quarter. So I like your idea.

I think you're early. That's fine. I might be. No, I agree. And we've been looking at it. So that's one of those things. Yeah, I think you have to have a contrarian sleeve, especially when you're looking in the market that has been so momentum driven.

So I like catching, I like catching blowups. Like I bought the meta blowup. I like buying brand name blowups that I think can turn around. But I also have plenty of stocks that are hitting 52 week highs. So I'm not just a psycho. My best recent blow up the last couple of years is I added Netflix to my value portfolio. So did I.

June of 2022 though. Grand Slam. I bought it in May of 22. I had another 50 points down, but I had the same instinct. Amazing. Yeah. Utilities are rallying like there's no tomorrow. I had another 50 points down, but I had the same instinct. Amazing. Yeah. Utilities are rallying like there's no tomorrow.

People are saying these are the next AI play. I don't think that's going to end well. I heard that yesterday for the first time. I don't think that's going to end well if that's why you're buying these stocks. If you're momentum driven though, these are the best stocks in the market. We actually have a chart from Chart Kid Matt. 14 days of 100% of the S&P utility sector, each of these stocks above their 50-day moving averages. So this is a history of how many times we've seen the XLU components be uniformly above

their 50-day. And this is a pretty notable rally. This goes back to 1990. So there have been 14 of these instances. What the hell? Do you worry about this because they're classic defensive stocks? Or can we throw that out? Staples too going vertical.

Let's... Staples are expensive. These guys... Is this a rate thing or... I think the problem... I think much of what's happening in utilities are, remember, these stocks got crushed last year. Isn't that a nice looking chart, by the way?

It's a chart kid. Chart kid. Do you have a Jersey farm that says chart kid? I have to. No, utilities were crushed last year, right? So if you look at, again, when we look at our process and you look at things like debt to equity, debt to equity just got massively reversed in terms of the amount like debt to equity. Debt to equity just got massively reversed in terms of the amount of debt versus equity. Now, I mean, I didn't like

utilities in 2018-2019 because they were really expensive. Debt to equity was at all near all-time highs and cash flow was going down. So last year it corrected a lot of those problems and obviously on a technical basis they were oversold, so they've come back. Now with this AI sexy theme, that bothers me a little bit from a fundamental perspective, because I'm going to buy these because they're paying good dividends.

They're great businesses. If you're selling Super Micro to buy Duke Energy, you're going to be pretty disappointed. Okay, but do you believe the story though, that all of a sudden these utilities have gotten more valuable because of how much power AI computing... If you're gonna make a two trillion dollar capex changeover from GPUs to GPUs and build all these new facilities you are definitely gonna

uptake utilities. It's got to be part of it. It's got to be part of it. Right. But maybe not taking these stocks of 15%. No. That might be. That might be a little bit too much. I think I'm with you on this. Can we do a couple of other earnings stories? Sure. Okay. Simon Property Group.

I view this as a pretty decent gauge of what the middle class, upper middle class maybe, is doing. There's nothing in here. Nothing bad? No. David Simon does the conference calls himself and he does all the interviews after. This is him. Needless to say, I'm very pleased with our first quarter results.

They beat, quote, tenant demand continues to remain very strong despite a cloudy macro environment. The company's very bullish on its entire portfolio. It saw its tourist-oriented properties outperform the others. Retail sales volume at the tourist-oriented properties increased 6% compared with 2.3% for the entire portfolio.

The malls made a big comeback. Physical stores are where it's happening. We're seeing a resurgence and reinvigoration of that whole product. So if you're looking for, uh-oh, the consumer, well, Simon's telling you nowhere in sight. No, we've owned that stock for seven years and a couple of our portfolios. It's a great week. Oh my gosh. Great company.

And I remember we bought it, we bought a lot of it in 2008 too when I was at Merrill for some of our portfolios because of the way that they're running the business. And so that's one of my go-tos. So here's, he's giving us a tiny hint. While inflation is moderating, prices remain quite daunting for lower income consumers. The company expects to see volatility in that segment. When isn't there volatility for lower income consumers? Always. The higher income consumer continues to spend and visits our property. Yeah, no shit. Yeah. Okay. All right. No big surprises there. Disney

had its worst single day since, third worst day since the pandemic, worst day since 2022. You're not worried about it. I'm not. Okay. This one's interesting. Robinhood beat. They got a Wells notice the day before. Stock is higher. Nobody gives a shit. It's crypto.

People are like, oh, well, Wells, but they're in crypto. So that makes sense. What they're saying about trading activity backs up what you're saying. People have rediscovered equities. I mean, these are young people, so they never undiscovered them. These are, you know, the Robinhood customers, their first go-round, they are doing shit.

They're doing options, they're doing crypto. Volumes are great, activity is high. Seems to be a really good time to be Robinhood management right now. What do you think? I think so, and that should also make you bullish on the other broader brokers like Raymond James or LPL or Morgan Stanley, and I think that's the place to be.

You got to take on the Robin Hood number? I did not look at Robin Hood, but Disney, I see you have Airbnb in there, there is some talk about travel moderating a little bit. Just the boom might be normalizing. Which is, it's not bearish, but just the travel, it's been a mega boom for a long time. Airbnb beat on earnings, beat on revenue, and then said, next quarter should be roughly the same growth rate as this quarter.

The street didn't like that consensus was 12% growth next quarter and now they're getting flat. They whacked the stock. But Airbnb is also saying just wait till you see Q3. Yeah, because you got the Paris Olympics. We got all this other shit coming. So I don't know is that I saw him on TV today talking about. He's impressive, Chesky. Yeah, he was talking about how many of the percentage of Airbnbs in Paris that they're ramping up for the Olympics. They don't have enough hotels in Paris. I was shocked.

Noah shocked me. Speaking of the travel boom, so I was on a Delta flight yesterday, I do own the stock, and it was full of business people, and they talk about the fact that I'm pretty sure, fairly sure, maybe, that business travel is back to an all-time high. Right, is that true?

When you're on a Delta flight, do you think the business people know that you are also a business person? No. They don't. Me, I don't think so either. I don't dress like a business person. Yeah, but you're doing business travel. I'm doing business travel, that you are also a business person? No. They don't. Me, I don't think so either. I don't dress like a business person. Yeah, but you're doing business travel.

I'm doing business travel. That's true. I am doing business travel. You're like undercover doing business travel. That's true. Given the world that we lived in, the Zoom COVID world that we lived in, I would never have guessed. I would have guessed, why would you need to travel?

Like why would you do that? Well. Because like most people, it's first level thinking. You're a first level thinker. Second level thinking is, Oh, wait a minute. Travel is now special. Yep. Hmm. Like now it's like, travel's meaningful. Before the pandemic, it was just bullshit. It was just get on a plane, go stay in a motel. It's like routine. Now it's like, yes, I get to travel. I mean, my travel's on an of them high. My business travel.

Yeah, me too. By far. Well, you know, I was on six airplanes last week. Not to brag. I'm 128 miles away from a three million actual on Delta. Oh wow. You need the BMO jet next time. Come on.

I'm saying. Never going to happen. Do you know the flight attendants by name? You must recognize some of them. I do a lot. And 100,000 miles. No, actually less from a million on United. What airline?

I'm under 100,000 flight miles to be a million on United. And I'm 128 miles from 3 million on Delta. Last time I was so when I... I heard on United, 100,000 miles, they let you fly the next plane. They'll let you. All I care about is when I cross 3 million on Delta, I think you're diamond for life.

Oh really? So just make up a trip and go. I'm flying back. You're good. All right, you have fun on the show today? Oh my gosh, it was terrible. I never want to come back. This has been amazing. You guys have been so great to me and I really...

No, no, no. I really appreciate it. I really do. Alright, say more. Say more. Say more. Well, listen, you are a fan favorite, as I mentioned at the top of the show. The audience loves when you come on. And I think we, Michael and I, like, we learned something from all our guests. And we really appreciate when you come with charts and information. Well, thank you. And a perspective that frankly, you're still out of consen- like people are now bulls on the street, right?

You're not the only bull and you know that, you're not even the most bullish, but you're still out of consensus in the way that you look at things. So we really, we get a lot out of this. Well, thank you. I can't believe that you didn't remember I was at O'Neill because I've been very blessed to have these great experiences at every place that I've worked at. O'Neill was in Ohio? Midwestern based? No, Los Angeles. I bet you did. Ben and I went there years ago to the O'Neill Related to Investors Business Daily.

Yeah. What was I thinking of? McDonald and Company. Yes. I don't remember. what were you doing there? So, I just laughed because I did everything wrong that you're supposed, I did everything that you're not supposed to do in terms of getting a job. I took my old Minnesota resume,

I took a red felt tip pen, felt tip pen, I crossed off my address, I put my New California address in, I sent it in, there's looking for institutional analysts, research analysts, sent it in, got the job on the first interview because I just got done reading How to Make Money in Stocks by Bill O'Neill. I worked in the research department. My very first paycheck.

Doing that CanSlim stuff? Yes. I love this. So my very first paycheck, I punched in for the very first time on Wall Street that I got paid. I was doing some stuff on the side before that. It was May 3rd, 1990. And within six weeks, Bill O'Neill got up

and told the entire company, I remember all of us that were going into recession because that was the Kuwaiti War. And I remember sitting in my cube and the director of research was literally crossing people's names off that the bill was gonna fire. So I walk in there, you know, 20 something years old and I sat in front of her desk and she goes, Belsky, I have nothing to worry about.

You're a hardworking kid from Minnesota. Bill likes you. Oh, and the rest is history. So I was there for four years. California kids were gone. They were. The surfers were gone. They were.

Dude, hey dude. You know what's funny about that? In 1990, it was a plausible guess That oil prices are spiking because Saddam invaded Kuwait. Yeah, there's definitely a new recession I feel like if that happened today stocks would route Scores on invasion of Kuwait a hundred percent fundamentally He was right and but it didn't last long and then we were at all time highs as you saw by that chart. So I've been blessed to be able to be at these amazing places and these amazing franchises. Tell us the Buffett story before we do favorites.

Okay. So. Because he's a big technician. He must have loved Bill O'Neill's charts. Bill O'Neill used to have great dignitaries come through. So I met Charles Schwab, Warren Buffett, and Peter Lynch. That's ridiculous. In your 20s?

I was 24. Were they? I'm trying to think. Was Buffett in like early 90s? He wasn't Buffett. He wasn't Buffett. He wasn't Buffett. Like late, by late 90s, he was like an international celebrity.

Correct. Okay. And Buffett, because at one point, Bill O'Neill had the largest database of publicly traded information on stocks. Really? Yes. Like more so than Dow Jones you're saying? Yes. Wow. So anyway, that's why that people would come through and I had 15 minutes with them and the funny part of the Warren Buffett story is I was in a hotel, it was my hotel, I stayed at the Essex house here in New York for 10 years, and I had to run back to my room for something in 2017, and I jumped on the elevator,

and there's Warren Buffett and Becky Quick. And Warren Buffett looks at me and says, hi, Brian. No. Yes. Yeah, but you're on TV. No, no, no, no, no, no, no, no, no, no, no, no, no, no. TV over 25 years.

But I said, oh my gosh, how do you know who I am? He looks at me, swear to God, no shit. He looks at me and goes, no, I remember meeting you. I remember meeting you at William O'Neill and Company in 1990 because Bill said you gotta watch this kid Belsky. And then of course I see it on TV. He gave the disclaimer, but how humbling is that? That's wild.

That's fucking wild. It's humbling, my ego would be through the roof. No, I'm like, oh, I'm like, oh, I'm not worthy. That's really cool. So again, I've been blessed to be around so many great people my entire life. Did Becky say hi to you? Becky said, so I said, thank you so much,

and da da da, I said, on behalf of the University of Nebraska, thank you so much for giving money to the business school, because my son was going to Nebraska at the time. And then Becky said, and her daughter, his daughter went to Purdue. And then Warren Buffett goes, oh, big 10 kids, huh?

Aren't you from Minnesota? I said, yeah, how come you kids didn't go to Minnesota? I said, I'm not going to give those guys any money. Okay. So that's pretty cool. Yeah. So when you met Lynch, he was at the height of his fame. He was.

Early 90s. Well, I remember too that, so Fidelity loves charts, right? Yes. he was at the height of his fame. Early 90s. Well, I remember too that, so, Fidelity loves charts, right? And they had a whole chart room there. Still do. Yeah, Ned's got that big chart room and they were the very first adopters of the Wanda system, William O'Neill database, W-O-M-D-A.

And so we had the charting software and everything. And so Peter Lynch was there. I mean, he was like a rock star. He was the one that said to me, he said, never buy anything unless you can reach out and touch it. Okay. I like that. I like that. He would have missed the internet, but that's okay. That's good. You got a favorite for us? Favorite what? Favorite anything. What are you into these days? I am watching Sugar Now on Apple TV. Oh, me too. Let's talk about it. I love that. Oh my gosh

Do you like murder mysteries in general? I do I do I do like detective shit I do did you guys watch the boys on Amazon love the boys? Oh Do you? Did you watch the spin-off thing yeah, yes, yes, yeah, that. You haven't watched it? No. Oh, it's really good. That's good too? Yeah. Soldier Boy shows up in there. So...

Okay, now I'm all in. Text us when you finish Sugar. I didn't watch the show, but Ben gave me the spoiler. So text us when you're done. Oh, I know. Are you finished? That, that, that. I watched the most recent episode.

The new one comes out Friday. I saw... Oh, I thought it was done. No. Is this the Colin Farrell one? Yeah. No, it's not done. There's another one comes out Friday.

They didn't drop a binge package. They're giving you one a week I'm thinking of something else. Yeah, sugar watch it. The way it should be. I'm super into that It's nice to see he's having like a career Renaissance. Yeah, he's great in that So he kind of went away for a little while. They stopped casting him as like a swat No, they stopped casting him as like the leading man. They stopped casting him in action movies He kind of like was in the wilderness and detective Yes, I brought him back. I brought him back and it wasn't even good and he's the penguin but he likes doing the batman

Penguin is not a movie. It's TV Yeah, but he was in the penguin in the Batman movie and that they just gave him a series. Yeah. Yeah Yeah, I like I like seeing him again. I thought I think he's great. He did this super weird Irish movie the I think he's great. He did this super weird Irish movie. The... What the hell was that called? The... The Bruges? No. Well, same actor. Inner Sherry? Bitter Sherry? What the hell was the name of that? I want to say Brendan Gleeson and him.

Banshees? Banshees of... You know this movie? This movie is f***ed up. This is what's called an anti-review. Alright. Michael, favorites? The Banshees of Inna Sheeran, that was cool. That's your favorite? I already said, no, no, no, no, no.

The Beekeeper, next time you're on a movie, do not watch this on your couch, it's not a couch movie. Next time you're on an airplane, fire it up. I'm on an airplane in about an hour and a half. Fire it up. Alright, listen, I gotta be very honest with you, I have never had more fun watching sports than I am right now.

These NBA playoff games are incredible and this Knicks series is like I'll never forget. Like some of the moments that are happening in these games. No the playoff sucks. The Knicks series is great. 78 complaints against the Knicks, right? Or against the refs. Because the Knicks from the Pacers. Carlisle's a bitch. Come on. Was he an assistant coach for the Knicks a million years ago?

I don't think so. Did I read that? Was he? Maybe. They said that Thibodeau and Carlisle were both assistant coaches. Was he an assistant coach for the Knicks a million years ago? I don't think so. Did I read that? Was he? Maybe. They said that Tibbito and Carlisle were both assistant coaches. In the Celtics I think. No, during Reggie Miller versus the Knicks.

Oh wow. But I don't know who was assistant coach in which team. I know that Tibbs was an assistant for the Knicks back in the day. I didn't know Carlisle was as well. I don't like that mentality after the game ends, start reporting fouls that were, I don't, I think though that there is some truth to the idea that the refs are terrified in Madison Square Garden. Oh no, listen, listen, the Pacers got some rough calls.

They definitely did, they definitely did. I feel like those things even out. That happens, yeah, they got some great calls. The Knicks are plus six in Indiana, so they're gonna get the calls. Pacers will get the calls. Anyway, that's my favorite, and I feel like we're literally going to wrap this up in four or five games. Well, without OG, I don't know if we can win two more games. Exactly. A hamstring?

Yeah, it's gonna be tough to win with six players, but for the sake of it. From New York, couldn't help it. Alright, Brian Belsky, you are a legend. We loved having you here. I want to tell people how they can follow you and then we'll get out of here. You're on LinkedIn, Brian G. Belsky. And you are on Twitter. Your handle is at Brian G. Belsky.

Thank you so much. Thank you. Hey everybody. Thanks so much for listening. On behalf of all of us here at The Compound, we appreciate you and we'll see you soon.