The Compound and Friends - IBM Warns, Apple Sues OpenAI, Big Bank Earnings Blow-Out, EPS Bubble, Welcome to Y’all Street

Episode Date: July 14, 2026

On this episode of What Are Your Thoughts, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ discuss: why Apple vs. OpenAI could reshape Big Tech, IBM's surprising warning and what it says about the AI trade, whether we're living through an "anti-bubble," and the debut of a new high-yield ETF. They also break down the biggest takeaways from bank earnings, including JPMorgan's blockbuster quarter, Jamie Dimon's succession plans, and what AI is actually doing inside the banking industry. Plus, they discuss the launch of the Texas Stock Exchange, why competition is finally coming for QQQ, Josh makes the case for ServiceTitan, Michael brings another mystery chart, and much more. This episode is sponsored by Janus Henderson, Investing in a Brighter Future Together. Visit ⁠https://www.janushenderson.com/⁠ for more information. Sign up for ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Compound Newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and never miss out! Instagram: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://instagram.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Twitter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://twitter.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ LinkedIn: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.linkedin.com/company/the-compound-media/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ TikTok: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.tiktok.com/@thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ritholtz Wealth Management⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/advertising-disclaimers⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/podcast-youtube-disclosures/⁠⁠⁠ Learn more about your ad choices. Visit megaphone.fm/adchoices

Should I just start rapping now? Do you want to? Yeah, make my music louder. I'm going to drop a verse. I got 16 bars for you, son. You will drop no such thing. I'm not going to do that. What's up, guys?

Welcome to an all-new edition of what are your thoughts. America's favorite investing live stream. My name is downtown Josh Brown. I am here with my co-host, Mr. Michael Batnik, as usual. Michael, say hello. Hello, hello. If you are new to the show, We talk about the biggest and most consequential topics happening in the market and the economy,

circa right this second. We've been doing this show or a version of this show all the way back to 2019. Did you know that, Mike? Or 2018, it could be. Yeah. Yeah. Wow. It's been a minute.

It's quite a run. And we absolutely love doing it. And we're so happy to see everybody who's here live in the chat. Sodak Jason giving a shout out to Duncan. That's right. Duncan is back and behind the scenes. Cliff Peebles, I'm jealous of your hair, Josh. Well, tough luck, because it's only going to get better from here.

I had my fourth consecutive monthly PRP treatment, coincidentally, today. And it's really not, because of the life cycle of hair, it's really not until month eight that you see the full results. Look at the results that I'm already showing, having just begun in March, or in, you In April. It's really, it's like a, it's like a scientific miracle happening here. Are they asking you for testimonials? They're going to be, there's going to be pictures of me.

There's going to be pictures of me on the wall. You're going to be the face, nay, the hair of PSP or whatever the hell it's called. Anyway, shout out to Dr. Shinebloom. He is absolutely crushing it. Can you believe it? All right. Guys, we have a sponsor tonight. It's Janice Henderson.

That's right, Josh. All right, take it. Janice Henderson investors, we believe working together is the way to work better. So do I. Like a bond of your portfolio plans in our in-depth strategy, your valued assets and our valuable insights, your mission and our vision, always working in perfect harmony to find the right investment opportunities, Janice Henderson investors investing in a brighter future together. All right.

Only two stumbles in the whole ad read. That was pretty good. Janice Henderson, no, not the worst I've ever heard. Definitely not the best. Janice Henderson.com for more information. And thank you so much, guys, for sponsoring the show. We appreciate you. You know the problem?

My reading skills are starting to atrophy. I'm an audiobook guy now, as you know. I know. I know. You have given up reading. All right. SpaceX, I don't have a ton to say on this. This is what I...

All right. What I want to say is this. We were part of this wave of market commentators in the run-up to the SpaceX IPO who were sharing these tables, these charts, these statistics about how the typical IPO, almost no matter how hot it is, is not going to be able to hold its pop. Within the first year, there's going to be a big pullback. Not for every, Google is the counter example. Google opened up and never, ever looked back, right?

But that's Google. Okay? That's like a long time ago. It's a very, A, it's a very long time ago. And B, it's, it's, I'm not going to say one in a million, but close enough. So we were part of this, like just saying, all right, everybody's excited. It's Elon. It's Rockets.

It's time travel. Whatever he's saying he's going to do. But number one is going to be a ton of stock hitting the market in short order, whether the ETFs are buying it or not. it doesn't matter. And number two, look at every other hot deal. There's been a window with a better opportunity. And this one round-tripped faster than I thought.

I don't even know if we bothered making a chart. But suffice to say, the stock was priced at 135, ran to 217. It's back at 138, 136 as of today's clothes, and it's less than 30 days later. What are your thoughts? This went exactly how we thought it was going to go, and I'm not taking credit for that. I don't know that there was... I am. No, no, no.

Here's why. I don't know that there was a single market commentator who thought it would go any other way. It was pretty much universal. Maybe there was a bull or two, but I think everybody talking to individual investors had the same advice. Maybe there will be a very short-term pop. And if that's your plan, you want to buy it and sell it the same day because you want to gamble. All right, fine. But if you're trying to buy it and hold it as an investment, wait.

I'm pretty sure that was like the universal advice. Who the fuck bought this at 217? If you had to guess, who's the top? It's not a hedge fund. There's no way. It's not a mutual. I don't think it's a mutual fund.

That's such a great question. And it wasn't day one. The stock rallied for five days. Uh, did it? Okay. I think it was like three days. Nope. It went up and then went up and then it went up.

It topped on the third day. The third day. Okay, fine. But that's such a good question. We'll never know. I have no idea. No, but here's the answer. Nobody will ever really know, but like just conceptually.

No, here's the answer. Who is the buyer? I'll tell you. It's people that bought a 217 because they wanted to sell it at 230. I don't think anybody thought that they would buy it at 270. And then are they still in it? No. No, I don't think so.

It's not 80 points. No, no. The volume in the first couple of days, turnover and the number of shares was, I'm making this up. Eight shares, like eight X turn. over for the number of shares. So I think it was just, it was short-term traders. Nobody bought it at 2.17 and it's still holding

because they think it's a good back to three. We have some guesses in the chat. Can I share them with you? Sure. Go ahead. Elon fan boys. Fine. Kathy Wood.

So I know she did an open market buy, but she also owns it from prior to it going public. I knew she bought it on the day of the IPO. I don't know if she got allocated at 135. I don't know how that works with an ETF. I don't know if you bought him on 30. Ben Lopez is saying, All In was pumping it.

I disagree. Those guys own it from pennies. They're not telling you to buy it from them. They're just excited. And if I were them, I'd be excited too. Those guys are friends with Elon. Like, they're not, they didn't get it at 135 on the IPO. They got it at like 10.

How about this? I would wager that of the shares that were bought above $200, I would guess 80% of those people are out. Oh, Jackman, 79, makes a good point. Funds for the leveraged GTFs. I guess, like, if people were trading the leverage GTF, like, within 24 hours, it's got to own stock. If it's got demand for the-

This is a show with a host and a co-host. And when I talk, you have to respond to me. We're doing a show together. Yeah. So, well, wait, let me, let me say my point one more time because you did it here because you were in the comments. I would guess that 80% of the people that bought above 200, I've sold. I don't think it's like bag holders that are the dumbest idiots of the world.

No, I agree with you. I think most people are out. No, I'm with you on that. I don't think that I don't think the people sitting in the stock right now at 136 are the people that bought it over 200. Because I think a lot of gambling took place above 200. Yeah, and they're done. And the gamblers are ostensibly, they have an out.

And that's part of the selling. All right. Either way, very instructive doesn't mean that anthropic or open AI when those come public or Anderol for that matter or data bricks or any of the deals that people are excited about does not mean that those will do exactly what this did. But I think people should have in the back of their head. This can happen. Great learning experience. And a lot of them look like this. Really, we weren't heroes for calling this out.

A lot do look like this. And I'm very curious to see where it finds the floor because 136 is not so bad. This is where basically, it IPO. At 1.50, this is nothing. It could go to 100. I'm not the exact same than it will, but who knows? We'll say. All right.

So Michael does not want to take any credit for having cautioned people. I do. So I will take that credit. No, no, no. That part makes me feel good. If you thought about buying SpaceX and you were convinced by Josh and I not do, I feel good about that. I'm just saying that was not a heroic warning. Everybody gave that warning.

Did you buy this stock now at the IPO price? I'd feel a lot more comfortable. it. Like, I don't know. I don't know where the bottom is. It closed an all-time low today after 11 training days. I'm not going to, I have no interest in buying the stock today. But if you're buying it here and you want to put it away for five years, okay. The little boys in my town are all texting me like my daughter's friends. They're like, now, now, now, they want to buy it so bad. I mean, listen, it's been trading for three weeks. I have no idea where this thing is going to settle at, but not for me. So that's a good point. Three weeks. What this process is,

is called what they refer to this on the street. This is called seasoning. Seasoning. The stock is being seasoned. Like your hair. Very much like my hair. So, all right, next thing. I actually think this is the biggest story of the last week.

Apple versus Open AI is the big one to me. I think that this lawsuit, Apple sued Open AI. I'm going to explain it in two seconds, but I just want to say why we're even talking about this. the outcome of this or not even the outcome, but the process of how this lawsuit runs its way through the courts literally has the ability to shape the next five years in tech.

That's how important I think this is. And I'm going to explain why. Apple is saying that OpenAI stole trade secrets. Number one, there are hundreds of, 400 former Apple employees now working at OpenAI, Not an accident, very deliberate. Open AI understands the thing that I have been telling you guys for a long time, which is that he who owns the device decides how the end user is going to interact with a given product

and is going to share in the revenue almost regardless of who wins. And that is the position that Apple is in. It's an installed base of two and a half billion devices around the world. And my investment thesis is that Apple is going to own the consumer relationship with AI. Whatever LLM you want to use doesn't make a difference. You're going to access it through iOS, and Apple's going to get paid, and knock yourself out. You could use any of them that you want. It's just how this is going to go.

It's no different from a lot of other things we've seen before this. Open AI knows that. I'm not a genius. Sam Altman hired Johnny Ive. bought Johnny Ives Design Studio to create a physical product that could do an end run around Apple. They want to do a pendant, like a necklace,

that sits at your chest and you talk to, and they want to do a desktop device, some sort of a box or something that's got speakers, perhaps a camera that you can interact with without looking at your phone. This is priority one at meta. This is what the raybans are all about.

snap with the spectacles, alphabet, they tried it with Google Glass. We'll see what they do next. Everybody wants to figure out a way to provide AI without paying the toll at Apple. Okay. That's what's going on. So Apple is saying that Open AI is just openly stealing trade secrets that have to do with its hardware and the way it builds products, et cetera, so that they could build their own. What's their case? Their case is they have a ringleader, Tang U-Tan, OpenAI's chief hardware officer who worked at Apple for 24 years.

He was the former VP of iPhone and Apple Watch product design. Apple says this guy directed job candidates to bring actual Apple parts, CAD files, that's computer-assisted design, and prototypes to open AI interviews for, quote, Show and tell. I mean, this is like hardcore industrial espionage. They say another guy, Chang Liu, ex-Apple engineer, allegedly exploited an authentication bug to access Apple's network storage from a former colleague's Apple laptop. They have text messages in the filing. Lull, I found out I can access the network storage so funny.

And quote, I still have another computer. They say Open AI was coaching departing employees from Apple to avoid the dreaded walkout, which is where Apple physically walks you out after your two-week notices up. So they'd have more time to extract data. And employees were allegedly told to notify OpenAI ASAP and avoid signing anything at an Apple exit interview. Now, I don't know Sam Altman personally. but I could kind of look at his face and absolutely picture him directing this kind of activity.

I don't know why. Maybe that's not fair. What are your thoughts? How long does it take for something like this to play out to work its way through the courts? Is this going to be going on for three years? I'm so glad you asked. It almost doesn't matter.

The thing that's going to happen is discovery. Discovery is this process by which the court directs both parties to reproduce documents and all sorts of things that can be used during the course of the trial. And if any of this is true, discovery is going to kill these guys. So any trade secret suit, now Open AI's internal communications will be laid bare.

Their own product roadmaps will be exposed, their own hiring practices. And this is at a moment where Open AI is trying to create and project stability, in the eyes of Wall Street. And to show itself as not a startup that literally hasn't been operating for more than three years,

but to really show itself as like this big, stable, trustworthy technology giant, but this is going to work in the opposite direction. So reputational risk. It's a really, really big deal. Zero to 100% chance of certainty. What would you say the audience are of that in three years from now,

where all or many of us are using a device that's powered by Open AI, a physical device. Will they be successful? I would say very slim, and now I would say, think about this as a worst case scenario for Open AI, because now not only can they not move forward in building physical products without the threat of anything they build, Apple immediately suing them.

Now they have to be distracted by the this whole thing where the people they hired could be pulled into depositions, right? Or could be asked for sworn affidavits or could be scared away from wanting to share their own internal knowledge because they might end up sharing something that they weren't supposed to have retained from their time at Apple. I do wonder what Apple. So I actually think this is extremely detrimental to Open AI's hardware story. So I wonder what Apple's motivation is for doing this.

Like, why are they doing this? Why bother? Because they actually said the phrase rotten to the core to describe the way open it, the way Open AI is going about its hardware ambitions, just like trying to deliberately rip off Apple. Now, four or five years go by, the court might find after multiple objections and delays and all sorts of tactics that Apple is wrong. it almost doesn't matter.

Apple is basically saying, oh, no, you don't. You're not hiring 400 of our people, telling people to bring their laptops, telling people to share files. No chance. We're not letting you get away with it. So now, what makes this really fascinating

is that Apple, on a parallel track, fell out of love with the idea of working with chat GPT. There was a time where it looked like chat GPT was going to be the default AI technology behind its own apps. Well, so this is the other angle that I was asking about. Do you think they're actually afraid of the hardware competition, which seems extremely far-fetched?

Or is this more they want to get closer into bed with Claude for whatever reasons? Not Claude. Gemini. Apple and Google have one of the best relationships among the tech giants, like one of the most complementary relationships that exist. I actually, I don't even know what would be a good comparison. Does Google pays $20 billion a year to be the default browser? Google has been the default browser and search engine inside of the iOS environment.

So in all of the Apple apps, Google has, it was default search, not browser, browser, so Safari, which is Apple's, but default search. And they paid a lot of money for that. And these two companies have worked very well together. And now they're working together again. Open AI was kicked out and their renewed push to, create Agentic Siri and other AI stuff within their phone is now being powered by Gemini. So this is like OpenAI not only started out in pole position to be the the AI solution

for Apple users. They got kicked out of there. Now they're going to work on a hardware product that they're already being sued for before it even comes out. This is, I think, a really, really big story and the ramifications of what's going on are going to come back to haunt a lot of the players in this space over the next couple of years. All right.

Well, we are still on topic 1A. We have 43 more pages left to go, and we are 20 minutes into the show. All right. Let's keep the move on. IBM blew up today. The worst day for IBM ever. Some people said back to 1961. Ever.

I'm going to say ever. Fine. 61. Who cares? Well, in dollar terms, for sure, the worst day ever. Put the chart up. The stock lost 25% of its market cap today. that is $67 billion in lost market cap over a revenue miss of $660 million.

Does that sound disproportionate to you? So is that 100x market cap? Let me ask you this. Why do companies pre-announce the way that they did? Like, why do they do this? Their earnings report is in a week or two. Why get ahead of this? What's the benefit?

So that they don't have a class action lawsuit, which they will anyway. Why would they have a class action lawsuit? They can't just wait 10 days? wait 10 days and then blow up, people will say, why didn't you give us any guidance? Why didn't you warn suing you? They're going to get sued either way. It's just the culture. There'll be a class action for any time a blue chip stock loses 25% a day.

There's going to be a class action lawsuit. But I think by coming out with guidance, I guess the theory is next week they'll do the actual call. And the bad news is already out so they can focus more on like telling, the sell side, how they're addressing some of the issues. All right, well, I thought. The bad news is I don't think they really, there's much that they can actually do, which we'll talk about in a second.

I thought that the reaction in some of the stock prices was moderately interesting today. So a lot of the AI infrastructure names that have been under pressure since Samsung topped a couple of weeks ago, I guess you could have expected them to be up 8 to 10% on the news and software to get killed. That didn't really happen. Like actually, software put in a really,

really nice bullish candle today. And the names that you thought would benefit with the exception of the cyber names, which they mentioned, like, I thought the market's reaction was interesting. The stocks that were hit negatively on this news have shrunk in terms of their importance to the IGV. This is the most important thing. Service Now had a tough day.

Not really. Workday had a tough day. They didn't get killed. No, but they, so they opened up down, they opened up down nine or ten percent. And workday was down 3.5% on the day. Okay, but my point is, if this were six months ago, oh, down 15.

The software sector would have been negative. So that's my point. The IGV was green in the middle of the day. No, IGV was bright green. And my point is, I think that it will take a lot. And not from IBM. I think you're going to have to hear from Salesforce or one of these companies directly, which you might.

I mean, we have earnings since a couple of weeks. I want to make a different point. I want to make a different point. The point I want to make is that the order of things inside of the IGV has changed significantly. The cybersecurity stocks are so much bigger now than they were six months ago relative to the enterprise SaaS stocks. So Oracle has shrank big time. Well, like ServiceNow, Workday, Salesforce, these were much bigger market caps and much more important to the IGU. And now CrowdStrike and Palantir and Palo Alto networks are and Fortinet are way more important than they were.

So there are cloud flare. Like these are companies where the share prices went up based on what. All right. So the CEO is Arbin Krishna. Wait, hang on, hang on, hang on. Back to your point. Do you know what the biggest name in IGV is? Today, isn't it Microsoft still?

How is this possible? Palo Alto Network. is number one. Yeah. Palantir is two and Microsoft is three. It's obviously not exactly cap-weighted. That's interesting. It's not perfectly cap-weighted, I guess.

All right, go on. I think it's a function of how much of their business is derived from software. Okay. That makes sense. It's how they figure that out. That makes sense. So, look, they said revenue would be 17.2%, which is up 1%, which obviously you can't do. Infrastructure revenue down 7%.

earnings, gap earnings down 2%, blah, blah, blah, blah. These are some of the statements that he made. He filed, I guess it's an 8K. This is from a letter filed with the SEC. Quote, in the first few weeks of June, we saw clients shift their quarterly capex towards servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases. Basically, they were saying deals didn't close because their customer.

were focused on buying other things. And one of those things is obviously hardware, and the other one is cybersecurity. So we're going to show some of these charts because the market actually reacted the way it should have. Let's do Dell. This is what IBM's customers are spending their money on. Let's do CrowdStrike.

New record high. This stock just split four for one. If it hadn't split, it'd be $800 stock right now. This was, look at it. Look at it. This was 350 not long ago. Palo Alto P-A-N-W. Stock Rift today.

So this is what, so basically, chart off, IBM's customers are securing compute, spending the related increase on cybersecurity for all these workloads that are now going to be AI workloads. And, of course, buying more servers and buying more CPUs and buying more GPUs and buying more memory, anything but what IBM sells. And IBM, by virtue of being the first of the tech companies

to pre-announce a week quarter, I think just said the quiet part out loud. Which is? Enterprise SaaS spending is not a priority for the enterprise, for corporations. And it's probably not going to be for the rest of the summer. And I honestly think that this was a warning shot. that investors need to pay attention to.

What do you think? I agree. By the way, we owned what we're all about here. But I'm surprised at the reaction from a Salesforce, which probably opened down 8% and closed moderately red. It was down 2% today. I would have thought that this would be like, to your point, if this was a few months ago,

Salesforce would be down 16% in concert. These stocks were already, so, all right, This is a good point that you raise. IBM started today within 5 or 10% of an all-time high. It's interesting that the market got it so wrong. The stocks that you talk about were already negative 30%. So that's an explanation. But it's interesting that the market, listen, the market's not all-knowing and all-seeing,

but it usually doesn't get surprised this bad. So IBM, the stock looked okay. Like you said, it was right near its highs. And down 25% for a $290 billion stock is remarkable. IBM had a very bad day one day last week. Do you know why? I don't. Starbucks told Wall Street that they are actively working on their own AI products.

And Wall Street interpreted that as Microsoft and IBM, which are big Starbucks vendors, are going to be in trouble. Starbucks is building a data center? Starbucks is, no, no, no, no, no, no. Starbucks is building software to help to help operate what some of these giant software companies typically sell them. So this is the vibes. I got to tell you, I can't imagine it being an IBM only issue. Can you? No.

All right. Let's talk about this. Everyone says, that everyone, a lot of people are mentioning the BWR. Many people are saying. Many people are saying. That's the correct vernacular. Thank you. That we're in a bubble.

and how do you not say it? Now, I suppose when they talk about the bubble, they are talking about a very specific. Now, there are some people that think everything's a bubble. Forget those people. There are some people that think that memory stocks were in a bubble, but maybe focus on the fact that these earnings are unsustainable,

and let's just say that we're in an earnings bubble. Chartkin Matt did a thing where he overlaid the forward EPS of the S&P 500 versus the... the actual EPS. In other words, how accurate are analysts' expectations for the forward 12-month earnings per share of the S&P 500? That's brilliant.

And it turns out they're pretty good at their job. All right? So the light blue line, which is the part that people say this is not sustainable, there's no way that this is, maybe it'll happen over the next 12 months, but people doubt the, I don't if I'm using the word right here, the efficacy of these earnings over the next 36 months. But over the next 12 months, they're probably going to happen. Here's why. Next chart.

They're within 5% of each other, 67% of the time. The only time where they meaningfully diverge to the downside, where analyst estimates are way off, obviously, is when you get a recession, which is impossible to foresee, obviously. So absent they recession, we are likely going to get the earnings that people are a admitting. All right. Put the first chart back up. What do you notice?

So the gray shaded areas of recessions, obviously. What do you notice happens right at the start of those recessions? Why don't you just tell me, Sherlock Holmes? Happened all three times. The street is almost always right, except at major economic turning points, and they go right off the cliff. They keep, they keep raising estimates long after the company's, start missing and disappointing. Great observation.

Right. Well, I mean, to me, so the real question is like, could something big enough happen where the street gets the memo too late once again and actual results start to disappoint while their estimates remain high? Of course. Well, so what is that thing? Because I have an opinion. I don't think it's going to be what everyone thinks it is.

What is the thing that you think everyone thinks? Hyper-scalers pulling back. No, I have a new, I have a new nightmare. Lower your, lower the volume so people think. I'm ready to unlock a new nightmare. This is very, very serious. Okay. A seismic shift in the pricing of AI due to more efficient models that rely on less token use and less memory.

Nah. What do you mean? Nah. Nah. Why not? because with every step function increase in the efficiency and whatever these models are able to do, people are spending way more, not less. So this idea that all of a sudden there's going to be some seismic breakthrough that pulls the cost down seems highly unlikely.

I'm not a scientist. There already has been a breakthrough. It's the adoption of it that's still in question. But it is only increasing the overall spend. The drop. I think it's increasing the overall use. And spend. But what I'm describing is different.

What I'm describing is an open weight model catches fire. We've seen this happen before. Linux is a great example. Everybody thought they were married to Microsoft for life. And all of a sudden, Linux came along. And a lot of developers just moved over to that because it was more efficient to build things. Fine, dude. If they decide that they're going to use these open weight models for 95% of the world,

workflows, and then only send the most critical 5% to the more expensive frontier models like LLM and Anthropic. If they decide, hey, you know what? We actually don't need the best model. We just need something that we can repeatedly do at a fifth of the cost. But that changes all of a sudden the earnings expectations that are in this chart. Plus 1,800 of that happening. Could happen.

So it's a long shot. Imagine if it does. I will kiss your feet. No, I don't want to happen. If that happens, I will regrow my hair. How about that? Well, isn't that the history of tech that eventually cheaper, more efficient ways of doing things come along and that puts pressure on pricing? Isn't that what always, literally always happens?

Yes. And I am out of my lane here, but these are like very expensive models to train. I don't know how much deep seek raise or whatever, but like that somebody's just going to spin this up. I just, it seems very far-fetched. All right, let's keep going. Okay. I think it sort of already exists. And we'll, listen, it's too early.

Nobody can know definitively. We'll leave it at that. All right. But the other thing is, there's not a stock market bubble. And let me make my case. Duality research has a chart that shows the year-over-year price change and the year-over-year EPS change in semiconductor stocks. And the spread is crashing.

because he says investors are clearly pricing in a peak in earnings growth. That's why. Investors are not overly optimistic. Look at this spread. It is at an all-time low. So the year-over-year EPS change is so far outpacing the year-over-year price change for reasons that I think are probably rational. Not probably rational.

People are estimated that this is not going to go on forever. Otherwise, the spread would not be crashing to this extent. Would you agree? I completely agree. That is what this chart is showing a lack of belief. Correct. That this has any more legs out past 27. Nobody thinks so. We could skip the next chart because it's not really relevant to this conversation. We're already going way late. Go to the chart from Mike Saccardi.

If this were a stock market bubble, this chart would not look like this. And here's what we're looking at. We're looking at, this is from Paulson, Jim Paulson. The S&P 500 old era relative stock price index. So we're looking at a market cap weighted index of the old era stocks. That is the remaining nine sectors excluding information technology and communication sectors. And they're breaking out. I feel like they're trying to say halo, but not pay me by saying old era. Get the fuck out of here. Just say the halo stocks are breaking out. All right. A few more charts. Let's keep it moving. This is like sort of a tangent to my overall point. I just thought this chart was super interesting again, I wanted to share it with the audience.

So Bespoke shares that the second quarter was the first time since at least 1990, that only one of the major S&P 500 sectors outperform the index. How nuts is that? How nuts is that? Everything's working. Yeah. Oh, it's like, it's like, it's, it's like still shocking the degree to which this is the case. It's unbelievable.

Yeah. And then lastly, you say, all right, S.K. Hynex was up 27% today. Am I going to say that like there's not areas of speculations? Of course, they are always. But does this look like a bubble? Throw up the D-Gendau. Look at this piece of shit. Names like Rigotony.

We don't talk about these names anywhere. Iran, Ionic or IonQ, whatever it's called. These names are just stuck in the mud while the index is at an all-time high. I very notably said a healthy bull market takes out its own trash. That is exactly what's happened. I love that chart that you just put up. I love that this market is not being led. by companies without earnings,

companies that are selling people, you know, dreams. Nonsense. And let me do you one last one. This is from Vanda Research, okay? They show the single stock net weekly buying is at its lowest since COVID. Now, we're about to transition into the SK Hynek's debut

because there are a lot of people that have moved away from single stocks and into levered single stocks and the ETFs, okay? So maybe that's part of what's happening here. But there's no doubt that retail, that's a fact. They are trading and speculating way less overall than they have been in the recent past, like in a serious way.

Look at that chart. No, I know. I see what's on the chart. So don't you, listen. Can I add, like, what if we blend this, though, with single stock ETFs? So I just said that. There are certainly a lot of people that are. trade in single stock ETFs. Like, obviously, we're about to get into it. Of course,

we've been all over this. But I really do think that a lot of, there's different pockets. There's different types of speculators. The single stock buying has slowed down dramatically. A lot of it's shifted to the ETF, but not all of it. I agree. And I just think that that person that like to speculate in individual stocks, they're still out there. There are less of them right at the moment. But those other people haven't gone away. They're doing prediction markets, they're doing options, they're doing a levered ETFs, they're doing single stock ETFs, they're still around. You make this point all the time.

They're never leaving. They're just playing different games. It's like walking, it's like walk into the casino, look at the backgammon table, nobody's sitting there. What do you conclude? They're sleeping? No. They're at a different table playing a different game.

So let's get to that table. What game are they playing? Pick one. There's more games. There's more games now than ever. That was an alley-oops, sir. You're up next. Well, we're going to do this S.K. Heinex thing very quickly because I know literally nothing about it. I'm not even interested in it. I don't even really care. But I would point out, I think it was $29 billion worth of stock. They were able to sell to Wall Street investors. It's not really a traditional IPO.

It's an ADR. Yeah, this company was already trading without a problem in Korea. And now they wanted to give U.S. investors, quote unquote, access to. S.K. Heinex on a U.S. exchange. And voila! And of course, it's already one of the most volatile stocks I've ever seen in my life, which is pretty much talk about seasoning. So this thing probably needs a month or two before anybody could look at it and figure out what the hell is going on. But one thing U.S. investors should be aware of,

this is the tail, not the dog. The dog trades in South Korea and Seoul. This stock will open with huge gaps up and huge gaps down based on what happens 14 hours earlier in Asia every night. This may not be your cup of tea, I guess, would be the point I'd make. There have been many. It's my cup of green tea. Get it?

Many successfully. Yeah, ADRs of international companies. I prefer the ones in the Western Hemisphere, where they sort of open up for trading and close around the same time as the U.S. market. Mercado Libre would be my example of that. Shopify in Canada. I don't really love the idea that you wake up to a surprise every single day of the week because you buy something where the primary trading is taking place in Asia.

So that's my comment on SK Heinex. I hope it goes to the moon. I hope everybody makes a ton of money. Good today. It was up 28%. Yeah, but what did it go down two days since it came public? It's a roller coaster. You could wake up.

This stock could be up or down 20% on any given day. I guess the point that I'm trying to make. More volatile than Western Digital, more volatile than Micron. Fair point. Yep. So you're not buying the 2X levered version of it? Staying out. All right.

Let's talk about banks. I listened to three calls today. I listened to Jamie Diamond and Jeremy. That's the only one I do. At JP Morgan. and I listen to DJ David Solomon, as I always do. You know, and I listen to Bank of America. Two things.

All right, so they all smashed, like across the board. Business is good. Business is good. Jamie Diamond was asked about return of capital to shareholders. He's like, you know, I hate that term. I view it as like we have investing opportunities, and that's another investment just like anything else, and our bogie is 17%.

If we can't do that, yeah, maybe we'll buy back stock. And they asked David Sullivan, he was like, we love returning capital shareholders. Like, there's the dichotomy between the two was very interesting. Really, very little mention of private credit.

Not once on the JP Morgan call. Just didn't really come up. But I thought that was notable. And anyway, the banks are kicking ass. Private credit's been super quiet. That's such a great point. Maybe it wasn't the last earnings quarter or maybe it was the one before.

but that one of these earnings quarters, every Q&A started with one or two questions about private credit risk. So, that's a really good point. Goldman raised $31 billion in private credit this quarter. Yeah. This is my takeaway. The theme across all of these reports, very simple. We're in a bull market. These are the companies that benefit the most from bull markets historically, and the system is working as it's supposed to.

any business that's in any way connected to equities is absolutely on fire. Prime brokerage, margin lending, equity finance, IPOs, follow-on offerings and secondaries, preferred stock issuance, market making, all intermediation, any business that touches equities is just going absolutely crazy. And Jamie said, quote, the markets are booming right now. it's getting as close to as good as it gets. We just don't know how long it's going to last. He was asked if this is as good as it gets, and that's what he said.

He said almost. Give me the JP Morgan chart. Full disclosure. I own the stock. I've been long for over a decade. I never sell it. What an unbelievable, what an unbelievable run. This stock's been on for all that time.

But even this year, like this thing is now up meaningfully on the year. and starting to move. This is almost a trillion-dollar market cap bank. They all said the same thing. Consumers and small businesses continue to show resilience, despite elevated gas prices and inflation, with higher tax refunds and a solid labor market contributing to strong spend growth.

Las Fargo said the same thing. I didn't listen to that. Bank of America said the same thing. I thought this is interesting. Back to the comment about the trading stuff. Jeremy was asked to unpack his comments. I think it wasn't just trading. Like there was record revenue in every segment.

Like everything went well. And so he said there's really not a lot behind my comment. It's essentially what you would get from asking any of the commercial AI models this question. The two stages, okay, we had some major IPOs, we had some major index rebalancing. We had some very complicated dynamics in the Korean equity market. There's been a lot of activity in Asia. The clients have been extremely active.

It's all the headlines, basically, that have driven the market. And then Jamie says, you guys can see most of this on a daily basis through the volumes of the New York Stock Exchange, the CME volumes, through hedge funds. It's not a secret. Margin loads. You could see a lot of this taking place during the course of a quarter. Yeah.

So, look, there are offsets to this. In a declining market, you have volatility, and volatility creates a lot of trading opportunity. That's not what this is. There's not a very volatile market. This is a market that's a classic bull market. almost every sector has huge winners. And a couple of things happen in bull markets, and this will always be the case.

One of the things is you could sell a lot of stock, whether that's Google doing an $85 billion secondary share sale or it's SpaceX doing a record IPO. In either case, J.P. Morgan is getting paid. Goldman Sachs is getting paid. So that's one of the things. The other thing is people who are along want to be more long. More long, yeah.

So they comment on there. derivative book was up massively. So their equity trading was up. Margin balances, prime brokerage. Like this is where all the money is. Two funny things with the analysts. Two different analysts asked about succession. Very notably, the head of banking, Marianne Lake, resigned from the firm during the course

of the quarter. And Diamond took two, elevated two people to co-president. Troy Roarbaugh and Doug Petnow. I don't know these people are. I think the board does that, not just him. Like it's the board's decision. Sure. No, for real.

Not around him, though. Anyway, they wanted to get a comment because she had been like the rumored successor for a very long. Her and Mary Erdos had been like the two rumored successor. And he just said, look, we told, we said what our plans were. She chose not to work here rather than stay. No mystery. I thought they handled that well. He would not give a definitive answer on when he's leaving.

He said a couple years. Couple, a few, severals. Yeah. In a few severals, I might go. Oh, last thing that was funny. Mike Mayo from Wells Fargo asked, why did you make an FX trader, the president of community banking or consumer banking? And Jeremy Barnum said, actually he's an options trader. I think that was a pretty good way to answer.

Last thing. Investment banking fees up 30%. That's not going to be every quarter from here on out. You should not extrapolate that. Equity's revenue up 86% year over year. Again, this is not going to be a SpaceX every quarter from here on out. Asset and wealth management, listen to this. 38% pre-tax margin.

on $6.9 billion of revenue. Revenue was up 19%. Assets under management were up 18%. A lot of loans. John, throw up that chart, the black chart with the blue and green bars, please. The next one. It's like a few charts. There we go. Thank you. Great job. So the green is JPMorgan and the blue is Goldman and this is equity trading. And pretty range bound for the last one, I don't know, five quarters. And look at that explosion this quarter. Yeah. Again, very traditional, classic bowl. market and exactly what you would expect to happen is literally what's happening.

All right. Bank of America. I've got... I didn't listen to this, so I'll let you take this one. It's very banky stuff. It's like a lot of net interest stuff. It's not as exciting as the other two. But I pulled out two things.

Look at the first chart. So they show the first half credit and debit year-over-year growth. And obviously there's gas. But look at entertainment and travel, dude. People are having a great time. Yeah. The dollar volume is up. 13% for entertainment.

Things are getting more expensive. But transaction number is up 7%. That is super healthy. I mean, beyond healthy. That's robust. Two Goldman. Wait, I have one more thing. Hold on.

Asset quality at Bank of America. So I'm not sweeping under the rug the concerns about credit card debt and auto loans. But Bank of America is Main Street. Like this is literally the Bank of America. and the net charge-offs on the consumer side are... It's like 90 basis points. This is the overall.

But there's nothing going on here. There's nothing going on here. Provision for credit losses are down. The economy and the consumer are beyond healthy. I wish there was something going on here. I would shout it from the rooftops. I would title a YouTube video. The consumer is melting down.

And you motherfuckers would click on it. It's just not in the chart. I'm sorry that you have so many people in your lives telling you how horrible things are. It's just not true. They can't stay off an airplane for five minutes. This was a great quote from David Solomon. So Goldman Sachs had a monster, monster quarter and a monster day for the stock. And this is who Goldman is.

He said, the trust we have built with clients over decades continues to position Goldman Sachs at the center of the most strategic and consequential transactions. This includes acting. as lead left bookrunner on the record-breaking IPO for SpaceX, an equity race for Alphabet, as well as advising Dominion Energy's sale to Next Era Energy and Comcast spin-off of NBC Universal. Goldman is still the king.

If ever there were a Goldman market, we're in it. Yep, for sure. All right, Wells Fargo. What a great... Put up the stock chart, Goldman. One more time. My God. You want to fade it?

Go ahead. So I just assume that Wells and Cities have the same thing. And I'm very curious. Wells is sort of boring. I'm sure. City had a negative reaction today. But I think that's just because the stock had run up so much. Their wealth business is on fire.

Speaking of that, we're going to hear from Morgan Stanley. I will listen to that. And then we're going to hear obviously the asset manager is BlackRock. I'm going to follow those very closely over the next couple of weeks. Yeah, City has a big catalyst. Bannamex, which is like a Mexican consumer bank, gigantic. They sold half of it to outside investors, and then they're going to do a full IPO of the rest of their stake at some point later this year.

That should be a good catalyst that it'll quote-unquote on mock shareholder value. You know, I have, hold on, hold on. I have a strong place in my heart for city. I'm part of the franchise, part of the story. I was a temp there in 2010 watching compliance videos doing my thing. Yeah. They did mention you on the call today. All right. We were going to do a preview, but it's too much. We were going to do Morgan Stanley, Black Rock, and Schwab.

But it's literally not enough time in the day. So we'll hold on to those for- I thought we were going to skip the Texas thing. This is kind of, there's like not a lot to say here. Do you think there's a good story? I want to say three things. I think it's fascinating. So welcome to Yall Street, the Texas Stock Exchange.

Just open for trade. You're about to laugh? That's what they're calling it Y'all Street. And it's Dallas. And it just opened for trading last week. My entire career was a consolidation of exchanges. The NYSC bought the American. NASDAQ bought, I think, the Philadelphia.

Like, there was a time where there were regional exchanges. They all got consolidated. And now we have the taxi. Knowing nothing, knowing nothing, I don't think this is going to work. Oh, I guess we'll find out. Wall Street seems to think it's going to work. Goldman Sachs. and Morgan Stanley are shifting thousands of jobs to Dallas.

Put this picture up. This is the new building that's now under construction. This will be uptown in Dallas, and Morgan Stanley is in negotiations to put their name on top of it. This will house the taxi, the exchange itself. Yeah, but they're not going to Texas. Morgan Stanley and Goldman and Goldman and Goldman and Gov and not going to Texas to support the taxi.

They're already in Texas, and they're adding more personnel, many of whom will be involved. in market making, trading, and attracting new issues. How are they going to attract new issues to list there? Very simply. They're starting out with nine companies. There's a public company called Energy Transfer. The CEO's name is Kelsey Warren, and he is the majority owner of the taxi.

Is that the MLP? Yeah, well, I think it's former MLP, and they did a C-Corp conversion, or maybe they didn't. Richard Fisher is involved, former Dallas Fed president, Texas Governor Rick Perry, former Texas Governor Rick Perry, and they have companies already listing and what they said, oh, Goldman and Bank of America are involved

Black Rock, Citadel, Schwab, Fortress, J.P. Morgan, they raised money for this thing. And they said that their listing standards will actually be stricter than the existing. They said there are 1,500 NASDAQ companies right now that would not qualify to list on the taxi and 200 New York Stocking

exchange companies. So they're actually going for regional, like they're looking for companies that are of the South and of Texas to start as primary listings. And then they're going to have thousands of stocks also trade there the way that you can buy New York Stock Exchange stocks on the NASDAQ and vice versa. So you will be able to trade any security you want there. And they're going to have companies that are primarily listed on the taxi. And I think it's no. I think it's notable. I don't know that it changes anything from an investing standpoint. Who cares?

But it could change the business. Don't care. Don't like it. No, I just don't care. You want to visit the taxi with me? I do it. I love Texas. Yeah.

I just don't care about this particular story. Okay. We can move. All right. Do you want to do the cues things? I mean, this is sort of boring, too. Nope. Throw it out.

Let's do make the case and then mystery chart and we'll bounce. I've talked about this. stock before. I like the technicals now for the first time. So I like, I've always liked the fundamentals, but now I also like what I'm seeing in the chart. You know, it looks like, it looks like toast. I mean, all these software names looks sort of similar. Yeah, it looks way better. Okay. I'm so glad that you said that. What Toast and this company service Titan have in common is that they, is that, well, that, but they are a hardware slash software play. meaning this is not like enterprise SaaS where you could just turn it off and use an LLM.

The devices themselves are part of what the company offers its customers. And it's endemic to what the users do to have both the hardware and the software. So obviously in the case of toast, it's point of sales. It's the kiosk at the front of the restaurant. It's whatever equipment is in the kitchen with screens. We know what post is working. Is tight in the business working? Yeah, really well.

And they're going to, I think, over the next four quarters, they'll have their first full year of gap profitability or well on their way toward it. This is a $7 billion market cap tech company, but don't think of it as tech because it's focused entirely via its customer base on the old economy. This is construction, this is plumbers, builders. This has techsy written all over it.

It should list on the taxi. It's a very unique situation. It is the fastest growing software platform in its vertical. They are providing everything from appointment scheduling to billing services, et cetera. When you have somebody doing work at your house, they will often have the device in hand. And they're just eating share. They are well on their way to becoming the biggest market share of all these scattered different solutions that people in this industry have used. They're going to become the industry standard. So I wanted to show people this

technical setup. This is my type of bottom. I love it. So that is a 200-day moving average challenge currently underway. And if it breaks, it is no longer in a downtrend. I wouldn't say it's breaking out. But this is the first sign of life. And you look at that consolidation period. They just could not push this stop meaningfully below 60. I love it. And now I think it wants higher. And look at the RSI at 65. I think it's resting once higher. Let me ask you a question. Which do you have more conviction in?

This or toast? Because they look very similar. It's the same story in a different industry, and they're both going to work. I think they're both. Toast is much larger, more mature, already profitable, more customers, bigger market cap. This is a much smaller version. But in my view, just as sticky as the restaurant business. I don't think a lot of carpenters want to do a software overhaul every six months.

I think once a business standardizes on service tighten, that's it. That's what runs the business, and it's going to be tough to get them out of there. Are you ready for the mystery chart? Mr. Brown? All right. Here we go. John, if you please. All right.

The orange line is a bank. And that bank is called J.P. Morgan. And J.P. Morgan has been the best performing bank. across almost every time frame, except for this time frame and except for against the Southern Bank. What's that purple line? You show me these in percentages?

This is three years. This is three years. What am I showing you? Percentage return? Yeah. JPMorg is up 144% in the last three years. Not bad. The stock is up like 200.

I think it's city. Bingo. Oh, man, I'm so good at this. Isn't that wild? I'm so hot. I had to take a shower after this show. You know what? It's wild,

not. I did a segment on City on TV the other day. Credit's Jim Labanthal. He was pitching this on TCAF with us. That's right. That's true. Always happy when Jimmy makes money. I did a segment on this on TV, and if you look at this versus 2007, this stock is still in a 70% drawdown. It's crazy, like, how long it's been. And it's still, like, hugely off those old highs, thanks to all the dilution they had to do to stay alive. But cities on fire, and they shrunk to get bigger. They sold 25 businesses under Jane Fraser before she was even the CEO.

She really did it. And their wealth is killing. She was running M&A for a city and she was just selling everything she could. And they shrank to grow. And it worked. All right. That's it from us, guys. Thank you so much for tuning into an all-new edition of what are your thoughts.

Thanks to everyone who joined this in the live chat. We miss you and we're not here. We love to see you. Thank you so much. We appreciate it. Big shout out to Janice Henderson. Thank you for sponsoring the show. Remember tomorrow's Wednesday, animal spirits of Michael and Ben.

We'll have an all new edition of Ask the Compound later on. And the Compound and Friends returns on Friday with a brand new guest, someone you have never seen on our show before. And I can't wait to introduce you to this person. Thanks again. Have a great night. Rithold's wealth management is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Rithold's wealth management and its representatives are properly licensed or exempt from licensure.

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