The Compound and Friends - If You're Not Bullish Now...

Episode Date: March 22, 2024

On episode 135 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Liz Young of SoFi to discuss: the Fed, Nvidia's new chip and where the stock goes from here, what could change the bullish market environment, the mixtape generation, and much more! This episode is brought to you by TBIL and the US Benchmark Series. To learn more, visit: https://www.ustreasuryetf.com/ 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 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, Liz was here in April 2023, like right after the SUV stuff, and Josh was very bearish on consumer credit. I was. No, but Liz said, Michael said that he'd be shocked if the next 10% move was higher and not lower. And I was equally as wrong. And that was April 12th or something in 2023. Why, was it straight up? I think so. I don't know.

I don't remember if you were talking about the NASDAQ or that. Even with the benefit of hindsight, like, it's a miracle what happened after the SVB fallout. Is it? Is it? I mean, with stimulus and with, you know, being saved,

I don't know if it's that much of a miracle. Do you think it was a stimulus? No, it was a... At that point? It was AI. AI! It was this... Oh, well, sure. No, consumer credit. If we're talking about the May 7 stimulus? No, it was a- At that point? It was AI. AI. It was this- Oh, well, sure.

No, consumer credit. If we're talking about the May 7th- No, just everything. Inflation coming down. She's talking about the banks. Yeah. The government just basically said, nobody ever has-

Oh, I'm sorry. I'm sorry. I'm not talking about the banks. I'm sorry. Nobody ever has to worry about FDIC limits ever again. I was talking about inflation coming down and the economy not cooling and stocks going vertical.

That's what I was talking about. Some of that, yes, is the thing that miracles are made of. I'm getting texts from home about how my daughter is just like me, like in a bad way. She loves her shit all over the house and so do you. I'm tripping over your shit. You're cluttery? No, I don't think so.

I'm clean, but I'm cluttery. Like shoes out in the middle of the floor. And then at the end of the day, I'll pick it all up for the most part. Maybe sometimes in about two days. I'm a slob. So Sprinkles wants to live in an Intel clean room. You basically do. Your house is very clean.

She wants everyone to have the white like booties over their shoes and like a hazmat suit. She opens birthday cards over the garbage. Is she afraid of a glitter bomb? No, there's no sentimental anything. Like we don't keep anything. It's right in the garbage immediately. So let's say there's a holiday. Yeah.

Like Valentine's Day. Yeah. Or St. Patrick's Day, whatever. At midnight, anything associated with that is in the garbage and not just in the garbage, but on the curb. When does like your Christmas tree come down? No Christmas tree because we're Jews. But if there were.

Yeah. Like December 25th at 10 p.m. No, the 25th at like 8 o'clock. It's like, all right. Pack it up. But thank God because if it were me running the house, it would be cluttery. Like I think you and I would probably be similar where it's not dirty. I'm not.

Right. It's clean. But it's just, I don't throw things away or organize them. I make a lot of very organized. Dirty and cluttered. Dirty is like filth. Dirty is like, uh, like crumbs. Don't point that at me.

No, no, no. I'm thinking, I'm thinking what would be somebody that walks into their house with their shoes on and walks around all day with the shoes that they wore in the city. Or like spilled your morning coffee and didn't wipe it off. My wife, I mean, Robin tells me to take my shoes off. I usually do. You should always do that. Do you walk on carpeting in your house or like rugs with your shoes on from the city? Wood floor.

But what about area rugs? You like go rub the city on the rugs? All right. So when you come to my house, the shoes get taken off in the garage and then we will throw them out. No, I'm just kidding. And we will replace them with new shoes before you leave.

But nobody can come into the house with shoes on. Like for almost for any reason, even workmen, I feel bad. They have to take off Timberlands to come like upstairs into the bedrooms

to like fix an electrical outlet. Hey, she runs a tight ship. But you know, again, now we're accustomed to that. So we've – but anyway, we're cluttery. My daughter and myself, we're – because we're creatives. Oh, is that it? Our heads are in the clouds.

We're thinking of things. So that's probably you too. I don't fancy myself a creative. You're very creative, I would say. With words perhaps. No, but like you're a career choice you're you're you're thinking maybe creative is the wrong word you're uh you're a thinker yes well people people want to hear what you think yeah me too yeah so actually there's a book

it was written last year called a creative act or the creative act by rick rubin yeah i haven't i read it it's amazing and And it's the first book. I actually, I wrote up a little summary of it for Bloomberg and they put me in the best books of 2023 article or whatever. And it was the other people that had read it. It was like me and two professional chefs. Yeah. So there was the first book that I read that I was like, maybe I am a creative.

Maybe. Well, it's really, it's really digestible the way he writes it. Yeah. It's like eight word sentences. Right. The chapters are like two and a half pages long. Because he's very zen. He's a barefoot in the woods guy. You know, sitting Indian style. It's a great book. But then also, it's the first

book, I think, that's about the act of being creative. Like being caught in the act of being creative. Like what goes through your mind, what doesn't go through your mind. It's not a book about art. It's a book about like the making of art, which is interesting. Well, and I think the most interesting thing about it was like every idea has its own timeline, and it's not your idea.

You don't own it. If you didn't bring it to the world at a certain time, it'll come to the world through somebody else. You're just the vessel, or whoever it is is just the vessel. And if you don't do it and somebody else does it two years later, you can't be like, you stole my idea because it just- Maybe the world wasn't ready for it. Exactly. See, Michael gets to watch me in the creative act all the time. It's almost-

It's exhilarating. It's almost- Is it Zen? It's almost- It's the opposite. It's almost unfair how much of it you get to see and how little of it everyone else gets to experience. I have always…

Yeah, I'm hashtag blessed. I've always got… How is the mood on the floor today with Reddit? People are excited. Reddit… So Reddit had its IPO today. Were you down there at all? No.

Okay. No. So they bought the most expensive package you could tell. Like they were traders with Reddit jackets on. They did like the window frost. What kind of products can you put out for Reddit? Just logos everywhere. They did the full floor takeover.

So whatever the Cadillac package is for an IPO, they took it. But they had a big crowd. People were really excited about it. And I didn't get to see the opening tick because halftime ended at one and they were still waiting for it. It was really strong, which is good. Very strong. Actually. So one of the things that SoFi does is we offer our members the opportunity to participate in IPOs, which is unique. And that was one of the ones that we offered. Yeah. Well, it makes sense because the demographic that's SoFi's core customer, they grew up on Reddit.

They know Reddit. So how does this work? You're able to get them shares before trading starts? You basically, you subscribe, right? And you probably don't get fully filled. You may not get fully filled, but we offer the opportunity for people to participate. We can't participate. I can't.

I can't do anything. Right. Do you think that Reddit is going to be a battleground stock right out of the gates, given the WallStreetBets community and how they might feel either really bullish or really negative on it? What are your thoughts on just the general environment around the stock? I mean, it's obviously a platform that I think has a very specific audience when you're thinking about investing. Yeah. I don't know if WallStreetBets is going to have that big of a—I feel like that's secondary. has a very specific audience when you're thinking about investing. Yeah.

I don't know. I don't know if Wall Street Bets is going to have that big of a— I feel like that's secondary. I feel like Reddit is first, right? And everything else is kind of secondary. And I was actually talking about this with somebody today. Remember back when, like, MySpace happened? And that was the first real social media that existed. And it was the primary one that you had.

And then Facebook started to come into primary one that you had. And then Facebook started to come into play, but you had to have, I think you had to have like- There were a few steps before Facebook after MySpace. Yeah. Friendster. Oh, I didn't do that one. Yeah, that was- I went straight from MySpace to Facebook.

You know what's interesting about MySpace? Very similar to TikTok. It started based on music. The original MySpace pages were a place where you could take the logos of your favorite bands and even link to early versions of their music online, which almost didn't exist. Yeah. really into certain bands or singers or rappers had a place to like almost display them like in the 80s you would have like a denim jacket with like pins on it yeah like that's what the original myspace page is and why that's interesting to me is that tiktok was musically when it started it was canadian oh we thought it was canadian it was chinese. But Musically was an app that was like showcasing your favorite music and dancing to it or lip syncing to it. So they both had like that as the organizing principle. With Reddit, they bill themselves as the front page of the internet.

And what's interesting about Reddit is it is hyper topic dependent. Like nobody is on there like I'm promoting myself as Michael Batnick and here's a link to my blog post. That doesn't exist. Right. You're there to talk about a specific topic. It's a chat room. In a subreddit. Yeah.

Yeah. You got a moderator who's insanely passionate about that topic doing that work for free. And then the people in there are all anonymous and they can't promote their own shit. Like they literally, the rules in most of the popular subreddits make it so that you can't drop a link to your blog post or your podcast. Oh, I didn't know that.

Right. Therefore, there is an argument to be made that Reddit is one of the only grassroots platforms amongst all the social media sites where it's not about promoting yourself. It's truly dedicated to discussing the topic. If you're there for some other reason like self-promotion, you'll gain no ground there. So the people that are there really want to talk about whatever. My point of bringing up MySpace and Facebook was that at the time, we MySpace was it, right? And I don't remember how long that lasted. And then

look at the evolution of the whole thing. So when you assume that it's just going to be this one company that continues on, you're probably wrong. So if you thought MySpace was it, then Facebook, then Instagram, obviously we know what's happened since then. But the exception to that is something like Uber. Uber started and then Lyft tried to come in, never really took it. Uber continues to be the leader and now it's a verb. But there's not a second Reddit, is there? Well, no. Reddit is the second Tumblr. Tumblr was topic specific.

The early days of Tumblr, if you were really into, let's say, let's say like a certain photographer, like if you were like a Robert Mapplethorpe mega fan, there were like- I said- Look at this show off, dropping Mapplethorpes.

If you were like super into that type of like, that type of art, let's say, and there were 100,000 other people around the world that were into that, they would discover your Tumblr. And then every day there would be new uploaded, like in that case, photographs. Reddit was around at the same time,

but Reddit didn't get big until Yahoo destroyed Tumblr. By the way, you know who destroyed get big until Yahoo destroyed Tumblr. By the way, you know who destroyed, you know who destroyed MySpace? Phil Perlman. No. News Corp.

Oh. Rupert Murdoch bought it and he's like, all right, how can we make some money? And then that was the, that was the end of that. Duncan, are you a Reddit guy? Not really.

Occasionally I'll go there to find an answer to something. Chris is a big Reddit guy. What answers are on Reddit that aren't anywhere else? You can find a Reddit if you're like, what kind of shirt was so-and-so wearing in this TV show? You can find a Reddit where people are talking about it. Right.

So it's like hardcore internet, which I think is cool. Yeah. Yeah. Do you think chat GBT will infringe, or are people there for the community? I think people are there for the community and hate hate

that's playful hate in a lot of cases one of the things that Reddit is selling itself as is a data provider to AI and you know they claim like whatever amount of terabytes of data but it's real user data. I'm not saying it rivals Google searches,

but it's a lot of activity over 20 years. We need a compound Reddit. No, definitely not. People need to start that. No. I don't... I think it's almost... We have enough comments.

It's enough. Yeah, it's almost cooler that there isn't one. Maybe somebody will start one. Yeah Speaking of I wouldn't be mad if somebody started they brought up Robert Mapplethorpe So speaking of photographs, we have a birthday coming up. So the compound team everyone wanted to give Yes open on camera Saturday. I love it.

Do I have to open this? Yes. Open it on camera. Let me see. Oh, God. It's very thoughtful. Very cute. Let me see.

Is that the picture of you with Eli? Love it. Oh, my God. Oh, and it's in a little Giants jersey. Oh, cute. But there's more. Oh, I know about this. Your dad was a stockbroker. Your older brother, Cooper, has been in the financial business for a long time.

was a stockbroker. Your older brother, Cooper, has been in the business, the financial business for a long time. What is it like being a rookie and having to learn the industry, the language? I mean, I sort of assumed that like, you know,

you were working with them, but you were sort of a figure. You're part of the team. You're doing the work. Right. First off, it's the first time my dad has ever been introduced

as a stockbroker ever in the history. Archie Manning also played football. Archie Manning, the stockbroker, world famous. Yeah, he was known as picking the stocks all over. It just sounds funny.

Hey, Michael, this is Archie Manning, the old stockbroker, wishing you a very happy birthday. Of course, that is Arch very happy birthday. Of course that is Archie Manning. Thank you guys. Archie Manning, one of the great stock brokers in history.

Wishing Michael a happy birthday. Shout out to Nicole for making that happen, by the way. Good idea. John Maynard Keynes and Archie Manning. That's Michael's favorite stock broker ever. Archie Manning. Thank you,'s favorite stockbroker ever. Archie Manning. Thank you, Nicole.

Love you. Well done. Well done. All right. Hey, John, what show is this? Three o'clock's coming in. This is The Compound and Friends, episode 135. Welcome to The Comp 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 redholts wealth management.

This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of redholts wealth management may maintain positions in the securities discussed in this podcast. Minds of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Today's show is brought to you by T-Bill and the U.S. Benchmark Series. Josh, ETFs are all about being at the right place in the right time. And T-Bill was in both of those places. It hit $3 billion in assets, and it only launched in August 2022. I thought it had been around for way longer. It's already 3 billion. Pretty impressive. Why? Well, with three-month yields today over 5%,

it's a great, easy way to lock in higher for longer, which the Fed just said, it's going to be a little bit higher for a little bit longer. So T-Bill is the US Treasury three-month bill ETF. It's only 15 basis points in fees, which is pretty low. And it's an easy way to bring three-month yields into your portfolio right away. Click on one ticker symbol, boom, you own it, no questions asked. And if you want to get surgical, T-Bill has 10 ETFs called the U.S. Benchmark Series covering every part of the curve from three months all the way out to 30 years. To learn more about these products, visit USTREASURYETF.COM. That's USTREASURYETF.COM. Episode 135. Ladies and gentlemen,

welcome to the Compound Friends, episode 135. So excited to be here today. Michael's in the house. John is here. Duncan is here. Rob is here. Nicole is in Hawaii. Aloha, Nicole.

We have a very special guest with us. Returning champion. No, you are. You are. We have video evidence. Our friend, ladies and gentlemen, please say hello to Liz Young. Hello again. Almost exactly a year later.

We didn't plan it that way, but it's pretty cool that it turned out that way. The title of last year's show was Somebody's Gonna Be Wrong. Yeah, it was us. All of us. It was me. Who else? All right. Guys, Liz should need no introduction,

but I'm going to give her one anyway. Liz is the head of investment strategy at SoFi. Liz also authors a blog called Liz Looks At and makes frequent appearances on CNBC. Prior to SoFi, Liz was a senior strategist at BNY Mellon and a portfolio analyst at Baird. Liz, welcome back. Liz, come up and light candle number three. You're running like a bar mitzvah.

I did. So Michael and I did a Dan Nathan show yesterday where you're a regular with Risk Reversal Media. I am. Guy kind of big-timed us. He wasn't there. He's such a punk. I said, where's the old man?

And Dan goes, he's not here today. I hate to break it to you, but he was there when I got there. A few hours later. No, I subsequently learned that Guy was there later, which was interesting. So did he wait to see us exit the building before turning the corner? Yeah, he was outside with sunglasses on. Well, listen, we're so happy to be with you. You and I had a pretty important television assignment yesterday.

We anchored the post-Fed closing bell. Yeah. The main point to me—we're going to do some Fed stuff in a minute. The main point to me, though, was that if you were already bullish going into that, there was literally nothing you could have heard that would have changed your mind. And if you were bearish, you kind of had to wait because you just didn't, they didn't throw you a bone. Um, it was like dovish. It was like optimistic. It was like everything that the bulls were hoping and more. And I guess that's

why we got two more days of party on. Yeah. I mean, I thought it was kind of a nothing burger, honestly. It was the projections changed. Obviously GDP went up, but I don't know that we should have been all that surprised by that given how the data came in. The estimates for inflation went up a little bit. Okay. I think the market was afraid that maybe he'd come out and say, we're going to cut only twice this year and not three times. And they just changed it for 2025, which honestly, I think that's something that we keep doing as a market. And maybe this happens every cycle, but this one, it just feels more acute.

We just keep pushing it, push it off into the future. Like, we'll worry about it later. Yeah. Where, okay, yeah. That's like real life, though. That's what I do in my personal life. Yeah. So you'll deal with it later. Yeah. Where, okay, yeah. That's like real life, though. That's what I do in my personal life. Yeah. So you'll deal with it later.

Just procrastinate it away. So you were surprised by the stock market's move. I was. I didn't give them what they said. Yeah, because I mean, I didn't think it was a ton of new information. There was no new information. And the market bought the rumor, bought the news. Right.

But the other thing that's interesting is that a year ago, if they would have changed their projections to say that inflation is going to be higher than we originally thought, I think the market would have sold off on that. Now they change their projections to say the inflation is going to be higher. And we're like, that's OK. Growth is stronger, so we can absorb it. We've got wage growth. People are still spending. Jobs are plentiful. So it's OK. We can absorb it. And I wonder, I really do wonder if, because he did make a point at some point during the Q&A session that stop anchoring basically to what interest rates were before the pandemic. That was abnormal. That's probably not going to happen again. It was, and I wrote

this in my blog, kind of take off your shoes and get comfortable because we're going to be at this higher level and that's much more normal. Let me quote you. One of the points Powell made was about pre-pandemic level of rates having been abnormally low. The spirit of the message is that we shouldn't anchor. Like, we're not going back there. Right. And then you said, in other words,

he reiterated that rates would remain higher for longer and then our recent gauges of neutral were probably off base. Right. People think neutral is 2% interest rates or lower because that's what it was for 15 years. There's nothing neutral about that. Right. It was always absurd. Right. People think neutral is 2% interest rates or lower because that's what it was for 15 years. There's nothing neutral about that. It was always absurd. Right.

Okay. So I like that takeaway. I don't know if the markets received that yet and digested it. What do you think? Well, I think what they're receiving and digesting is maybe this whole time that we've been at higher treasury yields and the inverted yield curve is still something that just doesn't add up. But maybe this whole time that we've been at higher yields and we've had inflation at a higher level than we're used to was – and I think I said this too in the blog. We weren't conditioned for that, but maybe last year and this beginning of this year is getting conditioned for that. Yeah, we're a year plus in now. Right.

And 2022 was the painful part of – we broke our muscles down. We were sore for plus in now. Right. And 2022 was the painful part of, you know, we broke our muscles down. We were sore for the whole year. And then we came into 2023 like, okay, new era. And maybe we can sustain some of this higher inflation. I'm not totally sold that that's the case. I'm also definitely not sold that we can sustain 5.5% Fed funds rate for the foreseeable future. Well, who do you think has to get used to that then? The Fed funds rate or inflation?

Well, I'm looking at 52-week and all-time highs right now. Citigroup, not an all-time high. Definitely not. Bank of America, also not. Goldman, yes. JP Morgan, yes. These are all-time record highs. So when we say people have to get used to it,

we talk about portfolio managers, we talk about like investor psychology, because the financial system seems like it's just fine with whatever we're dealing with right now. I think mostly it's investor psychology. Okay. And then I also think that it's corporations that have to borrow to finance their growth.

Okay. And that just hasn't come home to roost yet. You've got the corporate maturity wall that really doesn't start to be a problem until 2025, 2026. So that, again, we're just going to push it. We'll worry about that later. And hopefully rates will be lower by then

so it won't be a concern. Portfolio managers, I think, had their tough time last year where if you're a portfolio manager, I mean, you guys know this. Most of the listeners probably know this too. You have some sort of mandate, generally speaking, and you have to own whatever you said you would own in your prospectus and you've got limits on it. Well, if you've got an index that is being carried by a bunch of stuff that you just aren't

going to own because it's not in your mandate, that's a tough thing for portfolio managers to get used to. And the idea that maybe the thing that I do doesn't work in this part of the cycle. And how do I survive my way through that? So I think there's different parts of this whole experience that everybody's had to get used to. And I mean, all of last year, I felt like I was wrong. Looking at it like, how is this? If you're a portfolio manager and you're saying like the most we'll have in any one stock is 2%, and then you have a stock that becomes 6% of the index. Oh, and by the way, it's the best performing stock in the index. What are you going to do about it? I think one of the areas that the market might have been worried about, and when I say the market, that's not true because the market had gone straight up

into this meeting. So I can't say that with a straight face. I would say maybe market pundits have been worried about is that the re-accelerating inflation and the continued growth in the economy is going to keep the Fed maybe at five and a quarter longer than we had anticipated. But Powell said no, because he said strong hiring in and of itself would not be a reason to hold off on rate cuts. No, not all by itself. And I think that was something that the market keyed on and said, okay, I guess we're doing this. The market's strong and we're going to, the market's strong, the economy's strong, the

labor market's strong, we're going to cut anyway. Party on. Yeah. I don't think that he's going to go as quickly as people think he will. So, and obviously it's a vote. So it's not just him, but he has veto power for the most part. It's a chairman's board though. They don't defy him. I think that the Fed is going to have more stamina than the market wants them to when it comes to holding rates where they are. I agree with him. Of course, the labor market

in and of itself isn't going to be a reason to hold or cut. But if they get to a point where hiring is really strong and inflation has moved back up, I think that the answer to that question was assuming inflation held either constant or lower, getting closer to target. If inflation moves back up, and we've kind of stalled out for now, it hasn't gone down really that much more. Let's say it goes back up for whatever reason, and then they cut, and then we're supposed to believe that they're going to cut. I don't think that would happen. And I think that their threshold for pain is going to be higher than what investors threshold for pain is. I agree with you. They also said that they think that the first two months of

the year were mostly noise. Yes, but they adjusted their forecasts because of the data that came in. So they did move core PCE up. So noise or seasonal, right? And they're waiting to see if that actually was the case. And the statement that he continues to reiterate, and I'm going to choose to listen to him, is we need to have more confidence that inflation is on a sustainable path toward 2%. And he said yesterday, a number of times, we will get to 2%. We will get there. Now, they don't think they're going to get there until 2026.

You might not get a rate cut this year. But I think it's possible, not probable. What happens to the market if we don't get a rate cut? Because the economy has remained strong. Would that be bearish or bullish? It's bullish. I think it's bullish, yeah. As long as the data doesn't… If the data continues strong…

So I love that answer because I think the knee-jerk reaction would be, well, that's bearish. Yeah, but I hate that. So this is… Good news is good news. Liz and I have talked about this. One of my pet peeves is people that are like, oh, I hope things… I don't mind cooling off on the inflation front, but like you're rooting against strong job numbers.

Like that I never understood. And I don't think it's reality. I don't think people in the real economy are interpreting good jobs numbers as bearish. So this Powell said, quote, you saw last year, very strong hiring, hiring and inflation come down quickly. Now we have a better sense that

a big part of that was supply chain side healing, particularly with growth and labor force. So in and of itself, strong job growth is not a reason for us to be concerned about inflation. You could have job growth and disinflation simultaneously. Like that was my big takeaway. We said it on the air yesterday. And now we can get out of this game of, I hope too many people didn't get hired. Right. Well, and I think that's a good point. We should just get through that a little bit more

and make sure everybody understands. What I think he's saying too is the labor market was way out of balance. We had all these open jobs. We got up to two open jobs for each unemployed person, way too tight, which is how wage growth took off because companies had to pay more just to get employees in. And then they wouldn't let anybody go because they

were so afraid they wouldn't fill the seat if somebody left. And it was an employee's market. People were getting paid tens of thousands of dollars. That's how long ago, that's last year. No, right. People were getting paid tens of thousands of dollars for mid-level jobs just to like walk across the street and go to a different company. So of course they were doing it. But that's over, the job switching premium is over. That's over. So it came back into balance because the jolts numbers, which is something that we talked about actually the last time I was here, came down pretty quickly.

Quit rates. Right. And the quit rate actually is now back to a normal level. So jolts came down, so there aren't as many jobs open, but still plenty open where it feels healthy. And then you did have new entrants into the labor market or maybe re-entrance into the labor market. You got immigration is back. Right.

So legal immigration and illegal. But it keeps that the wage price spiral fear at bay. Yeah, I agree. I want to talk about the 10 year. The two years not really moving as a result of these comments, which makes sense. 10 year did a little Irish jig this month, right? What would you call this? Can we put this chart on screen, John?

This is the 10-year treasury yield. Now four spot, 2.8%. Looks like a really big rally starting from the low in March was around the 11th. And they ran it up. How many basis points is that? About 30 basis points. And it's backed off a little bit, but now it looks like it wants to reaccelerate. Is there a level in the 10-year that's a yellow light flashing for the stock market?

I remember 3% was really consequential. And then we blew through it and we got over it. Now it's okay. But where should the tenure be given where? I'm hearing technically this level right now, four spot three, five, or four spot five. I'm hearing technically. I'm reading people's notes saying that that could be a level

where the equity market says, oh, wait, wait, wait, wait, wait. I was good with a strong economy. This is too much for me. I mean, it's mythical, and it only becomes true if enough people believe in it. But, like, how are you thinking about the rise in the 10-year? What if it keeps going? Well, so, let's call it 435 just to have round numbers. The break-even inflation rate for the 10-year break-even is 235.

Explain that to the audience and Michael. The break-even rate is basically taking a regular treasury security, a nominal treasury security, a yield on that treasury versus an inflation-protected treasury security, which moves with the inflation rate. The rate that's the break-even is where you are indifferent between the two. And what it's supposed to do is suggest what inflation might be at over that period. You can look at two-year breakevens, five-year breakevens, 10-year breakevens.

But breakevens are not very predictive. No, but if we're talking about like in this moment, if we're looking at the 10-year, where should it be? This is the thought process that I would take. If the 10-year break-even inflation rate is 235 and the 10-year yield is at 435, that means that the real yield is two, right? Is that reasonable? I think that's pretty reasonable. You take the nominal yield, 435, minus what we would think inflation might be, 235, and you've got 2% left. So is a real 2% yield on a 10-year treasury reasonable? Is that a reasonable expectation for the next 10-year period?

I think so, too. Given GDP growth, it's in line. Yeah. So if the market was concerned about yields rising, I would look at things like regional banks, which are on fire. I would look at small cap value stocks, which are on fire. I would look at small cap value stocks, which are on fire. They're clearly not bothered by it. So the market thinks the 10-year rally will probably be contained. I think the market does think it'll be contained. But your question was,

one of you asked, what's the yellow light for stocks? Well, because wait, before you answer that, because what I mean is by yellow light, what's the level at which 10-year treasuries start to look really tantalizing versus equity risk. But cash already is there. Like if that was the thing. Is cash in the 10 year or is cash in the money market? But whatever. No, not whatever.

If you're a dividend investor. You could buy ultra short term ETFs that get you the cash yield. I agree. You could buy ultra short-term ETFs that get you the cash yield. I agree. But if you're a dividend stock, if you have a dividend stock bent to your portfolio right now, and all of a sudden there's a 10-year at five,

it might have your attention. But wait, if the 10-year is at five because inflation is accelerating, that will kill stocks. Yeah, I agree. Okay. Agreed. I think the red light is five. Yeah, okay.

The yellow light is somewhere between here and there, probably above four and a half. I would say more like four, seven, five. But I think the red light is five. Yeah. Okay. The yellow light is somewhere between here and there, probably above four and a half. I would say more like four, seven, five. But I think the red light is five. We already experienced that. Mortgage rates hit 8%. Everybody hated it. Yes. And then we corrected until October when we thought that cuts were coming in March and then we rallied. Put up this two-year. This looks like it's doing more than it really is. The range here is pretty narrow. Anything really to say about this reaction or not? I mean, this is just at this point. This is just at this point a function of like when the Fed moves, not if. Well, this is like an hourglass, you know, like days of our lives.

It's an hourglass that's the sand is slowly falling. Get it while you can. As we get, exactly. As we get closer, because this will change fast as soon as we know when that first cut is coming. When the first cut is coming. All right. So when the first cut is coming, describe that process. Anyone that's a buyer of the two-year all of a sudden knows that the bonds that are

in, let's say a two-year treasury ETF are going to start rolling off as they mature, and the new bonds purchased subsequently will be at a lower yield. And the price of that ETF is good. That's SHY. Well, also, the two-year is not going to wait for the Fed to say, okay, it's going to go. So where will the two-year be by the time the Fed does say we're going to cool off? I don't know. Is it going to be down to 4%?

I have no idea. Well, I think if we hadn't moved expectations for the first cut out so quickly, the two-year would have been down by now, right? We used to think it was coming yesterday. That was supposed to be the first cut. So it stayed. But if you look at it, I was trying to pull up the whole yield curve, but I don't multitask very well. But if you look at where it was trying to pull up the whole yield curve, but I don't multitask very well.

But if you look at where it gets kind of wonky, it starts to actually get wonky at like 12 months right now, which means that the market is pretty sure that we're going to get a cut this year. We're going to get a cut inside 12 months. And if that keeps getting pushed out, then this short end of the curve is still a good buying opportunity for a while until it stops being pushed out. Well, here's the dot plot. Here's where the market is getting this information from. And this is Bank of America's economist, Michael Gapin, quote, key takeaways from the Fed's dot plot for 2024 data, raised expected real GDP growth to 2.1%. I think as recently as December, the Fed thought maybe one and a half percent GDP growth to 2.1%. I think as recently as December, the Fed thought maybe 1.5% GDP growth. 1.4. 1.4. Now we're at 2.1. So that's a pretty big uptick in three months.

The Fed lowered expected unemployment rate to 4.0%. I guess, what is that, by year end? Yep. Okay. Kept expected PCE inflation at 2.4. That's no change. Raised expected core PCE inflation to 2.6%. So that's the higher for longer. Kept its expected Fed funds rate expectation at 4.6. Am I reading that right? That's right. Which I think was only one dot off from projecting only two cuts.

Right. So, all right. So. Also, people should. What do you see when you look at this? But just to be clear about this, we talk about this on TV a lot and we say it as if the Fed projected 4.6. They didn't really.

Everybody had a vote. All the dots got put on here as a vote, and we just picked the median dot. That's right. They didn't get together as a committee and say like 4.6. That's a good point. Yeah. So what do I see? Well, I see—

I see my mother. Look, you can look at this. You can watch it over time, and I do this— She's running through a field. Dogs are chasing her. Yeah. Who's winning? It's midnight in Eastern Europe.

Is she the red or the blue? There's snow on the ground and she's barefoot. What should I make of that? She needs to run faster for longer, I think, is what that means. What's going on here? What's going on here is that they keep moving it up. And if you watch— Moving what up?

Moving up their expectations of what they think the Fed funds rate will be. So it got pushed out. And they changed, which this got kind of buried in the data. They moved the neutral rate up. If we can say what they project as the longer term, they moved the neutral rate up. So look at all the way to the right, longer term, right? So that's beyond 2026 So the blue dots are yesterday and the red dots are December. You can tell there's a few more higher than there were in December. But not too dissimilar. Not too dissimilar, but it did go up just a smidge. But this is now, like look at the clustering at two and a half percent policy weight. So when we talk about the new neutral,

there should not be a lot of people expecting to see a 0.25 to 0.5% Fed funds rate like it's 2017. Because we're just not living like that anymore. If you're hoping for that, then you're hoping for a crisis. We're not getting to that unless there's a crisis. Exactly. So this is showing that the members think that long-term rates will settle in below 3%? Yes, but the long-term neutral rate moved up just a little bit.

So I'd have to look. I want to say it went from 2.5 to 2.6, so just a tiny little bit, but basically that was the soft way of showing higher for longer. So the two biggest areas that are impacted by rates are people that are waiting to buy a home, right? Obviously, they're completely naked, exposed to interest rates, and commercial real estate. And companies that need to roll their debt, obviously. Which is a lot of small cap companies. Which is not the S&P 500. That's Main Street, right? That's like normal people.

Yeah. Are those the two areas that are most in need of a rate cut, would you say? Well, small caps seem to be doing just fine without one. This week. Right. Well, and I mean, we've been talking about commercial real estate being— Like the economy Main Street, not necessarily stocks. Yeah.

Yeah. We've been talking about commercial real estate being— Like the economy mainstream, not necessarily stocks. Yeah. Yeah, I think there is a part of consumer lending that would like a rate cut. I mean, if you look at just the average credit card rate right now, and although that hasn't done anything yet, at least not in the big data that we look at, but the average rate that people are paying on credit cards—

Autos, too? Yeah. Crazy. Oh, and I mean the number of people that are underwater on an auto loan. But the example. Because are you? But the example. Mike, Mike, party of one.

But the example that you used about people waiting to buy a home, in no way, shape, or form, will the lower mortgage rate help those people? Well, we don't know that. We don't know that. What do you think happens to housing prices? We don't know that for sure. Do lower mortgage rates usually lead to lower housing prices? I agree with you. I agree with you. But you don't? We don't know that for sure. Do lower mortgage rates usually lead to lower housing prices? I agree with you.

I agree with you. But you can't say that definitively. It's possible that the majority of the gains are behind us. For what? For home prices. But they're still elevated. The home prices are still elevated. And they're not coming down.

Right. Well, okay. However, there was some data today. Existing home sales came in today really strong, above expectations. And then if you dig deeper into it, the supply of homes actually was the most, it was the biggest gain in supply in a year. They built some stuff. So they, well, existing homes. People are listing. People are listing. People are listing. Oh, existing homes.

Exactly. Existing homes. So the problem has been that the market was frozen because nobody wanted to get out of their 3% mortgage to get into a 7.5%. So now it's like, well, rates came down maybe a little bit and mortgages follow the 10-year, not the Fed funds rate. Were they now six? Well, if the 10-year's at 435, if you add about 300 basis points, it's usually something like that. Demand is what it is, but lower rates will also unlock supply because to your point, those people are stuck. They're like, I can't get out of this mortgage. I can't do it. Well, or at what point do you get to the level where it's like, okay, I can't be in this house anymore.

We've either outgrown this house. I don't care what the mortgage costs. We have to leave. By the way, 25% of home purchases are cash buyers. I don't believe that. No, you should believe it because you know why? That's people in our client's income and wealth bracket buying their adult children their first homes. But one out of four, it sounds crazy high.

But that's the only way to buy a $500,000 house or higher, most places in the country. If you're buying that and you're in your 30s and your income is $140,000 a year, you literally can't do it. No, I know. So the problem prior to rates being high was that the down payment was unaffordable. Now it's not just the down payment. It's also the monthly payment. And your rates are unaffordable.

So you're both ways. Now, hopefully, if rates come down, sure, the down payment is still egregious. And most people are probably going to need help. But at least, hopefully, you could swallow the monthly payment. Well, I think Josh's point is that if rates come down, I don't know what the threshold is. Maybe it's 4% in the 10-year. then mortgage rates are seven and something like that. Or maybe there's a six handle on mortgage rates or something. Then you get a bunch of people that come into the market who weren't in the market before now thinking that on a relative basis, hey, at least they're not

8%. I'll take 6 or 8. This is what I've been waiting for. But the interest rate is so impactful. So even if home prices rise another 5% from here, if you get the mortgage rate down from 7.5% down to 6%, you're still better off. Yes. And if you're a first-time homebuyer, you don't have an anchor to say, well, my last mortgage was 4%.

So to them, when they wanted a house, it was 8%. 6% sounds pretty good. Anyway, the housing market is totally demented. It's bad. Don't buy a house. So I want to pivot. Where do we stand on middle-aged men in leather motorcycle jackets? I feel like that's a leading question.

Who are we talking about? Is that somebody in particular? Jess is not middle-aged. He's old, though. He's middle-aged. How old is he? 50s. It's middle-aged.

40s, 50s. He wears the shit out of that jacket. I'll tell you right now. 40s is middle-aged? Yeah. That's depressing. Not 50s. It's middle-aged. 40s, 50s. I think he wears the shit out of that jacket. I'll tell you right now. 40s is middle-aged? Yeah. That's depressing. Not 50s. Okay, fine.

I'm 47. I think I'm middle-aged. You're getting there. Jensen's 61. 61. So he's not a senior citizen until he's 65. He's a youthful old man. He's rocking that motorcycle jacket is the point.

Yes, he is. I like a motorcycle jacket. I think he looks great in it. And I think it's kind of like his signature. It's the black turtleneck, but it's cooler. Josh and I were talking about how we can't pull this off for many reasons. But what he has, what he doesn't have that my idiotic jacket did, he just has the zipper.

There's no like big flaps. It's called the lapel. He doesn't have the lapel. I had giant lapels. It's not a good one. Michael has giant lapels. I don't know if that's breaking news. All right.

As much media and investor attention as Apple's Worldwide Developer Conference has historically gotten, I would say we are seeing a similar level with now NVIDIA. These are some of my takeaways. NVIDIA announced what seemed like hundreds of corporate partnerships. So if you're not quote, building something in partnership with NVIDIA announced what seemed like hundreds of corporate partnerships.

So if you're not, quote, building something in partnership with NVIDIA, do you even exist? It was kind of like my takeaway. They had brands on screen and corporate logos from really every segment of the economy, from healthcare to finance to tech. It was just – it was really impressive. I don't think Apple ever enjoyed this level of, scrutiny is the wrong word, just adoration. Because when Apple was doing its thing, there was first, forget about BlackBerry, but like then there was Samsung,

but then there was also like Amazon and Microsoft and other things to contend with for the attention. Nvidia is just on the top of the mountain all by themselves. Do you think that's healthy then? Defining a new category. I mean, I can't talk about individual stocks, so I'm just going to ask you guys questions. Well, Apple was ridiculed when they were doing product releases

pretty much every time. Yeah. Like, and I only know this because I was very active on Twitter for a long time. So that's where most of it took place. But the tech press, if they weren't invited to Cupertino for one of these things

and they were just like snarking it out from Brooklyn. They didn't, they weren't like worshiping Steve Jobs or Tim Cook live during an Apple product presentation. They were saying, oh, that's too big. That's too small. That's too ugly. That's too slow. You know, look what he's doing with his hands.

Look how lame that, that U2 album is that they stuck on everyone's device. So it was more critical. They were more critical. If you talk shit about NVIDIA, fine, you can. You better know something about the technology. Because this ain't a laptop. Like, this is a whole... So I think there's some element

of almost intimidation. Like, does somebody want to criticize NVIDIA's new GPU? Do you know anything that would like enable you to have an opinion? Most people don't. Correct me if I'm wrong, but he said something about,

did they come up with a new chip that now basically makes everything else obsolete? That's what he suggested. It's called the Blackwell. And the pivot that he did was- People clapped at the size of the chip. Was… Which was amazing.

Upgrading the ones that he sold recently and turning that into a SaaS revenue stream. Okay. Okay. But you have to basically redo everything that exists. Like all the stuff that we have right now. But nothing exists. He said,

we're not taking market share from anything. This is a brand new category. His argument… But then what happens to all of the stuff that we're using right now? It's worthless. Well, that's what it's okay. So that was what I was trying to get you to, but then that we have to go through a whole life cycle. Yes. If, yes, if you have, if you have a cloud computing architecture, that's CPU dominated, your cloud cannot handle AI workflows. and therefore, it's already obsolete.

Rip all those boxes out and put in GPUs. And that is the NVIDIA versus Intel story. Until recently, now Intel CPUs supposedly are there to support GPUs. And it's like everybody has to pivot. Like Amazon, Microsoft, you literally have a data center that has no value. That's useless. So like that takes a long time. Yeah, no shit.

And that's very expensive. Yes. So if we're baking in all of that, if we haven't yet priced in the fact that that's a big transition to make. Do you know why Supermicro became the hottest stock of the year? Because they are the, like it's, it's the, it's the servers that you can like cool off. Like it, because anything you're doing that's nonlinear processing is just going to heat up faster. So yes, there's like this whole,

um, there's this whole revamp that has to take place and all, and this is not just the United States, this is all over the world. So then the price action that's happened in NVIDIA bakes in the growth that would be expected once that revamp has occurred? No, orders. Orders. Well, that's the fun part.

How much has it baked in? 80% of it? 140% of it? Do we just do like another leg up once we start this revamp? Microsoft runs the largest public cloud. Okay? Azure. So if they are ordering up once we start this rebound? Microsoft runs the largest public cloud, okay?

Azure. So if they are ordering these $40,000 Blackwell GPUs, you can bet it's not to put them in storage. It's to put them out there. How are they putting them out there? Brand new facilities. And that's not just chips. That's all of the other equipment, including networking equipment,

including moving Earth and physically building this stuff. So between that and what's going on with the CHIPS Act and just fabricating semiconductors, there's a really big industrial component to this CHIPS story. It's not just a CHIPS story. I wanted to mention the sovereign AI trade. I wanted to mention the sovereign AI trade. So Jim Cramer had a one-on-one with Jensen Wang, and I think it actually is going to run tonight. Tonight would be Thursday night at 8 o'clock on CNBC. If I'm right about that, I'll be watching it. needs to have its own artificial intelligence and basically upload its entire culture

to a sovereign AI that is owned by the people. And so that's probably his pitch when he goes to Saudi Arabia. And he's like, hey, you guys should, the people should own this intelligence that's your culture. You know China's going to do this on their own with or without him.

But that's another, like that's a really big market. If every country decides it needs to spend X billions of dollars to build their own AI. Isn't NVIDIA not allowed to sell to China because the chip's too powerful? They can sell a degraded – they can sell an old chip or a degraded version of the new chip. They can't sell their top-of-the-line stuff. Got it. That's right. But China will figure it out. They'll build it on. Is there an

NVIDIA of China? I think Huawei and a couple of other players are saying that they're doing their own AI. In this whole thing, who's to say there's not some other company that comes out of nowhere like the Instagram did to... But it's too expensive

to come out of nowhere. What if it's an expensive to come out of nowhere. Is it? Like the amount of money to get these things. What if it's an existing company that has the capital and just… Liz, the large language models will be that. They'll be free. People will come up with specific ones for specific industries. There will be open source ones like we saw with Linux when it came for the Microsoft hegemony.

Without question, there will be cheaper, freer versions, but more likely on the software side. On the chip side, if the cost to develop something like Blackwell is, I don't know, $30 billion in CapEx, nobody's coming out of nowhere. And that's what the bulls will tell you is why NVIDIA is like a 10 to 12 year story. Because it's like NVIDIA is 70% AMD 30 and dot, dot, dot who, right? It's, it's, so that's, that's why people are so bullish. The last thing I want to say about this, I'd love to get your take.

Part of me feels like this has to end in a massive bubble. NVIDIA is 34 times earnings right now, forward earnings. That's not a bubble. I don't feel like this can just fizzle out or fade into the background. So to me, there could be this moment out there where NVIDIA becomes the largest company in the world. Like $5 trillion? It passes Microsoft, Apple, and then Saudi Aramco, and that's where you sell it. But then I could also picture – I was talking to Dan Nathan.

That's probably why I could picture this. I could picture another version of reality where they report a quarter, next quarter, the quarter after, where the results are spectacular but guidance is soft and the whole planet Earth explodes. So I could picture – I don't know what to think. We are way too reliant on one company. And part of, just sentiment-wise, we are. So this is the question I keep asking myself. I keep talking to my analysts about this. Think about what happened with the internet when it all started.

Think about the companies that we thought were going to take it forward and that were going to be the winners. You know, AOL for instance, or even remember like Napster, how you used to steal music and stuff. Maybe, maybe you did. Sure. I was a LimeWire guy. All the stuff I did, I definitely Napstered. But all of the things that we thought were going to be the winners in the late 90s, early 2000s. And we didn't even know what the internet was going to be. We didn't even really know the entire utility of it yet. We didn't even know how you could make money off of that yet.

And later on, 10 to 15 years later, we figure out that it's advertising on social media. We figure out that it's e-commerce. And all these companies had to come out of the woodwork. We had apps that made people millionaires overnight. All these companies got created in spaces that didn't exist. The internet was just the beginning of that theme. So AI is just the beginning of this theme. Yeah, what if it's robots next or who knows what?

Right. So it's not to say that NVIDIA will fail or that they're going to come out and disappoint everybody or it's not true or anything like that. But I'm willing to bet that the theme evolves enough over time that in five to ten years' time, we're talking about stuff that's related to AI that we don't even know about right now. And there's a bunch of new companies that have come out

to do whatever those little related things are. So I think all of this— Or the Mac 7 owns all the related companies. That's true. I mean, also possible. Microsoft announced a new PC today that's going to have a co-pilot button on the keyboard. This is how serious they are. This is like to them, this is the entirety of the future, is getting people to use AI-enabled apps.

All the workflows are taking place in Azure. All the software companies that are creating these apps are going to be hosted in Azure. Software companies that are creating these apps are going to be hosted in Azure. And all of the end users who are going to be utilizing these AI tools are going to do so with Microsoft hardware and software as their starting point. What if the Mac 7 and the next Mac 7? And that's the time. Drop your mic. Well, the Mac 7 is no longer the Mac 7. Can I show you some…

The Fab 4. Tesla's out. Can I show you some Google Trends? So Google Trends is looking at search terms. They express this in a number of 0 to 100. So these are not absolute search volume numbers. These just show interest in a specific term relative to the highest point for that term over the selected period. Or you could do this by region, but I'm showing you, I think, the Earth.

What is the term that we're looking at? So the first one is a 12-month Google search for the word NVIDIA. So that peak is February, mid-February, and I don't know the reason why. Was it earnings? But this GTC developer conference, we did not hit that prior February peak.

No, they just reported earnings recently. Yeah, that's right. Like in March. So what was that? I don't know. Is this updated? Because I feel like this last week was like fever pitch. This might not capture today.

I think it captures yesterday. But keep in mind, it's 12 months. Yeah. So, all right. The next one. So this is 2004 to the present, like since the existence of Google. So you can see there was search traffic for NVIDIA in the early days of Google. And I think the reason why is because of video gaming. If you were a gamer, you were constantly trying to see who had the best game card. And it was usually NVIDIA, the graphics packages. And it was usually NVIDIA, the graphics packages. So, but then you can clearly see, like, this is now at 100.

Like, the trend is, like, this is now the most important company in the market. So, to Liz's point, we might be, like, focused way too myopically on this thing. Well, listen, if there was ever going to be a short-term top, like, him speaking in front of 11,000 people with celebrities in there. That would do it. Let me derail this conversation. Did they put him on Time Magazine or whatever? Was he the most important person in the world yet? I don't know. I don't think he can.

If that didn't happen yet, it has to be now. Taylor got person of the year. Taylor got it last year. So this is his year. Who the fuck else are you going to give it to, right? Denis Villeneuve. Let me derail this conversation for one second. I was looking at... Archie Manning. Archie, yeah. I was looking

at... I'm looking at the top gainers in the S&P 500 year to date. And one of these things is not even close to like the others. I honestly haven't looked at this stock. I think I looked at this stock in 1998 during like the middle school like stock picking challenge. I remember looking at the stock.

The ticker is RL. Ralph Lauren. The stock is up 32% year to date, and it's going vertical. And I don't even know that this... What the hell is the story with Ralph Lauren? Is there some kind of merger? No, men's fashion is having a moment.

Plaid is back. No, no, no. I'll show you five different apparel companies. You'll be like, holy shit. These things look like biotech stocks that just like literally cured cancer. Abercrombie & Fitch is having a huge resurgence. Oh, my God. Deckers, another one.

They did. Abercrombie did like a rebranding. I mean, it's been a couple years, but they did like a reimage whole campaign. They were all doing that. And then the other thing that's happening that people don't even realize is Simon Properties, like with Spark. So there's like a joint venture between Authentic Brands and Simon Properties. But the mall owns Brooks Brothers. Like the mall owns Arapa Style.

The mall that had all these tenants that were going bankrupt, they bought all these brands and they basically propped them back up. And how hard could it be? Hire some designers, make the shit in India. Look, we have an apparel company. Well, I think, I mean, part of it, if you look, there's staples companies. I'm looking at the list of staples companies. I watch Procter & Gamble's up 11% this year. Costco's up 13%. I own a bunch of staples. Those are companies that you don't expect to make double digit returns in, in three months, especially in a time when people are worried about high rates and worried about a recession and everything. So I don't know if maybe some of it is we expected the consumer to crack

and there was so much expectation for the consumer to crack and then they didn't, that now it's like, oh shoot, we got out of all these stocks. We got to get back in. So I'm in Shake Shack. It's one of my biggest positions. I've heard about that. I know you have, but the stock was high fifties. It's almost 110. And they had a good earnings report, but not like AI. This stock looks like AI right now. Yeah. But then I didn't feel as special because I looked at Wingstop. Have you seen that chart?

No. What's the ticker? Holy shit. Is it Wing? I rarely look at Wingstop. I think it's Wing. Wow. Look at this fucking thing.

I mean, it's, what do they do? Double lemon pepper? Like, is that the new innovation? How big of a company is that? It's not big, but that's the point. These are small caps.

Shake Shack is a $3 billion market cap. By the way, getting back to Napster. Kids don't know. It used to take like 24 hours to download an album. Yeah. You did whole albums? I didn't have patience for that.

I did one song at a time. How long did that take? The burning part was fast. That got fast. But to your point, the download part was really slow. Yeah. You had to really want it. And you'd go back and check and see the progress.

Yeah. We just had more patience back then. I used to make all these mix CDs for girls. No, I did. Yeah. You had to really want it. And you'd go back and check and see the progress. Yeah. We just had more patience back then. I used to make all these mix CDs for girls. No, I did. Yeah. Yeah, they weren't bad. They weren't bad. Did you put album art on them?

No, I think I did that with cassette tapes, actually, because that's way earlier. I wouldn't have had anyone to make mix CDs for, I don't think. How did you make a mix on a cassette tape? I don't even remember. Well, we used to tape songs off the radio. Do you know that? And you just put it in so you'd have like a boom box that had a dual cassette thing and

one of the sides would record. So the radio... I do remember that. I do remember that. And you could just put it in and I think if you hit play and record at the same time, it would record right off the radio. The double cassette tape, you could tape off of a tape. Yeah.

And actually, the industry didn't like that. No. And there were like lawsuits. They wanted to stop Sony and Iowa, if you can remember. I don't remember that. From selling double cassette tape decks where you could record from one to another. But the thing that we used to do was when you would sit there and wait for the DJ to stop talking, but he would tell you what's about to come on.

And if it was like, it was like the song that you've been waiting for, like you had to wait a whole hour because it was really only 12 songs on. And how about get off and record? They did the countdown. They did like the top 10 every night. Casey Kasem.

So you would just wait if you wanted one of those and you'd sit and be like, all right, it was number six. I was like, it got to be five tonight. Get off AOL. I have to make a phone call. Yeah, pretty much.

Yeah, yeah, yeah. But it was like that. And if you got it right, if you got it just right where you hit record with no DJ voice and you hit stop at the right time, it was like you just cured cancer. But so we're nostalgic for those times for what? Were those really better times? Like seriously? I think they were simpler.

So I'm so glad you asked that question. The audio book for the Beastie Boys, which came out a few years ago, I think they were simpler. CDs or physical tapes around was really meaningful because you only had enough room in your pocket for three tapes or right. Or if you had a case logic, maybe you had like eight CDs in it because it was in a cargo pants. That's why the cargo shirt was invented. Well, if you left the house, if you left the house at 8am, you lived in Manhattan, you left the house at 8am. You didn't get back till 8pm that night, the whole day you had like three cassette tapes on you. The one that was in the Walkman and the two others that fit alongside your wallet in your pants pocket. So you really had to be invested in that album. And not only that, you would constantly be taking

things out of your pocket so people would see what music you were listening to. And it was like a sign of who you were. It's like, oh no no, I'm cool because, look, this is what I listen to. Nobody has to make these choices anymore. And the Beastie Boys argument was that it devalues our connection to the music when we could just listen to anything at any time. We don't have to make a choice of what's on in the car when somebody else gets in. But that's good. I don't want anybody seeing me with my Simon and Garfunkel cassette tape in my pocket.

I think it's good and it's bad. I think it's good and it's good. I don't want anybody seeing me with my Simon and Garfunkel cassette tape in my pocket. I think it's good and it's bad. I think it's good. I think it's good and it's bad. I mean, I said to John, bring in some records. We have a record player in here. And John had to choose. What do I not give a shit about because I'll never say it again. So he brought, right?

And he brought 14 albums in. Fleetwood Mac. No, no, no. I know you did. And we have some good shit here. We have Bowie. We have Vampire Weekend. Thank you.

But I know that you were thinking, as you were stacking up these records, that people are going to see that these are my records, and what are they going to think? Come on. Yeah, true. Okay. And what if I never see them again? What can I replace? Well, right. So you don't mind replacing them, but also you want us to know that you have good taste.

Fair. And I do. So that's the connection to physical music, which I have no idea how we got to this. And I remember, because what's also a lost art is listening to an album all the way through. And do you remember like, so Alanis Morissette,

Jagged Little Pill was one of my favorite albums of all time. 91, 92? 95. I have no idea what year. But I can still, if you start it from the beginning, I can like,

every single song, you know I can like every single song you know the sequence of every single song and once one ends you know exactly what's coming next in that next note people today

nobody knows how to do that no idea no because and the bands don't even they're not even releasing music that way so at this point if you're a big act

you're just releasing a song every two weeks because you need to stay in the conversation and maybe once every 18 months, you'll collect 12 of them and say, our new album's out. But you're certainly not doing that to try to sell units.

Because if you sell 30,000 albums, it's a huge deal. And these are bands that used to sell millions of records. And it's just not the game anymore. The mark of somebody who's in our age group is like, if you remember what track number songs were. Oh, yeah.

Right. You remember what that track number two on that album was, whatever. People have no idea what you're talking about. So I don't get nostalgic about that period of time, but I am glad that I lived through it. Yeah. So that's, you know, I don't want to go back. I love Spotify.

I'm like, I'm amazed at how awesome it is, but I'm glad that I had that experience. Nicole will not know that experience. Really? No. Nicole's 23, 24. She will not know that experience. All right. I want to get into a couple of other things before we lose you.

Fund managers are the most bowled up in two and a half years, according to Bank of America. Fund managers are the most bulled up in two and a half years, according to Bank of America. It's not a good reason to sell, but it is a good just thing that we should all be aware of that if you're bullish, so is everybody else. So who's coming in to be bullish later? Is that a good, besides that? No, but is that a good way to think about it?

Like you don't have a lot of potential buyers left if everybody's all in. I think that's a great way to think about it. I think that's a great way to think about it. I think that's a good way to think about even stocks like NVIDIA. What's the next positive catalyst? Who's left to buy? Well, and the rotation that's already very well underway. People are just grappling for things to buy that will have upside

because I think we all rationally enough can look at the MAG7 trade and a lot of what happened last year and say, okay, that's a little crowded, right? This is not a good entry point. If I own it, I'm going to keep riding it, but it's not a good entry point if I don't own it. So then you start to look for other stuff. I pulled a headline and put it in our plan here. S&P 500 set for 20th record this year, 20th this year. And it's what is today? March 21st, right? Like 20th record this year. So there's, there's so much euphoria and, and there's a debate between, are we mid cycle expansion or are we late cycle euphoria? I think that a lot of this stuff is a sign of euphoria, but that doesn't mean that it

has to end tomorrow. I mean, Mike, you and I talked about this before the show, just ride it, you know, like if it's, if it's happening, let it keep happening. Don't lament the fact that it will end. Like enjoy it while it lasts. Right. And at some point it will end. At some point it will end. And then we'll debate how painful that might be. Yes.

Here's the percentage net overweight. This is also Bank of America. Fund managers are net 28% overweight, which is the highest level since February 2022. So this is a fund manager survey, obviously. So this is just what people are saying. But there's a lot of net overweight in this group toward equities. Well, and you know what will happen then to people like you and I, Josh, in media, if this all does turn the other way, the narrative will become, well, everybody was so offsides. Everybody was positioned for there to be this other leg up in the market. And now everybody got killed because they weren't

positioned for that. The same way that the narrative in 2023 was nobody took part in the MAG7 rally because nobody was positioned for that. And then the regional bank thing happened. Everybody got scared. Nobody was positioned for more upside. Is any, are we ever at a point where everyone's positioned and then the right thing happens? That would be efficient markets. Yeah. Yeah. Okay.

So it's not just a fund managers, which by the way, like, yeah, yeah. How they, they ask them, are you bullish or bearish? Why would you be bearish? Stocks keep going up, right? So it stands to reason that they're not, that they're not bearish. Investors, retail investors are getting more bullish, at least according to the American Association of Individual Investors. The bull bear spread is fairly elevated. However, I would describe this, at least by this metric, as

optimistic, not euphoric. Because if you look at the next chart, we broke it down. What happens to the S&P 500? decile six months later. And the only information that is in this chart, we're in the seventh decile, by the way, the only information is that when there's extreme greed, like extreme, number 10, then things look pretty not great on a go forward basis. So the six month return is 1.6%, which is the lowest reading.

Yeah. So other than that, there's no signal here. So this is saying that over the last, this is saying that the six month return going forward from this level of optimism is 4.4%. Yeah. Which is like, I guess what you would expect a six month return. It's like in line with every other bucket except for the 10th. It's very regular. It's regular. It's regular. So I want to double click on why wouldn't people be bullish? This is the way that I'm thinking about it. We're still ticking after all that we've been through. We've just had two bear markets in the last four years. Historically, that is not a thing that is typical at all. Now, granted, one of them didn't last very long, but I would argue the societal effects from it will last forever. But then we had another one. 2022 was

a legit bear market for every type of stock and the bond market at the same time. It's horrible. We had a million Americans die. We had a riot at the Capitol. We had an attempted coup. We had the worst inflation spike in 50 years. We had Ant-Man 3, Captain Marvel 2. Batgirl was so bad, they threw out a finished film and bragged to their shareholders about the tax write-off. But meanwhile, earnings are growing again. Consumers are defying everyone's expectations,

especially mine. Wages are strong, but not boiling over anymore. Jobs are everywhere. Cash has a massively positive yield. Goldilocks. And there's a technology revolution underway that people are literally forced to spend on. So if you're not bullish now, when would you be? I guess.

Like what would make you bullish if not for the layout that I – right? Yeah. Would you agree? I for the layout that I – right? Yeah. Would you agree? I think – Do you concur, doctor? Why would I not concur? Yeah. It's like – all right.

I'm not bullish. Okay? What would make you bullish? It was hard to get bullish last year when it was just a handful of stocks and it wasn't – Yeah, this is better. It wasn't yet confirmed that the economic data was good. It was like the economic data was kind of meh. The stock market is confirming it.

Transports. But only a handful. Not really. But Liz, to your point, we also had earnings still negative. Right. We don't have that now. We had an earnings recession. I'm saying right now, every stock is participating.

Totally different. For the most part. Totally different. Which is why I think you saw at the end of the year and into 2024, a lot of the bears turned to bulls. And then you saw strategists clamoring over themselves, trying to raise their year-end targets because everything got blown out by the end of February. They don't want to get Mike Wilson-ed, like everybody wants to keep their job.

I thought being cautious in mid-2023 was reasonable, right? Given everything that we had been through, given the fact that yes, it was a handful of stocks, but now it's a different market environment. It's hard to find losers. I think you had to make the turn in your rhetoric if you're a strategist. Was fault when the earnings growth turned positive.

That was the time. For me, it was when NVIDIA did that blowout thing in May because I had been looking for like an AI. What chat GPT in February, I was like, we're going to have an AI bubble. But when NVIDIA had that blowout quarter and the stock went up like the most, any stock has ever gone up in dollar terms

in one day ever. I just said to myself, like a market that has that kind of risk appetite is going up. But if you didn't make the turn then, you're not making it now. Why would you? I wouldn't. You'll have more career risk now. Yeah, of course.

Becoming bullish at the top of the market might be worse. Way worse. If we're at the top. Way worse. Most consecutive days without a 2% decline in the S&P since February 2018. We're now on 270 something days without a negative 2% day. That's wild. It's extraordinary, right?

Well, I was saying to Liz earlier, like, there needs to be something that's not in the market right now. There needs to be an outside event that knocks us off our trend. It's not just… Perhaps. Ant-Man 4.

Good. Get me out. Well, so… The way that I look at it is crises happen. If we're assuming that something needs to knock us off the course. I'm not saying crisis, but we need news. Okay, big drawdowns. Fine.

Right, whatever. Shake the tree. They happen for, in my mind, one of two reasons. Either it's an external event, something totally exogenous, a pandemic, war, something that is completely out of the financial market's control. exogenous, a pandemic, war, something that is completely out of the financial market's control. Or it's due to excessive risk-taking over a period of time in the financial market. If you look at what happened in 2007-8, obviously we had excessive risk-taking, not just in people buying homes, leveraging and buying more homes, so the consumer was

taking excessive risk in their own real estate. This is the Minsky moment. And then all of the financial firms were taking excessive risk, borrowing own real estate. This is the Minsky moment. And then all of the financial firms were taking excessive risk, borrowing off of what the consumer was doing, right? So then you had this excessive risk wrapped up in itself, and eventually the tide went out and everything fell apart. And it was so painful because it was both the financial system and consumers wrapped up in that. Now, and I was just talking to Mario, my analyst, about this before I came here, where is the excessive risk? The excessive risk is perhaps being taken in some of those crowded trades, but is it, I don't remember which one of you said it, is it to the

point where it's a huge bubble yet? Can we say that it's excessive? We've had 14 IPOs this year. Does that sound like a bubble to anyone? No. So we're one quarter through the year, believe it or not. Well, people will point to the meme coins, but that's so fringe. Well, but maybe some of that is it. The whole thing about it, if you think about it, the exposure, right? The reason the global financial crisis was so painful is because everybody was exposed. So even if there is excessive risk-taking happening in crypto, or if it's happening in a handful of names that everybody's clamoring for, maybe it's not enough exposure to take the whole system down. So even if that does break up,

fall apart, whatever, and turn into something that it does shake the tree, all of America is not exposed to it. Right. If Bitcoin got cut in half, it would go from $1.5 trillion to $750 billion, probably back to a trillion the next day, but whatever. Like if Bitcoin got cut in half, name one S&P 500 company that's counting on higher Bitcoin for any of their earnings. You can't because it doesn't exist yet.

The one thing that is interesting, and I didn't put this chart in the show notes, but if you look at the comparison of how much Americans have exposed to real estate in their net worth and how much they have exposed to stocks or equities in their net worth, the amount in the last four years that they have exposed to stocks has skyrocketed, obviously. That starts to look a little out of whack with just the long-term trend of how much people, it's usually on an upward trajectory, but it crossed over the amount that they have in real estate, the amount they

have exposed to real estate. It's back under by a tiny bit right now, but they're like neck and neck. So the last reading I have, actually, it's a little more in stocks, $44.8 trillion in real estate. I'm not surprised because stocks appreciate faster than people's home prices will appreciate. Well, in this cycle, especially. Oh, yeah. Right? So 44.8 trillion in real estate, 47.5 trillion in stocks. I'm really glad you brought that up. That's a great segue into it. This is the last thing we're going to hit. Ben Carlson did a great post. So much money everywhere. And the idea is like, why is the stock market making all-time highs? Well, maybe it's because everyone's doing really well. I don't say everyone, like

obviously not every single person. But let's put up, John, let's put up household net worth hit an all-time high in December of 2023. So a couple of important things here that I want to get to. Total household assets hit $177 trillion. Total household liabilities, which is the red on the bottom, is negative $21 trillion. I mean, we are like, I know there's a national debt, blah, blah, blah, blah. But on a household level, people are doing really, really well. So in other words, net worth, which is gray, is assets minus liabilities. Household net worth is 156. I mean, just look at the growth in that in the last 10 years. It's extraordinary. And more than 90 trillion of that 156 is in either real estate or stocks.

Yeah. So here's the next one. This is household assets relative to liabilities since the great financial crisis. So this will take us back. This goes back further, but we'll start here. At the bottom, March 31st, 2009, this is household assets versus liabilities. And you see that we went from 5X to 8.6X. So we have much more assets than we have debt, even relative to ourselves 15 years ago. Stock market obviously has been hugely influential in that. Last one. Households are growing their assets much faster than they're growing liabilities.

So even the debts that we have are not expanding as quickly as the assets that we have. So this goes back to just January 2020. So the entirety of the post-pandemic period, you see that household assets are up 32%, liabilities up 24%. That spread in between is widening. So people are getting richer faster than they can even spend the money. And in the wealth management world, this is something that we encounter all the time. Financial advisors basically have to have conversations with clients like, listen, your portfolio has done way more than the original expectations that we had. So either you can take less risk or we have to dial up how much you want to spend, how much you want to give to charity, et cetera. You know what they're doing? They're saying, okay, great. Instead of a down payment for my son-in-law and my daughter,

here's the whole thing. I mean, that's, so why are 25% of the houses being purchased for cash? Because of asset price gains that people don't even have a way to spend if they wanted to on themselves. The rebuttal that you would get, not necessarily from me, but especially in an election year, we'll hear about this kind of stuff. The rebuttal that you would get is, yeah, household assets have gone up at the expense of government debt. So we just transferred the liability off of consumers, off of Americans, and put it onto the government. And now they're stuck with it. And the interest expense, if you look at the Congressional Budget Office, the projections of interest expense and everything, if rates stay this high and we keep borrowing at the rate that we are, is like off the charts in the next decade

or so. Obviously not sustainable. And then it continues to be, well, when will that be a problem? It's like reverse taxation though. But it's like, will it ever? Who owns most of the government liabilities? We do. The people do. Right. But will it ever be a problem? I mean, Who owns most of the government liabilities? We do. The people do. But will it ever be a problem? I mean, what party is going to practice enough austerity to change that?

None. Because you lose. Because you don't get votes. I don't like to poo-poo this and say it doesn't matter. It's just a debate that's been had since the dawn of the republic. Like literally. The dawn of the republic. Like literally. I don't know.

It's the same way that we almost shut down the government every six months or so. And it never really happens. Liz Young, ladies and gentlemen. My God. Can you just come back once a week? We do this every week? Every other week. All right.

Hey, we always end the show with favorites. And we'd love to hear what you think people should be watching, reading, paying attention to, listening. Like what are you into these days? Well, actually, I was telling Michael this before the show. You don't know why we got into this conversation. Now you're going to find out. So last weekend, I wanted to go see a movie. I go to this really small movie theater. It's a great little spot, well-curated lineup, only four screens. The one that I wanted to see, which was like an older De Niro movie or something, was sold out, so I couldn't get in.

So I had to go to the only other one that was playing. Barbie. No, it was the documentary of Ennio Morricone. Oh, you're kidding. Yeah. So it had started at six. What kind of artsy community do you live in that's got these movies? So the guy tells me it ends at 8.42.

I was like, this thing is two hours and 45 minutes long. So I go into this documentary thinking there's no way I'm sitting through this whole thing. It's all in Italian and subtitles. I'm not even really interested in the subject matter. I was like in rapture the whole time. Fascinated. So I would strongly recommend it. And it's obviously not in,

you know, your local, whatever, AMC. But look it up. So for the listeners, for the younger listeners who aren't familiar, Ennio Morricone scored

all of the spaghetti westerns that Sergio Leone made in the 60s with Clint Eastwood. And the scores, like, really hold up. Yeah.

Like, you almost don't even need to watch the movie again. What's the best spaghetti western? Well, the trilogy. The good, the bad, and the ugly. The man with no name trilogy, which is Clint Eastwood working with Sergio Leone. And they made three of them. The last one is the good, the bad, and the ugly. I haven't seen any of them.

These are – well, so my recommendation is just watch the last one. The first two require a ton of patience, and they are not modern movies. I think they're great. Yeah, Matt. But if you're not a cinephile – but the third one is a modern movie. It probably is the reason why all of the epics that have come after were even able to be conceived of. It's so gigantic, and it's basically Clint Eastwood and a, I think he's a Mexican bandit and they're both end up as fugitives, but they're chasing the same. You've definitely seen

this movie a thousand times, right? They're chasing the same cache of gold through the desert and they know it's buried somewhere, but they don't know where. So they're kind of friends, but then they're also enemies but it's just like really wide ranging and it's like, it's probably the reason why Spielberg probably saw it in a movie theater

and then made his first 10 movies. Tarantino's been like hugely influenced and Ennio Morricone, we were talking about, scored The Hateful Eight. Yeah.

And I think it was the last thing he ever did. I think it was. Well, and what you learn in this nearly three-hour documentary is that he didn't want to be known as the spaghetti western guy, so he wanted to do other stuff. And he kept getting nominated for Oscars for original score,

and he didn't win like five times in a row. And the Academy gave him an honorary Oscar because they almost felt bad that he never won. So they give him his honorary Oscar. He keeps scoring stuff, and he's old by this point. And then he finally won. He won two Oscars. I don't remember.

Oh, that's cool. But he did win two. It was a Huggies commercial. And, yeah, it's a great story. It's a really great story. You don't realize what happens behind the scenes in a movie when you're watching it. There's somebody, you know, writing all this. In Once Upon a Time in Hollywood, there's that whole, like, mini movie within the movie

where DiCaprio has to go do spaghetti westerns. But he ends up like meeting an Italian woman and that's his wife. But it was like really funny to see the movie posters. And it was like a nice homage to those films. So like, Michael, I would just see the third one. But like really watch it. And I think you'd love it. Well, in a similar vein.

Yeah, let's hear your favorite. So Josh and I went to see Dune 2 last week. It is in a similar vein. Yeah, let's hear your favorite. So Josh and I went to see Dune 2 last week. It is in a similar vein. No, no, no. You're going to tell me to be- No, no, no. Did not watch. No, here's where I'm going with that.

Okay. So in the trailer, we saw there's a new Planet of the Apes movie. I saw the original, not the original, I'm sorry. I saw the original remake, the one with James Franco, and I enjoyed it. And for some reason, I hadn't seen, so that was Dawn, and I hadn't seen Rise and War, which are the next two. And so in preparation for the fourth one that's coming out, I watched Rise and War for the Planet of the Apes, and they were really good movies. Amazing movies. Like really shockingly high – super high quality.

So there's that. And I'm also halfway through so this might veer into some weird shit but it's already weird. Dream Scenario is a movie with Nicolas Cage who is obviously one of our greatest actors ever

at least I think he is. It's an A24 movie and the premise is this. He's like a schlumpy professor college professor who he's a loser. He was always going to write a book he just never started it.

And then he finds out that a lot of people start seeing him in their dream. And I'm halfway through and it's awesome. Where are you watching this? It's on Max. Oh, really? It came out last year. I never heard of it. It came out last year. Dream Scenario. Dream Scenario. Yeah, last year.

Duncan, you aware of this? I actually just saw it. I added it to my list, but I haven't watched. It's fun. All right. No, I'll definitely check that out. Good tip. Willie Nelson is like 81 or 82 years old, still making new music. He just dropped a song this week.

It's called The Border. And he doesn't take a side in the debate over immigration. The song is from the perspective of a border patrol agent. And the guy comes home to his wife and her name is Maria. So I'm assuming he's trying to say like, I don't know what he's trying to say, but it's, uh, it's really nice to see somebody who's been at it for 60 years continuing. Just, he doesn't need the money. Just likes it. He doesn't need the controversy. He just has something to say on the topic and wrote a great song and it hit Spotify a couple days ago. Can you burn it for me? I will burn it onto a CD for you.

As soon as I'm finished making my mixtape for Liz, I will work on yours and I think you'll love it. Alright, hey everybody. Thank you so much for listening. If you like the show, please give us a rating and a review on the podcast app of your choice. We really appreciate it.

Thanks so much to Duncan, John, Sean, Nicole, Rob, Daniel, everyone who works on our content so hard each week. Archie. Archie, the stockbroker, thank you. Michael Batnick, have the best birthday weekend ever. Thank you. I'm sure the fans would want that for you. I know I do.

And hey, guys. No, I'm doing it for my would want that for you. I know I do. And hey guys. No, I'm down for my birthday party. This is perfect. My birthday party. I'm going to somebody else's birthday party which is perfect for me.

That's so on brand for you. I love it. Really? Are you going to tell people while you're there, hey, it's also my birthday? Yeah. No.

You definitely will. Absolutely. I love birthdays. All right. That's it from us this week. Thank you guys so much for listening. Thank you, Liz.

We'll see you soon. Is that fun? listening. Thank you, Liz. We'll see you soon.