The Compound and Friends - Inflation in Plain English

Episode Date: March 15, 2024

On episode 134 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Peter Boockvar and Dan Greenhaus to discuss: inflation, the Fed, stock market bubbles, Tesla, short sellers, international stocks, banning TikTok, and much more! This episode is brought to you by Franklin Templeton, manager of 70-plus ETFs in the US, including EZBC, Franklin Bitcoin ETF. To learn more, visit: http://franklintempleton.com/ezbc 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/ EZBC Disclaimer: For a period from January 12, 2024 to August 2, 2024, the Sponsor will waive a portion of the Sponsor's Fee so that the Sponsor's Fee after the fee waiver will be equal to 0.00% of the net asset value of the Fund for the first $10.0 billion of the Fund's assets. The Fund has filed a registration statement (including a prospectus) with the Securities and Exchange Commission (“SEC”) for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the Fund has filed with the SEC, when available, for more complete information about the Fund and this offering. You may obtain these documents for free by visiting EDGAR on the SEC website at sec.gov. It is also available on franklintempleton.com Franklin Holdings, LLC is the Fund's Sponsor (the “Sponsor”). Franklin Distributors, LLC, an affiliate of the Sponsor, is the Fund's marketing agent. Learn more about your ad choices. Visit megaphone.fm/adchoices

So I think they have to approve it on April 11th, it says. The World Trade Center is 1,776 feet. So it'll be 200 feet taller than the World Trade. So if you're looking for office space, Pete, that's where you want to… Is there a picture of it? Yeah, it's ugly. Of what it will look like? It will look like…

I mean, what… No, you know what? It'll look like everything in Lower Manhattan looks right now. Yeah. They all look the same. Yeah. I was walking past the J.P. Morgan building today, and that's the biggest thing I've ever seen.

How many stories is that? That's going to be 60, six zero stories, and it's going to be entirely electric. Zero net emissions. Jamie and I are going to have the top corner. Jamie will sit on the 60th floor. He'll have the best view. Yeah, probably.

That's cool. Wow, look at that rendering. That's Oklahoma City. Wow, that does look cool. So you can see on the bottom, there's some sex going on there. Is that a pool? Don't we have tornadoes there? I think I see the food court.

Yeah, I see it. It's right there. It's Chick-fil-A. JP Morgan building is Park Avenue to Madison, 47th Street to 48th Street. It's a square city block. It's one structure. Was that where they,

when they took over the old Bear Stearns building? Was it that location? That's still up. This is something else. This is right behind it, right? Yeah. This is 270. They're also in 383. I don't know. This is right behind it, right? Yeah. This is 270.

They're also in 383. I don't know. 383 Madison is the old Bear building. Okay. And they have the old J.P. Morgan building, which is right on park by Grand Central. Don't they have tornadoes in Oklahoma City? Not a weatherman, but… That's actually the building they got for three bucks, right?

It wasn't quite three bucks, but yes. The Bear Stearns building? Yeah. Yeah. That was most of the value. So when people are like, oh, Jamie Dimon's going to be the treasury secretary, maybe he's going to run for president, not until he sits his ass in that building. He has zero interest in getting into politics. But I'm saying at a minimum, you wouldn't build something like that and not wait another year sitting it.

Definitely. And be the CEO sitting ceo and host a lot of meetings have people come to your office the existing the existing uh jp morgan headquarters they have a they have a top floor thing it's not outdoors it's not a roof deck or anything but they have the guns from hamilton really like the actual not from the broadway show like like the dual they have hamilton and Burr's guns in a case. Wow. And they do like client events up there. It's pretty cool.

They have a whole bunch of other shit up there. Like the actual ones that were used for that duel? Like the actual ones. Was it Burr? Yeah, 1783. They're like behind glass and then they have like all these historical documents. And they do, I don't know if they still do it.

They were doing like an RIA event once a year, the asset management side. That's cool. So they would bring you up there for a cocktail party. Yeah. And they have some shit up there. So we're going to have that too. We're going to have Barry's guns. We're going to have the –

His car collection? We're going to have the guns that Barry and John Malden used to duel each other. I don't think there's a building big enough for John's gun collection. We need a museum for Barry's cars. We do. We do. So I don't want to do the whole show about this, but I also can't let it go because I've never quite heard anything like this before. I want you guys to react to this.

I love burning the short sellers. Like almost nothing makes a human happier than taking the lines of cocaine and away from these short sellers who like are going short on a truly great American company, not just ours, but it just love pulling down great American companies so that they can pay for their Coke. And the best thing that could happen to them is we will provide, we will lead their Coke dealers to their homes after they can't pay their Coke. And the best thing that could happen to them is we will provide, we will lead their Coke dealers to their homes after they can't pay their bills. And that's like one of my- Surely all short sellers. Yeah. Well, you know, go ahead and do your thing. We'll do our thing.

I love burning short sellers. That is, of course, Sarah Eisen interviewing Alex Karp, who is the CEO of Palantir. What accent is that? Is that Philadelphia? Coke? Karp? Sarah handled that very well. Your Coke dealer?

Is that… Not to offend anyone. I'm not sure. I have a Long Island accent. It's like Upper East Side, mid-1980s. No, it's either… Duncan, what kind of accent is that? I have no idea.

You know that part of the country. He was born in New York City. He could plug that into an AI model to tell us. Raised in Philly. Are short sellers all on cocaine, Peter? I mean, Jim Chanos was not, I don't believe. Besides him. I mean, a good short seller would never short a good company.

Well, listen, it is Wall Street, so you never know. That's true. But that's an – isn't that a red flag if you're an investor? You hear your CEO talking like that? You never want to attack the shorts. That's true. But isn't that a red flag? If you're an investor, you hear your CEO talking like that? You never want to attack the shorts. It's crazy, right? Those that do are defensive for a reason, maybe. I get why they would dislike the short sellers.

Yes. But then to go and publicly say something like that. I'm wondering if he had a conversation just prior to that of a short seller criticizing his company. He seemed fired up and ready to go on the topic. Listen, we've all been doing this for quite some time. We can list the number of people that have attacked short sellers. And with all due respect to Palantir and Mr. Karp, most of the people who've gotten defensive about short sellers

have gotten defensive for a reason and it hasn't. I was going to say that. And then I was going to ask, have you ever spoken to a CEO of a publicly traded company off the, like over a drink and the subject of short sellers comes up ever? Um, no. Yeah. Okay. I think so. And what was their, what was their comment on the P on short sellers or the people shorting their stock? The general view is that short sellers are a plague on society.

I think that's probably. So I've had a different experience. Anytime I've ever spoken to a CEO and the topic of short selling has come up, which is maybe twice, but once very, very, very recently. The comment is, yeah, whatever. Let them do what they're going to do. Like, very recently. The comment is, yeah, whatever. Let them do what they're going to do. Like, we'll prove them wrong. Not we hate them.

Not they do coke. It's like, yeah, they exist. It's like part of what we do. Now, if you're like being chased down the street by short sellers, it's a little bit different, but you're probably guilty of something if that's the case. It's not my experience that shorts latch onto a company that's like mostly a great company. No, I think that's probably right.

And that's the right response. Like a Tim Cook battling short sellers in the street. Well, how big is the short interest in Apple? But look at Apple too. It's only 4%. It's not even, I mean, it's not nothing. Has Elon said anything about the short sellers publicly? Oh yeah, he has, definitely.

You can Google that. He went after an iMorn. That was a leading question. He went after an iMorn, okay. There's also room to say, oh, he has, definitely. You can Google that one. That was a leading question. There's also room to say, oh, short sellers are fine. Just the short sellers who are betting against my company. Those are the co-cats. Those are always the co-cats.

That's right. We agree shorts are like a healthy part of the ecosystem and very often uncover things that no one else would. It's interesting. When you look at the stocks, you know, the people that go want to go long, they want to hurt the short sellers. They look for the highly shorted names,

but the most highly shorted names for a period of time, more often than not, they end up being right. Now they may get killed before they're right, but their thesis on a particular story more so so than not, ends up being right. Have short sellers ever put a good company out of business? Of course not. No.

No way. No, they never put a company out of business, but they reveal faulty business model or fraud that eventually does itself. How about this? If you're an investor or a CEO at a company that's being accused of something by short sellers or just being generally disrespected by people that are shorting the stock, if you think you're

right and the short sellers are wrong, they will eventually lose money and you will win. So they're almost, they're guaranteed buyers. Why would you be against that? Imagine if he was like, I can't wait to take their cocaine and snort all of it. I want the coke. Can I tell you one thing? You know, it's a great example of what you just said, Pete? Valiant. Oh, excuse me. Herbalife. Right. It really was a piece of shit after all. Have you looked at the stock lately? Yes. It's in single digits, right? It looks like it's going to zero. And Ackman actually tweeted on it just a few weeks ago.

So that basically knocked him out of the investment short game maybe forever. I mean, forever. Forever's a long time. Forever's a long time. But that basically knocked him out of the game.

It's an $8 stock. It's probably where it belongs. Yeah. But to your point, it was so heavily shorted. And it took years to play out. And it took years.

Does anybody want to invest that way? That was like, what, 2014? The Herbalife saga? It was probably a decade ago. Yeah, at least I would say. A Tesla short, if we had a Tesla short on the podcast right now,

it would probably point out, hey, not for nothing, Tesla's in a 50% drawdown. I know we're going to talk about that later. It took me a while, but... Also taking some time to happen. Well, no, Tesla shorts were wrong. Actually, I don't want to step on that.

Because the Tesla shorts came out. Actually, I don't want to step on that. Because the Tesla shorts came out in the teens, right? Like 27, whenever it was. I feel like they've been around for as long as this. But the short on Tesla, it sort of morphed. Originally, it was like, oh, Musk is P.T. Barna. But the original short thesis was he can't deliver. And he did deliver.

Right. And then he ended up delivering. Then it became a valuation thing. Yes, it's a car company. No, it's not a something else company. No, no, no. The fundamental thing that happened was that the crowd behaved differently than the short sellers thought. Right. All of the stuff about the company running out of money was true.

The short sellers assumed that a secondary stock offering would be a negative catalyst, but crowd psychology went the other way. Yeah, shareholders can go now. They said, oh, now it's definitely not going out of business. Look, they just raised a billion dollars. So I don't know if you heard Einhorn on, I forget what recent podcast he just did.

Barry. He did Barry. Oh, was it with Barry? Where he was talking about the- He doesn't do a lot of, by the way- No, he does not. Never.

But he was talking about the change in the market landscape over the last – It's called Short Sales and Cars with Barry Ritholtz. What is that? Short Sales and Cars? That probably should be the name of the podcast today. It's fascinating, Michael. Intriguing. But his point is that as a value investor, for anyone who's listening and didn't hear the podcast with Barry, that the landscape used to be that as a value investor, as a short seller, you could expose X or undercover Y and the market would

care and come around to your view. And because of the growth of passive investing and other meme-ifications, some of which you touched on, some of which you didn't, you can't rely on that anymore. And for years, if Danny Moses was on the podcast, he'd say that was the problem for Tesla. Obviously, something changed sometime in 22, and that behavior has been different. Here's what I would say. I think he has it backwards. With all due respect to Mr. Einhorn, it was an awesome interview. I think there was a period of time that was the aberration, a 10-year stretch, where you could go to Irisone.

You could lay out all of these terrible things about a company for all to see, the stock would halt and then open down 20%. And that was the aberrant period. I think for most of history, eventually bad companies were revealed and stocks fell, but shorts didn't have that loud of a voice. Like, I don't think in the 1980s and 90s,

there were like these short stories that would go viral within minutes and stocks would blow up. Well, when was Bill Fleckenstein around? That was- Early 2000s. Mid-90s. Or mid-90s?

Into the late 90s. But could he crush a stock with a speech? No, and he- There was no Twitter. Yeah, and he never actually did that. He wasn't necessarily a vocalist. So Herb Greenberg would write a column about a $3 billion market cap piece of shit. Right.

It would maybe fall 5% or 10% and then reverse right into shit. No, I'm just kidding. Or Dan Dorfman would run a story. Yeah, but so this— Who ran the Green Bear Fund? Tice, maybe? David Tice. David Tice.

David Tice, that's right. But so my point is, I think it's a very compressed period of time where the shorts had this power to really knock down a stock with a speech or a tweet or a presentation. And that's not, like we weren't going to revert back to that. We've reverted instead back to this thing

where most people don't care what a short seller has to say. They probably don't even hear it. But wait, but I think, but Einhorn's point wasn't on the short side. He was basically saying that good investing is about people agreeing with you later. And in these smaller cap companies

where he's finding value, if nobody ever agrees that there's value because there's less active managers, then those stocks will never see their value. And I think that was his main point. But the shorts, like the shorts are nailing these trades in solar right now. I don't know if you've seen any of these charts.

And EVs too. And EVs. And EVs. With Fisker. The shorts have been patient. They've been right. These are not great business models. These companies are not sustainable.

Solar edge looks like it's going to zero. Look at Sunrun. Look at ChargePoint. Nova. EV Go. Oh my God, ChargePoint is $2 under. Yeah. Rivian.

Rivian. Rivian. The funny thing about the charging companies, EVgo, et cetera. Blink. Blink, going, going. I got killed in ChargePoint on the long side, of course. The amount of money that's been spent so far,

there's been $100 billion spent out of all these different government spending programs. Virtually all of them, I'm overreacting, but 75% of the money that's been allocated so far has been for EV charging and or battery infrastructure. And so an enormous amount of money has flowed to these names and to this idea, and yet none of them can figure out how to make money. Although I maintain to the laughingstock of people at Solus that in 20 years, 25 years, gas stations will not be a thing. And you'll just pull up to Starbucks and there'll just be a charging station.

I got one more. That's a question of the hybrids. There's a worse outcome than that. There will be gas stations will not be a thing. And you'll just pull up to Starbucks and they'll just be a charging station. There's a worse outcome than that. The roof is a solar cell. The roof of the car is a solar cell and nobody stops ever. Still don't need gas stations. We're not ready for that now. What about convertibles? Nobody drives convertibles. There's two cars

already that have solar. Fisker has one and then Aptera is doing one. Right. So it's very, you can't power a car for 300 miles on an afternoon's worth of sun. But of course, that's where they're going to try to get to. I don't know if it's 20. I wouldn't know. But this also highlights like two different types of short sellers. One that says this is a broken business model. I'm going to short it. Or this is a fraud. I'm going to short it. Versus like the hedge fund that does relative value trades. I'm going to short it. Or this is a fraud. I'm going to short it. Versus like the hedge fund

that does relative value trades. I'm going to go along this. I'll short that. You know, they're not looking for that. They're just looking for one to outperform the other. You know, the Chanos obviously being the broken business model,

the fraud or whatever. I mean, I think Chanos looks for both, right? Like he looks for companies that it's a fraud because what they're saying is not possible. Like there's no way this company could ever be profitable based on the fraudulent statements they're making. Or ever realize this valuation. I mean, that's the fundamental argument there is that in order for a given company trading at X ratio, whichever one you pick,

you'd have to assume a 20% sales growth. And definitely you'd have to assume 90% market share or whatever it might be. Right. What, what, who's the, who's the, um, the, the, the short seller guy who comes out and he has positions in his own shorts. Um, uh, block, um, muddy waters, muddy waters. Yeah. Muddy waters is much more trying to find outright fraud.

And he has, that is an incredibly, Didn't Buddy Waters find a Sino Forest? Yes, he did. Do you know how many high-flying blue-chip hedge funds were long Sino Forest? Yeah. Just like nobody bothered to fly over there and say, is there even a forest? Did he also find Lucky Coffee?

That's a good question. I'm not sure. His most recent short is actually will be interesting. Blackstone mortgage REIT. Sure. As what? Not B-REIT, the mortgage REIT, that's the BXMT, which is a play on or a short play on office commercial real estate and that they're over their skis, they can't cover their dividend. That was his argument that he made on TV a couple months ago. That's not priced in already?

Like, isn't that thing probably – I'm sure that thing's destroyed already, no? Right. Well, that's a short from a macro. Sort of a macro call. Does that pay a big yield? Well, that's the thing. It's a negative carry. He's got a tough carry.

That's a tough short to carry for too long. I was going to say, the labor intensiveness to find fraudulent companies is just off the charts. And the mental stress. Well, so that's what's so funny. Like real professional short sellers will do that work. And then you have this like amateur class of short sellers who think like, oh, I just wake up and buy puts on NVIDIA. Yeah, but that's not – Because it went up a lot.

That's just like we're on the dice. My comment is if you're not a professional short seller, you have no business playing a game that people dedicate their whole lives to playing. The Blackstone stock has a 12% yield. The stock? Yeah, BXMT. It's a big cost to carry. Oh, okay. I thought you meant just BX.

No, not BX. We ready to go? Yes? All right. Oh, man. What a lineup today. This is like a dream team. Is this going to be a big one?

Could this be the best pot of all time? Probably not. Probably not, to be honest. Five out of ten. Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Redholz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Redholz

Wealth Management may maintain positions in the securities discussed in this podcast. Today's episode is brought to you by Franklin Templeton, manager of 70 plus ETFs in the US, including EasyBC, the Franklin Bitcoin ETF. Josh, in ETF land, they like to try to have memorable tickers. I think they nailed it with EasyBC because the spot Bitcoin ETF gives investors an easy way to get exposure to Bitcoin without having to worry about private keys, digital wallets, and all that stuff. That's right, Michael. And I'll tell you something else. EasyBC has zero fees. They've waived it to zero until August of 2024. That's followed by the lowest ongoing fee of 19 basis points.

We had a guest from Franklin Templeton recently who reminded us that the firm has a 75-year history of innovation. They've actually had big digital assets focus and presence since 2018. They've been building blockchain-based technology solutions, developing a range of investment strategies, and running node validators. They launched the first U.S.-registered mutual fund to use public blockchains to process transactions

and record share ownership. Really cool stuff from a firm with a solid footprint and trusted legacy in traditional finance. Learn more about Franklin Templeton's ETF lineup and EZBC at franklintempleton.com. If you're listening via podcast platforms or on YouTube, please see the link in the description for more information. I've had it with your negativity today. It's spring. The sun is shining. Manhattan is packed.

It took me an hour to get here from New York Stock Exchange. No one told you to take a car. I took the subway yesterday. You saw me do it. You saw me do it. Actually, I did. I got on the 5 train. How are you still taking trains in Manhattan?

Let me give you my Yelp review on the 5 train. Wait, how are you still taking cars? You're still taking cars in Manhattan. Excuse me, SUVs. Do you understand my stature on CNBC? SUVs only. It would never send an MKX. What a waste of time.

It would never send an MKX. What a waste of time. All right. Hey, put my music back up. Listen, guys. Last week, the show hit number six on the investment podcast chart for America. I wanted to tell you we love you. If you like the show, if you're a fan of the show,

shout out to everyone who's been listening since day one. If this is the first time you've ever heard the show, shout out to you as well. To the haters, we will be here forever. Do you understand that? Forever! Nicole, are we ever going to stop? Not a chance.

Alright, today's show, I've been looking forward to this for a long time. It's a family affair, it turns out. Dan Greenhouse is the chief economist and strategist at Solus Alternative Asset Management. Solus manages over $3 billion for institutions and family offices, specializing in event-driven, distressed, and special situation investment opportunities. Dan, welcome back to the show. Thank you, as always. And you brought your cousin. Not technically my cousin, but... Peter Bookvar is the CIO of Bleakly Financial Group, an RIA with over $9 billion in AUM. Peter also manages a global macro and income strategy for clients.

Peter Bookvar, welcome back to the show. Thank you, Josh. Let's clear this up, though. Hold on. Is this a big one? What? Is this a big one? It's episode 134.

What? A big podcast. This might be the biggest one we've ever done. I don't think it's the biggest one you've ever done. It really is. You know why? You two guys are two of the smartest people I know. I know I've told you both that.

I've told you that. Off the air. So this is not just a thing that I say, right? And how often have I repeatedly said, we are two of the smartest people? You have always agreed with me. Yes. You have always agreed with me.

We are glad to be here. But no, but like, what's the relationship? Nothing. He hired me. I trained under him and I owe my entire life to him. And his cousin is my wife. Wait, wait, wait, wait, wait. His cousin is my wife in addition. Wait, I didn wait, wait. His cousin is my wife in addition.

Wait, I didn't know Peter hired you. Yeah. My first job, my first real job was working in the, what became the equity strategy group at Miller Tabak. Me, Dan, and Tony Crescenzi. What year is this? Oh, Crescenzi. Mid 2000s. It was Tony, me, and Peter sat on the desk next to each other, just yelling. You were like right out of college? No, a couple of years later, but yes. Or mid to early 20s. So how did you find Miller-Tavak or how did they find you? Well, I knew Peter.

Yeah, I said to my wife. Because you're related. Yeah, I said to my wife. So you're looking for somebody. Why are you really driving the nepotism angle here? And I said, you know what? I think Dan would be great. And everyone's like, you know, hiring family,

you never know how that's going to work out. I said, he's a big boy. If it doesn't work out, it doesn't work out. And he's also very bright. And it's worked out. I would have cried and really complained, probably sued. Yeah. But it did work out because I'm that good.

All right. Well, you deserve it. You deserve all your success. We love having you on the show. What's the relation? Whose wife? Your wife. Oh my gosh. Really? It's not blood. It's the relation? Whose wife? Your wife? Oh, my gosh.

Really? It's not blood. It's my point. My wife bled with him. Your wife bled with him. But you two? Yeah. Okay.

Just really great friends. Just really good friends. Okay. I've heard both you guys talk about this. When Wall Street people talk about inflation, it's a very technical definition that has to do with a comparison over last month. It is not the same way that regular people mean it when they talk about inflation. And I've had a bunch of reminders of this recently at various get togethers with regular

non-Wall Street people, really smart people, just not people that speak the same language that we do. Well, we speak month over month. They speak from three years ago. Yeah. So. Well, they speak anecdote. They speak three years ago. Right. There's a whole list of reasons, but they are not talking about the pace of the rise in prices. They're talking about like what it costs to live right now, regardless of what the pace is. So the word you would use is anchored. These people in general, and if we throw up the chart that I brought, these people are anchored to pre-COVID levels. Why is that?

Because they're normal people and they're not economists. And so this, for instance- No, but what is it about pre-COVID? Because it was 2%? Well, just that's before prices started really going up. So this chart right here, this is the actual CPI. It's awful. So when you hear prices are up 3% year over year, this is the underlying index that is up 2%, 5%, 9%.

And you can see, I put it starting in 2000, through 2020, we can complain about the rate and whether this is correct or not, but it was a nice, steady upward slope, more or less. Digestible. And nobody complains. Because it's steady and you understand. No surprises.

That's right. And then all of a sudden you see the step function up. And to this moment now, the CPI, which is the total basket of goods that someone might purchase, is up roughly 20% from that pre-COVID levels, which is a very rapid pace of increase. Cumulatively. Cumulatively up 20%. And how many, like, let's say we had stayed at the steady pace of inflation that we had been on for two decades. Sure. How many years worth of inflation did we just pull into two years?

That's probably seven to eight years. I'd have to go back and look exactly. Well, since 2020— Eight years worth of inflation in two years is crazy. Since 2020, CPI is up about 19%. So, call it four years. Four years. Okay.

Yeah. That's a little— But this shows you, though, also that—and you can stretch this back to the—since World War II. Yeah. But this shows you though also that, and you can stretch this back to the, since World War II, you know, inflation's never transitory. It's just a rate of change that is. But that said, goods prices, inflation is actually transitory. And now it's disinflationary. So the 20 years leading into COVID, core goods prices averaged zero. Yeah. In the last few years leading into COVID, core goods prices averaged zero. Yeah.

It was services that's always up, whether it's sending your kids to camp, it's concert tickets, it's sporting goods, it's rent, it's healthcare, it's education. Right. And that's when technology comes in and production efficiency and globalization and low-cost wages out of China that helped keep price. It was services inflation that offset the zero and got to the one to 2% aggregate trend. So two observations on that. Um, when you back to this, this idea though, when you talk to people, first of all, they don't distinguish between goods and services. No, they don't care about cost of living. That's because for the average, for the average person, inflation is the price of food at the supermarket and gas to put in the car, more or less. I mean, obviously other things are involved.

A babysitter. My babysitter wants $30 an hour now. It used to be $20. That's right. So just to get back to your point, I think that one of the big problems you have in society in general right now in the United States, and we can tie this into politics for a moment. When you see like the current administration, for instance, saying the unemployment rate is at a multi-decade low and the economy is booming and we're creating hundreds of thousands of jobs a month, why are people so dissatisfied? I think that chart is at the core of this disconnect between how people feel because they're looking, they go to the supermarket and they spend $120, $125 at the supermarket instead

of spending $100 a year ago or two years ago, and they haven't been able to move past it. Well, and imagine hearing economists say inflation is normalizing. They're like, what the f**k are you talking about? I was going to say, in terms of levels. Well, I guess prices are only rising 3%. I'll do one better. Let's say we got a CPI print next month that was 0%. Let's say.

And then the Biden administration put Goolsbee on TV. Well, what's the other guy? Jared Bernstein. It'd be Bernstein. Put Bernstein on TV and Goolsbee on TV. Well, what's the other guy? Jared Bernstein. It'd be Bernstein. Put Bernstein on TV and Bernstein. Oh, Goolsbee's in the Fed now? He's out of the Fed. Okay.

So they put Bernstein on TV and he says, actually, inflation is flat. People would say, what on earth are you talking about? That's one. Two, be careful what you wish for. Because if people really want to roll back prices to 2019, what that would imply is maybe a 12% unemployment rate. So you probably don't want prices to go back to where they were.

You just want them to stop rising. So to that point, real quick, just throw up the table, the table I brought after the chart. That's a good one. Again, just to reemphasize this point, this is a survey, and there's any number of surveys you could point to, but this is a survey from YouGov when asked, and this is the end of last year, when asked, what would you like to see to improve the economy? Two-thirds of respondents in the survey said actually lower prices. And the important point to make, and then please go, is to Peter's point about going back to World War II, prices in general never go down. Some things go down. Hold on.

64% of people want lower prices. Yes. 64% of people want lower prices. Yes. 20% of people want higher wages. Yeah. Well, they're getting the higher wages. They ain't never getting the lower prices. That's right. And again, to the point. Yeah, that is a problem. But this also gets to the fallacy of a 2% inflation target by the Fed is thank God for technology, prices usually fall. So if

technology prices are keeping a lid on goods prices, and that's zero, then something else has to rise by 4 percent to get to the 2. Yeah. So Jay Powell actually is rerouting for higher other prices to offset that decline, natural decline in prices from technology, and that makes no sense. Yeah. What should they be doing? Well, the reason why there's a 2% inflation target is not because an econometric model spit that number out and said, oh, this is ideal for the economy. It actually was a selfish reason because the Fed says, well, if inflation's at 2, ideally we would have a Fed funds rate of call it at 4. And if we go into recession, we'll have 400 basis points to cut in a downturn. That's where the 2%. That's where the, that's the thought process behind a 2%.

It's not because it's right for the economy. It's right for their own policy. That's wild. Does anyone really know? Does anyone really understand that? No. Does anyone in the Fed say that out loud? No, I don't think this is like a hidden secret. I think that, listen, this is behind the argument. Well, should we make the inflation target 3%? Should it be 1%? The fact that you're even having that conversation, to Peter's point, sort of gives away the ghost, so to speak, that there is no academic literature that says 2% is the right target. Now, to be clear, they do think 2% greases the wheels of the economy. You want a steady, modest upward rise in inflation so people go out and spend. And there are a lot of people, by the way,

who would say the right level of inflation is zero. The joke that I heard is, why is it 2%? Like, why isn't it 3%? Well, 3% would be too high. Sure. Okay, what about 1%? No, no, no, that would be way too low. That's why it's 2%.

But they like the price of their technology products going down. Yeah. But people aren't changing their spending habits at all. We got retail sales today. Slight miss, but people are still spending. It depends on where you are on the income spectrum. The lower income consumer is definitely within a very tight budget and are having no choice. Is that not always the case, though?

Well, it is, but it seems like it's more so now because of the cumulative rise in inflation relative to their wages. I'm not saying that they're partying, but if you look at demographics and income and real wages, like people on the lower end actually, for the first time, I don't know if it's ever, got large real wage increases. That's why inflation is high though.

They are the cause of the higher inflation. You're going to set Peter off right now. No, it's true. They are 100% the reason there's higher inflation. If you're a restaurant, you don't have all these productivity levers to pull to offset higher wages. You only have one, and that's to raise that cheeseburger from five to seven because you got to pay your staff more. So where you don't have the productivity ability to offset higher wages, you have no choice but to raise prices, if you can get away with it. Well, let me just say real quick. Yeah.

To your point. So first of all, just look at the chart of TJX and Ross stores. I mean, they're obviously – these are retailers that cater to lower income or medium income consumers. They're doing incredibly well for a reason. And I know you just had McDonald's yesterday. Dollar Tree disaster. By the way, yes, Dollar Tree was not great. And McDonald's was speaking at the UBS retail conference yesterday and said lowering consumers is constrained. I hear a lot of these anecdotes

over time. I fall back on a company like Visa. And we mentioned this on air the other day. Monster. Visa sees everybody always doing everything. Every level. Every everything. Yes. Visa sees everybody always doing everything. Every level. Every, everything. Yes. And what's their CEO saying? Every conference call,

I find them to be one of the most informative and it's a must listen. And in the last quarter, they said they see basically no weakness anywhere. Now, again, that's not to say

that the lower income consumer isn't more challenged than the medium or higher income consumer. I think that's clearly evident. Dying for America is the same thing. Oh, please. No, no. But to me. I think that's clearly evident. Dying for America is the same thing. But, but, oh, please.

No, no. But to me, I think when you, when a Visa is a catch-all to account for idiosyncratic issues at Visa or Dollar Tree, et cetera, et cetera, Visa sees everybody everywhere

and says everything's fine. Dan, if the consumer is trading away from McDonald's and going to Taco Bell, Visa sees the spend. That's right. Yeah, I totally agree with that take. The only thing with Visa and MasterCard is that they're also benefiting from the secular

move of people just using their credit card. So the less people using cash, I mean, I barely have any cash in my pocket. My son doesn't. I don't even know. You're just saying that so you don't get mugged when you go outside. My kids leave the house with a credit card. They carry no cash ever. So more people are also using.

So now also they're also prioritizing where they're spending their money. They're spending less on stuff around the house and other things, but they're spending more on going out for dinner. And so it also is a shift in how they spend. Ally, Bank of America, New York Fed, you have to work pretty hard to find real pockets of weakness. Auto delinquencies are not going in the right direction, but there's always something. But generally speaking, the consumer is doing quite well.

But you also have to inflation adjust. Like Brian Moynihan never inflation adjusts his comment on the consumer. He says, yeah, consumer is fine. Retail sales are up. You know, our sales are 4%. Well, inflation is up 4% too. Yeah, the price is up. Right.

Okay, but to that point, throw up the chart I brought, the Bank of America chart. Brian Moynihan at the Bank of America Financial Services comment, he's made a comment like this in the past, but at the Financial Services comment, and I could be screwing it up a little bit. The next one, that's not the one, I apologize, said pre-COVID, our lowest bank consumer had somewhere around $3,000 in their checking cap. This one. The consumer had somewhere between $2,000 and $5,000. The lowest bank consumer had somewhere between $2,000 and $5,000 in their checking cap. Today, that peaked at somewhere around $13,000. And post-COVID, it was somewhere around $13,000.

It's today somewhere around $12,500. So it's still elevated relative to what it used to be. We all hear on CNBC all the time, excess savings, excess savings. It's still there. Here's bank, much like my point about Visa. Because wages are higher. Bank of America is a catch-all for everybody. And here's a chart from Bank of America, not Brian Moynihan's comment from a different division, the Bank of America Investment Institute, I think.

This is savings and checking balances, right? This is not anecdotal. No, this is actual amounts. So Brian Moynihan, one of the biggest retail banks in the country, is telling me that the lowest bank consumer has four times as much money still in their checking account today than they did pre-COVID. And that, along with the net worth chart that I brought, tells me the consumer is going to be just fine. This is Bank of America's economist Aditya Bhave, I want to say. Aditya Bhave. Okay.

You know the individual? Yes. In question? Okay. Not personally. We're not like me and Peter. I apologize that I mangled the name. He's not married to my cousin.

But the push and pull between goods and services is also really interesting. You could have a company that's effectively a goods-selling company talking like recession is obvious. And then on the other side of the household balance sheet, no, they're just spending differently. And we saw that with travel versus flat screen TVs last year. This is from a new report on the retail spending front. The ongoing weakness in nominal retail spending is partly for, quote, good reasons, namely broad-based deflation in goods categories, which is what Peter is talking about. We've been seeing since 2023. However, another reason seems to be that strong services inflation is weighing on retail's

wallet share. So in the CPI report, core services inflation came in at 5.2% year over year, which is smoking hot. Core goods printed negative 0.3%. So that's that push and pull, and you're seeing that here in the chart. It's not that money isn't being spent. It's not that there isn't inflation. Where the inflation is is moving at all times. It's always shifting.

Right. And you listen to the calls of Royal Caribbean, Live Nation. Yeah. They see not one speck of consumer spending weakness, not at all. Yep. But yes, to your point, you listen to Mohawk, which makes carpet. And you listen to even William Sonoma, which had a great execution. Have you seen the chart of William Sonoma recently?

No. Throw that up. Yeah. They had a great execution. Oh, my God. But they did talk about, hey, we sell home stuff. Yeah, the restoration guy has been screaming for three quarters now. Restoration.

So you think you're in two different economies. Yes. And that's something that – that's the problem with anecdotal analysis of the economy. The last person you hear speak sticks with you, but, and it's impractical to listen to 500 conference calls. And that's why I talk a lot about the Visa call or Walmart and Target, because like there might be a problem at Williams-Sonoma, but Williams-Sonoma does in a quarter what Walmart might do in a day or a week, or obviously, I don't know the numbers offhand, but. And it's hyper-specific. And it's hyper-specific. It's like cast iron pans for millionaires.

But listen, we- That's not the economy. Many normal people, non-millionaires, have cast iron pans. No, but like, who's the core customer of RH? Yes, RH is probably- $27,000 couches. An upper income bracket retailer. But getting back to the main point, I mean, I can't emphasize enough.

If you scroll Twitter or you listen to financial TV. Don't do that. I know. The constant fear-mongering about the consumer about to break is, to Peter's point, you can go, I wouldn't say it's BS, but you can go across industry and you cannot find any, really, any CEO or investor relations team talking about any material weakness, really anywhere. It's really spectacular.

One place, New York Community Bank. That's it. New York Community Bank. But also the higher income consumer is benefiting from 5% money market rates. Right. If they have savings. Which I think was an underrated component of the economy staying strong in 23. We forgot when you have like, I don't know how

many millionaires are in the United States. Your hand is very close to mine. 7 million, 8, 10 million, however many, when their bank accounts are gushing income, it's like a, it's a mindset shift. They just feel wealthier. There's more than, there's what, $6 trillion in money market funds. Yeah. That was yielding zero just a couple of years ago. Is now yielding real money. Yeah.

Hey, I want to ask you guys this. Is today a pivotal moment in the market? So we got PPI coming in hotter than expected. You have the 10-year up quite a bit. The two-year as well. And regional banks are down 3%. Small caps are getting crushed, as they always do when the market is going down. Is today the day that the market says, maybe they're not going in June either.

I don't know that I would go so far as to say they're not going in June. And I've been in the June camp for many months. I think clearly that, listen, to take a step back, a lot of what we're talking about here is basically saying the economy is doing fine. So why cut? Why cut? And I think that has to be your starting position for this conversation. That said, their view is, you brought up Gretzky the other day, or maybe it was Wapner.

If inflation continues to decline, and January and February notwithstanding, the assumption is that it does continue to decline. And at this moment, I would implore people to look at the PCE when talking about the Fed and not the CPI. But if inflation continues to decline into the mid twos, they're going to feel comfortable at some point over the summer, probably at least beginning the process of reducing rates by one here, one there. But just a point I couldn't wait to come on here

and make is, who cares whether they cut in June or they cut in September or they cut in May? Well, the two-year cares, and we learned today the 10-year cares. If you're an investor in the short end of the curve or the Fed fund futures market or the euro-dollar market, sure. But I assume most of the listeners to this podcast are buying stocks, maybe buying corporate bonds. They're pretty much only buying NVIDIA at this point. Fine.

So they're buying NVIDIA. This conversation about the Fed, it's fun and it's important. But from an investment standpoint, if the economy is doing what we're all saying it's doing, that wins out. Stronger revenue, stronger earnings growth wins all the time. I totally agree. Look no further than the market. I'm not rooting for weak economic data so that I get a rate cut. This conversation about good is bad.

I don't understand the mentality. Good is always good. I'm with you on that. And too good? Come on. How long can anything ever stay too good? We haven't had too good in quite some time. Or if you have too good, it doesn't last long.

Now we do. The market's up 16 to 19 weeks. Everything is elevated. The stock market might not ever look— Not ever. The stock market looks damn good right now. Are you saying stocks have reached a permanently high plateau? I'm not.

No, I'm not saying anything of the sort. But is that the bear case right now? That the bears have disappeared? The bear case is that financial conditions aided and abetted by the stock market have now eased so much that the Fed's next move might be another 25 basis point hike.

Bears have disappeared. And if that happens, and that's not my view, you're getting a 10% correction like overnight. If the Fed even hints that, hey, cuts are on the table, but also maybe hikes too. So is anybody seriously suggesting that the next move is a rate hike? Yes. Yes, people are? Yes. I'm starting to hear it. I think they stay where they are. I think we have to shift our focus to the balance sheet. And I say that because QE was such an effective tool in igniting

animal spirits in the markets. I mean, Bernanke himself said, we want to lift asset prices because then that lifts wealth effect and then consumer spending and so on. So it is a policy initiative to raise stock prices when you do QE. QT hasn't mattered because it's been offset by this money coming out of this reverse repo facility, which has been offset by GPU sales and NVIDIA as well. So QT actually, dollar for dollar, starts to matter in the next couple of months. Can you tell people where we stand with the Fed's balance sheet, what they've done so far to reduce it and what the guidance is? So they've shrunk it about 1.3 trillion-ish, give or take.

On a stock of what? Almost a $9 trillion balance sheet. Not nothing. Right. But this reverse repo facility that didn't exist a couple of years ago, they created it because there was so much QE overflow, like the money needed to go somewhere. And they created this new facility to sort of park excess money there. And that's actually shrunk by $2 trillion. When I say shrunk, meaning money markets have a choice. Do I take my dollar and park it at the Fed overnight? Or do I buy a one

month T-bill or a three month and six month? What interest are they getting by parking at the Fed? They're getting, I think it's 5.3 or 5.4. It's 5.33 versus what they could get on a T-bill, which right now would be roughly- Somewhat similar. But they may say, you know what? I'm willing to take some duration because if the Fed cuts rates, I'd want to buy a six-month T-bill. So $2 trillion is- Now, so if I decide to buy a T-bill instead of parking at the Fed, well, that's sort of

money that's- That dollar's getting injected into the financial markets. Again, re-injected. Yeah. So that's offset the shrinkage in the Fed's balance sheet. Now that that facility is down to like 450 billion, now it's getting to the point where QT may actually matter from an asset price perspective. And I've always like the hardest thing in investing is to try to figure out what's the right PE ratio. Well, wait, can we back up? So the Fed saying, so the Fed engaging in quantitative tightening while simultaneously doing trillions

of dollars in reverse repo. Well, well, it's like jumping out of a window with a parachute on like, what? Well, that's the thing. Yeah. The money's, the Fed's been taking money out. The money market funds have been putting money back in. Right. And the money coming back in has offset what the Fed has tried to do. So I don't fully buy this, but – Don't talk to your cousin like that. Yeah. A three-month fee bill, by the way, is $5.38, and I think you get $5.33 on the temporary reverse. So with billions of dollars, that difference matters.

Well, yes. Yeah, $5.33 is the effective Fed fund. Yeah, but there's a liquidity argument from a money management standpoint. Like it's worth it to me to be in an overnight facility if I lose a couple of basis points just to know that I have access to that money. Whereas obviously not that a treasury isn't perfectly liquid. It's just not as liquid as cash. And if there's one thing that we've seen in the post-COVID environment, it's that that small little bit of liquidity management matters because there's a lot of treasury managers who want that.

Like banks prefer to have reserves instead of treasuries, even though functionally they're basically the same thing. This is a big talking point. I don't mean talking point pejoratively, but this is a big talking point in a number of quarters that the drawdown in the reverse repo facility has compensated for the Fed's balance sheet. And sometime over the summer, this is going to come to a head, and it probably will. I'll push back for the fun of conversation here and say, isn't this just the latest in Fed-based fear-mongering that we've heard for the better part of 15 years? Why couldn't they ramp? If it turns out that the removal of the reverse repo program or the, I guess, the diminishing

size of it turns out to be disruptive to capital markets, don't just ante back up again. Or they'll stop tightening. In plain English, what the f*** are we talking about? This is very, nobody knows what we're talking about. Well, I'll give some context. Michael, let's say you have three lollipops and Dan has five. No, seriously, who does this impact? Are we talking about the banks and lending?

No, it's just all the money the Fed's created. It's the oxygen in the markets. Yeah, the end of QE1, right after it finished. Now, the Fed, QE1, they told you how much they were going to buy and literally the date was going to end. And within three weeks of it ending, the S&P 500 started a correction of like 18%. QE2, they told you again, how much we're buying, when it's ending. Within weeks, we had a 20% correction. Then you fast forward. You're leaving out context, but okay.

Dan's about to tumble your ass. No, I don't think that the S&P downgrade of the U.S. is the reason why we fell 20%. Okay, what year is this? That's the context you're thinking of. I don't think that was the reason. What year is this? Exactly.

The QE1 ended right before the debt ceiling in 2011. Oh, we also had a currency meltdown in Europe, though. No, no. I mean— No, no. I don't think it was the downgrade because who cared about the downgrade? Treasury's actually rallied after the downgrade. Yeah. So, QE helped markets.

And when they stopped— Because it's just like you blow a balloon. You can still blow air in the balloon, but if you're blowing less air in the balloon, the balloon just starts to contract. That's all. And then QT, we had a 20% correction in the market

in the fourth quarter 2018. Yeah. Then all of a sudden, he got scared. He stopped. Yeah. Hugger was on top. Mnuchin,

don't worry. I spoke to all the bankers. I called everybody. Everything's fine. And everyone's like, wait, what? Wait, who said that? Why?

Was there a reason? Now, over time, obviously it doesn't matter. It's not going to change how many iPhones Apple's going to sell. So it's more of a short-term impact. But you were about to talk about multiples. This has huge impact on what people are willing to pay for risk assets.

Right. If there's a sense that the tide is going out, multiples are not expanding in that environment. So just to make the multiple point. So where I would agree with Peter is to the extent that the Fed has the back of the market, has the back of the economy, it engenders a risk on environment, which itself permits people to increase risk-taking behavior, move out on the concentric circles of risk, so to speak, go out of high yield, IG bonds into high yield bonds, go out of high yield bonds into equities, et cetera, et cetera. And that behavior permits a multiple expansion.

Wouldn't you have thought, though, that we would have seen that in reverse already, given the amount of hikes, the amount of QT, the length of time this is going on, the rhetoric of 12 Fed heads making speeches every month? But now, mind you, we have seen no reversal. But literally, would we without Chachi BTN? I'm not even kidding. So first of all, I would argue more or less in favor of what you're saying. Although I will note, let's not forget that the market did sell off, the equity market did sell off 27% in 2022. Oh, Amazon just lost 56%.

Yes. We did have a correction. Go. Sorry. So the market bottomed in October 2022 just as the Fed finished its last 75 basis point rate hike. The market started to say, yeah, maybe we'll see more rate hikes. And we did. But the pace is slowing now. And that's when the dollar topped,

the stock market bottomed on that last 75 basis point rate hike. The market started to say, okay, there's light at the end of this rate hiking cycle. They may give us more, but they're slowing it down. So Peter, one of your overarching ideas then about investing in the 2018s and 2020s is that take the Fed literally at their word. When they tell you they're going to do something, the market will react. And when it's over, you'll see the reverse of that. that take the Fed literally at their word. When they tell you they're going to do something, the market will react. And when it's over, you'll see the reverse of that.

In terms of the P-molecule we're willing to pay. Because if what you're saying is true, the Fed said that they were going to meaningfully tighten conditions. They failed. They failed. With housing, they did. But other than that. Right, because I take everything the Fed says with a grain of salt.

Yeah. But the market is trying to say the Fed is slowly backing off. Like I gave the example of the balloon. They still may be pumping air into that balloon, but if they're pumping less in, the balloon's going to contract and vice versa. The market started to say, yeah, the Fed may give us more hikes, but they're all of a sudden giving us less. So the pain point is going to start to ease up.

And I can start breathing again. I think the Fed's been taken by surprise in terms of QT not having an impact for what we just talked about. But I think that's what really got the market off its ass. impact of what we just talked about. But I think that's what really got the market off its ass. Then you throw in AI in the early part of 2023, and that just gave the market a whole new breath of fresh air. And then animal spirits, earnings recovering. Listen, I think there's no doubt that for a long period of time in 23, that obviously, forget no doubt, it's evidentially true, that the AI stocks were doing the lifting. I forget the exact date, but it was sometime as late as September when the equal weight

was down on the year and the S&P itself was up 9% or 10% or whatever it is. So they're unquestionably true that leading into that fall that AI, quote unquote, saved Well, the thing about AI is the theme itself was comprised of the largest index weights in both the NASDAQ and the S&P. And conceptually, its interest rate irrelevant. What's funny is they're all buying stuff from each other to power that earnings growth, which is really amazing. So this chart from Straight Street is showing the earnings growth estimates year over year for the S&P 500, X, the Mag 6, and the Magnificent 6. Tesla's not in here. And the Mag 6 were 65% year over year, while the rest of the index had earnings estimates that were down year over year.

That's crazy. It's wild. That's why if you don't get earnings growth in the second half of this year from the rest of the S&P 500, you're probably in trouble because this isn't going to repeat itself. But that's always the case. Earnings growth is always- No, but we didn't need it last year. We were fine. Well, fine, because you got enormous multiple expansion from this new idea that exploded. Unquestionably true. But that conveniently helped us get through the earnings recession that we had,

and now we're on the other side of it. And the problem I have with these arguments, not that you're making it or even State Street is making it, is the suggestion is there's nothing else going on but the big stocks. And clearly that's not the case. And even when you step away from the second market theme, which is GLPs, aka Eli Lilly,

we talked about this on air all the time. There are so many stocks that charts of which look phenomenal. Everything, industrials, materials, everything. the time, there are so many stocks that charts of which look phenomenal. Everything. Industrials, materials, everything. The dark blue line is clearly indicating that the market is expecting 10% earnings growth from everything but the MAG6. Yes. And then the MAG6 is expected to do 28, which good luck.

I wonder what it would have been if you took out NVIDIA of that green line. Yeah. Much less. Yeah. But so anyway, if you look at this chart, you could say, listen, I don't know where we are right now, but the first 80% of Nvidia's move was justified, right? Like this is... Listen, you'll never know what's justified.

And this is where we turn the conversation to the 90s. And I'm excited because I brought some good charts. At least in my opinion, I brought them. They're good charts. But the topic now is just whether all these stocks are in a bubble and everything else is likely to suffer. And I can't disagree with this more. This is a point that Dan Ives and I, I think, have both made on TV regularly. This idea that all these stocks are in a bubble because earnings expectations are so high,

revenue expectations are so high, I think the comparisons to the 90s are misguided in a number of respects. And if you pull up like the first one of the 1990s charts that I have, first of all, the bubble, so to speak, the 1999-2000 bubble was after 10 years of investment of CapEx, of everything catching on. Is that this? No, this is your chart about how much the market has rallied right now, proceeding. Well, what this is showing is that if we're in a bubble, this is a pretty small one. At least for the S&P 500, showing the 25% price change in five months. This is the smallest.

It's had a 10 times since the 1930s. And this is the smaller than any of the previous runs. I think if anyone in that sense compares this to the 90s, they weren't there for the 90s. Because I said that the other day, Michael. We started our career in the late 90s. And Peter's a little older than me, so he's got better knowledge. But Qualcomm was up like 2,000% in the year. Qualcomm split twice in one year.

People don't even understand what that's like. Yeah. Skip to the next chart, not this one. Although this is a great chart also. Again, I'm biased. I brought it. But like if you weren't there for stocks going up 15%, 20% a day, a stock IPO-ing and shooting up 250. I think the average internet stock ended the 1999 250% higher than we're at IPO.

And there were 1,000 of them. And it was all over the place. Dan, which chart specifically were you looking for? I brought some Wall Street Journal screenshots. We made them out of order. Okay. So of them. And it was all over the place. Dan, which chart specifically were you looking for? I brought some Wall Street Journal screenshots. We made them out of order. Okay, so got it, got it, got it. So first of all, this comparison to 1999. It's not new.

For the listener, tell us what we're looking at. I brought a screenshot from Jeff Sommer, who was in the mid-2010s, like one of the more prominent financial reporters over the New York Times. And this is from the spring of 2014, where the title of the article is in some ways, it's looking like 1999 in the stock market. You can say that every year. You can say that. And believe me, I could have brought more. But if you go to the next screenshot, just to go back to the... This is Floyd Norris, who in the mid-90s, along with Gretchen Mortensen,

was like the premier financial journalist. I remember Floyd Norris, yeah. Every story is Floyd Norris. This is a Market Watch, aka New York Times article, A Bubble Grows Ever Bigger from the Summer of 1995. And if you read this, which you can if it's in the show notes or something.

First of all, it hadn't even started yet. But the terminology in here, you could print this article today and it would be basically the same thing. What Floyd Norris is reacting to in 1995 is the Netscape IPO, which was one of a kind. It truly was. It woke everybody up to what? It was Andreessen.

It would kick the door down to the consumer internet. It was the real thing, like in many ways. In many respects, it's chat GPT. Right. But that wasn't the tail end of the internet. That was like the first. So Dan, I'll give you, there's a beginning. Dan, I'll give you the mic back in a sec, but I want to read this very quick paragraph from super money. The Adam Smith book from like the sixties, I think. So he's talking about bubbles and stock markets and medias. He said,

all right, this is Adam Smith. We are all at a wonderful ball where the champagne sparkles in every glass and soft laughter falls upon the summer air. We know by the rules that at some moment, the Black Horseman will come shattering through the great terrorist doors, wreaking vengeance and scattering the survivors. Those who leave early are saved, but the ball is so splendid, no one wants to leave while there's still time, so that everyone keeps asking, what time is it? What time is it? But none of the clocks have any hands. And that's a great way to describe where we currently are. We all know that things are frothy, but we have no idea, is it one o'clock or is it 11.59? I'm sorry, I'm really going right now.

I can't emphasize it enough. Having lived through a few of these markets now, Peter, one more than me, it's impossible to tell in the moment, and let's use 05 as an example. Let's not go back to the 90s because a lot of viewers weren't there. But even in the 2000s bubble, the housing stocks peaked in 05. Housing activity peaked in 05.

Home prices started falling on a month-over-month basis in 06. The financials imploded in 07. All of that. And the market still went on to make new highs in October of 2007. Yeah. It just, you had the hedge fund, the Bear Stearns hedge funds. When did the Bear Stearns hedge funds? 06?

August 07. 07. BNP had the hedge funds blow up. So you had 14 more months before the S&P would top. Well, Bear blew up in spring of 08. But yeah, the hedge funds there. The Bear Stearns. But Burry started buying those things in 05, I think.

Who did? Michael Burry. He started buying the credit to four stocks in 2005. And by the hedge funds there. The hedge funds. But Burry started buying those things in 05, I think. Who did? Michael Burry. He started buying the credit default stocks in 2005. And by the way, and ended up being right. My point is just- And almost out of business. No, we know your point. It's well taken.

In real time, it's really hard. It's impossible to tell in real time. And this is the 90s also. My favorite stat about the 90s is everyone knows, everyone knows that the NASDAQ, I'm sorry, the S&P 500 peaked in March of 2000. What nobody seems to remember is that by September of 2000, it almost made a new high and did it on increasing breadth.

The market was in better shape in September of that year. And again, even then- There was an echo bubble led by the optical networking stocks like JDS Uniphase. Yes, you needed- And the market rationale for that in late 2000 was these aren't pieces of shit like eToys and Pets.com. These companies have real earnings.

They were coasting on the fumes of the Y2K CapEx. Sure. And they eventually blew up just as spectacularly. Right, because in obviously March 2000, everything fell apart. And then they started to pile in the summer, which took the market back to the highs in Sun Micro. Equipment. Because they shipped it from internet and they went into equipment. Right. But then, but not thinking that, well, all their customers are blowing up. All their customers are $0 stocks

now. How sustainable is Sun Micro if all their customers are disappearing? Hey, so that 2014 article that you posted, I don't know if it's mentioned in there, but I think right around the same time, end of 2013, was the infamous unicorn cover for Fortune. Oh, yeah. They said there were 100 companies in Silicon Valley

worth a billion dollars pre-public, and they said this is 1999. Well, because QE Infinity. It's 11 years ago. The rise of the unicorn. Now it's like standard. Of course, there are free IPO, billion dollar money losing startups. That's normal to us now. It was insane to people who had lived through prior history. This idea that you could have companies not even publicly traded, losing money worth, quote unquote, on paper, billions of dollars. So we've all gotten used to something that will probably never go back the way it was before. So another problem with trying to determine what time it is, you might be dead right that things have changed and we should

notice them, but they might never go back to the way they were. There is some sobering that's going on with this higher cost of capital in terms of if you're a small business and you want to borrow, it's going to cost you 8% to 12%. It doesn't show up on the front page of the Wall Street Journal about that small business that can't expand because they can't get a loan and they don't want to put a personal guarantee and the banks are more focused on getting rid of their commercial real estate book and not lending on anything else. Well, you know, it looks nothing like Nvidia, the Goldman Sachs non-profitable tech index. They're getting, they're getting destroyed. Those companies, no, there's no appetite for those companies anymore. The VC community, you have, it's very hard to raise a new fund now. If your

first fund five years ago, you can't sell any of the companies in it. You can't, you can't, you can't liquidate it. To your point, small cap biotech looks like that those,, you can't sell any of the companies in it. Yeah, growth capital, gone. You can't liquidate it. To your point, small cap. Biotech looks like those stocks can't get arrested. Right. Access to capital is tougher for these guys. Remember the cannabis craze? Yep.

SPACs. So now cannabis is basically fully legal everywhere. Every one of those stocks is a penny. And the money that's been burned in that sector as well. Solar. Well, tell your capital, all their growth funds, they're gone. When people talk about how the Fed was able to raise rates by 500 basis points and there was no pain taken, any one of these categories that we're talking about is evidence of froth coming out of the system. Again, in the interim, you papered over the large cap trouble with the big

seven, so to speak. But now you're on the other side of that. And to turn it to the present day, you're on the other side of that right now, where the breadth is broadening. We keep talking about small caps moving higher. Mid-caps obviously have made a new high. And to me, and we talked about this repeatedly, but the fact that the S&P 500 is up 8% or 9% for the year, maybe down a little bit more, I see today, when Tesla is down 30% for the year, Apple's down 10%, and Google is basically flat, is not a miracle, but evidence that the broadening out is happening. And instead of lamenting that, oh, we would have been down if not for the big seven, we should be thankful.

They rode us through to this moment where it appears like we're on the other side of it. And we don't need them anymore. The Cavs never would have won without LeBon james well not with zydrunas that's for sure i think we we the beauty of having like an apple google having that stretch of time when they led was healthy because they were such incredible businesses that had such secular growth opportunities the building of the cloud right if we If we shift to- It was a seven-year story. If we shift to a market that's being driven by semiconductors, whether it's NVIDIA or something else,

that just happens to be a more cyclical business. Yeah. It makes the market more fragile. Exactly. Now, NVIDIA can keep on growing, who the hell knows, but it's just a more cyclical business. Whereas the secular drivers- That's an interesting point.

Were a good money bet for a long period of time. You know, NVIDIA, as amazing as it is, you know, their biggest customers today, and I'm not, you know, I'm not talking, I don't want to talk negative about NVIDIA, I have no opinion, but their biggest customers today are trying to be their competitors tomorrow. It's Facebook. They're all trying to create their own chips. Meta, Microsoft, Amazon, they're all trying to build their own. Right, so is NVID's 77% profit margin sustainable? No way. It's not.

Now, again, I'm putting aside NVIDIA. Just semiconductors in general, they just happen to be a cyclical business. Their booms and busts just always is the case. So I'd rather the market being driven by Apple and Google just because of the quality of their business models. I saw something this week that I hadn't been paying attention to for a long time. But the sector within tech that always finishes a tech rally, like rallies at the very end, and you know it's getting close to being over, the electronic contract manufacturer stocks. Who is that?

Like Jabil? Jabil. Look at a chart of Jabil Circuit. It's the best looking chart I've ever seen right now. Flextronics. It's now called Flex Limited. Yep. These are the companies that when Dell gets an order for a machine, the order gets forwarded from Dell to Singapore.

And Flex has basically like their own Foxconn. And they just assemble it. They put it in a Dell box and ship it to Dell's customer. Dell doesn't ever handle any of the electronics. So there are maybe six or seven of these publicly traded. J Bill's probably the best one, the blue chip of the group. It is. But I, I very distinctly remember these being the last stocks going up, um, in that 99, 2000 era. Cause they still were coasting on the fumes of all those orders. The problem is the food chain. They're the caboose.

So if you're listening to the guidance from Jabil circuit, you're already because they don't know what's coming. They just know the orders they're getting to that. What I find most interesting about this conversation to your point about is, is the reason to be bearish is that nobody's bearish is that we keep having a conversation about a bubble when it ends, look over here. is that we keep having a conversation about a bubble. When it ends, look over here.

Nobody, other than my quick mention about whether this is 95 or 99, there's very few people making, I think, the point that a few of us are making, which is it appears as though, and I'm no great tech investor, but it appears as though we are at the beginning of a multi-year cycle of investment in not just NVIDIA, but in data center and reshoring, in grid stability, in decarbonization. We were at that. But so here's the thing. How many years of demand is NVIDIA pulling forward right now? So both these are true. We're at the beginning in real life. We're closer to the beginning than the end. But to Josh's point, how many years has NVIDIA pulled forward? Who the knows? We'll find out. Yes, we don't know.

Now, thankfully, the stock appears to be trading at, let's call it, 30 times earnings and not the 100 or 150 that Oracle and Sun Microwave. It is not an expensive stock given their competitive position and their profitability. So, Peter, you'll like this. So, there's some Willie Delwich on Twitter. He said the latest investors' intelligence data shows the most bulls since July 2021 and the highest bull bear spread since April 2021 and the fewest bears since February 2018. Well, that could change in one day. Yeah. So I focus on that every week.

But rational. Why wouldn't you be bearish? It's rational. Yeah. But no, it's a measure of the mood. And it only matters for the short term to your point. Like it'll tell you nothing where the market's going to be a year from now. But it could tell you where the market is in a month from now,

that maybe that tells you that everyone's too giddy. Maybe we just need to take a breath. Dude, it's been like 90 days since we've had a 2% pullback. I think it's time. Well, to your point, like, I'm not a good chart person, but I know a parabolic move when I see one. And when a stock goes straight up, it's like, if you're running and you're sprinting,

eventually you need to take a break. On cocaine. You need to catch your breath. Yeah. You need to catch your breath. And when a stock goes- We saw Nvidia have a negative- Yeah. Nvidia did this and then it did that. Right. So when a stock goes vertical, you have a giddy number like that. Maybe the market just needs to take a breather. Please. Well, listen, the whole S&P 500 is something like 12, 13, 14% away from the 200-day moving average. It's a lot. And it's not the most ever. It doesn't automatically mean you must go down.

But often when you get that far away from the 200-day moving, a crude way of measuring 16 of 19 straight-up weeks, it wouldn't be unusual to see us digest it. Maybe it's the Fed meeting next week. We could use a breather. And also, Abercrombie and Fitch went parabolic. GE went parabolic. Lilly, Nova. I also, Abercrombie & Fitch went parabolic. GE went parabolic. Lilly,

Nova. I mean, all good stories. The point is that when a stock goes vertical, to your point, you're pulling forward a lot of future return. You guys talked about the Cisco-NVIDIA comparison, your last call. In fiscal year 2000, Cisco made $0.57 a share. This year, they're supposed to make about $3.70. The stock has gone from 80 to 50. It matters what price you pay. Exactly. Because it pulled 25 years of earnings all in one parabolic move. This is the only bearish thing I can think of on NVIDIA is that what if they are currently making sales to customers that they would have normally made in calendar 2026? What if they're making those right now? Are there more orders lined up behind, or are we seeing three to five years worth of revenue packed into two quarters? I'm not saying it's definitely what's happening. I'm saying when you listen to, um,

the fury, the, the, the fury with which orders are being placed, it's definitely what's happening. I'm saying when you listen to the fury with which orders are being placed, it's conceivable. What I will add in this conversation, and I do this on air a bunch, I want to emphasize what's going on in the industrial space. And I can't talk specific stocks, but all the focus in AI is on chips, chips, chips. It's Broadcom, it's NVIDIA, et cetera, et cetera. We still have to build a data center. And last time I checked, NVIDIA cannot actually build the data center. You have to put the racks into the data center.

You have to keep the whole place cool. Like there are a whole lot of other companies that are ancillary, so to speak, to this narrative that are doing phenomenally well fundamentally that don't get virtually any attention on CNBC, on Bloomberg, on Fox, et cetera. And they're making new highs. And the charts about, we talked earlier about, like there are other things going on here besides just NVIDIA, but related to the same topic. And I wish I could get more specific, but like it just, it doesn't get enough play and it's a shame. I want to move to overseas stocks because

there's a lot going on and it's like exciting again. And I know you watch overseas stocks pretty much every day. And you and I have talked about like, what are the things that you think are important? So China is still a basket case. I don't know when that, if and when that will ever change. But Japan is the hottest stock market in the world. And India is the hottest emerging stock market in the world. And there's not only a lot of money being made in the stocks, but it seems that both of those governments are doing things that look on the surface to be corporate friendly, investor friendly.

Uh, they seem to be encouraging, uh, the stock market deliberately politically. It seems like countries are looking at what the United States has just had happen over the last 10 years. And they're saying, you know what, maybe there's something to that. Is that, am I reading that right? Do you think, or is there something else that I'm not seeing? You're absolutely right. Take Japan. Tokyo Stock Exchange basically told half the companies that trade there that trade under book value. If you don't get your stock at or above book value, we're going to delist you.

This is incredible. How are they supposed to do that? Buy back shares or what? Buy back shares. AI. GLPs. Focus on earnings. Improve your return on equity.

Buy back shares. Get rid of these cross holdings that are still much less common, but still common in Japan where companies own shares of each other, become a much more efficient business. South Korea now is getting on this bandwagon. That market has been trading at 10 times earnings forever. They're beginning to get religion. But the interesting thing about Asia- There's two things I do on an airplane, Peter.

I drink ginger ale, nowhere else, just on an airplane. And I read articles about South Korea in The Economist. It's a really specific plane. These are the only two things that I will do on an airplane that I won't do anywhere else. But yeah, there's a pro-shareholder thing happening in all these countries because I think they realize it's what their economies need. It's like it took a while, but that's bullish.

The interesting thing about Asia, I mean, we're talking about half the world's population is there. Yeah. It's what their economies need. It's like it took a while, but that's bullish. The interesting thing about Asia, I mean, we're talking about half the world's population is there. Yeah. And to me, Asia for the next 10 to 20 years is the most exciting growth story in the world in terms of a growing middle class. Even in China, China's middle class is going to go from 400 million people to 800 million people over the next five to 10 years. They're going to add the population of the US in terms of middle class over the next

five to 10 years. I don't know if you'll get the upside of that as an equity shareholder overseas, but the other countries I would buy that you can. The Chinese love to travel. They're going to go to Japan, Thailand, Indonesia, Vietnam, Singapore, India. These are all very exciting, emerging, middle-class stories. And there are ways of investing to sort of play that. And even the Chinese spender. In 2019, the Chinese spender on international travel spent $250 billion that they sprinkled around the world. Whether it was shopping on Fifth Avenue or going to Paris and London or going to Tokyo, they bought stuff. And the wealthier they get, they want to buy more stuff and they want to eat out and they want to experience the same things we are.

The luxury brands are like one of the primary recipients of that activity. That and even a stock we own is AIA Group, the largest insurance companies in Asia. That was the Asian business that was spun out of AIG when AIG went bankrupt. Growing middle class, you need life insurance. You need basic financial help that we get here. They eat more protein. They buy more clothing. They travel. Exactly. Stay in hotels. It's a very exciting macro story when looking out five to 10 years.

What's the India story, as you understand it? The growing middle class as well. It's not China, is what I keep hearing. Yes, but the interesting thing about that is China doesn't need another. We don't need another, a non-China, because China itself is still going to be a major growth contributor. Because even if China's GDP grows 3% for the next 10 years, in terms of dollars, it's still a lot of dollars.

And you combine an Indian middle class, the Chinese middle class, Indonesia's got 250 million people. No, no, no, Peter. S&P 500 publicly traded companies do need another China. Apple needs another story to tell about the next billion consumers who might buy an iPhone.

This whole region is going to be that. We know they're not going to be in China. This whole region is going to be that. The issue that Apple faces is competing against some of the Chinese phones that are selling phones in India for $10. That's right. Because they want to get them on – because Android costs nothing.

That's the problem Apple faces is being able to sell cheap phones to someone who's making $3,000 per capita. But you hear Netflix talking about India in a way that 10 years ago, Netflix, Disney were all about China. How do we get movies to open big in China? How do we get these Marvel movies on 3,000 screens, 5,000 screens in China? It's all India now. And look at the deal that Disney just – Disney – they thought that Disney may actually exit 100% from the India business. People said, you'd be crazy giving up that market. That's right.

Here they are. people said, you'd be crazy giving up that market. That's right. Here they are. They sold out a piece, but they are a big shareholder of the hot store that is a major market that someone else can run for them. Right. Okay.

So it's fun again, being an international investor. I believe so. Could you guys conceive of a scenario 2024 where many large overseas markets do better than the S&P 500 for the first time in a long time? I think the pro argument would be that investments move in waves and the US has been clearly the outperformer for the better part of 20. Yes. The US has been the star performer for 20 years. And if you're going to have anything resembling history, then the US is going to start

to underperform. That wouldn't be an unusual development. I think that's probably the most cogent pro example. I mean, the problem I have with that is just at least for the immediate future, the U.S. economically and earnings-wise continues to be far superior to most global markets. Now, the counter to that is that all the other markets are meaningfully cheaper. But the counter to that is they don't have any good companies. Too many counters. So India printed an 8.4% GDP number for Q4. That's incredible. Nobody knows that. Nobody's paying attention to that here.

People are riding the stock market momentum. I don't think anyone's become like an India, right? Do you hear anybody that knows what they're talking about? Now, that market has actually done well. Modi, yeah. The market's not cheap anymore. The market has done well. So in the short term, a lot of that easy money has been had. But looking out five to 10 years in terms of looking at global growth, certainly not going to get it out of Europe.

It's going to be more of Asia. Let's put this chart up, John. The three country markets, just for context. Wisdom Tree, Japan Japan hedged equity, which is WisdomTree's DXJ. It eliminates the yen impact. It's doubled. And this is back to summer of 21.

Three years. Okay. India up 26%. China down, cut in half. So will this look, do you think, substantially similar by the end of 2024? I think Chinese stocks have a lot of potential here of catching up.

They just fired their head of securities regulation in China. They're doing some things to signal that they want the stock market to go up. Everything they can to get the stock market up. You think it'll work? Baochun has tweeted this morning, the Chinese government has gone full BOJ. They purchased $45 billion of ETFs in the past two months to pump up stock market up. You think it'll work? Baochun has tweeted this morning, the Chinese government has gone full BOJ. They purchased $45 billion of ETFs in the past two months to pump up the market. Already owns a fifth of all equity ETFs.

They can move to buying small caps, but whatever, you get the point. So what do you do? I particularly like stocks in the hands. You just close your eyes and buy, what, red chips? So I'm playing it within that theme of the growing middle class. So stocks in Macau, Las Vegas Sands, Melco, you can buy here.

I mentioned AIA Group, Trip.com, which is the largest online travel agency in Asia. Some of them trade on the Hang Seng, so you can benefit from that. Because a lot of the companies on the Hang Seng are going to benefit from growth in the entire region, not just China. People think it's just a China play, but it's a regional play. Will the New York Stock Exchange-traded internet giants work, or are they still going to be in the penalty box? I believe so. They're just too damn cheap. Okay. The JDs.

And the Alibabas. And the Alibabas. You want to talk about who's a good play on that growing middle class, it's them. But hasn't Alibaba been cheap for 10 years? Yes, but when you think about everything that's been thrown at it, you can understand that multiple degradation with China government basically going after them. And but the questions about whether or not the listing here would even be allowed to continue. Right. You've gone from extreme exuberance to extreme, I think, bearishness. And that's what

happens in bull markets. Multiples expand and bear markets, they contract. And you've contracted them to such an extent that the Hang Seng, I think, trades at seven and a half or eight times earnings and has a dividend yield of almost 5%. I'm sorry, Bloomberg tells me Bob is trading at eight times forward. TikTok ban. And they're growing, right? TikTok ban went through in the House and now it has to go through the Senate, which seems less likely, but likely. Not likely. Not likely. Unlikely? Right now, listen.

What did you say? It was dislikely. Is dislikely a word? No. No. So yes, it passed the House. The prospects in the Senate are more challenged. And now that said, I think there have been surprises on Chinese legislation the last couple of years where things have passed to a larger degree and more quickly than political forecasters have expected. For my benefit, what's the story here? So we're trying to eliminate TikTok for political reasons, China's interference, or what exactly? Two issues. The first is data that

obviously TikTok has access to Americans' data. And then the second is political interference. And that really took a step up after what happened on October 7th, where a lot of politicians feel like there was one study that showed that, and I'm making no comment whatsoever about anything about October 7th other than what was revealed. And there was one report that showed that pro-Palestinian content on TikTok was 69 times more likely to be seen than pro-Israeli content. And now you might say, well, TikTok is disproportionately younger users who are probably going to lean in that direction

regardless. Again, I'm making no comment one way or the other, but my understanding is that politicians interpreted that data as being an issue to deal with. It's not true that younger people were necessarily going to lean in that direction. 20 years ago, there was an intifada in the Middle East, maybe 22 years ago, and we did not have anywhere near the amount of pro-Palestinian sentiment that we do today. So when they looked around to try to figure out why, they looked at college campuses and they looked at social media. But what about Reels? Does Reels show the same thing?

I've not seen any study on Reels that was comparable. But Reels is not controlled by a foreign government. I get it. I just want to add the final kicker here is if there's a disturbance with Taiwan, I use disturbance lightly, but if there's a disturbance with Taiwan, a lot of politicians in Washington are concerned about China's ability to try to shape American opinion in the lead up to a disturbance. And Russia, Ukraine, it's a similar concern. All right. So, yeah, these two concerns.

concern. All right. So yeah, these two concerns, what TikTok did when Trump was trying to, when Trump was going after it, he probably wanted to own it for himself. What they did was this thing called Project Texas, where they moved, allegedly, they claim they moved all of the US user data to literally Texas, and it's called Project Texas. And they claim it's on Oracle servers on USs soil and that no one in china can actually access it it's a u.s subsidiary managing the u.s the rebuttal to that is nobody believes it no yeah when china when china says to tiktok send me the data the u.s subsidiary is just that is the argument in washington now trump was demanding that they sell it to a u.s based company and we had a lot of really weird shit go on.

Like, all of a sudden, Oracle was interested, and Oracle was their biggest vendor. Walmart threw their hat in the ring. It was really interesting. Caterpillar. Yeah, yeah, Caterpillar. Now we're seeing something similar. The guy that ran Mnuchin has a consortium. The guy that ran Activision, Bobby Kotick, he claims he's got a consortium behind him to buy it.

Well, listen, 20% of social media use is on TikTok. It's huge. Oh, it's huge. We have – I brought a chart. I didn't bring the chart. Someone brought the chart about like the use on TikTok is longer and more prominent than all the other services. Like this is a real business. US daily time spent per daily average user in minutes.

94 minutes? TikTok? YouTube is 78. Snapchat is 19. Instagram is 60. People spend an hour, users spend an hour and a half a day. My kids spend maybe two or three hours on TikTok. They never stop.

If they get into an elevator, they can't stand still for one second. The phone comes out and they're not in Instagram. They're in TikTok. So why would Caterpillar be interested in TikTok? Why wouldn't they be? Because you have an enormous dedicated user base. The bill passed the house today, 352 to 65.

So that's bipartisan. Why do you think it's going to be so much more difficult than the Senate? Well, listen, the Senate is by design, since the country's founding, the analogy is always that it's the saucer on which the cup of tea is cooled. Do they need 60 votes for that?

Well, to get through a filibuster, sure. all you need to do is look no further than what Chuck Schumer had to say. When asked about it, he said, yeah, we'll review what the House said. This is a 25% possibility that TikTok gets banned in the United States. Are those based on CME futures? No, this is Dan Ives. This is Dan Ives. He pegs it at 25%.

Assuming the bill is approved at all levels, ByteDance would have six months to fully divest its US TikTok operations to another non-Chinese entity and it better be United States. The reason why this is relevant is TikTok's most recent valuation is $267 billion. They offered to buy shares back from people who own it, like Sequoia and other

U.S., right? So the question is, if it becomes a U.S.-based company, ostensibly it would be public pretty quickly. This would be another potential MAG-6 name because if it were unrestrained by any political concerns and it was a U.S.-based business, you could see this going from $267 billion to $500 billion. In a year. It could happen in a month. I think I read today that they do about $6 billion of ad revenue right now on TikTok. Yeah. But you could see it being considered like the sixth platform.

Now, why would the Senate strike this down? Would this be viewed as like an act of aggression towards China? Well, first of all, Rand Paul's— No, First Amendment. Yeah, Rand Paul's a pretty— And setting a bad precedent of just getting rid of. So that's a good point. Think about

this in reverse. If Russia did this to a U.S. company or China did this to a U.S. company, we would be screaming. First of all, our social media companies can't exist in China. I know, but if a company was currently in existence in China, as many are, and all of a sudden the Chinese said Coca-Cola must sell its Chinese operations to a Chinese company right now, think about the response here.

We would be going absolutely – Just think of all our energy assets that have been nationalized around the world. And some people say, you know what? If you don't want to be surveilled on TikTok, don't use it. If you want to show dance videos and you don't mind the Chinese watching, then go ahead. He's daring you, Michael, not to dance. That's some people saying like, if you don't, if you're worried about the national security and the surveillance thing, then use some other social media platform. Where are the dip buyers for Tesla? Why don't they show up this time?

for Tesla? Why didn't they show up this time? I think if the dip buyers need to come in when sales stop slowing down. You need a bottoming in their sales growth. I don't think they're there. That's not happening right now.

Wells Fargo is now predicting negative sales growth for Tesla. It's the first time we've seen that. Well, this gets back to a margin of safety. You don't have any valuation support when fundamentals turn to the downside.

So, Bailey Gifford, Cathy, Ron Barron, are any of them buying? I feel like for ARK, it used to be like 12%, 14% maybe. It's now 7%. I asked Sean this question. Barron bought 40,000 shares of Tesla in Q4, which is about 0.25% of Tesla overall. Bailey Gifford was a25% of Tesla overall. Bailey Gifford was a net seller of Tesla through Q4. But it was fine in Q4.

I want to see when they did a Q1. They sold 16% of their stake though in Q4. But Q4 was fine-ish. ARK was a seller in Q4 also. I want to see Q1. I don't have Q1 yet. I know, I know, I know. You're going to have to wait. John, some charts please.

ARK sold 276,000 shares last quarter, about 7% of its stake in… So these are the largest shareholders, though. That's why I bring them up. Tesla is 12% of Barron Funds, 4% of Bailey Gifford. It's their sixth largest holding. And it's still 7% of the ARK flagship.

It's their third largest. It was a $1.24 trillion market cap at the peak in January 2022. And it's about $500 billion today. And that previous chart you just set up was Peter's point. Go back. So, yeah, fundamentally, it's not great. What's changed, though, also for Tesla is I don't think the Tesla bulls

forecasted how hot hybrids are right now. Hybrids. Hybrid cars. Well, they don't make those. Right. I think a year ago- What's the hottest hybrid? I'm not sure,

but I'm saying like a year ago, people just assumed it's either internal combustion versus EV. Oh, that's interesting. You know, yeah. Toyota kept saying, yeah, you got to give hybrids a chance. Now hybrids are actually

gaining a lot of traction. I don't think the Tesla bulls- Duncan, what hybrids are people buying? I don't know. I don't really follow hybrids. actually gaining a lot of traction. I don't think the Tesla bills thought the hybrids would catch on. I don't know. I don't really follow hybrids. I also feel like Elon hasn't been that vocal about Tesla, like about the stock. If he wasn't doing what he's doing on Twitter, he'd be much louder, don't you think? I think that's probably right.

But to Peter's point, I don't think this can be said enough. Like there was a forecast for EV demand. To be clear, people still want EVs. Just demand is not ramping up nearly as quickly as was forecast. And so the idea that we're going to go full EV, so to speak, by 2035 or 2040, some of the forecasts has proven probably to be too optimistic. The hybrid bridge, if you will, is something that wasn't anticipated and is really screwing up the EV forecast. And to your point about Toyota, they were sort of the only ones that were out there saying, guys, hold on a minute. And they obviously have been rewarded. Everyone else threw their hat

in, so to speak, with what is unquestionably a money-losing business, at least for right now. And the big problem for a lot of these stocks, of course, is if Trump wins election again, what does that mean for the subsidies? What does that mean for the subsidies? What does it mean for the inflation reduction act? It depends who contributes to his legal fund. You know what I mean? The subsidies come back real fast. All right. We're going to leave it there. Did you guys have fun on the show today? A blast. How long is this? As long as it needed to be. As long as it needs to be. That's average. You guys, as I said, are two of the smartest people I know.

I so appreciate you coming here. Wait, don't we have to do the exit questions? I'll do an exit question. I promised Michael a stock pick just for him. Okay, I'm excited. Pitch us. So Madison Square Garden Sports. Sell me this pen.

I swear to God, I thought you were going to say MSG. Okay, go ahead. Okay, MSG S. That's its own ticker? Is that the sphere? Its own ticker. No, it only owns the Knicks and Rangers. The enterprise value is about $4.6 billion.

Forbes values the Knicks at $6.6 billion. Rangers, $2.2 billion. You're selling past the close. So for $4.6 billion, you get $8.8 billion value. But how do you ever realize that value? He's never going to sell it. He's selling past the close. So for 4.6 billion, you get 8.8 billion value. But how do you ever realize that value? He's never going to sell it. He's never going to sell. However, yes, it is. He may never

sell until he dies. Oh, he will never sell. No, we got to catch him with the sex scandal. He's in his 50s, no? He's late 60s. Late? Jim Dolan is late 60s? What if J.D. in the straight shot catches on? Well, that's a risk. They are talented. What he's done for the Sphere,

it was always the Dolan discount. People were blown away by the Sphere, and he's the guy behind the Sphere. But the Sphere has its own ticker. It's not MSG. My point was that Dolan's reputation is being actually revitalized with the Sphere, so maybe that valuation spread could shrink.

I don't hate it. Give him the sphere. So maybe that valuation spread could shrink. I don't hate it. Give me applause. I've been listening to Mario Gabelli pitch this stock since it existed, I think. He has, yes. I don't know about this one. 10 years, we can be having the same conversation. Now, I wanted to end,

because last time I came unprepared for a book or something, and one of the- Favorites. Yes, I was unprepared this time. Well, this time I came prepared. It was for a book or something. And one of the favorites. Yes. Yes. I was unprepared this time. Okay. Well,

this time I came prepared. It was the favorite show or something that I'm watching. And I want to say publicly on air, I have never been more jealous of a human being in my entire life than I was of Ryan Gosling the other night. Dude, which part? It's just the whole thing.

It just owns the world. The performance was, I'm, I performance was I'm I'm I'm shakingly jealous at at how cool he was how cool he looked

how good it was the whole and he laughed and it's Slash and Wolfgang Van Halen behind him how about his chick next to him

woman Margot Robbie behind him no no staring at the back of his head Billie Eilish was behind him

laughing Margot Robbie was in front of him laughing oh okay he laughed four different times when he punched when he fake punched the bass player in the face Baring at the back of his head. Billie Eilish was behind him laughing. Yeah. Margot Robbie was in front of him laughing. Oh, okay. He laughed four different times when he punched, when he fake punched the bass player in the face. Yeah.

I just wanted to say publicly, I'm not often quite this enamored with another human being, and I was of him. I knew when I saw him in Remember the Titans that he was destined for greatness. So, Duncan, what did I say yesterday? We were talking about, like, he's like the guy in high school that all the girls love.

So you want to hate his guts, but then you hang out with him and actually he's funny. He's cool. Damn it. He's nice. Oh my God. I can't even hate this guy. That's like, that's like what I think his rep is at this point. I think that's probably right.

Yeah. And you know, and you know, from that, you know, other people that are of that ilk. I, I, I. Can we talk about it? Who are we talking about? Your friend Adam. Okay. Every girl is in love with him, and he's also insanely talented, and he's also cool.

Adam Levine? I went to an acting camp. Well, yes. Yes, Adam Levine was. The crowd is very excited to hear about the acting camp. Go ahead. There were other people. Zoe Deschanel went to the camp.

I don't know if I'm speaking out of school here. Did you have scenes with Zoe? I was never in a play. I was in a, was I in a band with Adam? I played basketball with Adam. Yeah. You said he was a great athlete. The girls loved him.

We knew when we were 14. You knew he was a star. He was, he was, he was going to be something. He clearly had talent. Yeah. And also a really nice guy. Well, that's the problem, right? And he's a good guy.. He clearly had talent. Yeah. And also a really nice guy. Well, that's the problem, right? And he's a good guy.

Yeah, we're friends. He's a point guard. Yeah, yeah. All right, that's a great favorite. You really came ready to bring it. My favorite was the Oscars too. My whole family watched it. And we're two for two now.

What's the other one? We all watched the Grammys together. I mean, my wife, who doesn't care about music or movies, watched both. My kids, who have never put on network television, they watched both. And there was something in the Oscars for everybody to be like, let's keep watching. Listen, viewership for the Oscars was up. Linear television is obviously in secular decline, and there's no avoiding that. But if you're going to bring out the Gosling, you're going to,

you're going to bring out the viewers. I think it had this combination of like Oppenheimer and Barbie were both so big and they were getting a lot of awards. Although Barbie won. I think Barbie won like a production design. I can't, no, no, they didn't.

The poor things stole their thunder. Poor things won a lot also. But like, I can't believe they couldn't find one stupid thing to get Margot on stage to hand her. Or Greta, the director. She wasn't even nominated. It's incredible to me. Why is it incredible?

I don't know. It's one award. I got to be honest. It was honestly, it was a cultural moment the likes of which the United States really hasn't seen. And it was global. And it was global and it was a huge moneymaker. And this is why America hates these award shows because they're giving awards to things that nobody has seen. So now you have this thing that is both a contender in 10 categories,

has huge movie stars in it, and Americans actually got up off their asses and went to a theater. You can't find one award to give these people. And one of the great American brands, Barbie. Holy shit. What are we doing here? Anyway, I'm not that upset about it. Michael, what do you have for us on favorites? We're seeing Dune after this,

which I'm very excited about. I rewatched, I was telling these guys before, the second watch of Dune was so much better for me personally, because I had no idea the first time I watched Dune. I'm trying to keep up. And I was like, anyway, the second time,

you just enjoy it. Very good movie. Excited for tonight. But what I have for the audience today is the gentleman. Guy Ritchie did a movie, I don't know,

probably three years ago and he turned into a TV series. So it's like dark comedy. It's great. The dude from White Lotus. What's the best Guy Ritchie movie? I mean,

most people say Snatch. Yeah. I think that was the one that made his career. Snatch was great. Yeah. Anyway, The Gentleman on Netflix. Quite good.

John Carlo Esposito's in it, who's like one of the best TV actors now. Like Breaking Bad, and then he's just had a run. They put him in a Star Wars show. Is he in Mandalorian? He was in Mandalorian. So the dude from the show on Channel 4 also,

when all the power went out. Yes. I forget what it was called, but that was good as well. Yes. I'm excited to watch that show. It's quite British and quite good. Peter, got a favorite? So it took my wife and I 10 years,

but we finally watched the first season of True Detective. Okay. Did you binge it? And we binged it. I just rewatched it. And the acting was of True Detective. Okay. Did you binge it? And we binged it. I just rewatched it. And the acting was phenomenal. Yeah. Matthew McConaughey was unbelievable.

It holds up really well. It really did. You know what I think? It was so good that it was impossible to make another one that would be just as good. I think the Rotten Tomatoes number got cut in half in season two, so I don't even know if I'm going to waste my time. Don't, don't, don't. Go watch season four with Jody though.

Oh yeah, I heard that was. There's so much good TV. I don't know why you would waste time on anything except. The best, I agree with that. I'm giving shows like one or two episodes. If it's not the best thing I've ever seen. Yeah, it's such a time suck. Go back and watch something from the past.

Prioritizing our watching habits. Yeah, we don't have much time left, you and I. Yeah. You know what I mean? It's not forever. Peter and I have like college-age kids. It's not forever. All right.

We're going to wrap up from there. Thank you so much to our special guests, Peter Buchvar, Dan Greenhouse. And his cousin, Dan Greenhouse. And his cousin. And you guys are big TikTok users. What are your TikTok handles for the audience? I don't use it.

No? Okay. All right. Hey, everybody. Make sure to leave us a? I don't use it. No? Okay. All right. Hey, everybody. Make sure to leave us a rating and review. Thank you so much for listening. We love you. We'll see you next week. Did you guys feel warmed up?

Yeah, that was great. That wasn't an hour and a half. How long was it? I mean, it felt long. It felt long. We really, really appreciate it.