The Compound and Friends - Is Amazon a Monopoly?

Episode Date: September 29, 2023

On episode 111 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Perth Tolle and Gunjan Banerji to discuss: Amazon's antitrust issues, a coming secular rotation in equities, Investing in Emerging Markets and China, Meme stocks are back, and much more! Today’s show is brought to you by wealth.com. Visit https://wealth.com/compound for more info! Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

I would say. All right, let's get to this stuff that's really important. Is Patrick Mahomes a little bit jealous of Travis Kelsey right now? Do you think? Who isn't jealous of Travis right now? No, obviously. But like Mahomes is like the guy. And then like.

I was about to do the Mahomes voice. Well, you know. It's like Kermit the Frog, right? He's got to be a little bit jealous. Like no one's paying any attention to him this season. Like, it's a wrap. It's Kelsey's team now. Did your wife do the

Taylor Swift put Travis Kelsey on the map thing? No. What do you mean? So it's a thing that wives are videoing this. So Robin did it to me

in bed the other day and she's like, listen, so wives are saying like, oh my God, Taylor Swift put Travis Kelsey on the map and I turned to her and I'm like, what? She's like, oh, my God. Listen, Taylor Swift put Travis Kelsey on the map. And I turned to her. I'm like, what?

She's like, Taylor Swift. I said, who's telling you this? Where are you getting this from? It's viral. She started cracking up. Because I was like, it was so obvious that she was, like, acting. I was like, you don't. What are you.

Did she post you reacting to this? No. Well, she said it to her friend. And then she showed me her friend's video. And the husband's same thing. He's like, what are you talking about? Travis Kelsey is already famous.

Every husband is reacting the same way. Yeah, yeah. Well, Travis Kelsey hosted Saturday Night Live last season. He is already famous.

He's a celebrity. And one of the best players in the league but like now, I feel like if I'm Patrick Mahomes, I gotta, see,

he can't get a celebrity girlfriend because he's married. So she's going to MetLife this weekend. Oh that's going to be pandemonium. I'm awaiting the memes.

John can we can we throw up this video? Okay that's good. But did you guys see the jump in like jersey sales and everything? Crazy.

So that is jersey everywhere. The Taylor Swift effect. Ben had a good tweet. Ben said something like, if Taylor Swift would just endorse target date funds, we would solve the retirement crisis. That would be amazing. She really, though, is that powerful.

I was trying to think of, like, is there a comp in our lifetimes? And I came up with, like, Michael Jackson, like, in the 80s. Right. Like, before. She's probably bigger than Madonna ever was

would be my guess but she drives what I feel like was Michael Jackson more than ticket sales or were people wearing his gloves and stuff

I think Bank of America did this over the summer during the Eras tour they actually could track upticks in credit card and debit card spending in the cities she was performing.

All the hotels filled up. She's an economic event. She's an economic event, wherever she goes. I was asking Ben a couple of weeks ago, what's her market cap? If she was publicly traded, what would her market cap be? 5 billion? She's a Tesla.

Actually, no, she's not as controversial as a Tesla. She's an NVIDIA. All right, did you guys? So Mark Zuckerberg unveiled smart glasses yesterday. John, turn this up if we can. AI in them. Starting in the US, you're going to get this state-of-the-art AI that you can interact with hands-free wherever you go. We're going to be issuing a free software update to the glasses that makes them multimodal. So the glasses are going to be able to understand what you're looking at when you ask them questions. So if you want to know what the building is that you're

standing in front of, or if you want to translate a sign that's in front of you to know what it's saying, or if you need help fixing this sad, leaky faucet, you can basically just talk to Meta AI and look at it, and it'll walk you through it step by step how to do it. We built in one more feature into these smart glasses. You are going to be able to live stream to your friends and followers. Oh, yes. Everybody is ready to race, and I am getting ready to.

Let's go. Switching to glasses. Being able to share what you're doing live with your friends and followers. Oh, no way. Can you imagine that? The world is not ready for this. All right. These Ray-Ban Meta smart glasses, we're launching them on October 17th.

$8,000. Starting at $299. Not bad. That's it. I'm super bullish on this. I think that's pretty sweet. So we should just assume that we're all being surveilled at all times and be paranoid of anyone who wears glasses?

Plus, they're the ones wearing the glasses so they're the only ones not being surveilled. Right, they're behind the camera. But the glasses look, they're Ray-Bans. They're like good looking glasses and they're going to be functional. I think they're going to be a home run. I'm worried about the creeps who would wear this. It would be creepy.

So many creeps. That's actually the first adopters are the creeps who would wear this. It would be creepy. Oh, there's so many creeps. So many creeps. That's actually the first adopters are the creeps. Right. Yeah. It's going to be very, very weird getting used to this world. I don't know. What does this do? It's inevitable.

What does this do to the Apple glasses thing? Like, does this make them speed up? Or, I don't know. I don't know they're working on them. Whatever happened to that? I don't know. Was it Google glasses? Who had the glasses?

Do you mean the Google thing? It totally failed. Google did. No, Apple had like the goggles. Oh, no, that's coming. whatever happened to that I don't know was it Google Glasses who had the glasses that totally failed Google Glasses no Apple had like the goggles oh no that's coming that looks sick but that's not this

no no no that's not that okay Apple is like is VR yeah are you going to wear these things

probably not can you think of anything you do during the course of the day that you would need to go live from your glasses that other people

would want to see but it's not just going live it does a lot of other shit too. No, I'm not going live. I can't wait for the Apple headset.

I'm not going to get the present because it's a fortune but imagine being on an airplane and like watching an IMAX movie on like a 100 foot screen.

That is cool. Totally. I'll get the Apple thing before I get the Facebook thing. But that's totally different. That's VR. Yeah, yeah. Different.

I was just saying it's like that's where we are now is like basically helmets. Yeah. Like this is where we're going. You're going to be able to watch like a game courtside at the garden on your couch with the headset. Not with Facebook, with the Apple thing. Eventually. If Mark Zuckerberg wants to sell these things, the most important thing is he has to not personally walk around wearing them.

Like that would actually deter sales. He has to like let other people do it. Agreed. And be like in the background. So I don't think people want to be Mark Zuckerberg. Or he has to get some famous people that want to be the face of this thing. I mean he's upped his cool factor lately with the whole Elon matchup, right? That's like boosted his public persona.

And he got ripped. That helps. That's true. And he can definitely fight if you watch his videos. Like, he kind of knows what he's doing. So maybe he's cool enough to sell the gloves. You guys are following. Or at least cooler than Elon.

We had a big guest last week. You guys are following a legend. We had Jeremy Grantham in the suit. Yes. And no brush. I can't believe we're following Grantham before that or not. Wasn't he so sharp? He was so good. People were like going

crazy for that video or that podcast. Like we got a ton of feedback. We got... What? What did I do? No, something else. We got a ton of feedback and like one of the things that kept coming up was I always thought he was perma-bear. I didn't realize that there was a lot more to the story. And that's a little bit because of social media and traditional media.

It's easiest to just label people and just be like, Oh, this perma bear. And then it's like almost like a shortcut to have to actually explain all the nuance. Yeah. But he, um, he kind of broke that stereotype a little bit and, uh, I was happy for him. Not that show does that. Uh, yeah. Well, we give people more than we give people more than 30 seconds to talk.

We'll give you your true self. It'll all come out. It's all going to come out. Oh, brother. Exactly. John, we ready to get this started? Nicole? Oh, that was all cold open? Very cold. I was all nervous while spitting out my gun.

What show is it, Nicole? The Compound and Friends, episode 111. Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Today's episode of The Compounded Friends is brought to you by Wealth.com. Wealth.com is the industry's fastest growing estate planning platform. That's right, Michael. Their technology is unparalleled. They are the only end-to-end estate planning platform

for creating legal documents, bringing them to life through crisp visual flowcharts and helping advisors optimize plans using AI. Wealth.com is fully dedicated to helping financial advisors deliver on their clients' estate planning needs and can only be accessed through a financial advisor. Mr. Brian Hamburger has joined the strategic advisor. Not bad, not bad. Yeah. I met these guys at Future Proof. They won on the demo drop stage and that was pretty cool. I took a bunch of pictures with them after. Why do you think they won? Because they were the best in show. All right. That'll do it. All right. Thanks to wealth.com. If you're a financial advisor, check out their platform. It might come in handy. Go to Wealth.com slash Component to learn more.

1-11. 1-11, ladies and gentlemen. All right. This is a good one. Guys, I'm telling you, you're in for a treat. We have two very smart people who have come here today to tell us what's going on in the markets. We have a returning guest, Perth Toll. Perth is the founder of Life and Liberty Indexes and sponsor of the Freedom 100 EMETF, the world's first freedom-weighted EMETF. Prior to the Freedom Index,

Perth was an advisor at Fidelity. Welcome back. Thanks for having me. You know, I thought about it this morning. You were one of the first people to do video with us. You don't remember this. Neither do I. In 2018, when we were just-

I do remember. You do remember this. Side by side. Michael does it. No, now side by side, what are your thoughts? Yeah, well, I came for what are your thoughts because I was just in the office randomly. I'm like, yo, you want to do a video? It was so much fun.

That was pretty cool. Yes. I couldn't get you to do that now. You're too big time now. No, anytime. All right. Also with us today, Gunjan Banerjee. Gunjan is the lead writer

for the Wall Street Journal's live markets coverage and a CNBC contributor. Gunjan led the journal's award-winning coverage of meme stock mania. How did that go for you? Was it fun? It was a blast. It was the craziest story I've ever covered. It was unbelievable.

And your reporting on GameStop went on to be the basis for an Emmy-nominated Netflix documentary, which I have not seen. What is it called again? Eat the Rich. Okay. And prior to the journal, you wrote about distressed debt and munis at DebtWire. Welcome to the show. Thank you so much for doing this.

Thanks for having me, guys. We're going to have a lot of fun. I got to do one thing with Perth really quickly. Take your time. When I saw you at Future Proof two weeks ago, I'm sitting in the tent with Rob Arnott, and both Rob and myself were people who met you really early on in your journey. You basically had a back test and an idea, and that's it. Right? I wouldn't even say I had much of a back test.

Yeah. Oh, the back test was completely false. No, I'm kidding. No, but you were like, look, I have this idea. Yeah. Right. I wouldn't even say I had much of a back test. Yeah. Oh, the back test was completely false. No, no, but you, you were like, look, I have this idea. I know it's the right thing to do. I know it's going to be a superior way to invest. And I want to wait all of the countries around the world by how free their society is and emerging markets. Right. So, but it was quantitative. It wasn't squishy. And, you know, you took an approach that I think most people investing in EM just had never even considered. But that's all you had. And Rob met you. I met you.

And we were both, like, you know, encouraging and, hey, you should do this. Absolutely. So encouraging. Yeah. So, but we got to see you in a full circle moment. You came backstage. That was a full circle moment you came backstage wasn't that cool i was there too i was there too what are you doing mike was there so so but i didn't realize it are you managing 600 million dollars now yes is that is that oh my god the fun

round of applause for the team you did it it's It's a team. Yes, thank you. You did it. But listen, you were showing up at events carrying your kid in your arms. Yeah. You were, though. You, like, hustled. He's exaggerating. My kid was, like, nine. Still, you hustled. Like, you did this thing that almost nobody could do.

Thank you so much. To me, it's very inspiring. Michael was there from the beginning, too. He was there the full circle moment and the first day. Michael also played a role. When I say me, I mean me and Michael. Very inspiring. Michael was there from the beginning too. He was there the full circle moment and the first day. Michael also played a role. When I say me, I mean me and Michael. He's an extension of me in this example.

I didn't mean to completely exclude him. I'm not a self-back patty of Josh's. No, I don't want any credit for this. I want you to get credit for this. Actually, do you know the first time I met you guys in that old office over by MetLife? Yeah. The sub-lease. I had just done a bunch of meetings in New York,

all of them terrible. I show up there like one hour before I had to go to the airport because Barry invited me. It's like, come talk to Josh. And Michael was there. And I was just like, man, I don't even care anymore.

Like, is there a bathroom? Like, I literally just remember. Yeah. Can we give you a shot in the arm? Yes. Wait,

hold on. You guys heard what? Oh, say, say, say. You guys heard the idea. You loved it. You said, can I be on, remember? Can we give you a shot on the arm? Yes. Wait, hold on. You guys heard the idea. You said, can I be on your board? I don't have it. I didn't have it. I was like, sure. I don't have a board. Yeah, you're on the board.

I'll let you know when it's ready. But you did it. We're so proud of you. That's the most on-brand Barry thing I've ever heard. What's that? She's in touch with Barry. He's like, yeah, come have a meeting with Josh. Yeah.

Yeah. And he's nowhere to be found. Yeah. He does that to Michael. He does that to Michael once a week. No, and then Josh tweeted. And this is like, I have maybe like 300 followers on Twitter or something like that. And Josh tweeted, hey, just met Perth.

She's awesome. And then I get off the airplane. I have like five times the amount of followers. I was like, what the heck just happened? It was a Josh Brown tweet effect. I'm very powerful. Back when he was on Twitter. I don't do that anymore.

Now he's too powerful. All right. Amazon antitrust suit is probably the big story of one of the big stories of the week. A lot of big stories this week. So this, everyone knew this was coming. Maybe from the moment Joe Biden appointed Lena Kahn, this – she wrote a paper in 2017 basically announcing her intention to go after Amazon and why the government should curtail their ability to do what they do, which is please consumers. But, okay. That's a whole other – I'm sorry.

What do you mean everyone knew this was coming? Is that why you bought Amazon stock two weeks ago? You knew this was coming? No, I didn't know the date it was coming, but everyone knew there was an antitrust suit coming. I mean, it wasn't a secret. It was openly discussed. The timing kind of came out of nowhere this week,

but for all intents and purposes, it definitely knocked the stock down. Curious what your thoughts are. Gunjan, tell us, when you saw both the government suit and 17 states' attorneys general sign onto it, which I think was surprising, and then you saw the company's reaction, what was your big takeaway? I would agree that I think a lot of people saw this coming. What was surprising to me was when I was looking at some data on buying activity, there's been a ton of buying activity of Amazon stock this week, especially among retail investors.

Yeah. And it continues this trend throughout this year, throughout last year when tech stocks got crushed where people just don't think these FANG stocks can kind of lose their status. And they just keep buying. Every time there's dips in FANG, they're like, I just want to buy more amazon i think that's happened this week yeah i i don't think that i don't think that investors are pricing in any scenario like they knock the stock down but i don't think because these things go on for years so i i don't feel like anyone like is assigning a dollar value i think the relief maybe is that they're not calling specifically for a breakup, but they could, but it seems

like it's a monetary fine. What's the worst that happens? They pay a fine? $250 million fine, and they maybe change two or three things about what... Did you read any of the suit itself? I didn't read the suit itself, but my thought on what you just said

is anybody can sue for anything here in this country, so it doesn't mean anything's going to happen out of it. I don't read the suit itself, but I mean my thought on what you just said is anybody can sue for anything here in this country. So it doesn't mean anything is going to happen out of it. I don't see why it would prevent people from wanting to buy. And I do think it's ridiculous that they're suing for Amazon providing a value for their clients, providing a value. Here's what they're saying. Tell me what you think of this. The case they're making is that Amazon services are so interlocked that if you're a third-party seller on the internet, you literally can't avoid them. Amazon is selling its logistics and shipping services to the third-party seller.

Which you have to use. Which you basically have to use. Okay. So Prime? Is that what it is? Okay. Yeah, so the problem with that is the government is saying the problem with that is that every $2 you're doing in sales, a dollar goes to Amazon.

Amazon's answer to that is, well, we tried it the other way. We let third-party sellers handle their own fulfillment, and it was a horrible customer experience because we're just better at it. I thought this was weird. This is directly from the site. The complaint alleges that Amazon violates the law not because it is big

but because it engages in a course of exclusionary conduct that prevents current competitors from growing and new competitors from emerging by stifling competition on price, product selection quality, and by preventing its current or future rivals from attracting a critical mass of shoppers and sellers, Amazon

ensures that no current or future rival can threaten its dominance. To which Ben Thompson of Stratechery wrote, Stratechery? Stratechery? Stratechery? Stratechery. I feel like it's a close-up. Yeah, Stratech. Yeah, probably right. It seems eminently reasonable to me that Amazon predicate inclusion in a program defined by a shipping

guarantee on letting Amazon deliver your products. Prime was a massive risk at the time, dwarfed only by the many billions of dollars that Amazon has spent since then building out its logistics network. I see no basis on which a government regulator ought to demand that Amazon give out access to the Prime label and bear the reputation risk for third-party delivery services that did not take those risks or make those investments. It's absurd. I'm inclined to agree with him.

I kind of agree with that. If you have a customer buying something from you and you can control them getting a good outcome, you should be able to do that. I also thought it was weird where, again, they said exclusionary conduct that prevents current competitors from growing and new competitors from emerging. Isn't that sort of what business is? It's not like they're doing it in a way that's harming.

Now you could say that they're making it difficult for people to use their platform. Okay, fine. It's their platform. They built it. Are we saying they don't compete with Walmart and Target? Right. So to that point, in terms of how much, if you're considering them a monopoly, so this is from Ben Evans, Amazon has only single

digits worth of market share in total retail. If you consider all of e-commerce, they're at 35%. So again, within all of retail, they're single digits. It's not as if they're hardly the only game in town. How mad would the FTC be if Amazon takes out a new high this year, like in the midst of this suit? I feel like part of the intention here is to try to stop companies from getting this big and powerful to begin with. Even if they lose the suit, just the fact that they're bringing it, I feel like they want there to be some sort of a chilling effect on big tech. If these stocks, to your point, people are still buying these stocks anyway. If this thing keeps going higher, it's almost like a slap in the face now.

It's still in a big drawdown. I mean, what's it like 30%, let's say? 33% off its high. Yeah, I don't know. All right. I mean, I feel like we're going let's say? 33% off its high. Yeah, I don't know. All right, I mean, I feel like we're going to be talking about this for a long time. By the way, meanwhile, over the last three years, Amazon's down 18%. Doesn't seem like a monopolist. So the S&P is up 35.

That's pretty crazy. And the Qs are up, yeah, about the same. So Amazon's underperforming. It's over three years, like big time. I just feel like all of these businesses could go to another platform if they don't like it. Well, Shopify. So, I mean. Which is down more, right?

But then they wouldn't have access to as many customers. Right. So their benefit from being on the platform is greater than their cost, obviously. So that's, there you go. Right. What Amazon is giving them is visibility. Yeah. But then they complain that, that like if there's a hot

selling item amazon will see that and they'll push their own item in front of it which i mean maybe they're doing i would have no that's part of the cost then yeah that's part of the cost is is they're both your provider and you compete with them so i i don't i don't feel as though this this story is going to hang over the stock for very long just because of the nature of these things. So we know this isn't your beat. It's not ours either, but it's just big news that we have to discuss. OpenAI, they're talking about valuing the company. So they're selling shares at $90 billion.

$90 billion. They did a billion in revenue last year. Were they selling shares too? So this is existing shareholders. $90 billion. They did a billion in revenue last year. Were they selling shares too? So this is existing shareholders. I'm sorry, existing employees getting out. But Sam Altman said that there's no plans for this company to ever go public. We'll see.

So they're getting some liquidity for early employees, which is reasonable. But $90 billion, obviously, if they do get there, even 80, that sets the floor because they're going to raise more money. Did you think that we would see this much interest in AI like six months ago? Did you think that this would be anything more than like a few weeks of hype? This is like now we're in the sixth or seventh month of this. I did not. Not at all. And I think a lot of people have been caught off guard by just

how the AI frenzy has totally driven the S&P 500 up this year and the extent to which investors are just all gung-ho about it, right? No one's even questioning it. Not only S&P 500 is driving up, you know, semiconductor stocks in the emerging markets, TSMC and such. Yeah. I was saying I think it saved the stock market this year. Do you think that's too much? I don't think it's too much. I don't think it's too much. What's so fascinating is I remember at the end of last year, every time I would talk to investors, they were betting on a rally in value. They were betting on a cyclical recovery and for this big stock market rotation. And it's just so not what has played out this year. So I don't think a lot of people were positioned for this. I think NASDAQ up 25% year-to-date still, even with the sell-off this month.

And what is the S&P up? A couple percent. A few percent, right? And is the Dow negative on the year now? No, the S&P, I think, is up more than 10% this year so far. So 10% and then Dow minus 1% or something. Oh, Dow. Yeah, roughly flat. So that, all right.

Hey, Gunjan, I want to ask you. So Ben and I love reading reports from the journal and other editorials, publications, where you find man or woman on the street, right? Just how do you do that? Like literally, are you- They're talking about like your quotes. So it's quoted like Mr. or Mrs. Smith. And I'm just like, we always sort of chuckle at that.

How do you find these people? She stands on Avenue of the American. Like literally. Can you And I'm just like, we always sort of chuckle at that. How do you find these people? She stands on Avenue of the Emeritus. Like literally. Can you peel back the curtain a little bit? Sure. I mean, that is, I think, one of my favorite parts of my job is talking to, I love chatting with professional investors. They're super smart.

But individual investors are also really smart. And I love hearing what they're doing with their money. Like, actually, like, how big is their portfolio? How much money are they putting in this stock versus that stock? Where do you find them? A lot on social media. I also started getting a lot of

emails too, so I keep track of the people that email me. You have regulars? Yeah, I have regulars. She has a fan base. Are they super excited? I mean, it's the Wall Street Journal. emailers. She has a fan base. Are they super excited? I mean, it's the Wall Street Journal. You have to monetize the fan base.

It's very important. Teach me how to do that. No, I'm just kidding. Are you selling them hoodies with your face on it? No, no, I'm not doing that. All right, so these are people that read your articles at the journal, and they write to tell you what they think of the article. Yep. And then you have now, quote-unquote, sources.

You have people that you could say, hey, I'm doing a story on blank. What do you think? Totally. Or, um, or I'm on Twitter or Reddit or these days, even Instagram, people will DM me on Instagram to talk about stocks. It's kind of crazy. And this did not happen a few years ago. Is it always Tesla NVIDIA for the most part? It's not always Tesla N Nvidia. It's a lot of that for sure. But you'd be surprised. Like some people want to talk about small caps. Some people still want to talk about the memes. So yeah, I'll reach out to those people.

I'll do a lot of cold outreach on Twitter, Reddit, all these different forums. The meme stock's dead. So GameStop today announced that Ryan Cohen is going to be CEO. AMC is down 98% from its highs. GameStop is down 80%. I think for the most part, the meme stocks have had a revival from time to time, but it's not – the magic is gone. It's gone.

It's not 2021. It's gone. Like this year, Tupperware, Yellow, these stocks rallying. You're not seeing – Right Aid. But no, it's weird. So the meme stocks are gone, but the people haven't left. Because if you look at retail investor volume as a percentage of the overall market or options trading, this is what I was saying in 2020. I think even though this bull market will not end well with

respect to the meme stocks, gambling is addictive. And it's very hard to unlearn that or get that behavior out of your system. Like that shit, it hooks you. It does. And the line between gambling and investing has never been thinner. In part, thanks to things like options, which have completely taken off

over the past few years. It's so much fun. Well, everyday investors, we're not trading these things as much as they are now, you know? And especially with this boom in one-day options trading. Like that's like taking a shot of tequila instead of nursing a pilsner. Like it just hits you a lot.

Do those people email you or DM you? I feel like those are DMers. The one day option crowd is not sending an email and waiting for a reply, right? I mean, I did recently write about these one day options and I got a decent number of emails, but it's a lot of people on Twitter. They're using hashtags like lotto trades. They're still posting screenshots of 1,000% return, 5,000% return. Sounds legit.

They're in and out of these positions within minutes, if not hours or seconds. I think it was an article that you wrote or maybe one of your colleagues. Ben and I were talking about this a week or two ago. There was one person that you mentioned that you highlighted. And he said that like, he's, you know, doing his 401k and doing the, the whatever, the boring stuff. And they're like, this is, this is his fun. And I think that are there people that are overdoing it recklessly? And yeah, of course there always are. But I think that for a lot of people, like they're doing it reasonably responsibly. Yes, I would totally agree.

And there are ways to use options in a responsible way. Oh, that's what I want to talk about. They're totally gambling. The point is they're investing in one bucket, like long-term retirement savings, like set and forget it. And then they're also having fun with the other bucket. So that guy you're talking about, he told me Robinhood was his gambling account. He has another Fidelity account. So what's wrong with that? I think that's fine. You know one thing that's – it's not wrong with it. If he wants to do it, it's fine. But I think one word of caution is he told me he had put $5,000 or $10,000 into that gambling account 10 times in a row, and it went to zero 10 times in a row.

That's a different story. That's reckless. People go to Vegas. People buy boats. People just choose. This is how I want to burn my money on fire. And if that's when, personally, if I'm going to gamble, I'd rather, like, I don't like gambling. If I were to gamble, I'd probably rather go to Vegas and have the whole experience rather than just sit on my phone pressing buttons.

You want to be at the win. Yeah, but, you know, again, it's like, it's America. I mean, the danger there is, like, so I bet on sports, but it's one day a week. It's like Sunday. With the stock market, it's five days a week. It's nine hours a day or however many days. Crypto is 24 hours. Yeah, like it could turn pretty

dark. You want to hear something funny? I was talking to the guys from Public this week, and they told me the number one thing going on in their platform now is six-month T-bills. Cash is so hot right now. New meme stock. We went from NFTs to T-bills for this generation of investors in 18 months.

What a world. I mean, it's pretty amazing. That's the number one thing they're doing. So Masayoshi's son is back. Or he's creeping in the wings with this OpenAI thing. So they're letting existing employees who have been there early get out, reasonable, normal. If they're not going public, they want some liquidity. But they said OpenAI is why, this is from the journal, OpenAI is why they expect to raise more money by issuing new shares. Altman is already

fielding intense, I love that word in this paragraph, intense interest from investment giants like Masayoshi Son, because of course. And then also, the information had an article where they said Johnny Ive, so it's like AI hardware. They wouldn't specify because they don't really know. They're speculating. I guess maybe similar to the glasses, who knows.

Johnny Ive, the renowned designer of the iPhone and OpenAI CEO, Sam Altman, have been discussing building a new AI hardware device SoftBank CEO and investment manager Shishan has talked to both about the idea

what does that mean like a server they were just speculating they don't know a chip that goes into your brain reads your mind and then writes a story

I want so I want there to be this thing where like there's so many books that I want to read that I will never read like just

let me download it instantly upload it fine upload it into my brain right into my brain oh my gosh but then you miss There's so many books that I want to read that I will never read. Like, just let me download it instantly. Upload it. Fine. Upload it. Into my brain. Right into my brain. Oh, my gosh.

But then you miss learning by heart. I know. That would be great. But, like, there'll be a war where people are like, you still, you read books? You don't just get them uploaded to your brain? Yeah, right? No, that's a great idea. Thank you. I would invest in that.

Thank you. I'm with Sam Almond. Yeah. Gunjan, you noted that several big companies are now venturing into hardware, but for the most part, it's still just like a hobby for them. I don't know. When you see Zuckerberg's glasses, that feels like it's going to be more than a hobby. That looks real. I don't know. What do you think? We don't know what the upside is, right? And I have to give a hat tip to my colleague at the Journal, Dan Gallagher, who had this great piece

on how it's kind of a sideshow so far. You know, he said devices made up just under 3% of Microsoft's total revenue for the fiscal year ending in June. And it's a similar figure for Alphabet. So this is still not a meaningful revenue driver for these heavyweights. We haven't seen a lot of success here. I mean, AirPods and watches are monsters. No, Apple is watches are monsters. No, no, no. Apple is a hardware company.

I'm talking about Amazon's Fire Phone or all those HomePod devices that was Google. Even the Alexa was a flop. You're not seeing like the Alexa devices as much as you used to. I can't think of a sustained success in hardware to your point from any of the big tech giants that's probably why apple makes so much money everything that's going on is running through apple hardware in the end and they're getting paid on all of it so i like that that much has not changed so i think that's a really good point um parth what you got what do you point to i'm just looking at the google glasses remember those things they were. They were super dorky.

They were so hideous. And they were like $1,000, right? Mark Andreessen posed with them on, and that picture became a meme, like him wearing the Google Glass. Again, the wrong person to be modeling the Google Glass if you wanted it to work. The most beautiful person in the world could not make this.

We need Taylor Swift. Taylor Swift could probably do it. Let's talk, is NVIDIA the new Tesla? I find this interesting. I think every year there's that one stock that everyone's fixated on. In recent times, it's been a tech stock. I guess Tesla is like sort of

a tech stock. But like it wasn't always this way. Like 15 years ago, the it stock was green mountain coffee roasters. I shorted that. I'm telling you guys, I was around for this before it got taken over. It was more conscious. If this is possible, I hope her Herb Greenberg is listening to this. If it's possible, it was more controversial than Tesla in its day. It had every brand name short seller, like furiously writing columns and, and quote, giving quotes to, there was no Twitter yet. Um, just giving quotes to reporters 24 seven about what a fraud it was.

We're literally talking about K cups. By the way, it got bought by Pepsi. Yeah. It ended up getting acquired, but it was, it was like, so every year there's something like that. It monster energy drink was, was anyway, these days it's almost always a tech stock. And this year it's NVIDIA. Why is this?

I mean, I know it's up a lot. Why is this generating so much heat, do you think? I mean, I think it's just become that quintessential story stock. I remember, you know, to your point about the Tesla DMs. For a while, it felt like buying Tesla call options was free money. You'd buy them in the morning, sell them in the evening, and you just, you got rich, right? Yeah. And that's what NVIDIA feels like this year. Like, I can't help but think of the $1,000 price target on it. And Tesla is down 40% this year. Is it? Oh, down 40%

from its high, I should say. Not this year. NVIDIA breaking a trillion dollar market cap means a ton of regular people got rich alongside of like Wall Street money managers. And guess what? NVIDIA is still trading great. So it had that huge gap high. It was up like 30% after it upped its guidance from like 7 to 11 billion two quarters ago.

And it's still higher from there. It did not get into the gap at all. During the pullback, I mean, the stock's still trading great. I don't know. Thoughts on NVIDIA? I had, I was at a kid's event where another child's grandparent

asked me about NVIDIA. Because you work in finance? Yeah. So you say buy or sell? I said, it's high. The kids are playing with GPUs. Put this, John, put this chart up. Call and put options on NVIDIA.

To me, this qualifies as a mania. And I bet it can go higher from here. But there's also a lot of people betting against it. It's like 2 to 1. By definition, somebody has to be on the other side of every trade. 4 million contracts.

What is this? A day? This was daily volumes. And the reason I compare it to Tesla is that, similar to Tesla, like the options market has taken on a life of its own. Yeah. Where it's been the second most popular options trade in the entire market this year. I do think a lot of retail investors who have been playing NVIDIA options ahead of the past earnings lost money

because there was this huge run-up, ton of call options trading. The stock was unchanged after its earnings. So that means that you spent a ton of money buying options. Everyone lost except for the sellers. Oh, it rallied into the earnings. It was flat.

I didn't remember that. It was up and it closed down. It closed way off its highs, but it was flat for the day. So only the option sellers made money. So in the call options, the buyers of the call options, I'm guessing are mostly retail investors. Wall Street's making a fortune off them.

I'm sure there's a mix. There's definitely a lot of retail in there. Next chart, John. This is options premiums spent in 2023. Holy shit. Look at Tesla. Tesla is still so off the charts. It's $400 billion.

Wait, $400 billion in options premiums spent in 2023, and NVIDIA is still at $100 billion. That's incredible. And then it's Amazon, Meta, Apple, Microsoft, Netflix. So yeah, this is its own sport. And Tesla's its own wildebeest. Tesla has been, for the past few years, the most popular options trade in the entire market.

And that's why there's times when people think that the options are driving the stock moves themselves. I'm sure you guys have heard about the gamma squeeze. And there are times that's played out in NVIDIA this year too. Let's do this chart from Urien Temer. All right, moving on. So Urien, although same thing, I guess. Urien said,

I think there is a secular rotation coming from US large cap growth to everything else. But so far it isn't happening. In terms of global asset allocation, the only world to remember is that relative performance follows relative earnings and the US continues to lead on that front.

Relative earnings trump relative valuation. So he's got this really great chart where he's looking at the total return of the US versus ex-US, and of course, that's up and to the right. And then forward earnings per share, and again, up and to the right. And so the spread between the US, I think that's on a forward PE basis, and the rest of the world is high and deserved. And I mean, we talk about this all the time. Will there be a breaking point?

Is this just the new steady state where it's US mega cap tech and everything else? I don't know. I feel like I changed my mind. The question is, what's the thing that will flip the switch? But we don't need, so I think actually,

I think we asked are not this. Yes, there needs to be a catalyst. Maybe it's, you know, the Fed funds rate at five and a quarter, although that hasn't worked yet, thanks to AI. You don't need to know what the catalyst will be to know

or to have high confidence that this will not go on forever. So as somebody managing international assets for investors, what do you tell people about this question? So there's no way to predict what's going to happen in the future. They must love that answer. And then what? We're an index, right? So especially for index investors, the whole point of indexing is because you can't

predict what's going to happen in the future and by the way i'm fortunate to be working with mostly advisors who then have to give that answer they they have their own answers for their clients i don't know what their answers are but um that's that's definitely our answer and eric bautuna's posted something yesterday shout out eric um guest of the show. And he said, you know, for the entire 2000s, EM and small cap value were up over 100% each. Wait, what is this? I don't know if you guys remember this. The last decade. When we all started in the industry, right?

Yeah, yes. EM and small cap value were on a tear. Yes. And S&P and Nasdaq were down. Everybody wanted EM, remember? From 2000 to 2009, the S&P was 0% return. Yeah, so- And you made a lot of money in emerging.

So that could happen. We don't know, but- It seems like impossible now, but it happened a decade ago. It was impossible back then to imagine that emerging markets would have done so terribly for the next decade. Yeah, China was the engine

of the global economy. Even five years ago, China was still, you know, the big... It's so long ago, though. It's like 15 years of US outperformance-ish. So I feel like it should have turned a long time ago.

And there have been moments where you thought it was about to. It just doesn't. But to Yurian's point, it's relative performance, relative earnings, trumps relative valuation. The spread has been wide and widening,

but these companies keep delivering and they keep raising the bar and still jumping over it. Okay. So what's the story where emerging markets or even developed markets have earnings growth then that outpaces US

earnings growth. Like if you had to come up with- He's not saying that. That doesn't have to happen for them to outperform. Relatively. They don't have to. The spread on all valuation metrics is so historically wide that it wouldn't take a lot for this to start going the other direction. In your conversations with advisors these days, what are you hearing about? Just the state of willingness to invest internationally. Like what are some of the conversations like? So we mostly get inbound requests from advisors

who are hearing from their clients that they don't want the autocracy drag anymore, right? So they're concerned about- Can you define the autocracy drag? So yeah, I mean, Russia's market going to zero, China's market being a drag on investor returns in the emerging market space because they have such a huge allocation right now. Autocracy risk being things like, you know, the primary one being business priority risk,

right? So as a business, if your priority is to answer to the state versus your customers or your shareholders, then there's a cost of doing business that way. And we are subsidizing as foreign investors that cost. And that's probably the biggest cost of doing business in autocracies. But also there's data risk. We don't know the data is accurate or reliable because the government tells you what you can and can't say. Transparency risk. We don't know who the murky ownership structures, can and can't say. Transparency risk. We don't know who the murky ownership structures, non-transparent accounting standards. So all of those things are risks that you take in autocracies when you're investing there. So yeah, mostly our clients are advisors who are trying to

look into alternatives. They want exposure, but they want it differently than what they're getting in MSCI, for example. Right, and there's two types. One that doesn't want the autocracy drag, and the second type that believes that freer markets do outperform in the long run because they have faster recoveries. They use their capital.

The capital is allocated more efficiently. Stronger institutions, stronger rule of law. So I want that to be true because I would agree with it philosophically that in the long run, the freer a society, the better the stock returns should be for its domestic companies. It must be frustrating when you see like these stretches where Chinese internet stocks double the performance of the rest of the EM. And I know it doesn't last forever. It's more like a rally. But when you see stuff like that, surely people must ask you, like, are we missing the boat? All right, I get it. This is an autocracy. But like, are we missing the boat on where the real money is being made, not owning Tencent and all these other things?

Like, what's your response to that kind of thing? So fortunately, we don't have to do that response very much these days. I just put a chart on there of our return since inception versus EM and EMXC, right? So the outperformance is quite stark in the emerging markets. Now, we've had a couple of very, very rare events. So the war, COVID. So those are very, you know, very rare. So, you know, the outperformance, I don't, every time I show the chart, I'm like,

do not expect this all the time. But we don't have to answer that right now. And I had no idea that the thesis would play out this quickly. I'm happy that it did. But I think when we first launched it... So, right, if you're an index emerging ex-China, ex-Russia, the world took care of it for you.

Yes, but it wasn't just that. Because if you look at the recovery in 2020, for example, we outperformed ex-China. If you look at since inception, we outperformed ex-China. And you can zoom in on... Oh, that's not the right one, but that's okay. I just added it just two seconds ago because I wasn't going to show performance but if you want to but mainly like

last year for example Chile did well it was a very it's a very free market that has very little play in the benchmark indices because of the inflation trade because they're a high commodities exporter Chile is also an interesting market because it's a way to kind of play China without playing China. You don't have actually that direct autocracy risk, but there's a lot of trade with China. So if China does well, Chile does catch that. Oh, I see. But you don't have that direct autocracy.

But you're not putting money directly into that country. Yeah, so the government can't say, oh, you're a nonprofit now, like they did to the edutech companies in China. They don't have that risk, these companies in Chile. But you can indirectly kind of catch China growth. So when the reopening was expected, a lot of people were in these diversified markets that have Chile in it because they wanted that exposure. If you don't get a value stock rotation of meaningful length, it's really hard to make the case that developed or emerging markets elsewhere are going to outperform the US.

Are there inklings that in some other parts of the world, they're going to grow their own big tech companies at any point. Because I feel like that's like something outside of China has not really happened yet. I don't know. What do you guys think? What do you think about that? I think the bigger issue is that, not an issue actually, it's great for Americans, but just betting against the American economy has not worked. American economy has not worked. And I feel like you're kind of making that wager if you're thinking that EM can outperform on a relative basis, right? That these other economies around the world can outperform ours. And it's been a Teflon economy that just hasn't happened. Yeah. The economies don't have to outperform for their stock markets too.

That's true. And I would agree. It's unthinkable for that to change, but that's happened many times in the past. This does not have to go on forever. But I will wager that you're not hearing from too many individual investors in your DMs that are excited about emerging markets. I'm not. I hear from professional investors who are concerned about US valuations, and that's often the case I hear made for EM or global stocks. And also exactly what you guys are saying, where this has happened, it can happen completely out of the blue.

But for a sentiment check, it's not something people are, you know, reaching out to me about right now. I mean, to be fair, though, that's a different audience than advisors who always have an allocation. Totally. But I do think that the outperformance in the U.S. is so sustainable because it is supported by a system of rule of law. And that's what Josh wrote about in 2017 in his famous post,

which I hope you guys link here. What did I write? I forgot already. It's the link between stock markets and rule of law. I'm sure it was great. You were talking about you have to honor contracts. You have to know that you have to have private property rights for the market to work. Oh, I think that was me being anti-Trump

without using his name. Well, no, because you remember like 2017? Yes. He's the president. He would go on Twitter and start saying like, I'm going to shut down Pfizer. And the stock would go down like 8%. And everyone was excited about the Trump rally in stocks, which was real.

Stock market went up a lot after he was elected. But to your point, I was saying like, this is maybe- Oh yeah, you're right. Like this is maybe great today because it's so entertaining. It's probably not good over the long term if we have a situation where somebody in Congress or in the White House can just like change the rules on a company because the CEO wasn't deferential to them. But that was a real thing.

We had these Trump tape bombs in that moment. I do remember writing that. You actually did quote Matt Levine and said, if the president can, without consulting the courts of Congress, banish US lawful permanent residents and he can do anything. He can, he can. And the reason why the U.S. is a good place to do business is that for the last 220 years, it has built a firm

foundation on the rule of law. So yeah, it was, that's exactly what it was. It's such a double standard though, because I wrote that during Trump. Now Biden's, Biden's FTC chair is like literally just trying to unilaterally ban mergers, tried to stop Activision Microsoft, where there's absolutely no overlap whatsoever, et cetera. Meanwhile, Apple's market cap, just after public, I guess really nothing, but just getting back to that thing. Apple's market cap is, I think, bigger than all of the German DAX. And so I'm not saying that Europe

is somehow going to create the next Apple. I'm just saying that it doesn't take a lot for relative valuation spreads to narrow a little bit. In the journal, Chinese regulators are banning short selling. Am I reading this wrong or right? Did you read this? I did.

Yes, that sounds crazy. Let me quote this. Chinese regulators have taken a novel approach to prop up the country's faltering stock market by banning many companies, biggest shareholders from selling. Uh, how does how the new rules effectively placed share sale restrictions on about half of the 5,000 plus companies that trade in Shanghai, Shenzhen. And then, I don't know, like how do you honestly have a stock market and then tell the insiders that work at these companies

that they can't make sales? China Evergrande suspends trading as new trouble of Royals property market. I think their property market, is that like a something here low? Maybe what he did was short sell. They basically put the CEO under house arrest.

That's Evergrande. I don't know what he did. Maybe short sold his stock. Wait, he short sold his own stock? No, I'm just making that up. Oh my God. I don't know what happened. He's under house arrest. So the stock stopped trading on the Hang Seng.

Okay. So if you're an insider, though, at a publicly traded Chinese company, you now have share sale restrictions. Are they absolute? Or do you have to call the right person that you know and be like, I want to sell? Are you guys going to get mad at me? The police are going to come have tea with you if they see you short selling. All right. So my opinion is like this is why you have a 4PE on the Russian stock market, for example.

It's like, oh, they're cheap. Yeah. There's a reason for that. There's always a reason. So we don't know when these things will reverse, but we do know that it doesn't happen out of nowhere. Well, they're also disappearing their own executives.

So the insiders who are like the, like the Evergrande guy, they're holding foreign executives hostage. So there's an exit ban on a Japanese executive that's in China right now that's reported by the FT.

Is that bullish or bearish? I don't know. It's not good. It's not good. Okay. Well, didn't they get rid of Jack Ma for a while? I think he resurfaced, right? He resurfaced. But, I mean, if you're a Japanese executive or an American executive and go do China business and you can't come out, I mean, that's so many issues there.

Freedom of movement. It's not great. Yeah, I mean, all kinds of issues. Yeah, I mean, so they're not doing anything to convince foreign investors to go back in. It's the biggest outflows from capital, from China, biggest capital outflows out of China since late 2015, beginning of 2016. What happened then? Right. They propped up the stock market by telling people to margin their houses to buy stocks.

Stock market went up. It crashed. And then they banned short selling. And even at that time, they banned selling. Not short selling. Selling was illegal. Selling. For some point.

At some point, you couldn't sell. So you had your taxi drivers on the street margining their house to buy stocks. Wait, if you can't sell, how do people buy? I don't know, but you couldn't get out, basically. Don't worry about it. Yeah. Don't ask questions like that.

Put this tweet up. Jared Dillian. Shout to Daily Dirt now. Yeah. Do you know Jared? Yeah. Yeah. All right.

So Bloomberg tweeted something like, the relentless sell-off in Chinese stocks has made the market the worst performer in the world over the past three years, but some funds are looking to unearth pockets of value. And Jared, just from the top rope, du jour communist country disappears executives, expropriates property, and seeks to start World War III,

but some funds are looking to unearth pockets of value. That's. I don't know. I feel like that's too far. If we want these markets to open up, isn't there a case to be made that you want there to be international investors that have some say and some stake? Because it's not true that a country would open up its stock market to the outside world and then never listen to anything that those investors say. What do you think about that? The actions that have been taken so far don't seem to be catering to international investors at all. It just doesn't even seem like where their head's at. So I think it's kind of besides the point almost for the country.

And it's just – it's an afterthought how U.S. investors or investors – Can that change? Like is it possible that that gets better? Like I don't know. I don't know if it's a regime change or – I don't think they're going to change their mind. So here's the thing that's preventing it from changing. For them to change, open up more, be more transparent, open up more to

the opinions of foreign investors maybe, they would have to let go of some of their own power. So the CCP has so concentrated their power at this point in China that to open up at all would mean that they would have less power. There'd be more power going to foreign influence, people's opinions. And right now, they're not going in that direction. They're not going to pivot to democracy, you don't think? I mean, they're not right now. I hope they do. Is this why executives like Tim Cook are talking more and more about India? Yeah. And you know what? Personally, I'm so bored with China because that's all we ever talk about, especially in emerging markets.

Yeah. Well, it's the biggest, is it the biggest weight in MSCI? Yeah. It's like 35%. It was 42% as height in 2020. Wasn't the saying like,

I mean, it was the world. Was it the world sneezes? The US sneezes, the world catches a cold or was it China? It was both at some point. But China didn't sneeze.

They vomited and we're still pretty healthy. Yeah. So right now, that's it. Right? Like the world economy. It's different this time. It's been used up. But China didn't sneeze, they vomited and we're still pretty healthy. Yeah, so right now, that's a- Right, like the world economy is- It's different this time. It's like China's doing all these things to close themselves off more.

And then trying to blame the US for decoupling when actually they're doing the decoupling. They're taking back their pandas. Like the pandas. Say more. Literally. Is that a metaphor? No, literally. Bloomberg just reported, I put this on here.

They are taking, come on. They're taking back all the pandas that are in the US. Say more. Literally. Is that a metaphor? No, literally. Bloomberg just reported. I put this on here. They are taking, come on. They're taking back all the pandas that are in the US. Don't you f***ing touch the Bronx of pandas. Excuse me. They're going back. Excuse me. What do you mean take them? Pandas are so cute.

Can you think of a more useless f***ing animal on the planet? No disrespect. I know they're endangered. Sorry. I know they're endangered. I want them to thrive. Let me – I'm sorry. Go ahead.

I want pandas to thrive, but I have stood nose-to-nose with a panda with glass in between at a zoo. I have two children. I have stood nose-to-nose. Can you hear what this guy is saying? I have been to several panda encounter enclosures at several zoos around the country. Nicole, your thoughts on this? They literally eat. Hold on.

They eat 18 hours a day. I could do that. That's not – they literally – all they do is literally sit down and eat bamboo by the metric ton. That's enough. I stand with pandas. I love pandas. It's a nonproductive asset. Okay. Take the pandas. It's a non-productive asset. Okay.

Take them. Take them. What else are they trying to take? No, just the pandas. You can take my pandas, but don't take my freedom. Yeah, the rest of us, they don't want.

So yeah, no, I think, yeah, the conversation has truly changed. When we first started this, everybody thought, you know, you're crazy to not have China

in your fund. Now, everybody's coming to us because we don't have China. But it's not just China. There's 23 other emerging markets everybody thought, you know, you're crazy to not have China in your fund. Now, everybody's coming to us because we don't have China. But it's not just China. There's 23 other emerging markets out there. You know, Poland. What is Poland up this year?

John, pop this chart with Poland, Mexico, Taiwan, and Brazil. So what is this showing? This is returns from December 30th, 2022 through last week. You're cherry picking the four emerging markets that have actually gone up. Okay. These are the ones that went up more than 10% in the year today.

We're going to allow it because you're making a point. Go ahead. I'm purposely picking the ones that went up more than 10% in the year today. And I chose this timeframe because I know Michael likes shorter timeframes. Yeah.

Do you have anything that's dated back to yesterday? You can actually zoom out on this and it'll tell the same story. What is the story that this is telling? Basically, there's other emerging markets out there that you're missing out on if all you talk about is China or all you have is market cap weighted indexes.

What's going on in Turkey this year? Isn't the Turkey stock market going down? That's an autocracy and a half, though. Explain yourself. Yeah, you missed Turkey. Turkey, actually, we have a rule in the methodology that's a freedom momentum decline rule. So if it declines too quickly in any given year and we use Freedom House for this, this is like if they go more than five points in one year. Quantitatively.

And not the price. Quantitatively. Not the price. On the Freedom House scale. Freedom what scale? Not the price. On the Freedom House scale. Freedom what scale? Not the price. Freedom House. House.

The data. They do freedom metrics. Got it. We use Cato and Fraser for the main part, for the main country weighting, but we use Freedom House for this one rule. And the only country that ever invoked this rule was Turkey. So Turkey triggered this rule in 2018 because they fell more than five percentage points or five points on the freedom.

So they got booted? They got booted and they never came back in. So that's my Turkey explanation. A lot of alpha in Turkey right now. Stocks, countries making a 52 week high. Yeah. We didn't get to, we didn't get to this, these options trades, Mike,

but I want to, I want to, I want to go here next. This is, this is, so we mentioned options trades, Mike, but I want to go here next. So we mentioned options before, but just so the journal has this great article about, and it's yours, Gunjan, so congratulations. This is a great article. This is from September 12th. Amateurs pile into 24-hour options. I wanted to make sure we got to these charts. I don't think people understand the extent to which this is going on and how widespread it is and how much it's affecting the market. What is this chart that we're looking at? This is average daily options volume going back to the 1990s. And as you can see, things have just totally taken off since 2020 when the pandemic kind of ushered in this rush of rookie traders who wanted to suddenly trade options. So is this 10x the amount of

options trading that was going on in the 90s? Am I reading this right? You're reading it completely right. It may even be more than that. Volumes have doubled from five years ago. Doubled. But these people got wiped out. Or I should say, the stocks that they were trading, the meme stocks, the high beta, high flying stocks, all got killed, but they didn't leave. It's like the I'm not f***ing leaving thing from DiCaprio. They're finding new ways to gamble and they're not going anywhere. Here's one of Gunjan's best friends. Lucas Sommer woke up around, this is one of your pen pals, woke up around the time the stock market opened and still bleary-eyed opened his Robinhood app. Very good writing. It's like it was a dark and stormy night. All right. He had a hunch it would be a good day for stocks, scooped up some

options contracts that would profit if the NASdaq rose that day. By the time he was toweling off from a shower, though, the market had ticked down and his options had taken a big hit. Quote, that's a thousand dollar shower, he recalled. Soon after the options he bought for $3,000 were worth 80. Okay, but it could also be 80 to 3,000. This is the game these people have chosen to play. That's the game. They want the convexity, right? That's why people are playing this game for that high-risk, high-reward situation.

So this guy probably was in GameStop three years ago. Like, it's the same—you think it's the same people? It's definitely some of the same people, but I think the meme thing has evolved. As you said, like, risk appetite is still so high in all corners of the market. It's so weird. Yeah, it's still like people really do want to make gold. I would have thought last year would have killed that off. I think a lot of people did. I think a lot of people thought it would wash out the speculation in the market. But take a look at high growth stocks this year,

how some of these AI stocks have been trading. Crypto is up on the year. This is good for you. This is is your beat you don't want this thing to go away like you you have you have this thing nailed um this is also from your article my i i would not have guessed the number was this big between november 2019 and june 2021 according to the london business school the people trading these options have lost $2.1 billion. Where did that $2.1 billion go? Is it Citadel? The market makers are making a ton of money from this. And it's interesting.

I spoke with those academics and they were like, this is a really, really conservative estimate we're giving you. Because in order to get a paper through and approved, you have to be really strict with how you're coming to these numbers. So that's a conservative number. It's interesting because it's not, if you look at like Robinhood's quarterly reports, which I'm always very much looking forward to, they're not getting new users. Like their accounts, the number of accounts on the platform are not growing. And yet, is it just the people aren't leaving? Are there new people that are coming

into the stock market gambling or is it the people that have been here? It's a mix of both. It's really important to remember that options are a cash cow for the Robin Hoods, the Weebles, the Schwabs of the world. They make double the amount from payment for order flow and options than they do in stocks. So it's incredibly lucrative. And that's because the spreads are so wide. It's wider spreads. It's also tougher to get it right with options. You could, as you said, you could put in 500, 1,000 and kind of lose it all in a few minutes. I used to trade options back in the day and you would buy an option. It's like, all right,

I hit buy $500. Literally, the order gets exceded. It's like 390. It's like, wait, wait, what just happened? It's called the schmuck tax, Michael. Welcome to Wall Street. Happy to pay it. If Robinhood didn't exist, like the market makers would have had to invent it. It is literally the perfect mousetrap for transferring money from unsophisticated people

directly into the pockets of— Directly. Like literally— And it's structural. It's not like they're taking the other side. I mean, they're making the market. And so it's not like the traders, the retail traders have to win or lose. It's not zero-sum, right?

Well, many of the retail traders are losing money. But you're right that the market makers are taking the other side. Even if they were making gobs of money, Citadel would still be making money with that. Well, they make money from the spreads, right? By buying and selling all day long. Right. It's not even the directional. It's just the execution.

So I saw the move. Did you see the dumb money yet? I did. What did you think? I thought it was entertaining. What a pause. What a hesitance. No, I didn't mean to hesitate.

I did think it was well done. It was entertaining. I don't think it told the full story. These meme stock traders did not come out on top the way the movie showed. I so agree with that. I didn't dislike the movie for it, but it had to end somewhere. And they chose not to have it end in 2022 when all of these things go up in flames. So it's hard to watch the movie. You were so close

to the story for the lay person. Who played you in the movie? I forgot. Do you think that lay person would enjoy the movie? Is it fun? It is fun. I, to be honest, I really liked the soundtrack. There was some like fun hip hop music. It was, it was good. Yeah. It was entertaining. like the soundtrack. There was some like fun hip-hop music. It was good. Yeah, it was entertaining. It opens with a song that's too offensive for me to name. Yep, the Cardi B song. Is that Megan

Thee Stallion or Cardi B? I think maybe both. I thought maybe both. Oh, they're both on that song? I thought it was Nicki and Megan. I'm not saying the name of the song. Nicole's shaking her head. Don't worry, I'm not going to say it. Cardi and Megan. It was Cardi and Megan. Okay. Okay, sorry about that. Gen Z in the song. Nicole's shaking her head. Don't worry. I'm not going to say it. Cardi and Megan. It was Cardi and Megan. Okay.

Okay. Sorry about that. Gen Z. Gen Z in the house. What's up? What's up? Thank you for that. Anyway, I won't say the name of the song, but you're right.

You know what else I thought they nailed? The masks and just mask-wearing culture. Wait. Uh-oh. Oh, my God. I was about to say, what are you talking about? I forgot. Because the whole movie, but what they did, which I don't think a lot of people noticed,

the rich people are never wearing masks. Like the hedge fund managers, you never see them in a mask. The only people wearing the masks are the people that are trading on Robin Hood because they also work at GameStop or work in a hospital. And they didn't explicitly say it, but I picked up on that. And I thought that was an important context for the story. Like, why are these people so pissed that they're revenge trading?

Well, look at their lives. So they start out with Seth Rogen. He's yelling at a realtor on the phone. He's got a huge house in Florida. He's trying to buy the lot next to it so he can knock down the house and build a tennis court so his family could play tennis during the pandemic. Like that's like literally the first scene, right? And he's just as like angry about this tennis court renovation and why it isn't done yet as he is about his GameStop losses.

Why was it GameStop? Like why that stock? So that was the stock that Keith Gill got behind, Roaring Kitty. And he initially stirred up a lot of Reddit attention around it. But there's also a component to it where

why GameStop? There are other stocks that were just as shorted. Because it was gamers? Oh, because it was a shorted for gamers. Because these 22-year-olds grew up going to GameStop. It was something that they felt connected to that if there were a way to defend it against evil or whatever,

like they got more passionately behind that than they did like Bed Bath & Beyond. Has he been in the news? What happened to him? Does he still own the stock? So we interviewed him at the journal um in 2021 and that was his the only interview he ever gave and he never gave another interview is that right yeah is he still on wall street bets he stopped posting around that time he

stopped posting screenshots around the time of that congressional testimony became uh ridiculously overwhelming right he's just like a regular dude who all of a sudden gets national spotlight. That's a lot. He was getting a lot of attention. He's the hero of the movie. He's like, Paul Dano plays him, and he's an awesome actor.

Like, everything he's in is so good. Are you surprised they made him the hero of the movie? I felt like he was the easiest person to, like, make you feel sympathetic for and want to see win, right? Totally, and they paint him in the movie as this really blue-collar guy, like the juxtaposition between his home in a modest Massachusetts suburb and Ken Griffin and Steve Cohen.

It was really stark. You know, I thought another thing the movie really nailed was like the Robin Hood confetti. Yes. Kind of throughout the movie. Yeah, people are just like, bye, bye. It's like celebration. That was definitely a big part of the whole thing.

It's like it's a party. Literally gamified. Yeah. Yeah. So I like the pet pig that they had in Steve Cohen's office. This is not a thing that exists. I thought it did a few years ago. Did it really?

He had a pig walking around his mansion in Connecticut? It was a panda. It was a panda. It was a panda. I knew I didn't like those things. All right. I thought it was okay. I did not dislike it. I think people should see it anyway just because it will teach you a little bit about how the whole thing went down.

I do wish that there were a coda where they're like, oh, by the way, don't ever do this. And most of these people ended up giving back everything that they made. By the way, Wall Street made an absolute killing off of this. Killing.

Yeah. Yeah. They feasted on all of this activity, which they also don't. They killed Gabe Plotkin so bad he had to buy the Hornets. They also don't show you in the movie. You guys have fun today on the show?

So fun. Yes. Thank you guys. You have fun today on the show? Am I going to get one of these hoodies or what? It's in the movie. You guys have fun today on the show? So fun. Thank you, guys. You have fun today on the show? Am I going to get one of these hoodies or what? It's in the mail. Okay. Literally.

Okay. Quadruple XL for me, please. I'd like to layer underneath. China's going to try and take it back. Yeah. This is not made in China. We do this thing to end every show where we give out favorites to the audience. So something you're reading, watching, listening to.

Perth, start us off. What are you into these days? I saw an interview with Kajak Halas just one weekend. I was on the treadmill watching Bloomberg. And she is the prime minister of Estonia, a very small market. It's a frontier market, but very free, like freer by our Cato and Fraser metrics than the U.S. but very free, like freer by our Cato and Frazier metrics than the U.S., right? And she said that when they basically, when they got their independence and had to write their laws, they started from nothing because there were no laws.

There was no rule of law before. And she said that when they realized they would have to have rule of law, basic property rights to attract foreign investors. And so that's why they wrote their laws this way. And now they're one of the freest countries in the world, most digitized in the world. What was it before it was its own country? Was it part of Russia?

Yeah. It's an Eastern European post-Soviet nation. Okay, very cool. Where can we see that? It's on Bloomberg. You can link it. Okay. And what's Red Roulette?

Oh, that's a book by Desmond Shum. He's a guy who was very successful in China, and then they basically kidnapped his wife. That's the story of it. I just started it. It's so far so good. Is it like Red Notice? It's like Red Notice, which I noticed you have on your shelf.

How good was that book? When is that going to become a movie? I can't believe it hasn't already. Oh, it is? I think it's soon or maybe already done. I don't know. They were making a movie of it. Okay.

And there's a second book, something Frozen. Anyway, there's a second book by… What a fucking wild book that was. Yeah. Oh, my God. Also, Shut Up and Keep Talking. Shut Up and Keep Talking by Bob Pisani. We had Bob on the show when it came out.

He's so good. Yeah. The best. You know Bob? You're a CNBC contributor. Isn't he like the nicest guy ever? Yes, he is. So he was at Future Proof and he's such a superstar.

Yeah. Like he just has a line of people. They don't even want to take a picture with him or whatever. They just want to talk. They just want to FaceTime with Bob. And I thought that was so cool. He's been around like 30 years. On TV, 30 years.

So I thought that was pretty cool. You like the book? So far, so good. I'm reading multiple at once and just started each of them. I do that too. I read two at once and I don't finish either. Same. One day you can just insert them all into your brain.

Michael's going to come up with it. Gunjan, what's your favorite for this week? So I read this incredible New Yorker feature piece. So did I. On the Sam Bankman freaks. Oh, I did too. But I want you to talk about it. Tell us about it.

No, it was just a fascinating look at his parents. I can't even imagine having kids and having a kid who gets— They created him. Right, they created him and they were— That's tough. They went on the ride with him. You know, they participated in the riches. They aided and abetted, you could almost say. That's what people are saying. I didn't finish your

article. I feel like I read it for 20 minutes. I'm only halfway through it. But there was one part where the mom was said like, he's incapable of lying. That line blew my mind. It blew my mind. She seems like... Listen, I don't want to comment on people's, like, parents or whatever. Like, he did the crimes.

But then you read these emails where they're like, yo, give me a million dollars. Like, the parents seem worse than the kid in this case. And they were, she was an ethics professor. Well, that's the joke. That's the joke. And then the part that really struck me is the reporter does such a good job of this laying out where they signed a deed on a Bahamas property, like a $16, $15 million Bahamas property. And then they were saying that they didn't fully understand or there was some mix up in terms of signing the paperwork and stuff. They signed the wrong papers. I read that.

Yeah. And the reporter points out that they seem so, um, so detail oriented with everything else. So it just raised, raises all these questions about parenting and trial starts in October. Did they say, I think it starts next week. Well, no, but that, but, but on the heels of that article, what was already on the way was a suit against the parents from FTX, the estate of FTX, John Ray sued the parents because in the process of all of his work, he starts uncovering all this evidence that the parents are like helping themselves to millions of dollars.

I have a theory. They're in this like Stanford bubble. Basically, in the last 15 years, anyone that's even driven through Stanford is a billionaire at this point. They've been in the same house for 30 years. It's like a billionaire factory. And a lot of these kids are on campus. So they have like, they see these kids

come, these are professors. So they see these kids come in. The kid drops out of school two years later and founds like Airbnb. They're watching this wealth creation. If their kid is worth 30 billion, whatever the alleged number was, and they're trying to take... They didn't know they were taking the customer's money.

Well, we can't pass judgment on that, but the estate seems to think that they were looting this company. If you read the suit, it reads really badly. No, but maybe they just thought it was his money. I don't know. But they're involved is the point.

That's what I'm saying. Got it. But also as a parent, how do you even think about that? Like aren't you inclined to think your child is not stealing people's money or is being careful? And to this degree, it's not like he robbed the store. Oh, that's right. That's an interesting question. Why are they so unskeptical about this?

Did they just really believe he was destined for greatness his whole life and that this was normal? Because this kid amassed a $30 billion fortune in like a year. It's not like he invented something and then over 10 years he built the company. It was overnight billions and billions

and billions of dollars. Why weren't they at all skeptical? These are educated people. No one was skeptical. Wall Street wasn't skeptical. Everyone else was in the same boat as his parents. The guy just showed up and he's like a billionaire and he owns the naming rights to all these arenas. You're just like, oh, okay, I guess it's crypto. I don't know. Yeah, this is how crypto works. But I think the parents are the most likely to go along for it. I mean, I don't have kids, so I don't know. Maybe not, but I would think they would be even more inclined to believe in his practice.

Are you covering the trial? Who's covering the trial for you guys? We have a few reporters on it. It's going to be a circus. Can you muscle your way in there? Can you elbow your way into the front? I try to be a good colleague, but I'm sure they, to be honest, need extra hands. Do you think it's going to be exciting? I do. I do. I can't wait to— There's going to be a good colleague, but I'm sure they, to be honest, need extra hands. Do you think it's going to be exciting?

I do. I do. I can't wait to— There's going to be, like, a lot of, like, crazy testimony. Are there going to be, like, cameras allowed in? I'm not sure. I know we will have some reporters in the courthouse. They're going to be blogging and covering it.

Will they wear the spectacles if I can get them a pair? Will they wear the— What is consensus now, that he's going to go to jail? Oh, yeah, he's definitely going to jail. Can you imagine if he doesn't? The judge basically threatened them and was like, you're probably going to jail. Like the last reporting that I saw, the judge made some remark like if you're found guilty, you're going. They all turned on him.

There's nobody testifying on his behalf that was in the inner circle. They all flipped, which is what they probably should have done because they were all criming they were criming up a storm you like how I used that phrase? good work Michael you have a favorite for us? hashtag Chad gets the axe say more

I'm kidding I'll leave that for animal spirits I was watching last night Leonard Cohen I think this might be old. There's a documentary called Hallelujah, and it's about his life and just a remarkable poet. Oh my gosh, I want to watch that. Musician.

It's on Netflix. I love that song so much. I was walking through London this summer under a bridge, and this guy was singing that song. I didn't have any pounds on me. I almost dropped my phone number. Did he cry? I mean, no, he didn't cry, but he was so good. No, did you?

And it's a very moving song? No, but I filmed the whole thing. I'll send it to you. It's so good. And the acoustics under that bridge, it was like the perfect song, perfect location. If you're in the New York City subway, at least when I was there,

you would see a guy on a guitar playing that song, like, I don't know, once a day. The Jeff Buckley version is superior. Agreed. Okay. I started rewatching the show Justified. Did you Buckley version is superior. Agreed. Okay. I started re-watching this show Justified. Did you ever see it?

No. Okay. Timothy Oliphant? Yeah, there's like not a lot of good TV. So I started watching it again. Is it worth it? I never saw it.

I wish Duncan were here. He'd be into this. Yeah, no, it's amazing. It's from 2010. Does it feel dated? Yeah, they have flip phones. But it's like a crime drama show. I don't know, it's awesome. Can I just say one thing before feel dated? Yeah, they have flip phones. But it's like a crime drama show. I don't know, it's awesome. Can I just say

one thing before we wrap? Yeah. I did discuss this on Animal Spirits, but you all are of the age. I saw something on Instagram. It was like music intros from the 80s of shows we grew up with. I don't know. I almost made me want to cry. I felt so old and young. It was like Growing Pains and Wonder Years.

Who's the Boss and Charles and Chargers, by the way. They don't have shows. They don't want to cry. I felt so old and young. It was like growing pains and wonder years. And who's the boss in Charles and Chargers, by the way? It's the weirdest show of all time. They don't have shows like that anymore. Charles, Scott Baio was like an au pair or something. It was very weird. I watched all those shows because I was always home alone. Remember TGI Friday?

Yeah. Were you a latchkey kid? Yes, totally. What's latchkey? Like you don't know where your parents are. They don't know where you are. You have a key to the house. That's like a thing my generation,

a lot of the kids came home from school to them with a key to get into the house. I even didn't even use my – I just jumped in the window. Like I literally didn't even use the door. Are you like my generation? I am your generation, dude. You are? Yes.

So different strokes? Yes. What was your go-to after school? Facts of life? I mean I just watched Nickelodeon like 24 hours. Nickelodeon. I watched X-Men and Spider-Man. All right. my last favorite

I went to see Wu-Tang and Nas last night at Barclays oh my god you you feel some kind of way about that well I love I love both and I love concerts okay I think some of like the best moments of my life really first concert first concert yeah what was it um Backstreet Boys I was oh my, that is so… I'm going to a Pitbull and Enrique concert in a few weeks, which I'm really excited about. Get ready to dance. Wow.

The show is great. Nas is 50. What? And his first album he put out, he was a teenager. And I think he's four years older than me. I took the whole journey with him. Like, I got his first album. I've bought every album since.

Yes, I still use the word album. I know there's streams now, but whatever. Like, it was really cool to just watch this guy get his flowers on stage. And Wu-Tang, they had every single member. And ODB is dead, but his son comes out now. And he's got the braids and he does. It was very. Was Barryman the next cousin there?

No. No. It was very cool. Anyway, shout out to Nas and Wu-Tang. All right. We're going to wrap up for today. Do we have anything we need to do here, Nicole? Where are we going in a couple of weeks?

We have to promote something, right? We're going to North Carolina, Charlotte. Yeah. So we said this on YouTube the other night. I just want to remind the audience we are doing a live Compound and Friends taping in Charlotte. That'll be Tuesday, November 7th.

We have not released official details yet. If you want to be first on the list, send an email to askthecompoundshow at gmail.com. John, Duncan, and Nicole are monitoring that email. Subject line Charlotte. Inbox very aggressively. Subject line Charlotte live,

and you will be among the first. Tickets will be limited. All proceeds are going to No Kid Hungry, our favorite charity, and we always have a lot of fun when we take the show on the road. So make sure to send us an email if you're going to be in the Charlotte area

and you want to hang. All right, thanks so much to our very special guests, Gunjan Banerjee. Where can people follow you? What's your, other than your byline on Wall Street Journal? I am on Twitter, at GunjanJS. And you want lots of DMs.

Bring them on. Okay, invest in DMs. Bring them on. Okay. Invest in DMs. All right. Perth Toll. What an amazing job on the show today. How do people follow you? I'm also on Twitter, though I don't tweet as much anymore.

Good for you. Smart. I'm following your footsteps there. Yeah. The fund site is freedometfs.com. Okay. And that's about it. And where could they follow you, though?

Are you a LinkedIn person? I'm a LinkedIn person. Yes, I'm on LinkedIn. What's your address? It's personal. Where could they send you mail? All right. Hey, thanks so much, guys, for being on the show. We really appreciate it.

Thanks so much to the listeners. Make sure to leave us a rating and review. If you had fun, that is the best way to tell the algorithm that people similar to you would also enjoy the program. Please leave us ratings and reviews. We love them. Thank you so much. See you next week. Outro Music