The Compound and Friends - Is It Too Good? AI Capex Explodes Higher, Pre-Revenue Stock Boom, Will Falling Mortgage Rates Save Us With Telis Demos (WSJ)

Episode Date: September 23, 2025

On this TCAF Tuesday, Josh Brown welcomes Telis Demos, writer for Heard on the Street and co-host of The Wall Street Journal’s Take on the Week podcast to discuss: mortgage rates falling, the TikTok deal, record margin debt, JPMorgan credit card spending, the new threat facing active fund managers, Private market investments coming into 401(k)’s, and much more! Then at 43:22 hear an all-new episode of What Are Your Thoughts with ⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠Michael Batnick⁠⁠⁠⁠⁠⁠⁠! This episode is sponsored by Betterment Advisor Solutions. Grow your RIA, your way by visiting: https://Betterment.com/advisors Sign up for ⁠⁠⁠⁠⁠⁠⁠The Compound Newsletter⁠⁠⁠⁠⁠⁠⁠ and never miss out! Instagram: ⁠⁠⁠⁠⁠⁠⁠https://instagram.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠ Twitter: ⁠⁠⁠⁠⁠⁠⁠https://twitter.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠ LinkedIn: ⁠⁠⁠⁠⁠⁠⁠https://www.linkedin.com/company/the-compound-media/⁠⁠⁠⁠⁠⁠⁠ TikTok: ⁠⁠⁠⁠⁠⁠⁠https://www.tiktok.com/@thecompoundnews⁠⁠⁠⁠⁠⁠⁠ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of ⁠⁠⁠⁠⁠⁠⁠Ritholtz Wealth Management⁠⁠⁠⁠⁠⁠⁠, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here ⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/advertising-disclaimers⁠⁠⁠⁠⁠⁠⁠. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: ⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/podcast-youtube-disclosures/⁠ Learn more about your ad choices. Visit megaphone.fm/adchoices

Ladies and gentlemen, welcome to the compound and friends. Tonight's show is brought to you by our friends at Betterment, Advisor Solutions. More on Betterment in just a moment. We're going to start off with Tellis Demos, who is a writer for the Wall Street Journal's heard on the street. Tellis covers finance, investing, banks, interest rates, mortgages, you name it. And we had like some breaking news where there is now a deal for a consultant. sort of U.S. investors to take control of a new U.S. version of TikTok. So we'll get into that.

We took a look at what really drives mortgage rates was a fascinating conversation. It's not the Fed. It's not what you think. It's really a phenomenon where investors on Wall Street are bidding for portfolios of mortgages of a certain interest rate. And that drives what lenders are able to create new loans at. So you don't want to miss that. And then, it's an all new edition of what are your thoughts? It's Michael Batnik and I. We asked a very simple question, is it too good? Is it too easy to make money right now? And should this concern you? And what do you do about it, more importantly? So we take a look at some of the areas of the market where things have just gone absolutely crazy to the upside. We talk AI, open AI, more importantly,

partnering up with Nvidia and Oracle, some massive Kappex spending deals being announced. There's a lot happening there. We asked the question, is there even a bare market case to be made? And it's harder to come up with one than you think. We, I don't know, we do it all. This is a monster show. More than 2,000 people joined us for the live version on YouTube. And now you get to hear it if you weren't able to.

So thank you guys so much for tuning in. I'll send you to the show right now. 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 Ridholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholt's wealth management may maintain positions in the securities discussed in this podcast. All right. There we are. Look how handsome we look, tell us. What do you think?

you know we got i got i job i upgraded the uh the camera on my laptop just for this so i could well the audience the audience appreciates it all right ladies and gentlemen welcome to the live from the compound my name is downtown josh brown my guest today is someone i've been trying to get on for a while he's a great writer great reporter um tellis demos is uh writing for herne on the street which is i would say the most vital column for me at least at the wall Street Journal, where I read pretty much everything he publishes. He is also the co-host of Wall Street Journal's Take on the Week, which is a weekly podcast about markets and finance.

He might recognize his co-hosts, Gungin Banerjee, who's been on our channel before. Tellis covers the world of money and banking, too big to fail banks, Wall Street itself, private markets, crypto, insurance, mortgages, credit cards, financial technology, and more. Welcome to the show, Tellis. Thank you for doing this. Thank you. Hearing all that said is just like stressing me out about. No, no.

Don't be sure. How many things. Well, you are a polymath when it comes to financial media. Like you've got the gamut. So I want to start with these. I want to start with the, I don't know what you would even call it. I was going to say acquisition, but it's sort of not. It looks like the federal government and China have reached.

some sort of an agreement where TikTok will spin off its U.S. operation into the hands of Oracle and a consortium of other players who will take over running a new version of the app. It sounds as though we'll be licensing the technology from BytDance, which is the Chinese company that will no longer have access to U.S. users, but they will be paid for, I guess, the tech transfer itself. and then Oracle's going to hold on to all the U.S. user data securely in a U.S.-based cloud data center. And it'll sort of be like rebuilt as like a U.S. only TikTok app. Is that the journal's understanding of what it looks like so far, what we've heard in public so far,

and would just love to get your thoughts on the uniqueness of something like this? Yeah, I mean, I think there's, I think that there's, you know, we've reported the journal that the deal has come together. And I think it's, I think what's interesting is that it's not, I don't want listeners to come away with the idea that because the government is sort of obviously playing a role in sort of brokering this, that it's necessarily going to be then, you know, some extension of the government. There are a consortium of investors who are coming into it. Some, some big names Silver Lake. I don't know, you know, people know the private equity industry. That's a name. Yeah. that I'm sure people will know, you know, the longtime, you know, major, like, tech and financial, too, investors all over the place. Oracle is going to play a part of that. I also just have to, I have to flag that according to our reporting, I'm not giving any insight information here, but according to our reporting, what I read in the Wall Street Journal is that Lachlan Murdoch and Rupert Murdoch will probably be in the ownership group. That's something that Donald Trump said on Fox News on Sunday. He's named Michael Dell as well.

And so I should just say that Lockland Murdoch is the chair of News Corp, which owns the journal. And he's also chief executive of Fox Newsparent Fox Corp. And what the journal said, and I'll just read it here. I don't want to get myself in trouble. A person familiar with the matter said any investment in TikTok would come from Fox Corp. So just want to flag that for everybody that there's some crossover there. But I mean, look, it's a deal that shows you that like, it's funny. talk about, like, companies that are in the social media business today, we almost never

talk about their, like, social media businesses anymore. We talk about meta. We're talking about, like, you know, what are they doing in AI? How are they going to, you know, sort of drive that future? But I think, you know, the fact that everyone's so interested in TikTok is, it's just a reminder that, like, this is still where we all live our lives, you know, and young, old, I don't care, you know, the power users of TikTok I know are, like, middle-aged people who are just trying to like zone out at night and like they like that they can just scroll they don't even have to like pick something to watch they just scroll right and so um so i think i think it just goes to show you that like the the the interest in that deal is so high obviously there's big

politics but it's like it's it's a daily life thing for a lot of people right like i don't know i don't know if you do you do you do you use ticot i have an account where i think uh Nicole from my team posts clips of some of the stuff we do here on ticot but not yeah but i don't I don't scroll it. I don't watch it. I haven't, I'm already brain rotting with Instagram. I don't need like four more versions of that. I guess, I guess what, I guess what's interesting to me is that there are two political

issues with TikTok. One of them is user privacy. Like, it's a foreign owned company that is gaining access to, all right. So it sounds like the Oracle thing would solve that. If it's being hosted here and the China. will lose access to, I guess, coming and through a backdoor and seeing what U.S. users were up to. Okay. And then the other thing that I think this solves is, like, the foreign influence, like,

just, you know, what is the algorithm showing people in the wake of a crisis, for example, October 7th or the Charlie Kirk murder or, like, what is then being amplified to the 35% of all US 18 to 35 year olds who say TikTok is my primary source of news. That like that's an actual stat. It's more than a third of young people consider TikTok to be where they get educated. So not having the foreign influence on what the algorithm is surfacing, I feel like get solved by having now it's a consortium of U.S. companies, you know, ostensibly there's some political spectrum involved no matter who's going to run it. But like I feel like that's like one way to really easily clean up that issue. Then there's the financial side. But just to just to emphasize

your point, like we've been talking, obviously like late night shows have been in the news. I don't think I need to explain to people why. But to an extent like, I mean, is that really where people are getting their views from, right? Is a late night host who is, you know, I mean, I think at that, by the time you're getting to like, oh, I'm watching somebody say something on late night, you've already been inundated with content from seven other different places, right? And so, and so I think, you know, the, I'm not surprised to see the TikTok content recommendation algorithm, which, again, according to journals reporting, a new version of

that would be retrained, I guess, in this deal. And I'm just not surprised to see that that's a political football of like what What is that push and what is that not? And, you know, and, you know, I mean, certainly in my, just in my industry, right? Yeah. You know, it's, it's, it's, you know, the, you know, the, the, the media, you know, is, is, is only, you know, we're sometimes a passenger in, in some respects when it comes to, like, what, what did, what, what did the different algorithms sort of do? So I'm not surprised to see that that's, that's, if you're Mark Zuckerberg, what do you think, this is, is good or bad? It's a competitor to Reels that two years ago

looked like it might get banned off the face of the earth. All right, now it's not only not going to be banned, but it's going to be a U.S.-based corporation that competes directly with Reels. So from that standpoint, maybe not great on the advertising side of the business. It's a real competitor. I have to say, like, maybe like, maybe just like me being like,

you know, a relative, like, grandpa of, like, social media. So I'm not the savviest sort of user of it. But it's like, I feel like every app I open now kind of feels like TikTok. Like as a matter of fact, I was flipping videos, you know, kind of like you would on TikTok, right? Like next, next, next scroll. And at some point, I realized I was not actually looking at TikTok. I was looking at what I think was like I just sort of stumbled onto that, the kind of the vertical video feed of Facebook.

And so to be honest, like just, again, I'm speaking for myself as just like, you know, a middle age user these things. like, it's like, you know, I do think there's maybe kind of, we're reaching the point where like, I don't know what platform I'm on. I just know that I'm watching. And I think, and I, by the way, by the way, like, I see the same content. And YouTube has shorts. So, yeah, to your point, like everything looks like, everything looks like TikTok now. And the same content, like I see the same creators kind of pushed into different, you know,

places, right? And I think people, like, I remember the joke about Reels. what it was, that it was like, oh, reels is like where people go to see TikTok six months later, right? So I think at the end of the day, you know, how much does like one particular algorithm drive the conversation versus like the constellation, you know, of all of them? So, so, you know, I think, I think maybe the future is actually kind of,

maybe the biggest worry for Mark Zuckerberg is just maybe the future is a little bit like agnostic to that, right? Like I know I get it on my device and, which service serves it up to me. As long as the viewer could do this and just scroll up, up, up, up, they almost don't care what platform is facilitating that, as long as the algorithm is good enough to keep people's attention. All right, I agree with that.

We're going to make it extremely hard pivot because you've been writing a lot about rates and mortgage rates. And I actually think, so I'm an equity investor primarily. And so I actually think the most exciting potential thing that could happen heading into 26 is a true recovery in the housing market. And of course, that's not going to happen unless mortgage rates actually fall. They don't need to plunge. They just need to continue on their recent, let's say, last three months, last four months,

that kind of gradual dissent that we've been seeing in mortgage rates. and you've been writing a lot about it. So let me set you up here. You said long-term bond yields have been drifting lower because of a host of factors, including expectations the Fed will start cutting rates. Okay, we did that last week. The corresponding move in mortgage rates has been stunning.

A daily tracker reported the 30-year fixed rates hit their lowest level since 2024. We're at 6.29% this past Friday. And on the Friday of the most recent government jobs report, which was a slower than anticipated pace of hiring, the 10-year fell 0.09, which is a pretty big, is a pretty steep one-day drop-off. You will also point to the spread between treasury yields and mortgage bonds, which is falling as well, which is important. So I'd love for you to just kind of give us your take on what we're seeing in that mortgage market. and whether or not you think this is leading to the type of scenario that could unfreeze the housing market materially.

Well, I mean, just to start with that last question, like, I mean, there are, you know, what could unfreeze the housing market, right? What could get people buying and selling again? I mean, you either have to have a big adjustment in the price of houses, right? Which is, you know, for homeowners, kind of an ugly homeowner. idea, right? Basically, like, oh, a home prices have to get cheaper, right? Well, you know, that takes money out a lot of people's pockets. So that's not really necessarily a fun to think to think about. You could have people making a ton more money, which I guess is the best

case scenario, right? Like, everybody's just making a lot more money and then mortgages are more affordable. Unlikely. Unlikely right now. Okay. That's, that's, and then, and by the way, you know, these scenarios were, you know, kind of like a, you know, I think one of the, one of the big mortgage guarantors, I think it was one of them kind of laid out these scenarios. So this is not an entirely original thought. But then the other thing would be mortgage rates, right? Do mortgage rates come down meaningfully? Like, not just like all from five and a half to five, but like from five and a half back to the world of twos. And so, you know, so, you know, will any of this move the needle unlike affordability? I don't, I don't know

if we're talking about a move in mortgage rates, except in like an extreme scenario that, like, really changes that conversation, right? So, so I just want to, I just want to level set there. Like, I don't think that, that any kind of move that we're contemplating in the, in, in, in, just from the scenarios we're talking about here. Seven to five is, seven to five is meaningful. It's, it's, it's meaningful, but it's not going to bring those affordability numbers, um, back to, you know, and I'm going to, hold on, I'm going to, I want to, I want to credit, um, Let's see, give me one second here. This is, I was reading a Twitter account, News Lambert, Lance Lambert was kind of finding

something from Fannie Mae kind of talking about these things. And to get back to pre-pandemic affordability levels, you'd be talking about, again, in this calculation, a move back to from six and a half to 2.23%, right? Also unlikely outside of a financial crisis. Right, right. The series of events that lead to that are pretty extreme. Right. So I don't think affordability is going to change. However, you know, like certainly at the margins, right, I do think that there are, you know, some scenarios in which mortgage rates start to come down. What I was writing about talking about that stunning move was just sort of noting that, you know, look, I don't know how many people follow the mortgage market that closely. I didn't really understand what drove mortgage rates until I started. writing about this. And, you know, there's, there's just, there's, there's the world of the mortgage rates that you see, right? You call up a bank or you look at like one of the comparison websites they give you a rate. That doesn't come from. That's not like a, you know, oh, Fed funds rate plus

kind of thing. It's, it's a rate that's set by a market, and that market is the mortgage bond market. And so when you make a mortgage loan, it then gets, usually gets sold into the mortgage bond market. So what's going on with those bonds affects the prices that you might see in that get reflected in rates. And what was happening there was, and this was, you know, being tracked by mortgage news daily. I don't know if most people, when people talk about mortgage rates, I think they usually are talking about the Freddie Mac PMS. Yes. I forget Exel. I forget the primary mortgage market survey, pretty sure. And that's, that comes out on, I think on Thursdays. And that's backwards looking, right? So you're kind of getting, well, where have mortgage rates been

heading into this day? There are some daily measures of that, and one that I've cited my work a few times is mortgage news daily. And so, you know, what they were noting was that what happened was there was this essentially kind of air pocket in the mortgage bond market. I just, again, not to, I don't want to bore everybody, but the way mortgage bonds work is like the bonds have kind of a different coupons. And so there's, and they come in half point. And like buckets. Buckets. Right. So the six and the half, the six, the five and a half. And every mortgage kind of gets sorted into one of those. And so what, what was happening in that particular, this, this was after the jobs report a few weeks ago that where you saw like, you know, kind of 10 year long term

yields, which is really where kind of mortgages are more priced off of because mortgages, you know, you take out a 30 year mortgage, but a lot of people move or refi. And so a 30 year mortgage ends up really having more like a 10-year-ish duration, somewhere between 5 and 10 is kind of what people talk about. So that's why the 10-year treasury is a real reference for that market. The 10-year treasury is more powerful in terms of having the 30-year mortgage rate react to it. It's not overnight rates. If you want a quick guide to like what's happening in mortgage rates, look at that 10-year trade.

Well, let's put this, let's put this chart up. So this is from your article. So this is the yield spread between agency mortgage-backed securities, current coupon, and benchmark U.S. treasuries. And that spread has been falling, meaning the MBS products that people can invest in, the yield is getting closer to what, I guess, the benchmark U.S. Treasury of the same maturity looks like. There's a credit component to that. But I think, chart off. A little bit, a little bit. I mean, agency mortgage-back security. Securities are the ones that Fannie and Freddie and other.

They're pretty much money-good. Yeah, yeah, yeah, exactly. So there's a little bit of credit, but not a lot. You're making this point, though, that I think is really interesting, which is the institutional buyer of a mortgage-backed security. If they, so one of the big risks to them is prepayment risk. Right. So in other words, they invest in a bond, which is backed by mortgages,

but a lot of people that own those mortgages, the nominal rate of the mortgage is so high, that those are the first people who are going to refinance lower. When they refinance lower, they prepay the mortgage. The problem for the institution that invested is they thought they had

all these years of high yields coming to them and the bond has just been, you know, the income is being taken away because the person prepaid. So as a result, you've pointed out

there's actually more popularity from investors to buy the lower nominal yield, the 5%, let's say, mortgage bond, because there's less risk of that prepayment. And so that's that air pocket that you were describing. Exactly. And that, in turn, has an impact on the rate at which mortgages, banks will make mortgages. Who can they sell it on to?

It, like, really matters that there's a buyer for that MBS. Yeah. Yeah, no. So it's like all of a sudden the market's mindset shifts to like, uh-oh, I got to protect myself against prepayment risk, right? I've sold this option to homeowners that they might exercise to refinance their mortgage at a lower rate. And so, okay, I'd rather buy something that has a lower coupon or yield, but I think will actually last, you know, for a longer period of time. Because otherwise, I run the risk that, like, if too much of my bond prepays, I don't,

I don't lose money, right? I'm getting my principal back. But it means that then I'm sitting on cash that, like, you know, first you have to invest or like, you got to reinvest that, right? Yeah. And then the prevailing rates are lower. And so then you're like, okay, well, if rates are on their way down. So really, this is all partly about the market's expectations of like the way rates are headed. And so what's really underlying all this is a sense that like, despite everything we've talked to, you know, we kind of, you know, I know in the media, sometimes in the financial press, you know, we get kind of like, all right, there's a new narrative. And that's that like, treasury yields are surging right there's like a day when the 30 percent hits five 30 year hits

five percent we all okay all right what if rates keep going up and are there long-term concerns about the u.s fiscal health right uh and and you know are people not going to want dollars because of tariffs and all the right we get you know but then what happens is that you know a couple pieces of economic data come in they're not so hot and like some of the same old kind of muscle memory kicks in where it's like, okay, well, that means that the Fed's probably going to cut, so that means that I should buy today's bonds at this yield because yields are going to go down or flight to safety, right? Okay, oh, I'm going to, you know, cut some of my stock allocations, move into bonds, et cetera. So, so, you know, we saw the return of that dynamic, you know,

once we started getting a couple of, like, not so great economic data points. And so then you just had this kind of like, then like basically, you know, the battleship turns and a lot of people in the market start running towards the, okay, if rates are on their way down, here's how I've got to protect myself. But it turns really slowly. It turns really slowly. And institutional investors, when they get into a mindset that, you know what, we're actually more interested in buying the MBS at 5% versus 6. Six is a better interest rate, but more prepayment risk. Like, that battleship, once that turns, it's not, it's not all of a sudden going to turn back around because of one piece of economic data.

So I think that's a really good point. And it sounds right, yeah. And the self-awareness that you have as a journalist, just understanding the tendency of journalists to be like, we want a new story to tell because it's a new day. It's not always a new story to tell. And I know that's like a constant push and pull.

Yeah. I mean, it's not just about the new story. I mean, but it is like we kind of have to be like, I mean, you know, I would say that at least the way I think about it is like, all right, something, something new or dramatic is happening. I can't tell you that it's going to necessarily keep happening, but I feel like if I don't note it or think about it, then if things really do head in that direction, I don't want to

be in a position where like, I kind of was like, oh, no, no, no, this, things will never happen that way, right? It's like, it's like my version of like market timing. It's like saying, like, I'm not going to write anything about 5% yields on the 30 year because I think they're going to come down, right? I don't know, you know, like I'm doing my best. best like everyone else to figure out what's what's going on and so and so you know I want to you know I think sometimes the right way to consume you know financial media is is is not that we're making a

call but then we're just we're trying to just like prepare ourselves and and and our readers for like all right if we take if if the market takes this to its logical conclusion whatever right if they keep pushing on that then then here's what happens at the end of that and maybe we don't get there, but I would rather feel prepared as a journalist and to the extent that I'm providing a service to readers, you know, just kind of flag for them like, all right, here's what's on that side of it. Yeah, I think you're chronicling it and you're opening up the door to possibilities based on what's happening and not saying, all right, this is what's going to happen next, but you

should be aware that historically, when A, B, and C line up, D is normally the outcome or has sometimes been the outcome. I think that's, I think that's the thing. And if you do that well, you let people make up their own mind and come to their own conclusion. I want to show you a chart we made for this. This is 10-year treasuries versus the 30-year mortgage rate. And my guys, Sean and Chart Kid Matt, noticed the average spread since the year 2000 is 1.88%. the spread has now been above that average since March of 2022. But like these lines largely mirror each other. There's very little deviation here, especially over the, I mean, we're showing you

the super long term 25 years, but you will very rarely see a huge deviation between the 30-year mortgage rate and the 10-year mortgage rate. At times, the spread may be wider than others. But so when you said it's really the 10-year mortgage rate. year that you're looking at, if you're trying to understand the forward course of the 30 year, this is exactly what you're saying, but illustrated by us. Thoughts on this? Yeah, I mean, that spread has really been, it's really been the conversation, I think, in the last couple of years, because when, when, so, you know, as people may know, you know,

the Federal Reserve was for many years buying mortgage. as part of, they call it credit easing, quantitative easing, whatever you want to call it, you know, the Fed was, in some ways, you know, helping keep that spread really narrow by being a big buyer of mortgage, mortgage-backed securities, agency, MBS. And so when the Fed stopped doing that, you know, a couple of years ago and started letting that portfolio run off, like I think, you know, most strategist, investors I've talked to, you know, have attributed, you know, some of that spread widening to that, right? Just a big buyer coming out of the market. And, and, and, you know, to some extent, banks, you know, we're in the same position,

right? Back when, you know, rates were near zero, they were, like, grabbing anything that had a little bit of yield, including mortgage bank securities. We know that that got some of them in a trouble back in 2023. So, so, you know, banks have not been big, necessarily been big buyers either. And so you have seen a widening, but, you know, it's not, it's not to like such a level that I would say that on a long-term time horizon that those two charts, like, all of a sudden you see mortgages going like this and Treasury is going like this for a long time, you know, but, you know, it does. And so I think that, you know, there is the potential for some of that spread to continue tightening.

And, you know, just take, again, it's not going to drive mortgage rates from 6% to 2%, but it will, you know, maybe, you know, shave, you know, some fractional point off of that. And, and, you know, listen, every, every, you know, we all know as homebuyers or whatever, you know, every, every eighth of a point matters, right? Well, I think the, yeah, I think the bigger story. And you guys did a feature on this. I don't think it was part of hurt on the street, but, um, there are millions of households where for every 50 basis points in the 30 year mortgage rate, like a, it's like a new

tranche of households, it would make sense for them to refinance. And I think the journal stated it as rates would have to be 75 basis points or more below the new mortgage rate in order for the financial incentive to kick in and a household to say, okay, now is where it makes sense to refinance. So having millions of new households all of a sudden be in a position to refi is also, it's not just about moving houses. It's about unlocking liquidity. Yeah. Though I will say, I will say where mortgage traders kind of like make their money, like, right, the difference between somebody who's good at that and not or whatever is like really being able to kind of have a view on that prepayment rate, right? Because there are things that affect that, you know, like, for example, like if people, maybe you could refinance, you have an incentive to refinance, but maybe something's happened to you that like, you know, your credit's not so good anymore, right? or, you know, you can't pay the upfront costs, right? Because there's some out of pocket that you pay. So I think people taking a view on the prepayment speed, right? And by the way, other things I've read before, and again, this is outside of my expertise, but like, you know, what people in that market talk about is like, you know, okay, a lot of the market is, you know, what's the prepayment speed of a first time home buyer versus somebody who's not, right? I think, you know, sometimes people think that first time homebuyers prepay at a lower speed, right? Like, they're less likely. to refinance, you know, within the next couple of years.

The younger, lower income, right? It might be a lot of reasons. Some of it is, some of it, too, is like, you know, also, like, is there an anchoring effect, right? Where, like, people remember 3% mortgages. It wasn't that long ago. Everybody's somebody, you know, their neighbor, the person who sits next to them at work, they've got 3%. And so they feel like, oh, should I really be excited about 5?

Like, even if there's, like, a meaningful incentive, you're kind of like, I'm going to wait until they're back in 3. 4 sounds really good. So I think, so I think, I think one thing, too, that, like, that investors in that market or thinking about is like, what is that prepayment speed going to be? And anyway, just to let people a little bit of inside baseball there. Like, that's part of what people think about. Yeah, one interesting thing that you were talking about is that sometimes the rates don't

behave the way that you think they will. And we got a really great example of that last September. So the Fed surprised the market. They did a 50 basis point cut rather than a 25. Then they waited a year to cut again. but that's another conversation. But they do this 50 basis point rate cut. And then what happens?

And this is you. The Fed surprise markets by lowering its benchmark rate by half a percent at the September meeting. Over the next two months, the 10-year Treasury yield rose by about a half a percentage point. And average mortgage rates jumped about three quarters of a point. So the bond yields didn't cooperate with what the Fed was doing with overnight rates. And the mortgage market certainly didn't cooperate. operate. And so that's a thing that happens. And so even if the Fed does deliver two more cuts this

year or one more cut or whatever it is, to your point, we don't know for sure that there is some sort of definitive read through to how the rate of the mortgage market will behave. Yeah. I mean, there's so much that goes into whether or not, you know, people are are buying or selling at that longer kind of the belly or whatever you want to call it of the treasury curve right in those fives and tens, which is, again, where kind of mortgages are sort of, you know, you know, to some extent priced off of like, you know, that depends on people's views on a million different things, right? The economy, you know, politics, et cetera, right? So, so, you know, the Fed cutting now. As a matter of fact, you could even see a scenario where, like,

if the Fed cuts like super aggressively, that, that, that, you know, spooks people in some different way, right? About like, you know, the direction of the Fed overall and is the economy going to go overheat? Where do they know that we don't know? Yeah. Yeah. So, and so then you see, then you see people kind of like, you know, what do you call it? Like a bear steepener, right? Where people are like, oh, this isn't good. I need to sell. You know, so I don't know, maybe I mix up those terms. But like, but, but, but, but, you know, what the 10 year treasury does is only somewhat related to what the Fed does in its next movie. I want to get to one more thing before we let you go.

You've been talking about J.P. Morgan and its ambitions in the credit card market, and I thought this is a really great piece you did. So you say that they are already number one in card spending, and they want to be even more dominant in this business. Last week, we found out there's new pricing on the American Express Platinum card. Also a lot of new features that are going to come along with that. But on the J.P. Morgan Chase side, it's about the Sapphire. reserve, and they've been making a bunch of acquisitions, acquisitions that steer people

toward more ways to spend money on trips, on restaurants. What do you see happening in this market? And why do you think it's so important to J.P. Morgan right now? I think what struck me and what got me interested in that was just seeing how, you know, here's like America's biggest bank by most, if not all, measures. yeah um and uh you know and and and and here they are like really kind of you know investing heavily in a business that i think people think of as like oh it's got it's up right like credit cards like oh there could be lost the consumer loss is there right it's really competitive etc and you know

and then i think you know you just started to see it like we see it in our lives right like the you know the you know the sapphire card and it's you know fee and and and the value add and And American Express does that too. And City has a kind of premium travel card capital one. And so it's like what I wanted to just sort of write about was just like, this is a big business. And it's really important for even a bank as gigantic as Jake Morgan Chase, just because it's, I mean, the credit card business can can be a really, you know, good business. Like not only does it itself, you know, make money, right? and that's partly through the interchange fees

that banks collect when you swipe your card that kind of merchant fees we sometimes call them, you know. Now, some of that gets essentially like rebated back to people in the form of rewards. But, you know, it's still, but still that's a lot of money kind of moving through the banks and they have partners, right? All the companies that participate in those rewards,

like they want to be in on that, right? They want to be, they want to have that customer loyalty, you know? So, and the bigger you are. If you're not doing it with them, you're doing it somewhere else. Exactly. So they want you to do it with them. You pointed out, JP Morgan Chase credit card sales volumes just so people have an understanding of like the raw numbers involved.

And this is excluding corporate cards. This is just people using things like the Sapphire Reserve and some lesser cards. But that number pre-pandemic is just below $200 billion. And as of the latest way, it looks like you guys have that number now, just shy of $350 billion. So that is one of the fastest growing businesses within banking, period, full stop. And you could understand why, if you're a consumer facing, it's like you have to win there. And they certainly appear to be trying to win at all.

What do you think? Yeah, I mean, it's, and if you think about it too, like, you know, it's a feeder into all kinds of other banking businesses. Right. Like if you've got someone's credit card, right? You, you know, you can, you know, obviously maybe might have a checking account too or have a shot at that. You know, you can pitch them a mortgage. And then, you know, like I said, you've got the merchants, you know, in there too, right? Like you've got people who want to make deals with you, who want to do business with you because you, you know, you essentially are this funnel of money and where you point people, you know, can be very meaningful to, to, to a merchant, right? Like, you know, you know, you know, like I think one one thing I've learned is that is it, you know, when you're listening to the earnings call of like, you know, American Express, you've also got to be listening to the Delta earnings call, right? Because those two have been, you know, they have, they have a major business together, right? And so like, and so I think, I think people just really need to appreciate like how just, just the, the amount of money and just like the nexus of kind of like business that happens, you know, with credit cards. Right? It's not just like this, like, you know, thing in your pocket. You know, it's, it's a huge business. And even for somebody of the scale and stature of J.P. Morgan Chase. And also just that like, you know, it shows, too, like how Chase, you know, given its, its size can, can really be, you know, a fierce competitor in here where they can, they can deploy so many resources to, to, to making their cards, you know, attractive to, to users. Like, that's, that's, that's a tough competitor, too. So you, so to that end, and I'm a, personally, I'm a shareholder in J.P. Morgan Chase, just full disclosure, but you point out how J.P. Morgan has the ability to make investments here that pretty much nobody else does. And that ultimately becomes an advantage. They just don't have people asking them about how they're spending their capital and how they're investing to the same degree that other banks might. And this is, this is to quote you, the market has a high degree of trust in how J.P. Morgan's, spends its money. Unlike many lenders who can afford to be patient with the profitability of investments. You talk about the return on tangible common equity, 21% in Q2, well above its

through cycle target of 17. It's the highest among the big six U.S. mega banks. And they kind of are in this place where they can make investments and allow more time for them to pay off than many other banks that want to issue credit cards. And as a result, they can win more customer business through those incentives, and the bigger they get, the more benefits of scale that come later as sort of like a longer-tailed benefit to the company itself and its shareholders. It's a pretty unique circumstance that they're in. Yeah, I mean, they just, they have a profitability cushion, you know, just given how,

how high their, you know, return on tangible common equity is, which is kind of a benchmark. I think that a lot of investors and that the banks, themselves used to kind of look at their kind of core profitability that is like how how how well does their capital turn into to profit um and so you know so they can just i mean you know it's it's like classic right it's like they can they could put a loss leader out into the market that sort of like just either grabs them share or not and you know and and you know uh so you know so just just thinking about them as as as as a competitor is tough and you know and that's not to say that other banks don't have like compelling credit cards out there, right? Like, um, but, um, you know,

it's just like I, it just seems like, and just talking to analysts, you know, this, this is a view that came up. It's like there's, you know, when, when, when, when they're, you know, sort of saying, okay, we're going to invest in, in, you know, in our card business, the market's kind of like, oh, really, like how much you're going to spend? How long are you do that for? Like, what's the, you know, whereas with, with, sometimes it just, it feels like just looking at the way, you know, Jake Morgan trades, it's like, oh, great. Oh, wow, they're, They're investing more. Yeah, you got this.

We trust you. That's a good sign, right? And, I mean, J.P. Borgans are the only business that has that, but it's like that's, that's, that's a good place to be. And it may be, you know, kind of unique in banking. So now, we'll see, right? I mean, I mean, cards are not a riskless business, you know, if there's a huge recession, you know, borrowers are, can be exposed. Now, you know, again, Jason, and this is true of most of the big banks, you know, they try and play in the more kind of like prime,

super prime part of the market. So they're not lending to people that they think are at big risk. But, you know, credit risk is credit risk. And then, and then also, you know, again, you know, playing the rewards kind of race, running in that race with everyone else is expensive. You know, you've got to be offering people. You know, they're raising the fee, but they're also giving more, you know, kind of benefits, right? Like more credits and, and other, you know, the point totals and stuff. So it's not like, you know, you have to be able to see through all that and to say, okay, we still think that we're going to be, you know, that this is a profitable business today and we'll be in the future, right? Like if you just buy market share, we know that's

not necessarily like a road to success. So, you know, so it's not, you know, we'll we'll see if these things pay off as as anticipated. But yeah, cards are just, and I think right now is a really interesting time. Like I said, you know, people probably seen the marketing for all the different, you know, kind of card brands that they know that, you know, the, I still never, I still never got the call. Yeah, I never got the call with US Open tickets from Amex Platinum. I don't understand. Who somebody's getting that call? It's not me. So, all right. You got to spend more. You got to spend money to make money, Josh. Tell us, this has been so much fun. Thank you so much for joining me. I want to let people know where they can follow your writing and

you're reporting. You are at Heard on the street with WSJ and then the podcast. Tell people how they find the podcast. What's it called? It's called WSJ's Take On the Week. It comes out on Sundays. We focus on like markets, business, finance, you know, trying to look at what people are talking about in the markets and what's coming up. So it's a good, you know, listen to it on Sunday mornings to kick off your week. It's a good Sunday morning. Listen, all right, tell us, the other man. Thank you so much for joining us. We appreciate it. Thanks guys for watching and for listening. We'll talk to you soon. Ladies and gentlemen, it's what are your thoughts?

Good evening. Shalom. Shalom. Happy New Year, Josh. Somebody in the chat. Gary wants to know, is Michael going to be dressed up again or in a Nick shirt? Wrong on both guesses. What is that?

This is like 70s Supersonics. Yeah, man. Rest and peace in peace. All right. And this was accidental, but we each have the compound trucker hat on. I love him both, honestly. I love him both. Yeah, I've been alternating Siegelman Stable and one of our two compound truckers.

Guys, if you don't have one yet, I don't shop.com. I really don't. In my opinion, the illest trucker cap in the game. You want to get these while supplies last. Let me say hello to some people in the chat. Chris Brown is here. Evan Beauchamp. Matt Whitechek, let's go.

I agree. Biff Grevels. I see you. Who else is here? Georgie, Cam. Dave Alva is in the chat. Blake is here talking about the risk sniffer.

You're damn right. We're going to sniff out some risk tonight. Hey, what was the origin of that sniffing? I can't remember. I don't know, but it was hilarious. There was a chart that was called that, and I just couldn't stop laughing about it. Walter Benvin says, Josh, pounding it down here in Boka.

Pounded hard, Walter. Pounded hard. That's weird. All right, we have a sponsor. Betterment Advisory Solutions. Today's show is brought to you by our sponsors at Betterment Advisory Solutions. solutions. If you happen to be thinking, there's got to be a better way to grow my RIA. You're not

alone. With Betterment Advisors Solutions, we do the heavy lifting so you could focus on what matters most of your clients from improved service that makes asset transition smoother to fast paper-free onboarding that delights clients on day one. We've built a digital first platform designed to streamline your operations and make life easier. Now, if you're thinking, wow, they take the paper out of paperwork, then you'd be right. Throw your RIA your way with Betterment Advisors Solutions. Learn more at betterment.com slash advisors. Investing involves risk. Performance not guaranteed. All right. Shout out to a shout out to Betterment. We like those guys. Okay. The market is. So this would have been a better,

this would have been a better lead in for us if the market had stayed green today. The market is. What are we about to say? The market is. like I guess like the market has been screaming we took a little bit of a break today and like from my perspective thankfully because I don't like those seven straight day up you know moments because you know what they normally lead to so we took a little bit of a breather but there are now this is all right so the question is is it too good and man I remember reading a Jim Kramer column in 19. 1998 on the street.com, and I'm pretty sure it was called, is it too good? Like, this is a perennial problem for investors in bull markets. There are these moments where you just feel like, no, this is too good. Like, it's, it can't stay like this for long. Yeah, it won't.

And it won't. And it's a perfectly natural feeling to have. And, um, Jim was saying there was a time in the internet boom in the late 90s. And I remember him writing a column about, he used to get his breakfast when he came into Manhattan from Summit, New Jersey, where he used to live. He used to coming through the Holland Tunnel

and there was a diner on the other side of the Holland Tunnel. And the griddle was like a thousand degrees. And he would watch the guy crack two eggs on the griddle for him. And it's like, you have to know the perfect moment to pull those eggs up. Because if you leave them on for 30 seconds too long,

they're just burnt to a crisp and unedible. And he was like, comparing that to the NASDAQ, which, you know, it ended up being true. It was just too hot. It gives it too hot to put more money to work into this market atmosphere. So for starters, Mike, would love to hear your thoughts on the environment itself. All right.

So much to say. I guess I'll start here. It's not, we're not screaming higher. We're steadily grinding higher. And there's a big difference. The S&P 500 hasn't been, hasn't closed 3% below its all-time high since the beginning

or since the end of April. Isn't that wild? It's driving people. Absolutely crazy. We've got May. So if you... Samis are screaming. Yeah, no, no, no.

We'll get there. Okay. If you got out of the market in after Liberation Day as the market was screaming lower as it was falling through the floor, through the floor, we got that V-shaped recovery.

And you're like, all right, there'll be some sort of, maybe it won't retest the whole. whole thing, but maybe it'll, you know, give me a better entry. Nope, no better entry. No better entry. Like, not even close. Not even close. Um, so there are pockets of screaming euphoria. There are pockets of nothingness. But I would describe this market as, I guess, frustrating if you're looking for a better entry. Other than that, it's been beautiful. No pullbacks. No screaming higher. It's unforgiving. It's unforgiving for people that insist on buying

dips. It's just unforgiving. It is not giving you a chance to put money to work if like I can't buy it an all time high. Well, I don't know what to tell you. All right. Well, so we'll let's talk about what's going on like front screen first and then we'll get to other areas in the market. What's front page stuff? Well, I want I wanted to say this. Sean and I keep this best stocks in the market list, which we'll talk about later in the show. We have some, some charts to show you guys. But we're looking for constantly looking for where their strength is and the size of the list will undulate based on, you know, how good the market is. And sometimes a lot of names get wiped out all at once like they did this spring. And then when it rebuilds, the longer a rally like this grinds

higher, the larger the list can grow. We have 209 names on the best stocks in the market list. And our universe is the Russell 1000. It's a lot. Profitable companies in the Russell 1,000. thousand. So it's not really a thousand, but like 200 of, let's say, hypothetically, I don't know how many companies in the Russell 1,000 you think are profitable in 900-ish? A lot. Probably. Regardless, there are a lot of best stocks in the market right now. And there's no story to tell when I peruse the list. I look at it by sector. I look at by market cap size. I look at it by value versus growth. Any way you want to slice and dice it, it almost doesn't matter. You got stocks working from every corner of the investment, I don't know, stock a sphere.

It's like, it's just agnostic. If you're a stock, you're probably going up right now. And I don't think in and of itself, there's a lot of meaning there. But I just think it's important for people to understand there are a lot of stocks that are doing well. One other thing, I got a text. I'm a very famous man yesterday. you know my phone is filled with texts from famous people um this is a really famous person and i can't say who but i can read the text mike you could probably figure it out but don't

guess it out loud okay um bear with me one sorry i'll hear this okay so i hit him i'm like yo uber hit a hundred we did it like joking around because i've been yelling i've been yelling at this guy I don't sell Uber at 70, 80, 90. Great job. So he says, I haven't sold any either. Can this market continue? Everything I have is to the moon. Can it continue?

And then I don't answer because I'm busy. And then the next tech is fine. What are your best three for the rest of the year? Is this a client of ours? No, not a client of ours. Like in other words, I probably gave it 30 minutes without answering, just because I couldn't. It's like, all right, fine.

So it goes from everything is to the moon. Can it continue? 30 minutes go by, no answer. All right, what are your next three favorite stocks? This is everyone right now, I feel like. Because even if you walk away, even if you take some stuff off, and I have personally a little bit,

it's like you're still looking for all the other stuff that's going up. It's really, really hard to not participate right now. And don't you feel like that's everybody? Yes, yes, yes. If you own stocks, you're making money. I do want to point out that there are a lot of stocks that are sucking wind right now. Like there's two things are true. There are more stocks working right now concurrently than there have been in a long time.

But there are also pockets of weakness, particularly those that are getting crushed by AI. The trade desk is a great example. but there's a lot of them. I don't feel like there's a lot of them. I feel like there are a few notable ones. I don't know. That's kind of the camp that I'm in. There are a few notable companies that are, as you described.

I think there's way more stocks that just look up into the right right now. I don't know. I mean, unless you have five more examples of that, because that's an obvious one. I agree with you. Do you have five more of those? I can't think of any. Are we frozen?

My internet is sucking win. Let me close some shit out. All right. Close some tabs because we're a little bit live here. Four eyes. You bastards. You're pieces of shit. Are you in your new house?

I can't get it right. It's unbelievable. Are you in your new house? Are you paying up for the business class Wi-Fi? Dude, I'm paying for the quantum internet. How's it going? horrendous worse than the stocks is it really that bad no you're okay now okay we're back yeah we're back okay the question was why does your internet suck so much um i agree with you the

trade desk and some of these ai casualties are notable i just don't think there are as many as you think there are i think there are only a few and you just you happen to know what they are off the top of your head all right we'll see about that So look at this. For example, I'm going to go look at stocks that are 15% of more below their 52-week-high in the S-P-500. Okay. Hit me. There's a lot, dude.

Hit me. Hang on a sec. Index. Index. Not any. All right. It's not working right now. Let's just keep talking.

What else you have? Great. Okay. One thing that's concerning is that there isn't a bare case. and our friend Adam Parker points out that the lack of a bear case is the bear case and I sort of get where he's coming from and I think I agree with him

those are usually not the best times to put new money to work when you can't think of a reason not to and there's nothing holding anyone back and I sort of feel like that's where we are so I just want to go into his piece for a second because I thought it was really good he talks about a dinner

he's with seven cross-asset whatever geniuses Adam doesn't waste time with people who aren't a minimum of 180 IQ and they're all laughing like what's the bare case maybe if Jamie Diamond gets bullish like there's almost like nothing

to point to and then so here's what he said even more than not being able to address a believable bare case it's challenging to even know what to monitor to get increasingly bearish. Investors largely know that the paradigm has shifted with regard to using valuation as a primary or even secondary rationale for security

selection. As for like financial conditions, which would be another thing people would be watching, they probably tighten concurrent with the market pullback, not in anticipation of one. So in other words, that's not going to help you. That's going to be a stock market driven thing. monitoring comments from B of A about credit card spending and consumer conditions, tracking the card delinquencies, looking at employment data from LinkedIn, card data at MasterCard and Visa. These are all reasonable approaches to assessing the consumer, but they don't enable you to pre-position for a downturn without alleviating the fear of missing out on further

upside. So he's saying it's like the only two choices are you either have to admit you will be down when everyone else is down, or you have to not participate at all on the way up. And those are two really shitty choices, but we know everyone's going to make the first one. And as far as all this consumer data is concerned, the consumer, he says the consumer has been solid, but slightly eroding all year. Meanwhile, the market has just absolutely ripped. The erosion didn't matter. So he comes up with, we're not going to read through all these, He comes up with three bear cases, potential bear cases.

And can you guess them without looking? What do you think they are, if you had to guess? What are the three bear cases that Adam would have come up with? Not valuation. Okay, fine. Agreed. Well, he's smart. So I think that Adam would also not say hyperscaler slowing down their spending because that's not going to happen.

They're all in. That's not a real bear case. Bear case won. Oh, really? But they're telling him. He doesn't believe it. But that's not a bare case because Zuckerberg said yesterday, I'd rather go bankrupt than underspend.

I'd rather overspend a few hundred billion. That's not a real bear case. So what are the threat? Allow me. Quote, many are arguing that hyperscalor capital spending could balloon further. Forget about a bear case. Some believe the return for the spending is incredibly high. This past week, one investor told us Microsoft gets its return back in one year.

Another investor said the aggregate return on hyperscaler. capital spending breaks even in three years, has an ROIC of 15 to 20 percent in year four and a 30 to 40 percent return in year five. This means reasonable people in the investment world, in addition to those that the companies believe that for now, even more capital spending could be justified. So he says no way. That's the wrong bear case. Correct.

Case two, government deficits, force interest rates to back up, which eventually hits the stock market quote we are worried about this but we don't know how to time when it will matter and positioning for its inevitability would have destroyed returns nearly every year for two decades so he throws that out bear case three this one actually i think is is the big one my personal opinion ai slash productivity boom hits white collar employment quote recent data have indicated higher than normal unemployment from recent college graduates. The truth is, we don't have a great answer for this other than every other technological innovation cycle that focused on productivity caused labor to be deployed in new and different

areas. AI feels like it has the potential to be different, but for now, we think what's good for margins for the top 500 U.S. equities will probably matter much more for U.S. investing than long-term higher unemployment. That's what I was going to say. But my caveat is for now. Yeah, sure. All right.

So the three bear cases that he laid out, they're not real bear cases. So, like, that's, I think that's the point. Right. He's like scratching and cloying for something and he can't find it. Okay. Well, all right, I just want to, so I got the list. Let me ask you, just circle back to when my computer froze. You said that the trade desk is just one example that's easy to pull from the top of

the dome. Let me ask you this. So what do you think? Let's use 20%. Okay. How many stocks in the S&P 500 do you think are 20% or more below their 52 week high? So one, okay. The number is 150. It's a lot. Higher than I, all right, higher than I thought. Almost one in three stocks. So, and if I, if I expand that down to 15% or more, it's 203. So not everything is up into the right. If you're 15% below, you see that on the chart. It's, it's, oh yeah, yeah, yeah. It's 203 stocks. So this is my point. The stock market is not screaming. The hyper-scalers are screaming. The semis are screaming. The fucking nonsense pre-revenue companies are screaming. I credit to you if you're making money there. That's what's screaming. Everything else in the

middle is sort of blah. There's a lot of blah. There's a lot. There's a lot of blah. I guess for me, the fact that it's industrials, tech, communications, and financials that are all at highs means so much more than just a raw count of how many S&P names. You're right. I don't give a shit about all those consumer staples and fucking drug companies that are 15% off their highs. A, I don't think anybody cares. B, I don't think they're the drivers of earnings growth for the S&P.

Most of their market caps don't matter. And I think if they went to zero, nobody would even notice. I mean, that last part's not true. But the point that you made is the right one, that the stocks that you need to be making all time highs are. And that's all that matters. You see that? Now, is it too good?

No, it's not too good. For the hyperscalor part of the market, for the AI story. So this happened, I don't know, last night. invidia to invest up to $100 billion in open AI linking to artificial intelligence Titans you know what this is like this is like that episode of Scooby-Doo where the Harlem Globetrotters show up or like Batman arrives and it's like whoa what are they doing like what is that a is that a 44 year old reference what year are we talking I'm 48 yeah no in the early 80s you could a thing that could have happened is you could have been watching Scooby-Doo

And then, like, they're trying to solve a case and fucking Batman and Robin show up. And if you're seven years old when that happens, you have to, like, you have to run a lap around the block. They could do that. All right. But it finally happened. The only way this story would have gotten better is if Nvidia is investing $100 billion into Open AI. And Dan Ives is delivering the cash in a brief, in a, in a fucking tie-dye briefcase. I don't even know what else

could have made this story like a more exciting story and the rally kind of faded immediately after but there were some really great memes and if you're like sensitive now it would be a good time to look away from the screen. Hold on before the memes I told you that I spoke to you Dan is the fucking best

this is my language I was at dinner with him the other night in a six person booth and there's two people so Dan, me and Dan are middling and the two people to the side of him are in very traditional navy blue suits and he is in the rainbow outfit.

I love him. I love him so much. Let's get to the memes. All right. I guess this is like a Nintendo joke. Yo, I heard if you press up, up, down, down, left right, left, right, B.A. In San Francisco, there's an infinite money glitch.

So that's Contra. How do you get 30 free lives in a... Okay, so talking, speaking of 80s references, but like, oh, okay, so like open AI is going to spend $100 billion in the Oracle Cloud. Oracle's going to take $100 billion by GPUs. Invidia will take that $100 billion and it make an equity investment into OpenAI. And it's just round and round we go. These three companies are building the Stargate, whatever that is. It's going to be huge.

Here's the next one. I like this one. This is a great meme format, underused. invidia is investing how many billions to open AI to build 10 gigawatts of AI data centers because you know the person in the picture has never thought of a gigawatt or an AI data center in her entire life or ever will.

Here's another version of the merry-go-round. Open AI buys capacity from OCI, that's the Oracle Cloud. Oracle stock goes up, buys more chips from Nvidia then invidia stock goes up then invidia invests $100 billion in open AI then right back to open AI buys capacity from OCI

look there's like it's not quite this neat there's one more guys get over it all right Nvidia investing $100 billion into open AI in order for open AI to buy more

Nvidia chips and I will not describe the picture if you're listening you'll just have to trust me it's a funny meme all right so this is like And not unfounded concern because this is sort of the way the dot com and telecom build out in the late 90s, early 2000s came to an end.

You had a lot of companies that were doing these kind of like vendor financed equipment sales where they would like literally give a potential customer money. The customer would take that money and buy equipment from them. They were like financing their own growth. and they were doing it with routers, servers, storage. They were doing it with fiber optic stuff. And like it's sort of like represented the KAPX boom slamming into the wall. Yeah.

So this is exactly where we are. Speaking about us with Ben this morning. Ben Thompson wrote about this over the weekend that this Oracle, and he was quoting somebody else, this Oracle deal going negative free cash flow and making sure that there's now leverage involved because the hyperscale is it was all free cash flow and they don't give a shit we've we know self self self financed yeah so now you add the leverage you add the the debt involved and oh my god this is a free train and uh i don't know s&p 10 000 yeah core we've put it in the Dow look we we had like we had this whole thing and um i know a lot of the

time i go back to that bubble because honestly it was the greatest show on our It was the most insane thing I ever witnessed, but we really did have, like, companies like Cisco, and there were a lot of Cisco's back then. There was Juniper and Sycamore and Sienna. These were companies that were trying to sell as many routers and switches as they could into a telecom boom. The telecoms were being financed by IPOs and junk bond sales. But this is how this is the end, right?

Not not like, that was the, that was the sign of the end. At some point in time, once we see. start getting dead involved because the free cash flow can't support it, like, this is how eventually it ends. And whether it ends, uh, you know, four quarters from now or 20 quarters from now, eventually it's probably, uh-oh, somebody can't make do, can't make good. But it's, but it's core weave. Like, look, I, I miss the run up in that stock and I really don't care and I'm missing the new run up. I miss the original run up in, in core weave. When it came public, I was skeptical. It dropped. And then it ran from 35 to 180.

And then it sort of had a slow motion collapse back to 87. And I don't know if that's because of like a shareholder lockup, expiry. Okay. So a lot of people were able to sell. And then sometime around the first day or two of September, it just launched all over again, 87 back to 130. That doesn't sound like a lot, but this is a large market cap company. It's $64 billion market cap. And it is just careening back and forth between double digits, triple digits, double digits.

This is, for me, for me, ground zero in this whole thing. This is hugely debt financed. Yes, in the hottest business in the world, cloud computing. Another strike against it is it's in New Jersey. Another strike against it, it's in Livingston, New Jersey. And I know everyone that lives in Livingston, New Jersey. I don't invest in companies based on Long Island. I definitely don't invest in companies anywhere around that.

livingston short hills area so it has a lot of strikes against it and if if that concept of like vendor financed purchasing hits the wall that's where you're going to see it in that stock people are going to get really scared of that thing what are you what are your thoughts yeah i don't know enough about the colerive specific part of it but i would just say again it's really important that this is the next phase in the market. So this is from Doug O'Loughlin. This is really important.

He said, okay, the implications are profound for Amazon, Microsoft, and Google. They can no longer treat AI infrastructure as a discretionary investment. They must offend their turf what had been a disciplined,

cash flow funded race may now turn into a debt-fueled arms race. That's a vibe shift. If I've ever seen one, Welcome to the next and newest phase of the capital cycle. I believe the Oracle quarter achieves something more elusive than just revenue. I believe Oracle has just sparked the elusive animal spirit to life. For me, Oracle is the quarter that will remember in history.

I'm starting to think that the tariff potential, uh, anyway, he says like this is it. Oracle is going negative free cash flow. Can you explain? Wait, can you explain for everyone? What was the significance of the Oracle? So this was the Oracle earnings report last week, which took place a month after earning season. And the stock had its biggest move ever. It went up 40% in a day, which in dollar terms is just an insane amount of money.

What was it about what they said that caused that kind of a stock reaction? And why does that ignite this debt fuel to arms race when before all these companies were comfortable spending out of cash flow? And like what was it about what Oracle said that makes this guy feel that way? so one more quote and I'll tell you that he said compare the spending of the big three with that of Oracle Oracle is going to go negative free cash flow to win and it's likely that incumbents will respond I believe it's time for technology incumbents to start spending a lot more and most already indicated that they will but when what on on third on Thursday Mark Zuckerberg

was on a was on a podcast and he said if we overspend by a few hundred billion dollars that is much less, he goes, it'll be unfortunate, but that will be much less dangerous than falling behind. So the contract that we learned about in the Oracle call, was that a $400 billion contract? I think $300 billion contract with Open AI. It was like $50 billion annually. And I came up to the details, but Open AI is only doing $10 billion worth of revenue. And they're committed to like 50 a year for the next six years. Whatever the number is, there is not enough free cash to to justify it and enter a private credit or public and public credit, right? Blackstone's going to get involved.

All of these giant pools of capital are going to get involved. And if this does not translate into gobs and gobs and gobs of cash flow, and maybe it will, maybe it very well may will. But this will be the time where we look back on and say, okay, that was it. That was like the beginning of the end. And who knows when the end can be. The end can be 15,000 on the S&B. Who knows?

But I guess I'm trying to figure out where is the cash flow that gets generated from going negative cash flow to make these KAPX investments? Is it coming back in the form of subscriptions to open AI, $20 a month from a billion people? Because then I sort of get it. Is it more like an enterprise customer spend and all of these companies are now going to take whatever spending they're doing and migrated into the AI and leave behind legacy? spending that they used to do. Yes. It's all of these things. I think it's all it's, I think it's the 493 that are not doing anything that are basically

at zero. Totally rebuilt in their entire stack. In the chat, AirMax elitist says a trillion dollar spend for a new search engine doesn't seem financially responsible. So I know he's being sarcastic, but like I do feel a lot of people are like, I don't understand. It's just a software I could talk too differently than I talk to Google. and that's where all this all this carrying on is about.

I understand that sentiment too, but don't be so naive. Like, think about... I think he's being a smartest. No, no, no, but I am saying this is what people think. Think about what happened when we got the iPhone 7. I'm sorry, the iPhone 7. Think about when we got the iPhone.

What year was at, 07? When did we get the first iPhone? Yeah. Could you... 07, but nobody bought one until iPhone 3, which was 2010. You never, in a million years, could have predicted that was to come, the GPS unlock, the Uber, the App Store, the Spotify's, the Netflix,

like, not, maybe not Netflix. You could never, you could never, ever have guessed what's coming. So don't act like this is the final version and that it's done and that all the, that Mark Zuckerberg is an idiot and you're smarter than him. Just don't, don't, don't be that guy. I said that on TV today about Jensen Wang. And like Frank, so Frank Holland was guest hosting. I don't think Scott would have asked this question.

shout to Frank, but he's like, asking me, Joe Taranova and Jim Labenthal, like, is Nvidia making a mistake committing to spending $100 billion? And I'm like, dude, are you fucking kidding me? Like, in other words, like, can you imagine the audacity it would take for somebody sitting their ass on the New York Stock Exchange in a suit, critiquing what Jensen Wang thinks is the right investment to be making in AI? Good for you. Give me, like, come on.

Like, what are we doing here? Now, we could critique, like, the shareholder reaction. And, of course, there's, like, room to discuss, like, whether or not the stock reacted well to it, I would argue it did not. I think if that announcement came six months ago, Nvidia would have gone right to 220. And Nvidia did not. It reversed.

I think it had a weekday today. That could change because my – yeah, it was down 30. 3% today. That could change because Micron just had great earnings after the bell. But Nvidia had this huge pop on that news and then gave it up. All right. Markets open tomorrow, too. Uh, all right. But, but this is this, anyway, the point is, I know we're going long here, the Oracle quarter and what's happening now, because I feel like we've been saying the same shit every week for the last, I don't know, six months. This was an inflection point. So, all right. Well, wait, before we, so before we move off of this, the question is, what do you

do. So my opinion, and then I want to hear yours, you do not buy any more AI unless you're willing to trim some of your other AI. In other words, in this for me, I'm not telling other people what to do. I will not commit more dollars into the AI theme unless I'm taking profits from something that's already gone up a ton. I don't want to keep pushing the AI team specifically. Well, I guess at this point, it's probably half the NASDAQ 100. It's all the utilities and the natural gas transmission companies that are related to the build out. It's the industrials that are digging up ground and assembling all of these new data centers. It's a really big theme.

And I guess from my perspective, I'm glad I'm in it. It's done really well. A lot of stocks have gone up a lot, a lot of points or percentages for you. And that's great. I'm not looking for my 12th AI stock. and if I find one that I really want to be in, I think my argument would be, okay, but the money's got to come from somewhere.

I am not going negative equity to win the AI race as a common stockholder. I'm not willing to play it the way that Oracle is willing to play it. What do you think is the answer here? Man. Shut up and buy. I don't know. No, this is the fun part.

I don't know. This is like what we're doing here talking about. I don't know what the answer is for everybody. Another answer is focus less on valuations and price targets and all that old school shit and maybe just focus more on your own position size. Hang on. I mean, I hate this entire conversation because specifically it's like, are we talking about your brokerage account?

No, so are you. I'm not just saying. The listener, it's like we're talking about like if you have a fun trading account, right? This is not like your, this is not financial advice for your, you know, your retirement account or anything. I'm talking about if you have a stock trading account. It's self-directed or you work with a broker and you've got 25 stocks in your portfolio. Should you be looking for a 26 stock and your whole portfolio is like Micron, Broadcom,

Nvidia, AMD. Right now, right now, no. No, of course not. So that's how I feel. And if you come across something that you feel like, all right, this is going to be the next phase of the AI trade, that's fine. Maybe lose a little bit of Microsoft then. Yeah. Maybe lose a little bit of meta.

Okay. So, it is a very interesting market. We have on the one hand, and like the market, the participants, there's so many different storylines and areas of the market. You have the American Association of Individual Investors that we've spoken a lot about, not participating in the euphoria. You have Charles Schwab's quantitative. Literally, what are the clients doing?

This is not a... This is not a... This is not a survey. What are the clients doing? they're not very bullish like at all the last five months it's been sort of flat um and then you have of course uh you have this one corner of the market so i opened up my twitter and i saw a buco capital who is one of the best accounts on the platform in my opinion tweet and he nailed it my feed is just retail investors posting screenshots of literal millions and gains from unprofitable and even

zero revenue businesses and then some fundamental investors slowly going insane yeah screaming into the void. When have you seen that before? I saw... 2021. You know, the original, somebody tweeted this. I can't remember. It was so good.

This is like 2016 about people who are screaming to professional investors screaming to the void. This is 2021. Okay. So the people that, now, forget Schwabin and the AII, talk about young people that are into trading the Robinhood, like the retail investor when you think about them, they're on fire. They are absolutely on fire.

So Goldman Sachs has a basket. So try down, please. This is from Sherwood, Luke Kawa. Luke said a Goldman Sachs basket of stocks, widely held by the retail community, is going straight up into the right, poised for a record. 10th straight day of gains. Look at that bar. The bar is the number of days.

It's up 13% over a 10-day period. Now, Liz Ann Saunders, and I'll stop talking on one sec, Josh. Liz Ann Saunders tweeted, the meme, the meme stocks are up 73% on the year. And credit to us, we created a D-Gend Dow. Unfortunately, it's not investable. And short off for a sec, John, I just want to set this up. So we first unveiled this in December 2024. And we were like, listen, if this is the top, we'll own it. Our bad. Sorry, if this is like negative juju, bad vibes. People were mad at us. Okay. The D-Gen Dow is up 67% year-to-date. And interestingly, a lot of the names that I would just think are in the meme index, a lot of those things are not

in here. So we have, look at that, up 67%. And yeah, it got, it got an, so even more impressive than that, it almost tripled off the lows. So here's the thing. You have hyperscaloalers gone berserk, the AI trade, and then you have all of these not even unprofitable names, although yes, they are unprofitable. in some cases, you have pre-revenue companies.

So, Josh, you know what's going on with Oclo, the nuclear company? The mini nuclear reactor company that Sam Altman is invested in. So this company looks, honestly, it looks like they just invented gLP ones. So the stock is going straight up. It's up 1,500% of the last year. It's a $20 billion market cap, no revenue. Yep. Why would you need revenue?

No anticipated revenue next year. maybe in year 27, and they speak a lot on the call about the administration and data centers and nuclear energy. And listen, investors aren't stupid, okay? It is going up for a reason. And not only the people that buying it, not stupid, now maybe some of the people that are buying it today are stupid, but credit to them, if they made money, making money is not stupid. I don't put some money to these investors.

In fact, making money is the opposite of stupid. However, I got a text from my brother-in-law who is an artist, okay? He's an artist, he's a musician. he doesn't ask about the stock market, and when he does, I pay attention. So he said, my dad made some adjustments to my portfolio. This is on Saturday. Recently, he asked me to pass all along a question for you. He purchased shares of ACHLO, a startup work on nuclear reactors to power AI.

Since then, the stock has got up about 20% of my account. He's curious if you have any perspective on Aklos, specifically or more broadly on the rebirth of the nuclear industry. So I said, oh, boy, I was just looking at this. So I said, I haven't done any work here, but I'm just showing him a few tweets. Somebody tweet, I shared this with him. Here's a tweet from a sad value investor. My boy who thinks that Oclo is almost the same size as NVIDIA because the share prices are similar is up 200% this year. All right, let me read that again.

My boy who thinks that Oclo is almost the same size as Nvidia because they have the same share price, his account is up 200% this year. You know how frustrating these moments are for people that know anything. The more you know, the worse you're doing right now. Correct. So to Bucco's point. So here's what I said. This is a speculative mania. It's a $20 billion market cap.

I have zero insight into the fundamental hope driving these moves, but it's wild shit. Doesn't mean it has to stop going up tomorrow. But yeah, ride the wave, but don't miss more than you could lose. I hate talk about this type of stuff I'm not educated on. But this type of vertical move higher usually ends very poorly. So again, if you just have a few bucks in this name, then by all means, who cares? You have a million dollar portfolio. Maybe you could just take $10,000 and buy Vick's call options.

um december or january strike and just wait for some fucking shit to happen and uh that's that's like if you want to buy insurance because your portfolio is so much and you have so many of these names yeah and you can't believe how much they're up you want to if you want to peel 10 grand one percent out of a million dollar portfolio one percent do it yeah oh oh i'm sorry you're right yeah yeah yeah fine one percent of a million dollar portfolio buy so buy VIX 25 calls. Oh, don't even look at the premium.

Forget whatever it is, it doesn't matter because if we get one of these swift 10% ass kickings because of how insane things are right now, you're going to be thrilled that you did that. It's not financial advice for me to you. I'm speaking rhetorically. I don't know you. I don't know anything about you personally.

So Tyrone just texted us, a text that he got this morning. Good day. How do you feel about Aklo? Like everybody knows. is everybody's in. It's the new palinth. It's the new palance here. Sure.

So, all right. So I said, I've said this now several times. Put up the D-Gendau real quick. We don't have this one, do we? So none of these things are. We don't have ionic in here or I-O-N-Q, whatever it is. We don't have the quantum computing. What's ionic?

That's the quantum computing? And Q-U-B-T. What do we have in here that needs to be? We don't have rigat-one. Get, get draft kings out of here. We don't have rigat-tony. We don't have rigat-tony. draft kings might as well be apple at this point get that out of here we need to

oh dude i just realized you're not a soprano's guy it's like one of the best ever one of the best ever anthony junior lines my bad what was it's like a fight of the family dinner no no no no there's like a family fight at the dinner and he goes he's like eight years old he goes what so no fckin ziti now um all right what's i what's roguettoni riggetti computing reggati i want to i want to And with this, it's really hard not to see this nonsense, all of these unprofitable and in some cases pre-revenue names going up 20% a day with a $20 million on market cap. It's really hard to see that happening and not want to take all your money out of the market. However, this is the world that we live in.

This type of activity is not going away ever. Get used to it. This is the game now. Don't let it distract you from the fundamentals and the reality that there is a legitimate middle market and this nonsense is just going to happen when there's risk appetite you're going to see this type of moves get used to it last point throughout this chart i asked sean to make me a chart work sean um chart off please actually let me set this up i said shan how many plus one percent days have we've seen in the equal weight since july i just picked a random

date um and he made this chart look look look back please chart on so we've had We've had seven 1% days for the Equal Weight Index since July 1st. That's 59 days. So Sean zoomed out and made a 59 day window and look at the... Very normal. And this is normal. This ain't nothing. This is nothing.

So when you say we're screaming higher, it's a speculative mania. Yeah, in some places, but this is nothing. I mean, we're going to, like, now mass-produced mini nuclear reactors, like, igloo cooler-sized nuclear reactors. Dude, they're going to be in your ear. Can I have one of my backyard? Look, I know we're joking. All of the CAP-X spending, the trillions of dollars in CAP-X spending for data centers,

it's worthless if you can't power the facilities, and you literally cannot power the facilities with, and Michael Semmelis explained this to us in many different ways on many different occasions, you absolutely cannot like. all of these facilities with the current energy infrastructure. There's literally no chance that you'll be able to do it. It's not going to be wind.

It's not going to be solar. You literally need something that's nuclear. Now, do we want to build like 10 more 3-mile islands in this country? I don't think there's the appetite for that. So the Aklo Bull case and all the uranium

stocks, like I totally get it. And we talked about this with with Jan Vanek and they have an ETF that owns all this nuclear stuff or like, right? Like all the miners. Okay.

So I totally understand the story that almost like you can't have the AI projections they're making, the usage projections, you can't have them if you don't accept the fact that there's going to be

a heavy nuclear component. So fine. I get it. I still don't want the exposure to it because I'm not convinced it happens in a linear fashion, like in a straight line. And if I miss, if I miss, I miss.

But I can envision a scenario with these stocks are all cut in half in the course of 20 days. And people are like, holy shit, what just happened? I'm looking at for Van Ex. When I was on, did he say this was their biggest one? Oh, NLR. Is that the one? NLR.

NLR, nuclear. He said it was their biggest inflows this year. This thing has $3 billion in assets. Probably all in the last 12 months. So anyway, in conclusion, it is a fun and interesting and boring and psychotic insane market all at the same time. There's a lot of different things going on. Okay.

Here's something interesting. We got an update to the OECD global growth outlook. And it turns out that a lot of our worst fear is about tariffs really just are not showing up in the way that they were expected to show up, not really serving as that much friction. And, you know, we're hearing once more, well, you haven't felt them yet. Eh, all right.

So, but definitely I will, like at this point, right? Is that what they're saying? It's a little bit, like, um, waiting for, you know, it's like waiting for Godot. And I don't know, do you know the reference? So waiting for Godot is a famous play. Um, it's horrendous. by 21st century standards, unwatchable.

The point of the play is that nothing happens. It's two characters having a two-hour conversation that just goes in circles while they're waiting for somebody to show up for some reason. Godot never shows up, spoiler alert. It's a complete fucking waste of time. But I guess for people in the late 1800s,

this was like the height of entertainment. Anyway, waiting for these tariffs. Sounds riveting. Yeah, no, it's amazing. waiting for these tariffs to, like, show up. It's a little bit like waiting for Godot. We're just talking ourselves in circles. But let me quote a few things,

and then I want to hear what your thoughts are. Okay. The OECD now expects global growth of 3.2% this year compared to the 2.9% expansion it had forecast in June. Global growth was more resilient than anticipated in the first half of 2025, especially in the emerging markets. The full effect of tariffs, is yet to be felt. However, we are warning of significant risk to the economic outlook.

That sounds like they put that in every report. That's a Graham Rapids Hedge. Big time. You could just automatically include that. But what's notable is that they are now raising the global outlook and the U.S. outlook for GDP. The OECD now expects headline inflation to amount to 3.4% across G20 countries, slightly lower than June's 3.6% projections.

So they are reducing the tariff shock inflationary pressures that they were worried about and raising the global economic growth. And I just, one last thing that I wanted to pull out. Let me see if I could find it. Oh, growth expectations for the U.S. alone went to 1.8% for 2025. the June S, it was 1.6%.

All right, enough. So, all right. But so, like, that's the backdrop. So you talk about the lack of a bare case. Yeah. This is not a situation where the global economy is teetering. We're getting rate cuts and they're raising growth expectations simultaneously. All right.

Think about that. I'm thinking. I'm thinking. I'm liking. I don't think that this is just a U.S. phenomenon, although it's probably more pronounced here, this K-shaped economy that we live in. It is what it is. And obviously, like, the fabric of our society part, let's just, let's not talk about that for a second.

Just purely the economic ramifications, okay? Purely economic. The people with money have so much of it and are spending so much of it. And I don't know what stops that. There is stock market crash. Yeah. Nothing else. It's circular.

It's circular logic, right? Like as long as it keeps spending, the stock market will keep going up and up and up. It's the meme that we were talking about earlier. But you made the most important point that it's not a U.S. only phenomenon. I follow a lot of celebrity DJs. And these are people that go around the world playing parties. And depending on the time of year it is, they're going to the same spots because that's like where this global elite class is gathering. And sometimes the top 1% in the world, sometimes like the top 10%.

So Ibiza is not all 1% or global 1% or is. It's just the place to be. But this is like a migrating party. It's the same people. They go around the world. And it's one point in the year. They're in San Trope. Then they're in Monaco.

Then they're at the F1 race in Miami. The F1 race in Austin. Is it Monaco or Monaco? No, it's not. But like they're in St. Bar. It's at the end of the summer. It's like this thing.

But like the amount of people who have the money to be, at these things at this point is like what what i think has changed like imagine like these velvet rope opportunities to go to these places to see like fucking marshmallow dj or something and you can't get in right it doesn't matter how much money you have you can't get in because the sheer amount is too much right who have the money to do this has exploded and i think that that's and it's not dead and it's not dead it's equity we've got equity and cash so you know i'm a wealth that guy.

I know. So you ask me, you ask me, um, like what, what changes this? I just think it's the stock market. You, you get a 20, another 2022 without a V-shaped recovery at the end. That's what changes this. Sure. Yeah. But like, you want to, you want to like bet on that happening?

No, dude. It ends when it ends. It'll, right? Like, I don't know. That's true. All right. Um, one last thing on this. Powell spoke today in Rhode Island.

Neil Dutter had an instant reaction. We could put this up if we have it. In Powell's speech, two things stood out to me. First, the recent pace of job creation appears to be running below the break-even rate needed to hold the unemployment rate constant. Second, quote, the increased downside risk to employment have shifted the balance of risk to achieving our goals. So Neil is saying policy still be characterized as modestly restrictive.

There's reason to expect Powell to be on board with rate cuts at each of the next two meetings. So, like, assume Powell's pivot toward being more outwardly concerned with the labor market versus inflation, another two rate cuts. Last thing, I'm seeing a lot of versions of this chart going around. Put this up. Have you seen one of these yet? I have not. I hate these charts, but what's your point?

That's why I'm pulling it out for you. 2018 versus 2025. We had this really scary dip earlier in the year. in 2018 when the tariff started. Then we had a big recovery in the S&P. And then in the fall, the wheels just completely fell off. And the market crashed into Christmas. And a lot of people are taking that action.

And they're plotting this year. Now, obviously, there were more differences than similarities. But I wanted to just... This is criminal. I wanted you to get a little fired up with this because I've seen a few versions of it. This is criminal. Show me the percent change. That's horseshit.

No, because that ruins it. The percent change actually is not. not that bad. Yes, it is. No, it's bad. How much was the April, how much was the April correction? 19%.

Is that all it was? Yeah, I think the March correction in 2018 was 19%. Oh, really? Because I remember March was 19. It was only 19 this time around. All right, maybe you're standing corrected. Either way, so what? Lines can only go two directions, okay?

They can go up down sideways. Oh, shut up. This is nonsense garbage. All right, next topic. So I want to go through this quickly because it's enough already. But Josh Schaefer tweeted this chart from Bank, from Savita Supermanian. And she said, since 2023, consensus has been overestimating earnings growth for the 493 while underestimating growth for the Mag 7.

It's just remarkable. Like the dark blue lines, the forecast has continually come in lower than expectations. They've been underestimating and overestimating on the light blue line. It's just remarkable. Remarkable. Next chart, Todd Sown. Semis, holy shit. They're 15% of the market now?

Unbelievable. Broadcom is large in the meta. What in the world? Not for long. You know, the thing about market tracking changes in market cap or dollar amounts in market cap, man, that overnight, overnight. Yeah, yeah. You're right.

We've seen hundreds of billions come out of Apple at the drop of a hat. I'm perfect segue next chart apple and invidia now 14% 14% of the SEP 500 wow the two stocks combined are 14% what is it what is the thing we used to talk about where like ET&T and um so it was 40% 20% in the 1960s no yeah it was uh man in my head I think it's like 17% that we're getting there we're not too far away it's it is right it's wild uh all right however um all right however um Automize everywhere for the first time in a while. The Russell 3,000 spent years underwater. So finally, we got the Dow, the S&P, the NASDAQ, and the Russell for the first time since 2021. All right. I've said this before. It's like there's so much data and information.

It's really easy to make, to paint any picture you want about the market. I mentioned earlier, and it's fine. There's new ones involved. It's not black or white. I mentioned earlier the euphoria in that segment of the retail. hell market, which is, let's call it what it is. I'm not mad about it, but it is euphoria. And then other places in the market, it's like, you know, sort of yawn. So, Urien at Fidelity, Urien Timmer is talking about, he's talking about lack of froth in the market. So Urien says

another sign of froth in the market would be a surge in IPOs and MNA activity. So far, there are no signs of this. The chart below shows that IPOs and secondaries remain at average levels and far below the extremes experience in the easy money liquidity bubble in 2021. Chart on, look at this. So the purple and blue line. lines at the bottom, uh, that represents IPOs and secondaries. And nothing compared to that I have a counterpoint to this. Would you like to hear it? Sure. Okay. We don't need new IPOs for that to have that froth. Agreed. We're dredging up the old IPOs that are broken. I agree. You're right. You're right. Open door. Um, all the shit Eric Jackson's doing with all,

I don't even know what those stocks are, but those were 2021 vintage IPOs. When you have a stock at $2 that runs to $10, there's no need for there to be a wave of new IPOs because we have the old ones. I'm in Joby and Archer Aviation. These are 2021 vintage bubble stocks, but they've made a lot of progress in their business over the last four years. But like, that's what's replacing all of that supply. But then we do, we don't have a bubble in IPOs, but shit, we got core weave this year

and circle and we got a bunch. All right. So next chart shows M&A activity or lack thereof. It's almost fallen off a cliff. Not almost. It has fallen off a cliff. But, Josh, to your point, you're right. U.S.

IPO activity picks up after Labor Day. September strong start stands out for this recent years. That's Bloomberg. So we are getting more IPOs. But you're right. You're right. I think the context that you give around URIEN's lack of IPOs is important. So there you have it.

More of that. And then lastly, do you have anything else? Let's just, let's wrap up. The AI glasses. We got to do me. You want to do, give me 30 seconds on the AI glasses. So meta is really going for it. $800, it can show text messages, video calls, turn-by-turn direction of maps. They predict that meta will sell over 100,000 units. And so 100,000 units

by the end of next year. All right. This might end up being my worst take and Nicole can save a copy of it. I think these are for virgins. And I don't, I don't, I don't think. I think they're selling 100,000. And I don't think it's socially acceptable, at least not yet, to walk into a room wearing glasses with fucking cameras on the front of them. And now, could that change with Gen Alpha, like a face store? Yeah, I agree with you. I totally agree with it.

It could. For people in my demo, don't step to me with this shit on your face. Don't worry. I don't think anybody's going to. But I agree with you. Okay. All right. Let's do make the case.

I wrote this up for CNBC Pro with Sean. We talked to that at the end of the show last week about these energy stocks. They were ripping again this week, man. I'm telling you, there's something percolating here. I don't own any of these. Okay. This is the worst corner of the market. I'm going to show you the best stocks.

I have five. And we gave these letter grades. Let's roll through these. Valero. This is the best one. This one, like, for some people that look at this and there'll be that guard, I missed it. And I get it. Disagree.

What do you mean? I know, but I understand it. No, I don't, no, I don't, I reject that. This thing is gone side. This thing is going to miss out. This thing went Sino is for a year. It's only starting to move. Okay.

Another refiner, Marathon, pull this up. This one looks even better. You buy this, right? Yeah. Yeah. Here's Baker Hughes. This, if this one takes out 50. I don't know.

I feel like the stock never works. It never works, but it sometimes works. If this one takes out 50, who's selling it? Okay. Who's selling it, honestly? Yeah. This is this is not a refiner. This is oil field services.

And they have done a really good job managing the business. Don't get me fundamental, dude. You don't know shit. Next chart. Thank you. Philip 66 is the other refiner. This is the one that hasn't broken out yet. It's the juiciest.

It's juicy, right? Yeah, I like it. Because if you like the marathon chart, this is the marathon chart, but three weeks ago. Yeah. You understand? Yeah. Okay. And there's an activist.

I think Elliot is in this stock in size. So I thought that was an interesting one. Here's, I do own this one Chevron. I'm finally green. I got murdered in this stock when I first bought it. Take a guess where I bought it on this chart. I mean, that did look clean. I know.

It was a failed breakout because of Liberation Day. But I, um, I averaged down and I survived. I don't trust it. So I think it's a good dividend stock right now, but I don't think this one's going to go. So I gave that one to see. Anyway, my make the case is. is time to start looking at energy stocks again. I know there have been a lot of false,

there's been a lot of false promise in this space, but someday you're going to wish you did. And that's my story. You got a mystery chart for me? I do. All right. So let's go. Let's turn on, John.

All right, we're looking at a one-year time frame. All right. I'll give away the orange line. I mean, the orange line is an index. It's the index. And the purple line is another index. in a different area of the world that you'd be surprised that it's beating our index. Okay, this is Chinese internet is purple, and the orange line is either the NASDAQ.

So the orange line is the S&P and purple line is not that. Let's zoom out a little bit. So I did really good then. Let's zoom out a little bit. This is a tough mystery chart, but like... Can you give me something else? I will. This is five years, okay?

So would you say that five years is not cherry-picked? It's five years. Yeah, these are the same chart. It's five years. Almost perfectly identical. Not perfect, but almost. All right, the purple line is basically the opposite of what's international. European banks versus the ex-LF.

It's international value. Isn't that wild? I'm really good at this. No, but no, it's a tough guess. But isn't that, I only just want to show you like, isn't that very shocking? Wait a minute. How was I supposed to guess the Fidelity Series International Value Fund? It's international value, I told you, I told you it was a tough way.

one. This is not guessable. Okay, my bad. I'll lay you up next time. I'll lay you up next time. This is not guessable. You have to say it's an investing style. This is not guessable. Forget it. My bad. My bad. But isn't that wild? Do you see the shit I pull out for you next week? Penny stocks. Fucking bulletin board stocks. Isn't that surprising international value has outpermed the S&P for five years? I would not have believed that if you didn't show me the charge. How a sway? I think the foreign banks would probably be the key to that.

But who knows? Maybe I have no idea what I'm talking about. They have a lot of miners and gold is up a lot. Maybe that helped? Sure. I don't know. Value. Biff Grebel says as a wealth manager, I should have memorized all mutual funds. All right. Guys, thank you so much for hanging with us today.

We really appreciate it. We miss you when we're not here. Thanks to everybody who joined us in the chat. As Michael pointed out, it is a wet and wild. market. Obviously, some things will end badly. That doesn't mean the whole thing needs to end badly. Stay focused. Do what you think is best for your own long-term investing and do not false way to the madness of the crowd. Tomorrow is an all-new edition of Animal Spirits. My favorite podcast starring Michael Batnik and Ben Carlson. We'll do listen to the koala and

subscribe as you could see on screen. We'll do a new edition of Ask the Compa. We'll do a new edition of ask the compound and then end of the week is an all new compound and friends keep it locked we'll talk to you soon