The Compound and Friends - Liberation Day, Goldman Gets Bearish, Falling Knives

Episode Date: April 1, 2025

On this TCAF Tuesday, hear an all-new episode of What Are Your Thoughts with Josh Brown and Michael Batnick! They discuss Liberation Day and tariffs, Mag 7 weakness, CoreWeave, AI and much more! This episode is sponsored by Public. Fund your account at https://public.com/WAYT and get up to $10,000 when you transfer your old portfolio.   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 Public Disclosure: Paid for by Public Investing. All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Public Investing, Inc., member FINRA & SIPC. Cryptocurrency trading services are offered by Bakkt Crypto Solutions, LLC. Complete disclosures available at http://public.com/disclosures 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 public.com slash W A Y T. More on that in a moment. It's Michael Batnick. It's me. It's a supersized edition of What Are Your Thoughts? And boy, did we have a lot to talk about this week. We take a look at first and foremost Liberation Day, because this is the long promised

moment where President Donald Trump reveals the global tariffs that we've all been waiting for, and we get to see the continued market reaction. And something tells me this won't be the end, just the beginning. I hope to be wrong, but the fun part about all this is we all find out together. Goldman Sachs cut its forecast for both S&P 500 earnings and stock price returns by year end. We have a bunch of economic commentary from our friends, Ed Yardeni, Neil Dutta, et cetera. We take a look at the Mag 7 bear market. We take a look at the state of the AI trade in the aftermath of Coreweave's IPO and all

kinds of other stuff on Tesla, Gen X, low volatility stocks. It's just a ton of stuff in here. So I'm going to send you in. Thank you guys so much for listening. Enjoy the show. Welcome to the Compound and Friends. guys so much for listening. Enjoy the show. only and should not be relied upon for any investment decisions. Clients of RIDHOL's Wealth Management may maintain positions in the securities discussed in this podcast. All right, all right, all right, all right. Five o'clock East Coast time.

It's Michael Batnick. It's me. It's an all new edition of What Are Your Thoughts? I wanted to just start by complimenting the Exhibit A hat that you're wearing. I like it. For people that don't know, Exhibit A is a little startup that we incubated inside of Ritholtz Wealth Management with Chart Kid Matt.

And you are the CEO, Michael. I gotta tell ya, the subs have been great. More importantly, feedback, immaculate. Really? No notes. Really? Seriously, off the charts. Pun intended. How about that? If you're watching this and you're a financial advisor, check out... What's ExhibitA's website? It's exhibitaforadvice.com. The story is you can't make your own charts, update it. It's

too much. Compliance, the whole thing. We got your back. exhibitaforadvice.com. Check us out. That's cool. And we have an actual sponsor. I want to give a shout out to Public. If you're serious about investing, you need to know about Public.com. That's where you can invest in everything. Stocks, options, bonds, crypto. You can even earn some of the highest yields in the industry, which I do. Still juicy. Yep. Still juicy. The 6% or higher yield on the bond account is worth checking out. Public is a FINRA registered SIPC insured platform that takes your investments as seriously as you do. Fund your account in five minutes or less

at public.com slash W-A-Y-T. That's public.com slash W-A-Y-T paid for by Public Investing. Full disclosures in podcast description. All right. Welcome to, uh, what is it? Salvation day. Liber.

No, it's what's the day before liberation day? You know, I've been looking forward to this podcast all judgment night. I'm fired up. I'm ready to go. Was that an Emilio Estevez movie? Another judgment day. No judgment, judgment night, Emilio Estevez. Okay. And,'s Judgment Day. No, Judgment Night, Emilio Estevez. Okay.

And, all right. Early 90s. Let's go. So, all right. So, it's Liberation Day, sluts. Are you ready? Because here it is. You've been hearing about this for weeks now.

Some would say years now. But we are on the eve of the tariffs being announced. I'm hearing 20% ish is the scuttlebutt. That's a whisper number. I'm hearing that there are going to be specific conditions how certain countries can lessen those tariffs if they are willing to play ball. Kiss the ring?

Yeah, I mean, listen, there might be an out. The market is acting like there might be a, so stupid, but there might be like a positive surprise. And we'll get back to the tariffs, but what I wanted to point out was that we actually have a non-farm payrolls report on Friday, April 4th, and that, according to Michael Hartnett at Bank of America, is probably gonna be the more consequential day. In other words, let's assume tariffs are already

either priced in or on the verge of being priced in. The real thing right now is whether or not the economy is decelerating so quickly and where that might show up or might not show up is in that March payrolls report, which we're gonna get two days after liberation day. So I just wanted to throw that caveat out before we spend all this time on Salvation

Day, Liberation Day. Well, let me catch your caveat and throw something else back in your direction. You've been saying for, I don't know, maybe a year or two that we we're gonna wake up one day and it's just gonna be a nasty NFP number like it's not gonna be a gradual deceleration you're gonna see I don't know where a sharp decline you think this is the one no no but I still think that's out there I don't know it's this one I really don't want I really don't want to be right about that. Okay, so let's talk tariffs. Let's talk Turkey. John, if you'd please play this video. This is-

You heard Lucas's reporting there where the president says he doesn't care if the prices go up on US cars. So what's the message to the US consumer? The message is that tariffs are tax cuts, tariffs are jobs, tariffs are national security, tariffs are great for America, tariffs will make America great again. Holy shit, I want what he's having. Yeah, but it doesn't matter if it's true or not. There's 30 to 40 million people who believe in that. So that's it. Like, you might lose 10 million of those people

and then the midterm's gonna be interesting. But like, for right now, if he said tariffs cure cancer and AIDS, there are 30 or 40 million people that'd be like, yeah, that sounds. I mean, tariffs are a tax cut. Don't bullshit a bullshitter. Who do you think you're talking to, sir? Well, so that's definitely not true.

But there is a world where this administration feels that they're in a good enough place, that they're willing to risk a recession, and that on the heels of these tariff announcements, all of a sudden, they're getting all these visits in the White House from all of these foreign companies that are announcing massive scaled projects to be built here in the United States. And that even if there's a few month lag between when we feel the positive effects, those announcements

will be enough for people to feel that this tariff move was the right move to make. And I'm not gonna tell you that's a 0% probability. Well, I was gonna ask you, what do you think it is? Because I think it's very slim. The reason why I think it's slim is because I don't think the White House or the Fed or anyone else really can control what happens

once we get into a scarcity situation, scarcity of jobs, scarcity of opportunity. I think you lose control really quickly of the capital markets. I'm watching what everyone else is watching. We're going to get earnings for Q1. I think the commentary is going to be pitch black about all the uncertainty. I think you're going to hear about a lot of stalled CapEx plans. And then again, I'm watching this jobs report on April 4th to get some sense of whether

or not March was a bad month. We really haven't had a bad labor market month in a long time. And how does the market react to that? I don't know that we're cheering like, oh, yay, we surprised so much to the downside. The Fed is back to four cuts this year. I don't think anyone wants that. No, not happening. I think Tuesday is going to be, I'm sorry, Wednesday, the market's response is going to be binary.

Either it's going to be not as bad as we feared and we rip, or it's going to be like, holy freaking cow, he's really doing this and we dump. Yeah um all right. Goldman Sachs got out ahead of this. David Costin yesterday came out and said that they are reducing their earnings estimates and their S&P 500 return forecasts. I'm going to try to speed read some of the more important takeaways from what Kastin had to say. Josh, read it like that guy that read a book in one second. Oh my God. Is it the funniest thing you've ever seen?

I wish we had that video. All right. We reduce our S&P 500 three-month and 12-month return forecast to negative five and plus six percent respectively based on market prices at the end of last week. These suggest S&P 500 index levels of 5300, I guess that's by end of June, and 5900 by year end. Kostin says higher tariffs, weaker economic growth, greater inflation lead us to cut our S&P 500 growth forecasts to plus 3% for 2025, which is down from plus 7%, and only plus 6% in 2026, down from plus 7%.

So not that big of a cut to 26. Slowing growth, rising uncertainty warrant a higher equity risk premium and lower valuation multiples. The S&P 500 entered this year at 21 and a half PE on forward consensus earnings per share growth earnings per share Now it's at 20 and he's saying it should be 19 And then rise to 19.5 over the next 12 months. So not a huge adjustment I want to point out he let me finish this up. Hold on, no disrespect.

That last part was hilarious. Predicting where valuations are going to be three and six months hence is pretty hilarious. It's kind of his job. I know, I know. All right. Goldman's economists are now predicting a 35% probability that the US economy enters a recession in the next 12

months. The historical equity market recession playbook implies a 25% S&P 500 drawdown from the recent market peak, which was the February high. If followed, this pattern would suggest a further 17% drawdown from today's price to a trough of 4,600. That would be a PE multiple of 17 times current consensus forward 12 months earnings. Josh, are you ready for that personally? No.

He says during the last three major S&P 500 downturns, the PE multiple bottomed at 15 times in 2022, 13 times in 2020, 14 times in 2018. You don't want to know what 13 times these numbers would put us at in the S&P. You do not want that information. We're not getting there. The 13 times number, that's real bad. Yes. And he's saying, we recommend our stable growth basket, which contains the stocks with the

least variable earnings growth during the past decade and our insensitive portfolio of stocks with minimum correlation to the major thematic drivers of recent equity market volatility. So we're going to talk a little bit more about what that means, those types of baskets, but I want to put a pin in it. Would you agree with me that David Costin is probably the most influential of all the major bank strategists at the current moment? You would know better than I, honestly.

I don't know. I kind of think it's him and it's always somebody. And I think right now it's David Costin. I don't think it's like, because Marco Kalanovic is gone. Mike, what's his name? From Morgan Stanley? Wilson. I don't think it's like, cause Marco Kalanovic is gone. Mike, what's his name from Morgan Stanley? Wilson. Mike Wilson's not in that post anymore. He's doing something else.

Like a lot of the, a lot of like the really influential people are just not in that role right now, mostly because they've gotten a lot wrong about the bull market for the last couple of years. I think Kostin is one of the longest tenured and he's probably the guy of the moment. I don't think we go to 4600. Nobody can see the future, not David Kostin, not I, not you. And nobody wants to hear this. I don't want this to happen. But if we did get to 4600,

it would, I'm using air quotes only because it would suck shit. So I don't want to minimize it, but it would wipe out 2024 skiing. That's it Why where do we finish 23 right there right it right around there? Yeah, but people don't think that I do it I know I don't think that way. I'm just I'm trying to protect myself. Okay. Yeah, I don't know Here's one. Here's one of the reasons why I'm concerned Here's one of the reasons why I'm concerned. The point of the labor market is not to forecast the economy because, famously, the labor market is a lagging indicator, not really considered by most to be a leading indicator. However, it's also somewhat of a concurrent indicator.

And I think it's one of the best and most legitimate metrics by which to assess the current state of not only how things are, but how people feel. That's because 70% of the economy is the consumer. This is the thing that a lot of the bears got wrong in 22. They assumed we have to have a recession, but what they didn't realize was that nobody was really losing their job. In fact, the problem was in the opposite direction.

There was too much of a supply shortage for labor, which kept us at a recession. This time it's not the same. I want to quote Neil Dutta from RenMac. Conditions for the US household sector continue to deteriorate. Three things stand out. Retail gasoline prices are climbing. Rose in March 10 cents per gallon. Americans consume 135 billion gallons of gas each year. Thus, this represents a $13.5 billion shock to income

taking about a 10th from disposable income. Gas price is still pretty low nationally. Low but rising. Job openings continue to slide. This is a bigger one. According to Indeed, job postings continue to decline, falling to fresh year-to-date lows for the weekend in March 28th. This is a sign that excess labor demand continues to decline.

If openings fall, not as easy for the newly laid off fine work. Okay, early, early, but worth noting. It's not a labor market problem just yet, but it's a change. No, it's a softening, no doubt. Last one, stock prices are down 9% from their recent highs. If much of the growth in household consumption in the last year has been helped by lower savings from high-end consumers, and you know them in that camp, the drop in stocks will likely push these high end households to save a bit more.

Honey, the portfolio fell 9% in Q1. We're not going to Disney. Calm the down, calm down. All right, so this is how Neil wraps up. In short, consumer spending doesn't have anything really going for it right now. And if the US consumer does not have a lot going for it, the economy doesn't either.

The weak growth in consumer spending nearly ensures a below potential growth environment. And that's before the ongoing slowdown in residential investment and coming slowdown across state and local governments. Neil's not a perma anything. Neil calls it like he sees it. What do you think? Bro, Neil doesn't get tariffs. He doesn't understand. Neil doesn't get tariffs.

You know, he's right. And you're right. Neil is not a perma anything. He calls it as he sees it. And we're getting confirming evidence. It's a forecast, but Atlanta Fed GDP is dropping like a frickin' rock. Not good. It's now forecasting real GDP growth in Q1 of negative 3.7%, not great. Remember that big drop at the end of February and everybody explained it away? Yeah.

It was off. Oh, it was a data. It was gold, it was gold being on short or something. It was gold being on short. Okay, what are you gonna tell me now, tough guy? Yeah. Ed Yardeni cut his year on the estimate on the S&P 500 for a second time in less than three weeks.

He cut it to 6,000 from 6,400. He cut his 2026 target from 7,000. He said a happy outcome would be that the US would negotiate tariff reductions, but that won't happen if the US slaps a 20% tariff on all imports across the board. Chart off, please. Josh, let me ask you this.

I've been taking my cues from the market. Why isn't the market more concerned? Why isn't the market more concerned? Yeah, I have told you not to do that. Why isn't the market more concerned? Usually you expect the market to overreact and then we'll figure it out. Why isn't the market more concerned? Like, usually you expect the market to overreact and then we'll like figure it out. Why isn't the market overreacting? I'm going to answer that question by saying it's not not concerned.

It's just showing up in a very concentrated way. The mag seven is in it. We're going to talk about this next. The mag seven is in a bear market. Okay. Okay. All right. Well, those are the most widely held stocks and those are the companies that had grown to have become the most reliable equity holdings, not only for pros but for retail, for Joe's if you will. And that's where, that's the

canary this time. The biggest most liquid stocks are down but not out. Some of them are out. NVIDIA and Tesla are in massive drawdowns. The others haven't made highs in a while and are not acting well. I think that that's where the market is expressing that concern. They're not selling value stocks that are already at 11 times earnings. You're not going to see it there. That discretionary names are getting murdered.

Oh, the Russell's in a real fast 10% drawdown. It's there. Transports, Delta, the best airline is Delta. It's 27% below its 50-day moving average. You're telling me the market doesn't, you know what I mean? I guess my point is I'm surprised that the market is not that more, so let's get into it. All right, we just had the worst quarter since 2022,

S&P fell 5.7%, chart on please. Not great, okay. But this is the interesting part, Josh. To your point that you just made, the Mag-7's getting murdered. Every single one of them, except for Microsoft, I'm sorry, except for Apple, is in a 20% drawdown. This is the face blower for me.

The S&P 493, so take out the Mag 7, imagine they weren't there, and reweight this based on market cap, the S&P 493 is flat on the year. Is that a face blower? It's crazy. Right? I know why. Why is it down a lot more?

What is it, Berkshire and the like? Insurance, healthcare, utilities, energy. They're all up. My point is, you would just think that people are just gonna shoot first, and they're just not yet. Again, I think you sell what you could sell. You got people with 200% gains in these Mag-7 names. They've been riding them for three or four years, easiest sale to make.

You're right. You're right. Morgan Stanley's co-president said, we looked at the last large 15 sell-offs in the US in the last 15 years, and this is one with the highest level of dispersion, meaning the lowest correlation. He said Alibaba is up 74%. NVIDIA, meanwhile, just wiped out, had the largest single market cap decline ever. Some more charts. So the Mag-7, it carried the market for the last couple of years, let's be honest. Although there was a broadening of it.

What's in the left pane? What is this? This is the Mag-7 market cap as a percent of the overall S&P 500. And it got- Oh, that's a generational top. Maybe, maybe it got as high as 35%, which is kind of nuts. I'm ready to call it, I'm ready to call it.

Okay. It's a generational top. And it's now down to 30.5%. So a quick correction there, you've got the premium evaluation compressing big time. They now trade as a group at 25 times forward earnings. The SP is 493 is at 19 times. And this is as high as almost 40 times two years ago.

At the start of this year, the MAG7 traded at 33 times, it looks like. And now it's down to 25 and the rest of the market without the MAG7 is 19. That sounds right. Yeah, that's where the concern is showing up. And by the way, there's like this concurrent um AI correction happening that is hitting all of those stocks and so like they are they are struggling under the weight of falling earnings expectations concern about AI CapEx being able to continue and all the macro shit that every other Company has to contend with a lot. It's a lot. So that's where that's where the concern is manifest and it's a lot

All right. Let's stop this chart as I buy you Face meta fell below its 200 day for the first time in what feels like ages into a 21% drawdown yesterday Is that is that the one you just say I don't give a shit. I'm buying meta would feel like ages into a 21% drawdown yesterday. Is that the one you just say, I don't give a shit, I'm buying Metta? Not for me. There was a different one that I bought. I'll get to that in a second.

Josh, to the point earlier that you made about what's working in the market. Next chart, please. So chart goat, Sean, actually. I love this. We're looking at the S&P 500 sector exposure and what's falling and what's rising. So Josh, you love this, what do you love about this?

Because I ordered this one up, I just wanted to visualize, all right, if the tech sector and the consumer discretionary sector is losing market cap, where is it going? Because you're big, it's going somewhere, guy. People don't sit in, people, again, portfolio managers who are supposed to be 99% invested in equities don't sit in 10% cash.

So if they reduce their exposure by 10% to tech and to scratch, they're going somewhere. I know they are, and here it is, and here it is. So walk us through the biggest changes. Uh, all right. I want to get too close to the mics. I'm popping, but actually, Josh, can you do this? Cause I can't say I'm on my small technology is down 1.4% in the quarter. It doesn't sound like a lot. It's not 1.4% of the S and P it's right. It's 1.4% of its own weighting. Exactly. Okay. So that's down. Healthcare is up 1.1. Tell me the money didn't go somewhere.

You know what I mean? Yeah. Discretionary is down 0.8%. And again, this is just in three months. Consumer staples added 0.4. Energy added 0.5. I just bought a little Chevron. Utilities added 0.4. Real estate added 0.2. I just bought a little Chevron Utilities added point for real estate added point to so, you know what's happening?

apart from the tech versus healthcare the dispersion is like Yeah, the money is is being dispersed more widely. It's not like there's a new man It's not a new tech sector healthcare healthcare has gone from 10.1% to 11.2%. So it's not like, oh, here's the new tech. It's just the money is being sprinkled liberally throughout the rest of the market. So it's coming out of industrial discretionary tech.

It's going pretty much everywhere else. And that's actually what I would have guessed. And that's what the data says. So last thing on this topic, let's look at Alphabet's forward PE. It's 16.5 times. Now, you know, the forward PE has got to come to fruition in terms of the E I should say. But my God, assuming that search isn't dead, which maybe it is, maybe AI really does f*** them up permanently. But I feel very comfortable adding to Google and I would have if I had more cash available. So this is the forward PE ratio.

At the end of 2020, this was 28 times. It's now almost cut in half at 16 and a half times earnings. I think it goes lower. Yeah, it might. It totally might. But listen, if you're willing to ride out some bumpiness and we have to be careful about buying stocks under the 200 day, which we're going to talk about later in the show, I feel comfortable buying Google, owning Google at 16 and a half times forward earnings.

Assuming that a lot of the macro will subside, which I don't know if it's here or 20% lower, but assume we get through this, I feel comfortable earning Google at these levels. I sold 50% of my Google earlier this year. Good sell. I mean, I'm still long the stock. Everyone's long the stock. It's still one of the largest market cap companies in every ETF. But I think this is the first time in Google's history dating back to 1998, or certainly

its history as a public company, dating back to 2004, 21 years ago, where it has ever been on its back foot and not assured to have the level of dominance in its core business that it's enjoyed almost the entire time. I don't think Gemini is going to be as easily monetized. If you say, oh, what are you worried about, Chat Cheap ET and Claude and all this stuff? People, they're still searching Google and now they're getting Gemini AI results. Okay, that's true, but not with 20 blue links where every one of those 20 people is paying something. Like their core business is more under assault, my opinion. I agree. Is more under assault than any of the Mag-7 names other than Tesla. So maybe for two very different

reasons. Maybe I'm underestimating how quickly this shift happens, but yeah, will 11 year olds be using Google search as they grow? Of course not, of course not. But think about how many people, wait, when you want to know something, are you opening perplexity on your phone or Google? I'm still open to Google. I'm opening perplexity and I'm getting an answer

in a second, I wouldn't, what Google is great for is maps and if I actually want the links and references. So I am very excited, maybe I should be horrified to see Google search revenue next earnings report because if that cracks, holy shit, the stock's going to die. And also I'm reminding myself, as I say, like Google's trading at a forward PE of 16, attractive maybe, but I'm reminded of Nicholas Colas who says, valuations are not, math is not an edge, like everybody knows. No, no everyone knows it's 16. Everyone knows it's 16 times and PayPal is 12 times.

Right, everybody knows. And the reason why is because PayPal had the checkout to itself and then Apple Pay came along and competed into the Stone Age. And by the way, Apple owns the device and PayPal doesn't. And therefore, voila, a 15 multiple goes to 14, goes to 13, goes to 12. All right, so the CoreWeave IPO took place, and I think you, did you trade it on the IPO date? I bought it on the day yeah

I bought on the IPO day I bought it like 37 and sold it like 40 something like that like something like that. Alright are you in still? No I sold it at 40. I sold it that day. Holy shit it's ripping wow look at it. Holy cow go go go. It's up at it it's up%. Okay, so it opened at 40. The next day was a bad day for the overall market. Collapsed to 37. Today it's at 47. Good.

It's having a 27% rally relative to, I mean it's- Holy cow. It's a move. I love it. It's a vibe. I feel very good about this. You think a lot of people came in and started shorting this

like right off the bat? I don't know how that works, if that was available to be shorted like that. Who's buying the stock up 27% today? People that are selling Google, duh. No, I don't know. I know we're gonna talk about CoreWeave, but also like Newsmax, what in the world?

The stock's up like 2000%. It opened at 10, it's at like 120 or 210 or something. I mean, that's a great,, if you can feed conservative people red meat around the clock, like you can take meaningful revenue from Fox News and that's a great business. So anyway, I think this core stuff is very, I mean, very, I think it's important for the market. If this thing bombed, it would have been pretty concerning. Yeah. I said that I thought this was a big risk factor if it didn't go well, and it didn't

on the first day. But apparently there was some sponsorship for this thing out there. And then the next thing that will happen is analyst coverage. And that used to take like 90 days or something that that'll happen very quickly. And maybe that's, I haven't looked at the news today, but maybe that's what's coming now. Um, you'll see a lot of the underwriting banks and you know, the top three underwriters were

like JP Morgan, Morgan Stanley Goldman Sachs or something. So they're all going to have accumulated ratings. That's why I bought the day off. I saw a couple of smart people that I follow on Twitter. Like you dumb assholes. or something. So they're all gonna have accumulated ratings and overweight ratings. That's why I bought the day off. I saw a couple of smart people that I follow on Twitter, like you dumb assholes. You think that they're gonna let this fall below 40, like get hammered on the first day?

You know how much money is behind this name? Yeah. And you know what else? It's a smaller share count because they downsized the offering. Yeah. And that works in your favor if there's a lot of buying and there are less shares to go around. I see an article from The Motley Fool connecting the earnings results.

This seems like a stretch. There's a company called Progress Software that is an AI software infrastructure provider. And they had a really strong report and the stock is rallying. And the author is connecting that to the rally in core weave. Not sure if I buy that. How did you describe it? Sometimes there's nobody left to sell. Infrastructure as a service?

Well, that's what it is. It's IAS. I A A S. It's like, you know what it is? It's a great dude. It's a brilliant idea. If I am not ready to build my own data center, cause I'm unsure of the amount of demand I might have. I rent theirs and that gives me flex capacity. That's what, that's what, uh, that's what Microsoft is doing with them. Microsoft is two-thirds of their revenue because, first of all, it takes time to build a data center. It takes time to accumulate GPUs.

If you have a surge in demand for something like, for example, a chat GPT feature and all of a sudden everyone's using it, you can plug directly into CoreWeave and those users are not going to experience a disruption. Maybe this is a bad cop. It's a good business. Is it like Airbnb for data centers? I don't think I, I don't, uh, no, because they own the data center. This isn't, they're not renting out other people's data centers.

They own this. So I think the better way to put it is the same way software as a service allows an organization to flex how many licenses they need, how many seats. This company is standing by to provide excess capacity for when any of the major AI platforms need it. And in some cases, companies will never build their own. They'll just rely wholly on CoreWeave. And you know, it's why the cloud was so successful, not just for itself, not just for AWS and Azure and Google Cloud, but the reason the cloud was so important to the rest of the

economy, it made it so that you could start a business and not plunk down $20 million worth of your own servers. You just said, like, all right, we don't know what this business is going to be, but we're going to be in the Amazon cloud, and it will flex how much we're using it based on how much actual demand we have. So that's the concept here, but for AI. It's not a bad idea. I just. It's not my cup of tea. I don't like all the red flags on it that we talked about last week. So the news has been so noisy this week that I didn't even see this open AI announcement. Okay. So there's a Wall Street

Journal story in January about how badly Masayoshi Sun wanted to buy a big stake in OpenAI. I think SoftBank put in $500 million early, early, early and was mad that there wasn't more room. These negotiations have been going on for years and that $40 billion number was floated in January. That's roughly what SoftBank wanted to invest. They made it official.

This is from CNBC. OpenAI closes $40 billion funding round. Largest private tech deal on record. Never before has an investment of this size been made into a private technology company. Who participated? I don't know, but I think this is mostly SoftBank's money. And then their end investors, which is like Saudi royalty and God knows who else. This is so emblematic of the current environment.

Like CoreWeave, the hottest AI IPO in ever raised $1 a half billion dollars in public investors. Yeah. And then this thing did 40 in private. Well, importantly. No, I know, but still. Right, importantly, this is the company that has the most traction of all the user facing LLMs. Like people are using this all day, every day.

All right, the valuation, $40 billion financing values, chat GPT at $300 billion when you include the fresh capital. So that's what they call post money. Microsoft is probably like, all right, thank God it's not just us. Softbank's in. The valuation puts this only behind SpaceX, which is now worth 350 billion, and TikTok parent ByteDance, among the world's most richly valued private companies.

Oh, SoftBank's putting in 30, and the other 10 billion is a syndicate. I know- Including Microsoft. I know it doesn't matter for today's purposes of raising $40 billion, but I'm just curious, do we have any sense of what the revenue is? No, but a lot of the money is coming in to finance the Stargate project, which is like very heavily supported by the president and the White House and oracles in that and

a lot of people are involved in that. That bill, it's an $18 billion funding for Stargate. That's OpenAI's commitment. Basically SoftBank is saying, here, we're going to fund your commitment to the Stargate project. I had a couple thoughts. If the price was $60 billion rather than $40 billion, Sun would have just written the check. He strikes me as somebody that's very capable, very comfortable with massive swings, taking huge risks.

Something tells me he's not a price sensitive buyer. No, I don't think he cares. And sometimes that works out well. He was a huge splash into Alibaba early, early, early. And you know, at his size, you have to make huge deals. You have to invest in huge private companies and take big swings. So Alibaba was great. Arm Holdings was a huge winner.

Sky has huge balls. And then WeWork, I think he put 16 billion into WeWork, which was a zero, not as good. But that's his, he's a riverboat gambler. He's a really, really unique investor and he swings for the fences. So this is maybe the biggest swing he's ever taken. It is the biggest swing he's ever taken. So Josh, you asked me if I would pull the trigger on Metta. I did buy Nvidia yesterday at the Puke Open.

I've never owned Nvidia before, but I'm in it. 110? No, I'm in lower. I bought yesterday at like, I think 104. Okay, this is the lowest forward PE ratio for Nvidia in 10 years. Look at this. Yeah. Crazy. You know what's so weird about the stock market? You would have been willing to buy this at 30 times earnings, 40 times

earnings. On the way up, who cares? But before they had proven anything, now that they've proven, hey, AI is real, GPU is the dominant technology of the era, we are the greatest manufacturer of GPUs, and we are the most important company in AI, now it's worth half that valuation. It's just a weird quirk because investors only care about future earnings growth. They don't care about anything else. And that's just like, it's really hard to wrap your head around, and say, whoa, let me get this straight. In 2022, now this is with the stock selling off,

that's why the forward PE shot up, but forget about that idea. Like, you're like, yeah, Nvidia, 50 times earnings, I'll take a shot here. Now that they've done everything they said they were gonna do, you're only gonna pay 22 because probably it's gonna be hard for them to quintuple revenue again.

I would think. Yeah. I would think. So we don't pay for proof is my point because right now you have proof. Holy shit, this company is 90% market share. They did it. That doesn't get reflected in a multiple, in a PE ratio. It just doesn't.

The proof is not the thing. It's the potential. Equity markets are based on potential. Well said. Elon Musk put some money from his left pocket into his right pocket and merged Twitter or X with X AI. Smart move. This is like, this is the X was a problem.

X is problematic. It's really important to Musk in terms of like getting his message out and he's effectively become like the shadow president of the United States utilizing it. So it's like super strategically important. And for XAI, it's important. And for XAI, it's one of the most important unique sources of data to train on. And Grok, which is the output of XAI, the consumer facing output, is building its user base on the back of the user base of XAI, the consumer facing output, is building its user base on the back of the user base

of X. So all of these things are highly interrelated and he owns the majority of both of them. So why not smash it together? What's the hold up? Right. I think this solves multiple problems for him. What do you think? Matt Levine said, in any case, it's barely an M&A deal? He said, no, it's not an M&A deal. Two companies that were owned by the same person and shared employees and data and revenue and a name are now one company. They were informally one company before and they are formally one company now and no money changed hands. It feels like a silly technicality to call this a big M&A deal. Yeah, Bill Cohen wrote about this at Puck.

Back in November, Elon raised a fresh $5 billion for XAI at a $50 billion valuation. Now, four months later, this stealth deal values XAI at 80 billion, a 60% increase during the same time period where the S&P 500 has been down nearly 6%. Nice work if you can get it. You just make up valuation, doesn't matter. time period where the S&P 500 has been down nearly 6%. Nice work if you can get it. You just make up valuation, doesn't matter. Then Elon raised a billion of equity for X at a

valuation of 32 billion. And now you just smash them together. Two weeks later, that equity value has miraculously increased on paper to 33 billion. So when you are the majority owner of both and you control all the money and you decide who gets to invest in them what price it's not M&A it's like it's just like it's fungible equity value blah blah blah whatever he did this with Solar City in the public markets and that's the moment when the shorts should have covered because they should have realized Holy shit. This guy gets to do whatever he wants with no consequences. Why am I betting against this people were? That's when the short should have run from Tesla. So Matt Levine just said what you said better. He said

So Matt Levine is like the the Elon whisperer. I don't know if that's a great phrase But he's covers Elon better than anybody else. Would you agree? With great jewelry, I might add. So he said, but my heart isn't in any of this. Nobody cares. Musk has absolute control of XAI, X and US government regulators.

If he wants to smush X and XAI together, no one will complain. And it doesn't mean anything. Surely Musk isn't required to file forms and get regulatory approvals anymore. So Matt just goes on, but nobody cares, it's over. He did it, what are you gonna do? He basically lives in, he's in charge of everything.

Delaware just changed their state constitution to make sure they don't lose another company like Tesla. Okay, and he is now, his businesses are now located in Texas. He basically inhabits a sovereign nation. Elon land can basically do whatever he wants as long as the shareholders and the investors who are funding all this stuff are still into it and they are, they are, they are. So like what, all right, now this is interesting though. So another number that everyone's gonna be watching, and this is gonna come out tomorrow. So we talked about the jobs number Friday.

Everyone's gonna be watching this quarterly Tesla deliveries number. I don't know what it does to the stock. I just think from a standpoint of like, how bad is the image of Tesla in the eyes of potential car buyers? Forget about investors. This is an interesting story.

This is Reuters. Investors are bracing for a drop in first quarter vehicle deliveries as a backlash against CEO Elon Musk's politics exacerbates weakening demand for the electric vehicle maker's aging lineup. Musk promised Tesla would return to growth this year after its annual deliveries fell for the first time in 2024. Wall Street will be watching to see how a refreshed Model Y SUV and incentives made a difference. So the Model Y Juniper is like a refresh of the Model Y line. That's like their, that's probably their best car,

like most all around popular car. I don't think the Model 3 outsells it even though it's cheaper. Most people I know who have a Tesla have a Model Y. So it's the refreshed Model Y which hadn't come yet in time for last quarter versus the political backlash. And that's a number we're gonna get tomorrow morning, I think, and I think people are to be really into what that number is.

And they're going to extrapolate that in terms of like how much longer Elon's going to stay at the White House versus return back to Tesla. What do you think? I don't know, man. I just threw up my hands. Like, honestly, I have no idea. I would guess I would guess the stock goes up 12% no matter what. But like, I don't know.

All right. The expectation is 373,000 vehicles delivered March through January, according to 15 analysts who have refreshed their estimate in the last month. That would be a 3.6% drop from this quarter last year when it delivered 386,000. If that number is closer to 300 than 373, there's another leg down in Tesla. Yeah, I don't know where the line is. You're right.

If it's a bomb, now I don't know if a bomb is 320 or 260, but if it bombs, bombs, yeah, probably go lower. They got a shareholder quoted saying, quote, I think the numbers are going to come in below 400,000 and maybe as low as 350. Deutsche Bank is saying 340 to 350. But dude, this is the thing. The stock's getting killed. Nobody's optimistic.

No, I know. But I don't think the stock is pricing in a 300,000 number. Yeah, we'll see. Listen, say what you want about Elon and obviously not the biggest fan over here. But man, he makes a cool car. Let's throw up this tweet. All right. So what does this say?

I'm sorry. I can't see it. Josh, read this. I took delivery of my new Tesla Model Y on Thursday. Today I tried full self-driving and it flawlessly drove a 32 minute trip from my home to my kid's school. I'm absolutely blown away. How long has this been possible and why isn't everyone talking about it? That's weed, of course

Written but not who is that Matt Van Swole? Is that a fake name? Just just press press play for a sec. Just look at this thing like This is yeah, this is the world that we're about to live in and I'm I'm here for that This is what put the stock at a trillion dollar valuation. He is- I mean, this is true magic. Yeah. He's changed the world several times and this is why... Look, it's not in a vacuum that he's able to do all these things and do whatever he

wants. He put himself here with the technology he's built. And you don't have to like him to accept that that's the case. And a lot of people, like their cognitive dissonance, they hate his politics and therefore they hate his car. It's like, dude, these cars are among the most popular cars on earth and they're doing crazy shit. So, you know, say what you will.

Like you never see somebody tweet anything from General Motors that they're blown away by. It just doesn't happen. All right, Josh, this one's for you, buddy. The Gen X career meltdown. Let's go on screen, please, John. I have a career meltdown daily. All right, so this is the New York Times.

It's the end of work as we know it. And I feel powerless to fight the technology that we pioneered, nostalgic for a world that moved on without us after decades of playing our dues for a payday that never came. So yeah, not exactly fun. Of course, that's REM. And Josh, I feel like you wrote about this a couple of years ago as it relates to the finance world. It was like, I did everything I was supposed to.

Yeah, I think what the article speaks to is exactly that. There's a few million people, tens of millions of people, who played by the rules. And in our childhood, I'm like the latest Gen X, I think it ends in 78, and I was born in 77, or it ends in 77, 78 and I was born in 77 or it ends in 77. But like there was this idea like you go to school, you get good grades, go to college, get a good job, move up, maybe switch companies, maybe get promoted, show up every day, pay

your dues. And now you've reached, you're in your 50s. I'm not there yet, but you're in your 50s, you've reached what should be the pinnacle of your career, and now you wake up in the morning worried about, or you struggle more realistically, you struggle to fall asleep at night, worried about this AI onslaught that's about to stop you dead in your tracks.

I get it. It's like a little bit Cry Me A River, but it's a real feeling people have. Wow. I think it's more than Cry Me A River. Everybody hurts, Michael. Sometimes. Every generation has its burdens. The particular plight of Gen X is to have grown up in one world only to hit middle age in a strange new land. It's as if they were making candlesticks when electricity came in. The market value of their skills plummeted.

So here's one data point, and it's true. I mean, obviously, by 2030, ad agencies in the United States will lose 32,000 jobs or 7.5% of the industry's workforce to the technology. And this is not just ad agencies. I mean, it's ubiquitous. It's coming. Yeah, I think the millennials and Gen Z to a greater extent, um, prize the idea of entrepreneurship.

Yeah, we can adapt. You guys are f***ed. No, I just, I think the Gen Zs are like, why would I work anywhere? I'm sorry. Like, I just got to build my own thing. And maybe it's because they're younger and they're ready to take risk and they don't have kids yet. Maybe I'm just reading that wrong. But I do think GenX is the last generation from that analog world where like the length and breadth of your ambition was to get a great job and just earn a salary that could provide for a family.

And I think the reason why is they saw that it worked really well for their parents. And I don't think the Gen Zs who are the children of the Gen Xs, by the way, the Gen Zs are not the Millennials children or the Boomers children. The Gen Zs are my kids, my kids. Or my kids might be Gen A, depending on where you draw the line. But like, I think this new generation is not thinking like, how can I go work for a great company

for the rest of my life? I think there's gonna be a much more hardcore entrepreneurial bent. Anyway, I don't like the tone of what I just said. You guys are f***ed, so I apologize. That sounded nasty and it was. Because I really do feel for people that are like in their 50s and should be in their peak earning years and are now just completely screwed. Like it's bad.

You know what? You got to remember that the people writing this article are going to be biased to find other people who agree with them for the poll quotes. All right. No, I know, but it's not not true. It's not not true, but it's not universally true. And if you look at the top founders, technology founders right now,

and a lot of the executive ranks at these companies, they're Xers. All the people I look up to are Xers. They're doing great. Yeah, but it's just, that's like a sample. No, I know. I know. I listen, I completely, I completely understand it. And there are, there are industries that are just going to be run through by AI and journalism and media and ad agencies. Yeah. Like maybe arguably on the front lines of this and maybe other industries will feel it later. So I get it

But there's a glass half full part where it's never been easier to be an entrepreneur to start a business To get people to fund an idea like it's never been easier. Well for future business creation, it's never been better So that's the silver lining Right now that doesn't suit everyone. So not everybody could be a chief. You need Indians too. You need people to work at other people's companies. And there's a ton of uncertainty because companies

are going to use AI to spend less money on human labor. And we talked to Joe Lanz the other day about this. Of course, new jobs will come along that haven't even been envisioned today. Yeah, we get it. Just not for everyone. So all right, let's do this thing. This is low vol and momentum.

So Ari Wald, who is among my favorite technicians, is talking about where do you hide out right now. And he demonstrates the following, top ETF idea, momentum plus low volatility in terms of selection, our attempt at this later stage of the equity cyclist, I identify long ideas that have shown relative strength, that's momentum, and are positioned to at least keep pace with the market during a relief rally.

We think the Dorsey Wright momentum and low volatility ETF or DVAL strikes this balance. We're encouraged this ETF has upheld its 200 day average and completed the multi-year base versus the S&P. And then he takes some of the individual stocks that comprise the Dorsey Wright, Momentum, and Low Volley TF and shows you breakouts on all the charts. But just glancing at this, Michael, what do you think of the concept? It looks great.

Really smart, right? It looks great, and I love it. And these are boring names, a lot of financials, industrials, insurance companies, Costco, TJX, for example, Visa. Yeah. Yeah, these are the stocks, TJX, for example, Visa. Yeah. Yeah. These are the stocks that are working big time.

All right. So this list is the best stocks in the market. I had Sean pull the holdings from that Deval ETF that overlap with the list that we keep of the best stocks. And there's a lot of companies that are both in the DeVol ETF and on my list. Brown and Brown, which is an insurance broker. Well Tower, which is a healthcare REIT. T-Mobile. Republic Services, which is garbage collection. Cardinal Health. TradeWeb. Wait till you see a chart of TradeWeb. TW, Visa, MasterCard, Walmart.

So this makes like intuitive sense to me, with the exception of Walmart. Walmart doesn't make sense. All of these stocks are up year to date. But wait a minute, if you saw, you know what else, like Visa, MasterCard, if you thought the consumer was going to really soften, why would these be rockin' and rollin'?

They're not exactly rockin' and rollin'. They're on my best stocks in the market list. They look pretty good. They look pretty good. Because momentum is okay, and they're above some important moving averages. Dude, they look good. They're within reach of record highs.

They look way better than I would have assumed. All right, what's this next? Here we go. Okay, so we spoke earlier about like, where's the money going, what's working. Throw this up, please. So this is S& like, where's the money going, what's working. Throw this up please. So this is SAP 500 Performance for the first quarter and lot of red and the largest names as we know.

But dude, I see a lot of green, a lot of green. Money's gotta go somewhere, Mike. Lot of green, no it doesn't, but I see a lot of green. Yes it does. Look at Exxon and Chevron. Beasts. Beasts. Okay I want to talk about yesterday's reversal and talk about Monday. This is my favorite data. Stuff like this. This is from sentiment trader Jason Gepfert. He tweeted, today's reversal in the S&P 500 looks bullish. It should be bullish, and yet it really isn't. What are we looking at?

So Jason plotted the S&P 500 after a 1.5% loss to a six-month low and then close up 25 basis points. So you're talking about a washout, a nasty open that reverses and closes bullish. And if you look out one week, two week, one month, three months later, mixed to negative, a lot of red. So if it was yesterday a durable bottom, we will see. They asked this question on CNBC today of me, Stephanie Link, Jim Labanthal is Liberation Day a market clearing event? Meaning like, is that the moment where the tariff news comes out and everybody sells

and finally, people have sold enough, de-risked enough, taken down margin enough that like, we could say we've hammered out of bottom. And I said, I don't think so. It seems early. So to that point, I don't have this chart for today, but I had a chart that can make me S&P 500 stocks hitting a 52 week low. And we are nowhere near, unfortunately,

nowhere near prior capitulations, not even close. I don't think this is over. But wait, hold on, you don't need to have capitulation. But my point is to say, is this capitulation? Like if that's- Well, that was the question. When you say like a market clearing event, that's capitulation. No, no, no, no.

Definitively no. I don't think so. Definitively no. One of the things that we've referenced back to Ren Mac and Neil Dutta, their house view is that the tariffs are not an on-off switch. It's a dial. And Trump is going to fiddle with the dial way beyond this April 2nd Liberation Day. The dial is going to be just this constant up, tariffs higher.

Oh, I can't take it. I had a beautiful call. I had a beautiful call with the Germans, tariffs lower. So there is no market clearing event if that's what this is gonna be. And maybe it's not. And I, you know, I wanna be optimistic. So the question is, if it's on again, off again, does the market just say,

F this, I'm out, I can't take it? Or is it like, this is like charade. We're looking through to 2026 earnings. Forget about all this noise. You know what it is? The problem is that it has real impacts on earnings expectations. It does. And that's the part impacts on earnings expectations. It does.

And that's the part that I wish it was just theater. If not though. The problem is if there's no clarity, people pull back. I can't plan for the future in a world like this. I'm glad you said that. I'm glad you said that because that's what the surveys are reflecting. Yeah, they are.

Gross. The surveys are reflecting that non-committal, like that kind of wave of uncertainty where people are just like, I don't know. That's not the environment we were in two months ago. No, that's the invite. Now, could Trump wave a wand? Could he come out tomorrow and say, all right, I told you I was going to be tough. It's 20% across the board, all imported goods period, but I'm done. No negotiation.

This is just a new world order and everyone has to get used to it. I think the market could rally on that. Oh, no way. No way. They'll adjust earnings growth down from 7% to 3% and stocks will bottom. Maybe you're right, but that would be so bad. He's not going to do it. He's not going to do it.

That would be so bad for the economy. Cause he needs the twists. He needs what? Cause you know what he really wants to do? Oh, no, he wants this. He wants this drumbeat of announcements. He wants the guy from Hyundai and the guy from Volkswagen and the guy he wants and Volvo and Porsche. He wants them saying we are going to break ground on a 400,000 square foot facility in Arizona.

That's what he wants. And they might give it to him, to be honest. And then all of a sudden it's tariffs are coming off, they're playing ball. Like that process is probably not playing out or within the context of April 2nd. Yeah. So that's the dial nature of it. And that's why I don't think it's a clearing event.

Okay. To answer your original question. Josh, would you allow me to cook for a second? Mm-hmm. All right. You know, would you allow me to cook for a second? All right. You know, I kind of wanted to choose something from the long side to make the case for it because there's so many better entries today

than there had been. Like 24 was tough for make the case because everything was just going straight up. Then I was like, oh, let me tell you, the stock is up 30% of the last 12 months. Like, all right, so today- Not that problem anymore. No, so I want to make the case and it's a lesson that I unfortunately have had to relearn to the last 12 months. Like, all right. So today- You don't have that problem anymore. No.

So I want to make the case, and it's a lesson that I unfortunately have had to relearn and relearn again, on why you don't buy falling knives. Or if you should, there are rules to follow. And the simple rules are as such, keep it small. Don't try and go all in and think that you're going to catch the bottom. And wait for the, wait for stocks to stop crashing. That's probably like the easiest one. If you're gonna buy a stock that's a falling knife,

wait for some stabilization. I don't just mean like a week. Like wait for it to develop a base. Okay. Pay up for it. Sure. Yeah. Absolutely.

Yeah, so anyway, with that said, I wanna talk about Nike. John, chart on please. This stock has been a falling knife for quite some- You used this as a make the case recently and I think I blessed it. No I didn't. I don't think I did.

I thought you did. No, I'm pretty sure I didn't. Sean is keeping track so I don't know. Okay, go on. So anyway, Nike has had a shitty time and all you had to do was say, no, it's below its 200-day moving average.

It's not stabilizing. I'm not going to participate. So I want to play a video from the last time we spoke about Nike, I think it was July 2nd. I owned the stock at the time. Video on please, John. Since then, this is worse than the GFC in terms of drawdown. This is as bad as Nike has ever gotten. You're buying? Not only am I not buying, I'm selling.

Shorting? No, no, no. I own the stock. It was, thank God, my second smallest position, but I sold it at the open. Now it's your smallest? Yeah, no. No, no, no. I sold it at the open whatever day it was, Thursday. I have a 60% loss in the stock. Listen, it happens. So on the one hand- I think you did the right thing.

Well, listen. I think you did the right thing. On the one hand, do I want to buy a global iconic name brand company that's in one of its deepest drawdowns ever? Yeah, sounds enticing. On the other hand, it's not cheap and they're getting steamrolled. So it's still trading at 24 times forward earnings. So it's not like the stock is cheap and they're not growing and it's going to be a long turnaround

story. So you don't need to buy it now. Is it going to be higher in a couple of years? I don't know. I don't care. It's my second small position. I'm not mad to this thing took a loss and I'm out So I sold the stock for a loss. I I lost 16 not 60. I lost 16% and importantly Turn around stories most of the time especially something like this don't always turn around

So their most recent report was equally as shitty Wasteland capital tweeted zero signs of a turn around at Nike Genuine dogshit numbers just getting shittier shit growth down nine percent shit margins gross margins down three to twenty six basis points Year-over-year and even shittier guide down twelve to 15 percent next quarter China down 17 percent Jordans are dying So let's just chart this on please for the quarter on top of all of that They said quote

The progress we made against the win now strategic priorities we committed to 90 days ago Reinforced my confidence that we are on the right path, to which this person says, huh? I mean, just really, really nasty stuff here. A lot of funny stuff in here, but the bottom line is this has been a piece of junk. Yes, it's a global icon. Chart off, please. Yes, it's a global iconic brand that's down 56%.

You don't ask questions, you just buy, But actually you don't just buy. Because Alex Morris shows their EPS still shrinking. Horrible, horrible, horrible. Margins, next chart, getting squeezed to a kablooie. So bad, Alex says, five years ago in 2019, the collective revenues of four notable competitors, next chart please, OnCloud, Hoka, Anta, and Li Ning were equal to 20% of annual revenues. In 2024, the collective revenues of those four companies will approach 50% of Nike's annual revenues.

The stock, the business- They're just another company now. They're just another company now. They're just another company. And since I sold it, the stock has down another 13%. And it's hard to buy turn around stories. It really is. They're going to teach this in business schools. This is, I think Nike just closed down three consecutive years, the stock, which has never

happened before since they came public in the early 80s. So this is arguably the worst condition Nike as a company and as a stock has ever been in. The list of things that they personally did to shoot themselves in the foot. So there's always macro, there's always trends and fashion, and that's a perennial challenge for apparel companies. At the height of their power, I think in 2018 or 2019, they got greedy. They told their retailers to go f*** themselves and they said, we're going direct to consumer.

Yeah, so Dix, we're gone and Dix said, oh yeah, OnCloud, Hoka, please, we have, we have shelf space. Come on in. Foot Locker. F**k you, Foot Locker. Can you imagine? Yeah. It's your biggest distribution channel. They went from giving, they went from giving limited edition sneakers to Foot Locker just for their shelf space. So Foot Locker would have something that you couldn't get online to like, we don't care about you. We launched the sneakers app, we're doing Nike.com, and we're building our own store on Amazon to box out all the third party sellers who are

selling Nikes on Amazon. And that trifecta of what they thought at the time were strategically power moves literally turned their entire distribution funnel against them. Yeah now you've got this aging lineup Nobody gives a shit Michael Jordan fucking 70 years old nobody cares the the people that grew up idolizing Michael Jordan are shopping for assisted living Situations, okay, they're wearing New Balance. It's over. They're not playing basketball, I think is the important thing. So you've got that.

The last dance aired five years ago, that's it. The Jordan worship is so far in our past. LeBron James is 40 years old. You know what I mean? It's so over with. And then they haven't really, they're doing new color ways for the, for dunks and air force ones and air max 95s. And I suppose you can keep doing that forever, but that's not going to grow. That's just replacement value of people who are nostalgic for 2002.

No, they're still shrinking. They're still shrinking. It's awesome. So my point, my point is for 2002. No, they're still shrinking. They're still shrinking. It's awful. It's still shrinking. So my point is- And they lost the runners. And they lost the runners. And into the breach, New Balance came back. ASICS is coming in hard. Hookah and OnCloud are serious competitors.

And now they're just another flavor. By the way, I asked earlier, where is the overreaction of the market? It's in Decker Outdoors, which is Holka. That is the most discretionary spending is Ugg Boots and Holkas. Guess what? That stock is getting pounded.

Lululemon, again, there's MacroStories there and MicroStories pounded. A lot of these consumer discretionary names are getting destroyed. Oh, I'm glad you brought that up. The athleisure thing. Nike never really had it. Lulu had it.

Viori is taking it. Allo. And Allo is, like if you go to any class A mall in America, I don't care what city you're in, the hottest girls and women are in aloe. They're not in Lulu. Like the hot moms, like that's where they are spending hundreds of dollars at a clip. They're not in the Athleta.

They're not even really in Lulu. Like that's the, that's the vibe right now. Nike is not part of it. In conclusion, um, our late friend said it best. John Borman said, if you want to buy a stock because you want it to go up, buy one that's already going up. Now again, I keep relearning that lesson, but it's so easy and we make it so hard. I mean, that's the church that I'm a card carrying member of.

I want the best stocks in the market. I don't want the puzzles to be figured out. There's no style points and I don't buy falling knives. I bought one over the last three years. It's Pfizer. I'm still stuck in it. I do not. This is not what I do. All right. Mystery chart and then we're out of here. This was a super sized edition, by the way. This is a great show. This is six months. It's not a stock. It's not an ETF, but it's very important to the global economy. What do you think this is? Go. The 10-year.

Look at you. Look at you. Four spot two seven as of yesterday's close. I don't know where it is right this second. Dude, don't fuck with me. I know my charts. I know you do. But do you see this double bottom? And I know it's a it's an interest rate

But but do you but do you see that people do you see all right? Let me ask it this way Do you see that? in December of 24 we got down to it looks like 410 and Then and then all of a sudden they sold bonds and started buying stocks back Well, we're getting back into that region. And this time, if the economic data materially worsens and we don't have another inflation scare, this is probably going to visit 4%. Oh, yeah.

I'm really surprised with all of the legitimate economic slowdowns. Not fears. We are seeing economic slowdowns. And with all of the recession worries, I'm surprised it's still got a four handle. It still has a four handle because the inflation data is keeping the Fed from being like, yeah, four cuts. That's why that could stop on a dime. One bad NFP, one bad read on wage growth or one unexpected spike on initial claims, you're going to see four.

You're right. And then that's going to be a moment. And so keep you on the 10 year. All right. That's it from us today. Guys, thank you so much for tuning in. We really appreciate it. Shout out to our sponsor, public.com and the public trading app.

Tomorrow is Wednesday, which means an all new edition of Animal Spirits with Michael and Ben. There's also an Ask the Compound Wednesday afternoon live on YouTube. And we'll be back with another Compound and Friends at the end of the week. Keep it locked. We appreciate you. Have a good night. Whether you're just getting started as an investor or you're managing a multimillion night.

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