The Compound and Friends - No Capitulation Necessary

Episode Date: October 21, 2022

On episode 67 of The Compound and Friends, Dan Greenhaus joins Michael Batnick and Downtown Josh Brown to discuss what constitutes a recession, the Fed, ramifications of a strong dollar, Tesla's earnings call, buybacks, the importance of interest rates, and more! BONUS: Barry Ritholtz makes a special appearance! Thanks to our friends at Kraneshares for sponsoring this episode. To learn more visit: www.kraneshares.com Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com 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/disclosures/ Inclusion of advertisements by podcast sponsors 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: https://abnormalreturns.us5.list-manage.com/track/click?u=f8843b0fc6f0ed7d35e67dcf5&id=33b07916d1&e=4e0f612ef0. Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

All right, so I'm good to go? Zero percent chance. Oh, there we go. There we go. Now we're cooking with gas. All right. Zero percent chance. I knew you would do it.

Why do we need this if we're sitting across the table from each other? I will explain to you why. Watch this. Lean into your mic. As a professional broadcaster. I got this. I got this. It's an audio thing.

So you know how close or far you are. I said this? I really just wanted you to do that. If you're too far from the mic, it'll tell you because you will hear yourself. Also, Josh has effects. All right. I think we're ready to go. You guys, where's John?

All right. I've got a hard-ish stop. Yeah. Michael's got a flight tonight. Going to Fayetteville, Arkansas. It's great this time of year. Are you flying to Little Rock? Flying into Atlanta?

Literally Fayetteville. I got a straight shot there. But on the way back, coming to JFK via Dallas. Wait, there's a plane that leaves JFK and lands in Fayetteville? LaGuardia. Arkansas? Yeah. What are you going for?

You know what's crazy? They've gotten rid of all the unprofitable flights and only kept the most important ones. I mean, that seems like how many people could be on that flight? Every time you leave New York City, the world feels so small. I mean, in a good way. I was in Boston coming home. There was one person in front of me at security.

One person. In what airport? Logan. Oh, okay. In Logan? Yeah. It's really our airport is the biggest zoo. It's just, it's a freak show.

Something like 85% of all delays throughout the entire country originate in LaGuardia, JFK, and Newark. I would believe that. Just handling bags and people. Sorry. I'm here. Okay. Nicole's from the South Shore also. All right.

Where are you from? Long Beach. Oh, that's good if you like it. That's good if you like it. That's real South Shore. Thank you very much. That's even further south than me. That's like South, South Shore.

That's South, South Shore. All right, let's click it up. Let's click it up. How's my coloring? That was a very short quote. Yeah, I'm a little bit nervous for this one. Dan, you're like much smarter than us. I'm a little bit nervous.

Michael's super intimidated. I am intimidated. I wouldn't say I'm much smarter. How about this? You know a lot more things. That's fine. Perhaps. Yeah, I mean, that's up for debate.

Would you say you're one of the smartest people I know? I would say that. That's your intro right there. All right, let's go. Let's your intro right there. Three clicks. All right, let's go. Let's go. Let's do the show. Let's do the show.

Welcome to The Compound and Friends. All opinions expressed by me, Michael Batnick, and our castmates are solely our own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. in the securities discussed in this podcast. Hi, guys. I'm Josh Brown.

My friend, Brendan Ahern, is the founder of Craneshare, which also happens to be the sponsor of this week's episode. And I wanted to let you know one of my favorite information sources is Brendan's very good China last night email blast. Every night, Brendan stays up

till probably, I'm guessing, 1, 2 a.m. He's got the latest headlines coming from Asia, all of the stuff that may or may not affect the next day's trading. And he puts it all together

into a really great, easy to read summary, all the headlines you need, the backstory behind the headlines when necessary. And he's really covering everything, whether it's Chinese ADRs or it's currency stuff or it's political things or trade or the U.S. dollar. Just you name it. Brandon gets it in there.

He's a very good writer, very succinct, most importantly. So I would send you to Craneshairs.com or ChinaLastNight.com to learn more. Thanks to Brendan. Thanks to Craneshairs for sponsoring the show. Alright, this is a big one. This is a big one. We have one of the smartest people I know I've been informed in the house today.

I've been looking forward to this episode since I begged you to do it a few weeks back. Dan Greenhouse. Dan Greenhouse, ladies and gentlemen. Are you fired up? I wouldn't go as far as to say I'm fired up, but I'm certainly aware that I'm here. We are very fired up.

We wrote a little intro for you. Can I read it? Please. Dan is a male model and chief economist and strategist at Solus Alternative Asset Management. And you are a CNBC contributor. You are? I used to be. A former CNBC contributor.

Okay. Solus manages $3.3 billion for institutions and family offices, specializing in event-driven, distressed, and special situation investment opportunities. That's a lot of special situations. Hold. A lot of events. Hold. Things are being driven. A special situation right now with these armchairs.

That's a special situation. Finish. Prior to Solis, Dan served as chief strategist at BTIG and Miller Tabak started his career at Bear Stearns in 1999. Dan Greenhouse, welcome to the show. I think I met you probably in the Miller-Tayback days. Does that sound about right? You and I know each other for, yes, a long time. Yeah.

It feels like. Well, also, like, I think when we met, it was like, oh, yeah, you're a Long Island guy working in finance. Yeah, I think that's right. We probably knew a lot of people. Who happens to be Jewish. No, we're the same age. Yeah. Are you the same age?

There's not a lot of white Long Island Jewish people in finance. And we bonded. We stuck out like sore thumbs. And we had other, Joe Weisenthal was among. Oh, yeah, yeah. Oh, you know Joe? The last time you and I saw each other, we had dinner at Domino's in Midtown with Joe and Lynette Lopez. What do you mean Domino's?

Was it Domino's? No, yes, Domino's. Domino's pizza? No. Yes. Domino's pizza. What? Yes. There was a Domino's on like 42nd or 40 something. In New York city, we ate at Domino's.

We were out somewhere at some event celebrating something. This was during the earnings recession of 2015. How drunk was I? We were all. Okay. Oh, I do remember that. I do remember that. There's a pizza place upstairs.

Because it wasn't planned. It was like we were somewhere. I was there. You were there. I was We were all. Oh, I do remember that. There's a pizza place upstairs? Because it wasn't planned. It was like we were somewhere. I was there. Why did we end up in a Domino's? I don't remember why. Was it Domino's? It wasn't Domino's. It could have been Pizza Uno. Yeah, yeah, yeah. It could have been famous sales. No, but it was an after an event thing. It was an after an event thing.

It wasn't like, let's all meet at Pizza Uno. I feel our listenership just cratering right now. Actually, it was Fridays. It was after an event thing. Was it like, let's all meet at Pizzeria Uno? I feel our listenership just cratering right now. Actually, it was Fridays. It was Fridays by fun station. No, it wasn't. Yes, it was. I wouldn't have walked in there. Yes, it was. It could have been docks. I don't know. Be that as it may. Be that as it may. Here we

are. So, all right. So, I think I met you back in the Miller-Taylack days. So, bring us up to speed, though, because the most interesting and mysterious thing about you is that you are one of the smartest people I know. And you're one of the volume-up people. You know what that means, volume-up people? I assume that CNBC is on mute. Well, Bloomberg, Fox, just in general on trading floors on Wall Street, they don't have the volume on because unless there's something going on.

That is accurate. I've never walked into a client's office and had the volume on television. No, and it's not out of disrespect. It's just the nature of you're working. You're on the phone. You're doing – but there are volume up people for me. You're one of my volume up people. I genuinely want to hear what you have to say.

I'm flattered and I appreciate that a lot. I'm genuinely happy to be here. I miss the two of you. I'm glad that we're all together again and can – Well, time out. But now explain your disappearance. So you were a regular. You were a contributor.

I was a contributor in the mid-2010s or whatever it's referred to. Yeah. Now you got that. I moved from the sell side to the buy side to what is, as you mentioned, Solus Alternative Asset Management. And being the buy side, your public appearances are limited. The last couple of quarters, we've sort of loosened up a little bit, and I've started to peek my head out. And that's particularly on Scott Wapner's closing bell show. We're all up here, call it every two weeks.

Scott is the best. Scott, I have nothing but the nice things to say about you. You recently had Bob Bassani on, who also – Bob is the best also. Anybody, I think, involved with CNBC in any way has only the best things to say about Bob and Scott. So I'm happy to be there, and I'm thrilled to be here. So thank you again for having me. All right.

So you have reemerged and we're so happy for that. We're going to start with the fund manager survey. Michael, set this up for us. All right. There was a tweet talking about the fund manager survey that comes from Bank of America. I forget who said this at Bank of America. I might have been heartened. I can't remember.

It said, this screams macro capitulation, investor capitulation, startup policy capitulation, meaning that cash levels are at the highest level since April 2001. Your thoughts? Let's see. I mean, it seems pretty pronounced to me, but it hasn't worked. Like, this kind of sentiment stuff hasn't worked all year. Like we really haven't had any meaningful reversals. Yeah, I think when I hear people talk about capitulation, it's ethereal in the sense that I don't know that there's any actionable trading strategy that you can ascertain from any of these data points. Listen, cumulatively positioning certainly matters.

You can look at positioning in the CFTC data that comes out, the CME data, and you can surmise that people are not long equities right now. And the fund manager survey, and for listeners that may not be aware, this is a real survey that a lot of people pay attention to. I'm not at all surprised that cash levels are very high, but it's also to some degree telling me something I already know akin to margin debt. The market's up, there's a lot of margin debt, the market's down. It's coincident. Right. When stocks are down, cash is up, and that's why stocks are down. That's right.

It's cause and effect. We understand that. So there's not a lot here. What is this showing us? Similar thing from the manager survey. We're looking at allocation to equities and inflows, and both, as you would expect, are going down. flows, and both, as you would expect, are going down. But I got to say, there's a linear relationship between stock prices and bearishness, in the sense that obviously the lower stock prices go, the more bearish people get. And I am sure you encounter this in your world. In reality,

the exact opposite should be true. When stocks are at their all-time highs, and that's not to say they can't go on to continue to make all-time highs, true. When stocks are at their all-time highs, and that's not to say they can't go on to continue and make all-time highs, but when risk assets are at their highs, you're supposed to be a little more skeptical. And when the stock market's down 25%, 22% today, but 25%, you're supposed to really be starting to think about, what are my one, three, five-year time horizons looking like? Whether you're on the institutional side, as we are, or I imagine on the retail side as well, these are the moments when you're supposed to start lining up and even starting to dip your feet into the water, so to speak.

But the problem with that is if you get burned doing that once, you stop. So the September low – excuse me, the June low, you made a new low in September for the major averages. But that was also one of those screaming capitulation moments. John, you got that? averages, but that was also one of those screaming capitulation moments. John, you got that? That was also one of those screaming capitulation moments in, like, June 16th when the market made its low. You had a bounce, and then you had lower prices in September. So, you say to yourself, all right, I got bullish, and I got burned again. I'm probably not going to play that game. Well, listen, I don't want to, you know, again, I can't speak to the retail investor. You guys will also.

Well, you are right now, so. Speak for the retail investor. I apologize. But this is not dissimilar to 2002. The market made a low in the summer of 2002 after just the abysmal summer that year and then went on to make a subsequent low in October. And then obviously that ended up being the low retested in March of 2003 and off you went. Obviously, that ended up being the low retested in March of 2003 and off you went. But even if you bought at that summer low in 2002 and were, so to speak, out of the money by the fall, a year later, you were way up. It didn't have to be that low.

That's right. And so the table here that I brought with me is I put this on Twitter, although nobody seems to follow me on Twitter, but whatever. You're so much better off, dude. Anyway. So much better off. I just went back to 1960, basically. That's usually my starting point, since that's basically when the S&P came, as we know, it came into inception.

Just when the market's down 25% from a given cyclical high, how do you do going out a series of timeframes? And the line item I'd want you to draw your eyes to is the percentage positive line. And you can see one month later, you're up, call it two-thirds of the time. That's sort of a random occurrence since the market's generally up two-thirds of the time. But when you start going out 12 months, 18 months, 24 months, the S&P is almost always higher. So 24 months after the S&P falls 25% from a high, which we just did in September. That's correct.

And I think when it wasn't, it was like 0.8 and maybe 74. Hold on. 95% of the time, you have positive returns. For the index as a whole. Yeah. And the median is a 23% return, which is way better than average over any two-year period. And again, it's just basically telling you what you know, which is- When stocks are low, you want to buy them.

When stocks are low, you want to buy. So why does everyone have so much trouble with that from retail to professional to institutional to consultant? It just – it works against what we want to do psychologically. Like when we're in pain, we want less pain. And when things are going great, we don't want to leave anything else on the table. Yeah, I mean there's a huge behavioral economics component to this. But from years of meeting with – I mean listen, this is half the equation. You're supposed to buy when market's down.

But when you watch – and when you watch CNBC as we all are on, every – oh, the market's down. You got to buy. You got to think long term. Where are all these people when the market's down? Which is the right advice though. Which is the right advice. I know I'm looking at your boy, Nick Maggiuli. Yeah.

Just keep buying. Just keep buying. That's good advice. In theory, you should always just keep buying until it's time to retire. And I think from the RIA community, that's absolutely the right message. On the institutional side of things, you're supposed to be advising people when you're at the top and saying, hey, now's the time to start raising cash levels. That's always very difficult to do because of career risk and underperformance, and then you start risking losing AUM.

Well, there's also, on the institutional side, you're being judged against something. It's the S&P. Right. If you're a retail investor doing it yourself, you don't have to report your results to anyone but your spouse, right? And yourself. Yeah. I think the reason why this particular moment in time does not feel so obvious, the numbers that you said are empirical, factual, correct.

We know that. What's making this challenging, I think, is that everyone knows a recession is coming, and we're going to talk about that. And yet we haven't really seen the economic data turn yet. And I think investors are wary of getting too aggressive on the long side when the data hasn't even begin to really soften. Can I just, before you even answer that, not that it was phrased as a question or anything, but have you ever seen anything like this where the CEOs of the largest banks in America are promising you a recession?

People like Jeff Bezos are saying batten down the hatches. I don't know that anyone has a better sense of like what's going on with the consumer. The central bank chair is using the word pain regularly. They're saying pain, which is their way of saying recession. For political reasons, they don't say recession. They're guaranteeing you they want to cause a recession. I can't remember anything ever like this before. Can you?

No. So earlier this year, I went in preparation for this. I went back and watched. There was a video of me on CNBC in January. And I wanted to look at that one because I remembered that I referred to something that you had said the day before. And I can't speak for everything that you said because it's quite voluminous. It's a lot. It's just too much to handle. But at that time, you had said something about this is going to be bad. Because the next day, I had come on the Halftime Report and had echoed your concerns because I was pretty concerned coming into the year. I certainly didn't think we'd be down 25 percent by the middle of the year.

But the Fed was telling you, guys, pay attention. What's interesting about this is historically this is not what happens. The Fed raises interest rates. The market usually keeps going up. I mean, just think about 2004 through 2006 when the Fed hiked from 1% to 5.25. They hiked by 425 basis points. The market went up the whole time. And when you were supposed to sell was when the curve inverted and the Fed shifted into starting to cut. And obviously, that's 2008. And then when the- Simpler times.

Much simpler times. So to your point about have you ever seen this before, part of what I brought that up because part of what I was saying at the time, and I wasn't alone, but it was a smaller camp, was really all this data is completely irrelevant. Because the only thing that – this is too simplistic, but for now, the only thing that matters is the 70s, which is the last time you had an inflation level even close to – obviously it was much higher. How the Fed performed, how markets performed, how assets performed subsequent to that in the era of declining inflation is to a large degree irrelevant. And I guess in retrospect, I guess I'm not surprised to see what's going on. But at the same time, as it's happening, it's not what's supposed to happen where the market- Well, with disinflation, the Fed is trying to keep the economy growing, regardless of the recessionary pressure that's coming in. The Fed's trying to fight it. This time it's backwards.

The Fed is trying to bring about a short, shallow recession to prevent a worse case scenario later. So it seems almost like un-American. It seems like, wait, we're all rooting for job losses, lower stock prices, lower home prices, but we kind of are. Yeah. Well, it's not that you're rooting – you're not rooting for those so much as you're rooting for lower prices. But that's how you get them. I should say prices are never coming down.

If you look at the index – if you look at the price level itself, just think about the price of a porterhouse at Peter Luger's. The price of a porterhouse at Peter Luger's, a Wall Street staple for years, never goes down in price. Recession-proof. Recession-proof. But except for the pandemic when they couldn't sell any. But yes, a pandemic is obviously the exception. But the price level in general is not coming back down.

The burger at your local restaurant that was 14 and is now 18 is probably not going back to 14. What the Fed's trying to do is just slow the rate of increase. That's right. And the part of the way that you have to do that is through tightening monetary policy and job losses. And I know the big debate today is how much of this is out of the Fed's control, so to speak. And it's true. There's a lot of this that out of the Fed's control, so to speak. And it's true. There's a lot of this that they can't print oil wells. They can't print better fiscal policy, if you will.

But there is a demand component to this. And the Fed has looked at this and a number of private sector indicators have looked at this. Subsequent, we know this story. This is not anything new. But subsequent to COVID, we gave everybody a bazillion dollars, a hundred different ways. And they started buying stuff because they couldn't do things.

And the chart we have up here is core – in black, you have core services, and in whatever that is, orange, you have core goods. And you see that subsequent to COVID, there was a huge spike up in the price of goods. That's soccer balls. That's basketballs. That's stuff you could actually buy, Dumbbells, shoes, cars. And that price comes back down. Those prices are starting to come down. Fast.

Fast. And this is when Jeremy Siegel goes nuts on TV and other people echo those sentiments. This is what they're looking at. But the flip side of this is the black line, which is services, which is not only apartments and rents. It's also how much it costs to get your lawn mowed.

And that's like the wages piece. And that's the wages piece. So what the Fed has to do is say, okay, how much of this is supply driven? There's wide estimates. Call it, let's just make it up and say it's 50-50. Yeah, a lot of this is supply chains, which we know have normalized.

You've talked about shipping rates, the quantity of goods coming in, the number of ships at port, the dwell times, all of that has moved, the dwell times. All of that has moved in the right direction. But the other side of this is we have an extremely tight labor market. And the Fed, which is staffed by – universally by economists who all took the same classes at the same schools from the same professors, are all looking at this and saying there's a labor side to this that we need to untighten in order to bring down. But the mechanism that the mechanism you use is the controversial part. How do you untighten the labor market?

Well, you make it so that corporate profits get hit. People get thrown out of work. You knock down the value of houses. So people stop spending like they're Gatsby. Well, this doesn't happen. And you f*** up the stock market. Corporate profits are still at all time highs. Well, that's my point.

You need time for that transmission mechanism to take effect. And that's where we are. We're in the middle of that period. Dan, let me ask you- What are you missing? No, I just- I didn't number any pages. I didn't- I don't know.

No, I get that. Let me ask you a question. Maybe this is wishful thinking. Because everyone seems to know or anticipate a recession coming, the market has done a lot of the work for us already. The NASDAQ fell 35%. The S&P fell 26%. Is it possible that this will be one of the only times

where the bear market ends before the recession even begins? Yeah, I mean, so we all know historically, on balance, the stock market usually bottoms, call it three months or so, four months before the recession ends. But what's interesting about this is you've had a pretty substantial decline in equity prices. The point I've made repeatedly is, let's repeatedly is people our age are accustomed to the idea that

a real bear market is 50% drawdown in prices. We think we need to see the full thing. We experienced that in 2000. We experienced it in 2008, obviously a little less, a little more. But the reality is when you look back historically, that's not the 1990 bear market was 20%. The 62 bear market was, I think, only about 30%. Obviously, you have 74, which was also quite large, but 25% is a pretty substantial decline in prices. And to the extent that you were trying to ascertain how much is quote unquote priced in, a simple rule of thumb or a simple backward of the envelope way of doing it is, well, normally you fall 30%, 35%. We fall on 25%. Do the math.

We're pricing in 70% of our session. But here's the problem. It's where we came from. So you're not falling from a normalized valuation. Like the 07 peak, we were probably 17 times earnings. We're falling from 24 times earnings. So it's not quite 1999, but it's also not a garden variety valuation that you're starting from. Remember when we described Dan as the smartest person

we know? Look at this f***ing guy. He's got papers all over the place. There's like a method here. First of all, they're not stapled. Second of all, there's like a method here, though. Let's see what happens. This is genius. This is genius at work. Watch. But he has a system with John. It's like a signaling system.

This is like Sonny and Bono But he has a system with John. It's like a signaling system. I love this. This is like Sonny and Bono. I feel very comfortable just flashing. John, slide number 954, please. Well, I've got you, babe. Am I right? Yeah. Earlier, when we were singing it together, it sounded much better than it does now. But to your point about the valuations, you can also look at this through the prism of valuations.

We have this up. Okay. So let me go through these two charts first, and then we'll do the valuations. First, the chart on the left is your average price decline during previous recessions. Oh, that's good. With the horizontal line on the left chart at about a third. So the normal bear market is called a third. This is historically I've included 2022 at about 25%.

And you can see what each recession brought about in the form of lower stock prices. On the right is what happens to earnings. I've not penciled anything in for 2022 because, as Michael correctly pointed out, they're basically flat. But you can see historically you talk about EPS declines somewhere around 10% or 15% or so on average. Obviously, this is a relatively small sample set, but it is what we have to work with in the post-1957 era. On the valuation side of things, the number's about a third as well. Valuations normally compress about a third. Okay.

And if you take 15 or whatever where we are now and divide it into the 22 where we were, that's about a third. We did it. So to your point, from a price standpoint, you're about average. But we haven't even had the recession yet. That's the problem. That's why people are so freaked out. We did all this work.

See? We did all this work to the downside on valuation on price. We like we did, we took a lot of the excess out. We, we took SPACs and recent IPOs. We knocked stocks down 90% in some areas of the market. We've done all that. And like the shit hasn't even hit the fan yet. Yeah. And so, but before we talk about that hitting the fan, I want to make a quick point here about – because you said we haven't had a recession yet. And I'm a little late to the conversation, although this is the first time I'm on the show. Yeah. I wanted to make a point to the viewers to think, well, what do you mean we had two quarters of GDP? We already had a recession.

I agree. It's not a recession. We added four million jobs during that time. I don't think it qualifies. I agree. And just for the viewers at home, this is the recession in 2008 and the recession in 2001. And just two observational points. The first is in 2008, in the second quarter, GDP expanded by 2.5% or so.

Did it really? The second quarter of? Second quarter of 2008. Oh, wow. The economy grew. Huh. Consumer spending was positive. And yet no one thinks that we were not in a recession in the second quarter of 2008.

So the fact that there was a positive GDP print in the middle of what is a larger recession doesn't mean anything. And in 2001, an even more interesting point, find me in the 2001 recession the two quarters in a row of negative GDP. Oh, shit. Look at that. Wait. So 2001, obviously we all knew we were in a recession at that time. That's right. There was no debate.

You had Q1 minus 1.3 percent, Q2 plus 2.5. 2001, obviously we all knew we were in recession at that time. That's right. There was no debate. You had Q1 minus 1.3%, Q2 plus 2.5, Q3 minus 1.6, Q4 1.1. Yeah, we did the two consecutive quarters of GDP thing is dumb. We know that stuff. Okay, well, you should have told me that before I went off on this tangent. No, no, no. Even National Bureau of Economic Research is not like stuck on the two consecutive quarters. Yes, I just saw it. Before we get into the we already had the recession, I brought the slide. I wanted to. Yes. Before we get into the – we already had the recession.

I brought the slide. I wanted to use it. So we spoke about – but here's the thing. I know market cap is not valuation. Google is still $1.3 trillion. Fine. But down from 1.6. No, down from two.

Was it $2 trillion? Was $2 trillion reasonable? Well, not from the lens of today. Listen, price is truth. I hear that on CNBC all the time. I have a little bit of a contrary take, though. What if cash balances are rising and there's nothing

capitulation? It's just that here's a free 4% and never worry about anything ever again. So we're looking at like, oh, everyone's in cash. Yeah, because they're getting 4%. Dude, they have to sell something to be in,

they're not selling cash to buy cash. Understood. But sell something that could be, that could move, that has standard deviation of 20 or 25 versus being in cash and earning 4%.

No, it makes sense. But they are selling stocks. It makes sense. I understand. But that to me doesn't scream capitulation. If you tell me they're in cash

and they're earning zero, like they were three years ago, that's capitulation. Agreed. So on this point, this conversation about TINA and equities is dead. It's clearly dead. But it's not just treasuries. This is the yield on the high-yield bond index in black and the yield on the investment-grade index on the right-hand side in orange. Which is crazy. and the yield on the investment grade index on the right-hand side.

Which is crazy. In orange. You can now, for the IG index, which is obviously the supposedly best quality companies, the index itself yields 6%. So forget treasuries at 4%. You can go in and get high quality investment grade corporate bonds paying you 6% or so. I should have some cash and make that adjustment. Senior to the equity tranche. You have less. Do you have a cash and make that adjustment. Senior to the equity tranche. You have less.

Do you have a CFA? I did. Less volatility. And so like looking at people, quote, swing to cash and saying, oh, they're capitulating. No, they're just not stupid. And for not a ton of duration risk. We were looking at like a one to five year corporate investment grade ladder with like Apple and Goldman and Blue Chip names at like almost 6%. Yeah, admittedly, a large portion of the IG have maturities in 2050, 2080.

I mean, obviously, you're much more susceptible. But I was talking about the one to five. Yes. And even still. Yes. And especially when you come down into high yield. High yield, you don't borrow for 30 years. But anyway, just to button it up. So that's why I want us, I think we should be

careful about looking at global portfolio managers or retail going into cash when you consider what they can earn in cash and understanding it's not all fear. A lot of this is just rational allocation because shit has changed. Like we're in a different story. However, this is from Rob Anderson at Ned Davis. He said, margin debt is off the record high set last year and the speed of the deleveraging

suggests excessive investor pessimism, reversal from extremes, which we have not seen yet, have been followed by above average gain. Okay, we know that. Can I ask you guys a question? Why does this, and I don't mean this

disrespectfully at all. Why? Now you got to ask. Why does this matter? Margin debt. Doesn't matter. Look at it. It's the same chart as the S&P.

It's the same chart as the S&P. It is. But here's the thing. The 15-month rate of change. The 15th. Look at the red. The 15th month rate of change. I think this matters.

So we're saying that there's less speculative trading activity once the market has already fallen 20%. I don't know. And it might. I don't know that this month, 15-month rate of change matches up perfectly with the S&P. It could. It very well could. I think we're saying the same things. I generally have found margin debt to be like the most coincident indicator of all coincident

indicators. Well, listen, I think it's bullshit on the way up. Up there with trading volume, by the way. When is trading volume at its peak? What I always say, and you know what else? Oh, yeah, but the price of gold. The stock market's up, but gold. This was the whole thing.

My mom never opens up her Schwab or TD Ameritrade statement and says, oh, my God, I was up or down. But did you see gold? Or, oh, but I mean margin debt is up, so I really better be careful about these gains. I find that to be an irrelevant metric in the larger scheme either of analyzing the market and doing forecasting. You know what margin debt is great for? It's great for Twitter. It's content. It's good content.

It's really good content. Is it good content? Well, no. It's great for alarmist Twitter because – That's a thing? Yeah. Oh. Because it always looks like this is a maniac bubble.

It's about the person. It's like, oh, no. it probably will rise with the market. And then when the market falls, it'll fall off. Are those people also tweeting about the amount of debt outstanding at the federal government? Yes, of course. Oh, for sure. And our unfunded pension liabilities? It's in the same playlist. Josh, what's this Bank of America stuff?

Wait, hold on. We didn't do this number of times. I thought we could skip over it. That's okay. It's okay. Well, let's do it anyway. Do we have it, John? Do we have it?

Tom Sarafagus from Bloomberg plotted the S&P 500 with number of times capitulation is mentioned. I'm guessing Bloomberg is scanning all the news articles. Wait, wait. How many times capitulation is mentioned in their own articles? No, I'm saying in all articles. But I agree that you don't need to nail the bottom to know that this is a good buying opportunity. Right? Like don't look a gift horse in the mouth.

And when equities are off 25%, can they go down 40? Yeah, sure. Why not? Yeah. I mean the risk that you run into is you buy in October of 1929 and it takes you 54 years to get your – in real terms. If that's what ends up happening though, like what – Yeah. All right.

So this is the story count for the search term capitulation. And it's actually way off the charts. Wait, I can't. Is this a bullish or bearish divergence? I don't even know what we're looking at here. I'm going to go ahead and buy on this. Because it was higher in June than it was today. So is there apathy?

I don't know. Can you imagine like this is your trading model? No, it's just a tweet. Just apply 2 and 20. I would file this in the same cabinet with margin debt. All right. I like when we can – can I tell you something? We talk to a lot of people who are always adding new things.

I like people that are like, throw that out, throw that out, throw that out. To me, that's more valuable these days. I operate under the assumption that there are cameras on right now on us. There are. And why would I want that to stop and show a chart of something unless it's a particular relevance? Agreed. We should –

Let's keep it rolling. Josh, there's some good stuff in here. What's this? I feel very strongly that the viewers want more of us. This is from Bank of America. I like their stuff a lot. And John, we're going to go to this B of A data analytics. Basically, this is more on,

this is just more on positioning and specifically here. Let me set this up. This is just more on positioning and specifically here. Let me set this up. Surprisingly, though, this angst is not reflected in positioning data. Global equities have accumulated inflows, not outflows, of USD $169 billion year to date. ETF inflows $417 billion, more than eclipsing the redemptions from active funds, which is minus 248 billion. Trends are similar across client categories, hedge funds, institutional, private, corporate. Everybody is a net buyer of US stocks over the last three months, all categories. Active US household investors, which they call the $40 trillion whale in the equity

markets, have still not sold enough to reverse the 4.2 trillion of inflows registered in the last few years so in other words everyone's bearish everyone knows the recession is coming but no one's actually selling in fact we have a stock market down 20 something billion dollar uh 20 something percent and net positive inflows of over 100 billion. What do you make of that? I don't... So there's no signal there for you. I guess you can't call it capitulation is the main...

I guess you can call it capitulation if people keep... But again, I don't know why I'm searching for capitulation. From my standpoint, there are many other things that you would want to focus on to determine whether there's a quote-unquote bottom or a better buying opportunity than some. You don't need actual capitulation to make that. No, and I wonder, thinking out loud here as we're talking, what the origin of the need

for capitulation is. I guess, you know. I think it's muscle memory. Looking back on it, March 09 was capitulation in the sense that people were like literally jumping out of a window when you made new lows. Yeah. And I imagine it was the same in 74 at that bottom, which was cataclysmic

if you read the news reports at the time. But I don't know that, what do I need? We can add an apathy. Why not? Why not? Something this big, I feel like it would be tough. Something what big? Something as big as this,

a regime change from 40 years of declining interest rates that all of a sudden makes this hard turn to where the Fed is no longer your, like, it just feels like it's too big of a moment to end in apathy. Although I submit that some bear markets have ended in apathy. Yeah, I think that's probably right. I also would add, I think you just touched on something that we haven't spoken about yet, and it's probably the most important item for any listener or for us to- Two-year? This is a two-year yield? Is that where you're going?

No. Oh, I'm sorry. Go on. Now my train of thought is completely, go to commercial. No, you just touched on something that is the most important thing for people to be thinking about, and I would argue for you guys to be talking about, which is the regime change from 30 years of declining interest rates, 30 years of China exporting deflation, and what the next 10, 20, 30 years are going to look like. Because that decline in interest rates, the two

year, has underpinned, not exclusively because the stock market and risk assets are largely about earnings, but has underpinned the valuation expansion that we've experienced from the single digits in the 1982 to the peaks in 2000 and now. And what does the next 10 and 15 year investment landscape look like if you don't have that much of an underpinning, so to speak? And the Fed's, I think to some degree, the Fed is on, I mean, to a lot of degrees, but the idea that you want to get inflation under control, you talked earlier about how this is like not something you want to do, put people out of work, and obviously you don't. But the battle against inflation, to not over-dramatize it, but to completely over-dramatize it, is the story of the day, is the battle of the moment. Because if you don't win that battle,

everything else is subordinate to it, because you're going to have to come back later. And the resulting decline in valuations is going to take – I mean, we're all talking about 3 to 3,500 as some sort of a bottom. That's going to be a wishful thinking if the Fed doesn't get this right the first time. But that is the necessity of the recession. We've never had inflation spike above 5% and fix it with anything other than recession. So that's the necessity of it. And it's ugly, but it's true. Yeah, let me just – so we've never had inflation above 4% and an unemployment rate – or inflation above 5% and an unemployment rate under 4% solved without a recession. That's correct. And that was my argument at the start of the year.

Dan, I apologize for cutting you off, but you were talking about interest rates, so I'm not sorry. So I was right. The two-year is at 4.6. Okay. If that's how you feel, I appreciate it right. The two-year is at 4.6. Okay. No, that's, if that's how you feel, that's, I appreciate it. And the 10-year is at 4.2. They're just going vertical. So maybe, maybe you could say, listen, stocks were maybe appropriately overvalued for a 0% interest rate world. Now that's no longer the case. And even though multiples came down 25%, they could still have a lot longer to go. No, I think, listen, should stocks be trading at 20,

20-something times earnings with interest rates at zero and a pretty good growth environment, friendly energy, blah, blah, blah, blah, blah? The answer is probably yes. Because what are multiples? They are confidence. Vibes. I heard something about vibes on what,

oh, the TikTok. She popularized vibes, yeah. Yeah, I don't know. They're vibes, it's how we feel. It's another way of saying sentiment. I mean, listen, you can model out what, Something about the TikTok. She popularized vibes. Yeah, I don't know. It's how we feel. It's another way of saying sentiment. I mean, listen, you can model out what, you know, one of my problems with people on CNBC is they will just slap a 12 multiple. Like there's a reason why the market multiple sometimes is what it is.

Well, it's as unpredictable as anything else. No, that's right. Well, listen, there are, it's for sure, but it's inflation. It's inflation volatility. It's interest rates. It's right. But you can – well, listen. There are – it's for sure. But it's inflation. It's inflation volatility. It's interest rates. It's positioning. But yes, it's as unpredictable as anything else. But in a pre-COVID environment, a 20 multiple is perfectly reasonable. Now, obviously, is the right multiple 12, 14?

You have no idea. is the right multiple 12, 14? You know, you have no idea. And this is, again, going to be something of a battle because the idea that we're going to go higher because the multiples then get to subsequently expand from call it 14 times or 15 times forward to 18 times, you know, that's not happening. You've got to hire a multiple throughout the 20 teens decade

because the Fed was in a position to rescue the stock market anytime it got into trouble. What happened in late 2018 was the latest example. And that was actually the example that I think really converted everyone. Like this is just an upside. Because when the Fed did its pivot and they go from, I don't know, 2.5% interest rates back down to 1.75% because the S&P fell 20%. He said- That was just like 2019,

you then got a year with a VIX of like eight and 30% returns the S&P because that's the moment all the people that had been fighting the Fed and fighting all the QE programs, that's when they said, you know what? Actually, they didn't say this out loud. I'm wrong. Valuation doesn't matter. Just buy the

best stocks and shut the hell up. And like that was the regime prior to COVID. We're not ever going back to that, or at least not in the next five or 10 years. Because the Fed can't save the stock market anymore. And as a matter of fact, right now, one of the guys is saying, I was happy to see the stock market down. Kashkari. So it's a totally different world. So I agree with you. That's what's changed.

What does that mean for multiples? Well, it means kiss 20 goodbye. I don't know if it means we can't have 16, but I don't think that we should expect them better. So now it really becomes more about fundamentals. So two points. One, Fed members really should stop talking so much. Oh, God. Cosign. Cosign.

Please. I wish they would stop. I'm fine with increasing your open mouth operations, so to speak. But it's, oh. No, I'm with you. I was not aware we were in front of a live studio audience. I'm with you. I wanted to stop, too.

I wish they would shut up. Well, I don't even mind. But it's the repetitiveness and the volume is a little much. What's it like that happens? Zero. Zero percent chance. Look at you. Zero.

0.0. I think they're feeling themselves. Wait, Dan was making two points. What's the other point? I've not forgotten. Okay. Well, let me ask you this. The audience applause just totally threw me off.

Sorry. We've spoken about the VIX repeatedly over the last few weeks. Why isn't the VIX going up? Right now, the S&P 500, it is Thursday at 340. The S&P 500 is down 1% on the day. The VIX is also down 1%. It's at 30. Why is the VIX not telling us what we think it should be telling us?

Well, listen, let me ask you this. Where should the VIX be? 40? Why have we not seen a single spike? Above, say, 35. Is there an event that warranted a spike? Perhaps last Thursday. When you look historically, I mean, the VIX was 20 pre-Lehman.

Yeah, that's true. That's a good point. The stock market was down 20% on the, I think, the Friday before Lehman. You weren't down, and I know this because of the 25% table from before. The stock market was down 20% pre-Lehman in mid-September, call it. VIX was 22. And then Lehman happened, and there you go. And in the 2000s, I think it's something similar. I mean, when you look in the 2010s, which I'm much more familiar with, the only real spikes were in 2010 when Spain was downgraded and everyone realized this wasn't just a Greek problem.

Then you had 2011 with the debt ceiling. You had 2015 with the China deval. Those were events. Those were moments. That's how you get there. Listen, I'm no vol and VIX expert. You can bring on someone else. But that's how you get those spikes. Otherwise, you've had, for lack of a better word, an orderly decline in stock prices that, granted, has gone on for 10 months. But where in there would you need the type of hedging activity or exogenous event that would warrant a 40 VIX? Based on the last 15 years of data, I would argue that it's unwarranted. So I think if we're going to have it, it's going to come from one of two things. It's going to be something to do with the dollar or the treasury market.

I don't think there's anything with stocks that could unnerve us to that degree right now. So I think it's going to be something to do with the treasury market, some kind of blow up, or it will be geopolitical and who the hell could predict that. So speaking of the treasury market, I don't know if you guys are aware of this, but the treasury department is on the verge of doing a treasury buyback. Are you aware of this? Yes, but they're going to call it something else. They're not going to call it monetization or anything like that. Well, it's not – I mean I guess we can get into the semantics. So one of the biggest stories that I don't think gets nearly enough play on television or I assume among your viewers is the illiquidity in the treasury market, which has risen to such a degree that Janet Yellen is talking about it. Yeah.

And she's doing it and other people are doing it because they are – they have already – they, the treasury department, has already basically surveyed the primary dealers and said, hey, what's going on with this liquidity? Would it help if I came in and bought back my own debt? Yeah. And basically they have foamed the runway, so to speak, that by sometime later this year or early next year, they're probably going to introduce a program where they're going to start stepping in and buying off the run treasuries. Because who else? Who else is going to do it? Who can buy in the size necessary to affect that market other than us? The banks.

But they're not. But they're not because of the regulatory regime that's been in place. We kicked them out of that game. So basically the banks, whenever they do any risk-taking activity, however de minimis it might be, you expand your balance sheet. You have to segregate capital. So even holding treasuries and reserves is a limiting activity for the banks. Well, this is welcome news. Treasury bonds, the ETF has gone down for 12 consecutive weeks.

Oh, OK. So what do you think are the ramifications of that if they say, OK, we're starting this? A treasury stepping in. We're starting this program. Does the market like it? Or does the market say, what, don't we know? They should start an ETF. I buy it.

I don't know. I mean, the short – if you ask the treasury guys, they'll tell you it's good news. It's not as good – it's not the best answer. The best answer is something on the regulatory front, but you're not going to get that. So the treasury guys will tell you it's probably good news. When equity guys start waking up to these headlines, I think the initial reaction is going to probably be what's going on in the treasury market. That would be my reaction. Why are they buying back their own debt?

Remember when Mnuchin in 2018 – Wait, illiquidity in treasuries? Wait a minute. Mnuchin said, don't worry out of nowhere. I spoke to the biggest bank CEOs in the nation. They say liquidity is fine. Everybody's like, wait, what the f*** are you talking about? Yeah, yeah.

And stocks tank the next day. Why are we even talking about that? It's Alan Schwartz going on TV saying, you know, Bear Stearns liquidity is fine, like two days before. Yeah, but Dan, like this is a bigger story because the financial markets just ousted the prime minister of the UK like today. Like, well, I'm saying oil prices and dollar prices are now basically acting as the predominant forces in a lot of things that maybe they weren't even six months ago. Like what do you make of – this is a prime minister now with the shortest tenure in the history of England. The big joke on Twitter I think was would she last longer than a head of lettuce? And she did not.

Yes. The other one I saw was the Airbnb logo on 10 Downing Street. OK. But whatever. So she – but she basically got kicked out of her job by the financial markets. That's – yeah. I can go with that. Listen, oil prices are – we haven't touched on them yet.

This is a really big... Wait, before we do that, John, can you give me this Joe Biden thing? Are you able to do that? Okay. How right or wrong when we play the president talking about whether or not we have an economic problem? I sort of

agree with this. What kind of ice cream do you think he was eating? Pecan. Butter pecan. I mean, he's mean he's such a rocky ice cream cone. Do we have audio though? Rocky Rose. No, it's been it's like vanilla. Hold on. Hold on. Hold on. Let's do that again proceed If it's not gonna work, it's okay, we'll put it in post look at this look at that pose It's okay. We'll put it in post. Look at that pose. It's not going to work? It's not playing in perspective. All right, Jamal, read what it said.

Just read it. He's not concerned about the dollar. He's concerned about the rest of the world. Do Biden voice. He's basically saying the reason there's an economic problem is because of how strong the United States is and that everyone else— I'm sorry to interrupt. We have to take the picture of him eating the ice cream off the screen. No, I'm going to leave that up there for the—

I have ADD and I just cannot concentrate. Alright, get him off. He made this like not completely out to lunch idiotic point while eating the most enormous waffle cone. But

actually it was not the worst point which is that, no, no, no, we don't have a problem. Everyone else has a problem. Is it that simple? Well, the dollar is our currency and the world's problem. Yeah. I would add the strength in the dollar on a year-over-year basis, let's call it, is about as extended as it ever gets. It's remarkable, right? It's remarkable is the right word.

The problem with that is historically when the dollar gets this strong, things start to go wrong. The problem with that is historically when the dollar gets this strong, things start to go wrong. I wouldn't put the UK in that basket because I think the UK is a very idiosyncratic. She announced incredibly appealing supply-side reforms at a moment that maybe the market didn't want incredibly appealing supply-side reforms. I think it's probably a safe way to describe what happened. But the dollar doing what it's doing is invariably going to lead to – and I think you talked about this on TV today. I listened in preparation for this. Very astutely, I might add.

Yeah, and correctly, I would. Things start to happen. Well, listen. Nike just told us they missed out on $4 billion worth of sales this quarter because of the dollar. Procter & Gamble. Think about how much money that is. It's hundreds of billions of dollars in any number – I mean, you don't think Microsoft is going to talk about that? It is a major. They've been, right, right, right.

But besides the translation effect, which is purely an earnings thing, I mean, the primary way people talk about the dollar is through trade. Well, the strong dollar, it's good. It holds down inflation at home because it makes imports more appealing. It gives us more buying power for stuff that we're buying elsewhere. But the flaw in that argument is most trade around the world is invoiced in dollars already. So it's not exactly the – And U.S. households are not doing cross-border business. No, there's not.

Like maybe Chinese stuff on eBay. There's not. I mean, yes, I'll defer to Visa on cross-border transaction volume. But yes. But listen, imports are held down in price, all else equal. But again, I forget the exact number. It's 80% or 85% of global trade is already invoiced in dollars. Yeah. So my issue with the dollar is that we don't know the

ramifications of running up the dollar's value. Not that we did it on purpose. The dollar running up in value versus everything else as quickly as it did. We know that there are 40 or 50 emerging market countries, all of whom are now, many of whom, if they're not like oil kleptocracies, they owe a lot of money in dollar denominated debt. And this makes it really hard for them to pay it back. You can segregate the countries. You start that chain reaction. Yeah.

So maybe less important, but just getting back to earnings, Netflix said for Q4 2022, we're expecting revenue of $7.8 billion with a sequential decline entirely due to the continued strengthening of the US dollar for other currencies. So if we're not trading at 20 plus times earnings, and we're trading at 15, 16, with this as a headwind, where does that get us on the S&P? But from an analytical standpoint, you don't get any credit for the dollar. I mean, there's always questions, why don't companies hedge their currency exposure? Because you get no credit if you get it right, and you get dinged when you get it wrong yeah um and and these things comes and come in waves i mean we the last time the

dollar rallied it was a big story microsoft and nike and all the starbucks it's it's it's what everyone focuses on and i brought a procter and gamble because they just reported their number was like six percentage points lower than it otherwise would have been just because of the dollar right um so you think investors will no wall street says right, we'll get it back on the other side. But the bigger story is, what does this do to the global financial system? Like, we're congratulating ourselves. Look, the Fed did 400-something basis points of spoken rate hikes so far. They'll probably get there.

So far, nothing's blown up. OK, that's great. What happens in 23, a lot of stuff has to get repriced. okay, that's great. What happens in 23, a lot of stuff has to get repriced and there's a lot of dollar denominated debt around the world that is now way harder to be paid. And believe me, the EM guys have a Excel spreadsheet and in column A is every country and column B are countries with large current account deficits and high levels of external debt servicing needs. I mean, that's not going to creep up on anybody, that's for sure. My point about the dollar, and I said it already, but I'll repeat it, is whenever it gets this strong, things start to break. I don't know.

Where would you look for something that you think might be of note to investors in that regard? Emerging market countries with large current account deficits and high levels of external financing needs. Is it always Argentina? Who's always the one? I mean, Argentina and Greece are in some stage of default, like 75% of the time in their entire history, something like that. I think the market would yawn at Greece, but I don't think the market would yawn at some shit in Asia going wrong. Yeah.

I mean, listen, because it's not an individual. I mean, listen, we lived through Mexico and Orange County in 94. Argentina, again, has defaulted. I mean, from the U.S. equity standpoint, when has that ever really mattered? I mean, the U.S. has never gone into a recession because the world has gone into a recession. If you think about the Tohoku earthquake that knocked out the global supply chain, growth slowed a little bit, but we didn't have a recession here. We're largely impervious. We're what you might call a closed economy in that sense.

I mean, we're not – I don't want to say we're impervious, but we're largely impervious to a lot of these – So you're not like in your meetings, the people you're talking about, you're not really worried so much about like systemic stuff at this moment. There's nothing really out there. Listen, I mean the beauty of – We'll play this back to you when the British pound goes to zero. Did Dan just say we're in the clear? I mean believe me. He said impervious.

Hey, Duncan, let's timestamp that. Okay. Duncan, don't be afraid to not timestamp it. No, it's not that I'm saying everything's okay. It's that, you know, in 2008, there was so clearly something going on under the hood. Nobody knew. I mean, I shouldn't say nobody because a couple of people went on TV and, like, walked it right through. But something was wrong. You didn't know what. Hashtag Barry Ritholtz. Well – I mean I shouldn't say nobody because a couple of people went on TV and like walked it right through. But something was wrong.

You didn't know what – Hashtag Barry Redholz. Well, I mean – Barry was not totally – I don't know if we discussed it. That's when I met Barry. He started letting me be a contributor to the blog because I knew Peter Buford who I worked with back in Miller-Tayback. So I know Barry since the mid-aughts.

Mid-aughts. I can't call it. That feels weird. I don't know what that means. What the hell is an aught? What is an aught? I'm not sure where it came up with. Aughts or zeros.

Is that Latin? That's where it comes from. Is that Latin? No. Dan, is it possible that we- That was quite a pivot. Aughts. Can we avoid a recession, which economists seem to think is like 60 plus percent of the

hat? Can we avoid a recession if stocks still aren't cheap? The short answer is yes, you can avoid a recession. The longer correct answer is no. I just find it hard to believe that you are going to tighten policy by this much. Right. This dramatically. I mean, listen, let's look at the housing market.

So what's taking so long? This chart. Because initial claims today still on the basement. This idea of labor hoarding, by the way. Do you buy it? Through the prism of jobless claims? Yeah, but that still doesn't mean I should be adding 280,000 jobs a month. I mean, there's two different conversations here. Labor hoarding means I'm not firing them, but continuously hiring people is a whole other conversation. This chart, which I think you guys know about, is fine for viewers or listeners.

This is crazy to me, though. We just spoke about this. The Bank of America earnings chart. Guys, there are people listening who can't see the chart. Let me explain it. Explain the chart. So for people who cannot see the chart, this is checkable deposits by wealth cohort in the U.S. banking system. And what I've done is I've rebased it to 100 around COVID, right at the end of COVID there. And what this shows you is that checkable deposits held by the richest 10% of the country is up almost 300% now as compared to basically at the end of COVID. And even the lowest percentage, the 50, I'm sorry.

90 to 99.12%. Yeah, you're right. Yeah, the bottom. Yes. Did I include the bottom 50? Yes, the top. Blue, blue, blue. Blue.

Yeah, my boy, blue. Oh, yes, there we go. Blue, yes. Even the lowest bottom. Yes. Did I include the bottom three? Yes, the top. Blue, blue, blue. Blue. Yeah, my boy, blue. Oh, yes, there we go. Blue, yes. Even the lowest banked customers. 3X. Yes, have seen a meaningful. So when you say why hasn't it happened yet, there's a lot of money on household balance sheets. There's a lot of money on corporate balance sheets.

And ironically, that which caused the inflation, all the money we gave everybody, is somehow preventing the recession from taking hold. So we've been saying this, but we didn't connect those dots. That is a very interesting, ironic observation. We've been saying for the whole year that the consumer and the corporation, because they hoarded on debt in 21, have never been better prepared to withstand a recession. Now, all of this excess, if it goes on, will burn off, obviously. But that's why it's taking so long. But it's still a trillion above where it was in 2019. What is?

There's a trillion in excess savings at banks. Yeah, I'm not sure I believe all the data that everyone does. All the banks- I don't even know how they calculate it, but- It's how much did income grow in a given month relative to where it should have been. Assuming directionally it's accurate,

people have more firepower at their disposal than you might have thought. And that's what prevents the consumer from rolling over. And that's 70% of your economy. And that works for now. A lot of things work when the unemployment rate is 3.5%. When the unemployment rate is 4.5% and 5%, this conversation is going to be a little different.

All right, let's move on. Let's get to earnings. Okay. Bespoke tweeted yesterday, 35 earnings reports so far this season through yesterday morning, 71% beat rate on both EPS and sales, 9% risk guidance, 3% lowered. Actually, that's pretty good. I know it's early, but average one-day share price reaction, whatever, up 27 basis points. We'll take it.

I want to highlight, because JB Huntress reported, but this guy did a thread on trucking. And it was just the absolute perfect example of how COVID really f***ed everything up and particularly made supply, demand, and balances go absolutely ballistic. So what this dude basically said, if I could sum it up, is that trucking is capacity constrained. And when there was so much demand, a lot of capacity came on the market. And now at the same time as demand is collapsing, trucking earnings are in for a world of hurt coming into the early 2023 time period. Well, Knight Swift told you that last night they reported or this morning, I don't remember. But Night Swift basically told you that. J.B. Hunt was a little better.

But Night Swift – But they said inventories are high. I think – But again, this is emblematic. But this is a derivative of the good services story that you guys are well aware about and that we talked about. Like the economy is shifting. And I know this is repetitive and we all know this, but it bears repeating. The economy is shifting away from basketballs and grills towards—

Fayetteville. Towards airline trips to Fayetteville. But this is the—you know, this is like the goat in the python and you're just watching it work its way through. And it makes a stop everywhere. And, like, all the data that you would normally look at and be like, oh, it's a contraction. Oh, it's an expansion. Just throw it out because it's so aberrant. I have – I'm perfectly comfortable with the statement that – and I am solidly middle-aged in Wall Street terms or I guess even maybe –

Speak for yourself. We're the same age. I know, but still. This is confusing. You were born on the same day. But if you're not – Same age. I know, but still. This is confusing. You were born on the same day. Same hospital. I know, it's crazy. Wait, if you're not comparing things to 2019, then just stop talking.

Like, that's my—when I hear somebody say— Ahem. Hold on. Somebody's like, oh, this is collapsing. Relative to f***ing what? 2021? Does he always say that? He just got from Chicago.

Like, is that your benchmark? What do you mean collapsing? One of the funniest things. Give it to me versus 19 or stop talking. So two things. One, one of the funniest things Family Guy ever did was the Quill Whipple episode. Oh, that was great. Stewie. Phenomenal. When we go through companies, we have two PMs that basically

have final say on everything. It's Arkansas. Your flight is delayed. Put your phone down. Go everything. Every conversation. It's Arkansas. Your flight is delayed. Put your phone down. Go ahead. Every conversation is. He's like, is this the show? He can't believe it. What kind of romper room is this show?

Every conversation is, yeah, but what's my EBITDA relative to 2019? What's my revenue relative? Everything after that is an irrelevancy. It's crazy land. None of those stats should be compared to or relied upon. I'm with you on that. Making matters more confusing

is that not every company or every industry, every sector is saying the same thing. You have companies, Tesla, for example, and Elon might be full of shit. But what he did say was in the most recent earnings this week, I can't emphasize enough. We have excellent demand for Q4

and we expect to sell every car that we make for as far into the future as we can see. So, okay, and we expect to sell every car that we make for as far into the future as we can see. So, okay, maybe of course he's going to say that, but your thoughts on some companies being in wonderful positions right now. The best advice I can give, and I do give to any younger person who's listening or meets with me or whatever, is read every conference call transcript or listen to every conference call you can possibly get your hands on. Yes, it's cheerleading, and you have to sort through the very esoteric semiconductor nanometer particulars

that are irrelevant to you. But listening to what companies have to say is terrific insight. Why do you think that's so helpful for investors? What do they get out of that, that they wouldn't get out of reading newspapers or whatever? I agree with you. The level of detail you get on companies themselves and industries

is incomparable. You can't read a Wall Street Journal article and get the detail that management's going to give you. Now, that's true to varying degrees. And the believability, obviously, you have to take it with a grain of salt because, again, their job is, in all public appearances, to be as- But also listening to them, the inflection or the tone. Let me tell you something about inflection and tone. Whatever – Mario Draghi, whatever it takes speech, if you read what he says, he says we're going to do whatever it takes. Fine. When you listen to what he said, and this was my – at the time when I was at BTIG, this was my number one point to invest.

This was 2012. When they're about to embark upon Euro style. Saving Europe. Yeah. He gave a speech and he said, we're going to do a lot and it's going to – he said – man, now I'm screwing up the story. But he said, we're going to do whatever it takes. Paused. He said, we're going to do whatever it takes. And believe me, it will be enough.

And the way that he said – That was at Jackson Hole, right? I don't remember where. It was probably Jackson Hole. But the way that he said it was so informative to me. Yeah. The pause for emphasis. It was, it was, it was quite good. So, so, you know, reading stuff is, is one thing listening to it as another, but just to make the point, when you listen to what companies have to say, whether it's Procter and Gamble or Coca Cola, or even Nike, they are not telling me. And again, you have to take it with a grain of salt, but they are not telling me that there is some large-scale demand problem. The problem I have with corporate earnings so far is that pricing is up like 6%, 7%, 8%, 9%,

and volumes are all down for the goods companies. And that's not sustainable. And the volumes are all down 1% or 2%, and I think at some point that will. Well, the problem that presents for the S&P 500 is that most of the earnings are coming from goods, not services. In the S&P. Yeah. And the irony for this is for the economy as a whole. Most of the economy is service-oriented, like 85%, 86% of all jobs.

So that's interesting. That's a very big dichotomy. The S&P 500's earnings are coming from iPhones and cars and pharmaceuticals, like actual things. But the economy itself is coming from, hey, I just gave my personal trainer $80 for this morning session. And my kid's nanny is coming over late. Like that's the real economy that we live in.

Josh, Elon was asked by an analyst about like a superstructure. If Tesla, would they buy SpaceX? Because what do they buy? They bought a solar city, right? And he said, I'm not an investor. I'm an engineer and a manufacturing person and a technologist. So I actually work in design and develop products. That's what I do. So it's not, he's like, he basically said, we're not going to have a portfolio like Berkshire. So they're asking him like, why don't you buy more companies?

Well, I think they said like, is Tesla going to buy? You spoke about this, Tesla's going to buy Twitter. He said no. One thing he said that was pretty interesting. Several years ago, I said I think on our earnings call and I thought it was possible for Tesla to be worth more than Apple. In fact, I see a potential path for Tesla to be worth more than Apple and Saudi Aramco combined. Which implies $4 trillion in market cap. That's belief. That's confidence.

When you hear stuff like that, what's your reaction? Strong no opinion. Strong no opinion. I'm with you. I thought it was cool that on the company slides, he has himself listed as still techno king and CEO. I mean, he's entertaining, if nothing else. He makes it hard not to pay attention.

But listen, if you're a CEO, it's no different than's entertaining, if nothing else. He makes it hard not to pay attention. But listen, if you're a CEO, it's no different than anyone having confidence in anything else. When R.J. Barrett says, you know, I'm the best basketball player. Did you watch last night? Of course I watched. That was rough.

Yeah, rough ending. Great game. He was horrible. He was so bad. We'll get to a real team. Yeah, so I don't fault him. Every company should be like, I should be as big as Apple.

Okay, Alcoa reported, and remember earlier in the year, materials was like the hottest thing. Sure. Alcoa was up 60% year to date through March. It's now down 30% of the year, which is a remarkable year to date swing. That high low, up 60 to down 30,

and this is like not a tech stock. This is like aluminum. So their revenue, they said total third-party revenue decreased 22% sequentially to two – whatever. They cited alumina and aluminum prices. Did you know that alumina was a thing? It's a female version of aluminum. How did you not know that? Did you not take any biology classes?

I started to go down this rabbit hole of Alcoa's earnings report. This is like CFA level nine shit. It's like 180 pages. There's chemicals. This is way beyond my pay grade. But what I wanted to highlight was this. They generated $134 million in cash from operations. They repurchased $150 million worth of COVID stock stock and they paid a dividend of $18 million. They know who their investors are, I guess. This is going to be a bigger story though. A lot of the buybacks, the 2021 vintage are looking really stupid right now.

I want to get your take on this overall. It's not a pro or con buyback discussion. Here's Meta. This is from Barron's. Meta spent $48 billion and bought back 158 million shares, which was 6% of the stock outstanding. They spent an average price, $304 a share over the last four quarters. So they effectively overpaid by $27 billion based on the current share price, which is now down 60% this year. It's 133. Think about what Meta shareholders could have done with that $27 billion not lit on fire.

And some of the problems plaguing meta now about burn rate from meta investment. There are going to be a lot of these buybacks that look really stupid in hindsight. Yeah? Yeah. Listen, I am generally in favor of companies returning cash to shareholders as much as possible. But always? At all times, no matter the price? What can you do better with money than I can do better for myself? So, listen, I don't know that a buyback is necessarily, you know, we can have a debate about whether a buyback is better than a dividend or just paying a special dividend every once in a while.

It's a tax debate, really. Yeah, I mean, it's from a capital structure standpoint, obviously. And also remember, from a valuation perspective, this sort of gets lost in the mist, so to speak. But buying back stock, I get that it juices EPS, but also remember you're taking cash off the balance sheet. So from a financial engineering standpoint, you're trading X for Y,

and it's not as automatically beneficial as it might otherwise be. But as a general rule, I think companies should be buying back stock and paying dividends as much as they possibly can. So if I said to you, if I said to you, Meta bought back stock at $304 a share and now the stock's 133,

was that, obviously it's hindsight, we don't know that's going to happen, but like, wouldn't it be so much better to initiate a buyback now? Or you could take the other side and you could say, well, think about how much worse the share price would be if they still had that 6% of more shares outstanding. I don't think that second argument really holds up. But what do you think?

No, well, listen, I have to dig. But I think Facebook generates an enormous amount of free. I mean, all those companies generate an enormous amount of free cash flow. You don't want them playing stock market any more than you want the treasury playing treasury market by ramping up or ramping down issuance at a whim. Listen, who knew? Getting back to an earlier conversation we had about the stock market being down 25 percent, there was – Well, Facebook is down way more than the stock market too. Sure.

Then there's PayPal and a whole bunch of other companies. CSX beat on the top of the bottom line. I've got 10 minutes. Let's get to it. Get to what? Whatever we're going to get to. Yeah. Actually, we're coming into the home stretch.

Did you have fun so far, Dan? On a scale of six to seven, this is a seven. This is a solid seven for us? This is a strong seven. All right. We appreciate that. No, in all seriousness, this is great. I don't know what took me so long, but –

We're really glad to have you. I want to finish with something David Einhorn said in his letter, which just – I think it came out today, his Greenlight letter. I wanted to hear what you thought about that. He's having a great year. I think he's up 18% year to date, which almost nobody else is. A lot of humility. I just got back everything that I underperformed going back to 2018. I still have a lot more work to do.

Fine. This is him. Other than Twitter, which was a huge home run for them, I guess they bought it expecting the deal to close. We did not add any new material positions during the quarter. We continue to be positioned bearish, as we believe we're in a bear market. This differs from a correction in that a bear market takes time

and is persistent. In a correction, buy the dip gets promptly rewarded. In a bear market, not so much. We haven't had a bear market since 08, 09. Our strategy is to remain position bear. I think he's right. I think it's a bear market.

Correction behavior, maybe it rewards you from one day to the next. But overall, this knee-jerk buy the dip, it's losing this year. But I don't think – well, first of all, about Twitter, there were a lot of hedge funds that were just betting that when you go through the legalese, he's going to lose. Yeah. And he's – what ends up happening is not that necessarily you're forced to buy the company, but maybe he has to pay a fee. Yeah, I think Icon did the trade. He said on the conference call, Elon said, I think everyone knows we're overpaying for Twitter. He said that on Tesla's conference call.

But Twitter aside- The bear market commentary notwithstanding, I think- Are people buying the dip? I mean, listen, I think something you'd mentioned earlier, and I don't think we expanded on, Michael, was we've seen weakness in housing clearly. And by the way, I don't know if people are aware of this. In the middle, in the summer, the price of an existing home was up 50% or so from pre-COVID levels. At no point in the housing bubble in the aughts

was there a similar rate of change. Over the same period of time, housing was never, there was a much more prolonged and persistent rise in prices. But the rapidity of time, housing was never – there was a much more prolonged and persistent rise in prices. But the rapidity of the change in prices is incredible. Yeah, it's breathtaking. It's breathtaking. So anyway, so we've seen weakness in housing.

But you haven't – only now the ISM is starting to dip below 50. You obviously haven't seen meaningful weakness in the labor market. So in terms of by the dip, the argument I've been making publicly and privately for several months now is, so when those other items start to turn, I mean, you've got ISM New Order sub 50, but the index itself is still north. When you start to see those things turn, is the market going to rally on that when you start making the new leg lower in the economy? Maybe initially. I don't know. If we pull up my final chart and then we'll let you catch your flight to – That is the question.

What is the market going to do when – The last flight to Arkansas. What is the – literally, what is the market going to do when the data turns is the unknown. Initially, it's going to rally because it's going to say the Fed is done. That's right. And then it's going to go – Oh, shit. Things are slowing down.

So earlier this year in the leveraged loan market, the leveraged loan market – Yeah, we got this up. I'll get to this in one second. I have so many points to make. The leveraged loan market is variable rate. So it benefits when rates go up. I'll get to this in one second. I have so many points to make. The leveraged loan market is variable rate. So it benefits when rates go up. And to start the year, people in the leveraged loan market were like, oh, great, higher interest rates. And then somewhere in the second quarter, everyone was like, oh, higher interest rates. There's a turn. And I think to that point, it's like, oh, great, the data is getting weaker. The Fed's going to pause. And

then suddenly, people are going to realize what that means. What this chart is, is a rate of change in the federal funds rate in black. And this goes back, call it 30, 40 years. The 18-month change in the federal funds rate pushed forward and the ISM index in blue on the right scale. And what you've seen historically, it's not 100% accurate or linked. And obviously, post-GFC, there's some weakness in the data because the Fed Funds rate was zero. But what this is telling me is that you've got meaningful weakness ahead in the ISM index over the next couple of months. When that happens, the ISM is sort of the gold standard for Wall Street strategists when you talk about earnings in the economy. And if you're going to have an ISM dipping below 50 into the mid-40s, I'm going to start pulling down my EPS

estimates. I'm going to start pulling down my economic projections. And that is not, to me, an environment that you want to be particularly exposed in the short term for stocks. That's where I am. I expect worse just because how could it not get worse? I just don't know how the market will react. So I don't know if the market will keep cheering a recession knowing the Fed's done once it rethinks, oh my God, it's a recession.

All right. Well, our last segment for the day is we talk about our favorites. Actually, let me ask you a question. Why can't you just leave and we keep going? Does he have the off button or something? The audience would like that very much. I'm going to start. By the way, Dan Greenhouse, ladies and gentlemen.

Right? Am I right? I mean, only an hour, right? All right. New York sports. So I'm not a baseball fan, unfortunately. I used to be, but I broke up with the Yankees. It's too boring for me.

The Giants are 5-1. I cannot actually believe it. Every year. It's sort of astonishing that Owen won. Every year, my friends and I, as a joke, we make a reservation to the steakhouse wherever the Super Bowl is, and we make reservations to the hotels. Really? As a joke. We do it every year. But this is the year.

No, it's not the year. But I'm having fun. I'm having a great time. And the Knicks. I'm encouraged. You're a Knicks guy? So I am a Yankee fan and have been my whole life. And I'm not a huge football fan. I'm sort of, I don't prefer, I'm shocked they're 5-1, and the Jets are 4-2. And I'm a big Knicks fan. I'm sort of, I don't prefer, I'm shocked they're 5-1.

Yeah. And the Jets are 4-2. Yeah, it's unbelievable. And I'm a big Knicks fan. Dude, the Jets beat Aaron Rodgers at Lambeau. Yeah. It might be the best thing you could say as a Jets fan in 10 years. Let's go to a game.

Any game. Ooh, I like that idea. Can we expense it? Sure. Mike has good seats. I have tickets. Okay, let's go. But we look good. It's one game, but the Grizzlies are very legit.

And it's going to take time for our team to gel, but we have a point guard. The Knicks have spent years recovering from... Bad. It's a long hangover. And they are not... I mean, listen, they're not winning the championship, but this is a solid playoff team. Play in.

I think... You got a favorite for us? Any books, any TV shows, any movies? We always leave people with, like, a favorite thing that people have. People don't need me to tell them. Although I will say, that being said. Although I will say, let's go to that part.

Well, first of all, I'm staring at More Money Than God, Sebastian Mallory's book. Great book. If anyone out there has not read this book, this is one of the best books of the last 10 years by far. Absolutely. You want to feel old? That book's older than 10 years old. Really? Yeah. Oh my God. Really? Yeah. But I read it within the last 10 years by far. Absolutely. I would. You want to feel old? That book's older than 10 years old. Really? Yeah.

Oh, my God. Really? Yeah. But I read it within the last 10 years. Anyway, what else? I do, we, this is public knowledge. We had been, it doesn't matter. We spend a good amount of time on content.

So I can offer some TV shows. Please. If you like sci-fi and you've never seen The Expanse. Oh, Barry likes that. I can't watch it. He's a dentist. I started it. I couldn't keep – does it get better? It's phenomenal.

I only watched one episode. I'm like – Yeah, that's good enough to make a decision on. John, you're in? Yeah. You're in on The Expanse? Duncan? What about you?

I haven't seen this. What's it on? You can watch them now on Amazon Prime. Amazon Prime. Oh, that makes it easier. Where was it before? Sci-fi. Yes.

I don't even know what channel that is. Who do you have for linear TV? 4.96. I don't even know what channel that is. Who do you have for linear TV? 4.96. I don't know. What do you got? Oh, just for pure fun. I listened to Norio Rubini on Joe and Tracy. That sounds hilarious.

For fun? Sounds so much fun. Honestly, just I got to relay one thing. He's basically like, for the next 20 years, we're going to be working off this inflation thing. All right. Come on. He said that in this crisis that's coming up, now unfolding, you're getting the absolute best of the post-GFC deflation and debt bubble combined with the stagflation of the 70s and that they're morphing into this like chimerical creature. That's going to be the worst disaster of all time.

Listen. But wait. But wait. But wait, there's more? Well, the answer to it is to buy real estate in the Midwest up into Canada. And that's like how you're going to escape it somehow. Grand Rapids is recession-prone. But the way that he gets there is so serpentine and just artfully. And he throws in like insurrection.

And he has an accent. It's just honestly. Do a lot of your investors, are they? He's so good at what he does, Noriel. Like so much respect for just the craft of combining everything everyone's afraid of into one continuous fireball of shit. Bye, Mike. We love you. The suggestion that.

Safe travels. Good luck. Why are you going to Arkansas? The bagels? What are you doing? It's definitely not the bagels. The suggestion that the solution to that is to buy land in the Midwest. It's amazing.

You just have to listen to what John is saying. No disrespect to Noreal, but how many people can realistically – No, he's like you have to buy tips, gold, and like not live in Florida is the one way to survive. What about baked beans? Wasn't that Kiyosaki who said to buy baked beans? That I didn't listen to. The Kawasaki, the jet ski? No, no, no. that Kiyosaki who said to buy baked beans? That I don't, that I don't, I didn't listen to. The Kawasaki, the jet ski? No, no, no, the, the

Robert Kiyosaki. Yeah, that's a step too far for me. I don't know who that is. He was, no, Rubini was good. Rubini was, it's like an hour of just pure, like, you are all going to die right now. You know, the interesting thing about that is in the post-GFC that gave birth

to that cottage industry appears to have not really waned at all. No. And pre-GFC, it was largely unfunded liabilities and so how are we going to pay for our debt? And it was this esoteric looming debt bomb. But like everyone sort of acknowledged that post-GFC – Well, now the debt is – so the argument is the debt now is even bigger than it was. Which is true. Which is true.

And we weren't worried about inflation in the post-GFC. We were worried about the opposite. Now you have not only screaming high debt levels, private, public, all over the world, plus you have the inflation thing that the Fed is going to have to wreck the economy to solve. That's the – I'm not saying like – What? Look at this. What up, dog? So much fun.

Thank you. Thank you for having me. Sit down. Are you allowed to do this? All right. Where are you coming from? I'm coming from Jeremy Siegel and Jeremy Schwartz. Duncan, put more batteries in.

Let me see. He said something. I said, I would love you to sign this for my partner, Josh. They're going to come on the show in November with you guys. Oh, this is beautiful. Thank you very much. Dan, how the hell are you, man? I miss you so much.

How's it going? We were telling big picture stories. From way back when. And I was saying my first sort of, well, I wasn't saying, but I alluded, my first real public anything was through BookVar. Right. And you let me write on the blog.

That was like 1870? 1880? How old was he when you let him write? You haven't let me write on the blog yet. That was my bar mitzvah present. I haven't been able to write on the blog yet. You have your own blog. That's not true. I've had your post. I think you've republished my stuff. Multiple times.

You were never like, Josh, here, write something. Dude, you had your own thing and all I would do is point to it. Hold on a second. I'm going to interrupt because now that you're

both in front of me, indulge me for a second. We're recording this. This is fine. Indulge me for a second. I want to give you both your flowers and say, I have known you both for many years. Right.

What you have built here is really impressive. The Masters in Business program. Oh, I thought you were talking about this room. No. Because this room is really impressive. The bookcase. I assumed you built the bookcase. I know you're very handy.

But in all seriousness, it's just really to see you guys doing so well. We appreciate that. I don't want to say I love you both because I don't, but it's really just great to see. Tell us which is your favorite child. Pick your favorite.

I would never. He wouldn't dare. So we, you know, we just keep doing our thing and we're happy to just keep planning along. Would you say – and I'm only half-joking when I say this. Would you say that you have revolutionized the RIA industry through the constant – No. I'll tell you what we've done. And correct me if I'm wrong about this.

First, since we launched this business not from an RIA but from watching other people do it wrong, we emphasized – and this is why I always love Ray Dalio. We emphasized the figure out what you're doing wrong and learn from it and get better. So we've tried a lot of things that we've screwed up and fortunately, we've been very iterative and constantly improving. I think we made people aware of the fact that there's a different way to do it. So I don't think we revolutionized anything. When we, yeah, like if you think about the RAA business, think about the biggest firms, they were all built by personalities.

Sure. Like- Rick Edelman. Ken Fisher. These are $200 billion firms now. Peter Malouf. So we didn't really invent any of that. We followed them and just took it in a different – a little more modern direction.

I think we're like a little bit more Ben and Jerry's than those guys though. Right. Like a little bit more like – And that's because we're both fat bastards who love dessert. That's the big reason. Understandably so. No, we're just a little – I think in the end, people want to do business with people they like and people they trust. And I think we've given people a lot of reason to like and trust us.

Thank God. Stop and think about what we did that was so unusual. We don't have that much time. Why don't we have time? We're cutting to commercial? No, okay. Where do you want to be? It's better.

You have no idea where this could go. We'll be done by breakfast. Our dinners were like four came to the dinners. Our dinners were like four hours long. I know. I've been to one or two. But they're 10 people. That's why.

Eight people. Sarah Eisen taps out at the two-hour mark. Sarah was there on Wednesday. So there's still dinners. I haven't been invited in 10 years. Jim Chanos, Paul Krugman. It's a rotating group of people. Does Michelle Meyer still go?

She was there this week also. All the old people go but me. You didn't hit Dan? See what happens when you go incognito for six years? When I go to the buy side, all of a sudden you don't get to see these dinners anymore. But our entire attitude was let's see if we can do this better than other people. And when we launched, we were nationwide with an office in New York. People had to know us and trust us.

Otherwise, wait, I'm going to give you a million dollars and have never met you. This was pre-pandemic when that was in SOP. Now, it's – Well, that's the weirdest thing about us is most RIAs, it's like a guy at Merrill or UBS, and he says, you know what? My next contract is up. I'm not signing another one. I'm going to go do my own firm. Right.

They look around the town they live in. They say, what's a mountain or a lake nearby? Okay, that's the name of the firm. They have a membership at the golf course or the arena. Bryant Park Capital. That's all their clients are like local. And they're like a big shot in their small pond. And then if they're successful, they expand.

And they expand outward. We were inside out. We were like, hey, there's a few of us. We're in New York. All our biggest clients are in Texas, California, Washington, D.C. Made no sense. No one's ever done that. We did that in 20 – we started from in 13, but we were doing that in 2011,

10 years before the pandemic, doing 99% of our business over the computer. Virtual screen share, FaceTime. That's the weirdest thing about us. But that's now become the norm. Right. We were built virtual. We were built for the cloud from the beginning because we had no choice. Between my media footprint and now Josh's even bigger media footprint, our audience

was nationwide. You know what they say about big footprints. Size doesn't matter. Right. You know. The footprint size is not that important. Agreed. But it's reach.

Our reach was, we punched far over our weight and our weight is not insubstantial. But the whole thing would have collapsed had it been wholly reliant on Barry and I trying to figure out what to do. had it been wholly reliant on Barry and I trying to figure out what to do. We have since staffed to like 54 people, and we've got CFAs and CFPs and people who are experts in tax and trust in the state. There's a lot of expertise behind the scenes that people who are fans of the content or the blogs, that if you're just relying on what we're doing, it would never have worked. So it always had to be an ensemble. It would never have worked. It was just the two of us like,

what do you think of interest rates this month? Like that's not, that would not have gone very far. Full credit to both Josh and I guess to myself for recognizing- Full credit, that's generous. Full credit. Really brave of you to give yourself credit. No, I'm going gonna go out on a limb

here and say both of us are smart enough to say i don't know jack about tax but we have the bills who are tax experts what do i know about financial putting together a financial plan the way a true cfp expert uh so we have built this really really solid bench of people who all have a very deep expertise are we recruiting or what

are we recruiting them now no I'm just kind of you can't afford pull my spring alright wait wait alright we are gonna wrap but I want to thank you

for popping in here and yeah so if you read the inscription it's very lovely what do you got for us can we get a favorite from Barry

a favorite yeah a favorite from Barry? Oh. A favorite book, movie, TV show, something right now to recommend? So, wow. I'm in the middle of a couple of really interesting things. Can't be House of Dragon. The most interesting book is— No, it's an obvious— Yeah, yeah.

It's like saying you love the Beatles. The Price of Time, The Story of Interest Rates by Edward Chancellor. You're not reading that. I just interviewed him yesterday. I read that and I reread Devil Takes the Hindmost, which this guy writes the book, publishes the book in 99, Devil Takes the Hindlight, The Hindmost, about speculation. And now his book on interest rates comes out this year. Like talk about auspicious timing. What's the conclusion of the book?

Rates are important. And in fact, rates, interest rates, are the single most important financial number that has ever existed or will ever exist. I think that's entirely accurate. There's the original- It's gravity. That's right.

Rates of gravity. The original interest rate book, Homer something, I'm blanking on. Yeah, yeah, Silla. Richard Silla. That's right. The History of Interest Rates. 5. The History of Interest Rates. 5,000 History of Interest Rates.

Essential reading. I mean, but that's a tome. You can't read it. It's a dictionary. You can't read it. No, you put it on your shelf and you refer to it when you need it. I met him. He's active with the, you know there's a museum of finance?

Yeah, doesn't he run it? So I met him. Somebody introduced me to him at an event. I did here. He was here. That was here? Yeah. Okay. Richard Silla. I did here. He was here. That was here? Yeah. Okay.

Richard Siller. I have the book on my shelf. The book is this times two. Right. It's much bigger. It's a thing. It's a thing. It's a whole thing.

Do, before we let you go, we, like I'm. Right. No, no. You're the host. Wrap it up. Take us out. We want to thank our sponsors, Schick. Do you pop into, should I be flattered that you came in here? Is this normal?

Never. So my schedule is usually Tuesday, Wednesday, and they record Thursday, but sometimes I'm in on Thursdays. I didn't want to interrupt. Oh, and the other thing is, the other not book, but streaming, the third season of Orville is really good.

Oh, that's the guy from Family Guy. It's McFarlane. It's surprisingly good. Josh, that's the guy from Family Guy. Yeah. It's McFarlane. Seth McFarlane. It's surprisingly good. Josh told me you like The Expanse. Go back and watch the- Yeah, you like The Expanse, right? Wasn't that you?

Oh my God. The Expanse was- My two favorite things from the lockdown was The Expanse and Altered Carbon. Altered Carbon is- The first season of Altered Carbon is exceptional. Can I tell you something? The second season holds up surprisingly well. People told me it wasn't good.

I didn't watch it. Oh, no. I'm a junkie, so I'm down that rabbit hole and I'm really careful. I moved right on to Biggerton. That was fun. Both seasons were fun.

I need a new show. I'm watching the Elizabeth Holmes thing, The Dropout. That's good. See, really? I finally got to that. I can't.

I want to watch that and the WeWork one. The WeWork one was interesting. The WeWork one is fun. It was really interesting. It's not a straight that. I can't. I want to watch that and the WeWork one. The WeWork one was interesting. The WeWork one is fun. It was really interesting. It's not a straight biography. I watch anything with Jared Leto. That one's a lot of fun.

I actually tagged Galloway and say, who's the guy who they got you to play you? It's terrible. He's half your height. He looks nothing like you other than the fact he's got no hair. What are we doing? I was just telling you to remember to talk about your shirt before we get out of here. Oh, well, so we have these up already.

We teased these, and they weren't available, but now they are. So this is the official Jerome Corleone shirt. It's available at idonshop.com. A lot of people on my Instagram were like, where do you get that? We finally got them up. We sold a lot of them already, right? We have. But they're limited edition.

We're going to stop. And the proceeds go where? To us. Straight to Jerome Powell. Yeah, no. This is not like a. Wait, I'm getting paid for this, right? What's that?

Exactly. You're getting paid in shirts. All right. Is this a boys medium? It is. All right. Let's wrap here. Our thanks to Barry Ritholtz.

Nicole, who kills it every week. John, who kills it every week. Round of applause for Duncan and the legendary now back out of the shadows in the public eye, Dan Greenhouse. Thank you so much for being here today.

I hope you had the best time. We had a great time with you. It was great. Thank you. And Michael had so much fun he had to like literally run out the door. He just couldn't contain it. Scared him.

No, we had a great time. Thank you for joining us. And guys, we will be back next week. Thanks for listening. Make sure to leave us a rating, a review. It goes a long way. We love you. We'll talk soon. Alright, take us

out. Let's go to Arkansas. Was that everything that you thought it would be? It was fun.