The Compound and Friends - Retail Investors Just Plowed $100 Billion Into Stocks. THIS MONTH.

Episode Date: October 10, 2025

On episode 212 of The Compound and Friends, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by Scott Nations, Author and president of Nations Indexes, Inc., the world's leading independent developer of volatility indexes and option strategy indexes to discuss: market bubbles, retail's big moment, massive volume in quantum names, the return of meme stocks, the first cracks in credit, and much more! This episode is sponsored by Grayscale. Find out more about Grayscale by visiting: ⁠https://www.grayscale.com/ Sign up for The Compound Newsletter and never miss out: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠thecompoundnews.com/subscribe⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Instagram: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠instagram.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Twitter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠twitter.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ LinkedIn: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠linkedin.com/company/the-compound-media/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ TikTok: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠tiktok.com/@thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ritholtz Wealth Management⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/advertising-disclaimers⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/podcast-youtube-disclosures/⁠⁠ Learn more about your ad choices. Visit megaphone.fm/adchoices

I want you to know. You look great. I just spent five days in Boca at the gym, eating salads and sushi and string beans. I know. You were grinding. And I'm doing that so I could fit into regular size chairs. I saw you grinding on Instagram. I thought you looked skinny.

I'm trying. I'm finally trying. I blamed it all my wife. No, you do. I said, how did you let me get this fat? You look great. And she said, oh, now this is me. She's like, are you kidding me?

Do you see what I eat? All right, come on in, Scott. We'll have you over here. You got your both of them. all right scott i gotta tell you story when was the last time we saw each other until today you know i think it was in Vegas years ago for a cnbc event Vegas it's gotta be 10 years then

yeah okay all right you know we may have bumped into each other no for sure um in the old days when i used to do the fast money five show you were on the desk that's probably or sometimes you were the option guy. I was the option guy. That they would cut to. Yeah.

Yeah. Did they ever ask you to change your name to Njarian to do the options hits? Was that on the table? When I re-up my contract, we put it in there that they wouldn't ask anymore. All right. I got $150 every time they asked. What do you think of my pumpkin situation? It's good, which leaves me to believe you had absolutely nothing to do with it.

You had nothing to do with it. I think you hired somebody. Nick, is that in the right place? What? He's a sticklet from the shit. It's weird. It is? Isn't it usually here?

All right. It's definitely off. It's definitely. So, all right. So we have this thing in my town called, it used to be called dairy barn. It was literally a drive-thru for eggs and milk. John to 7-Eleven. Yeah, like you're on the way home from work.

Your wife's like, I need a gallon of milk. They have those in Ohio for booze. Okay. So this is for dairy. But it like sold and had different owners and then it closed down. And then this new group comes in. and they call it the barn. And I'm just glad it's reopened

because it's super convenient. Don't tell me private equity is not a genius. I don't know what, I didn't know what they were about to do with this place. They turned it into this like viral Instagram sensation that is now backing traffic up, like literally closing an entire lane of the main street through my town.

People wrapped around the block. They're coming from like New England and the Bronx and Brooklyn and Queens and all over the place to, like, drink these viral ice coffees with donuts on top or... All right, so there's a new drink that they just launched, which, of course, creates a fucking, like, DefCon 5 traffic situation. It's an entire pumpkin, not a mini pumpkin, like a pumpkin pumpkin, they cut off the top, they hollow it out, they fill it with, I guess, pumpkin spice latte or something. They cover the whole thing in whipped cream, two giant cinnamon sticks, and they serve it to people sitting at picnic tables right out on the street. So I've never seen it before.

So I pull up next to this thing. There's, I don't know, 100 people waiting in line for drink out of a pumpkin. There's a dude my age sitting at a picnic table with his wife. The wife's holding the camera. This is getting, look at the look on your face. This is getting worse and worse, right? The guy takes this pumpkin with two hands, lifts it to his face, and, like, chugging out of a pumpkin. And the wife is filming him.

And I just, I couldn't stop myself. So I just got back from the airport. I pull up to the corner. My wife is in the passenger seat. I lower the window. And she's like, she's going, oh, no, no, no, no, no. Don't do it. Don't do it.

This is not going to be good. I'm like, quiet. This has to be done. So I yell to the guy. He literally has the pumpkin to his face. I go, sick picture, bro. Send me that. Definitely send me that.

I need that pick, bro. What a dick. I know the worst. He slams the pumpkin down, this whipped cream in the air. His wife starts laughing at him or his girlfriend. So I speed off, of course, because I don't want to comfortate. So my wife's like, what if he follows you? What if he kicks your ass?

You know what? If that dude kicks my ass, the universe is telling me I deserve it. By a pumpkin-sipping freak who's got an Instagram girlfriend. Like, if that's, right? What do you think? I think he's going to be a fake tough guy. Listen, somebody who's drinking a whole pumpkin full of pumpkin spice latte with the whipped cream. It's probably got cherries on top.

Too-handed. Like a maniac. No, that guy's... No, listen, pumpkin spice latte. Latte was the beginning of the end for civilization. I sort of think that the timing coincides with when I think everything started to suck. Yeah, I think we, when we quit drinking black coffee and we started drinking, everything has to have an umbrella in it now?

They're not even drinking it, though. It's, there's, so this, look, God. You think it's performative? I know it is. God bless them. I want them to make money because it's my town and I want all the local businesses to thrive. Sure. So it's not really a comment on them.

Like, if it's just like the stock. market. They're doing all these secondaries now. If people are willing to buy it, you should sell it. But when did men start having this need to have their significant other film them sip out of a pumpkin, drink whipped cream out of a pumpkin, broad fucking daylight? When did it? I don't even know when this started. Well, when are their children going to see that photo and start making fun of them? There will be no children. That's the point. This is emasculation on a level like previously unimaginable. How can you mate with a person

that's doing this? I don't think they're going to be a next generation, honestly. I think this is it. Well, that's great news. Well, that means it ends... For the climate? No, it ends, it ends with them. It is, it's like a corollary of the Darwin Award.

I think it's over. It's got to be close to being over, right? Anyway, all right. Sorry, I had to get that off my chest. You okay? Are you going through the dairy, are you going through the barn today for your, uh, Have you seen this shit that's going on an instant? I now have to avoid Helet Avenue.

I'm glad I moved. Have you seen what going on here? Give me a little bit more. Yeah, it is ridiculous. Give me a little bit more insight into where this is, so I stay away. It's literally, all right, just like, oh, here it is. Look at this guy. Holy shit.

Oh, come on. Come on. Come on. Good for them. Listen, oh, my God, there's places huge and they're selling a ton of this. How much is one of those things? It's got to be a lot. Look at this.

Look, he's going to pick it up and drink out of it. It's a bowl of, it's a pumpkin filled with whipped cream. Wait a minute. What if the guy that you were harassing was the owner trying to promote his business? No, trust me, this guy doesn't own anything. And how much they charge for one of these giant pumpkin things? Oh, I'm going to guess that's like, it's 13. You know what?

Oh, no, that double that. Yeah, maybe 20 bucks. I hope they get, so here's the other shit. Like, this is like an ice coffee with a, with a, with a, donut or a piece of pie on top hold on that's the place this literally used to be like you just buy cigarettes on your way to the

to the bar that's what the back in my day in my day hmm apple cider donut we'd be better off if they're back to selling cigarettes and a 40 look at me with my apple cider donut icecloth I hope you drown in it

the whole purpose of this place was to get parliament lights Daniel's having an aneurysm and then go and then go to and then go to the club, go to the bar. I'm just glad that, listen, we split our time between Chicago, New York. I'm glad that we don't go to Long Island. You guys want to go to the stock market?

Wherever that is. Stay away from Long Island. It is, it's got to be Long Island. Tell me it's not Long Island. Of course it is. Where else would have been? It is. Are you ready? We own this disaster. You're right. Combin and Friends, episode 212. All right, let's go.

The most moment ever complained about that on islands. Whoa, whoa, whoa. Stop the clock. Here's a word from our sponsor. Curious about investing in crypto and not sure where to start. Start with Grayscale. Grayscale is the world's largest crypto-focused investment platform and has been in crypto since 2013. That's a long time when you consider how early we still are in crypto adoption.

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Welcome.com Welcome to the compound and friends. All opinions expressed by Josh Brown, Michael Batnik, and their castmates are solely their own opinions and do not reflect the opinion of Riddholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Riddholt's wealth management may maintain physical. in the Securities Discussed in this podcast. Big show, guys. Ladies and gentlemen, welcome to the Best Investing Podcast in the world. First time guest, Scott Nation. Scott is the author of The Anxious Investor, as well as a history of the United States in five crashes. Scott is also the president of Nations Indexes, the world's leading independent developer, of volatility indexes and options strategy indexes.

Scott, it's so great to be here. You had some other stuff that you wanted us to know that you had done in the past. Can we talk about the Chicago Mercantile Exchange for a few minutes? Yeah, I mean, we were just talking about when men really were men. Yeah.

And you want to talk about a place where that was going on in spades. Yeah. The floor of the Chicago Mercantile Exchange. Yeah. Pure testosterone. And you were in the pit? Yeah.

was in the pit. You work with Jonathan Novi. I stood next to Jonathan Novi for years in the S&P option pit at the Mercantile Exchange, and I'll tell you, you really get to know somebody when you stand next to him in a trading pit. That's Jonathan and I are still friends. You could see the other guy's soul, basically, because you're watching that fear and greed stuff and how they react to pressure. And how they act. And if they're a stand-up guy or if they're a weasel. Okay. And... How would you describe Jonathan? More of the weasel. side? Big weasel. No, Jonathan is one of the finest advisors.

One of my favorite people in the world, actually. Honestly, you could be in a pit with 500 people. He's not answering the question. And I'm going to answer your question. You could be in a pit with 500 people. And so I probably got to know, I probably came across thousands of traders in my time there. And I am still connected to maybe five of them, maybe a half a dozen. Jonathan is one.

Two of my business partners were guys, I mean, I stood next to. to Bob Ward in the pit. That's how I met him. But 99.99% of those people, everybody was just there trying to make money. Yeah. There's no reason to stay connected except to guys like Jonathan. Yeah. Is the market missing something not having something like that?

Or have we, like, moved on without it and everything's more efficient now? Yeah. It's a great question. And so for people to get the visual, I was one of those guys in a bright red, polyester jacket with a gray mesh back jumping up and down. What was your first year there? My very first year trading on my own was 1989. I just got started. But to your to your question, yes, we're missing something in that it was a place where young people could get started as traders and you paid your dues. I started as a clerk. Had a great job out of school, quit,

moved to Chicago, it will become a clerk at the Board of Trade, and you can't do that anymore. No. And so that's probably missing. On the other hand, it is so much, it is so insanely efficient now, markets are. Yeah. That it, I can't look back and say, oh, I wish we'd go back because it's just, it's a step back. The career on ramp to professional trading now is a computer science degree. or physics or physics or physics yeah i mean we have a uh we have an advisor who as a phd in math

from caltech is on our board right and he has told me that uh there is uh in finance now physics PhDs trump math PhDs why is that i i don't know trump like the like they do better or they are they are considered more valuable a physics PhD is considered more valuable than a math pH. What about phys ed? Not the same. That used to be. Well, phys ed is great if you're the guy

who's emptying the trash cans and sweeping up at the end of the day. That's weird because I forget who I'm stealing this from. Somebody said markets are way more like biological than they are like physics. Anytime you think you've cracked something with math, they changed the lock or they changed the code. I mean, you just said the markets are more efficient now than ever.

What do you mean by that? If you want to trade size now, and I don't care if it's interest rate futures or invidia shares or the S&P, you can trade immense volumes with very little market impact costs. You can move the market against you to a very small degree. And there are millions of people on the other side who are happy to make markets, and they're happy to make, I don't know, one-twentieth of a penny a share, and they'll do it until their heads came in.

Right. And that wasn't always the case. So more efficient and there's a lot of liquidity? There's, yes. Okay. I can, long time ago, when we were trading treasury bond options at the board of trade, I can remember when Pemco came in,

Bill Gross came in, and he just sold a ton of strangles. And he essentially killed the market by the time he sold about 150,000 of them. But he was like, yeah, I'll sell these strangles. And if the market goes down here, I'm happy to buy more. If it goes up here, I'm happy to sell some. I'll sell these strangles.

Oh, and we bought, oh, we bought him and bought him and bought them until our heads came in. Okay. So those were the days. But on the other hand, the markets are so much more efficient now, which is great for everybody. And now, opportunity exists for anybody. I don't care if you're male, female, 5-2, whatever. If you're smarter than the next person, then you're going to do well now. And that wasn't, unfortunately, that wasn't always the case.

Okay. It was more about who you knew, how close you could get physically, proximity to a trading post. Right? Like, like lineage, like this is my grandfather's seat, like that kind of thing. Yeah, not so much that. Proximity in the trading pit mattered. But for example, in the Eurodollar futures pit at the mercantile exchange, there was nobody on the top step who was shorter than 6'4. Actually, Jim Yorio showed me that, and he's not a tall guy.

No, he's not. And he told me that same, he explained that same story to me. Right. And when the brokers in the Eurodollar futures pit were looking for a new clerk, being taller, a clerk being taller was even more important. So the prime place where they would recruit from, Big 10 football, big 10 football and basketball programs. Wow, that makes sense.

Yeah. So, Scott, I can't think of a better person to have here for this week specifically. You're a market historian. Yep. you're a trader, you're a math guy, you know all about what we're going to talk about today, which is retail having a real moment. There's a new book, an old book that is being updated by Richard Thaler and Alex Emis. The book is called The Winners Curse.

And our friend Jason Zweig interviewed them in the journal this weekend. And here's what they had to say about bubbles. The main difference between then and now is the presence of the internet. Forms like Wall Street bets allows people to coordinate their actions on a massive scale. Bubbles typically births when some people start selling in others. can't viably coordinate in the holding position. But phrases like Diamond Hands inspired people to collectively hold a position for much longer

than before information technology was so widespread. And then secondly, the internet allows many more assets to become bubbles in the first place and now can take only a small group of people coordinating stocks like Coles or AMC to start what seemed to be a trend. The end result is many more bubbles that will potentially last longer than in previous periods.

That's interesting. let's talk Thaler, literally winner of the Nobel Prize, one of the smartest guys in finance. I, listen, I watched from the sidelines during that whole meme stock thing and kind of like a lot of people, maybe like you guys, shaking my head. Just, holy cow, come on. I actually think that in general, big bubbles kind of get cut off at the knees because of what we've been talking about. so many investors and so many people who are now willing to fade a big move like that. So the meme stocks, that was an entirely different story. That was purely emotional, purely behavioral.

I remember talking to a college student at the time when that was going on. And very smart girl. She said, young woman, very smart. and she said, well, I'm long gamestop because we know it's going to go to $1,000 a share. I'm like, well, how do you know that? Well, it's going to go to a thousand. Everybody knows that.

We all know that. Yeah. How do you not know that, dumbass? Right. And it probably went up another $100 a share that day, and I'm probably, well, I don't know, maybe I'm an idiot. Yeah. So it's easy for people to get together now,

and I'm not saying they're colluding, but it's all reinforcing and it's a self-aware bubble they say yeah we know it's a bubble jump in we're going to bumble it up even more that's one aspect the second aspect is if they can keep the ball in the air balls in the air long enough the corporation can a raise money via secondary and get itself out of the sort of trouble that made it a three dollar stock that's one we saw that with the movie theater the second thing is they could pivot and adopt the new business model. So GameStop is going to be a Bitcoin treasury now or whatever. Like, you know, that's a new phenomenon. So Michael's point, like, this level of coordination was heretofore not possible in the

age when people looked at a newspaper for stock ticker info and couldn't communicate with another million people who were involved. And you were nice enough to mention my book, The Anxious Investor in there. I talk about hurting. Yeah. The hurting behavior that is much more common now. And it's very easy for you to see somebody talk about something on social media. And then you look at the stock, oh, yeah, it's up 5% this month. Let me get, let me climb on board. Yeah. And that's very common.

And also, there's another thing that I write about that book that people feel like they're part of a tribe when... It becomes part of your identity. When they're on board. And one of the favorite things that I write about, phenomenals, on that I write about in that book, is this thing called Fantastic Markets. And it written, the idea came from a couple of British guys, so they spell fantastic with a pH. But in the 1990s, the idea was people felt that if they owned Microsoft or Apple, either the

shares or the products, they felt physically closer to Bill Gates or Steve Jobs. It was almost like they were buddies. It's like, yeah, I mean, oh, now I own an iPhone. So Steve and I are friends. We're close. And that one strikes me is really dangerous because whether you love Elon or Hade him, there are people out there who think, oh, I own 100 shares. He and I are best buddies now.

Yeah. Well, so long as the stock price has been going up most of the last 15 years. Yeah. People that have taken the wrong. I'd love him more than ever. Yeah, I mean, sure. How can you not? He's, like, kind of classic in a way that some investors have been begging for.

Yeah. I want to ask you about what you make of all of the, what you make of, like, all of the new ways to speculate. So I'm definitely going to ask you about what's happening in the option market. But before we go there, let's just take a quick look at leverage ETFs. This is not that new of the phenomenon. These have been around for a long time, but the popularity of them is at a fever pitch. I don't know if that's because of just the length of this ball market and the degree to which it's been running. Michael, what's in this chart?

This is a Todd chart. So Todd Sown updates this chart, just taking the temperature of the market and levered long, the ratio of how much money is in long versus shorts. It's about as high as it's ever gone. We've had $6.5 billion. come into these markets in the first nine months of the year. I'm talking about, I'm sorry, single stock levered ETFs, which is a little bit different than this, $6.5 billion in single stock ETFs in the first nine months.

There's almost $30 billion in single stock levered ETFs, which I don't even know if that shows up in this chart. But what does this tell you about where we are? And is this just now, Scott, is this just now a part of the market? Like, is there any going back or is this just not a signal here anymore? So before you answer, like, it's 10 to 1. So you got $140 billion in levered long. I guess these are indexed ETFs, Michael.

Yeah. Okay. And $14 billion in inverse or, you know, betting on a negative outcome. Right. I mean, it's about what you'd expect at the high of a bull market, right? The thing that stands out to me is, and to your question, to answer your question, no, we're never going back. We don't go back. When these sorts of products get invented and created and sold and,

and boy, they're selling the hell out of them, aren't they? Then we don't really go back. The thing that surprises me is that there's not more inverse. And it's not, I'm not saying that people ought to be loading up on inverse products because the market's going to tank. You would just think that just kind of through browning in motion, people would be have more of that stuff on in relationship to the broad market. And they don't.

Well, the problem is. As a hedge? Yeah, as a hedge or speculation. The problem is almost nobody makes money in these products, even on the long side. So, our friend Jeffrey Patak showed the micro strategy double levered long, Daniel chart 3. So this thing is up 98%. This is the total assets in here. This thing is up 98% since inception, just the price.

And somehow, investors have lost $397 million in the aggregate. And that's on the long side. So there's some really funky shit where Jeffrey said investors at investors. Traders actually made money on the short side, which is not neither here nor there. but these things are pure money incinerators and nobody cares yeah well and there are a couple of things like this you know we're involved we're in the volatility space and so the same thing happens in in vix ETFs levered or not um you know people want to be long vix systematically and so they buy some of these ETFs like an insured like an like an ongoing insurance premium that they're paying

horrible idea oh it's terrible nobody should do that no because The manager has to roll that product from one expensive futures contract to an even more expensive futures contract every month and talk about money incinerator between the roll costs and the actual expenses. So if you want to trade those products, trade them, use them tactically. You can't, but these sorts of products. What is the right tactical use of a VIX, of a VIX flavored ETF or ETN? is it like ahead of a Fed meeting where you think the market's about to be shocked or like what

how should that be used if at all probably not at all let's talk about the specific situation you're talking about before a catalyst hold on our sponsor today is vix ETF no I'm sorry go ahead and and quickly sebo for example hates us they think that we're a competitor okay to vix they seebo would be happy to kill us just to watch us die but vix is the 800 pound gorilla but no traders are very smart now when it comes to these sorts of things. So if you buy something, if you buy VIX options before a catalyst, whether it's a Fed meeting or a big unemployment number, if we ever have one of those again, then as soon as the data is out, I mean, instantaneously, those options are worth less than they were 30 seconds

ago. And so we call that the vol crush, volatility crush. That is a headwin that's almost impossible to overcome. So what, right? So if you want to express that bet, why not just buy puts on an index of stocks? Like, why even bother trading a VIX, like a volatility product? Well, the puts are going to, even if the underlying doesn't move, the puts are going to be worth less 30 seconds later. Yes. So options have become much, much, much more popular. over the past five or 10 years. And for a good reason, 20 years ago, people were all about options because they got leverage.

All they wanted was more and more and more leverage. Now, people have come to the conclusion and some pretty sophisticated retail traders have come to the realization that the benefit of options is not leverage, it's not more, more, it's that if you combine an underlying with an option, you can create a payoff profile that's absolutely superior to the 45-degree line that is owning or shorting the stock. But don't you think that's why people are in these leveraged products? So there's $100, whatever we said, $140 billion.

It's the off chance that you're in the AMD double-levered ETF before the announcement like we had last week. And there's like a fun component in here. I think that people are in these sorts of products or some of these buffered products, that sort of thing, is because they understand the value of the strategy, but they don't want to be bothered to do it themselves. Yeah, it's an easy button.

To a certain degree, it's like going out to dinner. Yeah. I could make that, or I can pay somebody a little bit more money and make it for me. Retirement account, I can't use margin. Hey, I don't need it anymore. Now I buy this product, I get 2XAMD. Right. And if Lisa Sue has a great appearance at a conference somewhere, instead of making 5% on that day, I'll make 10.

They made 45% last week in that one day. 45 times 2. Times, too, divided by sucks. But that's one name, and how many of those things are out there that lost them? But Michael's point is, it's lottery, yes. So, Scott. Yeah, well, unfortunately, yeah, there's, there's, no, but that's what it is. So Jason Zweig wrote an article, and again, he knows he's screaming into the void.

Nobody actually cares. But it's, it's astounding. So there was this new double-levered software, platform, ETF, whatever it was. And it was small. This guy was just launching the product. And he said the swaps were 1.7% a month. And so right off the bat, the manager, and this guy, credit him, he's like, I'm sure, this is, I can't justify this.

The swaps alone were like 20% annualized. But if you're in this thing for a week, a day, a month, who they don't, people don't care. So there's no amount of warning. There's no amount of tobacco warnings on the labels. People just don't care. People, they're, unfortunately, people have gotten to the point where they're like, you know, even if they have a great advisor. I know it's bad for me, but I like it.

And they're like, say they're 65, 30. And they have that 5%. Yeah, I agree. They're like, you know, I'm going to roll the dice with some of this stuff. I agree. And in some cases, it's working out really well. And that's why it's so hard to talk them out of doing it. Well, think about all the financial advisors who told their clients, don't buy Tesla.

It's a money losing company. Don't buy Bitcoin. It's internet fake shit. Listen to what Warren Buffett, Jamie Diamond, Charlie Munger and the rest. Or, like, if you are on the receiving end of that advice, don't do this, don't do this, don't do this. And then you make a million dollars doing it, you're probably done being talked out of recreational activities in the market for the rest of your life. When you're talking about, it's not what he's talking about. Nobody's making a million dollars buying the double levered shit.

I think, no, but directionally, a lot of crazy shit has paid off in the last 15 years. Well, or something even worse happens, Josh. You don't make the million dollars. But your friend or neighbor does. And that's it. That's it. Then you're done. Then you're like, oh, it's risky.

Okay, how about this? Here's five times the amount. Right. How you like me now? Right. A hundred percent I agree. Give me more of it. Oh, my God, you mean my idiot brother-in-law, he made all this money?

Yeah. And you told me not to. Do you agree this is one of the hardest parts about knowing the markets is communicating to people the difference between process and outcome? And sometimes you could have no process whatsoever and an incredible. and an incredible outcome. And sometimes you can have an amazing process that historically works really well with a terrible outcome.

And it's very, very hard to disentangle those two ideas. Yeah. One of the things I write about in The Anxious Investor and Thaler is the guy who actually first kind of started writing about it was this myopic loss aversion idea, which means that essentially, we'll put it this way. The less often you look at your portfolio or monkey around with it, the better your returns are. Yeah. And so I like a thought experiment.

How much better would the average investor do if the stock market was open one day a year? You could only rebalance. You could only trade. You can only invest one day a year. And the other 364 days a year, you had to sit on your hands. Can I introduce him to private equity? Yeah. Well, no, it is an interesting thought experiment, but so you would...

Except you get liquid once, every seven years. But you would say, like, obviously people would perform better, but what if on that one day people are like freaking the hell out? This is my only chance to get out. By the way, everyone's a seller on that one day. No one's a buyer. You think so? The stock market goes to zero when it opens.

Yes, because the people are buying other things. They find something to do besides stocks. They're in crypto. They're in real estate. So on that day, you close the market for a year. Guys, it's only open on Wednesday. Your point is well taken. The more you trade...

Everyone's selling. Right. Then if it's, if everybody is selling on that one day a year, I want to buy. You want to buy. I want to be the buyer. So Scott, as you, so you are a quantitative investor. You are looking at the math and objectively saying things are this way, things are that way. It doesn't mean, you know, the outcome, of course, but you're giving yourself a chance. There is, we are in this moment right now where there are so many outside forces, people acting in ways that may or may not make sense in the long term, but in the short term, whatever, it is what it is.

So right. They're drinking out of pumpkin. Right, yeah. It's like a whole thing going on right now. So Marlon Capital is as awful as estimated from public data. So let's just say it's directionally right, even if it's not 100% precise. Who knows? We have just witnessed the largest retail investing buying ever.

Retail has bought over $100 billion of U.S. stocks in the last month. The largest one million buying, the largest one month buying on record. Surely this amount of money coming into the market into these names has to have a dramatic impact on everything. Retail investor just bought $100 billion of U.S. stocks. Is this aggregating individual stocks and funds? I don't know the methodology, but maybe the next chart is a good setup for this. So Deutsche Bank has this chart that shows a basket performance relative to the rest of the market.

And they're showing the stocks with the most net call volume, which as we know is what the retail investors are buying. And it's also showing the most short of the stocks. again, what retail investors are buying. And these things are on absolute fire. And it's hard to tell somebody this isn't rational. It's like, what, making money is not rational? It feels pretty rational to me.

On its surface, is it totally irrational to be buying the most shorted stocks? I don't think so. I don't know. I mean, they're not going to be the most high quality stocks. We know that. I hate for retail investors fired up about some of these metrics. Yeah. And I would expect, listen, markets at all time highs, I'm trying to do the math in my head.

What's the market cap of the U.S. stock market? It's $50 trillion. Okay. So $100 billion out of $50 trillion is actually not that big a deal. And so I would expect that. I think the fact that retail investors as opposed to retail traders continue to put money in the stock market is a great thing. Agreed. I just, I hope if the stock market is off 25% from the highs, let's say next year, middle

of next year, if it's down 25% from here, I hope that they're still buying, and in fact, they're buying more. And one of the things that drives me crazy when it comes to professionals is stock buybacks. Companies who are doing stock buybacks are the worst traders in the world because they double up at the high. Yeah. Yeah. Yeah.

Yeah, if XYZ company XYZ announces a stock buyback or increases the size of their buyback, I'll bet you the stock has done really well over the past 12 months. Unfortunately, that is the way works. But isn't that human, that's like human nature. That's like when are you the most confident in your own stock? Probably afterwards just gone up 40%. But these guys are supposed to, the CFO and the CEO of XYZ company are supposed to be professionals. They're supposed to be not devoid of emotion, but they're supposed to have steeled themselves against.

Here's the other side of that, though. Berkshire Hathaway had a buyback, and they said publicly, were buyers below 1.3 times tangible buck value? I think that's what it was. Yeah. The stock never even got close to that. So now it's just like, all right, fine. We're not going to buy as much as we thought because we don't have an opportunity.

In your mind, that's the right way to handle it. Well, you can't, I think the mistake there is you can't say, this is what we're going to pay because it's never going to get down there. You have a natural put option. Maybe that's brilliant, though. Oh, yes. Scott, you just spoke about, like,

okay, $100 billion. Yeah, it sounds like a lot of money, but if you normalize it for the size of the market. All right, we did normalize it. Hold on to your face because it's about to be blown off your body. Okay. Daniel, chart five, please. So the retail stocks, I had Chartkin make this chart.

We're looking at some of the most in-favored speculative names. So I'm talking about Rigetone, RGTI, Oclo, Correweave, Micro Strategy. So what Matt did was he adjusted for the 20-day average volume, not of shares, of dollars traded, okay? Dollars of shares traded against the MagS7. And holy shit, Rigetti, which is a $10, $15 billion market cap, and Aklo and Corrieve, which is approaching 100, MicroStrates 100.

Those names trade as many dollars as Netflix and Netflix. Google, which are, uh, Google is a trillion plus dollar company. Is this wild or what? Well, this is a function of what we were talking about earlier. Markets are incredibly efficient. Companies are able to, brokers are able to sell their order flow. And there are a bunch of institutional hedge funds who are willing to buy it and make a 20th of a penny on all that volume and gin it up. And we talked how it's becoming more like gambling for those names. Somebody's going to, I don't know, trade 100 shares or some call options. And it's the 5% that's not in the S&P or in treasury bonds. But when you see this type of behavior, are you of the

mentality that, listen, if this is your 5% money, trade your ass off, have a great time. Or does this bother you. No, this is human nature. Yeah. I mean, this is human nature. Can I say one thing about this also? What are there, 10, 11 stocks in this group? I mean, I could have given you 20. Okay, fine. But like, in every market era, these stocks exist. They're just different stocks. So here are the names. Not to this degree. You're right, but not to this degree. So you have, you have qubit and Raghetti in here, which are, and QS. This is quantum computing. What's Iran? I don't even, I still haven't bothered to Google it. Do I care? It's that cost us up $5 a day.

It's quantum aviation. Get the fuck out of here. All right, fine. What is that? It's, okay. Nobody knows. It almost doesn't matter. Orbs and BMNR are these digital asset currencies. One is Tom Lee. One is Dan Hives. Dan Hives. CoreWeave is AI. Strategy is another. What's the point of name of all these companies?

That's not the point. Well, I'm just saying like if you pull these Jobie Circle, if you pull these names out and you go back to 2000. No, no, no, stop it right there. You will find the same version of that. There's no way, I'm guessing. School him. Hold on. There's no way I am guessing that in 2000, that the companies that were in the bottom 20%

of market cap were trading as much daily volume as IBM and Cisco and Yahoo, there's just no way. That's got to be different. Not in 2000 because the market was crashing, but in 99? There's no way, dude. The small stocks were not trading as much as the giants. It was much more difficult to physically trade stocks in 1999, but how about this? One of the things I write about in the anxious investor is that, and there's some wonderful research done on this, in 1999, if a company changed its name to include.

Yeah, dot com. Web.com, any of that. It didn't matter what they did. They could be a cafeteria. But if they now became cafeteria.com, then the stock would zoom. It was like crazy. We saw that in 17. They all became blockchain companies.

There you go. We saw that in, they're probably going to do that now with quantum. And there's, and or anything having to do a blockchain or crypto or anything. And I guess if you, if you're a shareholder, don't you want. your guys to do that? Oh, we own this boring cafeteria company. Depends how long you own the share for. But now you have an option to sell at a much higher price. They arrested these guys who won the deli in New Jersey. Those are good guys. I thought they were on Long Island. I thought they were next to the place that sells the pumpkin spice latte and a hollowed out pumpkin. But one thing,

real quick, in 2002 and 2003, the guys who wrote the paper about what happened in 19, 99 with renamings. They turned it on its head, and the companies in 2002 and 2003 that rename themselves away from.com, web, they outperformed the names that didn't. Yeah. Because everyone wanted to be in traditional value stocks in that era. Right. Yeah. So if gm.com changes its name to GM and we don't have anything to do with the web, but we're going to make some great cars and a whole bunch of them. People were like, that's for me now. I want old economy. We had real world examples where DLJ spun out DLJ direct. DLJ direct was going to be its online brokerage arm. They spun it out as a tracking stock for the first six months that outperformed regular DLJ. And then it

flipped. So, yeah, we do the, so I guess I would argue we do this all time. But to Michael's point, this might be the most extreme version we've ever seen. Because those companies that he's showing, some of them are telling. And they're pre-revenue. I was going to say, some of them are telling investors, we won't have a commercialized product until 2029. And they're trading as much volume as Google. Right. And I am firmly convinced that a combination of AI, fusion energy, which is probably 10 years away, and quantum computing is going to be massive. It's going to be absolutely massive.

But how in the world do you invest in a quantum computing business? Now, that's just, that's darts at a dartboard. But that's the point. They're not investing. They're trading. But there's my question for you. Does that turn you off from the overall market? Like, it's an expensive world of the history, S&P.

It's a very expensive NASDAQ. And then you have that activity as like a side show. But it's not even a side show. It's the main event for a lot of investors. Yeah. Well, I hope that the main event for a lot of investors is putting money from their 401k into spy. or TLT every month. I hope.

I think it probably is, but the self-directed investor with a Robin Hood account is not doing T-L-T and SPY. Well, and I would take, I would argue with your describing him as self-directed investor.

Those aren't investors. In 2022, they were. Remember, they were diving head first. T-L-T was like, put up the evolution of meme. This is such a great chart. All right, so we love the round, we love the roundhood guys.

So this is no disrespect at them. But it is just, hilarious, that they have a meme ETF that was listed towards the end of 2021. Good timing. We know what happened. They got delisted in 2023. And I'm overlaying this with the arc price, just because I guess it's the closest proxy. And yesterday, it's back.

They resurrected a dead ETF. I don't know if that's ever been done before. I'm sure it has. I've never heard of that before. But, uh, because the stocks are in favor. Because we're back. So this is meme priced in arc or arc price? No, it's not pricing anything.

I'm merely putting the dots on the arc price. I could have done the S&P, but this is a better proxy. All right. I'm going to do something I probably shouldn't do. Do it. What is the management fee, annual management fee for Meme now? I don't know. 70 basis points I made that up.

I could check. I have an internet. I bet you it's over a buck. No way. No way. These are not those guys. You can get away with it now because people are completely. $69.

$69. Okay. All right. Scott, you can get away with anything right now. If Tom Lee dropped the time travel ETF, people would put a billion dollars into it. People are completely priced elastic when it comes to something. I want to ask your opinion on this because Paul Tudor Jones was on CNBC this week

saying it feels like 1999, and maybe it does. I wasn't around in 1999 trading stocks. But this type of thing that is happening now is a new permanent feature of bull markets. It will never not, they will, the ability to speculate as we open the show with. It's so easy. You just got to get used to this. Yeah, I don't disagree with that. And to the degree that people are paying attention to the stock market in a way that they didn't 30 or 40 years ago is fantastic.

The stock market is a great way to build wealth and provide for your retirement and finance your kids' educations, as long as you only put a little bit of money in some of these knucklehead names. I have to be clear, I do think that most people that are being reckless are doing it responsibly. Like, I don't think that people are taking now that, of course, there's exceptions. But I do feel like generally speaking, people are like, yeah, I eat my vegetables and potatoes and meat in my 401K. And I'm having a hell of a lot of fun doing this. And guess what?

I'm making money, asshole. So shut up. What do you make of the blurring, though, of the lines between gambling in things outside of the stock market and the stock market? Oh, the stock exchange yesterday. So ICE is not the immigration ice, the other ice that controls the New York Stock Exchange. They made a $2 billion investment into polymarket at a, the valuation for polymarket of what,

10 billion, whatever the number. Some insane number. They're not even operating in the United States yet. And I assume they will be able to soon. Kalshi is operating in the United States. But this is a prediction market that ICE has now decided is worth more than like the biggest casino corporations.

I love a prediction market. Don't call it gambling. Yeah, we'll call it betting. Prediction market. But like if Robin Hood is combined sports gambling, with prediction markets, with investing in an IRA, stocks and bonds, and the next generation investor is going to grow up in an environment where you could just do all those things simultaneously.

We really are like in a very different world. Very different world and much more dangerous. I hate the intersection of investing in gambling because over time, investing is not gambling. There's never been a 20-year period where the S&P law, money once you account for dividends doesn't happen we're doing our best to make that happen though yeah you get to a high like this so i and i have a dear friend dear friend who uh we're on a text chain four fraternity brothers and on sundays he'll send us his goofy parley

bets he has 20 and he you know he's risking $20 on a 20 leg parlay yeah for fun and i'm like yeah i'm like you know go with god that sounds fantastic i think you're wrong here but you know i think the chiefs are going to win, but he's having a good time. And that's fantastic. Yeah. You know, some people spend a bazillion dollars on fishing gear. So, but the intersection where people think that that investing and gambling are alike. Yeah, that's incredibly dangerous. So it's going to happen whether, whether people like me and you like it, it's inevitable. There doesn't seem to be any restrictions against doing anything at this point. I don't, I don't like fishing, but if you want to be a, you know, go buy a bunch of fishing, you're go crazy.

Can we show you a ratio chart? This is, this is, so one of the beneficiaries and one of the inventors of this new meme world that we're living in is, of course, Robin Hood. And this chart really and truly is a miracle. What I'm showing here is the market cap of Schwab divided by the market cap of Robin Hood. And at its peak, the discrepancy was 22 and a half times. So, in other words, only two years ago.

Schwab, in 2023, Schwab's market cap was 23x Robin Hood. And two years and changed later, it's converging on one. It's one point three times. Robin's market cap is $135 billion, and Schwab is $170 billion. It could have been like one of the greatest

pure alpha pair trades I've ever seen. If you had put this trade on in 23, I want to be long Robin Hood short Schwab. Holy cow. If this touches one, go the other way. Oh, you think that's the moment? That's interesting. I will say this.

And I had this conversation with some people on social media right after Robin Hood launched. And as long as you understand what the deal is with Robin Hood, what your relationship is with them, then fine. Then use Robin Hood. But I had a number of people say, well, it's free. Robin Hood is free. I said, well, it's not really free. that you don't see where they're making money off of you. No, no, it's free to me.

And at some point, you just have to, you know, slap your head and say, fine, okay, I'm not going to waste any more time. If you understand their value proposition, then good, you know, I'm all things on that. The other brokerages are now all in the payment for order flow business anyway. Yeah. So that's number one. So there's no alternative. That's one.

And then two, yeah, I guess to somebody that's going to buy. Apple and hold it for 10 years, does it matter if they pay a penny higher than a normal bid ask spread? Probably not. Well, and now it becomes a marketing problem. Yeah. Schwab is your great-grandfather's broker. Yeah. Robin Hood is, you know, for a 20-something. And that's the marketing problem. That's pumpkin latte's got's broker. I already pitched, I pitched this to Schwab. I said, guys, Chuck E. S. And Chuck E.S. has a skateboard. Let's like Let's do, I don't, look, I don't think, I don't think Schwab has a, has a image problem because if you look at the amount of wealth at Schwab versus Robin Hood, it's still a huge difference.

But in Wall Street terms, Wall Street is purely interested in what is the future path of earnings growth. And the story at Robin Hood is, we're basically going to allow people to do whatever they want. So we know what the numbers are. I think Schwab, I think Robinon has $3, $4,400 billion worth of assets. I mean, not nothing. No, it's more than that. It's way more than that.

No, assets under management? Robin Hood? Oh, no, no, no. I thought you said Schwab. No, Robin Hood is like $350 to $400. Right, and Schwab is $10 trillion? Yeah, yeah. Well, but you say, you say you don't care, but let's walk it back.

What if you're a Schwab shareholder? Oh, no, they, I agree. I'm saying... They're lighting their hair on fire. As a user, I don't care. And I'm not saying it's an investment problem. I'm saying it's a marketing problem for Schwab shareholders. Yeah, you know what?

It could be, but in a bare market, We just made that point. The companies that took dot com off their name did better. You get into a substantial bear market for this type of trading activity. And all of a sudden, that's going to look like a bad word. And you'll see the Schwabs of the world come back into favor on the stock market. Last thing, to be clear, Schwab's shareholders are fine. The stock is up 45% over the last year.

The thing is, Robin is up 500. Well, and it's like we were talking about before. At Thanksgiving coming up, your idiot brother-in-law is, I was going to say, oh, you're still invested in Charles Schwabstock. You know, I've been along for the Robin Hood ride for the last two years. So the red car out in front, that one's mine. And, you know, I see you still got that Buick. And you're just going to, you're going to want to throttle your idiot brother-in-law.

I tell this story in one of my books about the ad campaigns on CNBC and other channels, frankly, every channel, every sporting event. The difference between 1999 and 2001. In 1999, it was like, Phil Jackson, what's your next big trade going to be? Like, people thought it was basketball and he's like on his laptop in the limo. Anna Kornicova picking stocks, Shaquille O'Neal giving stock tips. Jackie Chan, kicking a trade into the laptop that's in air while fighting off assailants. He's got money coming out at the wazoo. Do you remember the commercials?

Do you remember the commercials in 2001? One, it was Sam Waterston from Law and Order in a suit. And the tagline went from Jackie Chan kicking his laptop to place a trade to investing a serious business. And he did this whole direct-to-camera monologue with like somber tones because the marketing of this stuff mirrors the recent experience of the people who are market participants. So I guess my point is, I don't know. how excited you would be to be a Robin Hood shareholder in a bear market. And I kind of feel like you'd see the action rotate back to people wanting to be invested in Schwab because of its perceived permanence and stature. Let me ask you this. In 2001, if you had been Schwab, would you have hired

Sam Waterston or something? In 2001? In 2001 and said and had our marketing messages now, eat your vegetables. Yeah. Or would you have just gone quiet? No, they did they eat your vegetables. What would you have done? Probably the same. I would have gone quiet.

Why? I don't think you, I don't think you get anything from, by reminding people how badly they've done over the, over the previous 18 months, and that you were part of that, even though it's not your fault. Right. I'm not saying you'd hide. You know who went quiet? Who?

They, they put the e-trade. baby to bed for a little while. Well, and they did, E-Trade was, it wasn't it, wasn't it E-Trade that did, he's got the money coming out the wazoo? Yep. E-trade did the one, maybe it was E-Trade, did the one with the truck driver who owns his own private island from trading in the stock market. Remember that?

Yeah. He's got a picture taped up on his, on his son visor. They go, what's that? He goes, it's my island. Like, they, so some of these were, like, incredibly egregious, and they all stopped on a dime. And I really feel the same thing could happen this time. I think there's one difference. Going out on a limb.

And we were talking about it before. I think there's one difference here in that when the market sells off, people do rush in to buy. Buy the effing dip. They rush into buy the dip. And we were talking about before in the Vol space. We are now in a market where traders are so accustomed to seeing Vol normalize after a volatility spike. Yeah. And we saw it happen in, well, April.

April. And we saw it happen twice last year. There was December, and then there was another one, I think, in July of last year. And now traders are so, it's so commonly rush in to sell that volatility spike. They just want to sell option. Just sell them like, sell them like crazy when they see these volspikes because they know, if you will, that volatility is going to revert to the mean. You know, it's so interesting.

And so they have to get, and quickly, I was, I had just gotten started in 87. And the option market took years to recover after 1987. And now it takes about 18 hours. Yeah. And so, and what level is, like, how does the VIX ever get to 35 if people are already, um, fading it at 20? It just can't stand there. And I think that I never thought about us until just now.

Josh mentioned earlier that the stock market can affect these. businesses if they're able to feed the shareholders, more stock, raise money, pivot, whatever. I never thought of this until just now, how the vol spikes, I'm sorry, the volk crushes can impact the world in a real way because this is what ends up on the newspapers. And as soon as these vault crushes happen, it dampens the hysteria, not that the media needs any more of it, but it dampens their ability to try and scare investors and generate clicks and all that stuff because the volatile disappears pretty quickly. Yeah, it reverts very much.

very, very quickly, surprisingly quickly to the point where guys that are my age are kind of shaking their heads a little bit because I think what's going to happen is this is going to involve, this is going to continue to happen. Something crazy will hit the wire. Stocks will be down 10%. Vol will be up a bunch and traders will rush into sell volatility and they'll pat themselves on the back. And then at some point, stocks are going to take another 15 or 20 percent down like, VAL will spike again. And these people will all be like, well, this trade always worked in the past. Yeah, what did we just do? Right. And now I've lit, you know, I've lit my portfolio on fire by shorting VAL. And I think we will eventually, unfortunately, have that happen. One thing I will say,

I get to ask this question a lot, because in my crash book, I talk about contraptions. There's always some financial contraption that injects leverage at the worst. Portfolio insurance. And, you know, the world only, Josh, the world only really, broad world, only learned about portfolio insurance. On October 11th, no, October 12th of 1987, when somebody wrote about it in the Wall Street Journal. Yeah. A lot of people didn't even know it existed until then. but portfolio insurance or mortgage-backed securities.

Subprime. Right. And so people ask, is retail trading, on this retail trading and vol selling and that sort of thing and zero DTE options, is this the next contraption? And the good news is, I don't think it is. I don't think the system can build up enough size, enough leverage in these things to be the next contraption.

I think if the next contraption, if we have some sort of problem in the next few years, and crashes are very rare. Thank God. I write about five in that book. First one in 07, last one in 2010, the flash crash. So they're very rare, and thank God, because they do incredible damage to psyches. Yeah.

But if we do have some sort of big downtraft in the near future, I think it's going to be private credit. It's going to be the contraption. Can we skip ahead and just go to that story now? Stuck. Okay. We might go back to this gold Bitcoin thing because I want to get Scott's take on it. Private credit, it's not an anti-private credit message, what I'm about to say. Sounds like it's going to be.

No, no, no. But to your point, like, what's the mechanism by which the market actually gets nervous about something? Well, it's probably going to have something to do with one of the areas where the most money has been going. That's sort of aberrant relative to history. You have a lot of new holders of funds that are private credit. So two things in the last couple of days. The first is the BDCs. So for people,

business development corporations, these are publicly traded vehicles usually sponsored by larger organizations. With leverage. They dole out leverage as lenders, and they themselves are backed with leverage. And the goal is to capture the spread in between. The designation BDC is they're paying out

all the income in the middle. Can I show you a chart? This is the Vannack. BDC income ETF, ticker B-I-ZD, B-I-Z-D. So this is an index of, I guess, the 20 biggest,

25-bigest BDCs that are publicly traded that VAN-AC puts into an index and they created a product. You can see now that we are below the April lows in this BISD E-TF price-wise. And what I'm showing you... I'm sorry, the pricing is kind of ridiculous. This is a total return product,

but they look shitting. Well, I'm so glad you brought that up. the reason why this is falling is because the total return is being lowered by the fact that dividends are being cut. So a lot of these nominally look like they're going to pay out 9, 10, 11 percent, but investors are smart and they're realizing as interest rates fall and, God forbid, accruals, non-acruals or non-payment of debt starts to bubble up, the dividends have to be cut. And that's why these are falling. The pain at the bottom is volume. That's, I I think I did 30-day average volume.

So you have volume spiking as people try to get themselves out of these ahead of dividend cuts, which we know are likely for 26 because rates are coming down. Do you have a strong opinion on the popularity of private credit amongst retail investors or even institutions? Stay away. I am not a fan at all for a lot of reasons. One, it's almost completely opaque. Fees are huge. We were joking earlier about private equity. Not a fan of that in a retail portfolio either for the same sorts of reasons.

It's opaque, fees are high. Low returns are not particularly good. No liquidity. You know, it's worse than a hedge fund slamming the gates in 08 or 09. And these companies are going to, these managers, are going to say, yeah, but we have so much less volatility. Next chart, Daniel, this is just a list of the, these are the BDCs. These are all very reputable sponsors, Aries, Blue Owl, Blackstone, Main Street, Hercules,

Golub, KKR, Morgan Stanley, Goldman Sachs. These are their BDC products that they've listed as tradable vehicles. Right. And I'm not taking aim at the sponsors. If there's a market for something and sophisticated investors want to buy it, then they should fill the market niche. But my point is that to the degree that the stuff gets sold because they say less volatility, you got to remember who's coming up, who's pricing the stuff that's inside these portfolios. Yeah.

It's the managers. So, of course, they have less volatility. So the story here is, and for the disclosure, I tried to catch a fall in that if I sold that, I took a 5% loss and moved on in. one of these BDCs. The story is that one of the big borrowers blew up recently. They said that there's $2 billion or God knows how many billions of dollars were they don't know where it went. This is first brands.

So this is like an auto. There's some financing aspects of this where they're selling and buying the parts and the leases and the whatever, whatever. So I want to not conflate two different things. But to Michael's point, this is part of the same stress now that we haven't seen in credit markets. CLOs are a really big business that have been for a long time and basically the collateralized loan obligations.

And there's a company called First Brands, which is kind of like this conglomerate of like auto parts businesses, different brands in the auto parts space. Auto is always the first thing stressed in any economic downturn. The auto market itself is fine. This is about the companies in that ecosystem that sell parts. So investors are getting worried that this is maybe systemic. that holy shit, if there's a, God knows how many billion dollars lost here. Are they actually reading the covenants?

Like, what do these deals even look like? So there's a lot of doubt there. I will just say this. The idea that this is going to be the first of the next leg to drop, high-yield credit spreads are doing nothing, basically. And if you look at the size of the private credit market, relative to the rest of the loan market, it's tiny. It's a couple trillion dollars of a, the slice is absolutely tiny.

So maybe should investors be careful? perhaps. Yeah, and that's, actually, I've had this conversation with a couple of people recently. Is it big enough to spawn some sort of real disaster? Yeah, subprime was tiny too. There was a time we forget. Now, that's possible, whether there's just way more than we know about it. Well, think about it.

People, subprime, nobody cares about that market. It was the bottom layer of something that was unstable above it. And are you guys, you guys are probably both old enough to remember long-term capital management. I was 12. Okay. Bastard. But there were, I mean, those were supposed to be the smartest guys in the world. A bunch of Nobel Prize winners.

Big enough to be so systemic that the head of every bank was called into meet with the New York Fed and figure it out. And what was their number? Their number was at $300 billion? But the leverage, what was it, 50? Well, but the number, the amount of capital that was $300 billion. There's a lot of money, but it's not all the money in the world, even back in 1997 when that was. So the point is, is, if this gets spread out over enough names, then any of these things can cause problems. I was in.

It causes a shaking of confidence, which ripples. First Brands is the stone that you throw into the middle of the lake. It's inconsequential. It's the ripples. And just to barge in here with some numbers, this is a company that ended up in its bankruptcy filing, which will now be a three-year fight. amongst creditors, $11 billion in liabilities on $3 billion in revenue,

which is not even the problem. The real problem is double factoring. They took the same collateral and used it for multiple loans. So now people are looking at everything they own. Like, whoa, whoa, whoa, whoa, whoa, whoa. This is going on? That's the problem.

Yeah, to Michael's point, there's about the number I saw today, $2.3 billion that they think was was essentially double-factored. In other words, they sold it twice. Yeah. There's also, and quickly, try to be quick here, every crash not only has a financial contraption, it has a catalyst, and often the catalyst has nothing to do with finance.

People forget that in 1987, the Friday before the crash of 1987, we essentially went to war with Iran. Column one of the Wall Street Journal on that Monday morning was not, oh, stock market lost a bunch of money last week. column one, page one of the Wall Street Journal that Monday, was that we were essentially at war with Iran. Why do I bring this up? Because in 1929, what really, really got the crash going was a fraudster in London, guy the man named of Hattley, I think. Hattree. He had started forging stock certificates. And then he was selling these stocks or borrowing against them

and eventually somebody figured out, oh, my God, this is a counterfeit stock certificate. I wonder how many of these we have. And the number was actually relatively small, but nobody trusted anything. That's what, that's the thing that happens. That's right. And so they said,

I don't know if this stock certificate's genuine. Why am I going to wait around to find out? Sell them anyway. Right. And you bring that up because the weather in October of 1987 before the crash is not too dissimilar than what we're seeing today. All right, again, I'm not a, I don't,

I'm not a crash guy. I'm not one of those guys who thinks that you have to buy gold now because it's going to triple by the end of the week as the stock market. Well, I'm not that guy. The first brand's ownership is diffuse enough that we're not going to see one major player take a substantial hit just because of first brands. Jeffries has a $700 million exposure, which sounds like a lot of money and it is, but not really. UBS has one specific fund where 30% of its assets are first brands About $500 million.

Okay, so not knowing nothing, not knowing anything. So that's not taking anyone down, but that's forcing everybody to rethink the way they're investing in some of this stuff and maybe to ask some questions they weren't asking a week ago. But hang on, but not knowing anything, because I am certainly a tourist in the space, the likelihood of this blowing over

or turning into something, holy shit, I'm just going to take the odds of it. It'll blow over. And obviously, this could age very poorly. Well, there's another one. It's called TriColor. And it is involved in auto finance as well. Yes, sentiment is weighing on the group right now. There's no doubt about it. This is another CLO story that it's not. No, it is. It is. Well, I'm with you in that crashes are rare. Thank God. Because not only is a lot of money lost, but a lot of psychic energy gets, you know, wasted. But think about the stock market.

How many stories over the years have blown over? People were worried, and then they weren't. Right. Well, and we talked about long-term capital management. That was really ugly. I think the stock market was down 14% in that month, and it bounced back. But let's look at it a little differently in that. And what I'm going to mention is two Bear Stearns hedge funds.

In 06. I thought it was 07, but okay. 06, 06. were focused on mortgages and subprime mortgages blew up. They went to zero. One had, one used no leverage and one used some leverage, and the one that didn't use any leverage fell 90% and the one that used a little bit of leverage. That was the opening shots of the financial crisis.

That's right. And people were having exactly the same conversation then that we're having now. Was it October? No, I think it was in the summer. I think it's August of 06, to be honest. Okay. And then within 18 months. and Spare Stearns is zero.

Right. And everybody is terrified and the market is seized up and nobody can get any money out of their money market fund. So it's the same situation. Then as now, we don't know, I don't think that the same outcome, that we're going to have the same outcome. But sometimes the market gives you a little notice. Yeah.

And it's not just the BDCs. It's the equities too of the private equity companies. Correct. So it's very possible we never speak of this again a week from now. and there is no other first brands. I agree with Michael where you still have to give the system the benefit of the doubt that this is not widespread fraud and people doing crazy shit everywhere, but it does get people asking new questions and looking a little bit more closely,

and that's new. I want to finish by getting your take on this gold versus Bitcoin masterpiece from Chart Kid Matt at Exhibit A. Michael wanted. Not at Exhibit A, just to be clear. This is a Chartkin Matt production. What are, it's too many names of things to keep track of? What are we looking at?

I mean, you tell the story. This is great stuff. Gold versus Bitcoin on a calendar year basis. Are you shocked, two questions. First, are you shocked that we're in a stock market bull with both gold and Bitcoin also making record highs? you answer that one last thing. The number one category of inflows of ETFs this year is treasury bills. Yeah.

This is a weird, weird. Really? Yeah. This is a weird. Like, how crazy is what's going on right now. That makes no sense because you can explain all of the other ones with lower interest rates. Anyway, gold outperforming Bitcoin this year. It underperformed last year, underperformed the year before, just a straight ratio. I find that really fascinating. People are, gold is not what you would typically associate with a stock market, bull market. And you definitely don't expect to outperform crypto in an economic expansion like this. What the hell is going on?

You would expect both of them. You would expect crypto, gold, and the stock market to do well. Together? When interest rates are coming down, sure. Okay. All right. I'll buy that. I'll buy that explanation.

They're not, it's not like gold is doing well because the stock market's doing well. They're all riding the same ride. That doesn't really mean anything to me. Okay. I will say this, though, that in an environment where unemployment is at 4.5%, is there, and I understand it's looked kind of crappy over the last few months, and you can look at the revisions, but unemployment's at 4.5%. Why in the world does that demand cutting interest rates?

Inflation, depending on how you look at it, is anywhere between 2.5% and 2.9% and the Fed's bogies supposed to be 2%. So why in the world are they cutting interest rates? So I have a bigger beef with the Fed giving in the public opinion and cutting interest rates when it's really not appropriate. And the final thing I'll say, and this is, I talk about this in the crash book, the Federal Reserve does 10 times, maybe 100 times more damage by keeping interest rates too low for too long than they ever do by having rates too high. They fostered the bubble in 1929 by refusing to raise interest rates, even though they knew, and the quote they used at the time was speculative orgy. Yeah. And my favorite type.

They're the only good kind. Yeah. And the same thing happened in 2004, 5, 6, when Alan Greenspan refused to raise interest rates thought that the banks were their own regulator. Should referee themselves. Nobody knows their risks better than they do. They'll modulate and forget, you cannot forget the whole, I'll be gone, you'll be gone concept. What's that concept? Don't worry about it because by the time this matters, I won't be in this job and you won't be in the job that you're in.

I will have gotten my bonus check. Right. I will actually have my own private island. Yeah. I'll be retired somewhere. Somebody else clean it up. That's right. Yeah, I don't disagree with you.

But Chicago guys hate, typically don't like the Fed. I've noticed that. Yeah, you guys, the Chicago contingent is very suspicious of anything central planning, especially the Federal Reserve. Yeah, I get that because... The Bears haven't won since 85? No, you... I'm a Giants fan, so I can't talk.

They won in 86, and it's not like everybody in Chicago has to know that in where to get into the city. The season was in 85, the Super Bowl was in 86. That's right, and they beat the... Jim McMan. But Jesus out of the Boston cake eaters. Yeah. So my point is, I don't hate the Fed.

I think we need the Fed. It has a role. It should be a backstop. I'm not one of those guys who thinks that the Jekyll Island meeting that created the Fed was some sort of sabotage or larceny. Jewish plot. I'm quickly. I'm a fan. I just think that they do make policy. He's in on it. He's in on it. Hey, what kind of last name is Nations? What is that? Is that English? It is English. It's unique, though, right? It is. The first, first member of my first American in my family came over from Somerset, England in 1740 as a 14-year-old indentured servant. Oh, wow.

Think of the average 14-year-old today. Yeah. Do you think that guy would get on a boat and come over as an indenture servant? I can't indenture my kid to take the garbage out. Right. Yeah, or shovel the snow. I want to end the show with what I think is a perfect metaphor for the current economy and state of the world right now. Tell me what you think of this, Scott.

This is an article, CNBC.com. Delta Airlines customers are getting used to first class. revenue from the priceier, roomier seats toward the front of the plane could eclipse sales from standard coach seats for at least a quarter or two next year, Delta executives said Thursday today. In the last quarter, Delta said ticket revenue from its premium cabin rose 9% from last year to $5.8 billion, while main cabin ticket revenue fell 4% from a year earlier to just over six billion. And the CEO said,

So just do first class fights. That's it. No, no coach. Why are we putting coach people on the plane at all? Do I have to think of everything? I think that's called the private jet. During an investor day last year, Delta said just 43% of its 2024 revenue was coming from main cabin tickets down from a 60% share in 2010. Basically, it's flipped. And now all the revenue is going to come from 5% of the customers, 3% of it? How perfect is that of a metaphor for the case-shaped bull market? There are so many businesses, it seems like, where that is the case, where the, not the Uber wealthy, but the pretty wealthy, the well-off, are happy to spend money. Yeah. Whether it's travel or dining or entertainment. I actually...

Cocaine. I'll leave that one to you. I actually had... Don't. Don't. I had drink. Thanks last night with a good friend, long-time friend, who's a Hollywood, not a Hollywood, a Broadway promoter and producer. And he was talking about they just had a show open. Average ticket price, $450 had absolutely, average, average ticket price. One ticket. $450 for one ticket. So that's $1,000.

You take your spouse. Yeah. You take your husband. Pack theater. Absolutely. And sold out. They're selling all that they can get. at 450 bucks average.

And you know what that means? That means that the ones up in front are probably double that. Yeah. And, you know, if you're a kid who's a college student and wants to go see you, good luck with that.

Wait till it's on Netflix. All right, Scott, do you have fun on the show today? I did. You guys were fantastic. I love this show. A lot of fun. We're just big fans of yours.

You're great on TV. You write great books. You know you have such a great breadth of knowledge and just an appreciation from us for everything that you do. Thank you. Well, thank you. I appreciate what you guys do to entertain and educate, most importantly, investors because it can be tough out there. It can be overwhelming. And to the degree that people are educated when it comes to financing a retirement or a kid's education, then God love you.

Oh, look at that. Wonderful. What a wonderful way to end the show. Hey, we always finish with asking people what's one thing they're looking forward to or anything at all that you want to. share with the audience that you think they should hear about. And we'll let you go last. Michael, you go first. Okay. What are you looking forward to? Apparently... You haven't been home in a few days. I was thinking about it.

I'm happy to be home. Looking forward to sleeping my bed. Amazon Studios, I guess MGM is reportedly making heat too. Which I am quite excited about. Ball in. I just saw one battle after another. I went

in Florida. I went to Fort Lauderdale to the, they have a museum there that has a 70 millimeter IMAX and they show real movies on it from time to time. This is one of the best movies I've seen the last 10 years. And on the big IMAX screen,

it just, it's, you feel like you're on a roller coaster ride. My wife actually just saw that and she loved it. I'll stay with the movie theme. We have an apartment on the Upper East Side and we see the cast of

The Devilverse Prada, too, all over the neighborhood. Anne Hathaway, Stanley Tucci. That's right. And as you can tell, I'm not the world's biggest fashion guy. Yeah. Never read Vogue. But I loved the movie. I never saw it.

For some reason. It's actually a lot of fun. It's good. It's not a chick flick or whatever you would guess that it is. It's actually, it's a nice time capsule of Manhattan in that period of time, too. Yeah. But also, you know, some businesses are tough to be in. let's face it, is it probably none tougher than publishing.

Fashion magazine? Over the past few years. Is there even one left? That's probably what the movie would be about. Magazines or books or newspapers. Yeah. And so it's a time capsule, if you will, of when that business was really in its sweet spot, making a lot of money, fun to be around, that sort of thing.

I got my thing that we're looking forward to. We are doing a live recording of this show, The Compound and Friends, in Manhattan on October. What's the date? October 24th. October 24th. It's a Friday night. Doors open at 6 p.m. And it's me.

It's Michael and our special guest, Jim Kramer, coming on the show for the first time. And super excited about that. Is this the one at the New York Stock Exchange? No, this is at the South, this is at near the stock. I can't say the location until people buy tickets, actually. Okay. I just, but it's close enough. It's in the financial district.

Where can they find out about it? I'm going to tell people to, I don't know, I guess in the show notes, we'll have links and all over the compound social media. We still have some seats left and we would love if you guys are fans of the show and you haven't been to New York in a while, you're looking for an excuse. Me, Michael, Jim Kramer, Duncan, Nicole, John, Daniel, the whole gang will all be there and we're going to have drinks, we're going to have food, we're going to have some signed copies of Jim's new book and I promise it's going to be an epic night.

And final thing, final question. When is that again? October 24th. Sounds like fun. Thank you so, thank you so much. All right, guys, that's it from us this week. Thank you so much for watching. Thank you for listening.

Like and subscribe, do all the things. Scott, where can we follow you? Well, you can follow me on, I still call it Twitter. Okay. Scott Nations. Or check out our offerings if you're interested in volatility, Nationsindexes.com. We provide bespoke volatility indexes.

for retail traders and sophisticated institutional traders help you create the best possible trade structure. Nationsindexing.com. All right, we're out. Thank you, guys. You got fun? We work. Thank you, guys.

Thank you.