The Compound and Friends - S*** Just Got Real, Earnings Estimates Fall With Nick Colas, Trump’s Argentina Playbook

Episode Date: March 11, 2025

On this TCAF Tuesday, Josh Brown is joined by Nick Colas, co-founder of DataTrek Research, to discuss policy uncertainty, current market sentiment, the divergence in global markets, what an elevated Vix means for the market, minimum volatility strategies, and more! Then, at 37:31, hear an all-new episode of What Are Your Thoughts with Josh and Michael Batnick! This episode is sponsored by Public. Fund your account in five minutes or less at https://public.com/WAYT and get up to $10,000 when you transfer your old portfolio. Sign up for The Compound Newsletter and never miss out: https://www.thecompoundnews.com/subscribe Instagram: https://instagram.com/thecompoundnews Twitter: https://twitter.com/thecompoundnews LinkedIn: https://www.linkedin.com/company/the-compound-media/ Public Disclosure: Paid for by Public Investing. All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Public Investing, Inc., member FINRA & SIPC. Cryptocurrency trading services are offered by Bakkt Crypto Solutions, LLC. Complete disclosures available at http://public.com/disclosures Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Ladies and gentlemen, welcome to the compound and friends. My name is downtown Josh Brown. I will be your host. I want to start by saying thank you to our sponsor public.com and the public trading app. I use public so easy, move money on, move money out. Every asset class, they've got a 6% or higher yield in their bond account. They've got crypto, they've got stocks,

you could do whatever you want there. I want you to check it out for yourself. It's public.com slash W-A-Y-T, as in what are your thoughts. That's public.com slash W-A-Y-T. On tonight's show, we got to talk correction, because as of today, we made it official, a 10% correction from the new record high

the S&P 500 set back in February. And according to our chief strategist at Ritholtz Wealth, Callie Cox, this is one of the fastest 10% corrections ever. So Callie notes, since 1950, there have been 23 corrections that went down 10% or more. And of those 23, this one is the fifth fastest. It's only taken us 20 days to go from a record high to a 10% drawdown. And that is pretty rare. So I think the good news about this particular correction, number one, it's very heavily

focused in Momentum stocks and Nasdaq tech stocks. So a lot of stocks are down and a lot of stocks are down big and they're not all tech stocks, but that's really the epicenter of this one. And I think that speaks to positioning and leverage and some of the ways in which hedge funds had been riding the rally. And as a result, there are a lot of things that are not correcting or don't look nearly as bad as the S&P index or as the NASDAQ 100, for example. The other thing that's going on is you are getting help from your other asset classes

in your portfolio this time. I couldn't say that in 2022. The bond market killed you in 2022. This time, the Barclays AG, which is like treasuries and high-grade corporates, is up. When we have these risk-off days in the market, they're buying bonds, and you're getting help there. And again, I could not have said that three years ago during the interest rate scare bear market that we had. So that's a really material difference and I think it's important.

You're also getting help from European stocks. They've been rallying all year. Chinese stocks. There are some very specific reasons for these things. In China, they're doing fiscal stimulus and they're really trying to get their large cap tech stocks off the mat and it's working. K-Web, which is Chinese internet, is having just a huge year already. In Europe, they're scared to death of the lack of preparedness on a defense basis. And Germany is willing to do some things with their fiscal budget that I don't think we've

seen in 25 years. So we're going to get into that. I think we're starting to show talking about probably the most important thing, which is the valuation slash sentiment problem and the earnings problem. And Nick Colas of Data Trek Research is going to walk us through why that's important. Then it's an all new edition of What Are Your Thoughts with Michael Batnick and I. We take a look at the last five years worth of charts in the post pandemic period. We take a look at some of the things driving the market action from

day to day, and we're going to do all the rest of the normal stuff. We're going to make the case. We're going to do a mystery chart. So it's an action packed show. I appreciate you being here with us. I'm going to send you right in. Duncan, John, Daniel, let's do it. Welcome to The Compound and Friends.

All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Ladies and gentlemen, welcome back to What Did We Learn? My regular check-in with my friend Nick Kolas of Datatreq Research.

His co-founder Jessica will not be with us today, but we'll see her soon. Nick, I'm so happy to have you. It's a fairly momentous time. Let me just give you your official introduction and we'll get right down to business. Datatreq Research puts out the morning briefing newsletter. It goes out daily to over 1,000 institutional and retail clients.

Nick is also one of the smartest people I know. And as I told him last week, one of the only people I absolutely need to hear from in a time like this. If you want to see Nick and Jessica's YouTube channel, we have a link to it in the description below as well. Let me set this up, Nick. In the first month of the Trump administration, stocks were trading higher in follow through from the post-election rally, and everyone was focused on the deregulation and the extension

of the 2017 tax cuts. This is what people were really excited about and with good reason. Then the mood completely changed. In the third week of February, as the tariff announcements began, it was like Dr. Jekyll and Mr. Hyde. The trouble is not only do we have this tariff situation, but we also went into it with way too much enthusiasm, according to your research. Why don't you take us through why that seems to be one of the biggest problems right now? Sure.

Let's just start with popping up the first slide, which is the State Street Institutional Investor Risk Appetite Index. Now, you know, State Street is one of the biggest custodians of financial assets around the world. And what they do is track how their portfolio manager clients are changing positions in a given month. And this graph shows you when they turn bullish, when they turn bearish. Stuff below the line is when they're bearish. Stuff above the line is when they're bullish. And you can see they were

pretty negative in 22, got bullish in November 22. Awesome. That's the point, the first point on the left-hand side. Then they were pretty cautious. Through 2023, got more bulled up in 24. But what I've done is highlight when they get super bullish, when that number, when that index goes to its highs. And yes, they called the turn in November 22 perfectly, but they tend to get bulled up in the current bull market at exactly the wrong times. And we've highlighted those there. So July 23, they got pretty bulled up, S&P fell 8%.

July 24, got bulled up, S&P fell 8%. July 24, got bulled up, S&P fell 8%. Then in October 24, they got kind of pulled up, modest pullback there, but they were really in that really super bullish position at the end of January, and we're down, I had it 4% as of Friday, it's down probably six now. So we're seeing a pullback, but big money was really poorly positioned for this.

As you said, they got way too enthusiastic. That's problem number one. Okay. I wanted to stop there and just ask you when the institutions that whose data is being fed into this risk appetite index, when they get pulled up, what does that look like? Is that higher than average allocations to stock funds or smaller cash balances or some combination of the two? It's a combination of late has been very low cash balances, very high allocations to the US and that's been persistent for the last 24 months because of the American

exceptionalism trade, American stocks doing so well. So they were really poorly positioned both in terms of not having enough cash and being way too long the US they were tiptoeing Into EM at the end of the fourth quarter, which is a China spike China exactly Europe was underexposed and you know, we'll talk about you know How wrong that was in the next couple of slides had it exactly backwards Well, you can understand like late January why you start seeing institutional investors getting bowled up, we really had a lot of momentum coming into the year. And if you were in the camp that says, okay, come January, this is all about to get real

and stocks are going to sell off, it didn't happen. Didn't happen till mid February. So I think you had a lot of people just say, you know what, we gotta get on this train, this thing's going. And that's how you get those higher than average institutional risk appetite readings. Everybody just decides they gotta play. Perfectly said, yep, I have nothing to add to that.

Next slide is S&P earnings. So this is quarterly S&P earnings, this is facts that data. And you can see the dark blue lines are the historicals, nice steady uptrend in sequential quarterly earnings. But then we get to this funky downdraft in Q1. Now by way of background, S&P earnings in a normal market, normal economy, they go up 2 to 3 percent every quarter. They're nice and pretty steady. There's not a lot of lumpiness. But we have this big downdraft from Q4 to Q1,

down 8%. But then the streets expecting, and those gray shaded bars are street expectations, expecting 21% improvement in sequential quarterly S&P earnings through the balance of the year. That downdraft that you see down from Q4 to Q1, that's been pretty recent. That's been a bunch of companies in consumer discretionary materials, energy cutting their guidance because they're worried about tariffs. In fact, I did some pretty good work on that in their last earnings insight report. So that bump is the tariff downgrade of earnings. It's an air pocket. It's an air pocket. It's an air

pocket. It's dramatic. And like I said, normal times you get 2% growth, 3% growth in quarterly earnings sequentially through the year. There's not a lot of seasonality there. It's the same from Q4 to Q1. So the market looks six to nine months ahead of time. That's what markets do day to day. And right now, to get to those numbers

in the back half of the year, you need a strong economy. You don't get to record high S&P earnings if we're in an air pocket in the economy. So that's why the market's so twitchy. We don't have a lot of near-term earnings visibility in Q1 and Q2. This is entirely a back half of the year story. That's why you're seeing outsized volatility because the shape of the US economy in Q3 and Q4 right now is a big question mark on it. So let's throw that back up one more time so I can ask you.

All right, so for those listening who aren't looking at the chart, it looks like the last reported quarter we have, $65.77 for the S&P 500's earnings. And now the estimate for this coming quarter is a pretty steep drop off. After four straight quarters of earnings growth.

Now it's looking more like $60.57. And of course, that's an estimate. It's not actual. We won't know for a couple of months what it actually turned out. But that is a fairly large air pocket. But then nobody really seems to be cutting the Q3 and Q4 number to the same degree. Yep. So am I reading this right?

The street currently is expecting 21.1% growth from Q1 through Q4? Correct. Because that's a lot of earnings growth built baked into expectations, to your point. Yes. Now, to be fair, the street has been very good at calling the last two years of earnings. They were within two to three percent in terms of where they started the year on a number versus where it actually came out. Okay.

So we can't just fade the analysts automatically, but this does explain why we're getting this choppiness right now because we're relying on the back half. So it sounds like one of your big points here is we have a way too enthusiastic multiple going into this problem, 21 times forward. That is not what you would expect the multiple to be if there's this much doubt about the next quarterly earnings report

that is gonna start in April, we'll start hearing about these Q1 numbers. So it's like, there's just not enough doubt built into that number. Is that the biggest point? Yes. Okay. And it's not just, you know, evaluation,

it's also volatility. Volatility is an expression of uncertainty about the future results. When the uncertainty is higher, that vol has to be higher and we're seeing that now. We'll talk about the Vixen in a little bit. So it seems like the current expectation then is for a one or two quarter blip as either companies adjust or the administration pulls back on some of this stuff or some combination

of those two things. What kind of multiple do you think we would need to de-risk to to account for an earnings drop off of this magnitude? If it looks like it's going to be more permanent, is that an 18 or a 19? Because that's a really big de-rating. The 10-year average for forward 12-month P.E. multiples at 18.4. And we're 21 today forward. And we're 21 today. But let's keep in mind that 18 includes a lot of bad crap that happened in the last 10 years and much greater levels of uncertainty than we have right now. So I look at 18 as a floor, 18 to 20 I think is begins to be fair. Okay, here's some potentially good news away from the US stock market.

The multiples might be too low, given some of the recent developments. And you guys point out DeepSeek, some potentially positive government vibes for Chinese large cap companies, tech companies that were basically in jail up until this past fall, metaphorically speaking, sometimes literally. And now the Germans are going to rearm for World War III. So that's a fairly material shift, mentality shift taking place there. Is that enough for investors to offset this earnings air pocket we're going to experience here in the US?

It is more a kinetic response, I would say, to what's going on in the US, because, you know, as we all know, the returns outside the US over the past five and 10 years have been terrible. The US has just cleaned the table with all these other equity markets. And now you have some small catalysts. You have President Xi shaking hands with Jack Ma saying, OK, we're not going to persecute tech founders as much. You have DeepSeek proving that China is not brain dead on Gen AI.

And as you said, you have Germany really thinking about the most dramatic shift in fiscal policy since the reunification of the country in 1990, wanting to spend on defense, but also on infrastructure. And by the way, talking to my contacts in Europe and seeing some of the surveys that have been run, these are wildly popular initiatives in Germany. So they should pass.

Germans are tired of aging infrastructure, slow economic growth, being beholden to the US for defense. And so there is a broad social support for these measures. The catch is that it's all gonna pass by March 25 because the parliament changes on March 25. The outgoing parliament is still more likely to vote for these measures than the incoming Parliament. So there's a very short window to find out if this catalyst is actually true.

But the point is you have sort of fiscal cutbacks in the US and fiscal expansion in Europe. And that's why Europe is outperforming so dramatically year to date. Let's throw that table up. So here's K-Web, the Crane shares Chinese Internet ETF up 26.5% year to date, which is blistering, up 48.5% over the past year. So for a lot of people, these were no touch stocks. China was considered dead money. Well, good morning.

It's a new day. The triple Qs, the US growth trade, let's say, the NASDAQ, negative 3.8% on the year. And that's, I think, going into today. So today will make it worse. So that's a pretty big spread between K-Web and the triple Qs of plus 30%. And then you're saying something similar now is happening with European stocks. What are we looking at here? Yeah, so the point of this table is just to show

like the three, five and 10 year Kagers, how much these things compound, was dramatically in favor of the US. The Qs or the SB 500 versus K web and MSCI Europe. So you look at the three, five and 10 disasters, right? Now you've got people saying, you know what, maybe they're cheap enough and yeah, I'm not getting the US level of entrepreneurship and growth,

but I don't have to worry about big fiscal spending cutbacks and tariff uncertainty from the US side. I do have to worry about it from the European side, but maybe these things are beaten up and now there's a catalyst. You have the catalyst in China, you have the catalyst in Berlin. So we'll see how it plays out,

but that snapback trade is clearly working. I wanna show you, I brought a chart for you. I didn't know this existed until 20 minutes ago. This is the Select Stocks Europe Aerospace and Defense ETF, EUAD, Nick, they really got one for everything, versus the iShares US Aerospace and defense ETF, EUAD, Nick, they really got one for everything, versus the iShares US aerospace and defense ETF, which is ITA, which I think most investors are at least aware of. Look at this performance differential.

The European defense ETF is up 36.55%. And this is year to date versus the ITA, which is Boeing and then all the defense contractors, up 1.6%. Have you ever heard of this ETF? Actually, sadly, yes. You have? Okay.

Yes. I had it. Let's put up the table. These are the top 13 holdings, and I think these might be all of the holdings because Airbus is 21%, Safran is 19%, Rolls Royce which does not make the cars, Rolls Royce sold the auto business to BMW, they just make the jet engines and nuclear stuff is 13% of

this index, BAE Systems is a fairly well-known British defense company, aerospace company, and then this Leonardo, which is 4%, that's an Italian defense company. I don't know, you must know these names better than I do. Well, the one you skipped over, Rheinmetall, has actually been the spiciest, I think. I only skipped over it because I can't pronounce it, but tell us about that. It's a German defense manufacturer and has had this amazing rip over the past couple of weeks. And it was considered a value stock and like very attractive at the middle and end of last year.

I heard, I got a pitch to me. And then all of a sudden it's just, you know, hear it again three days ago and think, wow, okay, that was good call. I wanna point out that, yes, this index of 13 defense contractors based in Europe is up 36% year to date, but these stocks effectively have done nothing for 10 years. And it's not out of the question that they could be up another 36% if, for example, that parliamentary measure that you mentioned passes or something worse happens on the Ukrainian

frontier. Like, it's not out of the question for this rally to endure throughout the course of 2025, depending I guess on how confident you are that Europe is truly awakening to its own need for self-defense or how bleak you think the geopolitical situation will become, let's say, by this summer, this fall. So you would agree that that's kind of like a rational way to think about if you wanted to get into some of these stocks now? Yes. I mean, look, the easy trade is obviously over. And now comes the question of does this

measure pass by March 25th? And then how much does Europe actually use the capital sensibly? Because Europe is a place that capital has gone to die over the last 20 years. It has not been a good market since the financial crisis. Some of the charts on European in single countries are flat since 2008. So it's not been a great trade. So you really have to have a high degree of confidence that they'll do something sensible with the capital after a long history of not doing so. But the call really is, are the European countries now shaken up enough by the change in policy from the US that they are comfortable deficit spending? Germany says yes. But then are they

also comfortable actually allocating capital sensibly and fixing some of their own internal problems as well? And that's to be, you know, to be right. We don't know. All right. Last thing on this, you point out a lot of US equity rotation has already happened, making it harder to judge what to do now. This is like a perennial problem for investors. Like by the time they figure out what's going on, they may have missed whatever opportunity there was to capitalize on it, which is why most investors are better off not trying to chase index and sector rotation. But talk us through this.

Sure. It's the next chart. Yes, this is S&P 500 consumer staples minus technology when you're trailing relative returns. And what it shows is that staples usually underperform technology over any given one-year period. This chart goes back to 2015, so it's a 10-year time slice. And most of the time, staples underperform. No surprise.

Staples don't have the fundamentals, they don't have the growth, they don't have the technology, so cool. However, there are times when staples do outperform, and that's when things get really bad in the US market. So the biggest period was 2022, the rate shock. Despite the fact that rates went up, staples did really well relative to tech. Tech got cream, staples did a little better. Staples have just come off of their worst level of underperformance in the last 10 years at the end of 2023. And they've spent the latter part of the best, most of the last year recovering. And now they've actually outperformed technology over the last year. So a very unusual situation. So if you're going to get into Staples now and

sort of avoid tech, like you said, you've missed that move. That was a two standard deviation downside move. And this, I think, contributes to equity market volatility because a sensible investor will say, I can't be in tech and staples have 2% to 3% growth and are trading at 23 times earnings. I can't go there. So I'm just going to sell down the entire market. And that's what creates the higher correlations between the sectors and higher overall index volatility. Yeah. So I think this is a really important point because over the weekend, the lead feature

article in the Wall Street Journal for, you know, presumably the investor class is reading over the weekend, what do I do now? And the article is called Stock Investors Go On Defense With Dividends. And they point out the most popular dividend ETFs, for example, SCHD, which is the Schwab US dividend ETF is up 4%. The S&P dividend aristocrats index is up 3.5%. This is on the year. And the S&P is negative. And here's an example of one of the charts they put up. Here's Johnson & Johnson and Coca-Cola versus the S&P 500. But I was just thinking when I was reading it, I'm like,

oh, this feels, I don't know how late, I don't know if it feels totally late, but it feels somewhat late that this huge rotation has already taken place almost in the blink of an eye. And now we're gonna start telling people sell tech by candy bars. So I just looked at this as kind of like, this would have been much more helpful

if you published it 10 days ago and not over this weekend. Or a year ago. Well. When nobody would have printed that. Now we're asking a lot. You wanted to wrap up on a little bit more of a positive note. Tell us what we should be thinking about here.

Let me just get to this. All right, so let's pull up that table. Sorry, I prepared so many graphs for these presentations that's gotta go in order. This is really good. People should screen grab this thing. All right, let me just go through it for people who are listening.

So the title is When and Why Bad Things Happen to Good Markets. And let's just start by accepting that US equities over a very long period of time have done very well for investors. So since 1928, which is 97 years, the S&P has been down more than 10% on the year only 12 times on a total return basis. So 12 times out of 97, basically 12%, we've been down 10% or

worse. Eight of those were due to recessions. So 1930, 31, 37, 57, 73, 74, obviously 2001 and obviously 2008 Three were due to World War two 1940 41 or big political tensions like the lead up to Gulf War two in 2002 and One was due to a fed rate shock that didn't cause a recession 2022. That's it Those are all the 10% drawdowns for the last it's not very many years It's not very many and the key takeaway is it takes a genuine big shock. It takes a full-blown recession. It takes a war. Or it takes a huge policy misstep.

Now, one might argue that we're in the middle of the beginning of a policy misstep with the tariffs and other economic issues. But that game is not through yet. So as much as it's super uncomfortable now, just keep in your back pocket the idea that to get a 10% draw down, crap has to go incredibly badly.

Yeah, all right, I love that message. I think in people's imagination, these negative 10% plus years are more common than what you've actually shown us is the truth. And it's not that we can't be in the midst of one right now. Of course, we could. It's that it's not the highest probability bet. And it almost never is. And by the way, like, something really bad has to be happening. And if it's a full-blown recession, that's bad enough. But so I think that's really the salient takeaway. And that's not to say we haven't been in 10% drawdowns

a lot of the time. You're specifically talking about years that end negative 10% or worse. That's what's really rare. Okay. When you look at your statement, what did you do that last year? That's the message. Do we want to touch on this minimum volatility thing just for a brief moment? Sure. Couple of charts there.

So the MinVol strategy is one that buys stocks that have lower than average volatility. And there's a couple of popular ETFs that do this. One is USMV and iShares product. Other one is SPLV and Invesco product. Those are the two most popular MinVol products. And they're equityLV and Invesco product. They're the two most popular Minvol products and their equity product. Having a good year.

And they're having a good year. So they're up, the S&P is down and they're actually outperforming which is kind of uncommon because the goal of the strategy is to get 80% of the upside and only 60 to 70% of the downside. That's what Minvol means. So far we're just outperforming like forget you know the old benchmark. Yeah, all of the upside and then some because there isn't any. Right. So this table shows you how the two products go about their business. The USMB tries to hold something closer to the S&P 500 weighting. So put the S&P weightings on the left-hand side and USMB is modestly underweight tech discretionary communications because of the big tech names, a little bit real estate,

but it keeps a pretty even weighting. The biggest overweight is health care, 4.7%. SPLV just picks the 100 lowest vol stocks in the index. And so it ends up with a much more dramatic underweighting in tech and a much bigger overweighting, say, in utilities. So two flavors of the same thing. This is interesting. Look at that divergence in tech weighting.

So these are two strategy ETFs specific to minimum volatility, but because of the methodology, one of them is 25% tech, that's USMV, and SPLV is 4.6% tech. That is really interesting. SPLV is 4.6% tech. That is really interesting. So like choose, now they're both up a similar amount this year so it hasn't mattered yet, but choose your products. Like really think about the differences

and which one you think is the right version. Even if they both are an identical strategy, the way that they implement that strategy will not be identical. Yep, SPLV is the older product, so it has a little bit longer track record. USMV came out of iShares, I think in 2010, 2011, kind of the perfect time for Minval. So, but it's a big,

let's just roll to the next table. This shows you the top 10 holdings for the S&P, USMV, and SPLV. And you can see, you know, the S&P we all know is Apple, Microsoft, Nvidia, big chunky weightings. The top 10 are 36% of the S&P. Minval also approaches the strategy by saying, let's not be so overweight, big names.

So the top weighting in USMV is Walmart, 1.7%. The top 10 weightings are 15.7%. For SPLV, the top weighting is Coca-Cola, which ironically you have, you know, we're mentioning just before 1.3% weighting and a very even kind of structure. It's almost like a Minval equal rate product. Yeah, I was going to say they both look equal weight. And then of course, there's like changes in performance, like Walmart's had a really great

run. So it grows from 1.5 to 1.7. But it looks like in both cases cases you don't have any holding that's more than 2% of the of the fund that in and of itself It'll somewhat throttle returns in bull markets, but it's what saves you in an environment like this, right? So the message from this is look We're all apprehensive about the market the most important thing in investing is to stay invested in some form. And if Minval is better for your personal risk tolerance,

it's something to consider. And forgetting what relative returns have been. And then you like the USMV structure better than the SPLV because of its upside captures historically? Is that the main reason? The main reason is it's closer to the S&P. Those weightings that we discussed, the weightings are closer to the S&P and I don't like massive vector drift even for an important style like I'm involved. Yeah, I think if you get a tech

rally you will have less regret in USMV because it's closer to the real weighting of tech in the index. I think that, like for me, that would be the big thing that I would pull out here. Yeah, I mean USMV did not do great in 23 and 24 because tech was so much the driver, but you still made money. Okay, let's do some, let's do some Vic stuff to close out. Walk us through the Vic's playbook and why it becomes relevant now. The VIX Playbook is our, and we might as well pull up the chart here. So the VIX Playbook

is something that we discuss with our clients all the time. And it basically is a way to look for entry points when calm markets get volatile. And this chart shows you the VIX going back to the beginning of 2023. So basically the entire bull market. 27.3 on the VIX is one standard deviation above the mean. So an unusual statistical observation. And we've only gotten close to that level three times or gone through it three times since 2023. The first one was when SVB failed. That's what 26 and a half handle. It's two years ago this week. Yes. And, you know, the S&P was up seven and a half percent over the. It's two years ago this week. Yes. And the S&P was up 7.5% over the next month. That was a good entry point.

Then we had the volatility around the Yen rally and the Nikkei flash crash. And the VIX got to 38.6. The S&P was up 2.3% over the next month. And then the last one was that disastrous Fed meeting at the end of last year, where the VIX got to 27.6, and the S&P was up 2% over the next month. So what I told-

I forgot that one. Oh, I have not. I totally forgot. That was so painful. It was just Powell's worst performance, I think, in the history of his press conferences. Trying to explain that class. But if you were on vacation for that vol spike,

you missed it. Like if you were out of the office for two or three days, it came and went. Yeah, it did. And so my message is always wait for a 27 handle VIX close before thinking about buying a market. And I don't know where we are. Intraday, I think we hit 27 intraday today.

We'll see where we close. But that's been a statistically very important level. So for the moment, be careful. But if you wanna buy, think about a 27 handle VIX close before you start buying. Yeah, a lot of people are trying to play this game right now and not use the VIX, but they're using internals. They're looking for a spike in 10 day lows, 20 day lows.

They're looking for some threshold where if you get a certain percentage of the market all hitting 10 or 20 day lows at once, it doesn't completely de-risk whatever long side trade you're about to make, but it definitely puts the odds in your favor. And I'm seeing a lot of notes going around and obviously it probably looks exactly like that 27.3 VIX spike. Like those two things probably happen at the same time. And for good reason.

VIX actually measures correlations. When everything goes down, when you make all those 10 and 20 day lows, correlations high, the VIX is going to be high. That's just math. All right. What is the likelihood that the market has seen its peak and it happened in February? Just probabilistically, let's run through this for people that haven't seen your research on this topic yet.

Sure, actually Jessica mentioned this a couple of times ago, but let's put up her table. This is the number of years the S&P peaks for the year in a given month, and this goes back to 1980. So for example, in five years, the S&P peaked in January, and the average return of those years was negative 18.6. So if you peak in Jan, very, very bad. Thankfully we didn't do that.

So far we peaked in Feb. Yeah, we just made it. We just, literally just by days. There is one example of when the VIX, oh sorry, when the S&P peaked in Feb, and it was 1994, and in that year, the S&P was up 1.3%, and then we kind of cascaded from there. So generally speaking, markets ride through a year

which is why those peaks in September, October, November, December always have high positive returns. Yes, much, much less common to see the high for the year in the first two months and if you do, it's usually something very specific is happening. And I think in the case in 94, it was another rate shock. Yes. Greenspan was another rate shock. Yes. Greenspan surprise interest rate hike.

Yes. In 1994, the Fed had never actually told people their rate decisions, ever. They just put them out there, and they had to call a local bank's trading desk to figure out what the Fed had done. 94, there was a rate hike. I was on the South Side at First Boston covering the autos,

so deep cyclicals when this happened I remember vividly because for the first time ever the Fed actually put out a press release Saying we're raising rates and the entire street was like what the hell just happened because a that's a surprise and B If you're putting out a press release about one there's more coming So the market instantly corrected S&P was down 9% through April It ended up being up 1% on the year total return, down 1% on a price basis, but the market had real problems

digesting a suddenly much more aggressive Fed. And I think there's some analogies to today in terms of interpreting what new White House policy means for the economy. So it's a very similar policy shock. Yeah, I think what Greenspan learned from that episode was to stop speaking so clearly. He never gave another speech again that any English speaking human being could actually

tell you what he was trying to get across. Right after that, his speeches and his testimony in front of Congress, I think they used to call it the Humphrey Hawkins testimony. That's right. It just got increasingly more elliptical. And by the end of that period, he speaks like the caterpillar from Alice in Wonderland. It's just, it's riddles and palindromes, and nobody really knows what's going on anymore.

Oh, he used to say, if you think you've understood me, I misspoke. That's exactly right. Nick, this has been awesome. I want to let people know where they can learn more about Datatrek and follow your stuff. So first of all, datatrekresearch.com is the best place to go to find out more about how you could become a client of Datatrek research. And of course, Nick and Jessica are on YouTube.

It's youtube.com slash at Nick Colas and Jessica Rabe. Their full name spelled out. You guys are doing unbelievable stuff on video and I personally am getting a lot out of it. You having fun still? Absolutely, it's great. It's great. It's a grind but it's highly rewarding in terms of the audience response. They love your stuff So it really is and thank you to everything everybody who watches of course. All right. Thanks so much Nick We'll check them with you soon. I hope much appreciated. Hey guys. Thanks so much for listening. Thanks for watching. We'll talk to you soon All right. The chat, Michael, is, as they say, litty. I like it. Christmas tree. Everybody's here, dude. Why wouldn't, is, as they say, litty. Like a Christmas tree.

Everybody's here, dude. Why wouldn't why wouldn't they be? Where else would they be? This is our time together. So hey, guys, you say what up to the Pounders? Let's see. KL's here. He says, hey, everyone. Hey, everyone. Chris Brown's in the house.

Chris, don't take my hotel room at future proof. I heard what happened. It's very important. I have the presidential suite. I need it. It's very important that he gets that suite. You don't want to see what happens if he doesn't get it. I'll literally go back to the airport and leave.

When are you getting in, by the way? Sunday. What time? Are we in the same flight? I'm in the middle of the day. But I'm going to do the closing remarks on Sunday from the stage. All right. Chris is here.

David Graham. Roger's here. Jerry. Georgie, we see you. Jeff Asola. Stephanie James. Welcome back. Who else?

Everybody's here. Evan Beauchamp. Bob Rice. Great to see everybody. Bear in a foxhole. What to buy with the VIX this high? We might have some ideas, buddy. You never know. Magnus. All right. hole what to buy with the VIX this high. We might have some ideas, buddy.

You never know, Magnus. All right. Tonight's show is sponsored by our friends at public.com and the public trading app. If you're serious about investing, you have to try it. That's where you can invest in everything, stocks, options, bonds, crypto. You can even earn some of the highest deals in the industry. They built this thing called the bond account for people that don't want to screw around looking for bonds. They put it all together for you. It's a 6% or higher yield that can be locked in right now. Public.com slash W A Y T is

where you want to go. And if you transfer a portfolio from somewhere else, you could get up to $10,000. That's public.com slash W A Y T paid for by public investing full disclosures in podcast description. I took that whole thing for you, Mike. All right. I am nothing of not thoughtful. Am I not merciful? Yeah, true.

All right, guys, we're officially in correction territory. What? I'm not going to step on it. No, no, no, no, no, we're not officially in correction territory. The S&P is not. We're going to have a huge debate. I'm just saying. It's official, bro.

As far as you and I are concerned, we're in correction territory. As far as history books go. I'm calling it market eight. Over the line, Smokey. We're over the line. No matter. Look, we can play games, but that's where I am with this thing. I'm not here to debate, Jerry. All right. Before we go there, I want to show you this amazing thing that the New York Times did over the weekend, because I think a lot of what's going on these days, not just in the market and the economy, but politically, I think you can really trace back almost everything

to what happened five years ago. And the New York Times has this like subdivision called Upshot, the Upshot. And this is how they do their charting coverage. Look at that. Well done, boys. All right. The upshot and this is how they do their charting coverage. Look at that. Well done boys. All right, this is 30 charts that show how COVID changed everything

and we're just gonna scroll through and we'll just pause and where Michael has commentary or where I have commentary, we'll pause for a moment. But I think we are very much living with the after effects of what you're about to see in these charts. And we'll try to explain why as we go. But the premise here is that COVID broke the charts. So like this is an obvious example.

You could look at this unemployment claim chart for 100 years and you will still see this living nightmare. And it started five years ago this week or five years ago next week. Is it hard to believe? Yes. Three million Americans filed for unemployment benefits in the first week of COVID, six million the next, and that was one of the earliest shockwaves to ripple through the economy. Let's go next.

Resignations. You guys remember the great resignation, which was early 2022? Well, that's how we got the inflation that drove the Fed to one of its most aggressive hiking cycles ever. These freaking job switchers. Job switchers, people starting a business, you name it. All right, let's go. Money spent on food. You see this moment starting in March 2020 when groceries spiked. And then sometime around 2022 that crossed over and we went nuts for restaurants and delivery from restaurants and sitting in restaurants.

We're still going nuts. There's been no retrace. They really, there really hasn't. It's a, it's, it's incredible. A lot of the charts that we're going to show are that the New York Times pulled. Like we go back to trend, not this one. Yeah, no, I think this actually permanently changed the way we live. I really, I really believe that. Um, next oil prices.

Uh, this one for me doesn't really feel like a COVID story, but they're showing you the price spike from where Russia invaded Ukraine and then those prices faded. Dude, forget about that. The oil went negative. Yeah. I guess, you know what? I should take that back. We've never seen that before.

Never will again. I don't think so either. Nope. That was the strangest. That was maybe one of the strangest occurrences of the whole pandemic period was when People were taking delivery of a barrel of oil. I get negative. Yeah Getting paid to take delivery getting paid just take the oil. Yeah, it didn't last long Uh, what a bot what a buying signal that was. Holy shit

Um, all right next Uh, this is driving. So we it says America drove less and gave up flying almost completely. It took years for flying to return to pre pandemic levels. And now, of course, we're flying as though nothing ever happened and business travel rebounded. And that was one of the things that people were predicting. You would never see business travel rebounded. And that was one of the things that people were predicting. You would never see business travel rebound

to its previous levels. And that was wrong. I was a hun, I could not imagine that business travel would rebound to the extent that it has. I was in the cap of why would you go anywhere ever again? You just zoom everything. And then we started future proof

and we brought the whole thing back. It's true. We saved the economy. Okay. All right, so this is alcohol sales. Oh, yeah. We were in that spike. I was an alcoholic for probably two years. I was saying that to Ben today. I think I drank every day for two years.

Look, I'm pretty sure I met the definition. Never during the day, but drinking more than ever. No, you know why? And drinking more nights than ever. Because, you know why more nights than ever, because it was like we were at a hotel permanently. Yeah. Yeah. No, listen, it's, it's, it can be forgiven. Um, given the circumstances, people stuck in a house with their family, the kids are doing zoom school upstairs. You look, you're, you're looking at your spouse all day long. So we spent a billion dollars more on alcohol during the pandemic and that's that huge burst.

And a lot of that's imploding these days. It looks like the Gen Zs are reversing that trend hard. They are just not into it. I hate it. And good for them. All right, next. Have a martini. Grow up. Time spent at home, next. Have a martini. Grow up.

Time spent at home, like, it's still this way. Nah, this ain't never going back, ever. Yeah, like you're still talking to people who are at their house on a Tuesday at two o'clock. It's just, this is just the way we live now. So it, well, not for all of us, obviously. For many. You and I are lucky enough to exist this way.

At least, well, you don't stay at home. I do sometimes. But I still think it's weird. Like today, I was home and it felt odd. It still feels like I still feel like I'm doing something wrong, like I'm breaking the rules. A third of the people who work for us are working from their home.

Are they breaking the rules? Like this is just what it is. I'm just saying it still feels. Yeah, it's weird. Like I'm not doing something right. It's weird. I think if you're 25 and not, I'm 48. Let's say if you're 28,

like this is most of your working life now has been, you know, if you have one of those jobs that you can do it wherever. Bizarre. Yeah. All right, next. Bizarre. Yeah. All right. Next.

Time socializing with others. This one. I don't believe this one. I think this one's recovered a lot more than the chart is showing. I don't know where they get the data. No way, dude. Just think about how much time at the office and go out for a drink with your friends afterwards. A lot of those.

So is that what this is reflecting? I think so. I think this is part and parcel of the work from home thing. All right, we're off the lows. Next. The share of women in the labor force. Okay, the share of women in the labor force. I don't want to say silver lining, but because of the flexibility of jobs in the post pandemic era, the amount of women

who were able to take a job exploded. By the end of 23 going into 24, it hit 70% women between the ages of 25 to 54 who had a child under five. So for that cohort, they could not have a job because of the expectation of physically being somewhere. And I really think that this changed the world permanently. Women as caretakers and moms never had as much opportunity as the post pandemic economy created for better or for worse. I think it's good.

We're about a third of the way through these charts and we're already 10 minutes in the show. All right, sorry. Let's speed it up a little bit. Business applications, more people decided to work for themselves. Huge spike in 2020. People just said, not only do I quit, I'm starting my own thing. There's no way the rest of the world looks like this. No f**king way. No way. Next. Look at how we do. How to cut your own hair, web searches. That's over. We're back at the barbershop. Adopt

a dog. That's over. Yeah, this is showing Zoom and Peloton. That's when Zoom was bigger than Exxon at the peak. That was normal. The two darlings of the and both of them are now as low or lower than they were prior to the pandemic. Didn't work out. Online shopping. You see, we went way above trend.

We got to the point where it was like 18% of retail sales were online. Then we dipped back in 21 and 22, kind of corrected back to trend, but we're still above trend and that is an aspect that's, I think, never going back to normal. Up until the right. Yep. Next. Okay. Time spent watching television.

That is in precipitous decline. But we, in 2020 2020 was like peak TV and that's why Netflix and Amazon and Disney, they would just pay you anything for a show. They needed more. Dude, Tiger King. Remember that bullshit? Yeah, that's normalized. Tiger King.

Right. Um, next. Yeah, right. Same thing. All due respect to our beautiful national parks. We got Marcus to talk about. All right. This is interesting. US marriage rates had been declining precipitously in 17, 18 and 19. And then they bottomed in 2020. And then they spiked 21 and 22. and then they spiked 21 and 22, we broke that downtrend in marriage rates. And look, it's not easy to get married, start a family, buy a house, but we're figuring it out.

So that's, I guess, a good thing. I don't really understand the murderers thing. I understand the theft thing. If everyone's stuck at home, like I guess like where are you going to steal things? And then it recovered with the reopening. The murders peaked in 21 and 22. I guess that's like we need people at work and not out murdering each other. Next. I gotta think more about that.

All right, next. All right, positive flu Next. All right. Positive flu tests. Who cares? After tax income. All right. Josh, your post on this, you weren't supposed to see that. Yeah.

So, and I need my book for that post, but basically the American rescue plan was enacted in the fall of 2020 or the summer of 2020. You had stimulus checks one and two before that. And basically the after tax income of Americans shot up from 50,000 to over 60,000, which percentage wise is a huge difference. And then of course, we ran, you know, that we ran out of those things and after tax income fell back to normal and now it's rising again at its regular trend. That was a very bizarre moment where everyone had enough money to do whatever they wanted

and it upended the entire economy. It basically wrecked the economy. You can't have McDonald's posting $25 an hour jobs. We can't survive if nobody needs to work. And you know, I don't give Trump all the blame, I don't give Biden all the blame. I think a lot of different people were trying to do the best they could in a very strange situation.

I don't think this will ever be repeated again. I don't think anybody, any either political party got any credit for having done this. All right, next. Federal spending on children. Okay, sure. Lots of tax breaks. Federal debt. I mean, we are so on another planet right now. We basically had a $3 trillion jump in the early phases of the pandemic, which was tons of spending and then it just kept going. I mean, this is directly responsible for the creation of Doge.

Yeah, this is Trump. Yeah. Like, oh, it's a lot of stuff that we're living with right now that you can point back and say what were they thinking? All right, next. Well, hold on. Biden, that was Biden too. Oh, yeah, big time.

The Inflation Reduction Act. Oh my God. Inflation Reduction Act. Oh my God. Inflation Reduction Act was hilarious. We said it in real time. We said, in what way does this reduce inflation? Okay. Public transit obviously fell from, I guess you had something close to a billion trips per month falling to 200 million, which wreaked havoc with municipalities and city bus systems and trains. Next, that used car price spike that peaked in February of 2022. That was bananas.

House listings fell off a cliff, bottomed in February of 2022 and are gradually getting back to where they were, but still only halfway there. Measles vaccination. I don't have time for this today. All right. Um, awful. That chart sucks. Yeah. I don't have time for that. No, we're not going to do that. All right All right. That's it. Those are the charts guys. If you want to know like big picture macro, like why we are where we are with a lot of things politically, economically, those are the charts. We broke something fundamental about the way society works and how we pay for things and where the money comes from and what people become accustomed to.

And we're still like learning to live with the consequences. And it's really been an insane five years that we've all been through together. We're not going back to- Maybe we don't give ourselves enough credit for what we've lived through. We're not going back to like this normal period that we're talking about.

As if 2019 felt normal, but We're not going back to like this normal period that we're talking about as if 2019 felt normal, but we're not going back. Roger Weatherford said you skipped the interesting ones. Dude, it's 30 charts. We have a lot of ground to cover. Okay. All right. You're up.

So I said this to Ben today and I'm going to say to you, one of the things that people love to say in investing is I've seen this movie before and if somebody says that you could completely discard what they're about to say because no they haven't. There is no two periods of time. I've seen this movie. Oh, that's one of the bottom five worst things. You know what I was thinking the other day? If somebody uses the term hopium, there's a 99% chance that person has been underperforming for 10

years. If I ever say that, kick me in the nuts. If somebody tweets anything and in their tweet is the word hopium, oh, that guy sucks at investing. It's an angry thing to say. All right, so anyhow, Bespoke tweeted, the S&P 500 didn't have a single Monday open lower of 1% until we were 836 days into Trump's first term. That's nuts. There was no Sunday scaries in Trump's first term, believe it or not. And now today, this was yesterday, is set to be the third Monday open lower

of 1% of Trump's second term and we're less than two months in. Tom Lee did this great research report where he shows the performance in the first Trump administration of various different asset classes and about nothing tracks. So interestingly the China is, but whatever, it's random. It's completely different. It's completely different. We're going to talk about why later in the show, but it is night and day. And if your expectation was, I know how to trade Trump. No you don't.

Dude, that was everybody's expectation coming into 2025. Strategists, economists, small business owners. I've seen this movie before. Retail investors. Everybody was all balled up and I was right alongside them. All right, let's play this clip. I thought this was really interesting. John, please. up and I was right alongside them. All right, let's play this clip. I thought this was really interesting.

John, please. And I want to ask you about Ukraine and the blow up the other day with Zelensky. Let me stay on the economy for a moment because there are rising worries about a slowdown. You've got the Atlanta Federal Reserve saying we're going to have a contraction in the first quarter.

Look, I know that you inherited a mess and you said that the other night. I've all been here for a while. But are you expecting a recession this year? I hate to predict things like that. There is a period of transition because what we're doing is very big. We're bringing wealth back to America. That's a big thing.

And there are always periods of... it takes a little time. It takes a little time. But I think it should be great for us. I mean, I think it should be great. It's going to be great ultimately for the farmer. You know, don't forget, I mean, so if you're not China, would you invest in China? If you cut off Maria and said, what do you think Trump's going to say? I would have strongly guessed that his response would be, no, there's not going to be a recession. It's all going to be wonderful. Like, I don't know if I give him my credit for saying that, but it was not the response that I would have predicted.

I give him credit for saying that. I can't believe the level of message discipline coming out of this White House. They are. It's consistent. level of message discipline coming out of this White House. They are really good at this. And he, look, Besson's a professional. Like, Lotnik's a Wall Street guy. So that I'm not surprised about. And this is a huge upgrade in terms of, I'm not saying like I agree with everything you're doing.

I'm saying Wilbur Ross versus Howard Lotnik is not even a conversation the Wilbur Ross versus Howard Lotnick is not even a conversation. Wilbur Ross I think was half asleep. That guy, oh my God. Right, that guy. He was walking around in slippers. This is notches and besant, I don't know if it's a material upgrade for Mnuchin, but it's somebody that Wall Street.

Yeah, somebody that Wall Street believes in. And they believed in Mnuchin, but it's somebody that Wall Street believes in. And they believe in Mnuchin also, but like I just, I'm very impressed that he has been able to not freelance with the message. So Jonathan Farrow from Bloomberg TV tweeted that video, quote tweeted and said, the two seem very long-term rebalancing the economy. President Trump transition period,

Secretary of Best-Sent detox period, secretary best at detox period. And to which Katie Greifeld, quote T to the quote tweet and said, take your medicine is an unexpected early theme of Trump 2.0. Nobody could have predicted this. Like this it's, and that's why the market is reacting the way that it is. Who thought this was going to be the message of, of Trump 2.0. Yeah. And, uh, the same message is coming from Elon.

Like they, they, they got in a room and they said, guys, the only way this works is if we don't break it. Like if we all are saying the same thing, the market will get used to it. If we all start saying different things, it's going to turn into a mess. And I don't know who coordinated that, but they are sticking with this and they are getting Wall Street to reprice it really quickly. Callie points out this is the fifth fastest 10% correction from a record high of the entire 75 year period back to 1950. Um, so they are, they are getting the message out and they are sticking with it.

Remember, uh, deregulation capital market formation, IPOs. Well, NASDAQ, the stock looks like shit and, uh, Blackstone, the stock looks like shit. Uh, there was a, a swift repricing of risk. Am I naive? I don't buy it. You don't buy what? I don't believe the messaging. Oh, I do.

I wouldn't have in advance. I do now. I'll tell you why later. Wall Street is talking recession openly. So Howard Lotnick is saying there's going to be no recession in America, but I think I know what that's about. They will reframe it and they'll say, no, it's not a recession. It's a slowdown. Like even if it is a technical recession, like it's Trump land. So they'll be like, no, it's not.

What are you talking about? You know, like they won't admit that it's a recession. But Wall Street is not playing that game. JP Morgan, hang on, hang on, hang on. If they're trying to cause a recession, why won't they admit it's a recession? Because they are framing it as a transition from a fake economy to a real one. And I'm going to I'm going to I don't want to do too much like teasing, but I'm going to get to why later.

But on Wall Street, they're using the R word, hard R. JP Morgan Chase raised their risk of a recession this year to 40% up from 30% at the start of the year. We see a material risk that the US falls into recession this year owing to extreme US policies, tariffs. Goldman Sachs economist led by Jan Hacias on Friday said it was raising its 12-month recession probability to 20% up from 15. Okay. Bold.

Morgan Stanley economists led by Michael Gapin lowered their economic growth forecast and raised their inflation expectations. The bank now expects GDP growth of 1.5% this year, 1.2% next year. Their estimates were much higher. Also expects the Federal Reserve inflation gauge, which is PCE, to rise to 2.5. So here's what I want to tell you, Michael. I went to a football game at the University of Miami in September for Parents Weekend. And I was talking to a couple of the economics professors at the school.

And they were talking about Javier Millet. And I think one of the gentlemen is actually Latin American. And they were talking about if that's going to be the playbook of a new Trump, and we didn't know who would win the election at that time, but Trump had a lot of momentum and it looked 50-50 on the surface. And they were just talking about this could be the thing that you should expect is take your pain now because Millet spent 2024 pursuing this idea of a J curve. So when a J curve, it starts here, the first thing that happens is it dips down,

but then as it rounds, it breaks above the original trend and takes off like a rocket ship. And that's really the story of Argentina. It's why that's been one of the best stock markets in the world, which I'll show you in a moment. And the reason why I'm referencing Millet is because that is Elon Musk's intellectual hero. And I think Trump is a huge fan. And because Scott Besson is a global macro hedge fund manager. I'm certain he's familiar with the central tenets of what Millet is doing in Argentina.

So basically, Argentina has got 100 years of just horrendous inflation and booms and busts and all this union stuff and protectionist trade policies that have failed. And Millet came in and basically said, I'm ripping it all out. The economy is going to hurt for a few quarters, but I'm going to restore something that used to be special about Argentina and you'll see what the results will be. I'm going to free everyone to trade with whoever they want. I'm going to stop protecting these zombie companies that are sort of government supported. And I'm going to get rid of all the debt and I'm going to get rid of all the red tape.

And he's the guy that the original guy with the chainsaw. So they've had this horrendous inflation problem for years. And so I want you to see this. This is Reuters about a month ago, how Argentina took a chain saw to government a year before Elon Musk's oge. Michael, when you're like, or people are like, what are they doing? This is what they're doing. This is what they're doing. And they're all staying on message.

Moody's just upgraded Argentina's debt rating for the first time in five years. They also upgraded their forward-looking growth outlook for Argentina's economy. Millet spent all of 2024, his first year in office, he caught 40,000 government jobs, which in that country is a lot of people. He walked around with a chainsaw and he just hacked off limbs. He had this bulletin board with all the different government departments and he was ripping them off the bulletin board one by one and saying, this doesn't exist. This doesn't exist. And that was like a very powerful signal that they were taking the economy in a very different

direction. What they had prior to Millet was something called Peronism. It's after Juan Perón. Peronism is they have basically one political party and whatever the people are excited about, they just give you a version of that. So when the pendulum swings left, they give you a communist. When the pendulum swings back to the right, they give you like a hard right fascist, but it's the same party always in control. All of that has just been shattered

now and this is what Besant and Musk are paying attention to. What happened at first was it slammed the Argentine economy exactly as predicted, detox, transition period, whatever you want to call it. And then something really special started to happen. Everything started turning higher, including Moody's upgrading the debt. Let me show you this chart. This is purple, Argentina's stock market index ETF here in America, ARGT. As you can see, this has more than doubled and you can see this huge jump just as Millay wins the election and then it just continues to rally.

I'm showing it to you versus the rest of Latin America. Because you're trying to get an appointment in Trump's cabinet? What's going on right now? No, I'm trying to explain what the theory is that's driving them to do the things that they're doing. The mass federal austerity is coming- There's a few differences between Argentina's economy and ours. Yeah, no shit.

Thanks. Is there? I understand. I'm making the point that when people are trying to figure out what's happening, this is what they're doing. Inflation in Argentina is cooling. Government spending has been slashed, deficits are falling. These are all the things that Trump promised he would do for our economy, and it's actually working there.

They had a surprise budget surplus in November of 0.1% positive of GDP versus negative 4.4% the same time last year. And now that shock therapy is what we're repeating here. So let me just show you a couple of pictures. Here's Chainsaw Javier. Let me show you the next one. This is at CPAC, dude. This is last month. This is Millay gifted Elon a chainsaw to commemorate

the work that he was beginning at that time for Doge. Here they are together, broing out. I think this is at one of the rocket launch sites for SpaceX, which Millay came to visit while he was in America. And here is an embrace between President Trump and Javier Millay. The last thing I want to tell you. What's that? What's that on his face? What is that? Go back. Sideburn. Those are very fashionable in the 1970s, which is probably when he was a teenager. The minister of the economy, Luis Caputo, met with Secretary of the Treasury, Scott

Besant, at the end of February. They kind of had this closed-door powwow. I really think that it's important to just point out this J-curve idea is what they're doing here in the United States. Put this chart up. This is gross domestic product in Argentina. It is now forecast to continually increase between 2024 and 2029 by a total of 109.5 billion US dollars, which is 18.12% growth. So you see this dip down in the beginning of the term and then you see the J curve where

it reverses higher. And that's the story, I think, of why these guys are staying on message. I think they've all been really inspired by the chainsaw idea, cutting your way to a better economy and eventually faster growth. What are your thoughts? I don't understand that. What don't you understand about it? I'm here to answer questions.

Okay. So what turns the J in our case? Please. The idea that public sector spending, government spending, has been this huge fake force of hiring and employment in the economy. And when you reverse it, the private sector is no longer crowded out and has the ability to come in and fill those holes. You either believe in that or you don't.

These people believe in that. It reduces the deficit if Doge is able to find $2 trillion in savings, which is their stated goal. And ultimately, it should have the salient effect of reducing the amount of interest that we're paying on all the government debt. So when you hear them say we're focused on not the stock market, the 10-year treasury, that's what they mean. They'd like to see a three-handle because the United States becomes a better credit

in the eyes of the rest of the world. Okay. Well, if there was a recession coming, and there might be, I can't see the future, but if the market was actually worried about a recession, I think that credit spreads would be way wider than they currently are. I think that the 10-year would be at, I don't know, with the three handle, as you mentioned, not at 4.3. And I think Bitcoin would be at, I don't know, 40,000.

Nobody is pricing in a recession right now. We're at 21 times forward earnings and the economists on Wall Street are saying, we had a 20% expectation for recession, now it's 30%. Nobody's saying 100%. They were saying that in 2022. So you're right. Nobody and nothing is pricing in a recession. What's being priced in right now is maybe an earnings recession for parts of the market, slower economic growth. I totally agree with you.

So I am, again, with the obvious caveat that who the knows this could change tomorrow, this could get a lot worse. I think that everyone is in agreement that tariffs are bad, that there will be an economic slowdown, that earnings will get hit, but I think there's a big difference between a slowdown and a contraction. I'm sorry, chat, I am not endorsing the J-curve idea. I am not. Sounded like it. You did a pretty good job. People are saying MAGA Josh. Are you out of your mind? This is not, I'm trying to explain to you guys.

Dude, if you can't take the smoke, don't be on YouTube, OK? Definitely don't be in the comments section. What's wrong with you? Chat, I just am trying to talk you through the answer to the question. Dude, guys, drag him. Drag his ass.

I'm just trying to help people understand the mentality behind the fiscal austerity and the slashing of government departments. Now they're all saying Josh for Doge, Maga Josh. Thank you. Thank you guys. All right. Let's talk about the stock market's reaction.

We've got a bunch of charts in here. So this is from Sentiment Trader and they say we are at a critical juncture. Maga Josh, eyes on me please. The NASDAQ. I'm sorry. They're telling me where's my chainsaw. All right, go ahead. The NASDAQ 100 the queue is closed below.

It's 200 day moving average for the first time in over a year. They say to watch the next two weeks because every time it's lost, it's 200 day after an extended run and suffered at least a three and a half percent draw down within the next two weeks, it led to a bear market. And I have bad news for you. That's what just happened. So chart table on please. So on the left, these are once the Nasdaq 100 crossblows 200 day after a long period, after a long uptrend and then fell at least 5% then over the next year there was a bear market. So again, what are the dates on the right? Those are times when it didn't lead to a bear market.

When you had a, when you, when you did not have a drawdown greater than 3% over the next two weeks after it broke the 200 day. So we'll see. So we're on watch. We're on bear market watch according to this chart. Again, I think that they would be the first to say pass is not pro. Like, don't take this. This is not set in stone, but it's interesting. So all right, you've got, you've got, I made a chart XLP over XLY and we know the problems with XLY. It's 50% Tesla and Amazon.

Well, not anymore. But this thing is ripping, not what you want to see. And also if you equate it, also not what you want to see. Consumer staples are in fact ripping against discretionary. Remember this is the most bullish chart in the world, not so bullish anymore. I thought this was interesting. Look how fast that reversal. How would you even trade? You could not have made this trade. Very fast. So let me do a teaser of my own for later in the show because I'm going to talk about how things, how quickly things happen. Now, if you were to, if somebody were

to tell you, Hey, this could be a quick sell off, you would probably say, all right, I'm going to hide out in like mega cap stocks. I'm definitely not going to go into the equal weight garbage. That didn't work. Wrong again. Try it out, please. So in this sell off, the equal weight has outperformed the cap weight by quite a bit, but also equally as interesting, it's not happening in the most of 2000. So small caps are in fact getting smoked relative to the price weighted index or the cap index. We talked to Tom about small caps.

That's one of the things that he's gotten pretty wrong this year. I think he went into the year with the idea that small caps could outperform. I forget his rationale for why, but he's like, a lot of times if he's wrong about something, he'll be like, here's why I was wrong. He still doesn't understand why small caps look as bad as they do. And I don't think I do either. It's just this weird thing. They're not heavily tech, and tech seems to be the epicenter of the sell-off. So why are they clowning the Russell like this?

I don't have the answer. It's odd. All right. So good news, finally, for diversified investors. If you are not all in tech, if you are not all in stocks, Mike Zaccardi tweeted, the ag, which is bonds, had its best day relative to the stock market in 25 years, which is pretty nuts. And heaven forbid you own international stocks.

Well, this chart from Danny Kersh shows that international developed relative to the past 25 years. It's the biggest outperformance we've seen ever at this point in the year. Not in my parlay, Josh, who saw this one coming? Wait a minute. This is developed. It's divided by spy, divided by spy divided by or whatever. It's a difference, whatever.

Okay. Yeah. So remember I asked the question, this was a buy signal for international stocks. Remember I asked the question last fall, it's like what could conceivably happen that would ever give you a positive year for developed international stocks where the US market doesn't participate? I guess I figured it out.

Isolationism and productionism. Again. Afterward. This is investing, man. Like this is the shit, what's risk? It's what you don't see coming Who could have seen this coming? Not me Not me. I wouldn't have guessed it

Nobody would have it's crazy Yeah It's and it's really interesting to watch like Germany Reacting so that that shit JD Vance did there where he basically came out and said, you guys are under spending on defense. You want us to pick up the tab and you want to continue this Ukraine shit forever to protect yourselves and we're just not going to play along. And within a week, they were in German parliament talking about like deficit spending to build

their own weaponry. Like that's it's momentous stuff that's happening and in England they've got defense companies and there's an Italian one. I talked about this stuff with Nicholas yesterday but like there's a big mentality shift there too just like there is here and it's resulting in those stocks being bid and who could have honestly foreseen all of a sudden people want to buy developed Europe? Okay.

I mean, I guess that's what we're doing now. So, so back to you, Mac and Josh. All right. Panic selling. I came across this and I thought to myself, there are probably millions of people who feel this way. I'm going to read it to you. This is from Reddit.

I panic sold, been investing for three to four years now. So I'm assuming it's somebody relatively young, mostly in VOO and Nvidia with a sprinkle of BTC. Playing it like Buffett. I like it. Never cared about red days or green days, didn't bother following the market, news or politics. The algorithm is annihilating me.

Everywhere I look online is Trump did this, Elmo did what, that's what people call Elon to not get blocked. Tariffs tomorrow, tariffs next month. I still stayed the course until I watched $20,000 in unrealized gains evaporate before my eyes in a matter of days. I sold every single thing. So far, it helped me dodge an additional $20,000 to $30,000 loss.

Holding a cash position now until I figure out my next move is, while the majority of people are parroting, you can't time the market, timing is better than timing. DCA, hold, etc. I'm more concerned about the future of America. The money comes and goes, but I don't know if I'm being overly dramatic in thinking this is going to be a pivotal event in the power dynamic of the world. America is alienating itself from its longtime allies while siding with literal terrorists. All the while, I live in a rural red state and everybody is loving Trump around me.

I've never followed news or politics, but it's all my algorithm feeds me now. So basically the guy's like, I might have to block all in politics, all news, all stock market updates to keep my sanity. And I said, you know what? There's probably 10 or 20 million people right now going through some version of exactly that. Like, the cognitive dissonance and like, you know, if their political leaning is centrist or left, they can't f**king take it.

Like, wait, we're rounding up Canadians? Like they can't process it and as a result, they can't hold stocks. They can't feel like we're in this much risk for our safety, and then simultaneously take financial risk in the market. I don't know. You think 10 or 20 million people is too many? It's a country of 350 million, not everybody's an adult,

but I think that's gotta be a big chunk of people right now. Oh yeah. And that, to me, goes part of the way toward explaining the speed with which we de-risked. On Halftime Today, Scott Wapner had this piece of research about what people are doing in their 401ks. They're f**king selling stocks and buying bonds.

No, it's data. It's data. The data is saying that people are more active than maybe since the pandemic in the last, I forget what it was, one week, two weeks, and they're liquidating equity mutual funds and buying bond funds in their 401ks at very high levels. Not everyone, but an elevated amount of people. And when I come across something like this,

that's exactly what it is. I don't think the average 401k investor pays attention to the stock market every day. But politics, it's inescapable. Even if you don't watch CNN or Fox or MSNBC, it's all over your Facebook. And your friends are talking about nothing but, did you hear what Trump said? Did you hear what Elon did? So we really, I think we have like the beginnings of an epidemic of people making portfolio errors because the political situation is so psychically damaging to them.

I don't think it's won its course. No, it's only just begun, unfortunately. No, I'm not saying where the market is going, but remember a couple of weeks ago, we were looking at the chart of AAII bulls bears, and there have never been this many bears this close to the highs? You're 100% right. There is another layer of economic anxiety. If the market was selling off because earnings missed, nobody would give a shit but not to this extent.

No way. Nobody would care. This is people who are concerned for their own survival. Do I have a job? Is my company going to chainsaw me? The company I work for does a lot of business with the federal government. And did you hear about those guys down the street? They just had all their contracts canceled.

That's what I think is going on here. I think it's maybe so my point is it might not all be irrational to these people. I don't think it's irrational. I think it's a confluence of factors. Number one, it's been an up and it's right market the last two years. We had 20% gains in 2023, 20% gains in 2024 in the face of a lot of economic uncertainty. In 2022, at the end, 100% chance of recession, right? Wrong, 23, 20% gain. 24, 20% gain. You had economists, strategists, everyone was bullish and we got the it's it's just like a Jarring it's unexpected and this is what happens when the market is reminded of like oh there are risks risk

get risk gets repriced really quickly and On balance assuming we don't get a deeper session, which I don't think we will I don't like to see anybody lose money But I think in the long run this is healthy and way better than the inverse if we started the year with a 20% gain In the first three months, I think that would be much more worrisome than what we're seeing now. So, Todd's own does great work on inverse volume and what's going on there.

And this is a good sign. People are starting to buy the shit out of these inverse ETFs, which listen, I'm not saying that we're at a bottom or near bottom. We might be, we might not be, who knows, but you have to have this sort of level of fear before we do get to a bottom, whether that's tomorrow or next month or next quarter, who knows. So they like, whether you think these buyers are speculators or people trying to hedge alongside exposure,

or obviously it's probably both, doesn't matter. You, I do agree. You need to see them get super active shorting the market. Yeah. Okay. Tech flows are now negative. They've been positive forever. Oh my God. Look at this. Forever.

People are selling tech stocks again. It just in through the- Do they know about AI? AI is not going to save them, Josh. Through the lens of sentiment, you need to get a washout. Not saying we're washing out yet, but we're in the process of it. Semis, next chart please. Creamed. Creamed. Leading the outflows. This is not a bullish chart, even though the lines are going up,

guys. This is the amount of money being ripped out of the ETF. So Semis, I guess, is shorthand for they're selling NVIDIA and Broadcom. That's wild. Well, I'm with you. It's constructive. If you're going to panic, panic early. And that's who these people are. These are the panicers and you know they're

doing look they probably had too much exposure to the theme and like one of the big memes going around on Wall Street and in the media this week is that it's the pod shops are blowing up or de-risking I should say. So the story today was about Millennium. Supposedly they had a trading desk and they have all these different pods within the larger hedge fund and each one of these pods is doing its own thing. It's got a small amount of equity capital and so what they do to amplify the returns of the strategy is they use leverage. That's fine, but when a strategy goes against them, they have to delever really fast in order to stay

alive. And you had a lot of people riding the same stocks. You had a lot of people in this momentum trade. You think about like the Palantir, Robinhood, Coinbase, Nvidia segment of this market. Murdered. Murdered. Gone. And Rethro read it in there.

Like these are names that people had been riding with a ton of leverage and they got to de-risk fast. So on the one hand, here's the argument I'm having in my head. On the one hand, I believe that there will be a slowdown. I don't believe that there will be a deep recession, maybe a recession, maybe, maybe not. I do think that ultimately Trump cares about the market. I don't believe him, even though credit to them, they're being consistent in their message. So to me, this smells like, I don't know, 10 to 15. Could it be 20?

Yeah, sure. But I ultimately think that this will be one of a long list of reasons to sell. And I think the muscle memory of market participants buying the dip, even though this is different in terms of the emotions that come with it, I still think that muscle memory is in place. And so, okay, so that's on the one hand. But then on the other hand, it's like, well, if there is a slowdown and if earnings do contract, then why the f*** are we trading at 23 times earnings?

Right? So like- Well, you won't be. Well, so that's like the push and pull that I'm having in my head right now. Yeah. That's one of the big risk factors. We're gonna go from $65 in earnings this past quarter

that we just got the reports from to Q1. The consensus is now at $60. Does that have risk down to $58? Maybe. They're not going to keep stocks at a 21 multiple if that's where this is going. Now, a big part of that drop off, we should say, is the growth rate of the MAG-7 effectively being cut in half. And people have known that that would be the case this year. Obviously, 2024 was this massive AI-related build-out year, and that wasn't going to stay at full steam for years and years and years on end. So some of that fall-off in growth is a result of what people already saw coming. What's not in that consensus is 20 more companies saying what Delta just said, which is like noticeable consumer slowdown.

Ed Bastion very pointedly said, I don't see a recession. Yes, he did. Right? But he also said it's a noticeable downshift in consumer Tickets being booked. So he said this morning Phil the bow on CNBC said do you get the feeling that we potentially are heading towards a recession to which he said quote I don't feel it as you just said we're growing four to eight percent It if it was a recession we'd be down ten percent

So I said, I'm not trying to be cavalier about the risk. I'm not a idiot. I see it, right? I understand that there's a slowdown, there's anxiety. I guess where I'm coming from is like, I don't think, and I don't want anybody to lose their job. I'm through the lens of the market. If we're up 20% and then 20% and we end up this, we end this year down 13%, in the grand scheme of things,

is that that big of a deal? Would anybody have not signed up for that three years ago? Down 13 plus bonds higher, plus international stocks higher? Everybody would say yes. Who says no? So let's just be a little bit sober about what's going on and where we're coming from. And I understand the anxiety. I feel it too. All right. Let's just do this real quick. On AI, last week, Tom Lee was talking about the thing that Kantrowitz was saying at the Hightower event. And we were like, wait, what? So I read Alex's Substack. And he said, a few weeks ago, I met with Evan Ratliff, a journalist who cloned

his voice with AI, attached it to an AI model and had to talk to friends, family, and even a therapist. Ratliff captured the experience in a podcast called Shell Game. And as he relayed the finer details to me in person I wasn't risking meeting his AI bot on zoom. He shocked me with one anecdote Rattliff says his voice bot conducted an interview with the tech CEO and the bot was able to better To obtain better information than he the human journalist could Before the call Rattliff prompted his AI clone with questions and instructed it to ask anything else potentially relevant

The tech CEO played along with the interview. He works in AI for Voicetech for what it's worth and gamely responded to the bots' questions. When Ratliff listened to the recording, he was surprised to find the CEO really opened up, quote, he was a little more forthcoming with the AI than he was with me. There's a lot of quality. You don't necessarily feel like there's someone there and you might be a little bit more intimate than you would have otherwise. That can be very valuable in an interview for a reporting project.

End quote. It's a magic trick. It's a magic trick. Go on, go on, Megajosh. I'm not that impressed. It's cool. It's cool. I get it.

I'm not that I'm not that impressed with that. It's a. I get it. I'm not that I'm not that impressive. That's a word calculator. If you're seeding it with questions in advance, then it's going to ask and or riff off those questions. You know, I think one of the what the nightmare risk to the market and the economy and civilization is that we do get a nasty recession and companies incorporate AI really quickly to preserve their bottom line and don't bring workers back. Dude, you think that shit's impressive?

In 1987, I would call one Chinese food restaurant and then I would call somebody's dad and I would make it like the dad ordered Chinese food and didn't go pick it up. And I would just let them have it out. And we would tape record that. That's like to me like that some of those calls I wish I still had a thing that could play cassette tapes. I would go rummaging through my attic for these tapes right now. Solid gold.

So much more impressive than oh I fed the AI some questions and then it asked the tech CEO those questions. What are we doing here? So I don't know. It just doesn't blow me away. It doesn't seem like that big a deal to me. Okay, so last week you were not, you don't believe in robots.

Now you don't believe in AI voice. No, I believe, believe in it. I'm just not that blown away, but I believe that it's happening. I just, like that anecdote, it's like, yeah, I assumed it could do that. But you're telling me that the CEO played along because the CEO works in AI voice. Yeah, I understand.

So it's like, all right, big deal. All right, chart on. Do that with a CEO who's not playing along and tell me if they really open up to the AI. They're not. Be like, what the hell is this? Is a computer interviewing me? All right, how many of these companies do you own?

I can't, well, I can't see that well. All right, you want the answer? Not enough. I'm so bullish on robots. Way more bullish than I am on chatbots. So for those of you who are listening, not watching, there's a great graphic from Bank of America Global Research that shows who makes a humanoid robot.

And apparently, like, who doesn't make the humanoid robot? There's like a hundred companies in here. Yeah. I mean, that tracks like there were 200 or 300 American automobile manufacturers in 1920. And then like by 1930, there were 10. And now there's two. But let me ask you this. Last week, you were like, these are not happening.

These humanoid robots are not coming into our homes. No, of course, eventually. I just don't think that's this year. So in response to people looking at the Tesla robots, that's not this year. And my point was not that we won't get them in our homes. My point was they will be way more prevalent in factories and I think hospitals. Prevalent. Prevalent. Prevalent. Prelevant. Prelevant.

Okay. The ubiquity of these robots I think will is inevitable but I don't think the home humanoid robot for a family is a 2025 story. We're already in March. Okay. I think like the more exciting thing about the robots is how they'll enable us to medically care for our boomers. And that's like, that's where you could immediately start making money with these things. If it's 26, whatever. My point is, it's coming. They're coming. All right. I'm going to make the case, this sounds toppy as shit, it's too late to sell. I'm talking about your individual stocks.

And I know that's not- We're going to clip this for Twitter and Instagram. No, listen. I know that's never the case and it's not actually true. But my point is, happens so fast and not that they can't go low, but if you didn't sell two weeks ago, don't sell today. Don't panic late. And I understand the index is only 10% off the highs, but under the surface for individual stocks is gnarly. It is bloody. It is gross. Chardam, please shout to Grant Hawkridge.

All right. 38% and this was as of yesterday, 38% of the S&P names are down 20% or more. Yeah, that's the bear market. 54% of mid-caps are down 20% or more, and 63% of small caps are down 20% or more. And if you look out to the hood and you chop it up, how many down 30, down 40, a lot, okay, a lot. And it happened really,

really fast. Allow me to present with you some very cherry pick data. I understand that, but I think it's emblematic of what we just lived through over the last 15 years in the bull market. So this data is starting in 2010, stipulated. Bespoke says, of the last 32 times that the SAP has opened down 1% and then fell another 1% from the open to the close, it has been up three months later, 31 of those 32 times. Chart on please. So again, this is only going back to 2010. I get it. They get it.

What they're showing is that- It's a lot of instances though. It's a lot. So again, they're showing the open and gap down 1% and another 1% of selling intraday to the close. Those aren't the days to sell, you're saying. So again, it's only been a bull market for 15 years, but the point is there have been instances like this.

And maybe you think that this is different. Maybe you think that the world is ending. Maybe you think that tariffs are going to cripple the economy. I don't see it that way. I could be wrong. I hope I'm not. But Jeff DeGraaff sees it my way. Jeff DeGraaff tweeted, equity is a cushion against default in the capital structure. When there are stress and equities, it impacts credit at the margin. When equities are weak, but credit is not, it's usually a sign of overreaction on the part of equity markets and this is one way that they're measuring it. I love that idea. If the bond market's not cracking, the stock market's not going to be the thing that makes it crack. It's vice versa. It

only works the other way, not this way. So if next week or the week after we see credit spreads blow out, I'll say something different. I'm going to slightly agree and slightly disagree. It's too late to panic sell, but we could have a bounce and then lower lows later. Totally. So for me, it's not too late to sell, but what it's definitely too late to do is this bullshit rotation trade. That you missed. Missed. Okay, so here's my big point. So if you're gonna sell, go to cash and shut up, I would not be a seller here and buying consumer staples. That's what I wanna say.

100%. Those stocks are expensive too. My big point, if there is a turnaround in language and tariffs and policies and whatever, the market is going to rip so fast, you're not going to know what happened. It's going to be dizzying. And I don't know if and when that happens. It might not.

It might, but it might happen from lower prices. But if it does and you're in cash, you're going to miss it. You're not going to get back in. You know, you're right. It's just like Argentina. So no, but do you agree? There's not going to be an all clear signal. If you go to cash, you're not getting back in. No, I think there's another leg down though.

Fine. I'm fine. I'm not saying that this is the bottom. I'm surprised there hasn't been a bounce yet, actually. It's like not a great sign. And I also would say, listen, I get, I'm not being cavalier about risk. Bad should happen under the 200 day moving average. That's where we are. Crashes happen from oversold conditions. I hate to use the C word again, I'm not being cavalier about risk. Bad shit happens under the 200-day moving average. That's where we are. Crashes happen from oversold conditions. I hate to use the C word. So I'm not ruling it out, but for goodness sakes, and fine, if you're gonna sell, fine,

have a re-entry plan. If we start hitting circuit breakers and shit, if we have one of those days, I'm buying. I was about to say, if that happens, I'm in. I'm getting more. I wanna buy the tariff circuit breaker. That's what I want, actually. That's what I want for Christmas.

All right. Mystery chart. This is an industry group. So it's within a sector. I know what this is. You do? I'm the smartest f***ing man. No clues.

No clues. These are stocks. All right, wait. These are stocks, six separate stocks, and this is year to date. Hit me. It's Blackstone, Aries, Apollo. Oh my God, you're the smartest man alive. I'm so proud of you. This might be your all-time best performance on mystery charts. All right. In fairness, I look at this-

I don't think I could have done this. I look at these stocks a lot and I saw the Financial Times had a similar chart up. So- Okay. But I might've gotten it anyway because I do look at these stocks. Wait, what's BN? Is that Dean? BN? I don't know what that is.

Is that a typo? What's BN? No, it's a stock. Oh, that's Brookfield. That's Brookfield. Oh, Brookfield. Okay. Blackstone is BX, Blue Owl, which is private credit.

These stocks are down between 13 and 25%. KKR, Apollo, Aries, Blue Owl, Blackstone. Viom. Dude, that's really fast. They came into the year roaring. That's a really fast repricing of risk, like negative 20% for some of the biggest private equity companies. I think this is because a couple of factors.

My personal opinion is people are not excited to allocate toward illiquid investments when the VIX is spiking. It's just like not the first instinct you would have is how can I lock my money up? So that possibly pushes off this democratization, wealth management money ways that they're all fighting for. You don't buy that? These companies are going to grow their fee related earnings 10 10 to 15 percent for the next five years compounded Okay, I also think the lack of exits when you have stock market volatility like this, you know, what else isn't happening?

IPOs private equity retread IPOs You're not bringing anybody public and getting liquid and that these stocks Require some liquidity. You can't just invest in things and hold them forever. You need to turn the money. So I think that's what's going on there. Would you buy them? I, I own them. Yeah. Yes. In summation, I am not naive to the risks of the market is facing the

economy is facing, but I think that, uh, I think that the reintroduction of risk to risk markets is generally a good thing and we're early, but this too shall pass and stay with it. Don't do anything that you can't undo. Okay. I think we'll leave it there. Guys, this has been a supersized episode of What Are Your Thoughts? We really appreciate everybody who came for the live.

I want to let you know next Tuesday, Michael and I will be in Argentina. Michael and I will be in Miami beach for the first ever future proof citywide. Therefore there will be no, what are your thoughts? But we will have a live version of the compound and friends which is in part what we'll be working on while we're down there. Animal spirits is up tomorrow and you guys will also get an episode out next week, I'm

told. Okay. Um, we also have new Duncan and Ben on Thursday, ask the compound and an all new the compound and friends Friday morning. If you want to know who the guest is, we put that out to the super fans and the way you can join their ranks is by subscribing to the Compound Insider. And I believe we have a link to do that in the show notes, both on podcast and YouTube. So please, it's a free subscription and we give you the goods in advance. So if you love the show, you're going to love that.

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