The Compound and Friends - Scott Galloway on Building Wealth, Is Apple in Trouble, Geopolitical Risks

Episode Date: April 16, 2024

On this TCAF Tuesday, Join Josh Brown and Michael Batnick for a conversation with Professor Scott Galloway, author of the new book The Algebra of Wealth. Then, at 41:11, hear an all-new episode of What Are Your Thoughts with Josh and Michael! Thanks to Public for sponsoring this episode! Visit https://public.com/ to learn more!  Buy your ticket for TCAF in LA  Instagram: https://instagram.com/thecompoundnews Twitter: https://twitter.com/thecompoundnews Public Disclosure: Options are not suitable for all investors and carry significant risk. Option investors can rapidly lose the value of their investment in a short period of time and incur permanent loss by expiration date. Certain complex options strategies carry additional risk. There are additional costs associated with option strategies that call for multiple purchases and sales of options, such as spreads, straddles, among others, as compared with a single option trade. Prior to buying or selling an option, investors must read and understand the “Characteristics and Risks of Standardized Options”, also known as the options disclosure document (ODD) which can be found at: www.theocc.com/company-information/documents-and-archives/options-disclosure-document Supporting documentation for any claims will be furnished upon request. If you are enrolled in our Options Order Flow Rebate Program, The exact rebate will depend on the specifics of each transaction and will be previewed for you prior to submitting each trade. This rebate will be deducted from your cost to place the trade and will be reflected on your trade confirmation. Order flow rebates are not available for non-options transactions. To learn more, see our Fee Schedule here: https://public.com/disclosures/fee-schedule, Order Flow Rebate FAQ, and Order Flow Rebate Program Terms & Conditions. Options can be risky and are not suitable for all investors. See the Characteristics and Risks of Standardized Options to learn more. 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 Open to the Public Investing, Inc., member FINRA & SIPC. See https://public.com/#disclosures-main for more information. Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Ladies and gentlemen, welcome to the Compound and Friends. Tonight's show is brought to you by Public, public.com and the Public Trading app. Check out public.com if you want to literally earn money for placing your options trades. Listen, you're gonna do options trading, you might as well get something back for it. There are no commissions or per contract fees

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Options are not suitable for all investors and carry significant risk. Full disclosures in the description of this podcast. US members only. All right. Tonight's an awesome show. Scott Galloway. So you guys probably know who he is, or you've seen him on TV, or you've heard his name. He is an author. He's a professor. He's a marketing guru. He's a tech investor. And he just has a way of framing real world, big picture things that people just, they just find his

explanations for things to be fascinating. Great writer, great speaker. I've known Scott a long time. We've had him at our events live. I've been on his show. This is his first appearance, believe it or not, on The Compound. So Michael and I got to talk to him about his new book, The Algebra of Wealth, right in our wheelhouse. Why did he write it? What will the reader get out of it, et cetera? I think you're really going to love this conversation that we had with Scott Galloway, and that's coming up first. And then after, it's an all new edition of What Are Your Thoughts? We take a look at Apple, which is now in a 15% drawdown. Is it time to get worried? We take a look at Apple, which is now in a 15% drawdown. Is it time to get worried? We take a look at how markets historically have reacted to various geopolitical events

in light of what went on over the weekend. We take a look at Goldman Sachs' earnings, Bank of America reported, JP Morgan. So there's like a lot of great stuff in here, just an overflowing show. I think you're really going to have fun listening to both. They're coming at you right now. Without any further ado, I'll send you to John and Duncan. They're going to hook you up. 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, we are live from the compound with Professor Scott Galloway. Professor Galloway is a professor of marketing at the NYU Stern School of Business, best-selling author, founder, podcast host, raconteur. Scott, is that too much? I keep going. Or is it just right? I'm enjoying this. Keep going.

You like it? Okay. Scott was ranked one of the 50 best business school professors. He's founded multiple companies, including L2, Red Envelope, Profit, and has served on the boards of Eddie Bauer, the New York Times, and others. Scott, welcome to Live from the Compound. We're so happy to have you with us today. Josh, Michael, it's good to be with you. This is great. I wanted to say congratulations on the new book. And I know you get wanted to say congratulations on the new book. And I know you get a little bit nervous on the cusp of releasing a book because you told me a few minutes ago.

So we'll talk a little bit about that. But the book is called The Algebra of Wealth. And it sounds like it's right in Michael and I, right now, our wheelhouse. When does the book come out and who is it for? It comes out next week and it's for our younger selves. It's for, uh, let me be clear who it's not for. It's not for someone who's struggling with their finances and it's not a Susie Orman, you know, or I forget the guy's name, Pacman, uh, cut up your credit cards, just pay with

cash. This is for someone who has their act together, feels like they are, or they're going to make a good living. And it's sort of based off the research that shows that, have you seen that research, Josh, that you are kind of the average of your five closest friends? You become the same body mass, the same political affiliation, the same economics, I mean, everything, the same sports. But where there's greater variance is even if you make the same amount of money, someone will end up very wealthy, someone will end up very wealthy and someone will end up very not wealthy. And I tried to look at what are the behaviors and

the strategies of people who don't make an extraordinary amount of money, but end up financially secure. Because there are strategies and activities. So who it's really for, it's for young people who feel like they're making decent money. Maybe in some day they'll make great money, but they want to know that they're going to be economically secure. So when you've been very successful in media, in marketing, in technology investing, content creation, academia, what made you want to write a book about wealth? Is there something specific about the timing of the book? Is there something going on in your life that made you spend a lot of time thinking

about the concept of what are the things that wealthy people have in common or the people who end up financially secure? What brought this on? Well, what brought it on is I think a lot about young men. And I wish I had known. I've always made a lot of money, but I ended up, because of some bad decisions, broke at 42 or nearly broke. And if I had just implemented a few basic kind of character-building strategies, I wouldn't have had that kind of anxiety. Now, I recovered well, but it's really sort of advice to my 25-year-old self. And I believe that America becomes more like itself every day. I think America is a loving, generous place for people with money. I think it's a rapacious, violent place for people without money. And while we all like to think that money and happiness aren't correlated, there's a ton of research showing they are. It is. And I think a young person has an imperative to be really thoughtful about financial literacy and developing a series of

skills and character traits that will ensure that if they don't have a bestseller or a hit album or sell their company for a ton of money or happen to invest in NVIDIA when it's at a buck, that they're still going to have some reasonable semblance of financial security. So this is sort of advice to my 25-year-old self. Scott, to that end, I'm curious how your thoughts on money have changed over time. I know that I've read the algebra of wealth, I'm sorry, of happiness, which I loved. Thank you. You come from humble beginnings, but I think one of the reasons why you've caught on with America is because you're very open and transparent about who you are, where you've come from. And right now, you're a wealthy man, and you weren't always.

So do you still view yourself as the person with nothing? Or do you think like, holy shit, I'm rich, and this is pretty cool? I mean, the answer is yes. I still have tremendous financial anxiety. I mean the answer is yes I still have tremendous financial anxiety I went out to dinner with Josh and Barry and I feel a need to like tell them what I have and get their advice I'm worried every day that I'm going to go back to when I was 42 I had made a shit ton of money up to that point I had taken a company public but because of divorce because of not being diversified at all because of you know not out of control

consumption, but decent consumption, and a belief that I was always going to have like the big, big win. When my first son was born, you know, you're supposed to see bright lights and hear angels singing. I was so sick and nauseous, and they thought it was because of the experience of childbirth, and that's part of it. But what really made me nauseous was I felt nothing but terror because all of a sudden I was responsible for someone else, and I was failing as a father the moment this thing came into the world because I hadn't made just some simple decisions and strategies to put myself on firmer financial footing. And I was not only failing myself,

I was now failing a son. And it was just so humiliating and upsetting. And I thought, okay, I got to get really serious about financial security. And what I tell people, a lot of people say, well, I'm in my 40s. It's too late for me. I'm like, no, it's not. You're going to live to be 90. You're going to live another 50 years. You might have to spend more time catching up. You might have to implement these strategies more severely. But for me, it's, look, I'm constantly insecure about money. What I've done with my money now is I've realized, and this is hard to do, once you have a level of economic security, what you realize is money is the ink in your pen. It can write new chapters. It can make certain chapters burn brighter, but it's not your story.

And so for me, money is a means. And the ends is it takes away a lot of anxiety for me so I can spend a lot of time with my loved ones and do amazing things with people I care about and cement and deepen those relationships. And it also gives me the chance to give away money and get involved in things I'm passionate about, which for me is consumption

because it makes me feel masculine. It makes me feel like a baller. So it's not even philanthropy. So I'm an atheist. I think at some point I'm going to look into my kids' eyes and know our relationship is coming to an end. I hit my quote unquote number five years ago and I decided above that number, I was not going to hoard wealth.

I was either going to spend it or give it away. So I'm just squeezing the shit out of this lemon called life. I'm doing amazing things. I'm giving a shit ton of money away and I'm having a great time. I'm trying to pivot into the notion that money is the means. It's not the ends. And for most of my life, it was both the means and the ends. So I'm trying to get off that hamster wheel. So Scott, one of the things that you said just now really resonated with me because I had a similar experience. I think your moment that you described was probably related to the dot-com crash in that era. And mine was, mine was during the financial crisis. I have, I was having my second child

in March, in the summer of 2009. And that was when I was at my second child in March, in the summer of 2009. And that was when I was at my personal rock bottom. I had been through 2008. I already had one child. I already had a mortgage I couldn't pay and a house I couldn't afford. So I was, that's where I was. But I feel like that was a catalyst that moment. Like, all right, get serious.

And within a year of, of going, I fell asleep in the delivery room on the floor. That's how stressed out I was when my second, when my son was born, the nurses told my wife, they had never seen anything like it. Um, so I think I had like a month of sleepless nights going into the, the actual delivery. Um, but I need in hindsight, I needed that. Do you feel the same way? Like you needed to get that kick in the ass and not everybody goes on to achieve great things without having to battle back from somewhere dark?

Because that's the way I feel. Yeah, I needed it. And it sounds like, by the way, it happened to me twice. I was supposedly worth $40 or $60 million on paper in 99. My stake in Red Envelope, we were going public. Foreign Quatrone worth $40 or $60 million on paper in 99. My stake in Red Envelope, we were going public. Foreign Coctron from Credit Suisse was taken as public. I was looking at jets. By March of 2000, I had negative net worth. 2007, clawed my way back,

worked my ass off. Financial security, I thought on paper, boom, I'm broke again. off financial security. I thought on paper, boom, I'm broke again. And that was the first, really one of the first big lessons was just the power, all caps diversification. The moment you have assets, start diversifying. Because Josh, what I've come to recognize is I know the brightest minds in the world in finance. And with respect to which one investment will go up, nobody knows. in the world in finance, and with respect to which one investment will go up, nobody knows. And the easiest way to get risk-free return is to diversify. And if I'd just done a little bit of diversification at a younger age, I would have been in just a much, much better position. I wanted to ask you, there've been several books written about wealth coming from the perspective of very wealthy people, hedge fund managers, private equity CEOs,

celebrities. They don't always hit the mark for ordinary readers for obvious reasons. It sounds like you're aiming for the middle to upper-class person, which I think is smart because there's a different type of help needed at a lower income level, of course. But how will your book be different from some of the ones written from the perspective of other wealthy investors? How are you thinking about the person who's going to be reading it? Well, I tried to distill it down, just as I did with The Algebra of Happiness. I tried to distill it down to an equation that people can hold on to and start applying fairly easily in their life. And I'll give you the equation, and I would love your and Michael's pushback feedback. So the first is focus. And your

20s is for figuring out what your talent is. And the worst advice I think kids get is every graduation speech telling them to follow their passion. If someone tells you to follow your passion, it means they're already rich. And typically the person telling you to follow your passion made their billions in iron ore smelting. Your job is to find your talent and ideally find your talent and commit to something that has a 90-plus percent employment rate. What do I mean by that? Well, I want to be a DJ and I'm really good at it. Well, okay. Unless you're in the top 0.1% of being a DJ, a restaurateur, a nightclub owner, an artist, an actor, 180,000 people in SAG-AFTRA. These are the best actors and people in film production in the world. 87% of them make less

than $23,000 a year and don't qualify for health insurance. And what I suggest is that if you can find something that you're good at and could be great at it and commit to becoming great at it, that if it's in a 90 plus percent employment sector, which is 95% of the industry, being great at something and the economic accoutrements, the relevance will make you passionate about whatever it is. So as you get older, and Josh and Michael, I don't know your situation, but I'm super passionate about taking care of my kids. I am massively, I get huge joy from being able to economically take care of my 93-year-old father.

I love, I am passionate about not having the economic stress that I had for the first five decades of my life. That makes me passionate about what I do. And so what I tell kids in their 20s, it's about focus and finding your talent in an industry that has a strong employment base where you just need to be in the top half, much less the top 10% to make a good living. The next thing is stoicism. much less the top 10% to make a good living. The next thing is stoicism. It's kind of an incorrect word, but recognize that as Morgan Housel says, no one is thinking about your stuff as much as you are. And to try and recognize that character and friendships come from discipline and develop a savings muscle. I'm not suggesting that you be totally frugal in your 20s, youth is fleeting, go to Coachella,

pick up a backpack and travel, but try to at least develop a savings muscle where 100 bucks a month, 200 bucks a month, you just get used to the notion that you make as much as you spend and maybe a little bit more and just put away a little bit of money. And obviously there's the lessons about compound interest,

but even more powerful than that, you want to develop a savings muscle such that when you get to your 30s and after you found your focus and your talent and you start making real money, that muscle memory is right there. I know how to save money. I've done this before. People underestimate how hard it is because keep in mind, there's a conspiracy being prosecuted by the most talented well-resourced companies in the world to convince you at the exact moment you're vulnerable that an upgrade from economy to economy comfort is a good idea. That adding on that flourless chocolate cake from Balthasar to your order from Chipotle or from whatever it is, the juice guys, is a smart move to adding on, getting a second pair of on-running shoes for 20%. Everywhere conspires to soak you of every

piece of disposable income and more. So having the ability to separate your emotions and your need for gratification such that you can make more than you spend. It takes real stoicism and real discipline. The third thing is diversification. We talked about that. And then finally, recognizing the flaw in our species, because for 98% of our time on this planet, we haven't lived past 35, to just recognize how fast time will go. And just a little bit of discipline, a little bit of saving, a little bit of diversification. I mean, Josh and Michael, I don't know about you, I was 24 yesterday. And when my buddy, who I used to go to the beach with, was saying, I got to find money to max out my IRA Roth,

it was 2,000 bucks, and he was stressed. And I'm like, I remember saying to him these exact words, if 2,000 bucks means anything to me when I'm older, shoot me. But here's the thing, If $2,000 means anything to me when I'm older, shoot me. But here's the thing. 35 years on, that $2,000 and that $2,000 he kept putting away is literally several million dollars now. And I was too arrogant and stupid to recognize that I'm going to live another 50, 70, 80 years, and it's going to go by so fast. So just recognize the power of time. So I actually love all of those things, but I want to peel back the layers on one of them.

When somebody in their 20s, you say to them, look, it's going to go by fast, go to Coachella, do these things. I totally agree. And I find myself, I mean, I don't know why people ask me for advice given what a disaster my 20s were, but whatever. I try to, so they say like, well, how do I know when to live a little and when not to? So the example that I try to give people, I'm curious what you think or what Michael thinks, is focus on the stuff that you will only enjoy doing in your 20s and 30s. So leasing a BMW is stupid because you could always do that. You'll enjoy doing that in your 20s and 30s. So leasing a BMW is stupid because you could always do that. You'll

enjoy doing that in your 50s. You will not enjoy going to Coachella in your 50s unless you're friends with the band, right? So like the experiences that will be the best, like bachelor parties or things that you do with your friends before everyone's married, that's the stuff worth spending on. The things that you could always do later, that's the stuff that maybe you don't spend on. What do you think of that? What do you think about that framing? I think that's exactly right. And there's research. The research shows that we overestimate the happiness that things will give us. And we underestimate the happiness that experiences will give us. So by all means, save the money so you can go to whatever, Austin for a bachelor party.

Save the money so you can take a backpack and go with friends or a girlfriend to go to the Fringe Festival in Edinburgh, whatever it is. Also, just try and spend as much of your finite money on experiences with other people. One of the keys to success is that greatness is in the agency of others. One of the Google hiring managers said when we put out a product manager description, we get 200 resumes.

We limit it down to 20. And about 80% or 90% of the time, the one person who gets the job was referred internally and has an advocate internally. Your job in your 20s is to collect a set of allies and experiences that strengthen those alliances such that you're constantly put in a room of opportunities even when you're not in that room. And also, quite frankly, to find a really fantastic partner, a mate,

because you don't find a mate on Tinder, in my opinion. You don't find a mate on Zoom. You need to get out and you need to make mentors, friends, and find romantic partners in your 20s. So spend your money. I think just have a small clean place near work so you can focus on being at work. I think remote work is a disaster for young people. Try and really lean into the fact that, especially for men, that you have superior bone and muscle structure and this amazing thing called testosterone and get really f***ing strong. I think anyone under the age of 30 should be able to walk into any room and realize if shit got real, they could kill and eat everybody or outrun them. I would say really lean into your physical

fitness when you're young, really lean into experiences and really lean into environments where you're meeting and cementing relationships that'll carry you a lifetime. Don't buy things. You don't need things. Occasionally a little bit of peacocking, I get it. You're in your mating years. Spend money on experiences and solidifying and introducing yourself to new relationships. Scott, you mentioned that you hit your number five years ago. I'm curious, that number of yours, how many times- Michael wants to know the number. Yeah, what's your number? Now, how many times did you adjust that? And before I give the mic back to you, I think that the hedonic treadmill doesn't have to be a bad thing.

No, it can be. If you're obsessed with money and it's your only metric for defining who you are and it's never enough, that's horrendous. That's not a good thing. defining who you are and it's never enough. That's horrendous. That's not a good thing. But if you want more for the sake of not just dollars, but progress and growth, I don't think that's a bad thing. I think that benefits society. So how do you think about your number? Where did that come from? And just curious to hear your thoughts on that. So in reverse order, I wanted a number where with 3% to 4% post-tax on my asset base, I could do absolutely everything I wanted and never worry about money and even have money to give away.

And by the way, my number changed. When I was in my 20s or 30s, if someone had said, you're going to be worth $10 million, I would have hit that bid right away. My number as I got older and my tastes changed in kids and I started moving to high-cost areas, my number substantially increased. Now, in terms of the hedonic treadmill, what you're talking about, and I try to be as transparent. I didn't write a book about what should be. I wrote a book about what I think is. And it's not a Hallmark Channel book. When I was from the age of 25 to 45, 47, I did nothing but work. I did nothing but work. I was totally obsessed, is probably the right word,

with establishing economic security. I grew up without a lot of money. I wasn't able to take care of my mom in the manner that I'd hoped to, which I found humiliating and emasculating. I noticed that fairly uninteresting guys were getting really interesting high-character women if they had a lot of money, and interesting high-character guys were not getting great partners if they didn't have money. It just, for me, in America, I figured out very early the road to the things I want involved money in a lot of it. I did nothing but work for the better part of two and a half decades. It cost me my hair. It was emotionally and mentally very taxing. It cost me my marriage, Michael, and it was worth it. My life now is full of balance, full of relationships, full of citizenship because of that sacrifice. And what I tell young people is you can have it all,

you just can't have it all at once. And if you want to move to a lower cost neighborhood and coach Little League and live to work as opposed to work to live, and you don't need that kind of capital, more power to you, my brothers and sisters. But where I see a disconnect is when I see young people talking about, I say, what kind of life do you expect to lead? What does that mean economically? Where do you expect to lead? What kind of life do you expect to lead? Okay, realistically, how much money is that? And then they use the word balance in their priorities. I'm like, okay, boss, if you want balance, move to a suburb of St. Louis and you and your wife, if you work, if you, you know, she's, you're a nurse, she's a chiropractor, you make $120,000 a year, $150,000, you're going to have a nice life. You want to live in New York and have a nice place and have two kids?

You need to make a million bucks a year, minimum. And to make a million bucks a year in this economy, it means you need to be outstanding and work your ass off. It means you need to be outstanding and work your ass off. So what the book is about and what I try to have this conversation is you just have a sober conversation. The majority of young people I know expect a lifestyle that involves a massive tradeoff in terms of time and energy and sacrifice. They don't all know it. They know what they want.

They don't all fully understand what it's going to take to get there. And there's an even scarier part of this, which I'm sure you go into in the book. But the even scarier part is you might do all the right things and not end up in that situation where you can earn something insane, like seven figures a year. So then you, so then there's a whole other branch of the tree where you go off in this direction of, I sacrificed everything and I'm still not happy. But you talked about something. You said that moment when 2008, when you got beamed in the face.

I've been beamed in the face. I call it shot in the face twice. The key to success is your ability to mourn and move on. And I know a lot of people, they know mostly success their whole life. They have a financial disaster, a divorce, a business failure, and they never recover. They're stuck. That's right. They lose their mojo.

They get paralyzed. Nothing's ever good enough to get another job. Or they want to raise money for their new fund, but they can't quite set up the meetings. Or they keep waiting to interview. Or they don't want to make the cold calls. They don't want to do the hard work. They don't want to go out and start dating again. And they just go into stasis. So part of success is the ability, again, to get punched in the gut, get off the floor,

and take the eight count, take some time, and then go out swinging again. But it's been, you know, go out, go out swinging again. But it's been, I mean, the thing that's really rewarding is, you know, is, is building something with somebody and then enjoying the money for, you know, relationships. Scott, I'd be curious to hear your take on the following. I grew up with, I was fine. I was, I had everything I need, but we were not like Aruba people. I was fine. I had everything I need, but we were not like Aruba people. I was like a train ride to DC or a car ride to Boston, more accurately. And then when I graduated college, I was terrible. And so the economic security that I have now, I can't believe it because I never thought I'd be making any money. And so I think that there's a common thread where that people that don't start off life with money and weren't given anything appreciate it so much more later in life, not a controversial

take. So I'd be curious with that said, how do you balance giving your kids everything that you probably didn't have growing up and, but not giving them too much to spoil them? Michael, the, the honest answer is I have no idea. We'll find out in 10 years. It's something I think about every day. It's something that other parents who are blessed like me talk about all the time, because here's the thing. If I had what my kids have, I wouldn't have what I have. Exactly. If I had what my kids have, the only two things I'd have in my life are a Range Rover and a cocaine habit. I was lazy. I did want to change the world.

I didn't feel a need to be relevant. I didn't feel a need to have a purpose. I'm not naturally a hard worker. I did it because I was raised by a single mother, and there were real moments of stress that I never wanted to experience again. And my kids don't have that stress. So, you know, I do the basics. I have them play competitive sports. I have them do chores. I try to link the value of money, you know, on the airlines with a let you, I stick them in coach. I mean, I just, but I don't know. I'm all ears on how to instill a sense of grit and appreciation and drive in that fire. Because the reality is the reason I have it is because I didn't,

I didn't have a lot. So it's something I think about a lot. Scott, I think there's two reasons you have it. The first, which you just explained is absolutely true. But the second reason, and maybe beyond the scope of what we're talking about today, but worth bringing up is you did figure out something that you can do better than 99% of people in the world. Like you found this thing that's a perfect fit for the lifestyle you want to live, the talents that you were born with, and the things that you want to work on and get better at. You're a brilliant writer and speaker and thinker and communicator. So from my perspective, the thing that we all want to focus on with our children, whether we're giving them a lot or not, is helping them to that moment where they realize, oh shit, I'm really good at this. I can not only make a living, but enjoy it.

So I think that that is often the answer for the conundrum of, what if I'm giving my kids too much? Yeah, so you bring up a couple of things there. First off, thank you for the generous words, but I was asked on the last podcast, I was on what skill would you give a kid? It would be programming or Mandarin or critical thinking.

Hands down, the skill I would want my kids to inherit that has provided an extraordinary living for me is storytelling. The ability to take external data and then communicate it, whether it's the written word or PowerPoint or on a podcast or through humor, it's going to help you professionally and personally. If there was something I could, and I inherited it from my father. The other thing you have to realize is that a lot of your success and a lot of your failure is not your fault.

If I'd been born a man in 1920s Germany, I would have been dead on some Russian field somewhere. Being born in the 60s, a white heterosexual male in California gave me unfair advantage. I got free accessible education, UCLA 76% admissions rate when I applied. It's 9% now. Berkeley, I got a 2., UCLA 76% admissions rate when I applied. It's 9% now. Berkeley, I got a 2.27 GPA at UCLA undergrad. And then Berkeley let me into graduate school. Figure that one out.

I got into graduate school at Berkeley with a 2.27 GPA. And my total tuition all seven years, undergrad and grad, was $7,000. None of those things would happen right now. And this is why I'm kind of trying to lean into struggling young men. The reason I'm here is not my fault. It's because of the generosity and vision of California taxpayers and the Regents of the University of California and an America that loved unremarkable kids. We've positioned differently. Now, universities in the corporate world are trying to identify the top 1% and supercharge them to become billionaires.

I was going to say, at 16. Yeah. And here's the thing, no organization or person can predict greatness at 18. Did you have your shit together, Josh? Did Michael, did you? We're the opposite. I graduated from UCLA. Nobody was recruiting us to do anything. Yeah, Scott, I got kicked out of the same college twice. Twice? Twice.

I almost got, I was on academic probation three times, subject to dismissal twice. When I graduated from UCLA, the only thing I knew how to do was make bongs out of common household items, and I knew every line from the Planet of the Apes. I lied about my grades. I'm a good talker. I got into Morgan Stanley and got into business school. My mom got sick. That was a huge kick in the ass for me. And from the age of 27 on, I got my act together.

But I didn't get my act together until I was 27. And so if higher ed wanted to decide who were going to be the winners and the losers and not let them in, I would have been one of the losers. In my opinion, higher education in America isn't about identifying the top 10%. It's about giving the bottom 90 a chance to creep into the top 10%. What I worry about with young people, especially young men who have fallen further faster in our nation than any other group, four times as likely to kill themselves, three times as likely to be addicted, 12 times as likely to be incarcerated, more single women own homes than single men. And let me be clear, the ascent of women is wonderful and we should do nothing to get in the way of that. But the notion that somehow young men had anything resembling the advantage I enjoyed ignores all data, ignores all data. So I'm really trying to lean into trying to figure out vocational

programs, funding, and different types of media and different types of social programs that help young men get a semblance of the advantages that I definitely had and to a lesser extent, Josh and Michael had. So on this topic, you said years ago that it's never been easier to become a billionaire, never been harder to become a millionaire. Do you still feel that way? And if so, what are the ramifications for that on society? When I got out of business school, we all kind of made between $90,000 and $120,000. If you got a job with a consulting firm or a finance firm, you made $120,000 or $130,000. If you got a job in brand management, you made $90,000. In my class of 300

kids every year, and I need to do the research here, but I'm pretty confident in every year with 300 kids, I have one kid who will be a billionaire, either through alternative investments or technology. And I think I'll have probably a dozen that end up living with their parents. And that is our economy has increasingly become kind of the hunger games because of technology, because of income inequality, because seven stocks, and I'm getting to your area now, are 60% of the S&P's return. Look, if you ended up as a product manager at NVIDIA five years ago, you probably have $30 to $50 million in equity right now through no fault of your own. And if you went to work at Christ, I don't know,

General Motors or any number of small tech startups that didn't make it, you got your 110 or your 120 grand salary, but you weren't able to save any money. You probably needed your parents, actually, if you had to live in New York. I'm so glad you said that. And you know what's the craziest part of that is that your parents probably would have pushed you toward General Motors because what the fuck is NVIDIA? That's right. No one knows. No one knows. So, and these are the ramifications. When you have the kind of income inequality we have in this nation, the bad news is it keeps getting worse. The good news is it's always self-correcting. The more bad news is the means of self-correction are war, famine, and revolution. And I believe that the dissatisfaction we have in this nation where every kind of opportunistic infection blows up into a full disease, Black Lives Matter,

the Me Too movement, these are righteous movements where people are justifiably angry. But they turn into very strong anti-American tropes, despite the fact that for all its flaws, America has made remarkable progress around women. America has made remarkable progress around non-whites. There were 12 black people total at Princeton, Yale, and Harvard in 1960. This year, 51% of the freshman class at Harvard is non-white. That is a huge victory, a huge victory. When I was at UCLA, you weren't allowed to be gay. No one could be out. Now it's, I mean, I don't want to say it's been normalized, but they enjoy, I think, many of the same rights and freedoms I do. There is, America has come, we have enormous reason to celebrate, and yet we're

raising a generation of young people that hate America. So I find our inability to communicate the wonderful things about America is in large part a function of one, income inequality. You see people under the age of 40 have had their percentage, their net worth as a percentage of GDP cut in half from 13% to 7%. They're making less money than we did at their age. And the breakdown in the social compact is the following. For the first time in our nation's history, a 30-year-old man or woman isn't making as much money as his or her parents were at 30. That not only brings shame to the kids, it puts a strain on the relationship with the parents. It makes young men less attractive to women. There's less household

formation because three-quarters of women say economic viability is a key criteria in a mate. It's only 25% for women. Women mate socioeconomically horizontally and up, men horizontally and down. And when the pool of horizontal and up is shrinking because young men are failing, you just have a lack of household formation and you have exceptional increases in loneliness between the ages of 30 and 34. In 1990, 67% of people had at least one child. Now it's 27%. People aren't having kids because they can't afford them. So I don't think this ends well. I think unless we start giving young people more opportunity and letting them share in the immense unprecedented prosperity of our nation, we're going to end up with an angry populace that takes every injustice and

blows it up into a fatal explosion where they hate America. And you have a group of, we have the most angry and depressed generation ever in America. And what's worse about it is these were all concerted decisions through economic and tax policies. So I think that there's an enormous recalibration of our priorities that needs to take place. I think that's a really great message. I want to leave the viewers and listeners with just something about your writing process. Of course, a lot of the people who watch The Compound are entrepreneurs or would love to take some of their ideas and do something creative and possibly commercial with them. You've now written, how many books is it? I think this is my fifth book.

The fifth, okay. Are you getting better at the process of coming up with an idea and then actually writing it, turning it into a book? Or do you feel like you're starting from scratch each time? Because I picture you having a new idea like every day or every week. That could go all the way and become a book,

but of course, you can't do that because there's not enough time in the day. How do you know when it's time to push the button and actually write one, and are you getting better at it? I write a newsletter every week, No Mercy, No Malice. It's about 2,000 words. That's basically a chance to beta test the product. So when I write about young men and it resonates, when I write about the ills of big tech and it resonates, I'm like, okay, this could be a book. And usually my publisher will call me and say, we could turn this into a book. Well, they'll call you and tell you that every week. Pretty much. I'm actually in the midst of doing a three book deal. And then I do a video. And

if the video goes viral, you get a sense for what the market wants. The advice I would have is I wrote my first book at 47, 48. It's never too late to start writing. Two, just start. And don't wait for an agent. Don't think about the theme. Just start writing a chapter. Come up with a table of contents and start writing. And the only way you get better at writing is writing and reading. And the thing I try and do is I try to write as if no one's going to read it. I try to be fearless. I try to think about not being politically correct. I use foul language because it's authentic. It's me. I make references to violence and sex because that is actually the way I think. But what people want to read is they want to read something that feels authentic and like there's voice in it. So try, I don't ignore what my publishers say because they're smart people

and they get the environment, but what people want is something that feels real. And the key to writing is flipping open your notebook, your laptop, and just starting. In terms of tricks of trade, you know, most writers will say they write in the morning. I write alone at night with my dogs at like from 11 p.m. to 1 a.m., sometimes with a drink in my hand. So it's really, the creative process is different for everybody. But look, just start. You're no better or no worse than anyone in their first novel. And write as if no one's going to read it. Just try to be as raw and as thoughtful and as courageous as possible. read it. Just try to be as raw and as thoughtful and as courageous as possible.

That's such a great message. And as someone finishing up a book, I appreciate hearing some of the things that I think about the process confirmed. So thank you very much. Scott, I want to tell people where they can find the book and where they can follow you for more of your insights. You mentioned No Mercy, No Malice. What's the order? No Mercy, No Malice? No Mercy, No Malice. Yeah, that's right. I read it every week. I probably email you twice a year responding to it. I don't know if that gets tedious to you or if you appreciate it, but you're such a great writer. I can't help replying sometimes. You're on Twitter and LinkedIn. Those seem to be your two big social media platforms. I'm not on Twitter.

I haven't posted in eight months. I'm on Threads. Out of Twitter. Good for you. I'm on LinkedIn and the books and obviously the podcast Pivot and Prof G. Okay. So ProfessorGalloway.com is the blog. You got it.

All right. Very cool. Congratulations on The Algebra of Wealth. I can't wait to grab my copy and read it. We will link to it in the show notes below. Guys, thank you very much. Scott, we'll talk to you soon. Thanks, Josh. Thank you, Michael. Congratulations on your success. Thank you. Thank you. All right, all right. Five o'clock in the East Coast time zone, Eastern time zone. We're back with another all new edition of What Are Your Thoughts?

My name is downtown Josh Brown. With me as always is my co-host, Michael Batnick. Michael, say hello to the folks. Hello, hello. All right. Let's see who's in the chat right now. Everybody's here. Videotastic, Dr. Horton, James Sykes.

Tom Whalen says this chat is always busy. I know. I try to tell people. It's lit every week. Every week. John Colgan, what's happening? Everybody's here. Benjamin Lupu, we see you.

Scott A., Cliff. All right. We have a lot of show to do. I'd love to shout out everybody. Believe me, I would love to. But there's way too much going on. Before we get started, Michael, I understand we have a sponsor for tonight's episode.

We do. We do, Josh. That's right, Josh. It's Public. Oh, cool. Oh, cool. Well, who's Public, you may ask? Well, I'll tell you. Public is a place where you can buy and sell stocks, bonds, cryptos, whatever you want. I guess they call that a brokerage, a custodian. And here's what they're doing that's innovative. Options. They're giving you a rebate of up to 18 cents per contract traded. It's kind of like innovative and awesome. I'm into it. I used to trade options back in the day. I would have loved a rebate. I could have used it. So 18 cents, if you trade a thousand options contracts,

that's $180 back into your account. Is that how it works? Is that the math? I'm asking you. Sounds like it. Yeah. It's great. 10,000 contracts up to almost 1,200, according to public. That's pretty cool. So I'm not an options trader. I have to read this disclosure. Paid for by public investing options. Not suitable for all investors and carry significant risk. Full disclosures and podcast description. U.S. members only. So I'm not trading options there, but I am investing.

And I talk about the treasuries I buy there all the time. I'm also buying some Bitcoin ETF. And I'm buying some gold ETF there. And it's set to auto purchase. You are dollar cost averaging into Bitcoin since when? Yeah. And gold since it fell $10,000. I just started. And gold too. Buy a little bit of both. And I want to see which does better over the next 10 years. So public lets me set that up really fast. And I want to see which does better over the next 10 years. So public let public let me let's be set that up really fast. And I love it. So, hey, guys, if you want to learn more, go to public dot com.

All right. What are we talking about today? So there's a lot happening. I mean, you just revealed that your dollar cost averaging at the golden Bitcoin. I don't even know. I don't even know what year it is. I just I just started. So I'm hoping I'm hoping the world I'm hoping they fall more or else it's not really going to work out because I'm not doing enough.

Before we get to your first topic, let's tell the folks with an L who we're talking to in California. Oh, dude, this is going to be so cool. Matt Bellany is the former editorial director of The Hollywood Reporter. He is the founding partner of Puck, and he's the host of what I think is right now one of the Hollywood Reporter. He is the founding partner of Puck. And he's the host of what I think is right now one of the hottest podcasts covering the business of entertainment. And it's called The Town. It's a joint production between The Ringer and Puck. Matt Bellamy is going to be our guest live Tuesday, April 30th. And we have tickets available if you want to come out and hang. It's going to be a killer, one of a kind networking opportunity. Everybody in the

audience is going to be people just like you. They love investing. They love stocks. They love trading. They love the markets. And Matt knows pretty much everything there is to know about some of the most important storylines in the market right now, from Apple to Netflix to you name it. So I'm pretty sure a lot to say he's the only content creator who I listened to and read. I read the letter also. In fact, I think he's the only one. Okay. He's great. Besides me, you mean? I don't listen to you. I talked to you. Thank you. Thank you. All right. Hey, I want to talk about red lines today. Thank you.

Thank you. All right. Hey, I want to talk about red lines today. Jay Powell just did a hawking today. Can we call it that? Like when he says hawkish things, it's a hawking? I like it. He committed a second degree hawking today, and he flew to Canada to do this.

I feel like if he was going to do this, he could have just tweeted it out. So he went and appeared at an event with the Bank of Canada, Governor Tiff Macklem. Like most Canadian names, it sounds completely made up, but fine. That's the Bank of Canada governor that he spoke with. Oh no, it was in Washington. It's at the Wilson Center in Washington. My bad. Let me just give you the quote. Quote, given the strength of the labor market and progress on inflation so far, it is appropriate to allow restrictive policy, further time to work, and let the data and the evolving outlook guide us, he said. Did he know his mic was on? That is higher for longer for higher for longer. He just basically said, hey, guys, stop waiting.

It's literally, it's not happening. He did a first-class hawking, I would say. He hawked it up. Well- What are your thoughts? Listen, I do like the hawking, but he didn't say it's not happening. He might just, it sounds like he said you have to wait a little bit longer that's all he just hawked the shit out of this market did you see the two year ago over five percent did you see it so he he's he's hawking like there's

no tomorrow um look i think that there are a couple of bright red lines currently threatening the bull market and i don't know how big the threat is because both of them are self-correcting, which I'll explain in a moment. The one I don't want to spend a lot of time on today is $100 crude oil. I think it's a killer. And I have some data that backs that up in terms of what $100 oil does to inflation. So it'll make the numbers worse. Forget about the indirect effects where it makes people spend less money and probably is a threat to inflation. So it'll make the numbers worse. Forget about the indirect effects where it makes people spend less money and probably is a threat to earnings. I think $100 psychologically on crude is a red line, meaning you don't want to see what happens when we cross it.

The other one- Wait, hold on. Just so the audience is clear, we're not very close to $100. We're at 85. Right. We're not very close to $100. We're at 85. Right. It's out there. Do you realize how fast we got from 70 to 85? Because that's the distance between here and 100.

It's actually a shorter distance because the numbers are bigger. But the other one that I do want to talk about is 5% on a 10-year treasury, which we're not there either. But that one is threatening. treasury, which we're not there either. But that one is threatening. And we actually have some data, Michael, that I had asked the team for this morning. We got these wicked cool charts. So I want to throw these up and then I want to get your reaction. I asked you guys on the research side at Ritholtz Wealth Management, what happens to the S&P 500's forward return over three months and six months right after the 10-year yield crosses 5%? So not on the way down, only on the way up. Am I explaining that well? Yes. Yes? Okay. All right. Leave the chart on then. So

basically over all periods since 1978, when the 10-year treasury crosses 5% to the upside, you see stock returns minus 1.8% forward for the next three months, minus 5.8% over the next six months. That's notable because absent that happening, your typical three-month return is 2.3% positive and your typical six-month return is almost 5% positive. So it's a huge reversal that happens immediately within the first 90 to 180 days of crossing 5% to the upside in the S&P. Chart off. What are your thoughts? That chart speaks for itself. The stock market does not like when interest rates, when the 10-year crosses about 5%,

nor should they. What's funny about that is I think we average on the 10-year 5%. So it's really the approach to that level having been below it that represents a psychological red line. That's the point I'm trying. I'm not saying the economy can't handle a 5% 10-year. I'm saying the stock market has a hiccup as we cross through it for the first time in a cycle. I also want to show you the effect on the Russell. This one surprised me. It's not as bad as the S&P 500. Yeah, I would have thought it would be worse as well. Right. So let me just read this for the people that aren't seeing the chart and are listening. Over all periods, the Russell 2000 averages plus 2.5% over 90 days and plus 5.1% over six months.

That's just a typical Russell performance, rolling six months since 1978. If you look at those numbers, just after we've crossed 5% on the 10-year treasury, the three-month average goes to a 0.2% return, and the forward six-month average return falls to negative 4.1. So actually, large caps get hit harder, which is counterintuitive. You would have thought that the Russell would have more trouble with a 10-year. So my explanation for that is I think overnight rates matter more for borrowing. Therefore, the 10-year rate impact on small caps is not as pronounced. This is my theory. The reason why the 10-year crossing 5% to the upside is a hurdle for large cap stocks is that it represents,

it has nothing to do with funding a business or rolling debt. It represents true competition. If you think you're going to get 7% or 8% out of stocks, and all of a sudden I come along and say, get 7% or 8% out of stocks, and all of a sudden I come along and say, how about five no risk, lock it in for 10 years, you have to think about it. It's not a no-brainer one way or the other. So if you're somebody that just manages stocks, you don't care about this. If you're somebody that manages a portfolio of multiple asset classes, you are forced to really think that through. Now, you might still opt for stocks, but not everyone does. Therefore, we see those negative returns if and when we cross that level historically. Do you concur, doctor? I do. Why would I not concur?

Okay. Anything that you want to add to that or not really? I have a follow-on chart to your excellent charts. In 2023, the stock market was dominated by inflation and the path of interest rates that were implied in the bond market in terms of where we thought Fed funds rates were going. So chart on, please. So in 2023- Look at this. Look at this masterpiece. On the left-hand side of this chart, we're looking at the S&P 500 and the Fed funds rate inverted. And again, in the first half of 2023, when the applied Fed funds rate was going up, stocks were getting killed. They bottomed basically concurrently in late fall and rose together, meaning Fed funds rate implied came down and the stock market went up. And then in 2024, we had this weird break in the pattern where the stock market seemed to be

less concerned with the path of the Fed funds rate because, well, for many reasons, I think earnings is a big part of this. But to your point, Josh, it might be too much. We might have stretched this too far. The jaws are going to have to snap shut. I don't know about snap shut, but certainly come in. Okay. Look, it's stupid to talk about these big round numbers, except that it's smart. It's stupid because mathematically, there's not a big difference from 4.93 to 5%

in practice. There just isn't, unless you're a bond manager with a trillion dollars, like that's just not going to be noticeable to anyone, but it matters because the psychology has a huge effect on what people do. So that, that look, you probably remember this. We were saying like, when are people going to move? Like there's were saying like, when are people going to move? Like there's actual yield available. When are people going to move their money? Like what the hell? The number was 4%.

I don't know why, but it was like somebody flipped on a light switch and you had a bank crisis immediately following 4% on overnight waits was it. That was the trigger that that was when people said, oh shit, 4%. I don't know why. Why was it 4 and not 3.9 or 4.2? There's no good answer. But we do the same thing with the stock market, especially with the Dow. Like $40,000 seems to be resistance right now.

It's literally, we stopped on a dime and faded now we could cross through it next week and i'll shut up but something tells me there's going to be something about that number um that that just like people think twice before buying things as the market approaches a big fat round number like that we've seen it before. When I started in the business in 97, it was difficult to see the Dow get through 10. Eventually, it did fail. 20 was resistance for a while. Number 20. Okay. So anyway, we're not saying that these numbers have mathematical meaning, but they are, theoretically, they are red lines that people think twice about. Theoretically, they are red lines that people think twice about.

Let's do this Tony Dwyer stuff. We love Tony on the show. He's been on Compound and Friends. Tony's a strategist, kind of cordiality. price and the percentage of stocks that are above 10 and 50-day moving averages, or rather below. And what we're trying to do here is just get an idea of when does the correction go too far? Like, when do things get too stretched to the downside? And he actually put this out over the weekend. So the good news is- So we just had a washout? Yeah. That's what he's saying?

Yeah. He's saying? Yeah. He's got four metrics. I cherry picked two of them that had the most interesting visuals. But if you can see this pullback that we've had in the S&P, but you take a look in this lower pane, this is the percentage of stocks that are above their 10-day moving average, completely washed out. We're now down to 3.8%. the percentage of stocks that are above their 10-day moving average completely washed out. We're now down to 3.8%. And this is the percentage of S&P 500 stocks that are still above their 50 day. And that's now down to 36.5%. So that metric might not be washed out enough, but on the 10-day,

we're there. Yeah. All right. Can I give you one more though? Can I give you one more though? Before you give me that one, I will just say that the data is what it is and I do like the oversold in the short term, but I have trouble getting excited

about a downside flush when we're not even 4% off the all-time highs. True. Well, unfortunately, the real corrections have rallies

along the way. The problem is they rally the lower highs and then dump again. So what's the next job is 10 day VIX. What's the 10 day VIX. Oh, the change. Okay.

The rate of change hit an extreme level. Like the VIX hit 19 and that's a 40.9%. Um, move off of the recent level. It's still 40.9% move off of the recent level. It's still 29.9%. It's a percentage of a percentage. I know it drives people crazy. I get it.

I get it. I get it, but still. I get it, but still. No, it's not a but still. It's just not. It's a VIX spike. It's not. The only point of using the percentage is just to denote the fact that the VIX has moved from a low number

to a high number very quickly. That's it. That's the only significance is that we went from a 14 to a 19 really fast. I would prefer to see the change in just minus, like literally 15 minus 10. I think that would tell a different story. I just don't see this as a VIX spike. I'm sorry. I just don't. Well, the absolute level 19 is not particularly high. 25 is high. 25 is high. 25, you agree 25, even if you think it's going to 30, you're a buyer. I can't say about 19. Yeah, right. 19 is whatever. It's a bit warm. All right. I brought my own chart that I copied. I want to give credit and respect to the recreation. So Grant Hawkridge of All-Star Charts puts out great stuff on Twitter. I highly recommend giving him a follow.

He put out this chart that we recreated, and it's showing the percentage of S&P 500 stocks that are down various levels from their all-time highs. And the stocks that are in a correction, it's half the market. Half of the S&P 500 is in a correction down 10 levels from their all-time highs. And the stocks that are in a correction, it's half the market. Half of the S&P 500 is in a correction down 10% from its highs. So that to me is pretty notable. You also see stocks down 20% from their all-time highs, had a decent tick higher at 18%. So as usual, the index doesn't tell the entire story, but there's some selling going on. So can you explain this? We're basically just categorizing stocks based on how much they're down from their highs? Correct. Okay. So are we saying that this is potentially a contra indicator? Is that the purpose of the exercise?

I don't think it's necessarily an indicator. It's just, listen, indicators to me are only an indicator when they're at an extreme and And that's not what this is showing. Chart back on. I think that this is just a good visualization, a heat map, if you will, of where we are. And more stocks are correcting than not. Or I guess half of them are. So the percentage of stocks that are 10% from an all-time high is 50% currently. Okay.

from an all-time high is 50% currently. Okay. So you would have to see that closer to 70 or 80% to be able to say like, all right, this is something that we might want to trade on. Yeah, like has this gone too far? No, not even close. Yeah, yeah. Not even close.

Okay. That's a really great point. That's a great chart. Shout out to All-Star Charts. All right. I think we're going to move on. So it's early. If this is the first correction of the year, I think what you and I are both saying the

same thing, it's early still. I mean, literally, has it even started? Has it even started? I mean, quite literally, it has not even started. All right. Let's talk about Apple. Certainly one of the most important stocks in the market. I mean, everybody owns it.

Whether or not you own it individually, you own it. It's one of the biggest companies in the world. And it's not doing so hot. So this surprised me, actually. So Reuters reports that global smartphone shipments from January to March increased 7.8% to 290 million units. I don't know what I would have guessed, but that's probably- It's in the first quarter of this year. It's probably a higher growth rate. 8% is probably how they want to guess. And that's a lot of

phones, 290 million. And Samsung leapfrogged Apple to be the global leader. Samsung has a 20.8% market share. So Apple is back to second. It has a 17.3% market share. And I want to throw up some charts from Six Colors. They do great work on Apple. All right. The thing that I want your eyes to focus on is China. So they break it down. It's regional. So America, EMEA, China, for those of you who are listening. And China has stopped growing. And in fact next chart please shrinking not only has it not stopped growing it's shrinking and this is a big deal you know beijing put out the word they want less they want less people buying apple phones it's working so they don't say that out loud because tim cook still flies there and they

still you know still has brunch with uh you know, the people that he needs to meet with. But, you know, it's civil. But they do these things that are that are symbolic to get the marketplace's attention. So they say they don't want government officials carrying iPhones. I think that was two years ago. This is what this is what that looks like on the ground. Enough people in country pick up on that signal and they act on it. I think that was two years ago. This is what that looks like on the ground. Enough people in country pick up on that signal and they act on it. And they say, well, they don't want us buying these things.

But it's more to it than that. Apple's phones are not subsidized the way that they are in America by carriers. They're really expensive. So there will always be a luxury market in China for every luxury category under the sun. And that's why they're still selling tons of phones there. And they probably always will. It's just tougher to find the next incremental wave of customers at the price points they're at. And China has serious phone makers putting out new models all the time, innovating, and, uh, they're competing there.

It's, it's a knife fight in a way that it's really not, uh, here in the United States. So Apple's total revenue is, is flat. I mean, it's just, it's, it's not growing. And the stock is acting like trash. Drawdown please. The stock is in a 12% drawdown from, from, from the highs, which. 15, 15, 15, 15. 15, so that's notable. And in fact, if you look, so the chart on screen is Apple divided by the Qs. And this has gone nowhere since the middle of 2020.

So in the middle of 2020, Apple and the Qs are in the same spot in terms of performance. And if you go back to just 2023 or whatever, I mean, it's getting destroyed relative to the Qs. So yeah, it's pretty impressive that Apple can be acting so lethargic, to be polite, and the market has done what it's done despite not having its leader. Berkshire Hathaway is in a sell-off right now. And the only thing I could come up with as to why that would be the case is the fact that Apple is half of

their stock portfolio and a quarter of their market cap, the position that they hold in Apple. Berkshire also started to sell Apple for the first time last quarter when we got the 13F, I think for the fourth quarter, they had trimmed. It wasn't like a meaningful sale. They're still huge in the stock. I wonder what the next 13F will look like. We're going to get that six weeks after the quarter ended, March 30th. We're going to get those mid-May. So it'd be really interesting to see if they did anything with their Apple position

during the first quarter when the stock was not acting well. So did they add to it, or were they part of the reason it's not acting well? Did they continue to trim? They're not buying. They own so much of it. I don't know. Don't they own more than 5% of the company? Oh, yeah.

They are the larger shareholder. Yeah, they're not buyers. Look, this is disconcerting because Apple has been one of the great growth stories of the last 15 years. It's one of the largest stocks in the world. The silver lining is that as people sell the stock, the money goes somewhere else. Unfortunately, it's going directly to Nvidia. I have this on high authority.

Um, no, because think about it. It's the same sector and you got a lot of people missed out on Nvidia. They need to have it on the books. They need to show it in their portfolio. NVIDIA is selling 20 times next year's earnings, if you believe the estimates. Apple is still like 25 or 30 times earnings. It's too expensive. One of them is growing, the other one isn't. And so what's next for Apple to move the needle on the top or bottom line? I don't know. It's not the Vision Pro, that's for sure. Well, I have some ideas about that. So every summer, Apple holds the Worldwide Developers Conference, WWDC. It's other than the release of a new iPhone, which typically happens in the fall,

it tends to be the biggest event around this stock each year. That's in June. They haven't put out a date yet, but it's usually June. That's not very far from now. If you're investing in a stock today on April 16th, that's not a long time to wait for potential catalysts. Apple, the rumors right now, what people are excited about is iOS 18. Aoi. Well, of course, Aoi will probably play a role with Siri. So here are some things that Apple fanboys think are coming at the Worldwide Developer Conference. Some of this is wishcasting.

These are the things that they want to happen, not necessarily will happen. The last iOS upgrade involved Dynamic Island and people like that. People want to see more. They're asking for the slide over feature where you can see two different apps at the same time on the screen and not have to toggle between the two, but literally be looking at both next to each other. And a lot of people that multitask between two different apps are asking for that. You could picture, for example, being on Expedia and having your calendar open. So like that, that kind of thing. The action button was popular. I have a Pro Max 13. So I haven't upgraded my phone in a long time. And I can't think of anything that I'm missing right now. Maybe the action button is the thing.

What's the action button? So rather than just have a volume, the toggle on off a ringer volume, have that be an actual button that, that allows you to do something. They added that to the iPhone 15. So if you don't have a 15, then you don't know what I'm talking about. I do. I don't even know what it does. Well, you can, yeah. So you can assign it shortcuts. You can make it so that every time you press it, it calls Robin. Or every time you press it, it orders from Starbucks for you. Or every time you – Yeah.

Or it could open your camera. Oh, wow. So more with the action button, but also don't lose that easy on-off toggle feature for sound because people have grown accustomed to that. A couple of more things. feature for, for sound. Cause people have grown accustomed to that. A couple of more things, standby mode. So you could set the phone up and it's like a clock and it's just always showing the time. Oh, that I love. So that exists. So my phone is off right now and it's always, it always shows the time, which you could see. Okay. So what if you could see messages and mail on that screen instead of just the time? Um, so here it is. See, my phone's off and you see the

time. I love it. Okay. Um, I don't know. There's a bunch of these, there's a bunch of these on the tech sites, uh, check-ins for group chats. Somebody was asking for, um, a pro camera app being built in. So something that's like a little bit more professional is there's some stuff. There's some stuff they could do. None of these things sound – oh, the big one though really that people are expecting is a large language model built directly into Siri because Siri sucks. Sucks. Now, all large language models suck for different reasons, but people are experimenting with them and using them. They will get better.

Siri could leapfrog them all right now by just doing what it's supposed to do. now by just doing what it's supposed to do. The biggest thing that I love about the latest iOS upgrade was I can curse and it doesn't change it to duck you. That was huge for me. That was like a big productivity and time saver for me. I felt like they were looking right at me when they did that. All right. We've got a lot of meat left on the bones. Let's keep it moving. All right. Anyway, Worldwide Developers Conference is the next potential upside catalyst for Apple. Remember, I told you that. Okay, let's move on. We want to do, will the banks finally have to pay you more for savings?

No. You think no? I think yes. Actually, the reason why JP Morgan fell 18 points is because they are not sure what it's going to cost them to keep funding deposits. So I think you're going to be wrong on this one. The banks all report in earnings, and some of them had a great reaction in the stock. For JP Morgan, there was disappointment that they didn't raise earnings guidance.

The main reason seems to be they're not sure what deposit pricing will be for the remainder of the year. So deposit pricing means will the banks finally have to share some of the prevailing interest rates in the economy with their account holders? This is Telus Demos of The Wall Street Journal. Investors were probably hoping for more upbeat projections from Banks Friday about their net interest income, which were quite muted as of their year-end reports. After all, investors have slashed their expectations of how many times the Fed might cut rates in 2024 from six or seven times to now two, now zero, since this article was written. That should, in theory, help lenders keep earning higher yields. But during their first quarter reports Friday, JPMorgan Chase only raised its 2024 core net interest income projection by roughly a billion dollars. Citigroup and Wells Fargo maintained

their forecasts. Their shares were all off on Friday as the KBW bank index fell 1.5%. So the story here is we might be at a turning point where the big banks don't get away with paying you a basis point on your deposit because the safety of that becomes less interesting. And people start to move assets demanding some yield. I don't think it's going to be a sudden rush to the exits out of any of those banks. Look at this chart. This tells the story. They're not going past half a percent. This tells the story so far.

This is them being very gradual, and they've gotten away with it. And they will continue to. But once again, they did not raise guidance, Michael. So why not? If we don't think there's any rate cuts coming this year, right? The market is now saying, the market is now pricing it effectively one or none. Okay. So if that's the case, why weren't the banks able, confident enough to raise their expectations for net

interest margin? Why is JP Morgan stuck at 90 billion? Why can't they go to 100? That was the disappointment that sent the stock down 18 bucks a share. So if you don't think that they have that pressure, then why won't these banks raise guidance? Well, I'd say a few things. Number one, we don't know the exact reason why a stock falls. You don't know for a fact that this is what did it. They said- I'm pretty sure. Okay. They said a lot of things and you're isolating, oh, this is the thing that they said? It was the only thing that people were negatively surprised by out of the entire quarter. Every business at the bank is on fire. What about the fact that these banks have gone vertical into earnings and maybe they're just giving some back? Why did they go vertical

into earnings? Because- Higher for longer. That's why. Higher for longer is good for them. Yes, but not if it's going to cost them more than it currently costs them to fund deposits. All of the banks are saying the same thing, which is that what they call cash sorting, money moving out of these low interest bearing accounts, it's over basically. It's a trickle. Okay. I mean, that's what they're saying. Okay. Higher for longer though, could be a long time. Higher for longer is bullish for banks. Yes. Yes. But not if they are unable to raise earnings guidance because they're worried

about having to pay more in interest. Right now, it's super bullish. Or what if they're just being conservative in their guidance? That certainly could be the case. I mean, Bank of America did it last quarter, and then they had a huge upside surprise. No, it didn't help the stock price, but their net interest income was $100 million more than they've gotten this last time. You see, Michael, the difference between you and I is you focus on what you see right in front of you. And I think about where the puck is going next. I think this is an emerging risk for the big XLF names. What if one of them comes out and does something because they feel compelled to based on money

movement? The data is not showing that. Yet. It's over. I'm talking about where the puck is headed. Okay. All right. So let's talk about earnings.

There's a lot in here. So let's try and keep this at a brisk pace. Schwab, $9.12 trillion in client assets. Yeah. Not bad. Sorry, what's BlackRock? They said 10 and a half now? Yeah.

So Schwab is one of the biggest pools of client assets anywhere in America. It's different though, because custodian, asset manager. Agree. Okay, keep going. Total net revenues declined by 7% versus the prior year. Rising equity markets and increased client engagement helped drive 6% sequential. So that's quarter over quarter top line growth. All right, here we go. Total assets dropped by 5%. I'll be at a much slower pace of the client cash realignment activity, that's money moving out of

non-barring into money market funds. We saw a notable reduction in activity from January to February and March. And the overall realignment in the quarter was more than 80% less than the same quarter in 2023. And in fact, they said that new cash, like net new assets, is offsetting cash sorting. So that's a good thing. And here's why higher rates is bullish. There's a quote from the earnings call. To the extent that those rates stay higher for longer, that is a good thing for our business. We are asset sensitive. A continuation of higher rates means higher yields on the little more than one third of our assets that are floating, margin loans, lend our pledge asset lines, cash, et cetera, and potentially more time for us to capitalize on higher rates once we resume our investment activity following the paydown of our supplemental borrowing. It's talking about the acquisition.

Average trades up 15% over the prior quarter. Client borrowing or margin balances were up 9%. They said asset-backed lending, all the banks were saying this, was obviously wiped out last year. Nobody was doing that. Core net new assets for the quarter just shy of $100 billion. A lot of goodness in here. And I'm a shareholder.

I would have expected trading activity to be higher. That's obvious. It's been a raging bull market, especially January, February, March. And that's the quarter that they just reported on. So I'm totally not surprised by that. So Schwab, who we are, I guess, both a customer and a competitor to, in Q1, we saw a record $14 billion in net flows into our advisory solutions. And we're part of that. A 60% increase over last year. We have seen continued interest in our flagship wealth offering, Schwab Wealth Advisory, which attracted a record $4.4 billion in net flows for Q1.

And 30% of those flows are coming from the Ameritrade acquisition. So that's important to the Schwab story. Like, was the Ameritrade deal a great deal? It took them four years to do that deal. So you better hope that that's bearing fruit. And it looks like it is. So 30% of the enrollments in Schwab's own wealth advisory, that's like their in-house RIA.

And I know it's not really an RIA, but that's like the financial advisors who identify as I work at Schwab, not I custody with Schwab. Work for Schwab. Right. Employee advisors. They took in 4.4 billion. A third of that was families that had Ameritrade accounts prior to the merger. So that's them converting in-house rather than referring it out to other RAs. So Schwab had a much different reaction in its share price. And again, I own the shares versus the other banks. Now, Schwab is a custodian. Obviously, it's a different line of business, but it still is a bank in terms of, if you were to look at its bottom line, most of its earnings are from net interest income. Yeah, I would agree. It's just

not a money center bank. That's number one. Number two, it often gets lumped in with regional banks and it is definitely not a regional bank. They also have a lot of, yeah, they also have a lot of levers to pull that have nothing to do with banking, asset management being an obvious one. And I think we're probably past the days of Schwab trading with the KRE. I think Schwab should trade on Schwab. And we flagged this breakout technically a while ago. I didn't take the trade, but high 60s looked like an obvious place to enter. I actually bought more. I bought more on, what day is this? I bought more last

Tuesday as it looked like it was going to clear past 70. This looks amazing. I should have bought it. It immediately sold down to 69. Not nice. But no, technically it looks great. Next resistance is another round number is 80. I don't really see big selling materialize until it gets there. By the way, so it's going to close that March gap as gaps do. They get filled. That's where that gap starts. So, all right, let's go through some Goldman stuff.

Yep. This is a comeback quarter for DeSalle. I think David Solomon is now off the hot seat. That's the story of this quarter. And the comps were not that easy, not that tough. The environment got a lot better. They have been cutting costs like crazy. And that is now having an effect.

Oppenheimer's analyst calls this a perfect print. So let me just quote. We say it was a near perfect print. Oppenheimer analyst led by Chris Katowski wrote just about all the P&L categories did meaningfully better than expected. They did really well on trading. They stole market share on deal making, which is really important to the profits here. They continued to dismantle the retail shit that they were trying to do, and the losses are now negligent. It was a 28% jump in profit year over year.

I don't know if you remember this. I barely remember this, but it wasn't that long ago. People were planting anonymous items in page six and telling Bill Cohan that this guy's job was about to be yanked away from him. And that narrative probably fades away now. So a lot of disgruntled Goldman partners who were calling their favorite reporters around town, like Charlie Gasparino, and saying, like, this guy's days are numbered. I don't think anyone's going to be saying that right now. Somebody on the call, one of the analysts asked him if this was about as good as it's going to get. And he was like, listen, it was a good

quarter. Do I have a quote from Solomon? I pulled some quotes, but let's run through some numbers first. We could keep this moving pretty quickly. Charts on, please, John. So investment banking fees, this is, I mean, that's a monster jump. 26% quarter over quarter. That is a reflection of capital markets reopening. A lot of refinancing and debt going on, or rolling debt, I should say, and up 32% year over year.

Fixed income commodities and currencies, a monster, monster leap, up 113% versus the last quarter. So yeah, things are moving along there. Next chart. What do we want to say on the global banking side? Yeah, there it is. Debt underwriting. Up 77%.

Yeah, everything's up is the point. Up 77%. It's not really any one specific thing. Everything is up. Well, advisory is not up. Where? Top line. It's up 1%.

What am I looking at? So top line. In fact, maybe we have one more chart before a quote. All right. Asset and wealth management. So this was a sore spot. So asset management up 2% quarter of a quarter, wealth management actually down 1%. Well, that's the United Capital disaster, right? Yes, that is definitely baked in there. But yeah, you're right. Here's what Solomon said. We have talked about broadening our wealth management platform to get more broadly into

what I'd call kind of high net worth wealth management. And with the sale of United Capital, we continue to be very focused on our ultra high net worth platform. It is an extraordinary platform, best in class. I do think that the ultra high net worth business is still a very fragmented business. While we have leading share, I think those shares are still on a global basis. A leader is a single digit share. And then he spoke about the alts platform. Can we double click on ultra high net worth? So the problem with United Capital, I mean, there are many problems, but one of the main problems was culturally serving $1 million households is not something anyone else inside of Goldman was particularly excited about.

That was the bread and butter business of United Capital when Joe Duran sold it to Goldman in 2019. Well, it's dudes in khakis and a polo versus dudes with a blue shirt and a white collar. So we know these people. They're great advisors. They really care about what they do. They're dedicated, but they are not Goldman type people. They don't smell that way. They don't speak that way. When you meet them, they don't present that way. They definitely don't talk that way. They're all over the country and they don't want to be Goldman people. So it was never really going to work. So him highlighting

ultra high net worth platform. Yes, that is the business historically Goldman has been dominant in. And that's really, it's smart to refocus on that. It's a lot of opportunity. The fragmentation is all these bullshit family offices. Like every guy who manages to accumulate $5 million thinks he needs to hire a full-time CFO. It's laughable. And then they have CFAs running around picking venture capital deals for them. The whole thing's a joke. So Goldman can absolutely pick off the weaker, smaller family office type situations and make those Goldman clients because their capabilities are just so much more obvious to the client once they find out about it. So I think it's smart for them to refocus their efforts there. All right, let's move on to Bank of America and we'll breeze

through this. To me, Bank of America is by far the most interesting financial earnings report to listen and to go through because that is the American consumer. They added 245,000 net new checking accounts. They serve America. So here are some numbers. They deliver nearly $1.6 billion in investment banking fees and grew 35% from Q1 of 2023. Again, they're all saying the same story. Capital markets are reopening, which is a good thing. Investment in brokerage services revenue across Maryland, the private bank, grew 11% year over year to nearly $3.6 trillion. Not bad. I mean, that's a lot of money. They saw $60 billion in total flows over the last year.

So the wealth management is doing not so bad. They added 7,300 net new relationships. That's small. You think? In one quarter? If I was running Merrill Lynch, I would fire the head of sales for a number like that. 7,300? I mean, they're getting lapped and double lapped

by Morgan Stanley on a weekly basis. The whole thing's embarrassing. All right. This was interesting. Moving on to the banking side. They said this quarter, Zelle Transactions has now passed the combined number of checks written plus the amount of cash withdrawals from tellers and ATMs. And that's not necessarily a Bank of America specific story. That's all of us, right? Like the banks all sort of own Zelle. That was always inevitable. Do you use Zelle or I only use Venmo? All the time I use Zelle. Chart on, please. Sprinkles uses Zelle because so many of our service providers, that's what they accept. So look at the bottom right chart. It's checks versus Zelle and the gap is going to continue to widen. It's pretty incredible. Dude, if you hand me a paper check,

I almost feel like you're playing a practical joke on me. The hell do you want me to do with this? People don't take checks, but businesses do. I write checks to businesses. Sometimes you have to, but in any situation where you don't take checks, but businesses do. I write checks to businesses. Sometimes you have to. Yeah. But in any situation where you don't have to, you won't. No, who's taking out a check? Okay. All right. One more chart. So we're looking at the average loan and lease trends. And if you look at the top, total loans and leases, doesn't know apparent credit crunch. I got to be honest. I don't know shit about this.

I understand what the data is saying, like what it's meant to be saying. But I feel like this is an area I have to get smarter about. Like when banks report their loans, their leases, their commercial portfolio, I should know a lot more about what's really happening. Because I think hire for longer is going to upend a lot of this stuff. And I don't know enough about it to speak on it. So get smarter, get the quarter app and listen to the Bank of America earnings call. So this call was so beefy, Josh, that I put charts in the TCAF doc for Thursday, and I even have spillover for next week's animal spirits. That's how much is in here. Who's on the call? Is it Moynihan?

It's Moynihan. We could have done a whole hour just on Bank of America's earnings call. All right. I'm going to dive into that. Let's move on to Tesla. I'm going to dive into that. Let's move on to Tesla. This is like, this is going from bad to worse. This doesn't feel like one of those offensive layoff announcements that like Zuckerberg was making, like a rally of the troops. Like, let's get rid of the 5% of people that don't even really want to be here. And the other 95% are going to like kick ass.

You read his email? Yeah. It's a shit show. Yeah, it's not great. Over the years, we have grown rapidly with multiple factories scaling. With this rapid growth, there has been duplication of roles and job functions. As we prepare the company for our next phase of growth, it's extremely important to look at every aspect of the company for cost reductions and increasing productivity.

The next phase of growth, when does that start? Because- Can I tell you something? Deliveries just went negative. If this were last year or perhaps a different company, the stock would have been up 8% on the news. Oh, you think so? I mean, this was the story. But they did layoffs. Didn't they do layoffs last year too?

This was a big story for a lot of big tech in the back half of 2023 was right-sizing the employee count. And the stock market loved it. And now they're doing that. And the stock market's like, uh-oh, how bad is demand really? Yeah, we did this because we did this already. We did this already. I looked to Electrek's take they were just brutal and they don't hate tesla or elon they're not they're like they're they're an electric vehicle website they're just like they're so disappointed by what's happening here

and look if if elon weren't the founder and shareholder, like I think he would have been fired already. And this is like, you know, we want visionaries to run companies. We want founder led. We like that in technology, of course. But it doesn't it doesn't always go well all the time. Like Zuckerberg was was down 70 percent from the high share price. He listened to the market. He got religion.

It helps that the advertising business reaccelerated as the economy reopened. But it was a true comeback. So we were talking about earlier in the year, maybe last year, Tesla lowering prices to go on offense and crowd everybody out. And it seems now that's just not the case. So here's what JP Morgan's analyst, Ryan Brickman, said.

More than 10% of its global workforce should, by the way, they employ 140,000 people. Yeah, I was going to say it's 14,000 people. It's not an insubstantial number. And a lot of these are knowledge workers, like high salary, knowledge economy workers. So he said that should firmly dispel the notion that the company's big Q1 delivery miss was somehow supply driven rather than reflective of the demand problem. The news should now leave no doubt that the decline in deliveries has been

a function of lower demand and not supply. And he's got an underweight rating with a 115 price target and it's already bad, Josh. It's 157 down from a split adjusted high of, oh my God, I have to zoom out. It's so high. 4.15. Is it in a 60% drawdown now? If it's not, it's right there. Ish. And this is kind of wild.

So Tesla is now down, thank you, Y chart. It's down 61% from its highs. Over the last three years, now I'm sort of cherry picking because I had an incredible 2020 or 2021. Over the last three years, it's dramatically underperformed Ford and General Motors. Okay. So the reason why is fairly well known at this point. I'm not breaking any news.

One of the weird things about this winter, while we didn't have a lot of snow, we had long periods of sub-freezing temperature. And these stalled all-electric vehicles became not a business news story, a mainstream news story. People abandoning a frozen battery car and having to walk miles to get help. And now all of a sudden you hear Ford saying, oh, actually we're in the hybrid business. We do hybrids. So hybrids are the new electric vehicles. Now, of course, there's some hysteria involved, but you and I had this conversation. We were talking about like, is this the biggest buy opportunity in Tesla in five years? And I think we concluded no. And one of the reasons is you don't need to have thousands of stranded drivers with frozen batteries.

You just need people to have the impression that that's what happened. It's bad enough. It's enough. The impression is the thing in the mainstream media, not the business press, but people seeing a TV segment on NBC or their local NBC news affiliate that the weather is 18 degrees. And oh, by the way, maybe you don't take your Tesla out today. That screws things up in that local market. And when you see it as a nationwide story, it's bad. So I'm not saying that's a reason not to buy Tesla, to be clear. It's not me. I'm saying that's why the stock wasn't a slam dunk buy

in a 30% drawdown. Now is 60 extreme? I don't know. Tell me when delivery is going to turn up. Tell me when he's going to fire himself as a CEO and put an operator in. We don't know when these things are going to happen. I'm not catching this falling knife. No, I have no interest. Okay, let's finish. You got another cool chart here.

Yeah, last thing. Dealing with your portfolio when there's geopolitical flare-ups. Oh, have there been some lately? So just chart on. Let's just let the chart do the talking. There's been some times where the market falls. There's been a lot of times where the market rises. The point is there's nothing here to suggest that you should do anything with your portfolio. The median return one year after these 14 events that we have

identified is 13%. Now, the average is significantly lower because of the Yom Kippur War, which occurred in the midst of a really nasty bear market. So the average is closer to 5%. If you take out the Yom Kippur War, it jumps up to 8%. Mike, can we read off some of these events? And to be clear, this is a spaghetti chart. So we're showing the path of returns starting from right as an event is happening and what goes on 252 days later, which is a year full of trading days. Some of these events are the Cuban Missile Crisis, the Iraq War, JFK's assassination, Crimea, all these sort of things that have been in the news. I was about to say over the last few years, certainly that's not accurate, but you know

what I mean. I did a post on this topic on Monday. I think it was, was it Monday? And, or it was Sunday. But the post was three things to remember in times like these. And this is just as Iran is shooting shit at the Iron Dome

and the footage is all over the TV screen. So it was either Saturday or Sunday. But the three things are, the first one is you don't know what's going to happen. So in the case of Israel, as Saturday night unfolded and the attack started, it looked like we were on the threshold of World War III. And we still might be. But it looked really, really bad.

There were Saudi planes in the air shooting down missiles, U.S. planes, U.K. planes. The Iron Dome itself, the missile defense system, was operating on all cylinders. And the sky was just lit up with explosions. But I said, you really don't know what's going to happen. In this case, it was a measured attack. Iran telegraphed it a week early, and Israel is now going to do something back to them that they telegraph in advance, and hopefully everything cools off from there. Who knows? But that's the hope, right? So you don't know what's going to happen. Number two, you are more prone to imagine worst case scenarios. That's a fact. It's really easy to let your mind wander to the worst possible thing, like a nuclear weapon. And then the third thing is, even if you know what's going to happen,

if you guess correct, the thing you still don't know is how the markets will react. correct. The thing you still don't know is how the markets will react. And there's a whole litany of terrible things that have happened where stocks or bonds actually rallied. The assassination of JFK being an obvious example, the stock market went up 4.5% the day after. That was not supposed to be the reaction in stocks. Well, guess what? Futures opened green on Sunday night. I'll never forget probably five or six years ago, I was on a subway home on a Sunday night waiting for the futures to open because I think it was either a tax in Syria. I can't remember where the flare up was, but futures opened up 1%. And why? I don't know, but it's often counterintuitive. So again, the next time there's a geopolitical crisis, which I guess is tomorrow,

you don't know what's going to happen. You're definitely going to be thinking worst case scenarios. And even if you guess right, you still don't know what markets will do. Keep those three things in mind. Okay. Let's finish with make the case. I'm going to make the case for a stock that just fell, I think 15%. Oh, I like this. I didn't even see that you were doing this tonight. It's Home Depot. It's a stock that, oh no, it's a stock. I didn't even see that you were doing this tonight. It's Home Depot. It's a stock that, oh no, it's a stock that I don't own. Pitch me.

And it's a stock that I don't think I've ever owned. All right, let's just start with the obvious. Home Depot is the global leader in home improvement. Yeah, what do they do? But yeah, but much like the ultra high net worth space that Goldman was talking about, it's still relatively fragmented. They only, I mean, it's still relatively fragmented. They only, I mean, it's a large number.

They own 17%. They have a 17% market share. They estimate that it's a $980 billion annual business. So perhaps there's room to eat even further into that pie. Why do I like Home Depot? Well, they like their shareholders. That's why. Look at the shares outstanding. It is going in the right direction. They are not diluting. In fact, they're their shareholders. That's why. Look at the shares outstanding. It is going in the right direction.

They are not diluting. In fact, they're doing the opposite. They're buying back gobs of stock. They are also- Sorry. Increasing their- Let's pause on this. This looks like they had two and a half billion shares outstanding.

Dude, I am cooking. Shush. Next. They increased their dividend last year by 7.7%. And if I zoom back even farther, the line just goes parabolic because all they do is consistently raise their dividend. And if you combine the two, I'm talking about the dividends paid and the buyback, you get what's called a shareholder yield. And that is a pretty, excuse me, that is a juicy 4.5%. So fundamentally, I like the stock. Chart off, please, before we get to the next chart. I also, guess what? I don't believe the higher for that much longer story.

I mean, do I believe that rates, cuts are getting pushed back? Sure, I do. But I think that the bond market is perhaps overestimating how high and for how long rates are going to stay. So I just don't buy it. And it's not that I don't buy it today, that there's going to be an immediate pullback in rates. But I think eventually, rates will come back. And when they do, housing markets will, the fuse will be lit again.

And then last thing, technically, I like the chart. I like the chart. Chart on, please. This is a weekly chart. And what I see is a whole lot of former resistance at around 330, potentially, is the keyword here, potentially turning into support. Maybe it will. Well, you know where your stop goes, if anything. Well, I don't know where your risk appetite is. Is it under 275 or is it under 330? If I'm taking it as a trade because it's oversold and it found support at prior resistance, then right under 330 is where my stop is and it's a trade. Yeah, I agree. If you're taking this for

a trade, it's under 330. But I think you could take this as an investment. I'm not saying this is the bottom. Well, I agree with you. You might get a better price later. I agree with the premise. Home Depot doesn't need lower rates. It also is fine in higher rates. People remodel their house for different reasons at different times. There is no best environment for Home Depot. There are building manias that occur from time to time. But overall, this company continues to find ways to reward shareholders.

So I think you're going to be right here. I want to do my mystery chart. We can do this one quickly. John, if you please. Ooh. This is a growth company. I'm not going to tell you the sector because I don't want to make it that easy without you taking some guesses. But it's a classic growth company. And what I want to highlight here is how beautifully

this thing has behaved relative to its 50-day rising moving average. You're looking at a chart that goes back one year. So you can see that this stock has just had a great full year. And technically, there are no flaws here. Okay. You're going to have to give me something more than this is a growth stock. Okay, fine.

This is a NASDAQ stock. Okay. And it is in the top 100 market caps in the S&P 500. Okay. It's not a MAC 7 stock. It is a MAC 7 stock. That's my last hint. Incorrect.

Google. The reveal. Remember how cocky you were behind the scenes? Like, oh, dude, I'll guess in two seconds. I own this one. Remember how cocky you were behind the scenes? Like, oh, dude, I'll guess it in two seconds. I mean, listen. I'm actually surprised you got this one. What I do, I'm clearly a better teammate because I set you up for success. I actually give you clues, not just this is a growth stock asshole.

I gave you a smack seven. You had a one in seven chance. Actually, you knew it was an Apple, and you knew it was in Tesla, so you had a one in five chance. All right. Well, listen. I like it. I did my best, chance. Well, listen, I like it. I did my best, dude.

I like it. I like it. I own the stock, but not enough. I think it's my second smallest position. Unfortunately, if this continues at the current rate, it's going to be the best performing of the mag seven stocks. I mean, I know it's only April, but this thing is a leader and looks good. Okay.

Leaders lead. Leaders lead. That's it from us. Once again, remember, if you are in Southern California, come out and meet us. Come hang at the live taping at the end of this month. Link in description. Special thanks to the folks at Public, my favorite brokerage app. And remember, tomorrow is Wednesday. That means an all-new Animal Spirits with Michael and Ben.

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