The Compound and Friends - Six Reasons to Stay Worried

Episode Date: August 8, 2023

On this TCAF Tuesday, join Michael Batnick and Downtown Josh Brown for an episode of What Are Your Thoughts and see what they have to say about: reasons to worry, a buyable dip, higher rates, Buffett vs Icahn, earnings, Apple, and much more! Thanks to Public for sponsoring this episode! Go to www.public.com/compound to lock in a historic 5.5% yield on your cash. Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com 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. Wealthcast Media, 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. It is Tuesday and we are in the midst of, I don't know, week four, week five of earning season. There's so much going on today. So much going on this week. Uh, Michael and I had a wild and woolly episode of what are your thoughts? You're about to hear the audio from that right now. Hope you enjoy the show. And, uh, again, thank you so much for listening. 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. All right, gangsters. Let's see who's here. Chris Brown, compounders ready to roll. That's right. MK giving me a shout out for the Friday show on CNBC. I appreciate you. Late breaking news. We're being informed by Brooklyn in the chat.

Penn Gaming just spun off Barstool Sports. We're not going to cover that tonight. We have no idea what's going on. But good looking out. Bob Sacamano is here. Dr. Horton. Cliff Peebles. Sean.

The whole Duncan Hive is here. Ryan Buckley, I see you. Drew Pratt, what's happening? All right. Big show tonight. We're going to talk about earnings. We're going to talk about inflation. Warren Buffett, Carl Icahn is a mystery chart. And at the end of the show, I will be revealing for the first time ever, Michael Batnick's social security number. But first, a word from our sponsor. Michael, who's sponsoring the show this week? It's called Public. Ooh.

We like Public. Here's what I did on Public. I bought some T-bills. I did it. Like me. Six months. Easy, peasy, lemon squeezy. That's why you're my son.

Because I did that a long time ago. And you know what? I was not deterred by Fitch. I don't care what they say. LOL. I believe in the full faith of my U.S. government. Took like two seconds. Didn't have to go to Treasury Direct.

And like, I think that Treasury Direct is built on DOS. Remember that? Yeah. Yo, I feel that Treasury Direct is built on DOS. Remember that? Yeah. Yo, I feel like Fitch is Phoebe. Don't step to Uncle Sam. What are you, nuts? No, no, no. Yeah.

Moody's is Rachel and S&P is Monica. When you said Phoebe, I didn't know what you're talking about. Fitch is Phoebe. All right, go ahead. Keep going. So the other nice thing is, I mean, listen, I have said this before, this is obvious. If you're excited by a 5.5% six-month annualized yield and I'm excited by it, you got to hold to maturity, right? Otherwise, you don't get the yield. I know it's obvious, but it's worth pointing out. And then they'll roll the bonds

for you or the bills or whatever. And hopefully we're still at 5.5% in six months, we'll see. I think that's the future of the public app that I appreciate most is the automatic role because I'm already coming up on six months since I started buying treasuries there. Not to brag. I just don't want to deal with it, to be honest with you. I have enough going on. So, all right. Shout out to public. Thanks for sponsoring the show. This weekend, Ari Wald put out some stuff on the dip last week, and he's looking at it as a textbook viable dip. And I know yesterday and today, a couple of days have elapsed, but I think his take on the situation probably aligns the most with the way I feel.

He's looking at this seasonally. He's looking at the various cycles, as a lot of technicians do. And I just want to go through some of his comments. And as I'm doing so, John will pop the appropriate chart. So shout out to Ari Wald at Oppenheimer. Are we still selling this? Yeah, it's the best seller in the store, hands down. I think.

Nicole will correct me if I'm wrong. Okay, he thinks this is a textbook seasonal correction and it's August. And we know that October has historically been like a wild month, and September has often been the start of bear markets, and August is the doldrums, and all the pros are in the Hamptons, and they let retail or they let interns run the trading desk. We know all the tropes, but let's pop this up. Ari says, quote, we use seasonal trends as secondary

confirmation to our primary indicators. Last October, we weren't positive because major market bottoms frequently develop in Q4 of a midterm year. We were positive because the textbook criteria for a major market bottom had developed. Josh, can I play you for a second? Are you going to show the, are you going to explain to the audience what we're looking at? Yeah, man. All right. I was reading his to the audience what we're looking at? Come on, man. All right. I was reading his comments that explain what we're looking at, but okay. He is saying that this is – all right. So in gray is an amalgamation of the last 10 pre-election years. 2023 is a pre-election year. So here is the last 10 of those and all smashed together. Gives you a composite composite mike is that the right way to say it it's an average yeah okay so as you can see if we were to have this pullback in august it's like right on schedule with an average with a composite of the last 10 years averaged out like this is kind of like uh par for the course it doesn't feel that

way people like it perpetually going up, but it just doesn't. And I thought that this was really helpful context. What are your thoughts? Chart off. I am typically, well, there's a lot of seasonal charts. There's a billion of them.

I know you're not like a seasonal guy, but this is hard to argue with. Some I respect. Some I throw in the trash can. I like this one. I like this one. I think, because I think there's meaning here. Yeah, you know, you're good. Some I respect. Some I throw in the trash can. I like this one. I like this one. I think because I think there's meaning here. Yeah, you're good. You're safe. When Terranova was on our show a year ago or so talking about performance in midterm election years, I don't know why it matters, but it's matter. The market has never been down 12 months later. And I think

we were joking at the time, watch this year will be the year. No, it wasn't the year. It wasn't the year. So as Josh mentioned, for whatever the reason, August is a lazy month. And guess what? We've had a hell of a year, right? We've had a hell of a year. So giving some back is not only healthy, it's a good thing. It's normal. It's great. Here's more from Ari. Chart on, John. We got more optimistic in the market. Of course we did. Prices went up. Right. But he's pointing out that the level of optimism is more consistent with a pullback and not a

major top. This is back to Ari. Quote, we want to stress that the market is behaving in a manner consistent with a trend that should continue, a pullback in an uptrend and not a major top. For instance, while optimism is on the rise, we'd argue the levels of complacency that have historically limited bull market activity are still missing. He points to the investor's intelligence bull bear ratio at 3.1. That is not quite where it would have to be to form a top. Next chart real quick. We'll knock this one out. This is basically levels of support. So here's Ari. Potential. Potential support. Yeah, everything's potential. We see until it happens and then it was obvious. We see 4,400 as the

start of support. That's the 50-day average. It extends down to 4,200,400 is the start of support. That's the 50 day average. It extends down to 4,200, which represents the February peak. So using the midpoint of this range, we believe the S&P becomes attractive toward 4,300. We're watching a daily RSI reading below 40 as a tactical buy signal. All of this seems pretty reasonable to me. What are your thoughts on the levels? I just want to say one thing. This is noise, right? We're talking about this. We're here for entertainment and education, right? Like a lot of this seasonal short-term pullbacks. It's all, it's all noise to me. Uh, but that being said, I think that we saw a lot of signs as we were talking about with Dan and Guy that the rally was getting long in the tooth. And now all these things are ridiculously hard to call. Sometimes

you get lucky. Um, but we saw record saw record short covering or deleveraging or whatever. You saw Carvana and the junkies of the junctures going nuts. Mike Wilson capitulated. And there was just AAII got as high as it's been in a while. Yeah, like a lot of anecdotal stuff piled up with data. There was just a lot. There was just a lot. And one of them was to try to break the camel's back. The market is selling the news of the earnings, which we'll get to. And again, very normal stuff. Very normal stuff. Last technical chart. This is Stephen Sutmeier from Bank of America. He calls it not a seasonal correction, a seasonal pullback, but a tactical correction. He has levels too. I got levels. You know what my level is? I'm watching 4440. There, I said it.

He's highlighting some levels, 4450, 4325, and 4200 for various reasons. They represent prior levels where buyers came in or there was prior resistance that's now support. But I think the big picture here, once again, is that he's looking at these rising and bullish 50, 100, and 200-day moving averages. And so long as the trend is still higher, you could see those blue, green, and red guys. So long as that's the primary trend, I think that's really what we want to focus on. The trend is clearly higher. It's a bull market. Nobody knows when it's going to end. Every time we get a dip, we're like, all right, that's it. It was fun while it lasted. Nobody knows when it's going to end. Every time we get a dip, we're like, all right, that's it. It was fun while it lasted. Mind you, certain stocks came back pretty furiously today. We got

a Moody's downgrade, which we're going to talk about. But listen, it's a bull market. Hard to pick the top. Hard to pick the top. All right. Take it away. All right. We are talking about interest rates. Before we put the chart on, let me just set the stage here. Why haven't higher interest rates wrecked the economy? Why haven't they hurt the consumer? Why haven't they hurt the corporation? And we've been saying for a while, remember that pie chart, Josh, that I've been showing from Bank of America, I think, talking about how much of the S&P 500's debt is long-term fixed. It's like 85%. So you could raise rates, but these companies gorged, appropriately so, in 2020. They took full advantage of where interest rates were. Remember Microsoft got money like 2% or something, like literally?

A lot of them stopped their buybacks, which is really funny. They had stock prices that were down 20% and 30%. They stopped their buybacks, but they refinanced. And now they're in really good shape. And they could probably weather a recession. They stopped. That was a huge part of the story in the 2010s, the debt for equity swap, right? Issue bonds, buyback stock. And it freaking worked spectacularly.

Matter of fact, I forgot to put this chart in. I think I forgot to put this chart in. Q2 buybacks are down like 35%. We had a pretty good Q2, if you remember. Right. But so what that is, is like, that's just cash accumulating. And that's why the balance sheets are in the shape that they're in. Okay. So anyway, so this is a wonderful chart. This is from Lori Calvicina. She is the head of US equity strategy at RBC Capital Markets. So what we're looking at, so the, all right, obviously as you could read, S&P 500 companies are still benefiting from the era of low interest rates. So what she's showing is the estimated effective interest rate on the S&P 500 and it's low. It's still super, super low. She concludes that it's

in the 1.7% to 3.1% range. So for companies not in the S&P 500, yeah, it matters. It matters, right? If you're exposed to floating rates, it matters. But for markets as a whole, they're good. Go ahead. I want to hear something funny? I firmly believe that one of the strongest correlations in the market right now and probably for a while is going to be this new thing where when yields come down because bonds rally, small caps also rally or at least outperform the S&P because of exactly what you just said. If you're in the S&P 500, no problem with borrowing. Good. Small caps that are locked out, when rates fall,

people feel a little bit better about their outlook. And I think that that's like a new kind of nascent correlation trend that not a lot of people are talking about yet. Yeah, that's a good one. Next chart, please, John. There's a great visual. S&P 500 companies have shifted into long-term debt over short-term debt. So the chart on the right shows long-term debt to market cap. And it's pulled back a little bit. But again, these companies have taken advantage of low rates. They went way out there.

And they're good. They don't need to refinance. They've got plenty of debt. So again, that's mega cap companies. They're good. Right. They've got plenty of debt. So that's, again, that's mega cap companies. They're good. So if, right. So if you're looking for signs of stress, because you're watching the HYG or JNK, you are playing the wrong game right now.

That's not where it's going to show up, or at least not at the beginning. Like if that's what you're doing, you're wasting a lot of time. Also, not only do these companies have a lot of healthy debt on their balance sheet, they've also got a ton of cash. Now I'm picking two of the biggest companies in the world. But Apple, $160-some-odd billion. Berkshire, $100. Now, maybe Berkshire is a different story.

But still, these companies are sitting on tons, metric tons of cash. We got a joke in the comments tonight. Joke in the comments. Mark O'Connell says, what do you- Is this going to be at my expense? No, you're not part of this. I mean, really? Does the world stop and start around you?

Dude, pay attention. You're in the comments section while I'm lecturing. Mark O'Connell says, what do babies and T-bills have in common? You only get the benefits by holding till maturity. Not a bad dad joke. All right, Mark. It's a dad joke.

6.2. It's not bad. Not bad. All right, Josh. It's a dad joke. 6.2. It's not bad. Not bad. All right, Josh. Are we in the clear? Wait, what? No. That was a segue over to you.

See, I'm a professional. I set you up. That was a layup. You didn't take it. That was great. I dropped it. I let the ball sail into the stands and hit some, knock somebody's popcorn out of their arms.

and hit some, knock somebody's popcorn out of their arms. Ed Yardeni, who has been bullish and correct, has made a list of worries that the hardlanders, which I haven't heard this term yet, that we're calling the people that are still looking for a hard landing, we're calling them hardlanders. And I love it. And I think it's perfect.

Because it's a double entendre. Like it's a hard land. Like it's the land of hardship, right? But also, like, they're looking for a hard landing. I'm feeling this. Ed Yardani made a list of hardlander worries that are still legitimate worries. He's not, by the way, he's not, like, mocking these concerns. He's saying this is what, if you are still in the camp that we're going to land hard, which plenty of people are, these are the things that you're probably talking about or worried about.

Let's get to it. Okay. Commercial real estate crisis. This is so boring. It's probably going to happen, but very slowly is my take. It's probably going to feel like a crisis. It's just not going to be overnight. Um, he's pointing to things like the senior loan officer opinion survey saying 67.8% of lenders continued to tighten lender standards for commercial real estate, I guess, uh, into

this quarter. Um, commercial loans at all commercial banks have been flat at a record high, just below 3 trillion since March 15th, blah, blah, blah. It's just, it's not getting better. There is the, uh, he, he's joking that maybe, it's not getting better there is the main, uh, he, he's joking that maybe you can turn all these vacant malls into pickleball courts. It's funny. All right. Uh, renewed wage price spiral is number two. So basically many workers achieved wage increases by quitting their jobs for better paying ones. They could do so because the labor demand for labor has exceeded supply. That's still the case,

even though both have moderated. I think this particular worry is mostly in the rear view. And the reason why I said that is because there's a chart, I think, from the Cleveland Fed that shows wage gains from job stayers and job switchers. And as everybody remembers, during the pandemic or post-pandemic, job switchers were getting paid hard, right? United Auto Workers Union opened up negotiations with the auto manufacturing industry last week by demanding a 20% immediate wage increase and then another 5% during each year of the contract.

Hold on. So what I just spoke about is normalized. Now- I agree, but I'm saying it's not over. So how big, do you know what percentage of the labor force is in unions? That's a great question. It's relatively small, but according to Ed, their contracts can have an influence on wages in the non-unionized sectors.

Non-unionized workers can take their cues from big company or big trade union developments. And I'll have you know, not sure if you know this, my daughter drove to Starbucks. Try me. My daughter drove to Starbucks in our town last night and it was closed because they were on strike. Starbucks? You know that? Starbucks in our town. What do you mean on strike?

It's like a goddamn Bruce Springsteen song. I got it this morning. I got it this morning. I'm telling you, last night, they were striking. They struck? They struck. Okay. I believe it's stroked.

They stroked. Sir. All right. Federal deficit spiral. This is one that you can basically use as your bear market reason, probably for the rest of your life. Yeah. Yeah.

However, U.S. Federal deficits and the resulting U.S. Debt mounting debt are growing as a percentage of nominal GDP on a 12 month, some basis, the former just jumped from a trillion last July to 2.3 trillion. I'm sorry.

That's not good. I don't see this as a risk, like a real risk. Now it might cause some volatility headline, political headline. So complacent. But this isn't, come on. Sorry. So toppy.

No, no, no. Net interest is up and to the right always, but you got to adjust for the GDP. It's not that bad. Risk number five. Reason to worry number five, Bond vigilantes rampage. So basically, bond yields can get out of hand if people go on a buyer strike and just refuse to buy treasuries. He doesn't seem particularly worried about this one, but it's out there. We got a little bit of a taste of it last week in the long bond, and then it reversed. So who knows? Six, Fed goes vulgar.

If inflation doesn't continue to moderate and appears increasingly sticky, well above the Fed's 2% target, Powell and his colleagues may conclude they have no choice but to vulgarize interest rates, meaning raise them until they vaporize economic growth, which they did in the 70s. Again, this is if you're a hard lander. You have to believe that this is why you're going to have this hard landing because it's not in the data right now. So Atlanta Fed real GDP tracker 4.1% updated this morning. percent updated this morning. So he says for now, our economic outlook remains 85% odds of a note of a no landing or a soft landing and 15% odds of a hard landing that should remain the case unless one or several of the worries. All right, look, I think it's healthy. I think it's healthy

to keep those six things in the back of your head because they are real things. And we could go a full year where nobody cares. And then one day somebody decides to care and other people follow their lead and it becomes a story. So that's all I wanted to point out. You're up. I just want to, I want to say one thing on this. And I think I would agree. Big fan of his work.

One of these things could certainly happen or a combination of them, but I'm always worried about things that we don't think about. Like that is what real risk is. Like dinosaurs. Dinosaurs. real risk is. Like dinosaurs. Dinosaurs. Real risk is not something that you're going to put a list in, right? I mean, this is all well- Yeah, COVID, 9-11. I do not know. Yeah, this is all well-known stuff.

I have always agreed with you on that. But I would say- If we're adding stuff to lists, pretty much don't worry about it. If I had to pick one risk that would transpire, I'd probably say, yeah, inflation re-accelerates and the Fed keeps raising. Yeah. At some point, if that happened, then we'd be in trouble. By the way, so he's double counting that. That's both wage price spiral and Fed goes vulgar. Those are both the same thing, but okay. All right. Moving on. I'm not exactly sure what this chart shows. I think I know,

but let's throw it up here. We're looking at Bank of America card data, and we're looking at services, including restaurants and retail, excluding restaurants. So the thing that I'm not exactly sure is it shows percent month over month, but then it also says three-month moving average. So is it a month over month change of the three month moving average? That sounds weird. Month over month, three month moving average seasonally adjusted. What was the commentary that came along with this? I don't have it, but either way, either way, let's just take it at face value. And the thing that I'm interested in is, so it was negative. Retail excluding restaurants was pretty much negative for a whole year in 2022. I mean, this is in line with the experiences,

not, not items like goods, uh, services, not goods. Like this is. And so anyway, anyway, the thing that I'm focused on is all the way to the right. It's accelerating or re-accelerating. Uh, people are spending their butts off. It's kind of wild, but they're right, but they're spending it. Like they spending it like enjoying themselves taylor swift i think it's great yeah taylor swift's a billion and a half dollar enterprise she's doing six shows in la alone like it's it's a it's a phenomenal by the way i never thought for the rest of our lives we would ever have a pop star this big i thought after mich Michael Jackson and Madonna were not followed up for 25, 30 years, I thought that was it. Like this is the big, the Britney Spears, not even close.

This is the biggest star on the planet in her prime and getting bigger. She's been doing it. It's just like getting bigger. And she's a, she's a genius. Just everything she touches turns to gold. She's just converting the entire world into her fan base. It's unbelievable to watch. Her first album was from 2006. So that's the thing, longevity. It's like 17 years. Dude, she's been around so long.

That thing where Kanye West interrupted her speech, do you know what year that was? I'm going to tell you, but just try to guess. When do you think that happened 14 how about 2010 it's 13 years ago we're old that's how long she's been around oh my gosh and not just around but like big famous she's been big for more than a decade and she looks like she's 20 years old yeah i mean I mean, she is, wow. All right. Nobody switches banks. And I kind of shoehorned this into your topic about people who are still spending.

That's accurate. All right. So we have this survey, and I know you're not a big survey guy, but I just thought it was an interesting way to think about this. Dude, if it supports your prior beliefs, then I'm a survey guy. No, actually, it surprises me. I'm a survey guy. No, actually, it surprises me. Bank Santander says that 79% of middle earners, people making between $47,000 and $142,000, have not changed their financial behavior despite the recent banking failures.

One more time. 79% of middle income people didn't change their bank or their financial behavior at all after Silicon Valley Bank. Yeah, but 20% did? That sounds really high. Hold on. 5% switched banks. That's it. So- Wait, where's the other 15%? I'm going to get there in a second. Here's what's interesting. The three biggest banks in America, JP Morgan. I thought about this on TV. JP Morgan, Wells Fargo, Bank of America pulled in $50 billion in higher interest payment – from higher interest payments last quarter. Like none of them have raised the yield that they're paying, but they pulled in $50 billion in more net interest income regardless. They don't have to. If you haven't left, you're not leaving.

Look at this. JP Morgan. You agree? If you haven't left yet, you're not leaving. Year over year, 44% increase. Now they bought First Republic, but they also benefited from the chaos before they bought it. And they didn't have to raise their savings rate. So that's three gigantic banks that are making more money than ever because they can. And they didn't have to change their... Anyway, but Santander is going through... We have a couple of slides I just want to get to. This is 2,200 households. So only 5% of middle-income Americans actually changed their bank, which I think is a surprise to me.

Wait, and Josh, guess what? How many of them, that 5% were forced to because their bank literally closed? Yeah, right. So almost nobody did anything, but 32% have moved their funds to high-yield accounts. So interest rates going to 4%, 5%, 6% did prompt people to call their existing institution and make a change in how they were holding their cash. Next slide, please.

This is Americans talking about their biggest financial challenges. Go back. Inflation is still 57%. Meaning what? 57% put that as number one. Say it's their number one. Right. Only 3% give a shit about recent bank failures.

Yeah, nobody cares. Okay, but that's kind of surprising to me. I guess because nobody lost any money. Dude, they would have cared if the Fed didn't do what they did. True. Next slide. This is Americans leaving money on the table by not taking advantage of higher yields on savings. Look at this.

Since early 2022, 68% of middle-income Americans have not moved deposits into higher yielding accounts to take advantage. So rates have gone from zero to 6% and 68% of people in the last 18 months couldn't be bothered. That's incredible to me are you surprised by that i'm not how sway how are you not surprised because i know how powerful these people doing i know i i know it is so robin hood reported so p dude people just hold way too much cash in general in their checking account,

in their brokerage account? The only people, the only place, the only accounts where people behave the way that they should is in their retirement accounts for the most part. Robinhood reported like $240 million of net interest income, which is madness. Robinhood, it's, it's, it's a trading platform or an investing platform, whatever it is. How much cash do you think is responsible for generating that much amount of income from them? I mean, we can do the math and back into it. It's a lot. Yeah. It's billions, right? People hold, yes. People hold way too much cash all across the board. I don't know what level

it gets another. So if you left for 5%, if you haven't left for 5%, you're not leaving for 5%. I don't know where the next milestone is, where you get another wave, where people have to wake up. I don't think it's happening. Is that 6%? I don't know, 7? Well, the five or six banks that are able to pay zero and can live in a world where people are leaving that 6% on the table, they're going to make a lot of money. Actually, you know what's funny? Hold on, Josh. You know what's funny? People say banks can't make money when the curve is flat or inverted.

Bullshit. Yeah, look. Last slide. This is interesting. Most important factors when considering a banking provider, being stable and secure, 98% said,

98% of people use that as one of their main reasons. The second most popular reason was 24-7 access via online or digital applications. You know what people don't care about? Only 77% said they care about having a branch within 10 minutes of my home or work. And this is a great segue into what Moody's did today with the regional banks. It turns out- It sounds like they're looking for attention. What are they doing? I don't know. Yeah, they're all feeling frisky this week. It turns out people really less and less care if the bank has a branch. Everything is now on the app. Everything's

digital. It's only going in one direction further. Still, these regional banks used to have like their own sandbox where they had all the castles in the neighborhood and it just matters less and less and less. And that's why I agree with what Moody's did today. I don't think there's any future for most of the banks in the regional category. I think like BB&T will be fine. It's big. Well, what you just said in the future is the key part of what you just said, because

this is a big demographics thing. It's going to be, I call these- All of them go to the bank. I agree. I call these banks coal mines. They're not going to implode tomorrow. It's going to be 20 years of shrinking. Yeah.

It is not going to be pleasant. It's like linear TV. It's not going to be pleasant. It's like, it's like linear TV. It's just people that are just cutting the cord. A lot of these, a lot of these Neo banks that are like just an app now, like a venture backed. Some of these, the ones that make it are going to end up acquiring these regional banks in

10 years. How many branches do you think SoFi has? I don't know. Is it zero? Maybe. I don't think you could go into a SoFi bank. Yeah. I think they're only branches like in your heart.

All right, Moody's knocked the whole market down today with this shit though. But we came back. We took it back. I know, but I'm just saying like this is – I agree with what they're saying. They cut multiple banks' ratings and put others on watch. Pop up this KRE. Dude, that's exactly the point. Everybody agrees with what they're saying.

This is not news to the market. It's a blip. It's a blip. It's a blip on this chart. Josh, nothing in their downgrades was news to the market, which is why it knocked these banks down. And then they closed at the highs. This is not news, what they're saying. I agree that it's not news. They got FOMO from Fitch.

They're like, oh, shit, you downgraded the U.S. government? We got to do something. The Federal Reserve's campaign to list interest rates to combat inflation continues to have a material impact on the U.S. banking system's funding and its economic capital. Higher rates have reduced the value of bonds and other assets owned by regional banks, leaving the lenders with, quote, sizable, unrealized losses. Dude, we did that already. We already did that. I don't think it's over, my man. I'm sorry.

You sound like you think we've seen the worst. I'm not saying it's that. I don't think it's over, my man. I'm sorry. You sound like you think we've seen the worst. I'm not saying it's over. I'm not saying it's over. But I don't know. I don't know. But this is not news to the market. The market is well aware of the risks. All right.

That's all I'm saying. They threw this little nugget in. The ratings firm also pointed to the prospect of a recession in early 2024, eroding demands for loans and leading to loan defaults. It said banks could be hit by problems of commercial real estate, including higher rates, vacant offices, reduced availability of credits. Holy shit. That's insight. I'm not dismissing what they're saying, but yeah, we know. We know. The market knows. Are you in KRE currently? No.

Any plans to get back in? I did buy back Schwab. Not, yeah, it's not in the index. It's its own category. All right, listen. And I bought XLF for the first time in, I don't know, maybe ever. Not fading Warren.

Berkshire is breaking out to all-time highs. I'm in. Yeah, no, I'd fade Moody's. I wouldn't fade Warren. We're going to talk about Buffett now, actually. Let's do this. Give me a chart of Berkshire versus Icon Enterprises, and let's take it back 25 years. Okay.

This is really interesting to me. Toys in the hair. The purple is Berkshire. And for the last 20 some odd years, Icons publicly traded. I don't even know what you call it, partnership. It's kind of like a REIT or a closed end or something. Yeah. You know why you're a jerk?

This should be the mystery chart. Yeah. There's a lot of reasons. This should be the mystery chart. This is a great chart. You're going to love my mystery chart. It's going to completely baffle you. This is a phenomenal chart.

Berkshire is now up 908% over this 25 year period. Icon is up only 732% and falling precipitously so that Berkshire could catch up. This is not market cap. I want to make it very clear. Berkshire is gigantic. Oh, dude, Berkshire's ahead. Berkshire's ahead. Berkshire's ahead.

This is just performance. Warren Buffett is 92 years old, Michael, and Carl Icahn is 87. And let's talk about Icahn first. So they're both in the news this week. IEP, which is this publicly traded thing that owns Icahn's hedge funds and all of his personal wealth. It's been in the news because short sellers have attacked the payments that it's been making. They don't believe that these payments are real. They're Ponzi-like, according to the short sellers.

They just capitulated on Friday, cut their dividend for the first time since 2011. And half. Yeah, I read the CEO and CFO's comments from the conference call transcript, and they sound like babbling idiots. Horrible. Horrible. Almost like they were surprised that they were taking questions.

Icon is losing money in a raging bull market. He's got these stupid macro hedges on since, I don't know, 2013. I don't know, 2013. He's been betting widely against the market. And his longs are in like bad energy companies and bankrupted auto parts maker. It's just the whole thing is a shit show. And this is what Carl said. And I'm rooting for Carl to come back, by the way, guys. I don't want anyone to think that I'm rooting against anybody.

Quote, our returns have been overwhelmed by our overly bearish view of the market. Anyone remember Danger Ahead? 2015, I remember it well. Going forward, we intend to stick to our knitting and focus on the activist strategy. Icon fell 37% on Friday. It came back by the end down 23%. But basically, instead of paying out $2 a unit in distributions, they cut it to $1. And that was shocking. And keep in mind, this thing has already been cut in half by the time they were doing that. So I was just going to say,

with the benefit of hindsight, in all due respect, he should have stuck to his knitting, which is being an activist. Think about what he did with Netflix. I guess his son was big into that in 2013 or whatever. Just made a killing. They pushed Apple to pay dividends and buy back stock along with Einhorn in 2013 or 2014, whatever it was. They did amazing with that stuff. All of his macro nonsense has been nonsense.

He knows it. The company's second quarter loss doubled from a year earlier. This is with the stock market flying. Icon pledged a reset with the firm reducing its short bets. I don't know. Right. He was never a macro investor. And I think like in the last 10 years.

He turned into one. This is something really important. And this is not ageist. When you get older, you get more bearish. Of course, not everyone, Jim O'Shaughnessy, not included Warren Buffett and Charlie Munger, not included people. Most, most people, most people, when you're 87, you're not think excited about the future. Like, let's just be, let's all be very honest for the most part. What you see is kids with pierced things and nobody respects anything. And all the traditions that you grew up with are gone. And now with these tech stocks, they have $3 trillion market caps.

Like it's, it's just like, there's no way that a typical person in their eighties would look around and be excited about what's going on. And I totally get that. I will be the world's most curmudgeonly old person. That's a fact. I'm already well on my way. So this is no disrespect, but sometimes maybe just f***ing hang it up.

I don't know how else to put it. Like sometimes maybe just be like, you know what? I don't understand this world. I'm going to go enjoy myself. And that's not really what happens here. One of the big takeaways for me on that chart is it's the tortoise versus the hare, right? I kind of had just explosive returns, explosive, wonderful, magnificent returns, gave it back, pulled ahead, gave it back. And here we are. Let's contrast icon with Berkshire

Hathaway Berkshire Hathaway. Berkshire over the weekend, very quietly and with no fanfare whatsoever, just reported a $36 billion earnings, not revenue, $36 billion in quarterly earnings over the weekend. The stock hit a new 52-week high yesterday. I think it might've also today. This is the opposite approach of

paying a high dividend and going activist and writing nasty letters and swashbuckling. This is slow and steady. Uh, you know, stay out of the media, mind your own business, do one or two things a year where you talk to the press and you know, it's, it's, uh, it's obviously a different approach and seems like it's going well. I wanted to highlight- Wait, can I ask you a question before you just move on? If you had to pick one stock that would be most emblematic or most reflective on how the US economy is doing, would you say Berkshire is right near the top of that list? Yeah. If not number one?

Yeah, by design. It's supposed to be. I mean, that is USA and the stock's at an all-time high. 100%. And that's exactly how it was scripted. It's supposed to be that way. He's got foreign investments. He bought these trading houses in Japan. He had exposure to the Chinese battery stock that I think they just got rid of. But by and large, this is a proxy for the growth areas of the U S economy. Um, let's put this Apple chart up. Uh, did you know that Icon made a lot of money in Apple boarded in August, 2013 at $16 split adjusted and he wrote it to 24 bucks a share. I mean, that's a great trade. Can't hate.

Come on, you can't. Buffett, hold on. He's not a buy and hold investor. He won. Did you know that Warren Buffett bought the stock just as Icon was selling it? And I think, all right, Sean put this together for us.

Yeah, I can see it. No offense, Sean, but this chart is trash. Look at the dates. Look at the dates. Look at the dates. What do you mean, look at the dates? Look at the dates. What's wrong with the dates? There's like four 2021s.

You got to switch up the months, my man. They're quarters, dumbass. Dude, you're a dumbass. They're quarters. Stay with the story. Chart off. No, I will not. That's a horrible chart.

They're quarterly. You change it to a date dumbass you're a dumbass you have to do it quarterly because they file quarterly we wanted sir i'm talking about the labels 2022 that's january and then april and then sean is on long island right now he's twice the size of you i I would go easy. I would go easy if I were you. Carl Icahn would be up 1,250% since April of 2013 had he held his original position. Erroneous! Hold on.

He had $2 billion cost basis. It would be worth $28 billion. Yeah, he's not a buy and hold investor. I'm just saying. Yeah, you're not just saying. It's erroneous. It's totally erroneous. All right.

Buffett is up 730% since his purchase in Q1, 2016, he has about $176 billion worth of Apple, more than five times his cost of 31 billion since 2016. And he now, why did Icon sell? Perfectly reasonable. He said China's attitude toward Apple, remember this is early Trump campaign, early 2016, drove him to exit his position. Quote, you worry a little bit, and maybe more than a little, about China's attitude. Icon later added China's government could come in,

quote, come in and make it very difficult for Apple to sell there. You can do pretty much what you want there. He added, though, that if China was basically steadied, he would buy back into Apple. China's never been steadied.

He never bought back into Apple. I think China is now their third largest or third or fourth largest market, and the rest is history. You know what else? You know what else Buffett bought from, from icon recently?

Oxy. Oh, really? Remember, remember I can get out. Yeah. And I think he did well in Oxy. He was an activist there.

Yeah. Yeah. So he forced them into a lot of repurchases and stuff. And then Buffett bought in and, and reap the benefit. All right. Although I wonder if that's like, that's like Buffett bought in and, and reap the benefit. All right. Although I wonder if that's like, that's like Buffett's playbook.

Like I kind of really clean shit up. Let's get, let's get in. What's this tweet? Not to laugh, but come on. This is a great tweet. Throw it up.

I can't see clearly now the gains have gone. Yeah, it's a good point. Come on. It's a clever tweet. It's a clever tweet. All right. Let's talk about earnings and the reactions. That's what we're going to do. We're talking about the reactions. Anyway, this, I just wanted good pun. Come on. It's a clever tweet. It's a clever tweet. All right. Let's talk about earnings and the reactions.

That's what we're going to do. We're going to talk about the reactions. Anyway, I just wanted to – Oh, you got more? No, we'll get into the earnings now. I just wanted to say like I have looked up to Icon my entire career, and I've seen him do amazing things. But I think that like my own style and my own mentality is way more akin to Buffett's. And, you know, this was like, I guess, more confirmation bias for me.

I also don't see myself as a corporate raider. Yeah, I agree with you. No, I mean, but just like being pulling the trigger fast and, you know, fighting with people over investing or any of that stuff. It's not for me. So before we get into the reaction of the earnings, let's talk about earnings. So we've been talking a lot about how earnings are down 7% year over year. However, however, like all of it is from energy. Energy earnings are down 51% year over year.

Stop this chart, please. So if you back up- We were early to this. Didn't we say this like the whole first quarter? You did. Yeah. If you bet- Wait, talking about backing up the energy thing? No, we said like before you get carried away with this like earnings recession, understand 100% of it is coming from the energy sector.

Yeah, I think you were on that. So anyway, yeah, if you take energy out, earnings are up 1.4%. Is that good? Yeah, it's pretty damn good considering what's going on. You know, considering all of the challenges that has been thrown that good? Yeah, it's pretty damn good considering what's going on. Considering all of the challenges that has been thrown at us, I think it's pretty damn good. So this is saying that year over year, earnings are down 5.4%. Sales are up 0.6%. But if you take out energy, earnings year over year are actually up 1.4%, and revenue is up 4.3%. And look at some of these names.

So industrials, earnings up 25% quarter over quarter. Consumer discretionary up 37% quarter over quarter. Yeah. Communication, 64%. I mean, unbelievable numbers here. It's truly remarkable. And so that fueled the rally. That fueled the rally.

But as they buy the rumor, they sell the news. From Bespoke, 316 stocks have reported earnings this week. 73% beat earnings per share. 64% beat sales. More raised guidance than lowered. But the average one-day change on earnings has been a big drop of 1.6%. Even stocks that have beaten estimates on the earnings side have dropped 0.11%. JP Morgan's got a chart of this, really lays it out very nicely. Companies that are beating estimates are being rewarded less

than typical, while those that are missing estimates are being penalized more than average. And you see, again, you see it in the chart here. The light blue is companies that miss. The top is companies that beat. And companies that beat are not being rewarded. Why? Chart off. Because they already were rewarded. Look at the run in stocks. They already anticipated this. So I want to say that sell the news is officially the theme of Q2 2023 earnings season. And this is a really great reminder. Here's the takeaway.

And I actually, I think I have data that's fresher than yours, actually. But this is why investors cannot, quote, wait for the smoke to clear before buying. Stocks bottomed well in advance of these trough earnings And they almost always do Maybe I could say they always do Say it louder They always do So this whole idea of why would you buy if earnings are coming down

Because everyone knows you're not the only person having this insight Nor am I That's why would you buy? The other takeaway is that investors are not impressed with cost cutting anymore. That was last quarter's story. It's not enough. You're right. 100%, they already got it. Now they want sales growth. And there is some data to suggest that the companies with bigger sales growth were able to avoid that post-earnings sell-off. So John Butters did this for Faxet. S&P 500 companies see the largest negative price reaction to positive

earnings surprises since 2011. That's a big deal. That is a big deal. This is Butters. To date, 84% of the S&P have reported. This is as of August 7th, so my shit is a little bit newer than yours not to brag there you go uh of these companies 79 have reported actual earnings above the estimate which is above the five-year average of 77 um in aggregate earnings have exceeded estimates by 7.2 um which is above the 10-year average of 6.4%.

Yes. Given this strong performance relative to 10-year average, how has the market responded? Companies that have reported positive earnings have seen an average decrease of 0.5% two days before the earnings through two days after. That captures the whole thing. Healthy. Look at Uber. Look at Uber. These stocks are going to go up forever and ever and ever. Yeah. Yeah, that's right. Why is the market punishing

positive earnings? It is not likely due to the earnings outlooks from companies and analysts for the third quarter, which have not been more negative than normal. So if you're walking around saying, well, they're all guiding lower. No, they aren't. They're not. Not any more than usual. That's not the reason. It's sell the news.

These stocks have gone up big. Chart on. This is S&P earnings per share surprise versus average price change. Just so you can see what I've been illustrating with my lyrics. Next chart. can see what I've been illustrating with my lyrics. Next chart. And this is just another way of looking at that drop, that average price drop. Last one, last one. S&P 500 earning surprise percentage. And you can see that that's well within the-

Wait, hang on. All right. So we'll have the number of companies got that, and then the average price change. Oh, interesting. This is a great chart. Wow. It's a really good chart, right? Yeah. Thank you. I cut and pasted myself. Chart off. Last thing. Did you know, however, that there are some instances where companies are having a really positive reaction to earnings? Amazon. And Amazon Caterpillar was one last week. Let me show you one more. Yeah. Eli Lilly. Yeah. Today, this became the largest company in the pharmaceutical index. I think it had a 15% day. Pfizer? Bigger than Pfizer?

Bigger than Pfizer. Wow. Quote, Eli Lilly became the most valuable healthcare company in the United States after a stock price surge Tuesday morning propelled the Indianapolis drug makers market value above 500 billion. Mike, this is a 147-year-old company. Shares jumped by 15% on second quarter earnings, driven by fast sales of its diabetes medicine, Moonjaro. This is part of the obesity bubble that we're, no pun intended, that we're in the midst of. And they are, it has a potential for obesity treatment, a use for which it's expected to earn FDA approval later this year. So look at this. This is an earning story that

has a happy ending. Pretty dope. Yeah. Yes, sir. I like it any thoughts you said it all alright I'm gonna make the case is it my turn yeah yeah alright I'm not sure how I feel about this

I'm not making the I'm just laying it out there and I did this on Animal Spirit so forgive me for the duplicative entertainment topics what are the implications

like what if what if and this is not a call we're thinking? Like what if, what if, what if, and there's not a club, we're thinking out loud. What if Apple peaked? Like Apple is a big, big part of the S&P 500.

What if Apple peaked in price? Yeah. I don't think it matters. I think the market cap leaves Apple and goes into something else. I just, yeah. Love it.

Are you in the camp that says like Apple has to go up for the market to go up? Because I don't believe in that. Definitely not. It'll just shrink. If it did peak,

which I'm not saying, it'll just shrink in importance each day until other things matter more. If Apple goes from seven, is it 7%? If Apple goes from 7% to 5%, I don't think that's bearish.

Listen, there was a moment where General Electric was the largest stock in the S&P. Yeah. I agree. It became a penny stock and the band marched on. But what's interesting is unequivocally, Apple is the most popular stock in the world, just for individual investors, without a doubt.

Yeah. Without a doubt. But the company is not really growing. So there's a great chart from, I'm sorry, I don't want to butcher his last name. The guy that runs the transcript, it's great stuff in here. Okay. So the Apple has seen top line sales have shrunk, shrank year over year for three consecutive quarters. So the iPhone, which is their crown jewel, it's like almost half of their revenue, year over year, last three quarters, down two, up two, down eight. Okay. The Mac, not small either,

down seven, down 31, down 29. The iPad, down 20, down 13. Wearables, up two, down one, down eight. Services, which is their big engine of growth, eight, five, six, five. So for a total of, this is year over year sales, negative one, negative three, negative five. Quarter's not yours. This is important. I'm sorry.

Quarterly revenue year over year. Yeah. Okay. Let me just run through some more stuff and then I'll get your thoughts. So you've got the company slowing, but now I should point out, this is not the first time.

It did this in 2019, it did this in 2016, and then it created these, you know, $10 billion category. So it's, this is not without precedent. However, it's doing this with its valuation, pretty rich relative to its historical history. Try it on, please.

So I've got enterprise value to EBITDA. You've got the price to earnings ratio. You've got the price to sales ratio. And they're all directionally, it's all the same chart for the most part. So we've been talking a lot about, well, should these companies that are growing trade at a premium? Yeah, this is not growing. Should the best company in the world trade at a premium? Yeah. This is not growing. Should the best company in the world trade at a premium? Yeah. But should it trade

at a premium when it's already a $3 trillion market cap? I don't know. And I always say, I don't know. That's not my talk. I literally, I don't know. Now you could also say, well, fine. Let's assume that they're not going to create a new category, which they very well might with the headset. Who knows? And let's assume that Apple is now a mature company, which it is. I mean, of course it's a mature company. It's just not really growing that much anymore. They're still buying back a shit ton of stock. Chart on, please. So their share is outstanding. You could say it's down 38% over the last decade. So you could say, listen, Apple could still deliver decent shareholder returns just by the fact that they're so

capital efficient and they're doing so much to deliver money back to shareholders. Last chart, and then I'm done. But the shareholder yield is also telling a similar story of the other valuation charts. It's pretty low. And this would mean that it's rich. The company is trading rich. So that's it. I'm not saying if you pulled Apple that you could dump it. This argument's been made a million times before, but the company literally is not growing right now. Michael, Michael, Michael, you innocent son of a bitch. Put on your knickers. I'm taking you to school. Unbelievable. First things first.

Literally, literally wiping your face. You're so disgusted with the case that I made. The shareholder yield is just the inverse of the stock price, which has magnificently gone up 40-some-odd percent. No, it's not. Basically. Inverse of the stock price. Yeah, because it's the percentage of yield, but obviously the yield goes down when the price goes up. It's like a dividend.

All right. What else? Please. Please. So there's that. You're conflating. You're saying, can it grow? Revenue growth is down.

You're right about that. Multiple quarters. But earnings growth is going up. And I will explain to you why. Because smaller share count. So earnings per share benefits from that. Because I didn't just say that. Number two, gross margins, 44%.

They're actually going up this year and $80 billion run rate for services, which is a 70% gross margin business. So Apple can have a year with low or no or negative revenue growth, still grow earnings, still shrink its float and have a rock and roll share price. And that can happen for years and years and years. It would be harder if they can't find new growth, but that can go on. The services being the highest margin. Unless, what if the government says, all right, enough of this nonsense. You're not taking a 30% break.

Well, yeah, that's the rest. So if that happens, that will be the biggest decline in market cap that Apple has ever seen, if that happens, which I'm not saying it will, but if it does, it will. Yeah, I agree. Apple's really important, not just the United States, but in the countries it operates in. It is not the kind of company that some political figure would just be like, get them out of here. They just broke a record for their sales in India, which is a brand new market for them. They're selling lower priced phones because the per capita income is lower.

But that could be a growth. And that's the most populous nation on earth. It's bigger than China. You understand? It's like five United States. If that becomes like a new focus for Apple. Sounds like you understand. What are you, my dad?

No, I'm just saying. I'm speaking colloquially. Not to you personally. But just like just when you think Apple has no more growth levers, they find them. I totally, totally, totally agree with that part. And the last thing I'll say is,

okay, the last thing I'll say is what politician wants to go to war with Apple? Who's going to be the hero? Yeah, that's right. I agree. It's not popular. Last thing,

this guy's sod Malik is in the chat saying, wait, JB, didn't you say apple would move the market on cnbc before their earnings call yes didn't it i don't understand how are these two like he's saying like i can't think that i definitely did it definitely of course it did yeah that doesn't mean that it'll keep the market from making a new high forever there's a big difference between what what what the market did on the day that apple's down 5% versus what it will do over time.

Exactly. Exactly. You know I only call you my son because you shine like one. By the way, I want Apple to go up forever and ever. Don't give me nonsense right now. Don't do it. Do not do it. John, mystery chart, please.

Guess how many jelly beans are in this jar please like literally that's your mystery you gotta be kidding me I thought you were joking alright alright alright mystery mystery chart

unbelievable dude the look on your face I think I'm gonna get this one you are definitely gonna get this one i think i'm gonna get this one you are definitely not getting this one um okay i'm gonna make it really i'm gonna do everything i can to make you get it though okay okay but i won't okay this is a micro cap nope nope this is this is a company that reported earnings after the close today. This was the hottest stock of 2023. And if you don't know it,

you have to pretty much the whole year up until today, it has been the hottest trade of the, it's been the hottest stock of the whole year. Actually, it is the eighth best performer in the Russell 3000 year to date. I'm going to give you the sector. Next chart, please. Okay.

Semiconductor. This is this stock versus its semiconductor holders ETF, the sector ETF. This thing is just thermonuclear. It doubled last year in a bear market. It tripled, I think, since May. So if you don't, I mean, reported earnings, semiconductor, what is it? You have a guess? Am I going to be embarrassed if I don't know this? I feel like you need to maybe change what you're looking at if i i really didn't deliberately make this hard for you i swear to god no no this is not in video obviously no no no you know what i'll take the i'll take the l i don't know okay chart uh reveal this is super micro come on you gotta all right honestly dude this stock only got on

my radar two days ago. All right. Fair enough. This is it's an $18 billion market cap. Once it is. Yeah. It tripled this summer. It doubled last year. It's up a thousand percent over the over the past three years.

It is an AI play for people who missed Nvidia. And I wish I could say it had a ridiculous valuation, but it doesn't. I think it's like 30 times earnings or something right now, even after being up a thousand percent, they are very, very involved with every time the data centers buy AI equipment, they need, they need this company stuff as part of how it all works together. Is it too late to buy? I mean, I mean, I feel like it is. So they reported tonight and as of this recording, the stock's down 40 points. It's down 11%. So maybe you're getting an opportunity here. This is just, I mean, I can't, I can't rationalize buying it, but Holy cow, this thing is a hot story.

And it's only done 10% this thing is a hot story. Unbelievable. And it's only done 10% after hours. That's it. Worth listening to the call tonight on the quarter app. I guess that's all I would say. All right. Hope you guys had fun. It's been an hour.

It's been quite a night. We love you. We miss you when we're not here. Thanks for tuning in. Tomorrow is Wednesday. All new Animal Spirits with Michael and Ben, my favorite podcast. And then later this week, we're back with an all new The Compounded Friends. Great job tonight. Michael, Duncan, Nicole, Sean, John, great job with all the charts. Good night, everyone.

Whether you're just getting started as an investor or you're managing a multimillion dollar portfolio, Ritholtz Wealth Management has the solution for you. It all starts with building the right financial plan. To speak with a certified financial planner today, visit ritholtzwealth.com. Don't forget to check us out at youtube.com slash the compound RWM. Make sure to leave a rating and review on your favorite podcasting app. If you love investing podcasts, check out Michael and Ben every Wednesday morning on Animal Spirits. Thanks for listening. Ritholtz Wealth Management is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Ritholtz

Wealth Management and its representatives are properly licensed or exempt from licensure. Nothing on this podcast should be construed as and may not be used in connection with an offer to sell or solicitation of an offer to buy or hold an interest in any security or an investment product. Past performance is no guarantee of future results. Investing involves risk and possible launch of principal capital. No advice may be rendered by Ritholtz Wealth Management unless a client service agreement is in place.