The Compound and Friends - SNAP melts down, Disney earnings, Big Tech breakdown with Dan Ives and Alex Kantrowitz

Episode Date: February 7, 2024

On this episode of TCAF Tuesday, we're bringing you a new show called Great Quarter Guys! On this episode, Josh Brown, Michael Batnick, Alex Kantrowitz, and Dan Ives discuss: Tesla, Alphabet, Microsoft, Meta, Apple, and Amazon. Then, on an all-new episode of What Are Your Thoughts, Josh and Michael discuss: Mike Wilson, Snap, new Dow stocks, layoffs, the consumer, and much more! Thanks to Rocket Money for sponsoring this episode! Cancel your unwanted subscriptions by going to: https://rocketmoney.com/compound 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 tonight's show is just absolutely epic Just just epic and before I tell you why let me just also tell you we are brought to you by rocket money Rocket money is a very cool app. If you haven't tried this yet. It's really really easy It basically finds and cancels your unwanted subscriptions It monitors your spending and it helps you lower your bills. Rocket Money has over 5 million users. They say they've helped save their members an average of $720 a year, over $500 million in canceled subscriptions.

So we're not talking about pocket change here. So you probably are paying for a lot of things that you don't really use. That's okay. Nothing wrong with that. How would you know? Where are you keeping track of this in an email? Give me a break. You know you're not. So this is what you want to do. Go to rocketmoney.com slash compound. That's rocketmoney.com slash compound. Find out where your cash is going each month and make some decisions. Cut some of those expenses. I don't know if you heard, but at some point we're probably going to have a recession. So get ahead of it. All right. I want to talk about what we're doing

tonight, but I don't want to spend too much time because there's so much in the show. We did this new thing called Great Quarter, guys, with our our friends Dan Ives and Alex Kantrowitz. Alex and Dan are just – they're just so knowledgeable. It's ridiculous. Alex runs the Big Technology Podcast. He's the author of a very popular book on the subject, and he just knows everything that's going on with these companies. And we also happen to really like the guy. He's just a great guy.

So he's just an amazing guest for us. He agreed to do this show with us and experiment. And Dan Ives came through as well. And Dan actually recorded his part from an airport. He's such a beast. And he just was like sitting in an airport lounge. He had his laptop. He had his microphone or whatever. And he just delivered like sitting in an airport lounge. He had his laptop, he had his microphone or whatever, and he just delivered. And he was awesome also. So we looked at the

biggest companies reporting earnings and what they really said. And the purpose of the show is to do that with the benefit of a day or two worth of cooling off and not just react instantly. What was the number? This is more like, what did they really say? And what does this really mean for investors going forward? So that's going to be our approach on Great Quarter, guys. We'll do it again next earnings season. This was really just a test. The feedback was universally positive. And that's not the case for everything that we try. The video already did over 20,000 views on the YouTube channel. And we got a lot of emails. We got a lot of people DMing us.

You should do it again. You should do these stocks, et cetera, et cetera. So we are going to do it again. Special thanks to Alex and Dan for being good sports and working this out with us. But I think it came out great. You're about to hear that. And then it's another all new edition of what are your thoughts? We talk about the Snapchat earnings debacle, which was happening in real time as we recorded.

We got into some stuff on Disney, which by the time you're hearing this probably has reported earnings and a whole host of other things. So you're not going to want to miss that. Stick around. Here comes the show. Thank you guys so much for listening. We'll talk to you soon. 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. Hello, everybody. My name is Michael Badnick. Hello, guys. Welcome to Great Quarter, guys. The stock market doesn't move on good news or on bad news. It moves on better or worse news. The best day for the S&P 500 over the last three years was on November 10th, 2022. What happened on that day to drive the stock market 5.5% higher? October's CPI came in at 7.8%. 7.8%. That's one of the highest monthly numbers in the last couple of decades, but it wasn't as high as September or August or July or June. It's not good or bad. It's better or worse. The most important variable that drives individual stocks and therefore the stock market are earnings. Again, not good earnings or bad earnings, but better earnings or worse. Specifically, better or worse than analyst estimates.

We hear from companies four times a year when they present their earnings from the past quarter and give guidance for the future. Sometimes these numbers are in line with analyst estimates and the market has a ho-hum reaction. Other times, like yesterday with Meta, they blow out any and all expectations, even the most optimistic ones. Estimates are then ratcheted higher as the stock price leaves analysts in its dust. Meta is up 20% today, adding more than $200 billion in market cap after a blowout earnings report.

Josh and I wanted to create a show where we can go past the headlines and really dive deep into what's moving the biggest names on Wall Street. We're going to break down the earnings calls with some of the brightest minds that cover each industry that we're going to be talking about. So on today's pilot episode, where we'll go over Tesla and Apple, Amazon, Meta, Alphabet, and Microsoft, we have Alex Kantoritz and Dan Ives. Both have been on the Compound and Friends before, but for a proper introduction, Alex has an incredible sub-stack and podcast called Big Technology, and is a frequent guest on CNBC. Alex, you had Vlad Teneff from Robinhood the other day. That was awesome. Congrats on that one. Dan Ives is a

managing director and senior equity research analyst covering the tech sector at WebBush Securities. And Dan is, quite frankly, don't blush, the hottest tech analyst right now on Wall Street. Gentlemen, welcome to Great Quarter, guys. And just one note, just before we start the show, the name of the show is an inside joke, Great Quarter, guys. It's a nod to something that analysts frequently say before they kiss ass to management. This doesn't mean that every company we're going to be covering had a great quarter. In fact, quite the opposite. And that's a great segue to start with the first company that we're going to be talking about today, which is Tesla. Dan, let's start with you. What did you think of the

recent earnings report from Tesla? Look, I thought the actual numbers itself were actually relatively strong. In terms of units, where they sort of guided in theory for the year. But the biggest problem was communication on that call. Didn't really put a line of sand around margin. That was really the big issue. Because right now the streets focus, when do the price cuts end? Where's the line in the sand? Hold the margins

and then we move forward. And I think that's why the stock and we talked, it was a train wreck conference call. 80% of the reason the stock was down was communication but the story is well intact and I ultimately think this is really, you know, I think just an inflection point to the next stage of growth.

Dan, can I ask you, this is a company that has had this miscommunication thing hanging over it before, but investors have been able to look past all that. It's not as though Elon has been a masterful communicator at all times. What do you think has changed and why are shareholders now, I think, for the first time in five years, really starting to second guess the things that they're talking about on these conference calls two in a row? Yeah, look, ever since Zach, the CFO, left in August, it's been a debacle in terms of communication. And look, Elon's going to be Elon. Elon's never going to start to talk about margin, what the trajectory looks like in the second half. But when you don't have an adult in the room, that's where it's all gone off the rail. And investors, the story in terms of AI,

more mass markets, sub $30,000 vehicle, like that story is well-impacked in terms of, I think, the next stage of growth. But in this type of hand-holding period, if you don't get hand-hold, the street's going to assume the worst. And that's kind of what we saw take place here in terms of, I think, a lot of frustration that I've heard countless from investors. So the stock dropped 9% the day

after it reported earnings. It's now 55% below its peak. And Dan, I read your note saying that it was a disastrous earnings call. From my point of view, I'm not a professional, obviously, analyst. I don't listen to every Tesla earnings call, but I did listen. And I was a little bit surprised to see that there wasn't more pointed questions, really at all, about the price reductions in a lot of the cars. Alex, as you listened to Elon, were you surprised at the lack of questions about those margins and what they might mean for the future? Yeah, of course. I do think there should be more questions on the margins, but also more broadly, like if, if it, what it took the street to give up on Tesla this way was just that they weren't handled by a CFOs. Then how do you like really

evaluate their position in the first place? Like to me, and I'm curious to hear Dan's perspective on this as well. Everybody's perspective here. Like, isn't this the ultimate buying opportunity? Like if you really believe in Tesla and if you believe that that big story is going where it needs to go, right? Like Dan, you mentioned that they didn't get into specifics. They talked about the big story, but isn't this like they're, they're under 600 billion now, Dan, you had them going to a trillion this year. If you believe that, okay, maybe they miss on the margins a little bit. Maybe it's, going back to your question, Michael, maybe it's not as consequential as we were making it out to be.

Maybe we don't really care about the margins. What the big deal is, is that they're making this move towards being the leading electric vehicle vehicle one that's going to roll out self-driving is well on its way and and if you're not a believer in the stock then you're going to be out but if you are a believer this would be the time to double or triple down don't you think i mean i mean i talked about it on the compound in terms of when we went into detail, but you're going to have moments like this. We call it white knuckle turbulence. You navigate through because our checks and where we see the story go.

And I think when I look at Tessa, it's no different than meta 18 months ago. I can go to other examples of Apple. This is not the time to panic. I think we look back and this is actually more of an inflection point where we realize the margin stories start to turn i think the next phase of growth starts to factor in but but you own it for ai and now and we could talk about separate but with the

delaware situation i think tessa's going to texas they're going to get much to 25 percent and i think ultimately this is really gonna to lock him in in the AI initiatives. And that's going to be the next stage of growth. Hey guys, if you think about 2022, two of the greatest stock market bottoms ever for tech stocks. One was in May when Netflix disappointed. And I think the stock had come down from 600 to 120 or something. It was just a remarkable moment of destruction. But that was the double down moment.

And then later in the year, October 31st, there were analysts on TV crying about Facebook, about meta. And that turned out to be one of the great buying opportunities of all time. Tesla, the chart doesn't look great, but it doesn't look as bad as Netflix in that moment and meta in that moment looked. So I guess like, is there more to come? Is there a worse moment, a.k.a. a better buying opportunity? Or do we think we've seen as bad as things could get here?

I mean, I'll just sort of tap in. I mean, in my opinion, this essentially is the bottom. I'm not saying the stock can't go a little lower here, but they've cleared the decks. The street just absolutely torched numbers. The deck's clear. Sentiment's awful. The hate mail's up massively from institutional investors. What I love is

that the story in terms of AI, mass market, where they're going, it's all intact. Alex and I have talked about this many times offline. We view things similar. You got to see forest through the trees. Can't get into the group and think, wow, these analysts that I've talked about, you know, they're not a lot of individuals you want to be friends with in junior high school and

high school and, you know, the backbones. But it is a very worthwhile caveat, though, because this is ultimately still a story stock, right? And like we've always talked about how Tesla's worth multiples of, you know, any car maker, like it's 10 or 11 or 12 Fords right now. And so the question of how far can it drop? Like if that story goes off the rails, if you have someone like Dan on the air talking about how the call is a train wreck quarter after quarter, yes, there is more room to fall. So if you're holding the stock, or if you're thinking about getting in now, like this is you're crossing your fingers and hoping it can't drop anymore. But when we talk

about the bottom, I think Josh, you bring up a really great point. Like we may be there, but there's also a chance that we might not. And that's a scare if you're holding Tesla. We'll have plenty of time on future calls to talk about the Optimus robot, the Cybertruck and Dojo and some of the more ambitious initiatives. But in the interest of time, Dan, you made a top 10 list for Musk to turn around Tesla. Maybe pick out one or two of those real quick. I mean, one is the buyback. I mean, because in my opinion, look, a meta dividend, right? The point is you got to put a buyback line in the sand. $30 billion of cash. I think $10 billion. Just for starters, even if it's just the press release and you just do it a few sort of every quarter, you got to do that.

And two, I think lay out the AI initiative. This story is about AI. We even saw Cook talk about AI for Apple on the call. You got to lay out the initiatives and some targets for the street. That's the key. I think that's worth a trillion to a trillion and a half alone outside the car company. What did you think about his 25%? It's in Musk's best interest. I wanted to ask about that, Michael.

It's in Musk's best interest, the buyback, to shrink the float. His proportion of both the votes and the economic interest in the company grow commensurate with the shrinkage of shares. I know that's not all he wants, but it's in the right direction. Well, of course, and then now the whole Delaware taxes, I mean, now they're going to incorporate in tax and they're going to move Delaware board. It's going to supersede the 2018 comp package. Give them another package. Give them the 25%. And look, some investors, they'll talk about, oh, it's ridiculous. He sold to buy X.

Look, 60% to 70% of the value of Tesla is Musk. Musk is Tesla. Tesla is Musk. That's the reality. And you need him locked in with all the AI initiatives. When he made that deal in 2018, the market cap of Tesla was sub $60 billion. Now it's $580 billion.

It's been higher. Even if you dislike hearing a number like a $55 billion pay package, you do have to keep in mind that that's in the context of a 10x. And all incentive-based. That's what you want with magic.

He made the bet. All right. There we go. Sounds like we're moving on. All right. Moving on to Alphabet. Let's throw up this chart from Consensus Gurus, please, John. So this shows the forward PE going to the print. It's 21 times, which is a little bit higher than it had been in the last couple of quarters. Google, the stock has been a little bit rough, a little bit shaky, at least compared to its peer group. I'm going to compare it to the Qs. Let's get into some of the numbers before we get your thoughts on the quarter. All right, this is from the CFO. For the full year 2023, free cash flow was $69 billion. Very nice. We repurchased a total of $62 billion of our Class A and C shares. Google services revenue was $76 billion, up 12%. Google search and other

advertising revenues of $48 billion in the quarter were up 13%. YouTube advertising revenues of 9.2 billion were up 16%. Full year revenue of 33 billion was up 26% for the prior year. The market did not like it. Now, let's short term, but the stock was down 7% in the next day. Alex, I'll start with you. What did you hear on the call? Were you surprised? If you didn't see the stock price, what would you have guessed the reaction to the call would have been? if you didn't see the stock price, what would you have guessed the reaction to the call would have been? Yeah, I think that the numbers were, I think the numbers were terrific, but the things that you heard within the call were concerning. So Google added, I think it was like $6 billion in incremental ad revenue in the quarter, right? So that would make, and this is from Brian Weiser, who writes this great sub stack, Madison and Wall, that would be the standalone, the 11th biggest ad business by itself in the

world outside of China. And there was this long running meme that Google couldn't continue to grow like this because the numbers were so high. Like you're growing off such a high base, digital advertising was shrinking. Yeah, they missed a tiny bit on projections, but not by more than a hairline. And the fact that they're able to grow like this is incredible. But when you hear them talking on the call, what stood out to me was Sundar, first of all, talking about generative AI, not talking about how the company is leading. He was saying that they responded. I'm happy with how we responded.

What? You're Google. You invented this shit. Like, you can't respond here. You need a lead. And even if you don't think you're leading, you never frame it as a response. So I would be freaking out now, especially because that does challenge that core business of search. And then the president, Ruth Porat, admitted that there were cultural issues. Talking about the reason why that they're doing these layoffs, continued layoffs, is not because of margin, but because they're trying to cut layers out of the company to help improve the velocity to ship.

That sounds like meta to me, two years ago. And it worked for meta. But I think Google's even slower than meta. And we never had Google really, never really had meta come out and say, we're not shipping fast enough. You know, they talk about year of efficiency. We want to get margins better for investors. For Google to come out on the call and admit that the shipping velocity is not where it needs to be,

that it's responding to competitors, that's to me where the red flags were, but the numbers look good. Do you think that they want, is that a message for Wall Street or is it really a coded message for their own executives? Oh, that is a good question. I mean, I think both, right? It's like if you're within the company, you know at this point it's shape up or ship out. And now we're explicitly telling the street that you're going to have to get the job done or you're toast. Dan, Google was up.

Josh, just that last question. I think that was also a little coded message toward Wall Street. It was a little more mea culpa. We recognize it. We're going to Alex, but we're going to. They needed to do a little of that, I think, too, on the call. So I wanted to say that the stock sold off 8% after reporting this number. But the performance of the stock going into the number is a really big part of the story.

Alphabet was up 15% over the six months heading into the number and up 56% over the year prior. So it's not as though Wall Street has given them no credit on efficiency and streamlining efforts. And I want to get Alex's view. I'm super interested. It's like, to me, the AI Google Cloud story is the reason you own the stock. I think the huge upside here is that they start to monetize. And we've already, and we'll talk about nadella and what's happened redmond they start to monetize that google cloud store with ai with the amount of engineers that are within google headquarters i think that adds 34 dollars per share the story

does anyone have more data on earth than alphabet to incorporate into ai well Well, Facebook just said it does. I mean, in Facebook's earnings call, they say they have more data to train on than the common crawl, which is like petabytes of data, which I can't even fathom. Like the human brain can't imagine how much data that is. So like, and it's all theirs. It's all proprietary. They don't need to go to the open web or make any licensing deals with publications. But look, I'm not going to say that Google doesn't have any data. They have plenty and they should be in good shape here. The question is whether they can convert it in the way that their competitors have been able to. And we don't know that yet. Converted and incorporated. Sorry, just as a convert it and put it into their, I'm sorry, converted, but like incorporated into

products and they claim they're already doing that and they've been doing that without celebrating it on the ad side, which I'm sure they have because it benefits them. Why would they not do that? So we might not see everything they're doing. Advertising revenue, at least from YouTube, which is obviously a huge portion of their business. By the way, YouTube revenue has doubled from pre-pandemic from $15 billion, this is from Alex Morris, to $31 billion. But if you look at that chart, that's really gone sideways for the last, I don't know, eight quarters. And there was a monster breakout. And I think one of the reasons that I'd like to hear your opinion on this, guys,

is that they said on the call, we've invested in a full suite of tools, including our new YouTube Create app for Shorts to help people make everything from 15-second Shorts to 15-minute videos or 15-hour live streams. Gen.ai is supercharging these capabilities. Anyone with a phone can swap in a new backdrop, remove background extras, translate their video into dozens of languages. All without a big studio budget, we continue to grow watch time across YouTube with strong growth in Shorts and connected TV. Shorts remains a top priority. We have 2 billion plus login users every month, and we are averaging 70 billion in daily views. It's crazy. So that chart that you put up is really revealing because I think what it shows

is YouTube actually converting more of its watch time from the long form to the short form video, right? So it seems like a large portion of the user base naturally gravitated to the TikTok copy, which is shorts and moved away from the longer videos. And this happens whenever a company introduces a new ad format, you see this surge of usage. It's like first reaction is, should we try to make money off of this? Not until it's at scale. Then it gets at scale and it's like, okay, we should make money off of it, but then it's how, and it's a scramble for these companies to try to figure out how to do it. And that happened with Meta. You could argue that Reels right now is getting close to or about to

surpass the size of TikTok. It's massive. And Meta just now talked about how the money that they're getting on Reels is meaningfully contributing to revenue. And so I think that chart that we just showed with YouTube tells that exact story, which is that there was a lot of growth, that the ad revenue looked flat, but it was misleading because they were ramping up a way to make money off of these videos. Now they figured it out. And that's what's taken the time. So they talk about, they're going to talk a lot about how, you know, they, everybody wants AI in their story. We use AI to create these videos. Um, I think that's a sideshow. I think the real thing is that their sales team finally ramped and was able to sell this stuff and they're

crushing it. I just want to say, and now like I'm Alex's biggest fan. He, he sometimes, that being said, he, he picks up things that the street doesn't see what he just hit there. In my opinion, that was probably the most important thing from that conference call. What? The sales team is now good at selling shorts. That in terms of the broader story and where they're actually going to monetize and i think the street is not giving credit for what they're gonna do they became so focused myopically

on what was happening they're not giving credit which i think we sit here six months from now and and you know in my opinion alphabet is is a stock that is going to on its way to a portion 200. Do you have a target on Alphabet? 160. 160. Did you move it after this earnings report or no? No. Because in my view, the story doesn't change.

Just like I didn't move out when I didn't move Apple. Story doesn't. Before the bell rings, Moffitt Nathanson has a thesis where YouTube becomes the new cable bundle, meaning enough people subscribe to – how many – they have 100 million subscribers to YouTube? Did I hear the right number? mess and they can now say, how about if we put all of the channels that you want and all the apps here centrally on your Google account and we'll just pay them for you? And of course, Amazon's going to try to do the same thing with Prime. Where do you have these two companies? Are they neck and neck or is one have an advantage over the other to be the new hub of everybody's viewing habits

i mean i think you too yeah go ahead i'll just say quickly i think it could work like they have the nfl they have sunday ticket they're also like fairly neutral like compared to a lot of these others like their whole goal is just to deliver content to people versus like having a you know their own production house like amazon does so if if it's going to happen with one of them, it would happen with Google. I think it's a good call. All right. Moving on to Microsoft, the stock has been just an absolute juggernaut,

up 62% in the last year. Blowout numbers, as we've become accustomed to. Here's just thought that consensus grew chart, just beats on revenue, on margins, on operating income, earnings per share, just beats, beats, beats, beats, beats. Satya Nadella opened up the call saying it was a record quarter driven by the continued strength of Microsoft Cloud, which surpassed $33 billion in revenue, up 24%, unbelievable. revenue up 24%. Unbelievable. We have moved from talking about AI to applying AI at scale. By infusing AI across every layer of our tech stack, we are winning new customers and helping drive new benefits and productivity gains. There's no doubt about it that AI was a huge theme of this

call. Dan, what did you hear? The revolution's real in terms of AI. I mean, the monetization that we're seeing with Copilot, with Azure, with cloud, it started. And that's why when you look at Microsoft, I mean, I think that's a transcript you print off and keep in your back pocket. And anytime someone says the AI is hype, just take it out and say,

one, you read that transcript, which I think should be put in the room because this shows the actual cloud acceleration that's going to happen is a game changer, not just for Microsoft, but eventually for Amazon, for Google, and the use cases are exploding and they're leading the charge in red. moving and they're leading the charge in revenue. Why is the Azure cloud growing twice as fast as the Amazon cloud? I know we're not going to do Amazon yet, but what's going on? I mean, okay.

And now look, partially there's a lot of numbers, right? Amazon still, you know, called 25% bigger. But the biggest thing is that enterprise workloads, the backyard of Microsoft, now you're going into the sweet spot. So this is their territory. This is where they play. And when it comes to AI,

I mean, they're obviously, Amazon's nowhere near where they are. Alex, last time we had you on, you were a little bit, if I correct me if I'm wrong, you were a little bit skeptical about all the claims about what they were doing with GitHub and integrating this. Have you changed your tune or am I misremembering what you were saying last time we had you on? Yeah, I'm changing my tune. I think GitHub, right, the thing that was going on with GitHub was they were talking about how it was

helping all these engineers code. But then when I was actually speaking with CEOs about the up they were getting from GitHub Copilot, they didn't really, nobody concretely said, yes, this is making my engineers better. Now I'm starting to hear more CEOs talk about how this is making their engineers better. And that is a pretty positive sign for this Copilot. Now it could be something that they say we're going to try out. You know, the Microsoft sales is pretty convincing. They say we're going to try out. You know, Microsoft sales is

pretty convincing. They say you have a chance of making all your engineers 10x engineers. Why not try it for a couple of months? We'll give you a discount on the license, give it a shot. Microsoft has nice numbers to report at the quarter. So I'm not saying this is absolutely, you know, it's going to happen. It's going to have staying power for certain, but it's certainly a positive sign there. I have a question for you guys. All right. So we talk about the AI growth, right?

There's like 53,000 Azure AI clients, and one third of them are new to Azure. So, I mean, Dan, I'm hearing what you're saying. I'm curious. What will the churn rate be? Well, here's the other question that I'm going to ask. If you have $200 to put it down on one stock, are you going to put it down? Are you going to bet on Satya Nadella and his AI? Or are you going to, outside of Bitcoin, are you going to bet on Satya Nadella and his AI?

Or are you going to bet on Tim Cook and the Vision Pro? Ooh. Look, I mean. You can't say both, Dan. Yeah, go, Mike. In the short term, it's not the Vision Pro. There's no way. There's no both. Yeah. Go Mike. Yeah. Uh, in the, in the, in the, in the short term, it's not, it's not the vision pro. There's no way. There's no way.

Yeah. I agree. I mean, like look right now, enterprise AI, I'm obviously the godfather of AI gents in a video leading it, but when you look what Nadella is doing, Redmond,

it's, they should start building a statue for it. What is, uh, what does this headline mean? Accenture alone will roll out GitHub coilot to 50,000 of its developers this year. Are these developers working for Accenture or are these Accenture client developers? Josh, this is the story that we were just talking about on What Are Your Thoughts?

Right. But whose developers are those? Are those customers of Accenture that they are placing onto GitHub Copilot? Or is this their own employees? It's their own. Oh, it's their own. Because Josh, right now about 25, 20, 25% of all of Accenture, their whole sole focus that Julie, the way that she transformed it is AI. Right. Again, in terms of like that, that's their job.

Yeah. So now they're going to do that. Yeah. I'm sorry, Dan, just in the interest of time, here's the quote. Overall, we are seeing this from Saudi and Adela. Overall, we are seeing larger and more strategic Azure deals with an increase in the number of billion dollar plus Azure commitments. Vodafone, for example, and John, get ready with that chart, please. Vodafone, for example,

will invest $1.5 billion in cloud and AI services over the next 10 years as it works to transform the digital experience of more than 300 million customers. This is not slowing down. And you talk about, I know people say on TV, the law of large numbers. That's not what this means. But it is staggering. We're looking at Microsoft Cloud run rate revenues. It is staggering the size of these numbers and the fact that they're not slowing down. And they're not going to slow down. And this is, and Alex, this is a question to you because obviously you're always doing so many of your checks. Right now, there's almost a a time in other words like as a customer if you don't sign the dot line for copilot you go to the back of the line you won't be able to deploy

till the end of 25 because of the shortages so there's a huge pressure for cios to actually sign up i mean alex is that don't you know it's dynamic right now in terms of going to the back of the line for microsoft definitely yeah it seems in terms of going to the back of the line for Microsoft? Definitely. Yeah, it seems like they're going to definitely press the scarcity issue. And more than that, like, if you look at that chart, we were just looking at the growth. I was just speaking to somebody who's working within cloud. And they were talking about how we keep hearing about, okay, maybe Amazon and Microsoft are going to peter out.

And I was like, you know, who's going to win this one? And they were very bullish that it's going to be both companies. And the point that they're making is we're only about 40% of the way there on cloud. So another 60% of growth yet to be realized as we move computing infrastructure. Do you guys think most Fortune 500 companies will opt for a structure that allows them to utilize either so that they don't get stuck in the ecosystem of one or the other? Or does the pressure from Microsoft force people to say, hey, we're an Azure shop and that's just what we're building? Long term, I think everybody goes cloud.

I mean, the cloud will learn to solve the problems that are being solved with the on-prem software today. I don't know how long that long-term is. Josh, I'd say probably about 30% of them go hybrid, which basically means they can go eat. About 70% of them, they go full Azure. Because otherwise, if you just dip the toe in the water, you're not going to get the full set of their product. Okay, so now is the you're not going to get the full set of their product. We haven't even said anything. Now is the time they're going to commit. They're going to decide,

we're an Azure AI customer. This is how we're building it for that platform. Could you imagine being a CIO? And that's why what Alex talked about with Sundar, that's why it's so important that they need to get- That lock-in is the key to the next 10 years of earnings visibility. I was just going to say,

could you imagine being a CIO and going back to your CEO and being like, no, we're not going to invest in these AI products. Like it becomes a peer pressure thing. You're going to get fired. It could be your job.

Right. So last thing before we move off, we haven't even spoken about Office or anything like that. LinkedIn's got a billion members. I mean, unbelievable. Uh, this here's a quote, this quarter, we set all time records for monthly active users in Xbox. I mean, out of all of the big tech companies is Microsoft, not the conglomerate. It is. All right. Moving on, moving on to meta. I mean, this is why we play the game,

right? This is why we lace them up. Unbelievable, unbelievable. Let's just start with the market cap. John, chart on, please. The market cap, I think it peaked out at about a trillion prior to the spectacular 75% decline. I don't think there's ever been a chart like this. In fact, I'm just going to say there's never been a chart like this where you've got a trillion-dollar company, even adjusted for inflation, lose 75% of its value, and then gain 300% or whatever it did over the subsequent 18 months and make a new all-time high. Never.

Never. It's never happened before. It's never happened. There was just beats across the board. I just want to run through a few charts and then we'll turn over to you guys. So advertising revenue by geography. Again, very much like the YouTube chart that we showed earlier in Google's advertising, this was in a bear market. Advertising was in a bear market. There was a lot of headwinds, which we don't need to get into right now, but those headwinds have abated

and there was a monster breakout in advertising revenue just across the board. And then expenses as a percentage of revenue. We know all about the cost cutting and the year of efficiency. This has gone way down, credit to Zuckerberg and the entire team there. As a result, you have net income just skyrocketing, leading to a 20% $200 billion move today. And then lastly, the average revenue per person in the family of Facebook or meta companies. Again, it's a breakout. I was with Josh last night. Chart off, please. Was Josh last night going over this report? I'm just like, the charts. I mean, what a story. Dan, we'll start with you. Talk about Facebook's incredible quarter, metas.

Meta's story. Dan, we'll start with you. Talk about Facebook's incredible quarter, Meta's. I mean, I think this is really a comeback. It's historic, right? I mean, if you look at the subscriber growth, what they're spending per dollar of revenue, we've never seen a tech company at this scale be able to do it.

And the monetization from a digital advertising, the rebound, I think numbers could still go up another 15 20 that's why from a stock perspective you know many now looking okay you start to get the 550 600 given the trajectory where numbers go then you do the dividend that's just another sign for where you see this thing going from a confidence perspective. I mean, just an unbelievable quarter. Could there be anything sweeter for Mark Zuckerberg than on the day that Tim Cook releases the Vision Pro, which he talks about like he's seen God in, right? Meta stock is up 20%. Meta has the leading device.

Meta has no China overhang. We don't think that the Vision Pro is going to amount to anything more than $4 billion over the next four years. And he's beaten Tim Cook's ad embargo. I mean, it's a spike the football moment for Meta. What's so incredible to me, a lot of people try to ignore the technology and focus on the fundamentals in terms of like the earnings and cash flows to arrive at their opinion. And if they did that yesterday, then they would have said, okay, Apple 30 times, Facebook 35 times, I'll buy the cheaper one into earning. Like if we try to reduce what's going on at these companies to financial statistics only, we lose.

Same thing on performance. If we try to play this game where everything's already baked in, well, here was the setup going into meta last night. Meta was up 22% over the last six months, up 158% over the last year. A very lazy analysis that you could have conducted would have been to say it's 35 times earnings and it's up 160% since this time last year. All the great things going on at Meta are probably priced in.

And then it goes up 20% today. So maybe not. That's the remarkable part of this. Yeah. What are you going to tell me now? Hey, Dan, I want to ask you this, just piggybacking on Josh's point. John, throw up the chart from Consensus Gurus. I want to talk about the dynamic where analysts could be so far off the mark and then what happens subsequently. So very specifically over here, so operating margin, the analysts were estimating 33.8%. It was 40.8%. So a monster 700 basis point beat. How is it that the consensus can be so wrong and then talk about what happens next like so analysts after last

night they go back they update their models they come out with new price targets the streets reacted talk about all of those dynamics yeah i mean because a lot of times like you know come as good guidance you know you talk to them during the quarter and and you tend to get in a very tight band where numbers go and this is one they, they just blew it out of the water. I mean, it was no one, even the whispers and the bullcats, no one ever thought you'd have this type of beat above 40%. And then you go back to your model and you start to trajectory it out. But then what a lot of analysts do, including ourselves,

is that you're going to still give them what I view as like conservative targets where you don't want to set the bar too high because you don't want to just trajectory this to the next three, four quarters. Cause then you could ultimately, you know, I think that puts companies maybe back into the wall, but this is, it's an aha moment, right? For, for Monano. Alex, what's crazy is Facebook in 2022, uh, two we're spending like there was no tomorrow while the ad business was slowing down and it's an advertising company. Let's face it. Uh, tech enabled, but it's advertising this, this last year is the opposite. The ad market is recovering and their spending is going down.

Sometimes it's that simple. And I know there's a lot of other more sophisticated things happening. But if you like distill down the drivers of the stock, more revenue, less spending, stock go up. And that's exactly what – and this quarter is obviously – and of course it helps. They have the glasses on the market. They beat Apple to wearable, you know, that wearable format. But like, that's pretty simple stuff, right? Definitely.

I mean, their expenses were down 22% over the year. Their profit was up 10 billion quarter, I mean, year over year on the quarter. That's insane. Unbelievable. All right. We've only got, Dan, for 10 more minutes. So I just want to make sure that we're in the interest of time. Let's just move off of meta and onto Apple. So Apple, the stock opened down 4% on the day. The revenue is really not growing that much.

If really at all, China was not great to say the least. Interestingly, the stock opened down 4%. It is now positive on the day. Let's just quickly get into some of the charts here. So it was a bit of a, it was a mixed bag. They beat on revenue, but they miss on services. Obviously that's a big one. And then if you just look at like the revenue change year over year, iPhone is low single digits. Services has come down dramatically from where it was. And of course, this is the engine of all the growth. These are where all of the margins are. Alex, what did you see out of Apple's most recent quarter?

So the thing that struck me the most on this one was that they gave this guidance for the next quarter that said a lot of the sales last year actually happened in the March quarter that we initially anticipated happening in the quarter ending at the end of the year. And so, therefore, they're expecting another quarter of revenue decline in the March quarter this year because of the higher comps. So you look at the big picture from Apple then, and you have four straight quarters of revenue declines. This year, this quarter, the revenue went up, but you have to factor in that it was going against easier comps because a lot of those iPhones were pushed into the next quarter. And next quarter, it's going to potentially shrink again 5%. So when you think about Apple, I mean, yes, part of that is because of China.

But overall, that's pretty concerning to me looking at like where this company is going. Now, you could say and I'm sure Dan will say that it's because people are holding on to their iPhones large longer and they have a larger install base. And, you know, maybe it's good like we should maybe celebrate companies that have products that actually last for more than two years. But that being said, it's going to be a serious problem that Apple is going to have to deal with over the next few quarters. Dan, what do you think? So look, I mean, we didn't change our target this morning, and it was definitely a lot of sort of handholding early this morning talking to investors and last

night. Because my view view look alex raises great points china down 13 clearly a headwind it's not champagne or rose in shanghai but if you look at units this quarter they beat from an iphone perspective our checks continue to show 215 to 220 million units for the year the march guidance clearly that was confusing and i think definitely a little anomalous the way that they kind of talked about it but for the first time cook talked about ai you know we've talked about it this is the ai app store that we expect to come later this year ai technology baked into iphone 16 the active user base we thought was going to be 2.1 billion. It's 2.2. So 200 million more users. Now you're

going to have AI into that user base. You start to see a China number that even shows any growth second half of the year. This stock, in my opinion, is 225 off to the races. So look, the point is it's going to sharpen the knives from a bull bear debate, but it's hard to bet against what they've been able to do. And they've had challenges in China before. Is AI actually a risk to Apple? And hear me out on this one, right? Because this could change the way that we interact with our devices. Like we all saw that the winner of CES, as far as press attention goes, was the rabbit, which was this AI device that could basically allow you to talk to your app. So when we hear, you know, I heard, okay, Tim Cook finally said, you know, the two letters

AI, that's cool. But is that necessarily a win for Apple? I don't know. Well, I think with Alex, that point, I mean, you've talked about, I think that's why like you look at Vision Pro, what I view is kind of the start of a new form factor. I think two years from now, that sub $1,500 looks like sunglasses. form factor i think two years from now that's up 1500 hours looks like sunglasses and then this ai app store it's all about monetizing the install base and then they're going to put more ai into iphone 16 so i'm just i'm just viewing it as more i'm not going to sell apple on a quarter guidance

and ultimately on that guidance if you looked up sandbag special SPS in the dictionary, you'd have that guidance from Mark for Apple. Dan, before we let you get out of here and thank you for hopping on in an airport to catch your plane. How do you think about Apple in relation to some of its other big technology competitors? Are you, how excited or, or unexcited are you about them versus its versus their peers? Look, I think longer term, it's probably the most excited we are for any company relative to now tapping into an install-based new form factors in AI and where this next renaissance of growth's happening. In the near term, it's much easier to pound the table in the stocks that likely move higher in the near term.

It's Microsoft. It's Meta. It's Amazon. In terms of right now, the one that has headwinds, we're out to do more of a 40-minute call with investors versus a five-minute to Microsoft and Tesla. So if this stock doesn't grow in the next four quarters, can it keep its 30 multiple? Or are we going to see some contraction there? I think you'll see contraction, but I believe it does start to grow to that point. Services is key to the valuation, double-digit growth.

And then that AI component starts to hit. And I think we look back at Apple today like we did Meta 18 months ago. That's the call. Dan, thanks so much, man. We really appreciate the time. Safe travels. Safe flight. We're going to stick around with Alex and we'll take Amazon and you'll listen to it later. All right.

Dan Ives, ladies and gentlemen. Alex, you enjoying yourself? Love this. It's always great talking with you guys. We're going to wrap with Amazon, which is a stock that I own, full disclosure. Amazon, coming into earnings or coming out of earnings, it's kind of traded like shit. Try it on, please, John.

So the last two quarters, actually now three. Okay, I take it back. Including today and then the prior two quarters, it was up 7%. So not bad. But prior to that, 2021 was rough. 2022 was rough. It's up 7% today. It's one of the furthest of this group away from its all-time high from 2021. Other than Tesla, all the rest have either since made new highs or are very close to those prior

highs. Amazon's still a way off the pandemic sugar high and hasn't found its way back yet. All right. So let's look at this chart from GeekWire showing Amazon net sales by business segment. I asked Dan earlier if Microsoft is a conglomerate. Amazon can make a case as well. Of course, you've got the core business, online sales, online stores, which looks like it's about record highs. Third-party seller services, oh my God. The big one though is advertising.

So here's from the call. And of course we'll get into AWS, but advertising from the call. Alongside our stores business, our advertising growth remains strong up 26% year over year, which is primarily driven by our sponsored ads. We've recently added sponsor TV to this offering in the US, which Alice, I know that you've been talking about. So this happened to me actually two days ago where I turned on my prime and it said, do you want to use the ad-free version? If so, you have to pay whatever it is. I think $3, is it $3 a month? Alex, what was your thoughts on

Amazon's most recent quarter? Yeah, I thought it was impressive for a number of reasons. First of all, it turned the biggest profit in their history, $13.2 billion. We know Amazon has kind of been profit-averse for a while, but it really just shows the shift of the company. And you look at those retail numbers on the chart and they're kind of they're kind of now at par with where they were in the COVID era, which is OK. But this stuff was supposed to change consumer behavior forever. And it hasn't. And, you know, they're kind of now flat from the COVID era. But the areas of growth are the high margin areas. You're talking about AWS and you're also talking about advertising, which is like found money for them.

So Amazon's in the process of transforming as a company. We just ran a story about the makeup of its senior leadership team, which has almost doubled under Andy Jassy. When you've had as the retail folks have, a lot of the retail folks have exited and they've been replaced. But what you've had is a run-up in the folks who represent divisions like logistics and Amazon Web Services and all these entertainment services. Like Prime used to, I mean, AWS used to have two people on the senior leadership team at Amazon in Bezos' era. Now it has five.

So we really see that this is going to be a much more profitable company moving forward. And if you're looking at the era that we're in, we're not going back to zero interest rate environments. So you need to show some profit. And that's a very bullish thing for Amazon. This is another company that is now applying AI to their existing businesses to either grow them or boost profitability. They said they launched something called Rufus, which is an expert shopping assistant.

I love Rufus, which is an expert shopping assistant. I love Rufus. Trained on our product and customer data that represents a significant experience improvement for customers for discovery. So while you're shopping, Rufus is operating alongside of you or in the background, and it will help you arrive at the right product to buy. Is it as simple as that? Even better.

I felt like they were already doing that kind of. You go to the search bar and you start to have a conversation with Amazon, please help me compare two different coffee grinders. And it will then lay them out for you. And why I like Rufus so much is because the Amazon- Hang on, every Prime user has access to that? You could do that right now? I'm not 100% sure what the rollout schedule is, but I imagine this is going to go to every Amazon user, not just prime users. And the reason is, and Amazon knows this, is that the retail experience on Amazon is a mess. It's so much harder now to find the product that you want, comb through everything, and this might help solve it. The only question is, does it then hurt that ad business that we like so much, right? 26% growth in the ad business. That's where a lot of the profitability is coming from.

They'll have the same problem that Google has to contend with. Yeah, they almost have trapped themselves. I was going to say Google search and Amazon's product pages where the more clutter, the more potential ad revenue, but the less customer satisfaction. And if you go back in time 20 years, the hallmark of Jeff Bezos building Amazon was whatever makes the customer happy is the right answer. And Google beat all of the other search engines because of its simplicity. It just was a plain white page and it worked. So they almost seem to be fighting the very thing that made them both successful because now you've got two different competing business interests, ads versus commerce. Is that how you see it? Yeah, but I also love the fact that Amazon is doing this.

And it kind of goes back to what we talked about earlier with Sundar Pichai talking about how Google responded and others lead the way. Look, and the internet, it's very easy to build. and others lead the way. Look, and the internet, it's very easy to build. So if you don't lead the way, somebody else is going to. And then on your earnings call, you tell Wall Street that you responded versus led. And Amazon isn't waiting for that moment. Yeah.

Yeah. Alex, one of the reasons why Amazon, the stock, had been under pressure is AWS growth really decelerated. And it seemed to be ramping up a bit, at least in the most recent quarter, broke out of the sideways range that it's been in on the revenue side. How is AWS positioned versus some of its other cloud competitors? Well, it's the biggest company of them all, right? It's bigger than Google. It's bigger than Microsoft. It has more features, more functionality. And you're right, it did grow. it ticked up from 12% to 13% growth. So

that's a really positive sign for it. But there is definite liability there, right? Because the one who's really growing and the one who has the potential to grow even more is Microsoft. They have all those relationships with those stodgy enterprise companies that have been with Microsoft forever, and they're just upselling them. And so that's why you see the Microsoft growth rate so much higher than the Amazon growth rate. Yes, law of large numbers, but also just so much more runway for Microsoft. And I don't think Amazon is worried yet, but over time, could there be a worry? Absolutely. Alex Kantrowitz of Big Technology. That was incredible. Thank you so much. You kicked ass.

Appreciate the time. Great to see you guys. Thanks for hanging with us, Alex. Go do your thing. We'll come back to you next quarter. Sounds great. Can't wait. All right.

Good quarter, guys. Great quarter, guys. All right. We're going to wrap with this. Here's a great chart from Alex Morris showing the cumulative research and development expenses for Apple, Google, Meta, and Microsoft. That was $141 billion in the fiscal year 2023. Josh, these numbers are not slowing down.

We spoke about all the spend that not just these companies are doing, but their customers, how much they're spending on all of their platforms. The future, I mean, I know that these companies are big, but the future is extremely bright for these companies. Put that chart up real quick. So this is showing the amount of R&D that these companies are doing and the thing to keep in while it's sex, sex toppled over the last decade. The thing to keep in mind is what are they spending the money on? And so in addition to paying close attention to the companies we've just

talked about, in addition to paying attention to them as investments in and of themselves, paying attention to how they're spending money and on what helps us identify other areas that people will be making money on alongside of them. And that's why these companies are so crucial. It's not just about six or seven ticker symbols. It's about an entire technology revolution and all of the companies and jobs and opportunity in this new ecosystem that's coming to life. So that's why we're so excited about the concept. We opened the show with what ultimately drives markets. And there's no doubt, I don't think even

bears would have anything to say against this, that these companies are going to continue to grow. The fun part, it's not good or bad. It's better or worse. Are they going to continue to exceed expectations and reward their shareholders? Of course, that's the question that just remains to be seen. Michael, I want to congratulate you on the quarter. Let's take everybody out. And yeah. And guys, we will, if this is successful and you guys give us the kind of feedback that, you know, you like the show, we'll see you this time next quarter. party people welcome to the absolute greatest investing and trading and life programming on YouTube. Of all time. Yeah. I mean, YouTube, they haven't called us.

They haven't been like, wow, what you guys are doing is amazing. So we can't go by that. We just go by. No, but we just go by the fans. And you guys are showing up every week live and you're watching the replay and we love you. So thank you guys so much for being into what we do. I'm here. Let me just take a step back for one second.

We're going to get into some earning stuff. We have a whole lot to cover tonight. My name is Downtown Josh Brown. For those of you tuning in for the first time, I'm here with the co-host of the show, Michael Batnick as always. Michael, say hello to the time. I'm here with the co-host of the show, Michael Batnick, as always. Michael, say hello to the folks. I'm just, hello, folks.

I'm just noticing your name today. It's quite funny. Yeah, how about that? Hey, let's do a couple of quick hellos. We haven't done that in a few weeks. Tom Whalen, Rita B, what's happening? Akbar Muhammad, hello. Melissa, how are you?

James Sykes, Jay Luther, Scott, Bernard Josephs, Gary Walter. We appreciate all of you. I can't do everyone, but we appreciate all of you. Thank you guys so much for coming out. Tonight's show is sponsored by Rocket Money. Michael, what's Rocket Money? Wait, before we get to Rocket Money, and we will, do you notice anything different?

Not about me per se, but about the situation? What situation? It's light out. Oh, is that sunlight illuminating your head? It's still light. I mean, that's a computer screen mostly, but you see the background. Yeah, we're getting there. We're turning the corner.

Remember, we're going to see Bud soon. I heard birds chirping. I heard birds chirping in town on Sunday. It's pretty exciting. We are so back. It's not even funny. All right. So Rocket Money. I mean, we spoke. You know who they are. It's great. It's our personal finance app that allows you to cancel your unwanted subscriptions and monitors your spendings. It helps you lower your bills. You know what subscription I need to cancel? It's not a subscription. I need to cancel my Schwab account. We'll get to that later in the show.

You could cancel stuff right from, you could cancel stuff right inside of Rocket Money. Like you don't need to like go to a other thing. It's amazing. That's crazy how they could do that. Dude. You don't have to like go to each of these sites. If you see three things that you don't want to pay anymore,

right in the Rocket Money app, you can get out of it. I found out that I was paying, I had two New York Times subscriptions. I don't even know why. It's dope. I get like these large transactions detected every time Robin makes a large swipe. I love it. All right. Give us the URL. Give us the URL. It's rocketmoney.com slash compound. That's rocketmoney.com slash compound. All right. I'm not having that much fun today. So my day started triumphantly taking 20% of my Nvidia position off the table right on the open.

And I got out pretty close to 700, honestly. And I was thrilled with myself because I think I'm doing the right thing. I don't know if the stock's going to 1,000 or not. But this is the third time I've taken some NVIDIA off the table. Like basically every time it triples, I take more off. So I was like, look how responsible I am. And then I own a little bit of New York Community Bank, which I bought for a trade.

Stopped out, down 25%. What a piece of shit. I hope it goes to zero. And then after the close today, Snap, it's down like 30% now. So I got out of that after the close. So basically, my day started off with NVIDIA making me feel like I'm James Simons at Renaissance. And my day ended with two 25% quick losses. I mean, the dollar amounts don't really matter on those latter two, but so what?

I feel like a dick. But one thing is that I don't sit around with these things anymore. Like in this market environment, goodbye. I don't care. So these things anymore. Like, like in this market environment, goodbye. I don't care. So it could double or go to zero. It wouldn't make a difference. And, uh, now I'm going to talk a whole lot of shit about the seven. Wait, hang on before we get to those, I want to join you in the let's commiserate. So I'm down $3,600 on my snap position. That's a lot of fun. I wish, I wish that was me. Um, I will be, well, hold on, hold on. That's a lot of fun. I wish that was me.

I will be, well, hold on, hold on. I'm not done. I will be selling that at some point tomorrow, but to add insult to injury, I sold Enphase Energy yesterday because I don't like to take big losses. The only time I take big losses is like this, when it gaps down 30% overnight. Shame on me. We'll get to that in a second. I sold Enphase Energy yesterday. I'm listening. I'm down 9%. Eh, f***, I'm out. Guess what? What's this stock up after hours? Yeah, thanks, salt in the wound. How much is it up? It's up 10% in the after hours. That's fun. So just to double with it. It's earning season. It's earning season. This is the good stuff. This is why I stay in the game. Sometimes you need a periodic reminder,

oh yeah, this is why most of my money is in index funds. Just keep buying. Because this shit is hard. And sometimes you do dumb shit. And that's the way it goes. I also whacked PayPal today. They're going to report later this week. I don't trust those people as far as I could throw them either.

I'm hanging on for dear life to that one. All right, let's, so let's talk about Snap. So Dan Greenhouse tweeted this and I was sucked in this. The stock was looking good. The market knew something. No, they knew nothing. They knew nothing.

They knew nothing. Selling puts today. Holy stock was up 4%. The stock HOD right before the print. Nobody knows anything. Look at nothing. So why, why look at fool me eight times. It's not enough. Shame on me. Can I say why? Why? Look at, fool me eight times.

It's not enough. Shame on me. Can I say one thing though? No, no, you can't. Look at this. This is the next day price reaction every time they report earnings. It's a joke. What is wrong with us?

We're the dumbest investors ever. So can I say one thing? First of all- I thought it was different this time. They beat on earnings. Revenue was light and guidance was bad. And that's it. Like you can't be, you can't have a $30 billion market cap doing 5 billion in revenue a year.

No growth, no growth and barely any profit. And a little putz running the company who clearly has no idea what he's doing. Like he should fire himself tonight. I was, uh, I didn't listen to the Spotify earnings yet, but I was looking at their chart of their free cashflow growth credit to them. They got the memo. Everybody got the memo. Evan Spiegel didn't get the memo. You're fired. He announced layoffs yesterday. And I said on TV today, like that's, I don't know that that doesn't sound great going into earnings and announcing layoffs the day before almost like hey like remember we we fired

people guys like it's dude it's so bad this this is maybe uh the worst managed large i don't want to call it a tech stock the worst managed like large communications name or social media name like it's not it's not even close so who do they blame because twitter's good who do you blame they blame the middle east i don't know if that's hilarious or offensive they they fucking wrote a letter to shareholders they said due to events in the middle east i don't even understand how big this kid this kid should literally fire himself. Anyway, jokes on us. Yeah, well, not for long.

Okay, Chipotle, do we care? I don't care. Chipotle just keeps winning. The stock is now, it's a $70 billion market cap almost, or maybe more after hours. Just a monster. Just an absolute monster. It's a beast. And the negative on Chipotle was, well, they're not going to be able to raise

prices every year. Maybe they will. Oh, yeah. Remember? Dude, remember in 20, I don't know, 14, when Einhorn, not Einhorn, I think it was Ackman, maybe it was Einhorn, calling it expensive Taco Bell? Yeah. Good call.

Hey, you know what Chipotle never did? Blame the Middle East for a revenue shortfall. This kid's out of his mind. This is what they're saying to shareholders? The Middle East? Why don't you just say the dog ate your earnings report? That's insane behavior. I'm taking my 300 shares and I am leaving, sir. I bet you, I bet you he has, I bet you he has all the voting. I bet you there's a, I'm not going to look cause I'm out. I bet you there's a dual voting class structure and he has all the votes. Like, I bet you, you can't even activist this thing. Like without even looking at it, I would just make that bet.

Well, there's not multiple share classes, but he might have. No, he might have some super voting stock that doesn't trade is my point. Yeah, yeah, yeah. Who knows? And there are a lot of those out there, but like he has not earned that. One last joke. One last really funny thing. In 2018, which I think is a, I think based on 2017 after they came public, the compensation for that year, they announced it in 2018 for him. I think he paid himself $680 million that year.

This company has never earned money. The stock-based comp is completely out of control, but whatever. All right. What are we doing? Is it me? It's a lot. You really sound like Cousin on that one. Oh, Mike Wilson.

All right. So I don't, listen, I don't do this stuff where like somebody's going through the worst time in their career and you pile on. I just think it's instructive what happened here. And without getting personal about it, I think it's definitely a market story. And I'm going to get into why in a second. But let's just relay the news via Bloomberg. Mike Wilson, Morgan Stanley's top US strategist, is stepping down from his role as chair of the firm's Global Investment Committee. The Wall Street giant's top-rated US equity strategist will step off the GIC,

quote, to focus on serving his key institutional clients where the demand for generating tactical alpha is intensifying, said the COO of Morgan Stanley Wealth Management. So they're going to put in Lisa Shallott to replace him. And they kind of said over the last 10 years, he's been great, blah, blah, blah. So this is my take, and then I want to hear yours. blah, blah, blah. So this, this is my take. And then I want to hear yours. He looked really smart in 2022. And the problem with that though, is you become synonymous with being bearish. If you are the guy who was bearish in a bear market and you kind of like that attention and you just like keep letting people repeat that. You called it, you called it, you called it. And he never really was able to shed that persona in the media.

He kind of pulled back from doing mainstream media. You only really saw him on Dan Nathan's podcast. And he made like a Bloomberg appearance the day before he got fired, the day before he stepped down. He was supposed to be on our show in October, and he blew us off. And he blew us off in the absolute worst, most insulting way. He went into Google Calendar and removed himself from the calendar invite. This is true. I didn't say anything.

I was like, all right, guy's busy, whatever. And then like a week later he was on uh dan show because they love all that bearish shit and uh i just think he didn't want to i just think he didn't want to like defend the bear case um last october because the market was like you know up on the year i don't know or he hates me either way uh so what so but but look uh it would be poetic if that was the top so when did that happen for the record last friday uh yeah yeah it sure would be what are your thoughts all right my takeaway from this is very simple if you are bullish in a bear market your job your job is probably okay right because everybody's getting screwed in a bear market, your job is probably okay, right? Because everybody's getting screwed

in a bear market. If you are bearish in a bull market, you are fired. You are out of a job eventually. We've seen that play out a million times. You call it career risk. It's just, it's asymmetric. You can be bullish in a bear market and survive. You cannot be bearish in a bull market and keep your job for very long. So let me add to that. Wait, you know why? Because it's like everybody else is making money. You idiot. We got left behind.

100%. And it's Morgan Stanley. So it's like $3 trillion in wealth management assets. And it's the wrong firm to be like the most noted bear on the street for more than one or two years. Well, we heard, we heard, we heard from their, from their earnings report. And I don't know if this is coming down from him or whatever, but 22 to 23% of the client portfolios on average was in cash. That's, that's sick. And that's in Mike's defense in Mike Wilson's defense. i don't know a single

financial advisor at morgan stanley that listens to a word he says so i wouldn't i mean and i know like 20 of them so i i would tell you that morgan stanley wealth managers are not listening to mike wilson uh market opinions and then changing around their client portfolios. None of that is happening. I think we mentioned that, just joking around, why does Morgan Stanley wealth management or asset management have such high cash positions? Maybe it's because the chief strategist is the biggest bear on Wall Street. I don't really think that's what it is. I do believe the story that he feels he can deliver more value with his insights to hedge funds or institutional investors. They don't need to see him on TV. They don't need to read his comments in Barron's. They want FaceTime with him. Yeah. Like that's like institutional investors, you

know, don't need Mike Wilson on television being Mike the bear. They would much rather meet with him in person. So it is, if he wants to stay in the game and add value, that's probably a great move. This is a very visible post. If you are the chief strategist at the largest firm on Wall Street, which is what Morgan Stanley is now, it's a PR, it's a media role. And he doesn't seem to be having fun

in the media part of it. So I mean, another, another takeaway from me is just, that's just a really, really tough gig. It's really, really difficult. I couldn't do it. All right. I want to tell you a quick story and I, I remember this and a lot of people, I think brought this up also as soon as the news broke last week. There was a story in 1999 of the chief investment strategist at Merrill Lynch basically resigning slash being asked to leave at pretty much the top of the market or almost at the top of the market. And it was a guy named Chuck Clow. And he's still around. He's still in business. Maybe he's watching the show right now.

But Charles Clow was the chief strategist of Merrill Lynch, which at that time was bigger then than Morgan Stanley is now in terms of like how visible. Like Merrill Lynch was like Coca-Cola for investors. This is, you know, before everyone was doing their own thing online. Merrill Lynch was Merrill Lynch. And this guy had the top equity slot. And I want to read you what he said in January of 1999, after big rally in 97, 98, et cetera. He said, as 1998 goes out, liquidity rules the financial markets and central bank

policies seem more oriented toward capital support than at any time in history. It goes on. And then he basically says, he talks about bank credit in the US has exploded. There's a boom in loans for securities purchases, all these things that were inflating at the time. And he basically says, we believe this is unsustainable. And he had a bearish outlook for 1999. And that was in January. And then by August 28th, he resigned. So he basically, he was 57 years old. He was telling people to put 55% of their money in bonds, 5% in cash, only 40% in stocks.

The NASDAQ doubled, I think, twice during the course of 1999. It was just impossible to have the head strategist of Merrill Lynch be bearish. So he left. And of course, the rest is history. The stock market topped, I think, seven months later in March of... Anyway, they put a new strategist in his place and her name was Christine Callies. And she got the job in the summer of 2000,

just as the NASDAQ had topped out. And Forbes described her as, quote, unbendingly bullish. So she was talking the right language. And remember, Merrill needs the bullish talk because they're doing all these banking deals, doing all these IPOs. You can't have somebody that's bearish in the seat if you want to play. Anyway, she gets fired January of 2002 after two horrible years of being wrong,

bullish and wrong. And do you know who they put into the slot without looking? And do you know who they put into the slot without looking? Not Henry Blodgett. No, no. Rich Bernstein. That's how Rich got the job. Rich was a value investor. He was not pitching tech stocks inside of the firm.

And so Rich got the job in January of 2002. And the rest is history. Anyway, there's a Forbes column talking about this. And I forget, I don't know who the columnist is, but they call it, the market is the great humiliator. Yes, it is. So Mike Wilson in 2002 was unpunchable. He was the guy.

And then one year- 2022, excuse me. And then one year later, it's like, you can't even keep your spot because you're just that wrong. And that's unfortunately how this game goes. It's really, really tough to survive. Listen, we got humiliated in the after hours. It happens.

That's part of the game. Bro, I wake up humiliated. It's fine. Anyway, we wish Mike Wilson the best and hope he's happier in his new role. Okay, go ahead. All right. Let's talk about the future. we wish Mike Wilson the best and, and hope he's happier in his new role. Okay. Good. All right. Let's talk about the future. So we had Warren pies on the show on the compound and friends last week, and he had this great chart showing what happens after a long period of time after a year passes without any of the all-time highs, and then you make one. So this is the average of all of those, I think,

14 previous events. And the trend is clear. It's up until the right. Of course, this is an average of the 14 paths. This is not what anybody should expect to see in any given year. But when you mash them together, that's what happens. So we had that from Warren Pies. Then we had our friend JC put out some great stuff about a potential rug pull coming. And JC is basically saying that on the bottom is the S&P. Yeah, you see the market going up, the index going up, but we know what's causing it to go up. And there's less and less participation. You have less stocks above the 50-day moving average. You have less stocks above the 200-day moving average. Next chart, please, John. You have less stocks making new 50-day moving average. You have less stocks above the 200-day moving average. Next chart, please, John. You have less stocks making new 52-week highs.

And you can change that to three-month highs or six-month highs or whatever. It's less stocks doing that. Jason Gepford shared an incredible stat. The S&P 500, this is from Sentiment Trader, is within 0.35% of its three-year high. However, fewer than 40% of stocks are above their 10-day average, fewer than 60% are above their 50-day average, and fewer than 70% are above their 200-day moving average. That's only happened one other time. So it's just, and you see the data, it's not great. It's just a very odd dynamic where it's really, really, really, really, really being driven by an hour

and an hour leadership. And then JC says, as a potential catalyst, you've got the dollar, which has been a wrecking ball. So a potential out, not a potential, an outsized day on the dollar, which means that the open is lower than the previous closing low, and then it finishes higher than the previous high, which would indicate potentially a rug pull coming. What are your thoughts? Well, I guess all rug pulls start this way with declining internals. And so I know everyone has their own measure of, of internals, but they all line up right now. I actually, I got into a fight with my friend, Jimmy Labenthal on, on a halftime today.

Cause he was saying like participation is broadening. And as evidence, he was like looking at a few non-tech stocks that he owns that are acting well. So I said like, what measure do you look at to say that the rally is broadening? Because it's the opposite. It's objectively not. It's just not. He's like, well, so I guess he was trying to say he thinks it will broaden.

All right, maybe. I hope so. But in reality, the work that Sean and I did before the show, the percentage of stocks above the 50-day moving average came into the year 90%. That's way too hot. Every stock was in a short-term uptrend coming into the year. Now it's 62% and falling.

And that's a big difference. That's a very different environment, 90 to 60. 60 is actually healthy. 80 is not healthy. So it's not that the market is in a free fall. Directionally, we're not broadening out. It's just there are less stocks going up. And Nvidia going into today was up 40% on the year.

So that's why the S&P looks like it's rallying. It's not even the – how about this? It's not even the Magnificent 7 anymore. It's the Magnificent 6. We're losing MAG stocks, right? Tesla's gone. Yeah. What if Alphabet's gone, right? That's not making new highs right now after earnings. So we're at MAG 6 and maybe MAG 5 pretty soon. Now, let me just- NVIDIA reports later in February. We'll see. Let me just say two things for context.

Number one, JC's timeframe is probably different than most viewers. And I would think, not I think, JC said that they're buying puts. So he's buying options. He's a trader. If you're not a trader, you can't keep up with what he's doing. His risk is clearly defined. And I would also note that it's not as if, so even though fewer and fewer stocks are in uptrends, it's not as if they're rolling over and the market is only being held up by a few stocks because the S&P 500 equal weight is less than 4% off its all-time highs.

Okay? It's 3.9% off its all-time highs. all-time highs. It's 3.9% off its all-time highs. And the NASDAQ equal weight, the NASDAQ 100 equal weight is 0.9% off its all-time. It's at all-time highs. It's 90 basis points off its all-time highs. So if the QQEW or whatever equal weight of Qs you're looking at, if they were down like 9% and the Qs were at an all-time high, yes, I would say, okay, this is not really what you want to see. That's not the case. Again, the equity Q's are 90 basis points off their all-time high. They're at all-time highs too. One of the things that we talked about with Warren Pies on the compounded funds last week was the pattern, the election. I know you don't really

believe in patterns per se, but like the presidential election cycle in year four, the first half, you kind of fall apart in, in, in the stock market, to some extent, it's not a, it's not a route, but the gains in these years historically are toward the back half. When the uncertainty of the election starts to go away. Um, I don't think that the market is being affected by election uncertainty right now, so maybe this doesn't matter. But I would just submit, hey, man, you got 50% in the NASDAQ last year. You got 100-something percent in some of the biggest, most popular stocks. You got 100% out of Apple off the low. Are to be okay if, if we don't make new highs for the rest of the quarter? Like, I feel like everyone should just like take a deep breath because it doesn't have to be rolling over just because it stops going up. The average, I mean, rug pull is though an evocative term.

Well, that's what he does. It's a triggering. Do you know what the definition of rug pull is? Like the, the dictionary definition? I know you know what it is. No, I don't. I looked it up. A sudden revelation that completely contradicts the assumptions one has been led to believe, i.e. in cryptocurrencies, a fraud scheme where anonymous founders trick people into investing for a cryptocurrency project, which is then

abandoned. That would be an extreme way to describe a correction in the stock market. Rug pull is like the Fed says we're going to cut rates and then they hike them. So the average entry year drawdown for the S&P 500 is 14%. We've basically gone straight up. Is it possible that we get 10% correction from these levels? Yeah, that's always possible. Yeah, it's always possible. So we'll see. I'm going to do real quick on JC.

I'm going to do the JC pre-market 9 a.m. show on Monday with Straza. I've never, I've either never done it or I haven't done it in so long that I forgot, but I'm really excited about it. It's fun. It's fun. All right. So this is interesting.

Oh, you know what? I'm about to rug pull you, the viewer. So, and this is from Barclays. Now listen, hear me out. This is a rug pull. NVIDIA valuations. This is from Barclays. NVIDIA valuations fully priced in the AI GPU growth ramp. And we expect demand growth to

eventually moderate as we move from training into the inference phase. Rising competition from peers and customers in any LLM monetization issues are likely to temper long-term outlook for GPUs. China restrictions is a lingering risk. Okay. So is it time to sell NVIDIA? Well, guess what? That note that I just read is from their credit research at Barclays. Oh, that's interesting. So the equities, they're still bullish. They have a $650 price target.

That is from the credit side of it. That's not bullish. Do you know where the stock trades? 700? I don't from the credit side of it. That's not bullish. Do you know where the stock trades? 700? I don't know. What was it? You just said that. It's not bullish.

I mean, it's not super bash. But what I wanted to flag was this. So only 5% – I'm sorry, only 5 customers, only 5 of NVIDIA's customers provided 46% of their revenue last quarter. That's wild. And it's no surprise who it is. It's Microsoft, try it on places, Microsoft Meta, Amazon Alphabet, Dell, and Supermicrocomputers. So Microsoft alone is 15% of their revenue. What's this thing that the analyst said about the balance sheet? So he said that NVIDIA's balance sheet is bulletproof. This is the

credit guy. And in the wake of its failure to buy- I thought that sounds good. No, he just said his only concern is that NVIDIA is too expensive. Its bonds trade tighter to the equivalent treasury yield than Microsoft and Apple. Right. And the stock is up 42% in the last 23 trading days, which is so nuts. So throw some of these charts on. So we haven't really, really seen this before where it's like- I don't like charts that look like this. No, it's just the ascent is just way too steep.

And if you go to the next chart, I threw some Bollinger Bands around the weekly candles and the RSI is off the charts. I mean, this would be, I don't know. I don't, let me, it's a blow off top. It's too much. It's too much. It's too much. I don't like charts that go vertical like this after be after rallying for two straight years and then go vertical.

That's the end of a move. That's not the beginning. I don't like charts like that. It's not a gap up. It's not earnings related. That's just literally like, holy shit. How do I not own more of the stock? So Josh, it's you're right, holy fucking shit. How do I not own more of this stock? So Josh, you're right.

So as you mentioned, it's gone up 42% of the last 23 sessions. It's not as if like there was an earnings gap in there. That's only, that's just straight up. Well, hearing Meta and Microsoft talking about their AI CapEx and Apple, that's what did that to the stock. So they didn't have to report earnings. Everyone else reported it for them. I'm just eyeballing this chart.

This thing could go back to whatever, pick a number, 540, and it would still be in a monster uptrend. So 540, again, which is a number that I'm completely making up, but that's 22% down from here, which would be very, very, very, very normal. 2% down from here, which would be very, very, very, very normal. Yeah. I mean, uh, NVIDIA, NVIDIA doesn't always make it as easy as, as, as the stock. It doesn't always make it easy as it's been for the, for the last year or two. Uh, what did I want to say on this? Oh, um, the, the five customers that, how much of the revenue Throw that back up. It's 46%. I mean, that's crazy.

46% is coming from these. All right. What I would say is Dan Ives made the point, chart off. Dan Ives made the point with us on Monday. We posted great quarter, guys. And I hadn't really thought about this. He was saying, like, if you're a customer of Microsoft Azure, the cloud, and you're a Fortune 500 company or you're a government entity or something, and you're looking to get access to

AI tools, and you're looking to build something with AI, you have to be ready to say yes, because they have so much going on and so much demand that they'll put you to the back of the line. have so much going on and so much demand that they'll put you to the back of the line. What CTO can go back and report to the CEO or the board like, oh, why isn't our AI strategy being executed right now? Microsoft waitlisted us because I wasn't ready to pull the trigger. So that's part of this mania that's going on with these stocks and, and this build, they are absolutely building in advance of actual demand showing up. And Dan made the point that like, they really haven't had a choice.

And I found that to be really interesting. I wonder how, how long that could last before we start seeing concrete examples of companies boosting profitability or revenue growth via AI, which we're not really seeing yet. So that's a wrinkle. This sounds like a Grand Rapids hedge. NVIDIA has a $1.7 trillion market cap. I don't think you could say that we're closer to the end than the beginning of this AI ramp up period. I think that we're still in the first innings.

Has NVIDIA discounted the five years into the future? Maybe it has, we'll find out. But that being said, in the short term, this thing is way overheated. I'm sorry. Well, one of the reasons why it was okay selling some of it again is because it's now 3.6% of the S&P 500 and rising. 6% of the S and P 500 and rising. It's not as though we don't all, we like the, like everyone, the collective way don't have exposure to Nvidia. Like it's now a really big, really important weight in every, every like major fund. It's an, it's a huge S and P weight, huge NASDAQ weight, huge tech weight, huge semi weight. Like it's really big. And it's bigger than that. It's bigger than that. If Nvidia goes down 20%, you don't think that meta is going to follow?

Like- Yeah. And honestly, can you honestly expect, even if they have an amazing earnings report at the end of this month, which I hope they do, can you honestly expect them to add another $750 billion in market cap like they just did over the last 90 days? It's getting really wild. So I don't like charts that go up for a long period of time and then empire state building.

Yeah, it's not good. So I mean, look, I want the stock to work. I want it to keep going up. But I feel very uncomfortable with the rate of ascent. Correct. I think that's a fair way to put it. We should keep going. Yeah.

All right. That's enough NVIDIA for the week. New Dow stocks. So, this is interesting. Tomy Kilgore, who's a very good writer at MarketWatch, did a whole piece about how it's very likely, in Tommy's opinion, of course, that there will be a Dow rejigger happening this month. And there's a few reasons for that. The main reasons are you've got this breakage of correlation between the S&P 500 and the Dow. Look at the degree to which that

correlation had broken down. And I know that that's a moving target. But if you think about it, if you think about it, these two things used to move much more in lockstep than they used to, these two indices. But the other thing is Walmart's got a three-for-one split, and that should be the trigger for the change. Walmart's weighting in the Dow because it's a price-weighted index when it splits three-for-one will materially fall. The index will have to rebalance to account for that. It's a good excuse to make changes that, to Tomi and others could be long overdue.

So let me just read this. The last time the Dow made a change was August of 2020. They added Salesforce, Amgen, Honeywell. They took out Exxon, Pfizer, Raytheon. So it's interesting to just think about, well, what would get added if they wanted to do something now and what would get pulled out? Tomy points out the fact that there are four financials in the Dow currently. Visa, Amex, Goldman, and JP. Yeah. One of those is probably superfluous.

Maybe even two. I don't know. You have two credit card issuers, two banks that are almost identical. It might be overkill. So maybe Goldman would come out and maybe visa or maybe American express because visa is more representative of most consumers and American express is more to the high end. I could, I could envision, um, either of those scenarios. Here are the rules, um, for, for, for coming in. So it has to be a U Sbased company. So it's not going to be Taiwan Semi.

You have to be in the S&P 500. And it should not be part of the transportation or the utility sector. No danger there. And then there are some unwritten rules. And one of them is that they try to keep the ratio of the highest stock price to the lowest stock price at less than 10 to 1. The price of UnitedHealth is 22 times the price of Walgreens, Boots Alliance right now, for example. So the other thing is there was a time when companies that didn't pay a dividend wouldn't even be considered.

But Boeing doesn't pay one currently. And Salesforce has never paid one and they're both in so that appears to not matter companies with multiple share classes used to be something that they they tried to keep out i don't think that they care about that anymore um which is why maybe berkshire could even though they might have to reduce financials maybe berkshire makes more sense as a holding because of how many parts of the economy it touches. Last thing I want to say on this, if you think there's some permanence to these magnificent seven names, you don't have enough of them in the index. Do we have a list of the components?

Do we make one of those? Here it is. do we make one of those here it is so i mean salesforce is big tech fine it's not one of the mag 7 apple okay that's not going anywhere uh but that's that's pretty much what you have like you don't you don't have microsoft in here but you have ver. You have a Microsoft. Oh, Microsoft's in here. Wait, you have Verizon and Cisco in here. I mean, they're, they're not small companies, but you don't have alphabet or meta. Like the, I mean, these are two of the biggest companies on earth. You have Intel. I don't, so I wouldn't be surprised if we saw some, uh, if we saw some action, what do you, What do you think happens here?

Financials are the biggest sector in the Dow. Yeah. 21%. It's only 13% of the S&P. By the way- That's the obvious. So John, throw that three-year chart on. The S&P and the Dow, for all their differences, I don't care, dude.

It's the same thing. It still is. It always has been and always will be. It ends up in the same place, but there could be long stretches where tech is the swing factor. They diverge. All right. So here's some notes that I took. Goldman Sachs could easily be replaced with Berkshire. They're about the same price. Yeah. Cisco is the 27th largest stock. So it really doesn't move the index. Same thing with Intel. It's the 28th. So you could whack those and replace... I mean, Amazon and IBM are roughly the same share price. Amazon is obviously so much more representative of the overall US economy than IBM right now.

It's a joke. Coca-Cola? What about replacing Coca-Cola with Pepsi? Doesn't Pepsi do so much more? Or neither because you have Walmart, and that's where they're selling this shit. Anyway, IBM, Intel, and Cisco, what are we doing? We can't do better than that? We can definitely. IBM is almost like a non sequitur. What's interesting is this

is, so this is not mathematical. It's a committee and they meet all the time. Howard Silverblatt is like the chairman of this. What do you mean? What do you mean? It's not mathematical. Like that, like this is not, this is not quantitative. This is pure qualitative. Well, it's quantitative a little bit in the sense that you want to make sure what's coming out is replaced with a stock with a similar share price which sounds really dumb but that's the way that this thing is right so remember when apple did a seven for one that was probably because they got the call i got them in i got them in yeah it was like an 800 stock and they they got the call. We're considering you for the Dow 30.

When you get that call, you split your stock. Well, didn't Google split their stock? Didn't Google do the same thing? They have done that and they have not gotten in. Here, this is interesting. So I told you the last changes were in 2020, which is now four years ago, the last time prior to this that they've waited more than three years to make any changes

was from June 2009 to September of 2012. Was anything going on then? Nothing. We might've gotten a bit distracted in 2009. So they don't normally go this long without a change. So it'll be really interesting. I mean, I could make the case for Meta. And I know like, oh, it's Zuckerberg, blah, without a change. So it'll be really interesting. I mean, I can

make the case for meta and I know like, Oh, it's Zuckerberg, blah, blah, blah. He's like 40 years old. Amazon meta and Google are not in the doubt. It's a little weird in 2024. It's a little weird considering how important they are to the consumer economy, the business economy, advertising, they're global. They, one of them, one of them should be in, and it's pretty easy to find stocks that should be out. All right, let's keep it moving. So Dan Premack tweeted, one thing this job report highlights is how the conversation on X, I'll call it Twitter, over-indexes for media and tech news. So last week, we saw a monster jobs report. So last week, we saw a monster jobs report. And yeah, we see Snap, we see Google, we see Meta,

and we over-index for what's actually going on. Neil Dutta has this amazing chart showing that the rise in layoffs is not about an economic slump. So he breaks it down between economic conditions, which you saw a lot early last year, of course, a demand downturn, restructuring and cost cutting. And this is all about restructuring and cost cutting. And Josh, we spoke last week on what are your thoughts. Bucco Capital tweeted something about, we already did the layoff thing. How about how companies got to profitability? Now they're moving out. It's the same thing, but now they're calling it restructuring and cost cutting. Yeah. Right.

Size. And they're all like DocuSign just announced layoffs today as they lauder, like it's, it's every day and we're not in a recession. And again, we still haven't really gotten to the point where these numbers show up in the non-farm payrolls report. They're just, they're not showing up. It's crazy. But I, I, that's, that's the over indexing part. these numbers show up in the non-farm payrolls report they're just they're not showing up it's crazy but i i that's that's the over indexing part these are big highly visible brands we all know

the name like snapchat's like was it 500 people was it 500 people it's nothing it's nothing it's 500 people they're probably 500 people got hired since we started doing the show uh in other parts of the economy so um we see these layoff announcements. They're companies we've heard of. And therefore, we think this is this huge phenomenon. It's not yet. It could be. It's just not yet. I think you're going to see a lot of finance layoffs this year, personally. So bonus season is now., I think the restructuring in in um asset management Private equity. These are they're just overly staffed and uh, I wouldn't be we haven't really seen that yet Um, because we haven't had a real recession

Normally you get these financial layoffs after during a recession or after If we're not going to have one a lot of these companies are probably looking around and they're like Did we really need to hire this many, I don't know, accountants, wholesalers, whatever. So I think you're going to see like pockets and it's just going to go on all year. It's just, it's not showing up in the, in the national data, which is interesting. Um, all right, let's keep going. Uh, the consumer.

So I guess this is like related to that. Bloomberg Markets Live does a pulse survey. I know you're not a big survey guy, but let's assume Bloomberg is talking to a decent caliber of household where people actually know what's going on. like caliber of household where people actually know what's going on. 463 respondents, more than half said spending will stay strong or get even stronger in 2024. And they told them that they will keep spending on things like airline tickets, restaurant meals, and concerts, which is basically the whole economy now outside of GPU chips. This chart is basically showing that 49% are saying, like, we're fine. We're going to keep going. 45% say it'll slow

down. So if you're confused about the state of the economy, so are the consumers. It's kind of a mixed bag. Well, this tells you nothing about the future, but it tells you a lot about today. People are fine. People are fine. Next chart. Economists anticipate the annualized pace of spending will slow this year. So you can see the blue is the estimated growth, which they think drops down. In the fourth quarter, it was about 3%. And they have that dropping down by Q2 to under 1%. And that's just the pace of consumer spending growth. Next chart. All right. This is something worth keeping an eye on. Consumer credit stress to inch higher.

Maybe. In 2024, consumer delinquencies and defaults. 76% of people who responded to the survey, which was between January 29th and February 2nd, said that consumer delinquencies will creep higher. That's overwhelming. People expect to see that, probably not about themselves, but about their neighbors. I think this, I think this is like a really good description of the way things are right now. And that dread that everyone seems to feel is not being alleviated by higher stock prices. Like it's just with us. People think the wheels are

about to fall off still. Like people just have that foreboding in the back of their minds. What are your thoughts? Always. Well, not, I don't know. I think now more than ever, to be honest with you. Like, I don't ever remember a time where you've printed new all-time highs in the stock market and you've had this much dread about what the year could bring.

Yeah, well, you also never had 30% inflation over a 24-month period either. Yes. I'm saying with stocks at all-time highs in our lifetime. That's never happened either. Do you think that this is going to be one of the more important data points to follow this year now that the Fed is not the main thing, or when they cut is now the main thing, versus will they keep hiking?

I think delinquencies- What data points? What data? Credit card charge-offs, delinquencies, auto loan stuff. I feel like this is coming back. There's nothing there. Bank of America just reported- Yet. Yeah. There's nothing there yet. Bank of America just reported earnings and their charge-offs is lower today than it was pre-pandemic. And I'm not saying that's going to be the case forever, but when it happens, we'll talk about it. Absolutely.

It's amazing. Okay. Let's talk about it. Let's talk about it. It, I'm talking about the Apple Vision Pro. We're going to start with two short clips. John, if you please. And for the, for the I'm going to make a yeah it's that's like a lot there's like a lot going on inside of that box it's too too much assembly it's not apple steve jobs would never have shipped that shit okay for the listeners that was about 20 seconds of the unboxing of a vision pro and i counted about uh 17 or 18 steps to assemble it out of the box. I don't think Jobs would have shipped something like that. The magic of the iPhone is you got your thumb, you've got this, you turn your head, the eyes.

It's just, it's magic from day one. Now, obviously. Also, the payoff was trash. Like a sub Jurassic Park quality virtual dinosaur. Like that's the payoff. They shouldn't. One more. We got one more they shouldn't one more we got one more we got one more video one more video john i also want to see what's happening in this game so

i can click on team stats and real time they update while you're watching the game all the games that are being played whether they're live or archived for the day are here watch game i could swap it in or i could add to multi-view. So all of a sudden, one pops up that I'm like, oh crap. Like I can watch on the big screen or I can have it here. Let's go to another game. Philadelphia, Denver. Yes, please. Add to multi-view. So now I have three, three screens, three games. We literally have five live streams or archive streams of NBA basketball in my face I'm freaking out already I'm like this is incredible then what do you normally do when you're watching sports um yeah I'm messaging my friends with group text so that pops in over there. I could be browsing the web here.

This is insane. Thoughts? Does anyone besides Kevin O'Connor need that? I can't wait. If you're doing a basketball podcast and you need the group chat with the other podcasters, you need advanced stats, and you need three different games on three different screens okay because who else besides koc on sunday you need you need it on sunday in 2028 i will be sitting on my couch watching 14 games at once i can't wait can i introduce you to red zone because you only have two you only have two eyes in your head. Red Zone?

No, I don't know. What do you mean? I want all the games. I want all of the games. Anyway, let's not go too down the- You only can watch one thing at once. Look, I'm bullish on Vision Pro. I have yet to see the thing that makes 90% of people be like, I have to have it.

That's not it, what you just showed me. be like, I have to have it. That's not it, what you just showed me. We know that version one has a very small audience. Did you read that? People are saying if something goes wrong, you have to bring it back to the store. There's no support for a device. This is why you don't buy the first of anything. And everyone knows that everyone knows. I mean, this is really for early adopters and journalists and all that sort of stuff, but I want to talk about the, the, so I think, I think like, like most people, I think that this thing is magic. I think it's going to be a new category. This is hardly groundbreaking opinions here, but I should have shown here's what they should have shown.

They should have shown me at six o'clock at night in a suit that has makeup on the collar, sweat on my forehead, my tie choking me. I've just done three hours of TV slash podcasting, had seven meetings and pounded myself with carbohydrates all day. I'm wedged into a three-seater in the middle on Long Island Railroad. And I throw that thing on my face. And I'm like, in paradise, like I'm on the beach, or I'm like, so close to a movie screen, I'm almost inside of it. And I just like escape my life for that 40 minute thing. Like that's the that's the ad they should make.

If you really want to sell these to the middle class, get out of your own shitty situation for an hour at a time, just disappear into another place in time. That's the, for me, that's what makes this thing a killer device. They're not playing that aspect up. They're not doing that. At $3,500- That's a layup though. At $3,500, they're not ready for the middle class. All right. So Bank of America has some projections on what this is going to do to the actual business. They're projecting $1.4 billion in revenue this year, which is obviously a drop in the bucket. 3.5 next year- I need a device that removes me from this world.

By 2028, they're looking at $18 billion in revenue. Margins are not going to be high on this product. They're looking at 20% gross margins. So I think it's going to be, are you in more dud in terms of the business? Just business. Dud or real? They're having trouble, allegedly, and i only know what everyone else knows from from reading they're having trouble convincing the most important apps in the apple app store for the phone

they're having trouble convincing these companies to work with them and develop apps for the device and netflix is not there yet uh no netflix said no and so did YouTube. And that could change, but it's a chicken and egg thing. So this is really interesting to me because Apple, we haven't seen Apple struggle this way, and they may not struggle here. It's almost like you go to the developer community, and I don't mean like, hey, write a weather app. I mean something like Netflix or YouTube. And you say to them, we're really committed to this platform.

Therefore, you should commit your resources to making the Netflix app accessible on our, the Netflix has two questions to ask. Number one, do we really want to help Apple considering that we're competing with Apple and other arenas? That's one. Look at what we're paying to the iOS, That's one. Look at what we're paying to the iOS, you know, to the operating system, you know, to be included in the store. Number two is,

do we want to spend the resources that it would take to build this thing? What if the product's a flop? And everyone has to make that calculation strategically and financially. There's no users. They don't have to make that decision yet. But this is my point. There never will be users if nobody commits to building apps for it.

Okay. I understand your position. I'm saying not talking about today or tomorrow in 2028, will this be a meaningful line item for Apple or will it not be? Oh, a 40% chance. That's fair. That's what I would say. Less than half. Meaningful because Meaningful is loaded. iPhone is a $200 billion annual business. I understand. So Meaningful? I understand it's not going to be bigger than the iPhone or the services, but is it going to be a meaningful piece of their, are we going to be talking about it on their earnings call? Can I

say a different, can I tell you a different question? Yes. If Dan Ives is right and the product evolves into being a pair of Ray-Bans, which I suppose technologically will become increasingly possible as time goes on, that has been the history of Apple's different products. So if he's right, at what point do people just start using their phones less and therefore replacing them even more infrequently? If 60% of the things you currently do on the phone, on the screen, will move over to what you're doing on your wearable, is that cannibalizing some demand for phones? And I'm not even saying it's a bad idea by Apple because they might have to do that defensively. They're not going to be the only product in this category. They never are. So they might have no choice. But I could envision a world where the internet moves

from being handheld to being all around us. And Apple has to play there. So you said 40% chance, which is fair, that it's a meaningful line item that we're talking about in earnings. Or 40% chance that it's not meaningful and I'll just use whichever it ends up being. What do you think are the odds in percentage terms? What are the chances that in

five years it doesn't even exist anymore because it was that big of a flop? 10% chance. Very, very small. Very very very small okay very very small i'm with you there so uh because they really haven't given they really haven't given up on on hardware they've fixed whatever their issues were with original ipad original watch they have eventually figured it out so it's a it's it's not a slam dunk uh that they will figure it out,

but I also don't think it's a high probability. All right. My opinion is that this is going to change everything. Okay. I'm open to that. I'm open to that. Let's take everybody out. I want to make the case on Disney, which, funny enough, you own and I don't.

I love. Out of here. Both of you. Disney fans? Biggest Disney fan. Go ahead. Those kids are way too cute for you to be the dad. All right.

Disney traded really well into the close today. This might be stale if you listen to this on Wednesday morning. They report morning or afternoon. Go ahead. I forgot. Either way, they report tomorrow. Morning, right? Because isn't IGRE usually on in the morning?

I feel like it's always in the morning, but I could be wrong. I think so too. Let's put this chart up. Like this is what – I mean this is so textbook. Oh, yeah? Well, Snap looked good too. No, no, no, no, this is so, this is so textbook. Oh yeah. Well, snap, snap looked good too. So no, no, no, no, no. This bounce off the 200 day.

Um, and let's not equate this with snap. Uh, it's not overbought yet either. Like it's, it's not like egregiously rallying. It's just like rallying, rallying. Well, I, I actually, I bought more Disney at the close, so I hope you're right. Go on. All right. I'm proud of you.

I hope this works. I'm not of you. I hope this works. I'm not in it. I kind of feel like I should have bought it. I spent some time last night with Professor Jeff Sonnenfeld. That was great, by the way. Yeah. Oh, thank you. Look at his office, dude.

How out of central casting is that? Yeah. That's the Yale University School of Management professor, and he is awesome. I love it. He went nuts. He snapped last night. Dude, he went nuts. All the whole Nelson Peltz thing.

He's a big fan of Bob Iger, and he thinks the turnaround is already underway, and Disney has incredible things. I ask him, then, what is this guy Peltz doing? He's like, he just wants to grab a seat on the board and ride the coattails and claim that he helped fix Disney. I said, really? He's like, yeah, that's all this is. And I thought that was interesting. Anyway, let's break down the expectations really quickly. $1.82 billion in net income is what the street is looking for. That would be 84 cents.

They did 70 cents in the same quarter last year, 23.72 billion dollars, which would only be a 1% gain year over year. The slowest pace of growth since the pre-pandemic period started. Since the pandemic, the post-pandemic period started, since the pandemic, the post-pandemic period started. I think the expectations are low enough and Disney's had enough time that they'll find the right levers to pull and be able to make this look like it was a good quarter no matter what. You don't think so?

I don't think it's going to trade on this quarter. No, I don't either. Because I don't think anybody, nobody has big expectations for what they did in the last three months. I think more important is going to be what Iger says about the future. Speaking of breaking news after the close, we're not going to spend a lot of time on this, but we have to touch on it. What was this?

What was this thing that came out? So Warner Brothers Discovery, which owns TNT, Disney, which obviously owns ESPN, and Fox, which is channel five here. It's Fox Sports. They own a lot of football rights. They're going to each own a third of a new sports app that is coming this fall that ostensibly is going to allow people that only pay for cable for sports to opt out of that and get the cheaper version of this. This is a big deal. This is a big, big deal. You're going to call it like Sports 1 or something. So the idea is they now have to compete each individually with Amazon Prime, and that's not

really going to be fun to do. So if they all are sharing these games, they pool their resources, they pool their combined audience size, only then can they write checks. The NBA, as an example, is going to want like $70 billion, which would be a triple of the last package. So when they go to TNT, which is owned by Warner, like how is TNT doing that deal? It almost can't do it. So this is a mechanism by which they can all share the costs of keeping these sports rights away from big tech. And it's fascinating. It'd be a lot of fun to watch this play out. So- Yeah. And so I guess CBS or and universal nbc don't need to be in this deal because nobody nobody nobody pays for those you get those they might have to do their own

no i'm saying they do their own that's not part of that's not part of the cable but you get that just everybody gets channel two and four you don't need to pay for cable to get that no no no but they but they have to pay cbs has to pay a ton of money to the NCAA to run the, to run the sweet 16 and all that stuff. Like money is changing hands no matter what. So the problem is if it's less ad supported and more subscription supported and Paramount is not going to be a viable product, CBS is going to have a problem. They have to keep these games. They have the AFC games or whatever they have on Sundays. They have to stay. They have a big college sports package. Everyone's going to have to figure out a dance partner because the stakes are just going higher.

Live sports is only going up in price. Okay. So that was my make the case. Do you have a mystery chart for me? So you made the case for stock. Would you consider buying it? Yeah. Yeah. And I don't even care if it goes up after the earnings. I think I'm going to pull the trigger. I should have done it. And if it drops, I'll probably still buy it.

So I think I'm going to be a Disney shareholder. I think I like the direction things are going right now. Okay. All right. We're going to talk about, let's stop this chart. This is a weekly chart and hot dang, if that doesn't look like a clean breakout in progress, does it not? Would you agree with that, Josh? That looks amazing. This is a very important sector to the overall market and certainly the overall economy. That's for sure.

This is a sector chart? This is a sector chart. Yep. I'd like to solve the puzzle. Okay. This is XLV. Yes, it is. Oh!

It's the third largest. Basically, it's neck and neck with financials one good thing today for the for the the uh financials and health care this two and three biggest sectors second biggest sectors so it matters some people in the chat asking if i addressed snap yeah i i sold it if we address Snap. Yeah. We opened the show with it. We spent 15 minutes on it at the beginning. I don't know, what were you doing?

If you're a moron and you lost 30% at Snap, raise your hand. Oh, yeah, that's me. Yeah, I addressed it. I addressed it. All right, hey, everybody. Did you know tomorrow is Wednesday? Therefore, my very favorite financial podcast of the week, Animal Spirits starring Michael and Ben on every podcast app as soon as you wake up.

Don't miss that. Ben is doing an all new Ask the Compound on Thursday. If you have questions, personal finance questions, financial planning questions, tax questions, insurance questions, submit those questions to the compound and Ben might pick it and answer it live. And then on Friday, very special guests. We are so excited to be doing the show Friday and you guys are absolutely going to love it. So look for the compound and friends first thing Friday morning. Okay. That's all from us. Have a great night. We'll see you soon. Good night. morning. Okay. That's all from us. Have a great night. We'll see you soon. Good night.

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