The Compound and Friends - Stocks Aren't as Expensive as You Think | WAYT?

Starting point is 00:00:15 Here we are. There they are. How are you boys doing? Let's go. Fantastic. Excited. All right. It is Tuesday, September 8th. We are live at 5 as always. My name is Michael Batnik and I am joined by Sean Rousseau. Sean introduce yourself. Say hello to the audience. What's up guys? And of course, Chartkin Matt, who needs no reintroduction. Chart, say hello. Hello, everyone. Great to see you guys. Why are they here? Well, Josh is out today with the back. if there was an injury report, get into the NFL, swing of the things. Josh has a back. Not going to reveal more than that.

Starting point is 00:00:52 I myself dealt with back issues. Me too. Not fun. Oh, yeah? Yeah. During your playing days? All the time. Last month.

Starting point is 00:01:01 Oh. Sean, flex a little bit. What did you do for? You were a sport baller. I was a sport baller. I played football in North Dakota. Go Hawks. You got football guys here, Michael.

Starting point is 00:01:12 You got D3 for me, but. We'll get to you. Sean, guard or tackle? A little bit of both, but tackle mostly. All right. D, uh, D what? Was that D1? Yeah, D1.

Starting point is 00:01:24 SCS, though. Yeah. Chart, where did you play? Union College, Division III, Liberty League. Still. Hell yeah. Still not nothing. All right.

Starting point is 00:01:36 So, Josh, I hope you're feeling better. Uh, get well soon. Here's what we're going to get into tonight. We're going to talk about, and we've got charts out the ass. You would not believe how these boys are. cook tonight. We're going to get into the great re-rating and why some stocks might not be as expensive as people think. We're going to do a little bit of Peter Lynch's old adage, invest in what you know, why it's harder than you think. It works sometimes, sort of.

Starting point is 00:02:02 We're going to talk about one, what I think is a sort of missing ingredient from this alleged stock market bubble. And then we'll get into Apple's $2,000 phone. We'll do a mystery chart and that we'll get out of here. But first, we've got a sponsor tonight. Gentlemen, What do we got? This podcast is brought to you by DBMF, the world's largest managed futures ETF. Feel like the world's changing fast? Imagine a strategy built to move when everyone else is standing still. Going long or short across global markets as the trends shift.

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Starting point is 00:03:07 about the investment company. It may be obtained by visiting www.imgp.com. The fund is distributed by ALPS Distributors Incorporated. DBMF is the world's largest managed futures ETF as of July 31st, 2026 with $4.16 billion in AUM. All right. Listen, I feel like I make it look easy. You guys were lumbering through that. Chart, you've got a throat.

Starting point is 00:03:31 You're coming off a wedding, so you have an excuse. Sean, clear your throat mid-ed-end. My fault is my fault. Sorry. All right. Good job. Let's get into it with Matt. This is you.

Starting point is 00:03:42 We're talking about a great. re-rating? What are we talking about here? Yeah, yeah. So we're talking about the great re-rating. So at the beginning of the year, I talked about the great broadening that was happening in the market. And so we had a lot of stocks that were going up that weren't necessarily the MAG 7. And now we have a new phenomenon, which is what I'm calling the great re-rating. So the first chart that I brought today, Duncan, can we throw this up, is we're looking at the number of S&P 500 stocks with a 4P greater than 40. So these are the stocks that are like the most expensive in the market. And so as this line

Starting point is 00:04:14 goes down, it means there's less stocks that are trading above a forward times 4p. And look at it today, we have 27 stocks in the S&P 500, only 27 trading with the 4PE greater than 40. That's like marking past bare market lows and we're within 2% of all time highs. All right. So that's really incredible. All right. This is, you know, I was about to ask you like sort of a gotcha question, not really.

Starting point is 00:04:35 Trude off please for a second, then we'll come back to it. I was going to say, I wonder if this looked a lot different if you included stocks that were say moving the forward PE from 40 down to 30. But it doesn't matter. That's not what you're trying to say. Chart back on. What you're saying, I think, is holy shit, we only have 27 stocks in the S&P 500 with the forward PE of 40. We were at these levels, just 27 stocks, at the bare market low in 2022 and at the COVID low in 2020. Where is the enthusiasm? We're basically at all time highs. And every stock is getting cheaper. 100%. How can you talk about being in a bubble when you have the number of stocks with a 4P greater than 40 back to the levels that we saw in March 2020 when the market went down 30% in October 2022 when we had that grueling bear market. I mean, it just doesn't make sense to me.

Starting point is 00:05:31 What a killer of a chart. This might be if you were to go in front of the judge, the bubble judge, and you had one piece of evidence, is this exhibit A, pun intended? That's exhibit A right there. I like that one. But I looked at it also, Michael, nice little segue there, on a sector by sector basis. Okay, so John, if we could do this next chart as well. Okay, so I made this valuation heat map. So what you're seeing is within each sector, the percent of stocks with various forward,

Starting point is 00:05:58 within various forward P buckets. Okay, so like, for example, look at utilities. 81% of utility stocks have a forward P between 10 and 20. Okay, so that's how the chart is constructed. Now, first I want you to focus on tech. So John, can we flip to the? the next one. All right, so focus there. Look at tech. 38% of constituents within tech have a forward PE between 10 and 20. The next most common band is between 20 and 30 times forward.

Starting point is 00:06:25 Okay, so that's not crazy expensive for the growth we're seeing within tech. John, one more flip. Okay. Now look at the average. So on average across all sectors, 52% of stocks are falling within within the 10 to 20 bucket and 4P. So that's not crazy. expensive what are you guys thoughts go out Sean I the maybe this is a silly question to start out with is there just no companies with less than 10x earnings oh they're they're in there but like for example you know if you throw the chart back on these are probably real pieces of shit I dare you to know like there there are some like look at utilities 10% of those are trading below 10

Starting point is 00:07:04 you know there are some I was looking I was going through the data there's some like three four five six there yeah like Michael said they're kind of like piece of shit companies but but they're they're very very very very rare. All right. So go back to the tech one, please. All right. So what this is showing is that two thirds of all stocks in technology, which is the epicenter

Starting point is 00:07:24 of the stock market mania, air quotes, two thirds of that of those stocks are trading below 30 times forward. And only 20, only one out of four are trading above 30 times earnings. All right. Pretty reasonable. Good stuff. What else we got? Oh, all right.

Starting point is 00:07:42 A counterpoint, Sean, did you come with this chart? Yeah. So I think we see a lot of counterpoints about complaining about the price of earnings and forward earnings. And they throw up the price of sales. So, John, if you want to throw up price of sales sales. This is the trailing price to sales, and it's at all-time highs. And this is the counter that a lot of people are saying. But in my mind, this is an inept argument.

Starting point is 00:08:05 The counter to the counter. Counter to the counter that I put in. If a company turns more of each sales dollar into profit, its price of sales goes up, even if you're paying the exact same multiple. It's a miracle. So, for example, a business earning $2 on $10 of sales at 15 times earnings trades at 3x sales. Hold on. Go slow. I don't know we're doing math here. Go ahead.

Starting point is 00:08:29 A business, so if you have a company that has $10 in sales and their earnings are $2 and they trade at 15 times earnings, that's three times sales. With you? If that $2 of profit turns to $4 on the same $10 of revenue, still with the same multiple, the sales multiple doubles, but the earnings multiple stays the same, which is what's been happening in this market. There you have it. All right. This next chart that we're looking at from Meb Faber via Deutsche Bank, what are we looking

Starting point is 00:09:02 at here? This is their, what is this? Yeah. So all right. So they looked back since, wow, this is since 1935. and they plotted the S&P 500 quarterly earnings, and they did it in a log scale. And so essentially what's shown here

Starting point is 00:09:18 is this long-term channel that you're seeing, and we're starting to break above it. So this is from Deutsche Bank. US earnings are breaking out of a 90-year channel on the upside, which is incredible when you consider the high growth periods of the past. The debate will rage on as to whether this is a sustainable new plateau or an artificial period of AI-related, elevated earnings.

Starting point is 00:09:38 But if you squint at the chart, you can see the actual earnings are breaking out of the channel it's not the projections and my question to you guys is what do you guys think like is are we going to look back in 20 years and say a i marked the beginning of a new paradigm where earnings grow 11 percent annually for seven i'm making it up like is it is that too cute or what do you guys think i think i think there's a weird way to show earnings that's what i think there's a sort of a bizarre chart. All right, let me answer your question. Sean, you answer the question. What do you think? I don't think it has to be like a whole new paradigm forever. I think it certainly is a theme that

Starting point is 00:10:22 we're going to experience for the next, whatever. Like if we're going to put an inning to it, we did this last time. Like I would think we're in the first half of the innings, but I don't think it's going to continue on forever. Well, you boys know I'm a gap's get filled guy. So I think this is going to come back into the channel. One of the things that's remarkable about the current moment in time is the earnings growth. Now, this is the debate that it's getting pretty tiresome, if I'm being frank. But the earnings growth is off the charts. And the counterpoint would be, yes, but debt, unsustainable, CAPEX build out. This is not going to continue, which is why the market is not rewarding these stocks. This is why the P.E is shrinking, because these earnings are

Starting point is 00:11:09 not sustainable. I think that is probably consensus. That is what that is what the market is telling you. The market multiple is 19x right now, excuse me, which is below the five-year median multiple. It's right at the average median over the last 10 years. So we're pricing in those fears of circular spending or non-stable earnings. Like that's priced in. That's why we should have We should have came with a peg ratio, long-term peg ratio. Can we do that chart? Yeah, we can make that. Yeah, we'll make it.

Starting point is 00:11:40 Okay, so who made this chart about the earnings growth? This is my earnings growth chart. Walk us through it. So this is from Jim Bianca at Bianca Research. We're looking at quarterly year-over-year earnings growth. I'm sorry, it's Bianco. He is not a lady of the night. Bianco, Jim Bianco.

Starting point is 00:11:58 Jim Bianco. Anyway, we're looking at quarterly year-over-year earnings growth. growth, the S&P 500. And we're looking at just operating earnings in the blue. And that gray bar, that last Q2, 2026 gray bar, is what the year-over-year earnings growth would be if you included the realized investments. All of the other blue bars do not include it.

Starting point is 00:12:21 So two things I want to point out here. Thing number one, we're coming off of what is already a pretty high base, right? One year ago, four quarters ago, earnings were already above average or right at average. So that's one thing. The other thing is the earnings growth is still incredible without the unrealized gains and investments. So like we're just at in a period of time where earnings are incredible. Sean, before we get to your next chart about about that we're already at a high

Starting point is 00:12:47 base, you just thought it on one more time because I think I think I was confused and I think the viewer might be confused. The labels, the Q2-2026 earnings growth X and OI, they'll say the same thing, right? But right, my eyes are not deceiving me? No, yeah, you're correct. Okay. But what you're, but what it, what we're looking at here, is the gray bar on top of the blue bar, that's if you include all of the, all of the non-operating earnings, all of the increases in the valuations of some of these privately financed companies that Nvidia is investing in, for example. Exactly.

Starting point is 00:13:18 Yeah, that's correct. Okay. So take that top off, that top gray bar, and it's still insane growth. Yeah. All right. Next chart. This reminded me of a chart kid Matt hitter from chart kid Matt. dot com. The base matters. So if you look at earnings growth, this is S&P 500, year-over-year earnings growth for tech quarterly. And like I mentioned, the base, we are right now coming off of a average to high base. Same thing for tech, right? So if you look at the few quarters from 2020 into 2021, earners growth was incredible because the base was so low from COVID, right? The comps were very easy. But if you fast forward to 2025, the earnings growth that we're looking at here,

Starting point is 00:14:03 It's not off of a low base. It's actually off of a high base, which makes it all the more meaningful. Insanely improbable. All right. We're going to move on to the Peter Lynch thing. But before we do, I know what you're thinking. Wow, that's a snazzy shirt. You're right.

Starting point is 00:14:19 So we did a collab with Tropical Bros. And we've got a new one dropping for Future Proof next week. We also have a woman's cut. So we made that available for inquiring minds. If you are at the festival and you want a chance to win one of these snazzy looking polos and they are quite comfy, come by the booth and we'll see what we can do. All right. So I was thinking about this. There are so many name brand stocks getting sent into outer space.

Starting point is 00:14:50 So Matt, you made me a chart of some of these. This is my chart. Oh, hell yeah. All right. So the title is a bit cute. It says do not invest in what you know. So before we go to this chart, Peter Lynch is probably really annoyed at this segment because he's been dealing with the shit his entire career since he retired.

Starting point is 00:15:10 And he didn't just say blindly buy what you know. Okay. In fairness, he said, maybe think about what you consume on a daily basis, which I should have done in 2012 when I was eating in Chipotle every day, and think, oh, like, I'm using this product, this service all the time. Maybe there are other people just like me. All right, with that caveat aside, holy smokes, chart on. There are so many names that we know and love to varying degrees getting wrecked.

Starting point is 00:15:43 AutoZone and a 32% drawdown. Domino's pizza, down 28%. Lulu Lemon, down 55%. Uber 28, Nike down 50. By the way, Nike's market cap is down to $56 billion. dollars. And it just cannot, cannot get off the mat, no bounce whatsoever. And finally, my beloved Netflix is in a 40% drawdown. When you, chart off please. When you guys see this and digest it, what is the takeaway? Sean, you start. When I was in high school, I first started looking at this

Starting point is 00:16:18 types of stuff because like you see Target and you see the ticker and you know it and you're aware of it. You see Nike and you're like, I know this brand. Like I want to invest in it. I like their products. And And like, it's a very simple way to invest in things. And I think with Peter Lynch, like, he wrote a lot about it. The first book I read was a Peter Lynch book, invest in what you know. Like, I forget what stock he invested in, but it did incredible. And it was something that his wife used. And so it just, it's intuitive, but obviously it doesn't work all the time.

Starting point is 00:16:48 Chart. I started trying to put money in the market when I was, I think, a sophomore in college. And so it was like 2024. This is like this is like literally actually December 2019. Okay. And I I had only bought individual stocks. Okay. I could almost remember it was like Procter and Gamble. I think Apple was in the mix, but you know, Coca-Cola. All of these know what you own. And I was reading the same books as Sean. I think the best thing that could happen to me is COVID happened and these things got cut and like you know, these stocks got crushed. And I sold like a dumb ass. And I sold like a dumb ass. And. And I think. And. And. And. And. And. And it was the best thing that happened to me because even I knew these stocks and then I knew that just because I understood them and I might understand their business models, that didn't give me an edge. And I just started indexing. And for me, as a young person, it's actually been very helpful that some of these know-what-you-own stocks have gotten cream because these are the things that I did own. And they didn't work.

Starting point is 00:17:49 And even though I was going to Tripoli every single weekend after football practice, the stock wouldn't go up. And like you say, Michael, the stock doesn't know you own. it, I thought it did for a very long time. And it never did. And it went down and I sold and I started indexing. And it actually worked out. That's my take. I don't have this chart made, but McDonald's, for example, probably the ultimate buy what you know stock. If you look at a ratio of McDonald's divided by the S&P 500, which basically shows you like how one is performing versus the other. McDonald's hasn't outperformed since 2007. Like, It is crashing relative to the S&P.

Starting point is 00:18:33 Unbelievable stuff. Nike's at its same price since 2014. Like it has its own last decade. Like it's incredible. So you look at charts like this and you say, man, this is really, really hard. I'm just going to not do this anymore. And then you do it anyway. At least I do.

Starting point is 00:18:49 Can't help it. That's right. Yeah, we all do. All right. Wait, hold on. Can I add one thing? John, can you throw up the butt also do invest in what you know? Wait, wait, wait, wait, wait, wait, before we get that.

Starting point is 00:18:59 there. I just want to say one thing on this. There was a, so Michael Burry was buying Lulu Lemon, which seems strange at the time. And then Lulu reported earnings last week, got smoked. And he revealed in a substack, which I was curious to read, but I don't really feel like spending 50 bucks a month for Michael Burry. He said he's going to, it's his biggest position, which seems very curious and he wanted to aggressively add below $100. I never got below $100. Wait, wait, wait. I want to jump in here, yeah, because I think like the general sentiment, you know,

Starting point is 00:19:39 people put Michael Burry's tweets to say sell and they put them on an S&P 500 chart and it just goes up. But like I actually do, like I do listen when I see something like that. Like it does impact me as an investor. It does. I'm like, hold on a second. Maybe he's right. You know, like it's very easy to. just pass it off, I think. But, you know, I know he was right one time and it probably impacts

Starting point is 00:20:04 the way he thinks about things. But I do think that he's a smart man and probably has, you know, he could be right. That's all I'm saying is he could be right. On what? On Lulu or in general? On Lulu. No, not in general. On a specific stock. You know, it's like almost like so specific. Well, you should have kept that to yourself, but I'm only teasing. To varying degrees, to varying degrees, we are all influenced by things that we hear other people say, especially people that have done. incredibly well. I mean, obviously. That's, you know, that's part of the deal. All right, Sean. So on the other side, there's also things that you know that have worked extraordinarily well. Apple, for example. So what did you bring? Yeah. So you didn't ask for this. But I just, this is, this is a whole thing for me,

Starting point is 00:20:46 is that investing is difficult. Like we could, we could start with Peter Lynch and say, invest in what you know. And then everything that you know doesn't do poorly. And then so then, okay, is our new ironclad rule, never invest in anything that you know? And the answer is no. Like we could have commenters coming in saying, hey, dummies, like go look at Apple, go look at Airbnb, right? Go look at Monster, like some target, like some of the most well-known brands are doing incredible. So I think just the takeaway for me is that just because you know a brand and use their product

Starting point is 00:21:19 does not mean that they're a stock that you should be investing in. Correct. There are no ironclad rules in the stock market. it. All right. So I am listening to a new book, 1873, and it was all about one of the earliest global economic, truly global economic and stock market booms and about the Rothschilds and financing out the railroad build out, not just about the railroads, but they go like geography by geography, and it's a good, good listen. And one of the key ingredients around every single mania, bubble,

Starting point is 00:21:56 bull market, whatever, is fraud. It always happens. And I was talking to Josh about this. And I said, where's the fraud? And he said, what are you talking about? And I said, save it for the show.

Starting point is 00:22:13 So I don't know what he was going to say. But I think one of the points that he, this is the first point that he made. Then I said, you know, you find out. about the fraud after, which is fair and obvious. But if you think about the last mania that we lived through, which was four years, five years ago, right? Like 2020 was a legit mani. And I think, you know, we many people said in real time, this is, you know, this is nuts. Price of sales ratio,

Starting point is 00:22:44 how many stocks were trading with a price of sales ratio above, I don't know what the crazy number is, above 30. I mean, it was, it was nuts. So as I have the, as I have, this topic in the doc, some new shit has come to light. All right? Forget about the Mark Walter thing because while that is very, very much in the headlines and it's an incredible story, he bought the Dodgers in 2012. Right. So yes, there's, but like his whole empire is not a result of the market environment today.

Starting point is 00:23:17 So put that alleged self-dealing to the side. What I'm about to present to you is. not any fraud per se. It's just things. So to be clear, not fraud. I want to say per se, is not fraud, okay? I am not alleging fraud, but it is certainly things you see that make you maybe tighten your stops or maybe take a little bit less risk or maybe not do the leverage thing. Okay. So the timing on this was really chef's kiss. I think I saw this over the weekend. I didn't read the article because frankly who gives a shit. But Hunter Biden enters the cryptosphere with a new meme coin. Okay. All right. We're doing this. We're doing this again. Then yesterday or when was this,

Starting point is 00:24:09 whatever, Friday, whatever it was, LeBron James doing a deal with Polly Market alongside my beloved Eli Manning and I think Aaron Judge is involved. Then yesterday, I saw Robin Hood. Uh, is playing an official part in the IPO process for the wellness app, the ring, I think is part of this deal. I don't know. ORA. Now, I actually did read this article, and I do like Robin Hood. They're not, they're not like the lead dog here. There's 18 different participants in this IPO, and they are 18 out of 18.

Starting point is 00:24:45 But still, now, in 21, we saw the fraud in real time, right? Like we don't need to, uh, we don't need to dig at old scabs, but we saw it. In 2006, do you guys see anything that's outright fraudulent that if we are on the other side of this is going to be very obvious? And also, does that even matter? Is that like an absolute necessary ingredient for greed? What do you guys think? I don't know. I feel like the Hunter Biden thing, like they're kind of just jabbing at.

Starting point is 00:25:21 the other side, like politically. The other stuff, like, I don't know, like the polymarket, LeBron James. I'm not sure if I would consider that like speculation fraud. I mean, I guess it's not fraud. There's nothing fraudulent about it. It's just we're in a bull market and this is bull market behavior. I don't know. I think it's getting a little cute.

Starting point is 00:25:37 Like Robin Hood has been doing IPO stuff for a while, right? I think they're doing IPO stuff in 2022. Not like this. They were getting an allocation. Yeah. They're now part of the syndicate. True. Yeah.

Starting point is 00:25:48 I always find the magazine article stuff. and trying to like point to these types of things is a little bit cute for me. That's what I think. Chart. Yeah. I don't know if I'm like seeing anything that's just like outright fraud. You know, is it illegal for, for example, I was in Rhode Island over the weekend. There's some sports betting there.

Starting point is 00:26:07 You can't do it. But draft kings flips their UI. So all of a sudden you start seeing things like from the betting odds, but you can bet through draft Kings. And instead of minus 110, it syncs up with like what the odds would be on something like a polymarket. So you're so essentially like mimicking the prediction market. And like is that fraudulent?

Starting point is 00:26:26 No. No. No. It's not fraudulent. But, you know, it does feel that it's just getting kind of cute. And can maybe we look back in a few years and we see some of these headlines and we put them on a chart and say that maybe it marked some sort of like important turning point maybe. But like that wouldn't be something that I would bet on.

Starting point is 00:26:43 All right. I've got fraud for you. I forgot this. Mia Coppola ready. Credit to me hand up. there was fraud very recently in the which which IPO I guess in the SpaceX IPO nothing to do with SpaceX on their part but there was a lot of SPVs on SPVs these were the Russian egg dolls where people thought they held shares and they were excited for life changing money and in fact they either didn't or there was just there was some bullshit government on. So that is a, that literally is fraud and that actually just happened two months ago. And that probably that type of stuff probably only happens during massive bull

Starting point is 00:27:27 markets when there's incredible IPOs happening. Right. Yeah. Yeah. Okay. Um, so, all right, let's do this. You know what? Char, take it away. All right. Here we go. So on June 20th, 2025, we did an episode on TCAF with myself. Michael, Todd Sone, and Josh. And Michael, you said, we are at an, we are, quote, at an absolutely critical juncture for Apple.

Starting point is 00:27:58 So, John, can we put this chart on? Setting the table. Here we go. So this is a ratio chart that Michael, you had shared during the podcast prior. And I put a dot when that episode aired. And this is just looking at Apple divided by Spy. And your point was, look, there's a very critical line in the sand that we were at. where it said, okay, Apple is either going to break down

Starting point is 00:28:21 and it's going to be very bad, or it's going to be, or we'll just see, or this is going to be a rebounding point, and that's exactly what it was, was a rebounding point. Which, you know, I guess this is also just a marking of the importance of technical analysis, right? Like you saw a very important level that it had touched multiple times and it held that line. And then if you want to go to the next chart, John,

Starting point is 00:28:44 all right. So now this is showing Apple correlation, correlation and correlation with the NASDAQ 100. So Apple is coming becoming extremely uncorrelated with the remaining other 99 NASDAQ 100 stocks. And this is going back to 2003. This is a very long time. Wait, it's not just uncorrelated. It's negatively correlated. Yeah, negatively uncorrelated. So if you just go back 30 trading days and look at the S and look at the NASDAQ 100 versus Apple, they're doing completely the opposite things. And so it looks like this is just a function of the market picking other winners, or maybe this is a function of the other stocks and the NASDAQ performing

Starting point is 00:29:22 well, and it's a function of broadening, but they're quite moving the opposite directions. There's a lot of ingredients going on in the story. And the chart that you opened with for Apple Spy, this is why we respect technicals. Anybody could have looked at this chart and said, all right, like clearly there is something happening here for reasons that don't matter. But that was a critical point in time and the market did what it did. As far as what's happening right now today, Josh was early on this, so credit to him, Apple is so divorced from the current news flow as far as AI is everything. No, it's too much. Like they are the only ones. We made this chart other. They're showing CAPEX spend. We did this like a year or two ago maybe. CapEx spend as a percent of

Starting point is 00:30:16 revenue. And we said, what the hell is Apple doing? What is Tim Cook thinking? They're just not in the game at all. And Josh made the case last week on why Tim Cook deserves to be on the Mount Rushmore, maybe for some of the things, some of the decisions that he didn't make, that he very deliberately, not decisions that he didn't make, decisions that he chose, things that he chose not to do deliberately to avoid. And he could have definitely steered them in this direction, of doing what everybody else is doing, but he went the other way, and now you have it with a negative correlation, negative to its constituents.

Starting point is 00:30:56 And the other part of this story is just the overall market correlation is extraordinarily low. So Zero Hedge tweeted, this is from Goldman, we just traded through the lowest realized correlation period in recent history. in the last 25 years, only two periods I've seen this correlation before. And they weren't great for whatever it's worth, which in my opinion is not much, but 2007 and 2018. Now, this is not sustainable.

Starting point is 00:31:31 Sean, you asked, like, are we going to see earnings come back into the channel? Is AI going to make earnings after a new paradigm? You know, whatever, who knows? I know for a fact that this relationship is not sustainable. Now, it doesn't mean that the crisis company or anything, you know, I'm not suggesting that, but this will change because all it takes is one risk off event when correlation spike to one, right? What do you guys think is going on with Apple in the broader correlation

Starting point is 00:31:56 store? I wish I had this chart in here. Excuse me, my voice, my God. It's okay. Momentum and the Mag 7 has been as uncorrelated in history since the M-T-U-M-E-T-F launched, which is kind of wild. So in other words, the mag seven is no longer momentum. And it had been for a very long time. Well, because how much of M-P-U-M was the mag seven? Exactly. Yeah. So I think that's a part of it is like we're getting rotation, which I know this,

Starting point is 00:32:27 the chart that you just laid out is not, those dates aren't great when, when these stocks aren't correlated with each other. But I think it's great, right? Like healthcare and all of the other sectors, energy are kind of holding us up, pulling the index up as these other sectors kind of, you know, feel the pain, I guess. I think you're right. It's wonderful. Right now at this moment of time, I feel like the news cycle, the things that I'm talking

Starting point is 00:32:51 about every week, it's getting really repetitive. And I wish something would happen. That was the, but that was the market for 2023 in so many years where it's like, I have nothing else to say about the Mac 7. I don't know what else to do. So I think this is great. Matt, anything from you? All right.

Starting point is 00:33:09 If you show me this, if you should, no, I do. I just do, you know, if you show me this chart without knowing anything else on what's happening in the market, right? This, the realized correlation chart. That sounds like there's a lot of charts, there's a lot of stocks within the index that are performing opposite to one another. And that's, to me, great. I mean, you're seeing rotation out of certain areas and into others. And you're seeing, like, very intentional selling of certain pockets to buy others. But it's, yes, I would say it's confused intentional selling because people don't know, because we're in such an uncertain environment, which I know it's cliche, but we really are, that it's either this basket or that basket or this basket or that basket or no software is actually back in. Right? Like the news flow is changing on a daily and weekly basis. So.

Starting point is 00:34:01 100%. Right. The conditions are different this time versus the past ones too, which also means that there's probably no signal in this versus like looking back at February 2007. I agree with your conclusion. All right, before we leave this topic, tomorrow is John Turnus's first big reveal. They are going to be showing the world, I think, the foldable iPhone, which they were saying like, well, hang on, like other companies, this is not like a new thing. Samsung's having a defaultable iPhone forever. I think in order for Apple to do it, at least this is what I read in the article, in order for them to do that they acknowledge this technology has been around. It would have been prohibitively expensive. All right, fine, whatever.

Starting point is 00:34:39 It's still fucking expensive. So this new phone is going to debut at over $2,000. I'm excited about it, though. So I want to ask you guys, is this going to be a flop or is this going to be yet another smash from Apple? Chart, you're nodding. What do you think? I think this is so smart.

Starting point is 00:35:01 I can, so I wrote that blog post about how, like there's sort of like this increase in nostalgia now and like going back to a previous period in time and kind of like the boom of analog and I think that this is a play on that like I do think that I think people are just it's nauseating to open up your phone and be inundated with Instagram real notifications and for the younger folks Snapchat and I think that people just don't need the interface of having a screen in front of you all the time. time and so just the process of folding it open it's going to be I think a lot of people are going to ditch I really do think it's going to be a great a great product release like

Starting point is 00:35:43 people are going to say ditch their current iPhones and switch Sean what do you think I'm going to go the other way I want it to work because I like Apple and I like their products and I like innovation and I think it's interesting that they're putting something new out which I haven't done in what feels like a long time however $2,000 for a phone feels like a lot Matt you said this but people are trying to be on their phones less, like with more screen. I feel like this is for people who are watching movies or shows on their phone. Like, I don't know. Like, I feel like people aren't going to want to pay $2,000 for something that's just like they're already getting tired of, you know. But who knows?

Starting point is 00:36:17 I'd be happy to be wrong. I am firmly on the fence on this one. I really do see both sides. I really do see this as like a, come on, looking back, like you thought that they were going to be able to charge people $2,000 for their phone. But the way that it's financed these days, people have no governor anymore what they pay for and it's like you have to give them you know give them your credit card i mean it's it's it's in the it's in the it's in the bill who would ever buy the the the apple uh vr things right like who would ever do that morons morons i say yeah um when you close the phone does it whatever i we'll find that tomorrow okay um all right i want to talk about this we and others spent a whole lot of time when space x was a hundred

Starting point is 00:37:02 $10 saying, uh-oh, how low is it going to go when the unlock actually happens? And credit to me, I believe that I was like, it's on the calendar. Who has the ability to sell shares is going to sell them at $110 when they IPOed at $150 and it was $200, five hours ago, right? Like who's just going to dump? I understand, sure, some people will, but there's also going to be buyers and there's index funds involved. So chart, walk us through the Google search chart that you made.

Starting point is 00:37:39 Yes, so John, could we throw up the chart that shows SpaceX price for search interest? Okay. So Michael was just looking at Google search interest today, and he saw that the peak in Google search interest for SpaceX correlated to the bottom in the actual SpaceX price. That's what you're looking at. So look, people got a lot less interested in SpaceX at the same time that the actual stuff. stock bottomed. And it went from $108 to $154 today. Markets are so difficult. And, you know, this is just another example of taking the other side, actually working out. So up 50% since then. And you know what's funny, Matt? Chiron off, please. I actually, so I said

Starting point is 00:38:21 you the data, the thing that I put into the search history or into Google search, and it's the exact same chart. I put in SpaceX Unlock. But it's the exact same. It's the exact same. shape. This is all that anybody was talking about. So, we had the unlock, and it's a staggered unlock, and there's going to be more coming. But I think it was like 900 million share. I mean, it was a lot. It was a lot that came to the market. And guess what? The market freaking absorbed it. And we just moved on. I haven't seen anybody say, hey, all those fears, all those articles, all that time that we spent talk about, the unlock, the unlock, that was the bottom. Funny how markets work. All right, so our friend Dave Nottie tweeted an article from Bloomberg.

Starting point is 00:39:01 It's basically saying that the weighting of SpaceX right now is 1.5%. That's the 19th tweet off for one second. Let me just set this up. I know it's hard to like read the tweet, listen to me. All right. So it was 1.25% of the NASDAQ, which was the 19th biggest waiting despite the fact that it had the sixth largest market cap in the world at $2 trillion. So Bloomberg is saying that the waiting can hit 1.5%. after the rebalance.

Starting point is 00:39:33 Now there's a rebalance that's going to bring on more buying pressure. So maybe some of the unlock is being soaked up by the index rebalance. Okay, back to Dave's tweet. So Dave said, while the article ignores that the NASDAQ rewrote the rules just for this event. Okay. Worth known that the SpaceX lockup coincides with a massive, massive cues and related buy order as they're waiting increases. But the bottom line is this. Dave said, good luck figuring out whether supply is more than.

Starting point is 00:40:01 demand in a few weeks. Yeah, so like I, my take here is like there are like known risks and there's unknown risks and the known risks are priced in the second that we all we all know them. When it's on the calendar. Yeah, it's on the calendar. It's a different thing. It's in the prospectus. You can go and read it. It's already priced in. And so it's like how can that information that's priced in? How can that information change and that will move the needle on the stock? Like if we all expect Apple to have a really great announcement tomorrow and they have a great announcement, it doesn't really matter for the stock price. But if they under deliver just slightly, then it matters. And it's like here, like how is the actual news and information that we know today going to

Starting point is 00:40:49 change over the next few months? I think Dave's point is like, we know this information. And there's still more shares to be unlocked. Michael, I think you put in a chart of Bloomberg that there's like billions of shares left to be unlocked and the price is near its IPO high. So in my mind, like, I'm just in a blunder as to how you could ever think that this is signal. Like, this is just all noise to me. All right. I really do. So I actually will take the other side of that at this point.

Starting point is 00:41:13 Okay. Even though I just made the case that like all of the talk marked the bottom because it was on the calendar, chart back on, this is a lot of supply. This is a lot, a lot, a lot of supply. And I would love. Go ahead. I mean, kid, we just said it was priced in. But there's a difference between 900 million shares unlocking and 5 billion.

Starting point is 00:41:37 You can only price in so much, Big Sean. This is my meme. This is my meme that I thought of with the astronaut, which is funny, saying, wait, it's all priced in and the guy with the gun saying always has been. Shout out John. That was a great placement by you, John. Well done, John. Well done, man.

Starting point is 00:41:55 All right. Before we get to the mystery chart, any final thoughts? Anything you want to leave the audience with? I think that the next podcast I do, I'm not going to do math on it. Yeah, it doesn't work. Yeah, so just for next time. Yeah.

Starting point is 00:42:11 Charts only. If you can't really hear me, I was at a wedding all weekend for my brother. So shout out to my brother who got married. Love you, Carolina, Michael. And, yeah, I don't know if I'll be following Michael Burry's stock picks, but yeah, they influenced me a little bit. It's what it is. It's okay.

Starting point is 00:42:32 You're human. So am I. All right. The chart that we're looking at today is, let me start, let me just start harder and then I'll give you guys more clues as needed. It's the theme of 2006. And before we start to guess, are you buying this chart? I am. I wouldn't buy this chart.

Starting point is 00:43:00 I'm not, I wouldn't buy this yet. No. No. There is no evidence. whatsoever whatsoever that this downtrend has been extinguished. I mean, if you zoom in, there are a bunch of higher lows, but longer term, I think you do. What is it? Biotech.

Starting point is 00:43:17 Not even close. Love you, though. So, okay, Michael, would you buy this chart? I know we have to guess. Wait, hold on, try it off. Sean, I got to look at you. I said this has been the biggest theme of the year and I meant it. That wasn't a...

Starting point is 00:43:30 AI felt like too obvious. That wasn't a Ropodop. This is truly, this is. It doesn't look like any AI chart that I've ever seen. All right. Let me give, before I give you one more clue, chart, do you want to win in? I mean, the theme of the year is broadening. Okay.

Starting point is 00:43:45 It's a ratio chart. Yeah, it's a ratio. Of course, it's a ratio chart. I see that. It's been going down since 2021. It's something that sucks. It's probably like a household name. Is it like, but it's gone up recently.

Starting point is 00:43:59 I mean, Nike looks horrible. All right. Hold on. Just. Think about, Trotoff, please. Yeah, clues. Think about what happened inside the market. We've been talking about it a lot over the last 45 days.

Starting point is 00:44:12 That's a random number, but. It's health care divided by tech. No, but you're going to be mad when I, when you, when you, all right. Any, anything else? I feel bad for Josh. This is horrible. Yeah, this is, yeah, sorry, man. Yeah, no clue.

Starting point is 00:44:28 Just go, Michael. I was going to say like real estate divided by spy or something. All right. That is software divided by semis. Oh, geez, man. We're bad. Come on, boys. You make it look pretty easy, Michael.

Starting point is 00:44:43 You know, like you're kind of- I'm very good at this, but so, but you guys look at charts all day too. Hold on. You should have admitted that it was a ratio chart from the start. I didn't see the Y-I-Rash- That's the only thing I knew. That's the only thing I knew. And Matt said it on Slack that it was a ratio of chart, so you can't plead ignorance.

Starting point is 00:45:01 I'm pleading the fifth. All right, you guys want to like apologize or all right. I'm sorry. Yeah, look, we love all the viewers and listeners. We apologize. All right. Thank you, everybody who tuned in for the live. Let's wish Joshua.

Starting point is 00:45:17 Hopefully he is in good health for the event next week out in California. Hope everybody is enjoying the early stages of fall. This is my favorite time of the year. We've got football on Wednesday and Thursday and Sunday and Monday and all right. starting thank you very much for listening see you guys see you next time thank you bye

The Compound and Friends - Stocks Aren't as Expensive as You Think | WAYT?

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