The Compound and Friends - Stocks Fueling Consumers, AI Bull Market Tracks the Late 90’s With Nick and Jessica, Mohamed El-Erian Tells Powell to Resign

Episode Date: July 22, 2025

On this TCAF Tuesday, Josh Brown is joined by Nick Colas and Jessica Rabe, co-founders of DataTrek Research. They take a look at the current earnings and valuation of the S&P 500 to determine whether or not there is still upside for investors buying stocks today. Jessica points out a nearly perfect parallel between the current AI driven rally and the original Dot Com boom from 25 years ago. Then at 39:57, hear an all-new episode of What Are Your Thoughts with ⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠ and ⁠⁠⁠⁠Michael Batnick⁠⁠⁠⁠! This episode is sponsored by Betterment Advisor Solutions and Rocket Money. Grow your RIA, your way by visiting: https://Betterment.com/advisors Cancel your unwanted subscriptions and reach your financial goals faster with Rocket Money. Go to https://rocketmoney.com/compound today.   Sign up for ⁠⁠⁠⁠The Compound Newsletter⁠⁠⁠⁠ and never miss out! Instagram: ⁠⁠⁠⁠https://instagram.com/thecompoundnews⁠⁠⁠⁠ Twitter: ⁠⁠⁠⁠https://twitter.com/thecompoundnews⁠⁠⁠⁠ LinkedIn: ⁠⁠⁠⁠https://www.linkedin.com/company/the-compound-media/⁠⁠⁠⁠ TikTok: ⁠⁠⁠⁠https://www.tiktok.com/@thecompoundnews⁠⁠⁠⁠ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of ⁠⁠⁠⁠Ritholtz Wealth Management⁠⁠⁠⁠, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here ⁠⁠⁠⁠https://ritholtzwealth.com/advertising-disclaimers⁠⁠⁠⁠. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: ⁠⁠⁠⁠https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Ladies and gentlemen, welcome to the compound and friends. Today's show is brought to you by Betterment Advisor Solutions. We are also brought to you by our friends at Rocket Money. A lot of people are not aware of how much money they spend each month. They don't know what subscriptions they're paying for. They don't know what they spend on takeout or delivery. You know it's more than you think. You just don't even want to know how much more.

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Okay. We had Nick Colas and Jessica Rabe back on the show. They were incredible. The YouTube video went live 24 hours ago, tens of thousands of views, people just raving about the data track people. And we love Nick and Jessica. So it's always great to check in with them. We took a look at S&P earnings and earnings estimates and the current multiple. And it's sad to say, but you really have to have some lofty ideas about what the next 12 months will bring

just to justify where we're trading today, let alone any potential upside from here. And we're here to just tell it like it is. That's the reality. And Nick and Jessica will explain. Then it's an all new edition of What Are Your Thoughts? It's Michael and I. We do an earnings preview. We've got Amazon and Tesla coming up this week. This week is a really busy earnings week. 20% of S&P 500 companies will be reporting within this particular five-day period. We

take a look at the U.S. consumer. We pull out some quotes from the bank earnings that we got last week. And we do a whole, a whole laundry list of things and I want you to hear all of it. So I'm going to send you into the show right now. Thank you guys so much for tuning in. Enjoy. Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any

investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Ladies and gentlemen, welcome back to an all new edition of What Did We Learn? My name is Downtown Josh Brown. I am here with my friends, Nick Kolos and Jessica Rabe, co-founders of Datatreq Research, the authors of Datatreq's morning briefing newsletter, which goes out daily to 1500 institutional and retail clients. They're also two of the smartest people I know.

Nick and Jessica also have their own YouTube channel, which you can find in a link in the description below. It's earnings season, guys. I see you're pretty fired up about it. I know I am too. According to Factset, analysts were looking for just under 5% of news growth for the S&P 500 in the second quarter. That estimate has just risen to 5.6% as of the end of last week as more and more companies beat their expectations. If that

number holds, it will be the slowest pace of profit growth since Q4 of 2023. 83% of S&P 500 companies that have reported so far have beaten their second quarter earnings per share estimates. That is above the five-year average of 78%, but it's still early. The average earnings surprise of 7.9% is also lagging the five-year norm of 9.1%. One of the things you're hearing a lot about so far is that earnings during this earnings season are not the problem, valuation is.

We saw a Netflix report, we saw JP Morgan, Bank of America, blockbuster numbers, just great reports all around, but their stock prices faded rather than rallied. I wanted to start by asking you guys, do you think this kind of sell the news mentality is going to remain the trend throughout the rest of earnings season? Or do you think maybe people are just making too much of the first couple of high profile reporters?

Yeah, it feels like it is certainly a little bit of a knee jerk reaction off the first week. I think things will settle down and we'll have a little better earnings season because the numbers are really strong and the analysts took numbers down. But you raised the right point and we brought our homework today and wanted to put up the first chart, which shows valuations on the S&P. Because this speaks to the repertory valuation point and I think very powerfully. So what the table shows is a grid of S&P fair values

and it ranges on PE ratios on the columns and earnings power on the rows. And the PE ratio is run from 14 to 26 times. 14 is trough confidence. Like that's what you get when things are really just horrible. Investors don't believe in the future. And then 24 times is super peak confidence, like the highest levels we've had in the last 10 years.

And then 26 is just beyond the 1990s dot com bubble. So you have a wide range of confidence levels. And then you've got earnings levels, anywhere from the current estimates of 264 for the year, 300 for next, and then some small haircuts to those to give us a more realistic view, because analysts are always too high on their numbers as we all know. And the takeaway from this chart is the only upside to the S&P from current levels is

if you believe we hold 26 times earnings for this year and or 24 to 26 times for next year otherwise the S&P's best case at fair value or worst case, quite overvalued. So the message here is, yeah, valuations are extremely high and not just current valuations, but you have to believe in order to own stocks here is very aggressive expectations for extremely high investor confidence in the future. But you have to bet not only will we do those, the current full year estimate is $264 in earnings per share. So to be super bullish at today's level, you have to believe not only will those numbers hit but that the sentiment in the form of the PE ratio will also stick or even have upside from here.

And that's like a little bit of a tougher bet to make. It is. And it just, you know, look, math is not an edge. You know, this is not to say that you have to be long or short based on this math. But I think you have to understand why the math exists and then understand what the inflection points up or down are from here. My basic take on what's going on with that table is markets have been slowly reevaluating the durability of the U.S. economy and deciding that it's far more resilient than any prior cycle, 1990s, 2000s, 2010s. And there's a lot of logic behind that because if you look at the shocks we've had over the past just three years, the 22 rate shock, this 25 tariff shock. The economy rolled right through those. Unemployment didn't rise.

Jobless claims didn't rise. Labor supply is still fairly tight. Wages are okay. And the US consumer is holding an okay. Businesses didn't go and just do layoffs in 22 or earlier this year. And the upshot is you've got a very durable US economy. You've got an economy that, absent a very large shock, without a policy response, just continues to grow,

fundamentally because of this labor shortage, but also because I think there's just a lot of confidence built into the system right now. That's why the valuations are so high. And unless you get a big disruption, they can continue to be high. It's just remarkable that they're higher than pretty much any point in the last 10 years and holding in very comfortably at those levels. Before we go into the sectors, can we do 2026? Just give people kind of the full

picture, because I guess one of the reasons why you could make the case that today's valuation of 22 times earnings on $264 makes sense is that nobody's worried about 2026 as much as they were because we're already almost in August and people are now focused more on 26 versus 25. So when you look at 2026, you guys are pegging the current estimate at $300 per share of S&P 500 earnings. And at the current multiple, 22%, I suppose that would give us 65.99 as an S&P price target for year-end 26, which would be only a 5% return from here. Is that what you have it?

Exactly. Okay. All right, so we, I mean, I suppose there's room to say, well, people are really thinking about next year's estimate of $300. And they're saying 22 might still be a reasonable multiple. And maybe from that standpoint, the market still has some, you know, mid single digit percentage upside. And that's the justification for buying stocks today. There's room to, there's room to say that.

It doesn't leave a lot of margin for error. And then the upside- It leaves no margin for error. No margin for error. And then the upside case is either $300 per share proves too low or a ratchet up to super peak confidence, a 24 multiple on that $300 number puts us at 7,200 on the S&P, which would be 15% upside from today. So that's kind of like, I don't know, it feels extreme.

It feels like extreme sentiment. I know it's not super extreme, but it feels like it's headed in that direction. Well, I'll toss one more thing out, and I think Jessica's also got a comment here, which we need to hear. What I would toss out is that, yes, the market's looking at 26 earnings, very fair, but my paradigm is they're looking at 27 and 28 and 29 and 30. There's always a discount in valuations for recession. It just always is.

It's been since I've started doing this business in the 1990s. The market always says there could be a recession next year, 25% odds, 20% odds, and you have a lower valuation. Now the market's saying, no, the chance of a recession in any given year is maybe 5%, maybe 7%, and that's different from the past. I'm not saying it's right, but it is definitely different, and that's why you get these higher valuations.

You get a high, you get, it's a re-rating. It's a re-rating. Right, if we think the probability of recession is 15% in any given year, then a 22 multiple makes no sense. If we think it's only 5% that we could have a cyclical recession, and people could scoff at that number and come up with their own estimate, that's fine. But if that's what the market consensus is now, a cyclical recession would be so rare

that maybe it's a 5% probability, then a 22 multiple makes more sense in that context and may possibly even higher would be the way that I would think about it. Yeah, fair. Yeah, I think there's also a story here about how the US stacks up against the rest of the world. So we visit clients and business contacts across Europe on a quarterly basis and their comments are always the same. There's almost universal belief that only US equity markets offer superior returns over the long term, essentially forcing

marginal capital into US stock markets. And that's because they view the US economy as by far the most dynamic economy in the world, but also even more importantly, one that generates the most innovation. They just don't have as many tech or high quality growth companies to invest in in their home countries that as we do, and that makes ours scarce assets. So of course there are some success stories in Europe, but those disruptive tech companies often decamp to the US while they're still private, or when they do choose to go public,

so obviously there's more liquidity here. And they also lack the kind of vibrant startup scene the US has, and without that, European equity markets just won't have the same pipeline of innovative companies that has allowed the US has. And without that, European equity markets just won't have the same pipeline of innovative companies that has allowed the US to outperform over the last decade. Global capital markets know that. And so honestly, US multiples may not have an upper limit relative to history. So to just circle back to the top of my comments, what we've learned from wealth managers, which are effectively RIAs in Europe, is that there's a massive change in how money is getting managed

across the continent. It started in the UK about a decade ago. It's much newer in places like Paris and Milan, where we recently were, where retail investors are now going to wealth managers who want to allocate their money to the US instead of, for example, local banks investing their money in Italian sovereigns or utility companies, European wealth managers. They will see US big tech companies as globally scalable with large competitive moats and much higher returns on equity than rest world market leaders. So we think this has a 20-year tailwind to it.

It's a small sample size, but we think that means it's likely an even much bigger story than we hear about the sea change and how in the sea change of allocating European retail money to US stock markets in the coming years and decades. So it's such a great point. And I want to back up what you said with some data because the people you're talking to, they're not just making comments, they're actually voting with their euros. We got a report from the Treasury last week talking about foreign investor flows to US assets, both bonds and stocks. And it turns out in the 12 months ending at the end of May, it's about $1.7 trillion from

foreign investors coming into the country, which is not a record, but it's an enormous number. But what makes it an even more stark number is $600 billion of that over the last 12 months ending May came directly into US stocks. Most of that, when you talk about foreign money coming into the US, there's an assumption people say, well, it's central bank related or they're buying treasury bills because it's some sort of like risk off or rate arbitrage. $600 billion coming into stocks is not coming in from foreign governments or from foreign central banks. is not coming in from foreign governments or from foreign

central banks. It's coming in from private investors like the ones that you're talking to. It runs completely counter to the narrative that we heard right after the trade war started this April where foreigners were going to yank their assets out of the US stocks and bonds. They did the opposite. They plowed money in at insane levels. I think in May alone, $150 billion worth of foreign capital came into the US stock market

one month. So it's a really great point. Let's talk about the sector breakdown here, guys, because I know you looked at that as well just in terms of current multiples versus their longer-term averages. Yeah. I mean, we mentioned this, I think, in the last episode, but what's really important to understand is that it's not just tech that has got a higher multiple. It's not just tech driving that grid that we talked about.

Every sector except for healthcare and energy is seeing a much higher current multiple on forward earnings than the 10-year averages. Every single one, industrials, materials, not just tech, comm services, everything, everything except for healthcare and energy for understandable reasons, has got a higher multiple now than 10-year averages. So it's really a rising tide of confidence, lifting all boats. And I think it sort of supports both what Jessica and I have talked about, less recession risk and just incrementally a lot more interest from offshore in owning US assets. So one of the things going on at Savita Subramanian said the other day at Bank of America, companies that have a compelling story to tell about how they're using AI are going to get, are going to have the best post earnings reactions. And these are not tech companies, all companies. And I think that partially explains this rise in multiples for non-technology stocks that's accompanying the rise that we're seeing for technology stocks.

It feels to me as though everything for the S&P 500 is riding on the AI story remaining fully intact. I don't know where else the earnings upside would come from. If you had to replace the AI theme in people's earnings expectations with something else, I don't think it exists. I don't know what, MAGA, like I don't even know what story you... The story is so big, the AI revolution, not just big in our imaginations, but in the way analysts are thinking about earnings growth. I don't know where else it would come from.

I wanted to ask you guys, can you remember a time where so much of the S&P 500's growth story was riding on a single theme? Albeit, it's a big theme. But this feels pretty unique to me at least. I guess I'm the oldest guy in the room, so I'll answer the question. And it's a great segue into Jessica's next module. And that is it's the late 1990s. It is the initial adoption of the internet. And for very similar reasons. Brand new technology. How did that end for people that don't remember? I'm not gonna get there.

The.com CapEx story, how did that go? Well there were, okay so yes, that's a very important point. However, how did it go for managers who didn't invest in tech in 95, six, seven, eight? Terribly. Exactly. So yes, it ended seven, eight. Terribly. Exactly. So, yes, it ended badly, but it only ended once.

Okay. Let me give you some numbers. You know where I'll get to that. Yeah. Yeah, I know. We're going to take that in a second. The 2025 estimate of $264 for S&P 500 earnings, you guys might have a different calculation on this, but IT and communication

services combination contribution to that 264 is $79. Apple, the Mag5, so I'm just saying Apple, Microsoft, Nvidia, Alphabet, Amazon, the contribution is about 30 bucks, which is actually lower than I would have expected, but there it is. But then when you add back the IT and communication services sectors are about 30% of total S&P 500 earnings. So not just those mag-5,

but then you're adding in like the IBMs and the Oracles and some of it. Okay. Those five companies though are about 38% of the earnings from all of the IT and comm services sectors. So they're really important within their sectors. And they will contribute approximately 11% to 12% of just those five names. So you guys might quibble with the calculations or whatever, but just directionally, if we agree that that's… So then you say to yourself, well, in a world where that piece of the S&P 500's earnings don't come in to the extent that they're supposed to, that's a material change to the outlook.

There's no reason based on these companies' comments that it won't come in. None of them are downgrading expectations, none of them are cutting capex, none of them are lowering their outlooks. But like everything is riding on that. And even the S&P 493, a lot of these companies, when they come out and report, the commentary

is going to be all about AI, how we're using AI to do blank. Estimates have come down enough that they should easily be. If they don't be, we're in trouble. Okay. All right. So Jess, let's talk about the NASDAQ composite and that mid 90s bull run that Nick alluded to. Sure.

Okay. So we'll have a spooky chart. Since it's low back in December 2022, the NASDAQ Comp is eerily tracking its mid to late 1990s bull run with the fundamental parallel being the Internet VIN and GEN.AI now. So this chart up on the screen shows an index comparison of how the NASDAQ comp performed in the 1000 trading days following the start of 1995 marked by the blue line versus its low on December 28th, 2022 through today's close marked by the orange line. Whenever we publish updates on this chart, we get a lot of client comments and it's easy to see why. History seems to be repeating itself almost exactly.

So two points to put some context. Can we pause here? Oh yeah. Can we pause here? This is too perfect. Yeah. You didn't do anything with the scale or the lines of the chart. This is literally what it is? Yep. Oh my god. All right. I'm nervous. Keep going. So first, we start our comparison in 1995 because that year had a similar macro backdrop and bullish catalysts as an Aztecs latest rally. So like 2022, there was a Fed rate shock in 1994 after a period of low rates. And there was also a lot of enthusiasm about a new disruptive technology with the internet, which started to hit critical mass in the mid 90s. So for example, a lot of you will probably remember,

not me, but a lot of you will probably remember Netscape went public in August, 1995. And as for today, Chachi PT launched at the end of November, 2022, which was a month before the start of the current tech rally, which has largely been driven by enthusiasm for gen AI. And then the second point here is if you want to just throw back the chart back up, the

NASDAQ's following its mid 1990s experience, like you said, Josh, to a truly amazing degree. So Friday marked the 639th trading day from the NASDAQ's low in December 2022, and it's up 104% since then. On the same day in the 1990s tech stock rally, which was in early July 1997, the index was up 100% from the start of 1995. So super close. But the important point here is that as you could see in the chart, the path higher during both timeframes isn't linear. In the back half of the 90s, there was everything from valuation concerns after Alan Green's ban to rational exuberance comment, to Fed-right uncertainty given worries about the reemergence of inflation. And then you had some exogenous shocks as well, like the Asian financial crisis

and the blow up of hedge fund LTCM. But the NASDAQ was able to power through it all until March 2000. So our big takeaway from this chart is that the mid to late 1990s experience shows bull markets do occasionally face pullbacks from gross scares, policy uncertainty, and valuation concerns, all of which are happening now as well.

But large cap tech stocks were covered from resolutions to these issues pretty quickly and went on to rally for years, again, until March 2000, as companies capitalized on the internet going mainstream. So like any new technology, its success relied on a virtuous circle of adoption and killer apps. And the same will be true for Gen. AI now. And as you alluded to before, yes, this example eventually turned into a bubble that then popped. But we do think that this comparison shows US large cap tech stocks are still early in

a secular bull run driven by monetization opportunities around Gen.A.I. just like the internet in the 1990s. And that's why. Jessica, how far away are we from that hypothetical March 2000? How many months away would that be? So pretty far. So right now we're about in July 1997. Like we're like a few years away. So we have like years. We have a long time. Yeah.

If that paradigm, I mean, of course, like none of us think it's really going to match perfectly with the end of this thing. Yeah. No, it isn't. Yeah. We're not saying that the past is is is prologue But this is one reason though why we viewed the last few months of volatility as buying opportunities So for example, we published a report to our clients back on April 10th That said the nasdaq 100 and US large cap tech sector should rally Since both hit three standard deviations to the

downside over the prior 50 days and they're up 26 and 34% since then. And our 1990s experience or 1990s comparison shows they should continue to rally from here. I do have one caveat though, and that's we still do need to cross the chasm in tech speak and see wider adoption of Gen. AI across more applications and chatbots like JATGBT. That's why the market is rewarding so few names with Gen. AI premiums because it's still unclear how this technology will develop and see mainstream adoption. This isn't an argument for a bubble forming and bursting as much as returns just not getting as crazy as the late 1990s, but still chugging along at a decent clip. So actually, last week, we wrote a note that said, that was kind of

bold, but the Magnificent 7 is dead with investors now picking winners and losers between US big tech names. Those that best leverage Gen.A.I. are outperforming this year. NVIDIA, Meta, Microsoft Broadcom, Blackards. There's a big dispersion in that team. Absolutely. Yeah. Then you have Blackards and the structural growth theme that are outperforming like Apple, Google, and Amazon, and Tesla.

So we think the Max 7 is now the fat four. I love that. And I want to throw two things at you guys and get you to react. The first thing I would say is what's so crazy about that comparison. So people think of it as the dot com boom, but they forget it was half dot com, half wireless. That's when we all got our first cell phones. Before that, it was car phones. And Nokia was a leading global stock. People think of that as being seven years before the iPhone or 10 years before the iPhone, that 95 to 2000 run.

But very much, there was a telecom story that was powering. It wasn't just internet. Robotics are not even in, like nobody is yet, in my opinion, we don't have like a robotics giant other than Tesla. We don't have that wave yet, but that's where the AI thing is going to morph into, physical AI. And that, a lot of people that I follow, a lot of technology people, not Wall Street people are thinking that the second half of the 2020s as beyond AI moving into robotics and that's the kind of thing that could propel you for another three years before we hit

that March 2000 analog top. Yeah, I think that's a fantastic point. I think the biggest difference between now and the late 1990s and the biggest difference between those two charts we just threw up was that there's been 15 turns in Moore's law between then and now. So computing power is roughly 33,000, not 33, 33,000 times more than the original computing bubble. That incremental compute is driving incremental complexity and expense. That's existential difference between now and then. Right now there is a large scarcity, which you just alluded to as well.

There's a large scarcity effect of GenAI names, unlike the 1990s that could continue for a long time. Because back in the 1990s, for example, only took six months and a few million dollars for Netscape to build the Navigator browser. GenAI takes years and billions of dollars to build, so the barriers to entry are dramatically higher now than the 90s. So the scarcity effect could last for years and propel public company valu evaluations to extremely high levels, even more than the 90s. Right now, the orders of magnitude are just so much more complex.

One other thing I wanted to mention during this segment, guys, is investors are not confining themselves to the Mag-7 or the cloud computing platforms. So I took a look at the NASDAQ 100 and I wanted to look at the biggest winners this year with the highest price to sales because it's so widespread, this bull market. So Palantir obviously would be the first name to come to people's minds. It's up 400% over the last year. It's 122 times trailing price to sales. I don't know what the forward is. I assume it's less egregious, but I don't know, maybe it's 60%.

Cloudflare up 25% a year, price to sales 38 times. CrowdStrike, which full disclosure, I'm long, 28 times sales, 40% year over year. Zscaler is also 40%, 15 times sales. TradeDesk, 15 times sales. Snowflake, 18.8 times sales. Huge winner, up 40% of the last year. Data dog 18 times, sales, service now 17.5%. Workday 17%. MongoDB 16 times. We've got layers and layers of big tech winners that have had a monster return and are now selling at teens' price to sales and higher.

You know, and it's not that there's anything wrong with those stock companies or wrong with those stocks, but I'm just making the point that like the bull market has greatly expanded away from the mag seven at this point. And people are just going wild for all different stocks in all different parts of the AI ecosystem. Yeah, it's true. It's it's it speaks back to Jessica's confidence speaks back to our valuation discussion because exactly the same thing happened in the 90s. And I lived through

it. Ninety four was a terrible year, big rate shock. And it gave investors a reason to start looking for things other than cyclical stocks. They wanted to start buying growth because the economy didn't go into recession in 94, even though we had a rate shock just like in 22. And so they cycled into and said, okay, where's the growth? And the growth was, as you said, in two areas, the internet and then mobile phones. Radio Shack was one of the biggest stocks in the 1990s

because they were selling all the mobile phones. Right. They're also not just differentiating in the 1990s because they were selling all the mobile phones. Right. They're also not just differentiating in the U S but also, um, across the world, like going to, um, Chinese tech stocks that are leveraging gen AI as well. You know, it's funny, I forgot to mention this when you were talking about people allocating away from Europe in Europe and buying us stocks, they actually, they have a chip giant, ASML, and they actually disappointed last week.

Yeah, yeah, yeah. It went down 14%. Yeah, they like ASML and SAP, that's it. Yeah. Right, so their one chip giant actually ended up disappointing, and that would further reinforce Italian investors, Dutch investors, saying, you know what, I like my tech stocks American, thank you very much. Yeah, the our line from from talking to European investors, they love their culture, hate their markets.

Yeah. All right. We're going to do Nvidia and Tesla. Nick, I know you wanted to draw that distinction and how you think about valuation for these companies. Let's let's go there now to wrap up. Sure. We've got a table here. And it's a paradigm that I've used for, I don't know, 20, 30 years, think about stock valuations. And unlike using P ratios, I think it's a lot more illustrative of

what's actually going on in a given stock. So the way I think about a stock's value is present value and future value. The present value of the stock is just how much it's worth if it can earn whatever it's going to earn this year or next year forever. So a perpetuity value. And the right hand part of these this table shows that so it shows the four year earnings estimate for all the big tech names for the S&P and for some non tech names, and then divides that by point 110% and gets you the value of the stock if it were just to do nothing more than earn what it's earning this year forever

Now the stock is for more than that so the difference between the current stock price and the Current value is the implied future value how much the market is implying what percentage of? The value of the stock is based on stuff that is to come incremental earnings power new products new markets all the good stuff and What I've done is just rank the big tech names from highest to lowest present current current price Percentage from future value. So how much of the stock price is based on? Stuff that is to come versus the current earnings power of the company. And it ranges from 91% for Tesla.

So over 90% of Tesla's value is based on stuff that's going to happen beyond its current earnings power, all the way down to Alphabet at 45%, which is simply that less than half of Alphabet's value is being driven by what might come from the future. And the average for big tech is 67%. So the takeaway from this is that Tesla's is very, very richly valued. 90 plus percent of its value comes from stuff that is not evident in the

current earnings stream. Nvidia is roughly average 67% right alongside Amazon at 68 and Apple at 63. So yeah, more than 50%, but not egregiously so. The S&P trades for 52% future value, and then the largest non-tech names in the S&P, Berkshire, JP Morgan, et cetera, trade for 53%. So this gives you a range of expectations or a range of how the market is valuing the present for the market.

So roughly half of the S&P is future value. Big tech, roughly two thirds is future value and non-big tech, roughly half future value. So this actually makes sense when I look at the rankings here and I think about like the future value that investors are assigning to things that are not even in these companies' current earning streams. Tesla would be the stock I would expect to be there. Maybe it doesn't deserve to be 91% above, but that sort of makes sense to me. And then amongst the tech giants, Alphabet being the lowest also makes sense. Because yes, Alphabet has other their bets and they've got, you know, they've got like quantum computing and things like that. But like, for the most part, it's an advertising business, it's a yellow pages.

So I actually sort of understand how investors have sorted these out, even if they didn't mean to, or how they've ranked these based on what they're willing to pay for that implied future value. Is that what you would have guessed as well? If you would see this list cold? Yes, and we've done this math for years, so we kind of more track the development

of these percentages. Tesla is the one that is always at 90 plus percent. And it's just another reminder to people to say, yeah, the market already knows that this is all on the come. That's is literally in the stock. You can't short the stock or buy the stock based on those principles. So the only way the percentage of the current price from future value that that 91 percent, the only way that's justified is autonomous and robots. Yes.

For Tesla. We don't have to go into all the other ones. Of course, they're all gonna be involved in autonomous stuff in some way and robotics, but if you're a buyer of Tesla, you're buying it because you're bullish on Optimus, you're bullish on Cybertaxi. And I think that's the robotics piece of that story,

depending on who you talk to, it's either half the story or it's the whole story. Nobody would say, oh, I'm in this for the cars. Yeah. I mean, right. And the math says it's 91% of the story. Okay, totally got it. I would just point out on robotics,

you're not entirely crazy to ascribe that much value to Tesla as a result. I just wanted to mention Mark Andreessen was talking about general purpose robotics recently. He thinks it's tens of billions within the next decade, but he's also said things like robotics is potentially the biggest industry in the history of the planet. It's his direct quote. He thinks it could be $26 trillion in global revenue divided between household and manufacturing applications.

I think that comes from him or it comes from somebody writing about his comments. But if that even is anywhere close to being true, then if you're an investor today, you have to be invested in companies that are going to play a decent size role in that. And I think like most people, if you just regular people, not professionals, if you just said like, which company is the best way to bet on robots? Most people, they've seen Kim Kardashian posing with the optimist robot in photographs and they just they say, Oh, it's Tesla. And it may end up being that way. It may not. Who knows? We'll all find out together. But that explains the bet that people are willing to make there, whether it'll pay off or not. Yeah, yes. But it also also explains why you have to be long

US large caps versus rest of world. Because Tesla may not end up being the company. The company that may do it may be private right now. But you can be assured that they will end up going public in the US when they're ready to go public. And so it's funny about index investing is you're buying the companies today, like literally you're buying the 500 companies today.

But if you're gonna hold for 10 years, you're also buying for all the IPOs over the next 10 years and all the disruption and all the growth that's going to happen over the next 10 years. So the stack that we see right now on this chart will be totally different in 10 years. And all we can be relatively assured of is whatever the winner is in robotics will be on this list. Right.

It's a pretty safe bet. It's going to land there if it's a consequential company. All right, guys, this has been amazing. It's so great catching up with you. I hope you're both enjoying your summer. I want to I want everyone watching and listening to know that if you want to hear more from Nick and Jessica, and of course you do, make sure you check out their YouTube channel. There's a link to that in the show notes or you can go to youtube.com slash at the at sign, Nick, Colas and Jessica Rabe. And you guys are on a regular basis putting out great stuff at data track research.com for your clients. If you want to learn more about how you can subscribe to Nick

and Jessica's work, please visit datatreckresearch.com. Thank you guys. Great to see you. And we'll talk to you soon. Thanks so much. Thanks. Thanks. Thanks. Thanks. Thanks. Thanks.

Thanks. Thanks. Thanks. Thanks. Thanks. Thanks. Thanks. Thanks.

Thanks. Thanks. Thanks. Thanks. Thanks. Thanks. Thanks. Thanks. Thanks. Thanks. Thanks. Thanks. All right, gangsters.

We are back. We're live. It's 5 p.m. Eastern. It's Tuesday night, middle of earnings season. Super excited to be here. I see all the Pounders are in the live chat. I want to say what's up to a few of you guys. Mark Aguilar, what's happening?

Jack Rosenfield, good to see you. Magnus Cliff, Doc, Lurkin Caro, I see you my friend. Lance Howe is here. Nicole's in the chat. You all say what's up to Nicole. Policing, keeping everything cool. We got a full house tonight. Really glad to have you guys with us.

You know how much we appreciate it. C Marie, good afternoon. Indeed. Tyrone Ross checking in. All right. Everybody's here. I just spent the last 10 minutes watching video clips of Hunter Biden explaining how to cook crack.

I don't even know. This seems like the craziest time of year right now. Every insane thing that could possibly be going on is going on all at once. Obama's on the tape today. What do you mean? Like Trump just like outright was like, you did a treason.

You invented the Russia hoax. Right. It's wild, but wait, before we deviate, then we have to shout out the sponsor, I do want to say, and I see everyone in the chat talking about this, rest in peace, Ozzy Osbourne. We were talking about this backstage. People don't even understand Ozzy Osbourne is the original internet. So when I was like a little kid, like this was your currency, the craziest story you could think of to tell about Ozzy Osbourne. And all these stories were passed like, like oral tradition

because he bit off a bat's head. He bit off a bat's wing on stage, which actually is true. He got arrested in Texas for pissing on the Alamo. He, he snorted a line of ants like backstage at a concert like but like there was no internet but every kid even kids that didn't know what Black Sabbath was had an Ozzy Osbourne story and if you met somebody like that would be like you would trade Ozzy stories like that's it's insane how um how large he loomed over our childhoods. And who would have ever thought that health nut would have kicked off at 76? I would have thought he had way more time. But hey, it's how it works.

So RIP to the Prince of Darkness. Michael, you had something you wanted to get off your chest? I did. I don't like your shirt. That's bad juju. There's no reason to be wearing that right now. Market turmoil? It's the opposite. It's ironic. Okay. Okay. Well, I don't like that. It's ironic. If this is the top, I blame you. Hey, we refreshed the compound store for the summer.

Nicole wanted me to mention we restocked the hats. I know those were sold out. The hats are back. And here are some all new merch you may not have seen before. The official compound beach towel hats are back and here's some all new merch you may not have seen before the official compound beach towel designed by our own in-house design guru Daniel Para the series 777 t-shirts and brand new animal spirits merch so go to idontshop.com idontshop.com if you want to see what's new at the compound store okay I definitely don't shop.com today's show is brought to you by Betterment If you want to see what's new at the compound store. Okay. I definitely don't shop.com. Today's show is brought to you by Betterment Advisor Solutions.

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Investing in Volsor is performance not guaranteed. Performance not guaranteed. All right, we have a packed show. We have so much to get to. And I'm really excited to tell you we have a late addition to the show doc, because I just couldn't let it go without mentioning Muhammad Alarian. You know that like tweet format where it's like nobody dot dot dot.

And all right, so he's the Magic Johnson of finance. A finance put I should say. All right. Put this picture up. What'd he do? A finance Twitter I should say. All right. Put this picture up. What'd he do? He's CNBC covering it. Top economist Mohammed Alarian says Powell should resign to preserve Fed independence. Whoa. Why to take?

So I didn't see the tweet. I just saw the headline and it sounded backwards. And then I read the tweet and it was backwards. I'll read it. This morning US. This is Mohammed. This morning, US government, this is Mohammed. This morning, US government criticism, US government criticism, Trump criticism of both Federal Reserve Chair Powell and the institution itself has broadened to include mission creep and the effectiveness of other officials.

The developments of the last few days reinforce my view. If Chair Powell's objective is to safeguard the Fed's operational autonomy, which I deem vital, then he should resign. I recognize this isn't the consensus view which favors him staying until the end of his tenure in May, nor is it a first best, which is simply not attainable. Yet, it's better than what's playing out now, growing and broadening threats to Fed independence. So he's basically like to save the autonomy, LOL, the independence of the Fed, they have to, Powell has to step down and do what the people who are threatening the autonomy of the Fed want to have happen anyway. I don't get it.

Does Mohammed want the job? It's a great audition tape, maybe the best audition tape possible. The only way it could have been better is if he did it on Truth Social and not X. But that's one hell of a way to kick the door down and say, hey, remember me? Wait, Josh, I'm available. The last part of the tweet is, as to market reaction, most of the frequently mentioned candidates to replace Chair Powell would be able to come any potential market jitters? Disagree. What jitters? There's no jitters. There's no jitters. Oh, there would be. No, he's making the point that he understands the market would freak out a little bit if Powell resigned because he was bullied out of office by the White House.

And he's saying the Fed has a deep bench, don't worry. They'll put Waller in and everybody will be cool. No way. All right, whatever. I like Muhammad. I just, I don't understand this. I think he wants the gig. And why wouldn't he?

He'd probably be good at it. I mean, who's been watching and paying closer attention and speaking to more central bankers than Muhammad Al-Aryan over the last 25 years? I'd be happy with his assignment. I think that would calm market jitters. It's just a weird take. It's really a bad precedent because what do you think? The Democrats aren't going to do the same thing? Like that's, oh, this is how it works now? We are, we can't fire the Fed, but we can, we can bully them to death and pick apart their budget and, and harass them

personally and we'll get rid of them one way or the other. That's, I don't feel like the, I don't think the market would, would get over that so quickly, but what the hell do I know? They'd probably buy it. New record probably buy new record highs in stocks the day it happens. Who knows? You know what the Fed should do to preserve its autonomy? Not have Powell step down. Cut rates. Cut rates 50 basis points.

Shut everyone up. It's not going to change anything. You're not creating inflation by taking Fed funds from 4.5% to 4%. I'm sorry, you're not. It's just not how it works. Can I throw out an alternate view? If they really want to preserve their independence, take rates to zero. Right.

Right. That'll produce a great outcome. I really don't think the Fed can adjust interest rates by 25 or 50 basis points and have a marked impact on inflation. I don't think it'll hit expectations. I don't think it'll do anything, quite frankly. It'll make bonds slightly less attractive and maybe it'll produce a two-day rally in the homebuilder stocks and then everyone will forget all about it. You know what? I feel like this is tired. We're all tired of talking about the Fed.

That was a 2022 story. It's enough about it. You know what, I feel like this is tired. We were all tired of talking about the Fed. That was a 2022 story. It's enough, right? Who cares? All right, next. Consumers got their swagger back. This is the Wall Street Journal. When President Trump slapped tariffs on nations across the globe this spring,

many economists feared higher prices and spending cuts would flatten the economy. Consumer sentiment collapsed. We talked about it here. The S&P 500 fell by 19%. In two months, the world held its breath and waited for the bottom to drop out. But that didn't happen. Now businesses and consumers are regaining their swagger and evidence is mounting that

those who held back are starting to splurge again. Anecdotally. Do you see it? Do you see it? Do you feel it? No. You don't at all in any way. I totally do.

OK, tell me. I think people that are stock market Americans are like game on. I feel like a switch was flipped. I really, I don't think anyone. You feel it? I mean, I feel it in the stock market, I guess. Well, no, but that's obvious.

But like in day to day? Did the stock market, we just had a 26% rally in the S&P 500 in, I don't know, 44 days- Oh, you know what? I forgot. I bought a new house. You're right. I do feel it. The biggest house in the town.

All right. I really feel it. And I don't think anyone's like, oh, my stock portfolio is back up. I'm going to go back to acting like it's 2024. I'm not saying that. Like, I don't think anyone explicitly is like, oh, thank God my stocks are back.

I just think like when I look around and you know I'm very much on the scene, I'm in Manhattan, I'm on the Upper East Side, I'm in East Hampton. I'm at luxury boutiques all over Europe. Roslyn, eating dinner. No, like I, yeah, I saw your dad last night. But I feel that is a sigh of relief on the part of, let's say the top third of the population and it's like game back on.

Okay. You don't feel it at all? I don't know. I have to think about it. Okay. Here's more. JP Morgan reported unexpectedly strong earnings. The bank's economist no longer expecting recession, they said.

Here's Jeremy Barnum, the CFO. After the initial shock of tariff policy changes, everyone kind of went on hold, but quote, at a certain moment, you just have to move on with your life. And it does feel like some of that is happening just because you can't delay forever. Totally agree with that too. So I made a meme. Don't John, try it on please. Meme on.

It's incredible how much. Thank you. So for listeners, yeah, it's,'s NEO stopping all the bullets and it says the American consumer. It is incredible. Mimof, how much has been thrown at the American consumer? And I understand there are people struggling. There always are. Remember excess savings? Wasn't that supposed to run up like three years ago? Still working. Still working. It just... So we just won't stop spending. I know real test sales were a little bit soft.

If you looked under the hood, whatever. We've been through a lot of shit and we just keep taking it. So you mentioned Jeremy. I listened to the conference call. They spoke about the consumer. Quarter on, please. So the CFO of JP Morgan was asked about the consumer. All right. He said, so let's do the consumer quickly. I think we talk about this every quarter. It's obviously a very important question. We look at it very closely. It obviously matters a lot for us as a company, but we continue to struggle to see signs of weakness. The consumer basically seems to be fine. Now, a few things are true. Like if you look at indicators of stress, not surprisingly, you see a little bit more stress in the lower income bands

than you see in the higher income bands. But that's always true. That's pretty much definitionally true. And nothing there is out of line with our expectations. So it's not just rich people. Obviously, they're doing just fine with their 401Ks and their stocks and everything like that, but it's everywhere. Ally, chart on please. And Josh, I know you have something in between, but just Ally chart on. So Ally, the biggest part of their business is auto loans, a lot of some private in there. And their CFO said, 30 plus day all in delinquencies of 4.88% represents the first year over year improvement in delinquency rates improvement since 2021 improvement a positive inflection point for credit

performance. What you're saying that like it's a bad thing. No, nobody, nobody was expecting that since 2021. Yeah. Um, more from the journal credit card spending. The quarter JP Morgan was up 7%. This is quarter over quarter. So 7% over the same time 2024. Yeah, it's remarkable. That's everybody.

That's not just the wealthy. Here's more. US small business owners, 1,267 in the survey, 44% said demand for services and products is higher than they anticipated in January. A third were extremely optimistic that business would be better in the next three months. Just under a third said they would add more employees by then. That's small business. The transcript is amazing.

We shout them out all the time. Yeah, fantastic. Like, here's Jane Fraser from the Citigroup call last week. The strength of the US economy driven by the American entrepreneur and a healthy consumer, has certainly been exceeding. As I've been speaking to CEOs, I've yet again been impressed by the adaptability of our private sector.

Stock market's bailing us out. American Express, same thing. Wait, what do you mean stock market's bailing us out? Well, when she's talking about the American entrepreneur, what do you think she's talking about? She's talking about the American entrepreneur, what do you think she's talking about? She's talking about all these companies that are finding ways to continue to do well. American Express echoed that.

US Bancorp consumer spend remains resilient. Wells Fargo, this is Charlie Sharf as we look ahead. What we see regarding the health of our clients and customers has not changed. Experian, the credit reporting, quote, I think the passage of time the US economy continues to be strong. Regions financial, same thing. These people aren't being paid to say this shit.

It's all about the labor market. That's it. Like what the rails us? What stops us from spending? Well, so now let me throw a monkey wrench in. And I shared this chart on social media yesterday and got quite a reaction. But what do you want me to do?

It's the data. I think there are two types of consumers. I think there are stock market participants and everyone else. And it's almost childish to say people at the lower end of the income distribution are struggling. When are they not? That's definitionally, it's another tautology. Definitionally, if you're at the lower end of the income spectrum and prices in the economy

are rising, you're struggling. Not to be a dick and be a downer, but remember, Eisman was talking about how people that always yell about the debt, it's like virtue signaling. It's the same thing for finance people, people talking about the bottom decile of income earners are struggling. It's like no shit. Like obviously.

Yeah. Oh, I agree with that. Oh, no, I care about the bottom 10% more than you do. It's like, dude, come on. Yeah. And we, and we talked a couple of weeks ago about how the spending of that consumer does not even filter into the S&P's earnings. I think it was Savita's supermanian data. That's bottom quintile. I believe she was talking about it.

It doesn't even show up, really. All right. But anyway, here's a chart from the most recent University of Michigan release. I think this came out Friday. I mean, this is early, but we talk about K-shaped recoveries where one group is going in one direction, the other group is going the other. Whether or not you're in the stock market dictates what your sentiment about the economy is. And Tercile, for those who don't know, this is the top Tercile of people who own stock. You can see their consumer confidence is ripping, whereas the people with no holdings in stocks are at all-time lows basically.

What's a tercile? Is that the third? Terciles is a third. I had to look that up. I've never even heard that term. So the top third of the country who probably own 80% of the stock market, let's say, I'm making that up, but I bet it's true. Peter Brookfarr wrote about this, chart off, helping confidence here too continues to be

rising stock prices with sentiment gains among stock market participants. Those without stock wealth experienced a sentiment decline, however. So it's two different. So when people say the consumer is this, the consumer is that. Which consumer? The stock market American or everybody else? And I don't want this to be true. And I heard you guys on Animal Spirits last week, you were screaming at your audience who all own stocks, get in the market. You were talking to Ben. But like, what other way do you need me to say it? We basically have a situation where people are spending with abandon who have stock exposure.

For everyone else, it's harder to imagine why you would want to increase your spending right now. So it's tough, but I agree, it's a little bit virtue signally, so I don't want to spend any more time on that. Good. Okay. What is your read so far on earnings season? I know we're early, but...

I think it's pretty good. Expectations are rising as companies are reporting. Like full quarter expectations, analysts are taking numbers slightly higher. But the earnings growth rate is at a multi-year low. So I think right now the expectation is 5.6% growth for this quarter, which would be one of the lower growth rates for any quarter over the last three years. So it's good. Like companies are doing the number they're exceeding reactions are a little bit punk, and it's not that fast of an increase compared to what we saw two quarters ago.

Where do you want to start? I guess let's do, all right, let's start with some top line stats. This is a huge week of earnings. 20% of S&P 500 companies are going to report this week. 12% of companies have reported already. Sean put this together for us. Blended earnings, which is actual earnings plus estimates of companies that still haven't reported for S&P 500 companies grew 3.3% year over year.

50 basis points above the estimates at the beginning of the season. 82.3% of S&P companies have beaten earnings estimates so far, which is pretty good. The five-year average on that number is always 77%. We joke about that, but that's what it is. So we're slightly above. Actual earnings, take out the blend, the 59 companies in the S&P that have reported grew 2.6 percent year-over-year So and keep in mind we haven't had any big tech yet, which we're gonna get to in a minute

Analysts think S&P earnings grew just 2.6 percent in an ag you act aggregate year-over-year last quarter the lowest bar since the fourth quarter of 2023 and Coming up we have Amazon and Tesla tomorrow. I think both will be after the close. So if you're listening to this on Wednesday, they haven't reported yet. Um, let's get into, let's get into Amazon. Let's put this graphic up. So guys, like just as a level set revenue, 162 billion, which would be nine and a half percent top line growth. EBITDA 38.3 billion, which would be 14% growth. EBIT 14 and earnings per share should

be up 3.9%. The bar does not appear to be extraordinarily high from my perspective as an Amazon shareholder. Let's put this price chart up. Look, I think the stock's going to struggle if it can even get into that old high from January and February, which was about 240, 242. I'm not sure if that's easy to see in this chart, but you have a golden cross in the stock, which we talked about with JC last week. And again, I think you have a company where the expectations aren't like wild. And I don't see any reason why Amazon shouldn't have good guidance, just given what we're

hearing about the demand for AI and cloud. And AWS is the biggest cloud player on earth or AWS neck and neck with Microsoft. So that's where I am with that. The thing that so the stock, the stock has not done very well at all. We both on the stock. It's up 45% over the last underperformed in the first half for sure. But over the last five years, it's only up 45%.

The S&P is up double that and the Max 7 is probably up a lot more than that. To me, the thing that I'm most interested to hear from Amazon and Google and the other tech giants are their guidance towards CapEx and hyperscaler spend. Like what they're going to be spending on all these data centers. Because at the end of the day, we'll get to this in the next topic,

but it's all about semis and it's all about AI spend. And as long as they don't guide down, which I don't know why you think they would, then we should be okay. I think Amazon's going to be one of the biggest players in robotics in the world over the next five years. They already are, but I think that part of the story is not obvious to people. I think between drones and automated factories and the Zx automated taxi service.

There are a lot of things that Amazon's doing that don't show up in earnings and don't really get that much attention. But I think if people are trying to invest in the future and they understand that one of the biggest themes is gonna be automation and robotics, Amazon becomes a must own stock in a way that like, for example, Metta is not.

Like, Metta is a huge AI play, not really a physical AI play, not really a robotics play. Like, I think Amazon has the potential to be able to separate itself, but not yet. The robotics story is just too early. And again, the stuff they're doing is mostly to save themselves money. That's going to change, dude. The origin of AWS was their own internal computing solution. And one day they said, you know, I bet we can get customers for this if we were to turn

it inside out. And the rest is history. It birthed the multi-trillion dollar FANG company, a Mag-7 company, if they decide what we're doing with robotics might be valuable to our customers, like I don't know what the multiple on the stock should be, but right now it's 36 times earnings, cheapest multiple you've been able to pay

for trailing Amazon earnings ever, like on record. And I just think there's a lot going on here under the hood that is not getting that much attention as evidenced by the share price. So I'm bullish Amazon staying long through the earnings and we'll see what happens. Let's do Tesla. Why don't you take the reins at this one? So unlike Amazon, the expectations are terrible here. I can't imagine what they would have to say. Well, I don't want to say that. I can't imagine what they would have to say. Well, I don't want to say that. I can't imagine what they would have to say for the stock

to go down. It would have to be really, really bad, because they're looking for negative 13% on revenue, negative 35% on EBIT. These numbers are so bad. Negative 22% earnings growth. Horrible. Yeah.

What's right? And everyone knows. Everyone knows. So I think whatever they report, whatever the numbers are, I don't think anybody's going to care. It's in the price or it's, listen, we know about it. I think what's going to be more important is what they guide to. And more importantly, whether or not investors believe whatever crazy shit

Elon says because he always gets a little wacky on these earnings calls like he says some shit all the time Yeah, well alright. Here's what he's gonna do. He's gonna play up the launch of the Of the robo taxi which happened during the course of this quarter that he's reporting like that's gonna be front and center because they did that at the end of June. You're going to hear a lot of stats about how many rides and customer satisfaction and whatever. There's negligible revenue impact to this. They do not have a lot of cars on the road.

It's not a thing that's going to drive earnings this year. But if you're long the stock, it's probably a big part of the thesis. Why? Because you think that there's going to be a million of those cars all over the world making money for Tesla. So I feel like that's a really obvious thing that he's going to play up. Yeah. I wonder if any of the analysts are going to have the balls to ask them about the tie up between Tesla and Grok and XAI and Twitter and the whole mishpacha. Like are they going to want to know more details about what some of these transactions are

meant to do? Someone will ask. You think so? Yeah, I do. Okay. Look, I have nothing to say. I'm not a Tesla investor. I still don't get it. I never have gotten it. And I wish the longs luck. This is probably one of the worst estimate rundowns for these mega market cap companies I've ever seen going into a quarter. And the stock price is fine. It's fine. It's not at an all-time high,

but it's also not down. It's okay. I think it's up on the year. If you tell me stock is up or down 10%, I would say up, just because I feel like all the bad news is baked in. Yeah, that could definitely be. I wouldn't argue with that. All right. I want to do Netflix quick. So Netflix closed at a multi-week low today, big deal. The stock is at a monster, monster one. It's 11% off its highs. But they are just really impressive, continue to fire on all cylinders. I pulled some stuff from Alex Morris. Try it on, please. This is a sequential net ads, which

they stopped reporting in the fourth quarter of 2024. But look what they did. Look how they responded to the slowdown. They just absolutely executed the shit out of this business. Super duper impressive. The next table. What is this? This is net ads.

Remember, during the second quarter, it was spring break. They reported a loss or a decline. Subscriber ads. A stock got killed, and they just murdered it. They did exactly what they had to do. Yeah, this is epic. All right, next chart. Annual revenue per sub was $110 in 2016.

And every single year, well, not every single year, but over time, it's been super duper impressive. And more importantly, more importantly, the annual EBIT, so the bottom line per average sub has gone from $5 in 2016 when they were spending gobs and gobs, seven billion dollars on production, whatever it was, up to $37. And then additionally, you could see it in their margins. Just unbelievably impressive execution. Wait, so you're saying that they make $44 per year

in cashflow from each subscriber? Correct, and they have over 300 million global subscribers. Does that sound like a lot or a little? It sounds like a lot if you consider what the cost is. Yeah, all right. So they're charging every sub on average, because there's different tiers and pricing. But on average, each sub is $145 in revenue.

And of that, in cashflow, they're netting $44. Yeah, that sounds pretty damn good. That's pretty good. I mean, that's great, honestly. But also, put that chart back on, the margin chart. Look at this. I mean, unbelievable. Unbelievable.

Yeah. I mean, I'm not selling. And I saw all the narratives about like, oh, Tesla just had a great earnings report and the stock faded. Therefore, Tesla, Netflix, therefore, all the good news is in the stock. No, I don't think so. Come on. What's it up here? I mean, I don't think so. No, that's not how it's come on. It's up. Wait, wait, wait. What? What's it up here today? I mean, give me a freaking break. Huge.

It's still up 33% after this pullback. Yes, one of the biggest winners of the S&P this year. It's up 88% of the last year. I could pull back 11%. Before we move off this topic, I just want to mention, I listen to a lot of financial earnings calls. BlackRock, JP Morgan, Schwab, one other I can't remember. Not surprisingly, a lot of these companies

are relevant to the stock market and firing on all cylinders as the CFO of JP Morgan said. Like they are real, oh and Morgan Stanley. Should have said something. We were talking to JC and he's like, what's the most, for those of you who haven't listened to the 200th episode of The Compound and Friends that we put out last week, right after this, make sure you go and do that. It was pretty epic.

One of it, JC was like, financials are the most important sector. And I think like just given like every bull market is accompanied by financial stocks rallying. And my argument is like, no, you have it backwards, bro. When the financial markets are rocking, companies that are in financial services do really well because they feast on that activity. It's like you wouldn't say real estate brokers drive home prices. He would say rising home prices and sales of homes is good for realtors. Therefore therefore the business value of a real estate

brokerage rises when home prices rise. I look at the financial sector the same way. You're right, but to Jaycee's point, it's been a while since financials were doing really well relative to the S&P because we've been in a bull market for a lot of many, many years and they had been lagging a lot. So it's nice to see the confirmation. Yeah, the deregulation story and the stuff that Trump is doing with federal agencies is a really big part of this. They're cutting the regulators' budgets. They are turning down whistleblower cases according to Bloomberg News. Today, people are bringing whistleblower complaints about companies and they're saying, now we're good. Yeah, they're going to loosen the lending requirements.

They're going to take the yoke off of the money center banks. There's chatter in the market today that Goldman Sachs is getting ready to make a big acquisition. You imagine Goldman trying to buy a company under Biden? It would never be allowed to happen. What's the speculation? Who are they eyeing? Do you imagine Goldman trying to buy a company under Biden? It would never be allowed to happen. What's the speculation? Who are they eyeing? People are saying they want to do something big in wealth management, either on the platform

level or maybe buy a big player. I don't know. The hell do I know? But I'm just making the point, just the idea that we're contemplating S&P 100 financial services companies considering M&A is like a radical change from just a year ago. And that's the Trump effect. And it absolutely is a tailwind for the largest banks. And as a result, most of them are now trading at one and a half to two times book value.

I know it's not a bank, but BlackRock's been pretty acquisitive, especially getting to private markets. They raised the largest private fund ever from GIP, which is an infrastructure fund. They raised $25 billion. Yeah. Schwab making a new 52.5 today was interesting. And getting to crypto. Yep.

So a lot of getting into crypto stuff going on over the last couple of days. I saw Western Union made a stablecoin announcement. Maybe they watched our show. Well, too little too late. With what's his name from A16J? Sam Broner. Sam Broner. I saw PNC Bank announced a tie up with Coinbase to custody their banking customers crypto. So yeah, this is all of this is Block, which is the payments tech giant used to call it Square just got added to the S&P 500 this morning.

Really? Yep. $44 billion market cap. When Chevron closed the deal to buy Hess, somebody had to take Hess' spot in the S&P and block was up. So they got it. So these are all directionally positive for the financial sector. My only debate with J.C. is cause and effect.

I just think it's backwards. So all right. Foreign buyers love U.S. stocks think it's backwards. So, all right. Foreign buyers love US stocks, it turns out. Do you remember the conversation we had with Rebecca Patterson? And maybe we talked to a few other people in April and May. And there was a narrative out there, and I would have bought into it had I not seen the data, it was plausible that it was going to be like a slow leak out of US assets for international investors. Portfolio managers in Europe and Asia were going to lose faith in the US as a result of the trade war. You wouldn't see like a huge crater being blown in the side of the earth, but you would

like kind of see like gradual walking away from stocks and treasuries. So it's the opposite, it turns out. Foreign buyers, including central banks, sovereign wealth funds, but also private investors, like regular rich people overseas, just went absolutely crazy for US assets in the month of May and over the entire preceding 12 months ending in May. Just completely invalidating that idea at least so far. Foreigners now are up to $9 trillion of US debt holdings, which is about 32% of all outstanding debt and they've been buying more. They're also buying the US stock market hand over fist, which I think helped fuel this

incredible rally from April. So we have a chart from Ed Yordany. Let's throw this up. Ed says, total U.S. net capital inflows, including private and official foreign accounts, rose to a record $1.76 trillion over the 12 months through May. So, this is right smack in the middle. You have the tariff and trade war. Here, US net capital inflows attributable to official foreign accounts were only $33 billion.

So it's not governments. Those attributable to foreign private investors soared to a record $1.73 trillion. It's almost all private wealth buying US stocks from overseas. And I've got one more for you. This chart shows the cumulative purchasing over 12 months. US stocks are the blue line. So in case you're squinting, that's 600 billion in foreigners buying of US stocks on a rolling 12 month basis through May.

So the trade war, Michael, triggered an upside buying shock from overseas investors. Not a slow leak, not an exodus. And again, this is so far, but like, look at the, do you see that spike in the blue line? No, I don't see it. Noteworthy. Yeah. Yeah.

Not the way that a lot of people expected this would have gone. And when you see something like that, it's hard not to think that's going to continue. What would your bet be that that line looks like two reporting periods from now? Turn that back on. The red is bonds. It ebbs and flows. I mean, I wouldn't expect it to be higher. Why would it be?

They aggressively bought the dip. What's notable is that they were selling for most of the 2020s decade, like after the pandemic, they basically spent the entire time net selling US stocks. And just the enthusiasm with which they've been buying stocks looks like since December of 2024 is pretty, I mean, these are record numbers on this particular metric going back 30 years. Not every narrative that makes sense. Here's my takeaway.

What do you think? Not every narrative that makes sense to you as you're told the story ends up coming true. And in this case, it turned out to be a polar opposite. All the time. All the time. If it makes sense, it doesn't make money is what Mark Fisher told us. Jamie, on the conference call, they were talking about market expectations for Fed cuts. And he goes, well, whatever the market's expecting, you could pause it out the window. So all right, let's talk about the most important subsector.

There's no debating that, semiconductors. ChartKid made this, chart on. What we're looking at here is the forward PE coming down from the peak at 35.4 times down to 30.5 times. But the waiting in the S&P 500 over the same time is actually up to an all time high, almost 13%. That's a function of earnings growth. Yes sir.

The PE ratio is coming down, but the stocks are getting bigger because they're out kicking their coverage on the earnings per share front. And we know it's basically two stocks. We know this is in this is Nvidia and Broadcom. Here's Adam Parker. The stock market goes where the semis go.

What do you think about that statement? I mean, I said this five years ago, the semis and the new transports. So this is not news to us, but basically the semis are your guide to where the overall market will go. Well, the market can rally without the semis, but I don't think semis, like if Nvidia falls a bunch, I think that would certainly put a- What if it's not rallying with Nvidia. That would dampen the enthusiasm a lot. Adam says the key for revenue growth expectations for the technology sector,

and perhaps the key to success for the entire stock market is the semiconductor industry. ASML reported, which is not a US Semi, and it was a disappointing report, down double digits, the stock. People are waving it away saying, down double digits, the stock. People are waving it away saying, don't pay attention to that. Samsung is a 14% customer and there's some China stuff in there. All right, fine. What he's basically saying is the correlation between the S&P 500 and the semiconductor stocks is always pretty high, but has been particularly high of late,

peaking at 0.94 in late June. Several key semi-companies report in the next two weeks and we think there's no doubt that it will be hard for the S&P 500 to rally strongly if the semi-sector acts poorly. Agreed. And he sees that as one of the bigger risks, just keying off that ASML guidance and commentary. Put this chart up. This is Adams. Shout out to Trevariate and Adam Parker. This is the S&P 500 and the semiconductor stocks. And he's showing the correlation. And last month it hit 0.9, which is almost 90% correlated.

So it oscillates. It's up and down. But look at this upward trend stemming from 2016. That was the low of correlation between the semis in the stock market. And ever since, it's basically been up and to the right, which tells you how important this sector has become, I think, to the S&P 500. What do you think about that? Listen, this is very noisy data. which tells you how important this sector has become, I think, to the S&P 500. Yeah.

What do you think about that? I mean, listen, this is very noisy data. Like in 2023, we had a hell of a year and correlation was falling dramatically. But whatever, regardless of what this chart says, I agree with Adam. I think that if the chips sell off, it would be hard to envision the SP continuing higher. However, however, one of the hallmarks of a bull market, we saw today is rotation and RSP, the ratio are so the equal weight was up 1.27% today. The SP was all the winners. SP was up to 16 basis points. So it's possible. I mean, I don't know, crazy shit happens all the time. We

just spoke about it. It's not impossible. It'll be seem unlikely, but who knows? Today was a, today was a sell growth bicycles day. Charter. John, you have that mystery chart heat map that I, there we go. Thank you, John. Great job. Yeah. Look what they did.

This is an interesting day. So Nvidia, Broadcom, Oracle, Netflix, Meta and all the semiconductors got smoked and look where money went. Healthcare, the biggest laggard of the year. Broadcom Oracle Netflix met and all the semiconductors got smoked and Look where money went health care the biggest laggard of the year materials And really real estate energy banks. Everything was working. So this is you know, it's a bull market So hey you want to know my theory on today? Positioning I've been saying Positioning. I've been saying.

Did you know that 56% of the components of the SMH have a market cap over 100 billion? I don't know how many components there are. I'm guessing at least 30. Several. These are big stocks, dude. Like all of them. These are very, very big stocks. And I think Adam's on to something.

All right. Japan, we actually did a segment about this here on What Are Your Thoughts? We talked about this thing that the Tokyo Stock Exchange did. And just to bring people up to speed who missed that, they demanded that the companies listed on the Tokyo Stock Exchange that had a stock price trading below book value put together a written plan as to how they were going to fix that and improve the valuation that their stock was getting in the markets. And they took those written plans from these companies and they published them right on the website. And Michael, I'm happy to report it really worked.

Bigly. Like this is a great model for some of these horrible moribund international stock markets that are just now breaking out to highs but like have tons of low discounted, low value stocks. What they did actually worked really well. So they launched this a couple of years ago and they made companies say like, this is our plan. We're gonna do dividends, buybacks, we're gonna sell off non-core assets,

we're gonna make business improvements, we're gonna provide regular progress updates, blah, blah, blah, put this chart up. Here's MSCI Japan. I don't wanna confuse correlation with causation, but I do think there's a lot of causation here. Sure, yeah. Right?

And there's a couple of examples, which you don't have to get into all these individual examples, unless you think that some of them are worth talking about. You know, I kind of don't. All right, so forget that. Let's put up this Nikkei 225 chart just to give people the really long-term view. Last week the Nikkei took out 40,487, now materially above

the old highs from 1989. And the reason this is relevant is what percentage Japan in the global market cap? Would you say it's 15%? Is it that big? Only six? I don't know. Yeah, because I think as China has shrank, I think Japan has grown larger just by attrition. So people with international portfolios have seen Japan become a larger. I think that's right.

Two more charts on this and we can move on. The first, this is from Verdab Capital. Total dividends and buybacks of Tokyo Stock Exchange listed companies. Just focus on the light blue line. That's the combination of dividend and buyback. Of course this is playing a big role in the comeback for Japanese stocks. Yeah, no doubt, yeah.

That number has gone 10 years ago, 13.4 trillion yen to 28.8 trillion yen. It's more than a double in dividend and buyback activity. So they're shrinking the flow to these companies which boost the earnings per share and arguably boost the multiple that people are willing to pay for them. And of course, raising the dividend helps too. Here's another one more. Here's the historical median shareholder yield for companies by market cap. And what I'm showing you here, large cap is blue, but look at mid cap, orange. Look at green, small cap. Look at purple,

micro cap. Here's my question. What if the New York Stock Exchange said this to the Russell 2000 components that trade on their exchange? I love it. Get your act together. Yeah. Publish a written plan. You have a Alright, dear small cap CEO or board of directors, probably more realistically, you have a small cap listing on the New York Stock Exchange or NASDAQ, depending on who's talking. You have 0% share price appreciation in 10 years. You're selling at the lowest multiple book in 30 years, publish a plan for what you're going to do to enhance the value of your stock for shareholders or you're

delisted. Now. Now. We don't want your kind around here. If you're not interested in boosting- You have 72 hours. I actually would really love the Trump administration to convince the exchanges to look at Tokyo. Why are there thousands of publicly traded companies on the NASDAQ and New York Stock

Exchange that are not participating in a bull market that's gone on for 16 years now? If they don't do it, Muhammad El-Aryan will delist their companies. All right, let's talk about the Ether machine. This is awesome. You like it? I love the Avengers quote. All right. The Ether Machine, so there's a blank check company

called Dynamix, which I was pronouncing dynamics, and nobody's correcting me, so I'm going to go with Dynamix because it's funnier. It sounds like a snack food. But they're merging with another entity to become the Ether machine. The combined company plans to manage 1.5 billion in Ether. So it's going to be the strategy of ETH. It's going to be the biggest or want to be the biggest of ETH, right? It's going to be like the biggest or want to be the biggest

ETH treasury company. How many employees might a company like this need? Like two. One to go on CNBC and one to keep your filings current with the regulators. But the founder, one of the founders is like a super duper rich guy. He invested $645 million. Andrew Keys. Who is it? Is he a crypto billionaire? I don't even know who that is. He's a rich. I don't know. Sounds like fun. It's Alicia Keys' son. He's going to be the chairman and then Kraken and blockchain.com are contributing $800 million in equity financing at $10 a share. It's a SPAC, remember. The thing went berserk to the upside.

I think it ran 30% the day this was announced or something. And then it's since calmed down. I can't tell what this... So it was just over 10 on July 21st. Whoa, whoa, whoa. This is a terrible chart. Come on, guys. It just despecked two days ago. I understand, but I asked for a chart. What else would you show?

Oh, you know what? That's not me. My bad. I misread the dates. I apologize. I'm just showing the gap off. No, no, no. You're right. You're right. I f***ed up. Oh yeah. So Key said in an interview, it's team's experience with Ethereum will set it apart. Quote, we've essentially amassed the Avengers of Ethereum, he said. Do they have the founder, the Russian Canadian kid? Is he involved? Oh, what's his name?

Exactly. It's only the inventor. The guy with the skinny neck. Yeah, I don't know. What do you think? Investors want this. Sure. So they're going to lever up and start to acquire as much ETH as they can, just the way strategy did with Bitcoin.

That worked. You think this will work? I don't know. Maybe. 50% chance. All right, sorry. In the chat, so that Jason says it's Vitalik. Yeah, sorry.

Oh, is Tom Lee involved in this? No, I think Tom's in another one. He has another, he's doing his own ETH treasure. He's on the board or something, I can't remember what it is. Okay, cool. When are we doing one? Tom is in the the thundercats of ETH. The Voltron. What's your ETH accumulation vehicle? Have you launched? Somebody said our viewers are awesome. We got like five people telling us Tom Lee's vehicle is BMNR. Thanks to Ben Cash, Matt Karen, Gangsta Lean, and Midwest Cannabis.

This thing had a monster pop. It went from like 15 up to 160 down to 40. I don't know, man. We'll find out if investors want this. I would guess that what Michael Saylor did is impossible to replicate. I don't think you can just keep catching lightning in a bottle. Or wait a minute. What's better, a leveraged ETH ETF, like if such a thing were to be launched or one of these eats treasury vehicles Where it's not mechanically just like doing the trading based on the spot price But there's somebody actively accumulating you could buy levered eath on chain

I don't know if people are going to give the same premium to these companies I suspect that they're not all going to get it like that would make no sense Somebody was saying sort of agree with this take but I didn't read the article I just read the headline and I got busy. Somebody was saying, I sort of agree with this take, but I didn't read the article. I just read the headline and I got busy. But somebody was saying like, index funds bear the responsibility for the fact that individual investors are paying $2

for $1 worth of Bitcoin. Yeah, how? Because now, well, strategy's now in the index. So, dumb. So every time you give money to an S&P ETF, you're buying some strategy. Yeah, I saw somebody tweet, like, Vanguard is the biggest holder of strategy.

Well, yeah, it's the biggest holder of everything. It's the biggest holder of everything, but like, that's partially what is fueling the enthusiasm for these things. They just put strategy in the S&P 500. If Vanguard wants to remain independent, they've got to do the S&P 499. All right. I see where your head is at. Let's wrap up. We're going to do Make the Case. I already pitched this in March. I'm bringing it back because there was some news this morning

before the open and I just want to keep people up to speed with my thinking on it. But before we do that, guys, obviously, we are not giving anyone financial advice on the show. When we do make the case, this is Michael and I pitching each other stocks, and it's for informational purposes. There's a huge disclaimer below this video and in our podcast show notes, making this clear, but I just wanted to reiterate. I know, but like that being said. Well, no, there's even more of a disclaimer. Rocket companies, which I'm going to talk about and I've talked about already, also owns Rocket Money, which is one of our sponsors of our shows. So be aware, double this informational purposes. Do not follow us into trades.

Do so at your own peril or potential risk. But wait, we both own the stock. Yeah, I know. That's why we're talking about it because we both own it. But we're not telling other people they should buy it is the point. But Trump shocked the market this morning. More Trump. I know.

This is Bloomberg. President Donald Trump said he is considering a proposal to end capital gains taxes on home sales in a bid to boost the housing market. I have no idea how much money that means back to homeowners who are selling. I got your attention now because you're trying to sell a house. I know I got your attention. Here's what Trump said, quote, we're thinking about that, but would also unleash it just by lowering the interest rates. If the Fed would lower the rates, we wouldn't even have to do that. But we are thinking about no tax on capital gains

on houses. Trump was asked about the plan by another reporter and that was his answer. And then a republic, Marjorie Taylor Greene, one of the more stable House of Reps people, introduced a bill called the No Tax on Home Sales Act, which would eliminate the federal capital gains tax on primary residences. So the first $500,000 in gains is exempt, is my understanding. They're saying under current law, filers can exclude as much as 250,000

from taxable income on capital gains made on primary homes. But that amount, which is double for couples filing jointly, has not been raised since 1997. How many people do you think this would even apply to? But like how many people have a capital gain of more than 500,000 on the sale of a home? The top 1% of people do.

Outside of New York, California, Florida, how many people have a half a million dollar plus gain where this would do anything for them? Well, actually, actually a lot of people. Okay. I'll take do anything for them. Well, actually, a lot of people. OK. I'll take your word for it. If you bought a home 25 years ago, and you're looking to sell it today,

and you are near a major metropolitan city, there's a good likelihood that your house is over. I'm so stupid. I'm asking rhetorical questions, and I actually have the answer here. The National Association of Realtors estimates that around 29 million homeowners could have enough equity in their homes to exceed the cap for single filers. That makes

sense. 29 million homeowners as single filers have enough equity where this would end up being a tax benefit to them if they sold their home. Single filers. Yeah. Single filers. Not everyone who's married files a joint tax return. Oh, news to me. Okay. I don't know why, but that's just a thing. All right, so anyway. So put the chart. So what do you think rocket companies did? Yeah.

Bang! Whoa, scared me. Obviously, this would be... If you had to pick a stock that would benefit from this, this would be like to me at least. And Zillow. This and Zillow, 100%. I don't even look, you know what? I didn't even look at Zillow.

Look that up while I'm talking. It was up 3% today. So Rocket, we first brought to the show, I did this as a make the case on March 25th. But Rocket is more pure mortgage exposure. Oh, 100%. It's a mortgage pure play. Zillow is a little bit more complex, tied in with home prices. So we did this, Rocket was trading at 13.

That's actually my average cost. We did that in March. And the idea, and this is not my type of stock normally, but the idea is like you're telling me no one's ever going to refinance a mortgage again? It really looked like the bottom. Rocket made two really big bets, which I won't rehash because we talked about them already. They bought Mr. Cooper, which is one of the biggest mortgage servicing portfolios in America. And they bought Redfin, which is one of the biggest

websites and lead generation sources for realtors and obviously funneling mortgage leads through there as well. So Rocket did this really ballsy thing at the bottom of the housing market a couple of months back, where they announced two back-to-back huge acquisitions, and they just closed the Redfin one on July 1st. So Redfin is now a wholly owned subsidiary of Rocket companies. And the Mr. Cooper one, if you look at the share price closing with

rocket share price it seems highly likely from an arbitrage standpoint that that will go through as well this administration is not going to do anything to block a vertical merger so now they're going to go from being the mortgage provider to the servicer the advertiser the lead generator for mortgage brokers. They're building like the premier vertical stack for the mortgage market. One of the other reasons the stock is rallying is that one of America's best activist hedge funds is loading the boat. Value Act Capital, which now has 22,704,955 shares.

They own 8.9% of Rockets outstanding shares. They bought another 2,977,000 shares between July 7th and July 11th at prices ranging between 13.46 and July 11th at prices ranging between $13.46 and $13.94 according to Barron's. So they started buying the stock months ago and now they're up to almost a 9% stake. Value Act is interesting. They don't go in guns blazing, demanding things.

They try to work with management first, and they're gonna have to in this case because Dan Gilbert has 80% of the voting power. So Dan Gilbert, for those who don't know, owns the Cleveland Cavaliers and half of Detroit, like half the commercial real estate in Detroit. So there's some dilution. The float is gonna increase

because of Redfin and Mr. Cooper. So I don't know where that will leave value exposition. And Dan Gilbert's voting rights will also dilute down to 65%. But an activist can't really do anything that he doesn't want to have happen. But I think probably they could both agree the stock price

has been super depressed for a long time. And that's why I'm going to stick with the trade. Are you staying with it? I am. It's breaking out. I don't sell breakouts. You wouldn't sell it yet? No, I should buy more. I think if it falls again, which is possible, I don't think Trump is really going to like, all of a sudden be able to eliminate cap gains home sales. So the stock could easily fall back into the 13s. I'd probably buy more. Well also, a home builders rally today anyway.

So this was just a double dose of goodness. All right. I have good. Go make the case. I agree with you. Obviously, as somebody owns a stock with you. All right. I've got a mystery chart.

Here we go. This is a, I guess it's a subsector. And it's been in the doldrums. It's been under pressure for the last couple of years as higher interest rates hurt this one. Homebuilders. I'd like to solve the puzzle. Homebuilders. I love the confidence, but puzzle. Home builders.

I love the confidence, but no. Real estate. No. Energy. No. Hunter Biden. That's it. You nailed it.

Wait, seriously? You said as interest rates are higher, that's not the hint that gave this thing away for me? What is it then? That probably wasn't the best hint. We, this is, I don't really know. All right, give me a real hint. Oh, Jason Chen in the chat is saying regional banks. That was my next guess.

Not a bad guess. This is an equal weighted basket of names and there's just been a lot of a... A lot of conjecture, a lot of a overhang. What is it enough? What is it? I lost. It's XRT. What the f*** would be able to get that?

I didn't get great clues. I was trying to get clue it up. Anyway. Oh, I make this so much easier than you make it for me. I'm a good guesser. You are a good guesser, but I'm also a good guesser, but that was shit. What does interest rate have to do? Dude, I just said those weren't great clues.

I don't know, however you clued that up. Tee me up next time, bro. We're supposed to end this on a high note. All right, a reminder, new summer merchandise in the compound store, go to www.idontshop.com. Obviously no apostrophe, idontshop.com. Tomorrow is Wednesday, all new edition of Animal Spirits, my personal favorite podcast. The koala on screen is telling you to go ahead

and subscribe to the channel. If you haven't already, we certainly appreciate it. And Michael and I together, we'll see you at the end of the week with an all new compound and friends. Thank you guys so much. Have a great night. you