The Compound and Friends - The Year-End Melt-Up with Joe Terranova and John Roque, Momentum Stocks vs Small Caps, The Coin Flip You Won

Episode Date: November 20, 2020

All the ingredients seem to be in place for a melt-up in the stock market into year-end. John Roque of Wolfe Research and Joe Terranova of Virtus Investment Partners join Josh Brown for a discussion about small caps catching up with large caps, favoring quality and momentum in portfolio construction, what's going on with the US dollar sell-off, and more. Plus, you may not realize it but you just won a cosmic coin flip. Many other people were not so lucky, they ended up on the other side of a bet they didn't even get a chance to make. Josh's food drive for a signed copy of the book is here: https://thereformedbroker.com/2020/11/19/this-is-the-part-where-you-and-i-step-up-and-become-heroes/ Reviews and ratings go a long way, so if you like the show, leave us one today! Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

Okay, close your eyes. Not if you're driving, but everyone else, close your eyes. I want you to picture two guys. They're the same age. They both have a wife and two children. They live in the same town. They live in the same school district. One of them sells cleaning supplies to restaurants and supermarkets. The other one sells cleaning supplies to stadiums and arenas. The first guy has never been busier at work in his entire life. He's selling out of his stuff every week. He can't order cleaning supplies for supermarkets fast enough. He just bought a brand new Ford F-150 pickup this summer. 0% financing. And you know he's writing that shit off as a business expense. He is killing it right now. Could not be doing better. The other guy, well, the other guy is effectively out of work. There's nothing going on at 90% of stadiums or arenas, the places that used to call him to put in regular orders.

A handful of NFL teams have some fans in the seats, but that's about it. No concerts, no games, no playoffs, nothing. He's sitting on the couch watching Netflix. His federal unemployment benefits ran out at the end of the summer. His kids couldn't get new sneakers for school this fall. There is no new F-150 in his driveway. He's f***ing miserable. In a normal recession, his sales and service revenues might be down 10%. Maybe in a really extreme recession, 20%. Now it's down 90%. There's nothing to do. Did the second guy do something wrong? Did he do something to deserve

his situation? How about his family? Did they deserve this? As Clint Eastwood says in Unforgiven, Wood says in Unforgiven, deserves got nothing to do with it. The only discernible difference between guy one and guy two are who their clients are and what the effects of the pandemic have been. Arenas are empty, but supermarkets are packed. Air travel is dead, but car travel is through the roof. Business trips are over, but weekend getaway trips are booming. Steakhouses are empty, but pizza delivery is making record numbers month after month. It's like a coin was flipped and a certain percentage of Americans just wound up on the wrong side of that coin flip this past spring. And here we are nine months later with so many people still living through the consequences of that coin flip. They had no

chance. They didn't even get to toss the coin for themselves. Fate did that and they have to live with it. Unpaid bills, unrepaired cars, canceled family events, empty cupboards, fights, husbands and wives, sons and daughters, just their lives completely thrown into this cyclone of uncertainty through no fault of their own. What did they do? They woke up. The wife does the wrong thing for a living. The wife does the wrong thing for a living. The husband does the wrong thing for a living. That's it. That's all he did. So now you have millions of families in this situation, not of their making, living on the edge of insolvency,

bankruptcy, maybe even homelessness. Now, guy number one, he stepped in shit. He didn't do anything so great either. He just woke up. Outrageous fortune. Same with a guy who owns a car dealership or a woman who's a mortgage broker or same with a home builder or a Wall Street guy like me or an infectious disease specialist or a boat salesman or a bicycle shop. Unbelievable luck. How many bicycles do we have?

None. Sold them all. How many boats? None. We're on back order. Everybody bought a boat this summer. Okay. So that's the other side of that coin.

Now, what if you're guy number two or gal number two? What if you're a waiter working on tips, a bartender, an airline pilot, a chef, a hotel concierge, a business caterer, a wedding planner, a dancer on Broadway, a commercial real estate broker, a baseball stadium vendor, a theme park security guard? What the f**k are you doing right now? Does the universe hate you? What did you do to find yourself in this situation? Nothing. It just happened. What are the implications of this?

Well, I guess from a financial advisory perspective, it speaks to the need for people to have a minimum of three months salary in cash in the bank. Easier said than done, but that's the necessity. But I think more important than that, if the coin were flipped and landed differently, this could have happened to anyone. What would I be doing if for some godforsaken reason, the stock market couldn't open? On July 31st in 1914, the New York Stock Exchange closed for World War I, and it did not reopen until December of that year. Five months, not a single stock traded, could not buy, could not sell.

It wasn't until April 1915 that all of the various restrictions came off and things had gotten back to normal. This had never happened before. Hasn't happened since. Market wasn't closed for five months after 9-11, and that literally hit the market physically. Back to 1914, the president of the Stock Exchange at that time said, quote, the fundamental reason for closing the exchange was that America, when the war broke out, was in debt to Europe and that Europe was sure to enforce the immediate payment of that debt in order to put herself in funds to prosecute this greatest of all wars. There was to be an unexpected run on Uncle Sam's bank,

and the stock exchange was the paying teller's window through which the money was to be drawn out. So the window was closed to gain time. End quote. Why did the New York Stock Exchange close down for a war breaking out in Europe? Well, because globalization has been around a lot longer than you might think. Foreigners at that time owned $4 billion worth of US railroad stocks. The way to think about railroad stocks in 1914 is that basically they are the whole stock market. They are the whole economy. They're like Apple and Microsoft today. Okay. So 4 billion of them, which is a lot of them, are owned by Europeans who need to get their money out. They're going to sell. They're going to crash the US stock market anyway. Has to close.

3 billion of those railroad stocks were held by British investors alone. And all of that could have been liquidated. And when foreign investors in those days liquidated stock, they didn't take dollars back. They took gold back. All of the gold held in New York could have found itself on a steamship back to Europe. And because at that time we have a gold standard and dollars are only backed by physical gold, that's how you crash an entire country's financial system. In 1914, there is no federal reserve and nobody wanted to play around moving dollars. When they wanted to bring their money home, they exchanged dollars for gold and the gold in the form of bars and bricks was piled up

on railroads, on ships, et cetera. That's why every stock market in the world had to close. So this isn't science fiction. This is actually a thing that has happened, can happen. Here's Andrew Martin relaying what had happened in 1914 when they closed the U.S. stock market. Quote, Montreal, Toronto, Madrid, Vienna, Budapest, Brussels, Antwerp, Berlin, Rome, St. Petersburg, Paris, and throughout South America. London, the World Financial Center, closed on July 31st, 1914. Such was the global interconnectivity of interests and property 100 years ago. In the US, Baltimore, Boston, Chicago, Cincinnati,

Columbus, Detroit, Indianapolis, Philadelphia, Pittsburgh, St. Louis, San Francisco, and Washington all voted to close along with the New York Stock Exchange. I don't know if you realize this. Every one of those cities had its own little mini stock exchange. They've all been consolidated and rolled up. If the NYSE had not closed, it would have been, quote, the only market in which a world panic could vent itself, end quote. It was NYU professor William Silber who wrote a book about the 1914 shutdown, and he referred to it as the longest circuit breaker in American financial history. history. They had to close our market so it wouldn't become the scene of a global financial panic and the source of all liquidity for people who wanted it desperately all over the world. You think that couldn't happen now? Really? You think the job that you're doing now couldn't

ever be frozen or stopped? The industry you're in couldn't ever be put through, for example, what the hotels and restaurants and airlines are going through today? Is that what you think? Think again, because this time you just happened to have landed on the right side of that cosmic coin flip. This time, so did I. You are fortunate. I'm fortunate. I tell you this story because I want you to appreciate where things stand right now and because I want your help. I'm doing a book signing. This is my third book. I did other book signings in the past where I could show up at a bookstore or at a conference or even have people come visit my office. I've done everything. Can't do any of that now. But the book is really special to me and I wanted to

commemorate it with a signing. So this is what I'm doing. And I hope you're down with this. And I hope you want to help. I am committed to signing every single copy of the book, How I Invest My Money, that you would like to send to me. If you send me 10 copies and ask me to personalize each one, I will sign and personalize 10 copies. I promise. And I will pay out of my own pocket to mail those books back to you. I'm only asking for one thing in turn. On my website right now, The Reform Broker, there is a link to my food bank fundraiser at the Harry Chapin Food Bank and Long Island Carers Organization. If the name Harry Chapin rings a bell, Cats in the Cradle, great song.

You know that song? He founded his food bank in 1980. They're celebrating their 40th anniversary. They fed millions of people who could not get food, could not afford to feed their families. There are hundreds of thousands of people in my community. These are Americans just like you, just like me, who happened to have landed on the wrong side of the coin flip. And they do not know how they're going to feed their families and themselves this winter. We're talking about veterans, senior citizens, people who live alone, have no other means of support, people with children, families. So what I'm asking for

in exchange for me signing and sending back a book to you, is a minimum donation of just 50 bucks. If you're listening to this podcast, you're probably an investor or a trader. You're probably in the top 5%, let's say, of American households by income. For $50, you can make that donation on the internet in seconds. Seconds. That's all it takes. And then you get an email receipt, you give to your accountant. Here's the tax ID for Long Island Cares. I made a donation, write it off. So you get that. I don't want that. Okay. But I will be honored and thrilled to sign every book you want to send me. All I'm asking is think about the people who are on the other side of the coin flip from you and I, and God forbid, but someday it'll happen to a different group of people.

And we don't know what industry they'll be in, who they'll be, what walks of life, what geography. Could be a natural disaster. Could be a war. Could be another pandemic. I don't know. But I want you to think in those terms because we are among the most fortunate people in the world. And it's time for us to help. So I'm leaving the link in my show notes for the details of where you can mail the book and how you can make your donation.

Let's help people get through this winter who weren't fortunate in the way that we were. We can make a really big impact in people's lives. We're talking about families. All right. Here's where I want to go next. This show is going to be one of the best shows I've ever done. First of all, Joe Terranova is coming on today, and he's going to talk about why he wants to focus on quality and momentum as the two most important factors when he's looking at stocks and when he's building portfolios.

Joe is the chief market strategist at Virtus, which is a publicly traded asset management firm with over $100 billion invested with them. And Joe is the man, in case you didn't know. You've probably seen him on CNBC. You may have heard him on this podcast last time. He's the best. But we also have John Roque coming on for the first time. John Roque is the managing director at Wolf Research. Prior to Wolf, John made his name doing technical analysis at a series of institutional brokerage firms. Then he spent seven years on the buy side. He worked for George Soros. So John spent some time at Soros Fund Management, generating ideas, sending them up to the old man. And I don't know how many technicians there were at Soros.

There may not have been any, but John was definitely the most prominent. So he's an absolute beast, thinking about markets on so many levels. He's got great charts, great idea generation, great trading commentary, such an awesome down to earth, brilliant guy. You guys are going to love this. So we're going to do Joe and then we're going to get into John. And I think you're really going to love this podcast. And if you do, that means so much to me. So I'll appreciate that. All right, let's get into it right now. Duncan will hit the disclaimer and we're going to go for it. Welcome to the Compound Show with downtown Josh Brown. Josh is the CEO of Ritholtz Wealth Management. All opinions expressed by Josh or any podcast guest 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 investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Okay, we're here with Joe Terranova, Chief Market Strategist at Virtus Investment Partners. Joe, what's going on? Josh, how are you? I'm okay, but you, I look at you and I just see a hundred dollar bills floating from the ceiling. So it's an unbelievable day for you. You have a, you have an ETF launched based on an index that you created and people are really excited about it. Are you excited? I'm excited

about the index for sure. By the way, I'm also very excited about the performance of your book. Let's not fail to mention that. Oh, look at this. That is just a treasure to the investment community. And the pre-sale is going fantastic. So congratulations to you. Very nice of you. I appreciate it.

So first of all, before we even get into the index, which we're definitely going to get into because I'm really excited about it, I think you're doing this in a very new and novel way. And a lot of people are going to want to know about this. Can we just talk about the market? Sure. So I'm going to hit you. I want to run something by you. And don't jump in until I'm finished. But I want to get your reaction. All right. Okay. And I'm going to do a lot of the heavy lifting here. So if people get mad at my take, it's not your fault. It's my fault. All right? That's okay. All right.

Let me run this down for you. Low tax rates, low interest rates, at least for the next year. The Fed out to lunch. No sign of inflation. Two of the big four coming vaccines showing 90% efficacy in blocking the virus. U.S. dollar index down 8% since the March high. The 10 and 2-year treasury yield spread up 100% year-to-date after inverting last summer. Earnings are now growing.

Estimates are rising into 2021. They're going to talk about fiscal stimulus again this January and February. Homeowners' equity record highs, home values record highs, monthly new home building starts, October numbers, challenging the 07 highs. Almost every mortgage holder and corporation in America got to refinance their loans at rates approaching 0% this year. And there was no corporate debt blow up, no credit card blow up, no housing crash. Yesterday, 89% of S&P 500 stocks got back above their 200-day moving average. That's the highest reading since 2014. Now, 52-week highs, MSCI China, MSCI Emerging Markets,

Vanguard FTSE Europe, MSCI Japan racing toward a 30-year high. So Joe, tell me how in this environment, give me one good reason why or how we don't have an absolute melt-up into year-end for the S&P 500. I'm going to take a sip of water. You tell me. Take a sip of water. And amazingly, which is a surprise to all of us, I think you left something out that's also a wild card. We've got these things called tariffs that are currently in place. Gone. F*** out of here. Right. What do we think the direction of those tariffs are going to be? They're certainly not going to be to raise them. So we're either. So I suspect we're going to lower the tariffs or vacate them completely, which is very powerful for corporate margins and for consumer spending.

So what you have communicated in a very effective way is that for everyone that is listening to this call. You need to continue to be invested. And the mannerism in which you're invested, everyone can figure that out with their advisor, on their own, however they choose to do it, but you have to be invested. So the only negatives are the ones that have been with us forever,

like the debt, the deficit. Okay, they were here five years ago, 10 years ago. They'll be here 10 years from now. There's no way out of that. And then there were the negatives that none of us are thinking of, which you could put like coronavirus into that basket. Like those are the negatives, the ones you can't think of and the ones that are always here. What else? One more. Okay. Expectations. Oh, are we too bullish already? No. We seem to think that the equity market specifically

is some form of an entitlement, okay? That when we invest, we're going to realize returns like we've experienced over the last couple of years. And I think that expectation is number one misplaced. And it leads in terms of sentiment to a condition where if you tell the investor, well, you're not going to get your 13% annualized return from the equity market and your established growth, big five tech stocks are not going to give you their 50% on the year, they're kind of like, whoa, wait a second, the market must be going down. No. You might have adequate returns based on the environment that you're describing. So I think we have swings in sentiment, and a lot of it is based upon expectations because of what we've experienced in prior years.

I think investors are a little spoiled. They are spoiled. And this is one of the exercises that we go through with our clients in a flat market year. 2015 comes to mind, 2018. So in 2017, the S&P gave you like 27%. In 2018, down 5% or so. 2019, up 30. If I were to told you at the start of 17, three years, two of them are going to be like 30 percent and one's going to be flat or one's going to be down 5 percent. And I don't know what the order will be. Can you live with that? Oh, I sure can. What investor would say, no, I'm not taking that deal? Every investor on the planet. So

I completely understand what you're saying. We have become spoiled. Let me hit you with a stat. I haven't seen this anywhere. Ben and Mike are working on this behind the scenes right now. We're looking at entry year drawdowns. The S&P 500 going back to 1928. This year would be the biggest entry year loss ever where the market finishes positive,

assuming we go out positive, which who the hell, you know, it's mid-November. But you talk about spoiled investors. Look how fast they bought that dip though. The biggest dip. That's how you get spoiled. That's why people's mentality is like this now. So I agree with you. is like this now. So I agree with you. Spoiled, but also I think in a place where there has to be a strong realization about how important investing really is within your life

in terms of achieving the type of happiness that you're looking for. And again, and I'm not just saying this, going back to your book, that's why I believe it is a very powerful tool that you are putting in the investor behavioral toolbox. Because it teaches you that. It teaches you that. Yeah. I think, you know what? My colleague Blair was saying, she was signing some of these books for her clients, I guess our clients. And she was saying, on each page that she's signing, she's saying the why is more powerful than the what. Like, yeah, of course what you own matters, obviously. But the reason why is probably what's going to help you stay with it.

So I think that's a good point you make, Joe. I want to talk about the Terranova U.S. Quality Momentum Index. So I think most of my listeners are familiar with those factors, quality and momentum. They understand conceptually why you would want to screen and rank stocks by those two factors and what they bring to the table for your portfolio. But I've seen both of those interpreted differently by different asset management firms. So for the purposes of the index, the Terranova US Quality Momentum Index, how do you guys define quality? Well, what we first, if I could begin with, is talk about momentum because we place a higher degree of emphasis on momentum. And what we try and do, and Josh, I think you and I agree about approaching investments this way, is we try and keep it simple. I think that a lot of people have made

an attempt in quantitative models to replicate the brilliance of James Simons. And that's nearly impossible to do because you're not Jim Simons. So you're not going to be able to replicate that intelligence. So in a very simplistic capacity, we're just looking at momentum relative to the prior 12 months. And what we're doing is we're screening a universe of 500 stocks. And we're narrowing down that universe. Is the universe S&P 500? So the universe is large cap US equities based on INDXX, similar to the S&P 500, but index is the provider that we're using and they're helping us in terms of establishing, publishing the index. Similar stocks. Momentum is introduced to narrow those 500 stocks down to 250. So there's a high

degree of emphasis on momentum. And what is momentum? Momentum is a technical trend. It's identifying a technical trend. What does it mean when you identify a technical trend. It's identifying a technical trend. What does it mean when you identify a technical trend? It means you're identifying a high conviction opportunity. Josh, if you were playing basketball, or better yet, the kids are playing basketball because we know they're better than you at basketball. More likely. Okay. So if your son's playing basketball and in the first quarter he takes four shots and he clank, hits the rim on all four, does he want the ball in the first quarter, he takes four shots, and he clank, hits the rim on all four. Does he want the ball in the second quarter? Probably not so much. But if he gets the ball in the second

quarter, and he hits a deep three from the corner, you know what? He wants that ball, and he hits the next three shots. He's got confidence. And that's exactly what investors should be identifying. Where is their confidence in the market. That's exactly what momentum does. So momentum narrows you down to 250 equity names, and then we introduce quality. Okay. You're cutting your universe in half. You're saying we want the top half of the stocks that over the last 12 months have demonstrated the most momentum. Okay. So you're probably avoiding a lot of downtrending stocks, and you're definitely avoiding the 52-week low list. As example, the index, no energy.

Right now. It might someday. Might someday. Right now, no energy. Okay. So now you're left with the good half, speaking in terms of price, the good half of the large cap universe. So now we want to take out low quality names within that group.

Is that the idea? Correct. Okay. How do you define quality? So we graded upon three criteria, return on equity, debt to equity, and annualized sales growth over the prior three years. We screen the 250 stocks. And as you state, we remove 125 based on lower quality. You're ranking all stocks on each of those three criteria and the highest scorers remain in the fold. Correct. You create a composite score.

Okay. 125 stocks remain. Okay. And we equally weight them. Okay. And there is your US quality momentum index. So the typical exposure you'll have in this index to each stock is something like 0.75 basis points-ish at 125 names. Okay.

Some are about 0.77. I work at Renaissance Technologies. I don't know if you could tell by me running the numbers on that. Okay. Very cool. Now, what sometimes gets people in trouble with momentum strategies in general is they end up extremely exposed to a particular industry group or sector. So how are you guys handling that, if at all? So the equal weighted nature of it, I suspect, alleviates some of the concerns that one might have as it relates to your question. Okay.

And I think that kind of removes the risk element where you have an over-concentration that is created or that you place yourself in a position where you have single stock event risk. So that's why I emphasize the importance of equal weight because I think it solves a multitude of what has been complex problems for market cap weighted indexes. How frequently will the index rebalance? Because obviously when you're dealing with momentum stocks, you are going to have Olympic athletes in that group that quadruple, Tesla's up 430% this year. I think Zoom is up 600%. So how frequently do you have to cut those back

to keep them within that framework of equal weight? So there's a quarterly rebalance and reconstitution. That is done generally towards the back period of the earnings season. So we get the latest information as it relates to earnings analysis. So you're looking at quarterly rebalances, late January, late April, late July. And we obviously just had one in late October that was effective October 30th. So for the listeners, rebalancing is making sure the components are in the right proportion. Reconstitution is you're going to have names fall out of favor based on your quantitative analysis, and then you'll have new names that have earned a right to be in this index. So how many names do you think, let's say there's four quarters in a

year. So on an annual basis, if you're doing that process regularly, how many names do you think come in and go out if you had to guess looking at the past history of the index? Well, Josh, you and I don't guess at anything and you know that. So I've studied the prior 12 years. I've studied the prior 12 years. Most recently, we had 21 names that were introduced and 21 names that were removed. In the prior quarter, I was actually rather surprised and happy. We only had 11 additions and 11 names that were removed. I think a lot of the study tends to, because it's embodying 12 years, it tends to a little bit inflate the number. The number tends to push towards around 30 stocks going in and out.

But I think the tendency in the most recent years is for there to be less in terms of additions and subtractions. But it's something that I don't know that you could say is going to be consistent moving forward. So what's interesting though is this, so this is going to be fully invested. So there are going to be periods of time where there are very few stocks with what you would genuinely refer to as momentum, but you might have just like the stocks that have gone down the least, and you're comparing them against the universe. And so in let's say a rough market or a flat market, those might be, for example, consumer staples might be the best momentum stocks. And so that's where the screens would start. I don't think that you would represent this to somebody as a defensive strategy,

but that is one aspect of the way that you're ranking things to somebody as a defensive strategy, but that is one aspect of the way that you're ranking things where it could become defensive in a certain market environment. Have you thought about it from that standpoint? I think that's reasonable. I can appreciate that. I think about this debate that we have currently about growth and value, which I just don't understand because there seems to be this binary result on growth and value. And I'm not saying this is the solution to that debate. What I am offering is that I think this presents a compelling alternative in the form of a new strategy.

Right. So almost like leave that debate out. Let's look at price action and the quality of the company. And if somebody wants to say, well, that's a value stock. No, it's a growth stock. I really don't care what it is. It's going up and it's generating cashflow without a lot of debt. And you could call it whatever you, you could say it's a Martian stock. I don't care. I love that. I really do. Okay.

The last thing I want to ask you, how do you see advisors – a lot of my listeners are financial advisors, family office people, et cetera. How do you see them using the ETF that's just come out – I guess, did it come out today? It did. Okay. I know you're not allowed to talk about it. I am because we're not marketing ETFs on this show. But the ticker is JOTI because this is the Terranova Quality Momentum Index or Momentum Quality. What's the order? US Quality Momentum Index. US Quality Momentum. All right.

So the ETF based on this, which Virtus launched. By the way, you agree with that. Now, we emphasize momentum more than quality, but momentum quality just didn't sound good. No, you got it right. So the ETF, which is only 29 basis points for a smart beta strategy, I would say that's pretty reasonable. How do you see advisors using this particular product in their asset allocations? What do you think they're going to do? particular product in their asset allocations? What do you think they're going to do? So that's a great question. And I've thought about that a lot. And to answer that question, I look to the future. And I say to myself, long after I'm gone, is this a strategy that can continue to be used by the investment community? Because then you know you've achieved success. And why is it they would continue to use it? Well, I think the reasoning is because it's going to provide them large cap core equity exposure in the form of a better index. And it's also very simplistic.

But there are rules. They don't have to rely on you to make tweaks every day. Like you guys decided the quantitative rules. Set it and forget it. Okay. That's very important for advisors that when they recommend a strategy, it's not a new strategy six months later because they – You know what I mean? Okay. So I see what you're saying.

So can this out – can Jyoti outlive, uh, God forbid, uh, Jyoti. So that's the point. And I believe that's the way it's designed. My contribution at this point is handsomeness. Yeah. Um, do you ever think about like your, your name is now so fully associated fully associated with this because you created it and you're the face of it? There are going to be times when you look like a genius because this thing is crushing the benchmark. And then there are going to be times where it's behind the benchmark and that's just the reality of like life. Everybody spends time above and below, whether they're quant or whatever. Do you think you're going to – is that going to bother you at all? Or are you going to get too inflated when things are looking great? Like, are you going to be too high on yourself? Have you thought about that?

I absolutely have thought about that. And I think what we more troubling is to see an advisor at some point who says to me three, four or five years from now, hey, I tried to utilize this as a solution in a portfolio and I'm disappointed in it. That would bother me more. Okay. But it doesn't do what it's supposed to do. That would bother you. Okay. My friend, Meb Faber, did a post where he had launched, I think, not his tail risk strategy, but maybe he launched a tactical asset allocation ETF. And he basically just talked about this idea of basically the ticker is like a stand-in, like a representation of him. And so some months he's genius, some months he's a moron, and it oscillates back and forth.

But you've been doing this a long time. I think you'll weather that. I think you'll be fine. What kind of feedback have you been getting from people in the industry that have seen this so far? Well, the people that matter, which are investors like yourself, are supportive. They like the fact that it's removing the emotion from the investment process. They like the fact that it's rules-based.

from the investment process. They like the fact that it's rules-based and they like the fact that it has the ability in terms of a portfolio solution to make sure that vehicle, which is your portfolio, is staying in the lane and continuing to move forward, not worrying about how fast or how slow they might be going. Okay. Listen, I love the concept. Whenever we mention ETFs or any kind of investment vehicles on the show, we tell people to go right to the prospectus and do their due diligence and read up on it, the rules, the disclosures. And this is traded NASDAQ, right? Traded at NASDAQ and on Virtus' website, which is virtus.com.

You can get all the information that you need. Okay. We'll link to that and everyone go read up on Joe T. And Mr. Joe T, so proud of you, man. You've been talking about doing this for a long time. I know how hard you've been working on this. I'm so happy to see it being received this way and bon chance. I hope it goes well. Appreciate the time today, Josh, and congrats again on the book. All right, bon chance. I hope, uh, I hope it goes well. Appreciate the time today, Josh, and congrats again on the book. All right, my man. All right. I'm here with John Roach. John is live from what looks like a beautifully appointed home in Westchester. What's up, John? Hey, Josh. Thanks for having me. Uh, great to be with you. It's my pleasure. I've been looking forward to this for a long time. Who better to have on at

this juncture in the market? We're going into Thanksgiving. Big question, like, are we going to get this year and melt up this year or what? Like, what's going to happen? And then you're highlighting three things that I think are really important for people to pay attention to. And I'm reading your stuff every week, John. So I want to take these one by one because I feel like some of this stuff is under the radar and some of this stuff is being talked about, but maybe not by technicians and not really by people who understand what you're looking at. So let's start with big versus small, which you've been hammering on for a while now. And I think it's starting to become more apparent to people.

What's going on with large cap versus small cap? Okay. All right, Josh, thanks a lot. And thanks for having me again. So Josh, while I'm wholly technical, I try to think about things in kind of thematic approaches. While I'm wholly technical, I try to think about things in kind of thematic approaches. And as you well know, and I've listened to you all year long on CNBC and paid attention to what you have said with respect to, you know, kind of growth stocks versus non-growth stocks. And so we created our own ratio. We call it growth to non-growth. And then we went back to 1978 and we looked at the S&P 500 relative to the Russell 2000. And we found over the timeframe that we have the data for, and it's not exhaustive, so you can't

submit this in statistics class, but you could submit it in a portfolio management class, is that when a cycle turns from big to small, it tends to happen fairly abruptly. So we think that there's a cycle turn here where small will do relatively better versus big. Now, that doesn't mean that big is a sale. And we'll get into this later, I think, with respect to the FAANG stocks. It's just that small looks to be in a position where they can accelerate relative to big. And that's kind of the message. So, John, two things on that. The first is, if we are indeed in a true economic recovery, it would make sense for small to outperform because that's what always happens. And you think back to years like 2003 is like a really pronounced example, or I think 2009 maybe wasn't as pronounced.

But you should see small at this point in the cycle outperform. as pronounced, but you should see small at this point in the cycle outperform. The problem is it's been so long that so many market participants just can't even imagine it ever happening. When's the last time we saw the Russell do markedly better than the S&P 500? I can't even remember. I'll tell you. I mean, it's a challenging, very challenging question and concept. So to give you an idea, the last time that the Russell 2000 entered into an outperformance phase versus the S&P 500 was in March of 1999. Oh, my God. It was actually into the peak, not even after the peak. So at that point, the Russell started to do better. And then it actually did better for about 14 years or 13 years on a relative basis.

The last few years, it was sort of stilted. But, you know, so you're going back almost a generation. And I think part of the issue here, Josh, is that the big on a relative market cap basis have gotten so much bigger than small that it's very hard for, I'm going to just make this up, for Josh Brown asset management, or of course, Ritholtz, to go down in cap size because there's just not enough cap to satisfy a big cap fund manager. That's why I think it's so difficult here. Yeah. So now we're in this situation where people, let's say in normal circumstances,

they would be underweight small cap relative to large cap, obviously. Now they're even more so because of five straight years of gigantic stocks just absolutely trouncing. So when it does turn to your point, it will be abrupt and no one's going to wave the checkered flag. So you're doing that with charts to some extent, but it won't become apparent to people. Like it could be years before people look back and say, oh, wait a minute, the Russell's doing better for a long period of time. Like it could be a while before that's widely recognized, right? Of course, and you know this,

given your experience or given our experience or given your writings and given your history and what you've read, you know that it's very difficult to sort of see what is in front of your face. In fact, I'm fond of an Orwell quote, and it goes like this. To see what is in front of one's nose needs a constant struggle, which means, you know, it's hard to believe that something is changing. And just to take this one step further, I've spoken to guys over the last several years who keep pointing to the yield curve as being indicative of an oncoming recession. And I've just wondered aloud to them, are we getting the same signals out of this that we've gotten in

past cycles because the Fed has repressed the yield curve to a great degree, especially on the short end. So I think people take time to learn new lessons because they're so grounded in what has formed their experiences. And I think the same is going to be true for small cap relative to big cap. In fact, the peak this year for big cap relative to small cap, I know that it's accelerated of late, but big relative to small peaked in the spring. So you've actually been doing relatively better on the small cap side for six months or so. Right. And you were showing some of these charts with the most popular FANG stocks, which we're going to get to in a second, having seen their peak relative to the market in July and September. So I don't know if that'll hold true going forward,

but you had a period of time where they really were marking time and caught in trading ranges while other stocks caught up. I want to hit you with another Orwell quote to introduce that concept. So he said, whoever is winning at the moment will appear to be invincible. And I forget which of his books that comes from, but I think we learn that lesson all the time. There's always in every bull market, there's always this group of stocks where they just look invincible. You can't imagine a world in which they don't continue to dominate forever. And in the last cycle, maybe we would have been talking about banks or General Electric. And in the cycle prior to that, we may have been talking about IBM. But I think that nowadays,

it's even harder to imagine any of the FANG names not being dominant, but there might be some more validity to it. This isn't technical, but this is just like in sheer size and scale and how much cash they have. I think it's hard for investors to imagine them losing a battle against anyone. They may lose battles against each other and maybe that's the thing. But now you're looking at price action here and tell me what you're seeing when you look at the FANGs versus the S&P 500. Okay. I'm going to just add something to what you just said. And I'm going to even go back further because we're all students of history here. Perhaps you and I and Duncan, the three of us were investors back in the 20s. We may have said the same thing about utility stocks.

Yeah, absolutely. We may have said the same thing about utility stocks. We may have said the same thing about railroad stocks. Radio companies. Exactly. RCA of America, right? Radio Corporation of America. Right. Exactly. So I think that's important to consider. Number two is, I think we really have a very important thing to talk about here, and that's as follows. The technology group as a percent of the S&P 500, which we've adjusted, is more than 40% of the market cap of the S&P. That's fantastic. To your point, when you're winning, you can't imagine not winning. So I think we have to make a decision. Are these stocks that represent 40% of the S&P, are they going to be at 50% next year? Let's say the market's kind of in the same kind of

scenario and tech goes up roughly 20% a year. Can this be 50% of the S&P? I think it can. Well, then you know something, then we should decide right now that we're never selling one of these tech stocks because they're only going to get bigger. And that may be the case. John, the only reason I think that, and I know people hate this time it's different kind of thinking, but I want you to consider this idea. So you mentioned the railroads having once been dominant, and then we had telecom stocks were dominant. We've had all of these. Okay. Even energy stocks were dominant in the

mid-aughts, right? Remember that? Okay. But here's what's different. This week, Amazon announced pharmacy for Prime members. They're not respecting the fact that they're supposed to be a technology company. They just decided pharmacy is a $400 billion a year annual business. And they just decided maybe they should have 10% of it within the next two years. And you know they will because when you can tell your doctor to write the script through Prime and it's cheaper and comes to you faster and you don't even have to think about it, you're not going to experiment with going back to a pharmacy. So look what happened in the rest of the market in reaction. CVS kneecapped. Walgreens took a bullet through the head like one after another. That's what's different. These companies don't stay in their lane. So why couldn't this group of stocks become 50% of the market if they intend to eat 50% of all of the consumer-facing businesses? So just some food for thought.

No, it can be. And I think you bring up a good point here, and I'm going to try to explain it in two ways. Number one is, I had a friend of mine who was once an assistant general manager with the Los Angeles Dodgers. And he was talking to me about the Yankees and the rest of baseball. And this is what he said. He said, your team, because it's the richest team, can afford to make mistakes. Other teams can't afford to make those types of mistakes. So because Amazon's the richest, they can go ahead and try this, even if it ends up being a mistake, which of course I can't comment on. And number two is I once had a client in Dallas and we were talking on the phone and I said to him, you know, pragmatists proper, dogma is death. A week later, I had that t-shirt,

pragmatists prosper on the front, dogma is death in the back. So I got to tell you, I am willing to embrace any of these ideas, as long as it is corroborated by trend action and price action. I'm fully on board with anything that can work here. Okay. So what do you see in price action in the fangs that maybe I don't, or a lot of people don't? This is the most curious question of all, because you know, this growth to non-growth thing has been the conundrum for the entire year. And it is not at all that growth or FANG has given up. They have not. It's just that the denominator to that ratio has come on. And it's just that you have to give props to the people on the denominator side of that equation. And I had heard a week ago on a Twitter post, which I replied to

politely, a guy said, people are talking about tech blowing up. Tech hasn't blown up. And I said, no, I don't know that anybody said tech has blown up. It's just that the other side of the market has actually done as well as tech since May, just props to the other side of the market. Stay off that Twitter shit. People are there specifically to get into fights. Stay off that Twitter shit. People are there specifically to get into fights. You don value? We didn't want to have to define that. It was kind of like, we know non-growth when we see it. I don't necessarily know that we know what value is. On the non-growth side, we included basics, energy, financials, and industrials. That's how we intended to think about it. I know that within the Russell value, Costco is a big

component of the Russell value. Even I might argue that Costco is not value. So I thought I'd better not fight the battle that I couldn't really compete with. So I thought by calling it non-growth, it just was a little bit different as well. And now I'm kind of glad we called it that because people now say to us, what are the components of your non-growth side of the equation? I'm only too happy to give it to them. Right. So you've got sectors in the market that just, they require GDP growth in order to grow. You could have companies within them that take market share from others, but they are not in and of themselves going to become secular growth companies because it's just not the

world that we live in. So that's what's in the non-growth side. And you're saying though, that those stocks are now starting to play catch up and you don't need the growth stocks to blow up. You only need those to catch up for there to be substantially rewarding investment opportunity. Yeah. And I'd actually say, I don't even know if they need to catch up. I just think they need to participate. Yeah. Okay. Russell 2000 has made a new all-time high. The value line arithmetic index, new all-time high. It says to me that, it just says that there's a broader swath that we need

to consider. And I think that's positive. I mean, if the market was so narrow early on and it's less narrow, I think that's a plus. This week, I think we hit 89% of S&P 500 components above their 200-day. And those aren't all rising 200 days, obviously, but that's the highest we've seen in that metric going back to 2014, Batnick tells me. So I think that corroborates further what you're saying. All right. So from your perspective then, the FA fangs could consolidate and not really do much and have the rest of the market not necessarily catch up, but just rally. Yeah, participate. Right. So if you're following price, how could you look at that and say this is bearish? How could that

augur for anything other than a continued expansion in the bull market? I think it's hard to argue that it's bearish. I don't think it is. I think it's kind of like this. And I'm fond of these sports analogies, which are really the only ones I have. And so, you know, if you have a guy who's your third baseman and, you know, you're Aaron Boone because you're managing the Yanks and you have a guy who's playing third base for you and he hits 400 in April with 10 homers and 15 RBIs, you say, my goodness, not only is he my best hitter, he may be the best hitter in the league. And then he hits only 200 with five RBIs. You don't trade

the guy. I mean, you say, he got really hot in April. He's cooled down in May. I think he'll be fine going forward. I think that's the way it is when you're running a portfolio. Every stock can't be an all-star for you every single month. And you hope that there are guys on your team, in your portfolio, who come on when the other guys slow down. So for right now, the industrials and the basics came on and you've had big rallies in financials, while the FAANG stocks have just kind of said, listen, we did it earlier in the year. The other guy's going to take the baton from us right here. Yeah, that's right. That's exactly right. And I think Lee Cooperman likes to say, if every stock you own is on the 52-week high list, you're not really an

investor. You're a momentum trader. And if every stock you own is on the 52-week low list, you're out of business. So I think that makes perfect sense. And fortunately, most people are not riding five stocks at all times and ignoring the rest of the market because, or I should say most experienced investors, they know to mix it up and be able to own the stocks that could come on for you. And to your point, some of the large cap banks are up 20% in the last week or two. And if you weren't in them this whole time, you couldn't have bought them in time to catch that. And I think that's exactly right. Things move at an especially fast rate when there's turns

in this environment. That's a whole nother podcast. We could talk about that at another time, which I'm more than willing to. But what I found over time is that the Josh Browns of the world like to see stocks that are in bases, sideways consolidations, building, because the nomenclature is that there's something on the come. And you had that for many of the industrials. In fact, the machinery group, which is a subset of industrials, broke out in the early summer. So you've had kind of four or five months for that to rally. But I think what we do, my partner and I, Rob Ginsberg, is try to bring bases to the Josh Browns of the world and say, Josh, something's going on here. Either it's new

management, new product, pricing power, oligopoly structure, some shift. You have no idea how excited I get when I see like a whole industry group, either through an ETF or whatever, and consolidating for six months and the sell-offs lessening in intensity. Each time they fall, they fall a little less. Watching RSI start to build 50, 55, 60, higher lows on those pullbacks, and then just bumping their head up against that upper end of the range. And then when they go through- They really go. And I love it so much. It's like my favorite thing in the world to watch. I agree. It's my phrase, you know, I love big bases because from big bases, you tend to have tenured moves. Who said that? The bigger the base, the higher the space.

Yeah. And as you would tell me, you would, you know, it doesn't move for my reason. It moves for a fundamental reason. There's no doubt. I'm fully on board with that. I just think that price turns and then the narrative becomes obvious only afterward. understand that the way people feel about the fundamentals gets changed by how well or poorly the price has been. And I've only seen 8 million versions of that. And then people say, charts, I'm looking at the company's earnings. Okay, great. What are people going to pay for those earnings? I don't know. Right. Well, so why don't you watch? Why don't you see what they're going to pay for? All right. I want to get into the US dollar because the dollar to me seems to be a very underrated change agent for exactly what we were just talking about. Yes, fundamentals, but even more so sentiment.

And you're pointing out the dollar technically looks weak relative to 19 different pairs or crosses that you look at. So the dollar is weak around the world. Bitcoin is breaking out. Gold and silver haven't yet. There is an impact to S&P earnings from a stronger versus a weaker dollar. So tell me what's going on there. Okay. So I think that we are in the midst of the dollar's fourth weakening cycle since the, let's call it late 60s. Two of those cycles occurred during weakened presidencies or weakened presidents during the Nixon and Carter's administrations. Over time, Josh, if you take a look at a chart going back to the late 60s,

early 70s, the dollar is kind of in a long-term, slow, very melodic kind of downtrend. And we think we're in the fourth cycle, which will not really be evident until the DXY, the dollar index spot index gets under 88. But we think a weakening dollar is likely to be a better environment for commodities. Foreign stocks. Foreign stocks. Correct. Emerging market stocks, a likely suggestion that inflation might be higher, a likely suggestion that rates might be higher. So we think it's in a weakening cycle. And as you mentioned, versus 19 crosses, the dollar's weak. I mean, that's got to say something.

So, okay. So Jeff Gundlach came out this week and said on TV, it's his highest conviction bet. I forget where he was. But whatever. Gundlach's smart. And he talks about it being his highest conviction bet, I think, for next year or going to the end of this year. Now, anyone that follows politics or follows economics can explain to you why the dollar has been weakening. It's the rate at which

we're spending. And you don't really need much more thought to be put into it than that. and you don't really need much more thought to be put into it than that. But when you look at historical periods of a weak dollar, there are some very pronounced investment trends. And I was yelling over here just now foreign stocks, because I want you to talk about what you're seeing in the EM indices, Japan, Europe. Talk about catching up. The outperformance of large cap US versus everything that I just mentioned is so substantial over the last 10 years that you almost can't even see them on the chart together if you're using points rather than percentages. That's the kind of thing that could turn in a weakening dollar environment and in fact, historically always has.

So what are you seeing going on there? This is something we've been on. So thanks a lot for that intro. So here are some of the things that we've noticed. In August, we had a note out to clients, investors that was entitled, The Land of the Rising Sum, which was about Japan. And we had said, Japan, there was a lot of stuff going on beneath the surface that was encouraging. And we thought that Japan had a chance to really break out.

Now, in the last few weeks, Japan moved to a 29-year high on a yen basis. And then on a dollar basis, it is so strong that it's about 11% from its all-time high, which occurred in 1989. And we had a note about three weeks ago about Japan that was entitled, The Land Most Investors Forgot. And we think there's a lot of good stuff going on in Japan. A named guy whom you would know replied back to me and said, this is the poster child for value investors because Japan, as you well know, has not done anything for three decades.

Yeah. I had Nick Colas on the podcast last week. He was just saying like, it's hard to get. So I asked him, why is Japan at almost a 30 year high, the Nikkei? Like what's going on there? He's like, honestly, go back to like 1990, all it's doing is chugging along at a 5% CAGR. And it's just like it was so overvalued then that it's just now coming back to where it otherwise would have been. He's just like it's hard to get excited fundamentally about a country with declining population. But that's the story fundamentally. But now you look at, you talk about a value investor's dream. They're cheap stocks. Many of them pay big dividends.

Many of them have the ability to really not see much fundamental growth, but see price appreciation just purely on multiple expansion. And why would they get that multiple expansion? Well, obviously, government policies and stimulus could help, but a weak dollar is probably even better. And so that's exactly why you could see that trade work in concert with the non-growth versus growth. Correct. And these are all kind of similar pieces in the puzzle. And then, you know, we know China's doing better. And we think that one of the more likely repositories of strength versus dollar weakness would be the Chinese renminbi or yuan. And we think that if China is going to perhaps become the superpower that it wants to be or believes it is, it's going to need a strong currency.

superpower that it wants to be or believes it is, it's going to need a strong currency. Now, that comment by me may be out in left field with respect to talking about price and technicals, but there's always the narrative to explain why something is moving. It just takes us a little bit of time to figure out. We like Japan's breakout. And in fact, if you look at the EM indexes, both the MSCI version, which is MXEF,known index than the Nikkei 225, is already at all-time highs. And I can remember, to tell you a little war story, I was at Key Square Capital Management some years ago, and a strategist came in to see us. And I asked the strategist point blank, I said, is there an internal bull market in Japan that is not reflected by the Nikkei? And the strategist would not abide my question

in any way. And they replied that there could not be a bull market in Japan without bank participation. And I replied, there's been a bull market in the US without real bank participation, so why couldn't it occur there? So I think, again, that goes back to our pragmatic versus dogmatic comment. You know, there are changes. So they're saying you can't call this a bull market until like Mitsubishi Financial or what are the big banks in Japan these days besides SoftBank? Well, yeah, SoftBank is pretty funny. I've always said when SoftBank was very bullish, I said, you know, because it's not really

a bank, right? But I would say, you would say SoftBank is the world's best bank anyway. But Fishi, UFJ, Sumitomo Mitsui, Mizuho Financial, Sumitomo Mitsui Trust. So if they're not rallying, then Japanese investors can't acknowledge the possibility that something else good is happening. Yeah. And so just to give you an idea, so the Nikkei itself has made a 29-year high. The Nikkei 500 has made a new all-time high above the 1989 peak. And the Topix Bank Index is no higher than it was in June of this year. So you can have a bullish advance without banks leading clearly. Should

they participate? It would be a lot better, but we've proved it here. You didn't really need it. So the Japanese stock market is the largest component of IFA, like single country component of the foreign developed markets, which includes Europe, et cetera. I'm going to guess that typical American investor in either a 401k or an IRA or brokerage account, it's probably like the average is probably 2% Japanese stock exposure. And that might even be on the high side. If a lot, I'll tell you, as a percentage of the world's market cap, Japan's about 6%. The US is about 41%. So with respect to your point about holdings, I would say that people do not have anywhere near what would be a commensurate holdings in Japanese stocks. So technically speaking, here's the last thing I want to get

into with you. And thank you so much for coming on today, John. Thank you for having me. Before we talk about where people can find your research, I want to get into this idea that like, Like let's say 2021 is a year where the S&P marks time. So you get big rallies in the non-growth names, but they're not big enough to really push the average. And the fangs sit next year out, either because they're consolidating all the gains from this year or whatever. They don't have to blow up. But then you get 30%, 40% rallies in overseas markets that people have forgotten about.

And maybe it's emerging markets. Maybe have forgotten about. And maybe it's emerging markets. Maybe it's China. Or maybe it's Japan. But what happens at the end of a year like that? Because that's what generates the momentum. People feeling like they've missed something and now they want to buy it after it's had a 30% run. So that's the kind of thing that could lead to sustainable bull market and not just a tactical bull market. Do you agree with that idea? So I agree with your point, which is what I think you're saying, kind of without really saying it, is that fun flows always follow performance. They never were there beforehand, right? Right. Of course not.

Listen, right. I'm a fan of you and Barry. And if you guys kill it this year, you're getting the money next year. There's no doubt. That's the way it always works. So I think if there is a surprise to the upside next year, they may have some staying power. It could be like self-reinforcing. Yeah. Until everybody kind of, as Steve Chauvin used to say when I worked with him at Lehman Brothers, trends run until the last incremental dollar is committed. And I don't know that I'm smart enough or haven't been smarter yet to figure out when that occurs. Yeah. I think like we saw that with commodities last in the odds decade,

where they looked like they were a diversifier. So the flows followed for the next four years. And of course, everyone got disappointed, but that's how you get that kind of thing. So this is a non-US stock asset class that's been left for dead. And it could be on the cusp of doing something special relative to the S&P, but it's still early. So it's still early. There's no doubt. And of course, your point belies something we touched on earlier.

It doesn't mean the S&P has to collapse. That's not the call at all. It just says that there's something else out there. broker dealer side. You were doing research for institutions. Then you went to institutions and you were at a couple of funds. You were at Soros. And now investors, institutional investors, family offices, financial advisors can access your research through Wolf. And you are the managing director at Wolf. And so we want people to go to the wolfdailyhowell.com. Right. So thank you for that. So we're at www.wolfdailyhowell.com. Okay. We recently launched a new research product that's intended for RIAs, family offices, and financial advisors. Yep. And it's awesome. I love it.

Yeah. We're trying to use our portfolio strategy, technical teams, and we have a very strong quant team to provide, you know, broad themes and recommendations for those guys who are family officers, RIAs, and financial advisors. You got this great guy at your shop, Max Truns, who is... Correct me. All right. So when people reach out, they'll get Max, and Max will set them up with what they need to get more stuff from you. Max, and Max will set them up with what they need to get more stuff from you. And what do you, so you're publishing Charts of the Language of the Market on Saturdays? So Saturday is Charts of the Language of the Market. And you've seen it, you know, I have to have a hook. I can't just say this broke out, that broke down. I've got to have some sort of cultural hook. It's awesome. You're doing movies,

you're doing music, all my favorite stuff. Recently, it was the Lion in Winter. So there's always something. A few weeks before was the Sandlot because I saw a ballpark in the Bronx. There was a tree on the field. I mean, Josh, if you are playing there, you are really tough. Not only does the Bronx have a road named Gunhill Road, but there's our trees right on the field. My dad grew up in the Bronx. I hear about the Bronx all the time. Don't worry. Yeah, so he knows. And that's the way we try to do it. We're trying to use topical, metaphorical analogies to make an explanation. But we're trying to bring ideas to people that they may not be considering. John, your stuff is great. I'm going to beg Max to have you back on soon. So everyone check out Wolf Daily Howell.

In the show notes, I'll have a link to go there as well if you want to hear more from John Roach. And John, thanks so much for your time today. We'll keep track of these trends and we'll have you come back on and talk about them later. Looking forward to it. Thanks a lot. Happy Thanksgiving. You too.

Thanks for listening. Check us out at thecompoundnews.com for daily investing and market insights. You can watch all of our videos at youtube.com slash thecompoundrwm. Talk to you next week.