The Compound and Friends - Tom Lee Says It's Still Early

Episode Date: August 22, 2025

On episode 205 of The Compound and Friends, ⁠⁠⁠⁠⁠⁠⁠⁠⁠Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by Tom Lee to discuss: V-shaped recoveries, the AI driven economy, a stock-picker's market, Jackson Hole, the case for Ethereum, Tom's Granny Shots, and much more! This episode is sponsored by Neuberger Berman and Apex Fintech Solutions. Learn more about NBSD, including important information about fees, risks and performance at https://www.nb.com/en/us/products/etfs/short-duration-income-etf?cid=da_tpy_MYMM3_MYMM_ShortDur. NBSD from Neuberger Berman—efficient income, managed risk. Find out more about Wavvest’s planning engine powered by advanced AI and built on Apex’s AscendOS at https://www.wavvest.com/ Please visit https://fundstrat.com/tom for complimentary access to Tom's daily insights, market alerts, live webinars, and stock lists. Sign up for The Compound Newsletter and never miss out: ⁠⁠⁠⁠⁠⁠⁠⁠⁠thecompoundnews.com/subscribe⁠⁠⁠⁠⁠⁠⁠⁠⁠ Instagram: ⁠⁠⁠⁠⁠⁠⁠⁠⁠instagram.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠ Twitter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠twitter.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠ LinkedIn: ⁠⁠⁠⁠⁠⁠⁠⁠⁠linkedin.com/company/the-compound-media/⁠⁠⁠⁠⁠⁠⁠⁠⁠ TikTok: ⁠⁠⁠⁠⁠⁠⁠⁠⁠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

How was Jackson Holt? It was good. I wasn't there for the Fed part. I was there for the Alts part. The more traditional crypto part of Jackson Hull. Yeah, the salt thing, yeah. Oh, so they're doing salt, Assault Jackson Hole. It was salt Wyoming, yeah.

It was Cracken and Skybridge, both sponsoring. How was it? It was good. They had a lot of policymakers there, and, you know. So it was a good mix of, like, people building things, and then policymakers. Very cool. I heard you on with. the bankless guys. It was good. Yeah, I like those guys. It was good. They're not as good as you guys.

Yeah, of course. So we'll talk about obviously bitminer later, but is it bit minor, bit miner? Bitmine. Bitmine immersion, yeah. Where did that company come from? Was it, did you start or? No, it was an existing Bitcoin mining company, but it was very small company and it, you know, mining's not a great business. And so they were open to kind of rethinking of their strategy. So, the company was open to kind of pivoting to one focused on Ethereum. So they went from a miner to a treasury? Yeah. So they have this.

The originally was their thing was immersion mining. So they have liquid-cooled miners. But, you know, mining is a very competitive business because you don't necessarily win a block reward and you have all this cap-backs. Whereas now they're essentially their treasury strategy. holding Ethereum is really asset light or KAPX light, right? There's almost no capital spending. So it's a good pivot for them. I was saying this last week, Tom, are you getting bored of the market? I feel like we just say the same shit every week. Like, nothing's happening.

It's all just like, is AI going to blow up or is it going to continue? Like, I mean, I think there's a lot of clues coming that there are some really big things happening. Like, I think one of the most who's coming for what? I think that one of the most interesting things is that the U.S. financial system is about to get really re-architected in a way that's like oil, like imagine oil had also these EMPs and stuff. But the one difference is that the financial system could become like as big as the tech sector in terms of market cap. Really? Like J.P. Morgan's PE could become a growth stock. If, if what? Well, if they become less relying on two things. One is like the traditional financial architecture has a lot of friction.

Right, because there's so many intermediaries and everything that's done, including like how JP Morgan... But Tom, aren't they the friction? Yeah, why do they want to remove it? That's their rake. Well, but if they could make more rake. So remember, there's like power laws. Like, as soon as the banks get involved in an industry, they already have a large share. So they have the ability to do power law in anything they do.

And so, like, if they decide to go into, like, re-architecting the bank, they, one of their biggest sort of saves or value capture is the staffing, of the industry could drop a lot. You know, J.B. Morgan has 200,000 people, you know, they could make more money with 5,000. So I think that the financial industry could start to be trading like a tech sector multiple. Oh, I like that. That's a call. Right?

So that's very exciting. As long in J.P. Morgan, I'm into it. Yeah. So Goldman, like Jay Morgan and Goldman and Morgan, they're going to be strong, whatever they do because they have customer relationships that will follow them to whatever they do. So the metric for banks was tangible book. That's like what they always say on TV. And that's maybe that's not the metric.

anymore? Correct. It might be, it'll, and even things like credit cost and net net interest margin, it's going to change as a dynamic because like, if J.B. Warren gets big in stable coins, they might make more money from stable coins than deposits, you know? Like, they may, they may be a very different company. If, uh, I mean, it's not out of the question to see a re-rating like that because we're living through one in the utilities right now. Exactly. So, yeah, so it happens. So suddenly powers, become a really important driver because of AI. Well, AI is converging onto the blockchain to create a crypto token economy. The financial system is always the other side of that. So if there's a

big AI story for tech, there's got to be a big crypto story for financials. And that's why suddenly financials could become a huge percentage of the S&P. I like it. I like it. We'll take it. All right. Your headphones on. How far are we good? not disturbs on our phones. Am I the only one that has that problem? Usually? It's usually just me. All right.

Very common. My scursion. Very confident in my assertion. We love those claps. On my mic on my mic on my gosh. Episode 2.05. Oh, wow. Whoa, whoa, whoa.

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on September 7th at 4.55pm Pacific Time. 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 Riddholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Rithold's wealth management may maintain positions in the securities discussed in this podcast. Too awful. Can you imagine you've done this 205 times, not? What do you think?

It's always seems very fresh. It's super impressive. We keep it fresh. All right, ladies and gentlemen, welcome to the biggest and best investing podcast in the world. I'm your host, downtown Josh Brown. My co-host is with me, as always. Y'all say hello to Mr. Michael Batnik. Hello.

Hello. Hello. Thank you. Thank you. Thank you. Thank you. All right. We have a very special guest today, returning champion.

Fan favorite, literally the pinnacle of the pinnacle of, you know. stock market analysis, macroeconomic, foresight, somebody who needs no introduction, but I'm giving one anyway. Tom Lee is the CIO and portfolio manager at Fundstrat Capital and co-founder, head of research, at Fundstrat. Tom, welcome.

Thank you. Can I say one thing? A couple of weeks ago on Animal Spirits, Ben and I did a show, and we titled it The Dumb Money. And it was talking about all of the money. money piling into the treasury, the digital asset treasury companies. And then I listened to you on bankless.

And it was a correction of the record. I know we're going to talk about BitMine immersion technology later in the show. But I did say, regarding you, I don't think, in fact, let me not caveat that, there hasn't been a single person who is commenting on the market over the last 10 years. That's been more right than you. Oh, wow. That's true. Thank you.

Thanks. I mean, do you think that there's anybody else? No, I think Tom's the goat right now. Like slugging percentage on base, not a baseball guy, but all of those things, so. Nobody would argue it. But what's more impressive than your record of the things you've said and what's happened afterward, what's more impressive is how much shit that you've had to put up with along the way. Because, yeah.

No, because I remember 2011 and 2012, Tom Lee, and you might have still been at J.P. Morgan? Yeah, okay. And you were bullish. And at that time, being... Everyone was like a little bit bullish. Not every, I shouldn't say that. But being like as bullish as you were in 2011 and 2012, it almost felt like, you were a magnet for all of the anger and frustration that people had. Like, but you stuck your neck out there and you obviously were proven right.

I think we're, I don't know, 15 years of 12% average annual returns. 14. Yeah, it's been extraordinary. Nobody was saying that even the bulls were saying things about like the new normal. and, like, get used to 3 and 4% average annual returns going forward, and they had all these reasons why, valuations. Cape ratio. And you were one of the few people that was willing to be bullish the entire way.

You said, fuck all that. No, you did. You did. You also, during crises, you would pop on CNBC or wherever you were, and you would say, yeah, no, this is volatile, but the volatility won't last. And we still think, A, B, C, D. And then as those things would play out, you'd have to do it again because it'd be another crisis. But I do think that you are getting credit now.

You're getting your due for having been the most right market commentator consistently right. And how's it feel? Has it feel to be a gangster? Thank you. I didn't realize it was a gangster. I should carry like a machine gun. Yeah, yeah. No, if you're like a market's gangster now.

I feel like you're the guy. What do you think? Well, next time I come, I wore sunglasses. All right, fair enough. And grease back hair. No, but truly, how do you feel in the position that you're in now? Do you worry at all? This has been an amazing run.

It's got to stop at some point or not the markets, but like just your career arc. How do it, like, what is it like being Tom Lee right now? I'd sell up. I'd sell the calls, no offense. Michael would hedge. Michael would hedge you. But how do you feel? Well, you know, we are constantly reminded that we're wrong all the time with our clients.

I'm in a very strange business because, like, research. And we have two, essentially, really three cohorts, but really it's primarily institutional investors and then non-institutional. And we service them and we provide research, but they never really say you've done a great job. Okay. Because, like, their job is tough, and they already have many people providing advice. And so, like, we're just one of the many views. And so we never really get congratulated. take the credit and you're just an input.

Yeah. Okay, but that's fine. That's the business you're in. You're only as good as your last tip. That's, and that's another thing. Like, because I was an equity analyst, like, it's our next call that matters, not our previous set of calls. Oh, man.

What a hamster wheel that is. Yeah. Right. But it's fun and exciting because it keeps us grounded. And that's why I am so afraid to ever take a victory lap. Yeah. It's a really good point. And the reality of this business is that you could, you could have.

have somebody in the markets for a 400% run in the S&P. And then there's a 20% drawdown. And it's stupid Tom Lee, bullish right at the top. It's like, no, yes, at the top, but also for the 400% preceding the top. Did we all forget? Yeah.

But people do forget. They don't care. That February period happened this year. Like, all of a sudden, people are yelling at us saying, like, how did you let us sink ourselves and get caught in this tariff thing? You know, it's, and the Fed's not going to save us. And we kept saying it's waterfall declines are V-shaped, but no one could really believe it. But now that we recovered, at least we're not getting yelled at.

Are you surprised at the speed with which the market's recovered, even if you, so I know you remained bullish through that and it was the right, it was the right call. But are you, even you surprised at how fast we recovered? I mean, yes and no. There are Vs and there are Vs. That one looks like the pandemic. Yeah. Well, yes. I mean, that was a complete drawing up of buying power, and then a complete loss of confidence from the CEO level to everybody in the world because no one had an answer. So you could see why you'd have this huge air pocket. But I do know two things, that markets are symmetric. So the faster your decline, the faster the balance. Always? Yeah. Chart kid has a great one on that. Yeah. Yeah. So we show that basically, unless there's a recession, it's always a symmetric balance. It's one point. The race.

has like 1.4 to 1.7. So if it took eight weeks to lose 20, you'll recover it back in 1.4 times that length. Oh, okay. So in other words, it's always like a There's a symmetry. So why do so many people think V-shaped recoveries are anomalous when, based on what you're saying,

they're actually the norm? I think people don't study history. I think they study their own sensibilities. They're saying like, oh, well, if you lose confidence, it's going to take me this much longer to recover. That's why everyone says there's a K-shaped or square root. Oh, you, no, you hear like U-shaped recovery a lot too, right? Correct.

Like every letter but V. And it's always a V. It's always a V. Tom, so you did the work. You've got 12 waterfall declines since 1929. Do you think that this is what we're going to see going forward? Yes. It actually may be structurally.

Wait, what's a waterfall decline? What's the definition of that? Oh, well, it's a term we coined probably around the 2012 period, but it's when the market it has a high velocity decline. So like if you say... So like a lightning fast sell-off. Yeah, so the fastest decline to 10% or the fastest down at 20.

So rather than like dribbling lower when it just like the bottom falls out. Yeah, it's like you sprung a... Like the ship is just sank. So here's 12 with these. And just for the listeners who aren't looking, we have dates in here like 82, 87, 2002, 2009, 2020, 2020,

2025 is now on the list officially. Yeah. That was a big one. That was 20% and it was like overnight. Yeah. Okay. And usually no retest, at least in modern history. That's right.

I mean, it will look like a retest, but no. Usually that's another thing. People say there's always a retest. It might be true at the stock level because there's sellers that want to get out. But at the index level, it's actually rare. Yeah, I actually would say post-financial crisis, there are no retests. Yeah. Like that's it.

If you don't nail that moment, it's okay. You could still buy later, but you're not getting two chances at the bottom. You're buying higher. You're buying higher. And that might be okay for people. All right. Let's talk about the resilience of the current stock market. We'd love to just get your like 30,000 foot view of where we are.

So the S&P is working on a 10% gain for the year, give or take. NASDAQ slightly better, right? Leadership coming from utilities, industrials, financials, communication services. Yeah. So all the exactly what you'd expect. Huge semiconductor rally. year. And then what's not working? Energy materials. Healthcare. And health care. Okay. What do you make of the resilience of the market? Look at how much shit we've put up with already. Look at how

many like big, bad, scary things we've been through. And we're still in a double digit gain for the year. So what do you think? Well, I'd say number one, just for people to place themselves like in history. So if you had a fact pattern of two 20 percent gains and then the third year's up 10 already, and maybe we'll be up 15 or 20 this year, then we're in a bull market. Like, so whatever. Wait, mean, then you have confirmation that it's a bull market? Yeah, because that this never happens in a bear market.

Three, like, you can't have like a dead cap bounce at last 36 months. You can't have bull markets and bare markets. Yeah. But then they should then place themselves in history. This is probably more of an early start of a bull market rather than late. It's amazing because there's nobody that you would talk. to who would say we're early. But the pushback is, and there's lots of pushback.

You have people saying that it feels like 20, 21 all over again, the spec boom, the new issues, Nvidia and Microsoft, crypto, talking to Todd's own last week, Nvidia and Microsoft are almost bigger than energy, health care, staples, utilities. It feels like it doesn't make sense. But you're saying it does make sense. Yeah. I mean, I think that a lot of those comparisons, then they don't realize, well, where it's NVIDIA's rank as net income contributor.

I mean, they're almost the biggest, if not. They don't understand the granny shot. Yes. That's right. Put this chart up the third time we have had a most hated rally since 2020. This is a term that needs to be retired, right? Yes. Okay.

Why? The most hated rally, because it's always the most hated rally. People just hate rallies. That's it. Not everyone. Most people like it. The most vocal people just despise. People that sell definitely hate it.

This one is, this one has been particularly reviled, I think, because one, the speed of the recovery has been so fast. As you know, many people were aged sold in April because they're like, look, the economist told me 60% chance of recession. That's the same as a sell rating on the stock market. And they went to cash. They couldn't redeploy it because there was no pullback. It was too fast. Too fast. Is that what creates a hated rally, that phenomenon, like people don't get back in fast enough?

Yeah. And I think it just shows you that people don't operate with independence. They operate with a bias. they think when something bounces it's just dumb people buying and that prevents them from jumping on with the buy. I mean, think about Palantir and Tesla Netflix, they were all like

retail stocks. Like someone was telling me the first time that they try to buy Tesla institutionally. They had to bring in this like research firm from Oregon that wrote a report on Tesla. Okay? This is Jenison. And like that was the first time

that research firm ever got called to go to New York to actually meet a hedge fund. Wow. Okay. So, like, you know, all these, all the really big churns come because someone recognizes it, and it's not often like the crowd that recognizes it. Okay. So the hated component of this, the hatred comes from a lot of people miss out. A lot of people can't bring themselves to buy something that's already recovered because

they think they missed it. And then you have people that missed all three. Like, like, they never bought because they've been waiting since 2020. for, you know, a return to the lows. Yeah. And they don't get it. And then they don't get it again and they don't get it again. At that point, it's just like maybe stocks aren't for you.

Yeah. And I'm not trying to be snarky, but a lot of the people say, well, American deceptualism's over. That's why I'm buying Germany are the people that hated every rally here. And so they're trying to now create an opportunity somewhere else. Let me ask you this. So you have some charts showing the equal weight PE for the S&P 500. And it's been in a range over the past six years

it's average 16.3 and right now it's 16.9. On the next chart, you've got all these different things, all these different things that we've experienced and that we've brushed aside the resiliency of the stock market.

I like that you used eggs for the inflation cycle. Inflation to the fastest Fed hikes to the tariffs and everything in between supply chain issues. Do you think that this is, and I'm sure it's both, more of a fundamental tailwind

from the AI story and or a combination of between inflation and the length of the bull market and the psychology of the market, there is so much money willing, waiting to be deployed on every single dip. What do you think is more responsible or is it both? Well, I'll answer it by saying I'm, I've started off my career as a stock analyst. Okay. So imagine we have a stock. Okay, let's call it, you know, X, Y, and we shot it full of holes. Like, they should have been kill shots six times, right? Because every one of those was a kill shot for this bull market.

And yet this thing... What are the things? The inflation cycle... For COVID, number one. Fastest Fed hikes in history. Yeah, and then the bullwip chain effect was number two. The fastest Fed hikes... Well, the fastest inflation cycle in history, the fastest Fed hikes in history.

The Trump tariff shock. And then U.S. bombing Iran's nuclear... Each of those should have... produced a bear market. Yeah, should have killed the bull market or even kill the economy. So what does I tell you? Just like even like, you don't even have to know market history. Just common sense. The United States is bombing an Iranian nuclear facility. Therefore, buy the spous. Yeah, you'd never would have. That morning, nobody would do it. If you asked me in January, I'd say, okay, we got a risk of a bear market. Right. Yeah.

And none of these things were, uh, has produced a sustainable. That's right. We've had like bare markets, but not a secular bare market. Yeah. So let's say that this stock was 16 times and we shot it six times over five years, like just kill shots. Yeah. And it grew earnings every year. Yeah. We would say the PE has to go up a lot. And it hasn't. It's actually lower. It's a cheaper market today.

It's incredible. Yeah. So I don't think most people are looking at an equal weight market. Yeah. So that's number one. And if they are, they're not looking at the valuation. They're looking at Palantir. Yeah, they're looking.

When people say there's only seven stocks going up, I think it's a false portrayal of the stock market. There are seven very large. stocks. Correct. But with the big earnings. With big earnings. Justifiably large. Yeah. And I'd say the reason it's not just seven because our granny shots is only equal weighted and it's beating the market this year. And it only buys quality growth. So that ETF, that strategy is not reliant on having a 10% slug of the biggest stock

in the world. Yeah, it would hurt an ETF because granny is an equal weight by nature. So I agree with you. I don't buy into the seven stock paradigm, but the thing that that I probably believe that you would disagree with. I think the entire stock market return this year boils down to AI, CAPX. We're talking about utilities. Why did utilities get re-rated AI? Why are financials ripping?

Because of all the activity on Wall Street related to CAPX and AI stuff, M&A, IPOs, it's all one. Industrials, well, what the hell are they doing? They're building data centers. They're building gas transmission to power the data centers. The whole thing is AI. There's not a second thing happening. The GLP1 bull market's dead.

I don't know of another. Even like the quote unquote, the strong consumer, consumer stocks looks like shit right now. Nike, Chipotle, Starbucks isn't doing much. So like if there's one game in town, but it's affecting four of the biggest sectors in the market, it's a fairly fragile, or maybe I'm wrong, it's a fairly fragile thing to rest on. like, oh my God, I hope this AI KAP-X story holds up, because if it doesn't, it's taking down everything with it. Do you disagree with that, or you're on the same page on me? Okay.

So I'm going to 100% agree that AI... We can close out. Let's do favorites. That AI is the most important driver of the global economy. Okay. But where I think people make a, like an inference mistake, okay, is that the A theme driving the global economy has been systematic to the global economy since capitalism was started. Yeah, there's always been an industrial revolution.

Okay, fair. And even in the 80s, the retail sector was the best group for 20 years because boomers were entering the work. Women were entering the workforce. And there was a baby boomer thing on retail stock. So that was a single theme of demographics. And like the internet boom was a singular thing of actually creating digital infrastructure. So, like, it's always been a story of the stock market. So the fact that the entirety of the market's gain this year is being fueled by earnings coming from this one theme actually does not fly in the face of financial history.

It happens all the time. Yeah. So it's only a bubble if spending is not driving income growth. So margins should be shrinking or debt should be rising faster than revenue. And we don't have a leverage cycle yet and we have margins expanding. it's not even late cycle for AI. It's all AI. Dean Christians at Sentiment Trader had a great tweet this morning.

He said the internal conflict within the technology sector is remarkable, with a significant number of stocks making new highs while others are making new lows, as captured by what's called the high-law logic index. He said last week it surged to its second highest reading ever, underscoring how AI is creating winners and losers within the sector. So in other words, in plain English, there are more all-time highs or 52-week highs and 52-week highs simultaneously than there have been over the last 60 years. So the index rises on increasing dispersion between new highs and new lows.

So the index is being driven by the larger stocks. There's stocks that are obviously winning, we know, but there's stocks that are getting destroyed. This is semiconductors versus software to me. That's what I see. Yeah, I think it makes sense because when you're in a big cycle like this, the winners are easy to identify because they have visibility. But it doesn't mean the losers are dead, Matt, but for now they're kind of untouchable. This should be a good stock picking environment. A lot of people are saying the weakness in the software sector can be attributed to the employment picture and just less hiring, weaker hiring, which makes sense.

businesses spend more on software when they have a higher head count, right? You need less seats or more seats from an enterprise. So that's one part of it. And the second part of it is disruption. What software is being disrupted right before our eyes by AI? And one of the poster children people cite is the chart of Salesforce.com, CRM. Salesforce would say, no, no, no, you don't understand. We're going to invent a gentic AI.

The market doesn't think so. The market thinks that AI is going to be able to do a lot of things that people's employees can do, which means less demand for enterprise sales at Salesforce. Where do you fall in that debate? I think it's more the latter is driving. Because, you know, we know creator, the value that you pay for a creator now has dropped a lot because of AI, whether it's content creator or software. Developer.

Yeah, people are writing their own apps internally now. Yeah. Chat, GBT, GBT, fixing the code. So on the margin, if let's say it's only a 1% change in the demand of something that can cause 20% change in the price of something, we know it's been chipped away. Okay. So you think the weakness in the enterprise software space is somewhat warranted? Yeah. And you can probably see it in Silicon Valley, right?

They're not funding SaaS companies anymore. They're funding AI startups. They're funding tanks and drones. But that's a whole other conversation. Do you think the next leg of the bull market customer made broadening out? We saw something interesting yesterday. Duality research posted a chart showing that there has only been two days with better breadth and a bigger loss since 1996. So this was on Tuesday.

The SP was down 40 basis points. I think the equate was up 40 basis points, something like that. Do you think that that's what is going to drive the next like higher as an expanding market? Yeah. I mean, I think that there's many reasons to argue market will expand because the Fed has been on hold all year. So they're neither doveish or hawkish. But if they resume cutting, that's a it's a doveish cycle resuming. That's broadening. The ISM's

been below 50 for 30 months now. Why does that matter? Well, it's a sign of business confidence. Like the CEOs of these companies, because now I'm chairman of a company, like there's no internal economists. You get your economic view from the Fed and from like Wall Street, right? And so if the, if the economists are cautious, like companies are cautious, that's why the ISM's been suppressed. But that means you're not funding CAPEX beyond demand.

So expansionary expending hasn't taken place. That's a broadening. And then the third, of course, is that AI, agentic AI, we're kind of moving into the phase where we're seeing useful applications. That means companies are using AI

to actually grow their business. That should be broadening opportunities. It's not just the... Where are they using agentic AI? Is that chatbots at like an e-commerce site where they're handling customer complaints via an agentic AI, like an agent versus a human agent? Is that what we're talking about?

I mean, I'd say even at Funstrat, like we're finding a lot of ways now to use AI within the company to make it to run better, whether it's identifying the source of like why people are having issues or what they don't understand about what we're saying or how to actually sort of clip things that we're saying to emphasize more information or even understanding like the source of inbound traffic,

like the inquiry, so it's, this is the, maybe even in the last couple months where I've said, wow, we're really benefiting from it. Now, that would stop you from hiring a person to manually do those things? Yeah, I can share a story of a company, but I can't tell you the industry isn't because they asked me not to say, but they're a really big company. Adult entertainment industry. No, no. Okay.

Say more. But they're really big and use the supply chain. And they said that they were like, they have a commodity. that they got a hedge. And they kept losing money on their hedging. And then they were losing money on the supply chain because, like, they have to buy this commodity and they have to package it and sell it. Then they brought in Palantir. And then they, like, just fed every one of their invoices and all the truck times and literally every trade they did for hedging. And then it just spit out this, like, series of recommendations. Now they're making money. Their hedging of their

commodity is a huge profit maker. And their operating margins have asked, and then they said they have no idea what Palantir did. It's like magic. Yeah. So it was like just, it wasn't like a bunch of consultants coming. It was like literally they just fed this into like, can I ask you about Palantir? So I listened to their conference call for the first time. I'm like ridiculously late to the Palantir story. I sort of understood that it was a government contractor primarily that was now going to go into commercial and talk to corporations about how they can take their magic and apply it to every industry. And I love the story.

The stock is a $400 billion market cap. They're predicting $4 billion in revenue for this year. So it's like everybody gets it. I don't know how much opportunity there is in the stock right now. But it was remarkable the stats that they put up on this call about adoption of people hiring Palantir. Like I think they added like a thousand corporate customers in a quarter or something crazy like that. Is that the kind of company that you think transforms American business to the point where you get that re-rating in small caps? Yeah.

And finally, you get valuation expansion and mid-caps because Palantir or somebody like them comes in and completely transforms the company and Wall Street then gets shocked on the next quarter of the earnings report. Yeah. Okay. Okay. I did speak to Palantir because I saw them at an event. And this is what, so even like our company, which is only 33 employees, but we of course have big asset management and we have tens of thousands of clients. But I was like, could you guys just drop it and like make us better? They're like, let, like, just let us do it. And can you do it for free? Yeah. But here's the thing. I, my business partner, a bit of my mosaics says, that, you know, he has this term called grifting. Palantir eliminates grifting in your business model. Okay. Say more.

What they mean is, like, they'll find where someone is taking money from you that you don't need in your operations. Or there's too many people in this movement of something and you don't need them. Or maybe internally, you don't. Grifting is harsh. Well, I know, but it's just... Inefficiency, maybe would be a polite way of saying that? Yes.

I mean, but that's like a millennial term. Like, because I'm not a... But, you know what I mean? Like, they're finding how to get you from your revenue to your net income or even more revenue without. They're the new efficiency expert. And you don't have to be a better marketing. They're actually just saying this is how you should replumb your business.

So we have all of these magical companies that keep popping up out of nowhere that are getting huge and pushing the valuation of the index to new highs. And this is a tired case that the bears have been making for 15 years. maybe eventually it'll prove out to be true. But when you see something like this, the Iveda of the S&P 500 or whatever metric you choose, in this case, that's what GANIFI is using.

At an all-time high, why doesn't this scare you? What are the bears misunderstanding? I think that if we said started at point A, which is 2016, okay, and every company was unchanged, and their business strategy was exactly the same, and they didn't have to do anything

and face any stress in that nine years, then I would be shorting that chart. But look at what happened to all these companies. They had to deal with the six kill shots. We have, like, as you said, AI revolution, which is really an American story and maybe part China, but nowhere else. So why shouldn't more value be coming into American businesses?

So, you know what I mean? So you're saying we're paying up for companies, but shouldn't we? haven't all of these companies gotten so much more impressive in the way that they handle like we don't even have recessions anymore yeah and look at two Q earnings

that just passed 12% earnings growth like if someone said by the end of this pay up for right why wouldn't you pay up for companies that are this good at finding new ways to pull the profit level and they're growing faster now 10 years in I might say that's a good horse you know well Tom one of the

one of like the central precepts of the macro So, like the macro commentator is that ultimately profit margins, A, are always too high, and B, are on the verge of mean reverting. Yeah. And then they never do. Yeah. Which means companies of 2025 are better than companies of 2015 and way better than companies of

1985. Who would dispute that? Yeah. See, so the mean, the profit margin, mean reversion people dispute that every day when they wake up. Yeah, mean reversion is too commonly used a word. Like, it's proper in the... fixed income world, but in the equity world, there's no such any mean reversion.

There's winners and losers, right? And remember, in the S&P, like, those companies in 2016, out of the 500 in 10 years ago, I bet you 20% are gone. Well, that's the other thing. It's newer, younger, better, faster, stronger companies. Correct. Right. It's not the same, we're not tracking the same 500 companies over 10 years.

Yeah, if this was the Wilshire 5,000, I bet you it's been flat. Okay. All right. So we have a collection of 500 companies that doesn't necessarily match the ones that we were looking at 10 years ago. Yeah. Okay. I think that's a strong argument. Do we want to do, do we want to do, do we want to do this one? All right. Let's move on to the economy. So, Tom, you mentioned earlier that the ISM manufacturer, at least this one, the ISO manufacturer has been below 50 for 28 months. Do you care about this? Yeah. Why is this bullish? Well, because, remember, this is actually one where there's no one making up the answers. Like, this is a survey that's,

scent and people respond if things are better, worse, or the same. So it's, it doesn't have any political bias. It doesn't have any like, but the answers are biased, no? Like, the people giving the answers are, are not necessarily answering the question. So, but if they're answering it in a negative sense, that means that they're cautious. Which is what you want. Yeah. That's what you, you, you don't want this to be like a heavily bullish. Correct. You never had a cycle peak when you've had ISM below. By the way, this is the longest stretch since 1950. When you have this pervasive caution in business, we're nowhere near a cycle peak. So imagine people, imagine they turn bullish and they start spending money. You actually

were talking to the bankless guys about this. And this is an important point. Like everybody's bullish. No, they're not. They might feel that way if you're not bullish. Why do we have 25 months below a 50 reading on the ISM? Is it because people that answer this survey, What they hate the most is inflation. That would be my guess. And tariffs now? Well, that's like they hate tariffs because of inflation. Yeah.

I think they hate inflation more than anything. So I think that that's why you get four straight years of below 50 ISM prints. Yeah. Okay. Now, you remember when you are this far forlorn and dejected and then you flip positive, you won't just go to 50 and then it's over. We probably can have four years of this staying above 50. I mean, if you look at the history, once it breaks above 50, it's multiple years. But this could be a record stretch above 50.

This is bizarre. Talk to the chart that we're looking at. Like, this most recent episode of the ISM below 50 and the stock market just relentlessly grinding is not typical. Yeah, I would say like maybe the people answering these surveys are just not terribly important to the economy anymore in the way that they once were. ISM is still more correlated with S&P earnings than the services index.

Because we're more of a manufacturing. Who are the people commenting for this survey? So it's members of the IS Institute of Supply Management. So it's basically the survey. It's a factory foreman? But it also could be the Intel, NVIDIA, purchasing manager. Although they get one vote, right? They get one survey.

Okay, so tech is in here. Everything's in there. Okay. So you're saying that this is like a coiled spring. Yeah. Okay. But when does, what makes this flip positive? Because we're not going to, we're not going to get 2% inflation unless something's really going wrong. So what do these people need to flip positive? I think we need policy stability, which could come next year, like from the White House, I mean. Oh, this White House is known for stability. Okay. I'm with you on that. What else? Okay. Or it doesn't get more unstable. You get a fed that's doveish, which is cutting.

You're probably going to get that, if not next. Now, at a minimum, by May. But then you need this third thing to happen. You need the excess spread on interest products to fall. Like today, you know, if you're borrowing for a mortgage, it's normally only been at 160 basis points above the 10 year or like 1.6%. So the tenure's at 4.2, the 30-year mortgage should be 5'8. But it's not.

But it's like seven. So there's excess spread on mortgages. But as soon as those other two things happen, I bet you that spread drops. What is the source of that spread being so high? It's actually hard to explain. Someone says that it's either banks worried about prepayment velocity because they're going to charge, so they charge an excess spread. Or it's uncertainty about the value of the collateral. Like, can home prices drop so you don't, you have to charge a high rate because they're only putting 20% down.

Wait, the spread is high because they know that if and when rates drop, people are just going to prepayment. Yeah, so you lose money. Yeah, you're losing money. Or refinance? Yeah, so the velocity hurts you. Right. The lenders don't want 10% of their customers saying, here's all the money I'm refinancing lower.

Yeah, so they want to make money on it for now, on the current income. Okay. And then third is, of course, like the mortgage market doesn't have as much hedging and there's a QT. And so, like, it's harder to get spreads moved out. But for whatever reason, it's unusually wide. It's like 50 or 60-year-wide. Okay. So should that fall, which it sounds like you think would coincide with,

Fed funds rates coming down, that is, what, what's the, what's the meaning of that? Like, what's the effect of that? Yeah, I think the simple way to think of it is, like, I don't know, let's say there's 20 trillion of mortgage debt out there and like half is above that rate. That's 10 trillion times 1.6 percentage points. Like, that's money in people's pockets. Plus, how many more people are going to get mortgages now that it's 5%. I actually think, I actually think the Fed has not kept rates

this high for this long in a really long time. And once they appreciably fall, I don't care how bad the economy is. I actually think you could see the biggest mortgage refinance boom we've ever seen, like outside of the pandemic. Yeah, so think about how much money that drives housing recovery and liquidity

and people starting to upgrade their homes. Remember, like Home Depot said the upgrade projects keep getting pushed out? Yeah, that's what they're being pushed out for. Yeah. All right. Do you think that's the next bowl market is a housing, I don't want to say recovery because prices are okay, a housing activity recovery.

Yeah, it's like a rethinking of shelter because people will want to own housing, but they're too expensive. Like maybe there'll be new kinds of smaller homes being built or demand for modular, but people will borrow money to get it home. Okay. All right. I like that idea. Tom, are you worried about the labor market at all? Yeah. I mean, because we know we're not tracking it correctly, Mark, because ADP probably tracks it correctly, but they don't see reasonably adjust correctly, and then we know the BLS numbers are different. But overall, I think the job, the labor market is softer. I also think there's a lot less hoarding. That's why there's no pricing power anymore, right? Companies we're holding onto employees, now they're just

letting them go. Okay. I want to ask you about the phenomenon that's been chronicled this year at the New York Times and other places about the difficulty of recent college graduates to get a job relative to history. Just anecdotally, you probably, I know you've got a college age daughter, so do I. Just anecdotally, you're probably hearing tons of parents. Like, I don't understand why my kid can't get a job. Like, why is it so hard right now?

The economy seems to be good. The stock market's booming. I'm hearing this all over the place. Talking about business school kids, kids that should be hired. A, are you seeing that anecdotally? And B, what do you make of that? data? Is it something that could get worse? Is it a blip? Like, what do you think's happening? I think it is a big problem. I mean, I think it's observable. It's like too many things that

could explain it because one, the AI. Yeah, AI means there's a huge mismatch because most people aren't equipped to do the jobs that are going to be in the future available for AI. Second, I think there was this over sampling of people pursuing, like, liberal arts degrees expecting a job? I mean, liberal arts education is good, but we probably need, we have now a huge shortage in trade workers,

like massive, massive shortage. Like, it's just such a degree that AI robots are doing jobs that normally were trade jobs because there's a shortage. Yeah. So it's really complicated. But I guess I advise my kids because I have three kids, like age 20,

all the way 28, that... you know, there's no linear careers anymore, right? It's a very different future because AI. Meaning you might do one thing for eight years, take a break, and then do something totally new that we can't even conceive of yet. Yeah, or you might be paid for something that you didn't go to college for. Like, you may just be super creative, and that's your most virtuous skill, but that wasn't what you went to college for.

What do you say to friends of yours who have kids in this position? because I'm sure they're all asking you for jobs. Like, what do you tell other parents who have kids that are like, I don't understand this kid just graduated UPenn. Why is this employer that he's talking to, making them go on a fifth interview and dragging this out for six months? Because I'm hearing stories like that everywhere. Yeah.

Well, you know, I think a lot of people who work in the financial services industry are actually good, have personal experience of what is happening to the rest of the country, which is Wall Street got disrupted. by AI a long time ago. Like, that's why trading went electronic. It's all computers. Yeah. And research shrank what you need because you can just use. So everybody who's worked on Wall Street in last 20 years has already seen their lives disrupted. And plenty of people survive, but you had to have been adapting to it. Okay. So more adaptable kids? Yes. You might go to school for one thing, but you might have to pivot and take an opportunity somewhere else. That's right. And then some people will

make money passively. Okay. You know what I mean? Like some people may make money because they bought stocks. I mean, maybe people should just buy stocks early because in 20 years. You have to buy a lot of stocks to make money passively from them. Yeah. Average dividend yield in the S&P is 1.6%.

Yeah. But as you know, like, if when you look at people who bought basketball teams and like the compounded return, you actually did better just if they had put the same amount of money in the S&P. I mean, they didn't get to go to like get court sites. Less fun. Yeah. Better return. Okay. I mean, are we going to build a nation of, are we going to build a nation of people who start investing earlier because it kind of like become, everyone becomes aware of this idea. Like, you have to own the capital.

Yeah. It's like, remember people used to say like, oh, buy a house when you're 20. Now maybe we should just say buy the stock market because now you get, you can, you're long the AI disruption to equities. Invest in your own disruption. Yeah. Okay. Let's do this non-farm payrolls versus unemployment. employment rate. Were you one of these people that was up in arms when the White House threw the head of the BLS out of her job? Or were you one of the people that was like, the data sucks anyway? And we probably need a brand new way to collect it. What was your take on it? I mean, I'm a researcher. Yeah. And so if I like the BLS. I like the BLS. And it's like me getting fired and happens to me all the time by a client

because the market didn't do something they wanted, but I get blamed for it. you know? Yeah. So I empathize with the BLS. I think that they're probably really well-meaning people want to get the right number, but they have incomplete information. But perhaps they should be making very clear the standard error. Because, you know, the known standard error is like hundreds of thousands. And they never post it, but it's a known standard.

Because if they were to post it, it would render the information worthless. You're telling me we added 70,000 jobs last month, but the margin of error is 200,000 jobs. Then what did you say? Yeah. So I think they should have, and every chart, like a little, those little circles on the line. So you know what the high, low of a one, of a one sigma error is. The data quality has been declining for 20 years. The lack of response to their surveys.

Maybe they need to rethink the whole thing. Yeah. And probably, there's probably better ways to track the job market anyways. I agree. Cell phone tracking. Why? Because you could see who's going to the office. Or you could see if how many people are at Starbucks when they should be at the office.

I mean, you know what I mean? I feel like payrolls, like an ADP does a good enough job. ADP's really accurate. It's like, it's not 100% of the population, but yeah, it's very accurate. Tom, we've got, we've got Powell tomorrow at Jackson Hole. What is the market pricing in in terms of number of cuts and how do you feel about what the market is pricing in? Are they right? And what do you think Powell's going to say?

Let's throw his chart up while he tells us. Yeah. I mean, the market's pricing in two cuts between now and your end. I would say to me two cuts make sense if the Fed realizes real interest rates are too high because tariff inflation is transitory. And so they should look at the break-evens and realize four and a half percent Fed funds versus two and a half is 200 basis points extremely tight if you if you don't even think you're going to hurt the job market.

It's clearly hurting the job market. But do you think more rate cuts all of a sudden? rejuvenates the job market, or not necessarily? I think that a doveish cycle is going to get the ISM back up. So I think it actually is expansionary. Okay. And of course, on the housing, it's very expansionary. Do you have expectations for the speech itself?

And understand, by the time people are listening to this, it'll be Friday morning. Yeah. I don't know what time Jay Powell is speaking. It's the afternoon. Yeah, 10 a.m. Okay. Okay. So make a prediction that could be instantly rendered, incorrect.

I'll make one, too, but I want to hear yours. Well, last year, the S&P was up 2% after his speech. Yeah. I think we're going to, I think we're going to rally tomorrow. Okay. Even if he's hawkish and exerts his independent. Why? Just because it'll be over and people are waiting for it to be over?

Yeah, because we would expect him to exert his independence. But it doesn't have negative implications because he's already on hold. I don't think he's going to do like a highly politically charged thing. No. Wow. See, then the market's going to go up even more. Yeah. Yeah, so it's...

So the way that this was phrased, the way that this is being looked at is like, it's Powell's last stand. That's how Barron's phrased it. Like, um, ostensibly, this is his last chance to give a Jackson Hole address as the Fed chair. And he's being called a moron publicly.

Like, he's being shit on. And people are like, he's going to strike back. He's going to do this like fiery speech about the independence of the Fed. and why that's so important for America. I don't think he's going to do any of that. I think he's going to acknowledge the fact that the labor market is softening.

I think he's going to signal that there's a rate cut coming in September. And then he's going to deliver the rate cut. I just don't think that he wants more smoke. I don't know. I could be dead wrong, but we're all going to find out together. Yeah. And he's, you know, from what I've heard, because I don't know. I'm personally, you know, high integrity person.

Yeah. You know, a really class act. So you're right. It's more consistent with what you're saying. If he cares about the independence of the Fed, then ratcheting the temperature up is not going to help him. Yeah. Okay. What do you think of the irony that the jobless claims, excuse me, the NFP numbers were actually trending in the right direction for a rate cut?

And then Trump gets mad that they're not showing enough jobs. Yeah. But wait a minute. I thought you want a rate cut. Let me get this straight. You want a rate cut and you want an explosively higher hiring number? how do those two things work together? I don't really get it.

That's right. And also knowing in September, there's a big revision company, the annual revision, which is probably going to make all those private previous job reports look even worse. Right. But that's good if you want a rate cut. Correct. Okay. Maybe they don't really care what they want.

They just want the attention. Yeah. And maybe, you know, I mean, I'm just a fan of an independent Fed. I'd, you know, let the Fed do their job. Well, I think those days are over. All right, Tom, let's do some crypto stuff. So, because people love that. Just kidding.

No, they don't. People, nobody owns crypto. And I know that's not true. But it's the people, it's the companies that are buying the crypto. It's you guys. It's Saylor. It's the people that are early adopters. There are still a lot of people who just feel like they missed it.

They hate when we talk about it's enough. Bank of America. They ask their clients, do you guys own crypto? and 75% of them are at zero. So it is this weird thing where the price keeps going up, we know some of the reasons why, yet nobody seems to be owning it.

Yes. We know crypto is a generational divide because if you did this survey with someone under age 30, it's probably like 50% own crypto. History shows pretty clearly it's people in their 20s and 30s that are driving all future change. Credit card spending shows their investment.

The 75% doesn't matter, in other words. Yeah, or the 75% is going to flip to 75% on crypto. So we had the chief legal officer and chief financial officer of Coinbase, which is arguably the most public-facing successful crypto company. They spent 45 minutes with us on Monday. we put out the video the video does far less views than what we typically

put out on Mondays I'm not mad about it I thought it was an amazing interview I'm really good at this I don't know if you know Michael and Michael knows crypto better than I do

and I thought we did a great job I look at the comments and these are our fans so like that's fine you know we want to hear honest feedback they don't fucking care they just say oh these assholes again

talking about Coinbase. So we had crypto people in the comments who hate Coinbase because it's centralizing crypto. That's fine. That's a minority. Like people in traditional finance still do not want to hear about any success in crypto. And I think my answer to why that's the case, I think they look at the people who have made millions or billions of dollars in crypto as having done something illegitimate.

or lottery-esque. I don't think it captivates their hearts and souls. They don't look at it like, look how smart these people are. And what's so funny is, there are famous value investors who haven't outperformed the market in 15 years. If I put them on YouTube right now,

the views would skyrocket. And you know the names I'm thinking of. I'm not going to say them. But it's like, let me get this straight. This asset class has been the best performing asset class in the world for 10 years. And you don't want to give any credit to the people that saw it early.

and capitalized, you'd rather hear from somebody who couldn't make money if it hit him in the head because they're, quote, unquote, doing it the right way. Yeah. I think that's what's going on. Yeah, it is. So imagine, like, if your neighbor one day discovered oil in his backyard and became, like, really rich. Oh, you would hate his guts.

You'd hate him for a... I agree with that. And then he's like, it becomes an oil evangelist. You'd be like, I hate oil. I'm up with the oil. Shut up with the oil. Right. I hate you. I hate oil.

Right. All right, so that, you think that's what it is? And then imagine the oil did have some, a lot of scammy parts to it. Yeah. And. Right. You'd be like, enough with the oil. Well, that's, right.

That's the other thing. A lot of this money, they view it as scam, like, um, a lot of the activities is bad. But let's talk about, I want to talk about this. All right. Specifically with, with bit mine immersion technologies. The risk to any asset class, the primary risk is leverage. And leverage took down crypto in the last cycle, a lot of bad. actors. Talk about, so you tweeted or BitMine tweet on August 18th that you guys held

1.5-ish million eth valued at $6.6 billion. Is this leverage? Where is this money coming from? And why are people who say that this is like the epicenter of the next catastrophe wrong? Okay. I assume you're being leverage of BitMine. Like does the BitMine stock have a leverage? Just what you guys are doing, what Sailor is doing? Like is there going to be The concept of the crypto treasury involves, we're going to borrow money, use it to accumulate these coins where the supply is shrinking, and that's the secret sauce. Will there be a margin call? Is that the risk?

Talk about that. If you could, let me do like a couple of an explanation here. Duncan, what do you think? We can allow it? Good with it? Because it's not a sense. I'm genuinely fascinated by this, so I want to hear it. So on June 30th, Bitmine announced the transaction.

where I joined as chairman, and then Mosaics, who's my partner in this, became the digital consultant to help manage the treasury. So essentially, we helped to recast the company as an Ethereum treasury company. What was it prior? It was tanning salons? No, it was a Bitcoin mining company. Oh, it was a mine. Okay. Bitcoin miner.

Got it. And at that time, there was a $250 million investment that we brought in, you know, founders fund and Stan Drucka Miller and a bunch of real people. And what we, at that time, there was $4 of Ethereum per share, and the stock was $4.50. So no premium, effectively, almost no premium. Yeah, that's right. And then we've used capital markets, like brought institutional investors subsequently, and then bought more Ethereum. So as... You sold them new shares of stocks?

Yeah, that's right. Okay. That's right. And, you know, that includes Kathy Wood and Bill Miller's. And so last week... I don't remember you calling me, but okay. Can continue? Let me talk about that later.

Yes. But on, and last week, there was an updated registration statement file. So you could calculate how much Ethereum was held per share. And it was $35 per share. Okay. So the stock, you had $4 of Ethereum per share on June 30th. And then last week at the registration statement, it was now 35. And the stock was trading at like one and a half times because stock was, let's say,

50, you know, one and a half times its Ethereum held, but when you bought it on June 30th, it was trading at 0.2 times where the Ethereum would be in a month from a month later. Okay. Now, all of that was financed with equity, mainly institutional investors. There's the only debt on Bitmines company is a million dollar loan that was originally there on June 30th. So the company had a, but everything, its first principle is it's literally straight. clean equity.

So no leverage. It's cash to buy. Cash to buy. So you guys call Drach and Miller, Kathy. It's like, hey, we're going to do this thing. We're going to use this stock as a vehicle to acquire ETH. Yeah. And we need to sell stock to you in order to facilitate those purchases.

Yeah. In other words, you're putting money into the company. We're issuing you shares in the company. We're going to take your money that you give us and we're going to buy ETH. Ethereum. Okay. So nothing magical. other than it's Ethereum and it's not, you know,

hey, we're going to do a transaction where we're going to buy, I don't know, buildings or something that's more... Yeah, so Ethereum number one is where the stable coin boom is taking place, 60% of it. So like this whole Genius Act, Bessent says stable coins are going to go from $2.50 billion to $4 trillion. That's an exponential demand growth for Ethereum.

They're replacing money market funds. Correct. And it's dollarization and all that. Ethereum pays a 3% native yield if you stake it. So the $6.6 billion held of Ethereum is over $200 million in net income right now. The day we turn on staking, not only is there no debt on Bitminer, it's going to pay you $200 million a year in dividends. And what do you do with that buy more ether? Or we might just pay it out as cash dividends.

Where does that 3% native yield come from? Is that gas fees that users are paying to use eth? Well, it's called proof of stake. So Ethereum doesn't have a proof of work model where you're competing for a block reward. It's saying if you hold ETH and you agree to stake it and validate transactions, you earn the staking fee, which is 3%. Okay. So that's where that's coming from. Yeah.

And then there's a power law at work, that force at work, that if we get to 5% of Ethereum, we become a really benevolent staking entity. That's why we want to get to 5%. The distinction, one of the many distinctions between ETH and Bitcoin for people listening that don't care that much, but care a little, is that the Ethereum Foundation and the Ethereum whales are fairly coordinated. They have made changes before in the protocol, and they have changed Eith, like successfully, I would argue, to make it more useful to the community, whereas Bitcoin, there was one major fork where they created Bitcoin cash, but other than that, it's probably too

disperse for there to ever be any kind of coordinated action? That's right. Okay, so this is not quite as decentralized as Bitcoin, but it's more useful for things like stable coins. Yeah, so we're working with the Ethereum Foundation because we can explain to them what Wall Street's looking for. So keep in mind that the Genius Act and then SEC's Project Crypto is the recognition that using blockchain makes Wall Street faster and more efficient. I've seen it at BitMine because like when we get the cash, the minute it touches the blockchain, it moves much, we have much better visibility and it's much easier to move, you know, to actually track the money. The wallets are all tracked. And this is like 1971, because in 1971, the dollar went off the gold standard.

Yeah. And everyone said, I'll buy gold instead. But remember, the dollar suddenly became a fiat. Yeah. And Wall Street innovated because they said, now we have a dollar. Let's make sure we can move the dollars efficiently. You don't need to move bars of gold to match the movement of the dollars. Correct. So it created Wall Street, came out of that single act in 1971. So now 2025, Project Crypto from the SEC and Genius Act is saying Wall Street, take advantage of this new technology to make Wall Street a tech industry. But they're all choosing to do it, or the majority are choosing to do it on Ethereum. Ethereum is smart contract

platform and has what they call EVMs, Ethereum virtual machines. So you can do basically a lot of smart programs and contracts. That's where Robin Hood is doing their stable coins, the tokenized products on top of Ethereum. Right. So that's... Well, there's another L2 in the mix also for what Robin Hood's doing, but they basically want to turn stocks into a tokenized thing,

which I would imagine the initial stages you're doing that to attract more investor capital because people are really into it. But over the long term, if a large portion of the market goes that way, it's probably just in a more efficient system, get rid of DTC. Here's the risk. Let's just say that there's no margin call. It's clean, it's cash. The risk potentially is that I think that you are responsible for the move in ETH,

the crazy move of the last couple of weeks. Like, you did that, in my estimation, you got people excited. BitMine is a huge thing. You're raising tons of money. You're buying tons of ETH. If and when, because at some point there'll be a pullback, obviously, like, it's a risk asset. If at some point there's a pullback, there's a geopolitical event, a macro event, whatever the case might be, risk off, and ETH goes from $4,200 to $3,000 to $2,000, whatever, if you can't raise fresh capital because people just say, like, I'm not this, I'm not doing this, and you're not buying at the pace of which you were buying, would that, like, take the floor underneath away from Eith? Is that possible? Yeah, I mean, keep in mind a couple of things, because I can't tell you too much about the operations.

we're not moving the price of ETH, I can assure you. No, but the announcement of you being involved got other people to buy ETH. But I'm just saying like in a practical sense because when we're actually in the market, I don't think we've ever done an up bid. Okay. So I can't explain what we're doing. You're cleaning up sellers? People that are selling.

I have to be very, I can't tell you how we're buying our, but we're buying, you know, ETH tokens, but we're not, I'm, we got it. Yeah. And secondly, just to keep mind, like, we have a billion dollar buyback program in place. And with this native yield from ETH, we could be buying back. Buying back the shares, not more ETH, but the actual stock. That's right. Okay.

So, like, in other words, like, we have an internal mechanism to protect shareholders. But shareholders aren't being hurt in the sense that there's $35 of ETH. Well, last week, $35 of ETH held per share. supporting the stock price, which means we're not trading at a premium, especially considering the growth of that Ethereum helper share. It's growing like 50 cents a day or something. But if you're going to be at 5% of ETH, if that's the goal, don't you kind of want ETH to come in? Don't you want to buy it lower prices? Yeah, I want to be stacking it lower.

So I'm going to say this has been a good environment for Bitmine to see ETH kind of correct here. Pull back a little bit. How big could Eith get? I hate the term market cap because it's not, applicable. Your company has a market cap. EF doesn't have a market cap. Has a market size. Yeah, as a network value. What is the current value of all the ETH in the world? How big do you think it could get? Because working backwards, that's what the 5% stake in ETH, right? Okay. It's about $480 billion right now of fully diluted network value. Okay. But is the supply contracting or not yet? It's actually growing about 1%. Growing 1%. Growing 1%. Growing 1%. It's slower than Bitcoin's inflation rate.

Okay. It's actually a third of Bitcoin's inflation rate. Okay. And how big do you think that could be? Well, I think that there is a very high probability, I'm going to say maybe even 50%, that Ethereum's network value will flip bitcoins. Wow. Like when?

The flippinging. Maybe in a couple years. People have been saying this for a long time. Yeah. How much bigger is Bitcoin now? Is it six times? It's 2.2 trillion right now. And eth is, what, $400 billion?

Yeah. But you're not an ETH maxi. You think there will be both. I think Bitcoin's going to a million, but I'm saying like Ethereum's relative size, the ratio will actually be one to one. Last thing for me on this topic, when I dismissed a lot of this group as dumb money, what I meant was the people that are funding these treasury companies thinking that they're going to get the premium on the value of their tokens,

the way that Sailor did, the way that you are going to. I don't think there could be 30th Treasury winners. I think you can do it, if anyone can. Do you agree with that? Yeah, it's a, yeah, there's two things to ensure the differentiation. One is you need to have liquidity in stock. Bitmine is the 10th most traded stock in the stock market. That's crazy.

John Chart 14, this is unbelievable. Let me see this. So you have the alchemy of 5%. Bitcoin Miner or BMNR ranked number 10 by five-day average daily volume. This is unfri-en-believe. Your stock is trading more volume than Alphabet. Google. Broadcom, micro strategy. Wow, you flipped strategy already. That's pretty impressive. So nobody else can do this. Correct. So that's liquidity because that make institutions want liquidity. So they know that, Tom, we can buy 10 million shares of your stock, but we can get out if we lose, you know, we're not stuck. We're not stuck. We're not

a prison. The second is the velocity. Because, see, compared to an ETF, if you bought an Ethereum ETF on June 30th, you still only have $4 of ETH per share. We took your $4 and now it's 35. We're growing your ETH holdings. So it's different than owning a closed-end fund. We're actively growing your Ethereum. All right. So this is maybe a dumb question. Why wouldn't you do a secondary again? You think you wouldn't have buyers? Of course you would. Yeah, there's probably we, there's an enormous interest. We get- But when you do a secondary, it's not to dilutive because you're putting the money right into ETH? Correct.

So it's actually... It's not like a traditional secondary then. Yeah, Michael Sayles explained it like... Don't say yield. Don't say yield. No, no, no. He's saying he's selling, you know, a dollar's worth of Bitcoin, but because of the multiple of a stock, he's buying $3 a Bitcoin with it.

That's what his mechanism is. When you raise capital and then you're buying an asset, instead of a building, you're actually improving your book value. Okay. And then Ethereum itself is only at, you know, 4,000-ish. But if it flips, you know what I mean? Like, Ethereum has a lot of upside. Are there other tokens out there that this idea makes sense for?

Is that something that you guys are thinking about? I think if something is useful, like, because Ethereum has this whole story of, like, Wall Street going on to the blockchain. That makes it more useful. But remember, the AI world, the agentic world, where they, when you have robots, you have to now know proof of human. or proof that this is a valid instruction sent to the robot, you know, they're going to have to build a token model, which is right now most of that's happening on Ethereum. So the AI world, as you go to Agenic, has to use tokens on a public chain,

and it looks like a lot of it's going to happen on Ethereum. Okay. If there are any viewers still with us, is there anything else we want to do? Not enough, it's enough. All right, we can't get out here without giving you your flowers, as a kid say, about Granny Shots. What an absolute home run, $2.28 billion in assets.

When did you launch this last week? November 2024. Unbelievable. Let's just go through the slides really quickly. So for people that aren't familiar, Granny Shots is Tom's sort of like thematic ETF. The term comes from a famous basketball player who used to shoot free throws underhand.

And Tom kind of used that as like a metaphor for picking stuff. that he thinks are an underhand layup, not layup, but like a free throw. Yes. Not that they're risk-free or that things can't go wrong, but, like, he looks at these as, like, granny shots and therefore the ticker is GRNY, not promoting the ETF, just explaining it, full disclaimers apply, but show us the holdings. So these are like multiple themes inside of one thematic ETF.

Correct. Okay. And these are the themes that you think are going to be the dominant theme. therefore these are the types of stocks that you want to be invested in. Yeah, so the idea is like these things are going to last 10 to 15 years. Just like you said, AI is a juggernaut of a theme, like a story. It's not just 2025. It's going to be 2035 until 2030.

If you put BitMind immersion stock into Granny Shots, does the universe implode? How does that work? Is that like two versions of you coming together? But he's got like a strategy in there? It's like crossing the streams, right? All right. Here are the names. Hidden Gem.

Meta platforms. Nobody knows that. I'm just teasing you. But you have... Garmin. But you have stocks in here that people would not associate with, like, the future,

thematically. Fair Eye's a corporation, which is a data provider. Caterpillar. Goldman Sachs. What else is in here? PayPal, Progressive? That's a granny shot?

Yeah, actually, some of this... Monster beverage. By the way, there was a rebalance last week. So there's some removals. Okay. But, yeah.

Okay. Because we did our quarterly rebalance last week. But yes, those are the names. They, they, one of the themes that it is in here is millennials. And so not everything is an AI story because like Monster is an example of a millennial stock. They love it. Yeah.

That's their Coca-Cola. Yeah. And the idea is there's plenty of millennial stocks, but we wanted to have a stock that's tied to two themes. So Monster has to be tied to another theme. As you can see, it's tied to, uh, seasonality. So the reason that matters. is that a single theme won't always work at every month in a stock market.

So stocks that find themselves being relevant to multiple themes to make it in? Yeah, so it'll have like one thing pulling it if something's not pushing it. What do you say to people who look at this list of holdings and say, oh, I get it. It's a fucking momentum fund. It's not that. It's not, yeah. There's more going on here than just these are the big winners over the last 12 months. That's right.

If you pulled up the M-TUM, which I don't have here, it doesn't look like the same list. Okay. So Morningstar does the ranking. Quantitative is just not opinion. And you guys are crushing it. You're in the second percentile. Well, last week, who cares? But year to date, second percentile out of three, 1,392 different players. Yeah. I mean, it's a top 20, top 28. Now you've got to stay there. What's a bad market environment for this? Is it choppy market or a bear market? Like in what market does this not start? stay near the top of the rankings?

Yeah, it did see a drawdown February to April. So a bear market caused this to underperform, but then the recovery or stabilization causes to make up all the ground lost. Okay. So I would say this is trying to find the 30 most important stocks in the S&P that are tied to the growth drivers. Okay. So it's kind of a bit more growth oriented.

Can I pitch you? Can I pitch you a version of this that maybe you haven't considered? Yes. It's called Grandpa Shots. Okay. And it's like members only, we would get long. We get very long. Like brown loafers, if there's a trade.

Classic rock, books about World War II. Like, we would just like, right? Who's with me on this? It's smoking. You got to have smoking jackets. Things that you'd wear. Yeah, just like things that are just like. New Balance sneakers.

Yeah, maybe it's not a great strategy. Maybe we want to short those things. Congratulations, dude. This is amazing to watch. And by the way, didn't we say not to do this? I told you, don't. I said, don't do it, but joking around. The reason I said don't do it is because when you have a bad month, when the strategy

is a bad month, now this is like the thing that people use to beat you over the head with. But you never cared about that. Yeah, I'm okay with that. And we do record a video every week with our granting shots. So people have full transparency of like what's working, what's not. And I think that... Do people tell you who they're pulling money from to put money into this? Well, people always ask us what kind of bucket we're in.

And at the moment, we're not on any of the major wirehouse platforms yet because you need to be one year in. That's how you get to $5 billion. Yeah. Right. Because then if they approve you, like UBS, Morgan Stanley, if they're like, all right, we'll put this in the growth bucket. Forget it. It slides out. Yes.

Because that's people like, well, I don't need to own S&P growth. I want to own this. Yeah. This resonates more with me. Yeah. Right. And I think it's, yeah, so we're, you know, we're just trying to find you the best sort of important theme drivers in the market. Dude, I love it.

Congrats. It's amazing. Thanks. We end the show these days with something called, what are you looking forward to? And it could be career, it could be personal, it could be whatever. What are you most looking forward to right now? Oh, I actually have something interesting going on. Okay.

I'm sure it sounds like you do. Okay. Next, at the end of this month. I'm going to Seoul with my wife to the Freeze Art Festival. What is that? It's an art festival. It's the last year in Seoul, Korea. Like, Freeze has art festivals, I think, in Miami and a few other places.

Okay. She likes art. But it's really, we're going there to see friends. So actually taking a little vacation. Is she Korean? She's Korean. Okay. So how long are you going to go for?

August 29th. Okay. Then September. 7th, I come back to Huntington Beach because my favorite conference is going. I'm so happy that you're coming. We're so excited. We're bringing like half the company there. It's amazing. So what is Fund Stratt's presence at Future Proof going to be like? You're going to meet, I don't know, thousands of it. I think we'll be at 5,000 people this year. Yeah. Which is going to be bananas. We're bringing Mark Newton. Okay. We love more.

Head of technical strategy. We're bringing Sean Farrell. Okay. Who's our digital guy. We're bringing all. this like swag, you know, granny stuff. Oh, I love it. And, you know, I'm going to be speaking, but it, you guys do put on, you know, I think is one of the most important conferences and really one of the best conferences all year. So this is like, I'm very excited about it. Awesome. We're so happy to, we're so happy to have you guys. And for those of you who are coming to Future Proof, Tom is going to be booking our slots to hang out with him. So you go to whatever the activity is you want to do, Tom will commit to doing it.

So jump on the app. Make sure you book yourself time in the breakthroughs, too, to meet with Tom's team. All right. What are you looking forward to? We've had a long week, you and I. Are you sick of me? I'm looking, no, never. I'm looking forward to nobody too, the new Bob Bowden Kirk movie.

Oh. Did you watch the first one? No, I didn't see the first one. It's like John White, but with Bob Oden Kirk, which sounds weird, but it's great. Did you see weapons? Yeah. Should I see that? Yeah, I loved.

But will I like it? Yes. Yes. Should I see it in the theater or it doesn't matter. Yes. What else did you see recently? Together. The theater guy.

Yeah. Mike. I love movies. So do I. I love storytelling, you know. Together with Franco and his wife was excellent. Excellent is a stretch. It was very good.

But Weapons was truly a master of it. Yeah. Yeah. It was great. People are going nuts about this movie. He crushed it. Yeah. All right.

Duncan, what are you looking forward to? Well, I just saw Daniel D. Lewis has a new movie coming out. So I'm excited about that. He's unretired? Yeah. Well, I mean, but he's the weed in it. But his son is directing it, I think.

Overrated. Is it a horror movie? Daniel Day Lewis overrated. I think there's a supernatural element. I'm not sure exactly what it is. We watched the trailer. I'm still real confused. All right, John, what do you got for us?

Any trips? Any... Not in the moment. All right. Looking forward to making more contact with us. All right, my man. All right. Guys, it's been a pleasure.

Tom, thank you so much. I want to tell people that you have a special offer for compound listeners. This is super nice of you. Exclusively for listeners of the compound and friends. Tom has provided a link for a 30-day free trial. Please visit funstratt.com slash Tom.

That's funstrat.com slash Tom. You can also find a link in the description below. So if you're an experienced, self-directed investor, looking for trusted insights to grow your wealth, Tom Lee's Fundstrat research is the place to go. You're going to get access to his daily insights, market alerts, live webinars, and stuff. That's super nice of you.

Thank you very much. and compound listeners will most assuredly want to check that out. That's it for us this week. We appreciate everybody. Thank you for listening. We'll talk to you soon.