The Compound and Friends - True or False - Private Credit Is This Generation’s Subprime

Episode Date: March 6, 2026

On episode 232 of The Compound and Friends, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠���⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by Garrett Baldwin, author of Me and the Money Printer, to discuss: Weird market dynamics, recent global events, private credit, and much more! This episode is sponsored by Fidelity Investments and Janus Henderson Investors. Visit www.Fidelity.com/TraderPlus to learn more about Fidelity Investments and the all-new Fidelity Trader+, Fidelity’s most powerful trading platform yet. Learn more about Janus Henderson Investors at https://www.janushenderson.com/ 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 Fidelity Disclosure: Fidelity Investments and The Compound are not affiliated. Views, opinions, products, services, and strategies discussed are not endorsed or promoted by Fidelity Investments. Fidelity Brokerage Services LLC, Member NYSE, SIPC. 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

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and their castmates are solely their own opinions and do not reflect the opinion of Ridholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholds wealth management may maintain positions in the securities discussed in this podcast. Ladies and gentlemen, welcome to an all-new edition of the Compound and Friends. My name is downtown Josh Brown here with my co-host as always. Mr. Michael Batnik. Michael, say hi. Hello, hello. All right. And with us today, Garrett Baldwin. Garrett is a research economist and financial analyst based in Maryland. He is the author of me and the money printer and the founder and editorial director of AJB Capital Research.

Garrett, welcome back. Good to have you. Great to be back. Thanks for having me, guys. All right. So the last time you and I spoke, uh, the audio. went wild. They just, they really, they really loved the conversation. Michael didn't get a chance to be in the mix. So now it's the three amigos. We're all together. And I see that you are coming to us live from what looks like series bar at the CME. I know it's, uh, it's AI, but still, that's a, that's a pretty cool call out for the people that trade commodities in our audience. It's either that or you just see boxes of baseball cards in my office. And I don't want to look like a 12 year old boy. I want to look like I'm old enough to drink.

Understood. So in real life, you're actually in Baltimore, Maryland. All right, awesome to check in with you. So can I ask a very general question to get us started? What even just happened? On Sunday night, I said, oh, okay, cool, wartime stock market. Let's go. Let me brush up on all my charts and all my data so that I can speak intelligently,

provide thought leadership for the clientele of Rithold's wealth management. and do my job. What do I need to know? And we're pretty off script right now as far as a post initial airstrikes of a war playbook. What do you think is the story behind that? This is one of those days where I get up and I say, you know, I could have done anything else with my career. I could have chosen any other thing to be passionate about. And I could be covering like the world baseball classic right now. I wouldn't be frustrated getting up in the morning and just trying to figure all this out. Again, we talked before, you know that my thesis kind of comes back to monetary support, liquidity, and what the Federal Reserve is doing and what Japan has been doing.

And I think that that's the more critical thing. We've just been range bound. We've done nothing for three months. And as we'll talk about, you still have this large swath of stocks that are up more than 5%, up 10%, but the Mag 7 continues to bleed. I think that goes back to just the natural cycle of liquidity peaking in August, September, and the kind of shift award defensive's energy commodities, which tends to correlate with this period in that cycle. I heard somebody on TV saying it's not even really, what were they saying? It's like, it's not really a war until Congress declares war. And then I chat GPT, when is the last time Congress declared war?

and I think it was against Japan. So I don't know if that's the best way to gauge whether or not we should expect a wartime stock market. I don't know if we need the official declaration. Whether you like that or dislike that, that's just the reality. The reaction in oil and the dollar and all the things that you would typically expect to react sort of had like an 18-hour moment. And then we were right back to our regularly scheduled programming, which is, the software sell-off and the private credit crash. Does that surprise you how quickly we got back to business?

It does a little bit, but I don't think the worst of this situation is over. The people that I talked to who were oil traders, people who traded large swaths of oil back in the day before the Russia war, they're very concerned about this. They're more concerned about the Strait of Orboos. They think that escalation's coming. They are, you know, the people who are reading the report saying $200 oil. I don't know if we're going to get there.

But the reality is that this is one missile away, one one headline away from, you know, a significant shift that is comparable to the commodity rally, if we want to use that term, that happened back when Russia invaded Ukraine. Remind us, what was the reaction? What was the run-up and then what was the reaction when Russia invaded Ukraine? It was a monstrous runoff, but the process had started sometime about two months. months before they actually went in. And then we had a huge run-up that ran, I believe, until April. And then all of a sudden, it was just a massive risk-off event. And all of a sudden, just funds were

dumping oil and gas. And we had a huge downturn. I believe the June 8th downturn in 2022 was the largest hedge fund sell-off in 15 years. And it was a lot of relationship to commodity profit-taking. So they decided not to keep oil prices elevated indefinitely because that war is still going on. where you're, you're for now or something like that? I wish I knew what was going on. I really do. It just, it's just, you wake up and we go, I go back to something that I wrote last week about Japan changing the rules around insurance and what the insurance companies have to

hold and whether or not they had to sell their bonds. Like price discovery, I don't even know if it exists anymore. And, you know, we're just in an environment where it's kind of just a yolo market where people are chasing headlines. We got back to the private credit side. I think that that's still a major issue. It's very, very clear that Federal Reserve has had to step in with $55 billion a month in short-term Treasury bill purchases in order to protect our banking reserves.

And at the same time, the private credit story just continues to be this ongoing concern and deterioration about ongoing refinancing and questions about whether or not there's enough capital in the system to enable a lot of refinancing that's going to be needed to be done later this year. I believe cross-water capital put it at something like 13% of GDP needs to be refinanced just this year. And then you have to account for the fact that the U.S. is refinancing a significant amount of treasuries. That can crowd out private credit. That can crowd out private equity that needs to refinance as well. I think one of the reasons why the futures markets are responding as calmly as they are.

So Sunday night, you saw missiles flying and futures market open. down 1.2%. I mean, it was really not a lot. And we've seen this. This is not the first time where you've seen something happened over the weekend. And then you look at the market's reaction. You're like, all right, I guess like not really that big of a deal. The market doesn't seem too concerned. And I think the primary reason why is throw this chart up, chart one, John, please, from Yardinney. The U.S. has been a net, the net imports have crashed. We are now a net exporter of energy. The energy independent story, I think, think is the primary reason why our markets aren't doing what, say, markets in Europe are.

Like those stock markets and, of course, Korea that is much more dependent on energy, are getting hit a lot harder than we are. And you could talk about liquidity and all of this other stuff that obviously does matter. But for this week, particularly, I think that is why you're not seeing the market react the way you think it might. I agree. I concur with that. One of the things that's such a strange thing about geopolitics, and I don't know if this happened post-coated. or not. But remember, there was a time when King Jung-on just launched a single missile into the Pacific Ocean. And it wasn't, it wasn't an attack. It was just a test fire. And the S-A-P-500 or the Dow fell 4%, like instantly. That doesn't happen anymore. And, you know, we might even rally

on that. Right. That might actually, because that might be bullish for Palantir. And I wish I was, I'm only half kidding. Yeah. But I think, I think that that has, I think they're, I don't know if it's the plumbing of the financial system. I don't know if it's the fact that, again, passive investing is 50% of equities now compared to 5% in the 1990s. So once, you know, once again, it may just be the fact that there is just this ongoing burn, continued support of equity prices. And you've talked about this regularly, the fact that every two weeks, more money flows into these equity markets through passive ETFs. Yeah, that's the, that's like the secret undercurrent that people still haven't wrapped their heads around.

Right. That there is a price insensitive buyer coming in almost no matter what happens, literally, other than maybe nuclear war. We learned from COVID, the Vanguard 401K contributors, they didn't blink. Fidelity, same story. Schwab, same story. Like, we know that that underlying bid exists. It doesn't mean, all right, so just always buy.

It's always going up. But like, man, could you imagine if we had that current and reverse, you would never want to invest in a stock ever again. Garrett, let me ask you this, because there is, there is a large course of people that, I don't say blame the positive market, because that sounds like a weird thing to do, but they do. There's a lot of blame for passive money distorting markets and no price discovery. If mutual funds were 100% managed by active managers who were merely closet indexing,

do you think that would change the story? Like, do you really think that it's the past, okay. Yeah. No, and the other thing about that is that you actually see, I'm trying to go back to the exact numbers, because I did something on this back when I was at Modern Trader, where you had massive amounts of passive flows, but then you have all the active managers who are just trying to meet their benchmarks. So they're buying the exact same stuff. They're buying the index. They set the indexes. Right, right. Right. So there's no, there's no, there's crowding around those, those specific figures. Everybody's buying the same stocks. And then, you know, ultimately what we hear is we have. have a narrative shift and that's how we end up in a situation right now where we're trying to make sense of what's going on with the software stocks. There's a, there's a technological component to this particular geopolitical crisis, if that's what we're going to call it, where like with Ukraine, it was the first live example of a battlefield with drones,

like actively participating in war fighting for both sides. And I think it's sort of changed the story somewhat. In this case, it's a. We know there are huge issues with Department of Defense wrestling with Anthropic because they want, you know, obviously more control over the technology. They don't want to abide by the same terms of service that my mom does. So that's part of it. Someone was saying the reason why oil is not reacting is because, number one, the first thing that we did was take out the Navy. So the Strait of Hormuz is an issue in that ships don't want to go, but it's not blocked. And then number two, every time Iran launches, there's an AI Department of Defense effort to immediately pinpoint exactly where that launch came from.

And they wipe out the launcher. And as a result, Iran has stopped launching either because they've run out of launchers or most of their launchers or because they know this shot better count because the minute we fire it. The United States has this AI thing that instantly routes a tomahawk. to take that thing out. Like that is, I'm not a war expert. I'm just saying this is part of what explains why we're not contending with $100 oil, a CPI spike to come, and people freaking out about whether or not this means the Fed is now on hold.

That's not really the conversation right now. And thankfully, because I think that would have wrecked the market this week. That's an interesting observation because at the end of the day, you know, what, I believe it was the former head of Google, wrote a piece in the Financial Times, Eric Schmidt, and he basically said the future of warfare is happening in Ukraine right now. And the no man's land from a source of mine was 15 miles. So, you know, those, those tanks are not rolling across Europe anytime soon. And, you know, a $35 drone can knock out a million to $10 million tank. That could be part of the story. It could be the fact that the future of

warfare is going to be much more localized. It's much more targeted. It's not carpet. It's not carpet And in some ways, the question is kind of nuclear war off the table. I don't mean that, you know, it's obviously you have deterrent. But the reality is we can put a, you can put a missile into a single car and just take out one person rather than hitting an entire block. And that's going to be very interesting to see how all this works. Because once again, companies like Kratos, you're seeing it with, I'm blanking on Palmer Lucky's company. Ander. Yeah, that I had somebody who was recently in Ukraine and came back and he said,

I need to do every single thing that I possibly can to invest in this company, however I possibly can. That seems to be the tone around Anderil. That is the hottest ticket in town. Everyone wants in. What's this Korean Kaspi Index chart? So on Tuesday, the Korean market had its worst day, going back to 1990 and then a day later

it had its second best day going back to 1990. Garrett, I don't know the composition of the Korean market in terms of the traders, but it seems like there's obviously a lot of leverage. They're having a very good time.

They're partying over there. Yep. I couldn't tell you a thing about what's going on over there. I can't know everything. I mean, that way. Me either.

So let's put that to the side. But the thing is, with South Korea, you know, there has always been, you know, stocks that have been highly undervalued comparatively to, you know, other countries. I remember POSCO a couple of years ago was trading at like 0.6 times book values, steel manufacture. Korea is a memory chip stock. Right.

Korea is a meme stock. Right. For people that are trading international country ETFs, it got slammed because they import almost 100% of their energy. Yeah. So that's the obvious reason to sell that market. But also, it's like 40-something percent. two memory chip plays. One is Samsung, the other is S.K. Heinex. So you have like,

you have this incredibly weird situation where it's both an energy exporter, but also it's the primary source for the most important chips on the planet right now. And people just, I guess, panic sell and panic by when that thing gets moving. I think it's fascinating. It's one of those, it's one of the countries where I'll just look at and say, I don't know enough about it to make a decision, but it kind of feels to me when somebody says, yeah, I'm long Korea right now or I'm long, you know, pick a, pick a random country. It's like, yeah, I used to bet on ping pong back during COVID when there was no, you know, no other sports to bet on. I'm like, okay, you're just looking for action wherever you can find it. So this is a very, very weird market. And this week was weird.

And 2026 has been weird. Yep. I was very surprised. I wasn't surprised Monday when they took the 1% loss away and we closed green. I was very surprised on Tuesday afternoon. by Tuesday afternoon. So Tuesday morning, we gapped down hard. And it was like, oh, shit. Like that rally didn't stick. And when that sort of thing happens, you usually have trap balls, complacent bowls. And they took it all back Tuesday too.

And when you have that sort of reversal, John chart, the bespoke chart, when you have that sort of reversal where you're down 1% and you finish in the green, historically, that is very bullish. So bespoke says that this has happened on 2.8% of all. all trading days. So it happens. Obviously, it's not, it's not super unusual, but it happens. And they look at the performance of what happens a week, a month, three months, six months. And I think intuitively so, these type of bullish reversals have historically been bullish for the stock market on a go-forward basis. But, Gary, I want to ask you, I want to ask you about that chart and just the mentality

around that. I'm one of these people that has a very strong belief that when people sell stocks for any reason, either it's something with the individual company like the misses earnings or it's something where like the market is getting volatile and they just want to sell something. I have this like mental model and I hate that phrase, but I do, where like the maximum amount of time the money is going to sit in cash in that person's account. and I don't care if it's a hedge fund amount of a PM at a hedge fund or a mom and pop on Schwab. I think the maximum number of days that money sits in a money market is like three days.

And then three days go by, the world doesn't come to an end. Right. And they're like, they're like, what should I buy? Right. And I understand it's not that simple. And, you know, it's not as contained a world where it's the same dollar amounts and we don't have money moving in and out of bank. banks, et cetera. But just big picture, I think it explains the Vs. I think it explained, I just think it's a different investor class, both professional and retail these days. And they don't buy their

time. And I think some of that just has to do with the pace of life in general. 100%. Everything we do is sped up. So why would that reallocation into a new stock process, not be sped up? What do you think about that? Well, I just, I think that there's a, there's a couple of moving parts. One, there's incentive for, you know, brokers to try to get people to sell. There's, there's incentive, you know, for as much market action and as much money flowing around as possible. And if you look at it, there's that one crazy chart where it says, like, the average holding time in the 1970s was like 10 years. Now it's down to what, like 16? 10 minutes. Yeah. Yeah, it's in, and I think that there, you speak to the immediacy of the market. You speak to the fact that we can trade on our phone

at any given time. Everybody's got a tip. Everybody's got an opinion. And everybody's, you know, bouncing from one platform to the next trying to find something. And I think that in an environment like this where we're at all, we're within 2% of all time highs. And most of us feel like, what's going to, like, again, we talked about JC. JC's going to say that it's going to go 8,000. But like the rest of us are sitting here going, there's a war. There's, you know, constant money printing. There's a lot of uncertainty around earning. New Fed chair coming in. Right. And I was going to say this. There's that one meme that says, while the end of times will be horrifying, the pre-end of times will be extraordinarily profitable to finding on the opportunities that you can invest in.

That's what this feels like. And I think when markets are at highs, right, it's people are looking for, I missed out on this, I missed out on this, I missed out on this. So do I try to buy this stock that is, you know, trading it 20 times sales but is unprofitable, but it's down 40%. You know, it's going to go back. And I'm going to be, I'm going to be smart because I, you know, I timed that. And that's a very, that's just kind of the way that the market is selling to me. I think, I think the market is lying to us. I think you remember the, remember the vibe session, the hard data and the soft data.

I think the hard data is the market and the soft data is how we all feel. Aside from JC, and by the way, I'm more team JC in the not on this one. I don't think anybody feels formal. I don't think anybody's like, I can't. missed the next rally. I think people are very anxious. And I think that the market has swallowed so much. Like, I can't believe the rally on Tuesday. I really can't. I was shocked that we didn't close on the lows after opening like that down, uh, EM down 7% the Dow down, whatever was down at the open. The market continues to be hit with these super bearish narratives. And it just won't go down.

Like at some point, you have to say like, okay, like, yeah, I'm, I'm anxious too. But clearly there is an overwhelming demand for stocks. There are so many more buyers and sellers despite the way that we all feel like this doesn't feel great. But what about what about the narrative or the argument of, and I'll go back to what Stanley Druck and Miller said in 2018. You already got me. I mean, I can't rebut it.

Whatever you're about to say. So all he said was, look, you know, like trend investing is very complex now. Like if I'm down, if I'm looking to go down on something and short it, this, this stock moves into the third standard deviation and the algos step in and start buying it. And if you want, if you just look at volume weighted average price on a one minute chart, watch, you know, watch somebody like Jamie Diamond say something about the bond market. Watch it dip into the fourth standard deviation and then watch it rally to the fourth deviation on the upside. Like, it's absolutely wild, this type of price action that we're seeing. And I think the difference between,

you know, the 1990s and now, we would see three, four, five percent moves. We would see moves. We would see moves to the downside, we would see a continuation of trend. And now what we're seeing is kind of like this round tripping during the day. And I don't know how that's possible. I don't know what's necessarily driving it. I do understand, you know, what's going on with zero date, but I'm not going to blame zero date. Dude, on liberation, liberation day. So we were down like 10%, 12%, whatever it was. And I'm staring at my screen, as I always do. I am staring at the screen and I blink. And the market went from down 4% to up 7%. Yep. How, how does that? How does that? You know, how does, Does that happen? Because the, so what the algorithms have done is they've, they've made it, they've made it so all intuitive thinking, at least in the short term, is completely worthless. Any, any sort of like linear, like if A happens and then B happens, therefore the probabilistic result will be C and then D and then E. The people who think that way, the most intelligent people in the market who understand all of these connections, between.

cross-assad, it's blah, blah, blah, blah. It's not that they're stupid now. It's that the machines are speed-racing, speed-running, that whole process in minutes rather than weeks. I remember there were weeks for a story to play out, and then it would go too far, and then the buyers or the sellers would come in and correct that, and that's where the term correction comes from.

Right. Now, you're wasting your time, and actually one of the most popular trader memes for this reason is that thing where it's like the bell curve and you have a complete moron with crossed eyes on the left. The midway. Yeah. And then all the way on the other side on the far right,

you have a complete genius egghead. And both of them, their returns are zero. Right. And then in the middle of the meme, you have like a Jedi figure who's just like, I don't even think. Like, I just basically buy the index. And I don't even know what you guys.

are trying to do. But that's what those. Don't you think that this is awesome for people that have a brain? Because we saw what happened when Schwab fell 10% because of the altruist news. I know we keep bringing up, but it's important. And when CBRE and all these related names just got whacked and crowd strike fell 10% one day and then 8% the next day, doesn't that provide opportunity for people that aren't trading with an algorithm that can think for a second?

Yeah, I couldn't agree more. Yeah. And to compliment that, you know, know, one of the things that I focus on, there used to be a very distinct pattern that would happen in the market. The S&P 500 would fall under its 20 and its 50-day moving average. It would peter out. There wouldn't be any, there wouldn't be any buying. Then it would squeeze back up to its 20, and then it would just tank. And then insiders would start buying and there would be some sort of policy accommodation. You can see that in 08, 11, 15, 18, 20, 21, 22, 23, 24, and last April,

of course. And then the best one of the year was insiders picked up on November 19th and Japan announced $117 billion in stimulus. And I just, it was a Sunday night. I just sent an email out. I said, you better cover your shorts because this is just going to move. And now what's happening is we're seeing policy moves. We're seeing repo. We're seeing, you know, the support of the Fed. But like even that right now in the last couple of weeks and months, all we're doing is we're hitting a hundred day moving. average and we're going right back up. We're hitting a 100-day moving average. And now what's happening, the 100-day moving average is now moving right in line with the 50. That's where I think it can get interesting, particularly tax season, into April. But this is a market where you better be

compressing, if you are a trader, compressing the time frame that you are trading on. If you're long-term, if you have a thesis, if you believe in capital-efficient businesses, if you want to buy pole corporation because there was just a massive amount of insider buying, that's a good company, that's got a good thesis. I'm good with that. But from a trading perspective, I mean, it is. Oh, that's a great point. It's wild. So I actually, I actually believe this very strongly. It has never been more important for people to decide whether or not they are investors or traders. Whereas I think that you could have had sort of a more nebulous definition about what you do in the markets as a regular person over the last couple of years. You could say like, yeah, I'm,

I'm an investor, and then every once in a while I'll throw on a day trade, like that kind of thing. I just, I don't think that this is an environment that's conducive to tourism on either side of the fence. If you're a trader, don't miss your opportunity to stop out and then become an investor by accident. And vice versa, like, if you want to bet against the trend, you have to decide I'm an investor and I'm going to let that trend keep going against me. And I might buy a third, a third, a third on the way down because I'm determined to be an investor here. Or you sell the first rep. But you have to know. What do you do it? Like, what are you doing? And I think, I think there was a long time where you could kind of just be like a

whatever. I don't think people should be a whatever right now. No. Totally. And again, I focus heavily on momentum and insider buying. So there's a chart that you guys have, but it's, it's all of the stocks that are breaking down right now, the worst of the worst. It's like Campbell's Soup. And it's all the, It's all the credit companies. It's KKR. It's Huntington Bank shares, CBREs on that list, Aries management. And we're seeing a massive amount of insider buying on a lot of different equities. The moment that that stock falls off that momentum list, that negative momentum list, and there's insider buying.

Look at a stock like MSCI, Fernandez, the CEO. He bought it at 520. It broke down. It fell to like 500. Every time he buys the stock, it goes from 520 to 600. And you just look for these, you just look for these themes, these strategies, and you return to it. And by the way, I'm, I would love to buy KKR. Like, I would love to buy.

I think it's a phenomenal company. But I'm not going to touch it yet. And also, when do I really want to own it? When we do our next round of QE. Like, that's it. Like, the second that we, the second they really print money and they will, our financial sector goes up because we're a financialized economy. Let's stay there.

You think you're not saying they'll print money because of the KKRs of the world, but you do think we're going to have a credit cycle that goes heavily against some of these companies. But it'll also go against publicly traded, you know, it's not going to be a, if we have a credit cycle, it's not going to be a private equity, private credit only situation. Well, the theme right now in monetary policy is you have Warsh, who doesn't, who wants to reduce the balance sheet. But then you have Bessent who wants to issue more capital, more, more, more, more, uh, T bills for refinancing purposes.

And that matters because when you move, when you move out of 10, 15 years not having to lock things up in, in bonds, and you start issuing treasuries, go back and look at the 27, 2017 chart of the S&P 500. We have gone from what, 3,000 to 7,000. You know what happened that year? The Tax Cut and Jobs Act, and the Tax Cut and Jobs Act, in order to afford it, they started to sell aggressively at the short end of the Treasury bills. So instead of trying to fund it with 10 years, they funded it. We've gone from 11% of our debt being funded under a year to roughly 23 to 24% and Bank of America thinks it's going to go higher.

That is bullish. That's bullish for the amount of money that is sloshing around in the system. and that helped why is it why is it bullish because those because those treasury bills are liquid assets

that can be utilized for the purposes of repo and that is what that is what has helped drive that that leverage trade of you know you can call it 64 or how 6040 however you want

but you know we rehypithicate somebody had made fun of me for using rehypithicate last time but it's the most wonkish term in the world you lever up I love it

you lever up you lever up you live up TBOs And then you borrow, and then you borrow, you go out, you buy Facebook, you take it back to the repo market, you do this 10 times. And now you have turned a $100 million position to $2.5 billion. Wait, who's doing that? I'm not doing that. I wish I were not doing. Maybe you should.

Michael, we should be hypothesating. What am I doing? Moron. All right, let's get back to the stock market. So there's all sorts of weird shit as I keep saying. So our Fred Potson has this killer chart. I guess it's the table. And he updates this all the time.

And we're looking at every year that the S&P 500 was positive. Yep. And then also, how much did the top 10 stocks contribute as a percentage of the total? And of course, 2023 and 2024, it was all the big boys that did the heavy lifting. It was like 60% of the overall return. But year to date, the S&P is marginally positive. Right. So I don't know how Todd did this math.

It doesn't matter. Yeah, I don't get it. It doesn't matter. Minus 533%. I don't know. Whatever. Yeah, no, I have it. The top 10 stocks are a detracting.

No, we know. I know. But the negative that makes, Todd's my quant. I don't care. The point is this, it's never happened before. You've never seen an environment. That's the weird. That's one of the weirdest things about this year.

That's right. And I've got. It's anti-leadership. I've got, it's like anti-matter. I've got two more data points and then I'll shut up. So our friend, Andy Thrasher, has a chart that shows, as of yesterday, the S&P 500 has a three-month negative return. However, more than half of large-cap stocks are up 5% or more over the last three months,

and 38% have advanced 10% or more. We'd have to go back to 1990-2000 to find a similar setup. And then lastly, so you've got this tug-of-war between the top 10 sucking wind, giving everybody else an opportunity to make some alpha, which is great, and the rest of the market, and they're netting each other out, right? it's a tug of war and we're like we're not moving. So this is the tightest range for the S&P 500s to start a year in history. And this just feels so wrong. It doesn't feel like this is possible given like even prior to the missiles flying. It just feels like there's so much noise

and anxiety between private credit, the software, like all of this. It just feels like the AI build out. What is happening? Well, don't you see that this proves? my idea. Yeah, you're always right. No, no, no. In this particular case, though, doesn't go back to the second chart for a second. So the S&P is a three-month negative return,

but more than half of large caps are up 5% or more during that period, and almost 40% are up 10%. So chart off, what's happening? Very simply, no, people are selling the AI trade that they were along last year. They're coming out. of the metas and the Microsofts and the Amazon's because those stocks are not working. And they're not sitting around and doing nothing.

They're saying, well, shit, look at Exxon. I'll buy that. Look at Lilly. These are mega cap stocks that institutions can buy in size, liquid as water. And they're going up and they have nothing to do with data centers. And that's my point. Nobody is sitting on their hands when they get out of Microsoft. They're like, okay, what else are we doing?

And that's happening like that. They're not waiting. They're not deliberating. You can't deliberate. So I really do think it's money coming from the left pocket to the right. And the S&P is so far able to hang right where it's been and not give up anything. If you are a person who subscribes to the idea of cycles and credit cycles and investing accordingly, this is that.

This is the idea of when liquidity expands, you start to buy. buy high beta right off the bat, right? So the second that they engage in QE or the liquidity bottom is in, that was early 2023, high beta stocks. And then once everybody misses that rally, because most people do, because they're still bearish from previous events, that's where you start to see movement into some commodities and financials. Then as we move into the later part of the cycle. We are there now. Yeah, we're on the other side of the cycle now. So now you're seeing the mag seven the higher beta stuff drop it is a rotation to energy materials and consumer defensive so it's it's right on time and then what's the last stage duration you know actually

moving into bonds and looking at looking at the possibility of the 10 year coming down we'll see what happens that's party's over that's parties over and then you're buying yeah you're going out you're looking at corporate bonds how long do these how long does this phase 65 months. Sixty-five months according to cross-border. 65 months is the entirety of the cycle or the period of the cycle that we're in? Trough to trough. How long does the consumer staples energy commodity phase typically by us to start getting all bared up? If we were not providing a significant amount of $55 billion a month and Japan doesn't step in and Bessent doesn't tell them to get their crap together, we'd be there. I have a very hard time believing that with all, we would see SOFR blowing out right now.

That's, that's exactly what Powell hinted to. And that's what Logan hinted to in Dallas. They said, we've got problems in SOFR and our banking reserves are too low. So that's why they're providing the support. Now, this can go there. They're not going to call it QE ever again. No, it's called reserve asset management or something like that. And then they'll come up with a new name for the next time. Yeah, come on, you Muppet. Keep up. So, so, but the thing is, this can, this can either be a slow process. And if you look at 2022, it lasted nine months, really, you know, but we also did have a war at the same time. But in 2008, it went fast. And we were, we were at the top of a cycle in mid-2008 and then it just went. So,

you know, this is why, this is why we follow momentum. This is why we watch, you know, these key moving averages. I, I think right now, if we were not providing, the support the way that we are, we would be in a much different place. Rate this phrase on a scale of one to ten. Ten being very accurate, one being ridiculous. Private credit is this generation's version of subprime. Seven. Come on.

Yes. Michael does not like it. Subprime, dude. All right, go ahead. You first. No, no. So subprime, you have to look. Which did not matter until it mattered.

Wait, qualify your statement, Josh. Are you saying that are you analogizing them just in the sense that subprime is like the epithetor the spark or that these companies are subprime? Great. I'm glad you asked for that clarification. Yes. I'm not the one making that statement. But I think it's meant to mean that it's a sign of something worse beneath the surface, not as it being causal. Okay.

Now, in the case of subprime in 06, 07, it was both. it was both a sign that there was up underwriting taking place and it was causal because it was pulling out the Jenga pieces at the bottom of the tower. I'm not the one making that statement. I am the one hearing that statement

and I would love to hear from Garrett. Private credit is pricing a massive default cycle. It is. So Garrett, what do you think about this? But again, it doesn't have to be, it doesn't have to be a subprime crisis of the proportion of everybody

you know, losing their house. I'm not, I'm not saying it to that degree. I'm saying that the source of the crisis is in private credit, like it wasn't subprime and like it was in unprofitable tech stocks and like it was savings and loan, you know, paying 20 percent, having to pay 20 percent to make eight. This is, this is where, this is where a lot of people who are banking experts that I listen to on a regular basis have consistently said, look, this is going to be the source of the next crisis. And if we look at, if we look at the, we look at what this really, we look at what this really is. This is the shadow banking system, right? It's the, it's, it's private credit, it's private equity, it's hedge funds. It's all largely unregulated. What was being financed, being financed by the

traditional banking system. But what was there, the, the, these banks are originating loans and then just can't wait to get rid of, get them off their, get them off their balance sheet. That's what they're doing. Like, since Dodd-Frank, banks don't bank anymore. They originally- But the banks, but the banks are making the loans to blackstone. And then they're dumping them. Right. And then they're handing them, and then they're handing them off. And that's, and that's the real issue at the end of the day. Like, where, where did the origination of the housing crisis start? It didn't start at Goldman.

It started in the, with MBS in the shadow banking system, according to Posner and, you know, the people who really covered that. So I think, I think that this is, if we were to ask, like, what's, what's the highest likelihood of the, where the current crisis is? Oh, and by the way, we've already seen a lot of issues. we already are seeing refinancing challenges coming. And we're also seeing the fact that the United States government is going to have to refinance a lot of its debt and could potentially crowd out those private credit companies. And that's very comparable to some of the things that we've seen in past. The private credit guys, though, would say, okay, so we're the only people who are going to have defaults.

Right. Come on. Everyone's going to have the default. Everybody. Yeah. This is. So, but. Unless we print more money. Let's just print another 750 billion.

dollars and plug the holes because that seems to be the play. If only we can have a health crisis to give us cover to do that. There will be no appetite, obviously, to bail out these private credit companies that took loans from KKR and Blackstone and the like. I mean, obviously. There won't be any appetite, but they'll still try to do it. Can I ask you as a follow-up, one of the things that's really interesting is that we used Dodd-Frank and Basel 3 and all of these things.

to keep banks out of this business of making these loans. And that is why we have the Apollos and the aries of the world at the scale that they are. And it's a good thing. We separated the deposit taking banks with nurses and police and firefighters where they're putting their money. We separated that from people making loans to, let's call them, lower quality borrowers or riskier loans or whatever. Good. However, the banks over the last couple of years couldn't stand stay on the sidelines completely. So they're not directly making the loans. They're funding. They're financing the loans. They're financing the loans.

I'm not suggesting that that's some sort of like systemic thing. But I would say they're not ring fenced from this circus if it goes sideways. One of the things that I think we have to take a little bit of a step back in discussing this is you have to look at what has happened in this market for the better part of 18 months. Let's go back to Japan. Let's go back to the Japanese crisis. Biggest drop since 1987 on August 5th, 2024, right? Since then, and I think it probably happened again, since then we have had volatility spike, and then, pulled back by 40% in 10 trading days. That had never happened before before 2011. And my point is, this is what is, this is policy related. This is being, this is Japan stepping in. This is, this is the Treasury Department stepping in. This is the Federal Reserve stepping in. And it's just become constant. It's just this process. And I think that that is one of the other underlying reasons why this market's just doing what it's doing. There's ample capital in the system. And as we know, there's always ample capital until there isn't.

And that is why my concern is in the private credit side because it's opaque and because we've already seen what's transpired. We've already seen these, these types of moves. And I don't, I think it's just going to be a constant theme that we're not going, it'll go away for a month. And then it's going to come back in April. And then I totally agree. So everybody is concerned.

Blackstone's equity is down four. 40 plus percent. All right. Nobody, nobody does not know what's happening here. But I think you're so right because B-Cred, which they just had a big redemption for, which they met, 26% of the portfolio is in middle market software companies. So if Salesforce is under trouble, if their business model is under trouble, can you even imagine companies that are one, one-hundredth of the size? Right. So these, the payment and kinds that we keep hearing about, the defaults, which we haven't heard anything yet.

There's really been nothing. There's been some fraud, some write downs. But we haven't even started to see the underside of some of the stress in these portfolios. And that is what makes this even just so much more bizarre. Like the returns are good. The defaults are not there. But they're pricing in GFC like defaults. And in 2008, 2009, I think high yield.

just, I don't know, it's not a perfect proxy. I think defaults were like just above 10%, maybe 12%. And that's what is being priced into some of these BDCs right now. There's leverage there, so that's getting washed out. Yeah, ironically, the HYG and JNK ETFs, which you used to be able to use as a proxy for visually being able to see stress in the high yield market and the junk bond market, they're not as effective because those portfolios are way higher quality than they used to be. Like the bonds that make those, that index, both of the indices upon which those products

are based, they're just better credits. I don't know if they'll stay that way. But that's not a good, that's not a good canary anymore. That canary has been upgraded to, I don't know, a cockatoo. Like it's not, it's not even in the coal mine. Those are better credits. I think in this cycle, the publicly traded BDCs are a way. better. And it's not to say that they couldn't be wrong. But I told you six months ago,

I'm watching those more than anything else because that's like real time stress. There's this, there's that scene in the big short where they're talking about mortgages and they're like, who shorts housing? And then they stop and they go, oh my God, this is down like, MBS is down like 30%. And it's, it just comes at you really, really quickly. And you don't even realize in real time that it's happening. And I have a, I have a value reversion model. that we built that I pulled from a lot of different academic sources. And right now, looking at this, it's all BDCs, like, from like, from like value quality perspective, from reversion perspective, from the ability, like Warren Buffett rankings, it's Chicago Atlantic BDC, Manhattan Bridge

Capital, Chicago Atlantic real estate financing, BCP Invested Corp, Carlyle secured lending. Like this stuff looks dirt cheap. So, Gary, this is my point. Yeah. Everybody sounds like anything I want to buy right. Hold on. Hold on. Risk is like risk.

The subprime is always, and it's not to say that people didn't see subprime coming. Right. But fucking everybody is all over this private credit trade. Everybody is bearish. The equities are bombed out. And guess what? What makes me feel a lot better about this not being the next subprime? These things are illiquid.

So yeah, they'll bleed 5% a quarter until people calm down. And if the. returns stay reasonable, eventually the 5% selling pressure will abate. So that makes me much more optimistic, not that I'm naive to the risk, that this is not the next subprime. Do you think that there are a lot of people that want it to be? Yes. The financial time certainly does. There's a Schadenfreude element to this where people who did not make money in this space and have watched these guys become billionaires and they think they have no exposure to it. I think there are a lot of people rooting for defaults and blowups, and they want to see some of these guys personally

humbled. And I think the same could be said about what was going on with Silicon Valley Bank and people wanting to see the startup economy implode. I think there's an element of that. And I'm not saying the reporters covering this are definitely in that camp, but it's really easy to spin every single headline as being dire because there's a huge audience who will click on that. There's a, I would say two elements of this. And I want to, I want to phrase this properly. I still think that there is a angst and anger that will always linger from 2008. So do what? Particularly for people who are under 50. And I, and I want to, I'm, I'm going to be 45 in a month. how many financial crises have I lived through in my lifetime post 2000? It's a lot. It's like

it's 2000, 2008, 11, 15, 8, it's a constant process. And on top of that, I think there's a cultural issue here in the U.S. And it's kind of emerged over time. But people are really, I don't want to use the word bloodlust, but there's like, there's an element of revenge that is kind of like an undercurrent of our system. Especially for the billionaires. Like, everybody wants people on top to have to, if you're on the bottom of, right.

If you're on the bottom of the K, you would love nothing more than to see private equity guys that bought your favorite sports team and whose kids are getting into the schools that your kids can't. You would love to see them taken down a peg. Dude, in handcuffs, people would celebrate it. Honestly, that's the world that we live in.

And even if we, and I think it's even if we are, that group is impacted. So back in the day, well, we got to bail it. We got to bail out 2008 because the housing market's going to go down and that's going to impact you personally. At this point, though, I think there is a large group of people that are willing to take down their own ship if it takes, you know, some other people down with it. And that's, I think that's political, especially, especially they'd love to see rents come down. Yeah. Because, yeah, I mean, look, I don't think people want to see a ton of job loss. I don't think people want to relive 2008. Yeah.

But they, they do want to see some karma come for the top half of the K. We, I live in Maryland. That's a normal human instinct. I live in Maryland right now where our electricity costs just keep going up. And, you mean, the, the anger here is not only am I paying for all of the AI centers that are being built in Virginia with my, with my money. In addition to that, I, I'm paying for what will ultimately potentially take my job, right? So that's like hiring your replacement and then giving them your money in the process while you're training them. And that is very palpable here in Baltimore County.

Yeah, that's the crazy thing. Like there was an employee who was not laid off by Block. Last week, this week, I didn't lose track. This is like probably two days ago. Jack Dorsey came out and said he's firing 40% of the company. Right. They're going to go from like 13,000 employees. back to six or whatever or seven and uh somebody who is part of the 60% that gets to stay

quit anyway and she went on like this social media tirade and she's like dude they've been shoving this AI shit down our throats we have to use AI and everything none of it works none of it is helpful there are no efficiencies from it but they've just been saying AI AI AI AI and then after two years of that, they fire half the company. And it's like they made everybody use AI so they could figure out who they could get rid of sort of thing. And that was like the last insult.

So I do, I agree. I think societally there's an element to that out there. I have a question for you guys on what can break this. So John, throw that bespoke chart up again, please. So I mentioned that these 1% reversal days, like the down 1% and finish is green is, is bullish. There's only so much that we can withstand. Like if you continue to see this, that will turn from bullish to bearish. And what I mean is the red dots that bespoke has in this chart, I know it's a little bit

hard to see. Those are the times where it's down 1% at the low and it finishes green, but it's the first time in three months. Okay. So that's what we just had. Right. That's the first time in three months that's happened. when you start seeing that cluster,

and it's really only happened in the lead-up to the dot-com bust in the aftermath and 2008, shut off. When that behavior starts to become a pattern, that's when eventually the flush happens. So if we start to see more and more of these, I'll become concerned because that's what changes behavior. So what could break this meeting, like what could break the cycle and get us out of this kind of weird market behavior?

I posited on Slack the other day, a really big strategic acquisition or two. Not a private equity take, not an LBO or not a financial transaction, but if a big European bank made a bid for Apollo, that would get people to shut the fuck up very quickly about private price. I'm saying the opposite, Josh. I'm saying to the downside, what could break the retail's likelihood of saying, you know what? Like, I touch it still three times.

I'm going to, so you mentioned like the money. Boots on the ground in Iran would probably do it. The money goes from Microsoft to Halo stocks or whatever. The money doesn't stay still. Eventually, it will stay in the money market. Job loss. That's the answer to your question. I think you're right.

Tax payments. People won't change, people won't change their investment behavior until they lose their job. And if enough of them do, that will, that you could say goodbye to the 401K inflows for at least those people who are affected. But we haven't seen it. In fact, the ADP report this week, Garrett, you called it a narrative violation. What do we make of this situation? Where are all these job losses that we're pricing in?

I just wanted to add one last tax payments might be the other thing, right? So seasonally, we have a lot of, we look at the money markets going back 2024, 2025. Yeah, but that's a short term phenomenon. Sure, it would take us into April. But then the question is, all right, well, if it takes us into April, does the, does Does the Fed continue with its asset management strategies? I mean, naturally what this is about. But we're getting the benefits of the tax deal this year.

The 2025 tax deal, the big beautiful bill, those benefits haven't shown up yet. That's now. That's this year. So that might be a countervailing force. This is why I just follow one number and one thing with momentum and then I just trade accordingly. I was going to say, this is why I stress it. Yeah. Yeah.

Yeah, 100%. Yeah, let me ask you this. One of the things that I said, you know, if there's anything that's like flashing a yellow, maybe a shade of red light, it's the fact that staples were going parabolic. Yes. Like that was concerning.

It just, I was concerned by it. And those stocks, if you look like, those stocks have gotten whacked off hard in the last four or five sessions. And as a matter of fact, we have a chart showing the sector dashboard. John, can you throw that up, please? So this is looking at a bunch of various factors above moving averages and making new highs versus making new lows.

Right. And I feel really good that staples are now at the bottom of the barrel in terms of like weakest breath. Now, I don't feel great that financials are down there with it. I don't feel great that at the top of the leaderboard. How fast those cooled off. Wow. Yeah. I don't feel great.

I don't feel great that utilities, energy, real estate are the best and industrial materials. It was like that to me, that that does feel late cycle. Like it just does. Now, maybe it's healthy rotation and maybe the tech trade comes back and it was just a short term rotation. But what's your take on what we're seeing in terms of the leadership with these? What happened to me? Did I just chunk out?

That's okay. We still hear you. Just put your, just click the, I think the data. I think the date. What happened? I think the data center took your. Yeah. I think they hear me.

We hear him. Took your juice. We hear you fine. No. Give me one second. All right. This is pre-taped, so we can, don't worry.

No, no, no, brush. And he's gone. By the way, this, this is awesome. He's so smart, right?

Really good conversation. There we go. That was weird. All right. Well, you're back. So, so,

Garrett, what is your take on? Somebody's trying to silence you. So, So he is near the capital. I am. What is your take on what I described as the defensive nature of the leadership board? Well, it reminds me, and it's very comparable to 2022.

And you have geopolitical events transpiring. And you ask, like, what can take this down? Well, a significant move in oil can, significant move in food can. And then go back to June 8th. I mean, the XLE falls from 46 to 34 in like three weeks. weeks, right? So that might be it. It might just be a bunch of, you know, funds that are following the momentum in the defensive, following the momentum in the energy, following the momentum in the industrials, they all just wake up one day and say, you know what? We're taking profits and we're doing it right now.

And that is, that's exactly what happened on June 8th of, and I think we fell 15% S&P, maybe 12% in a very short period time. And it was just everybody woke up and said, that's it. Time to, time to exit. And then we had another hated rally through the summer. That was a, Like one of the most hated rallies that ever been a part of was after that huge fund sell-off, we burned higher all the way through when Jerome Powell spoke in Jackson Hole. Do you think the rally in stocks and gold last year proves what you're saying about liquidity being the primary thing? Because like what else would cause that? it's a very strange thing to have golden stocks raise each other higher.

And when I see stuff like that, like my, the obvious answer is, yeah, Garrett's right. This is just, this is just money being pumped into the system and buying, buying whatever it can. It's, it's not me saying that. That's Stanley Drucken Miller back in 1988 in Barron's saying, hey, you know, you know what you really want to do? You want to be involved in an environment where the central bank is accommodative. and boom, like, you know, absolutely nailed that call in 88 and had a great run through 90. You know, as far as gold, last time I was here, we chatted, I said, you know, what was the major catalyst that a lot of people still forget?

And it was the fact that we weaponized the dollar against Russia. And you start to see that run in gold transpired. That's when all the central banks started to bid. And then the retail trade in China has just been off the charts. And one last thing to keep in mind, you know, we're at the top of our cycle, China is actually at the bottom of theirs. So if China is engaging in stimulus, they actually would, that would benefit gold. It would benefit oil. It would benefit natural gas and other metals. And it goes back to that argument that China is a manufacturing economy and we are a financialized one. So that when we do QE, we, we, we tend to benefit our banks. I want to hit your idea, crowd strike against blackstone minerals. Tell us, tell us what you're

writing about and what's the idea here. I was, I was, I was, I was, why, you guys last week and Michael had a had a thesis around CrowdStrike, I believe. And, you know, I was curious about it because, you know, from a fundamental perspective, I found that, I found that stock to just be, you know, 20 times sales, unprofitable, potential AI disruption. And granted, like it's a great momentum stock. But then you've got Blackstone Minerals, which is cheap, pays 8 percent, highly capital efficient, and is, you know, owns the royalty rights on the fuels and natural gas that's going to actually be pumping, you know, energy into AI. So I was just, like, I was, I was curious, you know, what you were seeing in CrowdStrike,

from a valuation perspective that made you excited about it. So I, I bought Crowdstrike at 355 and I sold it yesterday at the open at 400. There we go. So that was, I mean, and it traded up to $4.25 this point. No, eight, no 8% mineral yields involved. No, but you know what? Unnecessary. I think one of the lessons that I've learned over.

a long period of making a lot of mistakes trading is what we said earlier. You have to know what environment you're in. Right. And I was not looking to be an investor. I think Crowdstrike is the best company in the space. I mean, this is what Josh is. I think is word for it. Right. But that's not what I'm doing here. I thought, I thought the two day, the 10%, the 9% back-to-back sell-off was absurd. And we know how these markets rebound. And I thought I'll shoot my shot. And if I was wrong, I would have taken. See, I'm winning out of the way, Garrett. If I was wrong, I just take a tax loss, right? No big deal.

So that's my thesis. Josh could speak to the longer term thing. The crowd. So momentum. The crowd strike, multiple needs to be thought of in the context of it being a network effects business, not a SaaS business. The way Falcon works, imagine an invisible shield all around the globe covering the most important governmental institutions, NGOs, mega corporations, and corporations, and

mega corporations, small mid-business, imagine this invisible shield. The more companies that join and utilize CrowdStrike, the more threats come in. And the CrowdStrike, the CrowdStrike AI will take an attack on one company that's under this umbrella, learn from it, and instantly share that knowledge with every other company that's under that umbrella. So it's a network effects business. If CrowdStrike had three customers, the product is not as powerful because you're only Intel sharing amongst three potential victims of hacks. If you have 30 companies, it's 10 times more powerful. If you have 300 companies, what happens when you have 3,000 companies or more, which is

the case with Crowdstrike, then all of a sudden, every single attack just becomes Intel for how to better protect all of the other thousands of companies before that hacker could get around to them. And that is why it's got the valuation that it has. I think at $100 billion being the most important cybersecurity company in the world, it's probably undervalued. And that revenue, that $5 billion plus in annual run rate, ARR, it's catching up. It'll catch up slowly. Valuation has a premium because people understand once you're in and under the umbrella, you don't fucking leave. You'd have to be crazy. You'd have to be crazy. literally crazy to rip this stuff out and go shopping for another vendor.

So this is not scientific, but I think we all agree. I this maybe we do not scientific, but for the leader in cybersecurity to not be, to not one day be a half a trillion dollar business. Like, yeah, you're going to have to eat shit, right? It's not going to be a smooth ride. It never is. But that's a type of, like Josh has, Josh has the personality, which I don't, to ride, to ride massive winners.

which is really fucking hard. Yeah, it's very hard. Right? Like, Josh has been in Nvidia forever. And that's what it takes. If you're going to make 3,000% in a stock, I can't do it. I just know I can't. If I'm up, I saw a crowd strike for a 12% gain in four days and I'm like, woohoo.

Right? Like, that's just my personality. Cyber's Tam is faster, bigger and faster. The cybersecurity opportunity, Tam is growing. They can't, like Gartner and. all these research organizations, they can't even keep up with their own estimates. They keep going higher. And AI, AI is like a gift to cybersecurity because now you're 1,000 Xing the amount of workloads and every workload needs to be secured. And every time Snowflake and Microsoft Azure

pass some corporations data between each other, that's a workload transaction that needs security around. So AI is an accelerator for threats, not a, and obviously a revenue accelerator too, which I think Kurtz made the case for on the last call pretty effectively. He says it better than I could say it. The reason I bring up BSOM and the way that I think in terms of crowd strike, I see that as something that I want to trade. I see it as a, you know, a momentum stock up and down both ways. And what I look at, we talked about this briefly last time. I was here. One of the things I went back and I did back in November, I started to look at, again, thinking about ends of times. What were, what did all the wealthy family zone over time? Like back in, back in Rome, back during the fall of Judea, back during the, you know, the revolutionary war, back during the, you know, French Revolution. It's always choke points. It's always like toll roads, things like that. So land, bridges, land, yeah, waterways, things that kick off cash. concubines.

Just saying. Baseball cards. So a name like BSM or energy transfer or EPP or T.O.Z. Is that related to Blackstone? BSM? Is that related? No, no, no, no, no, no. So they just happened to be called Blackstone Mineral? Yeah.

It's an interesting company. It started as a lumber company back in the 1800s. And they then found out that there was just a ton of oil under all of their lumber. Where is it? became Texas. Did you watch train dreams? No. Holy shit.

Oh, come on. Holy shit. Are you serious? Now I got to read the book. You loved it. What did you watch on your phone? Yes. Okay.

That is a you. I was watching a Nick game while I watched it. No, that is a, no, that is a you movie. Yeah, no doubt. I was. But, Florida. Stunned. But you could say.

But anyway. Oh, Nor, Nor, Noram. Sorry, Nuremberg on the plane. 12 out of 10. I'm watching that tomorrow. Michael Shannon. What's the kid with the overbite? Rami Malik, Freddie Mercury.

And who's the third guy in it? Russell Crow as Herman Gurring. Holy shit. With a German accent. This is out of the park. So speak of German accents. Garrett, how do you find, what you keep talking about liquidity? and the repo market and what they're doing over there.

What are you looking at? Like, you keep talking about this phenomenon. What exactly, like, for the listeners, are you seeing on the screen to judge whether or not there is favorable excess or a lack of liquidity? So the primary source that I pull from, I had studied cross-border capital in 2018, but I pay very close attention to what Michael Howell writes about. So Michael Howe's on Substack.

he founded cross-border capital. What's his lesson? How, H-O-W-E-L-L. Okay. And he created a, he created a global liquidity index. And he has written about this, you know, for years and years and years and years and wrote a book called Capital Wars back in 2020. And what was interesting about it and the reason that I subscribed to this,

I was trying to make sense of the 2020-3 rally. because if we go back to 2022, and I know that J.C. had talked about this. He's like, everybody was bearished and we turned around and we went bullish. I was trying to make sense of that because I remember there was a, I think we were at 3,800. There were people calling for 325 because the expectation was that the Federal Reserve was going to run off its balance sheet. And Hal wrote in the Financial Times, I think, December 2020, bottoms in. And he explained his cycle. And once I read that book and then I started to analyze that and assess that looking at federal reserve liquidity, looking at the type of auction sheets from the Treasury, focusing heavily on SOMA, looking at what's happening with the bank, Japan. What his number is, it's a liquidity index. It is all money outside in addition to the M2. And there's a multiplier effect on it. And he's got it somewhere around $185 trillion. And that's all of the money that is used for the purposes of refinancing. because basically six out of every seven new dollars that is created is used to refinance existing debt.

It's not used to actually fund growth. How much does that 185 trillion fluctuate from, I don't know, what periods month to month or quarter to quarter? Yeah, there's a chart somewhere that I would have that I'd have to pull for you. But I think that during the 2020 crisis, it pulls back from like 100 down to 75 really quickly. and then the Fed prints, and we start to take back, we start to take up again. Oh, so this thing can move? Yes, and one of the things that's interesting about it, so we built a momentum indicator. It's basically three different things that we look at, but the primary thing is we're just

taking the number of stocks that are breaking out versus breaking down in a very academic perspective. This goes back to the work of Grant Henning, who's a very prominent momentum trader. He wrote a book called The Value in Momentum. trader back in 2009. And then we layered that with J.P. Morgan's 2015 and then Cliff Asnus's Momentum is Everywhere report in 2012. And we built this model. And it's just basically green minus red equals positive or negative. And I'm not saying that it predicts everything. But when this goes negative, that's where we've had these big events. So for example, it went negative on August

1st, 2024. Three days later, Japan crashed. Will you email me the next time it goes negative? please? I will. Where do we stand? Where do we stand now? You're a subscriber to me and the money printer, aren't you? I'm not. I'm not. I'm a capital wave report. I will. I'll give it to you for free. Okay. So, and the point of what that is measuring is there is a relationship between liquidity, momentum, and then returns, right? So momentum lives upstream, or forgive me, liquidity lives upstream. Momentum is the result. Equity returns are the consequence. And that's a pretty simplistic way of looking at markets and I don't try to overthink things. Where do we stand now?

Right now we're negative. We've been negative since the last time that it went negative was January 28th. Two days later, gold and silver crashed. And then a week later, we had the biggest, that huge momentum move that transpired. I think it was the Wednesday. When did your model flip negative? January 28th. It's such a weird market.

Even though we are at all time highs, right? And that's what's really crazy about. it. And then the last thing that we're focusing on, there's a, there is a slide that I put in the deck and it's just a breakdown of all like the breakdown stocks right now. So you've got, I don't know if you guys can throw it up or not. Yeah, we have it. Yeah. Yeah. So these are, those are the stocks that are part of the equation that are breaking down right now. And as you'll see, you know, Campbell's is on this list. What is that? What the hell is going on with Campbell? I just brought up the trial. It makes no sense because you would think consumer defensive. But

Didn't the guys say that they're serving horse meat or something? Dude, it is. No, this does make sense. It's a perfect downtrend. This stock looks like a perfect trend. Generation Alpha is never going to drink metal cans filled with salt water. So this is a company that is constantly forced to reinvent itself every three years. And it never quite does.

And it's been a value trap my entire career. But put that one aside. Brown Foreman's interesting to me because it's also consumer defensive. This is basically bourbon and whiskey, right? When you have the alcohol stocks breaking down with the private equity stocks, that's some shit going on. I don't like seeing genuine parts on a list like this because of how pro cyclical that company is. Literally, like, you do not want to see the auto business in trouble.

That's one of the worst signs that exist in the stock market for the health of the economy. So I don't love that. interesting to see a bunch of banks on here too. That crept up on us and happened out of nowhere. Yeah, I get it. I like this. This is a good window. So what we do with that at that point is now we created a, I mean, I love Claude because as I said, it's just like strapping a rocket to my back because I'm just naturally curious about building things. We built a, we built a free website for insider buying that scrapes from Edgar. So now what I'm doing is I'm taking those stocks that are breaking down. I'm looking for insiders to start buying.

And we've seen this happen. We saw it with MSCI. We just saw a huge buy with the trade desk. Trade desk is up like 30% today. That's a performance stock today. TDD was down, was on that list, was on that breakdown list. And then there was a little bit of insider buying. The second that stock came off that list, there's two different things you can do.

You can trade it to try to buy it, trade it to the upside set a tight stop. I saw spreads below where the CEO or the CFO purchased the stock. So I'm willing to take possession of the stock at a lower level, but I'm targeting like a 20% return and 80% probability of profit and an annualized return somewhere in the 100% range. And I just do that over and over and over again. If the stock falls back on the breakdown list, I get back out. But, you know, what we're seeing is that even the insiders are not calling the bottom for names like KKR and Aries right now. Garrett, I want to let people know where they can follow you for more. and something tells me your website might crash once this episode goes live.

So give us the URLs. So that platform that we just showed, that stuff is not going to be live for another couple of weeks, but that's just on my website, garibaldwin.com. We'll make it accessible. Me and the Money Printer is at Substack. I never miss that. I never miss it. We have a paid level called Capital Wave Report that follows liquidity momentum.

insider buying, we put that reading up every, every day. If it goes positive, we send an email out, letting everybody know. If it goes negative, we do the same thing. We created insider stock buys. I think it's, well, just read the article. It'll be in there. And then postcards from the edge of the world is my other thing on substack. That's a little bit more like polysci-ish almost, right? Yeah. And again, it's, it's, again, that focuses on the choke points, right? So, you know, I've talked about AI. I've talked about a lot of these other, elements, but we do have a stock recommendation that aligns with it each week. And then in about a week, week and a half, I'm going to start writing more about the AI phenomenon and try to focus on

that. So those are the two primary things, figuring out what else I'm going to do relatively soon. My man, you crushed your first appearance on the compound and friends. We're so happy to have you, and we'll do this live in person in New York sometime, maybe this summer. Sounds good. I love it. Great to meet you, Michael. Thank you both for your time. All right, dude. Awesome. Guys, thank you. so much for watching and listening. We appreciate all your reviews. It tricks the algorithm into thinking that this is a good podcast. So please help me be a part of that trickery. And don't forget to subscribe. And we'll talk to you soon. Thanks for listening. Thanks for watching.