The Compound and Friends - Turbulence Ahead

Episode Date: February 11, 2022

On episode 33 of The Compound & Friends, Michael Batnick, Tony Dwyer, and Downtown Josh Brown discuss: Tony's 2022 core thesis, demographic tailwinds, corporate credit, Bitfinex crypto heist, bonus season on Wall Street, Super Bowl picks, and much more! This episode is brought to you by Masterworks. Visit https://masterworks.art/compound to skip the 10,000 person waitlist. See disclaimer at mw-art.co/x. 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/disclosures/ Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

He's the only Wall Street, he's the only traditional Wall Street guy talking about $100,000 Bitcoin. That just answered it. That's gotta be it. As usual, Josh with the answer, you know, it comes in high. He did say the market was gonna triple, right? Right. Quadruple. Is that what he said?

Triple. I'll say it's gonna double. Where are you going with the double? Oh, these are new. I don't even get out of bed for a triple. I like these. Chewbacca. I'm not watching Boba Fett, by the way.

Really? I don't have time for it. Is it good? Are you a Star Wars fan? Yes, of course I'm not watching Boba Fett, by the way. Really? I don't have time for it. Is it good? Are you a Star Wars fan? Yes, of course I'm a Star Wars fan. Then kill yourself. Are you a Star Wars fan? Did you guys see The Reacher?

Have you looked at watching The Reacher? No, what is that? Jack Reacher? That's a new series on Prime. Is it related to the Tom Cruise Reacher? It's way better. It's based on the same books? It's based on the book.

Those are Ben Spader books. But it's really out of the book. It's like a big hokey guy like in the book. I looked at the guy and I'm like – Is it violent? I'm not – yeah. Yeah? I'm not – yeah.

Okay. I'm not – I was thinking to myself, there's no way I'm watching this. This is so hokey. Yeah. And I got through the first one. I was like – It's Amazon. Okay.

I need a new show. I need a new show. Wait, you haven't said shit about public health. I did it in one day. Well, if you're a fan of Star Wars, then you have to be watching it. It's actually really good. It's very good. Say no more.

I won't watch. Do you know who made it? It's Robert Rodriguez. Do you know who he is? Yeah, he did Desperado. Dude, he's one of the best directors of our lifetime. I know him. I know.

So this is his series. He also did From Dusk Till Dawn, I think. He sure did. He sure did. That movie was a trip as an 11-year-old seeing that movie. How old was I when that came out? I don't know. But I saw –

You're 11. I saw Once Upon a Time in Mexico in the same theater as Rudy Giuliani and his daughter. And it is the most disgusting, violent movie. I remember sitting there with my dad. No, it's not. So we walk it. We're in the East 70s or whatever. There's a movie theater,

maybe on 2nd Avenue in the East 70s, and they live in Gracie Mansion. So his daughter at the time is a teenager when this movie comes out. So I go with my dad. My dad and I both live on the Upper East Side. My wife doesn't see movies like that with me, but I'm like a Robert Rodriguez nut.

I see everything Tarantino, everything. So we go to the movie and we see Rudy Giuliani and his teenage daughter walk into the theater. Within five minutes, Johnny Depp is telling a bad guy he's going to poke his eyes out and f*** his skull. And my dad starts hysterically laughing and he's elbowing me and he's pointing and Rudy's head is in his hands and his daughter is sitting next to him. The most violent movie of all time is from this machete. Oh, yeah. Remember that? Oh, that's crazy.

Do you guys remember Slapshot? Yes, of course. Okay, so Slapshot. My kids are playing hockey. They're little boys, like 9, 10 years old. I don't remember. I think I must have been out of my mind when I watched it. Yeah.

I didn't remember how it started. Do you remember how it started? Oh, 1977. I haven't seen this movie since the 80s. It started talking about anatomy in the first sentence. Yeah, yeah, yeah. I'm like, whoa! That's a wild movie, even for the first standings Yeah, yeah, yeah. And I'm like, whoa! That's a wild movie.

Even for stand-ins back then. Holy cow. Slapshot. Is this mic right, John? Is it good? Yeah, it's good. Okay, good. It is interesting being in that position where you're watching something

and not thinking anything of maybe the offensiveness or whatever. Oh, yeah. Versus when you're with somebody else. When you're with your kids. Yeah. Most of the funny movies, like all the Monty Python movies, I was not of sound mind.

Can I tell you something? Like listening to Howard Stern is one thing, but this is Howard Stern with your parents. But that shit has sailed with my kids because because of TikTok, they were listening to rap songs that ordinarily, if it came on the radio and I were driving, I would turn it off. Yeah, of course. Like there's five female rappers who all they do is like rap about their private parts. Yeah.

And they're the number one songs in the world. It's crazy. It's not even like on the margins. It's like this is the number one song in the country. It's a female rapper and a female singer and they're – right? Fine. I have no problem with that. singer and they're literally right fine i have no problem with that the thing is the kids hear these songs at seven and not only do they know the songs every single lyric they have dances to them

so then wow right so i'm with my friend adam and his daughter i think she's like seven or eight years old and she has a whole dance routine to one of the most i can't even say what the name of the song is and he's just sitting there sitting there like, he starts yelling at his wife at a barbecue at my house. He's like, get over here. What is she saying to me? Why is she grinding on the floor and saying those words right now? Oh, my God.

I have a heart attack. Yeah. He's about to call child services on you. Oh, boy. And to explain to him, it's TikTok is raising your kid, dude. It's on you. Oh, boy. I have to explain to him it's TikTok. It's raising your kid, dude. It's so true. I was lucky.

My kids were in teenage years right as before Facebook. Right. Right. Like as it was getting. I can't even imagine. You're fortunate. Because I don't have any social media. I didn't do it.

I killed Twitter. I killed. Good. Why would you be there? Buddy, you and I went off it unbeknownst to each other at the exact same time. Are you back on it? No. Nobody could understand

why I did that. It's almost like when people say it like, when are you going to tweet again? It's like asking me, when am I going to put a heroin needle in my arm? A dirty heroin needle. How do people not get that? Because they can't tear away from it for even two days. I'm addicted.

I can't leave. Michael can't leave. We miss you, Josh. I can't leave. Holy cow. I can't even deal. Dude, you have Slack, right? Slack is Twitter featuring Josh Brown.

Internal corporate Slack. It's good enough. Yeah, Josh. Look at this. We have Slack, too. Tony, Tony, on Tuesday, which was not even 48 hours ago. Actually, that was yesterday. Josh said there's going to be the mother of all double tops.

No, I didn't. For tech stocks. Yes, you did. Yes, you did. No, I didn't. Yes, you did. I said lower high, lower high. Fine.

Guess fine. Then wrong. Why wrong? What are you talking about? Right here? Yeah. Or right here. That's not the top.

I thought, no, no, no. You thought, you said this was going to be the lower high and we would have another lower high. No. This is the high. This will finish before it gets back to that. How? But let's not do the show before we do the show.

The lower high is already invalidated. Let's not do the show before we do the show. But we're at a higher low. Whoa. That sounds distorted. That sounds terrible. What happened to Francesa? Put my mic on.

It should sound like, turn my mic on. Yeah. turn my mic on yeah what reports after the bell tony you know what anything what reports today not i didn't see anything major all right last week was busy i'm like as you guys remember i i know very little about individual stocks because I'm not allowed to talk to them. So I kind of lost track. Smart. Better off. We had Disney this morning. I didn't even see.

What did Disney do? What did Disney say? What did they say? I got to listen to that. Disney. All right. How are we looking, guys? We're good.

Wait, wait. Hold on. Hold on. Hold on. I'm not. I'm not. I'm not. Does this go as video too, or is it just audio?

Formate. Everything. Everything. This is, this will be an IMAX. All formats. Don't be surround. All formats, my man. All right.

Giddy up. All right, let's do it. Let's go. Let's go. All right, let's do it. Let's go. Three, two, three, three. Welcome to The Compound and Friends. All opinions expressed by me, Michael Batnick, and our castmates are solely our own opinions

and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Duncan, did you know that contemporary art beat the S&P 500 total return by 164% from 1995 to 2021? No, never would have guessed. I didn't know that either, but it's true. According to Masterworks.

Man, I miss this one. Masterworks had a Banksy painting exit through the gift shop. You know how long it sold out? How fast? Three hours. Wow. Three hours. That's a popular one.

You can invest in blue chip art at Masterworks. You can get from artists like Pablo Picasso. I know that guy. Actually, I own one. The Hermes Assis. I own that. Banks who we already mentioned. Andy Warhol. All you have to do is go on your computer.

Go to www.masterworks.art.com. Episode 33. Very special guest today, Mike. What do you think about this? I feel great. It's pretty good. A fellow bald. We don't have enough balds on the show.

I'm outnumbered. I'm always working on it. I'm almost where you guys are. You're almost looking good. You know that I aspire to that. It's a 2024 story. Ladies and gentlemen, Tony Dwyer is in the house. Tony, welcome to The Compounded Friends. You and I have done stuff together, video stuff together.

This is the new show that we built as we exited the pandemic where we said let's actually get away from the zooms and see people in the real world you you like i'm all in on that you are all in on that okay i needed to see people how many days a week are you now uh reporting somewhere other than your house what are you doing what's your work schedule like well it really hasn't changed i I probably do. I travel a lot. So it'd probably be a couple days a week. And honestly, I don't know how you can collaborate without being around and seeing other people. You can't.

As a young person, I got into strategy because I worked with Greg Smith, Ed Yardeni, and initially a guy named Joe Feshback. And those three guys, I walked into their office because I was at the office and I told them, listen, I'm a political science major from a small school in upstate New York. I don't know anything about what you do and I'm supposed to recap it. Can you please – right? I learned. So can you please teach me? I ended up playing basketball with Greg Smith, racquetball and squash with Joe Feshbach and I would talk to Ed every night.

Where was this? What company? This was Prubash Securities back in 1987. May of 1987, I got in the game. Was that related to Prudential? Yeah, it was Prudential Bayes Securities. Prudential Bayes is B-A-C-H-E. And then it became, you remember Larry Wachtell? Yeah, sure.

Larry Wachtell was the guy that taught me how to communicate about the market. I'm so glad you just brought his name up. I want to ask you a flashback question a minute. Larry Wachtell had a hotline on his desk for brokers, prudential brokers. And like anybody who was selling securities for the firm could just call him. And all right. I worked for a guy. I answered that phone okay but i got a story for you when you're done hold on i worked for a guy we were like some bullshit brokerage firm in manhattan but the principal of the firm came from prudential and so he just kept larry wachtel's number yeah this is five years after he left uh-huh he would just like when the market was acting strange

whatever he'd be like let me see what's going on. He'd go on speakerphone with, like, five of us in his office and call Larry. And Larry would deliver this 30-minute, I swear to God, soliloquy. Is it monologue or soliloquy? Monologue. I don't know. It's whatever you want. You know Shakespeare? I think soliloquy works there.

It's a monologue. Well, no. A monologue is something you speak out loud. The soliloquy is something in the character's head. And they speak it aloud, but it's meant to – all right, it doesn't matter. Sounds right. He would do 30 minutes of bullshit like the raids and Europe. And it was like almost a recording, except it wasn't.

He really did that for anybody that called. He didn't even look at whose inbound number this is. So I got time for a couple of stories. Yeah, please. So how did I ever get, how did a guy like me ever get on TV? Yeah. I didn't go to B school.

Six pack abs. Same as me. Same as I got now, right underneath the rest of it. Right. So anyway, I'm one of the few people that would answer Larry's phone

because brokers would literally call him up and say, how do I turn on the computer? It was when it was just green and white stuff on the computer. By the way, for the listeners, Larry Wachtell was the chief investment strategist, right? No, no, no. What was he? You know who Larry was?

He was the head. Head of research? No, he was a reporter. What do you mean? Larry was officially a reporter at Prubase Securities. What does that mean? He reported the news as it came out and became – he then interpreted the news better than anybody else before then or after. Sounds like a one-man Twitter feed.

So I'm going to give you – like this is an interesting – I love this. Yeah. So nobody wanted to answer his phone because they're answering questions like how do I turn on the computer? Like how do you print something? And Larry would do his best to tell him. And Larry had this great thing. Like if somebody called up, he would end the call as soon as they said okay. He was the most gracious man on Wall Street.

Yeah. And he would – as soon as somebody said – you know how we say, I like X, Y, Z. Right. And okay. And he would hang up the phone as soon as he heard the word okay. And you would hear their next question as the phone is on. Right. Well, because the phone right because well

because the phone never stopped so i got on television because larry wachtel was the only guy at financial news network fnn that was on television other than the anchors at the time and i used to always bust his chops i think his son phil would laugh i would bust his chops say larry come on old guy let the young guy in yeah right i'm picking and because i picked up his phone and worked harder than anybody else when he had knee surgery and he couldn't go up the stairs at fnn he said give the kid a shot okay and you must have killed it it was a disaster well i was told at the time yeah that um they're just going to ask you about the market and i'm this punk kid that shouldn't

have been on tv yeah Yeah, sounds familiar. And they asked the question, how does the movement in the German boond affect the future for the two-year T-bill? And you had a good answer for that? I have the same answer that I have with you guys now. I don't know. And they liked it? They appreciated that? I said, I don't know, but this is what's important now.

Oh, so I did the opposite. So I did the opposite. I made an appearance like my third appearance on tv ever you get into the database and they you know erin burnett on cnn of course so she was on cnbc yeah i remember and they're like josh we're really desperate it's like a friday afternoon they're like some some shit just went down with boeing and or airbus or whatever. And we just – we got to do a segment on it. Do you know anything about – and I'm like, no. But I mean I could do some research and just say I'm not an expert on this, but this is – so they're like, okay, it's okay. So I do it, and the first question Aaron Burnett asked me is about a forward fuselage.

But I'm very on. I'm just like, I don't really know about this, but here's this other thing that I do know about that might be interesting to the audience. And that that's okay. We're supposed to do, bro. We're not supposed to make stuff up. So another Larry Wattelism on, on when casual Fridays became a thing, people would say, Larry, how come you always dress up on Fridays? What is this, late 90s? Yeah. Okay.

No, early 90s. Early 90s. They would say, Larry, why don't you ever dress down? It's okay to dress down. He goes, there's nothing casual about running other people's money. Oh, I love that. That's so I learned. You son of a bitch.

I learned in this business from the greatest strategists ever. I mean, think about that. Greg Smith, Ed Yardeni, and Joe Feshbach. And then after he left, it became Akinpour. I learned from them, but then I got to learn

how to communicate it. Wait, Tony, before you go there, but Wachtell didn't retire with the title reporter. Did he eventually become the strategist? He was an analyst.

He was never the strategist. Never? He was never a strategist. I mean, he could have been for all intents and purposes. He was absolutely the best. He knew how to communicate what was going. It's how I learned. It's the blessing that I got. Was he in the Barron's round table? No. Okay. I believe he went one time on Rukehauser. Okay. And what we did is we, we developed at the time that it was called the equity focus group. Cause I didn't know which way I was going to take my career. I knew that I love the strategy stuff and the equity focus group there that I

built from the ground up ended up with guys like Bill Meehan, if you remember Bill Meehan. Yes, I do. 9-11. I hired Bill because what we wanted to do was communicate and coordinate what the strategy group was saying to the financial advisors so they could tie together with what the research department liked. Bill Meehan is the guy that Barry Ritholtz on 9-11, I think this is accurate, was emailing back and forth with or something that morning? Yeah, we all were.

Okay. Because Barry was doing a column at thestreet.com. Yeah. And I'll ask Barry this story. I was doing thestreet.com at that time too. Okay. And Bill was, yeah, he was in the towers. Shitty story.

All right. So my Feshback question is, is he related to the Feshback brothers? Or that was its own thing? I think they're cousins, but I don't remember. I'll ask him because I'm still in touch with them every now and then. And they were like the notorious short sellers. Yeah. They're like old school short sellers.

Press it and then press it and press it and press it. Yeah, yeah. They were great at it. They're not still at it. I don't know. It's so long ago. This may shock you. I tend to be on the optimistic side.

I don't know how you wake up bitter every day. Yeah. So I didn't really follow them as much. Big beat for Disney. There we go. There we go. All right. That was fun.

Thank you for the memories. Dude, so learning how to communicate is important. I'm of the opinion. I've said this before. We're not in a math business. If it was as simple as figure out the formula, it would have been figured out. We're going to communicate at every level. At every level.

The Fed is in the communications business. Big time. Right. It doesn't take a lot of effort to push the button to go from 25 to 50 basis points. It doesn't take a lot of effort to push the button to go from 25 to 50 basis points. All of the effort is in how they explain it and phrase it and how they get you prepared for it and how they decide to reverse themselves when they have to. It's communications business. Every firm on Wall Street, same business.

Sell side research is communicating with clients and on and on. Asset management, fund management, most people buy stories, don't buy equations. Even the quants are telling the story of why their factors are going to beat the other guy's factors down the street. So I feel as though this is the ultimate communications business. And obviously the analog for that with what we're doing every day is – Thank God because I'm not that bright. I can communicate it because I'm not that bright. Morgan Housel says best story wins. It's true.

You agree with that? I agree with good guys don't finish last. Full stop. I also agree with the best way to communicate a story with integrity and honesty is what wins. I believe you have to be a likable person.

Clients don't want to meet with somebody that offends them or is not – or demeans them. That's why I don't have clients. Right? You haven't offended me. So, you know, and that's – but it's any business. We love to make this about us. It's not about us. My brother is an orthopedic surgeon.

He's a salesman. He's got to sell to the hospital. He's got to sell against the other orthopedic surgeonsopedic surgeon. He's a salesman. He's got to sell to the hospital. He's got to sell against the other orthopedic surgeons in the area. He's got a marketing. What he's selling is the certainty that he'll know what to do. Yes. And that's what we do, right? Like we did the MRI.

We determined the best course of action is surgery. When I open you up, we don't know how things are going to go. You have to believe in me that I'm going to get you out of this and it's going to work out. I've watched people that have never been in business, have never done the job that they're tasked with. I told you about my family business that the kids have. Yeah, mafia. I've watched people on paper. Family business.

We're not even good Irish, mafia. But the bottom line is it's never what's on paper. But the bottom line is it's never what's on paper. It's always about how you can communicate your true identity and how you go about it. I always say on TV, it annoys the hell out of some anchors. My job isn't to be right or wrong or tell you what to do. It is inappropriate for me to tell somebody that I've never met, have no idea their risk tolerance or financial condition. It's inappropriate for me to get on there and say, do this. Right?

I don't know what that is. It's like a child. All right. You get the buttons. I'm upvoting him. We agree with that. I'm upvoting him. So, no.

I mean, I believe that with all my soul. 100%. So, I will never go on and I tell my subscribers, I tell you guys. Your job is to say, this is what's going on. This is what I think it means. Or has meant before. This is what we're telling the professional investors that are relying on us for research and opinion.

Correct. But then, listen, you don't know all 1 million people that are watching you in that moment. How could you possibly? Right. So everyone has to have responsibility for their own actions as a result of this information they're getting. Your responsibility is to have the actual facts and to have thought enough about those facts that you can say something intelligent. It's creating a story, Josh. The PowerPoint I sent you for the show,

if you'll notice on the PowerPoint, there's a core thesis. And around that core thesis, you tell a story. You put together a mosaic and what the mosaic should say. Now, so two weeks ago, three weeks ago, markets getting smoked. Less than 10 percent of the S&P is above the 10 percent for five days in a row. Washout. And when that's happened in the past, you get a pretty snappy reflex rally, right? RSI was eight. Eight.

It's the stochastic, the whole thing. It's there. So you know it's going to bounce. So then the question comes to me, and it's why I stopped doing it. The question comes to me, do you buy them here? Oh, yeah, always. I don't know. What's your time frame?

Are they going to go up from here in a reflex rally uh huh I think so but do you buy them here I have no idea because I'm not going to tell you that it won't retest that low and if you buy them here and it breaks that low and you said hey you told me to buy them here well this is the other problem

and I don't want to dwell too much on this but I remember specifically in either June or July of 2020, after markets had staged that furious comeback and then they were getting the commentary from Druck and, you know, from some of the, arguably some of the best investors of all time, right? Tepper, where it's like, this is not where you buy them. Like, you know, it's over, whatever. And that's okay. They're, They have the right to have that opinion. They could have been right.

You know, in hindsight, we know they weren't. But my point was, you know, on the, they're like, Josh, you're telling people to buy or to stay the course. But Stanley Druckenmiller said this. And I just said very simply, here's the thing. Those are two of the greatest traders of all time. They're in the Pantheon, right? Stipulated.

And I'm not. But the reason they became the greatest of all time is that they can reverse their opinion 180 degrees in five seconds. And they probably did. And will put billions of dollars behind that reversed opinion. And they've done it in the past. And they probably did in the summer or fall of 2020. They're not going to call you. That's right.

So if you take the bearish commentary from them and utilize that, you may not get the phone call. You probably won't. Druck's not calling you. That concept I think is lost on a lot of people. That's right. When they're taking the commentary of somebody, thinking it's personal advice for them, and then they get mad because that person changed their mind. Hey, you didn't say – dude, how much did you pay me? Zero dollars?

Is Druck on Patreon? Druck's on Patreon, I think. One of the reasons I like you guys. Cameo. We can be silly. This is a serious topic. Yeah. And the seriousness of this topic is, like Larry Wachtell said, it's not a game.

It's not a game managing other people's money. No. And when people go – when people do that and they say you're right – please, for the love of God, don't listen to somebody like me at a data point and not watch the show I'm on or the website I'm on. You got to follow along like Drucker. He's even said I made a huge mistake there, but I reversed it quickly. If you didn't – like you said, Josh, if you don't follow that, he's not calling you. Well, that's the other thing. That's the other thing.

We're at data point. Tony Robbins spent like a few months pretending to be a financial advisor. He wrote a book for regular people, like how to invest for retirement. And I think he's well-intentioned. I mean, I think he was trying to do a good book. So he calls his best friends. He calls Ray Dalio and he's asking guys that made their money running the most successful hedge funds ever, like what financial planning advice could you give the readers of my book who have $30,000 in an IRA? And the whole thing is obviously ridiculous. So I think that's another thing that people get wrong. You listen to Jeff Gunlock, macro commentary, no offense, you're not Jeff Gunlock. You're not running $120 billion in bonds.

You're not running $120 billion in bonds. The shit he's saying may not apply to your 401k. Can you just watch and learn and not act on it? Usually it's a data point. So then he's bearish, obviously. He's selling fixed income and he's wrong. And people are like, oh, gunlock screwed me up. I got out of stocks because I was listening to him. Dude, when you're painting your house, are you like trying to emulate Michelangelo?

Because you guys are not doing the same thing. Can I explain? Can I take a minute to explain where this thing can go sideways? And you know this, but I think it's important for the listeners and viewers. Yes. Okay.

The problem with listening to somebody, taking their input and taking an action is you have no true conviction in that action. You just believe in that person. Right. So when it goes against you, you tend to do the wrong thing. So how do you panic into a whoosh when five days in a row you got single digits of the S&P above their 10-day moving average?

Because you don't have any conviction. It's not your data. I always urge people to, if you're going to do it yourself, make sure you come up with your own process. Don't use Josh's or Tony or Michael's process. Or worse. Because that way you know what to do when it's going sideways. Or worse, don't switch your guru each day based on the last opinion you heard.

Because none of us are. That's the full stop fact. Even if you think somebody literally can predict the future reliably, even if you believe that, don't switch which person you're listening to. But you know what? The problem is you can tell somebody a million times every single day, don't listen to me on TV, don't listen to me on TV. I'm just a person.

I've had this conversation with family members, the same family member, a hundred times about what Josh said. I've had this conversation with family members, the same family member, a hundred times about what Josh said. I said, I love Josh. He's very smart, very charismatic, but don't listen to him on a day-to-day basis for stocks. And it doesn't get through to these people. And it's not just one family member. There's multiple people.

They don't believe that the people don't know. Mike, where's it come around to? The same thing we started out with. Who could tell a good story? That's it. Who can get the mosaic? Well, people want to be told what to do. I used to buy –

We think we don't, but we do. I used to buy Barron's for the roundtable, the stock picks in the roundtable. I loved it. Like this is when I'm like 22, 23. I'm in the business. I don't know anything. And I think like this is what you're supposed to do. And like Abby Joseph Cohen would be quoted in the round table.

And she was great. Like no disrespect. And her equity ideas were not hers. Goldman Sachs has 500 analysts and they take the best ideas, filter it up to her so she can make her appearance and, and say the stock ideas and I would buy them and they would invariably go down. Not because of anything she did wrong.

It's just the nature of the market. So I go up to Feshbeck. And it's like, I thought she was a genius. She is a genius. She is a genius, but not at that. So I go into Feshbeck's office. I was, it was Barron's. On the cover of Barron's was Upjohn and they'd come out with Minoxidil.

Michael, you know what a Minoxidil is, right? What is that, a pharmaceutical company? No, it's the stuff for baldness yeah right so i'm like i go up and i bought it i bought options on it because i thought you bought the solution well i did too and it worked well so so i go i go up to his office and i put the cover of barons on his desk right i'm learning i told him i didn't know yeah i put the cover of barons's on his desk. I'm learning. I told him I didn't know. I put the cover of Barron's on his desk with Upjohn. I go, it's in Barron's.

It's a great story and I'm already losing money. I think I should buy more. And he looks at me and he goes, why would you ever throw good money after bad money? Yeah. And he could have told me that a 50 billion times and it wasn't until I know I lost enough in the options market to pay for what makes it bad money that the stock went down. That kept going down and it kept going down. It had good news. It peaked on good news and it started to go down. And of course, I bought the wrong vehicle, even if it was, which is

another way in which stocks break your brain going, going, peaking on good news. That's right. All right. I want to get into your stuff here yeah so you mentioned your thesis so far you're spot on so i'll spot you it's been it's been a month and a week but still you're spot on for 22 i want to just like recite a piece of your core thesis and then you're going to tell us the rest okay core inflation remains historically high you wrote this in de? Yeah. Okay. The highest level of core inflation in generations should continue to reinforce the Fed's more

hawkish tone. They have only gotten more hawkish since you said that and plan to wind down the balance sheet. There are two items that appear hopeful on inflation, year-over-year change in labor costs. And what's the other one? The other one is the 10-year inflation break-even. It's the market-based inflation break-even. All right. Let's do one at a time. And John, if you would throw up the non-farm unit labor core PCE versus non-farm unit labor costs. Chart on. Now, just keep in mind, most of our audience is not Larry Wachtell. Well, the great thing about Larry is he simplified it and that hopefully is my guess. So, all right, so do that. So, what you see in front of you is the blue line is the core PCE.

That's the Fed's preferred inflation measure. That's what they stated they use. People say, why don't – use the CPI or what about this? I use what the guy is printing the money telling me to use. I don't try and outthink it. Why do they use this? What does it take out? It takes out energy? No, it has a lower percentage of owner's equivalent rent.

That's it? It's the same makeup. It's basically it. So in other words, owner's equivalent rent or the cost of housing is a much bigger percentage in the CPI than it is the core in the PCE. And both of them have a core, which excludes food and energy. That's right. The blue line is showing you the core PCE, core inflation based on the one the Fed uses. The red line is unit labor costs, nonfirm unit labor costs. Now,

according to my friend Chris Lowe, because again, I'm not that bright. I know a lot of bright people. My friend Chris Lowe reinforced to me that that red line, unit labor costs, is a broader measure than average hourly earnings. So that's the better one to use. So my friends at Ned Davis, where I get most of my charts, they show that there's a correlation coefficient of 0.87. And so in English, that means they move together. Yeah, it's a little noisier. The red line is a little noisier than the blue line, but they end up in the same place. But they end up in the same place. And what you'll notice is the red line's been going

down for three or four months on a year-over-year basis. So that suggests that core inflation, which is a year-over-year indicator, should begin to turn down at some time in the spring. So what we have, guys, is the Fed in a box. I do videos and written stuff. The Fed is in a box because current inflation – they got two things, inflation and unemployment. Inflation is way too hot on current and unemployment is way too low. They have to raise rates in March. They said they're going to do it.

The market is ahead of them, frankly. Yeah. Right. But- Well, the market raised rates four times. Two-year treasury is one of the quarter, at least. At least four. Like if you look at the Fed Funds futures

versus the dot plot, it's much more aggressive on the Fed Funds futures, which is why our call for long-term rates, this chart plus the next one, which is the 10-year inflation break-evens, which is the market-based inflation expectations. If you ask me to explain it perfectly, I can't. You know, my kids have a funny thing in their business.

If you don't know the answer, Google it. So if you want a description of it, Google it. John, give us US breakeven tenure. How accurate are breakeven expectations or inflation expectations? They change dramatically, just like Fed policy. So how often does this actually predict future inflation? Let's just look at the chart. I'm not worried about its predictability. I look at where it is relative to where it's ever been. So guys, every recession in my career has been from a unique reason. Savings and loan crisis, Saddam Hussein invades Kuwait, right? Early 1990.

Then you had the dot-com, but that wasn't the recession. The recession was 9-11, the global shutdown that came from a credit crisis, WorldCom, the various – You don't think the NASDAQ crash alone was putting us in a recession because all that Y2K spending dropped off a cliff? It definitely helped it for 100 percent. And then Enron, WorldCom, and then 9-11. It was a credit crisis. It was like a triple whammy. It was everything.

Yeah, yeah, yeah. And the globe was weakening pretty hard too. Remember commodities were still low. Russian ruble, Asian contagion, long-term capital. That was 97 and 98. What I'm saying is a contributor. It all goes into – recessions don't happen on a dime. I was on Fast Money.

I think it was in – I know what day. August 26 of 2019. And I was on there because they had their graphic, which I never get input on, was the Dwyer's Doomsday Clock, which is pretty rare for me because I tend to be an optimist. It was because the yield curve – You should have your head explode on the graphic. It was exploding. Anyway, so the bottom line is it takes a while for us. So we had that one.

Then we had the great financial crisis and, of course, the pandemic. Always a unique reason to go into recession. What's the answer for the recession? What's the solution? Every time. Lower rates. Print as much money as you can. As much money.

So the human nature behavior of the market coming out of the recession should be somewhat consistent. More extreme each time because the amount of printing. Oh, that's interesting. But somewhat consistent. The reaction to the recovery should be consistent even if the reason for the recession is wildly inconsistent. So let's look at that chart that we had on the 10-year inflation break even.

So let's look at that chart that we had on the 10-year inflation break even. And the point that I'm making in this chart is that the US inflation 10-year weekly graph, when you look at the peak, that horizontal blue line, it's what happened coming out of dot com. It's what happened coming out of the great financial crisis. And it hasn't surpassed those levels and it stayed there. So the unit labor cost and the inflation break-evens are suggesting the opposite of what too many people like me are saying, that the Fed's behind the curve. The two data points that have excellent accuracy over time are suggesting that the market believes the Fed. Yeah.

That the Fed is going to get a hold on this thing. Right. But then the question is how many rate hikes do they need to get a hold on this thing. Right, but then the question is how many weight hikes do they need to get a hold of this thing? That's where the discrepancy comes in. And do they go too far? Awesome.

That's why I love these shows. I can actually explain stuff. You have 30 seconds. It's never the absolute level, right? Take us to commercial. Hold on, I hear the music. All right, got it. So the number one question I'm getting now Take us to commercial. Hold on. I hear the music. All right.

Got it. So the number one question I'm getting now and I always get at this point in the cycle is what's the level of rates that's going to shut it down or create a problem? And in my experience, it's never the level of rates. It's whatever the rate is to invert and flatten the curve and shut down financial conditions. And the Fed won't do that deliberately. No. So like for now. How could they? They do it every time because the 10-year trade is below where they ever think it will.

But they don't do it deliberately. It just happens. It just happens. Yeah. Because they raise rates and then what happens is the 10-year trade is below it. And remember, the yield curve in English – this is where I love to be able to do this. In English, the yield curve simply means what is a lending or investing institution getting their money at and what return do they get by investing it or lending it? So if a bank is getting their money at 0% and they're lending it at 2%, that's the same difference of getting their money at 4% and lending it at 6%.

It's 200 basis points. When that inversed, why would a bank ever lend money to lose money? So what happens is the long-term inflation outlook gets better as they're raising rates. Why would a bank pay 400 basis points on deposits and lend money at 200 basis points? Of course they wouldn't. Never happen. That would never happen. Which is what shuts down the economy.

That's what shuts down money economy. That's what shuts down money movement. Here's the problem. I've got a chart that I sent you guys that looks at the long-term Fed funds rate. Which one is that? It's from the Philadelphia Fed or St. Louis Fed. Is this the Fed is about to embark on a

tightening cycle? No. Here's this chart is the Fed funds rate. I love this. It the Fed funds rate. It's- I love this. The overnight rate. And what you see every cycle is a lower peak. I wish I could get up and point to the chart. All right. I got it. Because- In 2018, we peaked at 2.5% Fed funds rate before they had to start cutting again. So, I hope you remember this. I'm sure I was doing a show with you near around it. In 2019, with you near around it. In 2019, when Jerome Powell, 2018, when Jerome Powell said we're nowhere near neutral. Yeah, that scared the shit out of everybody. It scared the shit out of everybody.

My next report was the next rate move is going to be a cut. Yeah. Because you were bouncing that line up against what the downtrend line. So why is each peak of the Fed funds rate at a lower level? And the answer is because there's so much debt. If your solution to a recession is to print more money, an excessive amount of money, I can afford this. I'm making numbers up. I can afford a million-dollar house at 3%, right? I can afford maybe even a million-dollar house at 4%.

I cannot afford a million-and-a-half-dollar house at 4%. I cannot afford a million-and-a-half-dollar house at 4%. So what happens is when you throw so much money at it, what do you do with the money? You invest it. What happens with that money when you invest it? It lifts the asset price. So what people like me rarely do is talk about to turn over and create that economic activity, you have to turn over money. But there's going to be a point where people can't afford that million and a half dollar house at 4%. The only way you can afford a higher priced house and a higher interest rates is if you get some magic money coming in from your income, which doesn't happen, or you have

lower interest rates. So to your point, we have never, or maybe once it looks like maybe once we've never, other than one time, right around the year 2000, we have not had the peak in fed funds rates eclipse the prior peak coming out of the previous recession. That is correct. Since 1982. Right. But so this thing between 1995 and 2000 is a little bit aberrant because they never really – So here's an interesting thing. That last cut was 98 during the Asian crisis and it had nothing to do with our economy. Well, what has – so in 1995, what most people don't know, I love the market history.

1995, the first two quarters of GDP as reported were 0.5% growth. So if a recession is negative growth two quarters in a row, 0.5% growth. Yeah. Right? So that's – that 1994 move in credit, that high spike in yields, that shut down credit. And that was one of the worst internal bear markets. It was last year basically for a lot of stocks. You had an internal bear market that ended up with almost a recession.

It was close to recession. So I would say, Josh, on that 1994 move and 95 to 98 – It was also a surprise. He was doing intermeeting moves, Greenspan in 94. We were just talking about that. We were just talking about that. That put Michael Steinhardt out of business, the 94 surprise rate hike. That was brutal.

It was worse for the bond guys than for stock guys. It always is. So bond guys, how about this one? If you look at the 20-day rate of change on the high yield index, yield to worst, the only time I can find outside a recession it was as sharp as just now- It's 94. It's 2013 and then back to 91. Taper tantrum.

Oh, the taper tantrum. Taper tantrum did the same kind of thing. All right. What do you think about, we got some data yesterday that the Mannheim, which is a hilarious name for the used car price index, is finally flattening out? First time we had like a month-over-month change that was flat. And like a year. It did it last year too. It did it last year.

Remember last March and April you had this massive ramp in rates? Because that's when I shifted my market opinion because you had had such a sharp move in rate expectations. And it was based a lot on the Mannheim Index and its impact on the Consumer Price Index, right? So then it came down because it's a year-over-year calc, and then they gave out more stimulus. When you give people – we're going to be in an economic transition that goes from buying stuff to doing stuff. Yeah. Right? When you give people trillions of dollars …

Goods to services. And you don't let them go anywhere, they're going to buy stuff. That's right. And that's what they did. So there's a chart that I have that I sent you guys. It's the one that looks at the breakup of – the makeup of GDP between goods and services. It's the one that looks at the breakup of – the makeup of GDP between goods and services. You had a spike in goods coming off of the pandemic low to a degree that I don't think you ever have.

This one right here. So the top third of that chart is durable goods as a percentage of total personal consumption. Holy shit. Look at that spike. You've never seen – but it's also pullback. What's in that? It's cars. It's durable goods. Microwave ovens.

Anything. Washing machines. Wood chippers. All that stuff. Things's durable, good stuff. Microwave ovens. Anything. Washing machines. Wood chippers. All that stuff. Things that go on a ship, that get shipped to us. So that's, you know, it became, it went from like 8% to 13% of economic activity. And that shows up heavily in these inflation data calculations. Big time.

But the bigger one is services never go down. Never. Not like that. Not like that. Not like that. Before we even get services, this assumption that everyone who bought a used car and a dishwasher last year is also going to buy one this year, that's not how this shit works. Buddy, so I got another chart. Buddy. John, I brought a lot of charts. So there's another one that I have that's wholesale inventories hit a record.

So if you want 10 widgets and you're in a supply chain constraint and the demand is extraordinary because of all the free money, what do you do? If you want 10 widgets, you order 20. Double ordering. So the fourth quarter inventories. I've never before seen level of inventory build,

which is led by five months by goods orders, right? If you're going to, you need, so that turned down about three or four months ago. So that's suggesting that inventory is going to be depleted. It's also what happened in 2005, 2011. So I think what we're doing is replicating the economic movement because the solution

was the same. Of course, it'll be different to some degree, but it's a similar type of thing. So what's going to happen is we're in this transition where inventories are being depleted, which means you're producing less. So goods is down. ISM is coming down from the – Institute of Supply Management has peaked and coming down from the 60s. We're going to produce a lot less. We got enough. We overordered. The transition from that, buying stuff to doing stuff. That's the services number. John, go back one.

That's it. That's it right there. To Michael's point, that number never falls. Never, never. So when it did, the only way that could happen is it was forced to. It was forced to. So thank God because if you think inflation is bad now, imagine in services along with goods. Ben and I were just talking about the fact that a lot of this pull forward stuff might've been really bad for a lot of businesses

that we thought was good at the time. Like Zoom, for example, and Peloton and Robinhood and all of these numbers that were so distorted that made comps absolutely barbaric, like just impossible. Yeah. I think crushed a lot of these companies. It's going to, part of the issue

is going to be to manage inventory depletion because you rushed out to get enough stuff to create stuff where your demand's going to buy get enough stuff to create stuff where your demand's going to weaken because i want to go on a trip i don't want to buy another snowmobile right i i want to go somewhere yeah i've had enough looking at the house everyone bought a boat everyone bought a jet ski everybody bought motorcycle uh patio furniture stuff for their backyard we everyone did that. Let's assume. Correct.

The next step is not more of that. Right. How many do you like? Unless you want to know why- Which is why the travel stocks act so well right now, I think. I mean, we've got a wedding to go to in Spain and I can't wait. We're going to probably do a cruise. We're going to do a lot of stuff.

Bring your snowblower. All right. So what you see in this chart is you've got a massive spike in inventories. And look at in 2011 what happened. You came down. Look at in 2005. You came down from peak. You build inventories when there's finally demand after a recession.

If the solution is the same, the human nature reaction – some people think that companies are somehow different than everybody. No, it's a guy or a gal running the company. It's a CFO. Right? So they're getting stuff because they got to make it. Because they finally got to make it. Tony, what are Joe Biden's economic advisors telling him? Exactly what you just said?

What's the guy's name? Jared Bernstein or whatever? No, that's the old guy. I don't think. Is he the guy now? I don't think. I think he's back. Whoever Biden's. So Biden is probably every night he goes home.

These goddamn inflation numbers. Everyone hates me. And then he's got a chief economist or whatever. He's a national economic advisor who's probably saying to him, no, you don't understand. The leading indicators are telling us inflation is about to drop off a cliff. It doesn't matter. Basically, here's the problem. You've got really high inflation. It's all anybody's talking about or caring about.

So here to me, the risk isn't monetary. The market is already priced in more Fed rate hikes than the Fed is predicting. It's already there, right? To me, the issue is, does the government try, does the president try to do something to fix it? What? You've got terrible polling numbers. So there's been – and there's a history of that when you're in a midterm election year with a first-term president and the numbers aren't great and inflation is a problem. You've got to quote-unquote do something. And that creates – it could be geopolitical. It could be price controls. JFK did it with steel prices back in 1962 where he got into a very public battle with the CEO of US Steel.

Well, he just did something stupid that already didn't work with the Strategic Petroleum Reserve. What did he do? He sold barrels out of it and then the price immediately went higher. It always happens that way. It's like trying to manage the currency. It doesn't work. You can't. It's an trying to manage the currency. It doesn't work. You can't. It's an open free market.

So they're not going to be able to do it. So to me, the risk is in the upcoming maybe dock workers negotiation on the West Coast, I'm told, in April. Cruises and airlines are on fire. Because Omicron has crested. And now to your point, people want to go do stuff. You're going to go do stuff. So that economic transition creates a soft spot.

Yeah. Right. So we're in that soft spot. So you got to fed in a box going back to the top of the game. Wait, how long does that transition take between goods calming down and services ramping up?

Is that one quarter? I think my call is it's by the first half. It's the first half. It's why I was – not defensive. I was looking for a tumultuous year as you started to show out because of that Fed uncertainty and economic transition. I'm thinking first half. Hold on.

Before we get that, you know what hit an all-time high today? All-time high. Marriott. Did it really? Wow. Makes perfect sense. I want to go back to your comments. This is back to you.

Earnings per share direction should remain positive. The market correlates with the direction of EPS, which should remain soundly positive over coming quarters, despite the impact of higher costs, economic transition, and uneven global economy. Margins peak when the top line falls, not when costs go up from macro perspective. peak when the top line falls, not when costs go up from macro perspective. Okay. Most people think it's the opposite. Most people look at rising costs of labor, rising costs of commodities, and they say margins are about to peak. You're saying that's not actually how that works. No, because you can always pass it through. Always? Every industry? Or just generally?

No, no, no. That's a macro. So if you look at S&P 500 earnings like people like me do and you say, okay, costs are going up, that means margins are going to weaken and earnings are coming down. It doesn't happen that way. Margins are at record highs. Last quarter,

margins hit a record high. So why we're even debating it publicly is beyond me because that answers the question. Chipotle's got three price hikes since the pandemic started. It did one in December. They put through another December. They put through another one in January. So this is the chart, which you can see. It's S&P 500 operating margin against the

unemployment rate inverted. See how they keep that margin at all costs, pretty much. But then what happens? So what changes it? What changes it is you lose your job or you lose your credit, right? So when credit starts to tighten up, well, at least I'm working. And then when you're not working, you don't have any money to do anything. And so margins tighten up, right? They start to come down. Because people are spending less. They're spending less. You can pass through the cost when you have cost increases, but you can't fix revenue when it's dropping. I gave this example before.

Either the CEO of Lenar or Pulte or one of the home builders, they raised prices obviously when the cost of everything went up. And when lumber crashed for a second, they said now that cost of lumber came down or you're lowering your prices. And what did they say? We're taking it to margin. Right. Yeah. We're keeping it for our trouble. So by the way, Chipotle- Well, look at a bank. A bank is pretty slow and when rates come down, they're slow and lowering their rate. Look at a gas station. How f***ing fast does that price per gallon go up with the

price of oil? Before the gas goes up. And then the price of oil collapses and it's like three weeks before you see that at the pump. And it hurts the exact wrong people. Like this whole idea – unfortunately, the lack of investment in energy is obviously a problem, right? Because you still need a lot of gas. The problem is if you look at the percentage, if you look at the bottom quintiles of income, it's about 10%. Your gas usage per household per year is roughly a little under 10% for the bottom – the second lowest quintile of income. For the top quintile, it's like 1.4. Yeah. And this is why I just – it's the ultimate regressive cost. It's the worst.

Yeah. And this is why asset owners do well. UPS on their last earnings call announced the biggest dividend increase of all time. I want to ask you about – I mean it's such a big deal that we don't talk enough about. I want to ask you about valuation. So this is you. The combination of strong earnings growth and correction in the market has allowed valuations to become more attractive, similar to what took place in 2010, 2011.

I think the S&P PE multiple in 2011 was like 12. I mean this is obviously not that. It's a different – but interest rates were different too. The point of this chart is that people keep – Are we on the right chart? Yeah, yeah. So people keep talking about how this is like 2000. And no question, you've got concentration of market. But frankly, it was much worse in the early 1970s than it was in 2000.

People – let me give you a history lesson on 2000 because it was painful. So in the last quarter, I almost got – I don't want to say fired. But yeah, I almost got fired because I wrote a report called Cash is King. Please raise cash. That was the title of the report. Yeah, nobody makes money from that report. but yeah, I almost got fired because I wrote a report called Cash is King. Please raise cash. That was the title of the report. Yeah, nobody makes money from that report. No. And I almost got fired.

Mr. Dwyer, put that back in your drawer. And it was like – and the market went up 30 percent. So the NASDAQ composite went up almost 50 percent in the fourth quarter of 1999. Yeah, I remember. It didn't do that in the fourth quarter of last year just to be clear. Then it went down and it began the year with an 11.8% drop. And then guess how much it went up into the peak by March? Another 35%, right?

And then another thing that people don't realize is in 2000, you peaked – everybody talks about March of 2000. And that was the price peak. That was the NASDAQ peak. By August, you almost broke into a new high territory in the S&P. The NASDAQ obviously didn't get up, but it still bounced. So our view is that valuations are contracting like they did in 2010 and 2011 because earnings are going up so much faster than the market. Good contraction. because earnings are going up so much faster than the market. We're all calling this the re-rating, but you're saying the E in PE is still growing.

Totally. Which is why the multiple is coming down even faster than it otherwise would. The multiple came down last year. Where do you have the next four-quarter PE ratio right now? I use 20 now. I use 20 because that's the average PE when core inflation is between one and 3%. And I believe that core inflation will drop to below 3%. You're saying that's where we're currently valued? That's where I think fair value is because that's the average. So where are

we though in real life? I think it's like 18. What is it now? Okay. So I'm at 25 divided by 18 or 19. I don't even know. So we've overcorrected already in multiples. Hold on, let me do this so I don't make a mistake on such a big podcast. While you're crunching that, John, throw up this demographic tailwind. I talk about this all the time. It's like 20 times, so it's right around fair value, plus or minus. Okay, so I don't specifically believe that anybody can look at demographics and divine a market opinion from them. And I've also seen two people take the same data and come up with the opposite.

So like Harry Dent Jr. says demographics are destiny and we're fucked. Look at all these boomers. What does Harry Dent Sr. say? And then Tom Lee says the same data. He says, no, actually, we have a boom in 30-year-olds, 31-year-olds, 32-year-olds. Tom's right about that. This is the household formation boom that we've been waiting for since the year 2000. Yep.

It seems that you're in the same camp. I've been using this chart for the last six years. And I've read your book. Okay. And here's why. When did you get married? Tell people who are listening. What age did you get married?

20 – shit. Shari, if you're listening, I love you. and here's why when did you get married tell people what age did you get married uh 20 shit Shari if you're listening I love you uh uh 2003 I was born in 77 how old was I

28 okay Michael close enough I was actually 28 you were 26 I was 28 right

I was 26 so when is your when you get married I got I met Patty I love you Patty when you listen yeah I met Patty when I was 27 got married when is your house – when you get married, I got – I met Patty. I love you, Patty, when you listen. I met Patty when I was 27, got married at 28, first son at 29, second one at 30, out to the burbs I go with a big SUV. We're giving a shout-out to our wives at Robin, whatever.

Into everybody's world. But so here's the point of this, Josh. That's the demographics. I moved to – when I was 25, there was no plan of having a couple of car leases, a mortgage and a lot of insurance. But you weren't spending the way that you are two years later. Fast forward. I meet Patty and the game is on. We have two boys and we move out to the Burbs. And now you're spending for four.

Now you're spending for four but you're spending differently. Remember the millennials were always going to take Uber. They were never going to move out of the cities. It was the dumbest thing I've ever heard in my life. It was going to be this endless MDMA-filled brunch. Now there's not enough cars. I mean, sorry, there's not enough houses for us. You know what's as dumb as that?

That you're going to retire. You guys are money managers for people. Yeah. You're going to retire at 62 to 65. You're going to live 30 years on a total of a small amount of money. I'm trying to get Barry to even discuss. Barry just turned 60. He won't even discuss

retirement. So I don't think I'm retiring. You don't want him to get bored. No, I joke with him. So this chart is showing the number of millennials turning 30 suggests household formation spending and investment can continue. So this is a boom in people born in 1990. No, it will continue.

Which they just turned 30. Not can. It definitely will. It has to. It has to. But what do you need for that? You need lower interest rates to afford the higher houses. You need other stuff.

More houses. More houses. That comes after the kids that are grown up. No, we have a shortage of houses. Other stuff. More houses. You know, that comes after the kids that are grown up, right? No, we have a shortage of houses. Oh, we absolutely. Yeah. I mean, Ivy Zellman, you should have her on. I call her the queen of home building.

She's fantastic. Wait, I'm sorry. Did we just speak about this S&P with EPS chart? Can we just throw something one more time? Sure. This is very simple. Stocks actually represent ownership of businesses. I know like we just trade them on the screen, whatever. Like they actually represent ownership as businesses. I know like we just trade them on the screen, whatever.

Like they actually represent ownership of businesses and where earnings go, the price of stocks follow. It's very simple. Michael, I swear to God, you know, the problem became for me in this business when, and I've worked at NASDAQ over the counter firms, when people started trading symbols instead of what it was intended for.

That's my generation. Buy a piece of business. Well, mine too, honestly. If I'm being honest. When I was like 23, 24, we stopped even calling these companies by their names. We started referencing them as symbols. That's it. And I remember when I used to –

JDSU was the company. JDS Uniphase can kiss my ass. Our friend Joe Fahmy tells the best story ever about the late 90s. He tells his friend, he's like, dude, that biotech. He goes, that's a biotech? Oh, okay. That's right. Exactly. So this chart, the reason it's so important, I've made so many mistakes in my life and career, right? I still make them. So when people do, I got you. It's the dumbest. It's just awful because of course- No, we know. Awful people. So when – what I've learned in those mistakes is the core thesis. Here's the core thesis in a nutshell. The fact is the market moves with the direction of earnings. It's not debatable.

That's a fact, right? Look at it. You don't need to be a master market guy. Does one peak before the other historically? I don't even – they move together. It's a non – it can but it's not led. I don't want to optimize it. If profits are growing, stock prices historically are also growing. And that's what's happened. And it's not serial correlation, which means they always move up, right?

You can see that when earnings go down, stocks go down. And look at this chart. It stocks go down. So let's- Very clear. So that's the- Right. If you had to show somebody one chart- This is it. But there's four other points. So the market moves through the direction of earnings. Well, what drives earnings? Economic activity. What drives that?

What drives economic activity? Money, availability, right? What drives that? Fed policy. And what drives that? They told us. Core inflation and unemployment. It's not science. It's not – those are – so every time I get stupid and make a bad call – Meaning you deviate from that framework. Correct. Correct. So I've tried.

Since we've known each other as well as we have, I've tried to not deviate from that as painful as it can be. Because there's always this fifth thing like Russia invades Ukraine or China is saber-rattling over – there's always this other thing. Property values, property companies. National debt. There's always that other thing in the back of your head. Distractions. It always comes down – I have another chart. I hope John can bring it up. It's money availability. It's an excess liquidity chart. It's a real liquidity on the top.

What are we looking at here? All right. So people look at money supply. You have to go backwards to find that one. We have that higher in the doc. Yeah. Money supply, everybody looks at, and it grew at a level that's never been seen before at 24%. What I like to look at- Money supply exploded by 24% in one year. Right. So here's what happens.

Is this it? This is not money supply. This is real liquidity, which takes money supply growth plus a very key component, guys, equity and bond, mutual funds and ETFs, readily available money. Money you can go to the – Which can be sold and used. In a day, right? Why are we then out in industrial production?

Because that's what's being used for economic activity. Real liquidity is what you have versus what you need to spend. So in a household level, it's utilities and cable and things like that, right? And real liquidity, it's what you have readily available versus what's being used for economic activity. So as you'll see in 2003, a never-before-seen spike, right? In 2008 and into early 2009, again, a new high in excess liquidity. And look at what we did this time.

We kept it there for two years. And it's double the size of the prior peak. It's double the size. So if you look at how high that 30% is relative to the prior peak, that's drawn because of this cycle. What is the message though? It looked the same last cycle. So what happens as it reverses? We're doing what we do normally.

When it comes down, it just means you're putting the money into economic use. It's a good thing. Yeah. Okay. It's not because – it's not that money is going away or it's tightening. It's being used by companies. If you do a bazillion dollar bond offering, right? If you're a company, CFO doesn't put it to use in the first day. They put it in a bank. Remember the reverse repo stuff?

Yeah. That was getting everybody crazy. Yeah. Late 19. The only reason that that was, no, that was even after this because that surge in excess liquidity and money supply, you do a bond offering, you got to put the money in a bank. Where are you going to put it? If you're a company, you raise $500 million in a bond offering.

You got to put it somewhere. If you're not using it all at once, then it's got to sit somewhere. And you're not going into futures. You're going to put it in a guarantee. You're going to put it in short-term T-bills. Right. And that is a really big deal. So that wasn't a lack of liquidity. That was just money waiting for something – something to be done with.

It was being forced into T-bills and they're not – here's another one that nobody talks about. How about this one? Thank god the Fed is tapering because if they hadn't started tapering, they would have bought all the bonds. In 2018, when quantitative rates were rising, quantitative tightening, you had a trillion-dollar tax cut. You were funding it with production of treasury bills, not just treasury bills but treasuries, government paper. So you were letting stuff roll off the balance sheet at the same time as having a massive increase in supply to fund the tax cut. Today, it's opposite. The treasuries put out in the last two quarters a statement saying they're producing less Treasuries

because there's no need, because there's a stimulus. So when you're buying less paper, it's neutralized because you're producing less paper. And when you go into QT, you're not fighting increased supply. So how does that stuff impact earnings? Because if we're saying that earnings drive stocks, how does that stuff impact earnings? It's all about money that earnings drive stocks, how does that stuff impact earnings?

It's all about money availability. So what level of rates is the most important? It goes back to- What is it? Is it Fed funds? So banks are now getting their money. They initially get it at the deposit rate. So I have two yield curves you look at.

In the beginning of a cycle, it's the deposit rate or three-month against the five-year, your average duration. That's the right one to look at. It's the cost. Three-month to five-year versus twos and tens, which is what everyone else is talking about. Nobody looks like twos and fives. And twos and tens, you use when they – so after the bank earnings, my friend Brian Reynolds, who's one of my credit guys, he pointed out that the top – I think it was four banks,

Goldman, Bank of New York. SoFi. A Bank of New York. SoFi. A couple of other banks. That's like me, a shameless plug to wirestrategy.com. So anyway, when you look at those banks, they raised – I believe it was $28 billion in corporate credit in a week. So now they're raising money in the market. Now you use the 210 because that's the – they're getting their money in the market in a duration. In the beginning of a cycle, they get it by the deposit rate.

In the middle part of the cycle and beyond, they get it in the open market. So you use a different yield curve. Let's go to corporate credit real quick. Sure. I think this is from Tracy Alloway. She did this post. Throw this doubts about debt chart up, John. Black chart.

Measures of corporate credit risk have jumped recently. If we were to zoom out, this is really, you know, it's nothing with nothing. But it is noteworthy that finally this is starting to hit the credit market, the equity volatility that we've seen. But the next chart I think is more interesting. Almost always, and this is only going back five years, but almost always stocks get hit harder than bonds. I mean, stating the very obvious. and this is only going back five years, but almost always stocks get hit harder than bonds.

I mean, stating the very obvious. In the most recent drawdown, at least for the S&P, investment grade credit had a lower drawdown than stocks, or at least where they are today. It was very interesting because, again, the last time I looked at a couple of ETFs and the investment grade credit, and the last time you had a 20-day rate of change that was in the yield outside of a recession was tapered after.

And by the way, that was a great buying opportunity. That was a great buying opportunity. Is this just normalization? For bonds. Is this spike in the corporate credit risk, isn't this just getting us back to normalization? Like there should be bankruptcies. If you look back, I think I had included – I don't know if I included that. If you look at corporate credit, Josh, they do this.

You have higher – you have in 2005 and 2011, again, you had a spike in corporate credit yields because you were in this mid – this transition of Fed policy that you didn't know how it – it's the uncertainty. Yeah, you don't know how long the hiking is going to go on for. Josh, I was talking about this yesterday. Bank of America put out a chart showing all the corporate cash on balance sheets that they've already gorged. And so they could withstand higher rates because they're already flush with that.

It's 19 trillion in cash on consumer balance sheets plus corporate cash. So if rates go up, they're good. What do you think is going to happen to the buybacks? It's a historic level. Again, my buddy Brian Reynolds tracks it. It's a historic level of buyback announcements because you are flush with cash. You don't go into recession when you have too much money.

And there's a limit to how you could even invest that cash productively outside of buybacks. There's not that many things that you can really do. I mean by now, a lot of the strategic acquisitions have happened because interest rates were so low, you just tapped the corporate market. So, Tony, sum up for the listeners. And obviously, this is always subject to change, and we'll have you back on. But how are you feeling now? Like sum up your just like view of what's going on and whether or not so far – it sounds like you're saying so far most of what's going on and whether or not so far, it sounds like you're saying so far,

most of what we're experiencing is highly predictable of what it looks like after you've come out of a recession. And it just doesn't feel like it. Okay, why? Because the numbers are so big? Because the numbers are so big. And buddy, we're inundated with information every day and we're both on TV, right?

And it makes you feel like, like, I love the line, don't just sit there, do something. Yeah, sure. I have the opposite line right now. Don't just do something, sit there. All right. So with that being said, what would you tell our listeners? Stocks going up tomorrow? I would say sit tight.

Stocks going up tomorrow? Give everybody listening individual advice. Right now. What I want to do is I've said, let's avoid a catastrophic mistake in this timeframe. And what that is, is puking into the kind of whoosh we saw a couple of weeks ago or buying into a spike, right, a whoosh lower. Like we have four key tactical indicators we watch, but I don't want to buy into a spike because I don't have – I don't know what the Fed is going to do.

I want to see what they say in March. I would rather add exposure at a higher price with better data so that when it goes against me, I don't care. I think what you've been very good at, Josh, is having a rational thought when things are going against you because you have a process and a plan that you believe in. You have information you believe in. Well, also making these decisions in advance of what we're going to do and what we're not going to do rather than during. That's exactly. That's extremely helpful. That's my point. So don't just do something. Sit there. Tony, if we were able to raise interest rates four or five times this year to get off zero and normalize the monetary

situation and the stock market were to deliver flat to up or down 5%. That's my call for the year. Isn't that a great year? That's a great year. Like just for society. So think about this. You've added trillions of dollars. You've increased prices of homes 40%, 50%.

The economy cannot withstand significantly higher rates. The 10-year bond yield at under 2% is screaming at us that it cannot withstand higher rates. And so if you bring – that's why – if you remember that Fed funds chart, that's why it's a lower peak each cycle because there's so much more debt. It's so much higher prices. Michael also makes this point. There's so much demand for 10-year treasuries. Yeah. Anytime they get mere 2%, there are a lot of buyers.

I would be very surprised if we get many more buyers. If you're a pension planner or an endowment and you need a 7% return and stocks give you 7%, but you're 60% in bonds, and the highest category of fixed income that's liquid is high yield is giving you 5%. It doesn't work from a – so what do you do? You put it all in private equity. So you have a money flow. They could at least promise you 12%. Guaranteed. 12% nominal, no problem.

I want to pivot. Super Bowl. Are you a football guy? I don't even know. I know I'll enjoy the game. I'll tell you what. You don't care about either team or – I thought Super Bowl was the playoff games.

Which ones? All of them. Bill's Chiefs was sick. All of them? Yeah. So my dad – Neither of those teams were in this. He was a roommate in college with a guy named Ted Marsha Broda.

Ted Marsha Broda was the head coach for the Baltimore Colts. Okay. And he was the offensive coordinator for the Washington Redskins during Billy Kilmer, Larry Brown, crazy, crazy stuff. And then he was the offensive coordinator for the Bills during Jim Kelly. He brought Jim Kelly on. Oh, wow. So we – I have all these pictures of this, really cool stuff that they're not – it's just pictures. But I'll always be a fan of the Pills just because of that.

But I don't really have a – Well, I feel bad that neither of those teams made it. I know. I don't really – that's what – and I'm a giant fan. But I'm not upset to see the Bengals get a crack at it. Oh, I love it. I was telling my kids about the icky shuffle. Were you even born?

Did you see the commercial he did again? No. He's back. He did the icky shuffle on the commercial. How old is this guy? I don't know, but it was funny. It's got to be 60. He was in the arena for one of their games.

Yeah, that's what it was. I think that's what it was. They made him do the dance. I'm going to really enjoy the game. All right, so who are you rooting for and who do you think is going to win? Cincinnati, I think, probably. Okay, rooting for? Rooting for, don't know.

I'll say like I say in the stock market, when I don't know, I don't know. All right, I think the Bengals, I mean, I don't know. I'll say like I say in the stock market, when I don't know, I don't know. Alright, I think the Bengals, I mean, I don't know anything. I think the Bengals will win just purely based on watching this kid face down the homes. What was he down, 20 points? Unbelievable. I mean, if he can do that, then he can

win a Super Bowl. I'm betting my ass off. What are you doing? I don't even care. Everything. Are you doing the length of the star spangled banner? No, I'm not doing that. I'll do like, I'll do like, I put a banner that's like 12 to 1. Will both teams score a touchdown in the first drive? Probably won't happen, but you know what?

I'll have fun rooting for it. You know what's fun are those things you do at the office where it's like, you know. Oh, the boxes? Yeah, like what's the color of the- Oh, little prop bets. I'm all about the prop bets. I'm doing a lot of like five-way parways. Yeah, yeah.

What are the five ways? My whole life's about- Mainly like touchdowns. Like which player will score or which team? Which players, yeah. It'll be like borrow over 240 yards. No, I don't do that stuff. Will Jamar Chase score?

You know why I don't do that stuff? Becausear Chase score You know I don't do that stuff Because you don't like fun No it ruins it for me Because then what do I Even want to happen here You want to have fun You want to have That's why fantasy

I hate fantasy I'm rooting for a player Playing against my Giants I just can't bet Because then I'm too motivated I'm not a big bettor I love it I love it

Well we have an office pool We did $50 boxes Oh that's fun They're not all full yet I might have to buy Like five more I'll go in You want a box?

I'm on. All right, you got a box. Hold on. I've got to do it before I forget. LA is a four and a half point favorite. That sounds about right to me. But if you would have told me seven points. This guy's got fiat?

Is that fiat? I put real money in. That's funny. Okay, you got a box. All right, Michael, you have a bet? Besides all your crazy prop bets. What do you mean, for the Super Bowl? Who do you think is going to win?

I think, I'm torn. This would be a good game. Do you care who wins? I don't care. I just want to watch a game. He just wants the bet to come to him. I think that the Rams line is going to kill Joe Burrow. Well, that's, Aaron Donald could eat this kid for breakfast.

I mean, the Titans put him on his ass nine times, so that's what I'm worried about. They have a very weak offensive line. If I'm a Bengals fan, that's what I'm worried about. They have a very weak offensive line. If I'm a Bengals fan, that's what I'm worried about. But Borough's been amazing. So I just want a fun game. I just want a fun game. Me too.

That's why I liked all the playoff games. Because all the playoff games that one weekend were all four of them were like overtime. And I was crazy. Great playoffs this year. Did you hear about this Bitcoin hack from – not Bitcoin, just crypto generally at Bitfinex and they just arrested like this white trash Bonnie and Clyde for the modern era? I saw the New York Post on it. Tony, I got your box. Now we have two left.

You're in. Lock and load. Okay. So – What are my numbers? Kidding. I know. We're going to know on Friday.

I know. I'm kidding. It would be really funny if Tony wins. Tony wins the whole thing. All right. I'll say it publicly. If I win, I'm donating it to whatever charity you guys want me to. Good for you.

Donated to the victims of the Bitfinex hack. So I was joking around with Michael today. You used to watch these movies like the Thomas Crown Affair where like a $50 million painting gets stolen. And there are police with like the Parisian siren sound all over the city. They close the bridges, blow the bridges. That's like $40 or $50 million. These two idiots stole $4. half billion dollars is the allegation b with a b and the hack was in 2016 they didn't even bother like spending it they just like

transferred it to themselves their wallet and like just went on with their lives this the girl was writing a forbes column for some for some reason i think cn CNBC had the, had part of a rap song on there. The rapping is, I mean, worse than mine. Is she good? My God. It's,

it's actually unbelievable. I don't, I don't know. Cause we're not allowed to sing it. I'm not allowed to sing and dance. It's like a social. I want it to be good. Just the dollar amounts of this stuff though.

Like these are the crimes of the century. I don't think anybody's ever stolen $4 billion before. That's a lot of money. What was the Lufthansa heist in Goodfellas? But in 2016, it wasn't 4 point whatever billion. It's because of the appreciation probably, right? True. Right.

So at the time it could have been, if you take that painting and make it, you know, a billion, you know, I don't know. It's just disgust me to begin with. It's the kind of thing though where, so they were trying to launder it, but they were unsuccessful. Did you see what they were buying? They were buying gift cards at Walmart. Walmart gift cards and gold.

They needed Marty Bird. Who the hell buys gold? I don't understand two things. Remember I started out with good guys don't finish last. I don't understand waking up and being like evil to somebody and then stealing something that's not yours. Well, it's a victimless crime because it's a make-believe asset.

So I've, all right, last thing. And then we'll go into favorites and then we'll let you get out of here. You see this bonus season on Wall Street. These are the kinds of things that make me bearish, but they're so anecdotal and they're really not meaningful. This is very far away from your research,

but this is the New York Post. Quote, there is rain in the forecast and lots of it as flush Wall Street bros blow their record-setting bonuses on cars and caviar. We recently had a $10,000 bill for six people, said Jesse Schenker, who owns Oyster Bay, Long Island, whatever.

It doesn't matter. It's a whole article about people spending $5,000 on a bottle of alcohol, et cetera. It's just crazy. Historically, though, and you've now seen more – a lot of cycles. You don't want to read these articles. You don't want to read the articles. Number one, I hope the gals are getting as much as the bros. And number two.

That's right. The odds of me commenting on Wall Street bonuses during bonus season is zero. Fair enough. I'm just going to work hard. I just prefer it when those articles are not coming out. I know. But now it's almost unavoidable. But think about a month ago, like when the market's

tanking and the end of the world is here and all the retail investors are blowing up in whatever fly flyer. EV stocks. You know, it's that anecdotal stuff that gets kind of, some of the anecdotal stuff that I've talked about before is just watching, not my kids, because they can't trade because of my job, but some of their friends that, you know, they didn't think they had to really work because, well, you just buy stonks, they go up. They were right there. Everyone was going to retire and be a trader. And they were so mad at me

because similar to 1999, I was an idiot. And I was like, please don't trade these stocks. And they doubled the next day. Oh, and that was the hardest part that the best advice looked so bad for a full year. And I'm really good that that happens to me a bunch. But ultimately, again, it comes down to- Did anybody come back to you and be like,

thank you for being the voice of reason? Yeah, I made a few of them not do it because I've done it myself. I've blown myself up. I mean, I could have gone to Harvard twice. Mike does it every month to himself. I gotta remind myself. I gotta keep myself honest.

I will not trade options because the uptrend options work so well both on my hair and in my wallet right uh let's do favorites i'll start um do you listen to any podcasts besides ours i don't all right uh how come just no time so any free time that i have is based on aviation stuff because i'm a pilot and i love to fly no way i like I like to, yeah, I love flying. That's a, I use it. I, my son and I are pilots and my, my older guy. Wow. That's cool. What do you, what do you fly? Smaller planes? Just single engine. Flying carpet. A broom. Some would say a broom. I fly a Cirrus. It's a single engine four seater. It's awesome plane. That's so cool. Where do you fly to? Just around? We're going to be flying to Park City at the end of this month for a talk

I'm giving. I've flown to Vegas for a talk. Can you fly to the Bahamas? Do you have to stop on the way to Vegas from the East Coast? Yeah, it was two stops and an overnight. It was like a nine hour all in and I don't want to fly that long. But dude, going over the mountains with just you, the engine,

the Rocky Mountains, a couple of boys, it was just so good. engine. The Rocky Mountains. Yeah, a couple of boys. It was just so good. It's just so peaceful. You can't – there's no market stuff. There's no – So you're not an adrenaline guy. You're doing this because it's relaxing. It's actually – it's like peace.

It's like being – it's – yeah. OK. Wow. You know, it's funny because in my resume, I'm a pilot. I scuba dive and I've skydived. And it all sounds like really high adrenaline stuff. But there's a process and a procedure for all of them that you go through. Checklist is big with flying.

A checklist for all of them. Right. Where you minimize it. But what I love about that stuff is when I listen to a podcast outside of yours, there's times where I don't want to think anymore. I don't want to be the expert. I don't want to hear what do you think. Who gives a shit what I think? Like I just want to just be quiet and be able to think about something else.

And flying does that for me. So I don't listen to a lot of stuff. Right. How often do you fly? Every week, every other week. Wow. Like go up and just goof around. Could we call you Iron Eagle from now on?

Would that be okay? How about next time we do this? Chappie Sinclair? Why don't we do the Mile High podcast, Daddy? Why don't you come with me? We'll go in the plane, and we'll have a flight down the corridor of New York City. Hold on. What just happened?

Yeah, let's go. All right, wait a minute. I do want to come on the flight, but I have to call the David Jacobs Agency and check on my insurance coverage before we do that. Yeah, I've had people tell me that. No offense to you, but – No, Shia would love it. John Denver, Buddy Holly, God forbid. I'll tell you what, I worked for the greatest company because they let me – they don't question it.

They let me do it. How many people fit on the plane? Four. Okay. But not if Josh is on the plane. Not if I'm on the plane. Well, I was going to say five, but four. No, actually, it's called five.

It's four and a half. You can fit like Patty, the kids, and the dog. I feel like the audio quality would be great up there. What? Up in the air? No interference. Duncan, do you want to join the Mile High Club with me and Tony and your equipment? I'm not the biggest flyer.

Okay, so do this. Go to YouTube and just do a search for Cirrus and listen to some of the audio on some of the videos that are up there. It's fantastic. I don't know if I'd be able to focus because I'm a little – You get nervous. Especially in a small plane. I think it would freak me out. A small plane is a glider if it loses an engine, not a big plane. Oh, that's a good point.

Well, listen, if – This went totally sideways from the original intent. God forbid if things don't work out. Like we've all had a pretty good run. By the way, here's a funny joke. You're not old enough. Like I probably shouldn't do this given the viewership. How do you know in a room of a thousand people who's the pilot?

Go ahead. You don't have to guess. He'll tell you. Okay. Nailed it. Nailed it. Anyway, I was going to recommend a podcast to you. Invest Like the Best is Patrick O'Shaughnessy.

You know Patrick, right? I mean, he just had Peter Chernin on. It's about an hour. It's one of the best things I've ever heard. Really? Peter Chernin is like the guy that produced titanic and oh great 50 other amazing movies i didn't realize that he's doing venture investing and he's investing media companies what he knows uh he's uh he's fascinating definitely worth i listen i like to turn off too that's one of the few that i listen to it's really good the other uh

my other favorite is ozark season four which I don't know. You said you're watching Reacher. Are you watching Ozark? I got to get into it. My kids are into it. The older guy that started the software company, he loves it. It's very good this year. Okay. Tony, what have you brought us? Flying.

That's your favorite? He gave us Reacher. Packy's post this week. Josh, did you read this? No. So he wrote a post about what, like that we don't build anymore, the American dream, not that it's dead, but he basically was talking about this company where we'll somehow rent the real estate back to the company and they can become owners of the company. So Packy said, small business owners create value in a neighborhood, but they don't capture most of it, which is obvious. Another quote from the article, he said, we are trying to protect Americans' downsides

instead of maximizing their upside. Which is like Europe. I am a fan. Packy McCormick, 2028. I'm in. I love it. Okay, we're going to wrap here. Did you have fun today?

I had a lot of fun. I was, like, hanging out with you guys. Are you going to come back? Got to get the invite, but yeah. All right. Are you busy next week? I love doing shows like this because we get to talk about other stuff. Yes.

There's the music in my ear. We're rapping. We are rapping. They're playing you off like the Oscars. Right. I hope I won. Only because, as you know. I'd like to thank my wife.

I'd like to thank Josh Brown. The attention span of the audience, it gets to a certain point, and then, you know. I can't believe the three of us have been sitting here this long. No doubt. Hey, you're the man. It's been great seeing you. Thank you. I feel like my audience, Michael and I, our audience, has learned

a lot from your insights and can't wait to break your chops when all of this stuff does not come true. So we'll schedule you sometime this summer. Does that sound good? If you want to hit me, get in line. It's around the corner. Tony Dwyer, ladies and gentlemen. Where are we finding out more from you?

TonyDwyerStrategy.com Yes? Dwyer, ladies and gentlemen. Thanks, Tony. Where are we finding out more from you? TonyDwyerStrategy.com. Yes? DwyerStrategy.com. Okay. Anywhere else to follow you? Or not really? No, that's pretty much it. Good for you.

Did a great job today, by the way. We appreciate you. I really appreciate the time. It was fun. And guys, if you want to watch video from today's episode, make sure you go to YouTube.com slash TheCompoundR W M and follow us on Instagram at the compound news. We will see you guys next time.

All right. That's a good warmup. So stretch out a little bit and we'll reconvene in about 10 minutes. We'll do it for real.