The Compound and Friends - We Have Lost All Sense of Decorum

Episode Date: July 21, 2023

On episode 102 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Sam Ro and Jack Raines to discuss: AI and the market, the meme economy, Nvidia's rollercoaster year, the earnings recession, financial charlatans, Berkshire's massive bet on Apple, and much more! Thanks to Kraneshares for sponsoring this episode. Be sure to check out Kraneshares COO, Jonathan Shelon, on a recent episode of Animals Spirits: Talk Your Book. For more information on KLIP, visit: https://kraneshares.com/klip/ Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Josh has been on Twitter since before I was born. That was like when things were still on video cassettes. I got on Twitter the day you were born. Nice. And I told the world. April Fool's Day, 1997. I was born on April Fool's Day. You know that? Were you? You were the first?

I was 97 when I was six. My dad told me my birthday party was canceled. He was taking me to get a library card. Oh, shit. I cried. He said April Fool's. I didn't know what that meant. Then I just cried harder.

I was like, this isn't funny,ing funny, Dad. Oh, my God. I wanted to party with a fire truck. How you doing, man? We'll show you a laptop the same, too. Don't want you to be left out. Oh, let's go. You texted. Your birthday's canceled, and I'm taking you for a library card.

Yeah, that's an insane April Fools joke to hit your six-year-old son with. Is he funny like that? He has a very dry sense of humor, but he has an occasional zinger. Oh, man, that's great. I hate April Holes. Are you coming to Future Pro, Sam? I have yet to nail that down, but I'm pretty sure. I got my plan sick and everything. Oh, you're going? I'm there.

If you need any help with that, Sam, just let me know. Yep, yep. All right. Headphones on, everybody. I think I can do fine without this. Jack, you cutting back on travel? No. Not particularly.

You're traveling to the Hamptons. He's watching it up. I am going to the Hamptons. Traveling to the Hamptons. Where's next? The Hamptons. But after that? South Georgia to see my family.

Oh, Birmingham and South Georgia to see my family. But after that? Barcelona, Ibiza, San Sebastian. Where are you going in the Ham after that? Barcelona, Ibiza, San Sebastian. Where are you going in the Hamptons? Oh, Bali goes to San Sebastian. I need you to move down this way a little bit. Oh, nice. Where are you going in the Hamptons?

Where do you stay? Montauk. Oh, really? And an Airbnb. There's like 21 of us in a 14-person Airbnb. That sounds right. So you put like five people in a twin bed. It's perfect.

I was in West Hampton this weekend. Not for me. And South Hampton the weekend before perfect. I was in West Hampton this weekend. Not for me. And South Hampton the weekend before. And I'm not a Hamptons guy. So I just like walking around and going to some of the restaurants and stuff with people. So I kind of like it. Have you been to the Stephen's Hawk house? Yeah, no.

I don't do shit show Hamptons like you do. I do adult Hamptons. Does your generation appreciate Mr. Brightside who yes yes okay that's

that's my generation music the killers yeah well my generation also likes the killers like it's a nostalgia for something we never experienced when it was

at its peak right so like the Beatles we don't like them we had our Hamptons when I was your age it was like

Rockville Center and the Hamptons and Bord your age. It was like – Rockville Center. – Neptune's and Bordy Barn and it was gross, but it was great. Right. Wouldn't trade it for all the world. Right. But then I didn't go for a long time and now I go. It's different because I'm with adults. Right.

And they own houses and like you have to take your shoes off and it's – We take our shoes off. There's dinner reservations and it's not like, you know, how effed up can we get at dinner? It's like, it's just different than when I used to.

It could be. It could be. No, I had a nice time. We ate at this place, Alea. Okay. Sam, you ever, you know what I had today?

Szechuan gourmet. You ever go there? I don't know. Best Szechuan in New York City. Is it? Yes. I'll check it out. What do you got?

We overdid it. We started with soup, pork, dumplings. Is it placed on 38th? Yeah. Indian? I had Indian food last night, actually. Mango. He had the chicken.

I had the chicken, chicken, masala. By the way, that's a f***ing joke. I know what Indian food is. I didn't say it. We had like spicy dumplings, cumin lamb. I don't know. I ordered a ton. Well, Szechuan Chinese is like

the spiciest. It's a region of Chinese food. No, I know, but it's like the spicy one, right? Yeah, yeah. They've got the Szechuan peppercorns, the one you bite into and your whole mouth goes numb. You're supposed to avoid those at all costs. Yeah.

Delicious. I'll check it out. Put my mic on! All right. What episode is this? 102? Oh, wait. Duncan, what was that drop that I wanted you to include for me?

I'll have to look. I can't remember right off. It was funny, though. It was good. I can't remember right off. It was funny, though. It was good. Can't remember. I guess it wasn't that good. All right, let's make a podcast. What do you think?

Sounds good? Everybody's ready? Oh, yes. Feeling very relaxed. You guys are making me feel very comfortable. Feeling relaxed. Probably zero percent. Zero percent.

Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent.

Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent.

Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent.

Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent.

Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent.

Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero percent. Zero's a good suggestion. All right. John, what show is it? Josh, Compound and Friends, episode 102. Oh, wow.

102. Oh, my God. Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Today's show is brought to you by our friends at Crane Shares. One of the most popular investing strategies over the past couple of years has been cover call strategies, particularly in ETFs. They blew up over the last, I don't know, 12, 24 months.

We've spoken about the Crane Shares, China Internet, ETF before a million times, KWeb. There is now a cover call strategy on that. The ticker is KLIP. That's CLIP. If you would like to learn more about the fund, visit Craneshares, that's with a K, dot com slash CLIP with a K. All right, ladies and gentlemen, welcome back to The Compound and Friends, your favorite podcast about all things investing, finance, Chinese food, you name it. We cover everything on this show. Michael Batnick is here. John is here. Duncan's here. Nicole, Rob is in the background hanging out. And we have two very special guests today.

First things first, I'd like to welcome back returning champion, Mr. Sam Rowe, one of my favorite market writers. Thank you. One of the best ever to do it. Sam is the founder and writer of Ticker, a weekly newsletter providing market data, news, and insights for investors. Sam has contributed to Business Insider, Yahoo Finance, Axios, and more. Sam, welcome back to the show.

Thank you. Thanks for having me back. So happy to have you. And last but not least, coming to the show for the first time, Jack Raines. Jack writes The Young Money Blog, a finance-focused blog covering markets, memes and more. Jack is also an editor at ExecSum, curating the Liquidity Newsletter, which provides daily coverage on all things Wall Street and Silicon Valley. Welcome to the show, Jack. Humble and honored.

All right. All right. Yo, can we just talk about Liquidity for one second for people that are not aware of what it is, including myself? I follow all their accounts. I know you're behind some of them. I'm reading the newsletter that you write, Young Money, but I'm also like following all the meme accounts. I know you're behind some of them. I'm reading the newsletter that you write, Young Money, but I'm also like following all the meme accounts. What exactly is liquidity?

Like what is the corporate structure of liquidity? I mean, it's not a lot of it. There's not really a lot of it. There's not a lot of a structure to it. It's one dude. It's not me. So it's like, it's a little bit like the Taliban? They're C-Corp. I mean, yeah.

What do you mean there's not a lot of structure? I mean, it's – Who is the head terrorist there? Lit. Okay. Quiddity. First name, Lit, last name, Quiddity. Like we've had – like he signs contracts as Quiddity or as like the C-Corp.

Is he like extremely funny in real life? Because he's really funny. He's funny, but he's a lot – No way. He's like quieter in real life than you think he would be on the internet definitely not funny no offense yeah like ramp's not funny in real life at all almost like ramp almost as depressing in real life like all this humor comes out um no it's funny but he's a lot more he's wait wait who's the others who's the original liquidity but like there's arbitrage andy he went kind of postal after covid he's just

like arbitrage andy yeah he he was funny and then i think he might have gotten laid off during covid and now he's predicted the last seven world wars um he's he's all over the place no is it wait but i was asking you remember the website what's the guy the website you gotta do better dude he was he was hilarious i don't know if he's still around. He's a guy with a website. He used to go to his own conference, but in costume. Oh, my God. The Fly. Oh, my God.

So you don't know about this. That's before my time. Way before you and Liquidity and even Instagram. I mean, he's still around. He's a legend. I can't say his name. There's a guy named The Fly, and he had a site called iBankCoin and this was

a true maniac. Was that the iBankCoin the first cryptocurrency? No, nothing to do with crypto. This is like liquidity. He's still pretty active. He's still on Twitter. I've seen him on Twitter. Shots of Fly. I love this guy. No, but he would have events. He would hold an event and go in a costume. Nobody

knew who it was. He would show up in like a fake mustache and nobody— Nobody knew who it was. Nobody knew who it was. Wow. So he would attend his own— But I don't mean like a conference. It's a bullshit thing. Do people know what he looks like without the mustache?

No, I know. He wasn't really a costume. Nobody knew who he was. Yeah. He wasn't actually like a fake mustache. No, but he had a name tag with a fake name. Yes. So he was like an anonymous—

I'll tell you why I'm bringing it up to you. So similar to look quiddity, like nobody knows who he is, but hilarious. He was like a day trader who wrote about markets. Yeah. But when I say he would attend his own event, I don't mean like a bullshit event. He would rent out the Harvard Club. And he would have all these degenerate day traders. Probably 200 people there.

Yeah. Yeah. There were like media there. There was like press covering this. And he would be there in like a sweater vest with his hair combed to the side. All of that people are like, are you the fly? Are you the fly? Are you the fly?

It's like Clue, but like a conference. Dude, this is a real guy. All right. Shout out to the fly. Anyway, did not think we would be talking about the fly. Okay. Anyway, so liquidity. It's more of like, it's like a movement though.

It's like, because like a lot of people are now doing financial memes and they're imitating the memes that you guys do or they're resharing your memes, but it's a big deal. Yeah. The problem is he managed to figure out how to make a business out of it with the newsletter and then stuff coming off of that. A lot of the other— He's selling ads in the newsletter? That's the business?

Yeah, there's that. And then now he's like a venture scout for Bain, like has like a lot of different stuff going on. Like a lot of other meme accounts have a lot of like attention online, but it's hard for them to— like you can't just like sell sponsored memes. That doesn't work. It's hard to monetize memes. Yeah, 100%. Okay. But if you're a real guy or gal on Wall Street

or in hedge funds or in private equity and you see the liquidity stuff, you can tell this is somebody that's intelligent. Yeah. So that became like a door opener to do like real stuff behind the scenes. Yeah, because he worked in it for like seven or eight years. So like the newsletters,

while we do have a meme section at the bottom, it's like all the mergers and acquisitions, venture capital deal flow. Yeah, yeah. Believe it or not, not we do have a meme section at the bottom, it's like all the mergers and acquisitions, venture capital deal flow. Believe it or not, not everybody knows what a meme is. Most people do. But give an example of one of his most or one of your most viral memes. What does that look like for the audience? Who's like, what's a meme?

I mean, everything that has, what, hashtag ref on it, you only know what that means if you spent your entire career on Excel Yes, and then all the EBITDA stuff is did you guys invent EBITDA? Maybe there is there's a whole video. He put the saving capital markets So if you guys saw that where it was like the it was from like Saving Private Ryan Oh, and it's like so Lisa meme videos But like the entire thing is just like it's it's hard to a – I don't know if we can like somehow embed this in the video version of the podcast. No, we'll put links to some stuff.

My favorite one is the one where it's like if this is your boss, you're going to survive. Your company is going to survive. Oh, yeah. Like the guy in the like just awful loafers or whatever. I can't even describe it. But like the slacks that are like gigantic and then taper down to the ankle. Yeah. And then like the shoes that look are like gigantic and then taper down to the ankle. Yeah. And then like the shoes that look like they were bought at like Payless.

It's like if this is your CEO, your company is going to survive the recession. Dad's starter pack is an example of a meme. Yeah. The starter packs. That's a great meme format, obviously. What was the pastor? There was a pastor. Oh, wait.

Here's a good meme. I know what you're talking about. It's from the Barbie movie where it's got the two of them and it's like rich influencer girlfriend works 14 hours a day in private equity boyfriend. This is a good meme. There's a lot of Barbie behind the memes. Alright, John, you'll throw some up in the video, right?

Tell me about the process of making a meme. Are you like sitting down like, oh, I got a meme. Or does it just like snap a card to you? Start with edibles. How do you produce a meme? Smoke weed. Smoke weed. Stop smoking.. Or does it just like snap a card to you? Start with edibles. How do you produce a meme? Smoke weed. Smoke weed. Smoke weed.

So there's stuff that just like blows up that gets funny where like a picture goes viral. And then people just make a caption that's related to something entirely different that uses that image. Like the Barbie Oppenheimer is the biggest like, it's the biggest zeitgeist of memes right now. But if you're a finance meme page, you somehow relate that image to something finance, like influencer girlfriend, private equity boyfriend, and stuff like that. Anything that's big in pop culture right now can be very easily turned into a financial meme.

I do think memeing is almost like... The king. That might be the best meme. Those videos are insane. The dude with two teeth just cracking up. Does anybody actually know what they were talking about in the original video?

Trunk broke it down. He actually wrote out the entire, like he translated it one time. Is it funny? It's just like, yeah, but it's something stupid.

It's from some like, it's from some like, I think he's, I know he's from Latin America. I don't know if it's Mexico, but it was like a Mexican or Latin American talk show and he was just cracking up about something on a show.

They're both cracking up uncontrollably. Like there are mushrooms. Does that remind you of the Hitler meme from the movie Downfall? Yeah, yeah, yeah, yeah. Where they did that during the financial crisis 15 years ago, but that was like one of the original finance memes where they would just, they would make it like Hitler is running the Federal Reserve

or Hitler's running the Treasury or he's the CEO of Goldman Sachs, and they would just, they would make it like Hitler is running the federal reserve or Hitler's running the treasury, or he's the CEO of Goldman Sachs. And they would just change the subtitles out and it's Hitler profusely sweating and screaming at everyone around him, but they kind of memed it. And I think that was an early. It's like every like backup plan that he had during that phase of you know World War two all falling apart so it's like every time you heard about a business or like markets right the bailouts it's like well we're gonna do this or this is gonna happen but it's like no you have advisors saying no that actually failed

we tried that that's not gonna work you know you're just gonna end up in bankruptcy by the end he's slamming the table but all right all right so memes have been around for a while. You guys just do it at a very elevated level. Right. Very cool. Now, your accent, what part of Long Island are you from? South Georgia.

South Georgia. Right. Okay. Very cool. How long have you been up here? One year. Okay. And you're taking class at Columbia?

I am taking class. You're getting your MBA. I'm working on it. Okay. Dude, very cool. You're doing a lot of things. Thank you. For a young man. Thank you. Let's talk about. I'm working on it. Okay, dude. You're doing a lot of things. Thank you. For a young man.

Thank you. Let's talk about the markets. Oh, wait. Actually, yeah. Let's talk about the markets. I want to lead off by saying we have basically lost all sense of decorum. This has just gotten completely out of control. And I know today the NASDAQ's down, and they're beating up some of the biggest gainers of the year, and that's great.

This is from Ed Yardeni. In the brave new world of AI, investors seem to be willing to pay a higher valuation multiple for earnings, especially of the mega cap eight. Could it be that the historical fair value PE of 15 is history? Yes. It might be in the roaring 2020s,

dominated by the mega cap eight, which currently account for 27% of the market cap of the S&P 500 and sport a 31.2 forward PE. The chart is showing the S&P 500's forward PE. And then without those stocks, it goes from 19.2 to 16.7. So the whole market is not overvalued. But wait a minute. In 2013, this line was at zero, meaning there was no difference in price to earnings ratio of the

mega cap. And there should have been right. The market was wrong. Apple was way too cheap. Remember the back out the cash? I remember that. This is 2013. Yeah. You back out the cash app. Well, guess what? It was right. Apple. So these companies should trade at a premium. The weird thing is they're also the biggest companies. But it's also two and a half times. It's a lot. The PE difference, it's two and a half times that of the rest of the market. That's the part that I think we've lost.

And because these companies are working on AI, like this is what we're saying. I don't know. Gentlemen, thoughts? Yeah, I'll go first. I mean, you know. Shorter or long from these levels. Go. I mean, you know, I'm more of a hold guy.

So I think it's always possible something can go wrong in the next couple of days. Or maybe even just like the sentiment goes south. I mean, earnings from half of these companies are going to be out next week. So they could make some hiccup. Not great so far. It's not great so far. I mean, in terms of like, you know, if we're talking about beat rates relative to analysts, it's like all that stuff is positive so far.

Yeah. So whatever the expectations are, it's like, it's quite possible that they beat those expectations, but it's all going to come down to guidance, right? Netflix beat, the stock fell 10% anyway. Yeah. Probably because it just doubled. Now it's only up 55% year-to-date. So let me ask you a question. Right, exactly.

We're gaps guys here, right? We always have been. Sure. So the NVIDIA gap that sits at 320 when they guided from like 7 billion to 11 and the stock gapped up 25%, when does that get filled? Next, first quarter of 2024?

I mean, you know. Do you know how far away that is? That gap will get filled. Mark my words. That's scary. The thing about the AI is it's like there's so many parallels to every other sort of bubbly tech innovation development that's come out that it's very easy to say,

oh, this is like blockchain, 3D printing, the internet in the 90s and all this kind of stuff. But it's also being fueled by big names like, well, I hate to say BlackRock, but BlackRock just put out their mid-year report. And a huge part of why they were bullish on big tech names was because of AI. And they were saying that they had this roundtable a couple weeks ago that I went to. And I was asking them exactly this. It's like, the valuations are crazy on some of these stocks. Is it possible that the price has gotten ahead of the story?

And one of the things that they were saying is, well, the difference is there's actual orders for this technology. It's not like companies are exploring how to put blockchain into your workflows. People are already implementing AI into their workflows. Yeah. Jack uses it for all his newsletters. I do. Yeah, I've been writing everything over the years.

I don't even think he's writing anymore. I mean, if Apple can make $10 billion or whatever off of the watch and the AirPods, what are they going to do when they monetize? Well, that was unbelievable, that stock move yesterday. Yeah. So here's what happened yesterday. Josh and I were talking on Tuesday about how the stock market

influences how companies behave. And I said, with Microsoft gaining $150 billion in market cap in one afternoon, you just know that shit's about to change. And so Apple,

two days later, announced actually, and by the way, they've been very coy on this. They've been very, did I use that word right? They've been very quiet on their plans for artificial intelligence. Thank you. Here's

a Bloomberg article. Apple shares gained as much as 2.3% after they reported their AI effort. Here it goes. Okay. Apple employees say the company's tool essentially replicates bar, chat, GPT, and Bing and doesn't include any novel features or technology. Well, stock still went up $40 billion.

The system is accessible as a web application, whatever, whatever, whatever, whatever. What I want to- Apple has no current plans to release it to consumers. Doesn't matter, $40 billion. So what I want to ask you is this, is text-based AI going to just be something that everybody has like the web browser where there's Chrome and Safari

and Internet Explorer and whatever else? Like, is everybody going to have some sort of version of this? I think if you're in a business where there's a lot of communications involved, like a lot of inter-office emails and slide decks that you have to put together for VP or whatever, I think this is going to be huge. Because it's like, how much time...

And you're happy to pay for it. You're happy to pay for it because it's time well spent rather than having someone who gets paid $600,000 a year. Has anybody seen Bloomberg GPT in the wild? Has anybody actually used it or seen it? No? No. They have a Bloomberg GPT? They announced it like a month ago. I think in partnership with Microsoft or OpenAI, Bloomberg GPT.

It's the first like finance-driven large language model. No, but for real. I haven't seen it, but I have seen, we've all seen ChatGPT and we've all seen the output. Yeah, it's magic. People will, people like who are usually sort of skeptical and snark about this kind of stuff are taking screen grabs based off of prompts that they put up and then they tweet it because it's hilarious. It's amazing. I don't think anybody's dismissive.

You might be dismissive of what it's done to the stock market and said too much too soon. This morning, Google is testing a new tool known internally as Genesis that can write news articles that has been demoed for the New York Times, the Washington Post, and the Wall Street Journal. So these companies quickly got a re-rating. To Josh's point, probably has been overdone.

But is there, I guess there's doubt. Of course there's doubt. But we could legitimately be talking about like unlocking tens of billions of dollars of revenue. So I feel like people just don't know who's going to win it. Like they're all popping off because it's like Apple could win it or Google could win it. Or the one with Meta coming out where I'm like,

I'm not a like tech wizard or anything, but basically they are opening up their, they're selling a commercial version of their, whatever it is, AI stuff. And NVIDIA's up, I don't know how much over the last year, but a lot of what Meta's developing could hurt NVIDIA because NVIDIA kind of has a monopoly on a lot of their chips that are for AI stuff.

Meta could change that. So there's a new development every day, or like OpenAI was the thing up until three months ago. Now there's, or now there's like seven JetGPTs. So it's like a new development every day or like OpenAI was the thing up until three months ago. Now there's like seven JetGPTs. So it's like all of them pop off, one of them wins, and then the rest of them crash at some point. That's like how dot-com bubble happened, right? Like, okay, in hindsight, we know that the internet

was like extremely special and search engines and all this stuff was great. But back then, you know, it was AOL Search and AltaVista and Prodigy. And those were massive companies back then. And, you know, most of those names don't exist. And, you know, today it's stuff like Google and Facebook and all these other names that came after, you know, the bubble burst. Is there any chance, like reasonable, is there a reasonable chance that the winners in this

space are any companies outside of the top six? I'm assuming that Tesla is not going to win, Chad, GBT. The winner of like the company that benefits the most from AI becoming a widespread technology. The company that wins AI, and maybe there's multiple winners, but is it going to be anybody outside of Apple, Google, Microsoft? I mean, it could be that a winner is someone who just implements it the best, like a company that doesn't develop AI, but finds a way to become like five times more efficient with AI

and then takes market cap. Like, I don't know, like somebody like Stripe or just a random company, Airbnb might be able to like better price stuff. I don't know. I actually think every vertical will have its own AI mini champion. Like we talked about Schrodinger on the show. This is the drug discovery AI play. I bought it at like 20, sold it at 25.

It's 50 now because I'm a guru. But they are like the leading platform for other pharmaceutical companies to rent out that platform to perform their own AI. The other thing they're doing is they're providing the technology for free and partnering with companies, taking stock in those companies that are trying to do drug discovery with AI. Like they seem to be at the center, SDGR is the ticker. They seem to be at the center of the universe for pharmaceutical related AI. They seem to be at the center of the universe for pharmaceutical-related AI.

It's easy for me to picture every sector having its AI play, so to speak, because it's so early. I don't know if that means for a stock that's going to work over 10 years, but you're going to see IPOs now coming out where companies are going to be like, oh, we're the AI for retailers. Like every retailer uses our AI platform to figure out when they need to restock. And then you'll see like a human resources AI, like, oh, we're going to track all your employees and then ServiceNow will buy it. Like there's going to be like, I think smaller AI plays, but-

Or what if it's just Google and Microsoft? Well, I think they'll win the biggest because they'll address the most users. They can also start buying up. Exactly. I think that's what it is. Whoever starts to win goes like, yeah, come over here. I think that's right.

Businesses like Facebook didn't create Instagram. They acquired Instagram, right? Google, Alphabet didn't create YouTube. They acquired YouTube. That's exactly what's going to happen this time. Yeah, yeah. I think, I mean, how often do companies actually come up with anything on their own? Like even like, you know, in the biotech drug business, it's like Pfizer, Merck, all these

big companies, they acquire, you know, drugs that are in, you know, certain stages of discovery and they're responsible for the marketing. Before any of these companies could get to a $10 billion market cap, they're going to get bought. Besides their open AI. Yeah, I think that's possible. Yeah, it's going to be, you know, it's, well... With Microsoft.

Yeah, I would speculate it would be, like, these small companies that aren't public yet. So just these acquisitions happen very quietly. Like, these companies are probably, you know, Microsoft is probably going to acquire, like, 10 companies today that we've never heard of. But, like, maybe one of those companies ends up becoming responsible for, you know, creating the ai tool that blows all of our minds it's

also you get kind of a self-fulfilling cycle of microsoft announced an ai initiative their market cap goes up 40 billion then you acquire 20 billion dollars worth of ai startups it's just like you kind of just created that's value that's a really good point like them just announcing it is like a value creation well yeah ai washing, AI washing, right? If you don't deliver, you just at least say something, right? By the way, my newsletter is going to start implementing some AI. Sam GPT. Yeah, exactly.

All right, so check out this chart from First Trust. This is great. We're looking at the S&P 500 broken down by decile, and we're looking at within that bucket, what is the forward PE ratio? And what you'll notice is that by far- This is crazy. By far, the most expensive area of the market, just based on what they're expected to earn over the next 12 months, are the stocks 1 through 10. So the 10 mega cap stocks. They're trading at a forward PE of 30.6 times. Once you move from

names 11 to 50, again, by market cap, it drops to 18 and it just continues. It basically hovers around 18 and then it drops from 400 to 500, the smallest hundred names that trade at 14 times forward earnings. So the market is giving this bunch, this group, a lot of credit for what they're going to do going forward. And if there is any sort of a hiccup, and there probably will be, these names are going to get smoked. Yeah. But, you know, one thing- I'm thinking of NVIDIA specifically.

Sure. Well, yeah, I mean, NVIDIA is far more of a pure play than a lot of these other, you know, gigantic companies here. But, you know, how can you really, you know, sort of decompose how much of this valuation premium is due to AI versus, you know, just the rest of the business, the expectations for the rest of the business. Well, just if you look at where they've traded historically versus what they did this year, like there's a lot of expansion going on.

Yeah, but, you know, I don't know. So I've been like sort of like changing my thinking a little bit about how to think about some of these bigger companies. Like you guys read my blog about how it's like, oh, this is not actually five companies, but it's a conglomerate of like 50 companies. These companies just completely own all of our time. Like half of our computers is running off of the hardware of one of these companies. This whole show is going to be streaming on YouTube, which is owned by Alphabet, right?

This whole, like, I don't know what platform you guys are using for any of this stuff, but it's like, it's all sitting on Azure or AWS or Google Cloud. It's so true. Like, we were with a smaller provider for the podcasts, two different ones. Now we've consolidated the whole thing to Megaphone, which is Spotify. Which will eventually be Google. Right. Which eventually will, right.

The biggest listenership for this show, most podcasts, is Apple. I would imagine that a lot of the editing stuff, technology, is Adobe, which is maybe not in the top 10, but it's in the top 20. So it's just like you just go down the list and you realize, oh, there's a reason these companies are so dominant in the index because that's mirroring how dominant they are in our lives. And it could be that the prospect for earnings might not be sort of Nvidia-esque or small cap growth tech-esque, but there could be a higher confidence that these companies actually deliver on those forward earnings. What if we're talking about this in 10 years? These companies are so impenetrable.

And I wrote this like years ago as one of the many reasons why the valuation of the stock market keeps rising. Well, the biggest stocks, their moat keeps getting wider and wider and wider. And don't those deserve a premium? I think that's a huge part of the story. Like back in the day, there was concentration in the stock market. That's not a new thing. But when it was AT&T or General Motors, that didn't dominate your every,

like 80% of your life. My entire life and all of our lives are with these few companies. Yeah. And, you know, with all the indexing and all the stuff that's going on, you can just buy a portfolio of all these things, right? And so if you decide that you hate Apple one day, you're going to buy something, you know, the next day that runs off of Microsoft software or whatever. So it's like, you guys, the value guys hate this so much when investing becomes this intuitive where it's like, what are the best performing stocks of 2023? Oh, uh, Apple, Microsoft, Amazon, you know, all the best companies companies that you know, they hate that intuitiveness so much because it's not clever and an idiot or a child or a growth investor, which I think they look at all as the same, could just outperform. So they hate that.

The other thing they hate is like if an alien landed on earth right now and you were like – and you explained valuation. You were like – and you explained valuation. And then you said like – and they said, well, what's like a very highly valued – like what's an overvalued company relative to the rest of the market? And you're like, oh, Apple. And they're like, what's Apple? And you explain, oh, just like the company that gets 50% profit margins on everything and has the biggest installed user base. And they're like, oh, well, maybe that should be the most overvalued stock, shouldn't it? Yeah. And the other thing too, I mean, related to that, right? Like the reason why, you know, value investors might be frustrated, especially, you know, like, like you said, like at the end of the year, this is a story that everyone's gonna be telling,

right? But that's the issue with valuations. I think we like, it's one of the charts that, that, that we're going to talk about, but valuations might tell you if something is expensive or cheap relative to historical PE ratios or whatever. But the historical data tells you that a high valuation or a low valuation doesn't tell you anything about where the stock is going in the next year. On an individual stock basis. And even the market. Yeah, even on the market, too.

Yeah. So it's like the very fact that the valuation is high now is sort of a manifestation of this issue of, yeah, stocks can get expensive. And so why can't stocks continue to be expensive? By the way, I am, I am, uh, I am in the camp that valuations do matter. Like what you pay for a business app, of course it matters, but it doesn't tell you what happens in the next year, two years, three years, or even five years. It matters eventually. It matters eventually. It does matter eventually, but you know what, like a lot of these valuation metrics, especially like PE ratios, right? Like, so if a company is trading at 30 times earnings, right, this is a very high number, but most of the time you're calculating it based off of either the current year or what's

expected to happen in the next year. Well, so that that, let's say Apple is trading at 30 times next year's earnings. Well, 30 years from now, is that, is it going to be the same level of earnings? You're probably going to be able to sort of earn all that back in less time. Well, analysts do it all the time. Like this stock is trading at, you know, maybe it's 30 times earnings today, but it's trading at 22 times 2030 earnings or something. It's a dangerous game though. Of course it is. If you had played that with previous dominant tech companies, then you would be in Nokia at a level.

You'd be in Motorola. People forget that there were – maybe not as dominant as Apple and Microsoft are today. There were other tech companies where analysts were playing that game, thinking about 10 years out, not understanding that pretty much everyone in history has gotten disrupted. Well, how about this? This is why you got diversified, man.

There's not a lot of things you could say about valuation that's like conclusive. Like this, but what you can say is trading, buying something for more than 40 times sales, which NVIDIA is at, is generally a very bad idea. Like, that has not worked out very well. Like, Cisco, from 2000 to whatever, 2010, it grew at like 20% a year, the business. But it doesn't matter because the market was pricing in like 35% growth. And when you fall short of that, you get destroyed.

Yeah, that kind of reminds me of how people used to talk about the Chinese economy and what used to characterize a hard landing for Chinese economy. When you think about the US economy, a hard landing is recession, right? GDP goes negative and all this stuff. But there was a time when China is growing at 10% per year. 6% was a hard landing. 6% was a hard landing because it's like- Now they would do anything for 6%.

Yeah. Oh, yeah, absolutely. Right? Because it's like you plan, you're at 10%, you plan for a 9% or 8% growth or some deceleration. You go to 6%, then suddenly you have too much capacity and it's a nightmare. Jack, you threw this in the doc, Nick Maggiuli's piece on valuation. This is the hot topic of the year, right? Like everyone basically is like,

all right, these companies are great, but these stocks are overvalued. That's pretty much the commentary that I'm reading everywhere. What is this chart saying? Yeah, basically that PE ratios on average have been climbing over time, especially since the 80s. But it's one of those things where there was essentially like a monopoly. New York Stock Exchange had a monopoly on broker fees until 1975, which is right around when that started to inflect. So all of a sudden, trading fees come down. And then you have stuff like Robinhood E-Trade, where more and more people can invest. And then on top of that, companies are getting more global now, where, OK, like, yeah, Apple's huge. You could say it's

overvalued. But what if they expand more global now where, okay, like, yeah, Apple's huge. You could say it's overvalued. But what if they expand more into Latin America where everybody still uses Android phones and WhatsApp and they start using iMessage? It's like as more people can put money in the stock market, that's supply and demand is going to make you go up. Companies get more global. It's going to make their revenue probably go up. So this is the Shiller P.E. ratio, which I think is now 30-ish. So the Shiller P.E. ratio tries to normalize for the economic cycle. It takes 10 years worth of earnings.

Inflation adjusted. Adjusted by inflation. So the idea is like, all right, what is the multiple over a longer period of time? And it's very high right now, but you can see on this chart that it's been climbing. So I remember 10 years ago writing blog posts about like, maybe we should be paying a higher multiple on earnings. I didn't even get into the commission stuff that you just mentioned.

It's a good point. I was talking about like, what were the companies that we're comparing these companies to? And they were f***ing copper smelters. They were like concrete block companies. Like, of course those shouldn't be 30 times earnings. They might have been growth industries at some point.

Yeah, but they never had margins like these companies. John, throw that chart back out. The capital-intensive business. You know why this chart is completely busted? And again, I'm not saying valuations don't matter. I think they do. I think you're saying that. But, no.

We're going to edit this so that it looks like you're saying that. When the Shiller ratio crashed in 2009, at the bottom, after a 57% drop in the stock market, it was barely below the long-term historical average. Barely. The long-term historical average is like, what, 17 times? You're waiting for that? Good luck. And it was below it for like two months. Okay, so the other thing, to Josh's point about these companies, which we've been talking about a lot, the first billion-dollar company, inflation adjusted, was U.S. Steel.

What year was that? Like 1901, I think. It was worth a billion dollars in 1901 dollars? Yeah, you don't remember that? I missed school that day. I did a post on this a long time ago, so the numbers are not – they're directionally right. The revenue per employee was like $17,000. Again, inflation adjusted.

Facebook's revenue per employee was like $4 million. Like these are not apples to apples. They should not be valued the same, and they're not. People were getting so mad though when we were saying maybe the the schiller cape should be climbing you know like creeping higher every decade so another thing another thing about um the schiller p trending higher too especially like since uh you know like 1980 you also had interest rates falling for four decades so um you know actually uh jeremy grantham of all people, wrote in one of his notes, I think like four or five years ago, actually talks about this, where, you know, we may actually be in a new regime for evaluations where it's a mistake to think about the 100-year average for the PE or the CAPE, but like, you know, something that's more close to whatever the 15, 20-year average is because interest rates are so much lower. more close to whatever the 15, 20-year average is because interest rates are so much lower.

So the lower interest rates justifying those higher valuations for all those reasons, lower cost of capital and all that stuff. There's Robert Shiller in Money Magazine in 2012. Things can go for 200 years and then change. I even worry about the 10-year P.E. This is his Shiller P.E. ratio. Even that relationship could break down. I mean, it did. Yeah.

So. of PE ratio, even that relationship could break down. I mean, it did. One more thing I would add is early last year, Goldman Sachs published a study where they had some wizard statistician do some analysis

here. They concluded that... Was it litquidity? It might have been. It might have been. Yeah, lit something. But the takeaway was that while you can calculate an average for the P because there's numbers that you can use to calculate, there's actually very little statistical evidence to suggest

that the P-E ratio itself is actually mean reverting. There's actually a gravitational pull to that average. Like it can drift, you know, for years or, you know, decades, you know, above average or below average. Right. But there's nothing that's sort of like gravitational about those long-term averages to suggest. Who's to say that 15 times is the right number?

Well, that's the thing. It's not physics. It doesn't behave based on rules that govern like atomic structure in the universe. Well, you know what else? These are not, not, yes, these are businesses that are publicly traded. It's not as if you're buying a 7-Eleven and yeah, guess what? If you pay 20 times, that will have a much, a direct impact on how much you earn versus if you pay seven times. That's not what this is. Can you buy, can you buy Nvidia at 40 times sales? As long as, as you hit enter, you scream YOLO. Is that the way to do it? No, that's how it works. And you can probably sell to somebody who's going to pay 80 times sales.

Yeah. Well, that guy's really YOLOing. Well, it's like we were talking about earlier. Can you short these? Like I would say right now, Nvidia is incredibly overvalued, but it's also like these bubbles run a lot longer than they should. Like I remember when I was literally YOLOing SPACs during the COVID bubble, like I would buy them at 10 and sell them at 15. And then like Nikola Motors went to a hundred, it was worth more than Ford. And they had a PowerPoint of a truck that never got produced. It's like, there's, there's this like idea I have in my head of like, people hear about it, like basically on Twitter, on the internet. And then you see it, like, people start talking about it. And then Jim Cramer talks about it.

And then other people talk about it. And it takes, like, months for that whole cycle. Like, people are going to just be hearing about AI and NVIDIA, like, a month from now. You don't want to short these things, like, the day they get overvalued. No, and you can't short a value over the time. That's the thing, too. It's, like, with the passage of time, you know,

earnings trend higher, right? Like if you're looking at stocks broadly. And stocks usually go where? They usually go up because earnings usually go up. It makes a lot of sense when you think about

stocks going up, when you think about earnings going up. This isn't satisfying, but the way that I think about markets that feel overvalued, not feel, quantitatively appear overvalued,

it's much easier to adjust your expectations, right? And say, okay, I'm paying 28 times. That's probably, my returns are probably gonna be lower versus I'm going to time the market based on valuations. Like that is a recipe for disaster. Can we also point out NVIDIA was in a 50% drawdown last year. It was 120. It's 480 now.

So things change really quickly. Meta was in a 75% drawdown. Oh, my God. Talk about a round trip. This chart of NVIDIA is ridiculous. So I sat through that whole drawdown. It was 70 almost. It was the worst.

So I had a former hedge fund manager, super successful guy. I know him in real life, texting me while NVIDIA was like 150 on the way to 120. And he's just like, dude, you have to get out. Einhorn did that? No. No, this is under the radar guy. He used to work at a very big fund. He does his own money now.

And he's just like politely like, dude, you have to sell it and stop talking about it on TV for the love of God. This feels a whole lot like what, Tesla a year or two ago or when that started going nuclear? Well, Tesla reported this way. I think we're going to get into that. Let's talk about earnings. Well, we have some SAM charts. The earnings recession everyone's talking about is backward looking. Throw this up, John.

What are we looking at here? Okay, so- For the listeners, describe. This is a meme. Yeah, so this is quarterly earnings- It's a terrible meme. Yeah, this is- You don't even have Margot Robbie in this.

Unbelievable. How is this going to work? The first half is Oppenheim where the second half is Margot Robbie. So basically what you're seeing in the middle is the current quarter, right? Q2 2023. S&P 500 quarterly bottom-up earnings per share, actuals, and then estimates. Right.

So the dark blue is actual, and the second half of it, the striped, is forecast based off of analyst projections or whatever. So, you know, we're currently in what people are calling the trough of the earnings recession. This quarter that we're seeing the reports of now could be the bottom. Right. For the cycle. This quarter, which, by the way, ended in June, right? So this is behind us.

So, you know, this whole matter of like the earnings recession and, you know, really sort of obsessing about how they've been going down for the last couple of quarters. You know, that's a good story if you were talking about this a year ago or a year and a half ago where you're looking forward to what's going to be an earnings recession. This is a story in 2022. That's one of the reasons why stocks fell so much. It makes a lot of sense. The 2022 sell-off makes a lot of sense when you consider the fact that we're currently having an earnings recession. Can I say one thing? The peak of earnings was the second quarter of 22? 22 sell-off makes a lot of sense when you consider the fact that we're currently having an earnings recession. Can I say one thing?

The peak of earnings was the second quarter of 22? I couldn't tell you. I think it might have been. I'm just eye test. Yeah, yeah, yeah. So we're saying that earnings peaked at $56.69 a share for the S&P. Nice. And they're troughing at $52.71.

That's not a lot. And who gives a shit? It's not a lot. And we shaved off $20 trillion worth of stock valuation to discount that? Yeah. Well, it could have got worse. Does that seem like madness to you? No, we didn't know. We thought it would get worse. Nobody thought that that's all that was going to happen.

Okay, so it was an overreaction. There's also the recession that everyone was forecasting, right? Oh, it's coming. Historically, with a recession, you have an average earnings drawdown of like 30% or something. Yeah.

And so that's something that would justify a 20, 30% sell-off. So Sam, based on your chart, it looks like in the second quarter of 2024, which is one year from now, we'll make a record earnings quarterly high above the 22 high. Yeah, 2024, 2025 is expected to be record levels of earnings and earnings growth is supposed to return. I'm wildly bullish on 25.

All we need to happen here is no pandemic. Oppenheimer. Or maybe pandemic. I don't know. Pandemic is good for a lot of things. Why is Oppenheimer 2 coming out? Yeah, Oppenheimer. Well, yeah, I mean, or maybe pandemic. I don't know. Pandemic is good for a lot of stuff. Why is Oppenheimer 2 coming out? Yeah, Oppenheimer 2. Is the point that stocks

lead earnings still and that relationship really hasn't changed? I think that's next year. I don't know if you guys have that. Let's get into that. This one from Bespoke actually sort of,

you know, you can actually see it. Is this it? Yeah, so the dark blue line is the S&P 500 for the last two years. And so you can see the bear market in the dark blue as it comes down. This is while the reported earnings in light blue were still on their way up.

But you can see in the second half of 2022 where the forward 12 months worth of earnings are starting to come down. That's beautiful. So the market peaked before earnings did and it bottomed before earnings did. What happened in October of last year? The stocks bottomed. There was no sign based on this that earnings were finished falling.

What happened? So, yeah, I was trying to sort of figure out what that was really all about. Which part? The bottoming. Like when people start- Because look, earnings estimates are still coming down for six months. Chad GPT was announced in November 2022.

Is that right? I think, I mean, the AI thing, I think that's part of it. It gave people a new narrative anyway. So nobody was really talking about it until January. So it's hard for that to be plausible, but it would be funny if like, we would look back in five years and everyone just agrees. Chad GPT came out on November 30th, 22 stocks front ran that by six weeks and never went that whole lineup. That's that's AI. That's AI. You also have five or six months of cooling

inflation, right? So this is what the strategist will tell you was that like, this is when people start to really feel good that the inflation battle could be inflation inflation peaked uh no june june june of 22. yeah and okay so october you undercut that low but then you bounced really quickly yeah because stocks lead right so you know you don't have to have a a pivot at the fed for for stocks to bottom it's just this expectation that the pivot's going to come in four or five six six months. Next chart. What do we got here? Margins have been the big story, will continue to be the big story. You know who told us that last week? We had Michael Semblist on the show. Yeah. Was that last week? Yeah. Yeah. I said, where's the puck going? If we're not worried about inflation, what are they going to be worried about next? He said margins.

Yeah. You got to figure this out because the fluctuations in margins determines whether or not your earnings will be amplified by sales growth or sales contraction. Okay. So this is margin expectations have fallen. Record margins are no longer penciled in by analysts. This is showing us S&P 500 quarterly net margins, ex-financials, and the yellow is estimates. What if inflation is cooling off? These companies aren't lowering their prices, so can't that be a reason for margin expansion?

It's certainly possible, but another big thing here, another big thing is, yeah, I think that's exactly it. That's exactly it, right? They'll lower their prices if they need to clear inventory. They'll lower their prices if they need to clear inventory. They'll lower their prices if they need to clear inventory. They'll lower their prices if supply chains are so fixed and the excess demand in the economy has been sort of exhausted

that they now have to compete for business. Then, yeah, you start lowering prices. But for the most part, companies are doing pretty well in terms of sales. Do airlines who are competing very difficult look like they're lowering prices? Isn't our prices already sort of in kind of a deflation? A little bit. Although, well, don't need to go there. I like this chart. I sent this to you and Ben, the next one. Earnings recover faster than they fall. This is from Savita. Yeah, this is from Savita. I sent this to you and Ben on Shadow. Wait, so this is stairs down, elevator up? Elevator up, yeah. So what happens here, and so Savita explains down, elevator up, elevator up. Yeah. So what happens

here? And so Savita explains this is that historically what happens is during the downturns, you make cuts, right? You, you know, you sell buildings, you lay off some employees and, you know, you bring in severance. Yeah. You pay severance and write down inventory. You have much leaner operation. Right. And so when the sales start to recover, a lot of your fixed costs are much lower than they were during the previous years. So a little bit of sales growth goes a long way in terms of earnings growth. And this is actually something that Mike Wilson at Morgan Stanley has been talking about for a little while. So everyone knows Mike Wilson as this bearish guy who was bearish last year, is bearish this year. They think he's a part of a bear, but he's a little bit more thoughtful.

He's not. He's been very bearish. He's way more thoughtful. And it's like when you start to like read, you know, page two or three of one. Read. Is it available as a meme? But that's the thing, though. He does talk about what he expects to be like a pretty aggressive recovery in earnings growth in 2024 and 2025. like a pretty aggressive recovery in earnings growth in 2024 and 2025. So he's probably on the low end of earnings expectations for those years, but he does expect a sharp rebound in earnings growth because of all these things that he thinks is actually going to be a headwind right now, right? And it's this phenomenon called operating leverage, right?

The degree to which- Next chart, John. It's this degree to which a change in sales translates into a change in earnings. So on the way down, and so this is a big part of why we have this earnings recession. It's like sales are kind of weak, but because of the nature of the fixed costs, a small decline in sales leads to a large decline in earnings. Meanwhile, while all this is happening, companies are sort of realigning, right? There have been some layoffs. There is new equipment coming in.

Companies are sort of streamlining their business. You get rid of the office and have people work from home. So the cost structures are a lot leaner. So you have a little bit of sales recovery translating into a whole lot of earnings growth. You just said leaner. This is operating leverage. You're 315. You go down to 200 pounds.

You lose all the fat. Then you go back up to 230, and it's all muscle that's operating leverage. Yeah, exactly. What's the next chart? Is this Wilson also? Yeah, so this is just sort of like laying out the earnings expectations for 2024 and 2025.

So in the middle, you'll see these are Wilson's forecast. So you can see the Barry story over here for 2023. He expects a huge decline. He thinks it's not completely appreciated how much earnings will fall in 2023. He may, you know, we're going to find out if he's right about that. I think he's going to change his mind. I agree. Yeah.

I mean, but, you know, his 2024 and 2025 look pretty good here. When he flips neutral from bearish, that's when you buy Nvidia. I don't give a shit what price it's trading at. Just for the day. Just for the day. But the point here being that the most conservative strategist on Wall Street still sees earnings growth for next year. John, can we skip two charts? Because we spoke about the valuation.

We did the next one. All right. So we mentioned this chart of showing the next 12 months PE based on the bucket of how big the stock is. The biggest stocks are much more rich than the smaller stocks. This is manifesting itself in returns this year. 2022 value stocks kicked ass. This chart comes from OSAM and it's their value composite. And the strongest decile of stocks that would be most

attractive on the value factor are down 5% this year. The stocks that rank lowest based on the value factor, in other words, stocks that are trading rich. I was going to say the value managers had one good year in 10. Those stocks are kicking ass. So it's been not just a challenging year for value managers, but for any stock pickers. Because if you're not equal weight Apple or Nvidia, and how can you be? You can't be overweight.

What are you going to have? 20% of your portfolio in Apple? Well, it's funny you say that. Berkshire Hathaway's market cap is now 25% Apple and its stock portfolio is 50% Apple. Unbelievable. So they don't give a shit.

So Demi-Sci, because they have the biggest YOLO they've ever pulled. Yeah. There's like, I don't know what sort of constraints are on mutual fund managers,

but at a certain point, you just can't be over with these names. Yeah, I think you're right. I think you're right about that, right? Because there's probably something in the policy statements or whatever where they said you know we can't we won't let a certain name receipt right yeah what if it goes like two more

years it keeps going and then you try to go value and you underperform by like 20 over the next few years it's honestly i don't envy it's brutal the person in that position that has to make that decision like do i buy the stock that just doubled this year in the size that it's in the index? Just to keep up. Regardless of the performance, right? You're paying someone a fee and their best idea is Apple.

Yeah, right. I know, but everyone knows about Apple. It's hard. Is that, you just quote billions right there? Did I? Oh, yeah, that was a billion. That was like a first season. Josh wrote that.

I like Apple. I think I wrote that line. Actually, wait a minute. He nailed it, by the way. He did. So let's move on. Goldman Sachs chief economist Jan Hatzius, quote, we are cutting our probability that a U.S. recession will start in the next 12 months to 20% from 25%. And that's just science.

Well, credit to them. They've been below consensus. Yeah. No, good for them. I agree. And they've been below 50%. This is Jan. The recent data have reinforced our confidence

that bringing inflation down to an acceptable level will not require a recession. Like you could do this without one. So soft. It's whack. What is this chart saying? This is just like moments that happened this year?

Is it terribly important? No. I think, well, I didn't put this in. Oh, this is their probabilities evolving. Yeah, relative to the red, which is the consensus.

Yeah, they've been more optimistic than the consensus. When was the consensus most certain there was going to be a recession? October of 22? Literally at the bottom. When was the consensus most certain there was going to be a recession? A phobia of 22? Literally at the bottom.

Perfect. Bottom for stocks. I mean, is that just because everybody thought that when interest rates went up, it was going to, like, that just has to cause a recession? That was just the baseline?

Well, also the pace in which they were rising, too. Yeah. And we didn't even know they were going to start doing 75 basis point hikes. Is it weird now that the S&P 500 is trading higher

than it was two years ago when interest rates were zero? Super weird. Yeah, okay. Again, I'm only 26, so this is kind of my first time

doing this whole thing. I've been speed running stuff since COVID. Unemployment's lower. By the way, you're learning nothing out of this year. Yeah, this is all garbage.

By the way, nobody got this right. Like, nobody got this right. I mean, you shouldn't forget this year ever happened. Like, because it's going. I mean, you shouldn't forget this year ever happened. Like, because it's going to mess you up. That's just like 2020.

You could argue that Goldman probably got this right, right? Because they were always below 50% likelihood. Yeah, but nobody, but I'm just saying the stock market and just coupled the soft landing into like 2% within all-time highs. Nobody thought that.

I think there were some economists at some boutique firms who sort of- Oh, great. Fine. Honestly, we are all getting stupider because of this year by the day. Here's where it's really going to get dumb. People are going to over-index on what happened this time for how we combat the next.

Oh, I guess interest rates don't matter. Like, no, no, no. This is stupid. It's a COVID-related phenomenon that we're still paying the bills on. It's all COVID. Yeah, yeah. All the comps are stupid. Everything's stupid. And there's a lot-related phenomenon that we're still paying the bills on. It's all COVID. All the comps are stupid. Everything's stupid.

And there's a lot of signs that say that there's still a ton of excess demand in the economy. Right? I think I have some charts in here, too, where there's a lot of leading indicators that say that there's still a lot of pent-up demand in the economy. So, yeah, it's possible that we continue to have this economic growth go on longer. I do think it's kind of ironic that it's not until months of job creation and months of economic growth that people finally decide to get more bullish on the economy. I'm going to quote one of the leading economists of our day, Elon Musk. Elon Macro, economists of our day, Elon Musk. Elon Macro, during the Tesla call last night, said,

buying a new car is a big decision for the vast majority of people. So anytime in this economic uncertainty, people generally pause on new car buying, at least to see what happens. And then, I don't know. He's from South Africa. He's a genius. Don't worry what it says. Oh, here's what he said. So when interest rates rise dramatically, we actually have to reduce the price of the car because interest payments increase the price of the car. True. Checks out. So, and this is at least up until recently, I think the sharpest interest rate rise in history. So we have to do something about that. And so if someone's got a crystal ball for the global economy, I'd really appreciate it. Can we borrow that crystal ball? So, I mean, one day it seems like the world economy is falling apart and the next everything's fine. I don't know what the hell is going on to be totally frank. I wish I did. End quote.

Same. It's very honest. You know what I was about to say? What is going on? That's a lot better than, you know, a CEO coming out and saying, you know, we're going to have 5% growth for the next three years. Yeah, no shit. I totally agree. That's what he should say.

Because if he's saying, oh, here's how the economy is going to finish the year, I'm not so sure I would trust that. Yeah. So, and he's, you know, he's Elon. That's the great thing about earnings calls too, by the way, right? It's just blunt, straightforward. From him. He's very entertaining.

There's no compliance officer stopping you from- Sam, last week we were talking about the chart that you had in your note the other day about how Wall Street's strategies are still bearish on the second half despite being bearish this whole time. It's remarkable. You're right.

It's worth noting that the S&P is now above all the year-end targets Wall Street forecasters had coming into this year. I mean, where are we right now? 4,400? I don't know where we are. Whatever. 4,500.

The most bullish was Deutsche Bank. Deutsche. They were at 4,500. Barclays is the most bearish, 36.75. Shout out Wells Fargo. Yeah, shout out to Wells. So we're getting some capitulation. Credit Suisse is raising.

And now you said like three quarters of them have raised their price targets. Like should you be allowed to raise your price target? There should be like when you're – so I do a lot of live betting because I – Should you be allowed to? Hold on. So you can't bet on an NBA game, at least on FanDuel, when – Fourth quarter. No, when there's like four or five minutes left in the game.

That's it. Put your pencils down. There should be a pencils down moment for Wall Street strategies. I don't know when that is. Might be July, though. Maybe after Thanksgiving, they should stop. Or you should get one adjustment. Maybe one freebie?

What do we think? Some of these guys will adjust their targets into the fall. This isn't them. They never adjust it away from the direction of the market. No, they do not. They adjust it toward where the market is already. I think you just have to publish the last two years with a line scratched through the new one over and over again

for the last 18 months or whatever, showing how many times you changed it, what day you put those out, your track record. First of all, here's Credit Suisse, which I didn't even, like 18 months or whatever, showing how many times you changed it, what day you put those out. First of all, here's credit Swiss, which I didn't even know existed anymore. It's nice that they still have an S&P target. We are raising our 2023 S&P 500 price target to 4,700, 3.9% above current levels with modest upside from multiple expansion.

Very helpful. Also raising our 2324 estimates to 220, 237 from 215 and 220. All right. So I guess this is the guy's last report. And then he walks out. He walks out. Is this coming from UBS?

I don't even know what's going on there. I mean, one thing I will say about these strategies and these forecasts and these targets, like if you talk to some of them sort of, you know, behind the scenes, not a lot of them like playing this game. They have no choice. But you know, if you look past these targets, a lot of their research is still pretty good. And a lot of them will continue to like their, their fundamental arguments are still really robust. It's just that, you know, they had the wrong multiple on the wrong earnings. I want to talk about sentiment for a second. I, here's my take on sentiment. It is completely worthless unless everyone agrees, which is very rare. I think we can all agree that in 2022, everybody agreed that things were going to get worse.

Were you at our NASDAQ event? Yeah. Yeah. Yeah. Yeah. You did the survey. When was that? December? It was a hundred percent bearish. I asked the crowd, how many people think a recession is coming? And like almost every hand went up. How many people think October was actually the bottom? There was like, you know, one guy who was probably trying to be funny, put his hand up.

Everybody. So really that was one of the few times that I can remember that everybody was on the right side. And not answering on the internet, like live in person, looking at you in the eye. Everybody was on the same side. So when I say sentiment,

data's are bullshit, here's what I mean. So the July fund manager survey that Bank of America runs shows what do you think is currently the most crowded trade? Cash number one. This is what they think

other people are crowded in. So if you were to look at this, the global fund manager survey, cash is the most crowded trade. The least crowded trade is equities, okay? So you would say, oh, wow, people are still bearish. This thing has room to run. Then you look at, Sam, you actually put this in one of your pieces, the expectations of higher stock prices.

This is a survey from the New York Fed. The mean probability that U.S. stock prices will be higher one year from now, it's 35%. It's basically as low as it's been in the last decade. And you would suggest, you would conclude from this, okay, we have room to run. Nobody's bullish on the stock market. But then, okay, I'm sorry, one more, one more bearish one. This is from JP Morgan. They ask, are you more likely to increase or decrease equity exposure over the coming

days and weeks? And it's super low. Now, this was from June. I'm sure this looks different now, but only 17% were planning to increase their equity exposure, which again, was at the very, very lowest sign of the reading. Then you'll see something like this. The active managers continuing to add equity exposure. The NAAIM exposure index, I forget what that stands for, is up to 99 from 93 last week. So this is exploding higher, which would lead you to include, uh-oh, everybody's bullish. I should back off.

And then finally, if you look at the AAII bull bear spread, which is individual investors, the number of bulls outpaces the number of bears to the highest degree since January 2022 in the market topped. All of this is to say, I just showed you three charts that were super bullish, meaning that people were underinvested, and two charts that might be flashing, uh-oh, everybody's bullish.

I mean, there's psychological studies on stuff like this where you can ask the exact same question, but just frame it slightly differently, and you'll get a different answer. So unless everybody is super bullish or super bearish, which rarely happens, I mean, these are good for blog posts. Yeah.

It's like there's also the how do you think other people feel? Like how do your clients feel? How do you feel? How do you think? And what are you actually doing? And that'll differ from what you're planning to do. So hold on.

Josh, let me ask you a question. How bullish do you think Sam is right now? I think Sam is exuberant. There we go. I would say. Write it down. I don't know. I think not as bullish as he could be.

One or two more high noons. We'll see what happens. Can we talk about charlatans? We love charlatans. I think Chachi Batista is going to help us monitor charlatans. Put Jack's tweet up. First of all, I f***ing hate this guy. Oh, he's the worst. I think he's the

devil. Yeah, this is... And I actually think he knows exactly what he's doing. I don't think he's... I don't think that any of this is, like, innocent. Wait, before we get into the charlatans... Let me just set the stage for this. Ben Carlson, I'm going to give him credit for this idea. There's two types of charlatans. Type one is the charlatan who earnestly believes the message that they're putting out.

And I don't know if that would be a charlatan, but I almost respect that. Listen, you're wildly wrong, whatever, but it's earnest. It'll go down the ship. It's sincere. You believe it. The type two charlatan knows that they're— What's a type one? Without insulting anyone personally, what's like a type one charlatan?

I would say John Hussman. Like, he's very sincere. Yeah, I think he believes what he's saying. Thoughtful. He's not trying to pull the wool over anybody's eyes. Right. His research is very robust. It's foundational.

It's telling him. Yeah, exactly. It's not- Michael Saylor, 100%. 100%. 100%. He believes it. My favorite.

He believes it. This f***ing guy is a type two. So rich dad, poor dad now turned full psycho, and they know what they're doing. He said, I think a year ago, that the best investment you can make was cans of tuna. That's a direct quote. Like you're going to need to feed yourself

as this whole world comes undone. Does he know what an investment means? I've never read his book. It's like you're conflicted. I don't know exactly what his deal is, but you're conflicted by your financial interests. Let me set the tweet up. He's been calling

for the end of the world now pretty vociferously. You could be bearish, but this guy is calling for the end of the world. Okay, so now he's saying July 17th with the S&P up 25% and the NASDAQ up, I don't know, 50. I do not play the stock or bond markets. As an entrepreneur, I like my hands on control too much. Yet too many signs point to a severe stock market crash.

If your future depends on stocks and bonds, please be careful. Possibly ask for professional advice. I'm afraid that depression is coming. Okay. Maybe everyone will laugh at me for laughing at this in six months. We'll see what happens. The professional advice part is pretty good. Do you think maybe he just means people are going to be depressed in the future?

Yeah, that's what it is. Wait, Jack, read your tweet in your voice. Top rope. Do it. Read your quote tweet in your voice. Go rope. Do it. Read your quote tweet in your voice. Go. Okay. The irony of the guy who wrote

one of the most highly recommended personal finance books ever is a doomer who routinely gives 20 IQ financial advice. It's almost too funny to be real life. It's true, though. And yet, here we are.

Here we are. And guess what? His book was good. Is it good? Is it actually a good book? Can I confess? I've never read it. Same.

Never going to. 16-year-old Michael thinks it's good. It was the first book on personal finance that I've ever read. What was the gist of Rich Dad, Poor Dad like in one sentence? I don't remember. It must be brilliant. No, here's what I think it is. Like invest in yourself.

Like get smarter. I don't think that's what it's about. I think it's about the habits of dads who are wealthy contrasted with the habits of dads who are poor. No, it was about compound interest and tuna cans. No, it was about, it was about like, save it. I never read it, but like, I have an idea. Well, now he's not doing that.

Now he's like telling people the world's going to end. Therefore, buy my whatever the fuck he's selling. One more thing about Starlands that I... In this day and age where we've got chat GBT, people can look s*** up. Like, how are people... How do these people still have platforms? Because they're very convincing

when they speak and people don't care what they used to think or used to say. Yeah, people don't care what they used to say and people don't care, you know... I think people don't have time to vet people and vet information. No, I think that has nothing to do with it. They don't care. You know, I think people don't have time to vet people and vet information. No, I think that has nothing to do with it. They don't care.

They want the message. I'm telling you guys, I know this from personal experience. I went to a gold conference in Vancouver 10 years ago. Why?

12 years ago. I was invited to speak. It's a long story. I had no business being there, but it was great. Really nice people. And the whole gist of the event was you have to invest in these Canadian junior mining stocks because the world is going to come to an end. And Doug Casey, this is like his event.

He's a very nice man. Comes up to me, says hello, introduces himself. Then he goes on stage and he's telling people farmland or you're f***ed, like for your family. That's – you looked around the audience. They want that. That's what they pay him for to say back to them. People as they get older want the confirmation that, oh, no, it's not just me that's getting left behind. The whole world has gone crazy and actually it's probably coming to an end., no, it's not just me that's getting left behind. The whole world's gone crazy.

And actually, it's probably coming to an end. They know that it's not true. They want someone to say it to them anyway. And that is the domain of the type 2 charlatan. The type 2 charlatan is willing to be paid for delivering that message. And they don't invest that way with their own money. And they don't start companies because they think the world's going to come to an end. It's very obvious,

but that's the message that they're selling, and it's very effective. I think, yeah, I think one thing that does get lost in economics a lot and finance and rational behavior is that this whole economy is built on the actions of people who can be pretty irrational. And people are f***ing nuts.

Religious people. economy is built on the actions of people who can be pretty nuts religious people's two episodes ago on righteous gemstones on hbo so there's a family of evangelical um mega church preachers and it's hilarious it's it's a comedy but they did a flashback episode to what to 1999 and the preacher is selling like survival pouches to his flock on a tv commercial and then the world doesn't end it's like y2k and then y2k ends up being nothing and they're all protesting outside the church hey you sold me all this f***ing oatmeal like buckets of survival oatmeal and i don't need any of this s*** and they have to talk their way out of it. But it's like, people have always been

willing to pay for that message. Yeah. So in the economy, it's no different. What is this chart, Mike? So Michael Sambalist, just as naming names.

Put this up. I like this. Basically, like, there are, the reason why I get mad about not people being bearish, because I've been bearish plenty of times,

but people that are just like, like, depression level bearish, like, like, poor dad, you are preying on the financially illiterate, and it's just f***ed up. So anyway, Michael Semblist, who was amazing last week on the show, made a chart, like what happened if you shifted $1 from equities to bonds at the time of the Armageddonist comment? And the track record is not great. So – We don't have to say the names that are on here. Everybody knows.

We know who they are. Everyone knows the names. Again, it's not about being wrong. That's fine. It's just like these people are just relentless. And it's not even – at some point, I said that Hussman does legitimate work. These people – that's not – it's not even, at some point I said that Hussman does legitimate work. These people, it's, that's not, it's not even, it's a personality disorder. Well, I mean, some of the, some of these people are associated with having said negative things

going into the financial crisis. Right. So like, you know, you get one really amazing bad call. And you just want to repeat it. Yeah. Your whole career is made. I mean, like you're, you're already set for retirement. But then there's a psychological component to that where, like, you got famous for being bearish in 07 because you called the financial crisis. Your fans want you to be bearish. So now you're looking for your next hit, your next hit song, because you want to get back on Bloomberg TV and CNBC

and you want people talking about you on Twitter. So you're like, you're always looking for your next hit song and it might never come. And it's always, they always double down. It's never like, this is going to be not as bad as 08. Like, it's always like, this is going to make 08 look like. This is going to make 08 look like a walk in the park. I remember Kyle Bass was one of the ones who was like,

one of the big 08 home runs. And then he basically had a TV tour for the next like 12 years. Yeah, it works. And he tried to short like 10 different currencies. None of them hit. Like he thought Japan, China, all these countries are going to collapse yeah i'm hitting it but well the rest of the world is asymmetric you only need to be right once yeah exactly and then you can always raise a new fund and it's like it's it's like you know when you see like um br betting or

whatever on on twitter or tiktok or whatever like you know like printing out like you know these huge parlay yeah wins that make you a fortune, you know, based off of a $2 bet or something. It's like, that stuff is like really interesting. But the professional gamblers who might actually be making money are, they don't bet like that, right? Put up these Home Alone faces.

This is great. Who is this kid? I don't know. So StockTwits did this meme, I guess. They showed six months ago, the headline is how to use a 2023 market crash to get rich. And it's this kid with his hand on his head. And then five months ago-

It's like a 25-year-old. So a month later, why you'll regret buying stocks in 2023. And the hand is still on his head, but it's in a different position. Then- The hand's on his mouth. Three months ago, the Fed just crashed the market

and it's got his hand on his, it's in a fist on his cheek. And then just yesterday, how to get rich in the 2020 bull market. Josh, you know this guy, y'all were co-stars in the same movie. Are you aware of that? Was he in what movie was I in?

The documentary? Yeah, yeah, yeah. Well, right. Oh, he was in This Is Not Financial Advice. Who is this? Who is this? Graham something. He was in it too. Graham Steven. Yeah, he also talked to the Dogecoin guy. Or you didn't talk to the Dogecoin guy, but he talked to the Dogecoin guy.

All right, so here's the difference. He's not registered, like, giving actual financial advice. No, he is a YouTuber. He's doing entertainment. I'm just saying you're co-stars. You guys were listed in credits together. Got it. Okay.

Do you know this kid? Not at all. Okay. I think he's, like, 35, actually. I think he's like 35, actually. I think he's got nine years on me. So he's got hundreds of thousands of views per video, and I guess he's good at making the videos. That's the Mr. Beastification of YouTube.

By the way, I don't know this person. Fantastic thumbnail image. So when I say Charlotte, I mean like professionals. I'm not talking about this kid. Professionals are charlatans. Chamath. Duncan, are we the only people on YouTube who are not having just bitten the bullet

and said, okay, let's just crash on every thumbnail? Let's just do it. I can draw your thumbnails. Let's just do it already. I'm good people out there. I can do little crayon thumbnails for you guys. Honestly, I'm tired. Just I want from now on, John, write this down.

Every thumbnail, I need fire. Is this fire, literal fire? That is George Washington on fire. I need like $100 bills on fire in every thumbnail from now on. I like this Federal Reserve Photoshop tweet. She codes at the end where I could start selling Magic Spoon.

There was a- Can we just get to, that's all I want to do. There was an internal editorial strategy deck that got leaked from BuzzFeed a couple of years ago. Talking about how to draw attention to... How to impulse idiots on the internet.

Yeah, right. Skipping all the language stuff, but if you do add some more reds and oranges and bring up the concentration and the brilliance in it, it'll draw the attention of in it. Like it's going to, it'll draw the attention of people's eyes off. Let's talk about Twitter. This shit is crazy.

So somebody tweeted, you should get a consortium together who understands your vision for this website. Talking to Elon. So Elon responded, we're still negative cashflow due to 50% drop in advertising revenue, plus heavy debt load, need to reach positive cash.

Okay. So Bloomberg did an article. This is wild. Advertiser spending dropped 89% to $7.6 million over a two-month period earlier this year. These are estimates, of course. The top 10 advertisers spent $71 million from September to October before Elon bought the company. So, what happens here? Does it go bankrupt?

Somebody told me that all of the ads are now Cheech and Chong. All of them. All of them. They buy the whole advertising. It's insane. Every month, we blow up. It's just these like weed gummies

over and over and over again. I blocked it. I blocked that account. I actually, I keep playing. I wanted to amplify. I love it. Is that actually true? Did Cheech and Chong take over the entire-

It has to be at least like a $50 million. So Twitter is basically a drug dealing website now? It always has been. Is that all that's going on? It always has been. It's every- I've got a Bank of America promote tweet. I mean, it's just-

Yeah, I've seen them too. Also, she wrote- I'm guessing it's a she. This anonymous Sophie wrote a very detailed sub stack about actually how they should restructure the debt. Is she wearing goggles on her head? Is that steampunk? I'm guessing it's a shame. This anonymous Sophie wrote a very detailed sub stack about actually how they should restructure the debt. Is she wearing goggles on her head? Is that steampunk? I'm into that.

I think it's like an AI generated Margot Robbie picture. But I love the A&R accounts that actually have ridiculously well-written content. So what happens to Twitter? Like literally, does he just keep selling shares? You know they stole a Friendster. No, no, no. But I'm saying they're not – they can't cover – I don't know this. I'm saying, what happens if they can't cover their debt?

Like their interest? Does Elon just keep selling shares? What literally happens? I hope he re-IPOs it. That's my favorite take. Here's what happens. Morgan Stanley. Probably $10 billion.

Morgan Stanley is going to actually have to take the keys to this thing. They are. Well, it's them and a few other banks. I think they – They're the biggest. They have $13 billion. And they couldn't offload it. Nobody would take the debt.

No, nobody wants this debt. Morgan Stanley is going to have to, like, a credit committee. They're going to have to, like, take the keys. Sam, do you know what the debt is trading at? Well, the color scheme matches. They're already blue. They can just own it. No, I have no idea.

What do you think? What's the debt trading at? 30 cents on the dollar? Not great. So now Twitter's paying people to tweet? What is this shit? So Jason tweeted, what WTF Twitter? You're paying me $50,000 a year to tweet? It is this shit? So Jason tweeted, what WTF Twitter,

you're paying me $50,000 a year to tweet? It was really like $18,000 a year. That was over like a four-month period too. Wait, is he just saying that Elon is giving him a salary? No, no, no, no, no. No, is this a joke or not? I've seen other people tweet. This is real.

Yeah, this is real. These are real payouts. I didn't get one, which is bullshit. Wait, cannot. It's ad revenue sharing. Can anybody get paid to tweet? I think you have to be on Twitter Blue. And you have to have had 5 million impressions a month over the last three.

I would like to point out my alphabet three. I've got 30 million impressions alone. I haven't gotten a cent from that. Now who pays you? Does Cheech and Chong make a direct deposit? Musk Venmo's you. Musk Venmo's you. Is this Web 3?

This is Web 4. We're past that. But, you know, I mean, so it sounds like the payouts are based off of engagement. So this is going to invite all kinds of insane behavior. Oh, sorry. I want to play this real quick. Apropos of our Twitter conversation. I want to thank the motherfucking

haters because you you you you really make me get up in the morning and be the best i can be all the naysayers all the people that wanted to end my career now i gotta walk i'm on a walk of fame we could edit some of this right right? And that's the motivation. You got to let them haters motivate you. You got to let, if you want to go in the gym, get going to YouTube, see somebody talking shit about you, then go get your reps in. You understand what I'm saying?

If it wasn't for the haters, I definitely wouldn't have pulled this off. I swear to God. I swear to God. Thank you so much. I'm going to give you so much more to hate in the future. Trust me. All right.

And that is, of course, John F. Kennedy. So that's Ice-T accepting his star on the Hollywood Walk of Fame earlier this summer. So I've worked at a couple of media companies where there will be a higher-up exec looking at the data and saying, well, this kind of content is getting a ton of engagement. This is getting shared. This gets commented on. This has all the clicks. And then the editorial team comes in and looks at it, and you're like, I'm sorry, but that was a mistake. Someone wrote that.

Or that was from a partner that we didn't even know existed. And it's like that we cannot have content like this. And so, but you do know that like, you know, this rage, stuff that's polarizing, stuff that's conspiratorial and, you know, uses a lot of exclamation marks and headlines, you know,

we'll get a lot of engagement that shows up in the data. Yeah. You know the vaccine targeted Tesla short sellers? Did you know about that You know, the vaccine targeted Tesla short sellers. Did you know about that? Oh no, I'm just learning about this. That's gotta be true. The whole site is based on,

it's, it's based on different groups of people hating each other and then individual vendettas. Yeah. It's the whole site. But this is, I mean, you know,

if, if they don't already know this, this, this model will not work because the advertiser is leaving. There's not going to be any revenue. There's no new advertisers coming. Right, right. Because they don't want to.

Because, you know, Procter & Gamble is one. Sheesh and Chong are going to run out of money. Yeah. Like advertisers don't want, you know, their consumer products or whatever it is they're selling next to conspiracy and hate and, you know. next to conspiracy and hate and, you know. So I wrote this down. I said it's almost as if a dying social network populated by the bitterest, saddest, most anonymous losers on earth

is also not a great financial investment. It's so weird. Like, I can't believe it's not a gold mine sitting directly beneath an open sewer. It's really amazing. And it wasn't always like that. That's not what the site used to be. That's just what it is now. I mean, it's almost like there's some desperate attempts to try to inflate some

kind of metric inside the company with the hopes of finding some. Yeah. They're finding very obscure metrics and shouting them out. Yeah. And then putting them on a slide somewhere and then they'll try to sell it. I'll give you a stat. Did you know 20% of weekday Twitter is stay-at-home dads yelling at CNBC or poor people explaining monetary policy to each other? Did you know that? I don't know what the other 80%. That's a real... I'm in the other 80%.

I just make fun of the 20%. It's a role to have. I want to give a shout-out to Rich Filoni. That's how you say his last name, Sam? It's actually pronounced felony. You know Rich Filoni? So's how you say his last name, Sam? It's actually pronounced felony. You know Rich Filoni? So Rich just tweeted at me. And tell me if I'm off here.

You're so addicted to Twitter. You're the most addicted to this table. Not even close. You then, Jack. Are you on it right now too? I'm on it right now. I've been on it the whole call. I've been checking my notifications for the last hour. So here's what I learned it the whole call. I've been checking my notifications

for the last hour. So here's what I learned watching the Napoleon trailer. I knew that he was a general. Did he also become king? Emperor. Emperor. Yes.

I did not pay attention in world history. He did. He did. Then he got sent off to Corsica and then he came back and took back over for 40 days. And they sent his ass way further toica. And then he came back and took back over for like 40 days. And they sent his ass way further to another island. And then he died.

Elba. Yeah. They restored him temporarily. He had loyalists that were like, wait a minute, actually. That was good when Napoleon was. He also wasn't that short. That was British propaganda. It's a fun fact.

Oh, that's very fun. Average height for a Frenchman. Well, it was average height for a Frenchman back in the day, like 5'8". Probably. Where are we going with this? This is something you learned on Twitter? Well, Rich Floyd just tweeted. Because he was laughing that I said that on the podcast with Ben.

Oh, gotcha. So you're on threads now, but you're still tweeting. Yeah, so I thought a week ago that threads would probably win because I also felt Twitter declined a lot. A lot of people smoke weed while they're drinking. Right. But then I just couldn't stay on threads. And then I kept getting back on Twitter.

And I was like, well, I don't even have Twitter on my phone. Is threads already dying? Yeah. It's real? You know I'm not allowed to post on threads anymore? It's going to be gone by the time you're there. Do you know that? Did I say that to you?

Because my chief compliance officer was like, if anyone's doing threads, stop. Wait until our archiving software can plug into the API. And so now every time I post a thread, I think Nicole has to print it out and hand it to somebody. Send it to Iron Nut. No, it's like a whole procedure now. It's not worth doing, like to archive a thread. So we just all stopped.

And I'm like, we got to find a way to do this because it's a land grab right now you got to be in front of threads is that they had their list of influencers from instagram they put on there right away but one a lot of people on instagram don't know how to read that's the first problem the influences on there are illiterate and two those are the people who are posting most threads so like oh yeah let me just go in here and see what logan paul thinks about the economy like i don't give a shit about that Kim Kardashian is gonna write thousand-word thread post. Are you posting? I'm yeah, I I am just for the sake of I wouldn't I mean I have more every time it's like I'm either gonna post on on threads or just like sit around and like why don't

She's LinkedIn LinkedIn is a great place to have a Twitter personality. It's insane. Nobody posts anything there LinkedIn trolling Yes, there are one billion people there, three times the size of Twitter, and nobody posts anything. Oh, wait a minute. I forgot to ask you. I meant to ask you this, and then two weeks passed,

and it was just too late. I couldn't ask you. It was too late. You got in trouble, or the dean said something. Can you tell the story? Yeah, no, it's my favorite story. Do you know about this?

This is a true story, or is this one of your LinkedIn stories? No, this is a true story from a LinkedIn post. Okay. So, in October of this past fall, I was really putting my foot on the gas on LinkedIn shitposting. And I did one saying—I posted this really long thing, personal finance hack. I haven't paid for food in Manhattan in three months. It's moving here.

Because I keep going to different hotels around Manhattan and going in, signing off on random people's rooms, getting continental breakfast, coming back for steak dinner. I would take girls on dates to like the nicest hotels in Manhattan and we would just leave.

And like it blew up. LinkedIn, 2 million impressions. Screenshot of it on Twitter, like 15 million. Austin Reif, Morning Brew CEO, his most popular tweet ever

was a screenshot of my LinkedIn post on Twitter. It went nuts. So I get an email from our screenshot of my LinkedIn post on Twitter. It went nuts. So I get an email from our dean of students like three days later. Somebody sent it to Columbia? A Columbia alum sent a screenshot of my LinkedIn post to our dean of students. Idiots were outraged. Saying, I cannot believe that Columbia is letting students like this in that is destroying the reputation of our institution.

And there were people commenting on the post that would have like Wharton MBA or VP of Microsoft or JP Morgan saying go f*** yourself. Like this is petty theft. Like how do you fall for this? People think when you're on LinkedIn, you're at work.

It's perfect. So I ended up having to go. I ended up emailing the Dean Chaps. We're like, she's such a homie. She's so cool. But I emailed her back and I was like, she's like, yeah, can you come meet with me and explain this and i was like yeah just you know for clarity in the last week i've also said that i called joe biden and said i wanted more student loan debt

because i've got that dog in me it'll make me grind harder and i got vaccinated and i got and i got vaccinated a thousand times when they were paying people like 100 bucks to do it to make 100k as a side hustle. Oh my God. We're going to save this for later, but it's actually getting late already. I'm just going to skip to this. This is you on LinkedIn two days ago. You told a story about being on the one train, the subway. Oh my God.

And there's a mother with three small children boarding the car. She has a stroller. She has one strapped to her chest. And then the oldest child, no more than five, holding her hand. The car is packed. Everyone that was seated was avoiding eye contact with her. Like nobody wanted to give up their seat to this mother with three kids. And this is you.

Unlike the others, I didn't avoid eye contact. Instead, I looked her five-year-old son in the eyes and asked, do you want the seat? He smiled and replied, yes, please, before stepping my way. I then shocked him by saying, too bad. The mother looked at me pleading, please, sir, we are taking the train all the way up to the Bronx. I replied, today, your son is learning a valuable lesson at an early age.

You can't take anything for granted, this world. If you want something, you have to go get it. All right, so you're a sick f***. So a normal person reads this and gets what you're doing. Right. It's hustle porn. It's like a satire of- Of course.

What these aliens from Silicon Valley are posting in their real voice every day. Okay. Everyone understands that, but except not everyone. A few people don't like it. None of the users on LinkedIn. So that's- LinkedIn people are like,

he's a monster. That's the secret sauce, right? So when- See, the thing about LinkedIn is, one, posts stay on the feed for like days, weeks, months. If anybody likes it, comments it, it pops up on their followers' feeds. So every single person who's commenting,

please tell me this is satire. You're a terrible person. I hope that kid grows up to kick your ass. All this stuff. That's just going to put on their followers. I hope that kid grows up to kick your ass. I got a comment that was something like that, I think. It was something very similar. Oh, bro, you'll be the one pleading with him for the seat

in 15 years. I love that. It's probably true, too. It probably is, if that kid was real. And then I also always comment, is this a joke? No, I literally hate children. But anyway. Wait, wait. This guy goes, that kid will be primed for a career in sales. Good on you.

Exactly. That guy's dead serious. No, no, no, no. He gets the humor. Those people get the humor. All right. But occasionally one or two of them might not, but he definitely gets it. Oh, somebody said to you, instilling the grind set, one five-year-old on the one train up to the Bronx at a time.

Well done. Shout out to Steven. That's a dude. He gets it. He gets it. Before we get out of here, I want to talk about the newsletter business. Like, you guys are both,

you're doing it. Like, full-time solopreneurs or whatever we're calling you guys. I hate that term, but it is a term. That's the LinkedIn word. Jack, you just wrote a piece, actually. Well, this is really not on the newsletter per se

but you wrote it on your newsletter what have you guys learned what should we know he learned don't get kicked out of an Ivy League school for LinkedIn posts so

fair enough but so so Ryan Peterson from Flexports also CBS alum and he let DM me he said

if they make you delete it don't do it I was like whoa you're like a billionaire this is a crazy message to get he's like me. He said, if they make you delete it, don't do it. I was like, whoa, you're like a billionaire. This is a crazy message to get. He's like, freedom of speech. And I was like,

you're right. So honestly, I think it could have turned into a bigger benefit for me if I had gotten kicked out for something that dumb. But yes, that's still a takeaway.

You would have gotten a lot of clout. Tucker Carlson would have loved to have had me. And then what? And then you don't have to write a book. You're new to the workforce and to the newsletter industry. And I know it's ridiculously early, but do you think, like, is this going to be your career? Yeah.

No, I think so. I mean, I don't really want. Because of my LinkedIn history, I couldn't really get hired anywhere at this point. So it's like, yeah, I'm kind of all in on this. We might have a place for you. How many people are you writing for? On my newsletter, 43,000. And then on execs, some 254,000.

And you're 26 years old. Sam, what about you? You ever going to go back and work for the man? No. You know, that's a good question. They probably call you, like, hey, we got an executive editor spot opening up. You know, it's funny. It's like, as soon as I start this, they think that I'm just on the market, but

I'm actually really giving this my all right now, and it's great. Oh, like, you think it's like a cry for help? In between gigs, so I'll do a sub stack. Yeah, yeah, yeah, yeah. But no, no, I think it's great, like, the freedom, the flexibility. How many, are you two years in now? I'm two years in. Okay.

And I have a little over 20,000. And you love it. It's amazing. You're enjoying it. Are you guys both in the stack, or one of you is... We have. The hive? I'm ex-stack, current hive enjoying it. Are you guys both on the stack? Beehive. The Hive? I'm X-Stack, current Hive. What are you? I'm on Substack. Okay.

What's the big difference between Beehive and Substack? I mean, the business structure-wise, Substack, they make their money from taking a cut of premium revenue. On Beehive, it's just I pay like $100 a month for the list of features. They're both good. They just have slightly different features, landing page setup, whatever. Okay. Got it. We're going to do favorites, but first, did you guys have fun

on the show today? Oh, yeah. All right. We had a lot of fun. It's probably the hardest I've laughed in a while. What about you? It's nice to like. Yeah. Nice to get. As solopreneurs, we don't do anything social. I just sit in my room all day vlogging. That's horrible Yeah. Vlogging.

That's horrible looking. Bullshit. Look at that wall. You're doing a lot of travel this summer. I do like traveling. All right. All right. Let's do favorites. I will start.

Did you know Steven Soderbergh has a miniseries on HBO Max? Claire Danes. Who else is in it? Claire Danes is great in it, as always. And so is the guy from Justified. What's the actor's name? Oh, Timothy Olyphant. Timothy Olyphant.

So they're like the parents of a potentially kidnapped kid. And I won't say anymore. I haven't watched it yet, but I'm 100% going to. I'm in, I did two episodes, I think. And I think the third comes,

I think they come out on Wednesday nights. Has Soderbergh done any other TV? I think this, Yeah, The Girlfriend Experience Soderbergh done any other TV? I think this... Yeah, The Girlfriend Experience. That was TV? That I didn't watch. It was like Showtime or something. It's a series. It's crazy. Anyway, I thought that was cool. My other favorite was

Jack's LinkedIn, but we did it already. You're very funny on LinkedIn. Thank you. And IRL. Unlike Ramp Capital. Unlike Ramp. You're actually funny in real life alright Michael what do you got for us your boy Ray Romano you know he's got a movie out

I don't know if it's his directorial debut directorial debut but he directed a movie I don't get it what's so funny what's Ice Age 9 I don't know is it a series of animated movies the Ice Age movie oh I don't know. I haven't seen him do it. John left. Is it a series of animated movies?

The Ice Age movies? Oh, he was... Oh, I got it. Sorry. Oh, yeah. He was a character. He was the mammoth. That's his biggest movie. That's a big movie.

My dad told me to watch this. This is not the typical movie that I would watch. But given that he's... You just saw him on TV. And I love Ray Romano. It was synchronicity. So you press play. It's called Somewhere in Queens. And his wife is played by—I forget her name.

It doesn't matter. Here's the line. Leo and Angela Russo live a blue-collar life surrounded by the big personalities of their overbearing Italian-American family. When their son's chance at a life-changing basketball scholarship is jeopardized, Leo, who is Ray Romano, risks everything to help him, but may tear the family apart trying to make it happen. Not that I could have a movie that I watched, but it was great. It was great. I'll give it a shot.

Shout out to Ray Romano. Sam, any favorites? Yeah, I was going to just say a general thing of like, you know, try signing up for a bunch of independent newsletters. It doesn't have to be my newsletter, but like try signing up for some of the stuff that people are writing. Cause there's, there's actually some really good stuff out there. Shout out your favorites. Um, all right. So the one that came to the top of mind is this guy, Blake Millard. He's a financial advisor and I, I actually met him at future proof last year. Okay. And he told me about his newsletter and he's like, you know, I'm working on this thing. I publish it every night. You know, it's a couple of charts, whatever. Every night. Wow. Every night. I don't know what it is, but I have to open his newsletter every night.

Oh, wow. So what's it called? It's called The Sandbox Daily. And it's basically just sort of a roundup of both research and news of the day. But I don't know what it is about his writing and his presentation. But before I go to bed, I have to open it and scan through it. I've seen this before. Because I know that if I've missed anything, he's going to open it and scan through it because... I've seen this before. Because, like, I know that...

I know that if I've missed anything, he's going to have it. And if I've seen everything that he's covered, then I feel good about my day that I haven't missed anything. Oh, interesting. He's capturing a nice crosshair. Can I tell you who I pay for? Eric Newcomer. Yep.

Mark Rubenstein. Yep. Matt Klein. Amazing. Mark Rubenstein. Yep. Matt Klein. Amazing. Who else? Who else? Who else do I pay for? Who else is good?

Sam Rowe, obviously. Yeah. Who else is good? Who else are you reading? I just started reading Jack's newsletter. Oh, you're... I mean, Jack's incredible. Oh, my God.

Incredible writer. You know, he's... Jack's one of the... I don't know too much about you, but it seems like you're like one of the few people who can post on LinkedIn that you didn't give a mother a seat on the subway, but then write something really thoughtful in your newsletter while quoting Elie Wiesel. Yeah, no, I've got range. Yeah, the range is, I'm really, I'm really impressed by the range. Thank you.

Let me quote Jack. And I can tell, I can tell that you enjoy the writing. I think that's the thing. It's like when you scroll through so many newsletters, you can tell who likes writing and who's doing it for them. I bumped into, Jack, remember I bumped into you at the movie premiere. Yeah. Not long ago.

And I think I said this to you. If I didn't, I would say it to you now. You remind me of me 15 years ago. I was probably 32 when I started blogging and now I'm 46, but like 15 years ago, I like had, I was like compulsion. I have to write today. And I think that came through in the early stuff I was doing. Um, which admittedly was most of it, not very good, but the audience didn't really care. They would go with me because they could tell I was like compelled to tell the story of what I was doing on wall street.

And I haven't really seen a writer come along since until you, where I was like, Oh, I really feel like this guy is in that phase that I was once in. So I think I told you that, or if I didn't, I'm telling you now keep going, um, because it's going to go somewhere incredible that you can't even imagine. I want to quote Jack because he was silly on the show today. Wait, wait, wait. I just gave him his flowers. He's going to react. This is like a moment.

Yeah, no, that's – I appreciate that. Seriously. I'm going to pound it out? Let's go. Pound it out. All right. So sorry to cut you off. Jack wrote five things that you changed your mind on.

Number one was work and traditional jobs aren't prisons you should seek to escape. And here's what you wrote. Quote, there is absolutely nothing wrong with spending 50 hours per week doing a job you like but don't love that pays you enough to support your family and leaves you the free time to pursue activities that you enjoy. Your job doesn't have to be your whole life. It's okay if it simply supports everything else. End quote. You are wise beyond your years. There's so much bullshit about it. What is that in response to, like, you have to do what

you love? There are bad jobs and good jobs. I consider myself pretty lucky that I like what I do, but also, like, the editing side of execs, that's not something I love. That's just, like, an additional income stream within the writing sphere. That's what I view as. That's just like an additional income stream within the writing sphere. That's what I view as my,

like everybody has parts of their job they don't like. And if it like, yeah, the whole idea you have to like love your jobs. F***ing stupid. Nobody actually loves what they do every day. Like it's just like find something that's really good. Yeah,

what if you love it three days a week and two days a week you hate it? Isn't that good enough? Yeah. A hundred percent. And if it pays, if it pays your bills, if you can feed your kids, if you can take your kids to Disney World,

it's like, that's probably a pretty good job. And then do something you love when you're not working. Plus, if you can feed your kids, if you can take your kids to Disney World, it's like that's probably a pretty good job. And then do something you love when you're not working. Plus, if you have something you love and then you do it for work, it becomes a job. It's better to do something you like for work and do something you love or you don't give a shit if you make money from it or not. That's good Southern energy. Jack, all the sports guys that finally make it to ESPN or the NFL,

it turns into a job. What they love turns into a job. Yeah. And it's okay to have a, by the way, it's okay to have a job. Not everyone has to be chasing their passion. If you could find aspects of your job that you do love, it's enough. Yeah. Yeah.

It's enough. Like, just like the, it can be rewarding just to be playing into your strengths. No, but Sam, seriously, what's your favorite? Oh, let me, let me throw out one more favorite while we're on this subject. Yeah. Dan Toomey, video producer at Morning Brew. He's very funny. You got to follow his Instagram.

You got to follow him on TikTok or YouTube. Dan Toomey. I don't follow him on Instagram. Morning Brew. Ooh, I was in a video with him where we were making fun of LinkedIn. I'll send it to y'all. It's hysterical. He's incredibly talented.

A genius. Like, everything that he does and with his team, you got to watch it. You will... T-O-O-M-E-Y. D-H-T-T-O-O-M-E-Y. Yeah. He's also so... He did a stand-up show that I went to like a month ago.

He posts on his Instagram when he does stand-up. Highly recommend seeing him do stand-up. I didn't know if he'd be as funny when it wasn't scripted. He's just as good. He's just a genuinely funny guy. I'm actually going to see somebody do stand-up. I don't know if it's stand-up or not. Going to Alex Edelman's

one-man show on Broadway. Do you know anything about this? Supposedly, it's the hottest show on Broadway, but he's a comic. I don't think there's anyone else. That's tough. Am I going to a comedy? What's this person's name? Alex Edelman.

Is he like a veteran comedian? No, he's a kid. He's in his 30s. Oh. Well, that's a kid now? But he was like on all the big like late night talk shows. Had him on, just had him on recently. What's his morning routine?

We follow each other on Instagram. And then all of a sudden, and then I just think, oh, he's funny. He's a stand-up comic. Did he slide into your DMs? No. And then all of a sudden he's like everywhere. I'm like, holy shit, this guy has his own Broadway show. So that's how I'm going tonight. How exciting is that there's people you never

hear about and then they just explode out of nowhere? I love that stuff. I'm going to support it. I don't even know what the show is about. I guess I'll tell you guys next week. All right, we're going to wrap it up from here. Wait, hang on. Jack had one more thing. Well, no, I had my favorite too,

but also I had one question. You called him a kid and then said 30s. What age number do they go from kid to not kid in your head? Oh, I'm still a kid compared to certain people I hang out with. Perfect. Yeah, you'll be a kid forever if you want.

It's a state of mind. It's not a chronological. I agree with that. I love being a kid. That's right. I'm a 26-year- It's not a chronological. I agree with that. I love being a kid. That's right. I'm a 26-year-old kid. That's right. I was going to say my piece that I liked.

I don't know how I found it. It was this blog post by an Anu or Anu Adeluru called Trophy Jobs. I thought it was super. I ended up like kind of writing about similar stuff in my last one. But just talking about how there's these jobs that like they're put on this pedestal for almost no reason other than they sound like something you should want to do. Like, like everybody wants to be a VC or a founder. While it's not that every job, like VC isn't a trophy job for everybody. Some people really want to like be an investor, do VC.

Some people really want to found a startup, but there's a lot of people like, especially my age, just, oh, I want to be a VC because the idea of it's cool. And there's that. And like, I want to be an astronaut. Yeah. of it's cool. And there's that in every industry. Like, I want to be an astronaut. Yeah. Like, same type of thing without even thinking about the work. And then they get there and it's like, oh, shit, this isn't actually an interesting thing.

Because you know what? It's not that they want to be a VC. They want to be a successful VC. Yes. They don't want to be an ordinary VC. There's a big difference between those two. That's right. I want to be an Oppenheimer.

I want to be an Oppenheimer. All right. I think we're good. All right. Duncan, are we ready to wrap up? All right. Listen up, two. That's right. I want to be an Oppenheimer. I want to be an Oppenheimer. All right. I think we're good. All right. Duncan, are we ready to wrap up? All right. Listen up, guys. This is important.

If you love the show or if you even just like it a lot, there's only one thing we want you to do. Write us a review. Like, be honest, but write a good review. You can give stars one to five on Spotify on Apple wherever you listen to the podcast reviews are important for the algorithm they indicate

to other podcast listeners that this is a quality show they should check out on LinkedIn so is that heavy handed enough

my pitch for alright hey follow follow Jack Raines on where's the best place to follow you you're obviously funny

on LinkedIn Twitter and LinkedIn Jack underscore Raines on Twitter dark Jack Raines on, where's the best place to follow you? You're obviously funny on LinkedIn. Twitter and LinkedIn. Jack underscore Raines on Twitter. Dark Jack Raines on Twitter. There we go. Okay. And the sub stack is execsum. Get my beehive or beehive guy.

My blog is youngmoney.co and then execsum.co. That's how I know somebody's under 35 and they have like seven different things you have to follow them on. All right, Sam, you're the ticker. Tell people where they could find that. Yeah, it's ticker.co. Oh, we're both.co. That's awesome. Yeah,.co is great.

It's cheaper than.com. Oh, for sure. But what are you? T-K-E-R. T-K-E-R.co. And you can find me on Twitter at Sam Rowe. Threads. Threads.

By Sam Rowe. Don't worry about that. You guys crushed it today We loved having you, thank you so much for doing this And all the prep that goes into this And just making it a great show I had so much fun, Mike you have fun on this one? So much, love you guys

Hey guys, make sure to leave us a rating and review Subscribe, follow Jack, follow Sam We will see you next week Jack, great to be on the show. All right, you guys feel warmed up now? Feel like you are going to do this? I just want to kind of get the cobwebs out. Nice.

Yeah. Round two? Let's go. This is the point, man? No, round one. We haven't even been recording.