The Compound and Friends - What Are Your Thoughts 7/31 (Josh and Michael)

Episode Date: July 31, 2019

Josh Brown here - Michael Batnick and I return with an all new What Are Your Thoughts! Today's topics: * What technologies that we use now that will soon be obsolete? * Why bother worrying about manufacturing data when consumer data is what drives the economy? * 75 million Amazon customers are watching shows on Prime Video - what the hell are they watching? * Where does Once Upon a Time in Hollywood rank in the Tarantino pantheon? * Is Chipotle the greatest consumer turnaround story of our time? What lessons can investors take from its comeback? * Why is the Federal Reserve cutting interest rates for the first time in almost 4,000 days? * Esports - how can we make money from this? * Was the Wall Street Journal too harsh on the CFP Board? As always, we love your feedback and ideas, so let us know what you think about these topics below! Check out the corresponding video on our YouTube Channel: https://www.youtube.com/watch?v=6Co78bh5ANg&t=316s 1-click play or subscribe on your favorite podcast app   Subscribe to the mini podcast on iTunes or Spotify   Enable our Alexa skill here - "Alexa, play the Compound show!"   Talk to us about your portfolio or financial plan here: http://ritholtzwealth.com/   Obviously nothing on this channel should be considered as personalized financial advice just for you or a solicitation to buy or sell any securities. Please see this 3,000 word terms & conditions disclaimer: https://thereformedbroker.com/terms-and-conditions/ Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, I'm downtown Josh Brown. This is an all new edition of What Are Your Thoughts? I'm here with Michael Batnick as always. Michael does not know what I'm gonna ask him about. I have an idea. What? No, I'm just saying I have some ideas of what you're gonna ask.

All right, Michael maybe knows a little bit about what I might ask him. I don't know what he's gonna ask me. I have no idea. Let's get into it. All right, Mike, I'm going first as always. I wanna ask you, I saw a chart the other day from Goldman Sachs, and they were pointing out that most of the volatility in things like interest

rates comes from the release of manufacturing data, weekly, monthly, but a very, very small and shrinking component of actual GDP is coming from manufacturing data. So my question to you is, let's say over the last 10 years as an investor, you ignored all of that stuff. And the only thing you paid attention to was the consumer. So you watched retail sales, housing starts, wages, unemployment. Wouldn't you have just been way better off as an investor? Like, wouldn't that have just kept you in the market and all of the ups and downs of things like industrial production? If you tuned it out, you were never fooled for a minute that the recovery was still on. Is that a reasonable –

I feel like your questions are always like long blog posts and they're very leading. And so you ask a question and answer it. Well, it's my opinion. I want you to confirm my bias. So you're just giving me a chance to say yes. You can say no. So I agree with what you said. Right? It wasn't really a question. It was a statement and I have my stamp of approval. Here's the implication of that. Why would that change going forward? Why should I ever pay attention to ISM? It goes above 50. It goes

below 50. It oscillates. It doesn't trend. Well, it's also a much, much, much smaller component of the overall economy to your point. Yeah. So if the consumer is 70%, what am I obsessing over the other 30 for? It's not a leading indicator. But you said you started talking about interest rates, how manufacturing is. Well, yeah.

Who cares? All right. I cared a little. All right. So bear with me one moment. Oh, the Federal Reserve. Is that what's there? Here's my question.

Here's my question this week. So I don't I don't look at economic data that closely. And I understand that we're doing better than the rest of the world. Yeah. But the stock market is at all-time highs. Unemployment is pretty freaking low. Right. GDP is okay.

Yes. And they're really going to cut rates. But wait. Did you know? This is kind of an amazing chart from our friends at Beastbook. It has been almost 3,900 days since they last cut rates. December 08. Yeah, which is the second longest streak behind 1954. That's kind of wild.

But forget about that. They hadn't cut rates until 1954 from the aftermath of World War Two. Exactly. Yeah. So my question is, what is going on? Like, what are they saying is going on? What is the justification for potentially lowering rates today? They're saying that the risk is to the downside.

And because rates are so low, they're better off avoiding a recession than trying to fight one. So it's weird because they never really got to what a lot of people would say is normalization. Isn't risk by definition always to the downside? No. You could have the risk of an economy getting overheated.

And they're saying that's not the risk right now. That was a very good actually. Yeah. Well, they're saying have the risk of an economy getting overheated. And they're saying that's not the risk right now. That was a very good actually. Yeah. Well, they're saying like the risk is that Europe and to a lesser extent Japan and China are such a shit show that we can end up importing some of the weakness from there. And it'll be easier to just avoid that happening by pumping up a little bit more liquidity in advance. I'm stupid, but that's what they want to do. The only saving grace for that argument, the Fed did that in 1995. They had a single cut.

So in 94, the Fed did a surprise hike. I think it was 50 basis points overnight, freaked out the bond market. The S&P dropped 20% quickly. We were in an economic expansion, and they just did this shocking thing. And then in 95, they reversed it over the summer. They did a single cut, right? Like what we're seeing now.

Almost like to say sorry for that shocking hike. And the expansion was fine. We had another four years into the late 90s, into 2000. So like, if you want to look for an analog where this works out well, maybe that's it. But that's like, we have a sample size of one. So, I don't know. It's a very strange thing.

The conspiracy theorist in me wants to be like, the Fed wants to get Trump to stop tweeting about it and this is how they preserve their independence. So, dude. Okay. I don't know. So, I guess I don't understand wants to get Trump to stop tweeting about it and this is how they preserve their independence. So, dude. Okay. I don't know.

So I guess I don't understand what a rate cut does. It's certainly not going to help liquidity in the United States or financial conditions because they've never been easier. You could walk out on the street, write up a private placement memorandum and raise a million dollars in Manhattan right now. So I don't really understand what it's solving. Is it going to help German automobile manufacturing? I don't really see it.

And in fact, the lower rates are in Europe, for example, the worse it is. Their banks can't make any money and people have no desire to take any risk. and that's not changing even with negative rates, so I don't really understand. Very good answer. Okay. Amazon Prime Video, I hate all of it. What do you mean? There's nothing there.

I actually just watched something on Amazon Prime Video. Okay. Let me do my spiel. No, no, no. I tried The Man in the High Castle. It's the most boring shit I've ever seen in my life. I'd rather watch a fish tank in my dentist's office.

so you saw a bad show. What else? But that's the one everyone's like, oh, did you see man in the high castle? Yeah, it sucks. So Prime Video

is 40 million people in the US using it every month. They did 1.8 billion in revenue last year and paid out 70% of that to their content partners and Wall Street thinks they'll do like three and a half billion in revenue last year and paid out 70% of that to their content partners and Wall Street

thinks they'll do like 3.5 billion in revenue next year. What are people watching? What are you watching? Jack Ryan. People love that show. Okay, fine.

I didn't try that. What else? I didn't watch that show either. Hold on. I just saw something. You don't feel like it's as good as Netflix

or that there's a lot on there, do you? No, but there's a ton of kid stuff. I'm looking. A ton of kid stuff. I'm looking. A ton of kid stuff on everything. All right, gun to your head. I'm giving you HBO, Netflix, and Amazon Prime Video,

and you get to pick two out of those three. Well, Amazon goes. Now, what happens when Disney comes? Does HBO go too? Disney Plus app. I like Netflix. Although I just saw the worst show ever, Typewriter. I don't know what that is.

Look, I feel like Amazon Video will be fine. They're not in trouble. I'm just saying it sucks. There's nothing there. Listen, sometimes people watch bad shows. I just watch a show about ghosts. It's an Indian show on Netflix. A ghost is stuck in a typewriter.

Ask me anything. Sounds amazing. All right. You must have 300 years me anything. Sounds amazing. All right. You must have 300 years to live. I don't know why. I don't even watch a lot of TV, but I watch that. People are going to come at me

in the comments like, oh, you didn't watch like whatever they think is good. I watch like four different things. I couldn't get through a single episode of any of it. Oh. It's just not good.

Fleabag. People like that. Is that new? I saw, I didn't finish it, but it's quite funny. All right. I'll try it. What do you got?

What do I got? What are your thoughts? So today I tweeted, things we'll never see again in our lifetime. Recessions, inflation value, outperformance, and beepers. Things we'll never see again in our lifetime and you wrote inflation? Right. Did they come to you? So beepers.

Somebody asked me the question, what is technology that exists today that won't in 20 years? Like what's today's beeper? You have any thoughts? Take a minute. Don't take a minute. Oh, like what's the equivalent of a beeper? Yeah, you have 10 seconds. I feel like we're still beeping each other, but now we text instead of leaving phone numbers.

That's an answer, not answer. I mean, I had a beeper. You weren't old enough. I had one on my belt buckle at all times. So what do we use today that we won't use in 20 years? Oh, I think we'll go to the doctor's office like one-tenth of the amount of time that we go now. I think most things will just be dealt with on a screen. Like combination phone video chat with, and your doctor could be like anywhere and it'll be good enough. Prescriptions right through the computer. Like that. I think that that's like,

Speaker 1 4 billion dollar idea. Wow. Speaker 2 Well, it exists. I didn't invent it, but I, I can see the insurance companies getting very behind that cause it's going to save them a ton of money. It also helps retiring doctors who don't want to work five days a week and own a practice. They'll be able to just slot in in these kind of telemedicine roles. So I think

that's something that's... People go to the doctor now and most of the time they really don't have to. They want to talk to somebody. Let me hit you with this. Do you know what today is? Yes, I do. What?

The day that the Irishman trailer dropped. Fine. But you know what else it is? It's National Guacamole Day. And Chipotle is giving out free guac at all of their restaurants worldwide. Are you going to go? No. It's right next door to us.

I had guacamole last night. All right. This is what I want to ask you. Are you going to go? No. It's right next door to us. I had guacamole last night. All right.

This is what I want to ask you. This is one of the biggest comebacks for any retail or restaurant or consumer brand I have ever seen in 20 years doing this. So CMG is up 175% from the January 2018 low, which is incredible. And at that moment, it seemed like this company was done. So I wanted to ask you, what is the takeaway for investors when they witness something like this happen? What would be your takeaway just from observing? And I know you're not in the stock. I'm not saying are you bullish going forward, but what would you walk away thinking? Investing is hard. I mean, I don't want to get too specific on this one because you could learn the wrong lessons.

Right. Well, that's another whole other component. But like what, one of the big stories that was driving the stock lower was all of the food scares. People were, you know, it was like a, it was a viruses and it was, it was a meme like with the Chipotle and diarrhea jokes. Yeah. And then, but, but people said it'll never recover because their whole brand is about

freshness. Yeah. Um, they did. I don't know. I think they got new management. But people said it'll never recover because their whole brand is about freshness. They did. I don't know. I think they got new management. They got more serious about food safety. Time elapsed. They got some big hedge funds to come in and soak up a lot of the supply of selling.

And they did it. I mean, if they had a food scare right now, I don't think the stock goes drops back to 250. I think it'll be fine. But let's just say that they didn't fix the food problem. So this kept occurring. Would the stock be at $85? Yeah. You couldn't know that they were going to get their act together. Maybe that's one of the takeaways. Yeah. So here's the thing though. They're not the only company that's had to deal with things like this. This has always has always gone on. It's just it was so magnified in the public because Chipotle is such a buzzworthy brand. What about McDonald's a few years ago? I'm sure it happens every day.

I remember you were on TV saying, like, millennials don't want to eat shit when McDonald's was doing terribly in, say, 2015. And they fixed it. They fixed the food. There's no more dollar menu. No, they didn't. Yes, they did.

They brought in this guy, Easterbrook, and he cleaned up shop. They fired the CEO. They didn't fix the food. There's no more dollar menu. No, they didn't. Yes, they did. They brought in this guy, Easterbrook, and he cleaned up shop. They fired the CEO. They didn't fix the food. McDonald's and McDonald's. No, they did fix... The stock... Not like debating an opinion. They literally...

No, the stock price changed. No, they literally cleaned up. First of all, they started listening to customers and they did all-day breakfast. And that drove people back to try it again. But second of all, the burgers are higher quality. They're cooking them there. The chicken strips are better. Like they upgraded the menu and they stopped the dollar menu.

Now it's like an everyday low value menu, but it's like $2.50 to buy something. Not $0.99. You do seem well versed. They fixed it. So you saw Once Upon a Time in Hollywood. Yeah, it was sick. Where does it rank in the Tarantino universe? It's not top five, but it doesn't matter.

It's one of the best movies that you'll see this decade, I think. But how do you rank that against Pulp Fiction and Reservoir? You can't really. Like that canon is like too much. I'm going to give you a chance to walk that back. One of the best movies you'll see this decade? Yeah, I think. Well, decades almost over.

Like I'm not saying that at the beginning. I'm saying it toward the end. So in the teens decade, like this will be one of the ones that five years from now people are still watching. I see you shaking your head. You're great. Who is? Ben is? It's done. Well, he's a videographer so we can't argue with he knows more of that film than we do i just think people will still watch it because there's so much going on in this film

that people were going to want to go back to it and i think that's a hallmark of tarantino stuff so um not my favorite but i loved it i'd I'd probably see it again this year. This is my last one. Our friend Jason Zweig slaughtered the CFP board. And I know you wanted to ask me about this one too. So the CFP board is Certified Financial Planners. This is their association. There are 85,000 people who have that designation in the country.

And it's a very well-respected designation, Mike. You'd agree with that. But the article in the journal said that they spent tens of millions of dollars on educating the public that they should look for certified financial planners as a mark of, hey, we vetted this person and they're good. They do TV commercials now. That's what I'm saying. They've spent millions on TV. Remember they tried to get cute? With the DJ? Yeah, yeah.

Okay. So Zweig looked at that and he's like, yeah, but you're not really vetting these people. And then the journal turned up all these instances of financial planners who filed for bankruptcy or who had felonies that weren't disclosed. I guess, and I know CFP board takes itself very seriously. They're going to address it. I guess my question to you is, can you trust any designation? Like just because somebody took a few tests.

No, definitely not. And went through a background check one time. No. Like you have to always do your own investigation, right? Especially in this industry. Let me ask you a question. Yeah. Do you think it is the CFP board's responsibility to do thorough background checks on the people before getting the letters?

I think it is if they say they are. So if they're advertising that we are setting a standard for our members. Well, they're implicitly doing that. Maybe explicitly. I'm sure that there is some sort of like. If they're just like anyone who pays can be a CFP, but that's not what they're saying. And I know they're going to tighten it up, but that's not how they were advertised. They were saying our members are held to a certain standard. They should have done better.

Let me ask you another question. Do you think that somebody filing for bankruptcy precludes them from giving financial advice? Maybe not legally, but I'll turn that back on you. Let's say you met a financial planner and after five minutes of research, you turned up a recent bankruptcy. Wouldn't you be like, the fuck am I getting advice from this guy for? Of course. I would want to know about it. I don't think that in and of itself disqualifies somebody, but I would certainly want to know about it. Yeah. I think there's a rule about discrimination when you hire people that if they've had past money problems, I think you can't discriminate against them solely for that reason. I'm not, I'm not an employment lawyer.

Somebody told me that. Um, so it's, it's kind of a weird, it's an interesting space. Like, can you not hire somebody because they once had money trouble in their past? I guess you'd have to come up with another reason. All right. What do you got? All right. Last one. So the Fortnite World Series happened over the weekend. Is that what it's called?

The World Series? Did I just make that up? World Cup. Okay. Obviously, it's massive, right? Yeah. Just the pictures and everything and the money involved. But what is the investment opportunity, if any?

So I had a really interesting meeting yesterday with this nice guy, Will Hershey, who launched an esports ETF. I'm not going to get into the ticker symbol here. I don't know what the rules are. But it's not a video game ETF. It's literally a bet on companies that are involved in esports themselves. on companies that are involved in eSports themselves. And what he was telling me was that the teams are people like very rich people like Bob Craft own their own Overwatch team. So this is a team of like 10 players or 20 players even in some cases

where they just play this one game at these tournaments. People watch live and then people watch in the game too. And he's saying that these teams Are being valued At like Immense Like Like 300 million dollars

For one of these teams Which I find silly Because The revenue is not there So I just feel like It's a really cool idea And it could take off

But I don't think The audience And the viewership It did take off Yeah No I know But like I'm saying Could this one day be like NBC or ABC primetime? Like at 8 p.m.?

Like televised? Maybe. But it's just not there yet. And a lot of the fans have no money. So, you know, it reminds me of skateboarding. Like there were skateboarding heroes when I was growing up, like Tony Hawk and all these guys. And a few of them got a video game deal. And a lot of them made money, but they got free sneakers.

So this is like there's five guys making a ton of money. There's five million guys who think they might. And maybe it happens. What Will told me was that we're like 10 years behind Asia. In South Korea, every kid wants to grow up to be a professional video game player, and they have many multi-millionaire video game guys, multiple generations at this point. So I could totally see it happening here. I don't know what the bet is unless you're going to buy a team that's going to compete. I don't quite understand how a regular person can, quote, get in on the action, but we should be paying attention attention I guess is the most reasonable thing to say let us know what you think

we love your feedback on all these topics Michael and I get a lot of get a lot of joy going through the comments and hearing what you guys are talking about make sure you go ahead and give us a subscribe we'd love to hear your responses and we'll talk to you very soon