The Compound and Friends - Why Are You Even in the Market?

Episode Date: August 19, 2022

On episode 58 of The Compound and Friends, Joe Terranova joins Michael Batnick and Downtown Josh Brown to discuss why you should leave politics out of your portfolio, the latest meme stock rug pull, the right market P/E, Joe's ETF, and much more! This episode is brought to you by our friends at Masterworks. Visit https://masterworks.art/compound to skip the 10,000 person waitlist. See disclaimer at mw-art.co/x. Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/disclosures/ Inclusion of advertisements by podcast sponsors 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: https://abnormalreturns.us5.list-manage.com/track/click?u=f8843b0fc6f0ed7d35e67dcf5&id=33b07916d1&e=4e0f612ef0. Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

So I had to drop my car off this morning at uh at uh Timmy at Chevrolet okay yeah yeah uh who's Timmy? Timmy owns the place he's my buddy. Okay um I only know TJ. TJ's a good guy all right so what do you need? Ethan. I don't need anything I just I needed an oil change and I needed the filter replaced or whatever they made up. Who's Ethan? He sounds like a good dude. Ethan's the best guy. Ethan's solid. Anyway, so I pull up. There's a 747 train out of Freeport.

How stupid does this look on my face? No, you look good. Looks like a million dollars. Okay. So there's a 747 train. The service department opens at 730. There's like seven cars in front of me to pull in. Okay. So I get out of the car and I run my keys over to just anyone, like a random guy that works there.

I'm like, you're going to hate me? I literally can't stay here. If I miss this train, the next one is not 45 minutes. Like I just got to leave you my keys. He goes, I don't even know what we're doing with your car, sir. I'm like, I have an appointment. Just my wife will call you. to leave you my keys. He goes, I don't even know what we're doing with your car, sir. I'm like, I have an appointment. Just my wife will call you. So I left my keys.

I left the car sitting on the main road. And I ran to the train station. Okay, but we live on Long Island. You have to always know someone, as you know. Yeah, I didn't know anybody. So you need Ethan's cell number. Well, now it's fine. They called us.

They're great there. Shout out East Hill Chevrolet of Freeport Ethan's the best so the car doesn't give me any trouble though you have a Tahoe also

two of them did you hear do you have the high country what's that do you have the high country no I have the RST my shit is sick

it's like the sports package okay I don't know it's got the red stitching on the seats okay I don't think I don't know. It's got the red stitching on the seats. Okay. I don't think it's anything more than cosmetic, but whatever. It's hot.

You'll see my high country. So they said that. I can't see Josh. Can I like move this? Yeah. So they said the first electric Tahoe is 2024, which is one of my leases up. Okay. I might do it.

Okay. Well, I have two of them and then I just bought a Genesis my leases up. Okay. I might do it. Okay. Well, I have two of them, and then I just bought a Genesis. Is that good? Okay. What's a Genesis? So the Genesis was made popular by Tiger Woods crashing in it. Ooh. So I have a junior in Chaminade, 17 years old, learning to drive.

So I'm like, all right, where do I get this kid? If Tiger crashed it, then if Tiger could survive. If Tiger survived. So I found out what's a Genesis. What's a Genesis? Tonight, go home, Google it. Awesome car. SUV.

Hyundai. They've spun it out as its own brand now, right? Mm-hmm. Hard to find. They should really just call it the Tiger. Hyundai Genesis? Hyundai Genesis. GV70? I got the GV80.

Well, GV80, look at you. Let me see this thing. We bought Shari's car off the lease for Tara. She's not going to be driving until next year. What kind of car? It's a BMW. But it's the the new leases are so absurd that it was like obvious to just buy it yeah we've never bought i've never bought a car before in my life so you don't lease you that's nice that's the genesis that's that's the actual car that i have that's's my car. That's the color? That's a good looking car. Yeah. Good looking car.

What's Hyundai? Korean? North Korean. It's Japanese. North is North Korean. Look at you. Look at you. Two Tahos and a Genesis.

But you buy. You don't lease. Two cars. I buy. I bought. Why do you buy cars? Because the price was right. I'm not leasing a car right now.

No, but in general, you've always bought cars? No, I lease. You used to lease. Now you buy. I think everyone's buying. I just bought mine too. You have to buy. Can't lease right now.

The thing with the Tahos, though, is that they lease well because there's a lot of demand for them in the aftermarket from Uber drivers. I don't know. For me, they lease well because I know Timmy. Yeah, well, lucky you. I got destroyed on my lease. You know Timmy too. I got destroyed on my lease. TJ do the right thing? No, it wasn't his fault.

This is summer of 21. There's no trucks. Okay. He's like, if you want the truck. Here is the price. You're going to lose this round, but I'll get it for you. I'll make sure you get it. Look at Energy Stocks.

Breaking up. Speaking of. All right. I still can't get over that you've never been here. Never been here. We've been here for four years. Well, because you're a Long Island guy. Where you been, Joe?

Yeah. Listen, you know me. I keep a very small group. True. True. I'm glad I'm in your group. All right, Michael! Very confident in my association.

All right. Let's go. Let's get this. in your group. Very confident in my association. All right, let's go. What episode are we in? We are up to 58. 58! Welcome to The Compound and Friends. All opinions expressed by me, Michael Batnick, and our castmates are solely our own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon

for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Hi, I'm Josh Brown. Did you know... Did you see this Keith Haring? Yeah, Keith Haring is the real thing. Wait, that's for sale on Masterworks? All right.

Did you know that you could buy fractional shares of a well-known work of art, and then when that art appreciates and gets sold, you actually can get a piece of the profit. Have you heard of Pablo Picasso? This piece, 17 million. I can't afford that. What's that piece called? This particular Pablo is the home a la pipe. I already have that.

Is it a la pipe? Come on. What? It's not a la pipe. A la pipe. It might be a la pipe. I don't know. That's not a la pipe. A la pipe. It might be a la pipe. I don't know. That's not what's important.

What's important is that Masterworks enables you to add a new asset class to your portfolio. You can own fractional shares of well-known art by well-known artists, and it's a pretty cool way to diversify. So go to masterworks.art slash compound to find out more. And see the important disclaimer at masterworks.io slash disclaimer. Joe Terranova is on the show today. I don't want to say anything before I said that. I want people to understand. I'm going to give you, you're going to blush a little bit, Joe,

but I'm going to give you a very special introduction. With this skin, you think I'm going to blush. Okay. Good. Fair. Fair. Let's read your official title first. Joe is the chief market strategist and senior managing director for Virtus Investment Partners as well as a frequent contributor on CNBC.

Maybe even more frequent than me if that's possible. Well, definitely long – when did you first start doing CNBC? 2007. All right. So you predate me. We'll talk about that in a minute. Joe also developed the Terranova U.S. Quality Momentum Index in 2020. And there's an ETF based on it, which I know the rules are weird.

No, we can talk about it. We're allowed to talk about it. You are not? I can talk about it. Your're allowed to talk about it. You are not. I can talk about it. Your ETF ticker symbol is great. It's JOTI. What else would it be? And it's factor exposure to the two factors that I think that you're most excited about

investing in, which are high quality stocks that are moving in the right direction. Why wouldn't everybody just do that? Two factors that I've prioritized throughout my career. Okay. And it's all large cap? Large cap growth. Okay. When did you launch the fund originally?

November of 2018, the ETF went public. In August of 2018, the index, which the ETF tracks, was published for the first time. Well, listen, I'm very proud of you. Thank you. Yeah. And I know I had you on my podcast when you first launched it, and I was probably one of the first people you talked to about it. Absolutely. By design, by the way. Yeah. So this is something that from the day I met you, you were talking about doing. This is not like, hey, let's do an ETF. You have always been passionate about, I think, trying to find a way

to invest that's systematic, but that incorporates the things you've learned about what types of stocks work. And remove the emotion, which is critical, and make sure that it's rules-based because I think that's – in terms of long-term investing, to me more about the ETF as we go. But I wanted to say that of all of the people that I had met when I started doing CNBC in the first couple of years, which is like 2010, 2011, you were like the person that like from the get, I said this to Dan Nathan also, you and Dan were probably the two people that were the most welcoming. Not that anybody was not welcoming, but you guys – you in particular have been like a big brother to me. I used that term with you before, but like I mean it in every sense of the word. So having you on the show in my office, very, very special moment for me. So thank you so much for coming on. I appreciate that, and you deserve it. You deserve it. I'm proud of you.

Say more though. Walking around this office, I happen. I'm proud of you. Say more though. Walk more of that why I deserve it. Walking around this office, I happen to be incredibly proud of you. What you've done. Maybe even a little,

maybe jealous a little, even? Or would that be too? No, I don't think so. I'm glad this is on video. No, no. I don't measure myself against other people. No, I learned that a long time. I'm just teasing. No, I know't measure myself against other people.

I learned that a long time. I'm just teasing. No, I know. But it's remarkable what you, Michael, and Barry, and everyone have done here. And listen, when you're on CNBC, you know my persona. You know that I'm ultra competitive. You know that better than anyone. But you're an athlete.

I'm quiet about it. I have that quiet confidence, right? And I listen to what people say. And I'll tell you, a lot of what you say, I agree with. I have loud insecurity. You have loud insecurity. No, you don't. Stop it.

But there are times I might disagree with what you say, and I'll tell you. But most of the time, I'm like, the way Josh looks at the market is the way that I learned to observe markets back in the 90s working with Mark Fisher. We're definitely going to do some – we're going to do some Mark Fisher stories later for sure. We're big fans of Mark's. I want to start this week with where I think we have to start, which is the – I'm calling it a bear market rally, but maybe it's gone too far for us to still be saying that. How do you feel about the bounce that we've had? And just like for a little bit of context, growth stocks are up 13% off the June lows.

Value stocks are up about 8%. Momentum's up 10%. We've had the shareholder yield type stocks up 10. Like it's been really broad-based and most sectors are participating. Like it's really hard to find a sector that hasn't had at least a high single digits bounce. And it's gone on.

I think we've retraced more than 50% of the... Mike, do I have that right? Yeah, I'm just fact-checking your numbers. I think it's even more. The Qs are up over 20% from the lows. Yeah, my numbers come from Sean, so that's my man right there. All right, so what are we saying now?

Because if it's really a bear market rally, it kind of has to roll over right this minute. And if it doesn't, then I don't think we could still call it that. Okay. I think that having an intense debate over whether it's a bear market rally, not a bear market rally, I don't see how that's productive. And I say that with the sincerity of markets have a very unique way of leading sentiment, of leading positioning. And I think exactly what has unfolded here since the beginning of the new quarter has nothing to do with fundamentals. I get corporate earnings were resilient. Understand. I get that we're seeing a moderation

in inflation. Guess what? That's what the Federal Reserve has to do. Combat inflation, you have to have demand destruction. You have to have an economic contraction. That's the the Federal Reserve has to do. Combat inflation, you have to have demand destruction. You have to have an economic contraction. That's the price you pay and they can't stop. This is about technicals. This is about positioning. This goes back to in the month of June, you look at risk and you understand that allocators of risk were positioned like it was 2008. Yeah.

But there was one problem. Where was Lehman Brothers? I didn't see Lehman Brothers. allocators of risk were positioned like it was 2008. Yeah. But there was one problem. Where was Lehman Brothers? I didn't see Lehman Brothers. So now what's unfolded for the better part- Hold on. We have this. Throw this up. This is the Bank of America Global Fund Manager Survey.

So it's exactly right. So this is the net percentage of people taking higher than normal risk. It bottomed out at negative 60. I don't know what that scale means, but it had not been that bad sentiment. You had to go back to October 08. A remarkable chart. Yeah. A remarkable chart.

And you're missing the financial market imbalance that Lehman Brothers created. So what happens in that environment? What happens in that environment is that you understand that a large component – and this is for the both of you. I love how people are so appreciative of technicals when they align to your story. Yeah, that's me. But when it – and I'm with you. But when it doesn't align to your story, no, no, no. The technicals are fraudulent.

Pay no attention to that. They're sending a message in the market that doesn't matter. Well, OK. I'm sitting there. I'm watching all this. I'm saying to myself, you know what's going to happen here? All these non-discretionary rules-based funds that remove emotion, that have been telling me for the last 10 years the best thing you could do behaviorally investing is do what? Remove emotion. OK? In this economy? So they 10 years, the best thing you could do behaviorally investing is do what? Remove emotion.

Okay? In this economy? So they're doing what they're supposed to be doing, right? The S&P breaks above the 50-day moving average. Engage. Right. That's what happens. I know how quant funds work.

Now the S&P sustains above the 50-day moving average. Even more jumping. Engage even more. Oh, guess what? We now see in our vision the 100-day moving average. Even more jumping. Engage even more. Oh, guess what? We now see in our vision the 100-day moving average. We're going to be engaging more. Now, all of this is unfolding as the street is underweight, the strategy that has paid all of us in abundance, okay,

for the past 14 years. What's the strategy? Growth, right? Everyone's underweight growth. Yeah. Underweight growth, underweight long-duration assets. In the second quarter, that's how you spent your time, getting growth out of your portfolio. So what comes back now?

Growth obviously comes back. I don't know, Josh, what's growth? 40% of the S&P 500? If not more, 45%? Yeah, more. gosh, what's growth? 40% of the S&P 500, if not more, 45%. So how is the S&P not going to rally in that environment, eradicating, you need to take that? Eradicating the pessimism, reversing the overwhelmingly bearish sentiment. And the 200, I see, I don't think it's over because you have the 200-day moving average sitting so close. Those non-discretionary funds,

they're going to be buyers above that 200 day moving average. And here's the last point on that. What also is going to happen is when you study momentum, momentum usually observes a timeframe of six and 12 months. So if you go back six and 12 months, if you take the S&P 500 and you have it just kind of rest at 43, 4,400, do you know momentum looks positive on a six-month basis and a 12-month basis at that point? Really? For the very first time. So you're engaging these rules-based funds that don't pay attention to emotion. Right. But okay, that doesn't align with the fundamentals. So it doesn't work this time. I don't get that. I don't understand that. So I kind of look at – I kind of look at all of it and I say to myself, bear market rally, not a bear market rally.

45%. Takes nearly five years to recover. 2000 to 2002, same thing. Market goes down 45%. Takes four to five years to recover. And then 07 to 09, 45% down, four to five years to recover. Those are the real bear markets. Do I think that's where we are right now? My instinct says, no, I don't think we are. But do you think a lot of people thought that we were there in 2000 or didn't really come around to, oh, this is a real bear market until like 2001 when it didn't recover? Like in other words, not that much time has elapsed since the top. So if you go back and you think about the three time periods I defined, the 70s, there was no solution to the oil crisis and there was no offset. There was no offset because there wasn't a Microsoft, there wasn't an Apple, there wasn't an Alphabet. If you go back and you study 2000, we were coming off the currency crisis, the Asian currency crisis. And you had

this financial market imbalance because all these technology companies had relied on debt, right? And the debt was overwhelming the market. And then you roll forward to 2008. And obviously, we had, as Warren Buffett correctly called it, the weapons of mass destruction, right? Yeah. I'm not sure what it is in this environment that kind of creates that financial market imbalance. So I'm somewhat suspicious that this is going to be a prolonged

period. How about Germany and France rationing energy starting next month? That couldn't do it? Problematic. Evergrande? Not big enough? Okay. So I don't know what it would be either. I'll tell you something. I think the bear case is pretty easy. So lay it out. I think the bear case is just stocks have been extended, a little bit overvalued, and interest rates super low, and now inflation high. Yes, moderating, but inflation high. Fed removing liquidity.

And I don't think you need to overthink it. I think that's probably it. Okay. And what does the Fed do in that situation? Which one? As you described. The Fed funds rate is 500 basis points below inflation. So I think you could easily make the case that with stocks trading at 23 times earnings or whatever it was over the past decade on average, that stock should

probably now be trading at, pick a number, 16, 17, 18 times earnings. And that's it. So we're at 18 now. We're at 18 now. The problem that I have a lot of times with valuation is people study valuation. They tell me, well, the market should be here. I was on a call in June, and we had someone speaking, and they were talking about the S&P, which at the time was 3,700. And they were saying, based on the economic conditions, based on the tightening cycle, the market has to go down to 3,400. Has to. Has to. Oh, wow. When you use those words, has to. Well, are they saying like fair value? Or are they saying like literally that's what it has to do? Market has to, in order for valuation to set itself, where the historical norm is, to your

point, we have to go down to $3,400. And I kind of sat there quietly on the call. I was like, OK, I think we're close to maybe balancing. And who was that, David Solomon? I don't reveal. So after seeing oil trade at negative $30 a barrel, even if it was just for a few hours- Nothing has to do anything. But Joe, I think-

Then you know nothing has to do anything ever again. Joe, you're right. This is about positioning. It's about people being offsides. John, throw this chart back up. This is Bank of America Global Fund Manager Survey. The average cash level is about 6%, which is usually, you know,

that's about as high as it will ever get. So what's interesting is you have the systematic money being put to work because it has no choice, which is- Wait, hold on. There's more cash in global fund manager portfolios now than there was in April of 2020? Which I guess it makes sense. That was so quick.

So that's positioning. It's positioning. So you have the systematic people, and these people will chase eventually if the bounce doesn't break down. But what's interesting is I feel like you have a lot of people on Twitter that are upset, that are offside. Exactly. That didn't get the bounce.

A V-shaped recovery is not going to be good for finance. Just general frustration, but you can measure it. So Jason Gepford has this great site called Sentiment Trader. He said last week, and this was August 15th, he tweeted this. He said last week, the S&P 500 was more than 3%. And yet, small options traders brought fewer calls to open and bought more puts during the week. That was the first week since 2009 when retail traders fought a 3% weekly rally to that degree.

Yeah. So even the retail is not like buying into this bounce. Nobody buys it. And I understand because I think that everybody is of the mindset that earnings growth will slow and the Fed is not taking their foot off the pedal. So there's extreme skepticism regarding the recovery that we've had. And while people kind of focus on the shape, what's the letter that any type of recovery is going to take? I think there will be a V, I think there'll be a U, and I think there'll be an L in certain strategies, okay? I think the L, so right now, sitting here, the S&P- Apple is a V, bro. 42, and it should be a V. Yeah.

Because Apple has the fundamental characteristics of exactly what you want to own in this environment. It's a record quarter. Aggressive buying back stock. Holy shit, that's a V. That's a V. OK. Straight up. That's 7.5% of the S&P right there.

If you're talking to me about non-profitable technology and consumer discretionary and you've got this bounce right now, I mean this is America, the land of second chances. But the market really doesn't give you second chances. Yeah, I'm with you on that. Like you've got a second chance here. Say more of that because you've said that a lot, that the market doesn't let you get back in. No, the market is unforgiving. It's such a punishing mechanism, right? And it's smarter than all of us.

It's such a punishing mechanism, right? And it's smarter than all of us. And if you're sitting in those stocks and you're concentrated in that direction towards the non-profitable businesses, how are you not removing that right now, right? But to your point, Josh, there are V-shaped recoveries that can unfold. I actually think- Wait, Joe. But in those names, we've had- They're not Vs because they're not going anywhere near the old highs.

But PayPal, 60 to 100. Whatever. I know, but it's big. It's big. It's pretty big. No, it's not. Stop. Coinbase doubled.

But that's an L. These are big stocks. That's a big stock still, PayPal. But I'm saying it's a relatively big –lox 20 to 50 or 60. There have been some, but they're not anywhere near November 21 levels. And I don't think they're going back. No, they're the L. And that's where you kind of have to look at strategies. Okay, where's the L? Where's the U? Where's the V? Have I bought some companies that have an extreme valuation recently? Yeah. The JOTE ETF took a position in Datadog. I took the position8. Have I bought some companies that have an extreme valuation recently? Yeah. The JOTI ETF

took a position in Datadog. I took the position personally. It's a company that's growing its revenue at 70%, free cash flow margins at 20%. The stock is actually doing relatively well recently. I'll step out a little bit there. But overall, so you have to define which letter you believe it is. And for the overall market, I think we're in the middle of a U. I really do. So it's going to take longer than we think. I think it's going to take longer than we think. And I'll say this to you.

Even if we were to race back towards 4,800, do we stay there? Do we break out above? Like people don't understand the importance of time. Well, people think in terms of year end and 4,800 is like everybody's target right now. Right. It's the easiest target you could come up with. If we get a recession, would this be the only time that the bear market ended before the recession began? I don't know. I think the market's smart enough to know when to begin to price coming out of the recession. Listen, I'm a big believer,

and I keep saying this consistently on calls we have with advisors from Virtus. Don't complain about the economic contraction, because that's the only way out of this. That's the price you have to pay to combat inflation. I said, be careful what you wish for when people are like, see, inflation's coming down. OK, why? Exactly. So this is why the market balance, because inflation is moderating, I think. And so it's that, that sparked the balance positioning,

sustained the balance. What if we transition to, okay, but now we have to get past earning slowing, growth slowing? Well, I think what has to happen, first of all, you've got a series of events in September that is really going to provide the view whether this market recovery can be sustained. Balance sheet tightening increases. We all know that's coming, how liquidity is so important. To Josh's point, I think the situation in Eastern Europe is going to be a very tenuous one, not just for that specific region, but for the rest of the world.

And then the question surrounding, is there going to be this continued resiliency on the part of not so much consumers, but corporations? And why is that so important? Because if there's not, what you'll see in the fourth quarter is the buyback expectation won't be there. And that'll be a problem for the market. Because corporations will start thinking more about conserving cash. Frugality takes hold again, right? Yeah. So you sit with that cash on the balance sheet. Now,

right now, you've got corporations aggressively buying back their shares. Why? Because they're smart in recognizing President Biden's Inflation Reduction Act for the market, the best part of it is that you're pulling forward buyback activity into 2022 because people want to get ahead of the January 1st surcharge tax, the 1%. Now, I get that 1% is not a difference maker, but it's still 1%. Now, I get that 1% is not a difference maker, but it's still 1%. Why pay 1% when 30 days before you could pay nothing if you have the ability to buy back your shares? Okay. So we might have a front-end loaded buyback to get out ahead of. I think that's happening now. Okay.

I could see it. Josh, what does Savita say? For Apple, that 1% is meaningful. Absolutely. One more from the Bank of America Quants. This is Savita talking about where the market should be. She's basically saying either the PE should be 11, right now it's 20, or CPI should be zero.

Just read the first thing. Right now it's 8.5%. Just read the first sentence. She's saying only 30% of bull market signposts, things that happened before a market bottom have been triggered versus 80% in prior market bottoms, suggesting another pullback is likely. One signpost with a perfect track record is the rule of 20, meaning you add up the CPI year over year plus the trailing PE that has historically been lower than 20 when the market's bottomed. So outside of inflation falling to zero, which will not happen, or the S&P 500 falling to 2,500, an earnings surprise of 50% would be required to satisfy the rule of 20. I think that the pandemic broke all this.

So these rules can't apply anymore. Putting the economy on life support and then taking it off and starting everything with just – I think that broke the economy and I think it like totally shattered all of these previous rules. Can I ask – We have this chart? Can I ask you both a question surrounding this? And we all have a tremendous amount of respect and appreciation for Sivita's work. OK? She's brilliant.

She's awesome. She's awesome. I think she's the best. She's value-added anytime she's on CNBC, and I love her research notes. I look at it from the perspective. I always look at it from the perspective of if I'm allocating towards risk, if I'm putting funds to work in the market. Let's say I'm a trader. What do I do with that? Nothing. Ignore. Okay. Now, let's say I'm a long-term investor. What do I do with that? Nothing. Ignore. Okay. Now, let's say I'm a long-term investor. What do I do with that?

Ignore. It might inform your allocation decisions. No, it's good for people like us who produce content. We get to talk about this. It's good for conversation. Tell me how that would – If you're somebody that is very focused on valuation and you currently believe that valuation is not low enough to account for all of the risks. That might be one more straw

that potentially breaks the camel's back. John, throw out this next chart. So that part of it, I understand that valuation is a blunt tool and this is mental gymnastics, but hear me out. So this is a chart from Yardeni. We're looking at the forward PE for the S&P 500. And 2021 was a spike.

We know that was a funky time. But even today, after this bounce, after the decline, we are above where we've been for most of the last decade when the wind was at our back. Does it make sense- Meaning when the Fed was on our side. Yes. Does it make sense for valuations to be at the high end

of where they've been for the last, not forget about the last hundred years, for the last 10 years, given where we are today with inflation still up 8.5% year over year, with the Fed still tightening, growth will be slowing. And by the way, it doesn't matter what we think should happen. The market's not responding, but it does make sense that the market should be trading low. Okay. So I think two things happen in that situation. Number one, that's where I go back to my letters. That's why I think we're in the midst of a U. I think that the market is not going to go too far above 4,800.

And I think from a price standpoint, there's not much downside below 3,600. Time is the biggest enemy of the market right now. Meaning what? If you're a long-term investor, you have to learn something you didn't have to learn in the last 14 years. Chop. Stocks don't go straight up? No, you just have to have patience. You're addicted to the V recoveries

since 2008. I've been saying that. I've been saying that all year. It's not like you have to, if you're bearish, you have to be predicting 2,500 on the S&P. You just have to say to yourself,

okay, but I'm going to keep investing anyway. So what's the right posture? Relax my return expectation or the time it will take to get my return expectation. That's all you have to do right now. That's all you have to do. I totally agree. You have to focus on time. I wrote something on Virtus Investment Partners website. We put this stuff out. I quoted Hootie and the Blowfish. Time. Who doesn't? Time, why do you punish me? Right? And I wrote this back and forth because I could see that's exactly what was unfolding where this was going to take longer. The only solution to all the challenges, I'm sorry, I just rubbed this microphone. Sorry about that, guys.

No, no, no. She likes that. This is not a prop. So people on Twitter, when I hold these up on CNBC, they're like, oh, this guy's got a prop. I'm like, no, this isn't a prop. Who says that? This is what happens when you get old. Why are you watching Twitter while you're on CNBC? You know that's the cardinal rule. We'll talk about Twitter another time.

So I think time, why do you punish me? And I think that's exactly what investors have to just understand, right? And I think that's exactly what investors have to just understand, right? Recalibrate your expectations and know this is going to feel a little bit different than it's felt the last 14 years. We've gotten spoiled. 15% returns for 10 years? Come on. The other thing, though, and you took the chart away, but the other thing that I get

excited about, OK, is that I think what happens now, and Virtus is without question a quality growth manager. OK. So if growth is going to be scarce, what do you do strategically? You try and find growth in the market. So I think quality growth, I think growth at a reasonable price, makes a return here. Do you want to concentrate towards cyclically sensitive businesses right now when you know the economy is going to contract? Yeah, but except that, like energy historically is cyclically sensitive. That's your hedge.

But right now it's not. Right now it's secular. Like we have under-invested in energy production for 10 years now since all those shale plays blew up in 2014 or whatever, eight years now. That's now a secular growth story. These stocks used to be cyclical. So when I said before, Michael, that I have an appreciation for what he says on the show, because I really do. Back in the 90s, Josh could have totally traded with us. He could have. He

would have fit right in with Mark Fisher and the whole crowd. Yeah. He thinks the same way. He looks at the market the same way that we looked at it. So I look at energy. And energy is an overweight for me. It has to be for the secular reasons that you identify. But what else?

You're always focused on not what I can make in the market, but what do I lose? Yeah. That's how I'm a survivor. Listen, I mangle words. I'm from Long Island, and I don't have an Ivy League education. But I'll put my abilities in the market up against all those guys. Why? Because I worry about risk constantly. Energy is your hedge against all of this that we're talking about today, just absolutely collapsing, the market falling apart, and something happening in Eastern Europe that's really ominous.

You think U.S. energy stocks would hold up during that? I would say you mean stocks. You mean the commodities. No, I think stocks will hold up. So what's interesting, and I don't know if we have this chart or not, but energy equities are performing much better than the spot price of oil. Yeah. Okay? Dude, I just threw this in the doc before you started.

That's so weird. Okay. That's energy divided by crude. Energy is doing much better. Now, here's – John, do you have it? Which one? Here's an awesome –

Chart on, my friend. So I put – I showed you – if you guys have the chart of the spot price of crude oil – Look at this. Here's XLE divided by crude. Right. So obviously you have the spike of 2021. Crude went negative. But take that out for a second.

OK. The stocks are spiking relative to the commodity. Absolutely. And here's what's so interesting. So you talk about non-discretionary funds and removing emotion. Would you short crude oil right now? Emotionally or financially? Would you, would you, do you think it's logical to short crude oil? Of course not. No, but does anyone? Really? Do you know what crude oil, the spot price of crude oil, do you know where it is relative to the 200 day moving average? Below,

no? It's, it's 12 consecutive days below. The 200-day moving average is at like $95. So I have friends that are CTAs. They're short crude oil. Yeah, but they could change their mind tomorrow. Okay. But now look at that chart. How long were they long crude oil? They were long crude oil for eight months because it was above the 200-day moving average. How do we know where crude oil is going to be? So their point is, it's the Cliff Asness mentality. I'm a big fan of Cliff. I think Cliff is a genius. It's that mentality where you have to have rules because the rules know more than what you know intuitively. It's wisdom of the crowds. Of course, the market knows better than us. So it makes no sense to be short oil, but they are.

How is crude below where it was when Russia invaded? Because it is. Because they're like emptying the SPR. It's not that complicated. There's also an election in November. There's an election in November and they are dumping oil out of the strategic reserve,

which will not continue indefinitely. But it's not even crude. The story is really natural gas. And we're going to – we'll talk more about this later. But I think it's interesting that the energy equities could outrun the commodity price for a period of time. It could go on for a while, I guess. Absolutely. But again, I like that as that's the hedge.

You need that. And energy stocks have been dead money for a decade. And these companies, they're not incentivized right now to increase production. Let's talk about the Fed and liquidity because I think this is going to be the biggest story. We may not feel it in the market in September, although it'll start. But this is something that I think will be one of the biggest stories in the fall. that, I think will be one of the biggest stories in the fall. So the Fed is going to raise the monthly cap on how much of its bond portfolio it's going to allow to run off, meaning bonds that mature will not be replaced with new bonds. That's how they intend to shrink the balance sheet from

nine to seven trillion, mostly through runoff, which could take a really, really long time. But the cap is going up to $95 billion when you add up how many mortgage bonds they'll allow to mature and how many treasury bonds. And people forget, but prior to the pandemic, the Fed was injecting liquidity into the short-term funding markets and the repo markets because we were already struggling then

with like liquidity issues. And that's prior to the pandemic. So we don't have a great track record of QT. If you look at 2016 to 2018, we got a little carried away there. And 2018, we had two 20% crashes for the S&P inside of nine months. Like we're not good at removing – we're not as good at removing liquidity as we are

at adding liquidity. So – Well, adding liquidity is easy to do. I think what we're not good at is I don't think monetary policy sometimes understands what's going on with fiscal policy. policy sometimes understands what's going on with fiscal policy. So 2018 was specifically caused, the corrections you're citing, the two corrections, the one early in the year and then the one in the fall, with the Federal Reserve not understanding the impact of tariffs. The trade war.

Yeah, and how it was slowing the economy. And it was kind of like, how do you guys not see that? Just as last year in 2021, I don't think the Federal Reserve understood that a lot of the fiscal stimulus was unnecessary because we had technology, because we were able – It also wasn't up to them. But we were able to conduct our professional and personal activities because of technology most people, right? In certain instances, if you need a little bit of help, you were able to get the help. But the Federal Reserve was so slow to respond. To your point, they were still buying back. They were still adding liquidity.

They were buying mortgage-backed securities. This year, March 22. It's like you're still buying and you're telling us you're going to tighten. It made no sense. So I think they're slow to react in that environment. But I understand the liquidity is going to come out over the next four to five years, hopefully, hopefully, because the size of the Federal Reserve's balance sheet is double what it was going into the pandemic. It was about $4.5 trillion, right? Got up to

somewhere around $9 trillion. It's pulling back slightly. It's got a long way to go. So tell us what's going on here, Fed liquidity and the S&P. What's far best? What are we looking at here? That's the Federal Reserve's balance sheet, the size of the Federal Reserve's balance sheet. So this is basically liquidity. This is liquidity versus the S&P. Right. Over the last 10 years. And you could see that any time – so look at 2013. And in December of 2012, we began another round of QE. We increased liquidity in the market. Markets respond.

You see there's a lag effect. The S&P gets the message. Yes, he gets it. But then it really ramps a couple of years later. Absolutely. So the 2020 ramp up in the Fed's balance sheet perfectly corresponds to the 2021 stock market mania. Like it's – so it was about a one-year lag. Would the same happen on the way out is the question. I think – tell me where you think we are because I think somewhere between the end of 2014 and the middle of 2016 is how you could define the market right now. No longer adding liquidity, right?

Liquidity is not a positive catalyst. And the market kind of says, ugh, okay, really? And goes somewhat sideways there, right? But let's just say that you're of the mind that the Fed is good, that there will be a policy mistake, that the Fed will push it too far while growth is already slowing.

What would you do with that? Wait a second. Push what too far? Interest rates. They'll push. Or tighten too fast. Push tightening too far. Tighten financial conditions too quickly.

Tighten in the face of an already contracting economy. Okay, so, but how do I score that? Does that mean unemployment goes to like 8%? But that's sort of what I'm saying. Like, even if you are of the mind that things are going to get ugly, what do you do with that?

So ugly means a recession. Yeah. What do I do that position-wise? I lean more towards growth, but as a long-term investor, I understand that I need to have patience. Yeah, I think it comes back to you moderate your return expectations or you lengthen your time horizon for things working out. I mean, I think this is obvious, but it's overlooked.

It's much easier. Not that it's easy. Let's do this next chart. It's much easier to stay invested than to call it tops and bottoms. What are we – Joe, what is – so this is a smaller version of what we were looking at. This is the period between 2012 and 2016. You see the acceleration, the size of the balance sheet. I mean, look at how it perfectly matches the stock market.

I mean, but it does though. It really does. And then as the, as the monetary stimulus levels off, so does the stock market. And we get a flat market in 14, 15, and 16. No, there's no doubt that liquidity is very influential. It's hard to separate how important is it. Is it 30%? Is it 60?

But OK, so everyone talks about liquidity being important. What is liquidity? Think about what liquidity is as from the perspective of a manager of risk. Basically, what the Federal Reserve says is we understand there's some form of challenge in the environment in which speculators are afraid to assume risk. So what we're going to do is we are going to be an artificial buyer of treasuries. We're going to make sure that the treasury market remains stable. We're constantly buying treasuries. So what are you going to do with that? You're going to sell us your treasuries, right? And take cash. And take cash and step out

on the risk curve and speculate in the market. Now, in 2021, and I'm sure you guys will talk about this a little bit more, that speculation became excessive. Speculation went into crypto, speculation went into IPOs. That's also fiscal responsibility as well. Fiscal, but there was also this ridiculous amount of liquidity. 40% increase in home prices in two years. Did anyone need that? 40% increase in home prices in two years. Right. Did anyone need that?

So the offset to all of this is when the Federal Reserve is doing that, basically what they're saying is, all right, we're going to create a search for yield environment. We're going to punish savers. We're going to punish an older generation that was relying on income. And the trade-off for speculators is we're going to have a low volatility environment. We're going to insure that for you. That's why, by the way, hedge funds underperform because they assume too much beta in a market that's got low volatility and you didn't need to. And they get their shorts squeezed. But now we're on the other side of that. We're trying to change consumer demand and investor demand, investor behavior. Correct.

And so we're on the other side. So it should get a little bit more difficult. Let's go into this year three of a bull market thing. This is from our friend JC Peretz. Why isn't it getting harder? Do you believe in cycles? You've been around for quite a few. All the market is a series of patterns.

Patterns and recognizing the patterns. But what are we looking at, Josh? So this comes from JC. And I think what he's basically trying to show us is that year three, historically, things tend to get better. And some of that, so year two, all right, so JC is showing us the Dow Jones Industrial Average in various year twos going

into year threes. And so it's like the period from 1921 to 1924, 82 to 85, 09 to 11. And now he's showing us today. And the setup today looks exactly like these prior setups. Thank you, John. So year one, you get the ramp. That's why you call it a new bull market. Year two, there's some consolidation. And if history holds, the Dow Jones in this situation going into year three has historically used that year two consolidation as a springboard to significantly higher prices. So doesn't mean it has to happen.

It just means this pattern repeats all the time. And I'm sure if we go back and we look at all these periods, 1932 to 1935, 2001 to 2005, we could keep coming up with reasons. Oh, well, in that case, it was because of blank. Yeah, we could do that all day. We all know the history.

But I think there might be something to this idea of just having a tough year to digest a really good year being the bridge into the next good year. Okay. It's one way this could resolve. So, yes, I am a big believer of cycles. I'm trying to pull something up as we're talking. A big believer actually in presidential cycles. You know anything about presidential cycles? Enlighten us.

OK. So basically, if you go back and study. We're in a midterm year. Well, you're in a midterm year. We'll get to the statistics behind that, which are unbelievable. OK. If you go back to 1939, the beginning of World War II, this is the 21st midterm election year.

Do you know there has never been a negative return from the actual date of the midterm election to June 30th of the following year for the market? Really? It's been 20 consecutive years. So Joe is saying get crazy long this November, guys. OK. So you've got six occurrences where

you got greater than 20%, six times greater than 20%. Six out of? Six out of 20. OK. Six out of 20. OK. So you've got remarkable midterm election statistics, but also a presidential cycle. The four years of a presidential cycle, what you generally find is market returns are most

difficult in year two of that presidential cycle. Which is now. In fact, the worst quarter of the 16 possible quarters is year two Q2. Which came true this year. Which came true. So the question becomes, OK, what are the best quarters? So the question becomes, OK, what are the best quarters? The three best quarters in a presidential cycle occur from Q4 of year two through Q2 of year three. So that's October 1st of 2022 through June 30th of 2023.

Why is that? That's the sweet spot. through June 30th of 2023. Why is that? That's the sweet spot. My belief is because you're getting past the critical midterm election. You're removing a degree of uncertainty. You're not entering that presidential election cycle that's going to follow, right? And the market during that period generally doesn't have the inclusion of Washington,

D.C. in trying to understand the fundamentals of the market overall. I rely on this stuff. And it's helped me so far. In fact, the incumbent president often gets his ass kicked in those midterms, which brings gridlock back. Which brings gridlock back. So we don't get five more of these inflation reduction acts or whatever. Right? Okay. So we have a chart from Joe, actually.

Or what do we have? We have a table or a chart? Joe did a whole big piece. What do we want to look at in here? Yeah. I want to tear into this. Did it bother you guys that I was putting so much effort? No, we love it. We love it. Thank you. We love it. We asked you to. Okay, good. Let's go into this. This is Joe's comments from July 5th.

This is your observations and expectations. How often do you put this out? So I put out content through Virtus Investment Partners when I think it's incredibly important to do so. Not on a schedule. So it's probably, it's reacting to market conditions. So I think I did one on January 29th. I think I did another one in March talking about the importance of time. That was the Hootie and the Blowfish one. And then this piece was put out at the beginning of the second half of the year. And it's basically just a review. It's a review.

We talk about time. You can see only time could provide clarity for the inflationary pressures, monetary normalization, right? And by the way, everything that's going on right now is normalizing the abnormal. That's how I look at it. Everything coming into this year was completely abnormal. Yes. And we're just normalizing it.

OK. So if you scroll down a little. The biggest normalizing thing on this table that stands out to me, Joe, is two was completely abnormal. Yes. And we're just normalizing it. Okay. So if you scroll down a little. The biggest normalizing thing on this table that stands out to me, Joe, is two-year yields. Absolutely. Holy shit. It's just a normalization process. So we go through a little bit of a review on all the critical stocks. Go back a little bit.

Let's look at bond yields of where we were at the closing price in 2021 versus where we are today. I mean, that was abnormal. The three-month was 0.03%, so zero. That was abnormal. It's now 1.62% at the midpoint of this year. Look at the two-year. The two-year went from 73 basis points to 300 basis points. It's outrageous.

Outrageous. So fast. Outrageous. It's not just a normalization. It's an overnight normalization. It was quick. And there's your Bitcoin, too. Where is that?

46 to 18. That'll never normalize. 46 to 18. Oh, boy. 46,000 to 18,000. I wonder if that's reverse correlated with yields. LOL. Keep going if you can.

All right. This is just some Fed stuff. Look at that chart. Look at that chart. Look at that chart. Oh, my goodness. This Fed funds rate. It's hilarious. Look at this last decade.

The last 15 years have been completely abnormal. If you were to look at this, if you were to land from outer space and look at this Fed funds chart, where it's like zero, then it's ripped higher than zero. What the f*** is happening? Why don't you just say,

why doesn't the Fed become an algorithm? Keep the Fed funds rate at 3% and f**k off. How about the three-month is the new Fed funds rate? Why don't we just use that? Who is benefiting from all of these radical up-and-down cycle decisions? Am I right? Eight of the last 12 years, the cost of capital, and that's how I think, that's to me what Fed fought. The cost of capital was zero.

Free. Do whatever you want. Free. Do whatever you want. Do whatever you want. Eight out of the last 12 years, free. That's normal. So you know what you get out of that?

You get thousands of shitty IPOs. You get the rise of cryptocurrency as something that everyone is now taking seriously. You get NFTs. SPACs. You get SPACs. You get a million scams that we haven't even finished uncovering yet. You get wealth management firms

going from an average of like 200 million under management to $80 billion backed by private equity, blah, blah, blah. Like a lot of distortions that will now never go away. Money costs nothing. Go buy whatever you want. Go buy. Right. So that's, I mean, that's the consequence of keeping the Fed funds rated zero for eight out of 12 years.

It's really an extraordinary period of time. Extraordinary. So, okay. So we're normalizing that now, at least for now. All a result of technology, by the way, because that's the deflationary force. You think that's the big one that's bigger than globalization, that's bigger than demographics, aging? Absolutely.

OK. I don't believe it. There is no economic equivalent in the world to the United States. Where do you have – where can you find me a country that's blessed with the potential of energy independence, a strong consumer, and – Strong currency. Its economy values algorithms, artificial intelligence, and software programs. Science. And the companies that are producing it, right?

Yeah. Science. Our alphabet, Microsoft and Apple. Find me a country in the world that has that. Not to mention the two best geographic borders on the planet, Pacific Ocean, Atlantic Ocean. Not to mention the two best geographic borders on the planet, Pacific Ocean, Atlantic Ocean. Not to mention two friendly neighbors, Mexico and Canada. Not warlike, not interested in division.

There's like a lot. That's a deflationary force. And a miserable population. Right? People always say to me, how do you define the US economy? I say it's an economy of time and convenience. People are like, what does that mean? I said we deliver time and convenience to consumers. Everything is convenient. Your packages are on your doorstep. And in terms of time,

how fast can you give it to me? How fast can I get it? That's what the U.S. economy is. John, can we skip to slide 12? And we're going to do 12 and. We'll do a U.S. household debt to disposable income. Go up for one second. I'm sorry, Josh. This is your show. This is your show. No, no. Take it away.

Just go up for one second because it's important to show this. These are the midterm election statistics. Keep going. Thank you. Oh, you have the whole thing. I have the whole thing. And so listen, when I put something out on Virtus, you know, it's important. Those are the returns.

Didn't matter which party was president, who held the House, Senate, which way it went. There was no influence on the indicators. Wow. So we're saying that- 20 for 20. So from the first week of November when the election is held to June 30th. So let's call it a seven-month period. So these numbers are like FDR, 30%.

Like just random sampling. There are no negatives, zero, going back to 1942. And the range, Trump is only 6.76%. I remember the market being better. Maybe it's just my... Even Obama, back to back, two and a half percent, 10 and a half and two and a half percent.

What was the best one? I think that was FDR. This is a great example of why people should leave politics out of their portfolio. Yeah, because it doesn't matter who takes the Senate, doesn't matter who takes the House, doesn't matter which party what matters you know to me what matters pleasant bruce springsteen for us right now uh what matters is the finality of the election certainty like the

certainty we may not like who won but but oh my god thank thankfully we're done talking about it absolutely and it only comes the solution only comes through the course of time. And then the next one, the next chart, if you'll. Yep. These are all, and this is where specifically I wanted to emphasize thinking about time, right? So what's highlighted in red, those are bear markets. Those are down 45%.

And you could see the length of the decline. And then on the right side of the table, you'll see how long was the actual recovery. Well, what's remarkable is everything above the 07 to 09, Josh, it's all, Michael, it's V-shaped in its nature. Like all those corrections, even, listen, in 2020, we went down 35% in 33 days. Crazy. By August 18th, we had it all back, all back. Right. So who is that? Robin? So, so what's different, what's different I think is the Greens the Greenspan Fed has – like the Greenspan Fed was very active. It was like an activist Fed. It was very interventionist.

His finger was on the trigger all the time. And that's why every recovery has been a V-shape since his era because I think now that's just how the Fed works. Do you think the Fed will ever not be a market influence? No, I think it's forever. And you know why they have to be? Because of how big the investment component is in the economy. So prior to Greenspan, which is 1987 and before, it wasn't true that there were $20 trillion in retirement assets in the stock market.

There were very few 401ks. Most people's retirement was dependent on a pension, which meant most people had nothing at stake in the stock market. And most of the people acting in the stock market were either corporate insiders and executives or speculators. And there was like not this middle-class ownership

of the stock market that exists now. And because that exists now, the wealth effect from what stocks do is so pronounced that the Fed can't ignore it and has to intervene. We just spoke about the Fed funds rate looking silly with the zero, this, and back to zero. But if we let the market decide some sort of overnight rate, whatever it was, look at the stability that the Fed has brought to the financial system.

Now, a lot of people think that they've created instability because they can't get out, they're trapped. But what would happen absent a Fed and there would be just so many more boom bust events? Oh, no. I think the Fed exacerbates the booms and busts because they tend to be pro-cyclical in what they're doing. When was the last bust? They tend to reinforce the booms, which leads to even bigger busts.

It's been a while. I'm not like anti-Fed or whatever. The argument is that they'll take a normal bull market and put it on steroids, and then the resulting hangover is worse than it otherwise would have been. Look, when I – way back when was in college and studying finance, I wasn't learning about the influence of the Federal Reserve in the market. Because it wasn't like it is now. Yeah. So I think future students are absolutely going to be studying more the Federal Reserve's hand within markets.

What does that exactly mean? Barry talked about this in his book where Alan Greenspan's first month on the job was during the crash of 87. And he immediately acted faster than almost any Fed chief has ever had to act to anything. And I don't know if he cut rates to zero, but he cut rates to almost zero. And it worked. Actually, stock market closed up on the year in 87, which is not a lot of people realize. So that's the lesson that Greenspan learned was that for every panic in the market, I have a button I can push to make it go away before it turns into a real problem in the economy, which is actually the Fed's job. So now fast forward 11 years to 1998.

You have the Asian contagion, you have currency crisis rippling through, the ruble gets devalued, the Thai bot, it goes on and on. And then long-term capital blows up in the summer of 98. And so now you have twin crises. So Greenspan in the middle of 98, maybe August or September, once again, hits his button. The economy was fine. Like the economy was probably growing like six or 7%. The boomers were at their height of their spending. There was no economic reason to slash rates unless you were doing it as preventative medicine because of Asia or LTCM. And what happens? We get the best year for stocks in world history, 1999, right?

So he – and then he has to fix it in 2000 with aggressive rate hikes. So it's like people look at Greenspan coming along and just pumping things up and then having to do damage control. And that's now what the Fed does. So what's the reflation trade in your mind? What do you mean? What do you do? No. So people always say the reflation trade, right?

The reflation trade is back on. The reflation trade is nothing more than what Josh just said. The reflation trade happens when the Federal Reserve realize, uh-oh, I got to go back. I got to go back. I've got to step in. I've got to reflate the bubble that just deflated. That's all the reflation trade is. All they're doing is trading bubbles. The direct result of the cleanup from the dot-com bubble is a housing bubble. You take rates to zero, and it's not a miracle that everybody's buying a house and everyone's remodeling a house and that everyone's buying two

houses. Like that's, to me, it's very obvious that we replaced one bubble with another. So what's the bubble now? Cause I know in my mind, I've said this all year. In my mind,

the bubble is extreme valuation. I was going to say podcasts. Wait, where like unity and dataog and stuff like that? Like Snowflake? Non-profitable tech. Non-profitable consumer discretionary. It's about bubble burst.

Well, you called it, listen, I watch everything. You called it the hopes and dreams, right? Yeah, yeah. That's all. And I think to a certain extent, I guess I'm going to offend a lot of people, but I think crypto is part of that story. I think the IPOs are part of that story. I think the IPOs are part of that story.

I think SPACs are part of that story. I think that's collectively the valuation bubble. And it burst. It burst. It burst already. We need a new bubble. That's the thing, though. So now we need a new bubble to replace the bubble.

I'm not so sure we need one just yet. We're going to get one. That quickly? Well, let's talk stupidity while we're on it. Let's talk about Bad, Bad to Beyond. What in the f*** is going on with this stock? I mean, we saved this. We could have done this at the top.

This is a billion and a half dollar market cap, a meme stock. It has once again captured the imagination of traders, the attention of the media. How can you say this market has bottomed if we're back to this bullshit so quickly? What are your thoughts, Joseph? So first of all, I think a lot of this is hedge fund activity. I don't think that a lot of the extreme, and I think the hedge funds back in 2021 were participating and it was masked as it's the retail trader that's driving all

of this activity. It's both. I think it's hedge funds recognizing momentum. I think it's hedge funds recognizing a stabilized environment over the summer in which they had an opportunity to profit from it. Does it speak specifically towards your point? Did the market bottom? I don't know that-

It might be too anecdotal to- I don't look. This is some bullshit. Listen. There's nothing to do with economic macro. Why does this bother anyone? It doesn't bother me. Well, no, because it's market manipulation.

I'm not in it. I'm not long. I'm not short. No, it's market manipulation. That's why it bothers people. Because- Can you, Mike, can you like walk us through the timeline here? So on Tuesday, this is from Vanda Research.

It was in the Wall Street Journal. On Tuesday, individuals purchased the largest amount of Bed Bath & Beyond shares in recent history. Going back to 2014, individuals bought 73 million shares on a net basis on Tuesday. Okay. Okay. So why do I say that this is potentially market manipulation? Zero Hedge wrote about Ryan Cohn, who is the founder of Chewy, who has a venture fund. I thought it was a hedge fund. It's a venture capital firm. Okay, whatever. They bought far

out of the money call options on more than 1.6 million shares with a strike price between 60 and 80 when the price was at, I don't know, 15. In a classic attempt to spark a gamma squeeze made popular by what Elon Musk's offshore investing unit did with Tesla, this is the important part. The call options that Ryan Cohen bought expire in January, 2023, and are so far out of the money, the mere purchase created a feedback loop

where dealers had to aggressively buy the stock to Delta hedge. And since the short interest in bed and bath was off the charts, a short squeeze loop also to aggressively buy the stock to Delta Hedge. And since the short interest in Bed and Bath was off the charts, a short squeeze loop also kicked in on the stock that had a short interest at a whopping 44.3% of the float. That was on Tuesday. Okay. Okay. And then on Wednesday, just minutes before the close, he filed a form 144 telegraphing his intentions to sell almost 10 million shares. This is after the stock went up 300%. It was 24 hours later, which is 10% of the shares outstanding.

This is some bullshit. Sounds to me like we have a very unsophisticated SEC that can't keep up with a lot of the trading. Eventually, they're going to make an example. Yeah, they're not, too. They're going to be all over this. This is red meat. Do you think they have the technology? Yes.

I think they watch the options market so closely, and that's why all these insider trading busts occur. They're not like overhearing gossip. They're looking at who's buying options and who's got outsized profits. They're looking for people who are trading options for the first time. They know exactly what they're doing. So who are trading options for the first time. They know exactly what they're doing. So this was blatant and the fact that retail- They can't stop it in progress, but they certainly can hold people to account

after the fact. The fact that retail is so heavily involved just really makes it worse. And there's another side story to this freak show. This is a big case. Have you seen gamma squeezes like this on a smaller scale prior to the meme stock era that we're in now? Like can you remember this ever being a thing?

It's social. You've been trading a long time. Yeah, but it's not – you're not going to find me in those places. Of course not. So I'm not looking for it. No, of course not. That's not my strategy. Of course not.

But I'm saying have you seen – because now like to everybody, every time a small cap stock goes up, everyone's immediate assumption is, oh, it's a gamma squeeze. Oh, is it? Definitely. So the biggest option squeeze I ever witnessed was natural gas in December of 2000. Yes. That was – walk people through that really quickly. It was something – It was basically everyone in Houston squeezed out the entire

New York trading floor, which you knew was going to happen. There were some trading firms in New York as well. But basically, they were coming in and they were buying call options at ridiculous prices. On that gas. On that gas. And everyone was kind of like sold, right? You're going to pay up that much above the intrinsic value? Sold. So you had a lot of options specialists that as the price began to move higher and higher, which it did, natural gas surged through $10. It was like three, it went to 13? You had a huge squeeze. Yeah, yeah, yeah. Huge squeeze in natural gas. And basically, everyone got squeezed out. And Amaranth –

Was that a big hedge fund in Connecticut or something? Amaranth was a huge hedge fund. And they were unfortunately on the losing side of the trade. They got wiped out. Okay. So this type of thing has happened before. on the losing side of the trade. They got wiped out. Okay.

So this type of thing has happened before. It just has not happened in concert with like message boards and TikTok. And free trading. Right? Like this used to be, you said it yourself, it's like guys in Houston

who know the energy markets and guys in Connecticut running hedge funds. It was not like on the internet. Now everything is on the internet, which is probably why it makes it more salacious. But these things have happened in the internet. Now everything is on the internet, which is probably why it makes it more salacious. But these things have happened in the past. All right. The only response I would have to all of that, and I'll take your word, the SEC is sophisticated enough to come and write the wrong behavior. But I think the problem with all of this is that we see it and it continues to

happen through the history of markets. We know it's part of a learning curve, but we also know it's the wrong behavior. We know it's the wrong behavior. It's not consistent with what we know to be successful long-term investing, or even to a certain extent, if you want to be a trader, right? Yeah. It's just not consistent. It's not the right behavior. I like to use the golf analogy a lot. Okay. I never heard this one. Okay. So to me,

trading and investing is a lot like playing golf. It's a difficult sport. It's very hard to be a professional trader. It's very hard to be a professional golfer, right? Hard to be an amateur golfer. Yeah. Exactly. OK. Does that mean that no traders are going to have sustained success over time? No. There are a very small select group of traders that will be successful short-term oriented with their focus in trading, the same as there are professional golfers that have that success. The problem is the behavior, the behavior of the market is what troubles us because we know that's where the failure resides itself. Just as if you're playing golf, if I'm 70 yards away from the flag, do I take my driver out for that 70-yard shot? If I'm 400 yards away from the flag and I'm on the tee, do I use my putter?

That's what a lot of behavior is right now in the market. And we just know it's inherently wrong. You're not going to be successful. You know what I think one of the problems is right now? For young people, if you ask them who's the most influential investor for them that they've ever heard of, they will say Jordan Belfort. So Wolf of Wall Street was one of the biggest movies of the last listen to me

Wolf of Wall Street was one of the biggest movies of the last 10 or 15 years I think it came out in 2013 think about every teenager that went to see that movie and they all did all over America in 2013 is now a 25 year old man

and that looks cool to them. Like to that generation, that's their gecko, okay? We had the movie Wall Street. They had the Wolf of Wall Street. The thing is gecko is fake. The Wolf of Wall Street shit really happened, maybe not as colorfully as in the movie, but he's iconic to this new generation. They think that's how you do it.

They don't have a mainstream, they're not like Buff, they're not into Buffett. Like 25 year old kid is not into Buffett. 25 year old kid thinks the roaring kitty guy, the way he made himself $50 million is the real hero. Right? Like that's,

that's who they relate to. I can't believe that movie is 10 years old. Holy shit. It's like nine years old now, yeah. Oh my God. So my point is like there's a vacuum of like success, not success stories, but like the hero worship is all around f***ed up internet-based meme-y kind of shit and not where it should be. And that will restore itself at some point. But like right now, like who are young investors emulating? They think that kind

of shit where you trick the guy next to you is cool or where you get in on something before other people get tricked. To them, that's what they've seen. I don't think that they have like an archetype of an investing hero. So I think there's an educational opportunity obviously that resides itself there. I think part of what we all try and do on CNBC is helpful in that regard. I think – I mean hopefully. Hopefully. No, I think it is.

I do. I believe that it is. I think it is. I do. I believe that it is. But I think at the end of the day, if you're going to have success in the market, you have to understand who you are. You have to understand who you are and then take your personal characteristics and your traits and your ability to smooth out emotional inclusion in your decisions, and then really begin to craft a strategy of how you're

going to apply that into a market. And what are you trying to accomplish? Like, why are you even in the market? What's your reason for being in the market? Does anyone ever ask that question? Yeah, but so don't tell, don't tell me it's like, because I want to make a lot of money. But Joe, when you're 25, that is why. You're not – you don't care about retirement. When you're 25 and you're active in the market, not 401K, you have a Robinhood account. You want to turn five grand into 500 grand. I'm not saying you can or you should, but that is – that's every – that's what my intention was at 18 when I started trading. That's just what it is. I was just saying it for the love of the game.

But that's – but then that goes back to my pro golfer analogy. Okay, you can play the sport. Yes, you grow out of that. You can play the sport, but you're going to shoot 120. Of course. Every generation grows out of that. Here's the problem, though. You had 25 million brokerage accounts.

Not every generation. You had 25 million brokerage accounts open in 2021, and 96% of all stocks went up. That's your formative experience in the market is everything I buy works. I'm way smarter than I ever thought I was. Now I use leverage. Now I trade every day. Now I'm starting my own hedge fund.

Now I raise money from family members. Now I do SPACs. Now I do f***ing coins. Like that progression of sentiment that went on for people's first year or two years of investing, now you got to shake that off and realize, oh, that was like not real. So I'm willing to wager, okay, favorite restaurant anywhere, that if someone who's 25 years old in the fall of 2020 takes $50,000 and puts it in a Robinhood account and says that they're going to trade that $50,000, that five years later, that $50,000 is not going to match the return that they would have gotten by taking the $50,000 and putting it into a diversified portfolio. Of course not. Oh, no. There will be people that far exceed that.

There will people – It's just not most people. Right. Yeah. Exactly. Over a five-year period? Yeah. There will be plenty of people that –

There will be 1%. So what does that create? That creates the temptation that I could be one of those people. But you can be. Some people are, by definition. Some people are. You can be. Some people, and I've witnessed it, and I've seen it, okay?

And I've applied it in certain instances myself. But I think there has to be some educational process that lets people know, okay, if your mission, if your journey is to be that individual, I don't want you taking the amount of capital that is ultimately all of your savings and trying to make that educational effort with it. And I think that's where so many people are costing themselves so much money is that their first entree is taking the entirety of what they have and trying to trade with that amount. But don't you think that people can only learn by doing? Like, when's the last time you told them? Of course.

You're not telling- Obviously. You couldn't teach me anything. But I would never tell someone not to make the attempt, but I would tell someone not to make the attempt but i would tell someone be responsible drive the car first the speed limit don't drive the car 90 miles per hour on the southern state parkway with all the twists and turns so i did my first trades were levered were levered funds so tell that to jake freeman uh you hear this story no okay this Okay. This is amazing. But this is the shit that when this happens, 90% of the people that read this article say, wow, that's a fluke. And 10% say, I'm going to go do that. Okay.

This is Jake Freeman, 20-year-old university student, amassed a big stake in Bed Bath & Beyond. $25 million. He managed to raise $25 million. The Financial Times gated me. I got it. They want to know which of the following taxi or ride shares have I heard of. I pay cheapskate here. Okay.

What are you looking for? Wait, you subscribe to the FT? Of course I do. That's like Pandora. Do you also drink tea with your pinky up? Shut up. Here it is. So Freeman's initial stake cost about $25 million,

which he said was mostly raised from friends and family. He has invested for years- Oh, here it is. Here it is. Here it is. With his uncle, Dr. Scott Freeman, a former pharmaceutical- Who the f*** gave this kid $25 million

to buy Bed Bath & Beyond? First of all- He's from a rich family. Okay, rich family. How rich? This kid amassed a 6% position in Bed and Bath. That's unbelievable. And then sent him an activist note,

a 20-year-old. First of all, I listened to the conference call last quarter, and one of the—I never heard this before. One of the analysts just goes like, best of luck. This thing is—this thing is going—this is a bankrupt company. It is going out of business, and it's up 400% this month. Wait, all right. So, but this kid cashed—he cashed out yesterday.

He made $110 million. Made, all right. So, but this kid cashed out yesterday. He made $110 million. Oh, he just happened to cash out right before Ryan Freeman's filing to sell everything. That's not suspicious at all. But wait a minute. But here are the facts. Here's the facts. This kid had the chutzpah to get people to give him $25 million

to put into a $5 quasi-bankrupt piece of shit stock. The stock went from $5 to I don't know, 30. Where did it go? By the way, he bought it from TD and Interactive Brokers. Yeah, he did this on Meritrade, okay? Imagine the person that saw that order go through. Hey, wait, come look at this.

Come take a look at this. This is a $25 million. A 20-year-old. But it doesn't matter because here's what matters. It actually worked. $110 million. So there's no process. There's no – it's not quantitative.

He didn't force rank the whole consumer discretionary sector and pick the stock. It was a meme stock already, and he bought it, and God bless him. As an activist. He was right. It worked. It's very fishy, but whatever. Let's assume everything's on the up and up. So 90% of the people seeing – now, I got a text about this from my friend.

My friend Adam. He goes, how come you didn't tell me to give this kid money? Like joking. Time out. What? Sorry. I just clicked on his letter that he sent to the board of Bed and Bath. Dear sirs slash mesdemes.

What is that? Mesdames. Mesdames. Plural of mesdames.. What is that? Mesdame. Mesdame. Plural of mesdame. Who writes like that? Nobody. He copied. He found like, dude, he found like a Dan Loeb letter and cut and paste.

Nobody literally says that. Ben Abed is facing an existential crisis for survival. This guy laid it all out. I just give him credit that he wrote a letter and he didn't record it. If he's a trading savant, he doesn't need to be good at English. He's not a trading savant. But the point is. I'm not an English savant, obviously.

So my friend Adam texts me. He goes, how come you didn't tell me to give this kid money? And I wrote back. No, no, no. Give him money now. He has a track record. He can definitely do it again. Chase the performance.

He did it once. He can obviously do it twice. This is Jake Freeman, the 20-year-old. Freeman Capital's plan for the realignment of Ben and Beth consists of two crucial legs, cutting debt and raising capital. I mean, this kid went in. Oh, shit. I never thought of that.

Wait. Cutting debt and what? And then he made raising capital. Oh, that's a really smart move. Why didn't Ben, Beth, and Beyond think to cut debt and raise capital? That's wild. They needed Jake to let them know. Unbelievable. You don't step on anyone's dream. No, he didn't Bed Bath & Beyond think to cut debt and raise capital? That's wild. They needed Jake to let them know. Unbelievable.

You don't step on anyone's dream. No, he did it. The kid did it. You don't step on anyone's dream. All of this behavior, okay. It's been funded by the activities of fiscal and monetary policy. We understand that. Do I think the overwhelming majority is going to have success at it?

No. That's how you learn. That's how you learn. Do I think the overwhelming majority is going to have success at it? No. Do I think that – That's how you learn. That's how you learn. But if you're going to learn, learn by losing a little, OK? Not by going out and learning by losing it all. Don't have a $20,000 credit limit on your Chase credit card and take all $20,000 and put it into your Robinhood account. Sean, are you listening?

Which is what people are doing. That's crazy. Unless you're as good as Jake Freeman, in which case Joe's rules out the window. Can I just say, we just spent an hour on topic one. Well, no. We're going to talk about Joe T now. So first of all, before we talk about the ETF, what is Virtus? It's publicly traded. Tell us about the firm. It's a all, before we talk about the ETF, what is Virtus? It's publicly traded.

Tell us about the firm. It's a semiconductor now? No. Virtus is what you have here. Virtus is a family. Virtus is about culture. Josh, I think you know this in our industry because of what you and I do, because of the presence we have, the platform we have on CNBC. Someone's always kind of tapping you on the shoulder and saying, hey, I like what you're doing. Why don't you come do it for us? Yeah. And I've had that multiple –

I almost got a job at Freeman Capital. So I know exactly what you mean. I've had that occur several times over my career. But we've got an unbelievable culture. We've got a a how many employees family mentality um candidly at this point i don't even know okay with some family so well look here's how i think about it we started out as basically a 10 billion dollar aum company and we approached 200 billion at some point last year. That's amazing. Right now, we're about 175 billion. Our CEO is George Elward. He's been the constant since I've been with Virtus. I've joined Virtus in June of 2008. He's been there the entire time.

He's approachable. He's engaging. He is hands on in people's lives. I went through a personal challenging period in my life. He was there for me in a way that I think very few people in a corporate climate would. We're a publicly traded company. We've got unbelievable CIO and portfolio managers through our affiliates. We have an affiliate relationship with Kane Anderson Rudnick, Duff and Phelps, New Fleet Asset Management. People talk about bond kings, right? Jeffrey Gundlach, who I respect tremendously. Dave Albright is- I know Dave. I met Dave.

You know Dave. Dave is one of the most intelligent, thoughtful, taxable fixed income managers that I've ever met. And it manages a tremendous amount of capital. So it's a mosaic collectively. It's a culture. We just introduced Stone Harbor Capital into the family, Westchester Capital Management as well. And it's just a culture that I want to be part of. And hopefully for the next five to 10 years, I'll be part of it. Okay, so you are now an ETF king. So you have the JOTI ETF. And listen, you're not like what what you're not doing is Cathie Wood stuff. You're not you're not like making grand pronouncements about robots and the future and obsessing over innovation. But I do think that you want to be in stocks that have the potential to deliver the types of returns that people are looking for when they look for active management.

But you're doing it in a rules-based, completely transparent wrapper. So tell us about- You can keep going. No, no. So tell us about the construction a little bit and why quality and momentum and why together? All right. So first of all, I think it has to go back to my time working with Mark Fisher. I mean, the intensity, the focus, the long days, the every day you get the report card, what's the P&L? I went through that for 18 years. I was managing all of our traders. And over the course of time, that kind of wears you down a little bit. I couldn't do that for one year. So my children were born in 2005, 2006, and 2009.

I joined Virtus in 2008. And I kind of shifted gears and I just – the risk that I was taking was really just on a personal basis, my own trading. Stepped back a little bit from what my experience was back with Mark Fisher. from what my experience was back with Mark Fisher. Through the course of time sitting at CNBC, what I began to recognize is markets were becoming what I knew them to be, what my genesis, what I learned, which was all about studying price and studying about volatility and studying about movement

and understanding that you wanted to buy high and sell higher. That's what you do in the futures business, in the commodities business, right? You're not looking to buy low and sell high. You're looking to find where confidence is in the market and to be able to kind of surf on that wave, however that wave will take you. Sitting on the desk of CNBC, everyone would come on CNBC and, you know, okay, why do you like this stock? Well, just look at the stock over the last

two years. It's gone up. It's a great company and, you know, it's got all these great fundamentals, but the stock went up. Stop imitating me. You're on the show saying to buy the stock because the stock went up. If the stock didn't go up, you wouldn't be talking about it, right? So just say the stock's going up. OK. So I began to look at that and I'm like, well, wait a second. Because it's not intellectually impressive to be like, look at the performance. Right.

If you're coming on as a guest, not if you're an ensemble member of the show talking every day about stocks, sometimes you have to be humble and honest and say, listen, I've got losing stocks. OK. You're coming on as a guest to talk a specific strategy. You're doing a hit. You're doing a hit. Right. Right. OK. So I'm kind of watching this and say, wait a second now. OK. Now we're taking this single factor of momentum and we're not focusing on the potential risk. We're not adding a shock absorber to it. We're kind of neglecting a little bit of the

fundamental element. Well, what if we take my version of what I think quality is and marry it with momentum and create a strategy that first respects positive momentum, confidence in the market, but then applies the criteria of a fundamental observation that focuses on debt to equity, return on equity, and very importantly, annualized revenue growth over the prior three years. Now, when you take that last metric, which is annualized revenue growth over the last three years, what are you doing? You're prioritizing growth, which is what I believe the market is. Well, let's marry the two of those and let's see if we could, as I call it, mitigate risk and give a strategy that's a little bit of a shock absorber for investors that want exposure to large cap corporations. And that's why the product was introduced. It is entirely representative of the way I think about markets and the way I believe

the success of the markets should be. It is completely rules-based. It is remarkable, Josh and Michael, how the rules align with my thinking of the market. I'm going to give you an example. There have been seven quarterly rebalances for the JOTI ETF since inception of November of 2020. There have been, prior to the last one on July 29th, five consecutive rebalances where the technology weighting was reduced. Five consecutive. On July 29th, it was the first quarterly balance where we increased the weighting once again to technology. Why are they coming back in, momentum or quality? They're coming back in because of the quality factor, which is remarkable.

It's not the momentum factor. It's not what you would have thought. Right. So I know that the inclusion of quality is improving the overall strategy. In addition to that, the exposure to energy is now – and I said before I want to have energy as a risk, as a hedge against what can go wrong. Energy in the JOTI ETF is carried at an overweight because of momentum, obviously, over the prior 12 months. But that's exactly in my thought process where I think I want to be from that risk perspective. So I think it's a true reflection upon the way I look at the market.

The difficulty with momentum historically for asset managers to capture. Well, yeah, as a single factor. The difficulty is how quickly the momentum can shift. If you're using, let's say you're using sectors, right? So not everyone is, but you could, individual stocks, whatever. But you could have like the momentum in technology before and after February is like a really great example or before and after November of last year.

It's a really great example. It has – it goes from having the most momentum to having the least in a 30-day turnaround. And then how do you execute that from a rules-based perspective, let alone somebody just guessing? Like that to me, historically, when we look, we've looked at momentum funds, momentum strategies, that's really hard, the whipsaw and how quickly hot momentum becomes ice cold momentum. Am I stating that right, Mike? Yeah. So I'm looking at, I'm looking at the holdings. This is as, it says current, is that, I guess, relatively recently you look at it generally means right now. So let me just respond for one second. The, the process of rebalancing and you're doing this

quarterly quarterly. Okay. When in the quarter though, when in the, what do you mean stop it? Cause sometimes you don't want to rebalance because you could throttle what's working. What do you mean sometimes you can? If you rebalance too frequently, you could end up throttling returns because you don't let the winners run long enough. Okay. Who cares what I think? I created a strategy and the strategy is going to run. What I think is meaningless to the investor. So you can't step in and be like, no rebalance this month. Would you want me to as an investor? No, not if I bought it as rules-based. Absolutely not. 100%. Now, what did I do to place my fingerprints on it? When do we rebalance? We rebalance- Passover. The last week of January, the last week of April, the last week of July,

the last week of October. Why? Why? First week of the quarter. First week of the new quarter. Nope. I am including quality. Quality is what? Fundamental contribution of the strategy. You need earnings to come out. I want to get through at least half of the earnings. Right? I like that. So I at least half of the earnings. Right? I like that. So I get through half of the earnings. So I'm going to give you a great example. The strategy is going long Amazon on April 29th.

On April 28th of this year, Amazon has an earnings debacle. Stock is down like 14%. Yeah, the kitchen sink. OK. Next day, the stock is added to JOTI. 14% less than it was the day before. Yeah. OK.

Roll forward to July now. Amazon is basically a scratch from where the entry place was on April 29th to July 28th that Thursday. Amazon earnings comes out July 28th, 13% higher. The strategy was already rules-based. Right. That wasn't you pulling off an Amazon trade. You built it this way. So what was the strategy prepared to do on July 29th?

Sell Amazon. Right? Right. So now it sells Amazon. Why? Because the momentum is killed? Because the momentum factor. Right. The momentum factor said, take Amazon out of the portfolio. So that's where this, let's wait, let's have the inclusion of the most recent earnings report is important. And it's also equally weighted. Michael, you and I have talked about the equal weighting, removing the idiosyncratic single stock risk. I think that's important as well.

Oh, so you're not going to have a stock, no matter how much momentum it has, be able to keep growing past one quarter. Correct. If a stock gets outsized in that next rebalance, it's going to get taken down to- Is it 100 stocks? 125. We begin with 500 stocks. It is screened for momentum, which takes the number down to 250. Introduce the quality factor. Now you've got 125. And I want the stamp of Jyoti on it because I want

the performance to be out there. I want to own that. All right. So you have a huge, I know this firsthand. You have a huge following amongst financial advisors all over America. No, you do. I do. You do because you have paid your dues in that arena. You have been to probably every major Morgan office, Merrill office. You've met these people. They trust you.

You've looked in their eyes. You've gotten to know them. More importantly, they've gotten to listen to you over the years. They trust you. You've looked in their eyes. You've gotten to know them. More importantly, they've gotten to listen to you over the years. You're consistent. You're saying the same thing in 22 that you were saying in 12, and they know it. Okay. That's meaningful though because they're putting their asses on the line with any manager they pick. Right?

Like they're the one – so if they recommend Gunlock or Albright, they have to answer for one or the other. Right? So they're the one. So if they recommend, if they recommend Gunlock or Albright, they have to answer for one or the other, right? So they're making that choice. So that audience respects you and trust you. How are they using Jyoti? What are they, how are they positioning it in portfolios? So first of all, you're both aware of platform availability. Jyoti is available at Merrill Lynch. Oh my God, you must have written the biggest check you've ever written in your life. So Morgan Stanley, oddly enough, Jyoti's not available yet. Which is oddly enough.

Pony up. Well, Merrill has a very strict criteria to get on their platform. You're not around long enough to get on all these platforms yet also, right? To a certain extent, that's not true. So we're now sitting – coming up on two years from an AUM perspective, I think where we are today is somewhere around 90 to 92 million. The high point was 140 million. The high point was 140 million. The high point was 140 million, but then you had

the asset drawdown as well. But advisors are utilizing this in a portfolio, obviously with long-term vision, and thinking about a growth solution, thinking about a growth solution in a way that respects, to your point before, the valuation. Thinking about growth at a reasonable price, right? Thinking about this being utilized in a way. Someone once said to me, they said, we think about the strategy as the S&P on steroids and the NASDAQ taking antibiotics given the market cycle. Given the market cycle. So if we've got a decent market, this should maybe be the S&P

on steroids. And if the market is in that tumultuous rioting period- You're not getting full queues. That's – you're taking your antibiotics on the NASDAQ. Well, dude, I think you created something that there was room for that no one else has really done it. And I think you're – I think what you need to do now is let – like you said before, let time go by. That's all it is. And prove it out. That's all it is. Congratulations, man. I watched you launch it. And I think what you're

doing is awesome. The success of this will be known by my children. So we're going to skip ahead to the last thing that I want to ask you. That's it? We're done? Not yet. We're going to do, we're going to do one more thing. This is a mesmerize. We've just started. Was this good? I was going to, it was amazing. I was going to ask you about Kanye selling Gap clothing out of garbage bags, but I don't think you have a lot on that. You have a take? No. No? Okay.

So that's what I mean. So we're going to go ahead and we're going to skip ahead. Not to ask you about SPACs, but we did that shit already. Okay. All right. What's the best Italian restaurant in New York City? And be prepared for blowback

okay well I think you might in the next couple of hours have another restaurant to give consideration to let's just say that I'm going to take you somewhere that I think is really special I know where we're going can I reveal this doesn't get published until tomorrow

so don't worry about it okay we're going to Casa Cipriani. That's right. Okay. It's a private club and hotel with a restaurant. Okay. And I'm wearing a coat for this one. Yeah, but you could take – this flex – in the dining room, you have to wear the jacket.

Dude, I'm Josh Brown. I know. They're going to know exactly who you are. I'll literally walk in there with a Nolan Ryan throwback jersey. I don't give a shit. There's no cooler atmosphere in Manhattan. Why? We're going to eat outside tonight.

Oh, shit. We're going to eat outside. So you're just – Alfresco? You're overlooking the Statue of Liberty. You feel literally like you're on vacation and the food is fantastic. I love Cipriani. I went to a Cipriani in Anguilla.

They have one at Capsuluca in Anguilla. I went there in April. I couldn't believe it. I was like, why is there a Cipriani here?uilla. They have one at Capsuluca in Anguilla. I went there in April. I couldn't believe it. I was like, why is there a Cipriani here? It's the strangest thing. Food was banging. It's amazing. So, you know, it's where do you want to belong?

You want to belong? Mike, you look like a Zero Bond guy. Yeah, I can see that. Wait, that's a place? Josh has been to Zero Bond. You know who's a member at Zero Bond? Mike Murphy, I think. I went to a Murphy party at Zero Bond. I'm assuming he's a member. I bond uh mike murphy i think i could i went to a murphy party at zero

bond i'm assuming he's a member i belong to the zero hair but that's it that's a that's a mike murphy spot though that's a mike murphy spot what else what else is mike murphy mike murphy uh mike murphy had a microphone and he was rapping uh at zero bond like greatest 80s rap hits he was incredible at his own party it was one of the funniest things I've ever seen. Wait, so what's the best Italian restaurant in New York City?

Yeah, so besides the one we're going to tonight, what's your like, if somebody says, Joe, I'm going to be in New York one night,

I'm dying for Italian food, where, like, what's the best? Where do I go? Promola. Ooh, I did not expect that

from you. Promola. Okay, what did you think I thought you would say? I was going to go Campagnola. Or maybe I was going to say maybe El Molino. See, I don't want to.

Stuffy. Yeah. Well, there's three of them now. So you can go to the less stuffy one. Why do you like Promola? Where is it? It's Upper East, right? Okay.

Why? First of all, the gentleman that owns it is from Long Island. So 516. So that's supposed to be a good thing? That's a good thing. Okay. That's a good thing. He knows his Italian food. Okay. First of all, the gentleman that owns it is from Long Island. So 516, just like the three of us. So that's supposed to be a good thing? That's a good thing. Okay. That's a good thing.

He knows his Italian food. Okay. Food's fantastic. Okay. I don't even think it's one of the top five on the Upper East Side. Okay. No, I really don't. What do you think I would say?

Who do you think knows Italian food better? Me or you? No, probably you. Where do you think I would go? All right. My number one, just that. that. And where is Pomola? Uh, seventies, 60, 60. You like the Sparrow by Penn station a lot. Yeah. I love it. Uh, no, my, my place is Elio's on, uh, on, uh, 84th and second. Good place. Uh, good place. I got, I got engaged there. That's like my spot spot.

Cafe Antonucci. That's Wapner's spot. You've been there with Scott? He loves it. He loves it. It's pretty good. Campagnolo, just okay. All right.

Outside of Upper East Side, any others? What about Carbone? Is that place good? I'm going to – Carbone's a pain in the ass. Promola's my place. Promola's a spot. Carbone's annoying. place good? I'm going to... Carbone's a pain in the ass. Promola's my place. Promola's my spot. Carbone's annoying to get a reservation. It's like a whole...

If you're not in, it's like a whole production. You like San Pietro? I haven't been to these places. You've been to Elio's. Yeah. I'm excited for Maialino to come back. Scalinatella? 59th? Not bad. Not bad.

Serviceable. Got any others? All right. So we're going to say Promola. I got to go back there now. What do you got? What's your go-to? Spaghetti Carbonara.

And the Veal. Well, of course the Veal. It's the best in the city. Max Myers loves Promola. So let's go with Max. All right. How was that place you took us in Greenwich Village like a couple years back?

I don't know. Good question. The place in Greenwich Village. I don't know. With the pasta? Yeah, the Italian place with the pasta. You realize you're going to get me in trouble with the hunting fish club. No, I'm not. Stop it. We love hunting fish. That's not Italian.

Joe, you did great today. We're going to do favorites. You're going to go first. What are some things you did great today we're done we're gonna do almost we're gonna do favorites okay and you're gonna go first so what uh what are some things that you're watching listening to reading anything like what share with the audience what they should be getting into i love capitalism what is that by ken you don't know what i love capital no okay tell us everything. Ken Langone. That's the name of his book? That's the name of his book. Okay. I love capitalism.

Okay. Okay. So a couple of years ago, I get invited to moderate a panel. Jimmy Dunn, Vinnie Viola, Ken Langone at the O Hotel in Florida. The night before, Rich Handler gives the dinner keynote. One of the best experiences I have ever had. What event is this? So this was for Virtu Financial. OK. It was- That's Vinny Viola's-

Doug Sifu. OK. Doug Sifu. Vinny's not really involved anymore. It's more Doug Sifu. He's the CEO. OK. So Doug invited me to moderate the panel. And I'm sitting on this panel and I'm just listening to Vinny. That's a ridiculous panel. Jimmy Dunn telling stories about playing golf and then sharing in such an emotional way what he went through in 2001. And then listening to Ken Langone. And then listening to Ken Langone, I don't care what your political view is. We all know Ken leans towards Republicans. And as he said, he's probably giving more money to Democrats.

Ken just loves the country. He's just – he's an American treasure. He loves the country. He's just an unbelievable man. Did Ken make NYU Medical School tuition free to every student? Did I read that? I don't know. I think he did that.

I wouldn't be surprised if he and his wife did. I'm pretty sure they did that. I wouldn't be surprised. That's insanity. Okay. Yeah. So just listening to stories about Home Depot and – anyway, I love capitalism. Ken Langone, to me, that's a book that everyone should read.

You never read that? That seems like something that you would have read. When did it come out? Came out in 2017. All right. I got to add that to my list immediately. 2017 and 2018. Okay.

And what else you got? You brought one more. I loved The Winning Time. Yeah. Wasn't that good? It was so much fun. No, you really don't. I didn't love it.

Were you Lakers or Celtics? But he's like a basketball purist. He would rather watch the games. I just didn't love how it felt. But whatever. A lot of people like it. No, but listen. It took me back.

Yeah, I get it. The 80s, and that's when I was going to college. The Lakers, Celtics. I was too young to remember watching those teams in real time. But they were like, obviously, you grew up in the shadow of that rivalry i still can remember in my living room in valley stream with the shag carpet watching magic play larry bird on that monday night yeah for the national championship i still remember watching that game and how fixated the entire country was on that game and then when they started entire country was on that game.

And then when they started playing each other and there was a little bit of a period where they couldn't, they could never get to the finals to meet one year, the Lakers got upset. Then the other years, the Celtics got upset. And then finally you went through that period. who was the other teams in the mix? Sixers.

Okay. Sixers were good. And you went through that period and the Houston Rockets as well. And then Jordan comes along in the middle. That was – It was a little bit after. Yeah, he was more of an impact in going into 1990. But that period in the middle 80s where they would play each other, oh, my God.

Those games were unbelievable. I was Lakers. Yeah. Oh, you are? I loved the Lakers. I loved lakers i love the lake who did you love the way they were your magic were you magic johnson guy could you not be a magic guy yeah how could you not be my dad was a kareem guy definitely one of the coolest love kareem i used to you know try and do the the sky hook in my driveway um james worthy michael cooper just just love that team i thought the show was a lot of fun uh michael what do you got for us what do you got for favorites i watched him down last night okay he has a documentary out of netflix i thought it was remember i said it's not real yeah it was so

i saw him in new york and uh his set was was just okay the the special that he did on netflix was hilarious i was i was laughing so i finished on the train this morning. I'm like cracking up on the train. Do you know who he is? Tim Dillon? Out of control. He's a Long Island guy. He's an Island Park guy. How crazy is that shit? Wait, did he finish the special? I've never met somebody that grew up in Island Park. Did he finish it? No, I'm three quarters

the way through and I couldn't stop laughing. It's Island Park. It's like six blocks. It's aggressive. So Tim was on this show actually. Was he? Yeah. I'm like a huge Tim Dillon fan. And he mentioned his special. So Tim was on this show actually. Was he? Yeah. Okay. I'm like a huge Tim Dillon fan. And he mentioned his special. And he said he was doing a special, but we didn't know it was going to be Netflix.

So then the Instagram post comes out and it's Tim Dillon in front of a Netflix sign. I show Josh, he goes, that's fake. I go, he's joking.

Because he jokes on the show all the time that Netflix would be terrified to put his special on. And then he has a Netflix special and I go to Mike, I go, no way. It's not real. And it was real. How long ago did you have him on the show?

Three, four months? A couple months ago. That was the one episode I missed. Yeah, sure. Here he is. He killed. He killed on the show. Better than me?

Nobody's better than you. Come on. We've established this. Anyway, what's that? February. February. Shout out to Tim Dillon. Congrats on the special. That've established this. Anyway, what's that? February. February. Shout out to Tim Dillon. Congrats on the special.

That was really funny. He's going to really, really, really blow up big now because a lot of people who are not really hardcore comedy fans probably hadn't seen him yet. It was a very good set. And he was really good. Is the sauce in the bag is one of the funniest bits I've ever heard, right? Oh, my God. We have a lot of talent in the 516. Yeah the funniest bits I've ever heard, right? Oh, my God.

We have a lot of talent in the 516. Yeah. I mean, it's insanity, right? We have a lot of talent in the 516. Dr. J? Have you been back to Prime House? I haven't. I'm waiting for you. Did you guys like that?

That was so good. Did you like that restaurant? That was the best night of my life. That was epic. For the 516, that's a good place. Yeah, it's not bad. It's not bad. I'm waiting for you.

Let's go back. And Mike even liked it. Dude, that was the best night of my life. It was like one of the top five. Because Francesco was there. And Joe. It was just so much fun. Thank you.

You know what? You and Mike had a ton of stuff in common with the youth sports and all that stuff. I didn't realize. Yeah, Mike and I have a lot in common. I like Mike a lot. He did a radio show for us, basically. He was incredible that night. He was accurate.

Oh, yeah. Do you realize he told us the Celtics? He told us the Celtics were going to go to the finals. Yeah. Right? He told us the Rangers were going to do really well, and I looked at him like, the Rangers? Yeah. This is before the playoffs even started.

He was spot on. You can almost say the guy covered sports for 40 years. Knows what he's talking about. Let me do my favorite real quick. Umbrella Academy. Any takers? No? Do you know what it is?

No. Nobody? No. Okay. It's not for everyone. Is that Resident Evil? I love it. No.

It's its own thing. It's like these six orphans whose moms gave birth to them without ever having gotten pregnant and they get like kind of abandoned and this rich guy takes them all in and it turns out they have superpowers and it's very very surreal it's on Netflix

it's in season three it's awesome and City on a Hill which Joe discovered. I'm sorry. You did. You're going to ruin it for me. No, I won't.

Why? Season three. I haven't started it. No spoilers. It gets better every episode. Do you agree with that? That's an unbelievable show. It's an unbelievable show.

First two seasons were unbelievable. So it's Kevin Bacon, and he's like a scumbag FBI agent on both sides of the law. And it's Boston in the early 90s. And they nail the period detail down to like there could be a group of teenagers. And you look at the starter jackets and the jerseys they're wearing. And you're like, holy shit. It is so good. They are not playing games. I love all the love-hate relationships he has with everyone on the show too.

So the thing is everyone can't stand him because he'll like walk into an elementary school smoking a butt. Right. He's just a complete dirtbag, but he's so effective at what he does that they need him. They need him. And that's a great character. So, all right, sitting on a hill. I won't say any more about season three, Joe.

Did you have fun today? Had a blast. Okay, we're going to record this now. So this was the run through. You feel good? We're going to do it again. We're going to do it better this time. Okay.

Does that sound good? Only if it's in six months. Great job this week, John, on all the charts. I know we were very chart heavy. Shouts to Nicole. Great job. Duncan, how do you feel about today's show? I feel very good.

Anything we have to do on the way out of this? How's my hair going to look when I take these headphones off? It's going to look fine. It's going to look good. We'll let you refresh yourself. All right. Shout out to Joe Terranova, everybody. Joe from Virtus.

Joe of the Joe T ETF. Go read all of the relevant risk disclosures, please. And make sure that you are catching Joe on CNBC. What are you doing now? You're doing Halftime Report. How many days a week? Mondays and Wednesdays. Mondays you doing now? You're doing Halftime Report. How many days a week? Mondays and Wednesdays. Mondays and Wednesdays on CNBC's Halftime Report.

And then Tuesday I do Overtime with Scott. All right. So we do the opposite days. You and I, they don't, too much Long Island in one shot, I think. Fair enough. All right. I watch you though.

I know you do. And I hear you. I know you do. Do you know what I hear? What? You are the loudest typer in the world. Do you realize that? That's true. Everyone, everyone. He are the loudest typer in the world. Do you realize that? That's true.

He bangs his keyboard. He bangs the keyboard in the middle of the show. You think I'm the only person on TV on a keyboard? It's hysterical. Yeah. I can't help it. All right. I apologize to the audience.

All right. Thanks so much to Joe. Thanks so much. Thanks so much, Duncan, John, Nicole. We will see you guys next week. Take us out. All right, guys. We will see you guys next week. Take us out.