The Compound and Friends - Why Gas Prices Can’t Wreck the Market

Episode Date: April 3, 2026

On episode 236 of The Compound and Friends, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by Alexandra Semenova and Dan Greenhaus to discuss: oil prices and the market's reaction, the SpaceX IPO, V-shaped recoveries, the opportunity in private credit, the worst stock ever, and much more! This episode is sponsored by Aberdeen Investments and ClearBridge Investments. Learn more at https://www.aberdeeninvestments.com/active-etfs Find out more at https://www.clearbridge.com/ Sign up for The Compound Newsletter and never miss out: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠thecompoundnews.com/subscribe⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Instagram: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠instagram.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Twitter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠twitter.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ LinkedIn: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠linkedin.com/company/the-compound-media/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ TikTok: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠tiktok.com/@thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ritholtz Wealth Management⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/advertising-disclaimers⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/podcast-youtube-disclosures/⁠⁠⁠⁠⁠⁠⁠⁠⁠ Learn more about your ad choices. Visit megaphone.fm/adchoices

Guys, are we having fun this spring in the markets? I think so. A little bit? A little bit. It's got, I think this year's more, I mean, there's more volatility, but I think it's more interesting than last year. I thought it was fun up until March 1st. Okay. The worst stuff is not that much fun.

No. I mean, I think at the index level, we're actually not doing all that much, which is so interesting to me. I think it's flat. Yeah, it's, like literally. You would think that we're in much deeper sell-off, given the fact that we've had private credit concerns, AI disruption, this war now. I agree there's more yelling and screaming than what the index level would actually lead you to believe is happening. So, but that's good, though.

A lot of people, not hollering. So, Dan, basketball league guy. Same, I don't play, but I'm in one. I was in two leagues last year. How you ACLs? I'm fine, but true story. When I joined this league, the first play of the first game, in which I was not.

I was watching. The first play of the first game that I saw, a guy tore his ACL. Like immediately. First play of the first game. Like the guy of the show. Gordon. Reggie Theis?

No, Gordon. Oh, yes. From Utah. Yeah, that was ugly. Oh, oof. So if you don't do that, you're definitely going to do like a disc thing. Not you,

proverbially. Like. Thanks for the, no, no, not you. People in their 40s playing, like, aggressively playing basketball. It's like, Russian roulette.

Yeah, that's fair. But we have a somewhat aggressive league. Oh, you do? So I just say, like, you get to control how aggressive you play. Well, to some degree, but I also have an uncontrollable bout of anger every once in a while. Yeah, I see you as like being very competitive. Yeah, I went to, this doesn't matter. No, it matters.

It matters. I'm only in one league now because I went to the other league and they didn't. They didn't want you? Are you too physical? They don't appreciate the aggressiveness just as much. That's very on brand. No, me too. I like to bang with the boys.

We're doing. We're trying to play basketball. Yeah. This isn't Newcomb. I play tennis every... It's a long island. I play tennis every Wednesday. We should just preface to Alex.

We don't hurt each other. 50 Long Island jokes. Sorry. She's from Long Island. She's from Brooklyn. I'm from South Brooklyn. But I feel like... I grew up close enough to you guys.

You're on our island. We share the same island. Yeah. Yes. Brooklyn is technically on Long Island. It's not Nassau County. Rockland is technically upstate, but nobody really says that. Okay.

All right. So she can't claim Long Island. That's what we're saying? Anyone can be anything they want these days. All right, all right. All right, welcome, guys. So good to have you. She could hear, Jimmy.

As you could tell, we have a lot in the dock tonight. We have a lot to get, we have a lot to go over. All right. Shall we start a lot? Yeah, John, let's do it. The compounding friends. All right. Nobody be nervous.

Nobody be nervous. John, are you nervous? Always. All right. 236. ABC. Always be cool. Whoa, whoa, whoa, stop the clock.

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All opinions expressed by Josh Brown, Michael Batnik, and their castmates are solely their own opinions and do not reflect the opinion of Ridholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholt's wealth management may maintain positions in the securities discussed in this podcast. Ladies and gentlemen, episode 236 of the best-invested podcast in the world. Welcome to the compound and friends.

First-time listeners, welcome. Last-time listeners, I'm sorry, we did our best. We always do. My name is downtown Josh Brown. I'm here with my co-host Michael Batnik. Ladies and gentlemen, round of applause for Michael. Thank you, thank you. Ow!

Thank you. A good one, right? All right. All right. We have two special guests with us today. Returning champion, Dan Greenhouse is the chief economist and strategist at Solis alternative asset management, a firm specializing in event-driven, distressed, and special situation investing.

He's a longtime friend of ours, an all-around great guy, and frankly, one of the best guests any podcast could ask for. What a thrill. Who wrote that? Is that a barmistress speech? I don't think Nicole wrote that. I don't know. All-around great guy?

All right. and making her first appearance here on the compound. Alexandra Seminova is a reporter for Bloomberg News. She covers U.S. stocks and investment strategy. She is a regular contributor on Bloomberg television, Bloomberg Radio. Alexandra, thank you so much for joining us today. Are you excited? Great to be here.

I'm super excited. I couldn't wait for this. I saw you hit your first basketball shot. It looked like maybe in your life. I was terrible, yeah. Okay. All right. All right. Very excited. Guys, can we talk about oil first? Yes? Okay. I want to give you my interpretation

of what just went on in the last 24 hours. You tell me what you think. Let's hear it. Okay. The only thing that matters for all of the stock market commentary, blah, blah, blah, around oil is not the price of oil, but what the stock market does in reaction to the price of oil. And the stock market shrugged it off. We had an eight point jump in front month WTF. I crude. The back end of the oil price curve barely moved. It was up a little bit. And it only took two hours for the S&P 500 to reverse off the gap down lows. And where are we, where are we look like we're going to close? S&P's flat, equal weight is up. So we're recording at three o'clock in the afternoon. But barely any damage whatsoever this time around, even though the last time oil

spike like it did, we had a pretty decent-sized one day or two-day market event. So that's my interpretation is that the market is already done with this story. If we get another 10 points higher in WTI, maybe all bets are off, but like we're already, okay, I get it, a few more bombings and then we're out of there. But now you're reacting to the stock market because the market was down. That's all I ever do is react to the stock market. Same. Guilty. All right. What do you think, Alex? It's pretty incredible because when this war started, everyone was saying $100 barrel oil would be the tipping point for stocks. And we got there and it hasn't happened. I think it gets back to earnings.

We've seen analysts mark up their earnings throughout this crisis, which is different than any geopolitical shock in the past. So as long as we're getting that double-digit earnings growth that everyone is expecting, then a lot of investors will shrug this off. And the earnings season is what in two weeks now? So I think that commentary is going to matter a lot. Do you think, right, I was going to say we'll start getting earnings in a few days. Do you think analysts are even going to ask questions about the price of oil or by halfway through earnings season, it'll just be like a pass a thing to bring up? I mean, I think that a lot of corporate executives are going to want to comment on this about

how their businesses are going to stay resilient through this or kind of whatever strategies they have to mitigate any kind of impact of this. So we'll see. What do you got? Well, I've spent the better part of two weeks telling everybody I think they're not right about this. I think this is a much bigger deal. Why does everybody agree? Yeah, I think there, I mean, in our world in television, Bloomberg and CNBC, I think there's quite, well, that world, I should say.

There's quite a bunch of people who think, well, you know, this is a two-week excursion, this is a three-week excursion. The president says it's going to wind down, et cetera, et cetera. And as you mentioned at the outset are taking a pretty optimistic point here, I don't think the details here are getting through to people. Yes, obviously the market is telling me that they don't care as much right now as they did originally. And I think if you had told me, to Alex's point, if you told me or told the market a couple weeks ago that oil was going to go to $110. I think most people would have taken the over on down 5% or 6%. I would have.

I would have as well. But I think the important part here about the oil story is there has been mitigating factors. We went into the war with a huge oversupply, somewhere around 2 million barrels per day, an oversupplied market. So you have to work that off. You had floating – because the market was so oversupplied, there's tons of inventories, floating storage, ships that just had nowhere to go. You have to work that off. Iran is still getting its own oil through the trade. I brought charts, maps, if you will, of the Middle East.

I'm not in charge of that. All right. But say chart on. Chart on? Chart on? Is that like frame on? Oh, there we go. Look at this. Yeah, look at that.

So these are just the same region. The top left chart here is Saudi Arabia. Hold on. Is this bottom right quadrant Antarctica? That's correct. That's correct. Okay. Okay.

I'll take care of the jokes. So you've got the Strait of Hormuz up top. You've got the Red Sea on the left. Now, the other compensatory factor on the right here, that's the UAE. That's that little tip that juts out into the straight. That highlighted part is Fujair. The UAE can. can sort of skip the straight and send, call it a million and a half barrels through a pipe

to Fujaira and get out that way. And on the bottom left here, Saudi Arabia has a very big pipe called the East-West pipeline that goes across Saudi Arabia to Yanbuh up there in the north. And then it can come down through the south and get out through the Gulf of Aden. That's the Babo-Mandib Strait where the Houthis make noise. That pipe there, about two million barrels heading into this. So let's call it has a seven million barrel capacity. So let's just say four million extra barrels can go out that way. The point of what I'm getting at is between the inventories and the floating storage and the oil on water and the fact that we can offset roughly half of the 20 million barrels, it's allowed everybody to not be as dramatic as perhaps they might have

seen. We haven't seen the disruption. Right now, because we're in week four or whatever 30 days, it takes 20, 30 days for ships to get places. The amount of oil on water and in transit right now is ground to a halt. The last ships are pulling into various places. You're starting to see rationing out in Asia in particular because most 90% of the oil or whatever that comes out of the straight goes there. So the effects now are starting to get very dramatic and to really drive this point home. Inventories have to stay at a certain level. LNG plants, they go to minus 120 degrees. You can't just turn them off and then turn them back on. Pipes have to always work. Refinaries have to work. Production fill. So you can't go so low in inventories that you put a lot of

that stuff in jeopardy, which means there's since supply is doing. what it's doing, it's drying up, at some point prices have to go higher to curb demand. And that's sort of maybe, probably, possibly the environment we're entering in the next one or two weeks. So I'm not saying that's definitely happening. I'm saying thus far, I think the worst effects of what's happened, the West in particular, has been spared. So that was a long soliloquy, but hopefully that made sense. No, no, no. But so it makes a lot of sense because they're pricing in potential problems, but they're not actually feeling them yet. Well, we saw it coming in, here, I dropped in the Bloomberg story that the

dated Brent, which is the price right now, hit its highest level since 2008. That's telling you there's a squeeze right now. Let's put that up, John. Key real world oil price soars to highest level since 2008. Something's going on already. So what is this chart? It's a dated Brent oil price.

Who uses Brent oil? Everybody over there. I mean, there's a thousand different oil benchmarks. Brent is like, Brent is North Sea. So let me ask you a question, I'm not from being a wise-ass. Why does this matter for the S&P 500? Well, to Alex's point, energy, as we know, is a de minimis, but it's a very small part of S&P earnings, net income, et cetera.

So that doesn't matter. And I would also add, in terms of I was talking to, I think it was Wapner about this yesterday, as important as oil is for input costs, labor is a much bigger part of the cost structure for most companies. So you can argue it doesn't matter that way. However, oil is oil. And consumers drive and ships sail and planes fly. And if you can't get refined product out, people are going to start rationing oil.

We've already seen in the U.S. gas go to four. Somebody on Bloomberg surveillance this morning in California said he paid $7 a gallon, California being the well-run state that it is. You're going to start to see that. If this goes further, you're going to start to see gas prices start going higher. And that's where things are going to get more. Is that the story of why, like, 15 years ago, we would not have seen earnings revisions for the S&P going positive during anything happening in the Gulf? Because Exxon was 8% of the market.

Right. Is that the story for why we're seeing earnings estimates be able to be raised during an event like this because the S&P earnings picture is less sensitive to the fluctuation in oil and gas prices than it used to be? Yeah, I think so. And I think a big part of it, too, is consumer spending that has upheld this economy. And the consumer is much more shielded from higher oil prices and higher gas prices than it was in the past. So consumer spending, the price of energy actually comprised 3.7% of consumer spending in January 2026 by comparison. In the early 90s, it was closer to 6%. So it's not to say that oil prices don't matter, but the economy is better equipped to handle higher oil prices.

John, I'm going to interrupt and say chart on. Because I'd be specific. I brought that chart. Which one? The consumer. Oh, so John, go down a little bit. So, John, while you're looking for that. So it matters to certain industry.

So for example, the consumer, we had retail sales yesterday. Relax, your chart is coming. We had retail sales yesterday and they were pretty good. United Airlines said the first piece of good news is that, for now at least, demand remains the strongest we've seen. The 10 biggest booked revenue weeks in our history have been the last 10 weeks. And also, they said in terms of like where cost matter, where oil matters, The reality is, this is also from the United CEO, the reality is jet fuel prices have more than doubled in the last three weeks. If prices stayed at this level, it would mean an extra $11 billion in annual expenses for jet fuel and for perspective.

In United's best year ever, we made less than $5 billion. That's wild. So Delta said- They have to pass that on. Delta said something similar. Five of their best days ever have come post-the-war. So the chart on the screen now is exactly the point Alex just made. on the left, that's consumer spending on energy goods as a share of total consumer spending. That chart only goes back to 2007, but makes the same point. It's been drifting down.

And then on the right, when everyone inevitably says, yeah, but lower income brackets, what's that face? This is great. I love it. No, I'm, I'm, I'm, go. What did you bring on an amateur? So the chart on the right breaks it on my guess. Breaks it down by Desile, and you can see that for every single income cohort, obviously lower income brackets bear more of this cost. But relative to 2012, in 22, which is the last date for which I can assess data, every single income bracket has spent less as a share of their basket on gas.

So I was making a good face for listeners. I was making a great face because Dan aptly brought this thing where because everybody says this hits the lowest income people the most. And yes, of course it does. However, this is instructive that in 2012, 14% of their aftertax income was spent on oil and now it is down to what? Seven. It's a big move.

I'll go with seven. Sure, that looks right to me. Maybe five and a half, six something. Yeah, even better. And that's the lowest earner. And let's all be very honest about what's going on in the economy. The lowest earner almost doesn't even factor into S&P earnings. It's almost not even there.

I have a difficult time talking about this because you don't want to be dismissive of people who are obviously having a hard time. No, I'm saying for the earnings picture only. I'm not saying it doesn't matter matter. As investors, you have to what matters for markets and that doesn't matter. So we're going to get to this point later, which is that we're trading shares of businesses and we're not trading shares in the economy. And I think that that's writ large.

It's obviously very painful to pull up at a gas station and the number has a seven handle on it. And it's probably painful for like 90% of people. But that's not the same as what is the S&P going to earn in Q2. I think also to your point, Josh, we always talk about how the big beautiful bill is going to be kind of a tailwind for the U.S. consumer. But all of that money that they're going to get back

is probably going to be spent on higher gas prices. Yeah, so the average tax refund is a couple hundred bucks. It'll be boosted. Most people don't get tips. Most people don't get wages. But for people do, you're talking five or six hundred bucks. We can mechanically estimate how much more the average driver is going to spend on gas and it's about five or six, seven hundred dollars. So they basically, so the boost that a lot of economists were predicting, relative to the one big beautiful bill are now being eaten up. That's assuming gas prices stay elevated for the course of the year. What a share. It's like, oh, you got an $800 tax refund. But now everything is more expensive. And now you're going to spend $800.

extra over the next, I don't know, three months filling your gas tanks for whatever SUVs you're driving. So it's a push. I bought shares in Delta. Delta has its own refinery. It's not a miracle that it's the better performing of the airlines. And it's not that you want them to make money on their hedge because they bought a refinery, but it also doesn't suck.

I mean, it's also the best airline. And if you believe, as you suggested at the beginning, beginning that the market is telling you that they don't care anymore. So if you believe that oil is going to be lower, there's very few things. You know, I'm not recommending this by any way, shape, or form. I'm just saying something that would be levered, obviously, the lower oil prices quite dramatically would be airlines, cruise lines, those transport type stops. I think if crude falls, those are the immediate impact as the airlines go back to their highs. I am a Delta snob. What did, but what did Trump say last night specifically? He said, we're going to hit them hard over the

next four weeks or something like that? I think investors really wanted to hear him talk about an off-ram to this war, and it was the opposite of that. And we've also seen this pattern in the market since the war began, where people are buying on Monday. We're seeing a rally on Monday. We're kind of trading sideways throughout the week. And then people are selling going to the weekend. I think they just don't want to be positioned for risk because, I mean, I've seen people on Twitter call this the weekend war. When the market is open, we're hearing the president say over and over again that he wants this war to end. He doesn't want investors to be selling. stocks, especially in the term election here.

But then we get a lot of the bad headlines over the weekend. Down nine straight Thursdays. Yeah. And tomorrow, so if you're listening to this, we're releasing this Friday, the market's closed, and it's a three-day weekend, which opens

up all sorts of possibilities. I will also say, getting back to your original point about the bombs falling, this is somewhat of a duh statement, but it bears repeating, the bombs falling are largely irrelevant. The straight passage is what matters. You went from 50 ships to now five or six ships.

No, what will, right, what will be relevant is an expeditionary marine unit trying to take an island. That will. Yes, but I just mean, let's just say we signed a peace agreement tomorrow and we stopped bombing them. That's fine and obviously preferable to people dying. However, if the straight remains quote unquote closed, then bombs falling or not is irrelevant. Or Trump saying that it's going to reopen naturally, I think, was the problem.

Because if it's not the U.S. negotiating to reopen it, then who's going to do that? Well, right. Well, he basically said if we cease military action, then the strait will just open. Yeah. And the Iranians have said, sure, just pay us a buck a barrel. I'm paraphrasing, but just pay us a buck a barrel, which nobody is going to want to do. They may have to do it, but nobody's going to want to do it. What does that mean they pay us a buck?

So Iran's going to tell everybody who wants to get a ship. And by the way, getting back to my original point, I forgot the most important part about oil prices. There are no ships there. You've got to get tankers into the strait to get the oil and then get them back out. That's going to take a little while also. But Iran's going to say, if you want to get a ship out of here, you've got to pay us a toll or a tax. Or we're going to launch one of our drones at your hull. And so someone's going to have to decide the Emirates, the Saudis, is it worth about a buck a barrel per ship to pay the Iranians not to torch my ship?

I want to ask you guys this. Alex, your colleague John Authors has a chart of the Futsi All World Index. and he highlights the question that everybody's asking, is this it? Like, that's it. This would be the fifth largest drawdown this decade. It's nothing. So everybody's wondering, like, why are stocks not,

where's the trapdoor? Like, we haven't had a down 2% day. Are you kidding me? That's it. Which is incredible. It's bizarre. We haven't really had a VIX spike. I think it had a 35th the other day.

That's it. He's making the point that the global stock market is underestimating the danger. Well, I think, I think he's asking what we're all asking. And why aren't we down more? And I am a stock market truther. Like it, it dictates my mood and how I feel about the future. And what the stock market is telling me is that we will get past us.

And all of the headwinds that are hitting the market today, higher interest rates, higher potential inflation, a higher dollar, all of that sort of stuff will subside. And everybody will focus on earnings again. If you go to the next chart, I brought it for the S&P 500 going back to 2010. to contextualize the drop as well. So we got basically to 10%. You can see all the way there on the right. It's not usual, but it happens.

Nothing. But in the context of everything since 2000, it's not a very big drop. But let me ask you this. So the markets almost never underestimate risk, right? They do at key tops, obviously, by definition, in 06, yeah, we were whistling past the graveyard. But almost never do we like, ho-hum risk.

The Vicks always spike, investors always dump stocks. and today they're just not. And so that makes me feel good because we are prone to overreact and right now maybe we're underreacting, but I view that as bullish, not bearish. Maybe I'm complacent, I don't know. It's very fitting too that it is the one-year anniversary

since April 2nd when Trump unleashed his tariffs and we're up about 32% since then, which is really incredible given that we were on the cusp of a bare market. And it's really interesting to see that we are, you know, entering a war and we're not having much of a market reaction. especially before this war, we had everything going on with the private credit redemptions. At the start of the year, we had, you know, us capturing Venezuela's leader and Greenland. And the market just didn't react much at all.

Because I think the market has enough memory where the people that overreacted to the things that have taken place in the last three years, including Liberation Day a year ago, they looked so stupid, so quickly, and maybe it's a delayed reaction to this. I'll do you one better. And this has been a point of mind for a long time now. forget the last three years. What about the last 20 years? Well, I mean, sure. Since the GFC, the debt ceiling, COVID, Ebola, forget COVID.

Ebola, the fiscal cliff, the Chinese devaluation, Brexit. We've had all of these headlines. Deep Seek. Deep Seek Monday. Silicon Valley Bank. All of these. Not that they don't cause short-term. Right.

He or she who reacts least recovers fast. In all of these cases, however much longer later, we end up higher. And I think there is some, having seen what happened with Venezuela where it was literally the weekend, I think a lot of investors are probably, well, what am I going to do here? We're going to be down 10%, but we're going to be right back up a minute later. And I would also add the market structure changes that we've all seen over the course of our career certainly plays into this. I'll do you two better.

So midterm election years, going back to 1950, there's been like 20 of them, I think. the average max drawdown is 16%. I don't know why, but something always happens in midterm election years. What's an average max drawdown? So like the max drawdown in 1950 was 12%. The average in 1954,

I mean the max drawdown in 1950s. So the average drawdown? The average of the max drawdowns. Yeah, okay, fine. That's right. Was negative 16%. Oh, okay. I heard.

And one year later, it's been positive 100% in the time. Well, my one problem with that sort of analysis is one year later, the market is almost always high. Yeah, there's so many stats like that. 75%. Where if you take a long-term view, then the market is almost always higher.

75% is a pretty good percent. But I think the modern, I think the modern asset manager, we've got a championship. The modern portfolio manager or asset manager is punished more for having overreacted negatively than they are punished for riding out a downturn. It helps that most of the. downturns in stocks have been V-shaped. But, like, I think that's how you lose your clients.

I don't care if you're a mutual fund manager or, like, whatever, like, whatever the rapper is that you're managing money inside of, it almost doesn't matter. You will have a much harsher phone call with clients for having sold the bottom of a V and missed out on the recovery. Yeah. then you will calling people up and saying we're in a 10% drawdown. It could be 20 or it could turn around tomorrow. We're just going to stick it out.

You don't have as tough of a phone call or meeting or experience having to sit in front of a board or an investment committee. So I think that there's like an agency thing here where if that's the seat that you sit in, you have to decide buy or sell during a crisis. the easier call is I'm not going to I'm not going to panic. And if you do, oh my God, you better be right. Because if nobody else sold, then you're going to look crazy. Yes, I think for your world, that's 100% accurate. One of my least favorite times to be on TV is when I'm sitting next to someone

who's in the process of describing how he positions his portfolios to be durable and long. et cetera, et cetera, and we don't overreact. But on the institutional... I've been doing it for 27 years, but say more. By the way, I don't mean in a dismissive way. I mean, that's what you're supposed to do. Right. If I've got kids going to college and a retirement, where's that book?

Just keep buying. You see, at Ridholt's wealth management, we celebrate durability. All right, go ahead. Risk is an opportunity. That's right. But on the institutional side of things... Did you know the Chinese have a character for crisis that also means opportunity? I feel like that was in an episode of West Wing or something.

Is that true? Did I just make that shit Why are you asking me? All right. Go on. So Dan would say how he panicked sales. Go on. Yeah, so tell us about all the panic sales that you make. Here's a tip for the viewer and listener at home.

It's a tip. Hot tip. When you say something, it doesn't matter whether it's true or not. You better believe it. What Josh just did was waiver and you can't waver. That's true. But on the institutional side of things, you get paid to avoid these types of downturns. Yes.

And so the people I talk to, not that were an advisor, but I was on the cell side for some time and still have people populated throughout. Like, there's a lot of uncertainty. I mean, people are, I don't know what the right word is, but shell-shocked from the volatility, not in the market, but in the headlines. It's one day we're leaving. Then we're going to blow them to oblivion.

Yeah. And one day a ship gets through and that's great. And then the next thing you know, there's a fire. So there's just a lot of uncertainty that I would have thought, and we were saying before we came on, would have absolutely had the market low. Are you feeling this day-to-day? Because you're on TV all the time talking to people about this.

Yeah, I mean, it's been pretty incredible to see kind of the lack of a reaction. I think it comes down to people having a confidence that President Trump does not want the stock market to go down. He is the stock market president. He views it as his report card. And as long as he keeps coming out and he indicates that he understands the implications on the economy, when investors get those headlines, then they don't want to sell. And I think ambiguity also, I think, is part of it. until we get any kind of clear sign that the economy is going downhill or corporate earnings are going off a cliff, then people won't want to say.

We're not really getting that. Yeah. I just, I do want to say, though, let's not, let's not get lost in the tyranny of the headline, so to speak here. And you guys know this. Beneath the headline, hundreds of stocks are down 10 or 20 percent or more. So while the headline index is not down that much, and some of the Mag 7 are doing some important work there in terms of being flat instead of being down, meta not being one of them. But a lot of stocks are really badly hurt in a lot of industries. So there are people out there who trade in individual stocks that are probably listening

to this going, I don't know what these guys are talking about. To build on that, the stocks that are hurt are the name brand stocks that people actually own. The stocks that are up are the ones that people don't even know that they exist. So you have a market that's being led by utilities. Industrials great. Nobody heard of them. Industrials, no one's ever heard of memory chip companies that, you know, do most their business, build most of their product in South Korea.

The name brand stocks that people know are in big, deep drawdowns, like the Microsofts, the oracles, meta. So the stocks that people care about are down a lot. To be fair, though, that was kind of anticipated going into this year. I feel like a lot of strategists were recommending that their clients move out of, you know, the Mag 7, the high flyers, and broaden their exposures. So we've gotten used to V-shaped recoveries. And I think often in hindsight, we look back on like, oh, it was V-shaped bottom, like,

April 9th last year was a V-shaped bottom. No, it wasn't. I mean, yes, if you zoom out, it was. Like, today it looks, it looks like it. But throw this tweet up from Mike Sicardi. So as we, as we saw a gap down this morning, after a monster update, I said, it's like, oh, shit, we're going to roll over. And Mike says, April 9th captures all the fanfare at 2025.

But April 10th was a bruising session and the following week was no picnic. Bottoms are an MFer. Like, they're generally not very pleasant. There's a lot of testing and retesting and anxiety and, oh, shit, we're about to go over again. And maybe we're bottoming. today this week, next week, maybe we're not. But they're not easy. In hindsight, they are.

Everyone, on a long enough timeline, every bottom looks like a V. Sure. What I will tell you, trading through COVID, trading through Brexit, trading through the debt ceiling. What? Did someone... He does this thing where he points at Nicole as she shoots. That was a no look point.

I noticed that. I was watching some previous episodes, and I noticed that you guys will be talking and Michael will just do that. I should warn the one. I was going to say, now we've... But you've been a long... But normally, when you point at a camera, you scowl because it's hip hop. Can I show you?

Excuse me? What did I do with those scowl means? Let me show you. Like this. You ready? What Michael does... By the way, that's stunningly accurate. Correct.

When Michael does is very off-putting, he goes like this. Off-putting. He smiled. Oh, boy. Forrest Gump wave. All right. I don't know if you know, but that's how Mob Deep used to do it. Yeah.

Nicole, you're disrupting. All right, wait, wait. Where are we going? Are we doing this one? I want to see this one. This is good. This is good. This is good.

All right, this is from Mark Ungawitter. Yesterday, we had a rip roaring of a day. The SP was up close to 3%. Momentum days were up even stronger. And unfortunately, so we were below the 200-day moving average. And we all know this as market participants. Unfortunately, these really big, strong days tend to happen below the 200-day moving average. As a matter of fact, 70-8.

Oh, there it is. 83% of these up two and a half days happen in a bare market or in a below the tension. A downtrend. Yeah. Yeah. So. A lot of Wall Street trading desks yesterday were talking about how they viewed this as a short squeeze versus any kind of bigger change. Well, yesterday was definitely a short squeeze.

Yeah. Well, stocks can't go down every day. Wait. Why? Why was it a short squeeze yesterday? Because there was no actual change in sentiment around the war. It was just because we'd gotten washed out so much that people were buying for. First of all, also, I can show you the baskets.

All the short baskets were up 3%. Like, like, SaaS software. Yeah, that's right. Goldman's most shorted healthcare. All those names. That was the stuff that was leading. And momentum. But it was...

Small caps were doing well. Small caps were doing well. I saw somebody tweet yesterday. The unprofitable tech basket did very well. This was a good observation. She said, if your stock is up 10% today, I'm sorry, it's going a lot lower. Yeah. Oh, right, because that's the pain trade.

just reversing itself temporarily. For a minute. I did have one more thing on gasoline before we move on. This is from Neil Dutta. He says, I don't think it's that complicated when thinking about the economic outlook. We tell gasoline prices will continue to rise. Wholesale gas futures imply that pump prices likely advanced to $4.30 per gallon. As I've noted before, gas prices are up 85 cents per gallon against last year.

that works out to a $120 billion shock, which equates to 0.5 percentage points of disposable income. And let's put that chart up, retail gas prices. And, you know, I think that when we keep saying like the consumer's resilient, the consumer's resilient, almost like a mantra, like month after month, year after year, well, we're going to hear from the financials. We're going to hear from the banks, like very quickly. and that's maybe our first real read on whether or not they're seeing card spending pull back in one area because it's going up for gasoline purchases

and maybe that's not happening at all but this is the thing that we've been waiting on every time they report it's almost to the point now where the CFO they jump out at the beginning of the call and say let me just tell everybody the consumer's fine. It's like Wheel of Fortune

where they just give you RSTL&E or whatever it is. Just throw it out. Right, right. I, this is probably too quick to be, to have any real macroeconomic effect. This is all, I mean, again, this is weeks old. I always quote the Barclays have written a piece called it's the persistence, not the peak. And so the length of time that you stay up here, I mentioned earlier about the mechanical way, and that's what Neil was doing.

We can estimate how much of a hit this is. A lot of that's reliant on oil prices staying at four and a quarter or four 35 for the course of the year. If you go up and you come back down, and this is why it's an oil price spike. not an oil price plateau. If you go up and you come back down, there'll be some short-term issues, but people will move on pretty quickly.

So I doubt that anyone's going to say, and plus also remember, the banks that have branded credit cards are now providing since COVID weekly data on credit card spending by industry, which is super helpful. So I don't think it will happen that quickly, but this gets back to Alex said earlier,

when he mentioned last night that this is going to go on for two to four more weeks. Yeah. People didn't want to hear that. Yeah. Just again, the longer this goes gone, the longer the straight is closed, the more you're going to work down those inventories, prices are going to start going up, et cetera, et cetera. I think while the market may not be showing it at a headline industry level yet, the longer this

goes on, the harder it's going to be to ignore. At the start of the war, he also said that this would be a fortify weak conflict, and we've already passed that. So I think when investors hear that he's talking about another several weeks, they know that it's probably going to be much longer than that. All right. So the strategists haven't reacted yet. We're not seeing like across the board estimate cuts.

Obviously, it's going the other way. We're not seeing price target cuts. We've seen a couple of them. Some have. But they've been very modest. They've been more like we're accounting for the losses that we've already experienced. One went up. Yeah.

Barkley. Barclis. Raised his part. Who's a great analyst. Yeah. Yeah. We talked about that. We talked about that on what are your thoughts.

Credit to him. I like when somebody, even if he's wrong, I just like that somebody is actually using their own. Okay. But retail investors are reacting to this. It really seems like a lot of the popular fun in games that the retail trader was playing. The volumes are drying up.

The flows are showing, the flows are in reverse now. People want their money back. And people seem to have had all the fun that they want to have for the moment. Even stuff like gold and silver, which I know we don't associate with, it's a retail trade,

but it totally was, totally became, Alidium too. Obviously, crypto is cryptoing. Options volumes have dried up. I think that's a really big part of the story is that, and maybe that's not directly related to gas prices, but maybe it is. People have to get the money to speculate from somewhere. And so if you do something, Neil's describing it as $120 billion shock, I don't know how much it's really costing, but if you do something that takes money from people's left pocket, then they have less money to do this other thing that they might have wanted to do.

What do you think about that? Everything is a retail trade. John, chart 14. Grab this from the Daily Chartbook, your colleague, Siddhartha at Bloomberg. Investors poured $97 million into the pro-share's ultra-short Bloomberg crude oil ETF. The ticker is SCO. These are not hedge funds, Dan, is it?

Ultra shorts? I doubt it. No, because they would disrupts with futures. Futures or swaps or whatever. These are the ultra-short ETFs are not- These are not good products. Okay. I highly doubt institutional guys are playing in any meaningful way.

And these are daily trades. Okay. So that is one 95% retail, at least. I have a good chart for you that is kind of related to this. So I don't know if I can. Yes, this is the first person besides for me to pick up the computer. I do this all the time. The first time I was here, I brought paper.

I had to come ready. I love this move. retail single name buys at post-COVID love. Oh, this is new. Vanda research, look at this. So they keep talking about how the animal spirits that we've seen investors buying like the single stock names that they love, Palantir and Vidae. We haven't seen that since October.

So they're buying ETFs, but they're not buying single stocks. They're gone. So the animal spirits that we saw for so long are not here anymore. Well, I think that's a function of every pullback. The retail stocks aren't doing well. This isn't wrong. We gave people lots of. money and there's tons of anecdotal evidence of people sitting at home and that tried up.

You think that's still a thing? No, that's what I'm saying. It was for a while. It was and now it's not. I'm saying now we are people are, things are getting tightened up at the fiscal level. We're not giving out stimulus checks where that's all long gone. These guys will be back in two seconds. Okay.

They'll come right back. Yes, but they need new stocks. Like Palantir is not Palantiring anymore. You're right. You're right. Tesla is not Tesla. So here's what's working, Josh. So like Corning.

They're not buying Corning. No. They're not buying Sienna and all these boring names that are ripping. They're just not. Yeah. They're not, right. They're not interested in Constellation Energy. These are not, the stocks that are going up in March are not retail stocks.

Yeah. People don't even know that. Why not Sandisk? You know what? I don't even know what it is. You know what the best performing stock in March is? Ackami. Remember that name?

Of course I did. It's a $16 billion market cap. You know how many retail traders were in this thing? 12. Like literally, like nobody, nobody is in the stocks that are going up right now. I don't know. There's a couple of, Dow, Dow is a top performer, a Pacian. Yeah.

That's got a big following on Robin Hood. Very sexy name. So, getting back to, like, looking out of the second half of the year, assuming that we're not having this conversation in August, because if we are, the market will be much lower, right? If the war is still going on. Yeah, sure. Yeah, market will be much lower. So assuming that there is some sort of resolution to this eventually.

And we think that earnings will hang in there. The CEO of Paychecks said this week, what we're seeing is a stable macro environment. No signs of recession in any of our data or indicators. Nothing that would indicate that we would change what we're thinking in terms of pace on any of our segments at this point in time. They serve 750,000 small and mid-sized businesses of the United States. They know. And so absent like complete deterioration, yeah, the labor market's like soft-ish, but it's fine.

Continuing claims are fine. Initial claims are fine. And S&P earnings, tech earnings, 15, 20%. Stocks should be higher in the second half of the year. Yeah. Do you think the level of the stock market is a risk itself to the stock market or to the economy? Meaning we do have this huge wealth effect. We do have this K-shaped. A lot of the gains that have happened in the economy have happened for equity shareholders.

really haven't had a sell-off that we haven't come back from quickly. But if we have a sell-off where we don't get back to a new high within a couple of months, does it sort of change the landscape for the way people are spending? I'm still waiting for that moment. I haven't seen it. I disagree. It's the job market. It's the job market.

Yes, it's the job market. By the way, just to color it in, we got earnings from William Sonoma, five below, a couple of retailers who all said things look fine. Now, this was really before the war got going, but Paychecks is not alone. The reason why I disagree with this, with his assertion, clearly the wealth effect matters, clearly for upper income brackets, he just announced. He feels good or bad. The stock market's down. That's probably why he's wearing that sweater. That's all he could afford right now. That's fine. So it certainly drive sentiment and spending. However, we all seem to memory hole 2002. When the stock market fell by a quarter, let's say, 25, 27 percent,

Over 10 months. And yes, it started, in retrospect, it looks like a V-shaped bottom, but it didn't shoot right back to the highest. A 10-month bear market, down a quarter, down almost 30%. We obviously didn't have a recession to a company. We didn't have a recession. Why is that not? Oil went to $120.

There was food issues because of weed, et cetera, et cetera. Oil ran up on the Russian invasion. What's your point? We're talking about the wealth effect. You don't think the stock market wealth effect is as a. as important. I'm saying it does matter. I'm just saying, to be intellectually honest, I have to look at 2022 and say, stocks fell by a third, not a third, a quarter. And spending good enough. And the economy was not great, but it didn't go into a recession, even with a war that impacted wheat prices, grain prices,

et cetera, et cetera, et cetera. So I do think the stock market matters. I do think it matters for upper income bracket spending. However, there is this data point that tells me maybe you're not 100% right. Alex, what do you think? I will say now, though, that U.S. households now hold a record 45% of their financial assets and equities. So I'm curious what that figure is back in 2022. I don't know if it was as significant. Probably close but lower. Probably close but lower. It's more important than ever is what it would be the point that I would make. You mentioned the guy at CIBC. Chris Harvey, yeah. He said that equities are more important to the economy right now than gas prices.

Right. How the stock market is doing is more important. I think there's some validity to that. I sort of feel that way, but then a lot of people will say what Dan said, which is that we've had

plenty of bare markets that didn't tip into recession. This is the saying that the stock markets predicted nine of the last five recessions. But both things can be true. Those aren't necessarily contradictory things.

Dan, I want to get your take on private credit with the headlines this morning that 41% of one of Blue Owls legacy funds got, you know, people want their money back, 22% of the bigger one.

As usual, the headlines don't tell all of the facts. I was actually shocked to see. So they sent a letter out to their shareholders. I was very surprised to see this. Okay. The 5% tender offer represents $98 million, which together with gross capital inflows of approximately $872 million. Holy shit, that's a lot of money.

I would have thought that would have been zero, honestly. $8.78 out resulted in a modest net outflows of $116 million, less than 1% of OCIC's NAV as at December 31st, 2025. And this is also very, very noteworthy, in my opinion. Notably, this activity was driven by a relatively small minority of the investor base with approximately 90% of our 90,000 shareholders electing not to tender. That's shocking. 90% elected to stay put and 1% of shareholders

representing the majority of tenders. So there's a lot to say in this topic. But the first is a lot of these headlines miss some of the nuances and the inflow story is an important one. Every quarter loans mature get paid back. Every quarter money comes in and that offsets a lot of these outflows.

Also, everybody's putting in a tent. I know what we just talked. But in general, there's a lot of headlines out there. And if you own a non-tradable BDC, everyone's in your ear saying put in, put in, put in. You're only going to get 5% back. So there's some pressure there in terms of a headline. But the other thing I would point out is, A, there's clearly problems in private credit, obviously. Money flew into the sector early in the 2000s.

A lot of loans were made particularly to software for all the reasons. This problem is coming. there's a well listen sure there really aren't problems yet but everyone knows that they're coming yes and that's part of the redemption story but there are always more cockroaches is jamie diamond sure uh i think the part of what i've what i've been pushing back on is the idea that this is somehow systemic and that there's a there are a number of stories that get written obviously for clickbait reasons mostly but there are a number of stories that get written comparing this at the top prime give me a great come on there's no deposit taking institutions leverages nowhere near it was i brought

a pair of charts, chart 38 on the difference between this. 79. Here it is. Okay. The chart on the left is, this is commercial banks in the United States, lending to what we call non-depository financial institutions. That's called 14. Bank loans to regular companies that are not themselves banks.

Yes. Now, it could be reads. That's private credit. Yes. But it is the headline number, it's not only, but it's good enough. But isn't there nuance here? Because wouldn't you rather J.P. Morgan be making loans directly to Blackstone as opposed to Blackstone's customers and then having knife fights with all these syndicated loans?

But so this is the other thing is I don't think people get, not I don't think, clearly people don't get what's going on here. First of all, there's the leverage loan market. That's one and a half trillion in size. That's illiquid. Half those loans don't trade either. Those are your regular way loans. But by the way, just to finish the point, the chart on the right is resident.

real estate loans back in leading up to 2008. And that was like a third of loans. So let's just say twice as many loans as a share of bank loans in 2007 went to residential mortgages, as did loans today going to private. So real estate was a much, real estate was a much bigger. Problem for the banking sector. Okay. Which obviously housing is the biggest part of someone's assets.

You've also got more leverage. There's all sorts of, and the depository institution is the most important one. Apollo doesn't take deposits. But this is not to say there's no problems. There are plenty of problems. I'm just saying the likelihood that this is akin to 2008 is not nearly as dire. And that's sort of the point that Jim Zeltner and John Zito and those guys who are out there, the Owl Creek, not Owl Creek, I'm sorry, the Blue, the Blue Owl guys are out there saying,

it's just not that. It's going to be something, but it's not that. But at the same time, a lot of loans are made to a lot of software companies. I mean, getting back to the broadly syndicated loan market, there's 1,200 loans in the bro, they syndicated loan market. Nobody has heard of almost any one of them. Yeah. 85% of them are private companies.

90% of them are private companies. They're just, you don't know, their loans made in small amounts, a couple hundred million. There's all sorts of companies. No one had heard of first brands. No one had heard of tricolor. And they're not that big relative to the rest of the portfolies of these companies.

The risk is also very well shared. you often find the same loan in the books of seven or eight different private equity or private credit funds. And the final point I wanted to make about the lack of most people didn't redeem. The non-traded BDCs are a very institutional product because institutional people, I say, but institutional guys know the deal. You're not going to be able to get your money back at a time with that. It became a wealth management product. I'm not talking about retail.

I'm saying that is a product that really was meant for people who have long time horizons. It was. And a lot of those people who are in it, a lot of the money are cool with that. Yeah, but when you talk about $800 million coming in, that's money that's on autopilot at RIAs. They just say, no. Yes. Then I have dollar cost average again. Those are conversations.

So I don't think so. I think it's in the model. I talked to the people that run these gigantic firms. they all have private credit and private equity as a slice of the asset allocation. And so let's say they have 500 financial advisors. Those 500 financial advisors on board, I'm just making up numbers, a billion dollars worth of assets over the last quarter. If they say 7% of our allocation is going into this alt's sleeve,

that money's just going in, almost like a 401k, you have small cap, midcap, large cap. that's how they're treating it. I don't think that they're negotiating each time with a different client, should we buy this or should we not? You're 100% right. But I do think that in the second quarter, it's not going to be $800 million in. Because there's no way that those advisors aren't saying, well, the headline risk is too high now.

Guys, I don't really, this is not fun anymore. We just like pause maybe for a minute. Do you know what the most obvious trade on earth is that I will not make myself? If you think that this is a panic and a freak out, it's totally unwarranted based on the actual fundamentals, just buy the publicly traded BDCs. Yeah, buy OBDC. This thing's trading out a 25% discount. So you can buy it at it.

So if you want to go leave the other way, what's nav. Don't buy what I'm saying? Don't buy the private one. What are you an idiot? Correct. Well, there are people who prefer the illiquidity of the, I mean, there's a reason why non-tradable ones exist. So an idiot.

So an idiot. In other words, this thing has a ticker symbol. You have to live through it doing this every day. Okay? This one has no ticker symbol. You never have to see the price. However, you can only get 5% of your money out at a time, and it's going to be a really long time before you can get all of it.

Oh, by the way, the public one, selling it a 25% discount to NAV, the private one, they're still marking it up like it's 1990. It is crazy. Why would you put your money into a private one now? I don't get it. But no advisor will say, hey, we're going to get our money out of the private one, and let's go headlong into the fire of the public. But that's the choice.

You're right, but nobody does it in real life. But you're right. So the big question is this. Ultimately, what happens to the loans? Because Howard Marks has famously said the worst loans happen in the best of times and there's no doubt that there's way too much money coming in and the underwriting stand is probably loosened up more than a little. So OCIC, Blue Owls Fund that we're talking about. 36, 370 companies, $36 billion, that's what, according to them, that's what it's worth. 31 industries with a 0.3% weighted average position size. These investments are an average EBITDA of $297 million, 93% senior secured loans, 40% loan to value, and 91% backed by private equity sponsors.

So I don't know how much time these companies are going to need to prove to investors that the defaults are modest, that the distress is like calm before the headlines, before the ad flow subside. But it's not going to happen overnight. I can keep talking. Yeah, please do. I'm not a private credit expert. And the software, the software is the problem. It's 25% of some of these portfolios. You throw up chart 98, the one with the share that's in the software, just so we have it in the background.

I think you said the important part of the conversation here, which is that these are senior secured. Now, for equity people who don't know what this means, it means when you buy an equity, they could go to zero. When I... 17, John. Here we go. Thank you. Not 98. That's your share of software exposure by BDC.

These are the publicly traded BDCs. And this is how much software is in each of these products. Now, mind you, I have to double-check my numbers, but is health care? I mean, some health care technology could be software. There's some nuance to this. But in general, the numbers call it 25% on average. A lot about software made it very comfortable for these guys to lend to them. But the point about senior secured, I own you.

And for me, loner to lose money on a, lots of stuff have to go wrong. The equity has got to get wiped out. That's got to go to zero before that happens. All sorts of stuff that's subordinate to me. So this is the hilarious part. We're spending so much time on the credit. What about the freaking equity? Are you kidding me?

This is the famous line that guys have stumbled on, which is if you think private credits in trouble, wait till I show you private equity. Now, mind you, I'm not saying either in trouble. I'm just saying the, where people are talking about on CNBC and in the newspaper are talking about a lot of these loans like their equities. Like, why are they still marked at 90? A distressed loan might be 85.

Well, let me ask you. another question, follow-up. So I guess part of the problem is these private credit funds can show their defaults, de minimis, and the recover is 90 cents on the dollar. What's the recovery? Well, the recovery is a website? Like, what do these companies have to recover? Well, some of them, a lot of, like, so you could be secured by IP. Some of them could be secured by the ARR loans, the annual recurring revenue loans. You could, if you lend to a business, like a tangible business, there's property plant and equipment. There's, it could be IP, as I said.

So there's all sorts of stuff you can get secured by. And as long as you're a senior secured first lien lender, you're getting that. If things go wrong with Ridholt's wealth management, I'm selling these microphones. That's what's happening. But I guess it's more obvious if a bank repossesses a building, it's more obvious that they have something that they can rent out and charge your rent and turn that into cash flow. Sure. it's less obvious that you can do that with IP or that you can do that with a room full of engineers who are going to leave anyway. So to that point, the recovery rates for private credit restructurings, particularly in software, are much lower than in the brothel market or the regular way loan market.

They're in the, I don't quote me on this, although I'm on a podcast, 30s, 35, something like that. Well, it's a good, it's a good thing, anthropic and open AI and Google aren't in the process of disrupting everybody. So, all right, can we move on? Here's New York Times. SpaceX, Elon Musk's rocket and satellite maker, filed confidentially on Wednesday for an IPO. The company is committed to debuting in June, and Mr. Musk is aiming to raise $50 to $75 billion from going public. SpaceX values itself as more than a trillion dollars, would be one of the most valuable companies to reach the stock market. after Saudi Aramco's 2019 debut,

which was at $1.7 trillion, Aramco raised $29 billion in that offering. So this will be the biggest raise ever? I think this will be the biggest IPO of all time. Why do you think they filed confidentially? I guess because of what's going on in the market. I mean, ultimately, though, this is very positive for risk sentiment because if now is the time that they do it, yeah, if it happens,

and it's estimated to happen as soon as June for now, very interesting that it's now and it's confidential, I guess. He wants 30% of the float to go to retail. He is, Elon Musk is the champion of the Tesla shareholder, and he's very anti-establishment. He doesn't care for the conventions of being a public company and having to, I don't know, report things and dealing with board of director issues.

He wants to talk to his audience, his fans, put the stock in their hands. So, wait, how does this work? So they filed confidentially, as opposed to what, like a public S-1? Well, I think they will have to convert that to a public filing. But I think just for the time being, they file confidentially so that the whole S-1

isn't in Bloomberg articles written by Alexandra. So Tesla's down 5.5% today. I know they reported some of their car delivery numbers. I wonder, like, where does $50 to $70 billion come from? Obviously, institutional investors will be a big part of that. But is Robin getting a slice? I mean, they've all been marketing through these very ambiguous private funds, which is super interesting because they are marketing heavily to retail investors.

And it makes you wonder, too, with all the fees, how much of that return retail investors would actually get. Well, SpaceX is widely held by retail investors. To your point, through all these SPVs. So you're going to be reporting on this, so your team will, about some investors who thought that they held shares in SpaceX. So they bought an SPV. And, uh-oh, the shares aren't actually inside the box, inside the box. Only to find out that there are multiple tiers before that actual exposure. Within SpaceX is XAI, which is Twitter, but it's also it's the AI business of Elon Musk.

It's Grock. And I don't know, you think that's a big part of the story here or is this really just about space, the rockets, and Starlink? What do you think? Probably space as an asset class as an emerging asset class. People getting more excited about that, I feel like across the board. The launch didn't. The launch this week, which was NASA, not SpaceX, but that didn't. Yeah.

Okay. You think this would be the biggest IPO of all time? You think this is having the biggest IPO of all time? Is that a market top event that we look back at a year later and say, how do we not realize? I have no comment on anything related to SpaceX or this topic. Okay. Fair enough. But what I will say about a market top, I'm always reminded of when Blackstone went public in 2007.

How about? Yeah. I mean, it's, to me. But I will also say how many times have we said so-and-so going public is the top. Ali Baba was supposed to be the top. That was the top for Chinese tech stops. That's true. We've been calling the top for the last three years.

If we get SpaceX, Open AI, and Anthropic hit the market inside of six months. Yeah, that would work. That would do that. I feel like that would do the trick because there's a lot of market cap that has to come from somewhere else to fund the equity being sold in those fields. My pin tweet on Twitter. X from August of 25. So something must have been going on then is if people keep pointing to things

as an obvious sign of a market top, eventually one of those will coincide with a market top. And so many are going to say, see, I told you that was the market top, ignoring the 50 other signs of a market top that were not coincident with a market top. All right. All right. So, Dan, so I think that it would be poetic

if getting three of the biggest IPOs ever inside of a six-month period did coincide with a market top, it would make sense to somebody looking back years later who says, why did the market top or how did you know

it was the market top? That would be like a top. That would be the type of thing that you'd say, oh yeah. But again, how many times everything is the top? Jensen signing the bra. If that wasn't the top stop,

if that wasn't the Nvidia top, then nothing is a top. Turns out you need more than that to make a market top. All right, enough of that top. So let's talk about bottoms. Snap has an activist, finally. This is the worst stock in the history of the stock market. Every time the report, they go down 20%.

Do you know it's the worst stock of all time? Worse in Lyft? Oh, yeah. Way worse. Worse than Nike? Because they basically use it for stock-based compensation. They just... Oh, yes, that's right.

I've heard the story. They issue themselves billions of dollars, and the stock never goes up and they don't care and nothing ever happens. And since it came public, it has been a net destroyer of more money than almost any Doc, you could think of. But doesn't Spiegel control the entire board? Of course. Because he's like Diet Zuckerberg.

So what is an activist going to do? I don't know that an activist can actually do anything, but I just think the depth of the Missouri here. What's that? Does this have a dual share class? I don't think so. It might. No, it doesn't.

Okay. I don't know. I don't know the specifics of the of the board of directors if they're staggered or if they even have any actual power. It might be easier. Does this look like a company that has a board of, an independent board of directors. Okay.

So this company came public. It was like between 20 and 30. It's a $4 stock now. The high is in the 80s, which obviously happened in 2021, when the stock market was temporarily turned into a carnival. It is in a 94% drawdown. And this is multi, multi, multi, billions of dollars have just been wiped out.

Then you look at the compensation of the executives who run this company. And they are paying themselves. like they run Berkshire Hathaway. It is one of, I would say it's the worst stock I've ever seen. All right, so it turns out that Snap doesn't have a dual share class. It has a tri-share class. Okay. So the A has no voting rights.

It just sounds like that. The B has one vote per share and the C's 10 votes per share. And Spiegel and Bobby Murphy, I don't know who that is, but maybe his co-founder, collectively control over 95% of total voting power. So there's your answer. All right. So they have an activist now. This is a firm called Irenic.

and wrote a letter directly to Evan. We're writing on behalf of I rent a capital management, which manages $2.5 billion, and we have become a substantial shareholder. In SNAP, we own 2.5% of Snap's Class A shares. He then goes on to, this is not like one of those activist letters where they trash stuff.

This is way more constructive than that. But here's the headline. Snap should be worth a lot more than $7 billion. In our presentation, we outline a path to $26.37. Very specific. Call it the false precision of investment analysis versus today's $3.93 stock price. That takes the company to $35 billion in market cap. And the main point here is it's the craziest thing.

Didn't it jump like 10% after that? Yeah. Everybody uses SNAP under the age of, let's say, 40 years old. Everybody all day long. I was going to say like 25. Okay. But they can't, it can't stop using it. And this thing, this company can't find a way to make money.

Yeah, I do. Well, they were 28 when it came out. You absolutely do not. Of course I do. Of course I do. People are the 38 using Snapchat? I don't use it. You're 38.

Are you using Snapchat? I don't know. I don't know. My kids never, the app is never closed. Never closed. I have a 13 year old. They have not been able to make money in however long the, thing has been around.

11 years, 12 years. I don't know. How long should I get? It's $3 stock. Isn't it worth the risk that these guys convince him to do some of these things in it actually?

That's always... Your floor is only 100% loss. Yeah, the most you could lose is $4 a share. The most you could lose is everything. I think people want a turnaround story too. Look at Carvana, for example.

Also super beaten down. So a big reversal. If this thing turned around, it would be a big deal because I've never seen a stock in a 94% draw down, not go to zero. Carvada. Carvana. There you go.

Other than Carvada. One example. I'm sure if I thought, well, I could give you a couple of companies that went bankrupt and then came back and did something. Totally different story. All right. You guys have fun on the show today? It was a great time. Yes. How about you? Was this worth skipping Passover for? I didn't skip it. I'm just going to be late.

He's going to rush home after this. I got a salmon in there. I got a salmon in the oven. I already spoke to you, Raba. You skipped it. All right. And then you came here and you ate. you ate an entire loaf of bread. I did. Absolutely did not. I won the basketball game.

All right. Guys, we always end the show by asking people what they are most looking forward to, right? How was Finland? It was amazing. Why don't you tell, yeah, tell us about that. I was going to say, now I have a really high bar for what I'm looking forward to because I just came back from the best trip of my life. I went to go, the goal of the trip was to see the Northern Lights. If you're ever doing a trip to see the Northern Lights, manage your expectations. It was very cloudy, and apparently those beautiful pictures that you see online,

They're very rare to get to that extent. But it was amazing other than that. Those photographs are enhanced. Yeah, I saw them very mildly through clouds. But it was still very cool. I was like in a small town in Finland on the border of Russia in the middle of the night trying to find them. Went husky sledding. Fed reindeer was amazing.

Highly recommend. Wait, husky sledding guy. How many huskies would it take to pull me on a sled? Wait, wait. What was it like? Huskies dragon a husky. Are reindeer-friendly animal? Super friendly.

They're like big puppies. No. They're like in an enclosure. They're still very shy, but a little bit more social, I would say. Okay. Like I was in an enclosure with them feeding them and they were all coming up to me. You're a big traveler, period. I am, yes.

Okay, so where are you going next? I have to think about it. You haven't planned anything yet. I haven't planned my next trip. This time last year I was in Guatemala hiking a volcano, which was a lot of fun. Can I pitch you a trip? Yeah, please do. Looking for ideas.

Aruba? Picture it. Boko Ritone. Okay, perfect. Are you in? I knew that was going to be the recommendation. What about you? What are you looking forward to?

She's in Guatemala, go to Finland. He's going to the upper side. I was looking forward to... I'm going to keep the airlines running because I keep buying my next plane ticket. I was looking to from coming back on NGM. Where did I see you? Where did we see each other?

I want to say Roseville Field Mall. Oh, no. We saw each other at the container store. Stop! In Roselle Field. We were with Pookie. Not Pookie. Sprinkles.

Sprinkles. I hate the container store. Robin loves it. So I have a college-age child. So you have to go to the container store once you have a kid in college. Worst parking lot ever. It's like literally the rule. In Roosevelt.

It's not in Roswellfield. I mean, all over. Well, it's close to Rosliffield. It's in the Source Mall or whatever the new thing is next to the source. What is that called? That thing. It's off the one top. That thing with the Trader Joe's.

This is the Long Island part of the show. Sorry. Where's Parking lot ever. Anyway, how'd you do with those purchases? How'd you top of where? I probably return to all of them. How'd your containers go? What do you buy?

The container store? Containers. But what kind? There's so many of the ones. Tupperware. The clear kind. They're drawers. Yeah, but there's ones that go in your closet.

There's ones that go in your kitchen cabinet. My whole house is just container stores. Perfect. I have no furniture. Just containers. Sounds very organized. It's all the containers. All right.

Guys, we're going to get out of here. I want to let people know how they can follow you two and where they can learn more and what your preferred social network of choices to be building your audience because you're both spectacular. Alexandra, how do people follow you? Very active on Twitter. Alexandra and NYC. Follow me there.

I'm funny on there. You are funny. And what are you doing on Bloomberg? Like, what's your, do you have a set thing? Yeah, I'm covering U.S. equities on Bloomberg. So can go and look me up and find my bio page on Bloomberg and read my articles. And you're a future-proof regular. I am, yes.

It was my fourth time at Future Proof between Huntington Beach and Miami. So impressive. And hopefully we'll be there in September. You're going to come in September? Yeah. We just, I can't say who. I think we locked in our musical acts. I'm super excited.

Oh, my God. Well, you and I met for the first time at the fray. That's right. Oh, that's right. Lost and secure. Yes. So good. Yeah.

And as a future proof, never. Are you going to make it there? I've never been invited. You're invited every single phone. There's nothing for me to do there, to be honest. Funny enough, Dan and I met at a conference also. Where did you guys meet? At Diplo.

Yeah. So Alex and I have raved together. At a hedge fund conference, funny enough. We were at a conference and... You guys have EDM'd together? Funny enough. We both liked... Diplo was the weirdest act to have for this audience because no one in the audience

knew who he was. It was like... Well, except Dan and me. There was a VIP section that Alex was nice enough to escort me into when she was invited. Now Dan is forever indebted to me for that. And we were front row for Diplo. Yeah. The group we were with, we knew who he was, but all the other people behind us didn't know what was going on.

Why is this? He's playing a set and it's just like tumbleweeds and a lot of like older finance guys, FaceTiming their kids. You know what's so funny? Because you know what that is? That's like an event where they have so much money. Yeah. And they like ask somebody like, who should we get? And someone's like, oh, get Diplo.

They're like, all right, just order Diplo. And like, you know, he's getting the check. He's fine. It was in Miami. So it makes a little bit more. It makes a little bit more sense. It wasn't terrible. I mean, I think people...

It was cool. Listen, diplo is as good as you're going to get in that genre. Oh, yeah, you can't go. Jamie Fox is there too. I mean, I should say... Marshmallow would be... He's no sugar A, but... Marshmallow maybe would have been more recognizable for that crowd.

I don't think anybody would have known who... No, but they've seen the head. Can we get a hint on the guest for the, on the musical act? It is... You're obviously targeting Gen X. It's of the scene. It's of the scene. It is.

Yeah, it's, listen, it's perfect. It's perfect for us. I'm gonna guess. Is it a band or like a single performer? Well, I have two, so. It should be Blues Traveler. We did that. We did that already.

With Bush. Wake up. You know, there was a rumor that they canceled because one of the band members got COVID, but then they were there. Who were we talking about Blue Travelers? Oh, no, he actually did get COVID. Oh.

And he powered through. And he recovered. Can't miss future proof. So John Popper, like, like, a week before, they weren't sure if he was going to be all the way recovered. He was so good. They were so good. And I got to give him a hug after. So every, like, everyone was gone. He was coming out of the back. And I was just like, I have to say hi.

True story. I've seen four million concerts in my lifetime. And blues traveler in 1995 at the alumni arena in the University of Buffalo was one of the best concerts I've ever seen. I think I saw, was at the Horde tour. Were we together? I might have. Is this when you invented them? No, I wasn't in Buffalo, but I saw that same show. That summer. That he claimed that he invented Blues Traveler on the show. No, I really did. No, I really did. They're from New York. No, I honestly did. Are they from Eric? No. But I honestly, I knew about it for anyone, and I had all the CDs, and I was distributing them, like, to summer camps. That's how it happens. It turned into a thing.

That was like me with Cypress Hill. So, all right. I don't know how we got here, but, Dan, where do people follow you on social media? It's fine. You're all set. All right. All right. Guys, thank you so much for listening. We appreciate you. We'll talk to you soon. Guys, is that fun? That was so much fun. You know,