Almost Midnight, Micron Preview, Alan Greenspan RIP, Hello Jane Street, the Case for Meta

Summary

The Compound and Friends - Episode Summary

Episode Title: Almost Midnight, Micron Preview, Alan Greenspan RIP, Hello Jane Street, the Case for Meta
Release Date: June 23, 2026
Hosts: Downtown Josh Brown, Michael Batnick

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Episode Overview

In this lively and far-reaching episode, Josh Brown and Michael Batnick dissect the latest feverish moves in global tech and financial markets, preview the coming Micron earnings, break down outsized speculation in Korea’s chip markets, debate the late Alan Greenspan’s legacy, spotlight the elusive trading giant Jane Street, and argue (tepidly) for battered Meta stock. No stone is left unturned as the duo brings their trademark blend of deep market knowledge, humor, and exasperation with some of finance’s more questionable new trends.

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Key Discussion Points & Insights

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1. Korean Chip Mania & Market Speculation

Starts ~04:17

• Cosby Crash and Leverage:
  The Korean market (KOSPI) and MSCI Korea stocks plummeted—down about 10%—primarily driven by a handful of chip leaders, SK Hynix and Samsung, now dominating returns due to their critical AI/data center involvement.

  • Josh: “It’s like the whole stock market in Korea at this point has been completely taken over by this AI data center build out theme.” (05:01)
  • Intense concentration has led to speculative extremes: margin debt has hit records, with retail enthusiasm bordering on mania.

• Margin Speculation Feedback:
  Debate over whether high stock prices fuel speculation, or speculation drags stocks up.

  • Josh: “I think it’s more causal than you do... Stocks are doing that because people are leveraged and borrowing money to buy even more.” (07:19)
  • Michael: “The initial reason for the stock price is exploding. Let’s not get it twisted. It’s fundamental growth.” (07:53)

• Regulatory Response:
  South Korean regulators have started cautioning against leverage, but much of the volatility’s source is freshly launched leveraged products.

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2. Micron Earnings Preview and Chip Cycles

Starts ~10:25

• Micron’s Wild Ride:

  • Stock soared 4x in months; fell ~23% after last earnings, then rallied.
  • Michael: “It went from 460 down to 310 bucks in three weeks and then it went from 310 bucks up to 1200... quadruple in three months.” (11:39)
  • The implication: Chip stocks’ volatility can trap traders lacking discipline.

• Tech Dispersion:
  Tech stocks' distance from 200-day moving averages is at generational extremes; dispersion is wide, and mean reversion is a recurring theme.

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3. Market Breadth, Rotational Rallies & Sector Performance

Starts ~13:29

• Rotation between “AI up, software killed” or vice-versa is dominating 2026 tape.
• Financials and insurance have been surprisingly resilient amidst tech volatility.
• Josh: “If you zoom out and look at like the year to date chart, you’ll realize... these temporary reprieves... they’re like in this stasis and it’s not helping anybody.” (15:03)

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4. Market Clock & Earnings Cycle – “Almost Midnight”?

Starts ~16:47

• The “Earnings Clock”:
  • Using Yurian Timmer’s framework, the market is between 9pm–midnight on the clock—still favorable, but caution is rising.
  • “When the clock strikes 12, it doesn’t mean the party’s over...but that’s where financial conditions start to tighten, even as earnings continue higher” – Josh (18:01)
  • Debate: How close are we to midnight? Michael: “I’d say 8:30.” Josh: “I’m gonna say 10:30.” (23:55/23:59)

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5. Explosive Speculation: Leveraged ETFs, Futures, and Market Culture

Starts ~22:26

• Leveraged trading volumes in semis/AI stocks continue to suggest froth.
• Schwab moves into “prediction markets” and launch of perpetual futures contracts is spooking exchange stocks (CME, CBOE, ICE).
• Josh (on market innovation): “The more I hate something, the more I know it’s definitely going to happen... If you hear some innovation and it gives you a physical feeling of revulsion... it’s almost guaranteed it’s gonna happen.” (27:00)

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6. Jane Street Unmasked

Starts ~34:31

• Greg Zuckerman’s Wall Street Journal deep dive into Jane Street, which is opening up to recruit more AI talent for the first time in 26 years.
• “In Q1 of this year, Jane street earned $10.3 billion on $16 billion in trading revenue... more than Morgan [Stanley] and Goldman [Sachs] combined” – Josh (37:47)
• Michael: “Unbelievable... probably the most impressive firm on or off Wall Street in finance today.” (38:08)

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7. Mag 7 Breakdown & The Case for Meta

Starts ~39:00

• S&P 500’s YTD gains being driven not by the Mag 7, but by the “other 493” stocks. The Mag 7 are flat or negative.
• Market is “derating” hyperscalers (Meta, Amazon, Google, Microsoft) as Capex eats into free cash flow.
• Michael: “Meta is the worst performer of the bunch... expected to spend basically 90% of their revenue... and the market is saying, don’t like this.” (41:32)

The Case for Meta

Starts ~56:54

• Meta’s stock “in no man’s land,” but sentiment is bombed out (trading 18x forward earnings).
• Bulls point to new subscription services; Mark Mahaney’s “Time to Subscribe” calls for a potential bottom and $930 price target (over 50% above current).
• Josh: “The thing about Instagram and WhatsApp and Facebook, they’re very good at introducing something, looking at the results, and then figuring out how to get more people to use it and pay for it. And I would not bet against them being able to do this.” (62:05)

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8. Mega Gap vs. Small Cap, Russell Rebalancing

Starts ~43:44

• Small caps have outperformed recently, but Josh cautions: “History suggests you’ll get three to six months of this small cap renaissance... then... they’ll whack those small caps right back down to earth.” (43:17)
• Discussion on how much of this is index rebalancing effects, and speculation if the trend can last.
• Micron’s role in Russell index: momentary confusion, then clarified as a large cap.

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9. Alan Greenspan’s Legacy

Starts ~46:43

• Reflection on the late Greenspan’s legacy—a technocrat who believed too strongly in self-regulating markets and minimal oversight.
• Michael: “He apologized. And to do so publicly... his entire mantra was free markets. And he got in front of the world and he said my entire worldview was wrong. That’s really, really, really hard to do.” (51:00)
• Josh on the Greenspan Put: “Stock and bond market participants believe... the Fed is when push comes to shove, going to respond to tremendous turmoil in the investment markets.” (52:21)

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10. Blue Chips at 52-Week Lows, Nike as a Turnaround?

Starts ~54:19, Nike segment ~63:16

• Surprising number of big names at 52-week lows or deep bear markets: MasterCard, O’Reilly, McDonald’s, CME, Uber, Netflix, Palantir, Nike, etc.
• Meta, Netflix, Nike feature as fallen mega-caps:
  • Josh (on Nike): “It’s in the worst drawdown in Nike history since coming public in 1982. Look at this. So no, it absolutely cannot get worse.” (71:14)
  • Nike’s issues: China business, margin pressures, uninspired “drop” strategy; but new pre-order launches for NBA/NYK fans indicate efforts to reconnect with core customers.
  • “If they are going to do what you’re suggesting [with pre-orders], then maybe the stock... I don’t know, how could it get worse?” – Michael (69:55)

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Notable Quotes & Memorable Moments

• On market excess:
  “The more I hate something, the more I know it’s definitely going to happen.” – Josh (27:00)
• On chip/AI boom in Korea:
  “They are powering the global AI supply chain in a big way.” – Michael (06:18)
• On trading FOMO:
  “You almost have to say to yourself in that moment, ‘Oh, I’m not supposed to be trading stocks like this.’” – Josh (12:01)
• On market cycles:
  “It’s almost midnight. You know the analogy with the clock that has no hands... Everyone’s trying to know, like, what time is it?” – Josh (16:52)
• On Alan Greenspan:
  “He apologized. And to do so publicly... my entire worldview was wrong. That’s really, really, really hard to do.” – Michael (51:00)
• On Nike’s turnaround:
  “I think the pre-order strategy is a material development... where they’re going to stop pissing everyone off and start actually making money again and pleasing their customers.” – Josh (68:15)

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Important Timestamps

| Segment | Timestamp | |------------------------------------|--------------| | Korean Market/Chip Boom | 04:17–09:00 | | Micron/Earnings/Chip Mania | 10:25–12:25 | | Tech Sector Dispersion | 12:25–15:39 | | Market Breadth/Rotation | 13:29–15:39 | | The Market/Earnings “Clock” | 16:47–23:55 | | Leveraged Speculation/ETFs | 22:26–23:47 | | Schwab & Prediction Markets | 24:05–27:00 | | Jane Street Profile | 34:31–39:00 | | Mag 7 Breakdown / Meta Deep Dive | 39:00–56:54 | | Small Cap vs. Large Cap Debate | 43:44–46:36 | | Alan Greenspan & Legacy | 46:43–54:08 | | Blue Chips at 52 Week Lows/Nike | 54:19–72:41 |

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Episode Tone

Casual but sharp, skeptical yet hopeful, with plenty of witty banter, inside jokes about age/youth, some friendly self-deprecation (“I put myself in the penalty box for a year”), and a willingness to call out hype as well as highlight opportunity.

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Final Thoughts

This episode provides a comprehensive, often humorous look at the state of markets in mid-2026—from South Korean chip fever to Jane Street’s outsized success, ongoing sector rotations, the fate of blue chips, and the sorts of financial “innovations” that elicit both dread and inevitability from seasoned market observers. If you want to understand the rapid shifts beneath the market’s glossy surface—and how the pros think about bubbles, value resets, and true fundamental change—this is an essential listen.

Transcript

[A]

Foreign.

[B]

Ladies and gentlemen, children of all ages, welcome to an all new edition of what are your thoughts Only on the Compound Channel. We are live on YouTube and for those of you listening to the show on Spotify, on Apple podcasts, anywhere else, we appreciate it. Thank you so much for joining us. This is America's favorite regular streaming show. Live streaming show when possible, about the stock market. Everybody loves it. We love you guys too. We got a booming live chat happening right now. Want to say a few, say a few hellos, Michael. Is that okay?

[C]

Go for it. Can I do that?

[B]

All right. All right. Ratio Raheem says Nicks and none. They won. All right, we're. We're off Nick stuff. We're gonna take a break from the next stuff. We. We've heard you guys loud and clear. We're. We're gonna calm down on that. Biff Grebel says Alan Greenspan sucked. Debatable. We're actually gonna debate tonight. Who else is here? Nikki Sams is in the chat. You guys say hello to Nicole. Let's see. Luis Rojas says has Santoli ever been on the podcast? No, we were just talking about him. He's our favorite. But Santoli records. Records. Santoli's TV show is at 4 o'. Clock. So I'm not even sure how we would be able to logistically do that considering that that's when we tape the compounded friends. Right, Mike?

[C]

So we could do it at noon?

[A]

Yeah.

[B]

We would have to sneak it in somehow to. To fit his schedule. But 100%, we would love to have Santoli. Who else is here? Riley D. Anderson says. Let's go. All right. Let's go. Tonight's show is sponsored by Neuberger. Michael, what do we want to say about Neuberger?

[C]

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[B]

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[C]

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[C]

We're like two peas in the pod.

[B]

This episode is sponsored by clearbridge Investments. Amid rising geopolitical tensions and continued market uncertainty, investors are looking for stability. Even before recent developments in the Middle east, stocks backed by real assets were gaining momentum and can offer more predictable cash flows as volatility increases. Position your investment portfolio for wider equity participation with fundamentally driven Clearbridge active equity strategies. Clearbridge, a Franklin Templeton company. Go to clearbridge.com to learn more. All right, this wasn't an official topic, but Micron's going to report earnings after the close tomorrow. The Cosby crashed. For those who are not very closely following all aspects of tech, the Cosby is the Korean, South Korean stock market.

[C]

Do you know, do you know what the Cosby stands for?

[B]

No, I should say, do you know?

[C]

Do you know what it means in English? No, I don't know the answer to either those questions.

[B]

What's wrong with you? It's got to be something. It's got to be Korea something.

[C]

Korea, Ontario, salaries, I don't know. Who knows? I'm not sure what the rest is.

[B]

I got halfway too early in the show.

[C]

All right.

[B]

The head of South Korea's regulator, like their version of the sec, had some stuff to say. Bring us. First of all, let's do the chart and then, Michael, you could bring us up to speed.

[C]

Okay.

[B]

What is this?

[C]

What do you mean? You go. This is your chart.

[B]

No, it's not. MSCI. South Korea falls 9%. The Cosby Falls 10%. A lot of this stock market is dominated by a very small handful of companies like SK Hynix and Samsung that are primarily rising and falling based on demand for memory chips. It's like the whole stock market in Korea at this point has been completely taken over by this AI data center build out theme. And it's if you think we had a concentrated market here, Korea puts our concentration to shame.

[C]

I think it's more than half at this point. Samsung and SK Hynix. It's a Korea composite stock price index. By the way, that's what the Cosby stands for.

[B]

I see that.

[C]

All right, so Michael Semblis had a timely piece out today Talking about the 250th anniversary of this country and the stranglehold or Lack thereof that we have on the global economy. And one of the charts in there was this. Look at the margin loans outstanding in Korea. The investor base there, understandably so, is going bonkers. As well they should.

[B]

This is nuts, dude.

[C]

As well they should.

[B]

Yeah, but what do you mean by as well they should?

[C]

Well, when is the last time that the Korean stock market was at the epicenter of a mania being driven not just by insane speculation, but legitimate fundamental explosive growth? They are powering the global AI supply chain in a big way.

[B]

How do you make the leap from like they should be enthusiastic about their stock market to they should have explosive margin balances? And I know the Taiwanese are doing the same thing because they're caught up in the whole chip boom. So it's not just the Korean.

[C]

I'm making a giant leap. It's like a one for one. They are having explosive earnings growth. The companies are going up 8% a day. That obviously attracts degenerate behavior, margin loans and excess speculation. What the monks would be speculating if they're. If their stocks were doing this.

[B]

Okay, so basically like why wouldn't they be going bonkers? Look at what their stocks are doing.

[C]

It would be unusual investors.

[B]

I think it's more causal than you do. You think it's like, oh yeah, it makes sense. These two things are both going on at the same time. And I'm saying. No, no, no, no, no. Stocks are doing that because people are leveraged and borrowing money to buy even more.

[C]

Okay, well let me ask you. Are the earnings going up because people are buying the stock? No, people are buying the stock because the earnings are exploding higher. And yes, obviously it is a feedback loop. The more people come in, the higher the stock price goes. But the initial reason for the stock price is exploding. Let's not get it twisted. It's fundamental growth.

[B]

Yeah, no, it's not an argument. I guess it's the degree to which excess speculation is driving prices versus, oh, look at the prices. Therefore, why wouldn't people be speculating? I just.

[C]

Well, whatever.

[B]

I think it's more cause and effect, I guess, than the way that you phrased it.

[C]

Okay, fine. So the semiconductor index is 68 above its 200 moving average. By far the la. The. The. The most stretch these stocks have been over the last 25 years. We bury the lead here. Micron fell 14 today or 13. Excuse me. Sandisk was up 13. Western Digital up down 13. Western Dig down 9. These stocks have gone straight up into the heavens. And it is, it is unnatural. And these stocks, you can't just go up and up and up and up and up and up and up. Whatever sort of pullback we're seeing today, you know, not fun if you bought the top, but severely, severely, severely overdue.

[B]

Okay, but back to Korea. So this started overnight. We woke up to this shit. The head. The head of South Korea's market watchdog Lee Changin said the government had been too hasty in appro. In approving leveraged funds tied to some of the company's best known chip stocks which were introduced last month and have contributed to heightened volatility. See, nobody minds heightened volatility on the way up. They don't like it when it's, when it's. The volatility is on the way down. Regulators recently cautioned retail investors against the use of leverage on the Cosby as margin debt or borrowing to buy stocks rose to that record high in June. So yeah, their stock market's up 100% year to date. I agree with you. Like, well, of course people are speculating. That's what a market that doubles in six months creates an environment where everyone thinks I should be making more money than I am on June 12.

[C]

On June 12, the 3x because 2 is for losers. The 3x SK Hynix 5x Long ETP was launched on June 12. Did I say June 12 already? June 12, eight days ago. 3x. It fell 42% today. 42% today.

[B]

How much money could really be in that though?

[C]

Getting, I mean not a lot. There was $45 million today. But getting back to how extended these stocks are, look at the average tech stock, you know, let's back it up. Actually, let's do my, let's do micron first. So micron 161 above its 200 day moving average which is at 400, 400 bucks. This thing, honestly. So it reports tomorrow afternoon. I hope it doesn't fall 30, but this could fall 30 in a straight line and still be in a very, very, very healthy uptrend.

[B]

It was down 23% after the last earnings report which was starting, I'm saying the single day or something like that. It had like a really bad single day and I think, I think it ended up 3xing from the low or something like can you even.

[C]

I'll tell you, we've done this a million times but it bears repeating because we're rewinding back to March guys. This is not like a year ago. So before earnings the Stock closed at 460 bucks and it blew the doors off. Yeah, like I Think double the what the estimates were.

[B]

Yeah, yeah. And it was like an Nvidia style earnings report.

[C]

It went from 460 down to 310 bucks in three weeks and then it went from 310 bucks up to 1200 between, between the end of March, between April and whatever yesterday was now 4, 4x in three months.

[B]

Think about the people selling the day after it reported down 20, 30% in the hole and then they watch the stock. Would you say four quadruple? Yeah. You almost have to say to yourself like in that moment, oh, I'm not supposed to be trading stocks like this. Like this is not, this is not what I do because I, I don't know how you recover from that.

[C]

Yeah, I'd say, I'd say I put myself in the mental penalty box for a year at least.

[B]

Right. This is not my sport.

[C]

No, this happens. This happens. This just happens. Sometimes you get kicked in the teeth. It happens. So micro. All right, I did that already. Look at the average tech, look at the average stock. So chart Goat met made this beautiful chart for us. He broke down by sector the dispersion of stocks and their distance from the 200 day moving average. So Comm Services on average is the worst when you look at it through this metric the average stock is 8.6% below its 200 moving average all the way on the left side is tech. The average Stock is about 30% above its 200 moving average. With Sandisk Micron a western digital most extended obviously into it all the way on the bottom most extended to the downside. But this dispersion that we're seeing in tech is really something else.

[B]

Just the range of outcomes for tech stocks versus other I guess, I don't know, I guess like health care seems like sort of, sort of an extreme range of outcomes for those stocks.

[C]

Go back, throw that back. Healthcare does not surprisingly.

[B]

Utilities are very tight, industrials are wide,

[C]

energy is very tight. They all move together.

[B]

It's a cool visualization.

[C]

Industrials are wide because stocks like GE Vernova I'm guessing is an industrial. Like there's a whole AI trade in there and AI winners and AI losers. But this is a great chart.

[B]

Riley in the chat is saying RSP is green today. Not by much.

[C]

No, it wasn't. Was it?

[B]

It wasn't.

[C]

No, it was down. But I did notice down 34 basis points. But whatever.

[B]

I did notice a lot of stocks green and the tape blood red all throughout the course of the day.

[C]

And Staples Healthcare the boring was green

[B]

and Microsoft was finding the financials rallied today like, like almost, almost all the insurance companies, almost all the banks that I follow, like the financials were green. Well, asset management, we're not dragged down by this.

[C]

Asset management was blood red. Blacks BlackRock down three and a half percent, Goldman down a percentage. But insurance, bright green. Regional banks, bright green. Insurance companies all the way green. What's so interesting about 2026 is it's so binary. It's either AI up software killed or AI breather or in this case, AI killed, software bright green. So Nvidia down four, Broadcom down three. We already spoke about, you know, the other chip names, but ServiceNow up 3%, Salesforce up 2%. Now granted, these names have gotten absolutely battered, so 2% doesn't really mean anything. But it's fine. It's binary.

[B]

One day a week. It's one day a week. Opposite day. Yeah, where they, they, they crush the SanDisk micron component of the market and ServiceNow catches a bid. But the thing is if you zoom out and look at like the year to date chart, you'll realize like these temporary reprieves where they rally the software stocks or the home builder stocks or they don't, they're not making any forward progress at all. Like the software stocks I own, they've stopped going down, but they're definitely not going up. And they're just, they're like in this stasis and it's not helping anybody.

[C]

So I'm not, I'm not suggesting this by any stretch of the imagination, but people have been asking if I'm worried about AI because it's 40% of the S&P and it's whatever percent of the queue is like where do I go? Do I go to Europe? Yeah, there's not really a lot of there. Do I go to like low volume stocks here like Staples, whatever. They're not really exposed to AI. If AI is really going to peak, then maybe software is a good hedge, but it would have to go a lot lower.

[B]

Be very selective in software. I'd stay with cyber, cybersecurity and very little else. I don't trust anything I could. Microsoft rallied today. Some of the max 7 stocks caught a quarter bid today. They've been just obliterated in the last week or two.

[C]

Microsoft looks, I mean it's the biggest software stock in the world. You know, it's not really a surprise,

[B]

but it looks they're beating up Goldman Sachs. They're beating Goldman Sachs, they're beating up Alphabet now. Why?

[C]

Because one of their one of their head, guys left. I mean, that's the excuse. I don't know if that's real or not.

[B]

All right, let's keep moving. It's almost midnight. Do you know that?

[C]

Michael, what clock are we looking at?

[B]

I know your analogy with the clock that has no hands. And everyone's trying to. Everyone's trying to know, like, what time is it? What time?

[C]

That's not mine. That's out of Smith, by the way. It's probably midnight. It's probably midnight in Korea.

[B]

Yeah. Right. Now Yuri and Timmer at Fidelity shows us the US earnings clock. I think this was a really cool visual. It takes a second.

[C]

What in the world are.

[B]

No, no, no. Just give me, give me, give me like five seconds and I'll, I'll, I'll walk you through it. It's not that complicated. It just looks crazy.

[C]

The.

[B]

This is Urian. The US Earnings clock continues to advance in the sweet spot quadrant, which is 9pm to midnight, boosted by favorable financial conditions. Today looks quite a bit like 2021 and even 2017, 2018. So look at this clock as like four slices of pizza. And those are the four quadrants. And the 9pm to midnight is exactly where it would be on a traditional clock. And in that quadrant, financial conditions are loose and earnings are growing.

[C]

Okay, I like that.

[B]

You like that.

[C]

Yeah.

[B]

When the clock strikes 12, it doesn't mean the party's over, but you're in a new quadrant, and that's where financial conditions start to tighten, even as earnings continue higher. And that's a tricky, that's a tricky moment because if you're just looking at the company's earnings and you're listening to the management commentary, all appears to be well. But the thing that's happening behind the scenes or in the background is threatening future earnings growth because financial conditions start to tighten. And then ultimately you dip into the next realm, which is financial conditions are tight and earnings are down. And that is the worst quadrant on the clock. And that's the 2020-2022 example. As you could see, he's illustrated. So that's just one part of what I wanted to show you. You're in. Continues. The secular wave is alive and well, but getting on in age, per the chart below. Hold it for a sec, guys. Hold it for a sec. For the S&P 500, the 10 year price CAGR, cumulative annual growth rate is 13.7%. And the income, which is dividends and buybacks, is 3.9%. That means the share of income of the Total return is only 25%. So in other words, that 13.7% growth rate for the market, only a quarter of it is coming from the traditional activities of dividends and buybacks. Now let's put that up. And this is why that could be. It's not problematic definitively. It's that ultimately that becomes a constraint on further upside. Does that make sense? And you could see here he goes back to the year 1900 and you could see that when we get to this period of time where equity returns far outpace the portion that's coming from dividends and in recent history, buybacks, we get stretched to a limit and then there's a snap. Back to reality. Before I move on, Michael, do you understand what he's showing in this chart?

[C]

Yes.

[B]

Does it have any resonance with you or. Not really, no. Why not?

[C]

I love Yurian's work and I'm sure he mentioned this in the piece. You have to show the earnings. The reason why we're up 13.7% on a compounded annual growth rate over the last 10 years is because earnings are basically driving all of that.

[B]

He's making that point with the clock. Earnings are growing. This is the sweet spot we're in right now. He would agree with that next chart. So that stretch that I'm talking about, he goes on to say, that's in line with past mature secular bull markets. I don't think we're at the end yet, but between this statistic, the new equity supply boom and the cannibalization of buybacks from CapEx, for me it seems like we're getting close to the final innings. This plateau chart that you guys are looking at, again, the black line on top, you're talking about the growth rate itself and what you're seeing on the bottom, that 10 year income as a percentage of the 10 year cumulative annual growth rate.

[C]

I don't know, this is pretty noisy.

[B]

To me it's just another way of saying I hate long in the tooth. I don't use that phrase personally, but if you think financial conditions tightening potentially threaten the earnings outlook or earnings growth outlook, I should say we could still continue to see great earnings growth, but see the conditions in the background make it harder for that to last longer.

[C]

Well, that's the clock that makes a lot of sense. We had a new high, new all time high in the ratio of levered long AUM to inverse leverage AUM at 16 times. So I don't know what time it is for these people at this party, but they're drunk and they got to go home.

[B]

This is 4 in the morning.

[C]

So. Next chart. Look at this. This is the daily trading volume of semiconductor ETFs. Yeah. This thing could use a breather. I don't, like, you know, I'm not really dumb. I'm not rooting for anybody to lose money, but we need to sober up a little bit. So it's just.

[B]

It's just dumb.

[C]

Yeah.

[B]

On, like, what is the. What is this? Is this like. Do people doing, like, derivative trades based on.

[C]

This is the. This is the daily.

[B]

What are they doing?

[C]

Of. Of levered.

[B]

But, but, but what I'm trying to figure out from you, maybe you don't know, is this like they're day trading them or they're using them to hedge positions or they're.

[C]

They're, they're, they're doing what they do.

[B]

What do they do?

[C]

They're trying to make.

[B]

What is the. What is the meaning of. Of that level of activity?

[C]

Listen, the reality is these people have made a shitload of money. Great for them.

[B]

What do you mean? What do you mean? These people, right.

[C]

They've. Great for them. Great for them. But it can't last forever. All right, let's talk about. Let's talk about prediction markets.

[B]

So before we do that,

[C]

you do.

[B]

You don't think it's almost midnight?

[C]

Do I think the bull market is almost over? No. Do I think it's closer to midnight than what would be the opposite of midnight? What's the opposite of midnight?

[B]

6. 6am yeah.

[C]

Yeah, sure. We're closer. You know, the clock has passed 6pm I would say.

[B]

What time? What time is it?

[C]

8:30.

[B]

Okay, I'm gonna say 10:30.

[C]

When is it gonna be? Midnight? Okay.

[B]

Yes.

[C]

Charles Schwab is wading into the prediction markets. This is from the Wall Street Journal. The brokerage is working with CBO to roll out all or nothing options contracts that allow customers to place yes or no wagers on the performance of the S P500, according to people familiar with the matter. I don't know who those people are, but we were on stage with Rick Wurster, the CEO of Schwab, back in March.

[B]

Wait, did he lie to us?

[C]

No, no, he didn't lie to us. Here's what he said.

[B]

Okay.

[C]

I pulled the quote. So I think as we think about those three parts of prediction markets, information I think is relevant and will make available. Financial predictions at some point, we may do. And sport. So he said it. And sports, we really want to stay away from because our entire mission of Our company, The reason all 33,000 people get out of bed every day is to make people better off in their financial life. So he didn't lie to us. He literally said. He said, I think it's relevant that we'll make available. Yeah. So I'm dying to. I'm dying to hear what my problem is, please.

[B]

Well, you just. You're too young.

[C]

So Josh wrote in the doc. Read what you wrote.

[B]

Oh, I'll tell you what your problem is. You haven't figured it out yet. The cosmic joke of being over 40. I don't really know where I was going with this.

[C]

This reminded me of the scene of the Departed. You know what your father's problem was.

[B]

So this is what your problem is. It's not your fault. It's not your fault. It's not your fault. You're extremely experienced by most measures in every way, except for you haven't been around long enough to have seen enough, to have arrived at the point that I'm about to make. And everybody who's watching chatting it up. I hope you're enjoying yourselves. I want you to take a two second break from typing and listen to me. And if you're driving, pull over. The cosmic joke is that the more I hate something, the more I know it's definitely going to happen. And you have not yet arrived at this point because you are fresh on the scene, fresh faced, youthful, enthusiastic. You haven't gotten to where I've gotten. Which is when I hear something like, for example, tokenizing stocks so they could trade 24 hours a day, I say, this is what I say. That is the worst idea I've ever heard. I guarantee they're going to do it. And sure enough, like so we interviewed the CEO of Schwab about prediction markets. I didn't need to hear his answer, cuz I hate this so much that I already knew he was gonna do it. And so this is what I want people to retain. If you hear something, some innovation and it gives you a physical feeling of revulsion, like you just. You're just disgusted by it, it's almost guaranteed it's gonna happen. Almost guaranteed. I don't like what they did to professional sports with the gambling. I don't like what they did to college athletics with the name, image, likeness, I understand the reasons behind it. No hate for the kids that are finally getting paid. I get that too. I don't think we need 24. 7 trading. We didn't need any of this crypto shit. None of it has solved a single Problem in our economy or world or society. And no, I'm not a Venezuelan refugee. So, no, it doesn't touch me in any way. And I don't like this either. I really don't think people need to be making yes, no bets in brokerage accounts. And that's how I knew it was gonna happen. Fidelity will do it and sofi will do it and every other me too firm up and down Wall street, every venture backed fintech, whiz kid. They're all gonna do it. And most people will not be better off as a result. But they'll do it anyway. And I knew they would do it because I hate it. And that's what your problem. That's what your problem is.

[C]

Okay?

[B]

Disagree with any of it. No, I mean, it's true. You just haven't arrived there yet. But you know what's gonna happen? You're gonna age. Time's gonna go by. You're gonna get older. And one day you're gonna say to me, this is the worst idea I've ever heard. Guarantee it happens. And then on that day, I'm gonna say, young Michael, you've graduated, okay? You're in the club now. You're in the club now you understand the cosmic joke. Now you understand this is just like the way of the world, okay? And you haven't gotten there yet.

[C]

Alphabet is replacing Verizon in the Dow.

[B]

That hasn't happened yet.

[C]

How about that?

[B]

Don't you feel like that should have happened 10 years ago?

[C]

Yeah. What were they waiting for? So Alphabet is stock is 350 bucks. So where does that place it? You know where my. What my go to for Dow Jones holding holdings is? It's CNBC. CNBC has a great Dow 30 link. So let me sort by price. So Apple will be the 10th, like the 8th? No, I'm sorry. I'm sorry. Oh, shit. 1, 2, 3, 4. It'll be the fifth biggest stock.

[B]

They weren't asked to split.

[C]

No, no. It's 350 bucks.

[B]

It's a $350 stock. I guess they don't have to.

[C]

Goldman and Caterpillar, by far the biggest. They're both a thousand bucks. Then UnitedHealth is 400. Then Microsoft. 370. And that'll be Google. 350. So how is Nike still in the Dow?

[B]

So the Dow is like the Mag 7 with a couple of gas stations.

[C]

So the Dow just became. The Dow just became the NASDAQ 100. Because Verizon. Dude, Verizon is $46 a share. See ya. So they replaced, they replaced the second smallest stock in the Dow with now the fifth largest. Okay, what's that?

[B]

What stock can't get kicked out of the Dow?

[C]

Disney.

[B]

I have a good answer for this. No. Disney could in a heartbeat could. Yeah, totally, totally. It might.

[C]

All right, so shower your wisdom upon us. Old crusty one.

[B]

I'm not crusty, nor am I old. I'm very, I'm very youthful. I'm very youthful. What I was getting off my chest was not an age related thing.

[C]

All right. What can't they kick out?

[B]

It was age related. There's one company in there that's the only company that does what they do.

[C]

McDonald's.

[B]

Just tell it what is it wouldn't be serious. Go Boeing. You cannot say that. We can't, that we're not going to have airplane, like, like literally airplanes in the Dow Jones.

[C]

All right, that was a very, that was a very, very, very underwhelming reveal. Let's get back to the metal.

[B]

But there's no other Boeing.

[C]

Who gives shit? What is that the criteria? There's only. You need an airplanes in there.

[B]

Yeah, you do. Because it's an industrial average. And this is like arguably one of the most important industrial segments of the economy. So I'm gonna keep calling it industrial average. Do you need an airplane manufacturer? And there's really only one.

[C]

Well, by Josh Brown's rules, if you hate it, you know it's coming out. All right, it's coming out. I can't wait. I cannot wait. Get it out.

[B]

They could kick Disney out.

[C]

Yeah, they could. Okay. All right, so back to the matter. Hand this. So have you seen the exchange stocks? Look at these.

[B]

They're crashing.

[C]

Look at these. We're looking at cbo, cma.

[B]

Can I ask you, is this perpetual futures literally spooking the investors in these stocks?

[C]

Because that's quite literally. I think it's, I think this doesn't make any sense in the world.

[B]

And people, people are saying it's the perps.

[C]

No, literally, they were saying it when it happened. So this, this article is now. This article is two weeks old. The CFTC last week approved perpetual futures, a type of future style contract with no expiration date for bitcoin trading on Kalshi. Investors are worried that the CFTC could give the green light to other asset classes. And of course they will. So CME had its biggest weekly drop since 2020. CBO plunged more than 8%. Biggest weekly drop since 2020. Barclays analyst said the current, the concern is that Perps could come to equity products and potentially displace cme, cbo, S P products. I don't know, man. This seems so overdone. This seems so overdone.

[B]

Can you put that chart back up?

[C]

I want to buy one. I want to buy cma, which.

[B]

I want this. This one. This is what I want to hear from you. CME is the one.

[C]

Yeah. This is the king.

[B]

Terranova just bought cbo. He said today on tv.

[C]

Fine, whatever. That works, too. This makes no sense.

[B]

What about. Okay, why is NASDAQ down?

[C]

I don't think NASDAQ has as much to do with this. I just put it on there. But look at. Like, look at ice.

[B]

Geez. ICE owns Nash. You know what? This is for me? This is the case for stop losses. If you are, like, riding a trending stock, this is why you would use a stop loss. Because you couldn't have imagined perpetual futures being the spark that creates this fire. Like, there's no way to know in advance. So just let price tell you that people's. People's sentiment around the stock is changing and the uptrend is over. That's the case for a trailing stop.

[C]

In hindsight, and it's always easier in hindsight, the ICE stock looks like a really great rounding top.

[B]

But I'm not buying any. I'm not buying any of these. I like the brokerages better. Like interactive brokers made a record high today. IBKR. It's going to break 100. I bought. I bought Robinhood last week. It looks great. I like the brokers better than the exchanges right now.

[C]

Yeah, I get it. But I think I'm gonna buy one of these. All right, let's do Jane Street. Go ahead. What do you have to say about this?

[B]

It's interesting. It's interesting. So Greg Zuckerman wrote this, and Greg has written books, articles about the most interesting firms in the history of Wall Street. Notably, we had him on our show. He did a book about Renaissance technologies, and that's one of our most watched episodes we've ever done.

[C]

That was so.

[B]

I think a million people watched it. Did I make that up? I think it's something insane like that.

[C]

I'm looking now. Whatever. Keep going.

[B]

All right. Anyway, Greg has a really big piece at the Wall Street Journal, and I want to just spotlight it and make sure people didn't miss it. I'm going to give you the opening. Mystery has long shrouded Jane street, the Wall street trading giant. Its traders rely on proprietary algorithms, making it hard to understand how the Firm generates its profits privately owned, only trades with its own money, so its moves are difficult to track. It's also an unusually flat organization. No leader at its helm to speak on business television or serve as its public face. The purpose of the article was to say, this is now a company that started 26 years ago that's got 3,500 employees. They are trying to recruit 500 more employees this year. And the reason they're talking to the media for the first time in 26 years and actually revealing their own existence is that they're worried if they don't, the caliber of AI engineers that they want to hire won't want to go there. They won't think that this firm has the compute.

[C]

Yeah, it's amazing.

[B]

Or the capital to afford. Isn't that a fascinating thing?

[C]

So sick. So that was the takeaway of the article, by the way, the Greg Zuckerman video. That was six years ago, and he had 340,000 views.

[B]

That was. So that was. That was big. So they in April announced a deal to invest $1 billion in Core Weave and spend 6 billion on CoreWeave's AI Cloud Platform. After inking the transaction, the firm asked Core Weave to publicize the deal in a press release. And the Core Weave guy, the co founder who's quoted here, is like, wait, what?

[C]

Yeah.

[B]

And so it turns out they, like many other successful firms, are in this rat race for talent, and they want, like, AI engineers to know that that's like a legit place to go. They have a stake in Anthropic that they bought from the bankrupt estate of FTX. They bought Sam Bankman fried stake in Anthropic in 2024. Their private company portfolio is worth 20 billion. And this is the last thing I'll say on this. I don't think people understand. We talk about successful firm. In Q1 of this year, Jane street earned $10.3 billion on 16 billion in trading revenue.

[C]

Yeah, it's like Nvidia margins insanity. So it earned more than Morgan and Goldman combined. Or just about.

[B]

Morgan Stanley and Goldman Sachs each earned 5.6 billion in the quarter.

[C]

Unreal.

[B]

Those firms have 130,000 employees. Jane street has. I told you. What did I say? 2,500, 3,500.

[C]

Unbelievable.

[B]

So the point is, the only reason we know about that profitability is, and we talked about this on the show before, Jane street has bonds that are publicly traded. And so they have to put these filings out here. But just think about a firm that conceivably could have $20 billion in profit. Nobody knows of anyone who works there. There's no ticker, it's not public. There are no outside shareholders. The whole thing is internally managed. Is probably the most impressive firm on or off Wall street working in finance today. I would say right, like right at this moment, I know people say Susquehanna or people will say Millennium maybe or Citadel. I really think on a profitability basis it's gotta be this. And it's in a wild story. So I wanted to make sure people caught that article at Wall Street Journal. It was very good.

[C]

All right, let's Talk about the Mag 7 breakdown. So these charts are available for advisors at exhibit A. The next two that we're about to show and they are unbelievable. If somebody were to tell you that this would have happened at the beginning of the year, you would say like, wait, how? I don't understand.

[B]

We did predict this, did we?

[C]

I don't remember predicting it. We predict a lot of things. So maybe we did. Chart on. So this is showing The S&P 500 at the start of the year was 6846. Today it's 7.74.73 and 628 points of the S P were contributed by the 493. The MAG 7 at as a group collectively have taken points off of the

[B]

S and P. We said that, Michael. We did a whole segment like if you had to bet, would you rather have the Mag 7 this year or the 493?

[C]

Dude, I've been saying this. Are you kidding me? I've been saying this all year.

[B]

But I think we concluded. I don't remember. We'd rather have the 493 because they're the AI users. And this was going to be the year where we don't want to. We don't want to invest in the company spending all the money. We want to invest in the customers who are now seeing the earnings growth as beneficiaries of the AI technology. We did a whole. We did a whole thing on this hallucinating.

[C]

I also said software overset me so I should be in the permanent penalty box for that one. But anyway, be that as it may be that as it may next.

[B]

I said I've said worse. I'm long Netflix with an average cost in the 90s, it looks like it's going to zero. I'm pretty sure it is. All right, don't feel bad.

[C]

Look at. But the gap is widening. The 493 are up 14, nearly 15% this year with the max 7 flat. Like it's getting more extreme, which is amazing. And what's happening, it makes sense. You don't have to like scratch your head like. Oh, it doesn't. It makes perfect sense. The AI stocks, they're being re rated or derated as, as Sherwood says.

[B]

So be specific. Not the AI stocks, the hyperscale.

[C]

Okay, so the average forward pe. That's right. The average forward PE for Meta, Amazon, Google and Microsoft is near a multi year low. So the average forward PE collectively at the peak was 29 times. It's now 21 times forward. And the reason why is because their, their free cash flow is disappearing because they're spending all their money on, on, on Capex and R and D. So look at this chart from, from Semblison team right now. And Meta is the worst performer of the bunch.

[B]

Is this new? This is from his new piece.

[C]

This is. Yeah, this is from today.

[B]

Did you read it already?

[C]

I watched the video. Okay, so Meta is expected to spend basically 90% of their revenue, not their free cash flow of their revenue. And guess what? The market is saying, don't like this. Next chart from Tracy Via, who made this Nomura hyperscaler free cash flow projections.

[B]

Oh my God.

[C]

Holy shit.

[B]

The red is everybody's free cash flow.

[C]

That's Amazon, Microsoft, Google, Meta and Oracle. So the fact that these are being derated. Duh, I mean, of course they are. The market's not dumb.

[B]

Yeah. Blake Fisher in the chat is saying this is just business as usual for Amazon. He's right. Like they kind of, Amazon has been playing this game since they, since they came public.

[C]

That's true. That is true. All right.

[B]

We're not as accustomed, we're not as accustomed to this with Alphabet. And now they're selling stock and they're, and they're selling bonds and they're diluting and it's, it's gone further than we thought it would.

[C]

So here's a chart that we shared in January from chart kid. And I definitely remember saying, hey man, I think the, I think the small cap large cap ratio, I really think it might have bottom this time. Here we go. So the red dot is when we first showed these charts. The top pane is the Max 7 divided by the 493. And we said, wait a minute, this looks a little bit different. And the inverse of that was small caps divided by large caps. And they've both continued. So they went sideways since we published that. But they're breaking out today. The small cap large cap ratio is breaking out In a serious, serious way. And Max Evans relative to the 493.

[B]

Never lasts.

[C]

Oh, okay.

[B]

Never lasts. Enjoy it. I'm enjoying it. I own. I own stocks that are going up while. While Meta and Microsoft go down. I'm very happy. History suggests you'll get three to six months of this small cap. Renaissance history. And then some shit will. Some shit will happen with interest rates and they'll whack those small caps right back down to earth.

[C]

We'll see. Maybe.

[B]

Do you have a strong point of view about the upcoming Russell rebalance? You're going to see some of the biggest winners in the Russell get pulled out of it. Micron is a really obvious example, but there are others. Is a lot of this, like small cap comeback relative to large cap just miscategorized securities that are about to be rebalanced out at the end of the month.

[C]

Micron.

[B]

Yeah, it's very strangely not in the Russell large cap universe.

[C]

No, that's not true. What do you mean, dude, it's like a trillion dollar market cap. Of course it is.

[B]

Yeah. Now it is. What do you think it was last year this time when they were categorizing?

[C]

You don't think Micron's in the Russell 1000? I'm positive it is. One million percent positive.

[B]

They're going into it. They're being added to the Russell 1000.

[C]

No way.

[B]

What do you. Wait. Why? Are you sure about that?

[C]

100% sure. 100% sure.

[B]

I feel like they. I feel like.

[C]

Come on.

[B]

I feel like it's once a year and it's the end of June.

[C]

No, it's not in the 2000. No way. Stop.

[B]

I think it's in. I. Not only do I think that, I also think it's in the value index.

[C]

No, Josh, chill. Stop. Micron is. Micron is the biggest stock in the Russell 1000 value index.

[B]

That's. Okay, that's what I meant. Not in the small cap index. Okay. All right. I. Well, let me ask you this question. Let me ask you this question. What would it take for the year to end and see mega cap versus small cap continue along this trend?

[C]

All right.

[B]

Like money coming out of large caps and continuing to go to small caps.

[C]

What's interesting is that, by the way, micro caps, too. Micro caps divided by the S and P is ripping severely. And what's interesting is that the cost of capital is not going down. And that has traditionally just in a vacuum, been the single biggest driver of small caps, large caps. And if these companies are burdened with Higher interest rates. So the fact that it's happening despite high interest rates makes me think that this actually does have legs. Now if the Max 7 comes back, then, then, then this trend will reverse very quickly.

[B]

Right. So that's what's happened every single time over the last 10 years.

[C]

So, so if this, if this is another fake, I would say, I would say, like I wouldn't be shocked because all it takes is max 7 coming back and then it's over.

[B]

I guess it could, I guess. Stranger things have happened. I just, I feel like this is Lucy holding the football for Charlie Brown

[C]

and very well could be it very well.

[B]

Same thing over and over again. The same. The same people get excited about it every time. Every time it happens, the same people.

[C]

Guilty of charge, fired up, guilty as charts. Let's talk about Alan Greenspan. That was a hell of a stretch.

[B]

He was a good dude. No, I, the Wall Street Journal wanted to get one last kick in the ribs. Greenspan did this thing where he was like stridently anti regulation most of his adult life. He was like a Reagan guy.

[C]

He was a big Ayn Rand guy.

[B]

Huge, big iron Rand. That was like a lifelong mentor of his. And he was just one of these people that was like the, the markets will regulate themselves because the companies are self interested enough that they won't destroy themselves like that. That will be the governing factor. And whoops, no, it didn't go that way. Spoiler. So Wall Street Journal op ed. So for people that are not paying attention, he was the Fed chair under four presidents. He had been there, Reagan, most Fed chairs. Except for one other when Reagan appointed

[C]

him, Ayn Rand was in the Oval Office with him.

[B]

Yeah, so that was in 87. And the first time he got tested was the crash of 87. And he used interest rates as a tool to calm people's nerves. And Barry Ritholtz has written about this. He learned the wrong lesson from that episode. He learned that, oh look, 1987 didn't end up spilling over into the real economy because I saved a day by reacting to the stock market with a drop in interest rates. And then of course, he would employ that again and again and again, notably in 97, 98 with the blow up of long term capital. And then of course, famously leading into the financial crisis, he was ratcheting rates higher, reacting to commodity price inflation that he didn't see coming. Like, I sort of feel like the first half of Greenspan's tenure was incredible, particularly with Clinton in office in the 1990s. And then in the second half, everything went wrong.

[C]

So wait, so it was him, Rubin and Larry Summers at the helm?

[B]

Yeah.

[C]

And.

[B]

Well, Rubin, Robert Rubin was also a deregulator. He was the Treasury Secretary. And Larry Summers the same. And under the influence of the three of them, Clinton was convinced to repeal the Glass Steagall Act. The Glass Steagall act was sort of a depression era regulation that kept brokerage and banking separated. As soon as that happened, as soon as that repeal happened again under Clinton, you started seeing things like banks buying brokerage firms. And once that happened, basically the place where people's deposits were, were connected to casinos. And I don't think that that was like the primary cause of the financial crisis. Well, it was this contributing factor.

[C]

It was this. So I watched yesterday, there was a doc on Frontline, PBS about, about all about Bernanke's. Bernanke, oh my God. All about Greenspan's legacy. And they, the three of them fought very hard for the CFTC to have no oversight of derivatives because they didn't even think, they didn't even want fraud to be regulated because that's how much they believed in the free markets. They thought that fraud would be weeded out. The bad actors, whatever, like they were such free market enthusiasts. And Greenspan, to his credit, did something in front of the nation. And this man was the rock star of financial rock stars in the 80s and 90s. He apologized. And to do so publicly, Becky Hammond can't even admit that she was wrong about Jalen Brunson. And that's who cares? This guy's entire entire mantra was free markets. And he got in front of the world and he said my entire worldview was wrong. That's really, really, really hard to do. What do you end. He literally said that.

[B]

He did not say that.

[C]

Yes, he did. I watched it yesterday. I do it. I watched it yesterday.

[B]

But he put more of the, more of the blame on the companies than on the Fed itself. He said shifted the blame.

[C]

I'm not, I'm not saying that he was a great guy. I'm just saying I watched it yesterday and he said in front of Congress, in front of Henry Waxman, remember that guy? He said my entire view of the world has been proven wrong. Which is really, really hard to do. Not defending him, but he does, he does deserve credit for that.

[B]

Okay, I don't 100, I don't 100% disagree. But I think what he did was, he sort of said he did. It was sort of a mea culpa. But I don't think he held himself or the Fed responsible. What he said was we should. His worldview was wrong because he assumed people wouldn't blow up the economy because they would be looking out for themselves. So it's sort of not like the Fed was responsible for this. Was more like I'm disappointed in the executives of these banks.

[C]

Yeah.

[B]

So it was like sort of not far enough for a lot of people would be the only way. I would differ with that.

[C]

Well, yes, you're right. He didn't say I'm sorry for almost literally destroying the world economy because effectively that's what they did.

[B]

Right. So we have this thing that's with us still to this day called the Greenspan put. And this is stock and bond market participants believe, and with good reason that the Fed is when push comes to shove, going to respond to tremendous turmoil in the investment markets.

[C]

That's my worldview.

[B]

Yeah, I think they follow the 200 day moving average, I have to be honest with you. So I think that the Greenspan put is the legacy of Alan Greenspan. I think they talk about the dual mandate which is stability of prices in the real economy and keeping unemployment low. And I think those things are the guiding star. But I think the rhetoric and the speeches changes and sometimes the policy rate around very volatile stock markets and I think it's sort of an unofficial third mandate is thou shalt not crash the stock market. And this is lesser or greater depending on who's sitting in the seat. But I think the institution, the legacy of Alan Greenspan is the institution when Greenspan was there had no Bloombergs, no Bloomberg terminals anywhere. And now they probably have a thousand Bloomberg terminal on a lot of people's desks in that building. And I think that's part of the Greenspan legacy. We don't have to say more about it. We're gonna do tons of Fed stuff this year. I know Kevin Warsh is gonna speak in the middle of July to Congress. So let's hold the rest of our Fed commentary till now.

[C]

I quickly wanna talk about some of the stocks that are week lows. By the way, this is a hilarious headline. Not that hilarious, haha. But Microsoft, Satya Nadella, we can't let AI giants eat the economy. Oh really? Are you speaking about your stock price? Because it's not looking so great.

[B]

He's getting eaten.

[C]

Yeah, no kidding.

[B]

All right, so they're now releasing cheaper models and Anthropic is kicking the shit out of them in the enterprise. And now all of a sudden AI might be problematic.

[C]

So if you look at a list of stocks that are making 52 week lows, it's not really expanding to the point of like, oh, I'm worried. But the names that are on the 52 week low list or within 5% of their 52 week lows, they are, they are notable.

[B]

Give them to me.

[C]

All right. This is an order of the least bad to the trade to the trade desk.

[B]

Okay? Okay.

[C]

And the least bad is MasterCard and O'Reilly Automotive. These are each 19 off their 52 week high. All right? And then everything else is in a bear market. And these are, These are names. McDonald's, CME, AT&T, S, P, Global, Uber, Ice Fox, Comcast, Intuitive Surgical, Ulta. And now we're in the 40 below. Those are 20 to 35. Domino's Pizza, Palantir. Dude, this was like the, the, the retail favorite stock. Palantir.

[B]

Palantir has crash.

[C]

It's, it's in a 40% drawdown. And it looks really bad. It looks really bad. 42%. Excuse me. Netflix.

[B]

I can't believe it.

[C]

Netflix, a stock that I also own. It's my smallest position, but I would love to add if this goes a lot lower. I'm, I'm getting aggressive. I'm, I'm not scared of this.

[B]

Well, it's going lower.

[C]

Good. I'll buy more. You know what's interesting? I told Ben today, I've never lost 30% on a stock in my life. I don't think I'm down 30% on Netflix. Not selling. Excuse me. Nike down 47%. Adobe cut in half. Lulu, Intuit, and the Trade Desk. There are a lot of names on this list. A lot of big, big names. That's 20 big names. And there's a.

[B]

Could I find 20 names that are within 5% of 52 week highs that sort of offset this?

[C]

I'm not, that's not the point I'm trying to make. I'm just saying.

[B]

No, I'm just thinking out loud. Like there are a lot of name brand stocks that are at 52 week highs. Like I would say like Delta Hilton.

[C]

But that's the point is the S and p is like 1% off its all time high.

[B]

Yeah, you're right. These are like notable blue chip stocks in every sector and a lot of

[C]

these names are crashing.

[B]

Yeah. Like it's weird to see an Intuitive surgical at a 52 week low and a, and a Pal. Palantir cut in half. Like it's Right.

[C]

So I just thought it was notable. All right. I Am going to make a very tepid case for Meta.

[B]

Lean into it.

[C]

No, I'm not. Well, I don't. I don't own the stock. I'm not buying the stock. So it's tepid. But I want to say two things. Let's throw the price chart on here first, please. Third chart down. So this stock is in no man's land. I. I don't buy names like this.

[B]

Looks so bad.

[C]

Yeah, it doesn't look good.

[B]

Oh, man.

[C]

Like, I don't. I don't buy stocks like this. That. It just. It's literally in the middle of nowhere. Okay.

[B]

Oh, my God. What the hell? This looks so bad.

[C]

It doesn't look good.

[B]

Look at the rallies. Look how fast the rallies get sold.

[C]

Yeah, it doesn't look good. Looks like it's going a lot lower.

[B]

I would generational top.

[C]

I. I'd be excited to buy it in like, at like 470. Okay. At. the liberation day low or the tariff day low for that matter. All right, here's what I will say though. If I were to pull the trigger, the only right way that I would convince myself, like, all right, buy it now, because when these stocks turn, this

[B]

sounds like when O.J. o.J.

[C]

Simpson. If I would have wrote the book.

[B]

If I would have done it. If I did it.

[C]

No, no. But I'm serious about it.

[B]

If I pull the trigger, I'm serious.

[C]

The price changes of these names so fast. Remember when Amazon, out of nowhere, all of a sudden went up 25%? If you blinked, you missed it. Like, it's very difficult. It's very easy in hindsight to react, oh, I should have bought it in real time. These things happen fast. They don't let you in. All right, stock looks like. And nobody's excited about this name for reasons that we just mentioned. So the forward PE is. I'm sorry, 20 times trailing earnings. All right, 18 times forward. Meta is trading 18 times forward earnings. That's kind of nuts. Now. Why is it trading at 18 times forward earnings? We just said they are spending almost all of their freaking revenue or will be on. On. On Capex. But they. There was interesting news last week. They are introducing a subscription service. Now, you might say, like, that's a reach. That's a hell there. I don't like this. How desperate are they? Because it's an advertising company and it's the best advertising company in the world except for Google, but there might be something here. It's Instagram plus and Facebook plus and I don't know if it's targeted for influencers specifically. Might or might not move the needle, but they're, they're doing things.

[B]

Okay, so these are not, these are not subscriptions in the traditional sense. These are really subscriptions for power users. I actually think it's going to work. I don't know if it's a reason to buy the stock because the incremental revenue growth coming from some of these things that they're launching is really not going to move the needle relative to how much they're spending on data center stuff. But I wanted to bring that bull case out because probably one of my favorite analysts covering the stock, Mark Mahaney, says it's time to buy. So his piece is called Time to Subscribe and well, first we reiterate our outperform rating and $930 price target. That's 50% higher than where the stock is today. So he's like pointing at the stance.

[C]

Well, yeah, sentiment is pretty washed out. I like that. Good for him.

[B]

On the heels of Meta rolling out consumer and business paid subscription plans for its family of apps, as well as a new suite of Meta one AI subscription. All right, put Meta one aside. We don't have time for that today. But that's like their chatgpt, right? Like, that's like their use our AI instead of OpenAI's AI. But just. I don't even want to go there. The, the app subscriptions are interesting and they could work. People didn't understand how powerful what they did with Reels was going to be. And then it became the most important revenue growth engine in the company. So what Mark is saying is subscriptions across Facebook, Instagram and WhatsApp consumer MetaOne AI tiers that bundle app level perks with expanded Meta AI usage and business creator oriented MetaOne tiers that add verification, discovery links, insights, support and workflow tools. We don't expect these offerings to materially alter near term revenue growth. Given phased availability and likely low initial conversion. We believe even modest penetration against Meta's multibillion dollar user ecosystem, 3.6 billion daily users could create a meaningful high margin revenue stream over time. So put this graphic up. Like this is an example. This is Instagram 3.99amonth. More control over your story, more insights, more reach and discovery influencers you could bribe in Instagram to show your stuff to more people, more customization. Like, are there a million people who will pay 3.99amonth?

[C]

Yes.

[B]

Are there 10 million people? I think yeah. Yeah, maybe out of a population of 3.6 billion?

[C]

Yeah.

[B]

Will 10 million?

[C]

Yes.

[B]

Okay. And that's the point. So Mahaney is saying 5 to 10 billion in annual revenue opportunity, assuming 2 to 4% penetration.

[C]

Does that move the needle? What's their revenue? Are they doing 150 billion for every

[B]

1% penetration, it would generate two and a half billion in incremental revenue and 1.7 billion in incremental operating profit, assuming a 70% margin. So it becomes meaningful as they iterate and figure out how to get more people to say yes. And the thing About Instagram and WhatsApp and Facebook, they're very good at introducing something, looking at the results, and then figuring out how to get more people to use it and pay for it. And I would not bet against them being able to do this. But the thing is, it's not big enough. It may not be big enough to offset the reason the stock is going down. But I did want to bring that out. All right, we have mystery chart, and then we're gonna bounce. Put that up. I just bought this piece of shit. How much money am I gonna lose? And what is it?

[C]

Okay, is this Nike?

[B]

Look how good you are at mystery chart. Might be the best. Might be the best on the whole channel.

[C]

I don't know. How much lower could it go? You can only lose 100% tops. No, seriously, how much?

[B]

Earnings are a week? Earnings are a week from today. I think they'll be terrible, terrible earnings.

[C]

I could see the Stock going to 33, $32 after it reports, and that'll be the bottom.

[B]

So, all right, so I might have bought right before the last horrible earnings

[C]

report, but that's it.

[B]

That's fine. I could live with that. I think Tim Cook is loading up. I just want you to understand that the CEO is buying million dollar blocks of stock.

[C]

You never buy stocks like this.

[B]

No, never. This is so far outside my wheelhouse, but Tim's on the board. He's buying. The CEO is buying. There's another board director who's buying. And look, nothing can happen here. It's too big to be acquired, so there's no catalyst like LVMH does. $80 billion in revenue a year. Nike, with a 30% premium from today's valuation, would be 90 billion. LVMH cannot do this deal. They did Tiffany and it almost broke them. And that was like 17 billion. So it's out of reach for any rival bidder buyer.

[C]

Oh, my God. You also. Hold on, hold on.

[B]

63.

[C]

Oh, it was 280.

[B]

Yeah. You also can't have an activist here because Phil Knight's son controls all the votes. So as an A share and a B share the B shares are publicly traded but the A shares is where all the board director where all the the decisions take place and those do not trade. So nothing is no like there's no catalyst other than they get their shit together. I did want to make this point to you. I'm paying close attention. They I think they're playing the World cup beautifully with product ready to go. For a billion fans around the world who really care about this in every country and more importantly for American eyes and ears, I think they nailed it in the NBA playoffs and finals. They got lucky. It was the Knicks but they were betting that it would be the Knicks and as a result they had their go to market strategy perfect. They had the celebrities wearing the shoes as soon as the games were won. They had pre orders for drops. Rather than piss people off the way they normally do, do a drop, have the bots buy it up. It sells out. You have to go on stockx or a resale. They said, you know what? Now we're gonna do pre orders and we're actually gonna give fans the chance to own the shit when it's ready. Let me show you some of the shoes.

[C]

Jaylen. Jalen doesn't even have his own shoe. He wears Kobe's. Most of the time.

[B]

He wears Kobe's. We're gonna get there in a second. John. This is a Footlocker exclusive. Air Force One. You and I won't wear these. They're ugly as shit. They're literally candy corn orange. We're not gonna wear them. But this is a Footlocker exclusive. They had pre orders ready to go on Footlocker's website. Coinciding with the victory. I don't know when those shoes come out. It might be August. It's like later in the year. But the pre order go to market strategy and is going to make a lot more money for Nike and a lot more fans. Happy next one. These are dope. These are Jordan Threes.

[C]

Those have been around for a while.

[B]

These are Jordan 3. No, they haven't. Yes, they have Jordan Threes. Retro.

[C]

Those are not. Those are not new.

[B]

Yes, they're new and they're coming out. They're not out yet. They're not out yet. Stop, please. I pray, I pray that you stop.

[C]

Bro, I've seen those sneakers for like three years.

[B]

Don't tell me what you're saying you've seen a variation that you think is these. They're not these.

[C]

Hold on one second.

[B]

Pre order. Oh, no. He's about to pull the most decrepit sneakers out of his closet that mankind has ever witnessed. I don't. I don't know how long I'm gonna. I'm gonna sit here and wait for him. I might just do the rest of the show for you guys.

[C]

I'm back.

[B]

Here we go. Let's see what he got.

[C]

Those are not new, dude.

[B]

Yes, they are. They're retro. You're gonna pull out the originals.

[C]

No. Imagine I had this. No, they're not. These. Okay, so Nikes.

[B]

What the is this kid doing?

[C]

Nick's Nikes.

[B]

I don't understand. Did you take a gummy before we did the show?

[C]

Just look.

[B]

What does that have to do with anything?

[C]

You're making the case for Nike, asshole. I showed you. I just got new Nikes.

[B]

Oh, okay. All right, next. That was something. These are.

[C]

Those are horrible.

[B]

These are kith exclusive with Nike. These are the Air Max 95s. I don't like these either. I don't wear Air Max 95s. Cause they're very narrow and the toe box is too small. And I'm gigantic. So I don't really wear these. And then there's the last one. These are the ugliest ones I'm going to show you. These will probably be the top sellers. Out of all the ones I showed you. These are those Statue of Liberty green. So you're right. Jalen was wearing these. These are Kobe 5 Protros. But this new colorway New York versus New York comes out August 1st. I think they're going to sell a lot of these. And it's not that this is going to move the needle for Nike for their earnings, but I think it's a signal that they have figured out what they've been doing wrong. They've been pissing off their most likely repeat customers with this stupid drop strategy where every time they announce a new shoe, it's already sold out before you could even buy it. And you have to, like, go buy it from someone else for $700. The pre order strategy, I think, is a material development in the history of Nike where they're going to stop pissing everyone off and start actually making money again and pleasing their customers. What are your thoughts?

[C]

So those sneakers that I just bought, you know where I bought them? Not from Nike. It was annoying. I had to buy them from StockX.

[B]

Yeah. So if this has been an ongoing issue.

[C]

So if they are going to do what you're suggesting, Then maybe the stock. I don't know. How could it get worse?

[B]

It can get worse. All right, so here's how it get worse. Their China business is a disaster and everyone knows it. So it's not gonna be a shock. We don't know if there's any bottom. China has now competing footwear companies like leaning that are like comparable in quality to Nike. And there's a lot of nationalism in China where they actually prefer their own brands to, to American brands in most cases other than the iPhone. And so there might not be any bottom to the Apple China business, to the Nike China business. And I almost think they should do what Nvidia did, just like count it out.

[C]

It's 15% of their revenue and shrinking

[B]

and it's been a huge issue. So that, that could get worse. The other thing that could get worse for Nike is the tariff related, the cost side. And that's also been a huge issue for the stock.

[C]

I don't think that investor sentiment could get much worse.

[B]

No, it's in a 75% drawdown. It hasn't had an up year since 2021.

[C]

Oh my God.

[B]

It's in the worst drawdown in Nike history since coming public in 1982. Look at this. So no, it absolutely cannot get worse. The fundamentals could get worse, but I don't think the investor sentiment can get worse. That doesn't mean the stock can't go lower.

[C]

Problem is, whatever.

[B]

I took a shot. I took a shot.

[C]

It's not like 12 times forward revenue. It's still like, I think 18 or 20 times.

[B]

It's just, it's this incredible, it's this incredible like Battleship situation where it could legitimately take like 3, 4 years to turn this thing. It like, but it's happened. We've seen it. Ford is at a 52 week high. Intel is at a 52 week high. We've seen Chipotle, multiple comebacks. We've seen Netflix.

[C]

It could do it.

[B]

I'm not saying it's definitely going to happen because some of these don't ever turn. Under Armour never turned.

[C]

I forgot about that brand.

[B]

I know. But Under Armour was the thing that spooked Nike investors in the 2000s decade. In 2005, Nike shareholders were legitimately afraid of Under Armour.

[C]

Dwayne Johnson.

[B]

Anyway, I'm not like, it's not a high conviction. I'm not pounding my fist on the table. I bought some. I know it's the worst stock in the world. We'll see what happens.

[C]

All right.

[B]

We went way too long guys. Thank you so much for watching. Thank you watching for listening. Shout out to the live chat. You guys are the best. We miss you when we're not here. We'll be here next week. Tomorrow is Wednesday. All new animal Spirits. We'll do Ask the Compound and we'll do the Compound and Friends to finish out the week and keep it locked. We'll talk to you soon. Thank you guys. Good night.

[D]

Ritholtz Wealth Management is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Ritholtz Wealth Management and its representatives are properly licensed or exempt from licensure. Nothing on this podcast should be construed as and may not be used in connection with an offer to sell or solicitation of an offer to buy or hold an interest in any security or investment product. Past performance is no guarantee of future results. Investing involves risk and possible loss of principal capital. No advice may be rendered by Ritholtz Wealth Management unless a client service agreement is in place.

[A]

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