← The Compound and Friends
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- [00:13]
Josh Brown
Knicks in five. Did you know those were the words to the song all along? Well, make it louder.
- [00:20]
Michael Batnik
What song? We listen.
- [00:21]
Josh Brown
Oh, this song. Yeah. Ready? Ready. Knicks in five.
- [00:26]
Michael Batnik
See, I told McWhirst or Nixon six I was wrong.
- [00:30]
Josh Brown
Yeah. We did it. I know. The chat's super excited for us. Like 1% of the chat.
- [00:35]
Michael Batnik
Yeah. Everybody's super happy for us.
- [00:38]
Josh Brown
We are the champions. If you guys have been. If you guys have been with us since day one, you understand how meaningful this is to us and how long we have been waiting for this moment. Michael's going to the parade, so that's pretty exciting. I'm not. When you get to my age, you run from parades. I don't know if you know this.
- [00:58]
Podcast Announcer
I'm.
- [00:59]
Josh Brown
I'm gonna be 50 years old. Do you have any idea how many books about World War II I'm about to buy? Can you even. Can you even comprehend what's about to be happening? Anyway, we finally got it. So congratulations, Nick fans. Welcome to what are your thoughts? This may or may not be. Depending on whether you've seen the show or not, this may or may not be your very favorite show about investing. We do this every week at 2pm Eastern and almost all the time, we do this live. Those of you tuning in for the first time, my name is downtown Josh Brown. I'm here with my co host. His name is Michael Batnik. Michael, say hi.
- [01:41]
Michael Batnik
Hello. Hello.
- [01:42]
Josh Brown
All right. And for you long timers, we love that you come back for the live. Thank you so much. Denver scribe says almost missed the live. Wasabi, everyone. Wasabi. Heather says. Hey, pounders. Good to see you, Heather. Who else is in the chat tonight? Kps Fred. Happy for the Knicks in New York. Somebody said, holy hair. I know. I had a PRP treatment this morning. Actually, my scalp is on fire. But the results are coming through.
- [02:17]
Michael Batnik
Dude, it's so good that your face is growing hair.
- [02:19]
Josh Brown
I know. I'm like the Jalen Brunson of hair regrowth at this point. I'm going for a championship. We have a sponsor tonight. That sponsor is our friends at Public, the public trading app and public.com. it feels like there are two types of investing platforms right now. Legacy brokerages that look like they were designed in 1997 and then the new wave that looked at investing and thought, you know what this needs? Sports betting. Neither seems like a great place to build your wealth. That's where public comes in. It's the modern investing platform for those who take it seriously. Stocks, options, bonds, crypto. They have it all and the energy that they're not spending on building a casino. It's going into AI Public.
- [03:04]
Michael Batnik
That's right, Josh. I'll take it from here. Public is the only investing platform where you can create agents that can monitor the market, manage your cash and and execute your trades. Just enter a prompt, approve the workflow and put your agent to work. Go to public.comwayt to get started. That's public.com Watkins paid for by Public Investing. Full disclosure and podcast Description Go to
- [03:25]
Josh Brown
the Go to the thing, guys. Click the thing. 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, I think you're gonna. Are you starting with doing SpaceX?
- [04:08]
Michael Batnik
You know, we're sort of, we're sort of sharing the doc. We're gonna start with SpaceX. There's two mega themes that we're gonna get to in the show this week. One of them or tonight? One of them is for the last as long as we've been working together, which is since 2012. Hard as it is to believe, one of the themes over the past 15 years, 16, 14 years has been there's not enough stock. There's too much demand from the relentless bid and there's just not enough supply because all of these companies are buying back a lot of stock. We're, we're, we're doing it and there's just not enough equity issuance. That is over. All right. So that era over in the rearview mirror. The other megatrend that is over is to the extent that these companies are doing R and D. And I shouldn't have caveat of that. They are doing a lot of R and D. It's all been funded with cash flow. In 2020 and 2021, these companies termed the hell out. They gorged on debt because interest rates were basically free for them too and they didn't need to issue any more debt. They've been good. Better than good. Well, now they're issuing debt Nvidia 20 billion. So we're to get to that two themes. But it's, it's kind of amazing. Like those are mega themes. So we have the SpaceX IPO.
- [05:22]
Josh Brown
Do you think so? Both of Those things are really important. Do you think the average market participant, even professionals, have come to terms with this really big and important change?
- [05:35]
Michael Batnik
No landscape, no Barents is going to write about it. It's going to start to become a thing. But no, because it's just happening. It's only just begun. But this is, this is it. This is the end of an era.
- [05:46]
Josh Brown
Okay, not saying it's bad, but that's a great intro. That's a great intro to tonight's show because we have a lot to say on the topic.
- [05:53]
Michael Batnik
All right, so SpaceX, as we've discussed there, the IPO was a little bit interesting, a little bit unusual. Very unusual. Only 3% of the float was unlocked or they issued 3% of the company in new shares. So they raised, what are. They raised $75 billion. And so it was a very successful IPO. I think as most people suspected. Most people did not think this was going to face plant given all that we were hearing about the over subscription, all that sort of stuff. And it didn't face plant. In fact, it did the opposite of Faceplant. It is now the, the, the market cap of the company is now $2.64 trillion. And I don't know, it's probably going to pass Amazon tomorrow it is about knocking on twice as big as Metta. It's bigger than Taiwan Semi. What are your thoughts, Josh?
- [06:41]
Josh Brown
Well, hang on. It went up, it went up 20% the day of the deal, which everyone said, perfect. That's like Goldilocks for an ipo. That means the company did not value itself too low. They didn't leave money on the table and there was room for the people who bought the IPO to see a profit right out of the gates. So that was Shangri La. The next day the Stock ran another 15%. And then today plus 6, 4 plus 4.8.
- [07:11]
Michael Batnik
So well off the highs, it got as high as 225. Close at 203.
- [07:15]
Josh Brown
Okay, so if you are an IPO fan and you were watching this from the sideline or you got a piece of it or whatever, there's nothing negative that you could say about the way that this was received. The risk appetite in the market, the pricing they, they literally nailed stuck. What is the phrase? Stuck? The landing. Would you agree they did okay.
- [07:37]
Michael Batnik
They made, they manufactured the landing.
- [07:40]
Josh Brown
They did.
- [07:40]
Michael Batnik
This was.
- [07:41]
Josh Brown
Yeah, these are like the smartest people. Like respectfully, you don't have to like Elon. I'm not an Elon, Stan. But these are the smartest people in the world at the big investment banks, working for one of the smartest people alive. And there was, I could not imagine a universe where they brought this thing public at a price where it was gonna dump on day one. I know a lot of people thought that. I know people did think that there was a chance that. Of course there's a chance of it. I, I did not think that there was a chance, but neither did you.
- [08:13]
Michael Batnik
Okay, so throw that chart back on. I think a lot of people are scratching their head. Make it make sense. SpaceX's revenue. I, I can't remember what it was. I think it's less than 15 billion. Amazon is, I don't know. What's Amazon's revenue? 250 something. Whatever it is.
- [08:25]
Josh Brown
Yeah, hundreds of billions.
- [08:27]
Michael Batnik
All right, so you're like, make it make sense. It doesn't make sense. It can't make sense. And I think that. Talk to me in a year when all of the shares ex ellens are publicly traded and there is not $75 billion out there, or I guess, I guess it's now up to 110 billion. Whatever it is. When there's $1 trillion worth of stock out there and it's still 2.6 trillion, I'll say, all right, this, this is, this makes no sense. But right now it's sort of, it's, it's not real. It's not really $2.6 trillion. I mean, I know based on like the traditional. Technically it is, but it's really not.
- [09:02]
Josh Brown
Well, it's not because of the scarcity of shares available, but that's going to change within a couple of weeks. Really fast is going to change. And then that'll be a good test. How many versions of the chart? What does the typical IPO do a year after it comes public? How many versions of that did you see going around last week?
- [09:19]
Michael Batnik
Yeah, there's a lot.
- [09:20]
Josh Brown
What is that? Sour grapes? People that, like, they're, they feel bad that they couldn't get in on it and so they're like, like professionals, like telling their clients, like, yeah, but dude, here's what's going to happen.
- [09:32]
Michael Batnik
No, listen, I, it's 50%.
- [09:35]
Josh Brown
The average IPO is 50% lower a year later.
- [09:38]
Michael Batnik
Okay. So I think.
- [09:39]
Josh Brown
Not good.
- [09:40]
Michael Batnik
I think people need to know that. So I don't think anybody's valuing this on a discounted cash flow or looking out 10 years, people looking out 10 days tops, 10 hours, people are flipping this. So again, talk to me in a year, like, we'll see where it is. In a year I, I would, I would expect it to be lower. I'd be, I'd be really surprised. But this way if the market holds SpaceX at $2.6 trillion or even 2 trillion or even 1 1/2 trillion a year from now, it's then the bull market is still, is still, is still roaring.
- [10:07]
Josh Brown
The sell side started coming out with $3 trillion revenue projections. Obviously not for 2026, but like you started, started hearing some of that and then. What was the other thing I wanted to ask you about? It escapes me. I think, I think the, the big takeaway is there just wasn't enough stock relative to the amount of demand. And it's not even like the demand shocked anyone. Everyone knew there would be a lot of demand, but there was just, there was more and that's why you get a follow through into day three. It's pretty remarkable. The 2X leverage versions of SpaceX, the ETFs came out the next day. That's brave new world shit. I remember when it was like six months or three months. Now it's just like automatic. Our product is ready to go.
- [11:03]
Michael Batnik
And they did SpaceX, they did a billion dollars worth of volume.
- [11:07]
Josh Brown
Do you think that influenced this follow through that we're seeing in the price?
- [11:10]
Michael Batnik
I don't, I would guess, I don't know enough about the mechanics of how these things impact the underlying. I would guess. Josh Shaver tweeted SpaceX just had the second largest one day market cap increase on record. That was yesterday. $433 billion.
- [11:23]
Josh Brown
Again, yes, technically true phantom market cap.
- [11:26]
Michael Batnik
That's exactly right. So to me this is not a valuation story. Anybody who's looking at this, and I understand why they're saying that, anybody who's looking at this and saying this is such a sign of the times, how do we have a two point. It's not 2.6 trillion, it's not on paper.
- [11:40]
Josh Brown
On paper it's a giant asterisk. On paper, the company based on the 3% of its shares that trade freely or that were sold last week, on paper it's worth that. There's nothing you could do about it. That's just what it is. But even the indices that are going to add it, they're not adding it at as though it's 2.6 trillion. They have to adjust that by how small the float is and they will. So we're gonna get used to it. The dust is still settling. They basically confirmed the cursor deal. Today was the news. So they announced in April that they were gonna acquire this company, Cursor, which at one Time, maybe in 2025, was the leading AI coding company. They would help software developers with AI tools. And then, of course, as we know, a lot more tools came along, most notably Anthropic's coding tool. And what's interesting about cursor, it's a $60 billion acquisition. It's being paid for in SpaceX stock. Do you know what the breakup fee is?
- [12:59]
Michael Batnik
What is it?
- [13:00]
Josh Brown
$10 billion. If SpaceX fails to complete this acquisition, they would owe cursor the company $10 billion. Think about this world that we live in right now. Breakup fees. I remember, like, $5 million breakup fees being, like, customary. So this is just complete insanity. What is Cursor? It's interesting. They kind of piggybacked on Anthropic and built their own tool utilizing Anthropic's models. But then they pivoted and started doing a lot more with Xai, which is the SpaceX sort of the thing that owns Twitter. But also it's like Space X's LLM business. And they went from being a custom, primarily a customer of. Of Anthropic, to now being a competitor to Claude Code that's going to be folded within the Elon empire. And we know there's no love lost between Anthropic and Xai or Elon and the people backing Anthropic. So it's sort of like. It's sort of like what's. What's the thing that happens in wrestling where 20 guys are in the cage together? The Royal Rumble, say a Royal Rumble at this point, and it's hard to disentangle who's invested in what and who's backing who.
- [14:31]
Michael Batnik
This is the part of the story that pisses people off. And I understand the sentiment. I'm not exactly thrilled about it either. There are. I don't have the schedule in front of me, but there are provisions in the waterfall, the lockup, that if there are targets met, if the spot. If the Stock is up 20%, the stock is up 30%, more shares are able to become unlocked early. And when, or if that happens, then I do suspect that this thing will trade way down, way fast upon index inclusion. Now, thank God the index providers or the index manufacturers are saying, we're not taking all of this. We're not doing it. We're going to put a cap, we're going to put a maximum of three times the float, whatever the rules are. So it's not going to absolutely nuke the index, it's not going in at a $2.6 trillion valuation, thank God. But nevertheless, it does kind of suck that they probably will be using retail or index funds as exit liquidity. Again, it might be 30 basis points, but whatever it is, it's still. It still doesn't sit right with a lot of people.
- [15:32]
Josh Brown
Right. In their minds. They're like, doing retail, a favorite, like exit liquidity. They're begging us for the stock.
- [15:39]
Michael Batnik
Right?
- [15:39]
Josh Brown
Like, that's, that's the, that's the attitude. What. This tweet is wild. What's going on?
- [15:43]
Michael Batnik
So here, here's another thing that people don't particularly care for. There's just. There's just no rules anymore. Julian Klimochko tweeted. So, Elon Elon tweeted. I think SpaceX might be able to reach approximately $1 trillion in revenue in 2030. And I would be surprised if revenue is not greater than $1 trillion in 2030.
- [16:00]
Josh Brown
Are you allowed to do that?
- [16:01]
Michael Batnik
Traditional. I mean, traditionally, this is. This sort of thing is. Is, I think, frowned upon. So Julian said, this is the most amb. Management guidance and market history. And there's been no AK filed, by the way. Somebody said this would be a 90% CAGR between now and then. Maybe they could do it. I don't know. And if they. I hope they do do it. It'll be wonderful. It'll be wonderful.
- [16:17]
Josh Brown
But, but put that, put that back up. This tweet would be handcuffs. Handcuffs. Not a fine. Handcuffs. In another era, you could not do a public offering and then two days later come out and put your 2030 revenue guide on Twitter in the midst of the hottest offering of the year without some sort of a filing. But Elon Musk told the SEC literally to SSD on Twitter six years ago. I don't think anything happened with that. Like, I'm sure a lot of lawyers got paid, but there were no consequences to him whatsoever.
- [16:58]
Michael Batnik
Member funding secured. He was gonna take Tesla private. What is that?
- [17:02]
Josh Brown
And frankly, from the White House's agenda. And the SEC sits beneath. The President wants more of this. The President of the United States sees this as America winning, and it is. So I think he could basically say whatever he wants, and I don't think any rules apply to him at all. It's the world's richest man. Who's going to do anything about it?
- [17:27]
Michael Batnik
So a good segue into something that you wrote over the weekend about what makes our country special, you said, I went into the weekend thinking about, can
- [17:36]
Josh Brown
you read this without Shedding a tear. It's so beautiful. What?
- [17:38]
Michael Batnik
I cried the first time I went into the weekend thinking about how incredible our capital markets are. Only in America can a company start itself up in a garage and within a few decades become one of the most valuable businesses on earth. It takes intrepid entrepreneurship, sure, but. But what's also required is you, the American investor. The Germans and the Japanese and the British and the Brazilians have their founders and the risk takers. But what those markets are missing is the tens of millions of ordinary people who are willing to back these dreams and gambles with their own investment capital. Nobody does this like we do. We are the descendants of dreamers and gamblers, many of whom left behind everything. Many of them left everything behind and took the ultimate gamble with their very lives on the line in order to get here. This started in the 1600s and it continues until this day. Without the American investor, there is no SpaceX. Without the city of New York, there's no transference of these risks from venture capital to the public stock markets. It's so true.
- [18:33]
Josh Brown
Yeah. So look, there are unbelievable entrepreneurs around the world. Like, look at the guy from Spotify, Daniel Ek. What a genius. But that thing trades in New York. You know what I mean? Let's not forget. And you know, it's not anything specific about the NASDAQ and the New York Stock Exchange, although those are the two greatest exchanges in the world. Those exchanges could exist elsewhere if the investors were there. But the investors are here. They're in America. The type of psychopaths like us who are willing to put money into things where maybe the rocket won't explode the. The 10th time after it just exploded nine times in a row. That doesn't exist. No one's doing that. Look at what people are doing with their money in these other places. They're holding gold jewelry under the bed. They're holding bonds at negative interest rates for 10 years in a row. We are we, all of us. And I'm saying this on the 250th anniversary of the United States and on the heels of a championship in the city of New York. We are a rare breed on this planet. And it's not that there aren't risk takers elsewhere. There aren't 100 million risk takers elsewhere. We are the only game in town for something like a SpaceX to be able to come along. So I appreciate that that struck you, and I think it's super important for
- [20:04]
Michael Batnik
people to understand we are built different. So getting to the conversation that we opened the show with about. There was everything up until 2026 and now there's what happens on a go forward basis. So Bloomberg wrote about this. They said for the better part of two decades, a defining feature of the US Stock market has been scarcity. Year after year, shares disappeared from public hands with buybacks by S and P companies alone erased nearly $12 trillion worth.12 trillion in corporate buybacks. And now investors are about to discover what happens when the supply suddenly comes rushing back. So check this chart out. I mean it's.
- [20:41]
Josh Brown
I'm sorry, is that. Wait, wait, wait, wait, wait, wait, wait, wait. Is that, what are the numbers here? Is that. That's 1.2 billion in. In equity issuance. Yeah, but is, is that inclusive of.
- [20:52]
Michael Batnik
These are estimates. These are estimates. Holy. Reflecting estimated free float change. Yeah. So this is what they expect to actually come to market. And Josh, you've been talking about this for a long time. Like it's all about when, when they're, when investors are satiated and when we're overserved. And this is it. I mean, I'm not, you know, this is like the thing. And if we can get through this then, then I don't know what the bears have left. But we're not, we're not through it yet. And I'm definitely not ready to spike the football because there's, there's a lot
- [21:22]
Josh Brown
in front of us still to come. OpenAI and anthropic, which we're going to get into in a second.
- [21:29]
Michael Batnik
And I mean there's a lot more.
- [21:31]
Josh Brown
Yeah, well, that's probably a 27 vintage. We don't know the extent to which we'll see more of what we saw from Oracle and Alphabet. We don't know. I mean, what if Apple decides. Yeah, we've spent 15 years buying back stock. We made the decision. We actually want to sell a big chunk meta. Very likely. You know, it's A lot of companies are reversing the flow. They were sucking up every share of stock out there that they could and now it's a different world. And I agree with what you said. I don't think this has dawned on everyone yet.
- [22:08]
Michael Batnik
No.
- [22:09]
Josh Brown
So probably not going to be bullish for multiples for long.
- [22:14]
Michael Batnik
This is, this, this would not be bullish if. Forget about Apple. They're not going to do it. But it's happening. Like Oracle is doing 20 and 20. Yeah, it's happening.
- [22:24]
Josh Brown
Google, what is, what is this rainbow chart? Oh, all right.
- [22:27]
Michael Batnik
So I want to just, I would just want to before we get to the next topic, by the way, today we don't really have much about the actual stock market in the show tonight. Did you see the candle in Micron? Micron opened at a new all time high and closed down 6%.
- [22:45]
Josh Brown
Bearish. Engulfing. Bearish, Engulfing all the way white.
- [22:48]
Michael Batnik
Engulfing all the way engulfed.
- [22:50]
Josh Brown
Oh, we'll do it on compounded friends.
- [22:53]
Michael Batnik
So, all right. I just wanted to make the point that we're talking a lot about. It's AI and everything else and there's few stocks working. Not really true. In fact, not true. Not true at all. Mike Sicardi tweeted this chart. Throw this out, please. Look at the green line. We've got 64% of the S&P 500 above their 200 moving average. That is the highest since was that March of last year.
- [23:22]
Josh Brown
So long as those companies are either involved in AI or luxury travel, we'll be okay. I don't really think there's much else.
- [23:30]
Michael Batnik
It's not just seven stocks. Not even close. All right, so Josh, how do you play OpenAI?
- [23:36]
Josh Brown
Well, so this, this is, this is where we're going now. So if you watch this SpaceX thing with your jaw agape going into day three of gains probably goes up every day for the rest of our lives. I have no idea. And you're wondering what's going to be the next one? It's probably going to be OpenAI. They seem to be very aggressively elbowing to the front of the queue. It seems like there is a concerted effort to get news out there, get filings out there and get out ahead of Anthropic. I think they don't want to be the third one of the three public. And I think maybe there's even some cachet to get out ahead. And so we are hearing increasing rumblings that this thing is going to come soon. Originally they were saying September, but they could shock everyone. Nobody knows at this point. It just feels like everything's in flux. My friend Andre shepherd at Canter Fitzgerald put out a Note citing the OpenAI IPO filing. They filed the confidential S1 last week as a material catalyst for SoftBank, which is a huge shareholder. And so I wanted to share this idea with our audience. If you don't think you're getting allocated OpenAI and you miss SpaceX, this might be a stock, a ticker that you want to have on your screen and you definitely don't have it already because it has five letters in its ticker. It is an ADR SFTBY if you want to punch it up is SoftBank. And SoftBank is run by Masayoshi Son, who is a riverboat gambler, has taken. Has taken some of the biggest swings of all time that anyone has ever seen in the stock market. Sometimes they've worked out like Nvidia and sometimes they haven't like WeWork. But this is what he does. He takes huge concentrated positions, borrows a lot of money to do it. And when he believes in something, he goes all in. And he has gone all in on AI, specifically OpenAI. Here's Andres. OpenAI recently announced that it has filed an S1 ahead of a public listing. While the company did not provide exact timing it, it stated it may now potentially accelerate its timing. We view this as the most material catalyst for SoftBank and our coverage. OpenAI comprises 25% of SoftBank's equity value since OpenAI and ARM, which is also now an AI play, comprises 20. Hold on. ARM comprises 65% combined with OpenAI of SoftBank's equity value as of March 31, OpenAI closed its latest funding round with $122 billion in committed capital at an 852 billion post money valuation. This latest round includes A previously announced $30 billion commitment from SoftBank to be deployed in three $10 billion tranches. SoftBank has committed 65 billion so far to OpenAI. We continue to believe SoftBank benefits from direct access to rapid AI trend via its OpenAI stake plus market leadership position in semiconductor IP via the stake in ARM. They own 90% of ARM holdings and all those royalties flow through to SoftBank for all of the way that ARM is involved in data center build out. So he's bullish on SoftBank and I wanted to show you guys the chart. Put this up.
- [27:21]
Michael Batnik
So insanely volatile. Oh my God.
- [27:23]
Josh Brown
As you can. I said Riverboat gambler and I'm just showing you the last three years. You look at a 10 year history of this. It is a leveraged bet now on AI not quite the high but close and looking like it really wants to party when this OpenAI IPO comes along. The bull case here is very simple. It is a net asset value of 40 trillion yen or US$260 billion of gains for the company's valuation over the last quarter. Most of which is because of ARM and OpenAI's market valuation or in the case of OpenAI private market. The thing that's interesting here is that this stock used to trade at a discount. Think of a closed end fund. Investors would not actually pay what the net asset value of the holdings were because it was so volatile and people didn't fully believe in the bet that he was making. But that discount is closing and you might think, oh, that's not bullish, now I have to buy a smaller discount. Actually, that is when you want to buy when, when the RE rate is in, is, is in, in full effect. So over the last five years, the discount of SoftBank stock to the NAV if its holdings has been 55,0%. In early 2025 it got down to 60% discount. But as Morgan Stanley talks about this, as the AI assets have matured, the discount has fallen from 50 to 35% and now it's about 17%. This could go to a premium. The stock could trade at a premium to its holdings if people are willing to make a big enough bet on, on the opening pop for OpenAI. So that's, to me, that's a really interesting story that not a lot of people are aware of and it's an absolute gamble. People have said, oh, it's like the Berkshire Hathaway of tech. No, it's not. It's a ton of debt, it's not a ton of cash and his chips are all in the middle. But if you felt like you missed out on the last big IPO and you want exposure to the next one, this is a pretty obvious. And it trades, it trades millions of dollars like it's not a, it's not a problem to allocate to it in the us so I'm not saying go out and buy it. I'm saying put this thing on your screen, start watching it. This is your proxy for what they're going to do with the OpenAI IPO. What are your thoughts?
- [30:12]
Michael Batnik
Yeah, that's interesting. I agree with most of what you said. I think this is going to trade
- [30:15]
Josh Brown
on,
- [30:17]
Michael Batnik
I think this is going to piggyback on what SpaceX does because I would guess that OpenAI, as much as Sam Altman and Elon do not like each other, if this works and we're three days in, it's early, but it looks like so far so good. If it holds, then they are likely to follow a similar playbook because the bankers, they're all motivated to do the same thing, keep the price of the
- [30:43]
Josh Brown
stock up, what does the price of SoftBank do you. When we hear that the IPO for OpenAI is not going to be a trillion, it's going to be 1.5 trillion. This thing is going to launch, there's
- [30:57]
Michael Batnik
probably a lot of leverage in there. So. Yeah, no, I agree. I think. I think to the extent that you do want to Gamble on the OpenAI IPO, this is probably a smart way to gamble.
- [31:07]
Josh Brown
Gamble, yeah. I'm crazy enough to maybe do this trade. I'm not sure yet. Maybe I would wait for some negative news flow on AI and, and try to catch this thing not at the low, but lower because it's just had a pretty substantial move from the, from the low teens into the low 20s. But certainly, certainly worth keeping an eye on. We can move on.
- [31:33]
Michael Batnik
What did you think about our conversation with Iverson yesterday?
- [31:36]
Josh Brown
Yeah, guys, we spoke to the chief investment officer at pimco, which is one of the largest asset managers in the world, yesterday. We put that out yesterday. Yesterday. It all blends together. Anyway, Dan Iverson at pimco and I wanted to bring this back because he said something that we didn't spend any time on. I listened to the show again and I said, huh, that's interesting. So here he basically, I don't have the exact words. He said the disruption is here, which you remember, like the time is now, it's happening now. But then he said, we're going to have a good economy, but with a lot of credit losses and a lot of issues with private equity investments into disruptive companies. And at the same time that we're having these losses that's actually going to be boosting economic growth because those losses represent increased efficiencies and opportunities for profitability for companies. He's talking about it's economic expansion, but with credit losses and with people underwater and a lot of private equity investment and probably a lot of job loss. And he said it's going to be a very weird economic situation, which I think was his exact words. People can go back and watch that episode. It's up now. But what do you think about that concept? Because we kind of just like it. Glossed over that, but I don't think we've really spent any time on it.
- [33:14]
Michael Batnik
I think that's. I think that is a likely outcome, unfortunately.
- [33:19]
Josh Brown
Things be right about that, I think. Never seen anything like it, though.
- [33:22]
Michael Batnik
Yeah. So I think the case that he was making that we would agree with is that if you are zooming out and you're purely looking at this through the economic lens and forget about actual human beings for a second, if you are purely a robot and you're looking at the economic through the economic lens, this is going to be a good thing. The economic pie will increase, there will be productivity gains, there will be the pie will grow. Okay, but when you zoom in to how the pie is going to be redistributed and where gains are going to be felt and losses are going to be felt, it's going to be really up. And I hope it's just like not as bad as I think a lot of people think it's going to be. And I change my mind every day on how bad I think it's going to be. But there's going to be obviously political ramifications.
- [34:05]
Josh Brown
But wait a minute. But this, the kernel of that, that I want to get to which piece? Real quick, let me just answer in the chat. New York. Dom, why not buy Microsoft on OpenAI IPO as they are the largest single investor at 27%.
- [34:19]
Michael Batnik
I have that, I have that later in the, in the, in the show.
- [34:22]
Josh Brown
Okay. Microsoft and OpenAI are undergoing a slow motion divorce and that relationship seems to not be great. Microsoft now is branching out, working with a lot of other companies in AI.
- [34:36]
Michael Batnik
Stop. I have Microsoft later in the show. What do we talk? Get back to the Dan Iveson thing.
- [34:39]
Josh Brown
So, all right, so, so the kernel that, the kernel that I want to do with this is like we're gonna have to throw a lot of things out that we used to think were meaningful to understanding the economy.
- [34:51]
Michael Batnik
Oh, yes, yes, yes, yes.
- [34:52]
Josh Brown
So like in other words, let's say. So who are we talking to? Last week, Brian Levitt. I asked him, like, what are the things you actually do care about? Cause he's like, I don't care about that. I don't care. Okay, what do you care about? One of his things was about credit and loss. Like, I forget some of credit spreads. Let's say you might have to.
- [35:14]
Michael Batnik
You could see defaults tick up without spreads ticking up, which would be super weird.
- [35:19]
Josh Brown
But that's what I'm saying, because what those defaults ticking up represent is success for AI and all the companies employing it. So is that still a negative? Is it still a negative signal if we get a wave of disrupted company issues in the debt markets? Normally we would say, oh, that's a bad signal for the economy. But in this case it might actually be evidence that AI is working and taking out the trash.
- [35:52]
Michael Batnik
Well, let me give you one piece of evidence for why doesn't that twist
- [35:55]
Josh Brown
your brain around a little bit?
- [35:56]
Michael Batnik
Let me give you one piece of evidence for why you're right. And it's just one, but whatever. Two Fridays ago when we got the really strong jobs report, I think a lot of the sell off was, oh, Shit, Is AI not working? Are we overspending? We got a booming jobs report and the opposite happened. So I think in your scenario it's plausible that we could. That the stock market could cheer this on, as horrible as that sounds.
- [36:20]
Josh Brown
All right, so I guess what I'm trying to get at and then we can move on, is the layoff piece too. Ordinarily we would look at rising unemployment claims, jobless claims, and say this could be problematic. What if we have a scenario where the unemployment claims are rising, but that is contributing in and of itself TO S&P 500 earnings growth? Because every laid off person is a higher profit at a public company. So it is up like. Let me read this to you.
- [36:55]
Michael Batnik
That is a dangerous world that I.
- [36:58]
Josh Brown
That would be a dystopian bull market, but what quite possibly a bull market nonetheless. TechCrunch, the AI layoff wave is becoming a powder keg. Tech layoffs hit their highest single month in two years. 40,000 cuts. This is the tech industry laying off its own workers. Other voices have begun to weigh in, including Marc Andreessen, who recently called AI the silver bullet excuse for layoffs. Really, this is about mismanagement. Quote, essentially every large company is overstaffed. It's at least overstaffed by 25%. I think most large companies are overstaffed by 50%. I think a lot of them are overstaffed by 75%. And now they all have the silver bullet excuse. Ah, it's AI I sort of think just 150,000 layoffs in tech year to date. I sort of think the truth is somewhere in the middle. I don't think most large companies are overstaffed by 75%. If AI is super effective, it might prove to be the case that they are in two years. I have a hard time believing these people. These executives who fight tooth and nail for every penny in earnings per share are overstaffed by 75%. What do you think?
- [38:16]
Michael Batnik
It's hard to make general statements. I think that Jack Dorsey's company, Block or square, whatever the hell it's called right now, I think they were extremely. I think they overhired. And they're not alone. There's a lot of examples of companies that just got lazy and fat and bloated.
- [38:32]
Josh Brown
Let me end this. What makes this. This is back to the TechCrunch. What makes this combustible is that at the very moment tens of thousands of workers are being shown the door, a small cohort of AI insiders is becoming wealthy on a scale that's hard to comprehend. And then they do a whole thing about like we're creating like overnight billionaires with AI IPOs and stuff. I don't know if that's the thing that makes it combustible, but it is a sort of perverse coda. Oh, it is on a piece about
- [39:02]
Michael Batnik
a lot of the Elon becoming a trillionaire type stuff. It's, I mean, it's not going away, it's just going to get worse, the rhetoric around it. So I'm, I'm worried. I don't like it.
- [39:11]
Josh Brown
I don't think if we get to, if we get to 6 or 7% unemployment and you're, and you're like an OpenAI day one employee who's just become an overnight billionaire, you're probably rolling with personal security at that point.
- [39:26]
Michael Batnik
Yeah. So to be clear, I don't have a problem with Elon being a trillionaire. I mean, I understand why. I, believe me, I understand why people do have a problem with it. But the thing that worries me is all of the rhetoric around it. This that, you know.
- [39:42]
Josh Brown
But answer that.
- [39:43]
Michael Batnik
People are crazy.
- [39:45]
Josh Brown
Is personal security the new bull market? Like the new obvious bull market? Cause I don't know how you're really gonna have, if you're really gonna have this thing where a million people have jobs at AI companies and are worth $50 million each and then all of a sudden gutting white collar unemployment at the same time. And you know, who knows what happens with autonomous for blue collar employment. It kind of seems like it's, it's either unsustainable or you're going to want to invest in bodyguard companies. Like it's. I know that's a dark place to go, but that's sort of what it sounds like it's going to turn out to be.
- [40:27]
Michael Batnik
All right, let's talk about software. I want to move off this jamming ball. Tweeted Q1 earnings season is just about done and this quarter has been great for software. Looking at the year over year growth in quarterly net new AOR added, this was the best quarter by a long shot in the last five years. Now there's like some base effects going on here. They're coming off a lower base, but whatever. This is the fact he says this chart uses a basket of 50 public companies who report AOR subscription rev. While the aggregate net new ARR was high, 17% of the companies saw AR shrink. This is the second highest percentage of companies who shrunk quote over quarter in the last five years. So the aggregate was great. But very high dispersion. So there's a great complementary chart from A16Z showing big software moves, a three part story. So this is hard to see. But what they're looking at, what they're showing is on top. The companies that never sold off and are trading near their year to date high. So all cybersecurity, we're talking about Datadog, Fortnet, CrowdStrike, Palo Alto, something one. And now let's be clear, they did sell off. These were in bare markets, these fell 20% but nothing like the ones that partially recovered. We're talking about stocks like Atlasian, Unity Service, Titan, Workday, ServiceNow, Oracle. These are the stocks that fell whatever, a ton and then bounced to varying degrees. And then the, the other one is the stocks that went down and stayed down. And these are the ones that are like in the absolute I had the storm of our dude, Salesforce is going to replace you. And we're talking about intuit, right? Like TurboTax, we're talking about DocuSign, we're talking about Adobe. And chart off, please. We, we have a, an ops off site. We have, I don't know, 25 people in Chicago this week and Chris sent me a PDF of the agenda for what's going to happen and he said, remember graphic designers? That was like an actual quote that Chris sent to me. So Adobe reported this week and Adobe's market cap peaked at $327 billion a couple of years ago. It's now $84 billion. $84 billion. Now Adobe is the graphic designing company.
- [42:37]
Josh Brown
Oh my God.
- [42:38]
Michael Batnik
And what's interesting is they reported earnings this week. What's not, what's not really awesome is they're looking to transition the CEO, they're looking for a successor and the CFO just left. So that's not great. But, but what's so wild is they said we achieved $6.62 billion in revenue in Q2, representing 11% year over year growth. Earnings are at an all time high.
- [42:59]
Josh Brown
Nobody cares.
- [43:00]
Michael Batnik
So nobody cares. 11% year over year growth. The stock is down 47% year over year, year over year. Earnings per share was up 18% year over year. And again the stock is down 47% year over year. They spoke about the AI innovation they did three times, 3x year over year increase in AOR to greater than $500 million. So I mean, this is like so fascinating. I just want to fast forward five years. Is this the greatest buy of all time or is this just an obvious value trap? And the market is clearly saying the latter. This is a value trap. It doesn't matter what the earnings are today, next quarter, next quarter, next quarter. Because in 10 years, in five years, in 10 years, it's not today. And you know, some.
- [43:44]
Josh Brown
We'll see Situation Zero in the chat points out Canva is eating Adobe. I know that there are some market share gains and Canva came public so now they have a stock price. I could promise you what's going on is not benefiting Canva at all. They're taking market share gains in an industry where people think it's going to disappear.
- [44:05]
Michael Batnik
Look at figma. So figma's, figma's eating.
- [44:08]
Josh Brown
That's the one on that, that's the one that came public.
- [44:10]
Michael Batnik
Figma stock is terrible, terrible.
- [44:18]
Josh Brown
Go back to that first graphic with all the companies guys. So they really think like just based on this and it's not science, but they really think Intuit is the most company in the software industry. Zscaler ended up in the bottom. And that is. So what's interesting about Zscaler is that it's a cyber security name and they don't think that one is scaled enough to be part of like the, I guess the big four. They don't think that one's gonna have enough about it that's unique that it'll be able to hold customers. That might just be a competitive story, but it is never been tougher to be in a software stock investor.
- [45:03]
Michael Batnik
I don't know, I don't know anything really about the fundamentals of Intuit. I don't know how much debt they have or anything like that. Let's see.
- [45:11]
Josh Brown
Well, It's Turbo, it's TurboTax. You don't have to know anything.
- [45:14]
Michael Batnik
Hold on, hold on. I know what it is. It's a $77 billion market cap.
- [45:17]
Podcast Announcer
All right?
- [45:17]
Michael Batnik
I don't much debt is on here. Debt to equity ratio looks pretty, pretty reasonable. So this is, this is TurboTax. It's, it's Mailchimp, QuickBooks and Credit Karma. And all of these, each of these are like AI, AI, AI.
- [45:32]
Josh Brown
Do it yourself Tax filer, who would be paying A subscription to TurboTax just says to Claude, I always use TurboTax. Can you just tell me what I owe in taxes and help me with the filing? Oh, it's done in one second. Okay. Goodbye TurboTax subscription. Like, it's not, it's not a complex situation. It's as cut and dry as you could possibly imagine.
- [45:57]
Michael Batnik
I do wonder if Intuit is the type of company that that gets taken private. Problem is, is it like at half the valuation from here, is it at $20 billion? It's still 77.
- [46:08]
Josh Brown
Yeah. And that is one of the all time prior to this era, one of the all time big winners in the software space. It just, it was a home run on top of a home run for such a long period of time. And just like that, natural language questions of an LLM and you can get the same result as you would get logging into their marquee flagship product. And they won't be the only one.
- [46:36]
Michael Batnik
Intuit peaked at 820 bucks in 12 months ago. It was $820 a year ago. It's 280 sick 280 from 820.
- [46:51]
Josh Brown
Look, either it's the fattest pitch in history or it's, or, or the market is right. And this is going to be a very difficult 10 year stretch for the last thing.
- [47:00]
Michael Batnik
All right, the biggest software company in the world is Microsoft. And somebody mentioned earlier in the chat, well, if you want to play OpenAI by Microsoft, the partnership, blah, blah, blah, the problem is that software is just not.
- [47:16]
Josh Brown
Yeah, they're eating themselves right now.
- [47:18]
Michael Batnik
So look at this chart, look at this chart. The ratio of Microsoft to the S and P and Microsoft divided by the qs. The QS especially it is at multi, multi, multi year lows. I don't know. So the Microsoft has underperformed the QS by a lot since at least 2019. I don't know how long this chart goes back where it's a break even. But I mean again, Microsoft, they have the, they have the cloud stock in
- [47:44]
Josh Brown
the world, but they have the cloud business. And the cloud business, the cloud business is booming. So it's not 100% software in the same way like Oracle is a software business that's, you know, building a huge network of AI data centers. So it's not that cut and dry in the way that Adobe is.
- [48:06]
Michael Batnik
The market, the market. Correct, correct. But the market is treating it as such. The market is saying you're the biggest software name in the world. Yes, there's other stuff, but you're in trouble.
- [48:13]
Josh Brown
Okay, so like why not buy Microsoft to play OpenAI? Because OpenAI and their products and anthropics too are coming for a lot of what Microsoft does. So at best it's a push. And I'm not saying this is how it will end up. I'm saying in the eyes of the market, that is how they're looking at it. Eric in the chat copilot is a Huge failure. That's a whole other narrative overhanging this thing. A lot of corporations are forcing this copilot down their employees throats and their employees are going around the back and asking people, hey, I'd really rather use Claude, is that okay? I use it at home. I like it better. So there's a lot of that going on as well. And look, it's a shitty time to be in the software space. I own two software stocks. Neither of them are acting well. I don't expect them to anytime soon. These companies are guilty until proven innocent. If you're a value investor, congratulations, you are in heaven. Like if you're, if you want to make the bet, you have never had a better opportunity to make the bet that we're all overestimating the impact. You can. Every day the stock is cheaper than the day before. Knock yourself out. And I hope it works. Last thing we do tonight is tech debt. Nvidia is Planning to sell $25 billion of investment grade debt on Monday, or it was yesterday. That's the first bond sale for Nvidia since 2021. During the pandemic they actually upsized it from 20 billion after. This is the FT after receiving more than 85 billion in orders by early afternoon in New York. Thanks to the robust demand, the 10 year portion of the bond was expected to yield 0.5 percentage points, half a percent above US treasuries, down from 0.75 earlier in the discussions. They say they'll use net proceeds for general corporate purposes. They also are making a ton of AI investments themselves. They're using the balance sheet, they're using their cash to buy stakes in a lot of customers, which people have criticized. But that's another thing Nvidia is doing. Nvidia's debt outstanding will go from 8 and a half billion to 30 billion. When this is done. They have a double A credit rating by the.
- [50:44]
Michael Batnik
Hold on, that's like, that's like barely any debt at all for a company that size with that tiny sort of,
- [50:48]
Josh Brown
I mean come on, $96 billion in cash flow, like it's, it's no big deal. No big deal. Goldman, JP Morgan, Morgan Stanley running it. Our friend, friend of the show, Matt Phillips wrote about this at Axios today. Put up this chart. This is the net debt position of a handful of AI companies. What's included in here is Amazon Alphabet, Nvidia, Oracle, Meta and Microsoft. So we're at $158 billion. And just to put that into context, in 2020, that number was minus 150 billion. So on a net basis, meaning they had that much more cash than they had in debt. Debt was almost non existent amongst the tech giants. This is the thing that we originally loved about these companies. They were not capital intensive with the exception of Amazon and there was no need for debt because they were producing enormous cash flows. And to your point earlier in the show, that has completely gone into reverse. 770 billion in capex in 2026. 100% of cash flow from operations for those companies and not only are they selling more stock in some cases now they're selling a lot of bonds and that is not a problem yet because they all have very high credit ratings. The last thing on this Tony Pascarello from Goldman Sachs quote. For several years US mega cap tech companies have generated returned and reinvested capital to an extent that no other cohort could touch. I believe that will be the case for a while longer. But what has clearly changed is the capital requirement of AI so immense that free cash flow alone can't do all the heavy lifting. He says put this chart up in the aggregate. It's not yet time to worry about the inability of these companies to access capital. Our work suggests the core hyperscalers can add around 700 billion of more financing before their net debt load is greater than 1 times 2026 EBITDA. So of course that's a very Goldman friendly message from Tony at Goldman. They do want to be involved in selling more debt for these companies, would you agree?
- [53:15]
Michael Batnik
Sure looks that way. Oh would I agree that Goldman wants to? Yeah, I think, I think they'd be in that, they'd be interested in that. By the way, look at Goldman stock. Yeah, looks pretty damn good.
- [53:23]
Josh Brown
Last chart. Not all hyperscaler balance sheets are created equal guys. So if you want to screenshot this and look at it, they're showing those names. Plus they added coreweave and Nebius so those are considered neo clouds like the newer data center companies. And CoreWeave is a B according to S and P. Oracle is now a BBB which made a lot of news. Google is the only aa Meta is still a double A minus. Maybe not forever, Microsoft is still AAA remarkable but Amazon double.
- [54:01]
Michael Batnik
But look at Oracle. This is, you know, the market is not. The market is not cool with this. They're saying we don't like it.
- [54:06]
Josh Brown
Net debt to last 12 months. EBITDA at Oracle is 4x100.
- [54:12]
Michael Batnik
They're going to spend 132% of their cash flow on whatever that was OPEX next year. It's a lot.
- [54:20]
Josh Brown
Yeah.
- [54:20]
Michael Batnik
Market is saying it's too much.
- [54:22]
Josh Brown
Is the market saying it's too much if. If Google for Oracle and Amazon are still going up?
- [54:29]
Michael Batnik
I said for Oracle.
- [54:30]
Josh Brown
For Oracle it's too much. I don't know. I really don't know what it would take Oracle to get back to its high.
- [54:36]
Michael Batnik
Oracle looks nothing like the other two.
- [54:38]
Josh Brown
It looks more like 4 weave than it looks like then it looks like the others. You're 100% right.
- [54:43]
Michael Batnik
Yeah.
- [54:44]
Josh Brown
And s and P has already reflected that in its rating. There's no way in that. In that rating. So. All right, we're gonna do make the case and then Michael has a mystery chart for me and we'll get out of here. I bought a stock today. I am now long Robinhood. What are you.
- [54:59]
Michael Batnik
I tell you something. I swear to God I was going to make the case for Robin and next week.
- [55:04]
Josh Brown
Well, too late.
- [55:05]
Michael Batnik
I told the boys yesterday. Hold on, I'll give you the mic for a sec. But my thesis was going to be if you are. And you wrote by the robots a long time ago. If you are in the financial services industry and you're worried about being displaced by. By the robots, this is the robot to buy now public. Our sponsor is not publicly traded. Robinhood is. But they're coming.
- [55:27]
Josh Brown
37% drawdown for the stock is where I pulled the trigger. Not like me. I don't even look at stocks in 37% drawdowns normally for a trade at least. But I like the way this thing is recovering. The RSI is now back above 60. The rebound looks real. Today they announced a 10% workforce reduction in a filing and. And they did not use the word AI. Did not even hint at it. Here's what they said. The company is taking this action from a position of business strength. Including June month to date average daily trading volumes at record levels across equities, options and prediction markets. You know what I think they want to do? I think they want to right size the workforce. Now they're having an incredible quarter. Come out of the quarter and be able to give really good guidance for the second half. That's what I think. They looked at their stock below 100 and they said that now is the time to get back in the game. We met Vlad when we spent two hours with him. I'm just trying to mind meld with him from afar. That's what I think the mentality is. I think he wants a triple digit stock price. What was I going to say? Oh, this Helps give me the chart. Bitcoin is picking itself up and for good reason. Robinhood's stock price is still fairly correlated. Not perfectly, but fairly correlated to Bitcoin. Obviously it's a lot of crypto trading on the platform. And when bitcoin is in a free fall, as it has been, less people want to around with other tokens and coins and crypto trades.
- [57:16]
Michael Batnik
Huge part of their business. Huge.
- [57:20]
Josh Brown
Here's another growing part of the business. Our friend Dan Dolev at Mizuho wrote about prediction markets. He's got a note out saying prediction markets reach all time high in May. And in addition to equities and options and all the things that are going well at Robinhood, this is now becoming 9% of total revenue. So this is what Dan said. Prediction markets are the key positive. We now model prediction market contracts rising from 8.8 billion in Q1 to 13 billion by Q4, or 44.8 billion for the year and $57 billion for fiscal year 2027. Revenue from prediction markets is modeled at 464 million in fiscal 26, 570 million next year. That would be 9% of total revenue, but 19 to 20% of transaction revenue. Meaning it's not like earning money on cash or something stupid like margin loans. This is like actual action. So Dan says that is no longer immaterial. In our view, investors should see prediction markets as a new engagement layer. Do you think the NBA playoffs and finals were a big boost to prediction markets? Not just at Robinhood, but everywhere.
- [58:41]
Michael Batnik
So two things. Number one, I have to take the loss here because I was pretty public to Vlad's face that I thought they were drunk on this stuff. That. Not that I was bearish on prediction markets, but the way that they were leaning in, I thought that they were overestimating the amount of interest there. And obviously I was wrong. So guilty on that.
- [58:59]
Josh Brown
It might be early, we'll say, yeah, but no, people could lose interest.
- [59:03]
Michael Batnik
So far. I'm obviously wrong. When I was in Texas, I wanted to bet on the Knicks winning the game. The Knicks were five and a half point underdogs. And I said, I'm gonna. I want the money line. I couldn't do that because the sports books are not legal in Texas. So I went. So I went on, I went on Kalshee and I bet on Jalen to win the mvp. I figured if they were going to win tonight, Jalen would be the mvp. The odds were better. But the state stuff, the state specific stuff is really interesting.
- [59:37]
Josh Brown
It's a Huge arbitrage right now. That's what's going on.
- [59:42]
Michael Batnik
So I don't know how long that lasts. And that would have a material impact on these markets.
- [59:46]
Josh Brown
You know, I was in the last.
- [59:47]
Michael Batnik
Do not like it.
- [59:48]
Josh Brown
I was in Las Vegas. I was at the Wynn Encore or the Regular Win. Maybe the Regular Win Sportsbook for game one. I was in Vegas. I had to go to the airport. But, like, I caught most of game one before I left. I walked up to the window in the Sportsbook to place a bet on the Knicks to win. And they said the game started five minutes ago. I'm like, all right, that's great information. Thank you for that. I'm aware. She's like, no, no, no, you don't understand. There's no in game bet in the sports book. She's like, it's not like your phone. I'm like, oh, all right. I just pull out my phone and do the bet? She's like, yeah, I guess everyone else is. So it's an arbitrage. It's crazy arbitrage when you think about it. Maybe that's the case.
- [60:34]
Michael Batnik
The states make money hand over fist from DraftKings and FanDuel, and they make shit from. From these companies.
- [60:40]
Josh Brown
I promise you that ain't gonna be for long. Can I put up. Can I put up. Can I put up the technicals on Robinhood? This is what I'm so. This is what I'm seeing. I'm seeing a stock challenging a falling 200 day, which is not bullish by any means, but bouncing off of a now rising 50 day. And I don't really see a lot of resistance until like 1:25, let's say, which. This is a $96 stock. I bought it at 95 and change today. There's a lot of room between here and that. That cliff from December. What. What do you think about my trade? Do you like it? You blessing it? Look at the RSI confirming 61. A lot of momentum here. What are your thoughts?
- [61:26]
Michael Batnik
Yeah, it looks good.
- [61:29]
Josh Brown
Can I interest you in some shares?
- [61:31]
Michael Batnik
Yeah, listen, I've been. I've been looking at it, but staring at it. It was my make the case for next week, so.
- [61:36]
Josh Brown
Well, don't just look at it, trade it.
- [61:39]
Michael Batnik
All right. No, I like it. I like it. All right, here's my mystery chart. This is. I'll start here and then we can. We could. We could go deeper. Obviously, you saw the stock got pummeled. There were Macro headwinds in 20, 22, 23, 24, and unlike the rest of this industry, and it's a large one. This is violating the narratives because this. This industry is supposed to be doing really poorly right now. And this is a stock that I do want to buy. I. I want to buy this more than Robinhood.
- [62:15]
Josh Brown
Okay. I want to say it's housing or mortgage related. Housing related. Stay on that.
- [62:22]
Michael Batnik
Yep.
- [62:24]
Josh Brown
It's violating the narratives. I mean, look at that stock.
- [62:28]
Michael Batnik
Look at that stock. Dude, it's breaking out.
- [62:31]
Josh Brown
So is this Lowe's?
- [62:34]
Michael Batnik
No, Lowe's and Home Depot don't look like this. But this.
- [62:37]
Josh Brown
I'm trying to think of what housing stock, what housing stock could possibly look like this.
- [62:42]
Michael Batnik
It's a luxury brand.
- [62:45]
Josh Brown
It's a luxury brand in homes.
- [62:48]
Michael Batnik
I mean, I suppose themselves. I think it's a luxury brand.
- [62:51]
Josh Brown
Oh, this has got to be some sort of furniture shit. Yeah, restoration. Is it Rhodes?
- [62:56]
Michael Batnik
No, that one doesn't look good. That's the.
- [62:58]
Josh Brown
That one looks like death.
- [62:59]
Michael Batnik
Yeah.
- [62:59]
Josh Brown
All right, I got it. I don't have it. William Sonoma.
- [63:03]
Michael Batnik
There you go.
- [63:04]
Josh Brown
J Min in the chat gave it to me. I did not guess it.
- [63:06]
Michael Batnik
Okay, dude, look at this chart.
- [63:07]
Josh Brown
Thank you, guys in the chat.
- [63:09]
Michael Batnik
Look at this chart. So what the story is. The story is they're buying back a ton of stock. Like, a ton of stock. EPS has inflected higher. And I. So I own Florent Decor. I think that people, people that are on the sidelines, rightfully so, because they can't afford a house or they can't mentally get there because it just. It's too much. I think after three years of this, the fact that there are still 75 million people that are like 37 years old, I think housing might be turning a corner. I think people are just coming to the realization that. All right, I guess this is just what houses cost now. All right?
- [63:42]
Josh Brown
I don't think so. And I'm going to. I'm going to correct. I'm going to correct something. This is a. Not a bet on housing in any way, shape, or form. This is the top of the top of the K. That's who's shopping at Williams Sonoma on a regular basis. And then regular civilians pop in there once in a while when they need a new pot or pan. This has nothing to do with housing. Also, the longer you're stuck in a house, the higher your propensity to want to redecorate because what else are you going to do? Can't buy something new, can't build something. All right, I'll redo. I'll redo my kitchen. That's what Williams Sonoma is. Is about.
- [64:20]
Michael Batnik
You're 100% right. However, look at Florentico, which I do own. Look at Home Depot. Look at Lowe's. Look at Sherwin Williams. They have bounced pretty, pretty strongly. Now. It might just be.
- [64:30]
Josh Brown
Just don't think it is. I'll give you another. Shark Ninja made a Shark Ninja made a record high and shout out to the Barakas family. I don't even know they're from. They're from Long Island. Shark Ninja is the shark is the blender and the ninja is the vacuum or vi. No. Oh, it's the shark vacuum and the ninja blender.
- [64:51]
Michael Batnik
Yeah, I have one of those.
- [64:52]
Josh Brown
Okay. So is that a housing play? Not really.
- [64:56]
Michael Batnik
Not really. It's appliances sort of.
- [64:59]
Josh Brown
It's appliances, but. And the appliances go in a house. But nobody would say that's a housing play here.
- [65:05]
Michael Batnik
Here's my point on housing. It's not getting worse. It's not getting worse. The housing situation is not getting worse. It's not like rates are going to seven and a half percent. I think people are digesting the fact that housing is about as bad as it's going to be. And I think if you get any sort of lift, any sort of lift, there's a ton of leverage in William Sonoma, which I want to buy. What's so funny?
- [65:23]
Josh Brown
Matt Stavig said William Sonoma is not for the salt of the earth. I don't know if he's joking about me. Not salt.
- [65:30]
Michael Batnik
Yes. No. Josh is a pottery bone chopper, obviously.
- [65:34]
Podcast Announcer
All right.
- [65:34]
Michael Batnik
No sharing is.
- [65:36]
Josh Brown
Yeah. Guys, I want to say thank you so much for coming by for the live chat. This is a major show. We covered so much ground. Michael, you did great. Duncan and John, fantastic as always. Nicole, everybody, just all around. Thank you guys for rocking with us. We appreciate it. I want to remind you, first of all, we have the new compound hats in the store. We very rarely remember to send people to the store. Idontshop.com obviously no apostrophe idontshop.com there's a dad hat version that we did for. For the summer in green. And then there's I guess you'd call it a trucker hat version. Black with pink writing and it is sick. So go to itonshop.com and get your official compound gear today. Tomorrow is animal spirits of Michael and Ben do ask the compound this week, of course. And then we'll end the week with the compound and friends with a first time guest. Somebody we've never talked to before. We're super excited about it. Thanks so much for watching. Thank you for listening. See you soon.
- [66:56]
Podcast Announcer
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.