← The Compound and Friends
The Compound and Friends
Brian Belski Breaks Loose, Palantir Erupts, Stocks Getting Quietly Killed, Uber and Tost Report
01:43:49
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A
Ladies and gentlemen, welcome to the Compound and Friends. This episode is brought to you by our friends at Crane Shares. More on Crane Shares in a little while. Wanted to let you know that we are welcoming our friend Brian Belsky back tonight. We had a. We had an awesome session with, with Belsky right after he launched the. The new firm that I guess the first company he's ever started on Wall Street. He works, he's worked at some of the great giant banks and wanted to have an opportunity to build something of his own. And here it is. So Brian's gonna tell us all about it. We'll get into some of his big ideas for the stock market going into the end of the year. A lot of people forget a year ago last November he was putting out his year end 2025 target and he was at S&P 7,000. And we are just shy of S&P 7,000. Here we are, magic, about a year later. Belsky has just been on top of this bull market for years and years doing an incredible job as a strategist. And we got a chance to talk stocks with them too. So I think you'll have a lot of fun listening to that. And then it's an all new super sized earnings edition of the Compound and Friends with me and Michael Batnik. Some of my favorite names have been reporting this week. Uber Live Nation toast. We get into the Fiserv blow up. We take a look at what I consider to be a quiet bear market happening below the surface. Although Michael disagrees with me. A lot of big name stocks getting absolutely slaughtered lately and starting to become alarming. But Michael says much ado about nothing, so we'll let you guys be the judge. Anyway, that's the show. Stay tuned.
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B
Stay.
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A
Special thanks to quaint shares. I'll put you in there right now. Welcome to the Compound and friends. All opinions expressed by Josh Brown, Michael.
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B
Batnik and their castmates are solely their.
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A
Own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Hello and welcome to Live from the Compound, who is Brian Belsky? All right, today we're gonna have a lot of fun. You have a really big news to share with the audience. I want to set this up for a moment, guys. On the Compound we have our regular guests and then we have our regular regular guests. The people that the crowd goes crazy for every time they're on. They make a huge impact, and people are always asking for more. When are you going to have so and so back? One of our regular regulars is here announcing the launch of his own firm. We're super excited to have him back. It's a special edition of Live from the Compound. We're literally live, not on Zoom. And we're here with our friend Brian Belsky. Brian, welcome back to the show.
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C
How are you? Thanks so much for having us.
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A
Okay.
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C
It's amazing.
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A
What will you be revealing today?
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C
We're revealing our new firm.
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A
Okay.
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C
And it's called Humilis Investment Strategies.
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A
Humilist Investing Strategist.
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C
Investment Strategies.
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A
Yeah, Strategies.
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C
Humilist Investment Strategies. With the acronym his. The way I think about it, it's all his. Anyway. And when I talk about investing, you have to have a lot of humility when you invest, period. And humilis is Latin for humble. So a lot of people like Belsky, you're not humble? I mean, no, actually am. Very much so. And. But we. We have a lot of conviction on how we talk about things. So our tagline is investing with conviction and humility. Because one of our lesson or one of our.
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A
Oh, you have high conviction, but it's in the need to be humble.
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C
Correct.
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A
I got you. I like. I like that.
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C
You like that.
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A
Yeah, I do.
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C
So how did I come up with this whole. This whole tagline? So do you remember Louis Rukeyser? Yes, So I remember.
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A
Our YouTube audience will remember him.
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C
Well, yeah, look it up on the Internet.
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A
They are the great grandchildren of his viewers. So they'll remember.
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C
So I remember you go to Owings Mills, Maryland, and it was Friday night, December of 2000, and I was so nervous. Man, I was so nervous to be on. Laszlo Barini was on with Mary Farrell and Louis Rukeyser. And I'm nervous, and I'm like, what do I do? What do I do? How do I get through this? And I started praying. And there's this really important scripture that I've always said right before I do any public speech, and to start at that night, it's Micah 6, 8. It's from the Old Testament. It says, God asks you to do a lot of things, but you absolutely, positively must act justly, love mercy, and walk humbly. To this day, I still quote that before I go on every single television show, before I go up and do a speech, it just grounds me. So we're not gonna be right all the time in this business?
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A
Well, that's the line that got you through that for people that don't know. Louis Rukeyser show. What was it called?
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C
Wall Street Week.
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A
Wall Street Week. So it was every Friday night, it was like the market close and then it would air on pbs. But it predates cnbc. And for a fairly long period of time, it was the last word in who knew what they were talking about on Wall Street.
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C
Correct.
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A
Okay.
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C
Correct.
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A
That got you through there and you've maintained that idea?
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C
Yep, I maintained that. And that's what really got. So then as I started this process about, okay, you know, working for the man for all those years is fantastic. When you work for great places, like amazing time at BMO and then Oppenheimer for a couple years before that. Then my amazing time at Merrill Lynch, Piper Dane. You meet amazing people and you go through a lot of great things and you'll learn a tremendous amount of things about a business and in this business in particular. But at the end of the day, this business is all about relationships, period. And we've been very blessed to have great relationships all along. So I wanted to capitalize on those relationships. And quite frankly, when you're doing three jobs, when you're doing institutional strategy for Canada, institutional strategy for the US and portfolios, it's a lot. It was time to kind of focus on one. And that's why we decided, let's focus on portfolio strategy. Let's focus on our separately managed account business and running equities in both Canada and the United States. And we decided to pull the trigger.
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A
Okay, so now this is going to be the way you manage money going forward. It's your own firm. You'll have active strategies on the stock in the stock market. And you'll now be in a position to focus on that and not focus on the priorities of a much larger corporation that's doing a lot more things.
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C
Yeah, like say, for instance, you're doubling.
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A
Down on doing stock market stuff for the people that trust you with their investments.
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C
So in the institutional strategy world, you have to publish all these great research reports. And one of the ones that we've done for years is called the chart book. We've published a chart book since 1996 or 7. And so on the institutional side, we'd get a call from point 72 or Millennium or something. Hey, Belsky, can you walk me through this return on equity model for industrials and how that works and what are the signals? That takes a tremendous amount of energy and research to try to figure that out. It's not like we're not going to do that anymore, but we're not going to be that literally pointed in terms of institutional just to try to prove to people that we know how to do things. With respect to calling the market. I've said for a long time that the stock market is a market of stocks. Too many people that do what I do are so focused on the index and make it the big market call all the time. And obviously institutions want to try to figure out and make sure that you're a tool in their tool belt in terms of how they're running their portfolios or what they're thinking about. But we just want to run portfolios. We just want to talk stocks. We, we're part of the, to quote the movie Stripes, we're the last of a lost generation. I mean we, we like to tell stories and talk about companies and how they relate to your life. And that's one of my rules of investing. Investing is like life and life is like investing. If you think about it, you know, why do you like to go to Costco? I mean, why do you like to buy Apple? Why do you buy Netflix? Think about how important these great American companies were during COVID Whether or not it's Netflix or Google or Zoom or think about that. We could not have gotten through Covid without these great American companies.
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B
How many great American companies are you going to be owning in your model portfolios? What does this look like?
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C
Great question. So that's where the conviction comes in. So again, rule number three of investing is I don't know everything. In fact, I'm not the smartest person in this room. There's a lot more smarter people in this room than me. But I think I know a lot about the 50 companies we run. In terms of our US focused portfolio, I don't need to know a lot about the 450 companies that we don't own. But I think I know enough about the 50 companies typically in large cap money. We've proven through all this fancy back testing, 50 is a pretty good number. And so from the US focused portfolio, we're going to follow through with respect to what we're thinking on sectors and industries and our themes from a fundamental perspective. So we feel really comfortable with 50 companies as much of a 6% position and as small as 1% in our small mid cap portfolio which we've talked about on the show here. I just love, I mean as a parent you're not supposed to have a favorite child, but this is my favorite child, the smid, because you can play themes and stocks and stories. So around 65 to 75. Because the risk spectrum is a little different.
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A
You have more stocks in that category. I guess that makes sense. You would want to be more diversified as the cap size falls if you're trying to capture more of those individual stories.
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C
Right. So here's a great example.
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A
It's like a macro bet, right?
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C
So if you're gonna be, if you're loving, like we doubled down on Google earlier this year when everybody thought no one was gonna use Search again. Right. Or Apple, like say if we have a 6% position in Apple and a large cap portfolio, we're still gonna be kind of underweight.6%. But in our SMID cap portfolio, we love this company Celsius. I've owned it for a long time. You think I'm gonna have a 6% position of Celsius, the energy drink Delicious or Shake Shack? I mean, it doesn't make sense.
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A
You need more names because you're not going to take a 6% bet. Correct with. Okay, got it.
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C
So where we think we're different is not just because of our approach of doing frankly market strategy for all these years, but actually really live running money. We started in 2005, officially when we were at Merrill lynch, but I think that we've always proven that we put our money where our mouth is. And because we were FINRA registered analysts, we had to write the research report first, then it was published to the world and then all the portfolios come out. But I think where we're differentiated now is we're not just tech. We're not just go go momentum. We're not just large cap. We've always thought of the market holistically from an equity perspective. So whether or not it's smid, which we love, which we don't think people own enough of, but that's a whole other perspective. Value. We love value value stocks here, like intrinsic fundamental value stocks and then dividend growth because of the income. We focus on those companies that grow the dividend over time and have a proven track record not about yields, but dividend growth. So where we're going with the market, we think ultimately is that the market. We've been talking about it, we, meaning the collective market. People have been talking about broadening out for a long time. I think it's gotta happen at some point. It is. Will happen.
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A
Yeah, it is happening.
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C
It is happening. So I think what's gonna happen is we're going to not at the expense of Apple or Google, but I think we're just going to see a Spreading out of performance, which will actually help benefit dividend growth philosophies, value philosophies, small mid cap philosophies. And we're very well positioned for that.
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B
You mentioned the rally broadening out and people are looking at a lot of the names that are getting bombed out. And there are a lot. But if you look at the equal weight S and P, the Nasdaq and the Russell, the equal weight, all three of those are within 3% of their 50 of their all time high. Now at the other end of the spectrum you do have, I was looking at this this morning. There are 26 stocks that are down 40% or more from their 52 week high. Not like their all time high.
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C
Yeah.
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B
So 5% of stocks are in the S, P are down more than 40%, 20% of the index. I'm sorry, one, a third of the index. So one out of every three stocks are down 20% or more below their 52 week high. So in this market that we're in right now, where it's AI or nothing, you really do have to, for what you're doing, you have to be a good stock picker.
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C
Yes. And that's where it goes back to the stock market is market of stocks. And I remember when I was at Merrill and we were actually very bearish in 2007, 2008, but there's always something to buy. There's always something to buy even when you're negative. And on the AI side, on the tech side, not all stocks are created equal. You have a lot of semiconductors and different kind of fundamental trends. The stocks that you talked about with respect to the unweighted, the equal weighted S and P. You know why we remain so bullish, Michael, Is because if you looked at the earnings revision trends, okay, if you look at the fusion index of FY2 versus FY1, just lost everybody in math. But it's just math. If you take a look at that, they actually were improving a lot better and a lot faster than, than the big cap tech stocks or the top 10 companies. So that breadth and improvement of fundamentals we think is really what's led us to these new highs. So it also proves that you want to focus more on stocks now. That also increases your risk. But at the end of the day, you have to be able to have a process and a discipline that kind of helps diffuse some of that risk.
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A
There's an argument out there. Our mutual acquaintance Adam Parker wrote about this this week where he's looking at the, he's looking at the dispersion amongst the Mag seven and he made the case like last earnings quarter, Meta was the best performer. This quarter it was the worst. He looked at Nvidia compared to the other Mag sevens. Are they correlated or not? All of these things all year just go in and out. There's like no rhyme or reason behind good earnings responses in the stock price versus bad. It just seems like it's this company's turn to outperform or underperform. The case he's making is that the active bets that you should be making might be away from Mag 7 and just have those be a market cap weight because there's really no way to know or understand why they're moving in the same direction or against each other. Whereas lower down in capsize, you could probably have less over and underweight, but have an even bigger impact on your portfolio results. What do you think about that idea?
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C
I think that's 100% spot on. And we've been underweight the Mag 7 because we don't own a couple of those stocks in there. And we've been overweight other areas of the Mag 7. That's kind of number one. Number two, look at last week. Right. Look at last week on what Meta did versus Google. So you're starting to see a differentiation with respect to fundamentals now. Does it change next quarter and it's going to be another stock? Could be, but at the end of the day, that's why it makes sense to be more neutralize those and then overweight the rest of the. That's why, for instance, you know, we were very, very blessed and fortunate to own Oracle since 2014. Part of the reason why not in.
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A
The Mag 7, not in the Mag 7. Mag 7 esque performance.
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C
Yeah. So but we bought that company because of the balance sheet and the cash and you really want to bet against Larry Ellison? No. I mean, the dude owns a Hawaiian island. I mean, come on. Yeah, but now what he's been able to do and what they've been able to do in Oracle last couple years to really take advantage of what's happening in the AI side, that's an example of finding a stock that's not a Mag 7 that has done amazing and Broadcom's come and gone for the Mag 7 if you keep looking. But we've been there for a long time too. But our thing with owning 50 stocks goes back to you don't have to be the smartest guy in the room and don't need to know everything. You don't have to own everything. One of the things with institutional clients, I used to, when I was, you know, last week talking to an institutional dividend growth portfolio manager. They own 250 stocks in their portfolio. How do you.
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A
One strategy.
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C
Yeah, man. How do you make a difference in that? You have 20 basis points here, 15 basis points. I'd rather make a bet and have a process in terms of looking at that particular discipline to really make a difference. And that's how we do.
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A
You think there's like a pendulum though, where the market wants one thing and then another period of time where it wants another. Like there's a moment where everybody wants to own everything. Diversification and then the pendulum swings and it's like the hottest products on Wall street are concentrated earlier in the year.
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B
Think about after Liberation Day when all of the names that were exposed to China and the AI trade got smoked. You know what didn't at all? Berkshire. And if you look at the full picture year to date, Berkshire. The gap was so big in April between the S and P and Berkshire and now it closed and went the other way. Because now all that anybody wants is AI. It's sucking all the oxygen out of the market.
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C
You know, I keep thinking about this AI stuff and the AI stocks now relative to. Everybody likes to make the comparison of 99, 2000. I think it's absolutely not that. It's not anywhere near that now. Do the price performance stuff, the valuation. Sure. But if you were in the business back then, if you had a dot com on there, it was going up, it was going up.
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A
There's not some version of that right now.
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C
There might be, there might be a little bit of it, Josh. But I mean literally anything in technology, if you go back to look at also private wealth positions, equity positions in 99, 2000, okay, 90% of their total investment positions were stocks and 100% were tech stocks.
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A
Yeah.
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C
Why did they get. Because they were too. They weren't diversified.
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A
Who had the money taken away from you if you weren't allocating to tech? We're not quite that extreme now.
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C
We're not that quite extreme. And I'll even go back further. I remember in the very beginning of my career in 1990, back at William O' Neill & Co. And we'd have all these famous dignitaries come through, Peter lynch and talk about mutual funds, who you guys had the amazing fortune of seeing. Oh my gosh. Anyway, there used to be a ten year track record, then there was a five year track record, then there was a three year track Record, but quarterly.
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A
How'd you do last quarter?
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C
Yeah, what have you done for me lately? Janet Jackson. But it actually did change in the late 90s to a one year track record because of what was happening. These guys had to get paid to me.
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B
I think the biggest difference between then and now is the margins on these companies and the moats and the growth and all that sort of stuff. So there's this company called Duality Research that does amazing work and they showed the forward PE, which everyone's talking about, hasn't been higher in 20, whatever it is, it's not cheap. He says, okay, but you have to look at profit margins because profit margins are also at an all time high. So he adjusted the forward PE and he says it comes to 17.75 times less than one standard deviation above its 20 year average of 16.2 adjusted for profit margins.
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A
Meaning comparing this to.
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B
Yeah, so he says, so yeah, if this is a bubble, it's probably the cheapest bubble in history.
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C
Yeah. I don't. Going back to the bubble thing, let's talk about profit margins first part of our process.
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B
I mean, sorry, sorry. But look at these forward profit margins. Why would stocks, why would the multiples not be high in this type of environment? Correct.
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A
But the second question to this is how sustainable is the rate of that profit margin rising? Cause it's not the absolute level of the profit margin. It's does 14 and a half go to 16? Maybe the answer is yes.
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B
Oh, if that stalls out. Yeah, you're right.
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A
That's really the question. That's what puts an end to this is when that goes into reverse. If it does.
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C
Well, that's why as part of our process for 30, when we started publishing the chart book late 90s, is that you look at valuation, you look at earnings growth and then you look at operating performance. And we've been studying this for years and years and years and you have to look at all these things. I think too many people only look at earnings or only look at valuation or only look at price. And I think this is what a lot of people are missing. But the term bubble, I think is the most overused term in investments. Just like dysfunctional family is in terms of how families are. By the way, all families are dysfunctional.
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A
In their own special way.
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C
Exactly. We'll see that in three weeks and at Thanksgiving. Anyway, just because asset prices go up doesn't mean it's a bubble. You know when it's a bubble, when the man's making money, who's the man? Everybody Financial services. If you think about this, think about 99, 2000, the IPO activity, the secondary activity, the M and A activity, had all these deals, not, not just one or two, but all of them done with stock that was meaningless, it had no value. And you had all star analysts, you had rockstar bankers. Frothy, frothy, frothy, frothy, frothy, frivolous. We're nowhere near that.
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B
I was yelling about it this morning with Ben. To me, words matter, right? People throwing around the term bubble. To me a bubble is, and I know it's shorthand for expensive, I get it. Right. I always say too. But a bubble, a real bubble, is one in which there is no roadmap. There is no possible scenario to which future cash flows can justify today's prices. No way. It cannot happen. Like impossible. There's no model that you could show me, and that's not what this is. And then also part of the second part of that is that. And so therefore asset prices must correct. And don't give me 50% because Amazon and Google fell 50% in 2022. Asset prices must correct by at least 50, 60, 70, and not rebound in two quarters or two years. They must go down and stay down. So you could say stocks are expensive and we're gonna have a bear market. Sure. But a bubble to me is which there is no possible justification for today's prices.
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C
Go back to the moat thing, right? Because that's really important. Or whether or not it's from an operational perspective or a cash perspective. Let's go look back at two of the poster children, Lucent and WorldCom. I mean, they had no, they had nothing. I mean that was part and parcel where we didn't have 50%, we had a 90% pullback. So we're gonna have.
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A
I don't know, but they were selling a lot of equipment right up until the end. It's not as though Lucent were masquerading as a company and didn't have an operating business. The thing that created the top was the orders started to be canceled because all of the equity offerings that were financing the purchase of that equipment stopped coming in.
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C
Right.
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A
So Lucent doesn't know that until it's too late.
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C
No, because they created, they created a capacity situation. So that's another big them in investing over capacity, you want to buy the scarce asset and sell the asset with lots of capacity. So going back to the new firm. Humulous. We're trying humilis investment strategies. We're trying to create a scarcity proposal that we're going to have equity portfolios that aren't just one thing, but also provide for the market dynamic and then also overlay our years of experience.
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B
Do you think when people talk about where we are today, I feel like after listening to Microsoft and Amazon and Google, you can't say these stocks are in a bubble. I feel like most people would say they, they deserve what's happening.
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A
One special way though, people can say it, they don't like the circular financing of not only the product sales, but the build outs of facilities. And I was listening to Gerstner on his podcast talk to Satya and Sam Altman together over the weekend and he asked the question flat out, how could a company doing 13 billion have $1.3 trillion worth of financial commitments? And he sort of asked it tongue in cheek because he wanted Sam to have a snappy comeback. And he did, starting with we're doing way more than 13 billion in revenue. But he then subsequently dropped off the pod and said, gentlemen, I have to go.
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B
So that's why I was.
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A
That fuels peoples, but that when that stuff happens.
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C
He really did.
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A
He really did. And Satya finished. Satya finished the interview. Now, for all we know, and I haven't asked Brad about this, for all we know, it was planned. And Sam said, hey, I have 20 minutes for your show. I can't do the full hour. I don't, I have no idea. But I'm just making the point. People don't like the circular nature of a lot of the deal making, the overlapping, we'll give you revenue for this, you give us revenue for that.
- [24:28]
C
Right.
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A
And that is what gives rise to the bubble talk. It's not just about valuation, it's about the structure of the deal making. And I think we could all agree, any company that comes out and says we have a deal with Nvidia or deal with OpenAI, it's an automatic 10% pop in the share price.
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B
Wait, no, but I was just going to say exactly what you just did. And that's not Apple, that's not Microsoft or Google. We're talking about OpenAI and Anthropic and.
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A
Which don't have share prices.
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B
So OpenAI. All right, so let's just say they're doing 20 billion in revenue, whatever it is, okay, it's not 13, it's 20. Maybe let's say it's 25. They're looking to go public at a trillion dollars. Guess what they better grow into? They better get to a hundred billion dollars in revenue. Now you might say, and I don't know anything about this, Michael, there's no roadmap for OpenAI to get to $100 billion. Fine, maybe that's the bubble, but is it in the public market?
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A
Yes. Yes, because think of how many of these companies are reliant on OpenAI. Continuing to spend at the rated spending is in order to keep reporting their numbers. And that's the part that people are saying. We're not calling this a bubble because Microsoft's 100 times earnings. We're calling this a bubble because the revenue growth is not sustainable. If somebody kicks out one of these legs to the chair, I'm not suggesting I'll be the one to see it coming. But I don't dismiss the bubble concerns as easily as somebody who just compares P E ratios.
- [25:55]
C
Yeah, we're in the same boat. And I kind of go back to my o' Neal training as well. Stocks are rarely.
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A
Shaquille, Shaquille. Shaquille o' Neal taught you a long time ago.
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C
Will o', Neal, Bill o'. Neal, the great Bill o'. Neill. Stocks are rarely linear for long. So you know, call me cynical. Why Belsky, are you opening a firm at the top of the market? So my comeback would be. Well, I don't think we have the. We're not at the top of the market. We still think we're.
- [26:19]
A
It's funny that you said that upon your announcement. I think you're a little bit self conscious about oh my God, what if it is the top and I chose to launch my firm the same day.
- [26:29]
C
Well, I mean, you know, again that comes back to the humility or self deprecating. But our call is that a 25 year secular bull market started in 2009. I know you and I have talked about maybe different. Maybe it started in 2011.
- [26:40]
B
Whatever. Close enough.
- [26:42]
C
13. Yeah, 13. Potato, potato. But I think we got about 10 years to go. But we are going to have a recession again. We are. We're going to have a bear market again. We are. Before this big secular bull is done. And it maybe is one of these frothy people failing or really tripping small.
- [27:01]
A
Mid a partial defense against the unwind of the AI bull if and when it ever happens. Meaning market cap comes out of the oracles and out of the out of the Microsofts and looks for a home in an area that's not reliant on OpenAI getting to a trillion like is that a possible story?
- [27:22]
C
I think all three strategies are meaning dividend, growth, value and smid.
- [27:28]
A
You think they'll act as a counterweight in a portfolio.
- [27:31]
B
I do. Depending on how bad it is.
- [27:32]
A
I think they could. Yeah, I do.
- [27:34]
C
Because again, if you go back into SMID in particular, I know a lot of people have Talked about the Russell 2000 aren't making any money. Well, you can't make a broader index thing. You got to look at the companies, The S&P 600, it's got lots of cash and the companies, some of them are paying dividends. The mid cap index, the mid within the S and P looks really great as well. And you combine the two, there's a lot of great ideas. So if you think about like, you know, I already mentioned Celsius or Shake Shack or Chewy, these types of names that have nothing really to do with AI or I love small cap financials. Like Glacier Bancorp in Montana is amazing company where First Citizens was a roll up. A lot of, I mean these smaller banks I think are very well positioned from a relationship standpoint, just like the big banks are. We love financials in general from the value perspective. But I think that both those areas, meaning Smith and Value, excuse me, are gonna be huge winners through this. And I do think too that there's not enough dividend growth investing either out there. So I think I go back to when I was.
- [28:38]
A
We don't like the taxes. No, we don't like the tax relative to the buyback.
- [28:43]
C
Well, just reinvest the dividend. Reinvest the dividend.
- [28:45]
A
No, no, no. We don't want to pay the taxes on the dividend.
- [28:48]
C
No.
- [28:48]
A
I was looking at Ford versus gm.
- [28:51]
C
Yeah.
- [28:51]
A
I don't know that there are huge differences between the two. I know Ford's got the best selling truck. GM's got more high end luxury SUVs. I get that. But the really big difference seems to be GM's return of capital to shareholders is almost all in the form of buybacks and Ford's is almost all in the form of dividends. I don't know, like, I feel like that's a pretty, it's a pretty big difference. And I don't know what else is very different.
- [29:19]
C
I think that's right. If you go back to like I go back as a young strategist in the late 90s and I remember marketing in Boston at Fidelity and I remember meeting with a portfolio manager there and he's like, Belsky, I get. He was a small cap manager.
- [29:32]
A
Yeah.
- [29:33]
C
He's like, Belsky, I got to buy Microsoft to perform. I don't know if we're Quite there yet on that. But the other thing too is I wonder if there's gotta be some data out there chart guy can figure it out or something. I wonder how many value managers there are now relative to 10 years ago or mid manager.
- [29:51]
A
How many left? Not many. How many left and they have less money.
- [29:53]
C
Yeah, or dividend growth is like straight down. That actually is a contrarian signal right now. You have to have the fundamentals. Don't be contrarian just to be an asshole. Be contrarian if you have the analysis.
- [30:06]
A
To back it up or why it.
- [30:07]
C
Will change or why it will change. And I think that again let's go back to the dynamics of the market. I think we're going to have broadening out. If you have broadening out that obviously makes it for more cyclical areas in the market. More cyclical areas within consumer discretionary, within industrials and certainly within financials which we still believe after all of this are still under owned.
- [30:28]
B
Which part of the financials because there's a lot of different areas.
- [30:31]
C
Well we think, we still think it's a bifurcated market meaning the really big are going to do well and the really small are going to do well. That's why I think the in between we're going to have a lot of. We're going to have mega mergers of these regional banks because they can't compete with the big and they can't compete with a small. Yeah, that's coming.
- [30:49]
A
I saw one. Who was it like two weeks ago?
- [30:51]
C
Fifth, third and someone else. Yeah. Oh Comerica. They bought Comerica. But there's going to be more coming. There's going to be more coming because they can't compete with the really big. Now honestly too here's some perspective. Think about the financial crisis. But even in the early 2000s would you have ever thought that Goldman Sachs would be talking about private wealth in the early 2000s?
- [31:12]
A
Yeah.
- [31:13]
C
No way. What do they talk about now? All the time.
- [31:15]
A
Right.
- [31:16]
C
So I think the big banks with the multi divisional assets of wealth consumer, commercial, institutional, very well positioned. Right. The medium sized banks, what we used to call the regional banks it's going to be hard for them to compete. I think the brokerage business is still a great business because it's scalable. The asset management business is scalable but the small banks, these guys are cranking on earnings and we think that they're going to continue to be a beneficiary let's say of volatility in the market.
- [31:46]
A
You have a year end price target on the S&P 500 at 7000. I know you've consistently been more bullish than the pack in the last 10 years. In the last couple of years, you've sort of been still bullish, but like, not quite as far ahead of the pack because everyone else is caught up to you. How do you think about just the idea of an S and P target? Do you even need to do that anymore? Being more on the asset management side versus the brokerage side, what are your thoughts on where we are?
- [32:17]
C
You know, it's a great question because we've written this piece called the Year Ahead piece, and I think I've written like 26 of them and last year.
- [32:27]
A
You have to do it every year.
- [32:28]
C
Yeah, I gotta do it every year.
- [32:30]
B
Are you done?
- [32:32]
C
Listen, man, that thing is 40. I mean, it's the smart guy piece. And I don't, you know, more for institutions, but we put our piece out earlier, as we do usually following presidential election years, because we wanted to give more guidance. And so we put it out in early November. Right. A week after the election. In our bull case for 2025 was 7,000.
- [32:54]
A
So a year ago, going into the. Going into the. The election, where were you?
- [33:00]
C
So, 7,000 for the bull case for 2025.
- [33:03]
A
So. So 6,856 today.
- [33:05]
C
So we're here, but. We're here. But I'm not saying that to do this. I'm just saying that you did nail it. Well, I mean, but. But what we said is that a lot of things have to happen now. We put it out earlier. The good thing, now that we're going to be portfolio advisory business, we can watch all the other people kind of put theirs out and see what. Because in the past it was. Belsky puts us out early. And I'm not saying people. I'm not saying people copied me or anything, but we. For a reason, we put it out early.
- [33:30]
A
It's impossible for other strategists to not shade themselves with things that their colleagues think or say publicly.
- [33:39]
C
Of course.
- [33:40]
A
And I was all human, right?
- [33:41]
C
We're all human. That's. That's exactly right. And when everything was going down in April, we said very clearly that if you're an advisor, man. Right. And you're basing your business on a strategist target. Come on. Don't. Targets are an academic practice. They're an academic practice. And they're. They're a have to versus a get to. We get to put out a target going forward. We don't have to put out a target. And we will put out a target. But what we said in April is we own what we own, man. We own what we own. And we didn't change anything. And we were very, very, very lucky.
- [34:13]
A
So you deserve the commendations. You were one of the few that did not come out in the heat of battle in April and say everything we told you three months ago. Throw it out. Stuck to your guns. Think investors were well served, paying more attention to you than anyone else. So congratulations on that.
- [34:32]
C
Well, thank you. Thank you for that.
- [34:34]
A
What do you. Let's. Let's just close here. You're starting a business. It's the first business you'll ever be running. How excited are you? What are some of the first things that you think the public will see as a result of you being in this new position?
- [34:51]
C
Well, one of the interesting thing is I have an aura ring. And every morning I wake up and about three out of the last four mornings it says you have major signs of whatever because of the stress and you don't sleep. And it's very exciting.
- [35:04]
A
It's butterflies, butterflies, everything.
- [35:07]
C
I'm telling you, man, on Friday, when we changed our LinkedIn and we sent out, we put our website up live and we have people signing up for our research. We'll have research and we'll have our portfolios up soon. It was. Try not to be emotional. It was overwhelming the response. And when you're in the weeds, man, and you're working hard, you have no idea what you're doing and your impact on other people. And I've heard from people from William O', Neill, Dane Bosworth, early 90s, from Piper, a lot of people from Merrill.
- [35:40]
A
Like your fans, come out of the woodwork and say, I've been waiting for you to do this right.
- [35:44]
C
Yeah. Yeah. Congratulations. And then my great partnership at bmo, I mean, the brokers and the advisors up there are just amazing and sending me great well wishes and everything. It's so gratifying. But I don't. I'm not doing that for that. I'm doing it because I wanted. I wanted a new chapter in my life. And I'm super excited about being off on my own and doing this and being able to do what I love.
- [36:07]
A
How excited are you for Brian, scale of 1?
- [36:09]
C
10?
- [36:10]
B
11.
- [36:10]
A
Yeah.
- [36:11]
B
So what are you going to be doing for people that want to learn more about your services?
- [36:15]
C
So we have our website up. Humiliates Investment strategies dot com. Look it up and we will be you.
- [36:22]
A
Not everyone speaks Latin. H U M I L I S dot com.
- [36:29]
C
Nope, can't do that. But humilisinv.com or humilisinvestmentstrategies dot com.
- [36:35]
A
Perfect.
- [36:36]
C
Okay. And we'll have our portfolios up and running soon. And we're hopeful to have BMO as a wonderful partner still in Canada. We're hopeful to have some great partners in the US as well. And we're gonna be portfolio advisory delivery only. We're not gonna compete for assets. We just want to help people and run the portfolios. And I don't know if you know this about me, but I'm kind of an old school guy. Like, I believe that this business is all about relationships. If an advisor trusts us or broker trusts us to help them run their equity and they have some great clients, we will go out and meet that client because I think that's important and I don't think a lot of people do that as much anymore. That's how I learned the business. And so I think we're kind of going back to that.
- [37:23]
A
Ladies and gentlemen, audience fan favorite Michael and I. One of our favorite people we've ever met on Wall Street. We're so proud of you. We're so happy for you.
- [37:34]
C
I am proud. Listen, you guys have been amazing, like, seriously amazing. Barry and team, the entire family here has been so supportive of me.
- [37:45]
A
Thank you.
- [37:45]
C
And it means the world to me for everything you've done for me. And we're gonna be great partners going forward.
- [37:50]
A
Dude, so excited for you. You guys. Check out humulous.com. humulousinv.com.
- [37:57]
C
That's it.
- [37:58]
A
Let's subscribe to Brian's stuff. Let's get on the list. And my man, good luck to you. Wish you all the best and I know we'll see you soon.
- [38:05]
C
Thank you, man.
- [38:26]
A
You ready?
- [38:27]
B
Absolutely. Born ready. Let's go.
- [38:29]
A
All right, ladies and gentlemen, boys and girls, children of all ages, welcome to an all new edition of what are your thoughts? The longest running show on our YouTube channel, the Compound YouTube channel. Michael and I have been at it since 2018 in this format. Some of you remember there was a time we used to surprise each other with topics not our best content, I think. No, no big deal. We did it for four years, guys. On this show, we. We talk about all of the most important things happening in the market, in the economy, in the financial news. We stay in our lane. We don't veer off into directions where we don't belong. We try.
- [39:17]
B
We're doing the race today. We're not. We're not opening up with the race. What's the race, the mayor mayoral race. I thought we were starting the show.
- [39:24]
A
Stay out of that. I for one, embrace our new socialist leadership and I don't know. I'm out. I'm a lost words. All right. Anyway, we're gonna stay in our lane. We're gonna do stocks, we're gonna do bonds, interest rates, tech, all the stuff that you. You count on us for. I want to say hello to some people in the chat, but first, a word from our sponsor. Michael. Tell us about the sponsor.
- [39:48]
B
Today's episode is brought to you by Crane Shares Morgan Stanley Ticker Ms. Neither here nor there. They project the humanoid robotics industry could grow into a 5 trillion dollar market market by 2050. And investors are taking notice. Crane shares, KO ID ETF. I call it COID. KOID. KOID provides equal weight exposure to the companies powering this revolution. All right, I'll keep going. It's equal weight methodology. You're next, you're next, you're next. It avoids outsized exposure to mega caps like Nvidia or Tesla, which many investors may already own, while still capturing their influence on the theme. Josh, don't even bother. I got this. CoID's holdings include innovators like Robosense, that's a company specializing in LiDAR sensor technology, Oobtech, a significant humanoid robot maker, and Horizon Robotics, advancing AI chips that bring robots to life. Together with other holdings across Asia, the US and Europe, COID offers a broad based way to invest in the rapidly emerging humanoid robot sector. Learn more. Read the disclosure, please.
- [40:51]
A
KOID is non diversified. Diversification refers to theme, not regulatory status. Holdings change. See top 10@quenchares.com KOID review the prospectus for risks and details. Investing involves risk, including loss of principle. KOID is distributed by SEI Investments, distribution company. All right, shout to, shout out to Crane shares. And shout out to you guys that are joining us in the live. I see Chris Hayes is here. John Carlo. All, all the. All the gangsters are back. Curry Dip C. Paul Breezy. We appreciate you. Ben Loop. Who else? Everybody's here. It's an exciting time. I was saying to Michael before we came on, when it's not earnings season, I don't even know what we talk about because when it is earnings season, there's almost too much to talk about. It's just a deluge, if you will. What do you think?
- [41:43]
B
You know what? I'm here for it. Because August in particular, September two is just boring. There's nothing to talk about. Stocks go up 40 basis points every day. Whatever. Until you hear from the companies. And we're going to get into it today, like in between times and when there's nothing, when there's no macro news going on, really like a little Fed stuff here and there, it's just boring. We're saying the same, same shit every week. So I'm here for it. I'm excited. There's new stories, there's news to talk about. Let's talk about it. I agree.
- [42:09]
A
Even the stuff that goes down that I own, at least it's like a little bit of variety. Because that rally from July into year end was sort of relentless. Or year end into the fall was sort of relentless. And now there's opportunities being created.
- [42:24]
B
Finally. Let's go.
- [42:25]
A
All right. So Palantir is the big one. I can't believe it's the big one because like comparably speaking, it's financials. It's not that big of a company. It's not small. They're on a run rate that's like 4 and a half to 5 billion in annual revenue and they, they're growing faster than almost any company I could think of. Maybe any company I could think of not only growing, but growing profitably. And a lot of knocks on the company about its lack of profitability when it came public now look absurd in hindsight. This company is minting money for a $500 billion company.
- [42:57]
B
Now obviously the question is, is that valuation justified? And you know, we'll find out in due time.
- [43:02]
A
Yeah, it's 450. Holy shit. That's the other thing.
- [43:06]
B
Dude, it was $500 billion. Yeah, it's huge.
- [43:10]
A
I mean they've been. Alright, so they are only public for two years, but they've been in business for 20. I think it's worth pointing the company was founded in 2003, so it might seem more absurd than it actually is. Like how quickly this company got to a half a trill. But be that as it may, this is a huge business or a huge market cap and a fast growing business would be the way I would phrase it. Do you think it's weird how defensive he is and combined if he is.
- [43:41]
B
I do, I do. I don't think it's a great look in particular, I think. I don't know if he's talking to Burry directly but he's yelling at the shorts. There are no shorts. I think we have a chart up the chart up of the shorts. There's like 2% of the float is short. No, there are no shorts. There's nothing Here. So I don't know who he's talking to now. To the. I think you know what he's doing. He's galvanizing his base because his base are retail holders. And even if the shorts are imaginary, they're not imaginary because Barry just said he's short. It's like those guys. Like, we're in this together. We're saving America. We're making money. Why would anybody be short this company? Now, I'm. I'm kind of sympathetic to. Like, why would you be short this great American company that is trying to defend our nation? It's doing all of these great things.
- [44:22]
A
Not personal, because it's not personal. That's why you'd be shorted.
- [44:25]
B
I understand why people are short the name, and I understand him as the leader of the company. If this was you, you maniac, you would be relentless. If there was anybody shorting your stock, your company, and you were the.
- [44:37]
A
So that's all right. I'm glad you said that. I do think when you're running a business for 20 years, something that you built with your bare hands, and you've had criticism the whole way up, not from the investor class, but from political people, journalists who hate his message, his America first message, and I guess, like, a lot. So he considers himself to be center left in today's America. He's obviously not. But I do think he gets a ton of criticism from the left, where he's a war profiteer and they're spying on everybody, and he's, like, almost too gleeful about helping the Pentagon drop bombs in other countries. And there's just this, like, distrust on the left of the military. There always has been. This is nothing new. And he sort of became the face of that as the AI enabler of the US Military. For better or for worse. I would point out he's doing a ton of work with militaries and governments all over the world, including in Europe. He sees himself as somebody who's helping to erect a bulwark of technology against the enemies of the allied countries. What we think of this traditionally. So he's kind of got that chip on his shoulder where they've been giving him shit in the press even before he was a public company. So I understand the aggravation. Like, why do you guys keep betting against me?
- [46:04]
B
I totally get it, but that's one side of it, right? It's the political angle. And then the other side of it are the professional investors. I'm using air quotes who think a stock is expensive. He's like, you guys, you've been calling my stock expensive for the last 2%. And while. And meanwhile. Fine. And meanwhile, my investor base, the quote, dumb money. Look how much money they're making. You arrogant pricks are talking shit about. About us.
- [46:32]
A
I also think it's really hard, as a founder who's still the CEO, to disentangle people's skepticism about your stock from being like, skepticism about you.
- [46:43]
B
Yeah, it's him. It's his baby. It's his entire being.
- [46:46]
A
Right. I think he, like, thinks of Palantir and himself as interchangeable. And obviously they are. They. They are, right? They're forever entwined. Where does the person end in the company begin? There's no line. Because that's what it is to be an entrepreneur and to build something. It's not. He wasn't a hired CEO.
- [47:09]
B
Well, guess what? You're 100% right. And the reason why they. You can't untangle the man from the company, from the stock is because part of the thesis, for short of the company has nothing to do with the fundamentals. We're about to get into it. They are firing on all cylinders. The company is on fire. But the people that are short would say it is great company, but it's not a $500 billion.
- [47:31]
A
Oh, that's the question.
- [47:32]
C
Okay.
- [47:33]
B
And so. And the reason why it's a $500 billion company is. Is because you are pumping the stock to retail investors.
- [47:39]
A
So. So that's a really great point. Like, Burry does all this cryptic shit. He's like Drake with the. With the tweets. He like, doesn't like actually come out and say what he wants to say. Or he drops hints that he might be long or short. Something. I wonder, if you sat down with Michael Burry, would he say exactly what you just said? Yeah, of course. The company's doing great. Like, so I try to make that point on TV today. The bears aren't saying this is a bad company, just too expensive. They're just saying, like, investors today are paying for like, growth from 10 years from now. Like, it's been pulled forward. I don't hear anyone. This is not. All right, you know what? This is not. It's not Valiant.
- [48:22]
B
No.
- [48:23]
A
Okay? It's a really important distinction. Cuz in that case, if people were saying Alex Karp is a fraud, Palantir is bullshit, then his combativeness would be fully understandable. Like, how dare you say that? People are saying the opposite. They're saying investors are way too excited about this company despite the fact that things are going really well.
- [48:47]
B
Let's get to some of the fundamentals. Pull up, pull up the first. Their first slide. That talks about some of the growth.
- [48:54]
C
All right.
- [48:54]
A
U.S. revenue grew 77% year over year. I think the overall company revenue was up 63% was the number I heard.
- [49:02]
B
Dude, 20% quarter over quarter as well.
- [49:04]
A
Right. Sequential. So this quarter versus the prior quarter, not last year, 20%.
- [49:09]
B
Well, look at the. Look. Okay, so close. They closed 204 deals of at least a million dollars in revenue, 91 deals of at least $5 million in revenue, and 53 deals of. At this. Of at least $10 million in revenue. So this idea that it's just government spending is all government contracts. Not true. Just not true.
- [49:27]
A
No. They're adding corporate customers, what they call commercial customers. Here's the. The total contract value. TCV is the. Is the number they use is $1.3 billion, up 342% year over year. That's. I don't care what business you're in. If you're adding contract dollars at that rate, you are doing something very right. He obviously is the best version of a company helping other companies implement AI, hands down.
- [50:02]
C
And.
- [50:02]
B
And also a lot of traditionally the highest growth companies are doing so because they're giving the store away. Right. It's either negative value contracts or whatever. They're doing it with a margin rate that off the charts. So they're obsessed about the rule of 40, which is this term in enterprise software that measures your. How profitably you're growing, so your growth rate and your profitability. And they're off the charts. John, throw some charts.
- [50:27]
A
100 and 150, 114%. There's a rule of 40 score.
- [50:33]
B
This is them compared to enterprise software companies that have over $1 billion in revenue. The next chart shows them compared to, I think, the top 25 companies around the world. Who's even close? Who's next?
- [50:48]
A
Nvidia.
- [50:49]
B
Nvidia. And. And who's underneath him? I can't. I can't make that out. It doesn't matter. They're all. The point is they're off the charts.
- [50:55]
A
It looks like that is Rocky Mountain Chocolate Factory.
- [50:58]
B
That's exactly.
- [50:59]
C
I don't.
- [51:00]
A
Dude, I don't know what that says.
- [51:01]
B
I can't say.
- [51:02]
A
L. L Is that Lily?
- [51:05]
B
Could be.
- [51:06]
A
It could be. Right, Go back to the prior. There's nobody. No, one more. One more back.
- [51:13]
B
No, this is.
- [51:15]
A
Oh, this is it. The rule of 80 frontier. So where like the 80. The 80 comes from or the rule of 40. The 40 comes from that combination of profit margins and revenue growth. So like, what they're doing is not being done by anyone. And when he says that, he's not lying.
- [51:33]
B
And it's accelerating. So we have one more chart. Look at this, look at this. It's accelerating.
- [51:40]
A
It's at the point where every large company and every government around the world is going to be doing tens of millions or if not more in Palantir business if, if this continues. And he knows it. And so he's basically like, okay, let me get this straight. Of the 5,000, 3,000, 4,000 publicly traded companies in America, US and Nvidia, that's who you want to be short. Like literally the two best companies on earth. In the chat, people are pointing out Burry talked about getting short the, the semiconductor stocks last year. Not, not a great idea. Short Nvidia at different times.
- [52:22]
B
But it doesn't matter what he tweets because his, we see his performance and this is a great lesson. Forget what they say, all right? They could change their mind. It doesn't what they're. You look at the 13 Fs. It's in the past. His performance has been kick ass. He's been doing really well. So don't worry about what he says. Ignore it.
- [52:40]
A
What if he shorted? Right? What if, what if he bought puts two days ago and he covered them today? The stock went down 8%.
- [52:46]
B
Right.
- [52:46]
A
He probably, probably would have made money. So how do you know that's one too, Obviously. We've talked about this before. The dollar amount, people are, people are calculating the notional value of what those options contracts stand for. And they were saying, oh, it's half his fund is in puts. I very highly doubt that's the case. It's not. That's not how to calculate what his actual financial exposure is.
- [53:12]
B
Yeah, it's leverage.
- [53:14]
A
It's because it's low. Okay, look, I think there's room for both of these guys to be right. This stock could pull back 20%, I think not even violate its 200 day moving average.
- [53:25]
B
It's up, it's up money.
- [53:26]
A
And then it could rebound.
- [53:28]
B
What is it up year to date? I mean, it's. First of all, the pullback is, it's a baby pullback. It's up 116% year to date.
- [53:35]
A
So here's the other thing apart. Big deal, they're buying back stock.
- [53:41]
B
Really?
- [53:42]
A
Yeah. So if you're buying back stock, don't you want there to be short sellers knocking the price down? You could just buy them out of their positions on the way back up. He said he has $880 million left on an existing buyback authorization. Do you want to buy. Do you want to buy your stock at 200 or you want to buy it at 180?
- [54:02]
B
Yeah, I don't know. $500 billion market cap. That's not. That's nothing.
- [54:06]
A
Understood. But I'm just. I'm making the point. He's buying. He was. They bought back stock last quarter. They didn't not buy back stock. So if that's.
- [54:14]
B
He's rallying the troops. That's all. That's. That's what all the riders. The rhetoric is.
- [54:18]
A
I do think he is very wisely creating this retail army of people that he has made a lot of money for. I think you're right. He's galvanizing that base. And I'm seeing a lot of CEOs get religion on this. Netflix just announced the 10 for 1 split after a really long time of not doing splits. And then I saw the guy from ServiceNow on with Kramer, the CEO, and he was saying explicitly, we're doing this split because we want to make it so that our fans in the retail investor audience can continue to fight with us and be on the team and buy more shares. I do think that that's now part of the playbook Post GameStop, post 2020. I think technology CEOs in particular, but not only tech CEOs recognize the value of. In having a vocal retail shareholder base to counteract some of the narratives coming out of Wall street and institutions. I think having a rabid army, you better deliver.
- [55:24]
B
There's. There's not too many Alex Karp's, then there's not too many palantir.
- [55:29]
A
Well, the ServiceNow guy has made a lot of money for investors too, so. And obviously so is Netflix. And I think deliberately, like catering to that retail investor with a lower share price is part of the modern CEO playbook. Not dumb. I like it. We should split our stock. What do you think? Do a five for one. What's up, little five for one. All right, let's see what else. Let's put up the price reaction. This is got back into the gap.
- [56:01]
B
I mean, it's actually nothing. It's down. It's in. I mean, okay, stocks up 300 of the last year. If pulled back 8%.
- [56:08]
A
Wait, the point is it pulled back to the level it was trading at on October 29th.
- [56:12]
B
Yeah. Who cares? It's nothing.
- [56:15]
A
It's nothing. Total return. Give me It.
- [56:18]
B
Yeah.
- [56:18]
A
Next chart. So this is 160% since Christmas. Like, I think you could live through a couple of pullbacks.
- [56:29]
B
I hope so.
- [56:31]
A
It'll work out. His opening statement on the conference call was as livid as what he did on CNBC after on Squawk. I asked Sean to grab this. This is how he opens the call. Greetings. By any normal or even reasonable standard, these are not normal results. These are not even strong results. These aren't extraordinary results. These are arguably the best results that any software company has ever delivered. And that's not hyperbolic, despite what your analyst friends may want you to believe, because they've been wrong at every price. They're wrong in every single round. But of course, their perspective. And they're not investing their own money. But a normal enterprise company should not have a rule of 40 above 100. He goes on. I'm not gonna read the whole thing, but basically, like his entire tirade at this. This is the beginning of the conference call, not the end. Is like everyone who doubts us. And I do believe there's a certain component of the shareholder base that loves that.
- [57:43]
B
Yeah.
- [57:43]
A
And he knows exactly who. He knows exactly. Joe Altomaro in the chat saying he sounds like Trump. Yes. Deliberately, actually. Venn diagram of MAGA. Trump stock market investors and Palantir shareholders is probably 100% overlap.
- [58:03]
B
How about Tesla shareholders? Yeah.
- [58:06]
A
What's Elon going to do to catch up to Karp at this point? I feel like he's got to throw some punches, too.
- [58:11]
B
All right.
- [58:12]
A
It's an interesting story.
- [58:14]
B
Yeah.
- [58:14]
A
Very weird. We had a video clip. I'm gonna skip it. I don't think it's that important. Let's. Let's go into AI generally.
- [58:23]
B
Yeah. Before we get there to set up some of the things that's been happening in earnings season. The stocks that are beating, whatever, they already got rewarded. Not. Not shocking. We were talking about the setup going to earnings season. The bar was high and. But the stocks that are missing, oh, boy, it's. It's ugly. So Mrs. Have traded 5% lower on average the day after reporting, which is steeper than any other quarter in the history of our data, which goes back to Looks like 2016. Yeah. Okay, now listen. So I, I love this. I love. I love a healthy reset. I love stocks falling even as they beat. I don't like to see anybody lose money. I'm not bearish by any means. I don't celebrate this. But there is obviously a lot of optimism baked into the market based on whatever you're looking at option activity, sentiment. It's all saying the same thing. A healthy reset. Just blowing a little foam off the top of the beer. Let's reset. Let's everybody take a, take a, take a beat. I, I like it, I like where, where we're headed. Oracle stock closed the gap after that 25% pop after the open AI announcement or about to close the gap. Like a lot of the, Holy shit. This is like scary vertical price stuff. That's all, that's all gone. So now we can move forward, hopefully in a healthy way. All right, anything else?
- [59:46]
A
We're getting, we're getting a heads up. Axon Enterprise, which is taser and body cameras for law enforcement. Huge blow up after hours. That stock had been rallying up until late summer. And then.
- [59:59]
B
I don't know anything about that name.
- [60:00]
A
It's, it started. So it's like part of this like military industrial complex, like law and order, Trump trade kind of thing. They sell a lot of equipment for military, for police, for law enforcement. Stock had been doing really well until late summer. It broke down in September, technically, and I guess now we know why. It broke its 200 day three weeks ago and after hours tonight, it's down $150 a share. It's down 21% on earnings. I haven't seen the earnings themselves, but. All right, so not great.
- [60:39]
B
So topic two is a bit stale at this point. I put this in the doc, I guess like a week ago. So whatever. There's an interesting thing going on in the market where you're going to see this for the next, I don't know, three years because the stock market is so concentrated, you're going to see a lot of very bizarre days, whether it's equal weight outperforming or underperforming, like in a dramatic way. So for example, last Wednesday, I believe it was, or Tuesday it was the day last week bespoke tweeted this where they showed it was the worst breadth for an update ever for the S P. So there were only 200, I guess there were 300. 300 more stocks were down than up, which is off the charts. To which you would say, oh my God, breath, it's ever, you know, the divergence is 2000 all over again. It's being lifted by a handful of stocks while the rest of the stocks are crashing. Not so fast. Next chart by Duality Research. So, okay, it was last Tuesday, as you could see. But also look at all the odd days in 2025. This is the opposite. Okay, these are when you see a lot of stocks that are actually advancing but the index isn't moving. Well, how could that possibly happen?
- [61:52]
C
John?
- [61:53]
B
We could skip the next chart. Go to my Mag7 chart. So here's the deal. This is wild. The Mag7. The Mag7. The market cap of these stocks are equal to the bottom 449 stocks in the S&P, which is stocks 52 through 500. Stocks 52 through 500 are as big as the MAG7. So you're going to continue to see these really weird days inside the market where you could have a lot of stocks that are down, but the Mag 7 is a great day and the index is up. Conversely, you could see the Mag 7 drag the index down with a lot of advancers. So not to throw out this breadth data, but just. It needs context when you see it going forward. Because we're going to continue to see it.
- [62:41]
A
Yeah, I see it differently. I think the market is secretly getting killed below the surface. And I think it's a function of a couple of things happening.
- [62:49]
B
Wait, hang on, hang on. I'm sorry to cut you off. You can't. This is not. You think the market is secretly getting killed because there's data. The market is not secretly getting killed. If you look at the equal weight NASDAQ 100, Russell 2000.
- [63:00]
A
Stop looking at that.
- [63:02]
B
Stop looking at the equal weight stocks. What do you mean? How should I look at it? How is the market secretly getting killed?
- [63:06]
A
Look at, look at the internals.
- [63:08]
B
Okay, those are internals. But what internals are you talking about?
- [63:11]
A
31% of the S&P 500 are 20% or more below their 52 week highs. That's.
- [63:18]
B
We have that chart.
- [63:20]
A
I have this. I have this data from charts.
- [63:23]
B
I have this chart too. And I didn't put in the doc. You know why? Because there's nothing there. It's average. It's average. There's nothing there. No, your data is. Your data is wrong.
- [63:32]
A
25% since. So it's average.
- [63:35]
B
It's not 30%. The, the. Their 31% of the index is down. What? 20%. You said 30. It's a big difference.
- [63:41]
A
Or more 24.
- [63:43]
B
It's the average. It's average.
- [63:46]
A
Six and a half percent of the S&P is now at a 52 week low. And I bet today it's worse. That's as of yesterday. That is the highest level of new 52 week lows since Liberation Day. The average is 2%. It's six and a half. I know there's Nothing there until there's.
- [64:01]
B
There's nothing there, bro. I had him chart this and I didn't include it because there's nothing there.
- [64:05]
A
There's something there for me, it's nothing there for you.
- [64:10]
B
There's nothing on the chart. Keep going.
- [64:13]
A
Okay. Median RSI in the S&P, not average, median is 44. This is not consistent with bull markets. Median percentage of stocks below 52 week highs is minus is 15%. Look. Oh, this is the one. Actually. This is the only one I care about. Cause I keep this best stocks in the market list and it's shrinking. And 66% of the S&P 500 is actually down over the last month. It's nothing to be alarmed about.
- [64:45]
B
Oh my God.
- [64:47]
A
Nothing to be alarmed about. But it's also to your. The way you say it, it's also not nothing. We have a chart.
- [64:53]
B
Wait, hold on, Josh. Hold on, hold on. I'm just saying. You said the stock market is secretly getting killed. Could we just.
- [64:58]
A
Secretly getting killed? Okay, dude, dude, Pinterest is blowing up right now after the close. I know.
- [65:05]
B
I'm not saying, I'm not saying it's nothing, but.
- [65:06]
A
No, but where last week, last week, ups, Nike. The list of brand name stocks, while they're not important in dollar terms relative to Microsoft, the list of stocks that are important to other people, that are breaking down, slash, crashing slash, making new lows for the year is alarming.
- [65:29]
B
It is, it's notable. It's notable, alarming.
- [65:32]
A
But we're different people. We have different biochemical notable.
- [65:38]
B
Throw up, throw up. The nearing historic extremes. The way that I see it, Josh, is that the stock market was max long complacent and max above. Its, its 200 day moving average, it was 13% above. So we're just getting a little reset, A little foam being blown off the top of the beer. And you're right, there are a lot of names we can go down. The list of Starbucks, of Nike. There's a million of them. There's a million names that are getting leveled.
- [66:08]
A
My friend, you are in a kayak heading over Niagara Falls talking about a little reset. Stocks are secretly getting killed. We're not experiencing it as a market wide disruption yet because the stocks that really matter are holding up.
- [66:26]
C
Apple.
- [66:27]
B
But Josh, Josh, there's an index for this. It's called the equal weight. This weights all of the stocks equally. Dude. And it is down 2.4%. So shut the up. This is the data. The median stock is down 2. Well, not true. The media stock is not at 2.4%. The equal weighted stock market is down 2.4% from its all time highs. So when you say the stock market is secretly getting killed and it's alarming, you need to relax.
- [66:54]
A
I'm going to tell you the greatest thing about the show is we'll be back here next week and then we'll see who.
- [66:59]
B
I'm not making any. Hold on. I'm not saying any predictions about what's going to happen next week.
- [67:02]
A
Now here's what I want to say that's constructive. We needed this to happen. It got too easy. People are walking around with their big giant balls in a wheelbarrow. They're, they're not afraid. They're not afraid of, they're not afraid of a goddamn thing.
- [67:18]
B
Investors were definitely feeling themselves.
- [67:20]
A
And then when you look at like the strategies of the world, some of these, some of the smaller AI names and you look at like some of the things that people have made money in the oclos, I, I think it's negative. I don't think it's negative to see 30, 40% strategy is down 200 points, 450 to 250 in like six weeks. I don't root for people to lose money. I just think like some of these types of things needed that correction for people to calm down.
- [67:56]
B
Like, can I quote myself with the.
- [67:59]
A
Level of risk that they're, that they're assuming is not risky, a healthy correction.
- [68:03]
B
Or what did I say healthy Pullbacks only look. Pillbacks only look healthy in other people's stocks. But, but it is true in my estimation. Now again, it's not a prediction of where we go from here. But this is normal. This is normal. You can't go up every day forever and ever. You can't have these pre revenue companies at 30 billion dollar market caps up a thousand percent without any pullbacks. It doesn't work like that. So this is, this is the way it works. All right, before we have a few more charts, I just, I want to call this one out. I did it with Ben.
- [68:33]
A
I'm not, But I'm not. But I'm not done. Do you know what went up today?
- [68:36]
B
What?
- [68:37]
A
Yeah, you know, not a rhetorical question.
- [68:40]
B
Oh, went up 6%.
- [68:42]
A
They rallied financial.
- [68:43]
B
Home Depot went up.
- [68:45]
A
This is what gives me hope. They rallied the defensives, which, no, not looking for health care went up. Consumer staples went up. But the financials were the best sector on the day, up a half of 1%. No big deal. But like, and homebuilders that, that Tells me that we're not just throwing out the baby with the bathwater and giving up on the bull market. What we're, what we're doing is we're, we're tamping down some of the more egregious, silly stuff. And then, like, Berkshire went up today.
- [69:17]
B
Right.
- [69:18]
A
Goldman went up today.
- [69:20]
B
Home Depot went up.
- [69:21]
A
Like, there was some good stuff happening today that I like to see, and I think it's healthy.
- [69:27]
B
Health care rotation is. Who said. Is this JC Rotations of the lifeblood of a bull market? I don't know. Somebody said.
- [69:34]
A
Sound like a jc.
- [69:35]
B
Somebody said it. Is that Rafa Kampora? Who cares? All right, so I. I got to share this chart because I blew my own face off with this. I had Char kid.
- [69:43]
A
Yeah, I think that was a Acapora, but maybe not.
- [69:46]
B
Okay. All right, so $4 trillion for Apple. It's a lot of market cap. And I think it's easy to just look at, like, the numbers and not really appreciate the underlying businesses and of how large they are. So I had Matt show me their segments broken down and compare that revenue to other giant companies. So let's start at the top. The iPhone, which is basically half of the revenue of the company over the last 12 months. The iPhone did more revenue than bank of America. Not a small company. And Meta, also not a small company. Services, which are. Which is the crown jewel. It's the entire growth engine. The entire margin expansion engine of Apple services did more revenue than target $107 billion, which is wearables, which is the watch and the end. And the I. What's the what? The AirPods and home accessories. I don't know what that is. That did as much money as Starbucks almost. And almost as much money as Salesforce. All right, now you go on down to the computers. The Mac. The Mac did more money than Schwab. Significantly more money than Schwab. And the iPad, which. I can't believe this. I don't know. I guess I would have guessed. I don't know what I would have guessed. The iPad did $28 billion over the last 12 months. That's more revenue than AMD. Holy shit.
- [70:58]
A
So keep that chart up. This is. This is my takeaway. This is how crazy this is. AMD has a market value of 406 billion. Now, we know it's growing faster than iPad, but the fact that those two companies are revenue parody is bananas to me. You could say the same thing with, with, with Schwab. So just like, just for people's context, Schwab has a market cap of 170 billion. Mac just Mac alone is a bigger business than, than Schwab. And obviously, you know, the example with Target, the example with this is the chart of this is still the best business in the world. It's just not the fastest growing anymore. But it's still the best business. And Apple is the best business in the world. They're making money in year 20 of a product like an iPhone, where most consumer technology companies, at best, they've had like a three year run, a five year run. Think about Japanese companies selling VCRs. Like they, they have extended the lifespan of consumer technology devices.
- [72:08]
B
It's miraculous.
- [72:08]
A
And found a way to keep these things at 40, 50% profit margins.
- [72:12]
B
I guess the other two that I would say are competing and you know, whatever, we're splitting hairs would probably be Microsoft and maybe Google.
- [72:19]
A
I think this is a better business than both. It just, it's not growing as fast right now, but it's just bigger and it's better and it's global and the margins are still there.
- [72:30]
B
Yeah, it's wild. It's really impressive.
- [72:32]
A
And they just keep coming up with new things to sell. The same customers, keep charging the same customers more money for the same product, keep improving the products. They have this consumer lock in. And people like, well, why is Apple 35 times earnings? Because, because, you know, hard it is to shock a company like Apple in, like off its game. They just continue to deliver and the.
- [72:59]
B
Buybacks and the dividends.
- [73:01]
A
Yeah, but I'm saying people look at it like a consumer staple. It's a consumer luxury slash consumer staple.
- [73:08]
B
Well, it's the same story as Costco. Why are people paying 50 times earnings for Costco? I'm not saying it's just a.
- [73:12]
A
Because they know the customers are going to show up every week consistent.
- [73:15]
B
It's, you know what you're getting. There's no downside, surprises.
- [73:19]
A
People are paying up for that consistency. Even if it's not fast growth, it is. It's going to be there tomorrow, it's going to be there the next day. People drop an iPhone, break it. They're not switching to another phone. They're locked in. And that's worth a lot to an equity investor. All right, we had one more thing in that, in that market secret to getting killed.
- [73:45]
B
We. Was it the, the quotes from. No, I don't want, I don't want to, I want to skip the next chart. It's a lot of charts. The thing from Sam Rowe or the thing about you want to. Let's save the Altman stuff for, for, for tcaf.
- [73:58]
A
All right. Sam Rowe. I woke up to see almost every financial news site I read feature essentially the same alarming headline. Here's a partial roundup. Goldman Sachs and Morgan Stanley CEOs warn of possible drawdown. Wall Street Journal, seven more of those. Here are some quotes quote, it's likely there'll be a 10 to 20% drawdown in equity markets sometime in the next 12 to 24 months. Oh, my God. All right. Kreskin. Things run and then they pull back so people can reassess. A 10 to 15% drawdown happens often even through positive market cycles. It's not something that changes your fundamental or structural belief as to how you want to allocate capital. It's David Solomon from Goldman, The Morgan Stanley CEO Ted Pick said, I think they were at the same event in Hong Kong. We should also welcome the possibility that there would be drawdowns 10 to 15% that are not driven by some sort of macro cliff effect.
- [74:55]
B
Maybe the best thing ever. If we get a 10 to 15% pullback on no tariff nonsense. No. Oh, no. The Fed is going to start hiking again. Like, if it's just like, hey, we were over our skis and let's just reassess. Wonderful. Let's set up for the next leg. Higher. That's healthy. What's not healthy are no pullbacks. What's not healthy is up 25% every year with. No. That's what. That's what leads to a crash. Okay? You need pullbacks. You need doubt. We need the wall of worry to be rebuilt so that we can climb it. This is all good stuff.
- [75:22]
A
Wall Street Journal, Bloomberg, cnbc, Reuters, Business Insider, and Fortune all wrote the same article based on those comments from the two. The two Wall Street CEOs.
- [75:31]
B
Yeah. You're not going to not write it.
- [75:32]
A
I guess you have to write it. They must know better that they're basically saying nothing. They're saying, water is wet. They must know that. Like the editors, at least, who are.
- [75:41]
B
Yeah.
- [75:42]
A
I mean, but I guess.
- [75:43]
B
David Solomon. The stock market goes up and down. Write it.
- [75:47]
A
You know, it's an act. You know, it's an article. Ted Pick of Morgan Stanley. No correction in sight. That's an article. But you know, that's not what happened. These guys are. These guys are saying, look, it's a bull market, but so what?
- [76:01]
B
You know who's not, you know, what's, what's Buffett's problem? Get involved. Get involved.
- [76:08]
A
Sit there do something. All right, Great segue. Buffett is still a seller. Reported earnings like a. Like a gentleman on Saturday. No fanfare, no conference call, just almost like a handwritten note slipped onto the website.
- [76:27]
B
We like it that way.
- [76:29]
A
Yeah. Yeah. Berkshire was a net seller of stocks. They now have 380 billion in cash and cash equivalents, or Treasuries. And they bought back 0 shares of Berkshire Hathaway during the quarter. And they're obviously still not paying a dividend for the 70th consecutive year. Let's put this chart up. Not huge sales. They did that already in 24 when they liquidated two thirds of their Apple. But still selling. We don't now we don't know what they sold. Chart off because that will come out in the middle of November with the 13 Fs. Right. The quarter ended September 30th. They have 45 days. Typically, they nail it to the day. All of these big investors will come out with their 13F filing in about a week and a half. Then we'll find out if they sold more Apple, did they sell more financial stocks? What did they buy? What, if anything, did they net buy?
- [77:32]
B
They didn't sell anything. At least the net. The net is nothing.
- [77:35]
A
380 billion. I saw an analysis where it's like really 360 billion because of the way something's being calculated. It's like, cares, dude, what are we doing here? Chart on this is Berkshire versus the S and P. So, Josh, we were.
- [77:49]
B
Talking about this with Belsky yesterday. Look at how wild liberation day was. Berkshire was flying high. The stock was up like 15% while the S and P was down about the same. This was like the anti air trade. Right. And then, and then sentiment flipped big time.
- [78:04]
A
Yeah. Heather M42 in the chat is saying, BRKB is my cash equivalent. You know, it's sort of like. It's sort of like a joke, but it sort of actually is.
- [78:14]
B
No, it actually isn't. Just stop. I know what she's saying. I know, but it's just.
- [78:17]
A
No, but it's. I'm saying the market cap is increasingly becoming dominated by this almost $400 billion in cash. And when the market dislocates and has an event, people understand the potential for Berkshire to actually turn that into an opportunity for itself. They haven't yet.
- [78:35]
B
If you are looking.
- [78:36]
A
They haven't yet.
- [78:37]
B
If you are like, oh, my God, just AI everything, I can't escape it. It's 40% of the index. This is the anti AI. If this is a bubble that pops, whatever, whatever. I think Berkshire will do just fine.
- [78:49]
A
Better than they don't. They don't really own anything. They don't own enough of anything that requires this AI splurge to continue. Although they are absolutely involved from the perspective of the utility, they are obviously supplying power to a lot of data centers. They don't mean to. That wasn't the idea when they bought up all these utilities. But they're not. Not involved. They're just not directly involved.
- [79:20]
B
All right, we talk about some of the blow ups from last week.
- [79:23]
A
Yep.
- [79:24]
B
So this is one of the reasons why I love earnings season so much. You gotta hear from the people in charge. Because I listened to some of the Chipotle call and we spoke a couple weeks ago and I can't remember when I said if I was like, probably. I think it was probably like, yeah, Chipotle might be. There might be some value here. I'm not touching that stock. I don't believe this guy. I just, I don't believe what he says. I think he's, I don't know, that full of shit might be too strong. I just, I don't trust him. I don't like what he said on the call. And I don't buy the turnaround. I'm not buying the stock. I don't care how low it goes.
- [79:56]
A
It's not a turnaround. Like it's, it's like statistically this is not a turnaround. It's getting worse.
- [80:03]
B
So here's, here's the story. The increase in total revenue, it was not a lot, it was not a big increase. Was driven by new restaurant openings and a 0.3% increase in comp restaurant sales. Yuck. Due to a 1.1% increase in average check, partially offset by lower transaction of 0.8%. Nobody wants to pay 14 for the ball anymore.
- [80:25]
A
And this guy had the 17.
- [80:27]
B
And this guy had the gall to say, earl, this, like he opened it with this. Earlier this year, as consumer sentiment declined sharply, we saw a broad based pullback in frequency across all income cohorts. Since then, the gap has widened with low to middle income guests, further reducing frequency. We, okay, so all this might be true, but then he's talking about like a particularly challenged Cohort is a 25 to 35 year old age group. It's like, dude, yeah, fine, there's some challenge here, but they don't want your slop anymore. They don't want it. There's no value there. And in terms of like their, their stories and the metrics, for what they're going to be doing to turn it around to get people back to the store. I don't buy any of it. It's not going to work at all. And the stock is getting creamed. It's at a 54% drawdown. Throw this chart on this whole sector.
- [81:09]
A
And the whole sector is falling.
- [81:11]
B
It's not just them. So three years. This is them versus their peer group. So the peer group is not doing great either. But nobody wants this. Who is this? This is Charter had a great chart, the sloppole economy chart. It shows the year over year comp store sales. What this is measuring is like, all right, store x. How do they do one quarter to the next? Forget about new store openings. So sweetgreen, chipotle, cava, all of these sloppables. And I, I'm here for the stop. I don't mind the food. Nobody wants it anymore. Preferences are changing. So don't tell me about the consumer nobody wants.
- [81:42]
A
All right, so a few things are going on. Number one, the relentless price hikes are completely out of control. I can't speak to kava, a sweet green salad with like an extra protein or something. It's like a $20 meal in Midtown Manhattan.
- [81:57]
B
It's obscene.
- [81:57]
A
And it's. And it's a bolus slop. It's not good. The ingredients are ice cold. It just, there's nothing appealing about it. I had cava once. It's good chipotle. Everyone knows the food has gone downhill, but nobody can pinpoint how they know it. I've never liked it. I've eaten it. I just, I never thought it was good. But now people that love it are. My kid is a great example. He and his friends, they're off it. They just, they don't think it's good. It's. By the time they serve it to you and you Pay, which takes 30 seconds, it's already lukewarm, getting cold. They're banging you out for guacamole. That used to be cute. Guac is extra in this economy. It's not cute anymore. Nobody wants to hear it. They're not in on the joke with you. And it's too much money for what it is. They overexpanded, perhaps. And now That's Homet. We opened 64 Chipotle lanes. What is that? The drive through? Nobody wants to drive through. Imagine eating this shit in your lap while you're driving. Are you kidding me? So I, I, I'm not buying the turn on either if I want to. If I want to bet on a, on a turnaround in this space. I'm, I'm Starbucks. I'm not Chipotle.
- [83:05]
B
Or, and there's a lot of opportunities. Starbucks for sure. Or Domino's. Like not this, not this. All right, what do you think?
- [83:15]
A
It's going lower.
- [83:17]
B
I'm not buying it.
- [83:18]
A
Going lower. Is it just not going to go up?
- [83:22]
B
Chipotle, I have no interest. Yeah, I'm looking, I'm looking right now. So there's no balance.
- [83:26]
A
Is this alleged turnaround to artists buying any stock. What's his name? Scott Boatwright. Any inside. Any insider buying to speak of or. Probably not, right?
- [83:35]
B
I, I, I doubt it. I don't like this guy's voice. I don't like what he's saying. I'm not buying what he said. I'm not buying the stock. If it, you know what? Honestly, if it went to like 20 bucks, I would just be like, all right, fine. This an activist coming in here.
- [83:48]
A
Number of open market buys last three months, zero. But last 12 months, 24. Okay, 55 cells.
- [83:55]
B
No, no. If it go, if it go, if it, if it continues to get smashed and activists will get involved. Does Bill, is Bill Ackman still in this name?
- [84:02]
A
Taco Bell might have to ride again. I don't know if he's in it.
- [84:05]
B
Okay, if it. You know what? I'll buy it at 20. In fact, I would buy a lot of 20, but we'll see. But for now, no, I'm not interested. All right, let's talk about Fiserv. So Fiserv is one of the biggest financial technology companies that you probably don't know what they do. They're in a lot of behind the scenes processing stuff. But one of the things that you do know what they do is the, the you tap on the phone. So it's a Clover competitor, the stock?
- [84:30]
A
No, it is, it is, it is Clover. It's a toast competitor.
- [84:34]
B
My bad. Okay.
- [84:35]
A
Myself owns Clover. It's a puts called point of sale payment system. And you see it in a lot of stores and restaurants.
- [84:42]
B
So chart goat. And he is a goat. Made me a chart showing. So the stocks that are in the s and P500 today, okay, he went back to 2007. So when I say that this is a top 10 blob since 2007, it's just that of the 500 names today, this is a top 10 blowup of the names that are in the index today. So try it on, please. So AIG on a one day basis fell 61%, Josh. I know you remember that.
- [85:08]
A
Yeah, I remember almost all of these.
- [85:10]
B
So a lot of these were from the gfc, of course.
- [85:14]
A
But look at insurance.
- [85:16]
B
Look like you don't see. You don't see. You don't see this that often. And why did this happen? Because the results were an abomination. And what is hilarious to me, I mean there's a lot of things that stood out. They repurchased 7.2 million shares in the quarter, returning a billion dollars to shareholders. Returning. Excuse me, excuse me, excuse me. You bought 7.2 million shares knowing full well that this is going to be an absolute annihilation catastrophe. What are you mental? This is the most irresponsible, reckless behavior I've seen from a company in a long time. This is nuts.
- [85:58]
A
Yeah, the core numbers were atrocious. The core business is challenged. The growth part of the business, which Clover is part of, that is challenged. The payments. They had the CEO basically running and gunning this thing with buybacks and bravado. Then he parachutes out. I don't know if he sold all his stock or. I know he did.
- [86:21]
B
He did. He did. He did. He did. He did. Didn't he do it tax free? Because he's now in the administration and now.
- [86:26]
A
Yeah, and now the new guy. And now the new guy who's running this has to deal with was a disaster.
- [86:33]
B
The fundamentals are horrific.
- [86:36]
A
Right? I don't even know, like, I don't even know if this is a buy like it.
- [86:40]
B
There's no.
- [86:41]
A
It's not a bank. No, it's, it's not a bank. It's like a, it's like a paper pusher. It's like an information solution for financial.
- [86:49]
B
So Clover is the crown jewel of this business. This is the growth engine and they kept stuffing fees and stuffing fees into it. And matter of fact, Toast, which is a stock that I own thanks to you, got killed on the back of this because it just threw into whole. Into question the whole economics of this business. Toast, we found out, is just fine, but they pissed off their customers so badly that it actually, I think, I think Toast is a big beneficiary of this blow up.
- [87:17]
A
There's a great article this week. There was only one analyst who had a sell rating on Fiserv before it blew up. And it's a 26 year old kid that no one's ever heard of before. Great story and I loved it. I love the story. I'll just give people a little flavor of it. Fiserv's Only bear is a Bloomberg story. Fiserv's only Bear is a 26 year old analyst who beat Wall Street. And then of course I hit a registration wall and I am a Bloomberg sub. But I. It doesn't matter. The only the stock in the group that he really likes is toast. Which I like to see. So we'll see if this kid is two for two.
- [87:54]
B
But you know, it's hilarious. Look at throw up this chart. So all right, I get it. No, it's hard to see the future. Nobody. There's no sell ratings on Wall street anyway. Whatever. But look at the hold ratings. I guess it went up a lot. But like how are you still. How are you still saying to your.
- [88:09]
A
Clients why didn't these people cut it to a sell? Because you know why.
- [88:13]
B
I know that.
- [88:14]
A
How.
- [88:14]
B
No, I know that help.
- [88:16]
A
In other words, a lot of the buys became holds but none of the holds became cells.
- [88:22]
B
Yeah. Or how about this? You one of the holds because if you were a hold, if you were a holding, the stock falls 44% you better be up to a buy. Unless I guess you say now the story's completely changed. But finding. But then go to a sell.
- [88:33]
A
The thing is you don't want to go to a buy because you don't want the salespeople at the brokerage firm to start calling hedge fund clients and being like hey, we're a buy on this today.
- [88:43]
B
So really? Yeah.
- [88:44]
A
Can't really do that.
- [88:46]
B
Right.
- [88:46]
A
If you think that there are systemic problems at the company, you know this is like a three or four quarter penalty box.
- [88:54]
B
Yeah. This is.
- [88:55]
A
You don't want your salespeople taking a buy rating out to. Right. Because this is about trading activity on the desk. That's what they're paying you to cover these companies for. You don't want to encourage the institutional customers of your broker dealer to start buying this thing. No, I guess I get going to a hold.
- [89:12]
B
It's four days removed from that bomb and the stock has no bounce. It's. It's another 52 week low.
- [89:18]
A
So bad this gap.
- [89:20]
B
This gap. Unless this gap will never get filled.
- [89:25]
A
Right. I don't. This is. This becomes a stock that you just remove from your life. Basically.
- [89:30]
B
Just get rid of it.
- [89:31]
A
Just get rid of it.
- [89:32]
B
Actually, Josh, but we've been to the Fiser forum twice in Milwaukee.
- [89:37]
A
Oh right. They don't own the stadium. They just paid to name it.
- [89:41]
B
Yeah. Great investment.
- [89:42]
A
Great investment like ftx. Paid to. Paid to sponsor where the Miami Heat play.
- [89:48]
C
All right.
- [89:48]
A
It's a shit Show. Thank God. Thank God. Toast reported and was a good report because this thing got lumped in with, with that piece of shit. And I bought more.
- [90:01]
B
I bought more TOAST on the day that five server Borgs. I just wasn't buying that there was like systemic issues in the industry.
- [90:06]
A
I haven't had a chance to digest the TOAST numbers. But for people who are long term viewers of the show, I am an investor, not a trader. I've been accumulating stock in the mid-30s. I think it's going to 6570 and I think it's one of the most exciting opportunities in software because of the degree to which they can truly own this TAM. Here was the report Beat on revenue 1.63 billion versus 1.58 expected. Slightly missed on earnings. They did 16 cents versus 24 cents air, which is the most important number. Annualized recurring revenue was up 30% year over year to 2 billion. So that ARR is almost like annuitized revenue provided they don't have high churn and lose a lot of restaurant customers. That's the best kind of software business there is. You can budget based on that, you can build on that, you find other things to sell those same customers. They have a lot of different verticals that they've expanded into. It's not just payment processing. They're helping restaurant owners with staffing and what hours which employees are working different software. They're helping the chefs order ingredients, they're making loans to restaurants in some cases. And that's a business now. And they are the most important provider of AI to the restaurant industry. Believe it or not, these companies are anxious to learn how AI can help them save money. And Toast is on the front lines of getting these companies data ready to be used in various AI strategies. So they own that customer and they added 7,500 more net locations. There are now 156,000 locations all over the world. And they partnered with Uber to help them expand that international tam. I think Uber's in a hundred countries. So there's a partnership that was just announced yesterday where Uber's Uber Eats is gonna pull in Toast data and help the Toast customer restaurants with their online ordering. And Uber's gonna help push Toast out to the rest of the world. So I love that partnership. I own both stocks. Put up the Toast chart. Look, man, like this is volatile. It always will be. And it trades on rumors and innuendo. And they make a change to the pricing on their website and people start dumping the stock because they think there's like weakness in the market. It's all stupid. My opinion is the long term trend is for restaurants to use more digital technology, not less, in order to remain competitive. And this company has the industry on smash right now, especially if Clover's going to be up for the next few quarters. So I'm staying long here. Do Uber real quick. This is another name we've talked about ad nauseum on the show. My biggest position personally. Stock fell 4, 4 or 5% today by the close. Had an amazing report. 22% year over year trip growth on the mobility side, 21% gross bookings growth. Three and a half billion trips in the quarter. $50 billion in bookings. Revenue was up 20% to 13.47 billion across platform, which is the most important thing. Uber eats people using rides and vice versa. Cross platform users spend three times as much as everyone else. What, what else they say? Oh, monthly active platform consumers are now at 189 billion. Next quarter they could have 200 million monthly actives at this pace. How many companies in the world have 200 million people using their product or service every month? It's a small list. It is. Not a lot of people, not a lot of companies have that level. They also announced a deal with Nvidia. They're talking about having 100,000 autonomous cars on the road. Uber powering the, the rides part of that business, getting connecting drivers with consumers. Nvidia providing the technology. And basically what Dara has been saying is they don't think owning the fleet is the opportunity. They think that's going to be a private equity business, much like real estate investment trusts own a lot of buildings. They think the cars will be owned in fleets by private equity and it'll be like an income play. And the actual growth and value will accrue to the software and the technology, not the cars. The cars are rolling toaster ovens. So they are not pursuing that ownership strategy of the cars. They're sticking to what they do better than anyone, which is connecting users to be in the manufacturer they want.
- [95:14]
B
Who's, who's going to make the cars.
- [95:16]
A
They have a deal with Lucid. So what they're doing is making deals with AI with, with the autonomous vehicle technology companies who are in turn making deals with OEMs. So like everybody's going to make. Look, in five years, every car sold will be preloaded with this equipment to be level four autonomous. It'll be the ultimate commodity. It'll be like couple, it'll be like couple years.
- [95:42]
C
I can't wait.
- [95:42]
A
Yeah, you're looking at, you're looking at the end of drunk driving arrests and accidents. Phenomenal. So Uber is going to play a really big role there. And I think, I think the Stock belongs over 100. If today were a better day in the market, I think it'd be higher. All right. I was gonna do Live Nation, but nobody cares. Okay, let's do make the case and then we'll do mystery chart. We'll get out of here.
- [96:06]
B
All right, I'm gonna go fast. I. These are three companies that I own. There are so for, for index investors, there's no opportunity yet. Right. Like if you own the queues, if you own the S P cap weighted, there's nothing there. Right, Whatever. But as we mentioned at the top of the show, albeit a little bit hyperbolic from Josh, there are a lot of names that are pulling back. A lot of really great names that are friends. I'm not talking about Nike and Chipotle and Lulu. Like great businesses that are firing on all cylinders that are getting whacked for various reasons. One of them is Blackstone. A stock that I own that I think is going to continue to work is going to be a secular winner for the next decade. They are the premier name in private investments. The stock is in a 24% drawdown. I think they're getting caught up in some of the news over the last.
- [96:59]
A
Which I didn't even realize that.
- [97:01]
B
Yeah, dude, 24, not nothing. I think that news is blowing over. In fact, not. I think I know it is. At least in the BDC land. All of those names have. Have bounced pretty dramatically. But the private equity names and the private credit names, the asset managers have not. So I think it's a great opportunity. In Blackstone, S P is basically a monopoly. I don't know if the story there. So that's only 11 off its highs. I don't know if the story there is a lot of these lower grade companies are getting rated by not the big three. So maybe that's hitting it a little bit. And then. And then ice, which is the listings business New York Stock Exchange, I think maybe. Josh, I'd be curious to hear your take. I wonder if this is getting caught up in the prediction market, maybe taking some market share, which I do not think is going to happen. But either way there is.
- [97:50]
A
ICE just made a huge deal with Shane Copley at polymarket. At polymarket which is coming back to the US I think ICE is like spreading its bets on the roulette table. And if this is really going to be a big chunk of financial activity in the prediction markets. They want to have a dance partner. I know. I don't. I don't know. That doesn't look like that severe of a pullback. Compared to.
- [98:15]
B
It's 20%.
- [98:16]
A
How much? It's. How much It's. Is it?
- [98:17]
B
Yeah.
- [98:18]
A
Which one are we looking at? Oh, the orange one.
- [98:20]
B
Yeah. It's. It's not nothing.
- [98:21]
A
So I think I gotta dig deeper into that then. I don't know what's going on.
- [98:24]
B
These names are down a lot, so I think there's opportunity there.
- [98:29]
A
I'm Oliver Ruff says it's a mom. Donnie crash. Yeah. The New York Stock Exchange is now.
- [98:35]
B
Oh, my God.
- [98:36]
A
The New York Stock Exchange is now centrally located in the People's Republic of New York City.
- [98:42]
B
All right, well, if you believe that.
- [98:45]
A
There'Ll be a transaction tax.
- [98:47]
B
If you believe that's the story, then buy this with both hands. Josh, make the case. I mean, I'm sorry. Mystery chart. What do we got?
- [98:52]
A
All right, I'm long. This stock, we haven't talked about it in a while. Let's go. What is it?
- [99:01]
B
I love it. Let's go. All right, give me one clip. How about this? How about this market cap? Is it over? Under 25 billion.
- [99:09]
A
Way over.
- [99:10]
B
Okay. Okay. All right. I need another clue.
- [99:16]
A
It's an ARR story.
- [99:19]
B
Okay. Is this. This is as of today, basically, yeah.
- [99:29]
A
Look at the dates on the bottom. I'm not sure.
- [99:31]
B
I'm just not tricking you. All right, one more. One more clip. So it's an AR story. It's a large cat, very large stock. What else?
- [99:36]
A
I own it, basically. I own it basically since inception. One of the first people to own the stock. And I have a 4, 4 or 5x return.
- [99:44]
B
Okay. Nvidia.
- [99:46]
A
No.
- [99:47]
B
Oh, okay.
- [99:49]
A
Reveal. Too many clues. Reveal. Can't win them all. Michael Crow. This thing hit. This thing hit 551 today. Unbelievable.
- [100:02]
B
Good for you. Great.
- [100:03]
A
I have a post. I have a post reveal chart I want to show you.
- [100:06]
B
Great. Winner.
- [100:07]
A
So the Stock is up 852% since the IPO. That's a 42% annualized return. Market cap is now 140 billion. And I have to tell you, I don't own enough of it to like, really take a victory lap. I own a bunch. But like, this was the most obvious bull market to have foreseen in advance. You didn't know that crowdstrike would win. They've obviously are amongst the winners that you couldn't have known. Yeah, but I think the takeaway here for me, for the future, when you see an obvious bull market and you're not sure who's going to win, but, like, take a shot. Because, like, you had to know that cybersecurity spending was going to be in a bull market for the next. At least the next half decade to decade, you had to know it. And if you knew it. I'm talking to myself. Should have been way more aggressive. I should have owned five of these things and never sold all credit to you.
- [101:03]
B
Can I ask you one thing before we head home? What's the next one? Please, I need it.
- [101:08]
A
I'm doing. I don't know. The next thing I buy will probably get cut in half.
- [101:12]
B
This is. This is. This is a great trade. I'll credit to you and not trade.
- [101:15]
A
Hold and shout out to a friend of the show, George Kurtz. And I know he listens. And what an amazing job this guy has done. Not without hiccups and setbacks along the way, but, like, man, you talk about a company come public and just absolutely crush it for public shareholders. This is. And by the way, in his spare time, he. He won the Le Mans. I don't know if you know that.
- [101:37]
B
Hey, wait.
- [101:38]
A
Josh literally won the race.
- [101:39]
B
So when. When was the massive outage hiccup? Was that last summer?
- [101:45]
A
Two years. Two summers ago. I think it was Summer. Summer 23.
- [101:49]
B
The stock is definitely doubled, maybe even tripled since then. And I remember you were on tv. You sounded like Alex Karp. You were so mad at people selling the stock.
- [101:57]
A
Well, it's. Well, so I, like, I guess I was just saying, like, okay, now you're going to sell it like they made a mistake. They have to clean up the mistake. It'll be a financial fix. They'll call their customers, they'll apologize. Maybe there'll be a fine. Life will go on. You're going to sell it today. You sell it 30, 40% in the hole. And you know what? That outage actually should have taught you about the company, how important they are.
- [102:23]
B
Yeah.
- [102:24]
A
That glitch in a software update disrupted the entire planet.
- [102:28]
B
So it was the summer of 2024, so the stock got as low as 200. The stock's at 532 today. So again, you nailed it. Good. Good for you.
- [102:36]
A
I mean, I. I can't sell it now. I can't sell it. Yes, like, I look at that chart but one more time with the chart.
- [102:46]
B
No, but this is why you're good. You're very good.
- [102:47]
A
I know. I know.
- [102:48]
B
It could pull.
- [102:48]
A
Look at. Look at how severe some of these pullbacks have been.
- [102:51]
B
Yeah.
- [102:51]
A
So. But like. So. So what? I'm not. I'm not selling.
- [102:55]
B
Not so. Well, not so. I went from 300 to 1 to 120 and you held it.
- [102:58]
C
I know.
- [102:59]
B
That's.
- [103:00]
A
I know.
- [103:01]
B
Good for you.
- [103:01]
A
What did I tell you about the wheelbarrow? All right, guys. We. We appreciate everybody who joined us for the live. We love you guys. Thank you so much. We miss you when we're not here. I want to remind everybody, tomorrow's Wednesday. It's an allnew edition of Animal Spirits with Michael and Ben Carlson. We'll do Ask the Compound later this week with Duncan and Ben. And then it's an allnew edition of the Compound and Friends. And, boy, do we have a special guest on tap. You guys are going to love the show this Friday. I guarantee it. Thanks so much for being here. We'll talk to you soon. Sa.