← The Compound and Friends
The Compound and Friends
Bull Trap or the Real Thing? Plus, Dana Mattioli on Amazon, Coinbase Joins the S&P 500, China Tariffs LOL
01:49:19
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- [00:00]
Josh Brown
Ladies and gentlemen, welcome to the compound and friends. It is Tuesday, May 13th. We have an action packed show for you this evening. I want to tell you about our sponsor public.com I use public. I have the app on my phone and I have to tell you it is the easiest way to move money from a bank, move it back out, buy stocks, buy crypto options. It's just, it's just like lightning fast, super lightweight, it pops open. You could do whatever you want with it and it's worth checking out. Not only can you trade there, you could put your cash to work with a high yield cash account currently at a 4.1% APY. You can move money in from other brokerage accounts that you might have out there and if you do so, you can earn up to $10,000 for transferring those investments over. Find out more at public.comwayt as in what are your thoughts? That's public.com Watkins this has been paid for by Public Investing. Full disclosures in the podcast description. Okay, we talked to Dana Mattioli this week. Dana won a Pulitzer Prize for her reporting on Big Tech. Specifically, she is the Amazon beat reporter at the Wall Street Journal and she's out with a new book called the everything War. She's conducted hundreds and hundreds of interviews. Current employees at Amazon, former employees of Amazon, suppliers, competitors, vendors. She's got internal documents. She just spent years of her life writing this epic story of how Amazon became Amazon. And I think you're absolutely going to love checking out the book, but you can also listen to us discuss it and we talk a little bit about meta and some of the other things happening in large cap tech and Dana is just terrific. So I think you'll love that. And then in the B block it's an all new edition of what are your thoughts? It's Michael Batnik and myself and a lot is going on here. First things first, are we in a bull trap? If so, I have to tell you this is a good one. This looks all the way like the real thing. At this point I would be surprised if it turns out to be a bull trap. But you never know. And we will go through some of the ins and outs of that terminology. What it means, what to look for. We also take a look at some breakouts and stocks that we've been talking about for a while. Uber Toast. We talk about the breakdown in Google last week, Coinbase joining the S&P 500. There's just a whole host of stuff happening and we do it all for you as usual. So please stick around, enjoy the show, and we'll see you soon.
- [02:56]
Dana Mattioli
Welcome to the Compound and friends, all opinions expressed by Josh Brown, Michael Batnik and their castmates are solely their own opinions and do not reflect the opinion of Redholtz 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.
- [03:19]
Josh Brown
All right, we are live from the Compound. I'm here with Dana Mattioli. Dana is an investigative journalist and senior reporter at the Wall Street Journal. Dana, say hello to everyone.
- [03:30]
Dana Mattioli
Hi, everyone.
- [03:31]
Josh Brown
All right, Dana is a senior reporter, but I think the thing that is most interesting about the work that you're doing is the coverage universe you're talking about. You're not just reporting, you're kind of putting together this bigger story about all of the companies that matter the most to investors right now. These are the largest market cap. These are the most exciting headline generating businesses and you're extremely well sourced. You've done deep dives into companies like Amazon for years. You have a Pulitzer Prize. Do I have that right?
- [04:05]
Dana Mattioli
Yeah, we got one last week as part of a team.
- [04:08]
Josh Brown
Okay, congratulations on that and your book, the Everything War, which, which we're going to talk more about. John, put that graphic down. I want to show people the real thing. This is the actual, the actual. It's so good. I can't stop reading it. I'm about halfway through it, as I told you. But it really tells the story of one of the. These gigantic technology companies and kind of how it started and how it got to where it is. It's the story of Amazon, of course. But before we talk about that, I just want to kind of get into some of your recent reporting on some of these companies because we talk about this stuff from an investing perspective and you're looking at this stuff as kind of like a larger story of how it impacts the whole world, how these companies are impacting the whole world. What is it at this moment right now that you think is most interesting about the tech giants now that they seem to be playing along with the administration and really heavily impacted by a lot of political issues like trade, that maybe 10 years ago it wouldn't have been as impactful, but now they're like right at the center of all this stuff.
- [05:20]
Dana Mattioli
I just find it remarkable. The giant 180s we've seen, almost all of the tech titans do.
- [05:27]
Josh Brown
Yeah.
- [05:27]
Dana Mattioli
And I think at their core, these are really pragmatic people and There's a lot of downside if this goes the way of Trump 1.0, where they make enemies. You know, they lived through that, some of them, with really to bad effect, if you think about Amazon being just like castrated by the administration. So I think they've really learned their lesson. And, you know, we've chronicled how they've bent the knee in lots of different ways. And, you know, I think it's too soon to tell if they're getting the payoff that they want there, but they're definitely not getting, you know, beat up like they were the first term.
- [06:00]
Josh Brown
When you. So when you see, at the inauguration, inauguration, you see them in front row seats, obviously Elon Musk, but then you see Mark Zuckerberg and then you see Jeff Bezos, and they're all kind of lined up. Satya. And look, it's not weird for captains of industry to be at a presidential inauguration. That's. We've seen that in every era. But I guess the question is, did they ever really believe in like the liberal ideology or was that also a shortcut? Was that also expedience to do all the DEI stuff that they were doing and just kind of like go along to get along? But in the end, it's just about the competitive position of the business and whoever seems to be in power, whether it's the left, the right, the liberals, the conservatives, it's just about like, hey, let me just make sure that I'm in the good graces of the people that are currently in power. Like, what do you, what do you think is the thought process there?
- [07:00]
Dana Mattioli
I think at the core, many of these tech CEOs are more libertarian.
- [07:04]
Josh Brown
Okay.
- [07:05]
Dana Mattioli
So they, you know, more socially, they lean left, they're more conservative fiscally. They believe in like open markets and the likes. And what's fascinating to me is they had a horrible relationship with the Biden administration. Yeah, like, he was really tough on them. He didn't want to take meetings. He did things that really clamped their success. And they have very liberal worker bases. Right. So that's something they also have to think about when they're in the political realm. You know, I just think this time they really spent a lot of time game planning with their public policy offices, taking a Look at Trump 1.0, taking a look at the Biden administration maybe going too far in certain things that they were really pushed away from. I had a big story last summer about Elon Musk's political evolution, which is just, it was a wild story. He was all in on the Democrats for the longest time. If you look at his businesses, they're about climate change, they're about reversing climate change. Right. He had said openly that he voted for Obama. He really wanted to be part of the Democratic Party, but he felt pushed out. Biden spurned him. He would not mention him when talking about these big electric vehicle summits, even though they make the vast preponderance of electric vehicles in the US and when I speak to some of these CEOs in private and some of the senior leaders at these tech companies, there's that sentiment that they felt a little bit pushed out of the Democratic Party.
- [08:32]
Josh Brown
This is like the funniest thing is like they did this electric vehicle summit. Elon Musk is the most important figure and always will be in the history of the electric vehicle revolution, however far it goes, whether we ever see it be 10 or 20% of automobiles. You know, like, however, however long this. You cannot say that we would even have electric vehicles if not for Elon Musk. And then they have this summit and they don't invite him because he's anti union.
- [09:02]
Dana Mattioli
Exactly. And then he credits Mary Barra for electrifying the whole industry when they had like pittance of the market share and EVs and stuff like that. There were some own goals that really did backfire here with the tech titans. And you've seen this broader shift in the Valley in a way that I've never seen, you know, at Journal, been the journal for 19 years. I haven't seen these CEOs and companies move. Right. Like I did this last election cycle.
- [09:26]
Josh Brown
Yeah. So I think what's really interesting about that is then the union leadership or pro Biden, because Biden is actually doing the things for the unions that would help them. But the union membership is almost universally Trump in some of these cases. And so it's, it's just a weird, it's a, it's a weird thing to have pushed out somebody like an Elon Musk because it's what the unions are telling you to do. And then you don't even really have the support of the rank and file union people in the auto industry.
- [09:58]
Dana Mattioli
So.
- [09:59]
Josh Brown
Okay, so now we're in this situation where Silicon Valley and the companies in your coverage universe, Dana, are playing along with the administration in some cases. Some of the people are taking active roles in the administration. And it seems like it's a kinder, gentler ftc. Seems like it may be a kinder, gentler irs. Like a lot of the deregulation and the hopes about, like, less holding back of big business, but not all of them. Like, they're not getting everything they want. And you had a story about Zuckerberg thinking that Trump might have his back in settling, in settling a suit. Tell us a little bit about what your reporting told you there.
- [10:46]
Dana Mattioli
Sure. I mean, Zuckerberg has done a lot of legwork to try to ingratiate himself to Donald Trump and his administration. This was a CEO, if you remember, that Trump said that maybe he should prison put in prison for past offenses. And so he was really on the outs with this administration and disliked because of banning Trump from Facebook and Instagram after the insurrection and other things that people around Trump found really odious. So once it becomes clear that Trump is going to win the election, Zuckerberg really makes a lot of efforts here. He not only does the requisite $1 million donation to the inaugural fund that we saw all of them do after that. Right. That was like, a big move. He goes to the Mar a Lago, visit Mar a Lago. Right. Has dinner with Trump and gives him this gift of these new sunglasses that Facebook is making. But he also settled a $25 million lawsuit with Trump that many lawyers thought is a frivolous lawsuit that did not need to be settled. So he does a lot of things along those lines, and he feels good. He feels good that maybe his antitrust problem is going to go away. And it comes time for this big meta lawsuit to finally play out in public, to go to trial. And he also lobbies Trump's team personally to, you know, maybe take their foot off the gas here. And it just does not work. I don't know if it is a kindler, gentler ftc, to be honest.
- [12:21]
Josh Brown
Okay.
- [12:21]
Dana Mattioli
Andrew Ferguson has spoken very critically. He's the chair of the ftc, very critically about big tech. And some of the things he's done have been sort of in step with former chair Lina Khan. Not very conservative in nature in some ways. And behind the scenes, Zuck tried to settle with the ftc, and he made a very small offer to them. He said, I can't remember what the first offer was. It was. It was like a pittance. And FTC said, you know, you're too far away from where we want to be. We're thinking this should be a $30 billion settlement, like the biggest in history. And then Zuckerberg comes back with another offer. I think it was around 1 billion. And they said, it's $18 billion or we have no deal. And it's in trial, so that it definitely has not worked for him in that way.
- [13:09]
Josh Brown
Zuckerberg recently bought a big piece of real estate in Washington, D.C. nobody, nobody would do that unless. Unless they had a business reason that they felt that they would be spending a lot of time in Washington, D.C.
- [13:21]
Dana Mattioli
And the exact price is what Bezos paid a few years ago.
- [13:26]
Josh Brown
That's right. Bezos also bought a $23 million. That's right. Okay, so we're now at the point, I guess we're through the first hundred days of the administration. The stocks themselves are trading okay, especially given all the chaos for. From the trade war. Today is a great day. We're recording this on Monday because it looks like most of the tariffs that we had been worried about since early April have come off. You're seeing the Amazons, the Teslas, the Metas, they're all up huge on day. But even beside that, these stocks have been doing okay this year because maybe it's not quite a kindler, gentler ftc, but it does appear that these companies can do business in a way that maybe it looked like the Biden administration. You know, if we had another version of that or if we had Kamala Harris, it might be a little bit tougher. So I think, like, some of the pressure feels like it's come off, even for Bet, even for Bezos, who is not Trump's best friend.
- [14:31]
Dana Mattioli
Yeah, I think that's right. I was looking at Amazon's market cap today. It's back up to 2.2 trillion. Yeah, right. So it's doing really well. And, you know, there's been some measures that could be very helpful for Amazon. I mean, they're very exposed to the tariff situation. So, you know, the contours of a deal that was struck today with China is really helpful for a company like Amazon. You know, the Trump administration is also making changes to things like the Consumer Protection Bureau, which oversees dangerous products. There's a big case with Amazon. There's. If that were to be dismantled or, you know, other things happen to it that could help Amazon too. So there are things in the margins that could definitely help these giant.
- [15:13]
Josh Brown
So I want to talk about, I want to talk about Amazon. Just, just let's, let's give people a little bit of background. So you effectively became the Amazon reporter for the Wall Street Journal. So that. So did you ask for that or did they say, this is your beat? We want you to. This is now one of the most important companies in the world. We want you to focus and go deep into what's happening at Amazon.
- [15:36]
Dana Mattioli
How did that come up for it? Okay, I was the Wall Street Journal's mergers and acquisitions reporter for six years. I loved that beat. I spoke to a lot of investors in that time and basically my whole job is to break which companies are buying other companies. And I got burnt out because it's like an exhausting beat. You work every weekend. But I loved it so much. And I couldn't think of anything as exciting as M and A when I was thinking about what I wanted to do next. Except for Amazon, because toward the end of that beat, I started seeing companies doing really dumb mergers that made really no sense, that we're not creating shareholder value out of a position of fear. They were worried about Amazon coming into the healthcare space or the industrial space or the logistics space and eating their lunch. So they were trying to Amazon proof their businesses and they just thought this was the most feared company in corporate America. It's a giant black box by design. And I wanted to get into that black box. So I pitched this beat to my then editor in chief, Matt Murray, and the head of business at the Wall Street Journal and said, I want to get inside the black box. And they said, if you think you could do it, then do it.
- [16:44]
Josh Brown
You've got this really great passage that illustrates that idea. So Amazon starts with books because famously, they're the most cost effective thing to ship. You know, based on its size, what its weight is gonna be. It's just cardboard and pages and it's easy to package. It's an easy place to start. It's not just books for the sake of books. It's a prototype. This is you on July 13, 1999, after Capelli. Is that Jerry Capelli?
- [17:17]
Dana Mattioli
I can't remember his first name.
- [17:19]
Josh Brown
After Capelli sent his press release announcing that Amazon would expand into selling toys and electronics, the phones began ringing off the hook. Wall street loved Amazon's expansion rinse and repeat approach. With each new category it expanded in, Amazon chose growth over profits. Those gains came at the expense of its rivals. It was seen as a zero sum game. For every item that Amazon sold in the new categories it entered, it meant a loss from a physical store that merchandised that item. So, like, they would just announce, oh, now we're doing toys, now we're doing CDs. Now we're doing right. And they would put a survey out to their customers. What else do you want us to sell? People would say, auto parts. Okay, great, we're doing auto parts. And every time they did that, stock price would go up 5%, 10%. And it became. That's the rinse and repeat aspect to this. So you're looking at companies that are starting to announce mergers. It's like, well, what's the purpose of this? We need to get big enough so that when Amazon comes our way, we're.
- [18:23]
Dana Mattioli
Ready to fend them off. It's totally a defensive play.
- [18:26]
Josh Brown
Okay. So I find that fascinating because it's like kind of still in effect, like, Amazon is now running TV commercials for telehealth. And, like, effectively, this is an area where one of my physicians was like, going into, like, they would say, all right, we're going to do X number of telehealth appointments now going forward because people's habits changed during the pandemic and we recognize that. And there are people who want a doctor's visit, but they don't want to come here. Okay, we're now going to offer that. Okay, that sounded great. And then it's like, well, Amazon is now in that business too. So that might not have been the best investment that you could have made.
- [19:09]
Dana Mattioli
I used to go to one medical and then Amazon bought it. And I was in the middle of, like, writing this book. I had to find a new doctor. I mean, their tentacles are just everywhere. I think everyone just equates them with an online retailer. And yeah, they're all the biggest. 40% of everything sold online in the US is on Amazon. But they're almost impossible to avoid. They're a utility at this point. Even if you want to boycott them, it's really, really hard.
- [19:34]
Josh Brown
Right. So as a shareholder, I definitely don't want people to boycott them. A lot of the things that they've done are if you look at these things from a shareholder perspective, they have a fiduciary responsibility to their shareholders to maximize profit, which is profits weren't important in the early stages. They would have argued back then. No, no, no. We're maximizing growth, profits later. And it sort of worked. Then you look at the share price of Walgreens cvs. Like, this is clearly the next to me when I look at cvs, Walgreens, I experience the stores in person. I think of Walden Books and I think of Borders. Is that the way it looks to you from your report?
- [20:20]
Dana Mattioli
It's funny you bring those to about. You probably haven't gotten to it yet in the book, but there's a chapter about CVS and Aetna doing that whole catastrophic M and a size of Amazon. They would speak about it in every boardroom meeting. They were so nervous about Amazon getting into the healthcare space that they do this $69 billion deal, biggest in their history, to insulate themselves and it's just gone haywire. If you look at the market value of CVS Aetna today, it's way less than the market value. If you would just add up the both companies market values before they combined.
- [20:54]
Josh Brown
Yeah.
- [20:54]
Dana Mattioli
And it's a cautionary tale and I do think that these companies have not figured out the proper way to Amazon proof. And a lot of them are circling bankruptcy or feel like relics from the past that are just not going to be around for the next generation.
- [21:11]
Josh Brown
Dana, do you have a sense of why Amazon has so far avoided things like retail brokerage insurance? I know there was this joint effort with improbably Berkshire Hathaway, JP Morgan and Amazon to figure out healthcare. And healthcare is so ridiculous that within two years they just said forget it. But they haven't really gone into life insurance, for example. And from my perspective, it just seems so obvious. They, there's no reason why people wouldn't buy a life insurance policy from Amazon. So there must be something about certain financial businesses or maybe healthcare related businesses where they study it internally or they test some things out and they just say this is not a great idea. Do you think those are purely financial calculations or is there something else that maybe keeps them away from doing those things?
- [22:11]
Dana Mattioli
You know, they're not afraid of complicated areas, but I think, you know, they do weigh the regulatory environment of certain areas and, you know, life insurance financials could be a bit thorny.
- [22:20]
Josh Brown
Yeah.
- [22:21]
Dana Mattioli
Interestingly, they have not shied away from healthcare. It's the biggest area of, you know, GDP spending like in the country. It's too big.
- [22:28]
Josh Brown
Health insurance, the health insurance, but not health care itself.
- [22:32]
Dana Mattioli
Correct. They've been in health care and that's like a big goal of the current CEO, Andy Jassy's. And that's like one area where they've actually had some like big misses. You mentioned Haven, this war in Buffett, Jamie Dimon, Jeff Bezos initiative that cratered. They had.
- [22:48]
Josh Brown
What do you think happened there? They just, it wasn't as exciting as when they started to dig into the details or nobody had the time to really focus on it.
- [22:57]
Dana Mattioli
Oh, I just think it was massively complicated. I think they underestimated how complicated it was.
- [23:01]
Josh Brown
Okay. When, when you think about Andy Jassy and his tenure as CEO, I think. All right, so let me, let me actually back up one of the things I think people have gotten wrong on Andy Jassy was that he was like, sort of like, I don't want to say a fresh start, but, like, kind of like, all right, let's give the ball to somebody else. He had been with Jeff since extremely early in everything Amazon's done. He was kind of the guy in the room who Jeff would look at and say, what do you think just happened when they walked out of a meeting? And I think that was underestimated. So I think people looked at it like, yeah, it's a fresh start. But I always looked at it as like, oh, this is pretty awesome, actually, because this is somebody that knows the way Jeff would think about every twist and turn better than anyone else on Earth. What was your impression when they made him the CEO and how he's done so far in the couple of years that he's been running the show?
- [24:02]
Dana Mattioli
I totally agree with you. He. He started at the company a few weeks before the IPO'd in the 90s. Okay.
- [24:08]
Josh Brown
Yeah.
- [24:09]
Dana Mattioli
He was Jeff's technical advisor in every meeting with him. This was not like a totally new start. This is like a proxy for Jeff in a lot of ways. Right. So. And he embodies the culture. He helped create the culture of the company, which is like a very important thing in Amazon, for better or worse. The book gets into a lot of the toxic behaviors at Amazon because of that, you know, So I think, you know, you see a continuation of some of the things that Jeff would have done, but then you see him making his mark in other areas. Like I said, health care is a big initiative for Andy in a way that I don't think it was for Jeff in the same way. So, you know, there's some areas where they diverge a bit, but I think this is, like, very much about continuity.
- [24:50]
Josh Brown
Okay, what's the state of the US Government versus Amazon, the various different fronts that they may or may not be fighting regulators on? Where does that stand right now for shareholders and investors who can't quite keep up with all the different conflicts and concerns that exist right now?
- [25:10]
Dana Mattioli
Yeah, okay, so. Good question. The one area that Jeff and Andy really differ a lot is their approach to Washington, D.C. for most of Jeff's tenure, he ignored Washington, D.C. he made some really high profile missteps. He did not want to engage in a way that most big companies did, and he actually offended a lot of people. Okay. Andy is very diplomatic. When he first got into the office of CEO, he made a point to go to D.C. and meet with Congress people. Meet with the people who are now saying that the company's a monopoly because in 2023, the Federal Trade Commission under Lina Khan filed a lawsuit against Amazon calling them an illegal monopoly. And that goes to trial next year. And if you read the case closely, which I have, there's language in there that could mean that the company gets broken up. This is a very serious lawsuit. And so this is an area that they do take very seriously now, an area that Andy takes very seriously that Jeff might not have. And he's done a lot of damage control to clean up some of the messes that the company had made for itself. The third part of the book gets into how badly Amazon and Jeff mismanaged Washington, D.C. you think they should have.
- [26:26]
Josh Brown
Been more political all along and have made allies, like, had planted better seeds.
- [26:33]
Dana Mattioli
Not only that, they should have just avoided pissing everyone off. I mean, they made so many enemies on the Hill from both parties. This became like the one thing that the Democrats and the Republicans could agree on was that this is a monopoly and maybe should be broken up and that they're doing illegal things.
- [26:47]
Josh Brown
Okay, so that's why I want to. That's where I want to go next. One of the things that you get into very early on is the origins of why Lina Khan is at the FTC to begin with. She basically looked at this decision that had been made where they were going to treat Monopoly as something where like, if it's in the. If it's in the best interest of consumers, they're going to be easier on it, and if it's anti consumer, then they're going to be tougher. The problem with that is Amazon is incredible for consumers. Amazon is a very difficult competitor for other businesses, but the consumers are not harmed. And so if that was the standard that they were looking at Amazon along those lines, it was going to be really hard to go after them. People said, wait a minute, I get my stuff faster, I get it cheaper. There are multiple merchants on the site competing with each other to undersell. This is great. Why are you going after Amazon? I love Amazon. So that kind of has enabled them to get as far as they have without a major challenge like the one that they currently face. That's what's been flipped on its head. It's not the antitrust rules, it's the interpretation of the antitrust rules. Do I have that right?
- [28:03]
Dana Mattioli
Yeah, you do. And I would say with one caveat. In the early days, Amazon did undercut everyone on prices so it could build its monopoly so that it could put Sears out of business and they could Put Circuit City out of business and it could just, it didn't have to worry about profits. Right. So it could really offer low prices. And then the, the whole retail landscape is this graveyard of former retailers that it used to compete against.
- [28:25]
Josh Brown
Yes.
- [28:25]
Dana Mattioli
It has benefited from this perception that it has the lowest prices for years after. That's actually been true.
- [28:31]
Josh Brown
Pro being, pro consumer, that was the.
- [28:34]
Dana Mattioli
Vibe that it was low prices, lower than everyone else. Now what's really fascinating is now that they have this retail graveyard, what they've done is they've been able to extract tons of fees from all those third party sellers on the website. So a few years ago they used to take 19 cents on the dollar from someone selling something on Amazon. Today that's 45 cents on the dollar. So those sellers have had to raise their prices on Amazon. So we all pay more to buy those prices so that they have some sort of margin and that gets concealed when you think about Amazon. And that's what the FTC calls out, this type of behavior is raising prices and creating this like inflationary.
- [29:11]
Josh Brown
So the third, so the third party sellers thing, you've got a section of book we talk about. At first they try to launch an ebay clone. The problem is nobody shows up for it. Turns out people just like going to ebay and ebay is doing it better. And they had already reached, they already had already reached this like nucleus of buyers and sellers where it was really hard to like justify a reason for there to be a second one. But they pivot that effort into marketplace, which is for the first time, not only can you buy from Amazon, but you can buy from a third party who may even be competing with Amazon itself. On Amazon, consumers love opens up this whole, it opens up this whole new world of more sellers selling more things. And I think it's good for Amazon because they don't have to hold the inventory, but they can satisfy the transaction. Okay. So that becomes really important to Amazon.
- [30:14]
Dana Mattioli
It's like the happiest mistake because it opens the doors to all these sellers. Right. It's like the best mistake you can make.
- [30:19]
Josh Brown
Right. But the sellers are like frogs hopping into a pot of water that's not yet boiling.
- [30:26]
Dana Mattioli
Yeah.
- [30:26]
Josh Brown
Because they give up their own e commerce ambitions of building their own sites, their own marketplaces. They just say, you know what, I could just sell tons of stuff right there. All the customers are there. That's sort of what happens on one side. The other side is, you know, Amazon without having to hold inventory, but having every SKU you could possibly Buy you have those monoline retailers like your linens and things you talk about in the book. It's like, how could we possibly justify being a standalone operator? Because. All right, all right. So that's kind of how that all plays out. But again, most of it is to the benefit of the consumer. So this f. This suit, the current suit is really more about competing businesses. And now these competing businesses are like, we can't even make money on this side. Like it was one thing when we could make money. We can't make money at all.
- [31:19]
Dana Mattioli
Yeah. It's actually not even about competing businesses. It's about them kind of extorting their third party sellers. And it actually is, it is a standard consumer welfare lawsuit about prices being raised for customers, which is interesting because the FTC had moved away from that under Lina Khan, but this is sort of her white whale. And I think this is more of a carefully constructed lawsuit.
- [31:39]
Josh Brown
Okay. Amazon would say we tried it the other way. We let third party sellers handle their own shipping and logistics and it was a customer service nightmare. And so these are Amazon customers and the only way to do this business and preserve our reputation as the best place to buy things online is to force these third party sellers or, or not force, persuade these third party sellers to use us for shipping and fulfillment. There is some merit to that argument to anyone that's ever attempted an E commerce transaction with somebody other than Amazon. Amazon's just better at getting the thing to your door.
- [32:23]
Dana Mattioli
Sure. I mean it's the biggest logistic network in the US bigger than UPS and FedEx. Right. They're very good at shipping. But you know, I think a lot of those sellers would say like they are being forced to use Amazon logistics because then if you're not, you can't be on Amazon Prime. And that's where 200 million members are. Right. So it's this pay to play app atmosphere, they would say.
- [32:45]
Josh Brown
Right. So I guess the court is going to have to look at what's in the best interest. So it's tricky because I could see, I could see both arguments. If, if Amazon's logistics are literally the best version for the consumer, you can sort of understand why they would charge the third party sellers more to be able to have access to it now.
- [33:09]
Dana Mattioli
Be interesting to see where they come up, you know, what they come up with on remedies. You can almost see them making a world where Amazon Logistics has to be its own company. They spin it out.
- [33:19]
Josh Brown
Yeah.
- [33:19]
Dana Mattioli
And then it's, you know, a separate competitor. And that could be Something that's explored. I don't think it would be like an AWS spin off because it doesn't really have any bearing on the argument they made. But I think that logistics would be a big part of it.
- [33:32]
Josh Brown
I wonder how Shopify factors into this because effectively the pitch on Shopify is we can give any seller Amazon like payment and shipping and fulfillment capabilities and would Amazon be able to point to them and say, what do you mean monopoly? Spotify is right there based in Canada, but you know, millions of merchants all over the place utilizing their services. We compete with them.
- [34:03]
Dana Mattioli
I guess the flip side of that would be, well, why can't a merchant on Amazon using it to get customers use their Shopify shipping to fulfill the two day promise and stay in prime. Right. If they're so good.
- [34:18]
Josh Brown
The case about Alphabet paying Apple billions of dollars for Google to be the default search Engine on the iOS ecosystems browsers. It actually went against the tech giants. And there is going to be a remedy and we don't know exactly what it's going to be. Wall street has weighed in by selling off shares of Alphabet because it looks like they're not going to be able to maintain their hold or at least pay to maintain it the way that they were. So this, this case against Amazon and its outcome absolutely is going to have a big impact, especially in a worst case scenario. I know it's early, but how do you think this thing ultimately plays out?
- [35:05]
Dana Mattioli
Well, it's interesting. The book makes a lot of comparisons between Jeff Bezos and John Rockefeller of Standard Oil.
- [35:15]
Josh Brown
In the first chapter you start down that road.
- [35:17]
Dana Mattioli
Exactly. And what happened with Standard Oil and there's just so many similarities, it's kind of crazy. What happens with Standard Oil is they. John Rockefeller fought a breakup of Standard Oil tooth and nail. He did not want his company to be broken up. In 1911, Supreme Court breaks it up into 34 different companies.
- [35:36]
Josh Brown
Twenty years after the antitrust suit started. Exactly.
- [35:41]
Dana Mattioli
And it winds up being the best thing to ever happen to John Rockefeller or Standard Oil because all those companies separated from each other become behemoths in their own right. And some of them quadruple in stock market value. Okay, like, and he's wealthier beyond compare. And I think that there could be like an analog here with Amazon that, you know, they're resisting a breakup. You know, this conglomerate model serves them very well. They're like one of the last conglomerates that actually works because they're able to leverage their power with their vendors and their competitors and the people they Compete against to great effect. But I think if it were to be broken up, it might even be a Standard Oil sort of scenario where it unleashes more value.
- [36:21]
Josh Brown
So I, I love that idea. I think a lot of people are starting to talk about, you know, they think about the problems at Alphabet. Well, what if YouTube were a standalone business? Or okay, so the, the Baby Bells, which were spun out of AT&T, when that was broken up, that was done along regional lines. They basically created like the Northeast and the Southeast and the Southwest and each of those became standalone companies and then they all remerged with other companies anyway to the point where they, they basically don't exist anymore. I don't know exactly how Standard Oil, what along which lines those pieces were broken up. I feel like it was like Texaco.
- [37:02]
Dana Mattioli
And Exxon is one of them. Mobile is one of them. Right.
- [37:05]
Josh Brown
That regional too, or was that.
- [37:07]
Dana Mattioli
I think some of it was regional, but not all of it. Like there was Standard Oil of New Jersey for instance, that became its own thing, but. And then some of them wound up merging again later. Chevron was originally a Standard Oil company. Right.
- [37:18]
Josh Brown
I guess the question is like if, if Amazon were to contemplate, well, I guess if a breakup were, were forced on them as the ultimate remedy and then maybe they fought that for five or 10 years, but like what if, let's say they acceded to it and they said, you know what, you're right, we'll break up, we don't want to deal with this anymore. Along what lines? You separating the third party marketplace business from the first party business or we're, we're taking the Lord of the Rings show and spinning that out into its own. Like, I can't even imagine like what, what the different permutations could be, but I feel like there could be so many of them.
- [37:58]
Dana Mattioli
I mean this is like 12 different publicly traded companies and their advertising arm, the retail arm, cloud computing, logistics, movie studio, you name it. Right? Yeah, it could be literally everywhere. Kuiper is coming online now, right? That's another business that's going to compete with SpaceX. So there's just so many different ways you could hypothetically chop it up. But you know, if you read the FTC lawsuit that's really focused on like one area. So I'd imagine like logistics could be a big part of that.
- [38:26]
Josh Brown
Okay, you mentioned Kuiper, so let's, let's, let's end with that and then we'll tell people where they can get the book to read more. This is going to be the head to head bat. I think they launched 127 satellites last week or two weeks ago. They want to have their own version of Starlink. I think it's great for the world and for the consumer for it not just to be Starlink. I think having at least two players there offering Internet service. And so if it's going to be somebody versus Tesla or somebody versus Elon Musk, Amazon versus Elon Musk sounds like it even has a shot. Do you think that this is going to be a really interesting battle? Do you think that this is going to. Going to be kind of like a mano mano. A mano Musk versus Bezos. Even though Bezos isn't the CEO per se of Amazon, he's executive chair still.
- [39:26]
Dana Mattioli
So he's still very much involved. This is something very much like that was part of like Jeff's vision here, you know, deals with space, which is one of his like big areas. I think it's really fascinating. For a very long time Starlink has been the player in this space, no pun intended. And to see Amazon come online, I mean later than they wanted to, I think it could, you know, we could see some big ramifications here. So it's kind of exciting to watch.
- [39:52]
Josh Brown
Yeah, prime users having a discount for Internet service as like an introductory way to build market share. Sounds like it's really going to make the Space X folks not, not very happy with having that as a competitor. So if they can get the capacity online and get more of. I think they said they want to have like 1200 satellites in the sky in the next two years or something like that. It sounds like it's going to be the next battleground.
- [40:20]
Dana Mattioli
Timing is interesting too because it comes right as Jeff Bezos and Elon Musk sort of settled their years long pissing match, you know, or Elon would really criticize him online a lot about Blue Origin, his space rocket company. So.
- [40:34]
Josh Brown
Settled it at least. Settled it at least for now.
- [40:36]
Dana Mattioli
For now.
- [40:37]
Josh Brown
All right, so I want to send people to where they can get the book because I've been an Amazon shareholder forever. But I learned so much just going back through some of the old stories and your reporting is really. I mentioned to you before we started recording, it seems like you've had a thousand conversations with people about this company in order to write this book. It's just so well done and there's so much in here that I think most people haven't heard before or didn't fully understand. So I wanted to congratulate you on the everything war. And I asked you before, like, what was the most exciting feedback that you got? You mentioned the company was like, not as combative about what you wrote and what you published.
- [41:23]
Dana Mattioli
Well, I was very methodical in that I spoke to 600 people and I had hundreds of pages of internal documents to bulletproof it. Yeah, yeah, yeah.
- [41:31]
Josh Brown
Okay. Well, I think it's incredible and I want people who are looking for their next great business book to strongly consider the everything war. Dana, thank you so much for coming by and chatting with me. I really appreciated it and hope we talk again.
- [41:45]
Dana Mattioli
Thanks for having me.
- [42:06]
Josh Brown
Ladies and gentlemen, welcome to what are your thoughts? An all new edition. It's Tuesday night, 5 o' clock on the east coast. That means Michael and I are live interacting with the chat. Chad, say hello to Michael. He's gonna pay attention. He's gonna pay attention. He wants to see.
- [42:25]
Michael Batnik
No, I'm not. You have my full attention. That's how I do it here.
- [42:27]
Josh Brown
All right, Joe Altamoro is here. Akbar, Muhammad, what up? Ben is here. Jay Luther, Giancarlo Magnus is back. Chris is back. Georgie, we see you. The doctor is here. Guys, Nicole is in the chat tonight. Say hello to Nicole, everybody. All right, we got, we got the whole, the whole gang is here. This is a, this is an incredible moment in market history. I have almost never seen anything like this in my entire life. And we have so much to talk about. But before we do, Michael, we have a sponsor tonight. Who's the sponsor of the show?
- [43:03]
Michael Batnik
Guys, it's public. And I want you to do something. Leave the old boring legacy. Outdated platforms that make it hard for you to invest public. Makes it really easy. What do you want? Crypto stocks? Good old fashioned bonds. They got it.
- [43:22]
Josh Brown
Cash account. Cash like a high, like a high interest cash account. If you don't know what to invest in or you want to sit out, you want to, you want to say, you know what? This is not for me. I'm going to earn a little bit of interest while I figure out what I think is going to happen or how much risk I want to take. That's always an option, too. I'll tell you another thing.
- [43:46]
Michael Batnik
You.
- [43:46]
Josh Brown
You also can get a up to $10,000 if you transfer an existing brokerage account over to public. So let's tell people where to go. Public.com w a y T to learn more. Paid for by Public Investing Full disclosures and podcast description all right, here's what I want to start. And I know you wanted to start here Too. Josh was right. So we had like. You weren't debating me, really. You just, you weren't understanding what I was trying to say.
- [44:20]
Michael Batnik
We had this conversation so much.
- [44:22]
Josh Brown
No, no, no, no, no. I don't think you were on the other side of this from me. You just were like. You were like, wait, I don't understand. That's all. But we had like a little a flare up on the show a couple weeks ago. His Cali was on last week. Said it was like, why? Like, what is the market responding to? Why is the market rallying? Right? And I don't know. All I know is the market looks like they're now laughing at the tariff headlines. So my best guess at the time, and now it seems like it was. It was the right guess. My best guess is the market no longer believes circa early May what it believed in early April, which was that tariffs were gonna be here to stay. They were gonna get worse. People just basically said, you know what? He's capitulating already. Carve out for semiconductors, carve out for phones. Now he's talking to the auto industry. Now he's telling the retailers, don't worry, and winking. So it was just like kind of like the stock market each day was like, yeah, this tariff thing's not real. And that's where it like ended up landing. And, you know, nobody could really predict that in advance. But I feel like day by day, stocks started to just decide this is all going to be a big joke in the end. And that's what ended up happening. You had a capitulation over the weekend. So I just wanted to get your take on, like, you know, was that the right. Was that the right instinct, like, why stocks are rallying? They definitely weren't rallying because we're going to get all this tariff revenue that's going to offset income tax.
- [45:55]
Michael Batnik
Yeah. All right. Well, if you rewound during the throes of the sell off, I was pretty vocal saying that I don't believe him. And I was saying at the time that I could end up being wrong. But I don't believe that he doesn't care about the stock market. I don't believe that he doesn't care about the scoreboard. He's a narcissist. And that was the right.
- [46:21]
Josh Brown
That was the right call.
- [46:22]
Michael Batnik
Yeah. So, okay. However, I am still surprised at the stock market's reaction. So, for example, I am surprised that over the last 24 sessions, according to Mike Sicardi, the S&P 500 is up 18 and a half percent that has only happened a 24 session. 18 and a half percent rally has only happened in, in 1982 at the bottom, in 2009 at the bottom and in 2020 at the bottom. This V shaped recovery has me surprised. Bespoke tweeted. The last time The S&P 500 erased a 15% decline in under six weeks was 1982. This is rare. This is highly unusual. So I cannot believe that we've had a V shaped recovery that took back all of the declines and because if you ask me and if you ask the average investor, are things better today? What's going on the chat?
- [47:26]
Josh Brown
Nothing. I think that, I think the whole stream is in unison, basically confirming what you're saying. If you, if, if, if you, if you go back and listen to what you were saying, you were actually saying in real time. No way.
- [47:42]
Michael Batnik
Yeah, I was now, but I'm still, I'm still absolutely flabbergasted that the market hasn't said, you know what, all right, we, this is a confidence game and we are not as confident in the multiple that we should be applying to our stocks. Given all of this and given that earnings are probably going to slow down, there's probably going to be some negative impact to the market. But this market is looking all the way past that because they are temporary setbacks is what the market is saying.
- [48:13]
Josh Brown
I think I was super bearish in late March and right through the bottom of the market and probably look, I bought stocks anyway just because that's what I do. But I absolutely did not think that we would retrace the entirety of the sell off. Nobody and then, and then be looking at a situation where you're now 5% or 4% from back to the highs we're up on the year.
- [48:39]
Michael Batnik
Like what?
- [48:40]
Josh Brown
Yeah, 100% in a million years. I never would have guessed it. Which look, I think speaks to why it's so hard to try to guess which direction the next 10% is going to be. I don't know anyone that can reliably do it and I don't, I don't even know that. Even if you can do it, like, even if, even if you can say the next 10% is going to be this and then it happens, well then what do you do? Right then you have to make another guess and then that leads to another guess. So I was super bearish throughout the month of April. Still sort of bearish. Not super bearish anymore because prices went up and I think that's how, like that's how it lands on regular people. Like, when things on the screen get better, you start thinking about, well, maybe it wasn't as bad as I thought. And then when it happens every single day for three weeks, it's like, impossible to not consider the fact that stocks sniffed out the truth, which is the whole thing's a joke. And of course Trump was gonna capitulate. It was only a matter of whether or not he had somebody else do it for him. In this case, he sent Scott to Geneva and he said, do me a favor. Don't come back here without something good. You know, I don't want to hear it anymore, or whatever he said. And that's what he got, by the way. Peter Navarro was not sent to Switzerland. That was probably. That was probably good for 7% in the. Of the S&P's rally. Lotnik was sent to a TV studio. Besant was sent to Geneva to meet the Chinese, and Peter Navarro was sent to his bedroom without supper. Not basically, right. Have you seen him?
- [50:18]
Michael Batnik
No.
- [50:18]
Josh Brown
They basically said, hey, do yourself favor. Shut the up. We're trying to get this thing back on track. And he's gone like that. You think that wasn't the conversation. Stop. You're off TV until we tell you, you ghoul. Nobody wants. Nobody was bullshit anymore. So, look, I think. I think where we are now is. Is like, super insane. And I don't know if you. If you. If you threw money at all these. All these stocks during the course of the market bottoming in April. What do you do now? You keep them all? I. I'm not selling anything. It keeps going up.
- [50:56]
Michael Batnik
I have.
- [50:57]
Josh Brown
You bought a bunch of shit, too.
- [50:58]
Michael Batnik
I bought Nvidia, Uber, Crowdstrike.
- [51:02]
Josh Brown
Oh, yeah. Bought crowdstrike in the 300s.
- [51:05]
Michael Batnik
Yeah. So I'm up like 30 on a lot of these names. I'm probably gonna lighten up a little bit. Not because I'm not Because of an opinion on the future of these stocks, but it's 30% in two, three weeks. You got.
- [51:14]
Josh Brown
So I doubled my Amazon position. I added to Uber. What else did I do? I didn't buy Starbucks. That was the one I should have bought. I bought. I bought more Toast. We're going to talk about Uber and Toast later.
- [51:32]
Michael Batnik
I think there's a silver lining. Just. Just purely from.
- [51:35]
Josh Brown
Oh, Netflix. I bought Netflix. We did it on. We did it on the air during the show that I might. I might sell some of that. That's up a lot, dude.
- [51:44]
Michael Batnik
You have to remind yourself how you were feeling four weeks ago and we were all nervous and let this be a lesson. Let this be a lesson for the next time something like this happens.
- [51:54]
Josh Brown
I still am nervous. I understand that now the trade uncertainty is gone.
- [51:59]
Michael Batnik
What are you.
- [52:00]
Josh Brown
We're not gone, but significantly diminished.
- [52:02]
Michael Batnik
What are you nervous?
- [52:03]
Josh Brown
Well, 145% is not 30%. So. But 30% is still not great for the economy unless everything is an exception.
- [52:10]
Michael Batnik
But everything's going to be exempt. Everything that matters.
- [52:16]
Josh Brown
Yeah, great.
- [52:18]
Michael Batnik
Here's what I'm a little bit nervous about. You would think that at some point yields are going to matter and be somewhat of a headwind for stocks. The 10 year hit 4.5% today. Historic. In recent history, that has been, that has, that has kept a lid on stocks.
- [52:32]
Josh Brown
You know what's funny? Compared to the shit that we were worried about like three weeks ago, that almost seems quaint.
- [52:37]
Michael Batnik
No, I'm making up reasons to be worried. The Vix is under 20. The market's not worried. Why would you be worried?
- [52:40]
Josh Brown
Let's do some, let's do. Let's do some stuff here. Anyway, for those who aren't paying as close attention to this, basically Trump went from 145% tariff on China circa the first week of April and that is now down to. Down to 30% and probably going even lower. It's like. And by the way, that's not like the new tariff level. That's the baseline level while they negotiate. And I think they gave themselves another 90 days. So this is the New York Times. Let's do the next chart. So this shows that chart and then below it is the tariffs imposed by China, which went from 10% on certain things like nat, gas, coal and farm machinery to 34% on April 4, 84% on April 9, 125% on April 11, now 10% on May 12. So China took all the, almost all the tariffs off. So did Wei. Nobody made any concessions. This is the New York Times. President Trump made big promises with his China tariffs. China needs us more than we need it. America can outlast China in a trade war. Those advantages will let the administration get big concessions and rebalance global commerce. Trump's actions, however, suggest that talk was bluster. China made no concessions. By now most of us are familiar with this pattern. Trump makes big claims about what his tariffs can get, only for him to later back down without the other country giving up anything meaningful. It happened with Mexico, Canada and most of the Liberation Day levies. Despite his claims, America seems to need other countries trade as much as they need Ours. All right, so that's the New York Times weighing in on that. I wanted to ask you, because stocks rallied as furiously as they did, does that mean that the whole theory where, hey, we're going to get all this tax money from overseas and that's going to be what pays for the extension of the tax cuts is in the tcj? So does, is this like proof that the market never believed in that story and never will?
- [54:53]
Michael Batnik
I think so, yeah.
- [54:56]
Josh Brown
Can you expound on that or what do you think?
- [54:58]
Michael Batnik
No, I don't know about the, I don't know enough about the tax code. So I don't want an opinion on everything. Ok? I don't know about this shit. So I punt.
- [55:03]
Josh Brown
One of the things that, one of the things, the responses from Howard Lutnick over the last six weeks is of course we have to do the tariffs because we're going to extend the tax cuts and China's going to pay for our tax cuts. And the stock market rallying to this extent tells you that literally there's not a soul on earth who believed that story. Like not one, literally, not one person believes that. All right, so here's the question. Is this a bull trap?
- [55:34]
Michael Batnik
No.
- [55:34]
Josh Brown
So now we're 4% from the all time high. Like is, is this, is this the rally that sucks everybody back in right before we resume the downward trend? What do you think?
- [55:46]
Michael Batnik
Well, I, I almost reject that premise because I don't think the people that sold bought back. It happened too quickly. But, but if they did, and I don't think they did because it was just a blistering speed. No, I don't think it's a bull trap. I do believe that those were the lows, but I don't, like, I don't believe it. Like with, with everything I got. You know, if you told me that the economy weakens and we go into a recession late in the year and we take out the lows, I would not be surprised.
- [56:11]
Josh Brown
You don't think people who sold stocks in February, March, April bought anything at all?
- [56:16]
Michael Batnik
I didn't say that. You said that.
- [56:18]
Josh Brown
So what, what do you. So the hedge funds did not buy back in or, or maybe that's what the last five days have been.
- [56:24]
Michael Batnik
I'm just saying if you panicked in early April, I don't believe the market gave you a chance to buy back in. It usually doesn't.
- [56:32]
Josh Brown
You have. If so if you panic sold, you never really got the all clear until Saturday. Well, the thing that you, that the thing that made you panic is, is not going to be a thing anymore.
- [56:44]
Michael Batnik
The lows were on April 8th at that level we were down 19 and change from the highs. And then you had the up 10% day where we were going to do the pause and then I think like we gave like a little bit back and then we just, we haven't looked back. So if you look at every single day, every single candlestick from somebody that might have sold in April, when was a great time to get back in for you because like the fears were still there.
- [57:10]
Josh Brown
That's right. I agree.
- [57:11]
Michael Batnik
You were, you probably didn't believe the rally because why would you when all the headlines are saying we're going to retest the lows, why would you believe the rally? So I think that had you panicked. You're probably still on the sidelines waiting for a better opportunity and what do you do now? I have no idea.
- [57:24]
Josh Brown
I agree. Because if you were panicked, the reason you were panicked was because you thought the tariffs would cause a recession. The especially the tariff which people didn't care about, the Canada thing or the Mexico thing. It's the China thing is the thing. Right, let's just, let's just put that out there. So the announcement of the deal with Britain, which was last week, might have been the thing that got you to un. Panic a little come I don't blame.
- [57:51]
Michael Batnik
By that, but if you really, but.
- [57:53]
Josh Brown
You really didn't get what you needed until this Saturday, meaning yesterday would have been your first chance to say, all right, I was worried about the China thing. Now we're going to make a big beautiful deal. Yeah, I'll put that back on.
- [58:06]
Michael Batnik
So listen, the day after we had that up 10% day, we gapped lower by like 3% the next morning and for the next one, two, for the next seven days, we gave back half of that gains. Remember that, that 10% candle, we gave back half of it over the next seven trading sessions. So you probably thought, well, we're rolling over, we're going to test the lows. You didn't buy then. And then we bounced. We haven't looked back since. So I think that like, yeah, I'm sure traders got back in, but for like the average person that Panic sold, they're not back in. No way.
- [58:35]
Josh Brown
All right, let's define. So this is what I'm going to tell you. If this is a bull trap and my operating assumption is that it's not, I reserve the right to change my mind, of course. But like I just, I can't see how it would be if it is it's the most elaborate bull trap I have literally ever seen. And the reason I don't think it is now is because of what we heard during earnings season. But we'll get to the reason in a second. I want to start by defining the term. A bull trap is a lower volume rally that occurs in the midst of a bear market that ends up being a head fake and sucks people back in. And there have been some really convincing examples where it looked like, oh, the bull market is resuming, but it was just a bull trap. And we talked about this, Michael, you and I, a couple of shows ago. The 2000-2002 bear market, which I probably still have PTSD from, but the S&P rallied 5% or more on 10 separate occasions. This chart comes from chart kid Matt. So those blue squiggles higher Amidst this grueling 51% bear market, those are instances of. Of the S and P rallying 5% or more, and then, as you can tell, falling apart and are seeing lower lows later on. And every time that happened, less and less people wanted to play along.
- [60:04]
Michael Batnik
Sure.
- [60:04]
Josh Brown
Which is what. Which is why you get lower highs on the way down. So that. That's like what. That's what an example looks like of multiple bull traps inside of a bear market. Centerpoint securities has this really great thing on bull traps, and I just want to show you a couple of their charts. I mean, these are illustrations. They're not charts. So, like, that's, you know, if you were to take a crayon and illustrate for somebody, what does a bull trap look like? That's a really. To me, that's a really good, great example because it actually breaks the downtrend and you think you're out of the woods. But this one has gone way further than this illustration, which is why it's really hard for me to believe that this is a setup that's. That's going to trick everybody.
- [60:49]
Michael Batnik
Dude, we made. We got back all the losses. Like it's over. Not saying that we can't fall, but we got back all the losses.
- [60:55]
Josh Brown
Okay? Usually in a real bull trap, you get back, you rally back to a resistance level, usually the downtrend, and you challenge it and fail. And that didn't happen here. Usually there are big momentum divergences or volume divergences, and that's not the case here. Like the volume, even anecdotally, the things that Robinhood is saying with trading volumes, the ETF flows, all of that stuff is confirmation, not divergence. But let me show you what it would look like if it were a bull trap. So like very simply put, like a market rally that's accompanied by low volume. Meaning like, yeah, people are buying, but not to the extreme extent they were on the way up. That's a classic tell. And so when you have really high volume, like what we've had, that's how you go all the way. So there's a potential bull reversal.
- [61:57]
Michael Batnik
Last month we learned that retailers, retailers, that retail traders, retail investors, had the highest amount of buying ever. I think they bought like $50 billion worth of stock in a week. It was off the charts. So this is the opposite of a low volume bounce.
- [62:14]
Josh Brown
Let's put this, let's, let's put this chart up. So this is a net. So we talk about a, a negative divergence. You don't have it here. You see the confirmation from RSI, relative strength is 67 MACD, which is moving average convergence divergence up into the right. So you're not getting that kind of classic divergence with this rally. So we've come all the way back and you're getting the momentum. And let me show you, I made this this morning. Here's an example of a negative divergence. February. So as you can see, we come out of the election, the stock market, which is in purple, just rips higher and 14 day relative strength or 14 day RSI is ripping with it. And then as you head into January, you see where I have that red line? That's momentum falling apart as the purple line continues to rally. That's a classic and a lot of our technician friends pointed out at the time, that's a classic divergence in momentum versus price. And you know, look what ends up eventually happening. The market literally has the stool kicked out from under it and confirms that lower momentum, not vice versa. Now look at the way back up. The purple and the orange line are almost perfectly synced together. So you had the negative divergence already. It wasn't this month, it was four months ago. Am I explaining that well, Mike?
- [63:48]
Michael Batnik
Yeah. Yeah.
- [63:49]
Josh Brown
Okay, last thing on this and then we can move on. On the bull trap thing, put this last chart up. The difference between a bull trap and a bullish move. You see that volume spike with the buying in the bullish move, that's what's happening now. So like, I don't, I don't know what's going to happen.
- [64:09]
Michael Batnik
Yeah.
- [64:09]
Josh Brown
But if you say to me like, is this, is this the bull trap that gets everybody, sucks everybody back in? Not according to the classic definition of how I Learned what a bull trap is.
- [64:20]
Michael Batnik
Yeah, I'm with you. Ryan Dietrich tweeted over 55% and now it's over 60. But this was earlier today. Over 55% of components in the S&P 500 made a new 20 day high today. Okay, new 20 day high. This is yet another clue. The lows are likely in and better times are coming. It's been higher a year later, 29 out of 30 times.
- [64:42]
Josh Brown
So I take 16% average return.
- [64:45]
Michael Batnik
Yeah, I take this sort of stuff seriously. When you get, when you have this overwhelming amount of buying and we had the breadth of us earlier in the year, and when the psychology, the collective psychology of the market goes from everybody out to everybody in. Historically, that is the bottom. And it's hard to imagine given all the headline noise, but yet again, look.
- [65:06]
Josh Brown
At this roller coaster. Put this up. This is the S&P 500 performance year to date. I asked Sean and Matt to put this together. So this is, this is the downturn starting from February. This is S and P, not NASDAQ. Close enough. 18.9%. I guess on a closing basis.
- [65:27]
Michael Batnik
Mental.
- [65:27]
Josh Brown
And then almost perfectly symmetrical. I would say in about two thirds of the time it took to fall, you come back 17.3%. So you're not quite back to where you are in early February. At the top, you were 5844. Going into today, the high was 6144. Back at 6144, all the strategists had price targets of 7000, 6800, blah, blah, blah. That's, that's like, that's like almost a perfectly symmetrical comeback. We're not quite all the way back, but like, my God.
- [66:03]
Michael Batnik
And all the low, all of them, and it's not their fault. I would have done the same. That's the job. All of them lowered their price targets.
- [66:09]
Josh Brown
We're gonna, we're gonna do that in a second. Put a pin in that. What's this next chart? Oh, percentage of S&P 500 stocks above their 20 day. That's the left pane. 50 day, 200 day moving averages. This is interesting. So the S and P is back above the 200 as of today.
- [66:33]
Michael Batnik
It's got to be right. I mean, it's right there.
- [66:35]
Josh Brown
Okay, but. But only half the stocks are. I think the mag 7x Alphabet did a lot of the heavy lifting here. Just eyeball test. Look at chart. Look at Nvidia went nuts today. Microsoft went crazy last week. Yeah, Meta had a, had a, had a decent run. Apple, even so, just Tesla had a big bounce. So I think the Mag 7 is still doing a lot of the heavy lifting. Even though you now have a lot of stocks above their 20 day, you still only have about half the market above its 200. Do you find that somewhat meaningful? Is, is that the next thing that has to catch up?
- [67:13]
Michael Batnik
I mean, RSP looks great too. I don't know. I don't know that I find it super meaningful at only half or above.
- [67:18]
Josh Brown
All right, here are the sector returns off the market lows. What jumps out to you here from the market lows? So April go April 8th.
- [67:28]
Michael Batnik
Yeah.
- [67:28]
Josh Brown
Do this is every sector and how much they're up off the low. I'll tell you what jumps out at.
- [67:32]
Michael Batnik
Me, but what jumps out to me is this. This is literally exactly how you would draw it up from the top to.
- [67:39]
Josh Brown
The bottom, if you like. If you said, all right, there's going to be a huge market recovery. Rank the sectors in order of what you think will happen, more or less.
- [67:47]
Michael Batnik
How about this? The top five versus the bottom five, you would draw it up like that. So the bottom five is health care, staples, youth, energy and real estate. The top five is technology, industrials, discretionary materials and financials. You would, that's exactly how you would draw it up. Tax.
- [68:00]
Josh Brown
I got, I got, I got somebody here, Bill Greebles is saying Mag7 is not doing the heavy lifting. It's underperformed the s and P QQQ year to date. Handsome. We're saying from the April 8th low, the technology sector SPDR is up 26.7%. Listen, Mr. And the market is not.
- [68:18]
Michael Batnik
Sir Josh is very sensitive to people disagreeing with him. So I would, I would tread lightly.
- [68:22]
Josh Brown
All right, here's the New York Stock Exchange advanced decline line. What else could you ask for?
- [68:28]
Michael Batnik
Yeah, it's all the things.
- [68:29]
Josh Brown
Pretty good. So again, this is important. If this is a bull trap, it wouldn't look like this. Maybe you'd be like somewhere in the middle of that channel because we already.
- [68:42]
Michael Batnik
Got above where the previous highs were. Not the all time highs, but before we're higher than the liberation date dump. All right, so the question, is this a bull trap? It's already been answered. No.
- [68:52]
Josh Brown
Well, let me say one thing. I'll put that back up. This New York Stock Exchange advanced decline line includes a lot of bullshit. All the closed end funds that trade there and bonds. So this is better. Here's the S&P 500 advanced decline. And by the way, the next time somebody shows you an NYSE Advanced decline line say no thank you. Show me the S and P. Here it is, look, look. It's an all time high.
- [69:21]
Michael Batnik
Yeah.
- [69:22]
Josh Brown
So it's, it's tough for this to be a bull as it's tough for this to be a bull trap.
- [69:28]
Michael Batnik
The market has had a lot of bullshit thrown at it. We were talking with Neil last week or two weeks ago and we said this is a bull market. You had the biggest intraday declines erased in three years off. Bad news. That's what happens in the bull market. It shrugs up bad news. You might not like it.
- [69:45]
Josh Brown
Here's GLD hanging in there.
- [69:49]
Michael Batnik
Yeah.
- [69:50]
Josh Brown
Up 23.3% year to date. 5.4% off all time highs, which is nothing. That's so even with the market, the stock market melt up over the last five weeks hanging in there. GLD is not backing off. I find that interesting, don't you?
- [70:10]
Michael Batnik
Yeah, I do.
- [70:11]
Josh Brown
You would have thought money would fly out of there once we got the re certainty that we've been joking around about, but it didn't. So that's. I don't know if that's people or central banks. We had a couple of charts from friend of the show Todd Sohn Strategus. These are ETF flows off the lows. So this is in price, guys. This is the amount of dollars coming into and out of the number one receipt.
- [70:37]
Michael Batnik
Very interesting. Wow.
- [70:38]
Josh Brown
So interesting, right? I think Todd sent us this today or yesterday. So the number one asset gathering ETF from the low in on April 8th is Treasury Bill ETFs. That part not surprising. So short duration bonds is number two.
- [70:56]
Michael Batnik
No, this is surprising to me. To me, as Todd writes, he says category flows have suggested equity rally skepticism since the low. So to me this is exactly what I suggested at the top of the show. People are not buying back in. The people that sold went to bills and bonds and they still got to get back in.
- [71:15]
Josh Brown
What surprise? What's not surprising about. What's not surprising about it to me is when you sell stocks and you're not buying more stocks, that's where you go.
- [71:26]
Michael Batnik
Yeah.
- [71:27]
Josh Brown
So that, that's the part that's not surprise. That's the part that's not surprising. You're saying it's surprising or it's not surprising?
- [71:34]
Michael Batnik
I would have thought, I would have thought that given the rally, money would have had to flow into these ETFs, the market ETFs. And it did. It did. It certainly did. It's just not the leadership.
- [71:45]
Josh Brown
All right, here are the surprises. Put that Back up. Spot crypto was the number three category of ETF asset gathering. That's why $5.3 billion came racing into the safety of spot crypto ETFs. Okay, that's crazy growth. So growth factor equity 5. So there's the, there's the money. Yeah, so there's the money that came in. Precious metals at 4 billion. Okay. Less surprising, more bonds. European equity was actually net positive. That's actually interesting. They bought Japanese equities on a net basis too. That's interesting. Not, you know, not crazy amounts, but enough that it made the chart. All right, these were the big losers. Here's what they sold. Small cap stocks couldn't get arrested. They sold 5.5 billion worth of small cap equity ETFs since the lows on April 8th. Cyclical sector ETFs. Which I don't even, I don't even know. Like, would that just be like S and P? Materials.
- [72:45]
Michael Batnik
Materials industrials.
- [72:47]
Josh Brown
Okay. They sold Chinese stocks. Negative 3.7 billion. They sold the long bond 3.3 billion. I guess that's probably mostly TLT. And then they sold the defensive sector. ETF took in negative money, which I suppose is somewhat surprising, but maybe that's the nature of tariffs was that the defensive sectors are hit just as hard in worst case scenario.
- [73:12]
Michael Batnik
They held up really well in the sell off. So maybe that's just profit taking. I don't know.
- [73:15]
Josh Brown
Okay, next chart. We got one more from Todd. This is interesting. This is the same dollar went to equity and to fixed income since the April low. So the people who were buying something in equal amount and I don't know if cash T bills are in here as fixed income because maybe that's misleading. What do you think about this?
- [73:38]
Michael Batnik
They are.
- [73:38]
Josh Brown
They are. So that's, that's the source of that. Okay, if anyone's going to get caught in this bull trap or look stupid as a result of this bull trap not being a bull trap, it's the chief strategists. So chart off. Sam Rowe wrote this morning. Goldman, Sachs and Yardeni Research led Wall street in slashing their year end S&P 500 targets as the stock market tumbled in the following weeks. RBC Soc Gen Oppenheimer, B of A JP Morgan, bmo, bmo, sorry. Citi, CFRA and Deutsche bank all revised their targets lower on Monday. Yesterday, Goldman and Yardeni revised their targets again, this time up after the US and China agreed to temporarily lower tariffs. Goldman sees the year ending in 6100, up from 5900 Yardeni C6500 up from 6000. Sam writes, we're not going to pretend like the swing in The S&P 500 itself isn't influencing these revisions. Right. This is just marking to market. Right. That's all they're. That's all they're doing.
- [74:49]
Michael Batnik
What are they supposed to do? They were. They marked it down for a reason, the reason changed, and then they got to mark it up.
- [74:55]
Josh Brown
Well, that's not my criticism. I have no criticism. I don't think I would be any better at this. But you're in January full speed ahead with a 7,000 target. And then liberation, with the lead up to Liberation Day, the stock market crashes. Then you cut your target to lower than where the market is, right? As it bottoms, then it rallies for five weeks and you raise your target. Should take your target and shove it up someone's ass because nobody needs to actually read it. Is. Is the way if, if we're just like, oh, here's my year end target is 6,500. Unless there's a market crash, in which case it'll be 5,500. Oh, that's amazing. And then if it. And there's a recovery, it'll be back to 6,500. So what does the target do? Literally? What is it about?
- [75:47]
Michael Batnik
I don't care.
- [75:50]
Josh Brown
The financial media cares, right?
- [75:53]
Michael Batnik
Yeah, that's an article.
- [75:54]
Josh Brown
Every time they raise the target, lower target.
- [75:56]
Michael Batnik
Yeah, that's it.
- [75:58]
Josh Brown
I think. Look, I think it's the hardest job on Wall street to come up with a price target for anything, especially the whole stock market. But don't make it even worse by marking your target to market every time there's a correction. If you're a bull, be a bull and eat it. Live through it. Or don't be so bullish. If there's that much uncertainty that, that. If there's that much uncertainty that the minute something negative happens, you have to chop your target down. It shouldn't be as high as it was in the first place. Is that, Is that like a reasonable takeaway?
- [76:36]
Michael Batnik
Yeah. That's harsh.
- [76:37]
Josh Brown
So what do you. What do you do? Stop publishing targets? Stop.
- [76:42]
Michael Batnik
I don't know. It's a stupid thing. We know. We know. It's complete clownery. All right, let's talk about Google. So you were on the air last week when there was a report. Where did the report come from? Was it Apple? Who made this report?
- [76:57]
Josh Brown
It was Eddie Q. Testifying in court about the antitrust suit and pointing out, hey, it's not like anyone's searching Google anymore anyway.
- [77:08]
Michael Batnik
And Eddie Q is who.
- [77:11]
Josh Brown
The number three person at Apple.
- [77:14]
Michael Batnik
So the market, the Google, the market. Google fell 8% on the day. And I, I don't know when I bought the stock, but I sold the stock for a 4% loss. And I was pretty proud of myself because I think it would have been very easy to be like, yeah, it's so cheap and this is a great buying opportunity. Maybe just add. But I'm like, you know what? I'm now 4%. Why am I, Why am I? Who gives a shit? Just get rid of it. Right? Like, I don't need to be dying to sell something.
- [77:39]
Josh Brown
You're lucky you were only down 4%.
- [77:41]
Michael Batnik
What do you mean?
- [77:43]
Josh Brown
I'm saying, like you could have been down 20% really easily. You were only down 44.
- [77:52]
Michael Batnik
So let's start this chart from where Google's revenue comes from. And really it's search. I mean, we know that, right? Like there's. Yes, the cloud is growing really nicely and YouTube is a huge engine, of.
- [78:07]
Josh Brown
Course, but 50% of revenue revenue is search.
- [78:10]
Michael Batnik
It's search. That's it. So in my opinion, it's possible that we look back and we say, oh, wow. Remember when we thought that like people were going to stop using search and chatgpt and chart off, please. But this is going to be an overhang probably like forever. And even if, even though we learned last quarter, I don't know, when did they report three, four weeks ago, we learned that search grew 11% last quarter. And to me, when I saw that report, I was like, okay, like, yeah, we might be afraid of chatgpt. It's still growing. Really, really, really healthy, healthily. The problem is it doesn't necessarily matter that the stock is cheap. It doesn't necessarily matter that it's growing. What matters is the threat of its crown jewel is going to be under assault for God knows how long. Okay, so I want, I want, I want to hold on two charts and then I'll give the mic back to you. So Charkin made these chart on, please. This is Google since Chat GBT was launched and it's actually up 60%, which is not that much less than the Q's. The Q's were up almost 80% over the same time. So underperformance, but not dramatically. But here's the thing. The forward PE AS is as low as it's been basically ever. And what changes this? I don't know. Next chart. So what I had, what I had Matt do here was compare over the last One, three and five years. All of the mag seven names and yeah, over the last year it's the only one that is down. It's down 6% over the last year. Every other Max 7 name is up. Over the last three years it's the second worst performer behind Tesla and over the last five years it's the second worst performer only in front of Amazon. So yes, it's cheap. Yes, if you're a value investor and you have a long term time horizon, you might very well be rewarded. But for me that's not my objective with Google. I don't want the headache and I think the headache is not going away.
- [80:09]
Josh Brown
Okay, so I want to tackle that 11% stat that you just threw out. You said the growth of search was 11%. Here's the thing, that's not the growth of search, that's the growth of revenues from search. True, that's like Meta used to do that. They would just throw another ad in. Like increasing the ad load makes the product worse and makes the revenue higher today, but it costs you customers in the future as people grow fatigue. You ever try to read something@thestreet.com no. Holy shit. I dare you to accidentally click a link from. I don't even know how you would get there. Like Yahoo Finance or there's a story@thestreet.com People that are regular users of Yahoo Finance over the last 25 years. Like that's their go to how they just quickly find out what's going on. When they see the street.com they will not click it because they know what's about to happen. Video ad, close it. Another video ad, try to close it. It pops something else. Ticker scrolling across the bottom, ticker scrolling across the top. A pop up a form to fill out. By the time you get to the second paragraph you have seen 19 ads. Do you know why they're doing that? Because the traffic is doing this for the most part. And no disrespect to anybody who's doing a column there, I know they have like talented people but they have turned that site into a torture chamber for the reader. And now I'm sure, and I think like private equity owns it or somebody took it off the market. Now I'm sure whoever they were doing it to impress internally, hey look, our revenue was up. Okay, but how? Like were the views up? Were the reads up or the subscriptions up or is the usage up? No, but the revenue's up. So Google can continue to add more buttons and bells and forms and ad units and blocks of things tracking you. They could do that for the next 10 years and somehow grow revenue. But the street has already decided that that revenue growth, A, has decelerated to the point where it's a point of no return and B is not being accompanied by increased usage of the product. And that's. That's why it's a 15 multiple now. I just said all that. But what I want to say next is if you are a value investor, you should be buying Google hand over fist.
- [82:40]
Michael Batnik
Agreed.
- [82:41]
Josh Brown
Because that's what value investing is.
- [82:43]
Michael Batnik
Yeah.
- [82:43]
Josh Brown
It's accepting all of the things that people have decided are negative about the stock and saying, yeah, but I'm going to invest anyway. Because I think either the negatives are overstated or I do believe that company can fix it.
- [82:56]
Michael Batnik
I believe the negatives are overstated. I think that the threat from ChatGPT is overstated. But I also don't think it's going. The threat is going away, and the market doesn't think the threat is going away. So if Google rolls over and it falls another 15, 20%, I will buy it back and hold it. It's just not there yet for me.
- [83:12]
Josh Brown
I called it PayPal on TV, and that might have been harsh. Like, PayPal still grows. PayPal still has hundreds of millions of people that use it. The problem is there's enough competition there that it's never going to be able to grow the way it used to. It's not going to get its old multiple back, and the Stock sells at 11 times earnings. That's like. I think Google Search is going to be a hugely profitable business for a long time. For a long 20 years. I don't know.
- [83:43]
Michael Batnik
You know, it's funny, Josh, I almost forgot to mention this. We've done this segment multiple times. Five years ago, a couple. I don't remember one, which Mag 7 stock is like the least disruptible. And I think. I'm pretty sure I said Apple was the most disruptible.
- [83:58]
Josh Brown
I would have said Alphabet is the least disruptible.
- [84:00]
Michael Batnik
But I think we both said. At least, I think I said it was Google because it was impossible to envision ChatGPT. And the market share that Google had seemed fully impenetrable. So it shook me a little bit. In a good way.
- [84:12]
Josh Brown
I would have said. I would have. I would say. I. Of course you can't envision ChatGPT, even if it comes along. You can envision it as a private company being able to raise $100 billion. You can envision the speed with which that app reached a critical mass of users faster than TikTok, faster than any, like, literally anything that's ever happened before. There were so many things that you could not have seen coming. And at that time, you're talking about a company that's 95% market share, right? Unheard of. It does that. Doesn't exist anywhere in the world. But they had that, so that's why they look the least disruptible. Then the next. The next phase of that conversation is, okay, maybe somebody could come along with a better version of search. But Google's got a lot of resources. They'll reinvent themselves. They'll cannibalize their own thing, and they'll. They'll do it, too. And that still might be how this turns out.
- [85:12]
Michael Batnik
Maybe. Doesn't look well. Market doesn't like it. I'm out.
- [85:15]
Josh Brown
The market doesn't like it. But they are not giving up. They're built. They're working on that. You know, they're working on their own bots and their own AI assistants and products that they will weave into their core products and they'll get usage of. And I think, though, I think it's not like, unsurvivable, I just think it's a tougher stock than it's ever been before.
- [85:37]
Michael Batnik
Will Google outperform the Qs over the next three years?
- [85:42]
Josh Brown
I'd say no. I'd say. I'd say you would have to have a bear market for Google to outperform the rest of what's in that index. Be my guess, because that index has gigantic companies that we almost never talk about, like ServiceNow. And these companies are probably gonna be 20% growers with 40% margins. And I don't think people are gonna race them with Alphabet. So I would say probably not, unless you get a bear market. All right, let's touch on inflation. We got a CPI report. April CPI rose 0.2% month over month on both headline and Core, which was below expectations. The year over year was plus 2.3% on headline. Core was plus 2.8%. Those were below expectations. There's nothing really jumps out at me like lower egg prices, stupid shit like that. Services prices ex energy were up slightly. I don't even know how important that is to the calculation. Rent wasn't crazy. Airline prices were way down. Airline fares are in. The services component fell by 2.8% month over month. That's a third consecutive negative month for airline prices and negative 8% year over year. So that's good. Sticky part is auto insurance, but like there's nothing in there that would spook you. And I don't know, I guess the question is, is that the last tame inflation report we're going to get? And now we get the tariff era inflation reports.
- [87:23]
Michael Batnik
So yeah, I don't know. I don't know what the future inflation reports are going to hold, but this did surprise me. I'm looking at CME Fed Watch Tool and a week ago There was a 30% implied probability of a rate cut in June. And that's basically gone now. Went from 30% down to 8%.
- [87:47]
Josh Brown
So the market 100% chance of two rate cuts this year and like a 20% chance of a third, like for the full year, for the rest of the year.
- [87:58]
Michael Batnik
Where, where do you think inflation will show up in the coming reports?
- [88:04]
Josh Brown
I don't think inflation is the problem. I think goods inflation is the problem, not overall inflation. And I think services deflation will be disinflationary if goods inflation is high because high prices will kill demand and will hurt companies and companies will lay people off. And I actually don't view the tariffs as permanently inflationary.
- [88:26]
Michael Batnik
Well, you asked me you wish that.
- [88:27]
Josh Brown
Would be the case.
- [88:28]
Michael Batnik
Is this the last tame inflation report? Is that what you asked me?
- [88:31]
Josh Brown
Yeah. Because none of this stuff was in effect for April. Some of it though we effectively had an embargo with China. I don't know, I don't know how much time you spent like reading or looking at this. I haven't spent much time at all. Okay. But from what I surmise would spook Trump was the retailer saying expect empty shelves. If we're going to have Christmas, we need to start getting shit in now. I totally getting it. Okay. What we had was not a trade war. It, the, the level of tariff was so high, it effectively became an embargo. Like ships stopped coming here or China stopped exporting here and started sending things elsewhere and then maybe it would end up coming here.
- [89:18]
Michael Batnik
But if the tariffs are on pause again for another 90 days, why would you, why would you think that this is gonna be the last time inflation report?
- [89:25]
Josh Brown
They're not on pause. They're at 30% now. We thought they would be at 145%. You see, so they bought.
- [89:33]
Michael Batnik
I thought, I thought on Sunday they announced that. They paused him again.
- [89:35]
Josh Brown
No, no, it's 30 levels. 30. But then again half the shit is exempt. Right? So. Dude. So my point is when, when I say we had an embargo, I mean like ships not moving.
- [89:51]
Michael Batnik
Yeah, yeah, yeah.
- [89:52]
Josh Brown
Okay. So when I say the Last of the tame inflation reports. I don't mean next month is 9% inflation again. I mean weird shit that took place during the course of May because of the gap between when the tariffs were paused and when they were fully on, like, ships stopped moving.
- [90:12]
Michael Batnik
That's so you. So I'll turn this around.
- [90:14]
Josh Brown
I'm asking. I don't know the answer.
- [90:16]
Michael Batnik
I have no idea. What do you think?
- [90:20]
Josh Brown
I think here's the best case scenario. There are some weird readings in certain categories and the market ignores it because the reality has changed.
- [90:28]
Michael Batnik
I think that's likely.
- [90:30]
Josh Brown
So, like, you could get a really bizarre reading in one segment of the economy. Some sort of industrial material was tough to come by or whatever shipping rates. And then in the market yawns because they're like, all right, yeah, yeah, we know. That's because of the 145% tariffs that are no longer happening. So that's like a best case.
- [90:51]
Michael Batnik
Sometimes the market is really hard to figure out. Sometimes it's easy, sometimes it's hard. Yesterday we had Trump tweeting 80% declines in medicine prices or whatever number was. Whatever he said. And. And XLV was up like 4% of the day. And you're like, wait, what? And yesterday you would have said, well, the market clearly doesn't believe him. It's looking past it. Okay, that would have made sense. And then today, xlv was down 3%, like, dumped. A really bad day. The worst performer sector by far. Sometimes the market is confusing.
- [91:20]
Josh Brown
So one of the reasons why we keep the best stocks in the market list is to kind of check our priors. And it's, it's like a bias elimination machine where you might not believe in something, but like, price is price. And the buyers and sellers in the market just, they could agree with you or disagree with you and you should at least know. And one of the things that happened last week, Sean came to me and said, yo, Carvana is the best stock in the market. And I said, no way. You have the, Like, I, you know, I didn't say it to him, but I said to myself, he probably has the ticker wrong. No, it's like literally a best stock in the market. And the reason why I put this chart up, one of the reasons why not. The only reason why. This is the Mannheim Used Vehicle Value Index. You probably heard a lot about this in 2021. This just turned upward. The Cox Automotive Manheim Used Vehicle Value Index, which tracks prices of used vehicles sold at wholesale auctions, increased. You ready, Mike? 4.9% year over year. It's important to note this was a 2.7% month over month increase, which would be a 32% annualized increase. Automo Sean writes, automotive prices are going higher and demand for a value oriented service offering is in the midst of heating up. So we wrote this up for CNBC Pro yesterday. Here's a chart of Carvana.
- [92:50]
Michael Batnik
Unbelievable.
- [92:51]
Josh Brown
You know what a breakout looks like.
- [92:53]
Michael Batnik
But let me ask you this. So if the tariffs are reversed or don't go through, can't all of that demand that, like, holy shit, I better buy a car now. Can that reverse in two seconds?
- [93:02]
Josh Brown
I don't think it's holy shit, I better buy a car now. I think it's the used car being a better value than the car that can't be made or sold new because it's stuck in Mexico or the parts aren't coming in or whatever. I think that's what this is about. The other thing it's about is on May 7th, they put up an insane earnings report. 40% revenue growth. Net income was up 6x from the year prior.
- [93:29]
Michael Batnik
So they did 49 craziest stocks.
- [93:32]
Josh Brown
Dude, they did 49 million in net income in Q1 last year. That's 373 million this year. I mean, it's like just an insane story. Operating margin 9.3% versus 4% last year. Double their operating margin.
- [93:50]
Dana Mattioli
The.
- [93:50]
Josh Brown
So there's a stock at a RSI of 71. Made a 52 week high yesterday. Made another 52 week high today. I would never be bullish. Carvana in the midst of a trade war. What the hell do I know? The market is saying the stock is working. This company is, is positioned better than I would have guessed. And it forces you to understand the story.
- [94:12]
Michael Batnik
Yeah, no, I love it. I don't know that I've ever seen a stock go down 99%, which it did either. It went from 37370.
- [94:23]
Josh Brown
Let me give you the number. It hit $3.55 in December of 2022. It hit 370. $375 in August of 2022. 99% fall to 355. And now it's. Now it's at a record high.
- [94:44]
Michael Batnik
It's. No, it's not. Two ninety three.
- [94:46]
Josh Brown
A 52 week high.
- [94:47]
Michael Batnik
Excuse me, but I don't think I've ever seen a stock like this.
- [94:51]
Josh Brown
Now even if you're not bullish on the used car market, Sean writes, this is one of the most fragmented markets in the country. Any industry. Automotive News says 2.3% of market share is owned by the top dealership brand. 11.1% of total market share is the top 100 dealerships. That means 90% of this market has yet to have consolidated. And Carvana probably has the financial wherewithal to consolidate as much of it as they want at this stage in the game. So, look, I'm not buying the stock or going crazy, but do you own it? We wrote it up. It's on the list.
- [95:36]
Michael Batnik
It's a wild $39 billion market cap.
- [95:40]
Josh Brown
Yeah, I don't know. How big is. What's the TAM on used cars? It's gotta be enormous. And what if, and what if they decide we're not just gonna sell cars, we're gonna do something else? They could, like, like Robinhood is doing with every other vertical in financial services. What if they say we're gonna take football bets? All right, dude, what if they.
- [95:59]
Michael Batnik
What if they get it? What if they get into crypto?
- [96:01]
Josh Brown
You want to do this recession chart really quickly? Layoff chart, rather.
- [96:05]
Michael Batnik
All right, real quick, real quick. So I thought this, I thought this was notable. We're looking at, for those of you who are listening, this is from Goldman. The share of companies mentioning recession increased during Q1 earnings calls by 23%. All right, that's not a surprise. But here's what, here's what makes this very different than the two prior spikes. When you had recession mentioned spike, it did not. It was not accompanied by layoffs. So layoffs. The mention of layoffs only rose 2%. So it's hard to have a recession when there's no layoffs and then not lol. In fact, the opposite of lol. But ironically, there was a big announcement today from Microsoft that they're going to trim its worldwide workforce by 3%. Which would mean almost 7,000 people are affected by the job cuts.
- [96:53]
Josh Brown
It's nothing. It's a better headline than it is a story at 6,000 people. Goldman lays off 3% of its workforce every year.
- [97:04]
Michael Batnik
So no layoffs, no laughs, no recessions. We can move. We can move on what's right.
- [97:09]
Josh Brown
COIN is the last one we're going to do. And then we'll do mystery chart and make the case. Coinbase joining the s and P500. Let's pull up a chart. Stocks up 20 something percent today. Holy shit. Right? This is the first crypto component in the S&P 500. And this I'm showing you guys, a chart of inception back to the IPO, which of course was in 2021 or the end of 2020. It's not quite back to where it was initially when it came public, but it's come most of the way back. It's one of the most volatile stocks I've ever seen at its current market cap, but it's now replacing Discover Financial Services, which is going to be acquired by Capital One.
- [97:57]
Michael Batnik
Yeah.
- [97:58]
Josh Brown
Is it poetic to you that it's replacing a tradfi. Tradfi giant? I mean, it's not. The tradfi giant's not going out of business, it's getting acquired. But still it's a little bit poetic, right?
- [98:08]
Michael Batnik
Yeah, no, it is. I think they were like, yeah, it was cute. It was cute.
- [98:14]
Josh Brown
Here's that. Here's why that matters. This is the assets in index to the s and P500. Put this chart up, John. 1.6 trillion in ETFs, 5.3 trillion in mutual funds and insurance products. Another 3 trillion in derivative ETF exchange traded derivatives. So it's what, what Bitwise has the slide saying they, they equate that to about $15 billion worth of demand to buy shares of coinbase. Hence the 22% rally in the stock today. You know, pretty big moment.
- [98:54]
Michael Batnik
It is a big moment. I. The. It's wild, dude. The sentiment. If you think people were worried about the stock market a couple of weeks ago and they were crypto Twitter was in full on panic mode, absolute panic.
- [99:10]
Josh Brown
And I'm not in, oh, in April.
- [99:12]
Michael Batnik
In early April and for good reason. And for good reason. So when the stock hits 73, there were calls for, I saw a call for 10. Like people were freaking out. And it is, it is just unbelievable.
- [99:23]
Josh Brown
Why were the crypto people panicked about tariffs? You would think that crypto is a solution to tariffs.
- [99:29]
Michael Batnik
Just, just price action. You know, when your assets getting killed, you get bearish. But the fact that ETH is up 50% over the last week, 63% of the past month and bitcoin is up, it's just, it's, it's a wild move, really. Without any explanation.
- [99:47]
Josh Brown
Big catalyst coming up. Schwab said they're going to do digital assets something Morgan Stanley half the year for retail.
- [99:53]
Michael Batnik
Morgan Stanley as well.
- [99:55]
Josh Brown
So that's a lot. That's two huge pools of capital.
- [99:57]
Michael Batnik
Trillion dollars, but 53% in a week. Are you kidding me?
- [100:03]
Josh Brown
Yeah, dude, this is wild. This is the market that we're in. All right. For make the case, I don't have a new stock I want to talk about. We'll talk about some stocks that we've profiled here before because they both just reported earnings last week and I wasn't on the show Tuesday night and I know people want to hear from us on this stuff. So Uber is the first one. This is a new all time high I'm showing you, I guess. What is this? A one year chart? I'm showing you a one year chart here, but you take my word for it. Never before has it traded at 90. You can see it's been consolidating for a year and then it broke out. I mean the stock is on my best stocks in the market list. Obviously it's been for a week now. 72 RSI, not too overbought.
- [100:52]
Michael Batnik
Is this your biggest holding?
- [100:54]
Josh Brown
Yeah, I think it was neck and neck with Nvidia until just now. But Nvidia went up a lot too. So I'm not a hundred percent sure, but my top three are in video, Uber and Apple. And wait, Apple?
- [101:07]
Michael Batnik
I had no idea.
- [101:08]
Josh Brown
Yeah, I never saw. I just never sold it. So it's not. I didn't buy a lot of it. I just never sold it. And it's thousand x or what? You know, it just doesn't stop going up. Let's put up this second chart of Uber. Like very simply put, this is the story. And I. So I bought the stock after the IPO was my first purchase. And then I bought in the 20s and I bought it in the 60s. So I. I've been buying and selling the stock. But in the last four years I started to build a position and I stopped trading it. And this is the earnings versus the stock price. So what I'm showing you guys is trailing twelve months earnings of $5.71 a share versus a share price of ninety.
- [101:55]
Michael Batnik
I love.
- [101:55]
Josh Brown
Not an expensive stock. Look at the earnings.
- [101:58]
Michael Batnik
Not a mystery.
- [101:59]
Josh Brown
Yeah, it's not a mystery. Like shut. Like it's not. Yeah, they're on a. On a day.
- [102:05]
Michael Batnik
Josh, who are you about to flame? You have to say shut the. Who are you talking to?
- [102:09]
Josh Brown
Like people. People equated this to a bubble. When it came public because they weren't earning money, people were like, oh, Uber, it's not profitable. They'll never get to profitability. Really? Never?
- [102:22]
Michael Batnik
We.
- [102:23]
Josh Brown
That's the, that's what you want to say? Never. We just watched the price of oil go to negative $30 a barrel. You say never in the financial market. That tells me how unsophisticated you are. So this company came out of the gates losing a ton of money. They were under the cloud of a CEO scandal. The likes of which was so extreme Brian Koppelman had to make a movie about it. Right? It was like a book about the scandals at Uber. They were tracking people on the app in God mode and they were flouting the rules in every municipality. They were operating around the world. They would operate first and ask permission later. It was just this whole thing. Then no sooner do they emerge from that they find Dara to be the new CEO. He has to now sell all these assets all over the world. Sell the Chinese assets because China will never let them compete with their homegrown companies. They have to like take losses on all this autonomous stuff they were doing because they're burning money. So they do that. Then it's Covid. No one will ever get an Uber into an Uber again. Lol. Uber eats. Ends up saving the company. True story. Then after that it's. It's the inflation. Oh the inflation's too high. People aren't going to take rides or the drivers aren't going to want to drive for Uber because they're not getting paid enough or whatever it is. The reopening. All right. They do that now. It's work from home. Nobody's going to take an Uber to work anymore. Okay. They get through that. Then this Elon Musk shit starts with Cyber Cab. Stock gets hammered. It's like every year. Another crisis for Uber and new record high today. And look at the earning. Like if. When in doubt. If you. If you have nothing else to guide you. If the earnings line is going up into the right and you have a reasonable basis to think that that can continue, the stock should work. So that's what I wanted to show people there. Let's do toast really quickly. I think this is Uber for restaurants. Dude. And I made the case for the stock and I'm long and I just bought more before the earnings. You see the post earnings pop here was tremendous. They added 6,000 more restaurants in the last quarter.
- [104:35]
Michael Batnik
They edit any competitors.
- [104:38]
Josh Brown
There's gotta be one Clover which is owned by Fiserv and like just like regular Square. But that's there. They own it. They own this business. They have 120,000 customers and they have the Marriott. They have. They just added the Hilton chain. They just added Applebee's. They're now doing enterprise deals with these companies that have hundreds of restaurants. It's like just standardize on toast or take rate is 50 basis points. You're going to love us. And I think it's a wrap. Like what? Put that chart back up. I'm not Saying they're not going to, like, struggle with competition. But, like, what this looks like to me is they are now acknowledged to be the Uber of their space. Every restaurant, every bar, souvenir shops, you name it. They're just going to be like standardizing on toast. And this is, this is going to be the platform that every employee of every hospitality business and every owner learns how to use. And they're going to become super entrenched and they're going to be able to sell a lot of other stuff to these, to these places and they become indispensable. I know in a short off. I know in a recession, people worry about overall gross value of restaurant spending. I think the uber restaurants, excuse me, the toast powered restaurants, will do better in recessions because those are the types of restaurants that are like on their game and tracking their costs and are running professional business. And I think they'll become indispensable in a tough economic environment. I don't think people turn toast off and say, let's go back to a pen and paper to, you know, to track all the checks and everything that's happening. So that's the thesis. They're not selling it. I know it's up a lot. I'm going to, I'm going to let it, I'm going to let it develop. What do you think?
- [106:32]
Michael Batnik
I like it. I like it.
- [106:33]
Josh Brown
All right, I got nothing else. Let's do a mystery chart and we'll bounce out of here.
- [106:39]
Michael Batnik
All right, John, if you please. All right, Josh. Well, this is a stock. It trades on the stock market. It's a newly issued stock and that's. It went out today at an all time high.
- [106:51]
Josh Brown
Newly issued. Did it come public or was it spun off?
- [106:55]
Michael Batnik
Public.
- [106:57]
Josh Brown
It had an ipo.
- [106:59]
Michael Batnik
Oh.
- [107:02]
Josh Brown
It'S Robinhood.
- [107:04]
Michael Batnik
No.
- [107:05]
Josh Brown
Okay.
- [107:06]
Michael Batnik
And an IPO recently. This is. Look at the date.
- [107:09]
Josh Brown
Oh, you're showing me since inception.
- [107:11]
Michael Batnik
Yeah.
- [107:12]
Josh Brown
Oh, it came public this year. The chat is saying Core Weave.
- [107:17]
Michael Batnik
The chat is Right.
- [107:19]
Josh Brown
Wow. Let's put it up. Round of applause for the chat.
- [107:23]
Michael Batnik
That is a big win. It's a big deal.
- [107:25]
Josh Brown
Biff got this one. Who else? Or Sterling got this one. Jerry Car. Jerry Carcass said Reddit. Incorrect, sir. Why? What's going on with Core Weave? So this just trades with Nvidia, right? Is that basically how that thing acts?
- [107:41]
Michael Batnik
I don't know. But, but this is a very. This is a stock that came public under a lot of scrutiny from yourself included, as well as a lot of other commentators. And you love to say it this is important. It's good. It's good stuff.
- [107:54]
Josh Brown
Yeah. I still don't want to own it. I like, I respect new all time highs. I think if I want AI, I want Nvidia, not core weave. Okay, well, both can go up.
- [108:03]
Michael Batnik
Yeah.
- [108:03]
Josh Brown
No disrespect. All right, guys, thank you so much for hanging with us this evening. We appreciate you. Those of you who came for the live on YouTube, you know you're the best already. People listening out in podcast land, shout to the Apple listeners, Spotify listeners. We love you too. Make sure to check out an all new Animal Spirits tomorrow morning with Michael and Ben. We'll do Ask the Compound later this week and an all new edition of the Compound and Friends on Friday. Thanks so much, guys. We'll see you soon. Whether you're just getting started as an investor or you're managing a multi million dollar portfolio, Ritholtz Wealth Management has the solution for you. It all starts with building the right financial plan. To speak with a certified financial planner today, visit Rithwood. Don't forget to check us out@YouTube.com the compoundrwm. Make sure to leave a rating and review on your favorite podcasting app. If you love investing podcasts, check out Michael and Ben every Wednesday morning on Animal Spirits. Thanks for listening.