← The Compound and Friends
The Compound and Friends
Financial War With Europe, Gold Is Screaming, Netflix and BofA Earnings, the Case for ServiceTitan
01:12:47
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- [00:00]
A
Foreign.
- [00:17]
B
Oh, would you look at that. Right on schedule, Mike. Or one minute. One minute behind 501. Pretty good though. Pretty good considering.
- [00:26]
A
All right.
- [00:26]
B
Hey everybody. Welcome to an all new edition of what are your thoughts? My name is downtown Josh Brown and this is my co host, Mr. Michael Batnik. Everybody say hello, Michael. Say hello to the folks.
- [00:37]
A
How are we doing folks?
- [00:40]
B
All right. I'm seeing a lot of love in the live chat for the JC Peretz episode. Mike. The, the fans just. I don't know what it is. They just, they love them.
- [00:50]
A
You know, I think it's his voice. It's very, it's very baritone.
- [00:55]
B
That's it. It's the voice.
- [00:57]
A
It's gotta be more too.
- [01:01]
B
Let's see. Paul. LOL says I'm sniffing Risks risks.
- [01:07]
A
There we go.
- [01:08]
B
Where is the risk sniffer Merch. See Paul Breezy. What up pounders? Everyone like the meltdown today? I didn't love it, but I understand it. We got, we got a whole. We got a huge live audience right now. I made it comparably speaking, it looks pretty big. I guess Duncan will give us the final count anyway. Good. Slow. What do you got?
- [01:31]
A
No, no, no. Back to you.
- [01:32]
B
All right, good, see. Good to see everybody. Thank you guys for turning out. For those of you who are new to the show, we're going to get into some of the biggest topics in the markets and the economy and stocks and bonds and every everything that you'd be curious to hear our professional expert take on. And we do this every week, Tuesday 5pm so thank you to those of you joining for the first time and to my pounders who are here week after week, we appreciate you. Tonight's show sponsored by our friends at Tucrium. New sponsor alert.
- [02:05]
A
Shout out to Sal.
- [02:07]
B
All right, tell me about what's going on here, Josh.
- [02:09]
A
We looking to diversify your portfolio beyond bonds always. Commodities are getting more and more attention as we enter 2026. Tukrium's agricultural ETFs offer a way to access the futures prices of essential crops. These funds may help manage inflation risk and add diversification to your portfolio. Ask your financial Advisor or explore two cream ETFs on your own. Visit tucrium.com Click link in the show notes for more.
- [02:34]
B
This episode is sponsored by Clearbridge Investments. Earnings growth in the rest of the equity market is forecast to catch up with the Magnificent Seven in 2026. Position your investment portfolio for an expected broadening in performance with fundamentally driven Clearbridge active equity strategies. Clearbridge a Franklin Templeton company. Go to clearbridge.com to learn more.
- [02:59]
A
Josh, perfect timing. I saw. Yeah, I saw. I saw a headline, a tweet. I saw something today. All of 2026 gains erased. All of 2026.
- [03:13]
B
What's today's date?
- [03:14]
A
What is this, a fourth trading day? Come on, now.
- [03:19]
B
All right, well, you know why geopolitics has taken center stage. We're into earnings season, and earnings season so far is pretty damn good, as expected. Everyone kind of thought that it would be good, and it is good. But we've only really heard From, I think, 7 or 8% of companies so far. So it's not. Not terribly meaningful. Although we've heard from the banks and we get into some of the financials in a moment. But the geopolitical thing, a bunch of tweets and truth socials over the weekend from El President Day about Greenland and maybe the Panama Canal. And we're going to do tariffs not only on Denmark for stopping us from acquiring Greenland for military and strategic purposes, but we're also going to tariff all of Denmark's friends, like Germany, for daring to try to stop us. And the market looked like that. And they said, fine, more gold, less stocks, maybe even less bonds. And I don't know if this carries on through Davos. And it was just like Trump hijacking all the attention heading into Davos, where a lot of other world leaders are going to speak, or if he legitimately wants to go the distance and have a fight with Europe over. Over Greenland. I don't know. Michael, what are your thoughts on the reaction so far before we get into the details?
- [04:52]
A
Well, my first thought is when you say go the distance, I was reminded of the great movie Feel the Dreams. So I just want to throw that out there. All right. My first reaction is if there's going to be market turmoil, and there just is from time to time. That's sort of what we signed up for with this whole stock thing. Give me the geopolitical turmoil all day for two reasons.
- [05:11]
B
It's the most fatable. Yeah.
- [05:13]
A
It subsides and it's nonsense. And if there's going to be problems in the. In with the stock market, I don't want it to be from earnings. I don't want it to be from GDP or the consumer rolling over or manufacturing giving this noise all day. Well, you know, it's. Whatever. It's. It happens.
- [05:30]
B
I 90% agree with that take. Other than the asymmetric nature of, like, if something really breaks geopolitically, it's a much bigger event than if we have a disappointing gdp. Like, you know what I mean? Like, sure, if a hot war breaks out and we have like troops at risk or somebody counterattacks and like, that's like a whole other level if it, if it really breaks in a, in a bad direction.
- [05:58]
A
Okay. Obviously. And I don't think, I don't think that the Greenland is that I think this is nonsense on stilts. And also the stock, I mean, I was just looking at like Industrious, for example, got whacked today. They were so far over their 200 over any short term moving average. Like, this is a little slap on the wrist, the market needed excuse to sell off. And this is a good excuse as any. I don't like it, but it's fine.
- [06:20]
B
See, I. I don't know if I fully subscribe to the market needing an excuse, but I do think in this case that's exactly right. When you have, when you have stocks that are 40, 50% above their 200 day, and it's been a while since there have been volatility, any reason for the volatility will make sense when you just watch stocks kind of give back insane gains. And I did notice that like they happen to have hit some of the biggest winner is the hardest. And I don't know if that's random or if some of these companies have extensive operations in Greenland. I probably would believe it's the former. But I think in this case you have that exactly right. So speaking of Davos, Ray Dalio came flying in from the top rope. He lives for this shit. Like, he. I don't even, I don't even watch TV in the morning. Like, really. But like, I flipped it on because I saw the futures. All right, what's going on? Immediately, it's Ray Dalio in a fur coat. Just. And he looks incredible and he is the man.
- [07:23]
A
And no, you know, this, you know, disrespect that people throw out. Like, whenever anything like this happens, it's like the ultimate warrior running down the Runway. That's Ray Dalio. Anytime this shit happens, just with a.
- [07:34]
B
Flying elbow, like, God, like, I got this. You know what it reminds me of?
- [07:38]
A
Step aside.
- [07:41]
B
Ray Dalio is here. Anytime there's like this geopolitical thing where gold is ripping and yields are ripping and the dollar and bring in. Bring me Dalio. God damn it. So he's like, this is like Mariah Carey the day after Thanksgiving just bursting out of her cage. All right, my turn. So. All right, so great. He happened to have been in Davos I'm sure the interview was pre scheduled but what a perfect squawk squawk box segment on a morning like this. This is.
- [08:12]
A
What did he, what did he have to say were.
- [08:15]
B
I thought he was very good actually. He said on the other side of trade deficits and trade wars there are capital and capital wars. I don't know what the two capitals is about. Quote if you take the conflicts, you can't ignore the possibility of the capital wars. In other words, maybe there's not the same inclination to buy US debt and so on. And he gave a really I thought like sane rationale for why you should expect the gold rally to continue. Because central banks around the world are. It's not that they are dumping US assets. It's that with like the next incremental, the next incremental allocation to something less, it's going to be less, less US assets while this madness persists. And then you know what else do you really do? You pretty much you do gold. If you're not doing treasuries, maybe you do like yen denominated or whatever it is. But it's like it's a rational take and I think that's actually what's, what's really happening. And it's not new. Sort of been happening for a while. The, the Bridgewater people, they all love this story. They don't even think they like each other. But we had Rebecca Patterson on our show last summer. We had Bob Elliott and now I'm listening to Ray Dalio this morning. They all tell the same story of like big allocations from sovereign wealth funds and governments and central banks like doing anything other than buying US assets as a consequence of these types of financial wars. I want to show you some reactions and hear what you think. Let's do the top and bottom 10 industries today. Okay. Real estate. I don't know what that's. This is really about. Real estate, household products, telecom services, food and beverage, energy pharma, insurance, food, utilities were the best ten like industry groups. Does that make sense to you in a whisk off tape?
- [10:21]
A
Yes. Combined with the fact that I suppose a lot of these names are insulated from whatever overseas exposure revenue wise and other maybe not telecom so much but yeah sure. Defensive. Yeah, makes sense.
- [10:31]
B
They beat the shit out of the semis down 3% autos every time. Autos every time. That's just a, that's just a whipping boy. That's just a cyclical like oh we're bearish on the, on the global economy again. Sell some autos what else is in here that's interesting to you? The, the banks got whacked for 2%.
- [10:53]
A
The banks really got hit today very hard. Some of the alternative asset managers, KKR in particular, real. I mean KKR is down six and a half percent. Not exactly sure what that's about. Yeah, yeah.
- [11:07]
B
Okay. Gold. Give me the chart. Over $4,700 an ounce for the first time ever. You can see this chart basically does one thing which is go from lower left to upper right over the last six months or so or this is the last three months. But you can take my word for it. This has been an uptrend that's been in force for a while. They kind of got bored of gold at the start of the year or sometime in mid December. They sort of took some profits in the metal itself and maybe some of the miners. And then the calendar turned over and we were right back. I think there's a direct correlation to Trump stirring it up with foreign leaders and the way this thing acts, I think it's. I think it's like you just, you can't ignore the correlation between big one day rally, forget about the long term trend, big one day rallies in gold and geopolitical messiness. It's, it's sort of like they go hand in hand. Yeah, here's Treasuries. I guess the message here is almost every maturity went higher.
- [12:14]
A
No, I mean the long end for sure. Big steepening. So yeah, there's the instability, uncertainty at the long end and. Yeah, makes sense.
- [12:23]
B
It's not very extreme though.
- [12:28]
A
No, no, I wouldn't say so. I think what's going on in Japan is way more extreme. Rates are at the upper end of their range. But like no, not extreme.
- [12:36]
B
Okay. Bitcoin and ETH did not help you. They were not risk off diversifiers today. Bitcoin down 3%. ETH down 6. US dollar index down 0.75%. Again that's versus a basket which is most mostly the euro and the yen in that basket. But that one looks notable to me. One of the things we talked about with JC on Friday is like the thing that could really upend the rally in US stocks would be a dollar rally. So if you were worried about that today, you're less worried about the.
- [13:11]
A
This was not a particularly large risk off day. Some of the, like the, the bigger moves notwithstanding because in a real market puke, everything gets sold. I don't care how staple you are. They sell Hershey's, they sell everything, Clorox everything and intel had a big update. Some of the healthcare names were green again, some of the staples were green. So, yeah, not a pretty day on Wall street, but not a washout. Not even close.
- [13:34]
B
I wanted to spend a couple of minutes on this piece in the FT by Robin Wigglesworth, who's been on the channel, and Toby Nangle. And I think it's the right thing to read or to think about if you're truly worried about a capital war, a financial war between the US and Europe over the way Trump is talking about invading Greenland or taking Greenland. The title is Europe couldn't start a financial campaign against Trump if it wanted to. And I thought this was really helpful. So this is how they start off. Europe owns Greenland. It also owns a lot of Treasuries. We spent most of the last year arguing that for all its military and economic strength, the US has one key weakness. It relies on others to pay its bills via large external deficits. Europe, on the other hand, is America's largest lender. European countries own 8 trillion of U.S. bonds and equities, almost twice as much as the rest of the world combined. In an environment where geo economic stability of the Western alliance is being disrupted existentially, it's not clear why Europeans would be as willing to play this part. And that's a strategist from Deutsche bank that they're summarizing what he had to say. And then they go on to give us three reasons not to worry about this sort of thing where there's like a buyer strike and the Europeans dump all our. Dump all our stuff. The reality is that they actually can't. The first problem is mechanical. European governments don't actually control that 8 trillion in assets. It's held by private funds, pension funds, insurers, banks, asset managers, millions of households. Norway's sovereign wealth fund stands out as being an actual government holder of this stuff. But like the European Parliament would have to convene and pass a law that people are forced to sell US assets before that sort of thing would become a problem. And I want to put this.
- [15:34]
A
And then there'd be 175% tariffs, right?
- [15:38]
B
So put this chart up. This illustrates the public holdings of us. And then on the right side is all the international. So like Americans own this debt. The US Treasuries is the thing that I would point out, the second reason. Even if Europe could force Europeans to sell, where would the money go? Sellers need buyers. And absorbing trillions of dollars of US assets would overwhelm any alternative market. The entire MSCI Asia ex US equity market is only 13.5 trillion. Asian government bonds is only 7.3 trillion. The US runs a $27 trillion net international investment position. We have the deepest, most liquid capital markets in the world. I think that's a really strong argument. You're going to destabilize everybody and there's nowhere for the money to actually go.
- [16:37]
A
Hang on. Yes. If there were to be a light switch that you turn off, sure. But even if 15% of these treasuries get, get sold, there would be, there would be plenty of buyers and it would push rates up and prices down and they would be shooting themselves in the face. But they could do that. Absolutely. It's not an all or nothing.
- [16:56]
B
Yeah. It would have to be gradual and take place over time in order to even be possible. And that's a big if because at a certain point the sellers would be like, wait, why are we doing this to ourselves? Next chart. Is anything jump out on, on this to you?
- [17:11]
A
The Cayman Islands did.
- [17:13]
B
That's hilarious. What's, what's that about? They must have a giant economy.
- [17:17]
A
Yeah, right, exactly.
- [17:19]
B
Foreign holdings of US financial assets. It's $35 trillion held by foreigners. And Europe's a pretty big deal in here. About the point, the bad equivalent to Asia.
- [17:33]
A
The point that stood out, where I think they're absolutely right, is if these are non government entities. Right. Their pension funds are whatever it is and they have to own a portion of their portfolio and cash or equivalents or bonds or whatever. Treasuries are pretty good. Like they're going to dump them by what? No disrespect to any other government bond, but like it's all, it's all nonsense where they're going.
- [17:58]
B
Yeah. Here's the third point. Finally, the threat runs straight into mutually assured destruction. European banks and institutional investors are stuffed with Treasuries. Forcing prices lower would damage domestic balance sheets immediately. A rapid capital repatriation would also send the Euro soaring, hammering exports and risking recession across Europe. They ain't going to do that. And China never did it, despite all the rhetoric and all the, all the fear about one day China doing that for the same reason that Europe's also not going to do it. The blowback might be worse than, than whatever negotiations you're being forced into with, with the White House. So I thought that was a really good piece by Robin and Toby wanted to share that. And so if you ask me, am I worried about Europe waging capital war, financial war, against the US Is that a risk for investors? It is a risk. It is not a primary risk, and it's not something that I think actually is. Is about to. Is about to happen any minute. There are just too many risks for Europe to actually do it, even if they could do it, which also another really big if. So I wanted to bring that out. Anything else on this topic that, that we need to talk about or on.
- [19:15]
A
The topic we talk all the time about, like, long term investing and dealing with the noise and geopolitical stuff. Always. This is like the poster child of noise. This is nonsense.
- [19:24]
B
Scary nonsense. Okay.
- [19:27]
A
I mean, I don't think so. All right.
- [19:30]
B
Not afraid of Denmark at all.
- [19:32]
A
I'm not afraid of. Not afraid. No, I'm not. I just think this is.
- [19:36]
B
Do you know that the entire global supply of Legos comes from. From the Danes? I'm just saying, like, are you. Are you aware of how systemically important they are in the Lego market?
- [19:48]
A
Do you think that he actually wants Denmark for, like, or is this, like, is he jockeying for, like, a trade? Like, what. What is this? A bargaining chip?
- [19:59]
B
It's interesting. Like, a lot of people, not like Trump critics, but just like a lot of people, like, oh, you don't understand. This is just stage one. Wait till it happens in stage two. Then there are very cynical people who are like, it's just like taking the place of Epstein on the front page. I don't really. I don't subscribe to that at this point. I don't think Epstein can really hurt Trump. And then other people are like, all the most cynical people are like, he just wants to, like, get a new treaty that's the same thing as the old treaty. But he could act like he, like, won something, or maybe like, we announce a joint military base with Europe and, like, it looks like Trump did it again sort of thing. So that's kind of like what people seem to be saying. Read his mind. I have no idea.
- [20:47]
A
What would you trade Denmark for New Jersey and a country to be named later? I feel like that's, like, reasonable.
- [20:53]
B
I should be fair. I should be fair. The hardcore Trumpers, they really do believe it's like manifest destiny. And if we don't take control, the Russians will. The Russians could blow Denmark over with a feather anytime they want. It's unclear whether or not NATO or the Europe or the Europeans would even do anything about it. Therefore, better for us to grab it before someone who means us ill comes and takes it from the Europeans. And that's probably what, like, the rationale Trump will use behind closed doors. It's like guys, us or Russia, you pick. And actually, if that ends up happening, that probably makes the Republicans, like, really proud of what he's doing. Even if, even if it's ugly on social media right now, the outcome might actually benefit America. So I want to, I'm not saying I believe in one side or the other. I just want to give people both sides of what, what this seems to be about.
- [21:52]
A
Okay. All right. So I love listening to the financials reports because to me, they are my, they are my economic source of truth. Not talking about the credit card companies. Amex, it solves an affluent clientele or ally that's on the other end spectrum. Like talking like bank of America. That is right down the middle. Average balance of $9,000. That is Main Street.
- [22:16]
B
That is everybody, everybody, everybody has an account. Bank of America, like one out of three people. I'm with you.
- [22:21]
A
Yeah. Okay, so let's do this first chart on these are net charge offs. And the, the gray line where I want you to draw your eyes is the net charge off ratio. And it's down to the right. Right. I mean, it just is.
- [22:38]
B
So it's the opposite of everyone thinks is about to happen.
- [22:42]
A
So they give you $1.3 billion. It declined $100 million from the last quarter. Then they break it down further. They say, okay, consumer net charge offs actually increased a little bit. $14 million. All right. I mean, again, the trend is still lower, but it did, it did increase a little bit. Credit card charge offs.
- [23:02]
B
Stop. 14 million with an.
- [23:05]
A
No, no, I know, it's nothing. Credit card charge off rate of 3.4% down from 3.46%. So people that are looking for like credit card stress or whatever, not seeing it. Here's, here's where you saw it. Commercial net charge offs $295 million decreased $94 million. That's a pretty big drop off. So net net charge offs. Not telling you. I mean, I went through the report. That's my source of truth.
- [23:32]
B
We said this, we said this commenting on the JP Morgan earnings report. Not just this quarter, but like every quarter. It's like we keep telling people, we will be the first, the first source to say things have changed, this is getting bad. We are not apologists for the economy and we are not here to just like tell you everything's fine. But in these particular data, data series, everything is fine right now. It's not a prediction that it'll stay that way forever for the rest of our lives. But like I, a lot of people will just want this turn. They're like, they're pray. They're asking for it, they're begging for it, and it's not there. It will someday. Maybe it'll. It's just not. Not yet.
- [24:20]
A
Yeah, so it's, it's not to say the problems don't exist or that whatever company xyz, when they report bad earnings, that, that's fake. It's. We're not saying that. I'm just saying like this. This is my read on the economy. I use bank of America. All right. Morgan Stanley, just crushing it. They have two really great charts. One is our earnings growth. They show the average from 2016 to 2020. The earnings per share, I'm sorry, was 4.47 cents. From 2021 to today, it's $7.50. And a big reason for that is their wealth management unit is an absolute unit. From 2016 to 2020, they did $580 billion in net new assets. And then from 2021 to 2025, they've done $1.6 trillion. Just a remarkable job by, by the entire group there.
- [25:07]
B
Yeah, they, they made a whole slew of acquisitions. They got into the workplace. They just bought equities and. Which you and I should probably have a conversation about. They bought Parametric. Yeah, they, they, they bought like, they bought like asset management businesses. They bought retirement, corporate retirement businesses. And what they've been able to do, e Trade is, is a great example. They've taken like these populations of account holders and they found ways to funnel more of those people as clients to the wealth management side and into the wealth management products. And it's been really shrewd. And I think they're better at it than anyone else. Definitely better at it than Goldman, Definitely better at it than bank of America, Merrill and, and Wells Fargo. I don't know who is doing, who has done a better job than James Gorman. And, and now Ted pick at like, oh, there's 8 million users of that company. Let's buy the company and see out of that 8 million users. Who can we pivot into? You know, a higher, higher yielding situation maybe in some cases, or a better retirement vehicle for, for us to sell or whatever. And it's working. Like, it's obviously working because they're not adding all of this account growth organically. It's impossible. It's impossible. You can't do it with, with TV commercials. So I think they, I think they figured it out.
- [26:35]
A
They asked David Solomon on the call about wealth management and you know, what happened with United and what their game plan is and their strategy and, and and Sally said basically like we're really good at solving the, at servicing the ultra high net worth really highly complex situations but like we're just gonna rely on other third party distribution. We're not, we're not getting back into the REA space. So yeah Morgan did it right more.
- [27:00]
B
So Morgan, Morgan cracked it. They figured it out. I think Goldman excels when they're talking to people with 5 million and up. Morgan can do that but then can also also has the chops to deal with people 500,000 to 5 million and it's a really big, it's a really big population of people.
- [27:16]
A
Rewind the clock Josh to Whoa. Stop the clock. To 2015 it was the big three in asset management were BlackRock, State street and Vanguard and, and BlackRock one. I mean it's over. It's not to say that Vanguard's obviously not a behemoth and you know State street still monster but blackrock won. So they did so for the, for the full year. $700 billion in net new assets.
- [27:45]
B
Shit. That's come this right. So wait, let me say what we point one thing out that's coming from somewhere the pie is not growing sufficiently that that money is just materializing out of thin air. Someone's losing. You can't win that big if you're blackrock without many people losing to you. So I mean it's obvious. It's obvious like where they overlap, where they compete. But I think it's important to point that out. If they are winning to that extent there have to be losers.
- [28:16]
A
Oh there's lots of losers.
- [28:18]
B
Sizable.
- [28:19]
A
This is wild. They had 150 products, nearly 150 products across their ETF and mutual fund with over a billion dollars in flows. That's a lot.
- [28:29]
B
That is insane.
- [28:30]
A
That is broad. Yeah we entered. This is. This is what's his name. Is it Martin Small? Believe we enter 2026 with a base fee run rate that's approximately 35% higher than our base fees in 2024. That's nuts.
- [28:47]
B
What is that selling private assets.
- [28:51]
A
It's a, it's a big part of it so I mean it's certainly not the whole thing but and, and 50% higher than 2023 again off a very large base. So I brought out one chart that I wanted to share with you. It shows the full year investment advisory revenue compared to 2024. And yeah Josh, to your point a big bump there. In fact the biggest is private markets. Equity ETFs, assets, cash, fixed income ETFs. I mean, they're just lots of winning going on. So to the point of like private markets.
- [29:24]
B
Well, that's the biggest. Put that back up though. That's the biggest, that's the biggest gain in, in, in fees is in the private market. Like the biggest, the biggest delta from 24. Look at it. And it's bigger than everything.
- [29:40]
A
And it was, it was acquisitions. It was HPS and Gipsy.
- [29:44]
B
Right.
- [29:45]
A
Adding tremendously. So they said that they delivered $40 billion of, of net inflows into private markets. 40 billion. They're targeting $400 billion in gross private market fundraising through 2030. So I mean, that's a big bit. Those are big time numbers.
- [30:03]
B
400 billion in fundraising for their private asset funds. And it's insane. I mean they'll probably, it's blackrock. They'll probably do it.
- [30:11]
A
I would not put it past them. All right, so I thought this was interesting. Martin Small said he was asked about, you know, their private offering. He said, we're working on building investable indices that we hope to bring to market here in the next few years. And I think the real opportunity is to try to standardize index rules, to try to standardize pricing frameworks and ultimately publications so that you can create markets of transparency that ultimately can power futures contracts.
- [30:38]
B
What is that? Wait. Oh, they want to create indexes for the private markets.
- [30:43]
A
Yeah.
- [30:44]
B
Private holdings, yeah. Right. So I mean, this is like semantics, but like once you have indexes that are invest, that become investable through the creation of products based on them, and you have millions of people who become investors through these vehicles in these private markets, they're de facto no longer private. And then what it becomes is a regulatory arbitrage. Psych. Public companies or public issuers of debt have to provide 900 lines in disclosure and private assets have to provide 200 lines in disclosure. And then maybe a year later something goes wrong and the regulators come in and say actually it's 300 and then it's fine. And eventually there's sort of like a convergence. But if you have millions of investors, even if there are vehicles standing in between the investors and the holdings, it's still a de facto public investment.
- [31:39]
A
I would say that, I would say that, yeah, as the lines blurge, you would assume that the, the returns converge or at least a lot of the use air quotes, alpha deteriorates. And maybe the best that you could say, like charitably, is that there will still be diversification benefits from investing in different asset classes. Even if the, the illiquidity premium disappears.
- [32:00]
B
Yeah, I think that's right. And then like it's, we're still in this land grab phase where we're not sure which of these private assets companies is going to become the dominant player in wealth management, where advisors just like, it's like their vanguard. It's like the no brainer, like the easy button for. All right, I want to give my clients a 10% sleeve of private credit. Who do I go to? Like, ultimately there's going to, it's not going to be 500 options.
- [32:29]
A
They'll be set there. Six.
- [32:32]
B
There'll be like three eventually. Because that's just what happens in every category. And I think it's a good bet that blackrock will be there. I don't, I don't know who else. All right, let's, let's do Netflix earnings.
- [32:46]
A
All right, so I, I tried to.
- [32:50]
B
Do we have a print? Do we have a print?
- [32:51]
A
We do have a print. I, yeah, they're down. They were down 4% after hours. I tried to buy Netflix last week. I sold it, I sold it on Wednesday after that disgusting. Outside, outside Day Candle. And I'm happy that I did. Obviously I would love to buy it lower. But anyway, we'll see. Let's just get into the report.
- [33:10]
B
I made the sale, I made the sale of the year in Netflix out completely, completely out of 85%.
- [33:17]
A
You did. That was a very good sell.
- [33:19]
B
100 bucks. Goodbye.
- [33:21]
A
The stock was in a 35% drawdown prior to this. So whatever it is, it's worse now. So in every one of their Q4 reports, they show the long term stock price performance of Netflix versus the S&P and the NASDAQ. And it's pretty wild because definitively Netflix won the streaming wars right? Over. Not saying that they don't compete with anybody else, but the streaming wars are done. They won. And oh. And yet over the last five years, as dominant as the company has been, they haven't beaten the index. Kind of, kind of remarkable.
- [33:59]
B
Like in other words, not even really a lot of. You took a lot of volatility.
- [34:04]
A
A ton. A ton.
- [34:05]
B
And you basically got, you got cumulative return five years. You got below S P507.73 versus 96.
- [34:13]
A
Like, you know, like not, not, not that close.
- [34:18]
B
Yeah, it's like the, and then they show you like the since IPO where the stock is of 87, 000.
- [34:24]
A
Yeah, I mean, of course, ridiculous.
- [34:25]
B
Almost nobody, almost nobody held it since 2001. I would say they were mailing out DVDs.
- [34:33]
A
I would say Reed Hastings and probably some other early employees of that. All right, so let's get. Let's get into the numbers. So they open the report saying, In 2025, we met or exceeded all of our financial objectives. $45 billion of revenue, up 16% year over year. Operating margin of 29.5%, up 3 points. Ad revenue, more than 2 1/2x to over $1.5 billion. Not nothing. They. They did announce. So they stopped reporting subscribers, but they did announce that their past 325 million paid members. Wow. Operating. I mean, yeah, just, you know, great numbers. So they. They said, here's what they're focused on in 2026 that I thought was interesting. So live events. Warner Brothers sustaining healthy growth. And they end it with the entertainment business remains vibrant and intensely competitive, and we're optimistic about our future. So I read the report, and I took it as holy man. Like, yes, they're winning. Yes, they won. It is ruthlessly competitive. And here's the data point that caught my eye. In the second half of 2025, our members watched 96 billion hours on Netflix, which is a number that's so big, it's hard to really fathom what that even means. But it's only up 2% year over year. Like, that's because.
- [35:53]
B
Because I'll tell you why. They beat a lot of the board level mini bosses, but now they're. It's Bowser, okay? It's. It's YouTube. Like, they're. They reach the final level. The end of the final level, they're in the dungeon, right? They're working their way into the castle. The princess is tied up, and now you have to fight Bowser. You have to fight Alphabet. Bro, this is not Hulu. Those, Those, Those games that you won. Congratulations. You beat Disney plus. You beat. You know what I mean? Like, you. You beat Peacock. All right, that's cool. You, you know, you won a bunch of rounds. You went toe to toe with some, like, serious players. But now you got to go up against YouTube, and YouTube thinks that they are in your business. You. YouTube does not see a distinction other than they have a better cost structure for content. They don't pay for any of it. Outside of that, YouTube sees itself in the Netflix business. They don't see themselves in the. In the online video. They think they should be everywhere. They think they should be on living room tv, phones, desktop computers. It doesn't make a difference. They want the attention and the eyeballs. And they are ready to fight. And so that's why you see Netflix trying to pull YouTube creators, put them on exclusively on their platform. Right now, it's sort of affordable to do. And I guess YouTube's response will be, okay, we'll just have even more creators come along. You're gonna buy them all. So that. That's the battle now. And that's why I think that. That watch hours. 96 billion hours, which is an insane number. That's why I think you see that leveling off, though, because at a certain point now, you run into the daddy of. Of all streaming and. And online video, and it's. Dude, it's Google, you know, cannot be overstated. It's a bigger company with bigger resources, a lower cost of content, a global audience just like you have. And every format, long form, short form. They're making sure they're doing shorts. They're encouraging creators to pretty much do anything that they want to do. And it's. Now it's harder.
- [38:19]
A
Yeah.
- [38:19]
B
So I think that reflects that.
- [38:21]
A
It does. It definitely does. Another thing that stood out to me within the Watchtowers is the. The growth is only occurring with originals. In fact, the library, everything else, everything that's like. Like suits, for example, anything that's not new material. So a decrease in total hours viewed. So it is ruthlessly competitive. They laid it out there. I don't think that Netflix is, like, in trouble or throw or. I mean, it's competitive, and that's what it is. And the Stock is down 38 or whatever. If it falls below 80, I will absolutely back up the truck.
- [38:58]
B
You know what's funny? The narrative, like, in the last three weeks has shifted from, oh, my God, Netflix is so dominant, they're gonna buy Warner Brothers to. Boy, Netflix really needs Warner Brothers.
- [39:10]
A
Mm.
- [39:11]
B
Like, how fast that happened. Yeah, like, if Net. If Netflix doesn't get Batman and Harry Potter, they're like. Like, that's. That's the. But I like, I just picture, like, two months ago was like, whoa, they have boxing, they have ufc, they have football, they. Basketball. Like, Netflix is getting everything. They won. They won the streaming wars. And now it's like, man, I sure hope they get some more content there. I think that that's proprietary narrative.
- [39:40]
A
That narrative is mostly partly true. Like, obviously, there's more than a little true in there. But I think it's being overdone due to the reaction of the stock price. Like, I think the stock price was in a 16% drawdown. Nobody would be talking like this.
- [39:54]
B
Yeah. But put that put the drawdown chart up, John. It's 35%. It looks worse. It's worse. It looks like something's wrong. Like it doesn't look like profit taking. It looks like something is, like, materially wrong with Netflix. That's why. That's why that narrative is catching on. I'm not saying that's the case. I'm just saying that's why that narrative is catching on. You can't blame arbitrageurs for a 35% haircut in. In the share price. They're not.
- [40:23]
A
No, dude, it's real. It's. It's real. Like, obviously, the price is what the price is. There's plenty of willing buyers and sellers out there. I'm just saying, I think the narrative that we're discussing that, the. That that is out there about they're screwed if they don't buy Warner Brothers. That is being taken, in my opinion, a little bit too far due to the price. I don't think. I don't think it's quite that dire.
- [40:41]
B
All right, let's do. Let's do some Fed stuff. Kalshi has an interesting bet up that many people are taking part in. Based on the volume. It's not huge, but it's not zero either.
- [41:00]
A
That's real.
- [41:01]
B
It's real. So that's $45 million as of the time I grabbed this screenshot, which was 30 minutes ago or an hour ago. Right. Is that the right way to say it? 45 million worth of contract volume.
- [41:13]
A
Mm.
- [41:13]
B
Okay. All right. So this is basically I just. I cut it off at the top four because everybody else is at 3% or lower. This is the horse race between Kevin Wash, Rick Reeder out of nowhere in the second slot. So it's Kevin Warsh at 50%, Rick Reeder at 26%, Christopher Waller at 11, and Kevin Hassett at 8%, which I was surprised by. These are. This is the derby to be nominated as Fed Chair. Powell's term is done in May for those who aren't paying close attention to this. And Trump has made it very clear that Powell is going to go and one of these gentlemen or somebody that nobody's even talking about is the likely replacement. And it's sort of like a derby because it is going back and forth. It is definitely moving and people are placing these bets. Let's put that chart up one more time. The blue line, Mike, is Rick Reeder shooting from obscurity. Looks like low single digit percentage up to 26%. And I have no information as to why that's the case. Waller started out in. In April as a strong candidate. He was probably saying positive things about tariffs at the time. I don't really remember. He's been bleeding ever since. And obviously Wash is still the front runner. And we've talked about on this show, he's married to Ron Lauder's daughter. Trump's known him his entire life. And Trump is best friends with Lauder as an Estee Lauder, and this would sort of keep it in the family, so to speak.
- [42:55]
A
I don't understand, though, because I don't follow this stuff super closely, but I follow what Neil is saying. And from all accounts, it looks like Kevin was just like a super hawkish guy. He really has always hated inflation. That doesn't sound like that doesn't sound like the type of person that Trump.
- [43:09]
B
Would like in office, unless there are conversations behind the scenes where it's like being super hawkish is just the character that I play. I actually will do what you need me to do, Donald. Like, I think that's maybe the explanation. It's like he doesn't really believe all this shit he's been saying for the last 25 years. In the end, he's ready to be an operative here for the White House. Here's my question. If you knew definitively who would be the next Fed chair, would you do anything different with your portfolio allocation?
- [43:50]
A
Absolutely not.
- [43:51]
B
Absolutely not.
- [43:53]
A
No.
- [43:54]
B
Really? Nothing different, really.
- [43:58]
A
Why? What would. What would you.
- [43:59]
B
I don't know. I'm not sure. But I'm not sure I'll do. I'll do not.
- [44:02]
A
I'll do you one better. Even if you told me the path of interest rates, I don't know that I would do anything different with my portfolio.
- [44:09]
B
You might within reason, come within reason.
- [44:12]
A
Like if you told me that rates were going to zero or something stupid, yeah, sure, I would. I would do Right.
- [44:18]
B
Okay, here's Neil Dutta, friend of the show of Ren Mac, who took a chainsaw out and came after Kevin. Wash. It's here's Neil. Time for DJT to feel the market. It's no secret I'm not a fan of Kevin Walsh. I did not like him for treasury secretary after the 24 election, and I don't like him for the Fed either. As a general principle, I think anyone who invokes can't lock and Hobbs in speeches about central banking is better off being in a think tank sitting in an ivory tower than in front of the public. Wash has been hawkish his entire career, Michael. To your point, he hates inflation even when it's running below the Fed's target. It's one thing to be wrong, it's another to be wrong in the same direction. It would be an interesting choice given the President's policy views. Trump risks getting duped. WASH might make sense if this was Paul Ryan's gop, but it's not. We are talking about someone who has been critical of tariffs and not pursuing enough free trade deals in the past. The good thing about Wash, to the extent that I have anything nice to say about him, is that he isn't very good at doing the blocking and tackling of economic analysis, which is why he could easily get pushed around by the fomc. And then the last comp. So it sounds.
- [45:41]
A
How do you really feel?
- [45:42]
B
Yeah, dude. D. I don't know. What, what do you think happened between these two guys?
- [45:47]
A
Neil is like the nicest. This is. Dude must really suck.
- [45:51]
B
This guy must suck. I don't know enough about it to have an opinion myself. The last thing from Neil, Real quick. Notice that Hassett had his moment in the sun late last year. During this time, 10 year yields generally rose. The market is now flirting with Kevin Warsh again. 10 year treasury yields are climbing. Markets aren't stupid. And no, both candidates are compromised, changing their views to accommodate the President. That's why the long end is rising. Personally, I don't see either being able to sway the committee to a dovish position. Although Hassett might be more effective. Put this chart up. So this is the same Kalshee horse race. He's using Kalshee's data. But then the gray line is the US 10 year treasury yield. So, so on the right Y axis it's, it's the treasury yield which is now making one year I guess following.
- [46:43]
A
Six month highs which is like the gold line, the grain, the gold.
- [46:48]
B
Yes. Those two now appear to be correlated as that red line which is Hasset, completely breaks down.
- [46:53]
A
Right, right, right. I mean there's other stuff going on but. But yeah, it's pretty good.
- [46:57]
B
Okay.
- [46:59]
A
Yeah. Okay. We done with that topic?
- [47:05]
B
We're definitely not done with it, but we're done with it for tonight.
- [47:07]
A
Good enough. All right. So the Max 7 is breaking down and we mentioned this with JC like what was so interesting about this entire period of like when are they going to stop working? I think the assumption was that they were going to be the last to go. Right. That it was going to be a repeat of the dot com bubble bursting where everything was going to roll over. They were going to be the last things holding up the market and then they would finally come tumbling down. What if it's the opposite this time? And I'm not suggesting it is, I'm just saying what if, what if it is? So we have this weird dynamic playing out where the Russell 2000 has outperformed the, the Mag 7, I'm sorry, the S P for 12 consecutive sessions which is the longest period outside of 2008. And in fact Josh, I had Shark kid and Matt show me the rolling 12 year return, 12 day return. Show me the spread. So 7.3% is the current level of outperformance, which is not nothing. In fact it is the fifth or sixth largest event since the turn of the century. So like meaningful outperformance. So the question is this next chart you see the Mag 7 breaking down to the through the rest of the market. Now if you invert, this is a.
- [48:23]
B
Great, this is a great chart.
- [48:24]
A
Yeah. So it could be seen as a positive like all right, well great. The rest of the market, the 493 is finally taking the baton and you see that while the small caps are breaking out. So which is going to win? Is it like the risk on of the small caps or is it holy, we're losing the leaders. I tend to think the risk on signal is stronger given that we're in a long term bull market and bulls deserve the benefit of the doubt. But I'm definitely open minded to the.
- [48:47]
B
Fact that maybe it' good put that last chart up. I so I made my feel this last week. I sort of feel like it's just another oscillation and it'll fade and then everyone will say lol. Remember I got all bulled up on small caps because they had this massive 7% outperformance for a week early in January. A lot of this to me is financial advisors and maybe some family office money, some institutions, maybe even some like pensions, just like doing a rote run of the mill new year rebalance, whatever underperformed the most over the last year or wherever you're underweight, buy more of that, sell whatever you're up the most in. And we look at it like there's some sort of like strategy to it or like change of character in the market and it's just a rebalance. And that's until I'm proven wrong. Like three more months go by and the Russell is ripping relative to large. I just, I know too much. I've been around for too many of these. They always disappoint. So I Think large caps trend. Small caps oscillate. And I know it's offensive to people that make their living in small caps and they want there to be this year of outperformance. When it happens, I'll apologize. I'm not. I'm not getting sucked into it. I just. I can't. I can't afford to.
- [50:19]
A
Fair enough. But chart pack on. So forget about the bottom pane. What about the top one? What about the mag 7 breaking super interesting.
- [50:26]
B
That's more interesting to me. Is this way more interesting to me.
- [50:33]
A
Is this bearish or bullish?
- [50:33]
B
And I know it's super bullish. Okay, it's super bullish. The energy sector is going to go from like 2% of the stock market to 6% this year. It's going to triple in proportion. That's what I think is going to happen. And I think a lot of that money will come from people getting bored of the same mega caps that stop working. I just. I just think that's how it works. And people can convince me, oh, the money doesn't have to come from anywhere. It comes from savings accounts or you'll never know where it comes from. Or every seller has a buy. You know what? No. People. People get bored of trades that stop working and look for trades that are working. That's it. That. I really don't think it's complex. I'm sorry. There's Tesla money that's in gold miners right now. It is. You don't have to like it. I just know it's true. So my opinion is that's a bullish development. I don't care about this leadership trope. It doesn't matter to me if Microsoft sits out 2026. I still think the market could have a good year. So, I mean, that's my. I'm an optimist though, also remember this. So everything I say is always like, yeah, things will probably be okay. So I could be wrong about that. But I think it's possible you could lose the leadership of the last three years and have those stocks do not much in aggregate. And the S and P does find. Because new areas of the market step up. It happens.
- [51:59]
A
It happens all the time that it's. Well, it's been a minute. It hasn't happened in a minute. I would love to see it. All right, next topic.
- [52:08]
B
I found myself in complete agreement with Sir Michael Burry over the. Over the weekend. So I don't. I don't subscribe to his substack, but I. I do read his stuff when he just posted, like, outside of the subscription product. And here's what he said. I want to hear what you think. I think most critics of my articles have not taken the time to read them. I know that's true. Because nobody wants to be behind the paywall. This is the thing. As a hedge fund manager, we have to disclose our positions. But just as no one wants a dissertation on each position, no one wants to pass on the opportunity to give offhand poorly researched criticisms of such positions. This is why black box managers tend to have the most outrageous returns. Jim Simons did 50% a year with his black box. Many individual investors do 50% a year with their own private portfolios. Even I did almost 50% a year at Scion when it was a complete black box. But few do that when they have to disclose their positions every week, month, quarter. Because the criticism for holding an obvious loser can be not only scathing, but in this day and age, viral. I'll pause there. Chart off. What do you think about that concept?
- [53:27]
A
I think it's spot on. There's. I think what he said is so obviously true. There's no other side. I think for the most part, people don't have the attention span to read past the headline where all of the nuance is buried, and they just get mad and they start yelling and they start yelling at each other and they rile each other up. And yeah, nobody, nobody reads past the headline.
- [53:47]
B
But just this idea, like Jim Simons with a black box does not have to come out on Substack or Bloomberg Television and explain why the firm is doing what they're doing and then be held out for criticism where Twitter idiots and journalists and competing funds all have their say about it and then have to withstand the criticism. And I think, like, I think that's exactly right. Which leads me to my point, which is maybe shut up. Like, maybe, you know, like, maybe if the criticism is. Is too much, not to Michael Burry to like everybody. Like, maybe it's a good idea to just invest and be quiet and not feel the need to. Like, it's not enough for me to make money in this trade. I have to convince everyone in advance that it's going to be right. And then when it goes against me, I have to defend it.
- [54:40]
A
Well, almost.
- [54:41]
B
It's a ridiculous way to try to make money.
- [54:43]
A
But. But for these people where their filings are public, they sort of have no choice. What are they supposed to do? Like, they, they have the light on them in many cases, from their investors, from the public.
- [54:56]
B
Yes, but if you are not a public figure, like, if you just are not out writing substacks and commenting on Twitter, you have less to worry about. I think that how many hedge funds don't say a. Don't say a word. They allocate and they don't. They're not in the mix. Get out of the mix.
- [55:14]
A
But. But they talk to their investors. And I think this is one of the hardest parts about managing money with individual positions. Whether you're in the spotlight or you're just communicating with your investors, it is really difficult because you could change your mind and be right for changing your mind, but then people like, well, you will use. You were invested, and now you're. Now it's like, well, yeah, I was wrong. Like, I changed my mind. That's what good investors are supposed to do is.
- [55:43]
B
Or I thought this. I thought this. And then something changed. And now I think that.
- [55:49]
A
And then. And then.
- [55:50]
B
Wouldn't you kill me if I didn't change my mind?
- [55:52]
A
But unfortunately, a lot of investors see that as, like, weakness somehow. And it's just. It's hard. It's hard. There's a lot of investors out there that are. That would be like, thank you. You got it wrong. You were transparent. You didn't bullshit me. You didn't dig in your heels and start coming up with all sorts of gymnastics about why you're going to be right.
- [56:10]
B
Yeah. But in the moment, it looks like you're an idiot.
- [56:12]
A
Yeah. Which is. Which is. Which is unfortunate, but that's the way it works. So I think one of the reasons why Barry so uniquely was able to withstand the scathing criticism, beyond criticism, from his investors who were trying to rip money out of the fund and is because for his sake, fortunately, he's. He's on the spectrum. And most people. Most people that have the emotional wherewithal can't take that because it's punishing. It's too much.
- [56:39]
B
It's too much.
- [56:40]
A
And to his benefit, he has the ability to sort of whatever, not process it the way that most people do. And it uniquely worked for him. Most people are not in that situation. It's really difficult to withstand the pressure from people getting mad at you like that. Like, I certainly couldn't take it.
- [56:55]
B
So I agree. I just have a couple of things that I would share in the same vein. Number one, you only think you want to be a contrarian because it sounds cool and it looks romantic in the movies. Like, I was right when everyone was wrong. It's like, almost. It's. It's so seductive. But to your point, most people aren't built for it will never develop the degree of conviction needed to endure a contrarian trade that at first goes against them in private, let alone in the public eye with millions of people paying attention. Nobody could do it. Almost nobody could do it. So that's 1, 2. If you're going to go against the trend, the grain, and fight a trend, just be quiet. Don't make.
- [57:43]
A
Don't.
- [57:43]
B
Don't make yourself synonymous with the call and ask yourself, like, do I want the money from this trade or do I want the credit? Like the public accolades, what's more important to me? I honestly think for some people, it's the credit, especially billionaires.
- [58:00]
A
Because you need more money, you monetize the credit, right?
- [58:05]
B
Two more things. The people that you're arguing with needlessly should have money invested with you. Otherwise, who are you arguing with? Why are you. Why are you arguing? I mean, it's. It seems insane almost. It's like, this is what I think. Now I'm. Gonna. Now I'm gonna have a brawl with people that are hiding behind fake names. Why? I'm not sure. My ego? I don't know. And then the last thing. When in doubt, just be quiet. If you're. If you're right, the market will reward you. You don't also need to get the crowd on your side while you're placing bets. Like, what would make that necessary?
- [58:46]
A
Lol.
- [58:47]
B
Why?
- [58:49]
A
If you're right. If you're right in public, you're gonna be pretty damn noisy. Let's be.
- [58:53]
B
I know I'm different. I'm built different than most people. I can withstand. Do you have any idea how many psychopaths I've had to listen to tell me every reason why I'm wrong about everything I ever say? I don't. To me. I don't need the black box. I'm good. I really don't care at all. I'm not. I'm not suggesting that other people attempt that. I think answering to clients hard enough. Like, why add another degree of difficulty? Answering to the public, it seems like an insane thing to want to do. So I thought. I thought Barry nailed it. And he's right.
- [59:27]
A
And you're right. Being. Being contrarian and surviving is. Is almost impossible because the way that prices work. I think I'm stealing this from somebody. In fact, I know I am. I don't know who said this. Rising. If you're going to be a contrarian, that means that you're going against the Crowd.
- [59:42]
B
Yeah. So I'm not. That, by the way, also is another aspect to it.
- [59:45]
A
And the way that these things work is that rising prices attract buyers and falling prices attract sellers. And that is just permanent. That's never going to change. So if you are always on the other side of that, that's like impossible.
- [60:02]
B
Just falling and falling prices attract ridicule.
- [60:06]
A
Right, Right. So it's, it's not a fun way to make a living.
- [60:08]
B
It's shadow, especially if you're a name person. It's Shaden Freud. She's like, oh, everyone thinks that guy's so smart. Look how much he's down in blank stock. And it feeds on itself. All right, we're doing make the case in the mystery chart and then we're going to bounce out of here. We are already running up against the clock, so I'll do this quickly. Service Titan is a new name in my own personal portfolio. Are you familiar with it?
- [60:34]
A
No. Why you own this? Please tell me.
- [60:37]
B
Well, what do you think it is? You're making a face like, I just threw. Like I just threw a bag of trash at you. What is it about the. What is it about the, the name or the ticker symbol that. That was so offensive?
- [60:48]
A
No, normally when you're making the case, we buy stocks that are going up. This is not doing anything like that. So I'm curious to hear the case.
- [60:56]
B
It's misunderstood. Like, like a lot like a young Josh Brown. People. People are not giving it credit for what it's. What it is.
- [61:04]
A
I don't know this company, so.
- [61:05]
B
And they're worried about what it's not. It's a category killer. But it's so early for this category that it does not yet have meaningful market share because nobody does. And most of its potential users don't even understand that it exists. Think about the people who come to do work on your house. Landscapers, plumbers, H vac roofers, people digging a pool. The guys that come and work on the bulkhead in your backyard for the boats. Think about the thousand different service providers who will be at your house at some point or your business at some point over the next 30 years. What a lot of them have in common is billing is sort of a nightmare. It's invoices, it's putting things in your mailbox. It's just, it's like the 19th century for a lot of these trades. And it's not their fault. They just, they haven't had somebody build specific for them. And Service Titan has changed that. It's Run by the founders. It came public like a year ago. I was on the floor the day it came public. They are still running it. They have a great story. It's like, I think it's like an Armenian American family and it's two brothers. But anyway, they call themselves the operating system for residential and commercial trades. It's more than a point solution. Once contractors adopt scheduling, dispatch, billing, payments and CRM all in one platform, the switching costs become very high. So if it reminds you of Toast, which is another one of my favorite stocks the next few years, that's exactly what, what led me to it originally. So they are very early in this adoption phase when all of these guys, mostly guys working in the trades, are starting to get these handheld things and really modernize themselves. But it's, it's every trade that you can imagine they have software for. And this stock wrongly put up this chart looks like shit. Wrong. Wrongly got caught up in this software sell off. Like are we honestly saying chart off? Are we honestly saying that electricians are going to start vibe coding their own billing apps with an AI? Like, is that what we're, is that what we're saying here? Give me a break. That's obviously not that. This company's core customer is not developing their own apps on AI. It's the dumbest sell off I've ever seen. And they will have massive market share in this space and I think this sell off will look stupid. The Last earnings report Q3.
- [63:48]
A
That's a contrarian in you.
- [63:50]
B
I'm being contrarian. Revenue grew 25% year over year to 250 million. Platform revenue up 25%. Net dollar retention exceeded 110% which means they're not, they're not only adding customers, not losing anyone. 95% of revenue is platform derived from subscription and usage based products. So not transaction sticky. Platform gross margin 80% up from 77% growth. Total gross margin reached 74 and a half percent I think for the year. So Morgan Stanley upgraded it this morning. Didn't really matter much. Overweight from equal weight price target 130. Underappreciated long duration compounder. That's what I think. TD Cowan $150. Price target reiterated a buy. Let's see. KeyBank overweight, the category leader in trades focused vertical software with a widening moat. Needham buy rating target 140 focused on the stickiness of the platform and high switching costs. These customers are not switching. I don't think they're going to trade shows and demoing five pieces of Software. So everyone that this company gets on the platform is probably a light. Consider that an LTV lifetime value of that customer. So I'm getting more attracted to the stock as it sells off, not less. What are your thoughts? Would you buy some? How do I get you in this stock?
- [65:17]
A
I am shrinking, aggressively shrinking my personal, personal stock portfolio. I don't. But, but I do like that. I do like the story.
- [65:26]
B
One, one interesting thing. They were asked about the difference between mom and pop customers and, and PE backed competitors in the, you know, private equity has been rolling up all these H vac businesses and roofing businesses. So they say the PE backed companies in the trades are like their best customer. They're the fastest to adopt, they're the fastest to upgrade, they're the fastest to try different products in the same vertical. And so it's almost a play on pe. As PE buys all these companies and modernizes them, the odds of service titan being pulled in. So it's like a salesforce for carpenters.
- [66:05]
A
Yeah, it's a good story.
- [66:06]
B
I really, I'm telling you, there's something here. Anyway, not investment advice. Do your own research. I'm not your broker or whatever.
- [66:15]
A
All right, good, good, good one. Okay, I've got a mystery chart for you. I think I have, I have two charts. Would you. This is, this is an easy one.
- [66:24]
B
Hold on. I have a question. In the chat, Michael is aggressively shrinking his portfolio. Need more. Let's dig into that. He's not shrinking it. The market is shrinking it. He owns the wrong stocks.
- [66:36]
A
Wrong. No, I am aggressively selling my individual stocks. Matter of fact, the only one, the only one that I still own, like literally the only single one that I still own is imax. And I will have more to say in the coming weeks about why I did that.
- [66:55]
B
Playing. Playing it like Buffett, huh?
- [66:57]
A
I'm expecting a market meltdown. I'm keeping the dry, the powder dry. That's not a market call. It's nothing to do with that. Okay. All right, here's my mystery chart. So this is a Dow component. And obviously it's looking horrific. That's. This is a short term chart. This is a one year candle daily. And then you should know this. And then the next one is, we zoom out a little bit. This is a weekly three year. And do you think this, do you think this is going to hold? I mean, obviously there's been a lot.
- [67:25]
B
This was a winner in 24.
- [67:28]
A
Yeah. Do you think that, do you think the support holds? I mean, it looks like it's cracking false breakdown.
- [67:32]
B
25.
- [67:33]
A
False breakdown or all the way.
- [67:37]
B
Is this Home Depot?
- [67:39]
A
No.
- [67:41]
B
Can I have one more clue?
- [67:43]
A
Yeah. It's a. It's a. It's a. It's a. I got that throw. Throw the previous chart up. We. We speak about this. We've been speaking about this a lot.
- [67:51]
B
Oh my God. What is this DOW component? Is it Nike?
- [67:57]
A
No. Come on, dude.
- [67:58]
B
I don't know. I can't get it.
- [68:00]
A
Say. It's. It's hard.
- [68:01]
B
I only follow the best stocks in the market.
- [68:03]
A
I don't look at trash like this. That's true. The lights were brighter than you expected. That's Salesforce. Yeah.
- [68:10]
B
Yeah. I don't. You know what, dude? I don't. I don't. Once they look like this, they're off the. They're off my radar.
- [68:18]
A
Yeah.
- [68:18]
B
I had no time for this. Where is this going?
- [68:21]
A
A lot going.
- [68:22]
B
It's going into the hundreds.
- [68:24]
A
It looks really bad now. Maybe it's on false breakdown watch. But you can't assume that it looks terrible.
- [68:30]
B
You know what's, you know what's crazy about this thing? Like, like they already did all the efficiency stuff. Like they already laid off, I don't know, thousands of people. Like they did that three years ago. They already had the activist battles.
- [68:43]
A
Adobe looks the same. I mean these names.
- [68:45]
B
I got stopped out of Adobe same.
- [68:48]
A
These names look so bad. And I don't know. There's. I don't know. This is, this is tough.
- [68:54]
B
I mean I. This is just a market wide rerating of software to the downside. The likes of which we haven't seen in 25 years.
- [69:03]
A
Look at service. I mean servicenow. Literally puking. I mean this is. And this is a name that like a, a business that people like revere. Like this is allegedly like one of the best run businesses. I mean what do I know but.
- [69:15]
B
Work, work days in this group. It.
- [69:17]
A
Dude. So it's. They're puking. Like. I don't know. I, I feel like at some point like this is a crash that needs to be bought for as much as we're saying that like selling prices attract sellers. I would say don't buy fall knife. I'm not buying these.
- [69:32]
B
I'm going to miss the bottom. Knife. I'm fine.
- [69:34]
A
You should. Good. Miss them. Miss the bottom.
- [69:36]
B
It's not for me. Don't do this. I don't do this. And I tried with Adobe. I thought, I thought it's. I didn't say it's going to bottom but I thought like if it's Going to bounce. It should bounce here. That lasted six days.
- [69:48]
A
So these names right over for me, these names are now permanently in the penalty box. If I, if I revisit these names and it will be with a higher low at a minimum or when the sellers dry up, because obviously that's not even close. I mean, maybe we're close. Who knows? But it's speaking.
- [70:04]
B
Yeah, I don't play this game and I'm not going to, I'm not going to try now. Okay, guys, thank you so much for watching the show. Michael and I love seeing the live audience. You guys were, you guys were on fire today. We appreciate you. For those of you listening, Spotify, Apple Podcast, those of you watching the replay on YouTube, we love you too. We know not everybody could be here for the live and that's cool. Thank you guys so much. I want to remind everybody, tomorrow is Wednesday, all new episode of Animal Spirits of Michael and Ben. Later on Wednesday, another live stream, Ask the Compound. It's Duncan and Ben and they are answering your questions. And you guys can get a question into them by emailing. Ask the. I think it's ask the compound, showmail.com. do I have that right? You don't know? All right. It's something like that. It's something like that. Oh, there it is. Ask the compound, showmail.com. so if you want Ben and Duncan to tackle your personal finance or invest in question, that is the best place to send it. And then we'll be back with an absolutely insane episode of the Compound and Friends at the end of the week. We got you covered wall to wall. Keep it locked. We'll talk to you soon. Thanks again. Good night.
- [71:42]
C
Wealth Management is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Ritholtz Wealth Management and its representatives are properly licensed or exempt from licensure. Nothing on this podcast should be construed as and may not be used in connection with an offer to sell or solicitation of an offer to buy or hold an interest in any security or investment product. Past performance is no guarantee of future results. Investing involves risk and possible loss of principal capital. No advice may be rendered by Ritholtz Wealth Management unless a client service agreement is in place.