← The Compound and Friends
The Compound and Friends
Global Stocks Lead, US Lags, How DOGE Layoffs Might Affect the Economy, Josh’s Breakout in Progress
00:53:17
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- [00:01]
Josh Brown
Ladies and gentlemen, welcome to the Compound and Friends. It's a special Floridian edition. I am in Boca Raton and Michael is in Naples, Florida. But we did the show and it's a good one. So it's. What are your thoughts? And this week we look at the breakouts happening in Europe and Chinese equities. They're actually leading the US market this year, which I think is somewhat surprising. And we take a little bit of a reading from around Wall street, what people are saying. We also look at the federal layoffs and some of the stuff that Elon Musk and Doge are doing with various government departments and worker buyouts and the firing of probationary employees at the government, et cetera, and what might be the economic impact of that. So stick around, it's a great show. Duncan, Daniel and John will send you in right now.
- [01:00]
Michael Batnick
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 Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.
- [01:22]
Josh Brown
All right, we are, we are Michael Vanik and Josh Brown. We are your hosts for a new, all new edition of what are your thoughts? Super excited to be doing the show this week from Florida, both of us. Michael's on the west coast, I'm on the east coast. So we have you, we have you guys covered. We are sponsored by a great sponsor, public.com and the public trading app. Michael wants to tell you a few things about what public can do for you.
- [01:56]
Duncan
Listen, what can't they do for you? If you're looking to buy, sell or buy, sell or hold securities of any kind, they make it really easy. Like really easy. I don't know if never before is a stretch, but you could buy individual corporate bonds, blue chip companies like in two seconds and bonds are juicy. I own bonds.
- [02:18]
Josh Brown
You want to hear something funny about public? I started my account initially so that I could do like the short term Treasuries for the high yields last summer or probably before last summer. But like that's what I was really initially doing and over the weekend I bought some Solana in the same account. Like how many? I feel like I'm doing like the trades that I'm not proud of like sometimes in the trading app cause it's just so easy and it's smaller dollar amounts but it's Just everything's so easy on the public app. So eventually I could see myself doing everything from Treasuries to Solana and everything in between. So I want to tell people where they can go. It's public.com w a y T and if you fund your account there, get up to $10,000 if you also transfer an old portfolio. So public.comwat is and what are your thoughts? Okay, let's start the show. Last week we opened up with a segment on US Stocks and kind of like a level set. What's happening in the S and P? What's happening in the overall market. What we're going to do today is look at global stocks because this is really where all the excitement is. And we didn't get, we didn't get to it last week, but it's like this is what's happening right now and people are, I feel like people are more excited about international stocks to start this year than in the last couple of years. Am I, am I crazy?
- [03:48]
Duncan
You are crazy. Well, you're not crazy. You're not crazy. The technicians are excited.
- [03:54]
Josh Brown
Okay.
- [03:54]
Duncan
Right. Because no, it is a start. But they are still very, very much under loved, under owned. But price is telling a very different story. So people that are actually buying. Yes, they are more excited than they have been for sure.
- [04:09]
Josh Brown
Well, we're going to check in with some technicians now and some fundamental analysis and we're going to get to the bottom of what's actually happening. So let's start with Willie Delic who is doing ACWI versus US charts. For the uninitiated, ACWI is the All Country World Index. It's sort of like a catch all for international offense around the globe.
- [04:35]
Duncan
I feel like, I feel like you're one of those people because it's called the AC Way. Nobody around here calls it acwi.
- [04:39]
Josh Brown
Well, I'm just telling people to ticker because that's the etf.
- [04:42]
Duncan
Yeah, it's called the acqui. Nope.
- [04:43]
Josh Brown
Okay, fine. So you can call it the Acqui US Breath. This is Willie. US breadth is churning. Global breadth is improving on a country level basis. The new high list has expanded sharply and an increasing percentage of markets are above their 50 day averages in 200 day averages. And we'll put up this first chart. Okay, so here's the acquis and global breadth. And you. I mean, I don't know that the 50 day average is necessarily like important to the people looking at this chart. I would just focus on price, which is the top, the green and then like just Kind of glance below and see how this oscillates up and down. And that's a percentage of different countries that make up the acqui index. Is that the best way to explain it that right.
- [05:32]
Duncan
I don't know if it's a percentage of countries per se or components in.
- [05:35]
Josh Brown
The, in the equity percentage of AC markets.
- [05:38]
Duncan
Yeah.
- [05:39]
Josh Brown
So market is an acqui country.
- [05:41]
Duncan
What's interesting to me, look how noisy these, these, the 50 day and 200 AR.
- [05:47]
Josh Brown
Yeah. Because you have countries that like are in favor, out of favor, in favor and it just churns and it never like 100% is the, is the high, high end and it never stays there long, but it also never stays, you know, at 20% because people are allocating all the time.
- [06:05]
Duncan
Now wait. An important point of the story is that a huge part of the acqui is the U.S. yeah. Right. So global to Willie's point, like global markets. It's not just us. The S& P opened at an all time high this morning. But it's not just us. The dax, the cac, Japan like countries are rocking. Even China, which we'll get to in a second.
- [06:26]
Josh Brown
Yep. Okay. So Willie goes on to say if the rest of the world's going to take the lead, there's a major hurdle it most overcome. The acqui ex US that's the one, is in its longest sustained uptrend since prior to the financial crisis in 2008.
- [06:39]
Duncan
Here's that chart.
- [06:42]
Josh Brown
Pre crisis peak remains a key level of resistance. It has been tested a couple of times over the past few years but. But a decisive breakout has not been forthcoming. So he's like, he's keying in on that 0607 period of time. And as you can see, this is like the latest in a series of challenges to see if acwex US can break out and that those shark fins at the bottom are the consecutive weeks of trend rising. And that's 98 weeks at present, which is a pretty strong, you know, long term intermediate to long term trend. Like I sort of feel it's undeniable that this has been building for a while. What are your takeaways from this chart?
- [07:26]
Duncan
What is, what is the trend rising mean? Does he, does he define that?
- [07:30]
Josh Brown
I'm sure he does and I didn't.
- [07:33]
Duncan
Bother by the way.
- [07:34]
Josh Brown
Let's. It's a 10 month moving average or something.
- [07:37]
Duncan
Okay.
- [07:38]
Josh Brown
Right.
- [07:38]
Duncan
So 98 weeks, regardless, it's the longest winning streak of the rest of the world outside of the United States. And it wasn't like long ago. Like last year, the last couple of years. Like why own anything else? And would you tax.
- [07:53]
Josh Brown
It's been attack like if you're an advisor, having an international allocation has given you something every 90 days to apologize to your clients for and try to come up with an explanation for why don't worry soon. Now is the don't worry soon.
- [08:09]
Duncan
Yeah. So, so do you would you agree that Deep Seek was maybe not the spark? Because this has been happening prior to Deep Seek. It was happening in Europe prior to Deep Seek, but this was like at least for Chinese stocks, which we'll talk about again, like definitely the fuse for that.
- [08:23]
Josh Brown
I'm going to tell you that Europe, Europe keys off of China and the Just Buy Everything moment with David Tepper on Squawk Box. After the Chinese rolled out like 20 different fiscal and monetary policy announcements at once, they shot, they fired the bazooka. Ever since then, Chinese stocks have been doing pretty well. Chinese Internet stocks have been doing very well. And quite frankly, the Europe China trading partners paradigm is way more important than any other in the world. So I'm going to tell you that Europe is being led by what's happening in China. And we're going to get to some Europe stuff in a second because Ed Yardeni, not, not necessarily a technician, is picking up on the same story. And I want to quote him, he said US Stocks haven't been exceptional since Donald Trump won the presidential election on November 5th. That's if the performances of the major country MSCI stock market indices are measured in local currencies. We're going to put that chart up now. So far, Trump's tariff turmoil seems to be weighing more on the U.S. canada and Mexico and many other emerging markets than it is on China and most European countries. That could change once reciprocal tariffs are blah, blah, blah. So what you're basically seeing here is MSCI regions and selected markets performing in their own local currencies. There's Germany at the top, emu, which is just the European Union countries, Spain, France, Sweden and then all of Europe and then Switzerland and then you see China and then it's in descending order. The next thing that Ed says is let's consider why this chart off, why this relative performance alignment may be happening and whether it will continue. So he goes into China trying to boost its economy and stock market. The easing package last September, that was that bazooka moment. But stock valuation multiples remain low, especially when you compare them to India or the United States, which a lot of people would when they're allocating. He Also points out Chinese government actively reaching out to entrepreneurs to bolster confidence in the private sector. President Xi held a high level symposium with prominent business leaders last week. And it's just like this all out thing where the deep seat thing came out and then all of a sudden you heard Alibaba say, here's our new LLM. You heard. So it's like this cascading effect and let's put up China. This is the MSCI stock price index on a daily basis. In blue it's US dollars and red it's local currency. And look to your point, like this is early and hasn't really made an impact in the long term performance. But the technicians would say you got to start somewhere. One more chart. This is iShares China Large Cap ETF, or FXI, which most of us use as a shorthand for the Chinese stocks stock market. And the orange line is the S and P. And you could see like this rally is pronounced relative to the easygoing. What are you, what are your thoughts on the China thing? Do we agree that this thing has legs and continue all year?
- [11:32]
Duncan
Well, I bought last week, so I'm hoping it does. Now I've, I've tried to bottom cherry pick China in the past. It hasn't worked. But it's, it's going so frustrating.
- [11:42]
Josh Brown
Like it's. So those Chinese, Chinese rallies, like they, they have so many stops and starts and people throw in the towel, but one of these days it won't stop.
- [11:51]
Duncan
So it's, it's a. Look. Just put that chart back on for a second. I don't think anybody would, would say that Chinese stocks are outperforming us over the last year. Now, of course, you know, zoom out. It looks a lot worse, but still it's a year. It's 365 days of outperformance. And pretty significantly, if we had KWEB.
- [12:05]
Josh Brown
Up here instead of fxi, I think it's even more pronounced.
- [12:08]
Duncan
It's a little bit worse. Oh, it's worse, but, but recently it's better. One year it's worse. Three months, six months I think since.
- [12:15]
Josh Brown
Deep Seek, though I'm, I guess I'm talking more like the last two weeks. That sector is quite a bit. All right, let's do Europe. This is also Ed. The MSCI stock price index for the European Monetary Union has soared to new record highs over the past few days. He's admitting he didn't expect that, but here's why. Chatter about a possible ceasefire in the war between Russia and Ukraine sent Germany's DAX higher. The euro jumped to 105. European Union plans to invest 50 billion euros to support AI investment. And they want to quote, unquote, this is the. Here. The president Ursula von Leyen announced on Tuesday European AI innovation needs to be supercharged. So prior to that comment, the big idea is that it's going to be China versus the United States. And the role Europe sees for itself in AI is as the referee. The referee can't win by definition. So if Europe has decided they actually want to be a player on the field and not just policing everyone's tech, it's a. I'm not saying they'll be able to, but it's a different. It's a mentality, it's a vibe shift. Last one. Investment style ratios. Go stay home or go global. So do you see what's going on here? This is US MSCI divided by all country, world ex. US in dollars in red.
- [13:41]
Duncan
Yeah, just annihilating.
- [13:43]
Josh Brown
Annihilating. And for how much longer? Can that really go on? Oh, we have one more. This is MSCI forward earnings per share. This is the United States versus. Yeah, so here's why it's annihilating. This is the earnings of the. Of the US versus the, the acqui. And that's a big reason as to why. It's the reason.
- [14:05]
Duncan
It's the reason. It's not happening for no reason. Investors aren't dumb. Like, we are out earning them and outgrowing them. And therefore investors will assign a higher multiple to these stocks. Like, it's very simple.
- [14:15]
Josh Brown
Let's do jc. We just witnessed a new all time weekly closing high for both the S and p and the NASDAQ 100 row. Look at this. Wow. So this is the. I'm showing you guys the cues.
- [14:28]
Duncan
Remember the new cash, by the way? Like, just seriously, what was that four weeks ago? Yeah, yeah.
- [14:34]
Josh Brown
Should I buy everything back? All right. Technology on an equally weighted basis just had its highest weekly close in American history. Raise the roof. That's nuts. So far into this expansion and we're still like breaking, breaking records. Here's the Global 100 Index Fund. He loves this chart. He loves this index. And I think you do too. You write this is like the. The hundred biggest companies in the world. Of course it's US dominated, but it's like the global Dow is the way I've heard him phrase it. And again, new all time high. What else? Like, what else would you really want to see?
- [15:12]
Duncan
Right.
- [15:13]
Josh Brown
So I'm waiting for.
- [15:14]
Duncan
I'm waiting for the transports to confirm.
- [15:16]
Josh Brown
So he says that's because more stocks around the world are going up in price, not because fewer stocks are going up. He's such a smart ass. I'm going to read this in his voice. I've gone back and done the work. I can tell you for a fact that these are things you see regularly during healthy market environments where investors are being rewarded for owning stocks. Am I lying? Am I wrong? And then he said 10 out of the 11 sectors in the S&P 500 are above their 50 day.
- [15:43]
Duncan
What's the 11th?
- [15:44]
Josh Brown
So even on a short term basis, what's the one that's not probably, If I had to guess, energy.
- [15:51]
Duncan
Yeah.
- [15:52]
Josh Brown
I don't know. I could be wrong. It could be something else.
- [15:54]
Duncan
Yeah, okay.
- [15:56]
Josh Brown
All right. Jeff DeGraff. The comparison to the US 2008, 2009 bottoming phase suggests a potential inflection point for Chinese markets. He thinks that this is like the S and p coming out of 08 for Chinese stocks. That's how long that bear market's been running for.
- [16:14]
Duncan
Oh, okay. I was like, wait, what?
- [16:16]
Josh Brown
For China, tech stocks appear to be leading the way. That's the K web names. And Hong Kong could be on the verge of a significant breakout after historically poor performance. Then he says on the dax, the DAX has broken out relative to the US indicating potential strength in European equities. A weakening dollar could boost US non US equities further. So I. Michael, what I'm trying to tell you is everybody, the macro guys, the micro guys, the bottoms up, the technicians, they're all seeing the same thing. They're all keying off price and trying to figure out the story for why this is happening and whether or not it'll continue. I don't hear anyone saying fade it. What I do hear is, oh, here we go again. The skepticism. Like, all right, really, Europe's going to outperform the US this year. Really? With Trump and Elon making America great. Maybe, maybe.
- [17:13]
Duncan
The US has outperformed Europe for 12 of the last 15 years. It's wild. Underperformed the US.
- [17:19]
Josh Brown
US you had it right.
- [17:21]
Duncan
Yeah, yeah, wild. Okay, so let's move on. This is a great chart from Callum Thomas and It shows tech ETFs market share against the rolling 12 month net ETF flows into those markets and what they're showing is up and to the right and it's accelerating. And the quote is, even if this isn't a top or turning point, it's the type of setup that makes a market vulnerable. To any change of mind in the masses. Now predicting when that change is going to be is obviously impossible. You would have thought that deep seek would be the first shot across the bound. I guess it was. But tech stocks have come roaring back and I want to pair that because a lot of what we do in the market is short term, right? We're thinking that like next couple of weeks, next couple of months, maybe next couple of days. This guy Barry Schwartz had a tweet that I just thought was really great. Amazon revenue should hit a trillion dollars by the year end 2029 and you Schmohawks are worried about this year's ROIC. Great use of the word.
- [18:27]
Josh Brown
Thank you Barry. Thank you Barry Schwartz. I'm trying to say this as loudly as I can on television two to three days a week until people hear me not yet. Amazon I think should be everyone's biggest conviction long for the next couple of years. Put up the first chart. This will be wrong which I like. I like Callum Thomas a lot. I get, I get his daily chartbook email and I think he does a fantastic job. This mentality, even if this isn't the top or turning point, it's the type of setup that makes a market vulnerable to any change of mind of the masses. Now I think what ends up happening is these stocks could underperform and a new group of stocks steps in in, in in its place. It's not a given that the five largest tech stocks in three years are going to be the current five. It's just not a given. What if Salesforce and CrowdStrike are in the top five? Like what, what if, what if Uber's in the top five because one of the. It won't be because they're so great. It'll be because one of these companies stumbles badly. I don't necessarily think that has to mean the end of the tech bull market. Like if Alphabet screws something up royally with their with Gemini AI and really sets them back and they start losing quit search query volumes to perplexity and to chat CBT in a really noticeable way or the ad budget shift away that would really suck for shareholders of Google. I just don't buy that that means like we're set up for some sort of mass disappointment. I just think other companies come in and fill that vacuum of lost market cap. We've, I mean we've seen it. It is a thing that has happened. What if IBM decides it wants to be a mega cap again? It's it. Seriously? Well, I think things happen.
- [20:19]
Duncan
I think you're onto something because especially what we've seen recently, which is not always true on the way up, is that there was significant dispersion amongst the MAG7. Like look at Netflix versus Microsoft, for example, or whatever. Like meta versus anything. Meta versus Tesla.
- [20:34]
Josh Brown
Yes. So it's. Look, no one is saying, oh, this is just a, this is just like a, it's a one way trade. It only, it only goes up. We had a big pullback in a lot of these names. Not Meta, but everything else after earnings reports and the deep seat thing, it was like a double negative for, for the mag7 theme. And they're fighting it off, but not all of them, not all of them are back.
- [21:03]
Duncan
Microsoft is still.
- [21:05]
Josh Brown
Tesla's still in a draw. Tesla's still in a drawdown.
- [21:08]
Duncan
Huge.
- [21:09]
Josh Brown
And Nvidia hasn't even reported yet.
- [21:12]
Duncan
Yeah.
- [21:12]
Josh Brown
So it's too early to be throwing a parade or, or, you know, so we did a show last week we called the twilight of the Mag 7. And the point is like the big, the large cap tech thesis could be intact, but it might not be these particular companies. Like, it could. CRM could be one of the names if, if agentic AI, if they become the leader in agentic AI and one of the fastest companies to like actually announce tangible revenue growth as a result of it. That, that could be a Mag 7. We. You're not like, you're not, like, we're not retiring anyone's jersey. Like you're, you're goaded forever. That's not how the stock market works. It never did. Let's do federal layoffs. This is, this is a big story getting bigger, but it's mostly a political story. I don't think that there's a lot of like Wall street research about the economic impact of the layoffs of federal workers to the extent that we've seen research about the effect of tariffs. So like the, the economists who cover the political impact of these things, they've been way more focused on tariffs than they have on what's happening at Doge. But now the numbers are getting really big. Read this tweet from Heather Long set this up.
- [22:33]
Duncan
All right, so Heather says, and she's an economist for the Washington Post, roughly 275,000 federal workers lost their job this week. That's over 10% of the federal workforce. 75,000 of them took the buyout and 200,000 of them are probationary workers that were let go. The White House has not confirmed the total, but this is how many were on Probationary status. That's a lot of lives upended. And many government services will be impacted. While most organizations can cuts, can, can survive a 10% cut, keep in mind these cuts were not even across the government. Many agencies hit hard in Trump's first term are being decimated now.
- [23:05]
Josh Brown
Right. So, so we're not going to have a political debate about whether or not you like Doge or you think federal workers are lazy or you think the country's being torn apart. We're not doing that. The question from our perspective and our purview on the show is when do these numbers, assuming this momentum continues, get large enough where they start showing up in the economic data? And Callie, our, our chief investment strategist, Callie Cox, spent the weekend and the day off yesterday trying to come up with a way to answer that, that very question. So let's quote Callie Mike, and then I want to get your response.
- [23:48]
Duncan
Okay.
- [23:49]
Josh Brown
She's referring to this as the largest job cut in American history by a mile, she says, at the largest employer in the nation, which is the federal government. She says if all probationary workers were laid off, we have to digest the total reduction of 275k workers. Even if only 25,000 or an 8th of probationary employees were laid off. What's probationary? The last to be hired, like the newest hires in the federal. I think that's, I think that's what that means. They haven't yet attained full time status because they're still on probation.
- [24:22]
Duncan
Sounds right.
- [24:23]
Josh Brown
Great, I just made that up. But let's go, we'll roll with that. I think that's what it means. Even if it's only an eighth of what they're saying, the total job loss would still be in six figure territory. For context, US based employers, corporations cut an average of 1.7 million jobs per month last year. This round of federal buyouts and layoffs alone could account for a fifth of that number. Much higher than the point 4% or 6,000 layoffs the federal government contributed in 2024. What's your reaction to that stat?
- [24:58]
Duncan
It's a lot, there's a lot of like, nuance here and stuff that I don't understand. But what is important is that these people are going to be paid through the end of September. So it's not like all of a.
- [25:07]
Josh Brown
Sudden they're going to change their spend. They're going to change their spending habits immediately, whether they're paid or not, when the end of the road is coming. You are not, you're not a cheesecake Factory, four nights a week.
- [25:17]
Duncan
Yeah. You just aren't fine. I don't think that you're going to see any change in retail spending based on what happens to this cohort. I just, I don't.
- [25:25]
Josh Brown
Because it's. Well, well, if we got regional. If we got regional credit card data from Arlington, Virginia, and I was going to say Howard County, Maryland, it would be different.
- [25:35]
Duncan
So I don't know this is true or not, but. But people are saying that, like, you're already seeing a ton of supply come on the housing market in that area. David Kelly says, just in terms of timing, these employees will be classified as unpaid leave until September. So they will still be counted as employed in both the household and establishment surveys. Okay. So that's important to keep in mind. However, they will not be required to work and will be free to find other jobs. We will know more, of course, with the release of the March jobs report. So that's the one.
- [26:06]
Josh Brown
That's the one. Okay. So when we get the first week of March, we get the February jobs report, it almost doesn't matter because we know that this thing is coming in the following month.
- [26:17]
Duncan
And I don't think. I don't think. I don't think there will necessarily be a market reaction to what we know is coming.
- [26:23]
Josh Brown
Unless this momentum continues. And we don't even know. We don't know the actual number of probationary workers that will actually be let go. We don't know if people are being told, okay, you can hire back people, but just make sure they're loyal to Trump. Like we. It's. It's. It's happening at lightning speed. And by the way, it's happening seven days a week. This Doge Department was involved in, like, the Social Security Administration over the weekend. They're not like, they're. It's a blitzkrieg. They're not waiting.
- [26:54]
Duncan
Yeah.
- [26:55]
Josh Brown
And they're not letting the media catch up. They're ahead of the media pretty much at all times. One thing Callie points out that I think is important, she talks about, like, corporate efficiency. So, like, here's Cali. When we hear about layoffs, we imagine a company cutting staff to fatten up the bottom line or make ends meet. People carrying boxes full of mouse pads and whatever. These layoffs are not that the federal government is a workforce of 3 million people. Postal workers, park rangers, doctors, psychologists, prosecutors, social workers that exist to serve 330 million Americans. They're not there to generate profits, they're not there to appease shareholders, and they're not Trying to optimize the bottom line. The distinction matters. One thing you'll notice in hiring trends is that the government is less likely to cut jobs in an economic crisis for exactly this reason. Let's throw this chart up. She's saying government jobs are the backbone of our economy. So the gray line is recession. The gray bars, the public sector hiring is blue, and private sector hiring, which is corporations, is more volatile in yellow. And look at the pace of government job gains through the last. What is that, seven recessions back to the 1970s. They sort of don't flinch. Yeah, they can. They continue to add payrolls no matter what's happening in the economy. And she's making the point that that's by design and we might miss it when we. When we need it.
- [28:30]
Duncan
Yeah, that's interesting. I hadn't considered that angle. So the drawdown unemployment is. Is significantly less than what you see at the corporate level. Obviously, Dr. Kelly makes another good point that I think is overlooked or maybe a misnomer. The government has been doing all of the hiring, which is. Which is not true. So Dr. Kelly says. In January, total federal government civilian employment amounts to just over 3 million workers. And contrary to popular opinion, has not been rising quickly in recent years. Over the last four years, as the economy recovered from the pandemic, federal government employment rose by 5% compared to an 11% increase in overall payment employment, payroll employment. So it's not just been the government carrying us this. This is a big story. And I think we will, we will. We will know more as the data becomes apparent.
- [29:20]
Josh Brown
Yeah, I also think. I also think that. And Barry Ritholtz has done a pretty good job of this. It's shocking because of the way it's being done. And the pro put the probationary thing aside. 75,000 government workers accepting a buyout might not be that shocking in the context of a 3 million person workforce. It's the suddenness and the style in which it's being carried out. Some of it feels sort of like for show. Some of it like, sort of feels like it's theater. And now you have a lot of people on social media coming out that are like, wait, I'm all for government efficiency, but I don't think Elon understands what I do. Like, like, I'm part of the efficiency of the government. The government needs me to stay efficient. Nobody's listening to any of that shit. It's just slash and burn. And I think that's the part that's so upsetting to people. And they're not. I don't think it's even an economic story in the eyes of the people that are hearing about it. It's like, what is happening in our country. And so a lot of emotion is getting mixed into what the actual impact might be. And maybe both will be. You know, maybe it'll have severe societal effects and severe economic effects. But again, I think it's just too early to say on the latter, which is why maybe you're not hearing a ton of Wall street projections being changed based on the. The buyouts.
- [30:45]
Duncan
I'm being. I'm. I'm going to optimistically be open minded to the idea that this is not all terrible. That, like, the outcome might not be as horrendous as it might feel to some people. We'll see.
- [30:58]
Josh Brown
One argument I'm sympathetic to, Mike, is this. And this is bipartisan, just this idea that some of the people working in government are really good at. Like, just like some of the people working anywhere. It's not just government. State government, federal government, Fortune 500 companies. There are people that are really good at obstructing any attempt to, like, cut costs or root out. I don't want to use the term fraud per se, because that's being thrown around too much. But, like, there are a lot of people who are inside of this machine that do not want efficiency, do not want a flashlight shown on their desk. And I think part of what Elon is saying is if we don't do shock and awe, like, these people are experts at evading what we're trying to accomplish. So we have to do it this way. That might be overstated or it might not. I don't know. But I get it. I sort of get it. If you give people, all right, in the next six months, we're going to come around looking for shit. It gives people six months to hide a lot of the inefficiency, that it would be missing the point of the exercise.
- [32:07]
Duncan
Yeah.
- [32:08]
Josh Brown
All right, this is trumpy as I'm going to get this.
- [32:10]
Duncan
This is a good segue to, to a leaked audio of Jamie Dimon, the CEO of JPMorgan Chase, saying, Get back to the office. Let's play this clip.
- [32:23]
Jamie Dimon
A lot of you were on the zoom and you were doing the following, okay, you know, looking at your mail, sending texts to each other about what an asshole the other person is, okay? Not paying attention, not reading your stuff. You know, and if you don't think that slows down efficiency, creativity creates rudeness and stuff. It does. Okay. And when I found out that people are doing that. You don't do that. My goddamn meetings. You go to meet with me, you got my attention. You got my focus. I don't bring my goddamn phone. I'm not sending texts to people, okay? It simply doesn't work. And it doesn't work for creativity. It slows down decision making. And don't give me the shit that work from home Friday works. I call a lot of people Friday. They're not a goddamn person to get ahold of. But here are the problems, okay? And they are substantial, okay? Which is the young generation is being damaged by this. That means they may or may not be in your particular staff, but left behind. They're being left behind socially, ideas, meeting people. In fact, my guess is most of you live in communities a hell of a lot less diverse than this room. Every area should be looking to be 10% more efficient. If I was running a department of 100 people, I guarantee you, if I wanted to, I can run it with 90 and be more efficient. I guarantee you, I could do it in my sleep. And the notion these bureaucracies, I need more people. I can't get it done. No, because you're filling out requests that don't need be done. Your people are going to meetings they don't need to go to. Someone told me to prove something as wealth management that they had to go to 14 committees. I am dying to get the name of the 14 committees. And I feel like firing 14 chairmen of committees. I can't stand it anymore. Now you have a choice. You don't have to work at J.P. morgan. So the people of you who don't want to work at the company, that's fine with me. I'm not mad at you. Don't be mad at me. It's a free country. You can walk on your feet. But this company is going to set our own standards and do it our own way. And I've had it with this kind of stuff. And I come in, I've been working seven days a goddamn week since COVID and I come in and where's everybody else? Here and there. And the Zooms. And the Zooms don't show up. And people say they didn't get stuff. So that's not how you run a great company. We didn't build this great company by doing that. By doing the same semi disease shit that everybody else does.
- [34:44]
Josh Brown
That's my. I told you before, that's my president. I've been telling you that for 15 years now. I agree with everything except for One thing. What do you think it is? He said a lot of shit.
- [34:56]
Duncan
I don't know what you would disagree with. I thought everything he said was more or less spot on.
- [35:00]
Josh Brown
Well, I don't want everyone in office all the time, so. I agree. If I were him, though, I would. Because it's a publicly traded corporation and it's a bank, and. And it is a big bureaucracy, and it does require. It does require live in person, customer interaction five days a week.
- [35:20]
Duncan
What.
- [35:20]
Josh Brown
So our business doesn't.
- [35:22]
Duncan
What part of what he said did you most agree with?
- [35:26]
Josh Brown
That it doesn't. That it doesn't really work and that there are young people who are just. They're never. They'll never catch up. The same way I. The same way I have to tutor my son out the ass on Math because his sixth grade year was spent with 15 minute Zoom. And then he spent the rest of the day on his bike and just like, could literally never catch up. It's. So now imagine this for people in their 20s. And I agree. The part I disagree with is he's like, I work seven days a week.
- [35:58]
Duncan
Okay, Bro, you're a billionaire.
- [36:00]
Josh Brown
No, but here's the thing. His kids are growing up. Like, I'm not. I'm not doxing anybody. He's. He's got kids in their twenties. It's different when you. When your kids are seven, you should not be working seven days a week. So I don't think throwing that statement out there to everyone as though, like, that's something you should emulate. But I agree. He's the frustration of the moment.
- [36:23]
Duncan
I get. Yeah, Listen, he also. It's like, I work seven days a week and I'm paid for. I pay very handsomely for that. Right. Like, his employees a week.
- [36:31]
Josh Brown
He makes $35 million a year. He should work seven days a week. And he loves it. I don't think. I don't think. He spends six hours on a Saturday on the phone with people and being like, this sucks. I wish I weren't doing this.
- [36:43]
Duncan
Yeah.
- [36:43]
Josh Brown
Because he has the power to snap his fingers and not be doing that. What does he consider work? The pictures last summer on the. On the, on the mega yacht with Jeff Bezos. Like, is that work? Technically, yes.
- [36:55]
Duncan
Yeah, Yeah, I agree. I agree with you. The part that hit home for me the hardest was for young people because there's no way. Not. Not no way. It's really hard to know how talented somebody is when the only time that you're seeing them is scheduled zoom meetings. Like, you don't know about their personality. You don't know how hard they work. You don't know how they face adversity. You just, you just can't know certain things about people over the screen.
- [37:23]
Josh Brown
You know, it's these, it's the little moments also that form these bonds. So. So over the weekend, I watched the Saturday Night Live 50th anniversary. It is the most incredible thing that that show has been able to withstand five decades in roughly the same format that it's always been in with a few minor tweaks. And one of the, one of the lessons there from the permanence of that show and the institution that it's become is that when they have a show that week, everybody reports on Monday and they're all together until Sunday at 2am at the after party. They're there morning, noon and night. They're sleeping in the office. It's like part of the gig. It's young. That's why there's not 45 year old comics on the staff. It's people in their 20s and sometimes 30s, and it's almost a commune inside 30 Rock. And it's those little moments where an offhanded joke could lead to something that becomes a smash hit sketch that gets 100 million views on YouTube over the next 25 years. So there are a lot of things that are lost when your only interactions are scheduled and they're 15 or 30 minute Zoom meetings and people are not necessarily being themselves afterwards with each other. And so he's not, he's not wrong about that. Look, like every other company, we're trying to find that balance and get people together as often as we can, which we're doing later this week in Naples. But like, he's running an entirely different organization and I think Dicky nails it.
- [39:00]
Duncan
Okay, agreed. Let's move on to something I thought was really wise from Bucha Capital, who is one of my favorite followers on Twitter.
- [39:08]
Josh Brown
Who is who? People send me. His people send me some of his tweets. I don't know who that is because I guess he came along after I was gone.
- [39:16]
Duncan
Yeah, I don't know anything about him, but he's, he's really, he's clever. He's really bright. Okay, scrolling through my doc. One sec. Sorry about this. Okay, so let's, let's actually start with this. Throw up this chart from Sherwood. So we're looking at more than $250 billion was spent on gig economy platforms in 2024. The lion's share of that is Uber, but it's also doordash and a little bit left. And I was really, really wrong on this. I just didn't buy DoorDash as an idea. Chart off please. The, the fees are egregious. I just didn't believe that this would continue to be a thing. And the stock, if it's not at an all time high, it's. It looks damn good. So Buco Capital tweeted The takeaway from DoorDash is actually that investing is simple. They built, coordinated and effectively scaled a three sided network using zer era funding that is no longer available to their competitors. And so spreadsheets are actually irre irrelevant. You just buy the stock. And I'm pretty sure he said this before earning when the stock exploded higher but damn, that was well said.
- [40:21]
Josh Brown
Yeah. If you look at, if you look at a chart of Instacart. So the company came public last February. The company. Sorry, when was I never look at that stock.
- [40:32]
Duncan
How's it doing?
- [40:33]
Josh Brown
So it came public September of 2023 and about a year ago it hit its all time low of 22. It's 50.
- [40:41]
Duncan
Wow.
- [40:42]
Josh Brown
It's up US. It's up 65% since inception, since the IPO. And people were scrutinizing the financials like wait, this doesn't make sense. So what's a three sided market? You have the delivery person, you have the supermarket itself and then you have the user on the app. The user on the app wants convenience and the lowest possible price. Not always the lowest price, but like the most convenient version. The driver wants to make some money going into the supermarket, loading up a cart and then showing up at your door. And of course the supermarket wants to sell products at a margin. So that's the three sided market. And then some would argue it's a four sided market because they also run ads on the app. But just let's say three sided market. It's really tough to establish that at a scale where it goes everywhere. And somebody who uses Instacart can use it like wherever they are. That's a really difficult thing. So once somebody sets that up, they don't necessarily need to be profitable right away. They just need to demonstrate that they can keep adding users and the profitability eventually will come. Doordash on paper was the perfect short. The perfect short candidate. And of course like all the famous short biased hedge funds hated it. Uber too. But what ended up happening there was the market consolidated. Two players, I think DoorDash bought Seamless, Uber bought Postmates. You went from this situation where you had like six or seven of these to two. And when there's two, someone's going to make money. And I think that's the. So it's a Zurb story. Yes, but it's a consolidation story too. And he doesn't reference that, but I think you have to add that part in.
- [42:27]
Duncan
But the doordash did get smoked. Like it's got a miraculous chart. It basically went like, like a frown, sort of like Robin Hood did. So I want to.
- [42:35]
Josh Brown
The story was there are no barriers to entry. That's not the story anymore. Right now. No one. When their right mind would launch a doordash competitor.
- [42:46]
Duncan
Never will be.
- [42:47]
Josh Brown
That's right. And that's, it's Uber. That's the thesis behind Uber.
- [42:51]
Duncan
Yeah.
- [42:51]
Josh Brown
And Instacart, like they, they get, they get capacity.
- [42:56]
Duncan
So Ben Thompson did an interview with Dara last week and they were talking about the Zarbara and Dara said, speaking of like, back then, value creation was in raising money, not spending it wisely. Now it's the other way around, which I think is the way the world should be.
- [43:14]
Josh Brown
Say it again. Value creation, he said.
- [43:17]
Duncan
Value. So talk about like the Zerb era. Value creation was in money raising, not spending it wisely.
- [43:23]
Josh Brown
Yeah.
- [43:24]
Duncan
Now it's the other way around, which is, I think, the way the world should be. So you used to like get multiple expansion when you were raising more money.
- [43:32]
Josh Brown
One of the interesting episodes with Tesla is all the shorts were beared up on this thesis that like they were having a cash crunch. And then they announced this huge, wildly dilute of equity financing. And in a 1990s 2000s paradigm, that would be, oh, shit, the stock is going lower. That's not how it works Now. Now Elon raising. Elon raising 100 million in equity capital. Maybe it's dilutive, but it's also proof that there is tons of money for him and he'll never go bankrupt. And the stock pole vaulted because dilutive to what?
- [44:10]
Duncan
There were no, there were no, there were no profits anyway. It was all about survival.
- [44:14]
Josh Brown
Yeah. So some of that is that and then some of it is just the backdrop of the market and knowing which is which. And there are some environments where dilutive equity financings are negative. We're just, we're not in one of them right now.
- [44:26]
Duncan
Yeah, yeah. All right. I, I. No place to put this topic. I just wanted to shoehorn in here to talk about it real quick. Oh, actually. All right. So Schwab announced that clients will be able to trade a wider range of securities 24 hours a day, five days a week. Thoughts?
- [44:43]
Josh Brown
Yeah. We knew this was. We knew this was coming. No choice. Schwab will offer sports betting within. I would say by 2030. You want to take that bet against me?
- [44:58]
Duncan
Yeah, I don't think so.
- [44:59]
Josh Brown
What choice will they have? Do you understand their future? I don't think they want to. Their future clients conflate securities trading and prop betting on sports. They don't see the difference in the same way that they don't delineate between equities and crypto. Does it go up or does it go down? That's it. It doesn't make a difference. You will 100%, especially in the Trump era, have the gambling apps coming to. Coming to a congressman and saying, we really should be a part of people's retirement accounts. I know you're laughing, but think about how inconceivable some of the shit that's going on now was five years ago. I know, it's hilarious, but we have people inventing meme coins, telling the public, I'm about to scam you with this, and the public buying it, thinking someone else is about to get scammed higher later. This is the economy now. So if Robinhood successfully merges sports and prop betting with stock trading, what choice will the incumbents have if they don't want to watch the next 20 million gen ZS open their first brokerage account there. It's all defensive. I don't. They want to do this. You think. You think Chuck Schwab is, like, excited when the board says, hey, hey, chuck, we're going 24. We're going 24. 5. Stock trading people, for some reason, feel the need at 2am to do trades. And we're gonna. We're gonna allow it because we have no choice. So this is where the world is headed. Unless there's some sort of, like, Great Depression where people completely lose interest in gambling. I don't know. I don't know what else to tell you. So 24. 5 will be 24. 7. There won't be much volume or liquidity. I don't think institutions are going to transact after midnight. Will you see greater adoption of US Stocks by international traders and vice versa? Maybe that's a silver lining that comes out of it. Because if these things are trading in their hours.
- [47:10]
Duncan
Josh, what case are you making for me?
- [47:13]
Josh Brown
All right, chart on. What do you see?
- [47:17]
Duncan
I see a breakout in progress.
- [47:19]
Josh Brown
Okay. That's what I see. This is Chicago Merck. I own nasdaq. I should also be buying the stock, and I might, it popped onto the best stocks in the market list on February 4, so about a week and change ago. And as you can see, it's making a run at this early 2022 high three years ago. So it's been consolidating for three years. The exchanges do best in general when capital markets are rallying and there's a lot of capital formation, a lot of activity and there's a lot of trading. And I think we all understand that that's exactly what's happening right now. When they reported last week, they beat on both the top and the bottom line. Revenue was 1.53 billion ahead of expectations. They beat on earnings by 7 cents a share as well. So the company did annual revenue last year of 6.1 billion, which was up 10% over the prior year. Operating income was up 7. They announced a 9% increase in their dividend. The yield is now 4.3%. So here you have a stock that's about to break an all time record high, having just beaten and raised, and they're not reporting until April 23rd. I think the stock, when it goes into its next earnings report is higher than where it is today. And as she breaks this. Put that chart up one more time. As she breaks this 250 level, like who the hell is. Unless the market has a substantial pullback, which of course is possible, who the hell would the sellers be?
- [48:58]
Duncan
Not.
- [48:59]
Josh Brown
What do you. How many shares can I put you down for, sir?
- [49:02]
Duncan
Well, I already own Intercontinental Exchange, which is in a similar business. So swap out. I won't.
- [49:09]
Josh Brown
Why?
- [49:10]
Duncan
I won't do that because I like mine.
- [49:12]
Josh Brown
Is that the endowment effect? You like the one you have just because it's yours?
- [49:16]
Duncan
Absolutely.
- [49:17]
Josh Brown
I might, I might, I might do a swap myself. I might come out of. I might come out of NASDAQ and into.
- [49:22]
Duncan
Don't, don't sell a winner. Don't sell a winner. Come have a loser. Sell a loser. Buy a winner.
- [49:27]
Josh Brown
The problem is I'm so fire these days. I don't. Oh, actually I should sell. I just lost money and I lost money in the trade desk. I was, I had a, I had a 30% profit that turned into a, a 10% loss.
- [49:41]
Duncan
That was a rough one.
- [49:42]
Josh Brown
That was a rough one. So I'm not, I'm not, I'm not batting a th.
- [49:46]
Duncan
Like whack that piece of.
- [49:48]
Josh Brown
I. Well, I did. It's a, it's a, it's, it's an automatic sell. All right. You got a mystery chart?
- [49:54]
Duncan
I do Have a mystery chart for you, Josh. This is a group of stocks. A basket, if you will, that was unloved. And now. Tom, would you buy or sell this?
- [50:04]
Josh Brown
Hold on. This is an etf.
- [50:07]
Duncan
It's a basket of stocks. Yep.
- [50:09]
Josh Brown
But if it's a bad. It's a fund. Yeah. How do you want me to guess?
- [50:13]
Duncan
It's exchange. Well, I'm not done talking, asshole. It's exchange traded. All right, but I'm asking. Would you buy or sell this?
- [50:19]
Josh Brown
Would I buy or sell it? I would buy it, but I wish I could buy it last week, too.
- [50:22]
Duncan
Yeah. Next chart, please. So this is showing the performance compared to the s and P500. It's outperforming over the last one year by 10 percentage points. Some would even say a thousand basis points. I wouldn't, but some would. Over the last three years, it's still destruction, chaos, fire, but it's working. And it's working in a serious way.
- [50:42]
Josh Brown
This is ark.
- [50:43]
Duncan
It is arc.
- [50:45]
Josh Brown
Wow. Am I the best you've ever seen?
- [50:48]
Duncan
No.
- [50:49]
Josh Brown
At. At. At. At.
- [50:51]
Duncan
You are the best at congratulating yourself.
- [50:54]
Josh Brown
No, but I'm pretty goaded. At. At the game of mystery chart. I'm, like, really good at this. I feel.
- [50:58]
Duncan
All right.
- [50:59]
Josh Brown
You.
- [50:59]
Duncan
You keep taking credit for my clues. Although, in that case, that's pretty good.
- [51:02]
Josh Brown
You didn't give me much. Why did it. Why did it just hockey stick last week? What. What's the holding. That. That did that is it.
- [51:10]
Duncan
Palantir is a big one here.
- [51:13]
Josh Brown
Is that their big. Is that one of their biggest holdings now?
- [51:15]
Duncan
So it is Tesla still the big boy 11. Roku is not. Coinbase is a winner. Roblox not a winner.
- [51:23]
Josh Brown
She nailed it on. She nailed it on Coinbase.
- [51:26]
Duncan
And Robin.
- [51:26]
Josh Brown
That. That was way out of favor.
- [51:28]
Duncan
And robinhood. Robinhood's a 5% position, too, so she's got some big winners this year. Big, big winners.
- [51:33]
Josh Brown
Shots. Kathy. Some would say this is a sign of the end. Some. Some would say this is another sign of the top when those types of stocks are doing what they're doing. But I won't say that I'm too afraid to get in front of that steamroller.
- [51:47]
Duncan
Party's just getting started.
- [51:48]
Josh Brown
All right, guys, thank you so much for. For watching and. And for those of you listening, we appreciate you. Any way you want to get our stuff, We. We substantially appreciate it. I want to make sure you guys are all listening. Tomorrow morning, Wednesday morning, all new edition of my favorite podcast, Animal Spirits, with Ben Carlson and Michael Batnick. And then at the end of the week, we have a big show. We are talking to Brian Belsky Live in Naples, Florida in front of a an in house audience that includes many of you who who bought tickets to the event. So you'll be able to hear that though and watch that on YouTube and on podcast. Thank you guys so much for coming through and we'll talk to 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 ritholtswealth.com don't forget to check us out at YouTube.com thecompoundrwm 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.