How to Tune Out the Noise - The Compound and Friends

Transcript

Josh Brown (0:00)

Ladies and gentlemen, welcome to the Compound and friends, my name is Downtown Josh Brown. I will be your host. I'd like to thank Flat Rock Global for sponsoring the show this evening. More on them in just a moment. Tonight's show is about how you can tune out the noise. Michael Batnick and I on an all new edition of what are your thoughts? Talk about just how noisy this moment is and I have a few theories as to why it feels noisier than ever and probably is noisier than ever. So we'll talk about the way we think about market noise, economic noise, social media noise, political noise and how we cope with it, how to. How to deal with it. We also look at some of the weakening spending metrics among the highest end consumers. Louis Vuitton had a notably disappointing earnings report. We look at the bank earnings which were actually pretty good. On balance, we take a look at some of the pessimism showing up in various surveys. We do a little bit of AI stuff. We get into some individual names there as well. And overall pretty, pretty good show. I'm really excited that you guys are here with me to listen. Thank you so much. I'll send you there right away.

Michael Batnick (1:19)

Welcome to the Compound and friends. All opinions expressed by Josh Brown, Michael.

Josh Brown (1:23)

Batnik and their castmates are solely their.

Michael Batnick (1:26)

Own opinions and do not reflect the.

Josh Brown (1:27)

Opinion of Ritholtz Wealth Management.

Michael Batnick (1:29)

This podcast is for informational purposes only.

Josh Brown (1:32)

And should not be relied upon for any investment decisions.

Michael Batnick (1:35)

Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.

Josh Brown (2:00)

Mike check one two one two.

Michael Batnick (2:04)

Serenity now. Josh, you got me.

Josh Brown (2:08)

What a shitty close today. Some, some, some shout outs to, to, to the pound. Biff Grebel says it's libation day. What are you ordering? What is that about? Bill Sweet said that today too.

Michael Batnick (2:23)

I don't know what that means.

Josh Brown (2:24)

Summary

Podcast Summary: The Compound and Friends – "How to Tune Out the Noise"

Episode Details:

Title: How to Tune Out the Noise
Release Date: April 15, 2025
Hosts: Downtown Josh Brown & Michael Batnick, with rotating guests
Description: Downtown Josh Brown and Michael Batnick, alongside their friends, delve into expert insights and hot takes on the latest in business and investing, navigating through the cacophony of market and economic noise.

1. Introduction and Overview

[00:00] Josh Brown:

Welcomes listeners to the episode focused on "How to Tune Out the Noise."
Highlights the abundance of noise in various sectors: market, economic, social media, and political.
Mentions topics to be covered: weakening spending metrics among high-end consumers (e.g., Louis Vuitton's earnings), bank earnings, survey pessimism, AI developments, and individual stock analyses.

[02:00] Michael Batnick:

Provides standard disclaimers about opinions and investment advice.

2. The Increasing Noise in Modern Markets

[04:49] Josh Brown:

Reflects on the similarity between the current noisy environment and the 2010-2013 post-financial crisis era.
Points out that today's noise is magnified due to the intertwining of economic and political discourse and the omnipresence of social media.
Notable Quote:
-"We can't disentangle the economic stuff and the market stuff from the political stuff, and that's where one of the biggest sources of the noise lies." [06:18]

[07:51] Michael Batnick:

Contrasts macro noise today with past instances, noting that the current noise level is "a thousand times noisier."
Highlights the pervasive influence of social media, making noise more toxic and overwhelming compared to earlier days dominated by blogs and nascent Twitter.

[09:27] Josh Brown:

References Tom's "Cave and the Stream" analogy, emphasizing the need to balance staying informed without being inundated by constant chatter.
Discusses the challenge retail investors face with conflicting opinions from various market participants on social platforms.

[09:47] Michael Batnick:

Suggests that the best strategy is not to react impulsively to market noise but to remain stoic and focused on one's investment strategy.
Notable Quote:
-"Practical advice for people that are like, you know what? Yeah, how do I tune out the noise? It's as dumb as you get." [11:54]

3. Survey Sentiment and Market Pessimism

[15:25] Michael Batnick:

Presents data from a Bank of America survey indicating a record number of investors intending to cut U.S. equities.
Notable Quote:
-"Record numbers of investors are dumping U.S. stocks. I don't believe it." [16:15]

[17:03] Josh Brown:

Criticizes the survey's reliability, citing past instances where similar sentiments led to negative outcomes (e.g., March 2023 minibank panic).
Notable Quote:
-"It's the stupidest chart I've ever seen." [17:25]

[20:28] Michael Batnick:

Acknowledges that while survey sentiments may be overblown, they indicate heightened uncertainty which could lead to a slowdown in economic activities like layoffs and reduced spending.

[21:53] Michael Batnick:

Discusses the impact of uncertain tariffs on corporate spending and the broader economy.
Notable Quote:
-"If we're in legit recession, people are going to tell them to stop by selling the stock." [33:42]

4. High-End Consumer Spending Weakens

[34:31] Josh Brown:

Highlights a Wall Street Journal story about wealthy consumers canceling seven-figure home purchases, signaling a reverse wealth effect.
Emphasizes that high-end consumers, previously insulated from economic downturns, are now pulling back due to stock market declines.

[40:12] Michael Batnick:

Analyzes Louis Vuitton's disappointing earnings report, noting a 45% stock drop.
Notable Quote:
-"Louis Vuitton just said other than champagne, everything is down." [41:17]

[42:35] Josh Brown:

Compares Louis Vuitton's struggles with competitors like Hermes and Kering, suggesting that the luxury sector is experiencing a significant downturn.
Notable Quote:
-"They have stressed customers. Let's put this chart up." [42:35]

5. Bank Earnings and Market Stability

[49:02] Josh Brown:

Reviews major bank earnings, noting that JP Morgan remains resilient, down only 1% year-to-date, outperforming competitors.
Notable Quote:
-"Look, I know that there are, there are trading opportunities in these bank stocks... I've owned JP Morgan since a London Whale." [49:23]

[50:46] Josh Brown:

Discusses Morgan Stanley Wealth Management's decline in client assets, indicating potential investor withdrawal or reduced confidence.
Notable Quote:
-"Wealth management revenue grew 9%... They sold Smith Barney to the joint venture with Morgan Stanley." [56:09]

6. Artificial Intelligence and Corporate Investments

[21:50] Michael Batnick:

Highlights Google’s commitment to maintaining its $75 billion CapEx guidance for 2025, despite tariff uncertainties.
Discusses Alphabet's advertising revenue decline as an indicator of market skepticism towards Google's future.

[26:08] Josh Brown:

Shares his decision to sell his remaining Google shares due to concerns about AI's impact on search dominance.
Notable Quote:
-"I'm out. Done. And look, we all have exposure to Alphabet no matter what... So I think we could escape without the real thing, without the real recession." [23:27]

[28:38] Josh Brown:

Analyzes Amazon’s substantial capital investment in AI infrastructure, questioning its long-term payoffs.
Notable Quote:
-"Read between the lines. What is he communicating to the sell side?" [28:38]

[29:08] Michael Batnick:

Discusses Nvidia's massive planned investment in AI infrastructure in the U.S., reflecting industry's commitment to AI despite regulatory challenges.
Notable Quote:
-"Nvidia is down big after hours. No, it's not." [58:04]

[60:00] Josh Brown:

Explores the partnership between Uber and Waymo in Austin, highlighting rapid adoption of autonomous vehicles.
Notable Quote:
-"It's a faster adoption than the Waymo only, which they've done in San Francisco and, and elsewhere." [60:00]

7. Autonomous Vehicles and Market Implications

[60:00] Josh Brown:

Details the collaboration between Uber and Waymo, noting that 20% of Uber rides in Austin were autonomous.
Discusses the strategic advantages for autonomous vehicle companies partnering with Uber, such as fleet maintenance and data integration.

[62:53] Michael Batnick:

Reflects on the positive advancement in autonomous vehicle technology, with no major accidents reported yet, indicating technological progress.

8. Consumer Spending, Reverse Wealth Effect, and Economic Indicators

[34:24] Michael Batnick:

Recommends watching "Friends and Neighbors," highlighting stories of high-end consumers scaling back their spending.
Notable Quote:
-"This is a Wall Street Journal story over the weekend about people canceling seven-figure home purchases." [34:31]

[36:49] Michael Batnick:

Analyzes Louis Vuitton's stock performance and organic sales decline, questioning if it's an isolated issue or indicative of broader sector problems.

9. Stock Market Sentiment and Investment Strategies

[53:03] Michael Batnick & Josh Brown:

Debate the efficacy of trading based on market sentiment indicators.
Discuss strategies for buying during market panics vs. buying based on fundamental strength.
Notable Quotes:
-"You have to know what you're buying and why and what your game plan is." [67:15]
-"If you are going to be buying individual stocks, you have to have some sort of a strategy." [67:50]

10. Mortgage Rates and Economic Outlook

[69:12] Josh Brown:

Highlights the recent surge in mortgage rates, emphasizing that 30-year mortgages have surpassed 6.5%, pointing towards potential economic strain.
Notable Quote:
-"It's the most obvious thing in the world to me. Why are people out of their minds?" [69:12]

[70:03] Josh Brown:

Explores the paradox of rising mortgage rates alongside increased refinancing activities, suggesting a possible "refi boom" despite economic uncertainties.

11. Conclusion and Final Thoughts

[71:11] Josh Brown:

Summarizes the episode, reinforcing the debate on whether the current market correction is a buying opportunity or indicative of an impending recession.

[71:28] Josh Brown:

Expresses hope that the continued uncertainty will not push the economy into an actual recession, drawing parallels to past scenarios where premature panic was mitigated.

[72:31] Michael Batnick:

Wraps up the discussion by noting the VIX spike and the diminishing impact of tariff shocks, signaling a possible stabilization in market sentiment.

[Final Remarks] Josh Brown & Michael Batnick:

Encourage listeners to stay informed, maintain strategic investment plans, and navigate through the noise with a clear, disciplined approach.
Promote upcoming shows and invite listeners to engage with their content across platforms.

Key Takeaways:

Navigating Market Noise:
- The current market environment is exceedingly noisy due to the amalgamation of economic, political, and social media influences.
- Investors are advised to remain stoic, avoid impulsive reactions, and focus on their investment strategies.
High-End Consumer Spending Decline:
- Significant weakening in high-end consumer spending, as evidenced by Louis Vuitton’s stock drop and canceled luxury home purchases.
- Reflects a broader reverse wealth effect impacting even traditionally insulated segments.
Bank Earnings and Financial Stability:
- JP Morgan remains resilient amidst market turbulence, outperforming peers.
- Other banks show mixed results, with some experiencing declines in client assets and trading revenues.
AI and Corporate Investments:
- Massive investments in AI across major corporations like Google and Amazon indicate a strong commitment to technological advancement.
- Concerns persist about the long-term payoffs and market disruption caused by AI innovations.
Autonomous Vehicles Partnership:
- The Uber-Waymo partnership in Austin showcases rapid adoption of autonomous vehicles, positioning them strategically within the rideshare market.
- Highlights the symbiotic relationship between technology developers and service providers.
Economic Indicators and Recession Concerns:
- Mixed signals from economic indicators, with some suggesting a slowdown while others indicate underlying strength.
- The ongoing debate centers on whether current corrections are buying opportunities or precursors to a recession.
Strategic Investment Approaches:
- Emphasis on having a clear investment strategy, understanding the rationale behind each investment, and preparing for different market scenarios.
- Importance of distinguishing between panic-driven purchases and those based on fundamental strength.

Notable Quotes with Timestamps:

Josh Brown:
-"We can't disentangle the economic stuff and the market stuff from the political stuff, and that's where one of the biggest sources of the noise lies." [06:18]
-"I'm out. Done. And look, we all have exposure to Alphabet no matter what..." [23:27]
-"It's the stupidest chart I've ever seen." [17:25]
-"Why are people out of their minds?" [69:12]
Michael Batnick:
-"Practical advice for people that are like, you know what? Yeah, how do I tune out the noise? It's as dumb as you get." [11:54]
-"Louis Vuitton just said other than champagne, everything is down." [41:17]
-"If you are going to be buying individual stocks, you have to have some sort of a strategy." [67:50]

Conclusion

In this episode of "The Compound and Friends," Downtown Josh Brown and Michael Batnick dissect the overwhelming noise permeating today's market and economic landscapes. Through in-depth discussions, they explore the implications of weakening high-end consumer spending, the resilience and challenges within the banking sector, significant corporate investments in AI, and the transformative strides in autonomous vehicles. The hosts emphasize the importance of strategic, informed investing amidst a sea of conflicting information and market sentiment. Listeners are encouraged to maintain disciplined investment approaches, prioritize fundamental analysis over noise-driven decisions, and stay adaptable in the face of evolving economic indicators.