How to Tune Out the Noise

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.

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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.

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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]

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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]

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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]

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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]

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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]

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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.

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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.

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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]

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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.

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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.

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Key Takeaways:

1. 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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

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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.

Transcript

[Josh Brown]

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]

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

[Josh Brown]

Batnik and their castmates are solely their.

[Michael Batnick]

Own opinions and do not reflect the.

[Josh Brown]

Opinion of Ritholtz Wealth Management.

[Michael Batnick]

This podcast is for informational purposes only.

[Josh Brown]

And should not be relied upon for any investment decisions.

[Michael Batnick]

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

[Josh Brown]

Mike check one two one two.

[Michael Batnick]

Serenity now. Josh, you got me.

[Josh Brown]

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]

I don't know what that means.

[Josh Brown]

Oh, because tax day is over. It's April 15th.

[Michael Batnick]

Shitty close, dude. Down 14 basis points. What?

[Josh Brown]

Back to Bill Sweet. We did 605 families taxes this year, which is 100% growth in households from 2022. That's pretty. That's pretty gangster. Shout to RWM Talks. All right. Biff Grebels is here. Andy Cliff said make the market go up. Jb not, not really one of my powers. I guess. I suppose I could try do better, but. Yeah. John Rush is here. I feel liberated from my gains in the past couple of years. Feel you. Chris Brown, Jason Chen. Cliff is in the house. Nicole is in the chat. Thank you guys so much for joining us. This is an all new edition of what are your thoughts? Michael and I have loaded up the doc with the topics that we think you guys want to hear about. Investors, traders, economics enthusiasts. We got something for everybody today. But first, Michael's going to do a brief ad read for our sponsor, Flat Rock Global.

[Michael Batnick]

But first, but first, Josh, I feel like this show we're getting back to our roots. Yeah, like right, the past couple of weeks we had to be all over the Vix 60. We had to be all over tariffs and turmoil and dollar and rates. But like now we've got some stuff in the dock. We're getting back to our roots. We're talking.

[Josh Brown]

I love the show in a bull market, but I really love the show in a bear market. And I, and I think it's just, it's a, it's more exciting, B, we're like more helpful to people, I think so.

[Michael Batnick]

So. All right, we have a new sponsor today. The show is brought to you by Flat Rock Global, a boutique credit manager that focuses on niche credit market interval Fund strategies looking to diversify client portfolios with private credit. Check out Flat Rock Global. They offer three funds. One diversified private credit, the Flat Rock Core Income Fund, Ticker CORFX Middle Market CLO BB Notes, Flat Rock Enhanced Income Fund, Ticker frbx and finally the CLO Equity Flat Rock Opportunity Fund fropx. There's about, there's a billion plus in these strategies. So clients seem to like them. Visit flat rock global.com/thoughts. That's flat rock global.com/thoughTS. Let's get to the show.

[Josh Brown]

Josh, you killed that ad read. I have.

[Michael Batnick]

Thank you, sir.

[Josh Brown]

Was that a sleigh?

[Michael Batnick]

All right, so quite slay.

[Josh Brown]

This is where I want to start today. Do you remember in like circa 2010 to 2013 when we were coming out of the great financial crisis and every time the economic data had like a momentary blip, it was like, here we go again. And then you had the European financial crisis and it's, it's early Twitter days, but really it was blogs. There were no podcasts. It was really like Twitter and blogs and people would use Twitter to share the link to their blog. That was the financial media ecosystem. A lot of financial bloggers got discovered by Bloomberg and CNBC and the Wall Street Journal because of all the blogging and all of the tweeting. But one of the, so it was a great era for financial content. But one of the downsides was there was a ton of noise and a lot of the best bloggers like Tatas Visconta and Eddie Elfen, mine and Patrick O'Shaughnessy when he was still writing. Like a lot of the top bloggers, myself included, I think we would do these posts about like how to tune out the noise or why it's so important to tune out the noise. And it was just a lot of stuff about noise because there was a lot of noise. Do you feel like this period right now is very similar to that 2010-2013 mini era? I sort of do.

[Michael Batnick]

I see what you're going for, but I think it's like a thousand times noisier.

[Josh Brown]

Oh no. Yeah, No, I agree. But like it's, it's, it's similar though, just in terms of the noise being so dominant. I do think it's noisier now. I think the data is noisier, which is. Actually makes it even tougher. And I think the economic stuff and the market stuff is 100% wrapped up in the political stuff and they can't be disentangled. And that's where one of the biggest sources of the noise. But that's why it reminds me so much of the European debt crisis. There was all this stuff about like austerity and like the role of central banks and, and the US approach versus what they were doing in Europe and German parliament and the Bundesbank. That's what makes this feel similar to.

[Michael Batnick]

Then it's macro noise which is completely different than deep seek noise or earnings recession noise or anything related. So in that respect, I feel like we didn't really have that. I guess we did with the trade war. I guess in 2018 we. But Covid wasn't. It wasn't a macro noise. 2015 Brexit was a little macro noise, but it was, it was across the pond. So I think we haven't really had a global macro noise event since the double dip 2011 era that you're talking about. I also think one thing that's different in a bad way is now everybody is on social media. Like it was still nascent back in the day. Now everybody's there. Michael Antonelli had a great take. He said Hearing everyone's thoughts 247 is the worst thing to happen to society since the mosquito.

[Josh Brown]

Oh, I think it's toxic. Do you remember? You remember Tom? Super nice guy. He did like the research puzzle blog. Yeah. Do you remember? And he did this really cool post called the Cave and the Stream. I might be missing it might be the cave in the river. But the concept was like sometimes it's best to Stay in the cave and not be around the other animals. And then sometimes you go down to the river, like the watering hole, and as you're drinking, you hear from all the other animals that have gathered at the river to drink also. And you kind of need to balance those two things. You can't be totally cut off like a hermit and not understand what people are talking about. You also can't stand at the stream all day and listen to the chatter of a thousand different animals. And one of the things that makes it so noisy, especially Twitter, is like, everybody has their own approach to investing. Everybody has different time frames. Pros mixed with retail, mixed with day traders, mixed with hedge funds, mixed with politicians who are market curious and they want to be in the conversation. And I think that, like, it's. If you're just like stumbling upon this, it's like, oh, my God, 500 people in my timeline with 500 different opinions. What the hell do I make of this? And sometimes the answer is, go back to the cave. This isn't for you, bro. Like, you're not. This is not going to help you. Whatever information you're gleaning from other people here, it's just going to confuse you and make it worse. Back to the cave.

[Michael Batnick]

Especially if you are looking for some. Something to, like, calm your nerves or some direction or a North Star, you're not going to find it on social media. It's the exact opposite. If you were nervous and you're looking for, like, people to calm you down, it has the opposite effect. It is so scary out there.

[Josh Brown]

Michael, how do you tune out the noise?

[Michael Batnick]

I don't. I consume all of it.

[Josh Brown]

You do. You remember the thing I did about consuming all of the noise and becoming immune to it as a result? Remember that? Not. Not really.

[Michael Batnick]

I remember a lot of your blog posts. Not this one.

[Josh Brown]

So I did. I did this thing people like, hold on. You're saying, tune out the noise and you're on TV five days a week? Because back then I was like, what? How? How do those two things jibe? You're in some of the noisiest television segments.

[Michael Batnick]

You are. You are the noise.

[Josh Brown]

I am the noise. This is how I explained it. The best way I could explain it there's is I might have done this on the show before. I might not have. There's this great scene in the Avengers, like, throughout the first Avengers movie. One of the gags is that Robert Downey Jr. As Iron man, is trying to wind up. Who plays the Hulk? Ruffalo.

[Michael Batnick]

I do. Mark Ruffalo Yeah, he's trying to wind.

[Josh Brown]

Up Mark Ruffalo the whole movie. Like, try to get him mad. So, like, he Hulks out, and he can't. He can't piss him off sufficiently to get him to hulk out. And he's like, what's your secret? Like, how are you? How are you containing the rage? And at the end of the movie, there's a moment, Ruffalo looks at him. He says, you want to know my secret? I'm always angry. Like, I'm always mad. So nothing you do is really going to be the thing that gets me to Hulk out. Right. My point is, I swim in this stuff 24 hours a day, seven days a week. I read everything. I listen to everyone's takes. I read all the research. I'm in the TV segment, I'm on the podcast. My own and other people's. I'm so immune to all the noise that it just doesn't make me want to do anything. I think. Doesn't affect me, doesn't sway me. I think. And it's 15 years of this. It's not.

[Michael Batnick]

I don't know that I believe you. I mean, I know what you're saying, but, like, you feel.

[Josh Brown]

Last time you saw me be, like, I just heard somebody say something, and now this is my whole belief system.

[Michael Batnick]

I don't think. I don't think it works like that. But it's like a cacophony. Like, you. You take everything and you absorb it and you interpret it. I think that for practical.

[Josh Brown]

Yeah, I agree.

[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. Tuned out the noise? You kidding me? This is the noisiest world ever. But one thing that you can do, like, really and truly, if you teach.

[Josh Brown]

Yourself not to react to the noise.

[Michael Batnick]

Maybe that's the better. That's tough, too. If you follow somebody and you saw them tweet something and you almost impulsively acted on one of their tweets, and then you didn't unfollow that person or mute them, like, remove them from your existence.

[Josh Brown]

Oh, because they're too powerful.

[Michael Batnick]

Yeah. Yeah. Because there are people that are really smart and that put out opinions, and you see their track record and you think, like, they were so right last time, and they said something and you almost acted on it. Just unfollow them.

[Josh Brown]

Oh, I have those people. Ray Dalio, is that for me? I don't read his stuff. This. He scares the shit out of Me, I just don't read it anymore. I think he's amazing. I think he's a brilliant guy. I saw him on Squawk Box. I turned it off. I said, I want to hear this. It's not going to be constructive.

[Michael Batnick]

How many for me?

[Josh Brown]

For what I do?

[Michael Batnick]

I'm the opposite. He's been saying 1937 for so long. Like him.

[Josh Brown]

I know, but he has a. He has a little bit of a power over me because he's a very effective. He's not even like a market. He's not even like a market commentator anymore. He's more like a historian almost. He's brilliant. And I will. I am susceptible to people that I think are really smart and there aren't that many. So I don't listen to him anymore because it's not going to. It's not going to help me do what my job is, you know, it's.

[Michael Batnick]

Really instructive to me.

[Josh Brown]

You have one of those. Do you have one of those people?

[Michael Batnick]

I do have a few of them. I'm not going to name them, but.

[Josh Brown]

Am I one of them?

[Michael Batnick]

No. And tooth. No. In 2012, we were at Barry's Big Picture conference and there was some guy on stage. You know who I am? Don't say his name. He was so. He is so smart and he waxed poetically with a European accent and scared the bejesus out of me. 2012. So I think that if you go through that enough times and you listen to enough people be completely dead ass wrong, you get a little bit. Not immune, but resistant. Resist.

[Josh Brown]

That was that era. That was that era. That was like 2011 or 2012. And he was doing this thing about how the Roman Empire crumbled. And it started with the breakdown of trust.

[Michael Batnick]

Yeah.

[Josh Brown]

Like the emperor started to mix other metallic alloys into the coins so they weren't really gold. And then once nobody trusted the currency, it wasn't long before people started ripping up contracts. And yeah, listening to that, getting taken in by that. When you're. It's already a moment of heightened volatility and you're already nervous and that just puts you over the edge. Like, holy shit, this is the end of the empire. Empire. What about the political? So here's what's weird. Like you watch. You're watching like CNN or Fox News or MSNBC or whatever your drug of Choice is at 8 o'clock at night and they have like Dan Ives on I Can't Escape Market Commentary. Now it's on the political shows. Bill Maher is Doing tariff shtick. That's. I watch Bill Maher. He, he, he did his. He opened his monologue with tariffs. I've never heard him open a monologue with market commentary in my life. They got that, that guy from the New York Stock exchange that, that everyone takes photos of the super express, the Einstein guy. What the hell is he doing on cnn? What does he have to say? So, so that's what's. That's part of the problem now. So now you have people who don't normally pay attention to markets and they're getting the market noise in the places that they normally just get regular news.

[Michael Batnick]

And think about this. If you are. It's hard enough to fight your own emotions in a bear market. Now you have to contend with everybody else telling you that the S and P is going to 3,700.

[Josh Brown]

Yeah, yeah. Look, I think, I think it's one thing to say tune out the noise, but it's another thing you actually have to. You have to define what noise is. Maybe before you can even tune it out. What right now is noise and what is signal to you?

[Michael Batnick]

To me right now the servers are totally noise.

[Josh Brown]

The surveys.

[Michael Batnick]

Show me this one. Let's show part of. So, okay, this is from the global fund manager survey from bank of America. Record number of. Of investors intending.

[Josh Brown]

Okay, throw it out.

[Michael Batnick]

Intending to cut u S equities. Okay, show me what they do. I don't care what they say. Look how noisy this chart is to begin with.

[Josh Brown]

Yeah. Literally throw it out.

[Michael Batnick]

But here. Oh my God. Record numbers of investors are dumping U.S. stocks. That doesn't feel great to hear. I don't believe it. Sorry.

[Josh Brown]

It's. Hundreds of fund managers answered the survey and I do and I. And they're like, they're super moody and like responsive to the mood of the mood of the market. They're like way less stoic than you would expect. Global fund managers answering survey to be super emotional. Put that chart up. All right, so when is this noise? Because in 2020 the only two times they've ever gotten this bearish on this particular metrics want to the intention to cut and over to underweight. Right. The only two times 2023. March of 2023. That was during the minibank panic Silicon Valley bank.

[Michael Batnick]

Great time to buy stocks.

[Josh Brown]

Great time to buy stocks. But there's one other time. October of all five they were right to panic. Okay, what a in shit show we ended up in years later and they.

[Michael Batnick]

Bought a merging market stocks even worse. Here's another one. John, show the University of Michigan, one. Now, come on.

[Josh Brown]

This is insane.

[Michael Batnick]

So for people that are listening.

[Josh Brown]

Wait, stop, stop. What is this?

[Michael Batnick]

It's the percent of respondents making negative comments. Now, listen, I'm.

[Josh Brown]

I'm just as where making negative comments in the survey.

[Michael Batnick]

I'm less than thrilled with the current administration's handling of tariffs and their messaging. But you're telling me that it's, like, almost twice as uncertain as anything that we've lived through over the last 30 years? I just.

[Josh Brown]

Come on. Stupidest chart I've ever seen.

[Michael Batnick]

Nonsense, Nonsense.

[Josh Brown]

Wait, hold on, hold on. The percent of respondents making negative comments. 60% of the respondents to the UMich consumer sentiment survey. Are they all in Michigan? That would explain a lot. Have you talked to Ben recently?

[Michael Batnick]

Right.

[Josh Brown]

Ben's walking around with a black cloud over him because he lives in the manufacturing heartland state, like the automaker state, the industrial state. He, He. I've never heard. I've never heard him this despondent as I have over the tariff and trade stuff.

[Michael Batnick]

Yeah, he's. He's not thrilled. So all of the survey sentiment stuff says the same thing, but, like, it. It's showing hysteria.

[Josh Brown]

It's hysteria. That's a really good. It's almost beyond noise. It's be. It's like, this is more than noise.

[Michael Batnick]

It's the opposite of euphoria. It's like pure hysteria and panic.

[Josh Brown]

It's pandemonium.

[Michael Batnick]

Yeah. So listen, like, again, I'm not. This sucks. The tariffs aren't great, and the messaging around them is worse, but it is.

[Josh Brown]

Inconsistent, which also adds to the noise, the idea. So, first of all, if you actually go up to somebody and ask them what the tariffs are or what, like, what the tariffs are going on, they have no idea because they're not. Because they don't live within it, and they're not as focused on it as we are. They don't know if it's steel. Is it. Is it oil? What, like, is it semiconductors? At this point, nobody knows what the hell is going on. And I think we're talking about bank earnings later. But I was struck by Brian Moynihan's response first in his. In the Q and A of the. Of the conference call this morning, Brian Moynihan, CEO of Bank America. But also, I heard him talking to Sarah Eisen today, and he's just like, look, you're asking me to comment on things that are still theoretical. We have no idea what the. We just don't know.

[Michael Batnick]

Right.

[Josh Brown]

How do you. How do you expect me to make A comment on how the tariffs are going to affect the economy or our business when we don't really know what they are yet.

[Michael Batnick]

Josh, to that point, did you see United Airlines after the close?

[Josh Brown]

I saw it ripping into the close.

[Michael Batnick]

So they ripped after the. So they reported earnings and they gave estimated guidance for a stable environment and estimated fiscal year 2025 in a recessionary environment. So not. They didn't pull guidance like Delta did and Walmart did. They gave a range stable recession.

[Josh Brown]

So why give guidance at all?

[Michael Batnick]

I don't know. I'm just saying. Just.

[Josh Brown]

All right, so I think we agree surveys right now are pointless. People are out of their minds. Well, okay, what else is noise?

[Michael Batnick]

Not totally pointless because all of. All of the surveys and the sentiments, including from CFOs and CEOs are saying the same thing. It's probably not great. Like the heightened uncertainty, people are pulling back. People are worried about. About layoffs and income. They're going to spend less projects. CapEx is going to come down. So we, we will see a slowdown as a result of this. But it is over the top.

[Josh Brown]

Right? You could have a slowdown. That's not actually a recession, which is what the banks are guiding to. So bank of America is like, we are not forecasting recession this year. Things could change. That's our call right now. Is not recession. This is not their Merrill lynch guy that does cnbc. So this is like the bank's internal forecasting.

[Michael Batnick]

If you take the service at face value, we're going to a depression.

[Josh Brown]

Citigroup reported to. Let's just hit that here really quickly. Oh, we're doing the bank earnings later.

[Michael Batnick]

Yeah, let's put it.

[Josh Brown]

Forget it. All right, what are we doing after this?

[Michael Batnick]

So I want to talk about the I spend because are we to believe that these secular trends that are in place, the wheels that are spinning are all of a sudden going to be completely undone and reversed by government policies?

[Josh Brown]

Are we to believe. See, only a Seth deals in extremes.

[Michael Batnick]

Absolutes, absolutes. You're right.

[Josh Brown]

It's too absolute. The question. Right. So like we need shades.

[Michael Batnick]

So Vivek Goyal from Altimeter. So Google had a conference the other day, tweeted amazing that Sundar Pichai reiterated their $75 billion CapEx guide for 2025 despite the tariff uncertainty. Big Tech plus OpenAI realize that this is a generational opportunity and the prize is large enough to continue investing through the macronois. So Josh, I want to put a pin in this for 10 seconds. Maybe 30, maybe 60. And I want to show this chart from that I pulled up on quarter. So Alphabet Google, I asked them make me a chart showing Google Ad revenue by quarter over time. So on the quarter app you're able to do this. And this is, this is pretty damn sexy if you ask me. And I am super duper excited, slash a little bit nervous as a shareholder to see this drop I 12%.

[Josh Brown]

Wait, what is the chart showing?

[Michael Batnick]

So this is, this is Google's ad.

[Josh Brown]

Revenue and this is in dollars, not as a percentage of the total.

[Michael Batnick]

So I think it's very obvious the reason why Alphabet is trading air quote cheaply at 17 or 18 times 25, 15 times 26 is because the street doesn't believe it. Is there an existential threat that they're going to report 1/4 a decline in ad revenue? Because people are actually, actually, actually migrating away to ChatGPT and the like.

[Josh Brown]

I sold Google the rest of my Google today. Did I tell you that?

[Michael Batnick]

Did you? Dude didn't. But I was thinking about dumping it too.

[Josh Brown]

I'm out. Done. And look, we all have exposure to Alphabet no matter what. It's one of the top 10 market caps in the world. It's in every index. It's in the dividend index and the buyback index, Shareholder yield index, it's in the growth index, probably be in the value index to depending on the rules of said value index. It's in the NASDAQ, it's in the S&P 500. Everybody has notional exposure to Alphabet via ETFs.

[Michael Batnick]

So I assume you dumped it because of what?

[Josh Brown]

I just, I own the stock. I sold half of it like two months ago close to 200. And that second half, that second half was hanging on for dear life because I just, it, it's, it's really, it's not an easy sale for me because I'm super bullish on YouTube and I'm, I'm like Gmail life. Like I'm, I'm Gmail, I'm Google Docs. I'm very, very heavily involved in all their products. But I'm watching, I'm watching how my kids are getting information. They're not, they're not using Google, so they are Gen Z. And when they want to know the answer to a question, it's never a Google search. It's right into ChatGPT. The app is home screen of the phone. And they don't want blue links and they don't want sponsored links and they don't want to scroll down on a web browser to get to the answer ever. They just want the answer.

[Michael Batnick]

So you think it's.

[Josh Brown]

I don't know what percentage of search that that takes away. I don't know if Gemini can successfully put that at the top of their search results and somehow make money from it. You never had to worry about Google until now. The core business, 97% advertising. Google.

[Michael Batnick]

No, no, no, no. It's not quite that high, but it's a lot that. I mean, that's the business.

[Josh Brown]

No, no, I meant, I meant search. Excuse me. The advertising business is. Right. Like YouTube is huge, but search is even more important because search sends people to search YouTube.

[Michael Batnick]

Yeah, yeah.

[Josh Brown]

And. And then they have the, the cloud business, which they're the third biggest player and they make tons of money in, in cloud and they're never going to.

[Michael Batnick]

Be number two or number one in cloud. It's all about search.

[Josh Brown]

Right. So I think that they have a less defensible moat in terms of advertising than Meta. Think Instagram is just like a better, a better mousetrap for users and advertisers and they, they fight. Basically. Basically, this is what I would say. Instagram is in a, is in a death struggle with TikTok that could go on for 20 years. One gets the upper hand, then the other on and on and on and on. Google is now going to fight everybody. Yeah, that's the reality. They're going to fight everybody.

[Michael Batnick]

But so everybody knows this, which is why it's trading at 17 times forward.

[Josh Brown]

Why it's cheap.

[Michael Batnick]

Yeah, cheap.

[Josh Brown]

Cheap for a reason. It's a below market multiple.

[Michael Batnick]

But my point is I'm very excited to see slash nervous their next earnings report.

[Josh Brown]

Yeah. So I don't think Google's screwed. It's just they, they're in a. They're in a. They're in a fight. They haven't been in a fight in a really long time. They were paying Apple $50 billion or something in order to be the default search browser on Apple devices.

[Michael Batnick]

Well, that's Facebook. They fought Facebook for advertising dollars.

[Josh Brown]

I feel like they were a duopoly and they did very different things. And I, I would guess they're their top 500 advertisers use both platforms.

[Michael Batnick]

Right.

[Josh Brown]

This is one or the other.

[Michael Batnick]

You're right. This is existential.

[Josh Brown]

It's existential. They either, they either watch ChatGPT and a few other LLMs take a 20% chunk out of the search market because they build something and it's perplexity and Claude and Llama and Meta is building search with their own Tools, they're not going to pull in Google search ever. Like the avenue is being closed off to them. There was a judge that ruled that effectively what Apple and Google cooked up together this scheme to make Google a default search did permanent harm to the market for other search products. Now you might ask yourself what are the search products? That's the point is DuckDuckGo which promises they're not collecting your data while Google, Google incognito browsers are. That's like how they're advertising themselves. There's nobody else, no one else left.

[Michael Batnick]

All right, so let's, let's put the pit back in that and get back to the AI spend. So Amazon Andy Jassy wrote a letter this week. Let's throw this up on the screen please so I could read it. He said in part of there, he said there is also substantial capital investment required in aws. The faster demand grows, the more data centers, chips and hardware we need to procure. We spend this capital upfront even though those assets are useful for many years. We only start monetizing this capital investment many months after we spend the capital and over many, many years which leads to attractive long term free cash flow and roic. Anyway, the point is Nvidia, that's, that's where this led me to like they're.

[Josh Brown]

Can I see the end of that? I'm sorry I hadn't read this said.

[Michael Batnick]

We continue to believe. I'm sorry I cut off way too early. We continue to believe AI is once in a lifetime reinvention of everything. We know that demand is unlike anything we've seen before and our customers, shareholders and businesses will be well served by our investing aggressively now.

[Josh Brown]

But read between the lines. He, he's talking about 15 to 20 year payoffs. These investments like he's telling you so. He's tell so and he might be right. He knows more than any anyone. Nobody knows as much as Andy Jassy about the necessity of investing in data centers. Let's just put that out there where I'm not second guessing. I think what I'm saying is like read between the lines. What is he communicating to the sell side?

[Michael Batnick]

It's going to take a while to get paid back. By the way. There's also a reason, you know, Walmart is trading at a higher forward PE than Amazon, like substantially so.

[Josh Brown]

Yeah.

[Michael Batnick]

Which as an, as an Amazon shareholder that does not inspire confidence. I'm like oh great, Amazon's cheap. I'm like why the is it so cheap?

[Josh Brown]

Yeah, well I think because Walmart is not trying to spend a trillion dollars in. In data center.

[Michael Batnick]

Not, not probably.

[Josh Brown]

They're not thinking as far ahead as. As Amazon clearly thinks they need to.

[Michael Batnick]

Does not inspire confidence. All right, Nvidia. So the announcement this week was. Within the next four years, Nvidia plans to produce up to half a trillion dollars of AI infrastructure in the United States through partnerships with tsmc, Foxconn, with Strong Amcor and Spil Spill. I don't know who that is.

[Josh Brown]

I was impressed by the politically savvy move that this. This appears on this. Like, it's not. They're not hiding, like, oh, we're. We're doing something for the optics for the White House. They're just like, yeah, this is what we're doing. And AMD followed up really quickly, which is not in the dock. But AMD is like, oh, we for the first time ever are going to contract with Taiwan Semi to use their Arizona Fab to make some chips for us. Because AMD historically has made everything in Asia. So this is where the puck is, is, is moving. Everyone now wants in on this TSM Fab that's in Arizona. Everyone's like, calling them, like, we really need an announcement. We really need to shift some chip, chip production into the United States. Intel's not capable already. Can you do it? And. And Taiwan Semi is like, guys, it's not our biggest facility. It's just Arizona. Like, what do you want from us? None of these chips even have to get made. But the press releases have to go out, dude.

[Michael Batnick]

AMD is such a disaster. And at the end of 2020, the stock was trendy at 100 bucks. It rocketed up to a buck 60, then collapsed to 53. So 100. One hundred and sixty. 53. Oh, there's AI. So 53 up to 230, and then from 230 back to 95. It's where it was in December of 2020 with an 80% to a crash. Like, what a disaster the stock is.

[Josh Brown]

The only bigger disaster is Intel. It's the two of them at this point. Do you know?

[Michael Batnick]

But AMD was supposed to be the number two. It's supposed to be.

[Josh Brown]

I never believed it. I never believed that. I don't buy the second best. I don't buy the number two. That's not how I invest. I know a lot of people that bought Broadcom and that kind of worked and AMD didn't. But so fine, so there's one and two, but there's no number three. I don't believe in this, this. I think tech. I think tech, telecom, communications, these are winner take all endeavors. And you don't buy number two. Do you know intel turned down Apple when Apple was looking for somebody to make the first iPhone chips? Did you know that story? Do you know, while Nvidia was, was doubling and tripling down on GPUs for nonlinear processing, intel was acquiring a company called Altera. They just sold it to a private equity firm this week. They took a 50% haircut. This is a purchase they made 10 years ago. In 2015, I think. I think they spent like 16 billion and sold it for 8 billion or something.

[Michael Batnick]

Intel looks disastrous. The worst, it's hanging on 10 to 20 bucks for dear life.

[Josh Brown]

A lot of questions about the, the puppy dog on the bed behind me. It's not Snoopy, although I could see why you might think it is. That is a jelly cat. You know about jelly cats? No. Little boys don't play with stuffed animals anymore. They're. They're too old. Right.

[Michael Batnick]

I don't know what a jelly cat is.

[Josh Brown]

Jelly cat. All right, what else are we doing in this?

[Michael Batnick]

Oh, I'm good.

[Josh Brown]

Yeah. No, that's, that's. Look, you're asking the right question. Could, Could a slowdown be pronounced enough where all of the, all of this a. AI spending not only looks insane, which I think to a lot of people it already does, but looks downright dangerous. Like, is that, is that the, Is that the question? Yeah, I think if we go negative GDP in the second half of this year and this tariff confusion is still with us, and we're going to talk about in the next topic, the way people are pulling back on their spending, it's going to look. It's going to look nuts. Yeah, people are going to tell them to stop.

[Michael Batnick]

I think it has to get really bad before they slow down.

[Josh Brown]

Like, people are going to tell them to stop, though, if that, if that's the case, if we're in legit recession.

[Michael Batnick]

Well, their shareholders will tell them.

[Josh Brown]

Well, they're going to tell them by selling the stock.

[Michael Batnick]

Yeah, that's.

[Josh Brown]

I'm saying that's what they told Zuckerberg about the Metaverse. They said, can you, can you please stop? No. Okay. Sell it at any price. So I think it's a risk. All right. Reverse wealth effect. We. So we talked about negative wealth shock recent. On a recent episode. Yeah, this is a little bit different. I only want to look at the high, high, high end of. I want to look at. Not the high high end. I want to look at the top 20% of consumers. Because that's where the action is right now.

[Michael Batnick]

Did you watch your Friends and Neighbors?

[Josh Brown]

No, not yet. Is it good?

[Michael Batnick]

These are the types of people. These are the type. It's only two episodes but these are the people.

[Josh Brown]

Okay. It's a Wall Street Journal story over the weekend about people canceling seven figure home purchases. I have been waiting when this component of the market would finally break down. So just to chart off one second, just to bring people up to speed. So over the last couple of months there've been a lot of stories and a lot of CEO commentary from Target and others saying at the low end the consumer is like pulling back. Okay. And then it migrated. It was like, yes, the everyday consumer is now being way more cost conscious. People that were shopping for clothes at Macy's are now at Walmart. Like there was like. But the high end, the commentary was like they don't give a shit. They just keep spending. Right? Especially on travel, on experience. The concert tickets, like no problem selling out the front row of everything. No problem selling first class tickets. No problem selling $10 million condos in Miami. That's starting to break now. And that to me is the most notable sign. And this is not noise. So let me read this. In the US the richest 10% have 36.3% of their total assets and stocks and mutual funds. 18.7% is real estate. This is total assets. Until recently, luxury sales were on an upswing agent said high Wall street bonuses indicated a strong year ahead. This is like as recently as January over the median. Overall, the median sale price for U.S. luxury homes to defined as the top 5% of sales rose 8.8% during the second quarter of 2024, more than twice as fast as non luxury homes. So that was the environment that we were in. Now people's behavior is materially changing. The article opens up with an anecdote, as most do of somebody named Peter Ocean, who was a real estate agent. His clients accepted an offer of 10.25 million for a four bedroom co op in Lenox Hill. That's like the East 70s in Manhattan. And then the buyer's just like no. And the reason is the client stocks were down 25%.

[Michael Batnick]

I'll do it.

[Josh Brown]

Okay, that'll do it. That'll make you change your mind real quick about.

[Michael Batnick]

Especially when they're using their portfolio for a loan.

[Josh Brown]

And the thing is all of these wealthy people are affected by the same thing. It doesn't matter what line of work they're in. The stock Market is universal. And, and when the stock market, okay, markets lost 6.6 trillion in an epic two day route April 3 and April 4, fallout in the high end real estate market has been swift. And then the tariff announcements and then all of a sudden they're getting all these quotes from all these realtors at, at, at these highfalutin firms and it's like, yeah, people are, people are backing away, prices are being cut. And this is that negative or that reverse wealth effect in action. And it doesn't take long. Which I think is the salient point that I want to make here. Are you surprised by any of this or. Not really.

[Michael Batnick]

Not really, but I kind of want to see what happens actually in the data as opposed to the anecdotes. I believe what they're saying, but we need more time.

[Josh Brown]

Here's data. They quote a guy, Stephen Shane of Compass, who's like the big wheel in Aspen real estate. So you assume the Aspen real estate market is fairly insulated from pretty much anything. It's like all moguls and okay, this guy said he saw $100 million worth of real estate return to the market since April 2. It's a week ago. Including one of his listings, a 7900 square foot house that was asking 52.5 million list. It was listed in December, was marked pending on February 24, relisted on April 8. So that's a, that's a sale that fell through. Like I don't know if that's data. It's another anecdote. But like these people are realtors, do not want to get, get quoted in the Wall Street Journal about the market being soft. This does not help any, any of what they're trying to do. So this is where, this is where we are now. And I think it's, I think it's material. I don't think it's always two more things. This at the Javits center this week, 32,000 hairdressers, colorists, salon owners, beauty technicians. They did their annual like, you know, industry convention where they, I don't know, unveil new shampoo. Here's a quote. It's feeling a lot like 2008, said Christie Powers, who's worked through three economic downturns since 1999. So this is a salon owner in Maryland and saying our workers now, they're probably a lot of federal workers coming in to tell me how stressed they are halting services to save cash. Another quick quote from here. So again, this is the salon customer. These aren't Coal miners. Guys, this. This. This one owns a salon in Massachusetts. Quote, people don't like to walk around with roots. Showing clients who previously got color every two or three weeks are stretching it to four or five. Citing the political situation and implying they've lost money in the stock market. They're cutting back in other areas as well. So it's not just us. And she's been in the business says 28 years. So that's the thing. Last Louis Vuitton. Did you see this?

[Michael Batnick]

I did. I have some stuff to say about this.

[Josh Brown]

Okay, not disastrous, but also not what it was last year when they couldn't keep.

[Michael Batnick]

Disastrous.

[Josh Brown]

Yeah, the stock's disastrous. They could not keep luxury goods in stock. Two summers ago, I was in Italy. I was in Amalfi Coast. People were lining up in the morning, the boat would. The boat would come to Capri, drop off all these luxury goods. They would bring it all the way up the mountain into the store. The store would be empty two hours later, and everybody wants to leave Italy with something leather. I mean, Prada, Gucci, Fendi. These stores would get cleaned out by lunchtime. You had to get in line before they opened, and there was nothing left in the store. That is not what's going on. Louis Vuitton just said other than champagne. Everything is down. They own Louis. They own Dior, Bulgari. Bulgari, Hennessy. Hennessy. Everything is down. Sales down 3%. And they don't see any sign of a recovery in sight. They have stressed customers. Let's put this chart up.

[Michael Batnick]

So the stock is down 45%. There's another thing going on in here. So, yeah, organic sales down 3%. Not great at all. Wine and spirits down 9. Fashion and leather goods down 5. Watches, flat. Perfumes down 1%. Not great. There's another part of this, though. Show that luxury titans chart by. By quarter. Next chart, please. There we go. For the first time ever, her has a larger market cap than lvmh, which is kind of nuts considering the next chart. So, yes, Louie is. Is not in a great shape. I don't know if this is more about Louis specifically. It's probably a combination of factors, but it's also Hermes eating their lunch. Look at the head start that Louis had on this company. It's remarkable.

[Josh Brown]

There's another company that reports earnings called Kering. I don't know if they're. I don't know if their report is out yet for this quarter, but they own Gucci. I think they own Cartier and Mont Blanc. They own the luxury brands. They own the luxury brands that Louis doesn't. It's, it's like four. There's like four European luxury companies and they own everything. And then here in the United States, I guess we have like, I don't even know Ralph Lauren.

[Michael Batnick]

But my point is the chart, the chart for Hermes looks healthy. So I don't know if this is just a Louis story. We'll find out.

[Josh Brown]

All right. My opinion is it might just be. It's not disastrous. It's tough comps. Last year and the year before these luxury retailers shot the lights out.

[Michael Batnick]

Yeah.

[Josh Brown]

So right now it doesn't look. The stock's down 45% a lot. So it's, it's, it's a lot. But again, this like feeds into this idea that something has materially changed. Even Michael, even Cathie Wood. Cathie Wood is out with a recession call. I'm not going to read the whole quote. She does this thing about the tariffs and GDP and capitulated to the interest rate. She's saying one sector of the economy after another since 2022 is falling like dominoes because of that interest rate shock. And that now it's going to be like, it could be economy wide. And here, this is the last sentence. Now that much of the economy is seized up in response to the fear of tariffs, the drop in activity is likely to be more severe than otherwise would have been the case. And then she calls for tax cuts, deregulation and lower interest rates, which I believe all three are on the way. Last thing. Why is this so important? This is a Warren Pies chart. We were batting it around in the slack yesterday. Guys, it's binary. After the s and P500 falls 10%, you either have a recession or you don't. If you don't have a recession, you should just be buying every stock you can get your hands on. That's that teal colored line. Warren says. Keep it simple. No recession means correction is a buying opportunity. This is an amalgam of all of the 10% s and P corrections that did not coincide with a concomitant recession. The purple line is when there is. And as you can see, that's a, that's a nightmare scenario. Just absolute torture. Every dip, every rally is sold. So that's why this is so important. Are we in a correction that's just a buying opportunity or are we in a recession? Correction, which is a much different thing. Do you agree with that?

[Michael Batnick]

Yes and no. Two things if you. So Warren has another chart that breaks out those lines individually. And it's not as binary as it looks, but it's still a valid message. If we don't get a recession more or less by everything. The other point that I want to make is there are some shades of the end of 2022 or the beginning of 2022 in here where everybody knows. Now there is extreme uncertainty about ultimately what the levels of tariffs are going to be. But corporate America and Main street is getting a warning sign. Prepare for X. Now it would be helpful if we could actually prepare for X. But the point is that everybody in 2022 put their head between their legs, embrace for impact and just by nature of doing that, it changed the outcome. Now, I'm not saying that it's going to be the exact same thing that we're going to avoid a recession because everyone knows one's coming, but when you have this sort of forewarning, it might help dampen the impact of what could otherwise be a disastrous outcome.

[Josh Brown]

I agree. Like you could get so cautious and then if there is no recession, the exhale is like a new bull market.

[Michael Batnick]

Exactly, exactly.

[Josh Brown]

I, so I, I know that that's possible because we just lived through it. You're exactly right. But I, but I do worry about another externality is if everybody thinks there's a recession and they stop spending, you will have one.

[Michael Batnick]

Yeah, yeah.

[Josh Brown]

So I don't know, I don't know how you. I think it has to do with employment. Like if, if everyone thinks there's going to be a recession but there aren't any layoffs, you probably don't get one. If everyone thinks there is a recession and they think it long enough for the hiring to slow and then go into reverse, you will get one. Well, I think it's a duration hundred percent pessimism.

[Michael Batnick]

You're 100% right. If we don't see layoffs now, what's the timeframe? Like, what if we just don't see them for the next.

[Josh Brown]

That's a great question. You know what? Dubravko Lakos came on halftime report today. He's sort of bearish JP Morgan macro whatever and he said the longer this uncertainty persists, the more of like a fait accompli. This is just going to be like it's the recession becomes unavoidable if this uncertainty lasts long enough for it to force a recession.

[Michael Batnick]

Yeah, but we're going to, but we will get announcements for better or worse.

[Josh Brown]

My point is we had that scare in March of 23. The FDIC came in resolved two banks, saved three others and sold them off too fast for that panic to A, infect other financial institutions, B, change anyone's buy the dip behavior. And as a result that panic didn't turn into a full blown bear market or eve or a recession. If this continues for six weeks and the message just keeps reverberating among CEOs, stop hiring.

[Michael Batnick]

No nightmare.

[Josh Brown]

Stop hiring. Start cutting. That's the, that's, that's why this, that's why the shit coming out of this administration has got to get more on point and cohesive.

[Michael Batnick]

Yeah, we need, we need some clarity even if it's not great. Like, we just need some finality of.

[Josh Brown]

Like almost like every tariff I've announced is now on and there will be no nuance live with it. The market would like that. Yeah, the market would like no tariffs. I understand, but that's probably not going to be the outcome here. So this is the new environment. I'm not making changes, get acclimated to it. I think we could escape without the real thing, without the real recession. Six more weeks of this. I don't think so. So I hope somebody's listening.

[Michael Batnick]

Duncan just said Nvidia is down big after hours. No, it's not.

[Josh Brown]

Yeah, I'm seeing that in the chat. Is it in the chat?

[Michael Batnick]

Is it 107? It's down four and a half percent. I mean it's not.

[Josh Brown]

No, that's not, we can't see this is the noise that we're talking about.

[Michael Batnick]

Duncan, double down biggest like down 13 down 5% is a flush wound. All right, let's talk banks. So I listened to JP Morgan, I listened to Blackrock, Goldman and Morgan Stanley and I didn't listen to bank of America, but that's the only one I.

[Josh Brown]

That'S the only one I listen to.

[Michael Batnick]

They're all saying like ish, the same things. I think it's, I think it's, it's noteworthy that JP Morgan just continues to be the winner in terms of its share price. Chart on please. This is year to date down a measly 1%. Just absolutely lapping the competition. It's pretty remarkable.

[Josh Brown]

You know, this is back to what I said earlier. I buy number one.

[Michael Batnick]

Yeah, yeah.

[Josh Brown]

Look, I know that there are, there are trading opportunities in these bank stocks and over any given three week period, Wells Fargo rallies more or whatever. That's fine. That's somebody else's sport. I don't play that sport. I've owned JP Morgan since a London Whale, you understand? And I'm and I'm. And. And the dividends are buying me more stock. I want it to go down. So we. You know, that's. That's what I'm doing in these banks. I thought the Moynihan commentary was notable. He's just like, look, we're. We're on watch like everybody else, but it's just not showing up. I think. I think, like. I think they said credit. I think they said credit card spending was up 4% year over year. Now, I don't know how much of that is because prices are up, and it's just people doing the same transaction.

[Michael Batnick]

But spending more dollars as of March. Meaning that it's like decent.

[Josh Brown]

Sam Nowak is telling me, telling us. Nvidia says the government has banned them. What?

[Michael Batnick]

From selling H20 chips to China, taking a $55 billion. No, no, no, no, no, NO. 5.5.

[Josh Brown]

5.5, 5.5. All right. Nothing that sounds more.

[Michael Batnick]

That's more realistic, not nothing. Okay. I pulled out a few quotes that I want to get to.

[Josh Brown]

From.

[Michael Batnick]

From the CFO of JP Morgan. Chart on, please. All right, the main thing that we see there is what would appear to be a certain amount of front loading of spending ahead of people expecting price increases from tariffs. So, ironically, that's actually somewhat supportive, all else equal. But I think what it sort of highlights is that during this transitional period and this elevated uncertainty, you might see some distortions in data that make it hard to draw larger conclusions. Chart off, please. Josh, I mentioned this last week. The data. The data is going to look very, very noisy.

[Josh Brown]

That's the. No, it's like, oh, there's a spending burst. No, this is people that need supplies before the tariffs go on.

[Michael Batnick]

Dude, what if Apple just got an upgrade cycle because of this?

[Josh Brown]

I know Apple. Apple disclosed today that they flew in.

[Michael Batnick]

6 million planes, $5 billion worth of.

[Josh Brown]

Worth of phones on. On three different flights or something like that. Yeah, I think they flew in a huge shipment from India. India is now making 20% of their phones, which I did not know. I was not aware of that, but.

[Michael Batnick]

Cobbling the pieces together, right?

[Josh Brown]

So if you need. I don't. I don't know what people make. Like, one of the companies I was talking about today on tv, Fastenal, they got stung bad. They need. They have to buy a ton of steel. Fastenal is basically making construction supplies and equipment and literally fasteners, like anything you could think of. They got hurt bad in 2018, and they resolved that if there's another trade war, there's another tariff thing going on. They're going to be ready for it with their, a new and improved supply chain. You picture a company like that, they're like, oh no, we're not doing that again. There's going to be tariffs starting next month. Let's go to work. Let's pull in everything that we need. Like, that's a really great point that you made. Some of the data that we're going to see is just irrelevant or pull forward and we don't know what's what yet.

[Michael Batnick]

Well, the funny thing is like all of these earnings seasons that we're entering throw about the window. Who gives a shit what, what these companies did the first three months of the year? Completely irrelevant. I know it's always forward looking, but now it really is forward looking.

[Josh Brown]

The results matter at all. That's, that's why, that's why last week one of the, one of the themes we were talking about that's dangerous is yanked guidance.

[Michael Batnick]

Right.

[Josh Brown]

Because it's all we have to go on that matters.

[Michael Batnick]

All right, next quote from Jeremy. He talks about the low income. I thought this was interesting. When we look at our car data and also our cash buffers and people's checking accounts, of course it is true that it is relatively weaker in the lower income segment. But when you take a step back and you ask are we seeing signs of distress in the lower income segment? The answer is no. So sure, the margin cash buffers are lower and you see some rotation of spend and spending is a little bit weaker than it was in the peak spending moments. But actually some of the increases in spending that we're seeing in April are actually coming from the lower income segment. So no evidence of distress, I would say. Very important, I think.

[Josh Brown]

Who is that? That's Jeremy Morgan. Yeah, yeah, yeah. I mean, there are signs of distress, but not like extreme. Like some of the stuff, some of the stuff about like car loans and delinquency, it's like just barely lifting off the bottom. It, it was bumping along the bottom for so long like, like an L shape and now it's just starting to lift off. But it's just, it's not big enough to say that there's like true stress in, in that segment. I know people are stressed out. We mean financials, we mean like an economic term. You don't really have stress there.

[Michael Batnick]

So DJ Solomon from Goldman Sachs was in the opening remarks was very much dancing around Trump talking about the need for like some sort of reform. But also like, we got to be careful. So the, the Important thing there was their investment banking fees were down 7% quarter over quarter, like every other investment bank. But their fixed income and currency and commodities trading was up 61%. Smash.

[Josh Brown]

Tons of trading. The problem, the problem, of course, with that is that Wall street doesn't really give you a multiple on your trading profits because they don't believe they're.

[Michael Batnick]

No, it's temporary for sure. Morgan Stanley Wealth Management. This was interesting. They didn't. I didn't get any color on this on the call, but chart on, please, so I could take a read. Read this. Total client, Total client assets at the end of the year was 6.2 trillion, give or take, and fell to 6 trillion, down 3% quarter over quarter.

[Josh Brown]

That's interesting how.

[Michael Batnick]

Especially considering the fact that last time we spoke about them might have been, I don't know if it was last quarter or a couple of quarters ago, 20% of their, their, their assets, client assets were in cash. So I'm curious as to what it was that led to that big of a hit.

[Josh Brown]

I got some highlights on the Citi call.

[Michael Batnick]

They actually, they're killing it though, by the way. Morgan Stanley Wealth Management.

[Josh Brown]

Yeah, Citi said investment banking revenue increased by 31% to 934 million. I guess that business is small and so it can post a growth rate like that. It's like. Well, I mean, small relative to Goldman Sachs. Well, Goldman Sachs.

[Michael Batnick]

Goldman Sachs was decent. And they did the giant Google deal and there was another giant deal that they did there. So if you pull those out, it's probably way weaker.

[Josh Brown]

Yeah, same thing. Equities trading strength trading revenue jumped 32% year over year. 6% decline in fixed income trading. This is Citi. And then they said wealth management. Revenue grew 9%. And I said, Citi does wealth management. They did. Do you know about this?

[Michael Batnick]

Is it like the Legacy Solomon business?

[Josh Brown]

No, they sold Smith Barney to the joint venture with Morgan Stanley and Morgan Stanley took the whole thing over. They must have restarted. Is it like restarted wealth? It's probably like in the branches.

[Michael Batnick]

Yeah, it's got to be in the branches. All right, check this out. From quarter turn on, this was, this was sick from Wells Fargo, I asked, how is the mortgage business doing? And they, through their AI bot, they gave you a million different things and I clicked on one of them. Business mortgage loan originations actually increased 26%. But here's, but here's the. We continue to streamline the business. That's one way to put it. Oh, boy. Streamline the business with headcount down 47%. Holy shit. So there is an absolute ice age in the mortgage origination business. Obviously. By the way, I told you, Josh, I bought Rocket with you.

[Josh Brown]

Yeah, we're buying, we're buying that stock at the very bottom. I don't know if this turn, but this is as bad as the mortgage business gets.

[Michael Batnick]

I just think that. I don't believe that rates are going to stay high. I don't believe it. I think they're going to come down. I think the refi. There's going to be a refi explosion.

[Josh Brown]

You're not getting stagflation for an extended period. If the economy sucks, the price of everything is going to drop. Deflation, the man goes, demand goes away.

[Michael Batnick]

Yeah.

[Josh Brown]

So I think the, I think the mortgage. I think the refi boom is probably more likely than a new origination boom in a bad economy. But I think the refi boom is good enough for, for some of the stocks that we're talking about.

[Michael Batnick]

This is mildly encouraging. So Nvidia is down 6% after hours. Accused are only down 1%.

[Josh Brown]

That's a very Nvidia specific story. Selling GPUs to China doesn't really affect anybody. I want to do this thing with Uber and Waymo. We don't spend a lot of time on it, but I think it's an important story because we talk about autonomous vehicles and robo taxis on the show a lot. Really interesting thing happened. The guy from Waymo came out talking about the adoption rate in Austin. And Austin is now ground zero for the battle that's about to take place between Waymo and Tesla. Cybertaxi Austin. Austin is where Tesla is launching. They say they're launching in June. It's a really key city for tech people, for media people. All eyes are on Austin. And I thought, this is really interesting. Waymo. Robo taxis made up 20% of rides offered by Uber in the city of Austin during the last week of March. That's pretty nuts, dude. So in other words, Uber and Waymo launched in partnership. If you go to get a ride on Uber, on the regular Uber app, just like you always do, they might send you an autonomous vehicle and not a human.

[Michael Batnick]

I wonder what prices is it more.

[Josh Brown]

They let you opt out if you don't want the autonomous, but they don't tell you to choose it in advance. Do you understand? Yeah, it's a, it's a negative consent. It's a. It's like you have to say, no, no robot. After they assign it to you. In a place like Austin everyone's drunk all day anyway. They're probably like, yeah, it, send the robot. I don't care. 20%. In the last week of March, of all the Uber rides, were Waymo on the Uber app.

[Michael Batnick]

That's remarkable.

[Josh Brown]

It's pretty dope.

[Michael Batnick]

People want to try it.

[Josh Brown]

It's a faster adoption than the Waymo only, which they. They've done in San Francisco and, And elsewhere.

[Michael Batnick]

So is that the full case for Uber?

[Josh Brown]

That's the bull case for autonomous vehicle companies like we ride, maybe someday, Tesla, certainly Waymo wanting to launch in cities with Uber rather than just all by themselves. And that's my thesis on Uber, is that in the end, these companies are spending billions of dollars to put these things on the street. They want them to be used.

[Michael Batnick]

I wonder what the economics are of the deal between Waymo and Uber.

[Josh Brown]

Well, one of the interesting things about that is there's a service component, and Uber is in that business where you have to house these vehicles at night, you have to refuel them, you have to maintain them, you have to change the oil, you have to clean them. You do need human involvement. You do need what's called fleet services. And so Uber's in that business. And so that's another reason for a provider of the vehicles to partner with Uber. They do fleet management, fleet maintenance, and they'll make sure that there's a constant flow of people using the cars so that you don't have them just sitting out there on the street waiting. This is interesting. Alphabet's autonomous vehicle unit has racked up 80% more driverless rides in its operating zone in Austin in the first 27 days than it did in the first 27 days of the San Francisco launch. So, like, Americans in general are just getting more comfortable really, really quickly. Oh, put this tweet up. This is Alex Immerman. He's from Waymo. And he's basically saying. He's basically saying that working with Uber and Uber running fleet ops and is the first rideshare partner with the driver of the future. Or. This is the. This is the guy that's. That's did the data collection, I should say. And then the guy from investor relations at Uber retweeted it and, and, oh, this guy said. Andreessen Horowitz, partner. That's, that's a Twitter. This last thing on this. So my take is Uber is going to be a great partner for companies that want to launch autonomous vehicles into a given city because they have the ridership, they have the fleet maintenance operation, and they know that they know all of the data about who gets picked up when, how much money you make in each neighborhood. They have all of that work done. So coming into the market with your own autonomous vehicle is great, but plugging with Uber is probably the cheat code. And they're going to launch together in Atlanta. Now, that's the next city of the combined Uber Waymo thing and we'll see how that goes. If that looks similar to Austin on the east coast, that's going to be really interesting, I think for shareholders.

[Michael Batnick]

You know what's good we haven't seen yet is people get hysterical, understandably so when there's an accident with the self, with the, with the driverless car. You haven't really seen many of those headlines, which speaks to the advancements in the technology.

[Josh Brown]

Can I have this charge on? This is the adoption speed. This is the cumulative Waymo ride volumes in Austin were 80% higher than San Francisco in the first 27 days. You see the black line, Michael?

[Michael Batnick]

Yeah, it's remarkable.

[Josh Brown]

So that's the Uber Waymo combo. The pink line is Waymo by itself in San Francisco. So that's what we're. That's what we're. Anyway, Uber is selling, I'm long the stock, in case you couldn't tell. Uber is now selling at 15 times the next 12 months earnings expectations. They're expected to grow earnings 36%. Not a lot of 15 multiples on 36% growers in the Nasdaq. And the only reason it's not 25 times earnings is because of this fear that they're going to get boxed out of their own dominance.

[Michael Batnick]

I also own Uber with you. And it's funny because every time they talk about Waymo, the company drops as if it's a threat. But your point this whole time has been no, it's an asset.

[Josh Brown]

They're working really well together. Well, sorry, you're up.

[Michael Batnick]

Okay. I'm gonna make the case for the following. It's a bit long winded, but bear with me for a second. All right, this is from Jay Capel of Sentiment Trader. I believe we touched on something similar to this last week. It says risk on, risk off indicator. I don't know what exactly is in here. It oscillates. It's noisy, of course, but this is some sort of fear metric. Okay. And we hit an extreme last week. And 1, 2, 3, 6 and 12 months later. Now, careful because n equals 1, 2, n equals like 7. All right, so 100 hit rate on n equals 7. Take that for what it's worth. Point is, point is people bought the panic. And so for every data point like this, I can show you the next one. There's a ying to the yang which show is following its largest 15 daily gains. Next chart please. The US stock benchmark was higher six months later, only 43% of the time. All right, so hardly a slam dunk. But obviously last week people did a lot of buying. You saw that in the leverage ETF flow space. But there are stock. Not but. And also there are stocks that are making a lot of 52 week lows. 52 week lows as we know are a dangerous spot to buy. But people love to buy it. I love to buy some of them. I wish I didn't, can't help it. But this is, this is where we are. Grant. This is a great truck from Grant Hockrich. He tweeted the stock market 52 week lows. 52 week new lows. Excuse me, expand to its fourth highest level over the past 17 years. So we got a hell of a washout. Okay, here's a, here's the point that I want to make. You have to know what you're buying, obviously, but you have to know what, why you're buying when you are buying into a panic or when you're buying a 52 week low. You really have to have a game plan. Meaning, all right, am I buying this because it's, it's a, it's a piece of shit that is so stretched that I'm going to sell the snapback and get out at 20% rally or am I buying something that has held up really well, that has shown relative strength, that has dipped because I've always wanted to own it and now I'm in this. And this is not a trade. So for example, last week I bought CrowdStrike. Chart on, please. CrowdStrike divided by the S&P. So CrowdStrike. CrowdStrike has outperformed over the last couple of years. It's shown really great relative strength into the sell off. And so I bought crowdstrike with no plans of selling into the rally. Okay. Conversely, last week I bought Apple. Apple has been a piece of junk compared to the market. It's gone nowhere. Literally, it has gone nowhere relative to the market for the past three years. It's not a leader. It's gone up, it's had good runs, it's had bad runs. But last week we had, I showed this chart. The worst rolling four day period of all since the dot com bubble burst for Apple was down 23% in four days. I bought the panic and I sold the bounce. I was in it for. For the bounce, and that was that.

[Josh Brown]

So, so you're saying, like, you had a different thought process about what you were doing with CrowdStrike.

[Michael Batnick]

Yes.

[Josh Brown]

Versus what you were doing with Apple.

[Michael Batnick]

So my point is, if you are one of these people and if. Listen, in an environment like this, you have to have a good reason to buy an individual stock. Right. Especially if the index is giving you a 20% sale. Right. You could buy the NASDAQ down 25%. There better be a good reason why you're buying an individual stock and not the index. So if you are going to be buying individual stocks, you have to have some sort of a strategy. Know your time frame, know what you're buying, and know what you're going to do. Like, in other words, if this goes lower, am I going to panic? Well, then don't buy. Like, you have to have some sort of a game plan going. This is. This is the type of stock that I like it at 100. I'll love it.

[Josh Brown]

Do you have a. Do you have a stop. Do you have a stop on that Apple purchase or you were. You were going to stay long no matter what, because it was so oversold when you bought it.

[Michael Batnick]

I would have continued to add if it, if it crashed more.

[Josh Brown]

Okay, what about CrowdStrike crash?

[Michael Batnick]

Like, I'm not selling.

[Josh Brown]

No, no, no, no, no. So, all right. So. So you had no mental stop. You had no downside protection in either of these names?

[Michael Batnick]

No.

[Josh Brown]

One of them you would have kept adding to.

[Michael Batnick]

Yep.

[Josh Brown]

Okay. All right. And you knew that going in. Would you have honored it?

[Michael Batnick]

Kept buying down?

[Josh Brown]

Yeah. You bought apple at 170.

[Michael Batnick]

I bought it at 170. I sold it to 210 at 150.

[Josh Brown]

You're adding to it?

[Michael Batnick]

Yeah.

[Josh Brown]

120.

[Michael Batnick]

Oh, yeah, yeah, yeah, yeah.

[Josh Brown]

Okay. All right.

[Michael Batnick]

I mean, that would have been that. Listen, I don't. I always had to be my preferred outcome because obviously there's a lot more bigger things on the line than me adding to a trading position. So I'm happy that it worked out this way. But my bigger point is, you have to know what you're buying and why and what your game plan is.

[Josh Brown]

And this has been another edition of Balding Alpha. Make the case.

[Michael Batnick]

Thank you.

[Josh Brown]

Thank you, Michael. I have a mystery chart for you, by the way.

[Michael Batnick]

I also own it. I also bought an Nvidia. Now I'm not sure what to do. So I guess I. I guess I need a Better plan.

[Josh Brown]

Maybe get off the podcast and go manage risk. Put this chart up for me, John, if you would. No hints. What is it? No, I'm just kidding. Well, all right. As you can see, I left the Y axis intact. So you can see this has a percentage attached to it. I'll just tell you, I know it straight up.

[Michael Batnick]

Okay.

[Josh Brown]

It's an interest rate. It's 6.62%. What am I? 5? I'm looking, we're looking at is a 10 year look. What am I.

[Michael Batnick]

These mortgage rates.

[Josh Brown]

Look at, look at you. Wonderful job. I knew you'd get it, but I didn't think you'd get it that fast. We have a one year look at this too. Keep this up. This is a 30 year mortgage over the last year. Gun to your head. Gun to your head.

[Michael Batnick]

Lower.

[Josh Brown]

This sees six before seven, right?

[Michael Batnick]

Yes.

[Josh Brown]

This is the most obvious thing in the world to me. Why are people out of their minds?

[Michael Batnick]

In fact, by the way, it would be kind of hilarious if we're wrong because what I'm about to say is pretty ridiculous. I don't know what would have to happen for it to go to seven.

[Josh Brown]

It would have to be just not going to.

[Michael Batnick]

It would have to be just a dump of Treasuries, which would be awful.

[Josh Brown]

The risk here of us being wrong and mortgage rates not falling is that Even if the 10 year falls, mortgage originators don't feel comfortable making loans.

[Michael Batnick]

Nice.

[Josh Brown]

That's nonsense because Fannie and Freddie are backing conforming loans like 95% of the market for mortgages is, is federally backed nonsense. So I, so I don't, I don't even think that's a real risk. I think this is almost. There are a few things in life that are guarantee. I think it's a guarantee that the next 50 basis points. 30 in 30 year mortgage.

[Michael Batnick]

I wouldn't go, I want to go that far.

[Josh Brown]

I would.

[Michael Batnick]

Okay, here's, here's what I'll say in conclusion for the show. The. We had the, we had the, we had the VIX spike.

[Josh Brown]

Do the wrap ups.

[Michael Batnick]

Now I'm wrapping up. Chill out. We had, we had a vix spike to 60. It's now back to 30. The ability for tariffs to shock the market is probably behind us. It definitely doesn't mean that the bottom is ultimately and I have no idea, but I think that like the grand pronouncements that have spooked the shit out of investors is probably not going to happen again next week.

[Josh Brown]

Yes. Now we're just left with the Garden variety. Will we or won't we have a recession debate? Because the ability, the ability of tariff announcements to shock the market may be lessened, but the abilities, the ability of tariffs to damage corporate earnings very much.

[Michael Batnick]

Still with us now, let's see reality.

[Josh Brown]

Totally guys. Thank you so much for tuning in. This has been a super sized addition. Not on purpose. We just had so much to say. We love you guys for coming to the Live. See you. We'll see you next week and every week hopefully for what are your thoughts live at 5pm on the east Coast. For those of you listening out in podcast land, we appreciate you too. Please leave a rating and review. Remember, tomorrow is Wednesday. All new edition of Animal Spirits with Michael and Ben. We'll do Ask the Compound live on YouTube later this week and an all new edition of the Compound and Friends with a very special guest you are definitely going to want to hear from this week. Keep it locked on the Compound all week. We love you. We appreciate you. 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.