Kenneth Rogoff on the Dollar, Stocks Laugh at Tariffs, Starbucks and Amazon Earnings

Summary

Podcast Summary: The Compound and Friends – "Kenneth Rogoff on the Dollar, Stocks Laugh at Tariffs, Starbucks and Amazon Earnings"

Episode Details:

• Title: Kenneth Rogoff on the Dollar, Stocks Laugh at Tariffs, Starbucks and Amazon Earnings
• Host: Josh Brown
• Guests: Kenneth Rogoff
• Release Date: April 29, 2025

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1. Introduction to Kenneth Rogoff

[00:00-03:22]

Josh Brown welcomes listeners to "The Compound and Friends," highlighting the episode's focus on earnings reports and introducing the special guest, Professor Kenneth Rogoff. Rogoff, a former IMF chief economist, Harvard professor, best-selling author, and former chess grandmaster, joins to discuss his new book on the dominance of the US dollar and its implications.

2. The Dominance of the US Dollar

[03:23-09:49]

Josh Brown sets the stage by explaining the significance of the US dollar in the global economy. He emphasizes that Rogoff's book, "Our Dollar, Your Problem," explores why the dollar's dominance has been a significant advantage for the United States and what potential shifts could mean for the future.

• Notable Quote:
  • Josh Brown [09:49]: “The premise of your book is that dollar dominance is not a given for the rest of our lives... What is dollar dominance today and why is it so important?”

3. Historical Context of Reserve Currencies

[09:50-16:34]

Rogoff delves into the historical evolution of global reserve currencies, highlighting how the British pound, Dutch guilder, and Spanish pieces of eight once held similar dominance. He explains that such dominance is not permanent and depends on various factors, including geopolitical power and economic stability.

• Notable Quote:
  • Kenneth Rogoff [11:15]: “Before us, it was Britain. It was the UK from the Napoleonic wars up... it's an incredible benefit to us in a lot of ways.”

4. The Euro's Struggle to Replace the Dollar

[16:35-23:11]

The conversation shifts to the Euro, questioning why it hasn't supplanted the dollar despite Europe's significant economic size. Rogoff attributes the Euro's challenges to fiscal crises, lack of a unified geopolitical stance, and political fragmentation within the European Union.

• Notable Quote:
  • Kenneth Rogoff [13:09]: “Had the euro crisis not happened, and if they hadn't invited Greece in, they probably wouldn't happen. They'd have a bigger footprint.”

5. The Impact of US Trade Policies and Geopolitical Power

[23:12-35:51]

Rogoff critiques the Trump administration's trade policies, arguing that unilateral tariffs create uncertainty and undermine global economic interdependencies that favor the dollar's dominance. He emphasizes the importance of maintaining geopolitical power to support the dollar's status.

• Notable Quote:
  • Josh Brown [24:24]: “They derisively refer to it as 4D chess. Is the Trump administration playing 4D chess...?”
  • Kenneth Rogoff [24:43]: “He could just put a tariff on 10%, actually, I would come on and speak to you. No big deal...”

6. The Vulnerability of Dollar Dominance

[35:52-41:58]

Rogoff underscores the fragility of the dollar's dominance, linking it to the US's increasing debt and potential future economic crises. He warns that losing confidence in the dollar could lead to higher borrowing costs, reduced market share, and broader economic instability.

• Notable Quote:
  • Kenneth Rogoff [30:42]: “That is our Achilles heel. Because if the dollar blows up and we run into debt problems and have to inflate, that's going to push people out of the dollar.”

7. Potential Alternatives to the US Dollar

[41:59-55:20]

The discussion explores possible alternatives to the dollar, including cryptocurrencies like Bitcoin and China's renminbi. Rogoff remains skeptical about cryptocurrencies becoming a dominant reserve currency due to their volatility and lack of government backing. He anticipates that the renminbi poses a more credible challenge but doubts it will replace the dollar entirely.

• Notable Quote:
  • Kenneth Rogoff [49:22]: “Well, I think the challenges are going to come at the edges from China and the renminbi. That is where the challenges.”
  • Josh Brown [55:17]: “Bitcoin is not the next dollar.”

8. The Future of the US Economy and Federal Reserve Independence

[55:21-65:35]

Rogoff discusses the critical role of the Federal Reserve's independence in maintaining economic stability and managing inflation. He warns that political interference, especially from administrations seeking lower interest rates, could undermine the Fed's effectiveness and exacerbate economic vulnerabilities.

• Notable Quote:
  • Kenneth Rogoff [45:22]: “I actually wrote the first and most influential paper on central bank independence... I can't say I would have done better.”
  • Josh Brown [41:35]: “Do you view the decline of the dollar's dominance as inexorable or...?”

9. Implications for US Consumers and Businesses

[65:36-74:10]

Rogoff explains that a decline in dollar dominance would lead to higher borrowing costs for consumers, lower equity valuations, and increased economic volatility. Businesses would find it harder to finance operations, and consumers would face higher prices.

• Notable Quote:
  • Kenneth Rogoff [39:31]: “It's sort of death by a thousand cuts. It's not necessarily one big event.”

10. Closing Thoughts and Future Research

[74:11-57:00]

As the conversation wraps up, Rogoff shares his ongoing research into the future of the dollar and real interest rates. He reiterates the importance of understanding the dollar's role in the global financial system and cautions against complacency regarding its dominance.

• Notable Quote:
  • Kenneth Rogoff [56:55]: “I spend a lot of my time on research... It's definitely something where once we've lost it, we'll wish we had it.”

11. Post-Interview Segment: Earnings Reactions and Market Insights

[57:00-120:59]

Following Rogoff's interview, host Josh Brown and co-host Michael Batnick delve into earnings season, discussing various companies' performances, stock market reactions, and broader economic indicators. They analyze the mixed results from sectors like healthcare, communication services, and energy, highlighting how companies like Starbucks and Amazon are navigating the current economic landscape.

• Notable Discussions:

  • Ray Dalio’s Pessimism: Dalio expresses concern over trade disruptions being irreversible, reflecting deep ties with China.
  • Earnings Reactions: Mixed corporate earnings with sectors like healthcare outperforming while others like manufacturing lag.
  • Amazon's Tariff Transparency: A controversial moment where Amazon considered displaying tariff costs next to product prices, which was later retracted.
  • Market Sentiment: Analysis of consumer sentiment dropping to historic lows under the Trump administration, juxtaposed with stock market resilience.

• Notable Quotes:

  • Josh Brown [74:32]: “If you sold two weeks ago, what do you do now?”
  • Michael Batnick [85:46]: “This is the same type of stuff that sets up a new bull market, which sounds hard to believe, but that's what it says historically.”

12. Conclusion

[121:00-127:00]

Josh Brown thanks Kenneth Rogoff for his valuable insights and encourages listeners to explore Rogoff's book, "Our Dollar, Your Problem." The hosts briefly mention upcoming episodes and express optimism about future discussions on economic and investment topics.

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Key Takeaways:

• Dollar Dominance is Fragile: The US dollar's status as the global reserve currency is not guaranteed and can be challenged by economic mismanagement and geopolitical shifts.
• Trade Policies Impact Economic Stability: Unilateral tariffs and trade wars create uncertainty, undermining the benefits that come with dollar dominance.
• Federal Reserve Independence is Crucial: Maintaining an independent central bank is essential for managing inflation and ensuring economic stability.
• Emerging Alternatives Face Challenges: While cryptocurrencies and the renminbi present potential alternatives to the dollar, significant barriers prevent them from replacing the dollar in the near future.
• Economic Implications for Consumers and Businesses: A decline in dollar dominance would lead to higher borrowing costs, reduced market valuations, and increased economic volatility, affecting both consumers and businesses adversely.

Final Note: For a deeper understanding of these topics, listeners are encouraged to read Kenneth Rogoff's book, "Our Dollar, Your Problem," and stay tuned to "The Compound and Friends" for more expert insights on business and investing.

Transcript

[Josh Brown]

Ladies and gentlemen, welcome to the compound and friends, tonight's show is brought to you by Betterment Advisor Solutions. We are also brought to you by Rocket Money. I want to tell you Rocket Money is literally one of the easiest ways that you can manage your personal finances. See what bills you're paying, see what you're paying that you don't even use and cancel it. Rocket Money is a personal finance app that will help you find and cancel all of those unwanted subscriptions that have built up and you've forgotten about and it's time to time to do something about it. They will also help you monitor your spending and help you lower your bills. You can grow your savings, all your subscriptions in one place. Rocket Money has over 5 million users, has saved a total of 500 million in canceled subscriptions. Cancel your unwanted subscriptions and reach your financial goals faster with Rocket Money. Go to Rocket Money.com compound today. That's RocketMoney.com compound. Okay, huge show. This is the busiest week for earnings reports and we're going to run down everyone who reported so far. And a little bit of a preview about some of the companies still to come later this week. Starbucks was reporting while we were recording. So that one we, we react to live. But before we go to what are your thoughts and all those, all those earnings reactions, we have a very special guest in the A block. We talked to Professor Ken Rogoff. Kenneth Rogoff is a former IMF chief economist. He is a Harvard professor of economics. He is a best selling author, he is a former chess grandmaster and just all around brilliant guy. Was fortunate enough to have been introduced by a mutual acquaintance and Ken agreed to do the show. He does not do a lot of podcasts, he does not do a lot of hour long conversations with people, you know, one on one and allow them to record it. So it was just really cool to have this experience and, and Ken's got a new book out and I read the book over the weekend and I absolutely loved it. And it deals with the dominance of the US dollar and why the dollar and its importance to the world has been such a huge tailwind for America, for investors, for businesses, for banks. And what happens? How does that end? What happens if that's going away? What does that look like? And Ken is one of the foremost authorities on these types of things. So it was a really cool conversation. You'll hear that first, then we'll get into Michael and I doing earnings reactions and the rest of what are your thoughts? And it's just, it's an amazing show, so please enjoy it and I will send you in there right now.

[Ken Rogoff]

Welcome to the Compound and friends.

[Michael Batnick]

All opinions expressed by Josh Brown, Michael.

[Josh Brown]

Badnick and their castmates are solely their.

[Ken Rogoff]

Own opinions and do not reflect the.

[Josh Brown]

Opinion of Ritholtz Wealth Management. This podcast is for informational purposes only.

[Ken Rogoff]

And should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain.

[Josh Brown]

Positions in the securities discussed in this podcast. Hi, everyone, I'm Josh Brown, and welcome back to Live from the Compound. Today you're going to learn about one of the most important aspects of the global economy, the dominance of the US Dollar. We're going to tell you why the dollar's use around the world is so important to our way of life in America and why that dominance might be under threat right now. My guest today is Kenneth Rogoff, one of the most distinguished working economists in the world and a chess grandmaster just like me, whose career spans academia, international finance and public policy. Welcome to the show, Ken. So great to see you.

[Ken Rogoff]

Thanks for having me. And thanks to people for listening.

[Josh Brown]

Absolutely. We never crossed paths on the international chess circuit. It's so strange.

[Ken Rogoff]

I don't know why.

[Josh Brown]

Most of my matches were played on Long Island. I don't know if I don't know. All right. I wanna give people some sense of who you are and what you've accomplished because it's obviously very impressive. You had served as the chief economist at the International Monetary fund or the IMF. You were there from 2001 to 2003 in that role, professor at Harvard University. So you are the Thomas D. Cabot Professorship of Public Policy, and you teach economics. And obviously you've been hugely influential because of your books. So the last one, which I read, this Time is different. I remember how much attention that book got and how much media and how many people had opinions on it, both pro and con. If we could just start by summing up this Time Is different, which you wrote with a co author. But tell us why that was such a huge book at the time, if you could, and whether or not you knew that it would be when you were writing it.

[Ken Rogoff]

Well, we worked on it for seven years, a little bit like this one, my most recent one also. We thought that financial crises were a bigger problem or more recurrent problem than people thought. And one of the early insights we had is they've been going on forever. So Spain had been defaulting in the 1500s. The UK defaulted in 1340. You know, people just think, you know, it Never happened before. It's been going on. But I think the thing that we did that was original in that book was most of the earlier books are the Treasury Secretary or the Finance minister was so depressed at midnight when they saw they couldn't pay the debt and they called home. And our book had numbers. We put together numbers in a way nobody had ever done before and allowed you to look at the footprints. How does it unfold? What do you look for? And when the book came out in the early papers, we were mocked because the New York Times had a two page spread saying, well some people think it's going to be bad, but these people, it's just ridiculous. They think it's going to be going on and it's going have to go on for a long time. But our benchmark numbers were pretty useful. And one big point we had was that if you have a financial crisis, not like a typical recession, it's a slow recovery, it takes years.

[Josh Brown]

Which is how it played out here.

[Ken Rogoff]

Which is. Oh absolutely how it played out here and almost everywhere. Most recessions, they're terrible, which actually bounce back pretty fast and within a year you, you're doing better than when you started. I mean even if we have a recession now, that's a good guess of how it'll look. But if you have a financial crisis, it's much more crippling and lasts much longer.

[Josh Brown]

I think what you did with that book was you used numbers to demonstrate how debt either puts you into a financial crisis or exacerbates it once you're in it. And that's why those recoveries are U shaped and not V shaped.

[Ken Rogoff]

Well, I think what it is is that our societies don't really have an ambiguous feeling about debt. So we don't just suddenly, you know, like in the old days the British would put people in debtors jails or worse.

[Josh Brown]

Go to a workhouse.

[Ken Rogoff]

Go to a workhouse. Yeah, yeah. Nowadays, well, let's go to court and let's go to court again. And that's a large part of why it takes so long to play out. So it's, I mean they happen in every society. That was a really interesting thing that they're similar in a very autocratic regime, in a regime with a French style legal system, which is different the historical circumstances. So that was a stunning, stunning finding that we had.

[Josh Brown]

Well, I really appreciated at that time because that was my first financial crisis that I had ever. I shouldn't say lived through, but worked through. So it was my job to kind of talk to Investors who had money on the line in markets that were collapsing by 2009. When your book came out, we were recovering in the stock market, but not in the housing market. Certainly not.

[Ken Rogoff]

Well, actually not yet, like. So our book came out in our papers in 2008 and the book in September 2009, and it was still pretty grim.

[Josh Brown]

Very much in the crisis. Okay. Today the big concern is, is that there is this international trade war. It's very simplistic to say we started it because obviously we're dealing with issues that have been with us for decades. And it's not any one president, but certainly the current president wants to accelerate the battle into a full blown mayhem. And it seems like that's the strategy from the start. And there's a lot of questions about what that means. But one of the big issues here, and one of the reasons why we're able to unilaterally announce we're now in a trade war with 100 countries is because of the dollar and its centricity to the whole system. So that's what I wanted to talk to you about. The premise of your book is that dollar dominance is not a given for the rest of our lives. Since all of us were born and raised and most of the people watching this, that's the only world they've ever known. It's not the only world that could ever exist. So let's start there as a premise and then we'll take it further. But what is dollar dominance today and why is it so important?

[Ken Rogoff]

So we know English is used everywhere. We're just so privileged. If you live in the United States or some of your listeners weren't born in the United States, it's just such a privilege to have English as the language. And if you have somebody from one develop country and somebody from another developing country, chances are they're going to speak English in the European Union. You know what the working language is English. It's not French, it's not German. And a little bit the dollar plays that role and it's an incredible benefit to us in a lot of ways. So one of the ways is we absolutely pay lower interest rates. Not just Uncle Sam, but if you have a mortgage, a car loan, it's lower because the world is eating up those dollars. They're being absorbed partly into the rest of the world. It was a very liquid market. So that's one thing we have. There are other things we could go on to, but no, it's not a given. So doesn't change very often. The dominant currency. Before us, it was Britain. It was the UK from the Napoleonic wars up. Even after World War I when they got really hit hard compared to us, they were still co equal with us. It was only after World War I and World War II that they lost it. And before them there were the Dutch, before the Dutch, Spanish.

[Josh Brown]

So let's really zero in on this concept. You've explained that if you're lucky, you get 100 years as the dominant currency. In some cases it's 200 years, but that's more rare. You went back to the Spanish. So they're pulling silver and gold out of the mines in South America, which gives them the ability to do this pieces of eight silver coin that everybody in the world believes in. They know the ore exists in South America, they know the Spanish have claimed to it.

[Ken Rogoff]

Exactly.

[Josh Brown]

So they say to them, so it's just this like, all right, we're on the seven seas. Anywhere that you encounter this pieces of eight, you feel good about it because you know that the country can back it up. The next phase is the Dutch and they've got these silver backed florin certificates and that's basically money.

[Ken Rogoff]

They had an innovation. They thought of paper. They didn't just have coins, they issued paper. And then that's part of the coins.

[Josh Brown]

It's back. They know it's backed by something real. And so the gilder is the coin and the florin is the paper.

[Ken Rogoff]

The paper, exactly.

[Josh Brown]

Then it's the British console. And that goes on for almost 200 years. But then something interesting happens. In the miasma around World War I, we end up with sort of two global reserve currencies because that's when the US dollar takes its place alongside the British console or the pound sterling. And you've pointed out that sometimes there are two reserve currencies and eventually the new one wins out. But it takes a while and you can kind of share it. There's nothing that's real. I mean, the Euro is not quite a replacement for the dollar overall. It's not dominant in the way that the dollar is, but it's very ubiquitous in international trade. Why isn't the Euro being thought of as the thing that could someday replace the dollar?

[Ken Rogoff]

Well, first, even in those history you give. There was a while where the Spanish pieces of aid were still floating around. They were used in a lot of the world. And it doesn't change very quickly.

[Josh Brown]

Shared the stage with the guilder.

[Ken Rogoff]

Yeah, they shared the stage with the guilder. They shared the sage with the guilder. And even for a While with the pound, people still loved the Spanish pieces of eight. They didn't have the financial depth. I mean, I think the problem. So first of all, going back just 20 years, everyone thought the euro would do better. I remember they thought the euro would reach part. Europe was the same size as the United States. Hard to believe these days. I mean, we have just killed it. While they've been very small, in the.

[Josh Brown]

Year 2000, the United States and the continent of Europe had roughly equivalent gdp.

[Ken Rogoff]

Exactly. And the stock markets were about the same, believe it or not, nobody knew. And it kind of looked like they had advantages and disadvantages. They designed their central bank very cleverly even compared to ours. But then they had this debt crisis around the time of our book in 2010, 2012, and that really shook confidence. So you can point at reasons that they don't have one country. Everybody loves the German bonds. They don't really like the Italian bonds so much. The French bonds are in between. You can at these things. But I think had the euro crisis not happened, and if they hadn't invited Greece in, they probably wouldn't happen. They'd have a bigger footprint. There's still 20% of the global economy that they've got. Europe's still pretty big, but they haven't expanded in the way. They're not used in Latin America, they're not used in Asia. They're used, but just not the same.

[Josh Brown]

Well, part of the thing is that they found themselves in a fiscal straight jacket of their own making. They were not able to respond as quickly as the United States was putting aside the central bank. The fiscal stimulus that we did here, I think enabled us to do a quicker end run to get out of the crisis than Europe could have politically.

[Ken Rogoff]

Well, yeah, but I mean, the problems. Germany wasn't in a crisis. Greece was in a crisis. Italy was in a crisis, Portugal in a crisis. So the stimulus would have gone to give a lot of money to the south, and they gave a lot anyway. The other thing I would say about Europe that people underestimate the importance of is they're not a geopolitical power. They sort of hide behind the United States and have let us spend a ton of money every year. President Trump is right about that. Actually, previous presidents said the same thing, but in a sort of less aggressive way than he has. But we were spending when The Cold War ended, 7% of GDP at the end of the 1980s. 7% of GDP. Imagine that. It's down to 3% and cumulatively spent a lot. But on the other Hand. They're not a geopolitical power. And that matters if you want to be the. The main currency in a lot of ways. Like, okay, an obvious thing is it's harder to invade you if you're.

[Josh Brown]

When you say geopolitical power. Military.

[Ken Rogoff]

Military. Military power. Yeah, it's harder to invade.

[Josh Brown]

Is it ironic, then, that one of the consequences of this current presidential term for Trump is that the Germans are now openly talking about rearming and possibly becoming military power?

[Ken Rogoff]

It's gonna help the euro actually say that. I mean, I didn't know what would happen, but I say that if they ever built up as a military power, they're going to expand. The other reason's a little more subtle. And again, you can kind of. Trump says it really bluntly, but there's all sorts of deals that go on in the global economy about how the IMF works, how the different banking systems work, how are they connected, and we kind of get our way in every deal. Part of it's we're big, but it's also a subtle subtext is we're not gonna defend you if you don't do what we want. Trump actually says that. But you go back to Nixon, you go back to Ronald Reagan, you go back to other presidents. It was there in the negotiations.

[Josh Brown]

There was no Twitter. I've been trying to make this point, and I'm not a MAGA person. I think I'm a centrist.

[Ken Rogoff]

I try to be.

[Josh Brown]

I tried. I aim to be. Probably not on all issues, but what I tell people about the way Trump speaks about Jay Powell and is a thousand op eds. The independence of the Fed is under threat. Every president did this. They just didn't do it publicly. They all had an opinion on where interest rates should be.

[Ken Rogoff]

Trump tweets it, and Nixon recorded it. So your listeners can go back and listen to the Watergate tapes where he's just chewing out the Fed chair. It was Arthur Burns. You go do this. And Arthur Burns printed money like crazy.

[Josh Brown]

He was Democrats, too. LBJ had a view on.

[Ken Rogoff]

Absolutely.

[Josh Brown]

He confronted Martin.

[Ken Rogoff]

Absolutely.

[Josh Brown]

About where rates were. Okay. So I'm not saying that makes it less scary than the constitutional crisis that could arise. Right. Okay. All right. But it's the same thing with the dollar. So Trump says things out loud like, NATO doesn't pay its fair share rather than try to glad hand people behind closed doors, which was probably the Clinton.

[Ken Rogoff]

It hasn't really worked.

[Josh Brown]

The Obama hasn't worked. So. And I don't know that this will work, but maybe people don't actually make drastic change until they're really threatened. And I think they feel threatened that they're in between a United States that's less interested in defending all of these countries and Russia, which is as aggressive or more aggressive than it's been a long time.

[Ken Rogoff]

You know, I haven't had to use a lawyer really, but what I read is, you know, sometimes you want a lawyer who's an SOB representing you. Then again, if they turn on you, it's not so great. That's right. But yeah, I mean, sometimes you need to bargain very aggressively.

[Josh Brown]

Okay, one of your. One of the great. First of all, the book is called Our Dollar your Problem. And I'm going to ask you about the provenance of that title because it's a great anecdote, one of the great things about this book and what makes it so accessible for anyone non economists. This is for anyone to read. You take these personal anecdotes from your life and your travels and you interweave them into each chapter so that people have a little bit better context about how this stuff actually touches people. You tell this story about it's the late 60s, you're playing chess competitively throughout Europe, and you come to this realization early in your life that while everyone is kind of forced to accept the dominance of the US dollar in their lives, in their economies, that's not the same as everybody unilaterally appreciating America. And you tell the story about everyone in a bar singing along to White Rabbit by Jefferson Airplane. And it's the late 60s. They know every word, even if they don't speak English. But then an hour later, they'll sit at a meal with you and they'll lecture you on everything wrong with America. So our pop culture is a huge export for us. Our Treasuries is a huge export for us. The dollar is our gift to the world. But not everybody takes it and says that they love everything that comes along with it.

[Ken Rogoff]

No, absolutely. I mean, I didn't really go to high school much in high school and was playing chess all over the place. And you get to talk with people and, you know, they knew everything about America, but they had a lot of complaints about it. I mean, we did have all kinds of problems back then. But yeah, I mean, they love you but they hate you, and so you kind. I think it's very important as an American to understand that. And it's also part of policy. I mean, I think some of our presidents haven't traveled much, and I think that's a Problem?

[Josh Brown]

Yeah. I wanted to, just as a side note, ask you about that late 60s, early 70s era for you, of traveling the globe playing chess competitively. There was a show called Queen's Gambit on Netflix. Did you watch it?

[Ken Rogoff]

Oh, of course I watched it.

[Josh Brown]

You had to have watched it?

[Ken Rogoff]

I had to watch it. I knew the author of the book, Walter Tavis, who wrote the book.

[Josh Brown]

Is that pretty close to. Was chess really the global. That big of a phenomenon as they show it in the book, where they're all celebrities?

[Ken Rogoff]

It was absolutely true. I mean, when Bobby Fischer was playing in the early 70s, he was on the front page of every newspaper, the big magazines. I would ride in a taxicab in Spain, and the driver would turn around and go, bobby Fischer loco. Because he had a reputation for being really eccentric. And it was actually very. In the United States, there was certainly an intelligentsia that was interested. PBS had their most watched show following the chess matches. But I didn't tell people in my high school, I played chess. I went to a very tough high school. I was scared to seem wimpy or something. And it wasn't till I just was in the newspapers all the time and they found out. But then I'm playing in Yugoslavia and I go into a bar and they go, why did you play so stupid today? You know, I bet on you. And it was just wonderful. I mean, to, you know, be accepted that way.

[Josh Brown]

It's a really cool thing that there was this era, and I think kind of video games came along and replaced the interest among young people for chess. I mean, I think that's, like, part of it. I don't.

[Ken Rogoff]

I mean, chess is having a really good period.

[Josh Brown]

So I want to say, well, now it's having a little bit of a renaissance.

[Ken Rogoff]

Yeah, yeah, absolutely. No, I mean, you know, it goes through cycles. That's not a good, good phase now. Okay, So I wanted to add one other thing about that. I mean, I certainly also learned about life because I was making money playing chess. In fact, I didn't earn as much money as an academic till my mid-30s, which is partly saying how little you were as an academic. But I wouldn't feel comfortable going into hotels and spending money. I would sleep in train stations and park benches and stuff, and learned a lot about life, I think, from having done that.

[Josh Brown]

Here's where I want to go next. I asked you about chess because one of the recurring memes of this era, mostly people mocking Trump's aims in the trade war or some of the things being said by the Commerce Secretary, the Treasury Secretary. They derisively refer to it as 4D chess. Is the Trump administration playing 4D chess in your estimation, as a former former traveling chess phenom, is that what you think is going on, or do you just think it's ideological and it's not strategy?

[Ken Rogoff]

Trump is right about many things. I tell my students who think he's wrong about everything. How can he be wrong about everything? You'd have to be a genius. If I gave you a multiple choice test and you missed every question, you must know the answers. Like, he's not wrong about everything. I think he's wrong about this. If he just put in a Wrong.

[Josh Brown]

About the problem or wrong about the solution?

[Ken Rogoff]

Both. So let's start with the problem. On the one hand, people are selling more to us than we're buying from them. That doesn't sound good. But on the other hand, people are putting a lot more money into the United States than we're putting into them. And it's building factories, it's bidding up our. The United States has just dominated the world the last 20 years. Okay, we could redistribute income better, we could do some things better, but it has not been a disastrous period. We are the envy of the world. So I would say the problem's not. There are periods sometimes when you run a trade balance really fast. It's a problem that happened in the early 2000s. I was writing about it, Alan Greensand was saying, no problem, Everything's good. Our financial markets absorb it. And I got to speak after him on an occasion and disagree with him. Of course, everyone had disappeared by that point when I was speaking. But yeah, I mean, there are times it's wrong, but it's really his solution. That's so nuts. If you just put a tariff on 10%, actually, I would come on and speak to you. No big deal. It's a tax. I don't like taxes. Maybe it's not a perfect tax, but he could cut some other taxes, look at the whole package and say, okay, I wouldn't do it that way, but okay. We have worked on this as economists trying to quantify how bad it is. It's just not that bad. We're a big country. We don't really import that much. 10% tariff, not a bad idea. The problem is this let's make a deal. Absolute uncertainty, chaos, which for him is part of the object of it, I think.

[Josh Brown]

I think so, too.

[Ken Rogoff]

It creates so much uncertainty. You know, for someone who's an importer, for someone who's investing. He's just wrong on it. We can go in circles about it, but if he would retreat, it would be better.

[Josh Brown]

The chaos serves one very specific aim of his, which is to be the center of attention and to be the person that everyone has to come to and plead with. And I think he's smart from the standpoint of if that's your goal, he knows how to accomplish that goal. He's got the CEOs of the top companies in every industry from not just all over America, but all over the world calling him, taking meetings with him, begging him to see reason or tailor what he's doing specifically so they could have their own loophole. He's got Tim Cook coming to him and saying, here's what I need. Please, can I have it? Might not use the word please, but that's the implication.

[Ken Rogoff]

I couldn't say it better than you said.

[Josh Brown]

So he likes that?

[Ken Rogoff]

No, he likes it. But I mean, after a while, at some point you have to deliver results, and the results he's delivering are not good. He says it'll all be better. I think the thing. I just don't really get what's on the other side of this. It could be I could draw out a map where he just. Everything we want. But I was just in the UK and so it hadn't quite dawned on me until he was there. They were putting free speech as a free speech. The UK didn't have good enough free speech. It's different than ours. This is the Magna Cartas from the uk, the birth of modern liberties there. So, yeah, you described it. Well, I can't. But if he would retreat from this, he would have a lot better four years, and so would everyone else.

[Josh Brown]

One of the reasons for the uncertainty is that there is no clear aim. So if you have a trade war and you say, my ultimate goal is for these other countries to drop all tariffs completely, and once that happens, we will do the same and free trade. And I'm a free trade ideologue. And there should be absolutely no protectionism anywhere. And that's the goal. Okay, probably you don't get it, but at least people understand what the end game might be. When you come out and say there are tariffs until the fentanyl stops crossing the border to one country, and you say to another country, I need your media to give more voice to the right wing. And then you say to a third country, no, this is just about autos. And then a fourth country, we want to sell you steak. People look at this and say, okay, so in other words, the tariff is just the place setter. So that when Trump meets with his counterpart in Country A, it's just about getting something. It's not about getting to a specific economic deal.

[Ken Rogoff]

And so let's come to the dollar. That's our Achilles heel here. So when Trump came in, our debt trajectory was already looking pretty shaky. It had looked okay to many people when interest rates were super low. But once interest rates, in my opinion, had normalized more, then suddenly our interest bill was exploding. It's more than doubled in a very short period. And suddenly you can't just think everything's free. And that idea, which was very prevalent not just on the left and parts of the right, but also in academics, that was a very popular idea and a lot of people held it. A lot of smart people. It's looking pretty dubious right now already. That is our Achilles heel. Because if the dollar blows up and we run into debt problems and have to inflate, that's going to push people out of the dollar. And then if suddenly people stop liking us as much and add even more interest to that interest going up, that's happened recently.

[Josh Brown]

I want to make sure people understand what you're saying. So, effectively, people are willing to take the US Dollar as payment in trade and hold the majority of their FX reserves in $ denominated assets like Treasuries or dollars themselves. They're willing to do that because there's this implicit bargain that in exchange, the Federal Reserve will not allow inflation to inflate away the purchasing power of those dollars. So that's what's under threat. That's what's under threat. Now, one of the things that's under threat now, we were able to get off the gold standard because people were willing to just take our word for it. We have the most powerful military in the world. We have one of the most dynamic economies, and we promise we won't inflate away the purchasing power of the dollar. And people said, great, I'll hold my ass.

[Ken Rogoff]

Let's pause on that. Okay, not right away. I mean, so go to the title of my book, Our Dollar. Your problem dollar used to be as good as gold. If you were a government. So, you know, individuals, it was in early 1930s, you couldn't get gold for your dollars, but if you're a government, you still could. And so the whole world was built on the premise that the dollar was good as gold. But we had the Vietnam War, we had the Great Society, we started having creeping inflation, we started getting challenged by The French and others started turning in their gold. And Nixon finally said, no more. Dollar's not.

[Josh Brown]

You know, you can no longer bring a dollar to the window and get its equivalent value in gold. Now you just have to go along with us because we say it's good as gold.

[Ken Rogoff]

Well, or not.

[Josh Brown]

I mean, was that 71?

[Ken Rogoff]

That was in 71. And so John, he sent John Connolly, who was the treasury secretary back then, a very larger than life Texan. He went back to confront the big leaders from all over the world, Europe, Japan, Canada, and they go, what are we supposed to do? We're holding a ton of dollars just like the Asian central banks are today. And Connally said, I'm paraphrasing it slightly, it's our dollar, your problem. And of course it was our problem because we didn't really have a plan ourselves. And we had all this inflation in the 70s. It was terrible for most Americans. It was a really low growth period. Why the title speaks to me is, first of all, the irony. It was our problem too. We didn't recognize that. And you can talk about that with the trade war. It's worse for the United States than anybody. And you know, second, it's something that captures the arrogance of the United States. And I don't want to say I'm very proud to be an American, but sometimes I hear this arrogance which doesn't have a sense of humility and we make mistakes and I feel uncomfortable with it. Maybe you don't, I don't know. But it spoke to me. And so that's why, you know, that's why I chose it.

[Josh Brown]

It's a very evocative statement to make because that's not what America is really riding high in that era. To your point, we're about to capitulate in Vietnam and we've got civil rights issues that are only a year or two in the rearview mirror, if at all, that were ugly in the eyes of a lot of the world. And to sit in front of foreign finance people who are worried that all these dollars they're holding are about to be inflated away and say, it's our dollar, but it's your problem. I think it's a brilliant title for the book.

[Ken Rogoff]

It Sunk the Dollar. That was a period. Dollar dominance had risen to a peak and it went way down after that. It only started building up when the Fed figured out what to do. Under Paul Voelkel in the early 80s, we had really high inflation. He raised interest rates, I mean the short term interest rate to almost 20%. Can you imagine Powell had to do that. And I worked at the Federal Reserve back then. I was a junior economist. And there were people marching on the Fed every day. Car dealers mailing in a million keys of cars they couldn't sell. Builders sending in two by fours for things they couldn't build. It was chaos there. And Volcker really stood his ground.

[Josh Brown]

You may never have a Fed chair again. Who's got the guts to do something like that to break the back of inflation. It'd be very hard to convince a president you're gonna have to sacrifice your term so that I could do this and have the President say, yeah, sure, no problem. I mean, this is why Carter is a one term president.

[Ken Rogoff]

This is why Carter was a one term president. And by the way, our debt back then was 30% of GDP and not 120% of GDP. So when he's raising interest rates and it turns over on all the debt, it's quite a headache.

[Josh Brown]

Here's something the Trump people will say publicly or they won't quite say it, but they'll hint at it. But it might be true. Okay, you don't like what we're doing, you don't like the trade war, you don't like to have to negotiate one on one with Donald Trump. What else are you going to do? Meaning the renminbi is not going to become the world's reserve currency. It may become Russia's reserve currency or Iran's reserve currency, but it's not gonna become the reserve currency. Probably in Europe and probably not in Latin America either. You've got gold, you've got Bitcoin, you've got the Euro. But in the end, what things come back to is we have the technology, we have the market dominance, we have the biggest stock market, we have some of the highest per capita incomes, we've got the military. It's really hard to imagine a scenario where the dollar completely loses its dominance to one other currency.

[Ken Rogoff]

It won't, but we could lose a lot of the advantage. So think of market share. Our market share rose a lot after the financial crisis, believe it or not. I mean, I would say in some ways we caused market share of global gdp, market share of global p. But market share of, for example, how much trade is in dollars, market share of how much financial instruments are in dollars. The dollar exploded. No, it didn't have to happen. Europe. Yes, Europe's not going to. Nobody in New York's going to be using the Euro. But you said Latin America and Africa. Oh, believe me, they use the Euro. Some already. They'll use it more, they'll hold it more. And the renimbi, we think of them. Who wants China to know anything? There are a lot of African leaders and Latin American leaders, South Asian leaders who trust China more than the United States. Maybe they have human rights abuses or something, or a civil war going on. And it's not just Russia, it's a lot of the world. And so as our market share shrinks, and it could shrink a lot, our interest rate will go up, we'll have less security. We didn't talk about that. But the dollar dominance lets us see everything going on in the global financial system because it passes through the US because we make the rules. And the Chinese want to change that. So I thought that was coming without Trump. When I wrote the book, I thought if Harris won, I mean, obviously who could expect exactly what happened. But I thought we'd get another burst of inflation the next five to seven years. I thought China would continue, continue breaking free. I thought Europe might expand its footprint. So I thought dollar dominance peaked 10 years ago, not just today. When Trump entered the scene, it had actually fallen quite a bit. By some of the measures I use. He may have accelerated it a lot, but it was coming. I mean, these things don't happen overnight. They're not suddenly, but we were headed in that direction.

[Josh Brown]

So in a world where the dollar loses market share and the United States loses some of its dominance in some of these international endeavors, what does that mean for the everyday US Consumer? Lower price earnings multiples for our equities, lower valuations for our small businesses, Higher borrowing costs, more volatility in the prices of things like these are the negative externalities of a world where we're headed in that direction.

[Ken Rogoff]

Yeah, it's sort of death by a thousand cuts. It's not necessarily one big.

[Josh Brown]

It's not an event. It's a mentality that takes over.

[Ken Rogoff]

Well, for example, if you're a medium sized business in the United States, you can borrow abroad if you want to. There's no other country where that's true. Because people want dollars and if you have dollar income, they'll take you. It's going to affect mortgage rates. You'll see it. When we have another crisis, I'm sure something will happen. I mean, I don't sound dark, but we had the pandemic, we had the global financials.

[Josh Brown]

It's every seven years.

[Ken Rogoff]

Yeah, well, I would say a recession every seven years. But right now it seems like even more things happen. And when it does, if you look at those events you mentioned already, the US Borrows twice what everybody else borrows. Three times what everybody else borrows. Everybody else is looking and, you know, disbelief.

[Josh Brown]

We haven't had the consequences yet.

[Ken Rogoff]

We haven't had the consequences.

[Josh Brown]

Right.

[Ken Rogoff]

But as our debt moves up, as the dollar dominance moves down and we try to do that, we'll get blowback faster and you'll feel it. So I think, you know, that's when we'll really be put to the test. Maybe sooner than that, by the way, but some crisis, and I don't. Will Federal Reserve independence survive that situation? Okay, forget about Trump. Anyone who's president and they would like interest rates to be lower, there are other tools besides inflation. So, yeah, I mean, it's definitely something where once we've lost it, we'll wish we had it.

[Josh Brown]

Do you view the decline of the dollar's dominance as inexorable or. Because one of the things that you do in your book, which I found really effective, you point out these turning point moments where things might have gone differently in your mind. Is this just a question of degree or a question of how long it takes, but it's gonna happen no matter what, or are there off ramps and what are they?

[Ken Rogoff]

Well, there's definitely an off ramp. If we just govern ourselves unbelievably well and suddenly we.

[Josh Brown]

That's probably not gonna happen. What else. What else can we. Any quick fixes in mind?

[Ken Rogoff]

No. I mean, I would definitely preserve Federal Reserve independence as long as you can, but that's easy to say and not as easy to do in practice, and both sides have problems with that. So, no, there's not an easy offering.

[Josh Brown]

Has the Federal Reserve earned the amount of independence that they demand? And I know it's in the Constitution, and I understand from 1913, it's not in the Constitution. Sorry, you're right.

[Ken Rogoff]

People need.

[Josh Brown]

People think it is, but it's not.

[Ken Rogoff]

Congress could put the Fed out of business in a week.

[Josh Brown]

What's in the Constitution is that the President can't unilaterally remove the heads of certain agencies without Congress weighing in. But not the Fed.

[Ken Rogoff]

Well, it's in the Congressional. I don't know that the Fed's embraced in there at all. I'm not a lawyer, but I think that if the President had Team Congress completely behind him, they could make it disappear. The Fed, actually, they have this incredible building in Washington. Have you ever been there? To the Federal Reservoir?

[Josh Brown]

I have not. I've seen from outside. I've not been inside.

[Ken Rogoff]

It's really Impressive looking. My thesis advisor, Rudy Dornbush, who's a great man, said central banks have to have really expensive over the top buildings. So they look like money pillars.

[Josh Brown]

They have to be pillars.

[Ken Rogoff]

So they didn't have that building when the Fed was formed. They didn't have it till the mid to late 30s. They had a little room in the Treasury. They can get stuffed back into that little room in the treasury if Congress wanted. And by the way, the progressives have all these ideas that are not as out to lunch as you think of a future of stablecoins and central bank digital currencies. It's going to suck money out of the banking sector. It's all going to go into Treasuries, even in treasury backed stablecoins. And they say, well great, then we will decide how to lend the money. It won't necessarily be in the private sector. So there's a lot of pressures coming on Federal Reserves from both sides. Both sides, Both sides. People who think Trump causes everything. It's us, it's our. You know, both sides have these visions of what they want to do. They want to use the Federal Reserve for their own purposes.

[Josh Brown]

Yeah, I think there's a wing within the progressive side where they want to abolish the irs, but not for the same reason the right wing does. They actually want to just tell you what taxes you owe and have it be automatic. They don't want there to be any negotiations or any professionals sitting in the way of that. Social credit systems where do you believe in the right things? Do you say the right things on your social media? Great. Therefore you get more credit. You get more credit for supporting the quote unquote right side. And the other people that don't agree with us, they get less credit. So there's all kinds of paranoia. But I guess my original question, there's so much of an outcry, he better not dare fire Powell. And I'm in that camp. I like things the way they are probably because I'm 48 years old and I have a family. I'm not looking for disruption. But there are people who would say, look at how ridiculously we careen between disinflation, huge inflation during the pandemic, all these mistakes along the way about not watching over the banks. The Fed was the regulator of the banks leading into the financial crisis. Look how badly they screwed up. Covid. They thought it was supply chain, they thought it was transitory, it was about the labor market all along. Has the Fed really earned the level of independence that they Currently, Enjoy.

[Ken Rogoff]

Let me tackle two parts of this.

[Josh Brown]

Because they are not popular. The Fed is not popular.

[Ken Rogoff]

I actually wrote the first and most influential paper on central bank independence when nobody had independent central banks. So I'm talking my book here to think it's a great thing, but I think it's worked very well all over the world having independent central banks, even in countries with dubious governance. Now, have they earned it? I always ask myself, could I have done better? And I think something I get from chess is when I was a kid and getting good fast, but I would look at a game and somebody who was really good would be playing against Bobby FISCHER on move 33, they did something dumb, and I'm going, I could beat them. And when I started playing one mistake and you. When I started playing them, I realized, wait a second, I couldn't even get to move 15, you know, against Bobby Fischer. And you look at the Fed's mistakes, you have to look at all the things that they did right, you know, along the way. And I asked myself, could I have done a better job in real time? And I think, you know, Bernanke Powell, for the most part, Greenspan, I can't say I would have done better. And Volcker, certainly not. So there's some people who say, well, you know, we should go back to gold. That's a popular thread and conservative thought. The Wall Street Journal will publish pieces by those who think that's a great idea. That's worse than Trump's trade policy.

[Josh Brown]

I mean, because it's more restrictive, because.

[Ken Rogoff]

You can change your mind. You know, it's not like some computer program's forcing it on you. It never lasts. That's what the problem is with the gold standard. And it's like you set up all these landmines when you walk out of it, and then you have to step on every landmine when you do. So. Yeah, they're not perfect, but it's worked the last 20, 25 years, even in the United States, maybe since the 90s, it's worked pretty darn well. Not perfectly, but some of this is also forecasting the mistakes. Like the progressives like to say, oh, we should have spent so much more money to come out of the financial crisis. Not if you had the IMF and the Federal Reserves and the White House's forecasts. And then in the pandemic, I mean, I don't know about you. I thought it was gonna be worse than it was. And I think a lot.

[Josh Brown]

Oh, I definitely did a lot of.

[Ken Rogoff]

The forecasts, did so if you thought it's gonna be worse, you'd keep the interest rates lower, you'd spend more. And then everybody says, what freaking idiots that we had inflation. What freaking idiots. Well, you didn't know what it was gonna be. So I like to ask myself, like I did when I was a chess player, don't just look at move 33, look at the whole game they played. Would you have done this? Would you have done that? And it's been a pretty good system.

[Josh Brown]

Okay. So I wanted to just, I wanted to kind of conclude by asking you if there were to be a new medium of exchange or currency on the scene that could do a lot of the things that the dollar does, but maybe not have all that baggage. There are a lot of people who genuinely believe that that would be bitcoin. It's decentralized, it's native to the Internet. It doesn't require there to be a military backing it because it's not sovereign. There are a lot of aspects to, I wouldn't say all cryptocurrencies, but to Bitcoin specifically, that make it unworkable. Like you can't do the amount of transactions that you do in dollars in bitcoin, even if you had a thousand years to get a year's worth of transactions done. So a lot of things about it that are unworkable. But is that concept something that's not owned by any one country but that's internationally accepted? Is that probably where the real challenge to the dollar comes from? Because it seems unlikely to me that it's going to come from another country's own sovereign currency, if there's any challenge at all.

[Ken Rogoff]

Well, I think the challenges are going to come at the edges from China and the renminbi. That is where the challenges. But crypto, first of all, it already does challenge the dollar. In the global underground economy, people are avoiding cash, as they don't. Well, that's probably 20% of global GDP. That's my estimate in the book. And I think consistent with a lot of other people's. That's as big as Europe has. I mean, that's a pretty big slice of the pie. So bitcoin and the more derivatives, the.

[Josh Brown]

More black market, the non record transactions are 20% of the economy.

[Ken Rogoff]

Yeah, yeah, yeah. In Europe it probably averages. And even in Germany it's probably 15%. In France, maybe a little lower. In Italy it's like a third of the, well, 30%. And Greece even more. And then you go to India and China, it's even more than that. So already that's a big thing, by the way, in trade between China and Russia. Today, of course, cryptocurrencies are being used as part of it. But it's very hard to replace the dollar or a fiat currency in legal transactions. So there are a bunch of reasons. One is Bitcoin's very volatile, so there's some purposes it can't serve as well. But I would say a bigger reason is the government makes the rules. And there's a very nice passage in Harari's Sapiens. He's got a few chapters sort of saying, well, if everyone thinks bitcoin's the currency or he doesn't use Bitcoin, then that's the currency. No, no, no, no, no. That's just wrong. The government can make the rules of what bank takes banks take. They can make the rules of what you pay taxes in. They can make the rules of what they pay their suppliers. And this creates network effects. They can make it hard for you to.

[Josh Brown]

Bitcoin doesn't have a government that can do that.

[Ken Rogoff]

Bitcoin doesn't have a government. What they do have at the moment, and this is a critical area, is a big infrastructure around it. Things like Coinbase that are really banks, they're just banks. They have a lot of bells.

[Josh Brown]

They're holding currency in the end and.

[Ken Rogoff]

You can do transactions. And a lot of when we're talking about bitcoin being used, maybe 95, even 98% of the transactions are like that, that can be regulated. I mean, Trump's saying he doesn't want to, but that can be. And so the government has a lot of control over this. So what I say is the private sector innovates, but the government eventually regulates and appropriates. And so if the government really likes bitcoin, we could have something like it. But I suspect we will have a central bank digital currency. It might be around stablecoins, definitely relatedly, but I don't think it's going to be bitcoin except in the underground economy where you can't control the on chain transactions.

[Josh Brown]

So one of the things back to Sapiens, one of the ideas in that book is the idea of a legal fiction. I think he uses the example of Volvo as a legal fiction. Everyone agrees that Volvo exists, but it's not naturally occurring. It's all paperwork. It's an article of incorporation. There are people who work there, they get paid a salary. We just, we all kind of agree that Volvo is a thing because it's a thing. And if enough people believe that it exists, then it exists. I think bitcoin is headed to that plate. I'm not like a bitcoin lunatic, I own it. But I'm not like an evangelist. But it's headed to that place where if enough people believe that it's real, that's all you need. And you point out coinbase. I would point to the fact that belief in or advocacy against cryptocurrency became one of the most important factors in some local elections, specifically in Ohio. They threw the senator out because he was anti crypto. The person came in, wasn't pro crypto, just not against it. And that was good enough. They raised enough money in super PACs that they were able to replace somebody sitting in Congress. It's just starting. So I don't know that there's an organized anti crypto front. I know that there's a highly organized and well financed pro crypto front and that might be enough so that it gets to the point where it's a legal fiction and it's got a widespread enough base of belief that it does become legitimized.

[Ken Rogoff]

Let me challenge you here. I think it'll be around forever. So I don't hold with Jamie Dimon and Nouriel Roubini and Paul Krugman or saying it's going to be worthless. No way. Not unless everybody, you know, there's no underground economy anymore. But in the legal economy, it's, it's, it's, it's not going to, it's not going to stay at a big level. It's, we're going to have a crisis in the crypto. We did already.

[Josh Brown]

I think we have one every year.

[Ken Rogoff]

We had one with ftx, but as it gets legitimized, it goes into pension funds, it goes into insurance companies. And we're going to find out. We have to regulate that banking structure. And regulating it can mean know your customer, see everything. And a lot of the appealing things won't be there.

[Josh Brown]

So I mean having my having BlackRock, the world's largest asset manager, having their fastest growing product be a bitcoin, a spot Bitcoin etf, having Fidelity now banking crypto alongside stocks and bonds for regular Americans, a lot of boomers. Robinhood's got 30 million users. I think 85% of them own crypto. That's the next generation of investors. They treat crypto just like they do any other asset class. They diversify with it. I feel like it's crossed over. I mean, you seem more skeptical than I do.

[Ken Rogoff]

You go through cycles in these things, I mean, stablecoins, I think will come out at the other end and bitcoin will always be there, but I don't think it's going to expand outside the underground economy.

[Josh Brown]

So bitcoin is not the next dollar.

[Ken Rogoff]

Bitcoin is not the next dollar. It's a thing, but it's not the next dollar.

[Josh Brown]

Okay. I've taken up a lot of your time. You've answered so many of my questions. I absolutely loved your book. I just wanted to say thank you so much for joining me. And I want to tell people they can get this. Amazon, Barnes and Noble, bookstores, everywhere. Yes, yeah, of course. And of course they can follow your writing as I do. You're about once a month for Project Syndicate. I've been reading your stuff over the years and I've learned a lot as a result. What else are you doing these days? You have a whole promotional blitz for the book or where else are you popping up next?

[Ken Rogoff]

Well, so I spend a lot of my time on research. And so there are parts of the book about what's going to happen to China, what's going to happen to real interest rates. When I talk about the dollar's footprint shrinking, that's a big research project to think about that. So actually that's what I spend most of my time doing. And it was really fun to try to put it into this book and pull it together, put in the life to lean into. My age that I've seen all these things. I've met with all these world leaders and these policymakers. But, yeah, a lot of my time is sort of spent with a pencil and paper and trying to do stuff.

[Josh Brown]

I think you have a nice balance. You have all these great life experiences at very high levels. You, you've met a lot of important people and then you've got all this time that you've spent researching and I think both sides of your life come through in the book. And I just, I sped through it. I loved it so much. So I can't recommend this enough. It's called Our Dollar. Your problem. Guys, thank you so much for watching, Listening. Ken, thank you so much for your time. Really appreciate it.

[Ken Rogoff]

Thank you so much. I wish I could have you with me all the time explaining what I'm trying to say.

[Josh Brown]

Let's go sell more books. All right, thanks again. Thanks for watching. We'll talk to you soon. Guess who's back? Ladies and gentlemen, welcome to the world famous compound channel. On YouTube or Apple or Spotify, wherever you're, Wherever you're getting me. It's so nice to be with you. I have my co host of what are your thoughts? Here with me today. His name is Michael Batnik. Michael, say hello to the folks.

[Michael Batnick]

Hello to the folks. What's happening? How's everybody doing? Good. Same.

[Josh Brown]

So for relatively newer viewers and or listeners, I don't know if you guys realize how long we've been at it. We've been doing this since 2019. Six years. Does that sound right to you? This particular show? What are your thoughts?

[Michael Batnick]

Wow.

[Josh Brown]

I mean, I know animal spirit is a little bit longer. It's a little bit longer running right. That's 2017.

[Michael Batnick]

But six years is six years, man.

[Josh Brown]

Six years. All right. And, and better than ever. Better than ever. I don't know, I don't know if you've seen the. I don't know if you've seen the reviews and the, and the video views.

[Michael Batnick]

I feel like I'm at the peak of my powers. Personally. I don't see the reviews, but I feel.

[Josh Brown]

All right, let's, let's thank our sponsor real quick and then get right down to it because it's earning season and there's a ton of stuff here.

[Michael Batnick]

A lot to get to today. So today's show is brought to you by our sponsors at Betterment Advisor Solutions. Imagining a future as a first step.

[Josh Brown]

Investing in that future with Betterment Advisor Solutions is the next. Whether you're launching your own practice, looking to streamline client onboarding, or just searching for efficient ways to scale your firm, Betterment Advisor Solutions is here to help.

[Michael Batnick]

They automate to make tax optimization simpler, and they provide support to make administrative tasks easier.

[Josh Brown]

At Betterment Advisor Solutions, they are building innovative technology for anyone who's ever said, I think I can do better. So grow your ria your way with Betterment Advisor Solutions.

[Michael Batnick]

Learn [e-mail] advisors investing involves risk performance not guaranteed. Josh, let's get to the show.

[Josh Brown]

All right, so first things first. You got that Siegelman stables hat at the Knicks game. I think they sold them out. I don't think there's any left for, for game two. Okay.

[Michael Batnick]

They had thousand game five, son. Oh, you mean there were.

[Josh Brown]

No, no, I'm saying I don't think they're going to have them there tonight because I didn't get one. I was going to ask you to get me one, but I think they're sold out. But it looks, it looks good on you. I like. Thank you. Let me show off a really quick, brand new piece of merch. Whenever we do Something new. We tend to show it off here first and give our live viewers the first crack at it. These are limited edition. We're not gonna have a ton of them. This is the official Markets in Turmoil T shirt. How could you trade without this shirt? Like, I don't even know what he. What? Oh, it comes in three colors. That first color was navy. You know what this color is called, Mike?

[Michael Batnick]

This is royal blue.

[Josh Brown]

Cobalt.

[Michael Batnick]

Okay.

[Josh Brown]

Royal blue is for pikers. And this is purple. I like. Guys, these are not available anywhere else other than the compound. Nicole just tweeted the link. We'll have the link in the description on all the platforms. Get them while you can. The official Markets and turmoil shirt is the most legit way to represent the compound while you are navigating these markets. All right, let's start with Ray Dalio. It might surprise you, but he is somewhat pessimistic and concerned about the situation that we find ourselves in. And not to be overly blase, but the stock market is coming off five straight rallies in a row, and he's still pushing this through. Like, he's still going through with this line of thinking, which is that it's too late. The changes that were probably going to happen anyway and Trump has just accelerated are you can't recover. So I just want to read you the opening two sentences and then get your reaction to the piece. And he posted this on X.com and I'm assuming elsewhere. This is Ray, one of the greatest hedge fund managers of all time. Okay, get stipulated. Some people believe that the tariff disruptions will settle down as more negotiations happen and greater thought is given to how to structure them to work in a sensible way. However, I am now hearing from a large and growing number of people who are having to deal with these issues, that it's already too late. And then he goes on to say, whatever happens with tariffs, these problems won't go away. And that radically reduced interdependencies with the US Is a reality that has to be planned for. Ray's got deep ties and roots in China. He's been managing money for very powerful and wealthy Chinese people for decades. So I think that's probably where that's coming from. What do you think?

[Michael Batnick]

Yeah. So I don't know Ray Dalio personally, but he's been. He's been on the beat that the US is at the 1937 yard line, that the debts that we've been creating are unsustainable, and he is ostensibly been looking for that unsustainability to not be sustained and to go a different direction.

[Josh Brown]

He's been looking. He's been in search of the trigger, and I. And now he thinks he's found it.

[Michael Batnick]

Yeah. So maybe he's right.

[Josh Brown]

Yeah.

[Michael Batnick]

All right. So even though he's been saying this since at least 2017, that we've been on the precipice of something not great, I don't want to then discount what he has to say because I don't necessarily disagree with him. He obviously knows a lot more people, important people in China than we do. Is he being hyperbolic? I don't know. But I do agree, bottom line, I agree that a lot of the damage that has been created over the past 28 days or whatever it is since Liberation Day, that can't just be undone with a tweet.

[Josh Brown]

People can't forget that, too. That's. I think. I think so. There are a lot of people, like Wiesenthal and Tracy are mocking this idea that, like, in Asian culture, it's so important to save face. And they, like, tweet it, like, mockingly, like, are they saving face? I don't even think it's about saving face. I think it's just like a wake up call. The Europeans and the Asians just looking at the situation and saying, like, oh, we can't rely on this shit. These people are crazy. Like, look who they look who they look, how they speak now. They're not doing this behind closed doors. They're, like, tweeting this stuff.

[Michael Batnick]

Like, we counterpoint.

[Josh Brown]

Go ahead.

[Michael Batnick]

We are the consumer to the world.

[Josh Brown]

Yeah. No stipulated. But also, there's an implicit deal there. We're the consumer of the world. And the reason why is because the world has agreed they'll keep buying our debt. They will. They will finance our consumption of the things they make. That was the deal.

[Michael Batnick]

Yeah, but wait, but you.

[Josh Brown]

But you said there's a reciprocity there.

[Michael Batnick]

But. But you said it last week. It's not as if they're financing our debt for. For nothing. They're. They're. We're buying their goods and they're turning their dollars into reserves.

[Josh Brown]

Yes. It's a system. Yeah, it's a system.

[Michael Batnick]

So the question is, it just doesn't.

[Josh Brown]

Work for every single person.

[Michael Batnick]

The question is, was April 2025 a watershed moment in the history of international trade, monetary policy? I don't know. Maybe. Like, for real? Maybe.

[Josh Brown]

All right, if I. If I had to guess. If I had to guess, like, what's the better bet? We look back on this in three years and say, Everything changed. Or we look back on this three years and say, remember that? That was weird. Lol.

[Michael Batnick]

Anyway, I'd said the latter.

[Josh Brown]

The latter is more likely or less likely.

[Michael Batnick]

More likely, in my opinion, that we.

[Josh Brown]

Look back on this and it didn't matter.

[Michael Batnick]

Yeah.

[Josh Brown]

Okay. I hope you're right. I'm not sure how I feel.

[Michael Batnick]

Honestly, I don't know what confidence I have on that. It's not like I'm not dismissing the fears. I would say, I don't know, like, am I 65% confident?

[Josh Brown]

Okay, I am confident that this is not a rug pull and that if Ray ends up being right, it's not an all at once thing. It's gradual and probably imperceptible to most of us because we're not dealing in international trade. But it's just like this kind of. And Rebecca Patterson told us something similar. Like it's not like this earthquake that happens. She called it more like a drought where the capital. Just like gradually there's less and less and less of it. Again, we don't have the answer. Like what's the alternative to the US dollar? What's the alternative to Treasuries? There doesn't have to be one single replacement. It can just be a market share issue where we go from 30% to 20% and it happens over 20 years and maybe we don't care or maybe it's really meaningful and we look back and say, I can't believe we blew it. We had the ultimate situation. But that's the way that smart people are talking about it. Ken Rogoff told me that yesterday.

[Michael Batnick]

It's the right question to be asking.

[Josh Brown]

This is right. Number one, we are on the brink of the monetary order, the domestic, political and the international world orders breaking down due to unsustainable bad fundamentals that can be easily seen and measured. Two, the progression of events leading to these increasing disorders is similar to those that have progressed many times throughout history. So this one looks like a contemporary version of the old story. Three, there is a.

[Michael Batnick]

Wait, whoa, hold on. Just on the two. He's dying to see this movie again. Not that he wants a world to burn. I'm not accusing him of that. But he's. He's been saying, oh, I think you're right for.

[Josh Brown]

He's been prophesying it for long enough that at this point he's now rooting for it. I would agree. Even if he doesn't want to, I think it becomes subconscious. How many times can you go to Switzerland and sit there outside on that CNBC set and say the same thing before you actually want to see it come to fruition.

[Michael Batnick]

So if he's right, this, like, begoats him forever. Yeah, because he could say, I was. I've been warned. I've been warning about the situation for a decade, and nobody listened to me. Nobody took me seriously.

[Josh Brown]

Okay? So it's. If he's right. If he's right, this undoes, like, seven decades of precedent. So, like, we. We. We basically had this agreement in the Bretton woods thing, was just kind of this agreement that everybody said, all right, we'll go along with this, because clearly the United States is the last superpower and the most reliable superpower that we're all allied with, and this is just going to be the way it is. And the dollar is going to have this centricity, almost like the sun is to the solar system. And it was. Okay. Like, it did its job. It didn't work for everyone necessarily. But, like, free trade overall has been good for society.

[Michael Batnick]

It's been miraculously good for the globe.

[Josh Brown]

Yes. And it's pulled a lot of people out of poverty, and it's led to tons of innovation that has made life longer, life better, more tolerable. Yes, of course there are winners and losers, but we have to look at these things on balance. Then in 71, you're fighting inflation, you're fighting in Vietnam, you're losing both. Nixon pulls us off the gold standard. The rest of the world's like, wait, what the. Do you mean, what is the dollar backed by? And basically we said, it's like, don't worry about it.

[Michael Batnick]

Us.

[Josh Brown]

Yeah, you got to live with that. It's us. We got this. And everyone said, okay. And that's 50 years. Yeah, that's the last 50 years. That's the history. So now, you know, from Ray's perspective, that's what's being threatened and probably being undone. Maybe. And maybe now it's bipolar. It's the renminbi half of the globe, and the dollar half of the globe. I don't know, maybe you see some countries. Maybe you see the Latin Americans using more euros, maybe, maybe yuan.

[Michael Batnick]

I doubt that.

[Josh Brown]

I don't know. You doubt that Brazil, which trades in huge abundance with China, would not want to have more yuan reserves?

[Michael Batnick]

I mean, I was talking about the US Specifically. No offense.

[Josh Brown]

Well, no offense taken, but I don't know that anyone can really know, because we know that gold is being stockpiled by every sovereign and central bank around the world. No denial of that. So we know that there are people that do want an alternative to a greater degree than they did even as recently as five years ago. So that part we know for sure. We don't know anything else. One of the big questions has been will foreigners sell all of their US Assets? Again, that fear is probably overblown, that it's going to be some earthquake of people dumping their own holdings because they're going to knock down their valuations if that's really the way they want to behave. So it'll probably be more of a trickle. Let's put these charts up. This is a Deutsche bank chart shared by Tracy Alloway. We're not zoomed in on, but what's going on in that top pane, top left pane, that's inflows into foreign domiciled ETFs that invest in US bonds, sets a one month rolling sum priced in billions, billions of dollars. So it's gone negative, but it's like negative $2 billion on a one month rolling basis. It's not this avalanche of money out of Treasuries, at least on the part of foreigners holding ETFs. Am I explaining that right, Michael?

[Michael Batnick]

Yes.

[Josh Brown]

Okay. In the right side, this is inflows into foreign ETFs for US equities. Again, it's barely negative. So I think the thing to say is that no, it's not like massive outflows out of U.S. stocks and bonds on the part of foreign investors, at least not by looking at ETFs. But it's like a buyer strike. Do you agree with that? It's just like they're not dumping, but they're not buying at the same rate that they were up until now.

[Michael Batnick]

Yeah. And I would also say if you zoom out and you look at total holdings, it is so far up into the right. And this is a dip. So that's important too.

[Josh Brown]

This is right. This is not a complete trend change, what we're seeing so far. All right, we're going to get to earnings in a second. I want to do this political stuff really quickly in a nonpolitical way. Trump just celebrated 100 days in office. Unless you've been living under a rock, the media has been gleefully reporting that it is the worst first quarter in the stock market for any U.S. president. Back to Nixon during a really horrible era for the US Economy. And I don't think things were as bad now as they were during Nixon's term. Rick Newman did a bunch of stuff at Yahoo Finance. He's got a great column. I'm just showing the charts here because I think that's really all we need to tell the story. The red line is Trump term two. That's stock market performance at the hundred day mark. As you can see, he's behind Biden. Obama 2. Trump 1 was the third best on here. Obama term one was the fourth best. Both Clintons are back to back then George W. Bush, then George W. Bush. So Trump term two is the worst in modern history. But again, it's 100 days. It's not going to define his entire presidency. Next chart.

[Michael Batnick]

I hope not.

[Josh Brown]

Look at this. What do you think about this? Consumer sentiment? The worst out of every president. And just the rate of dissent is pretty. It's pretty alarming. Yeah, yeah. This is 50% consumer sentiment is at. Are these percentages or 50 points? How do they quote University of Michigan consumer sentiment?

[Michael Batnick]

Like Dow points?

[Josh Brown]

It's like one to 100. No, it can't be one to. I don't know. It's horrible. Next chart. This gets a little bit more specific. What people are unhappy with. So the Trump economy at 100 days. Jobs, manufacturing jobs, income and inflation. And when you look at it this way, it's kind of middle of the road. Right. Like relative to the other presidents.

[Michael Batnick]

Yeah. Nothing really monstrously stands out here.

[Josh Brown]

So it's interesting, like on the actual data itself, nothing bad has really happened. And again, it's only been 100 days. So like all of that stuff is really stock prices and sentiment. All right, last thing. This is the approval rating at the hundred day mark for Trump term two. The only worst approval rating we ever saw was Trump term one. I don't think this is like anything other than politics. Like obama in term one had the highest 100 day rating. People need to remember that's coming out of the financial crisis.

[Michael Batnick]

Right, Right.

[Josh Brown]

It could not have, like things could not have been worse. And then Obama's inaugurated in January of 09, March 09. The stock market starts to rally furiously. And I don't think the whole thing is about stock market, but that definitely helped.

[Michael Batnick]

Anyway, it's all part of the same thing. Let's move on.

[Josh Brown]

What are your thoughts on Trump's 100th day? Has it been everything that you hope for?

[Michael Batnick]

I love it. I like can't wait for the next hundred.

[Josh Brown]

Can you remember an about face this dark from what people's expectations were to the reality of the first three months? It's pretty jarring, right?

[Michael Batnick]

No, it's wild. Yeah. All right, let's do some quarter stuff.

[Josh Brown]

Okay.

[Michael Batnick]

So we we are in the heart of earnings season and it's mixed as it always is. But let's throw up this first chart from chart good. We're looking at 9.7% year over year earnings growth for the S&P 500, which has been revised higher by 3%. Not nothing how since the start of earnings growth.

[Josh Brown]

I'm not even joking. I'm not even joking.

[Michael Batnick]

I'll tell you, okay? I'll tell you. So number one, healthcare up 37%. Communication services. Number two, energy and materials and staples are in last. And let's get to some specifics, shall we? Josh, wait.

[Josh Brown]

Can you stay on here?

[Michael Batnick]

Sure.

[Josh Brown]

We're saying that health care, the sector grew earnings by 37% year over year.

[Michael Batnick]

It's a mix.

[Josh Brown]

What the hell did we cure?

[Michael Batnick]

Both actuals and estimates.

[Josh Brown]

I'm still a wreck. How did we do that? Not rhetorical.

[Michael Batnick]

Well, no, I have my silence. I can't answer. I don't know. I don't follow the healthcare sector that, that closely.

[Josh Brown]

All right.

[Michael Batnick]

In fact, let me.

[Josh Brown]

Communication services don't follow.

[Michael Batnick]

All right, let's get into it. Let's get into it. All right, so this is from Google's earnings call, which was last Thursday. YouTube Music and Premium reached over 125 million subscribers. That puts YouTube at a 62 billion dollar run rate, about one and a half times the size of Netflix. That's from App Economy. Yeah, that's monster. Look at this chart US TV time market share, YouTube versus Netflix. Netflix has been stagnant and YouTube keeps eating. It just keeps going higher.

[Josh Brown]

Okay, so here's my hot take on this. I think the customer of YouTube TV, which I am one, is also almost a guaranteed Netflix subscriber. I don't like. I don't think there is anyone that's paying Alphabet paying YouTube $84 a month for YouTube TV, which I currently am. That also isn't giving Netflix their 20 bucks. I like, I think that's almost universal and it's just, it's a replacement of cable. I'm not saving any money. I ripped out all those Verizon fios boxes two months ago and I'm really glad that I did. But my bill is the same. I'm pay. I'm just paying. I'm paying YouTube for basic TV and I get like a lot of sports and I get all the news channels, the cable channels, and I get all the broadcast channels. Right? Then I'm paying Netflix. Then I'm paying Max. And I just think like all we really did was take the same dollar amount that was going to Comcast and FiOS and just hand it to Google. I mean it's great for Google because now they're getting, now they have broadband customers that are just getting wi fi from them. And then a lot of those people are probably also buying TV through them and they're not really competing with Netflix. It's like they're complimentary services.

[Michael Batnick]

Yeah, yeah, I would agree. So, so last week or two weeks ago I was saying I'm really looking forward to Google's earnings reports specifically to see what happens with search. Like, is the ChatGPT application of the Internet going to show up in Google's earnings? And the answer is no, not yet. In fact, not even a little. So YouTube ads, I'll get to the search in a sec. YouTube ads went from 8 billion a year ago up to 9 billion, give or take. Pretty remarkable when you look at Google. Google advertising 61.6 billion up to just under 67 billion. Pretty amazing. They saw double digigit income, double digit.

[Josh Brown]

Gains that, excuse me, 6, 60, 61.5 to 66.8 percentage wise. What is that, 7 or 8% growth?

[Michael Batnick]

10%. So 10% or so?

[Josh Brown]

10, 10 fold.

[Michael Batnick]

Pretty amazing. And look down, look at the operating income from from 25.4 billion up to 30.6 billion. Pretty amazing.

[Josh Brown]

Now they're executing.

[Michael Batnick]

They're executing. The stock still trades like shit. I am a weak hands owner of it.

[Josh Brown]

I'm out.

[Michael Batnick]

Yeah, I know it's not acting great. It's cheap maybe for a reason. It rallied 5% and it's giving back most of it.

[Josh Brown]

So it always, so it always does that. It's one of the cheapest, it's one of the cheapest stocks, the NASDAQ 100.

[Michael Batnick]

Yeah, if it rolls. I'm probably gonna bail to be honest. So we'll see.

[Josh Brown]

I think it's, I think it just, it's like they're executing, they're doing everything they can do. It's a great company. It's just a great company going to war.

[Michael Batnick]

Yeah, the overhang is not going away. Now I will say the AI overview, it's working, dude. Like the numbers are working, the product is working. I'm using it more like it's, it's not, it's working. They're competing.

[Josh Brown]

AI overview. So when you, the Gemini thing at the top.

[Michael Batnick]

Yeah, when you Google something. So Gemini is like the ChatGPT competitor, but when you Google something there's an AI overview which pops up. Right. And it's it's pretty good. So we'll say when you, when you.

[Josh Brown]

Put that same query or talk into your chat GPT app, it's no overview, they just give you the answer.

[Michael Batnick]

Well, it's the same. It's the same idea. Like it function functionally. It's very similar. Right.

[Josh Brown]

Google Search never had to worry about that. Google AI does they have to worry about that? There's 10 other versions for sure. So.

[Michael Batnick]

So Starbucks, another stock that I own, it was a real piece of shit. Quarter.

[Josh Brown]

And expected, though.

[Michael Batnick]

Not expect.

[Josh Brown]

Fired up for this quarter.

[Michael Batnick]

Not. No, you're right. The tournament story. The stock is down.

[Josh Brown]

Oh, all right.

[Michael Batnick]

Now it's falling. Makes sense. It was at first blush, it was like not really reacting negatively. And I'm like, why not? It was pretty crappy. So the stock is down 4 1/2% in the after hours.

[Josh Brown]

Yeah. So. All right, so just to give people a little bit of context on Starbucks, so last summer they pulled an absolute baller move. They went out and got literally the best CEO in the quick service restaurant space. They got Brian Nichol from Chipotle and the stock just absolutely launched. It went, it went from 78.

[Michael Batnick]

It went from 78 to a buck 20. Almost.

[Josh Brown]

Yeah, 78. I have 115 is the high. Maybe that's closing high, whatever. As recently as March of this year. So for like nine months, that stock went, just went on an absolute tear. They've reported a couple of quarters. None of them have been good. Every time it's like, give Brian Nicholl time. He's going to figure it out. He's going to figure it out. I haven't really noticed much change. I'm in Starbucks seven days a week. They're writing my name with a Sharpie on the cup. I could do without that. That feels like it slows shit down. I understand the mentality. It's like we're going to get our workers engaged again in the customer experience. Knock it off with the Sharpie. Nobody gives a shit.

[Michael Batnick]

But it's China. China. They're doing way better. I think comp store sales were flat, maybe even up a little bit, which was a disaster.

[Josh Brown]

China, that was the big overhang on that stock. It's not how long it takes them to make a coffee. It's China.

[Michael Batnick]

No, but I'm, I agree. And the numbers out of China were not horrific.

[Josh Brown]

Yeah.

[Michael Batnick]

So throw, throw this up from consensus media. It's just disgusting. It's a miss everywhere. Like, yes, expectations were, have, are not high, but they missed everything. So check this out, Josh, this isn't from the quarter. Speaking of like AI and LLMs and all that sort of stuff. So given that Starbucks reported an hour before we started, I said tell me how the quarter went. And it did. It told me that total net revenues decreased. It told me that a decline in comp store sales driven by a decrease in both average ticket and transaction volume. They cited a challenge in macroeconomic conditions. But then I said, and then I said, tell me more about the most important parts. So it did. Comp store sales global comp store sales decreased by 4%. 6% decline in North America and 2% decline internationally. And what's really amazing and, and forgive me for plugging the company that we invested, but it's just so phenomenal is that it gives you like bullets. So it extracts it from the data from the earnings report and then you hover over it and it takes you to that part of the report. It's miraculous, I think.

[Josh Brown]

Yeah. So revenue down 2% year over year. That's like hard to believe. Coffee is literally dealing drugs. How revenue negative year over year. That just losing. No revenue. No. Operating margins down too. That's right. Yeah, that's right.

[Michael Batnick]

A lot. 12.8 from 14.3.

[Josh Brown]

That's hundreds of basis points down. That's not good.

[Michael Batnick]

It's not good. When is stock should be down more?

[Josh Brown]

When is his honeymoon? Well, it's not taking out the pre Brian nickel announcement price, which is what I wanted to get to, at least not yet. The conference call is probably underway as of 5:00. How much longer is Brian Nichols honeymoon? So you have another year. Does he have another quarter before people start like seriously saying he doesn't know what he's doing? I think it's his third quarter.

[Michael Batnick]

No, I. But I think the China stuff is working better than it was. I think he has a few. I think he has some time. So do I have much time.

[Josh Brown]

But so do I. I think if this gets into the 70s, I'll probably pull the trigger.

[Michael Batnick]

Yeah. So I think I'm probably more likely to buy more than to bail, but I don't know tbd. All right, so let's talk about the guidance.

[Josh Brown]

I mean it's almost a 3% dividend yield right now. Assuming they keep the dividend, it's a $96 billion market cap. Here's a problem.

[Michael Batnick]

It's not cheap. I know.

[Josh Brown]

27 times, 29 times forward with earnings falling and revenue falling. That's the problem. This could be in the six. This could get into the 60s, dude, that's the. That's. I don't think that it will because I think there's a premium valuation here because if and when they figure it out, this thing can be unstoppable. They just. We're not there and Duncan is not around. And in China, they have Luckin and all these other coffee chains and it's. The McDonald's is slinging coffee and it's, it just. It's another one of these, like, incredible brands doing the best they can in.

[Michael Batnick]

A tough situation like Nike and Disney.

[Josh Brown]

You think it's easy to sell American anything in China right now?

[Michael Batnick]

Yeah.

[Josh Brown]

Or probably 20 other countries.

[Michael Batnick]

So you have a lot of. Of companies pulling guidance in here. UPS, General Motors, JetBlue, Coca Cola. Oh, they affirmed the guidance. Actually, I am surprised. I was looking through these. They're not getting destroyed.

[Josh Brown]

Yeah. So here's something I got very wrong recently. We did a whole show about this. How I felt the next big risks to the market would be companies pulling guidance. They're pulling guidance. Every, every day 10 more companies are coming out and saying, we do not reaffirm what we said in January. The stock. You're right. The stocks are in some cases paying the price, but the overall market is absolutely not phased.

[Michael Batnick]

Well, you would have, you would have been right if this was a different market environment. If the Vix was at 50, they'd be getting slammed. Vix is at 23.

[Josh Brown]

But then I'd be. But then I'd be like, incidentally, right. I just, I got this wrong. I thought, I thought the sell side would react to yank guidance, which is blanket downgrades. And the sell side is like Cali put it this way in our client update, this Wall street sell side, at least as it pertains to tech, they're just frozen in their tracks. They won't do anything like, they will not touch estimates for semiconductors. They know they have to. Everyone knows they have to. It's like a game of chicken away from here. UPS pulled guidance this morning. They didn't crush the stock.

[Michael Batnick]

I mean, it's already crushed.

[Josh Brown]

It's already crushed. And maybe everybody already expected that General Motors pulled their guidance and delayed the conference call. You ever see some shit like that?

[Michael Batnick]

Delayed the conference call?

[Josh Brown]

I think so.

[Michael Batnick]

I think Paramount did that a year or two ago.

[Josh Brown]

So this morning, JetBlue will. We will not reaffirm our guidance. They didn't cut it. I'm saying they pulled it. Coca Cola affirmed guidance. But.

[Michael Batnick]

Yeah, but, but also these, like, JetBlue's dead. You know, I mean, just getting point.

[Josh Brown]

I thought this would, I thought this would be negative and lead to market wide volatility. Okay, we're in the thick of the most busy earnings season of the of the quarter this week here. Tesla Cut. Guys, this is via Morgan Stanley, via Sam Row. Put that graphic back up. Tesla Cut Guidance. Masco, which I think makes like Sheetrock Wallboard Cut Guidance. Baker Hughes, which is Oil field services Bank. Bank Ozk, which used to be bank of the Ozarks Frontier. I don't know what this other one is. It's one after another. And these stocks, if you look at them, some are down a lot, some are barely down. The S and P is up. I don't know. Yeah, what do we do now?

[Michael Batnick]

I mean, again, the companies that are pulling guidance are lousy stocks.

[Josh Brown]

We're realistic.

[Michael Batnick]

No, I'm just saying they've already been killed. They've already been killed. JetBlue was at 8 bucks a couple of months ago, a couple of weeks ago, it's now at $4. You know what I mean? Like, yeah, we know. Your stock's down 50. I don't care if you pulled guidance, we already cut you in half.

[Josh Brown]

I got stopped out of this Baker Hughes. This was on the best stocks in the market list until April 2nd. And then they just demolished every oil. Every oil stock.

[Michael Batnick]

That is a head and shoulders top. Wow. Okay.

[Josh Brown]

I'm not buying back.

[Michael Batnick]

So Spotify, this morning I listened to the conference call and I was listening, I'm thinking, like, the stock is down 8%. Remember a couple of weeks ago I said to you, like, you don't know what's priced in until you see the numbers, right? Until you see the stock react. Because Spotify, I listen to the call and great. I mean, relatively speaking, like, this company's on fire. Let's go through some of these charts. Look at.

[Josh Brown]

Well, this is, I just, I clip this.

[Michael Batnick]

Okay?

[Josh Brown]

The, the thing that people said they didn't like. The Stock was down 8% in the pre market. I want to point out it doubled over the last year and I think it's quadrupled off its 2022 low. This company, when they stop spending money on podcasts, just exploded to the upside. But the guide for monthly active users was below.

[Michael Batnick]

Fine.

[Josh Brown]

It was 689 million versus 694 million.

[Michael Batnick]

Okay. And then the stock basically closed flat on the day.

[Josh Brown]

So many companies have 700 million users.

[Michael Batnick]

Dude, they're on fire. So look at this chart on, please. So this is the top we're Looking at premium growth, it's just upper to the right. You look at a premium revenue. Underneath, you're looking at ad reported growth. Ad reported revenue. Next chart, please. This is the great look at their margins exploding. If you look at their free cash flow, same thing like the company is firing on every cylinder. And this is the reaction intraday. So this stock, it sold off, probably, Josh, to your point, it had just been a rocket ship and whatever. People took profits and then they got right back in.

[Josh Brown]

Unfortunately, I think it. It gets back to the gap and top of that gap and rolls back over. There's not anything that they're doing wrong. Put that chart before this up. So this explosion in margins is really key in 21, which is where this, this data series starts. They're basically doing this $2 billion influencer spend. They give Joe Rogan money, big money, which probably is paid off for them. They give Bill Simmons money, which I'm sure that is paid off in spades. Since then, they try to buy Joe Button. They try to buy a whole bunch of properties. Then they start throwing money at celebrities who've never podcasted. Chart off. They give. They give money to like the royals. What's his name? Prince Harry. The one that nobody likes. The redheaded one, Harry.

[Michael Batnick]

And then the Kardashians.

[Josh Brown]

They give money to the Kardashians. They give money to Harry. And what's the. What's the girl?

[Michael Batnick]

Meghan.

[Josh Brown]

The princess Meghan. Here. You're. You're. You're famous. Here's a podcast. Kardashians. Yeah, you'll probably be great at broadcasting. I bet you can't wait to sit in a studio. The Obama's got a podcast. So they. I get it. They. They looked at it like it's a land grab. Let's wait. That wrap everybody up.

[Michael Batnick]

That was. That was hanging over the stock. The stock was in shit because of that.

[Josh Brown]

My point. So they, they retrenched. They said, all right, this is stupid. We got the ringer, we got Rogan, we got a couple of the biggest property. They did. They get called her daddy. And I don't. I think for three years. And then that contract, whatever they got, the ones they wanted to get, they invested in the podcast space. They pulled back that investment substantially. Between that and music revenues, they're killing. They're killing it. I agree. I agree. And I don't. I don't know that. I don't know that this thing needs to go much lower. I just don't think it'll get back into an uptrend it's not Netflix. A lot of people got long Spotify after Netflix.

[Michael Batnick]

Wait, dude, what do you mean back up in an uptrend? Look at the stock. It's, it's, it's absolutely in an uptrend.

[Josh Brown]

I'm talking about shorter term. I think it's, I think it's going to struggle with the pre earnings until they come out next quarter and beat expectations.

[Michael Batnick]

Yeah, we'll be fair. Listen, would be fair. Stocks. Stocks doubled and tripled. So that'll be totally normal. All right, let's talk about the biggest question on Wall street today.

[Ken Rogoff]

What?

[Michael Batnick]

What, what? The stock market. What is happening? So you're telling me that the market is unchanged, in fact better since the Wednesday afternoon announcement. The NASDAQ is now higher than it was pre liberation day. And the S and P is right where. Right where it closed. Why? We'll get into that in a SEC chart on, please. Look at this monthly candle. I mean, this is like super duper abnormal. This is funky. Josh. The Nasdaq was down 11 of the lows of the month just for the month. It was down 11 for the month in April and it's now up one and a half percent.

[Josh Brown]

See where it found support?

[Michael Batnick]

Ooh, I do.

[Josh Brown]

Tell me you don't believe in God. Look at that. Look at, look at where that found support. There are no ACs right at the 2020. Right at the 2021 peak. At the end of 2021, the Q's hit 400 and then sold off to like 280 and had a. Just a brutal bear market. We literally that candle bottoms this month right at Those old late 2021 highs and refuses to get below. So, Josh, is that a 9% rally off that low?

[Michael Batnick]

More.

[Josh Brown]

It's more. It's 11. 12.

[Michael Batnick]

We were, we were down 11. So we're up even more than that. So I am one of these people. I don't think the stock market is stupid. In fact, I think it's the opposite. But I am having trouble making sense of why the market is higher today than where it was before the announcement capitulated.

[Josh Brown]

Because. Because it's. Because it's already over. That's.

[Michael Batnick]

But it hasn't. But okay, fine. But, but okay, but counterpoint. It hasn't even begun.

[Josh Brown]

No, no, no. The recession hasn't even begun. And we might have one. The trade war has already been lost.

[Michael Batnick]

Okay, why are stocks higher? Dude, you don't have to have an answer.

[Josh Brown]

Laughing. Because it's a. Because now it's a joke. Because now it's a. Remember you said this, not me. I said this first during COVID You said this here on YouTube two weeks ago and it was perfect. What I say, you said the headlines are shocking, but their ability to shock us will dissipate the longer this goes on for.

[Michael Batnick]

You said that's your line.

[Josh Brown]

Well, you probably didn't say dissipate, but. But it's like, yeah, the news will, will keep being crazy, but our response to it will go from oh my God run to oh, that's so annoying to lol. Here's Lutnik today. We have a deal in place with the country, but I can't reveal who it is yet. It's a joke already, is it? Micronesia became a joke. But my point is allegedly it's India, but no, this is my point. This is my point. We haven't had the recessionary thing that may or may not be coming yet. We don't have empty shelves. We don't have skyrocketing CPI reports. All of that could be in the future or may not be. It's Schrodinger's cat and what we have is a joke.

[Michael Batnick]

Investing is a confidence game. And you're telling me that the multiple that investors are willing to pay for stocks today being the same that they were willing to pay 30 days ago before the announcement is the same? Doesn't make sense. Objectively. It doesn't make sense.

[Josh Brown]

Not listening to me. It's over. They capitulated. They're talking today. They're talking today about a carve out for the auto manufacturers.

[Michael Batnick]

We're talking past each other.

[Josh Brown]

What's left?

[Michael Batnick]

I'm asking why investors are as confident in the multiple car.

[Josh Brown]

I just explained it.

[Michael Batnick]

No, you didn't. You said lol. LOL is not an explanation.

[Ken Rogoff]

No, lol.

[Josh Brown]

The trade war is over. We lost. There's a carve out for Apple, there's a carve out for computers, there's a carve out for semiconductors. Today they said they're working on a carve out for automobiles. It's over. What are the tariffs on denim like jean jackets. What literally are the tariffs on if we're carving out cars? It's the. It's game over.

[Michael Batnick]

Okay, fine.

[Josh Brown]

The market's high.

[Michael Batnick]

Say the tariffs are over and there are no tariffs, which is not true, number one, tariffs.

[Josh Brown]

But tariffs exempting tariffs is what we have.

[Michael Batnick]

Fine.

[Josh Brown]

You see.

[Michael Batnick]

Getting back to. Getting back to topic number one with Mr. Dalio.

[Josh Brown]

Answer your question.

[Michael Batnick]

With Ray Dalio talking about the floor moving beneath our feet. Why are investors willing to pay the same price for stocks as they were 30 days ago? I just don't know. It feels curious to me. Thirty days ago, apparently nothing surprises you.

[Josh Brown]

So, no, no, no. I didn't foresee this outcome. I understand that 30 days ago the worst case scenario was somewhere out in front of us on the horizon. We had no idea. Now we know exactly what the worst case scenario is and they're already pulling back from it. So now there's. The uncertainty of how bad will it be is in the rear view. Now what's in front of us is just peeling it back, making it a little bit less bad. A little bit less bad, and then it's gone, it's over. We lost. News flash. No, nobody won. But we definitely didn't win.

[Michael Batnick]

Okay, the S&P 500.

[Josh Brown]

You don't like that explanation or you don't like that I came up with it?

[Michael Batnick]

I mean, you're allowed to just be like, yeah, this feels weird. You don't need to like, make up an answer. Go ahead.

[Josh Brown]

The market hates uncertainty. There is less uncertainty today than there was in March, is there?

[Michael Batnick]

No, Gabiche, there is more. There is less uncertainty today than there was before Liberation Day.

[Josh Brown]

Liberation Day?

[Michael Batnick]

What were you on?

[Josh Brown]

Liber Immigration Day was still in front of us in March. Now it's like, my God. Remember he said 180% tariffs on China. Remember that?

[Michael Batnick]

Let's move on.

[Josh Brown]

It's. It's become. Listen to me. It's become something that now we can get our arms around. That's as bad as it could be. Now what's the reality? Probably not going to be that bad. It's. We. Certainty. The market loves certainty.

[Michael Batnick]

Okay, the S and P 500.

[Josh Brown]

With me, bro. Except for a few people who are with you.

[Michael Batnick]

Hold on.

[Josh Brown]

Can I just tell you what's going on in the chat? Josh is wrong. Okay, let's get that out of the way. Josh is about to punch his monitor. No, I know. Michael is my brother. We disagree professionally. This is what we do. Guys, let me. There's a couple others. You're getting some props here, okay? So just, just bear with me.

[Michael Batnick]

This is all part of the show. Let's.

[Josh Brown]

Let's supply shocks. Coming. No, they're here.

[Michael Batnick]

Okay, please, attention. All right, so Ryan Dietrich tweeted the S&P 500. He's done great work all week on this. The S&P 500 is up six days in a row and up more than 7% over that time. It's only happened eight other times, it's crazy higher. Six months later, seven out of eight times, never lower a year later. So this type of stuff, this type of stuff does not ordinarily happen in a bear market rally. This is the type of stuff that sets up a new bull market, which sounds hard to believe, but that's what it says historically. So we spoke last week all about the breadth thrust. That was like the topic du jour. Sentiment Trader says this is a super zweig, a super breath for us. So what does he mean? Super zweig, a super duper swag.

[Josh Brown]

Has that been used before?

[Michael Batnick]

What this is measuring is and why I love this sort of metric, it's because it's capturing the psychology of the market, which is permanent. The psychology of the market. It's a psychology mob. It's Same as in 1700 as it is today. People behave like people. Okay, so what is, what. What is a super breath Rust? What it is measuring is what happens when you go from extremely oversold to extremely overbought in a matter of days. That's what it's capturing. Chart on, please. So, as you can see from Sentiment Trader, the green diamonds, this happens at market bottom. So specifically, we're looking at the New York Stock Exchange up issues. It's the 10 day exponential moving average of them going from under 35% to over 65, over 64% within 30 days. So again, extremely oversold. Everybody out to everybody back in. And a year later, it's higher 100% of the time.

[Josh Brown]

Now, I never would have predicted this.

[Michael Batnick]

That this was gonna happen.

[Josh Brown]

This is like, to this degree, like a super zweig bread thrust inside of the same month as the trade war starts is wild now. Absolutely wild.

[Michael Batnick]

So, Josh, I was talking with Ben about this today on the show. We use a lot of Ryan's other data. This is the hill that I will die on. You can't panic sell, because what happens if you sold two weeks ago? Now, this didn't have to be the outcome, but here we are. If you sold three weeks ago, literally, what do you do now?

[Josh Brown]

What happens is you do a lot of podcast appearances and you tell everyone I'm right, the market's wrong.

[Michael Batnick]

I'm not talking about pundits. I'm talking about real people. Like, seriously?

[Josh Brown]

All right, yeah, real people have to. Real people. If you sold, if, like, if you got. If you went to cash your whole portfolio. I don't. You probably never invest again after this. Like, think about what that does to you.

[Michael Batnick]

It's awful.

[Josh Brown]

It just makes you think the whole Thing is rigged against you.

[Michael Batnick]

It's rigged. It's a joke. It's a game. All right, so now here's, here's real talk about the market being at the same level today as it was prior to the announcement. It's not. I'm talking about the index. There's, there's components that make up the index. So if you look under the hood, not everything is at the same level. There's winners and there's losers. So let's look at the best and worst industries since Liberation Day. Energy, equipment, demolished air freight and logistics.

[Josh Brown]

This is good. This is good. Wait, hold on one sec. So on the left, these are the, these are like the industry groups that have had the biggest comeback since that announcement or went down the least.

[Michael Batnick]

Just, just four. Two, like the close of four to open a four. Three.

[Josh Brown]

Give me like the top five sectors.

[Michael Batnick]

For, for each five sectors are construction and engineering, entertainment, tobacco, software and food and drugs.

[Josh Brown]

And then gas and utilities is in there. It's a little bit defensive. It's got a defensive bend to it.

[Michael Batnick]

All right, but more importantly, more importantly, let's look at market cap. Okay, let's go to the next chart. So just because the index is where it was, doesn't mean every stock is. Apple down $190 billion. Amazon $87 billion. United Health down $104 billion. Facebook down $78 billion. A lot of stocks are getting destroyed. On the flip side, Broadcom up $93 billion. Microsoft up 90 billion. Netflix of $77 billion. So there is a lot of things happening inside the market that might, that might make the.

[Josh Brown]

Wait, wait, let's do more of these because hold on. If I asked you, if I blindfolded you and said, and said like which what? 10 blue chip stocks have had the biggest market cap swings positively since Liberation Day. There's no way you're guessing Walmart, but It's on there. Plus 47 billion. Yeah, like it's, there's no way you're saying Microsoft.

[Michael Batnick]

No.

[Josh Brown]

Well, if I said most market cap in dollars you might have. But like Walmart.

[Michael Batnick]

But it's so interesting because you've got Microsoft and Netflix in the left column. Biggest winners and Amazon and Apple and meta biggest losers. So the market is making sense of all this. The market is saying, okay, loser.

[Josh Brown]

Okay, such a great point. And you know who could shut the up forever? The index. The ETFs are distorting the market. Oh really? Can I show you record breaking dispersion between the top 10 market caps? Apple. Look at Put that back up. Show me how ETFs are manipulating the market, you dumb ass. Look at Apple. It's down. It's. It's down $200 billion in market cap. Microsoft added 90. That's the number one and two market cap companies in the world. Explain to me how ETFs are manipulating the market. Those people. Those people should feel free to never speak again. What do you think of that? Is that a fair conclusion?

[Michael Batnick]

No, it's a little bit. I mean, I think that.

[Josh Brown]

What do they have to say?

[Michael Batnick]

I think that it's a more nuanced argument than that. But yes, for the purposes of this. I think that markets are.

[Josh Brown]

There's no nuance in that chart. You have gigantic market cap companies completely diverging in direction. Where's the new. Where's the nuance in Amazon and Walmart diverging to that degree? It's the same. They sell the same product. Okay, seriously, like, it's, it's wild. And I think, I think that's like a feather in the hat in the cap of like real stock pickers. Like, if you understood that Apple was way more susceptible to trade with China than Microsoft, that was a really easy. That was a really good trade to have made. And you got paid for making it. You got Alpha, if you got that right.

[Michael Batnick]

I want to talk about a chart from Torsten Slok which shows the sharpest decline in earnings outlook since 2020. So if you want to tell me that. LOL, the tabs are behind us and it's a joke and the market should be where it is today. I mean, what would you say for this?

[Josh Brown]

I would say it's a bit curious. I would. I would say it's completely unexpected. But remember, as quickly as they take earnings expectations down, they can add them right back. And Michael, if they sign, if they, if they sign this exemption on autos, like, it just shows you. And I think they're going to. If they sign a trade deal with Japan or India or there's some breakthrough with China or something, if they do that, no one's going to price in these revisions anymore. They're going to blow right through them. And I think that's what we're experiencing over the last week. There's no, there's no better explanation than re certainty.

[Michael Batnick]

Well, the market is looking right past all this, so it better be right.

[Josh Brown]

That's what I'm trying to say.

[Michael Batnick]

It better be right. All right, let's. Let's move on to some audio clips. We're going to talk about Amazon. So this happened this morning. Amazon will soon display a little number next to the price of each product that shows how much the Trump tariffs.

[Josh Brown]

Are adding to the cost of each product.

[Michael Batnick]

So isn't that a perfect, crystal clear.

[Josh Brown]

Demonstration that it's the American consumer and.

[Michael Batnick]

Not China who is going to have to pay for these policies? Miss, I will take this since I.

[Josh Brown]

Just got off the phone with the.

[Michael Batnick]

President about Amazon's announcement. This is a hostile and political act by Amazon. Why didn't Amazon do this when the Biden administration hiked inflation to the highest level in 40 years?

[Josh Brown]

And I would also add, she's a paid, she's a paid liar. She's 27 years old and tell her what to say. And she this says it for a living.

[Michael Batnick]

This really bothered me and it's pretty frightening.

[Josh Brown]

It really bothered Trump too.

[Michael Batnick]

All right, you know, before we get to that, let's just play the next clip from Alex Cantritz.

[Ken Rogoff]

Just to be super clear, the team.

[Josh Brown]

That runs our ultra low cost Amazon.

[Ken Rogoff]

Hall store considered the idea of listing import charges on certain products. This was never approved and it's not going to happen.

[Josh Brown]

So this isn't happening at all.

[Michael Batnick]

No, it's.

[Ken Rogoff]

The information's incorrect.

[Michael Batnick]

All right, enough of that.

[Josh Brown]

So I'm just going to, is that, is that, is that boy one of Jeff Bezos's clone army? All right, so they sent, all right, they sent him out to reassure Alex Kanchowitz, what's going on here?

[Michael Batnick]

No, it was, it was a miscommunication. They're not doing this.

[Josh Brown]

I understand. And I think they were thinking about doing it very seriously. And the only reason why is because Amazon hall specifically competes with Shane and Temu and they're both doing it like Amazon hall is not competing with Walmart. It's competing for this like really like cheap shit China import business, I guess, for like teens and people in their 20s.

[Michael Batnick]

My, my point is the, the White House, I think they were going to.

[Josh Brown]

Do it is my point.

[Michael Batnick]

I think the White House attacking and making an enemy of one of our companies, calling that a hostile political act, I just don't want to live in that world. I don't like it at all. I hate it.

[Josh Brown]

Well, I guarantee it's so much worse than whatever you just saw in front of the curtain. And I'm going to tell you right now, I think it was being considered, I think Jeff, Jeff's not the CEO of Amazon and he's definitely not sitting in a room making decisions at that level about what you're going to display on the price page. So if that even got to Jassy, I'd be surprised.

[Michael Batnick]

And then. Well, it was originally with Sullivan today about the hike, and he said it. Well, it's not. It's just. It's such a. A joke.

[Josh Brown]

Yeah. Lotnick is also paid to say what. What. Whatever he has to say. I don't know if that got to Andy Jassy. I doubt. I highly doubt Jeff Bezos was consulted on it. I think if that idea were brought to Jeff Bezos, he's smart enough to know immediately, no way are we doing that. In no way does that help us. It's not like it's going to lead to more sales. It's not like there's any kind of win that we get from the customer for showing them why they're getting screwed. Even if it's not our fault, we're not doing it. All we're going to do is create a really powerful enemy. And sure enough, they spoke by phone. Bezos, not even the CEO, he gets a call from Trump. He's like, I never heard of that. We're not doing it. It's fake. And then Trump actually said, great conversation with Jeff Bezos. It's not happening. Now we know where the red line is for the Trump administration. U.S. corporations cannot tell the consumer. This is why this costs as much as it does. That's really interesting to me. Now we know where the. The most sense that's the Achilles heel is if companies start telling their customers.

[Michael Batnick]

The truth, which Lutnick said to Sully, he's like, it's 10%. What? We can't. They can't handle a 10% increase. Give it's 10%.

[Josh Brown]

It could be anything. How do you know it's tariffs?

[Michael Batnick]

What a joke. Companies can't raise prices because their goods are costing 10% more. It's 10%.

[Josh Brown]

You know how stupid they think we all are? Do you know how? That was my takeaway. Not me and you. Like all of us. They must think we're so stupid that you could say, these tariffs are great and they're gonna help the economy. And tariff is the most beautiful word in the dictionary. Just don't show them on the price page. Okay, that. That makes sense. That's how stupid they think we are. That's.

[Michael Batnick]

So, again, don't raise your prices.

[Josh Brown]

But.

[Michael Batnick]

But again, America, no, no.

[Josh Brown]

Raise your prices. Don't blame us. That's. That's the message to corporate America. I actually think they're happy that that happened today because it gave them A chance to really explain to the Fortune 500. I'll tell you what you can't do. No one's gonna do it. You'd have to be suicidal to do it now. Like there was a thing that Ford was doing. Ford went hard the other way. They were not gonna add tariff to the sticker price. Instead they said we're gonna give everyone employee pricing. Like we're gonna actually, we're gonna eat this for as long as we have to to try to pick up some market share. So no one's gonna do that now. And now we know where the red line is. You can say there's uncertainty. You go on a conference call and remove your guidance. You could tell sell side analysts that you're not reaffirming. What you can't do is tell your customers how much of an increase in cost is directly related to what the White House is doing. Don't you dare. And that to me that was like the big takeaway. I thought that was great. I loved it. All right, what do we have left? It's.

[Michael Batnick]

We're Getting Real Quick 2 charts on Amazon. Since we're talking about them. Did you know that Amazon and the S and P are neck and neck since 2018? It's kind of wild. Seven years of no outperformance.

[Josh Brown]

I didn't know that. Couple things on Amazon. We have Amazon versus Walmart chart too.

[Michael Batnick]

We spoke about this last week briefly. Just the PE is crisscrossing. It's just notable.

[Josh Brown]

All right. I was going to do this whole thing today, which we don't have time for, about. Amazon today launched 27 satellites. They're going to have 1800 satellites ringing the globe. They're launching their own competitive competing Internet service to Starlink. And I think it's going to work and I think it's going to be a pretty good growth engine. Not anytime soon. The capex will far outweigh any profitability probably for 5 years, 10 years. But Amazon being able to offer its own web service all over the globe and Starlink not being the only game in town, I think is kind of important. I think it's good for the planet and I think it's really interesting. But we're not going to do that today. I would also say prime day. There's a whole bunch of sellers saying forget it, we don't want to participate. And I didn't realize this. Did you know, Michael, 62% of everything sold on Amazon in the fourth quarter of 2024 was from a third party seller.

[Michael Batnick]

I thought that was 3%. No, I didn't know that.

[Josh Brown]

Would you have guessed? It's like 2/3 of their business is third party sellers.

[Michael Batnick]

I don't know what I would have guessed. That's high.

[Josh Brown]

It's high. Not Amazon selling other people's stuff, but like other people selling their own stuff. Yeah, that's, that's more, that's a bigger part of business. I thought Prime Day hits merchants, but they do it because it's good for revenue. It's not as good for profits. The average Amazon seller keeps 15 to 20% of a sale as profit after paying all the Amazon fees, et cetera. Amazon takes a 15% commission on every unit sold on Prime Day. And sellers pay Amazon $1,000 to highlight a discount. You know where it says best deal on a product that costs. That cost seller a thousand bucks. So anyway, US shoppers spent 14.2 billion during Prime Day last year. I think it's the biggest shopping day outside of Black. Black Friday or Black Monday or whatever it is. That's a really important day for Amazon. And they have a lot of third party sellers who are just like, not this year. We can't get our stuff at the cost that we normally get it. We're just not doing it. So that'll be interesting. I'm sure people will ask them about that when they report on. Is it Thursday afternoon? Okay. All right.

[Michael Batnick]

All right, well, I'm with this.

[Josh Brown]

Let's go to make the case or do you have something else?

[Michael Batnick]

Yeah, I just want. Yeah, we'll end with this real quick.

[Josh Brown]

All right.

[Michael Batnick]

So I typed into the quarter chat bot today what were the most important things set on calls today about the state of the consumer. And it pulled quotes from Coca Cola and Starbucks and Visa and everything that happened today. And again, they're, they're, they're, they're tagged so that if I scroll over one of them, the quote pops up and I can be taken to that part of the conference call. Okay. I bring this up because Adam Parker did a similar exercise at Trivarit Research where he typed into chat GBT, assuming Nvidia grows revenue, 50% in 2025, 25% in 26, etc. Going above and beyond what will Nvidia earn in 2030? And he shows below is the unedited response. So Adam goes through this whole thing about the type of work that these models can do. And here's what we how he concluded. He said, Chachi BTO3 costs 20 per month in minutes. It can do what it currently takes Highly paid analysts, days and weeks to accomplish. If you are already regularly doing this kind of work, sorry for showing you the obvious, and if you aren't, it is definitely worth tinkering with because firms and research departments with dozens of fundamental analysts may keep some, may shift some to other areas, or may only hire going forward, those with differentiated skills that can't be easily replicated by models. Obviously, we could have asked different and varying questions, better questions and iterative questions. We could have asked what the forecast for revenue growth over the next five years would be, given its analysis of demand and competition. But if part of the analyst job is to understand what introduces volatility into the P and L of companies, these models are already quite good for many applications.

[Josh Brown]

Well, good luck finding a DJ who can move, move and shake and shake like this. John Lovitz Good retort. I'm meeting tons of kids who are like, I want to be a. I want to be an analyst. Dude, you need to have your head examined. No, the hiring class is probably going to shrink by 90% the next five years because. Because what do you do when you get out of college? What's your first job as an analyst is bitch work.

[Michael Batnick]

Yeah.

[Josh Brown]

There are needs to pay you health insurance to do work. Because Chat GPT is the greatest bitch of all time. Yeah, so is. That is not. That is not smart. Do not go to. Do not pay $400,000 in tuition to become an analyst for Wall Street. Please don't do that.

[Michael Batnick]

So I am making the case. There's a play on words here, Josh. It's IMAX and chill. So what am I talking about here? I want to talk about this idea and I'm certainly not predicting by any stretch of the imagination a bear market rally that looks like the dot com bubble. My point is. Chart on, please. My point is that you can't get too hot or too cold in market downturns. There was 10 market rallies of 5% during the dot com bubble. They all fizzled. They are all psychologically very damaging. And this is also a plug for exhibit A for advice dot com. If you are an advisor, you can have this chart. This is our chart of the week for this week. All right, Any comments on here? Josh, before you go to Imax, Biff.

[Josh Brown]

Grebel is saying your firm's colors. Oops. No, you don't understand. That's our company. Dude, he thinks you. He thinks you screwed up and stole a chart from someone else.

[Michael Batnick]

That's the opposite.

[Josh Brown]

I lived through these. And I will tell you every after Every one of those, it just felt worse and worse and worse. And here's what ends up happening. Then you get a 5% rally and everybody goes, no way.

[Michael Batnick]

Yeah, it's cried off.

[Josh Brown]

Sell them. And then that's the one.

[Michael Batnick]

Yeah.

[Josh Brown]

And that's the one. But that's not a V shape. That's a real bear market. We haven't experienced one of those in a, in a very long time. Like, honestly, we haven't had one.

[Michael Batnick]

Yeah.

[Josh Brown]

And I hope it's not. Maybe it's this year, maybe it's not. I hope it's not. But also have no control. Let me do a mystery chart.

[Michael Batnick]

No, no, no, no, no, no, no, no, no, no, no, no, no. Sir, I'm making the case for imax. Give me a second.

[Josh Brown]

Oh, okay.

[Michael Batnick]

Give me a second.

[Josh Brown]

That was quite a wind up, Michael.

[Michael Batnick]

Thank you. I made the case for IMAX back in September and I'm reiterating my buy. I bought more shares. I still. Hold it. All right, turn on, please. Let's go through this quickly. There's a five working.

[Josh Brown]

It's defensive. Is it like defensive? Yeah.

[Michael Batnick]

I don't know about that. Here's, here's, here's all you need to know. Here's all you need to know, Josh. This is taking market share. Going to the movie is an event now. People don't just get out of bed and go to see whatever movies out there. The account to two and if they do, they're going to see it on the big screen. Next chart, please. So the top 10 grossing IMAX titles as a, as a. For the market share of domestic opening weekend, it's double digits now. IMAX has less than 1% of all screens. You saw this with Dune Part 2 and you're seeing it with Sinners. IMAX has less than 1% of all screens. I think 20% of all of all views for Sinners was done at the imax. They are winning and it has flown through to the bottom line. Next chart, please. Operating cash flow. So I like the story. I like the stock I'm in. I believe in it.

[Josh Brown]

I think it's going to work. It's also small enough that somebody should acquire it like it's a billion bucks. It's tiny. It's been an acquisition target allegedly for 20 years when I started buying this stock roughly at the same price it is today. It's two different types of imax. There's the real IMAX theater, which is seven stories tall and gigantic. But then the better business is converting existing theater. Is Like AMC or Regal. If they have a, let's say they have an Octoplex. They have eight screens. They'll take one of them and make it an IMAX conversion. It's not quite as jaw dropping of a viewer experience, but it's good enough that to Michael's point, when you're going to see Sinners, that's the experience that you want. It's nearby, it's an elevated ticket price. IMAX takes a piece of it. Everybody's happy. The other thing you're going to hear this year is huge battles over who gets IMAX screens for their big movies. You've got new, you have Fantastic Four coming in a month. You have new Avengers coming a year later.

[Michael Batnick]

The movie the studios are promoing imax. It's a big part of the story.

[Josh Brown]

You have, you have Superman coming, which is Jurassic, which is a complete revamp of the DC Cinematic universe. And, and you have Tom Cruise coming back. All of them are vying for whatever IMAX screens they can get their hands on. And that gives Imax like a lot of clout and power in the industry which should translate to greater market share. So I like the story. I should probably join you in that stock. Maybe I'll wait till it doubles and then I'll buy it.

[Michael Batnick]

All right, I'm sorry, mystery chart.

[Josh Brown]

Go ahead, mystery chart. This one's not going to be that tough. These are two companies that basically do the same thing. Prices look very different. What'd you say?

[Michael Batnick]

Coke and Pepsi.

[Josh Brown]

Give this man, buy this man a Coke. I have not gotten to the bottom of why. Show me the next chart. I just want to point out Coca Cola beat earnings today. Reaffirmed guidance for the year. This has been one of like the easiest, lowest stress stocks to be in year to date. It just looks great, it acts great. You can see it drop below its 200 day for a cup of coffee. The buyers came in immediately and bought it. And today is not just a 52 week high, it's an all time record high. Give me that last chart. Michael, this is like you talk about American exceptionalism. What's more exceptional than a chart like this? Effectively sugar water in a can.

[Michael Batnick]

Nothing.

[Josh Brown]

I know they sell water and they, I don't know, they probably sell like 50 versions of, of, of soda. But like in the end that, that's American exceptionalism. Turning something that basic into a brand that enduring. And new. New all time record high today. And of course larger shareholder, the goat, Mr. Warren Buffett. All right, that's it from us today. Guys, I want to thank you so much for listening for watching this extended edition of what are your thoughts? Michael, you crushed it today with the charts. Sean Chart Kid, Matt Cali, everybody. Thank you so much. John Duncan, we appreciate you. I want to remind people, tomorrow's Wednesday, which means an all new edition of Animal Spirits. Michael and Ben, there's a new Ask the Compound with Ben live on Thursday. And then on Friday we'll be recording something really special for you guys which you will get over the weekend. And all new Compound and friends, keep it locked. 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 also starts with building the right financial plan. To speak with a certified financial planner today, visit ritholswealth.com don't forget to check us [e-mail] the compoundrwm. Make sure to leave a rating and review on your favorite podcasting app. If you love investing podcasts, check out Michael and Ben every Wednesday morning on Animal Spirits. Thanks for listening.