Liberation Day, Goldman Gets Bearish, Falling Knives

Summary

Podcast Summary: The Compound and Friends – "Liberation Day, Goldman Gets Bearish, Falling Knives"

Release Date: April 1, 2025

Hosts: Downtown Josh Brown and Michael Batnik, alongside a rotating cast of industry experts.

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I. Introduction

In this super-sized episode of "The Compound and Friends," hosts Downtown Josh Brown and Michael Batnik navigate through a plethora of pressing topics in the realms of business and investing. From geopolitical events like Liberation Day and its economic repercussions to nuanced discussions on market forecasts and individual stock performances, the episode offers a comprehensive analysis for investors aiming to stay ahead in volatile times.

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II. Liberation Day and Tariffs

Key Discussion: The episode opens with anticipation surrounding Liberation Day, a pivotal moment where President Donald Trump is expected to announce significant global tariffs.

Notable Quotes:

• Michael Batnik (04:08): “You've been hearing about this for weeks now. Some would say years now. But we are on the eve of the tariffs being announced.”
• Josh Brown (06:07): “The message is that tariffs are tax cuts. Tariffs are jobs, tariffs are national security. Tariffs are great for America. Tariffs will make America great again. Holy shit.”

Insight: The hosts dissect the potential implications of the tariffs, pondering whether they will truly act as economic stimulants or merely burden consumers and businesses alike. They express skepticism about the administration's portrayal of tariffs as unequivocal positives, highlighting the divide in public perception and the market's nuanced response.

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III. Economic Indicators and Recession Outlook

Key Discussion: Beyond tariffs, the conversation shifts to upcoming economic indicators, particularly the non-farm payrolls (NFP) report scheduled for April 4th, which could signal the health of the U.S. economy.

Notable Quotes:

• Josh Brown (05:55): “You think this is the one?”
• Michael Batnik (08:53): “We really haven't had a bad labor market month in a long time, so...”

Insight: Referencing Michael Hartnett from Bank of America, Batnik emphasizes that the NFP report will be more consequential than the tariffs themselves, suggesting that while tariffs might already be priced into the market, the real question lies in whether the economy is decelerating rapidly enough to trigger a recession.

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IV. Goldman Sachs' Bearish Forecasts on S&P 500

Key Discussion: Goldman Sachs has downgraded its earnings and return forecasts for the S&P 500, reflecting concerns over rising tariffs and economic uncertainties.

Notable Quotes:

• Michael Batnik (09:26): “We reduce Our S&P 503 month and 12 month return forecast to negative 5 and past 6% respectively based on market prices at the end of last week.”
• Josh Brown (11:27): “I don't want that information.”

Insight: The downgrade includes lowering the S&P 500's projected levels to 5,300 by June and 5,900 by year-end. Goldman cites factors like slower growth, increased uncertainty, and higher equity risk premiums. The conversation delves into the skepticism surrounding these forecasts, with both hosts questioning the accuracy and implications of such predictions.

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V. The Mag7 Bear Market and Its Implications

Key Discussion: A significant portion of the episode is dedicated to the Mag7—seven of the most widely held and influential stocks in the market—which are now entering a bear market phase.

Notable Quotes:

• Michael Batnik (18:02): “The Mag7 is in, we're going to talk about this next. The Mag7's in a bear market.”
• Josh Brown (19:07): “We're not getting there. So the 13 times number, that's real bad.”

Insight: The Mag7 comprises tech giants and growth stocks that have historically driven market performance. Their downturn signals a shift in investor sentiment and market dynamics, raising concerns about the sustainability of recent market rallies and the broader economic outlook.

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VI. Core Weave IPO and AI Market Dynamics

Key Discussion: The Core Weave IPO is examined as a case study in the AI infrastructure sector, highlighting the interplay between new market entrants and established tech firms.

Notable Quotes:

• Josh Brown (28:14): “I bought it on the IPO day... It's ripping. Wow.”
• Michael Batnik (31:03): “It's like Airbnb for data centers.”

Insight: Core Weave's successful IPO and subsequent stock performance underscore the burgeoning demand for AI infrastructure. The hosts discuss the company's role in providing flexible capacity for AI initiatives, drawing parallels to the foundational impact of cloud services on modern businesses.

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VII. Tesla's Vehicle Delivery Numbers and Stock Impact

Key Discussion: Tesla's upcoming vehicle delivery numbers are poised to be a critical indicator of the company's performance amid political and economic headwinds.

Notable Quotes:

• Michael Batnik (43:09): “How bad is the image of Tesla in the eyes of potential car buyers?”
• Josh Brown (44:50): “If it bombs, it would wipe out 2024's gain.”

Insight: With expectations of a potential decline in vehicle deliveries due to political backlash against Elon Musk, the hosts debate the possible repercussions for Tesla's stock. They consider factors such as product refreshes and incentives, weighing them against the negative sentiments influencing consumer behavior.

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VIII. Gen X Career Meltdown Amid AI Advancements

Key Discussion: A poignant discussion centers on the impact of AI on Gen X professionals, exploring the anxieties of middle-aged workers facing technological disruption.

Notable Quotes:

• Josh Brown (47:27): “I really do feel for people that are in their 50s and should be in their peak earning years and are now just completely screwed.”
• Michael Batnik (50:43): “There's a ton of uncertainty because companies are going to use AI to spend less money on human labor.”

Insight: The hosts reflect on a New York Times article about Gen X’s struggles with AI-induced job displacement, discussing the broader implications for the workforce and the challenges of adapting to rapid technological changes. They acknowledge the emotional and economic toll on individuals whose careers are threatened by automation and AI advancements.

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IX. Low Volatility ETFs and Market Performance

Key Discussion: Investment strategies are explored through the lens of low volatility ETFs, specifically the Dorsey Wright Momentum and Low Volatility ETF (DVAL).

Notable Quotes:

• Ari Wald (53:12): “Our attempt at this later stage of the equity cycle is to identify long ideas that have shown relative strength. That's momentum.”
• Michael Batnik (54:08): “This list is the best stocks in the market.”

Insight: The hosts evaluate the effectiveness of low volatility ETFs in providing stability and consistent returns amidst market turbulence. They highlight the inclusion of well-performing, less volatile stocks such as Visa, MasterCard, and Walmart, which offer a balanced approach to risk and reward.

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X. Nike's Decline and Strategic Challenges

Key Discussion: A critical analysis of Nike’s significant stock decline and strategic missteps showcases the vulnerabilities of even iconic brands in shifting market landscapes.

Notable Quotes:

• Josh Brown (60:46): “I'm not gonna participate. So I wanna play a video... I sold it at the Open. I have a 16% loss in the stock.”
• Michael Batnik (64:24): “Nike is not part of it.”

Insight: The episode delves into Nike’s declining financial performance, citing shrinking revenues, deteriorating margins, and increasing competition from brands like New Balance and Alo. The hosts discuss Nike’s failed strategies, including overreliance on direct-to-consumer channels and neglect of key retail partnerships, which have contributed to its stock plummet and market irrelevance.

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XI. Stock Market Sentiment and Potential Reactions

Key Discussion: The hosts analyze overall market sentiment, debating whether recent movements signify a true market bottom or merely temporary stabilization amid ongoing economic uncertainties.

Notable Quotes:

• Michael Batnik (56:25): “Tariffs are not a one off switch, it's a dial. And Trump is going to fiddle with the dial way beyond this April 2nd Liberation Day.”
• Josh Brown (58:40): “People are just like, I don't know. That's not the environment we were in two months ago. No, that's the environment now.”

Insight: They explore the idea that tariffs and economic policies are evolving variables rather than fixed events, maintaining that the market has not yet fully grappled with the prolonged economic adjustments. The conversation emphasizes the persistent uncertainty among investors and the absence of clear capitulation signals that would otherwise indicate a market bottom.

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XII. Conclusion and Key Takeaways

Key Discussion: Wrapping up, the hosts stress the importance of strategic investing, cautioning against impulsive moves like buying "falling knives." They advocate for focusing on fundamentally strong stocks and maintaining a balanced portfolio to navigate the volatile economic landscape.

Notable Quotes:

• Josh Brown (68:36): “I apologize. That sounded nasty and it was because I really do feel for people that are in their 50s and should be in their peak earning years and are now just completely screwed.”
• Michael Batnik (68:51): “Don't buy falling knives. Grab carefully and wait for stabilization.”

Insight: The episode concludes with a reflection on the unpredictability of the markets and the need for investors to remain informed and cautious. The hosts encourage listeners to avoid making rash investment decisions based on short-term volatility and instead focus on long-term, stable growth opportunities.

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Notable Quotes with Timestamps

• Michael Batnik (04:08): “You've been hearing about this for weeks now. Some would say years now. But we are on the eve of the tariffs being announced.”
• Josh Brown (06:07): “The message is that tariffs are tax cuts. Tariffs are jobs, tariffs are national security. Tariffs are great for America. Tariffs will make America great again. Holy shit.”
• Michael Batnik (09:26): “We reduce Our S&P 503 month and 12 month return forecast to negative 5 and past 6% respectively based on market prices at the end of last week.”
• Neil Dutta (14:58): “Retail gasoline prices are climbing. 10 rose in March. 10 cents per gallon. [...] This represents a $13.5 billion shock to income.”
• Michael Batnik (18:02): “The Mag7 is in, we're going to talk about this next. The Mag7's in a bear market.”
• Josh Brown (23:30): “But my point is you would just think that people are just gonna shoot.”
• Michael Batnik (60:36): “Don't buy falling knives. Grab carefully and wait for stabilization.”
• Josh Brown (68:36): “I apologize. That sounded nasty and it was because I really do feel for people that are in their 50s and should be in their peak earning years and are now just completely screwed.”
• Michael Batnik (68:51): “Don't buy falling knives. Grab carefully and wait for stabilization.”

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Conclusion

This episode of "The Compound and Friends" provides a thorough exploration of current economic challenges, market trends, and individual stock performances. The hosts offer valuable insights into navigating investment strategies amidst geopolitical tensions, economic indicators, and technological disruptions, making it a must-listen for investors seeking informed perspectives in uncertain times.

Transcript

[Michael Batnik]

Ladies and gentlemen, welcome to the compound and friends. Tonight's show is brought to you by public.com wat more on that in a moment. It's Michael Batnik, it's me. It's a super sized edition of what are your thoughts? And boy did we have a lot to talk about this week. We take a look at first and foremost Liberation Day because this is the long promised moment where President Donald Trump reveals the global tariffs that we've all been waiting for. And we get to see the continued market reaction. And something tells me this won't be the end, just the beginning. I hope to be wrong. But the fun part about all this is we all find out together. Goldman Sachs cut its forecast for Both S&P 500 earnings and stock price returns by year end. We have a bunch of economic commentary from our friends, Ed Yardeni, Neil Dutta, et cetera. We take a look at the Mag7 bear market. We take a look at the state of the AI trade in the aftermath of core weaves, IPO and all kinds of other stuff on Tesla, Gen X, low volatility stocks. It's just there's a ton of stuff in here. So I'm going to send you in. Thank you guys so much for listening. Enjoy the show.

[Josh Brown]

Welcome to the compound and friends.

[Michael Batnik]

All opinions expressed by Josh Brown, Michael Batnik and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. All right, all right, all right, all right. 5:00 East coast time. Michael, It's Michael Batnik. It's me. It's an all new edition of what are your thoughts? I wanted to just start by complimenting the exhibit A hat that you're wearing. I like it. For people that don't know, Exhibit A is a little startup that we incubated inside of Woodholtz Wealth Management with Charkid Matt and you are the CEO.

[Josh Brown]

Michael, I gotta tell you, the subs have been great. More importantly, feedback, Immaculate.

[Michael Batnik]

Really?

[Josh Brown]

No notes.

[Michael Batnik]

Really?

[Josh Brown]

Seriously, off the charts, pun intended. How about that?

[Michael Batnik]

If you're. If you're watching this and you're a financial advisor, check out is what's. What's Exhibit A's website?

[Josh Brown]

It's Exhibit A for advice dot com. The story is you can't make your own charts update. It's too much compliance. The whole thing. We got your back. Exhibit A for advice dot com. Check us out.

[Michael Batnik]

That's cool. And we have an actual sponsor. I want to want to give a shout out to Public. If you're serious about investing, you need to know about public.com. that's where you can invest in everything. Stocks, options, bonds, crypto. You can even earn some of the highest yields in the industry, which I do.

[Josh Brown]

Still juicy?

[Michael Batnik]

Yep, still juicy. 6% or higher yield on the bond account is worth checking out. Public is a FINRA registered SIPC insured platform that takes your investments as seriously as you do. Fund your account in five minutes or less at public.com w a y t that's public.com wat paid for by Public Investing. Full disclosures in podcast Description all right, welcome to. What is it? Salvation Day?

[Josh Brown]

Liber. No, it's. What's the day before Liberation Day? You know, I've been looking forward to this podcast all Judgment Night. I'm fired up. I'm ready to go. Was that an Emilio Estes movie? No, that's Judgment Day.

[Michael Batnik]

No Judgment. Judgment Night. Emilio Estevez.

[Josh Brown]

Okay.

[Michael Batnik]

And.

[Josh Brown]

All right, early 90s. Let's go.

[Michael Batnik]

So. All right. So it's Liberation Day. Sluts. Are you ready? Because here it is. You've been hearing about this for weeks now. Some, some would say years now. But we are on the eve of the tariffs being announced. I'm hearing 20%. Ish is the scuttlebutt.

[Josh Brown]

That's, that's a whisper number.

[Michael Batnik]

I'm hearing that there are going to be specific conditions how certain countries can lessen those tariffs if they are willing to play ball.

[Josh Brown]

Kiss the ring.

[Michael Batnik]

Yeah. I mean, listen, there's a, there might be an, there might be an out. The market is acting like there might be a. So stupid. But there might be like a positive surprise. And we'll get back to the tariffs. But what I wanted to point out was that we actually have a non farm payrolls report on Friday, April 4. And that, according to Michael Hartnett at Bank of America, is probably going to be the more consequential day. In other words, let's assume tariffs are already either priced in or on the verge of being priced in. The real thing right now is whether or not the economy is decelerating so quickly. And where that might show up or might not show up is in that March payrolls report, which we're going to get two days after Liberation Day. So I just wanted to, I wanted to throw that, throw that caveat out before we spend all this time on, on Salvation. Liberation Day.

[Josh Brown]

Well, Let me catch your caveat and throw something else back in your direction. You've been saying for, I don't know, maybe a year or two, that, like, we're going to wake up one day and it's just going to be a nasty NFP number. Like, like it's not gonna be a gradual deceleration. You're gonna see out of nowhere a sharp decline. You think this is the one?

[Michael Batnik]

No, no, but I still think that's out there. I don't think it's this one. I really don't want. I really don't wanna be right about that.

[Josh Brown]

Okay, so let's talk tariffs. Let's talk turkey. John, if you'd please play this video. This is, you heard Lucas reporting there, where the President says he doesn't care if the prices go up on US cars. So what's the message to the US Consumer? The message is that tariffs are tax cuts. Tariffs are jobs, tariffs are national security. Tariffs are great for America. Tariffs will make America great again. Holy shit. I want what he's having.

[Michael Batnik]

Yeah, but there's. It doesn't matter if it's true or not. There's 30 to 40 million people who believe in that. So that's it. Like they might, you might lose 10 million of those people and then the midterm is going to be interesting. But like, for right now, if he said, if he said tariffs cure cancer and AIDS, there are 30 or 40 million people, that'd be like, yeah, that.

[Josh Brown]

Sounds, I mean, tariffs are a tax cut. Who. Don't bullshit a bullshitter. Who do you think you're talking to, sir?

[Michael Batnik]

Well, they. So that's definitely not true. But there is, there is, there is a world. There is a world where this administration feels that they're in a good enough place that they're willing to risk a recession. And that on the heels of these tariff announcements, all of a sudden they're getting all these visits in the White House from all of these foreign companies that are announcing massive scaled projects to be built here in the United States. And, and that even if there's a few month lag between when we feel the positive effects, those announcements will be enough for people to feel that this tariff move was the right move to make.

[Josh Brown]

Okay.

[Michael Batnik]

And I, I'm not going to tell you that's a zero percent probability.

[Josh Brown]

Well, I was going to ask you what do you think it is? Because I think it's very slim.

[Michael Batnik]

The reason why I think it's slim is because I don't think the White House or the Fed or anyone else really can control what happens once we get into a scarcity situation. Scarcity of jobs, scarcity of opportunity. Like I think you lose control really quickly of the capital markets. And I'm watching, I'm watching what everyone else is watching. Like we're going to get earnings for Q1. I think the commentary is going to be pitch black about all the uncertainty. I think you're going to hear about a lot of stalled CapEx plans. And then again, I'm watching this jobs report on April 4th to get some sense of whether or not March was, was a bad month. We really haven't had a bad labor market month in a long time, so. And how does the market react to that? I don't know that we're like cheering like oh yeah, we, we, we surprised. So much to the downside, the Fed is back to four cuts this year. I don't think anyone wants that.

[Josh Brown]

No, not happening. I think, I think Tuesday is going to be, I'm sorry, Wednesday the markets response are going to be binary. Either it's going to be not as bad as we feared and we rip or it's like holy fricking cow, he's really doing this and we dump.

[Michael Batnik]

Yeah. All right. Goldman Sachs got out ahead of this. David Costin yesterday came out and said that they are reducing their earnings estimates and their S&P 500 return forecasts. I'm going to try to speed read some of the more important takeaways from what Coston had to say.

[Josh Brown]

Josh, read it. Read it. Like that guy that read a book at one second.

[Michael Batnik]

Oh my God, is that the funniest thing you've ever seen? I wish we had that video. All right, we reduce Our S&P 503 month and 12 month return forecast to negative 5 and past 6% respectively based on market prices at the end of last week. These Suggest S&P 500 index levels of 5,300. I guess that's by end of June and 5,900 by year end. Costen says higher tariffs, weaker economic growth, greater inflation lead us to cut our S&P 500 growth forecasts to plus 3% for 2025, which is down from plus 7% and only plus 6% in 2026. Down from plus 7%. So not that big of a cut to 26. Slowing growth. Rising uncertainty warrant a higher equity risk premium and lower valuation multiples. The S&P 500 entered this year at 21 and a half pe on forward consensus earnings per share. Growth earnings per share. Now it's at 20, and he's saying it should be 19 and then rise to 19.5 over the next 12 months. So not a huge adjustment. I want to point out. He. Let me finish this up. He says, hold on.

[Josh Brown]

No disrespect. That last part was hilarious.

[Michael Batnik]

Predicting.

[Josh Brown]

Predicting where valuations are going to be three and six months heads is pretty hilarious.

[Michael Batnik]

It's kind of his job.

[Josh Brown]

I know. It's a. I know, I know.

[Michael Batnik]

All right. Goldman's economists are now predicting a 35% probability that the US economy enters a recession in the next 12 months. The historical equity market recession playbook implies a 25% s and P500 drawdown from the recent market peak, which was the February high. If followed, this pattern would suggest a further 17% drawdown from today's price to a trough of 4,600. That would be a P E multiple of 17 times current consensus forward 12 months earnings.

[Josh Brown]

Josh, are you ready for that?

[Michael Batnik]

Personally, no. He says during the last three major S&P 500 downturns, the PE multiple bottom that 15 times in 2022, 13 times in 2020, 14 times in 2018. You don't want to know what 13 times these numbers would put us at the.

[Josh Brown]

When I.

[Michael Batnik]

When I do not want that information.

[Josh Brown]

We're not getting there. So the 13 times number, that's. That's real bad.

[Michael Batnik]

Yes. And he's saying we recommend our stable growth basket, which contains the stocks with the least variable earnings growth during the past decade, and our insensitive portfolio of stocks with minimum correlation to the major thematic drivers of recent equity market volatility. So we're going to talk a little bit more about what that means, that, that. Those types of baskets. But I want to put it a pit. Put a pin in it. Would you agree with me that David Costin is probably the most influential of all the major bank strategists at the current moment, you would know better than.

[Josh Brown]

I Honestly, I don't know.

[Michael Batnik]

I kind of think it's him. And it's always somebody. And I think right now it's David Costin. I don't think it's. I don't think it's like. Because Marco Polanovic is gone. Mike, what's his name from Morgan Stanley Wilson. Mike Wilson. Not in that post anymore. He's doing something else. Like a lot of the. A lot of, like the really influential people are just not in that role right now, mostly because they've gotten a lot wrong about the bull market for the last couple of years. I think Costin is one of the longest tenured and he's probably the guy of the moment.

[Josh Brown]

I don't. I don't think we go to 4600. Nobody could see the future. Not David Costa, not I, not you. And nobody wants to hear this. I don't want this to happen. But if we did get to 4600, it would. I'm using air quotes only because it would suck shit. So I don't want to minimize it, but it would wipe out 2024's gain. That's it. Why?

[Michael Batnik]

Where did we finish? 23. Right there.

[Josh Brown]

Right. Right around there.

[Michael Batnik]

Yeah, but people don't think that.

[Josh Brown]

No, I. Dude, I know. I don't think that way. I'm just. I'm trying to protect myself. Okay?

[Michael Batnik]

Yeah. I don't want to. Here's one of the reasons why I'm concerned. The point of the labor market is not to forecast the economy. Because famously, the labor market is a lagging indicator. Not really considered by most to be a leading indicator. However, it's also somewhat of a concurrent indicator. And I think it's one of the best and most legitimate metrics by which to assess the current state of not only how things are, but how people feel. And that's because 70% of the economy is the consumer. This is the thing that a lot of the bears got wrong in 22. They assumed we have to have a recession. But what they. What they didn't realize was that nobody was really losing their job. In fact, the problem was in the opposite direction. There was. There was too much of a supply shortage for labor, which kept us out of recession. This time it's not the same. So I want to quote Neil Dutta from Red Mac. Conditions for the U.S. household sector continue to deteriorate. Three things stand out. Retail gasoline prices are climbing. 10 rose in March. 10 cents per gallon. Americans consume 135 billion gallons of gas each year. Thus, this represents a $13.5 billion shock to income, taking about a tenth from disposable income.

[Josh Brown]

OK. Gas price is still pretty low. Nationally low.

[Michael Batnik]

But rising job openings continue to slide. This is a bigger one according to. Indeed, job postings continue to decline, falling to fresh year to date lows for the week ending March 28th. This is a sign that excess labor demand continues to decline if openings fall. Not as easy for the newly laid off find work. Okay, early. Early, but worth noting. It's not a labor market problem just yet, but it's achieved.

[Josh Brown]

No, it's a softening, no doubt.

[Michael Batnik]

Yeah. Last one, stock prices are down 9% from their recent highs. If much of the growth in household consumption the last year has been helped by lower savings from high end consumers. And you know I'm in that camp, the drop in stocks will likely push these high end households to save a bit more. Honey, the portfolio fell 9% in Q1.

[Josh Brown]

We're not going to Disney.

[Michael Batnik]

Calm the down. Calm down. All right. So this is Neil's. This is how Neil wraps up. In short, consumer spending doesn't have anything really going for it right now. And if the US consumer does not have a lot going for it, the economy doesn't either. The weak growth in consumer spending nearly ensures a below potential growth environment. And that's before the ongoing slowdown in residential investment and coming slowdown across state and local governments. Neil's not a perma anything. This Neil's a. Neil calls it like he sees it. What do you think bro?

[Josh Brown]

Neil doesn't get tariffs. He doesn't understand. Neil doesn't get tariffs. You know he's right and you're right. Neil is not a permanent anything. He calls it as he sees it and getting confirming evidence. It's a forecast. But Atlanta Fed GDP is dropping like a freaking rock. Not good. Nets now forecasting real GDP growth in Q1 of negative 3.7%. Not great.

[Michael Batnik]

Remember that big drop at the end of February and everybody explained it away?

[Josh Brown]

Yeah, yeah. It was.

[Michael Batnik]

Oh, it was a data.

[Josh Brown]

It was gold being on short or something.

[Michael Batnik]

It was gold being on short. Okay. What are you, what are you going to tell me now, tough guy?

[Josh Brown]

Yeah. Ed Yardeni cut his year under estimate on the S&P 500 for a second time in less than three weeks. He cut it to 6,000 from 6,400. He cut his 2026 target from 77,000. He said a happy outcome would be that the US would negotiate tariff reductions. But that won't happen if the US slaps a 20% tariff on all imports across the board. Trot off please. Josh, let me ask you this. I've been like taking my cues from the market. Why isn't the market more concerned? Why isn't the market more concerned?

[Michael Batnik]

Yeah, I have told you not to do that.

[Josh Brown]

Why isn't the market more concerned? Like usually you expect the market to overreact and then we'll figure it out. Why isn't the market overreacting?

[Michael Batnik]

I'm going to answer that question by saying it's not concerned. It's just showing up in a very concentrated way. The Mag 7 is in we're going to talk about this next. The Mag 7's in a bear market.

[Josh Brown]

Okay. Okay.

[Michael Batnik]

All right. Well, those are the most widely held stocks. And those are the companies that had grown to have become the most reliable equity holdings, not only for pros, but for retail, for Joe's, if you will. And that's where, that's the canary this time. The biggest, most liquid stocks are down but not out. Some of them are out. Nvidia and Tesla are in massive drawdowns and the others haven't made highs in a while and are not acting well. And I think that that's where the market is expressing that concern. They're not selling value stocks that are already at 11 times earnings. But you're not gonna see it there.

[Josh Brown]

That discretionary names are getting murdered.

[Michael Batnik]

The Russell's in a real fast 10% drawdown. Like it's, it's their transports. The Delta, the best airline is Delta. It's 27% below its 50 day moving average. You're telling me the market doesn't. You know what I mean? Like.

[Josh Brown]

Yeah, I guess my point is I'm surprised that, that the, the market is not that more. So let's get into it. All right. We just had the worst quarter since 2022. S&P fell 5 something percent. Chart on, please. Not great. Okay, but this is the, this is the interesting part, Josh, to your point that you just made, the Max 7 is getting murdered. Every single one of them, except for Microsoft, I'm sorry, except for Apple, is in a 20% drawdown. This is the, this is the face blower for me. The S&P493. So take out the Mag 7, imagine they weren't there and, and, and reweight this based on market cap. The S&P493 is flat on the year. Is that a face blower?

[Michael Batnik]

It's crazy, right? I know. Why, why is it, why isn't it.

[Josh Brown]

Down a lot more? What, what is it? Berkshire and, and the like?

[Michael Batnik]

Insurance, healthcare, utilities, energy.

[Josh Brown]

But my point is you would just think that people are just gonna shoot.

[Michael Batnik]

First and they're just not yet again, I think you sell what you could sell. You got people with 200% gains in these Mag 7 names. They've been riding them for three or four years. Easiest sale to make.

[Josh Brown]

You're right. You're right. So Morgan Stanley's co president said, we looked at the last large 15 selloffs in the US in the last 15 years and this is one with the highest level of dispers, meaning the Lowest correlation, he said. Alibaba is up 74%. Nvidia, meanwhile, just wiped out. Had the largest single market cap decline ever. Some more charts. So. So the Mag 7, it carried the market for the last couple years, let's be honest. Although there was a broad.

[Michael Batnik]

What's in the left pane? What is.

[Josh Brown]

This is. This is. This is the Mag 7 market cap as a percent of the overall S&P 500.

[Michael Batnik]

And that's a generational top.

[Josh Brown]

Maybe. Maybe it got as high as 35%, which is kind of nice.

[Michael Batnik]

I'm ready to call it. I'm ready to call it.

[Josh Brown]

Okay.

[Michael Batnik]

It's a generational top, and it's now down to 30.5%.

[Josh Brown]

So a quick correction there. You've got the premium evaluation compressing big time. They now trade as a Group at 25 times forward earnings. The S&P is 493 is at 19 times, and this is as high as almost 40 times two years ago.

[Michael Batnik]

At the start of this year, the Mag 7 traded at 33 times, it looks like, and now it's down to 25. And the rest of the market without the Mag 7 is 19. That sounds right.

[Josh Brown]

Yeah.

[Michael Batnik]

Yeah. That's where the concern is showing up. And by the way, there's like this concurrent AI correction happening that is hitting all of those stocks. And so, like, they are struggling under the weight of falling earnings expectations, concern about AI CapEx being able to continue, and all the macro shit that every other company has to contend with.

[Josh Brown]

It's a lot. It's a lot.

[Michael Batnik]

So that's where. That's where the concern is manifesting.

[Josh Brown]

It's a lot. All right, let's start this chart.

[Michael Batnik]

As you face. Meta fell below its 200 day for the first time in what feels like ages into a 21% drawdown yesterday. Is that the one you just say? I. I don't give a. I'm buying Meta?

[Josh Brown]

Not for me. There was a different one that I bought. I'll get to that in a second. Josh, to the point earlier that you made about, like, what's working in the market. Next chart, please. So chart goat, Sean.

[Michael Batnik]

Actually, this.

[Josh Brown]

We're looking at the S&P 500 sector exposure and what's falling and what's rising. So, Josh, you love this. What do you love about this?

[Michael Batnik]

Because this. Because I ordered this one up, I just wanted to visualize. All right, if the. If the tech sector and the consumer discretionary sector is losing market cap, where is it going? Because you're somewhere.

[Josh Brown]

You're a Big. It's going somewhere, Guy.

[Michael Batnik]

People don't sit in. People. Again, portfolio managers who are supposed to be 99% invested in equities don't sit in 10% cash. So if they reduce their exposure by 10% to tech and to squash, they're going somewhere. I know they are. And here it is. And here it is. So walk us through the biggest changes.

[Josh Brown]

I want to get too close to the mics I'm popping, but actually, Josh, can you do this? Because I can't say I'm on my small.

[Michael Batnik]

Technology is down 1.4% in the quarter. It doesn't sound like a lot. It's not 1.4% of the S&P. It's right. It's 1.4% of its own weighting.

[Josh Brown]

Exactly.

[Michael Batnik]

OK, so that's down. Health care is up 1.1. Tell me the. Tell me the money didn't go somewhere.

[Josh Brown]

Yeah.

[Michael Batnik]

You know what I mean?

[Josh Brown]

Yeah.

[Michael Batnik]

Discretionary is down 0.8%. And again, this is just in three months. Consumer staples added point four. Energy added point five. I just bought a little chevron. Utilities added point four. Real estate added point two. So you know what's happening apart from the tech versus health care? The dispersion is like the money is, is being dispersed more widely. It's not like there's a new. There's not a new tech sector. Health care. Health care has gone from 10.1% to 11.2. So it's not, it's not like, oh, here's the new tech. It's just the money is being sprinkled liberally throughout the rest of the market. It's so it's coming out of industrials, discretionary tech. It's going pretty much everywhere else.

[Josh Brown]

Okay.

[Michael Batnik]

And that's actually what I would have guessed. And that's what the data says.

[Josh Brown]

So, last thing on this topic, let's look at Alphabet's forward pe. It's 16.5 times now. You know, the forward pe has got to come to fruition in terms of the E, I should say, but my God, assuming that search isn't dead, which maybe it is, maybe AI really does them up permanently. But I feel very comfortable adding to, adding to Google and I would have if I had more cash available.

[Michael Batnik]

So this is the forward PE ratio at the end of 2020, this was 28 times. It's now almost cut in half at 16 and a half times earnings. I think it goes lower.

[Josh Brown]

Yeah, it might. It totally might. But listen, if, if you're like, willing to ride out Some bumpiness and we have to be careful about buying stocks under their 200 day, which we're going to talk about later in the show. I feel comfortable buying Google, owning Google at 16 and a half times forward earnings, assuming that a lot of the macro will subside, which I don't, I don't know if it's here or 20% lower, but assume we get through this. I feel comfortable earning Google at these levels.

[Michael Batnik]

I sold 50% of my Google earlier this year.

[Josh Brown]

Good sale.

[Michael Batnik]

I, I, I'm still, I mean I'm still long the stock. Everyone's long the stock. It's one of the, still one of the largest market cap companies in every etf. But I think, I think this is the first time in Google's history dating back to 1998 or certainly its history as a public company dating back to 2004, 21 years ago, where it has ever been on its back foot and not assured to have the level of dominance in its core business that it's enjoyed almost the entire time. And I don't think Gemini is going to be as easily monetized if like, if you say, oh, what are you worried about ChatGPT and Claude and all this stuff. Like people, they're still searching Google and now they're getting Gemini AI results. Okay, that's true, but not with 20 blue links where every one of those 20 people is paying something. Like they, their core business is more under assault. My opinion, I agree, is more under assault than any of the Max seven names other than Tesla. So for two very different reasons.

[Josh Brown]

Maybe I'm underestimating how quickly the shift happens, but yeah, will 11 year olds be using Google search as they grow? Of course. No, of course not. But think about how many people are you.

[Michael Batnik]

Wait, are you, when you want to know something, are you opening Perplexity on your phone or Google?

[Josh Brown]

I'm still open to Google.

[Michael Batnik]

I'm opening Perplexity and I'm getting an answer in a second. I wouldn't. What Google is great for is Maps. And if I actually want the links and references, so I am. But sometimes you just want the answer.

[Josh Brown]

I am very excited. Maybe I should be horrified to see Google search revenue next earnings report because if that cracks, holy shit, the stock's gonna die. And also I'm reminded, I'm reminding myself, as I say, like, Google's trading at a forward PE of 16. Attractive, maybe. But I'm reminded of Nicholas Kolis who says valuations are not math is not an edge like everybody knows.

[Michael Batnik]

So everyone knows it's 16. Everyone knows it. 16 times. And PayPal is 12 times.

[Josh Brown]

Everybody.

[Michael Batnik]

And the reason why is because PayPal had the checkout to itself. And then Apple Pay came along and competed into the Stone Age.

[Josh Brown]

Right.

[Michael Batnik]

Everybody, by the way, Apple owns the device and PayPal doesn't, and therefore, voila, a 15 multiple goes to 14, goes to 13, goes to 12. All right, so the Core Weave IPO took place. And I think you tweet. Did you trade it on the IPO date?

[Josh Brown]

I bought it on the day. Yeah, I bought. On the IPO day. I bought it like, 37 and sold it like, 40. Something like that. Like. Something like that.

[Michael Batnik]

All right, Are you in still?

[Josh Brown]

Nice.

[Michael Batnik]

Oh, you sold it at 40.

[Josh Brown]

I sold it that day. Holy. It's ripping. Wow.

[Michael Batnik]

Look at it.

[Josh Brown]

Holy cow. Go, go.

[Michael Batnik]

Look at it.

[Josh Brown]

It's up 27%.

[Michael Batnik]

Okay, so it opened at 40. The next day was a bad day, for the overall market collapsed to 37. Today it's at 47.

[Josh Brown]

Good.

[Michael Batnik]

It's having a 27% rally relative to. I mean, it's.

[Josh Brown]

Holy cow.

[Michael Batnik]

It's a move.

[Josh Brown]

I love it.

[Michael Batnik]

It's a vibe.

[Josh Brown]

I feel very good about this.

[Michael Batnik]

Do you think a lot of people came in and started shorting this, like, right off the bat?

[Josh Brown]

I don't know how that works. If that was available to be shorted.

[Michael Batnik]

Like, who's buying the stock? Who's buying the stock of 27% today?

[Josh Brown]

People that are selling Google. Duh. I don't know. I know. I know. We're going to talk about Core Weave, but also, like, Newsmax. What in the world? The Stock's up, like, 2,000%. It opened at Ted. It's at, like, 120 or 210 or something.

[Michael Batnik]

I mean, it's. That's a great bit. If you can feed conservative people red meat around the clock, like, you can take meaningful revenue from Fox News, and that's a great business.

[Josh Brown]

So anyway, that's just this. This core stuff is very. I mean, very. I think it's important for the market. If this thing bombed, it would have been pretty. Pretty concerning.

[Michael Batnik]

Yeah, I said that I thought this was a big risk factor if it didn't go well, and it didn't on the first day, but apparently there is some sponsorship for this thing out there. And then the next thing that will happen. The next thing that will happen is analyst coverage. And that used to take, like, 90 days or something. That. That'll happen very quickly. And maybe that's. I haven't looked at the News today, but maybe that's what's coming now. You'll see a lot of the underwriting banks and you know, the top three underwriters were like JP Morgan, Morgan Stanley, Goldman Sachs or something.

[Josh Brown]

Yeah.

[Michael Batnik]

So they're all going to have accumulated ratings.

[Josh Brown]

That's why I bought the day of. I saw a couple of smart people that I follow on Twitter, like, you dumb assholes, you're. You think that they're going to let this fall below 40, like, get hammered on the first day? You know, much money is behind these name. Behind this name.

[Michael Batnik]

Yeah. And you know what else? It's a smaller share count because they downsize the offering. And that works in your favor if there's a lot of buying and there are less shares to go around. I see an article from the Motley fool connecting the earnings results. This seems like a stretch. There's a company called Progress Software that is an AI software infrastructure provider, and they had a really strong report and the stock is rallying and the author is connecting that to the rally in Core Weave. Not sure if I buy that. How did you describe sometimes there's nobody.

[Josh Brown]

Left to sell infrastructure as a service?

[Michael Batnik]

Well, that's what it is.

[Josh Brown]

It's.

[Michael Batnik]

Is I a. A s. It's like, you know what it is? It's a great dude. It's a brilliant idea. If I am not ready to build my own data center because I'm unsure of the amount of demand I might have, I rent theirs.

[Josh Brown]

Yeah.

[Michael Batnik]

And that gives me flex capacity. That's what. That's what. That's what Microsoft is doing with that. Microsoft is two thirds of their revenue. Because first of all, it takes time to build a data center. It takes time to accumulate GPUs. You can just. If you have a surge in demand for something like, for example, a chat CPT feature, and all of a sudden everyone's using it. You can plug directly into Core Weave and those users are not going to experience a disruption.

[Josh Brown]

Maybe this is a bad business. Is it like Airbnb for. For data centers?

[Michael Batnik]

I don't think. I don't know. Because they own the data center. This isn't. They're not renting out other people's data centers. They. They own this. So I think the better way to put it is the same way software as a service allows an organization to flex how many licenses they need, how many seats. Like this. This company is like standing by to provide excess capacity for when any of the major AI platforms need it. And in some cases, companies will never build their Own, they'll just rely wholly on Core Weave. And, you know, it's why the cloud was so successful. Not just for itself, not just for AWS and Azure and Google Cloud, but the reason the cloud was so important to the rest of the economy. It made it so that you could start a business and not plunk down $20 million worth of your own servers. You just said like, all right, we don't know what this business is going to be, but we're going to be in the Amazon cloud and it will flex how much we're using it based on how much actual demand we have. So that's the concept here. But for AI, it's not a bad idea. I just, it's not my cup of tea. I don't like all the red flags on it that we talked about last week.

[Josh Brown]

So the news has been so noisy this week that I didn't even see this open air announcement.

[Michael Batnik]

Okay, so there was a Wall Street Journal story in January about how badly Masayoshi Son wanted to, to buy a big stake in OpenAI. I think SoftBank put in $500 million early, early, early, and was mad that there wasn't more room. So these negotiations have been going on for years and that $40 billion number was floated in January. That's like roughly what SoftBank wanted to invest. They made it official. This is from CNBC. OpenAI closes $40 billion funding round largest private tech deal on record. Never before has an investment of this size been made into a private technology company.

[Josh Brown]

Who participated?

[Michael Batnik]

I don't know, but I think this is mostly SoftBank's money. And then they're, and then they're, you know, their end investors, which is like Saudi royalty. And God knows this is so emblematic.

[Josh Brown]

Of the current environment. Like Core Weave, the hottest AI IPO in ever, raised one and a half billion dollars from public investors. Yeah, and then, and then this thing is private.

[Michael Batnik]

Well, importantly.

[Josh Brown]

No, I know, but still.

[Michael Batnik]

Right. Importantly, this is the company that has the most traction of all the user facing LLMs. Like, people are using this all day, every day. All right, the valuation, $40 billion financing values ChatGPT at 300 billion when you include the fresh capital. So that's what they call post money. Microsoft is probably like, all right, thank God it's not just, just us. Softbanks in the valuation puts this only behind Space X, which is now worth 350 billion. And TikTok parent ByteDance among the world's most richly valued private companies. Oh, SoftBank's putting in 30 and the other 10 billion is a syndicate.

[Josh Brown]

I know, I know.

[Michael Batnik]

Including Microsoft.

[Josh Brown]

I know it doesn't matter for today's purposes of raising $40 billion, but I'm just curious, we have any sense of what the revenue is?

[Michael Batnik]

No, but a lot of the money is coming in to finance the Stargate project, which is, like, very heavily supported by the President and the White House, and Oracle's in that, and, like, a lot of people are involved in that and that bill, it's an $18 billion funding for Stargate. That's OpenAI's commitment. So basically, like SoftBank is saying, like, here, we're gonna fund your commitment to this Stargate project. I had a couple thoughts. If the price was 60 billion rather than 40 billion, Son would have just written the check. He strikes me as somebody that's very capable, very comfortable with massive swings, taking huge risks.

[Josh Brown]

Something tells me he's not a price sensitive buyer.

[Michael Batnik]

No, I don't think he cares. And sometimes that works out well. He was a huge splash into Alibaba early, early, early. And, you know, at his size, you have to make huge deals. You have to invest in huge private companies and take big swings. So Alibaba was great. Arm holdings was a huge winner.

[Josh Brown]

Sky has huge balls.

[Michael Batnik]

And then we work. I think he put 16 billion into we work, which was a zero. Not. Not as good. But that's his. He's a riverboat gambler. This. He's a really, really unique investor, and he swings for the fences. So this, this is maybe the biggest swing he's ever taken. It is the biggest swing he's ever taken.

[Josh Brown]

So. So, Josh, you asked me if I would pull the trigger on Meta. I did buy Nvidia yesterday at the Puke Open. I've never owned Nvidia before, but I'm in at 110. No, I'm in lower. I bought yesterday at like, I think 104.

[Michael Batnik]

Okay. This is the lowest forward PE ratio for Nvidia in 10 years. Look at this.

[Josh Brown]

Yeah.

[Michael Batnik]

Crazy. You know what's so weird about the stock market? You would have been willing to buy this at 30 times earnings, 40 times earnings on the way up.

[Josh Brown]

Who cares?

[Michael Batnik]

But before they had proven anything. Now that they've proven, hey, AI is real. GPU is the dominant technology of the era. We are the greatest manufacturer of GPUs, and we are the most important company in AI. Now it's worth half that valuation. It's just a weird quirk because investors only care about future earnings growth. They don't care about anything else.

[Josh Brown]

Correct.

[Michael Batnik]

And that's just like, it's really hard to wrap your head around. Let me get this straight. In 2022 now, this is what the stock selling off. That's why the forward PE shot up. But forget about that idea. Like, you're like, yeah, Nvidia, 50 times earnings. I'll take it. I'll take a shot here. Now that they've done everything they said they were going to do, you're only going to pay 22 because probably it's going to be hard for them to quintuple revenue again.

[Josh Brown]

I would think. Yeah, I would think so.

[Michael Batnik]

We don't pay for proof is my point. Because right now you have proof. Holy shit. This company is 90% market share. They. They did it. That doesn't, that, that doesn't get reflected in a multiple in a P E ratio. It just doesn't. Yeah, the proof is not the thing. It's the potential equity markets are based on potential. Elon Musk put some money from his left pocket into his right pocket and merged Twitter or X with X AI. Smart move. This is like, this is. The X was a problem. X is problematic. It's really important to Musk in terms of like getting his message out and he's effectively become like the shadow president of the United States utilizing it. So it's like super strategically important.

[Josh Brown]

And for Xi, and for Xia, it's important.

[Michael Batnik]

And for xai, it's one of the most important unique sources of data to train on and grok, which is the output of xai, the consumer facing output is building its user base on the back of the user base of X. So all of these things are highly interrelated and he owns the majority of both of them. So why not smash it together? What's, what's the hold up?

[Josh Brown]

Right.

[Michael Batnik]

I think this solves multiple problems for him. What do you think?

[Josh Brown]

Matt Levine said in any case, it's barely an M and a deal question mark.

[Michael Batnik]

He said, no, it's not an M and A deal.

[Josh Brown]

Two companies that were owned by the same person and shared employees and data and revenue and, you know, a name are now one company. They were informally one company before and they are formally one company now, and no money change hands. It feels like a silly technicality to call this a big M and a deal.

[Michael Batnik]

Yeah, Bill Cohan wrote about this at Puck back in November. Elon raised a fresh $5 billion for XAI at a $50 billion valuation. Now, four months later, this stealth deal values XAI at 80 billion, a 60% increase during the same time period where The S&P 500 has been down nearly 6%. Nice work. If you can get it, you just make up valuation. Doesn't matter. Then Elon raised a billion of equity for X at a valuation of 32 billion and now you just like smash them together. Two weeks later, that equity value has miraculously increased on paper to 33 billion. So when you are the majority owner of both and you control all the money and you decide who gets to invest in what price, it's not M and A, it's like, it's just like it's fungible equity value, blah, blah, blah. Whatever. He did this with Solar City in the public markets. And that's the moment when the shorts should have covered because they should have realized, holy shit, this guy gets to do whatever he wants with no consequences. Why am I betting against this?

[Josh Brown]

People were.

[Michael Batnik]

That's when the short should have run from Tesla.

[Josh Brown]

So Matt Levine just said what you said. Better. He said. So Matt Levine is like the Elon whisperer. I don't know if that's a great phrase, but he's covers Elon better than anybody else.

[Michael Batnik]

Would you agree with great jewelry, I might add.

[Josh Brown]

So he said, but my heart isn't in any of this. Nobody cares. Musk has absolute control of Xai X and US government regulators. If he wants to smush X and XI together, no one will complain. And it doesn't mean anything. Surely Musk isn't required to file forms and get regulatory approvals anymore. So that just goes on. But nobody cares. It's over. He did it.

[Michael Batnik]

He does.

[Josh Brown]

What are you going to do?

[Michael Batnik]

He. He basically lives in. He's in charge of everything. Delaware just changed their state constitution to make sure they don't lose another company like Tesla. Okay. And he is now. His businesses are now located in Texas. He basically inhabits a sovereign nation. Elon Land can basically do whatever he wants as long as the shareholders and the investors who are funding all this stuff are still into it.

[Josh Brown]

And they are, they are, they are.

[Michael Batnik]

So like, what? All right, now this is interesting though. So another number that everyone's going to be watching. And this is going to come out tomorrow. So we talked about the jobs number Friday. Everyone's gonna be watching this quarterly Tesla deliveries number. I don't know what it does to the stock. I just think from a standpoint of like, how bad is the image of Tesla in the eyes of potential car buyers? Forget about investors. This is an interesting story. This is Reuters. Investors are bracing for a drop in first Quarter vehicle deliveries as a backlash against CEO Elon Musk's politics exacerbates weakening demand for the electric vehicle makers aging lineup. Musk promised Tesla would return to growth this year after its annual deliveries fell for the first time in 2024. Wall street will be watching to see how a refreshed Model Y SUV and incentives made a difference. So the Model Y Juniper is like a refresh of the Model Y line. That's like their, that's probably their best car, like most all around popular car. I don't think the Model 3 outsells it, even though it's cheaper. Most people I know who have a Tesla have a Model Y. So it's the refreshed Model Y, which hadn't come yet in time for last quarter, versus the political backlash. And that's a number we're gonna get tomorrow morning, I think. And I think people are gonna be really into what that number is and they're gonna extrapolate that in terms of like how much longer Elon's gonna stay at the White House versus return back to Tesla. What do you think?

[Josh Brown]

I don't know, man. I just throw up my hands like, honestly, I have no idea. I would guess, I would guess the Stock goes up 12% no matter what. I don't know.

[Michael Batnik]

All right. The expectation is 373 vehicle thousand vehicles delivered March through January, according to 15 analysts who have refreshed their estimate in the last month. That would be a 3.6% drop from this quarter last year when it delivered 386,000. If that number is like closer to 303 73, there's another leg down in Tesla.

[Josh Brown]

Yeah, I don't know where the line is. You're right. If it's like a bomb. Now I don't know if A bomb is 320 or 260, but if it bombs, bombs. Yeah, probably go lower.

[Michael Batnik]

They got a shareholder quoted saying, quote, I think the numbers are going to come in below 400,000 and maybe as low as 350. Deutsche bank is saying 340 to 350.

[Josh Brown]

But dude, this is the thing, the market, the stock's getting killed. Like nobody's optimistic.

[Michael Batnik]

No, I know, but I don't think the stock is pricing like a 300,000 number.

[Josh Brown]

Yeah, we'll see. Listen, say what you want about Elon and obviously like, you know, not the biggest fan over here, but man, he makes a cool car. Let's, let's throw up this tweet. All right, so what does it Say, I'm sorry, I can't see it. Josh, read this.

[Michael Batnik]

I took delivery of my new Tesla model Y on Thursday. Today I tried full self driving and it flawlessly drove a 32 minute trip from my home to my kids school. I'm absolutely blown away. How long has this been possible and why isn't everyone talking about it? That tweet. Of course written, but no, who is that? Matt Van Swole? Is that a fake name?

[Josh Brown]

Just, just press, press play for a sec. Just look at this thing. Like this is, this is the world that we're about to live in and I'm, I'm here for that.

[Michael Batnik]

This is what put the stock at a trillion dollar valuation.

[Josh Brown]

He is, I mean, this is true magic.

[Michael Batnik]

Yeah, he's, he's, he's, he's changed the world several times and this is why this, it's. Look, it's not in a vacuum that he's able to do all these things and do whatever he wants. He put himself here with the technology he's built.

[Josh Brown]

Yeah.

[Michael Batnik]

And you don't have to like him to accept that that's the case. And a lot of people like their cognitive dissonance. They hate his politics and therefore they hate his car. It's like, dude, these cars are among the most popular cars on earth and they're doing crazy shit.

[Josh Brown]

Yeah.

[Michael Batnik]

So, you know, say, say what you will. Like I. You never see somebody tweet anything from General Motors that they're blown away by. It just, it doesn't happen.

[Josh Brown]

Yeah. All right, Josh, this one's for you, buddy. The Gen X career meltdown. Let's go on screen, please.

[Michael Batnik]

Jon, I have a melt. I have a career meltdown daily. So.

[Josh Brown]

All right, so this is the New York Times. It's the end of work as we know it. And I feel powerless to fight the technology that we pioneered. Nostalgic for a world that moved on without us after decades of playing our dues for a payday that never came. So, yeah, not exactly. Fine. Of course, that's, that's R.E.M. and Josh, I feel like you wrote about this like a couple of years ago as it relates to the finance world. It was like I did everything I was supposed to.

[Michael Batnik]

Yeah. I think what the article speaks to is exactly that. There's like a few million people, tens of millions of people who played by the rules. And in our childhood, as I'm, I'm like the latest Gen X, I think it ends in 70, 78 and I was born in 77. Or it ends in 77 but, like, there was this idea, like, you go to school, you get good grades, go to college, get a good job, move up, maybe switch companies, maybe get promoted, show up every day, pay your dues. And now you're. You've reached. You're in your 50s. I'm not there yet, but you're in your 50s. You've reached what should be the pinnacle of your career. And now you wake up in the morning worried about. Or you struggle more, more, more. Realistically, you struggle to fall asleep at night worried about this AI onslaught that's about to stop you dead in your tracks. I get it. It's like, it's like a little bit cry me a river. But, like, it's. It's a real feeling people have.

[Josh Brown]

Wow. I think. I think it's more than cry me a river.

[Michael Batnik]

Everybody hurts. Michael.

[Josh Brown]

Sometimes every generation has its burdens. Their particular plight of Gen X is to have grown up in one world, only to hit middle age in a strange new land. It's as if they were making candlesticks when electricity came in. The market value of their skills plummeted. So here's one data point, and it's true. I mean, obviously by 2030, ad agencies in the United States will lose 32,000 jobs, or 7.5% of the industry's workforce, to the technology. And this is not just ad agencies. I mean, it's ubiquitous. It's coming.

[Michael Batnik]

Yeah. I think the millennials and Gen Z, to a greater extent, prized the idea of entrepreneurship.

[Josh Brown]

Yeah, we can adapt. You guys are.

[Michael Batnik]

I know. I just. I think the Gen Zs are like, why would I work anywhere? I'm like, I just got to build my own thing. And maybe it's because they're younger and they're ready to take risk and they don't have kids yet. Maybe I'm just reading that wrong. But I do think Gen X is the last generation from that analog world where, like, you're. The length and breadth of your ambition was to get a great job and just earn a salary that could provide for a family. And I think the reason why is they saw that it worked really well for their parents. And I don't think the Gen Zs, who are the children of the Gen Xs, by the way, The Gen Zs are not the millennials children or the boomers children. The Gen Zs are my kids. My kids, or my kids might be Gen A, depending on where you draw the line. But I think this new generation is not, like, thinking, like, how. How can I go work for a Great company for the rest of my life. No, I think there's going to be a much more hardcore entrepreneurial bent.

[Josh Brown]

Anyway, I, I don't like the tone of what I just said. You guys are so. I apologize. That sounded nasty and it was because I really do feel for people that are like in their 50s and should be in their peak earning years and are now just completely screwed. Like it's, it's, it's bad.

[Michael Batnik]

You know what? You gotta remember that the people writing this article are gonna be biased to find other people who agree with them for the pull quotes.

[Josh Brown]

All right? No, I know, but it's not. Not true.

[Michael Batnik]

It's not not true, but it's not universally true. And if you look at the top founders, technology founders right now, and a lot of the executive ranks at these companies, they're Xers. All the people I look up to are Xers. They're doing great.

[Josh Brown]

Yeah, but it's just, that's like a sample.

[Michael Batnik]

No, I know, I know. Listen, I completely, I completely understand it. And there are, there are industries that are just going to be run through.

[Josh Brown]

Yeah.

[Michael Batnik]

By AI and journalism and media and ad agencies. Yeah. Like maybe arguably on the front lines of this and maybe other industries will feel it later. So I get it. But there's a glass half full part where it's never been easier to be an entrepreneur, to start a business, to get people to fund an idea. Like it's never been easier.

[Josh Brown]

Well, for future business creation, it's never been better. So that's the silver lining right now.

[Michael Batnik]

That doesn't suit everyone.

[Josh Brown]

Right.

[Michael Batnik]

So, you know, not everybody could be a chief. You need Indians too. Like you need people to work at other people's companies. And it's, There's a ton of uncertainty because companies are going to use AI to spend less money on human labor.

[Josh Brown]

Yeah.

[Michael Batnik]

And you know, we talked to Joe Lonsdale the other day about this. Of course new jobs will come along that haven't even been envisioned today. Yeah, we get it.

[Josh Brown]

Yeah.

[Michael Batnik]

Just not for everyone.

[Josh Brown]

Yeah.

[Michael Batnik]

So. All right, let's do this thing. This is low Vol and momentum. So Ari Wald, who is among my favorite technicians, is talking about like, where do you hide out right now? And he demonstrates the following top ETF idea momentum plus low volatility in terms of selection. Our attempt at this later stage of the equity cycle is to identify long ideas that have shown relative strength. That's momentum. And are positioned to at least keep pace with the market. During a relief rally, we think the Dorsey Wright momentum and Low Volatility ETF or DVAL strikes this balance. We're encouraged. This ETF has upheld its 200 day average and completed a multi year base versus the S& P. And then he takes some of the individual stocks that comprise the Dorsey Wright Momentum and low volume ETF and, and shows you breakouts on all the charts. But just glancing at this, Michael, what do you think of the concept?

[Josh Brown]

It looks great.

[Michael Batnik]

Really smart, right?

[Josh Brown]

It looks great and I love it. And these are boring names. A lot of financials, industrials, insurance companies, Costco, tjx, for example, Visa. Yeah, yeah, these, these are the stocks that are working big time.

[Michael Batnik]

All right, so this list is the best stocks in the market. I had Sean pull the holdings from that Deval ETF that overlap with the list that we keep of the best stocks. And there's a lot of. There's a lot of companies that are both in the D Vol, ETF and on my list. Brown and Brown, which is insurance broker, Welltower, which is a health care reit. T Mobile, Republic Services, which is garbage collection, Cardinal Health trade web. Wait, TC a charter trade web, TW, Visa, MasterCard, Walmart. So this makes like intuitive sense to me.

[Josh Brown]

With the exception of Walmart, Walmart doesn't make sense.

[Michael Batnik]

All of these stocks are up year to date.

[Josh Brown]

But wait a minute. If you saw, you know, what else like Visa, MasterCard, if you thought the consumer was going to really soften, why would these be rocking and rolling?

[Michael Batnik]

They're not exactly rocking and rolling. They're on my best stocks in the market. They look pretty good because momentum is okay and they're above some important moving averages. They look good within. They're within reach of, of record highs.

[Josh Brown]

They look way better than I would have assumed.

[Michael Batnik]

All right, what's this next?

[Josh Brown]

Here we go. Okay, so we spoke earlier about like, where's the money going? What's working? Throw this up, please. So this IS S&P 500 performance for the first quarter and lot of red and the largest names as we know. But dude, I see a lot of green. A lot of green.

[Michael Batnik]

Money's got to go somewhere, Mike.

[Josh Brown]

Lot of green. No, it doesn't, but I see a lot of green.

[Michael Batnik]

Yes, it does. Look at Exxon. Look at Exxon and Chevron. Beasts.

[Josh Brown]

Beasts. Okay, I want to talk about yesterday's reversal and talking about Monday. This is my favorite data stuff like this. This is from sentiment trader Jason Gfort. He tweeted today's reversal in the s and P500 looks bullish. It should be bullish. And yet it really isn't. And what are we looking at? So Jason plotted the S&P 500 after a 1.5% loss to a six month low and then close up 25 basis points. So you're talking about a washout, a nasty open that reverses and closes bullish. And if you look out one week, two week, one month, three months later, mixed to negative, a lot of red. So if was yesterday a durable bottom. We will see.

[Michael Batnik]

They asked this question on CNBC today of me, Stephanie Link and Jim Lebenthal. Is liberation day a market clearing event? Meaning is that the moment where the tariff news comes out and everybody sells? And finally people have sold enough de, risked enough, taken down margin enough that we could say we've hammered out a bottom. And I said, I don't think so, it seems early.

[Josh Brown]

So to that, to that point I did, I don't have this chart for today, but I had I, A chart can make me S&P 500 stocks hitting a 52 week low and we are nowhere near, unfortunately nowhere near prior capitulations. Not even close.

[Michael Batnik]

I don't think this is over.

[Josh Brown]

But wait, hold on. You don't need, you don't need to have capitulation. But my point is to say, is this capitulation like if that's.

[Michael Batnik]

Well, that was the question. When you say like a market clearing event, that's capitulation.

[Josh Brown]

No, no, Definitively, no.

[Michael Batnik]

So definitively one of the things that we've referenced back to Ren Mack and Neil Daughter, their house view is that the tariffs are not an on off switch, it's a dial. And Trump is going to fiddle with the dial way beyond this April 2nd liberation day. The dial is going to be just this constant up tariffs higher. Wait a minute.

[Josh Brown]

I can't take it.

[Michael Batnik]

I had a beautiful call. I had a beautiful call with the Germans. Tariffs lower. If so, there is no market clearing event. If that's what this is going to be and maybe it's not. And I, you know, I want to be optimistic.

[Josh Brown]

Question is, if it's on again, off again, does the market just say f this I'm out, I can't take it, or is it like this is a charade? We're looking through to 2026 earnings. Forget about all this noise.

[Michael Batnik]

You know what it is? The problem is that it has real impacts on earnings expectations.

[Josh Brown]

It does.

[Michael Batnik]

And that's the part that I wish it was just theater.

[Josh Brown]

If not though, the part of the problem is if there's no clarity, people pull back. I Can't plan for the future in a world like this.

[Michael Batnik]

I'm glad you said that. I'm glad you said that because that's what the surveys are reflecting.

[Josh Brown]

Yeah, they are the gross.

[Michael Batnik]

The surveys are reflecting that non committal, like that kind of wave of uncertainty where people are just like, I don't know. That's not the environment we were in two months ago. No, that's the environment now. Could. Could Trump wave a wand? Could he come out tomorrow and say, all right, I told you I was gonna be tough. It's 20% across the board, all imported goods, period. But I'm done. No negotiation. This is just the new world order and everyone has to get used to it. I think the market could rally on that.

[Josh Brown]

Oh, no way. No way.

[Michael Batnik]

They'll adjust earnings growth down from, from 7% to 3% and stocks will bottom.

[Josh Brown]

Maybe you're right. But that would be so bad.

[Michael Batnik]

He's not going to do it. He's not going to do it.

[Josh Brown]

That would be so bad for the economy.

[Michael Batnik]

Because he needs the twists. He needs what? Because you know what he really wants to do? Oh, no, he wants this. He wants this drumbeat of announcements. He wants the guy from Hyundai and the guy from Volkswagen and he wants. And Volvo and Porsche. He wants them saying, we are going to break ground on a 400,000 square foot facility in Arizona. That's what he wants. And they might give it to him, to be honest. And then all of a sudden it's tariffs are coming off. They're playing ball. Like, that process is probably not playing out all within the context of April 2nd.

[Josh Brown]

Yeah.

[Michael Batnik]

So that's the dial nature of it. And that's why I don't think it's clearing event. Okay, original question.

[Josh Brown]

Josh, would you allow me to cook for a second? All right. You know, I kind of wanted to choose something from the long side to make the case for because there's so many better entries today than there had been. Like 24 was tough for make the case because everything was just going straight up. Then I was like, oh, let me tell you, Stock that's up 30% in the last 12 months.

[Michael Batnik]

Like, all right, so that problem anymore?

[Josh Brown]

No. So I want to make the case. And it's a lesson that I unfortunately have had to relearn and relearn again on why you don't buy falling knives or if you should. There are rules to follow. And the simple rules are, as such, keep it small. Don't try and go all in and think that you're gonna catch the bottom and wait for the. Wait for stocks to stop crashing. That's probably like the easiest one. If you're gonna buy a stock that's, that's, that's a falling knife. Wait for some stabilization. I don't just mean like a week, like wait for it to develop a base. Okay.

[Michael Batnik]

Pay up for it. Pay up for it.

[Josh Brown]

Sure, yeah. Absolutely. Don't. Yeah. So anyway, with that said, I want to talk about Nike. John, chart on, please. This stock has been a falling knife for quite.

[Michael Batnik]

You use this, you use this as a. Make the case recently and I think I blessed it.

[Josh Brown]

No, I didn't. I don't think I did.

[Michael Batnik]

I thought you did.

[Josh Brown]

No, I'm pretty sure I didn't. I will.

[Michael Batnik]

Sean is keeping, Sean's keeping track. So I don't know, but okay, go on.

[Josh Brown]

So anyway, Nike has had a shitty time and all you had to do was say no. It's below it's 200 day moving average. It's not stabilizing. I'm not gonna participate. So I wanna play a video from the last time we spoke about Nike. I think it was July 2nd. I owned the stock at the time. Video on, please, Jon.

[Michael Batnik]

And since then. This is worse than the GFC in terms of, in terms of drawdown. This is as bad as Nike has ever gotten. You buying?

[Josh Brown]

Not only am I not buying, I'm selling. I. No, no, no, no. I own. So I own the stock. It was, thank God, my second smallest position, but I sold it at the Open.

[Michael Batnik]

Now it's your smallest?

[Josh Brown]

Yeah. No, no, no. I sold it at the Open whatever day it was Thursday for a six. I have a 60 loss in the stock. Listen, it happens. So on the one right.

[Michael Batnik]

I think he did the right thing.

[Josh Brown]

Well, listen, on the one hand, do I want to buy a global iconic name brand company that's in one of its deepest straw dens ever? Yeah, sounds enticing. On the other hand, it's not cheap and they're getting steamrolled. So it's still trading at 24 times forward earnings. So it's not like the stock is cheap and they're not growing and it's going to be a long turnaround story. So you don't need to buy it now. Is it going to be higher in a couple years? I don't know, I don't care. It's my second smallest position. I'm not married to this thing took a loss and I'm out. So I sold the stock for a loss. I lost 16, not 60. I lost 16%. And importantly, turnaround stories most of the time, especially something like this don't always turn around. So their most recent report was equally as shitty. WasTeland Capital tweeted, Zero signs of a turnaround at Nike. Genuine dog numbers just getting shittier. Shit growth down 9%. Shit margins, gross margins down 326. Basis points Year over year and even Shittier guide down 12 to 15%. Next quarter, China down 17%. Jordans are dying. So let's just chart this on, please, for the quarter. On top of all of that, they said, quote, the progress we made against the win now strategic priorities we committed to 90 days ago reinforces my confidence that we are on the right path. To which this person says, huh? I mean, just, just really, really nasty stuff here. A lot of funny stuff in here. But the bottom line is this has been a piece of junk. Yes, it's a global chart off, please. Yes, it's been. It's a global iconic brand that's down 56%. You don't ask questions, you just buy. But actually you don't just buy because Alex Morris shows their EPS still shrinking. Horrible, horrible, horrible margins. Next chart. Getting squeezed to, to kablooey so bad. Alex says, Five years ago, in 2019, the collective revenues of four notable competitors. Next chart, please. On Cloud Hoka, Anta and Li Ning were equal to 20% of annual revenues. In 2024, the collective revenues of those four companies will approach 50% of Nike's annual revenues.

[Michael Batnik]

The stock, the business, they're just another company now.

[Josh Brown]

They're just another company and since I sold it, the stock is down another 13%. And it's hard to buy Target Mountain Stories. It really is.

[Michael Batnik]

They're going to teach this in business schools. This is we, I think Nike just closed down three consecutive years. The stock, which has never happened before, since they came public in the early 80s. So this is arguably the worst condition Nike as a company and as a stock has ever been in the list of things that they personally did to shoot themselves in the foot. So there's always macro, there's always trends and fashion, and that's a perennial challenge for apparel companies. They, at the, at the height of their power, I think in 2018 or 2019, they got greedy. They told their retailers to go themselves and they said, we're going direct to consumer.

[Josh Brown]

Yeah. So Dick's, we're gone. And Dick said, oh, yeah, on Cloud Hoka, please, we need, we have, we have shelf space. Come on in.

[Michael Batnik]

Foot Locker. You Foot Locker. Can you imagine? Yeah, it's your biggest distribution channel. They went from giving. They went from giving limited edition sneakers to Footlocker just for their shelf space. So Foot Locker would have something that you couldn't get online to. Like, we don't care about you. We launched the Sneakers app. We're doing Nike.com and we're building our own store on Amazon to box out all the third party sellers who are selling Nikes on Amazon. And that trifecta of what they thought at the time were strategically power moves literally turned their entire distribution funnel against them.

[Josh Brown]

Yeah.

[Michael Batnik]

Now you've got this aging lineup. Nobody gives a shit. Michael Jordan fucking 70 years old. Nobody cares. The people that grew up idolizing Michael Jordan are shopping for assisted living situations. Okay? They're wearing New Balance. It's over. They're not playing basketball, I think is the important thing. Right? So. So you've got that. The Last Dance aired five years ago. That's it. The Jordan, like the Jordan worship is so far in our past. LeBron James is 40 years old. You know what I mean? Like, it's just, it's so over with. And then they haven't really. They're doing new colorways for the four dunks and Air Force Ones and Air Max 95s. And I suppose you can keep doing that forever, but that's not gonna grow. That's just replacement value of people who are nostalgic for 2002.

[Josh Brown]

No, they're still shrinking. They're still shrinking.

[Michael Batnik]

It's also shrinking.

[Josh Brown]

So my point, my point is.

[Michael Batnik]

And they lost the runners. And they lost the runners. And into the breach, New Balance came back. A six is coming in hard. Hookah and on cloud are serious competitors. And now they're just another. They're just another flavor.

[Josh Brown]

By the way, I asked earlier, like, where's. Where is the overreactions of the market? It's in. It's in Decker Outdoors, which is Hoka. Like that is the most discretionary spending is Ugg boots and Hokas. Guess what? That stock is getting pounded. Lululemon again. There's macro stories there and micro stories pounded. A lot of these consumer discretionary names are getting destroyed.

[Michael Batnik]

Oh, I'm glad you brought that up. The athleisure thing. Nike. Nike never really had it. Lulu had it. Viori is taking it Alo. And, And Aloe is like if you, if you go to any class A mall in America, I don't care what city you're in. The hottest. The hottest girls and women are in Aloe. They're not in Lulu. Like the Hot moms. Like, like that's where they are. Spending hundreds of dollars at a clip. They're not an Athleta. They're not even really in Lulu. Like that's the, that's the vibe, right? So anyway, Nike is not part of it.

[Josh Brown]

In conclusion, our late friend said it best. John Boorman said, if you want to buy a stock because it's, you want it to go up, buy one that's already going up. Now again, I have to, I keep relearning that lesson, but it's so easy and we make it so hard.

[Michael Batnik]

I mean that's, that's the church that I'm a card carrying member of. I want the best stocks in the market. I don't want the puzzles to be figured out. There's no style points and I don't buy falling knives. I bought one over the last three years. It's Pfizer. I'm still stuck in it.

[Josh Brown]

There you go.

[Michael Batnik]

Like I do not. This is not what I do. All right, mystery chart and then we're out of here. This was a super sized edition by the way. This is a great show. This is six months. It's not a stock, it's not an etf. But it's very important to the global economy.

[Josh Brown]

What do you think this is go the 10 year.

[Michael Batnik]

Look at you, look at you. 4 spot 27 as of yesterday's close. I don't know where it is right this second.

[Josh Brown]

Dude, don't with me. I know my charts.

[Michael Batnik]

I know you do, but do you see this double bottom? And I know it's a, it's an interest rate, but, but do you, but do you see that people? Do you see. All right, let me ask it this way. Do you see that In December of 24 we got down to it looks like 410. And then, and then all of a sudden they sold bonds and started buying stocks back. Well, we're getting back into that region and this time if the economic data materially worsens and we don't have another inflation scare, this is probably going to visit 4%.

[Josh Brown]

Oh yeah, I'm, I'm really surprised with all of the legitimate economic slowdowns, not fears. We are seeing economic slowdowns and with all of the recession worries, I'm surprised it's got a four handle.

[Michael Batnik]

It still has a four handle because the inflation data is keeping the Fed from being like, yeah, four cuts. Yeah, that's why that could stop on a dime. One bad nfp, one bad read on, on wage growth or one, one unexpected spike on initial claims that you're gonna see four.

[Josh Brown]

You're right.

[Michael Batnik]

And then that's gonna be a moment. And so keep, keep you on the ten year. All right, that's it from us today, guys. Thank you so much for tuning in. We really appreciate it. Shout out to our sponsor public.com and the public trading app. Tomorrow is Wednesday. Wednesday, which means an all new edition of Animal Spirits with Michael and Ben. There's also an Ask the Compound Wednesday afternoon live on YouTube and we'll be back with another compound and friends at the end of the week. Keep it locked. We appreciate you. Have a good night. Whether you're just getting started as an investor or you're managing a multi million dollar portfolio, Ritholtz Wealth Management has the solution for you. It all starts with building the right financial plan. To speak with a certified financial planner today, visit ritholtswealth.com don't forget to check us [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.