Mag 7 Falls Behind, How David Adelman Bought the 76ers, Bill Ackman Buys Uber

Summary

Podcast Summary: The Compound and Friends

Episode Title: Mag 7 Falls Behind, How David Adelman Bought the 76ers, Bill Ackman Buys Uber
Release Date: February 11, 2025
Host: The Compound (Downtown Josh Brown, Michael Batnick, and guests)
Guest: David Adelman, CEO of Campus Apartments and Owner of the Philadelphia 76ers

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Introduction and Episode Overview

In this engaging episode of The Compound and Friends, host Downtown Josh Brown and Michael Batnick delve into a multifaceted discussion that intertwines high-profile business acquisitions, market dynamics, and investment strategies. The episode prominently features David Adelman, a prominent entrepreneur and sports team owner, offering listeners a deep dive into his journey and insights.

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Interview with David Adelman: From Humble Beginnings to Sports Ownership

David Adelman's Origin Story
David Adelman shares his remarkable ascent from an 11-year-old learning the ropes by sweeping floors at Campus Apartments to becoming the CEO of a billion-dollar student housing empire. He recounts a pivotal moment when a childhood bet with his family friend, Alan Horowitz, led to him working off his debts by performing labor at Campus Apartments. This early experience instilled in him a profound work ethic and a deep understanding of the real estate business.

[07:04] David Adelman: "Student housing is the least cyclical business, almost 100% good business."

Expansion and Strategic Vision
Adelman discusses how he expanded Campus Apartments beyond Philadelphia, capitalizing on opportunities in Columbus and North Carolina. By 25, he was ready to take the helm, driving the company's national growth. His strategic foresight identified the fragmentation in student housing as an opportunity to unify and standardize high-end accommodations across various college campuses.

[09:03] Josh Brown: "How do you make this decision for which school is next after Penn?"

[09:06] Michael Batnick: "It's supply and demand. If there's enough supply, you're not adding value."

Community Involvement and University City District
A significant highlight of the conversation is Adelman's role in supporting the University City District in Philadelphia. Amid rising crime and community concerns, Adelman stepped up as the largest private sector supporter, contributing $500,000 over ten years to establish a four and a half million dollar operating budget for the district.

[20:22] David Adelman: "When most landlords in West Philly were hunkering down, he was the only one who contributed to this. You must have seen that your business and the state of the neighborhood are kind of intertwined."

Ownership by Ritholtz Wealth Management
Adelman introduces a new channel, Ownership by Ritholtz Wealth, aimed at discussing business ownership and wealth building outside traditional markets. This segment serves as a platform for entrepreneurs and shareholders to share their experiences and strategies for financial success.

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Market Overview: Mag 7 and Beyond

Mag 7 Underperformance
The hosts transition to a critical analysis of the "Mag 7"—the top seven mega-cap tech companies that have historically driven market performance. This year, however, the Mag 7 has slightly detracted from the S&P 500’s gains, with the remaining 493 stocks outperforming.

[55:31] Josh Brown: "The Mag 7 is actually detracted from S&P 500 year-to-date performance. Not by much. The other 493 names are up 3.4 or 5% year to date."

Factors Behind the Shift
Several factors contribute to this shift, including geopolitical tensions between the U.S. and China, regulatory scrutiny, and increased capital expenditure among the Mag 7 companies. These elements have introduced company-specific risks that were previously mitigated by broader market trends.

[63:06] David Adelman: "Apple too. You're right, you're right, you're right."

Economic Indicators and Sentiment
The conversation also touches upon economic indicators like the ISM New Orders Index, which recently climbed above 55—signifying a potential manufacturing rebound. However, both hosts express cautious optimism, acknowledging that survey-based indicators can sometimes be self-fulfilling or misleading.

[74:36] Josh Brown: "It’s a survey, but whatever. So like, still, this is a historically good thing."

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ETF Market Discussion: Proliferation and Risks

Surge in ETF Launches
The episode highlights an explosive increase in ETF launches, with over 100 new ETFs introduced this year, setting a pace towards 1,000 for the year. The hosts express skepticism about the quality and sustainability of many of these funds, categorizing some as "money incinerators."

[84:54] Josh Brown: "I'd like stupid people to have their money incinerated. How do you wake people up from their TikTok-induced stupor? It’s going to happen because you’re tired of getting over."

Risks of Leveraged and Themed ETFs
Particularly concerning are highly leveraged ETFs, such as a proposed 2x Leveraged Quantum Computing ETF with extreme volatility estimates. The hosts critique these products for being speculative and potentially destructive for uninformed investors.

[86:50] Josh Brown: "Let’s throw this up. We’re going to spend a minute on this because I think it’s probably the most interesting thing going on."

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Individual Stock Performances and Strategic Investments

Highlighting Strong Performers
The discussion shifts to standout stocks that have demonstrated exceptional performance, such as Cloudflare, Palantir, and Spotify. These companies are praised for their robust earnings, strategic sector positioning, and ability to rebound from setbacks.

[78:11] Josh Brown: "Appropriate to learning hard lessons… pay more attention to us and we'll get you through it."

Bill Ackman’s Investment in Uber
A significant portion of the conversation centers on Bill Ackman's strategic investment in Uber. Ackman's move is portrayed not as activist investing but as a calculated bet on Uber's long-term viability, particularly in the autonomous vehicle sector.

[89:00] Josh Brown: "He thinks it’s well-managed. He's not an activist, at least not yet."

Financial Sector as a Bullish Play
David Adelman champions the financial sector, citing strong performances from major institutions like JPMorgan, Goldman Sachs, and Wells Fargo. The financial sector's resilience is attributed to higher interest rates benefiting profitability.

[95:04] David Adelman: "XLF is the second largest sector in the S&P 500 behind technology stocks, and it's way the hell up."

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Private Equity and Wealth Management Integration

FS Investments and Alternative Investments
Adelman discusses FS Investments, his firm managing $84 billion in assets, focusing on alternative investments. The firm partners with wealth managers to offer transparent, alternative investment products, bridging the gap between traditional RIAs and the private equity space.

[46:31] Josh Brown: "RIAs know that in the end they're answering for whatever goes on. So that must be a big part of that effort is just transparency."

Emphasis on Transparency and Trust
A recurring theme is the importance of transparency and proactive communication in investment management. Adelman emphasizes building trust through honesty and early disclosure of any issues, aligning with the fiduciary responsibilities of wealth managers.

[47:05] Michael Batnick: "Your brand is everything. And so I say that to everyone I mentor."

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Conclusion and Final Thoughts

The episode wraps up with reflections on market dynamics, the importance of diversified investment strategies, and the ever-evolving landscape of private equity and wealth management. Hosts and guest underscore the significance of adaptability, informed decision-making, and community involvement in both business and investment endeavors.

[88:54] Josh Brown: "Pay more attention to us and we'll get you through it. And we ain't crying about ETF launches. We're adults. We're over it."

Key Takeaways:

• David Adelman's Journey: From child labor to CEO and sports team owner, exemplifying perseverance and strategic expansion in real estate.
• Mag 7 Underperformance: Highlighting a shift in market dynamics where broader stocks are now outpacing traditional tech giants.
• ETF Proliferation Risks: Concerns over the quality and sustainability of the rapidly growing number of ETF offerings.
• Strategic Investments: Emphasis on strong performers and informed investment decisions, including high-profile moves by investors like Bill Ackman.
• Financial Sector Strength: Recognition of the financial sector's robust performance amid higher interest rates.
• Private Equity and Wealth Management Synergy: Importance of transparency and trust in forming successful investment partnerships.

Listeners are encouraged to follow David Adelman and the hosts on Instagram and other social platforms for ongoing insights and updates.

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Notable Quotes:

• David Adelman at [07:05]: "Real estate, okay."
• Josh Brown at [20:22]: "We could do something good for the community and it can be good for us."
• Michael Batnick at [46:31]: "RIAs know that in the end they're answering for whatever goes on."
• Josh Brown at [73:16]: "You're going to get one reputation. If you guys did something inappropriate to your clients, how are you guys ever gonna be in that business again?"

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Resources Mentioned:

• KellyIntel.com
• Ritholtz Wealth Management Disclosures
• Ownership by Ritholtz Wealth Channel
• Animal Spirits Podcast by Michael and Ben

Follow Us:

• Instagram: @TheCompoundRWM
• YouTube: youtube.com/TheCompoundRWM
• Podcast Platforms: Apple Podcasts, Spotify, YouTube

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This summary encapsulates the key discussions and insights shared during the episode, providing a comprehensive overview for those who haven't listened to the full podcast.

Transcript

[Josh Brown]

Ladies and gentlemen, welcome to the compound and friends. Tonight's show is brought to you by Kelly's ETFs. Kelly US Cash Flow Dividend Leaders Index, also known as the Cows ETF Index, is tracked by the Cows ETF, that cow s and the HCO ETF. HCAO is tracking the same index as cows, but it then will write covered calls on the constituents to bring in some income and reduce risk. So the index itself that they're basing these ETFs on invests in companies with a blend of high trailing and future free cash flow yields that have a history of growing and paying dividends. So they're cash cows. That's where the name comes from. It has a 98.6% active share versus the S&P 500. So this is not a clone of the index. These are very different stocks in very different weightings. I want to send you over to KellyIntel.com to learn more about cows and hcow. Check it out for yourself. All right. We talked to David Adelman who is currently an owner of the Philadelphia 76ers. He is also the founder of a business called Campus Apartments. There are college campuses all over the country that have these high end, very nice apartment buildings for students as an alternative to living in dorms or living in decrepit student housing. It's been an incredible concept. It's a billion dollar business. And David Adelman started as a child basically sweeping up for the owner of a college campus apartment building in Philadelphia and became the CEO in his 20s as they began to expand the business all over the country. And the rest is history. And I want you to hear that history because it's an incredible story. David was super generous with his time and we recorded that for a new channel that we launched called Ownership by Red Holds Wealth. So ownership, I wanted to give you guys this sneak preview. Ownership is going to be a little bit different than what we do on the compound. On the compound we talk about investing and trading and markets and the economy. What we're doing on ownership is talking to business owners and not just founders, but you think about how many employee shareholders there are at all of the public companies in America and then all of the venture backed startups. This is really the modern route to building wealth in this country is to either own a business or become a shareholder of a business someone else owns, but to share in that upside, the equity upside, the profitability distributions, etc. So this is a channel that's really talking away from markets and talking a little bit more toward people who are trying to become a part of the ownership class of America. So whether you're a business founder or you've gotten shares as part of your compensation at the company you work at, or you would like to be on the track to be able to do that, or you own real estate, or you come from a background with an inheritance or any version of ownership, the content that we're going to do there will be relevant for you. So what you're going to hear tonight is a conversation between Michael Batnick, myself and and David Adelman. We'll talk about basketball, of course, but we'll talk about business and life and the intersection between the two. And I think you'll really get a lot out of that conversation. Immediately following, it's back to markets. It's Michael, it's me. An all new edition of what are your thoughts? We'll talk about the Magnificent Seven, something I'm calling the Twilight of the Magnificent Seven. We'll talk about the broadening out of the market and some of the biggest winners of the year. We look at some names that you probably don't hear much about that are making people a lot of money and we'll get into some stuff about the ETF market too. It's, it's a whole thing and I promise you'll get a lot out of it and you'll love it. So with no further introduction, I'm going to send you over. Thank you guys so much for listening. Duncan, Daniel, John, take it away.

[Michael Batnick]

Welcome to the compound and friends. All opinions expressed by Josh Brown, Michael Batnik and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain.

[Josh Brown]

Positions in the securities discussed in this podcast. Hey guys, it's me downtown Josh Brown here with Michael Batnik. Welcome to the ownership by Ritholtz Wealth Management. We are super excited for our guest today. We are talking with David Adelman. David, welcome to the show. Thank you so much for being here.

[Michael Batnick]

Thanks for having me guys.

[Josh Brown]

I'm going to read your official bio.

[Michael Batnick]

The one my mom wrote and you.

[Josh Brown]

Can stare into space. David Adelman is an American businessman and entrepreneur. He is the CEO of Campus Apartments, co founder and Vice Chairman of FS Investments and the founder of Darko Capital. David is also a limited partner of Harris Blitzer Sports and Entertainment, an industry leading sports and entertainment group. And your portfolio is the Philadelphia 76ers, the New Jersey Devils, Crystal palace, which is English Premier League soccer, football, and the Prudential Center. That's part of the portfolio.

[Michael Batnick]

Yes.

[Josh Brown]

Okay. And you have, in my opinion, one of the coolest all time origin stories for how you got started in business, how you learned to do business and how you got to where you are today. And I would just, I would love to just prompt you and have you tell us all about it, but it starts with you as an 11 year old making a bet, writing a check that you couldn't cash on the basketball court.

[Michael Batnick]

It's hard to start young as a gambling degenerate. So, yeah. So great to be here, guys. Thanks for having me. So you know the story and lots of people know this. I'm a Philadelphia guy, grew up there. And you all have a guy who's like your uncle, but not really your uncle, family friend type guy. So I have one of those. His name's Alan Horowitz. His mother and my grandmother were best friends. He was a big brother to my mom her whole life. And he was Uncle Allen to me and still is. Closest could be. And so I'm 11 years old playing basketball with Uncle Allen and I said, I bet I can beat you. And literally, like most people let the 11 year old kid win. Okay, Not Uncle Alan, right? And so not only does he not let me win, but I guess I had a thing as a kid. I'd be like, I'll bet you, I'll bet you like, I was like, you know, he's like, oh, you want to bet? I lost my basketball, my football, my baseball glove and my little bank book that you had as a kid.

[Josh Brown]

Just everything you own.

[Michael Batnick]

It was like all my shit. And so literally I had to go to his business Campus Apartments, which the business I run Today as an 11 year old kid, every Saturday and I had to stack lumber or sweep sawdust. And at the end of each session, I got one thing back, okay? Literally they were sitting in the. I remember this. He had like a Corvette back then and they were sitting in the glass trunk and he would like make sure I saw it, like taunting me. Oh, well, there's your stuff for next week. I gotta come in and work.

[Josh Brown]

What do your parents say while you're working off this deck?

[Michael Batnick]

They thought it was great. They're like, oh, you.

[Josh Brown]

They like the message behind it, right?

[Michael Batnick]

Work, don't be a gambling degenerate. And you gotta pay your debts.

[Josh Brown]

You're in the suburbs of Philly at this time.

[David Adelman]

What was the Business. What was campus apartments back then?

[Michael Batnick]

So back then, you know, smaller version what it is today. But, you know, Alan had a great vision as a kid. His father passed away when he was 10 years old, and him and his mom started really early on. And the vision was that student housing was a captive audience. So he started systematically around the University of Pennsylvania, buying small properties, renovating them, leasing them to kids. And, you know, just kept, you know, back then he would like, you know, just kept rolling it into more property, growing, growing, growing. And then, you know, basically what happened for me is so, you know, after the 11 year old, I got my stuff back. Two years later, I'm 13 years old, I have my bar mitzvah, I have a whopping $2,000. And my grandfather was actually in your guys business. And they're like, oh, do you want to give it to your pop pop to put it into stocks? And I'm like, no, I want to give it to Uncle Allen. I want to do what he does. I'm 13.

[Josh Brown]

Real estate, okay.

[Michael Batnick]

Literally, I'm 13, and my parents are like, no one thought it was school. Saying I was like, all right, great. So he's like, well, what do you want to invest in? I'm like, what do you have? So literally we got in his car and we're driving around University City, which is around Penn, and I'm seeing like, oh. He's like, well, we have this, I have that. And I finally. I'm like, that one.

[Josh Brown]

And these are all students living in student housing.

[Michael Batnick]

And he's like, well, why that one? I'm like, it looks like the biggest building. How did I know how to value real estate at 13 years old?

[Josh Brown]

Did you ask what the cap rate?

[Michael Batnick]

I didn't know that.

[Josh Brown]

Right.

[Michael Batnick]

I'm like, all this stuff. So like, I literally like, you know, like mob guy. I hand him a brown paper bag with like two grand in it. And that was my baptism into real estate.

[David Adelman]

Student housing. Like the least cyclical business, I guess. Covid was a, you know, but outside.

[Michael Batnick]

Of that, like, so during COVID we collected about 94% of our revenue and every other.

[David Adelman]

What's always close to 100, close to defaults, whatever.

[Michael Batnick]

You have some defaults or, you know, some family issues, stuff like that, but it's almost 100 good business. And so like, for us, what I learned is it was just a slow and steady, steady business. I learned that it was so highly fragmented that like every school there was an Alan Horowitz. Like a mom and pop business.

[Josh Brown]

Yeah, literally mom and Pop.

[Michael Batnick]

Which, you know, Alan started small and then became more than mom and Pop.

[David Adelman]

So you came in like Vince McMahon and you unified the whole thing.

[Michael Batnick]

That's what we did, right? We said, like, let's bring it together. Let's make this popular. Let's. And so my thesis was this. If you guys. When you guys were in college and you went to go to the dining hall, the person serving you, you know, kind of lunch, like what, you know, was like, usually a university employee, then somebody is just like, why the are we having our own employees serve food? Let's outsource to Aramark Sodexo Levy, you know, one of those companies that does that. And so, like, I was like, well, why can't I be the Aramark? Aramark's based in Philly. Why can't I be the Aramark or Levy of real estate?

[Josh Brown]

The school doesn't want to manage properties.

[Michael Batnick]

It's not their core competence.

[David Adelman]

But when did this idea. Inception.

[Michael Batnick]

So that happened. So, like, so I came into the business. Let me. I'll. I'll.

[David Adelman]

So you're 14 now.

[Michael Batnick]

I'm right. I'm in that. Yeah. So he CFO weekends. Yeah, yeah. I'm, you know, I'm in charge of, you know, construction now. But he did so systematically. From the time I was, like, 13 through graduating college, I worked. He had me do every job. Okay. Work in the office, leasing, accounting, maintenance, construction, plowing walkways, like, you know, when it snowed, like, all that stuff. So literally, I graduated college on a Thursday and started working for him on a Monday.

[Josh Brown]

You at university? Ohio State.

[Michael Batnick]

The Ohio State.

[Josh Brown]

The Ohio State.

[Michael Batnick]

So we playing for the national championship on Monday night. Just want to.

[Josh Brown]

Sure. Notre Dame, right?

[Michael Batnick]

Yes.

[Josh Brown]

Okay, good luck with that. Were you scoping out the campus housing situation even while you were in school? Like, was the. Were the wheels turning? Like, oh, my God, we have an opportunity.

[Michael Batnick]

I'll tell you a great story. So I'm actually going to the game with the guys I lived with in college, some of them. And so we're all living off campus after. We live in the fraternity house. Did that whole thing. We live in a house, like a seven bedroom, like one or two bathroom house. Like, you know, kind of a shitty house. And there's one outlet in my bedroom. 1. And so I go to the, you know, the management office. I'm like, hey, you know, I don't know what's going on here, but there's only one outlet in my bedroom. Could you guys install some more? And they're like, no, And I'm like, that can't be right. Cause I've been working at, like, a real estate. Like, so I literally, like, you know, so I'm 20 years old, 21 years old. I go down to the city of Columbus building code building, and I'm just a kid in line. Like, the guy's there, but, like, you know, it was like a nice Columbus, like, a nice, parochial town they actually like, how you doing? Like, can we talk to you? It's not, like, here or Philly, where, like, no one else. And I'm like, excuse me, sir, can you tell me the building code for, like, outlets in a bedroom for a house? And he photocopies it, and it's like, oh, one every eight feet, right?

[Josh Brown]

So you could have more if they had a willingness to do it.

[Michael Batnick]

Well, I take the piece of paper, I go back to that leasing office. I was like, my whole house would, like, outlets in all their bedrooms every eight feet. Thank you.

[David Adelman]

That's frustrating.

[Michael Batnick]

So that was, like, my first kind of doing it. I graduate, I go there. Alan starts having me do everything. I want to learn all the jobs. It's great. And I immediately saw that this was highly fragmented, and there was an opportunity to do this in a big way nationally. So literally, like, I'm 25, 26 years old, and I'm like, hey, I think we should start doing this in other places. And Alan's just a great, easygoing guy. He's like, I don't know, man. We got, like, a nice thing going here. He's like, no, no, no. I'm gonna do this. He's like, well, then you should run this thing. And so, literally, like, at 25, 26 years old, he's like, you should be. You can run this. And like, you're the CEO. Yeah, I'm the CEO.

[David Adelman]

How many employees are there at the time?

[Michael Batnick]

40, 50.

[David Adelman]

Holy shit.

[Michael Batnick]

You know?

[Josh Brown]

So how do you make this decision for which school is next after Penn? Is it we want to move out.

[David Adelman]

Regionally, or did you stay in Philly?

[Michael Batnick]

So we went. We actually left Philly. We went to, you know, we did something in Columbus. We went to North Carolina.

[David Adelman]

Why?

[Michael Batnick]

Opportunity. We just saw some opportunities. Just went bang, bang, bang. Like, just started, you know, kind of doing it. And then what really happened, you know, put us on the map. In 2004, 2005, I was like, maybe I got approached from some banks to go public as a student housing company. There was already one or two others.

[Josh Brown]

Acc, which I was invested in.

[Michael Batnick]

Americans. There was one called Educational Realty Trust. None of it doesn't exist anymore.

[Josh Brown]

Blackstone by acc.

[Michael Batnick]

Blackstone bought acc, Doing a great job with them. And so they're like, you should go public. And I was like, yeah, I guess I'll do that. And then, you know, we talked about it before. One of my really closest friends is a guy named Michael Rubin, who was a Philly guy. We've been friends since we're 24 years old. And he was running a really small public company at the time. He's like, you sure you want to do that? Like, maybe you should do something else. I was like, oh, maybe I don't want to do that. Like, I don't know. I just kind of didn't know.

[David Adelman]

But you needed capital.

[Michael Batnick]

I needed capital. To that date, what we did in real estate is you would develop a project, create value, refinance it, and just keep rolling the dollars. Right? So you do one project at times. I want to do more than one project at a time. So I need to. I need capital. I wind up running a process, and I wind up getting a global sovereign wealth fund to give me $300 million in five. And it's a pretty funny story because, like, I told the bankers taking me around, I want 300 million. Not like. And they couldn't understand why I'd never raised a nickel before. Okay, we finally. I said, look, after you raise it, like, I'll tell you why.

[Josh Brown]

But you have the cash flow to show that, like, there's a return on this.

[Michael Batnick]

I had the experience to show that if we put money to work and we did it like one deal at a time, like, I wasn't investing all that money at once. It was kind of like, accessible from the investment group. Long story short, we get a $300 million commitment from a global sovereign wealth fund. And now I can say of equity. So I'm like, oh, I want the kind of. I'm young and I want to like. I'm like, oh, we can say a billion dollars of real estate, 300 million of equity, 700 million of debt. That's how the leverage works. I was like, I just did a billion dollar joint venture with a global. You know, so that's the guy that.

[Josh Brown]

Wants the big novelty check.

[Michael Batnick]

So I got. Oh, yeah, so. So we got. So. But that put us really. And then we quickly grew very. You know, we're in. You know, we've been anywhere from 18 states to 28 states, you know, kind of fluctuates, you know, as you kind of grow, create.

[Josh Brown]

I know. So I Noticed that trend while I was in school. We had the Knox boxes at the University of Maryland.

[Michael Batnick]

Sure. I know. Well, yeah.

[Josh Brown]

Okay.

[Michael Batnick]

We're developing something in Maryland right now.

[Josh Brown]

Are you okay? So that was like where you basically had to live. And it was upstairs, downstairs, a mom and pop little. The worst. They're gone now. Yeah. But then Hartford Towers and then like it.

[Michael Batnick]

Yeah.

[Josh Brown]

It seemed to be going more toward the route where parents were like willing to help the kids afford these places and they started to look more and more like hotel style.

[Michael Batnick]

What happened and is happening is a lot of these schools where that were like state schools, where it was mostly in state.

[Josh Brown]

Yeah.

[Michael Batnick]

Started getting out of state kids. You get the Long island kids and stuff.

[Josh Brown]

You need amenities.

[Michael Batnick]

Right. And then all of a sudden, mom comes down from Long island, was like, oh, no, no, this isn't going to do. Right. And so like if you see our gyms and our fitness centers, our rock climbing walls, like it's insane what we're building for these students right now.

[Josh Brown]

Yeah. All right. So what you're looking for then when you select a campus area and you say we should have a presence here. I guess part of it is a dearth of other players where you could kind of like grab the mind share of most of the students. You don't want to like walk into a situation where everyone's already set up.

[Michael Batnick]

Right. Well, it's supply and demand. Right. If there's already enough supply, like you're not adding value.

[Josh Brown]

You want a school that's growing, growing.

[Michael Batnick]

Or you think is about to grow. Like I always tell a story that 10, 11 years ago, it's probably 11, Clemson, before their football program was what it was, was not what it was.

[David Adelman]

Right.

[Michael Batnick]

It wasn't even a top 20, you know, it was never a top 25 team. And all of a sudden. But when you see some of these predominantly state schools all of a sudden rising, that actually that popularity gets more. Out of state students.

[Josh Brown]

Yes.

[Michael Batnick]

Out of state students pay more than in state students. All of a sudden. Bingo. Those out of state students could afford to pay rents of what a new construction product costs.

[Josh Brown]

Yeah. So my daughter, we're from Long Island. My daughter has friends at Clemson and at University of Georgia. Five years ago, nobody from my town was going to these places. So is it the football team?

[Michael Batnick]

It is.

[Josh Brown]

Is like kind of what leads it. It's the tip of the spear.

[Michael Batnick]

It is. It's sports and the awareness. And then the schools get smart about marketing and they say, oh, we're going to get these out of state students. You know, if you look at the out of state tuition, you know, I told you my daughter's at Boulder. Right. The difference between out of state tuition in state tuition, you know, it's 4 to 5x. It's great revenue for these schools.

[Josh Brown]

Yeah. The schools have to balance having enough opportunity of slots for local kids.

[Michael Batnick]

Right. But versus, like, let's see it change rapidly.

[David Adelman]

Are you getting. Or was there a point where you started getting phone calls versus going out and scouting new.

[Michael Batnick]

Well, two sides. One is, you know, there's. What we do predominantly is off campus. Right. You know, most schools house their freshmen, so that's 25% of the capture rate. The rest is kind of to the open market. But there are times where the schools are looking to improve their housing or, you know, kind of, I give you the food thing, saying, like, we don't need to be involved in it, but we want to have a little control over it. And we'll do these. What's called a public private partnership. We're actually doing that at Maryland right now.

[Josh Brown]

Okay. So they'll say, we need you to build something great.

[Michael Batnick]

Here's a piece of land. But we want you to put the capital in. So they'll put the land in and we put capital in, bring our expertise. That's how it goes.

[Josh Brown]

Okay. So somewhere along the line, you get to the point where the industry takes notice of what you're doing and you win an award in.09 multifamily real estate executive of the Year. And I want to point to something, a decision it seems like you made, that in hindsight, I would guess you would say this is probably one of the best decisions you've ever made. And this is related to the area around Pennsylvania. They needed some investment. They needed somebody to step up and believe in the community. And I just wanna quote something that was written about this episode. With crime spiraling out of control in the neighborhood, Penn asked local stakeholders for a financial commitment and political support to start the University City District, a special services district to improve the safety and cleanliness around campus. Adelman became the largest private sector supporter of the district, contributing $500,000 over 10 years to help Penn establish a four and a half million dollars operating budget for UCD. Somebody said something really nice about you. They said when most landlords in West Philly were hunkering down, he was the only one who contributed to this. You must have seen that your business and the state of the neighborhood are kind of intertwined and you can't win if the Neighborhood doesn't win and probably vice versa. And you stepped up at a pretty critical time.

[Michael Batnick]

Yeah, look, that's exactly what it was. And my partner, Allen, who's still my partner, we were talking about it. We're like, what happened was Penn was always an elite institution and all that, but the neighborhood was kind of iffy. There would be kind of a safe zone and a fringe zone. And then there was this kind of like, I hate to publicize a famous murder of a professor, like, off campus near where our stuff was too. So all of a sudden you're like, wow, this is really bad. And so Alan, my partner, and I were like, we have to do something. But we're real estate guy. We're not public service.

[Josh Brown]

What do we do?

[Michael Batnick]

Like, what do we do? And so this whole consortium came together and they asked us for money. And we were like, you know, Alan and I were like, we have to do this. Like, thank you. Thank you for setting it up. At least. You know, we're just money. Like, let us, like, like, we got to save this. And by the way, if you're successful, like, it was easy to see if you're successful, this is going to be good for our business. Right. Like, so, you know, like, my two things can be true. We could do something good for the community and it can be good for us.

[Josh Brown]

Yeah, I think there should be more of that. I know there have been attempts with things like opportunity zones over the years, etc. But like, for, for better or for worse, if you have a facility that's on a campus and the campus is in a. In a city, you need the city to prosper in order for people to want to go to that school and pay rent to you. Like, it all has to work in concert with each other.

[Michael Batnick]

Right.

[David Adelman]

David, that. That $300 million that you took, that was for a particular deal. That wasn't equity in the company, was it?

[Michael Batnick]

No, no, no. So. So, yeah, great question. So we never took equity at the parent company.

[David Adelman]

So why?

[Michael Batnick]

It's a great question, you know, and I believe it's funny because I mentor a lot of investors. My family office does a lot of investing in companies where I'm like, you know, having. Owning less of something big is better. I had a vision on the real estate side. I thought I needed to maintain control, and I thought real estate was unique kind of asset class where I could maintain control of day to day of employees, business, things like that. But then you could venture with capital at the real estate level. So I felt like you could Have a win win there. So we have investors at the real estate level. You create value at those deals. It's good for the investor, good for us. You know, we share those profits with our employees. Like, you know, how do you do that? But yet still, you know, I didn't want anyone coming and telling us how to run the business or who to hire and fire, so. But that was.

[Josh Brown]

Sounds familiar.

[Michael Batnick]

That was a personal preference, though. I don't always give that advice to entrepreneurs that are building businesses.

[Josh Brown]

Right. We sort of have that same mentality here. We're in an industry that's rapidly seeing private equity investment being made in RIA firms. We're not opposed to it happening. We just don't want it to happen.

[David Adelman]

We want to be the last one standing.

[Josh Brown]

We don't want it to happen to us.

[Michael Batnick]

Yeah, well, listen, culture sometimes gets harder to maintain depending on how that works. And, you know, is the investor coming in have the same vision that you do? And, you know, look candidly over those times, I didn't know how to kind of quantify that. You know, will that person want to be there or are they going to, at your worst moment, say, well, it's time to sell.

[Josh Brown]

So the parent company for everything is Darko Capital.

[Michael Batnick]

Well, parent company for the real estate's Campus Apartments.

[Josh Brown]

Campus Apartments, Okay.

[Michael Batnick]

Darko Capital is my family.

[Josh Brown]

That's your personal.

[Michael Batnick]

Yeah.

[Josh Brown]

Okay. You've got this concept of treating private equity like it's venture capital investing. We definitely want to hear more about that. You make venture type investments, but you're in the private equity world. So your expertise, I guess, straddles both elements of building and running a company.

[Michael Batnick]

Yeah, I mean, the way I describe it is I have this unique. I don't know if it's unique, but, you know, I have, like, really bad ADD and I have ocd. Okay, so you're both. I have, like, both, like. And so, like, I focus on things intently for a short period of time, and then I'm like, on to the next one. So I am. I am good at kind of thinking through strategic issues, putting things together, getting something going. But, like, you know, like.

[David Adelman]

And then other people do it.

[Michael Batnick]

Correct. So like Campus Apartments. I've had a partner there, Dan Bernstein, who's been with me 26 years. He's our president and chief investment officer. He is way better at running the business than I am.

[Josh Brown]

Right.

[Michael Batnick]

Like, like, much better. And so, like, knowing that, like, you can have partners or, you know, people you work with that can play off your strengths or weaknesses, to me, Is like how you create success.

[David Adelman]

We have the same thing here. We have somebody who's focused full time on like actually implementing the ideas that we have.

[Michael Batnick]

And they have to.

[Josh Brown]

And that's me. All rise. Cold brew Coffee Cred. AI Margo. American Harvest Vodka. Ali Pets. You're involved with fanatics which. Talk about in a second. Tell us about your portfolio. What gets you to. Yes. When people come to you with ideas and what do you bring to the table?

[Michael Batnick]

So, you know, and each of those companies are, you know, very, very different. So for example, American Harvest Vodka is. We own, I own a alcohol business platform, American Harvest Vodka, another brand called Beech Whiskey, and that is a vertically integrated spirits company. So it's under the umbrella of Darko Spirits. I have a CEO who runs that. No outside investors. We have about 15 people who work there. So a little different than my norm of just being more like passive or non control investor. Usually I'm a large shareholder, but not the largest. It depends on the situation. Credit AI based in Philly, one of my favorites. One of my larger holdings. Interesting scenario. Two guys had built ING Direct, which was the first Internet bank, if you remember, back in the day, you would remember that. So kind of the fintech gurus and then these two brothers who are like brilliant smart tech guys and they figured out an algorithm about how to take a debit card. And using this debit card creates credit. Okay. And I won't bore you with the technical way it works, but that partnership has now worked where we have a deal with Starbucks, for example, where we now are working with Starbucks and their 400,000 employees for their baristas and employees to just deposit their paycheck on our debit card. And that swiping of the card is building their credit. Okay. We created a project called EWA Early Wage Access, where we can lend people money against their paycheck before it happens in a few days before. And so there are things that we've done in that financial services space that are pretty interesting, you know, other ones that, you know. What other ones? So you know, Margot, okay. Run by two brilliant women based here in New York who their Harvard business plan was, why do women's shoes, like, for a working woman, like have to be uncomfortable to look good? And so their whole thesis was like, can we create shoes that are like fashionable, transition affordable? Because like you see women like New York or Philly, they're walking to work in their sneakers and they've got their other shoes in their bag. In the bag, right? Because they don't Want to do it? They were like that, that's insane. Like, let's create something. So Alexa and Sarah just created this great company. They also, I learned this from it, that women's feet aren't the same size necessarily. So one of their lines is custom shoes. You step in a thing, it measures your foot, Boom, it ships you the shoes too.

[Josh Brown]

Oh, your left and your right foot might be slightly different.

[Michael Batnick]

Might be slightly different. So, and so, you know, that was, you know, one Ollie Pets you just mentioned. You know, for me, that was kind of the early on, the dog food. You know, if you have dogs, which I never had them growing up, but now, like, you know, my, you know, you've got like my kids, my wife, my dogs, I'm kind of last in line, right? But like, so the way my dogs get treated with their food and their treats and all that stuff. And so this premium product that is, you know, delivered to your home, ordered on an app, all of that, like, you know, just like high end food. Not the stuff that's sitting in the can for like, you know, three years is, you know, the new thing. And we got in early.

[Josh Brown]

So one of the things about venture capital these days is that everyone has money. Money's not really the problem. Attention is the problem that needs to be solved. So I would imagine you have a platform where when you come to the table, all terms being equal, the difference is, hey, look, what else I can do besides just write you a check?

[Michael Batnick]

So I pride myself on really two things. One, this traditional venture fund will be great for your company when it's 80 degrees and sunny, okay? But like when it's cloudy and there's storms coming, like during COVID you know, I can't tell you how many of our companies that were venture backed needed capital. But those funds, you know, they would, they invested out of fund two, and they couldn't put more out of fund three, and we were giving lines of credit to our portfolio companies, right? And so, like, for me, like, if we invest in something, you know, every now and then, like, you know, I'm sure you see these, like, guys will pass the hat and it's a cool deal and like, I know nothing about it. I do that less and less. I like it when I know who the founder is. I know what the product is. And by the way, is it adjacent to campus apartments or one of my other businesses where I can add value?

[Josh Brown]

Right. It could be some kind of cross promotion.

[Michael Batnick]

You think about, like, campus apartments. We've got 25,000 students that live in our buildings. And you think about, like, the disposable income they have. They're kind of tastemakers. I can't tell you how many consumer brands are like, hey, here's a product. We'd love you to put it out to your.

[Josh Brown]

Oh, that's interesting. Students.

[Michael Batnick]

Right? Like, think about that. So if I think something's interesting, then, you know, it's testing well. In our kind of ecosystem, where do.

[David Adelman]

You tend to invest in terms of, like, revenue stage, where these. Where these companies are early. So pre revenue.

[Michael Batnick]

Pre revenue. And where. I'm betting on the jockey. Okay, Right. And so to me, you know, by the way, I hit a lot of zeros. Like, I don't want to look glamorous here. Like, we lose a lot of money pre revenue.

[Josh Brown]

It's part of the.

[Michael Batnick]

It's part of the bad. Right. You got to do that. But, like, you know, if you have the right product. And then I look at it, I'm like, well, what's the barrier to entry for the next guy who might be smarter or have more capital to beat us? And if there's, like, a moat around that, I'm like, well, that's interesting. I like the guy or gal who's doing it. There's somebody I want to back.

[Josh Brown]

I want to get into fanatics a little bit. Your relationship with Michael Rubin, and then we'll talk about how you came to own a piece of the devils and the 76ers, which. Tough game against the Knicks last night. We don't have to spend a lot of time on that.

[Michael Batnick]

It was brutal.

[Josh Brown]

So talk to me a little bit about. You mentioned Michael's almost a childhood friend of yours. How did that all come into being? Because from my point of view, the ability to do business with people that you're also friends with is, like, one of the greatest, the best. I mean, it's gotta be right up there with the greatest feelings in business.

[Michael Batnick]

Yeah. And so, you know, Michael and I live, you know, we grew up in kind of outside Philly together. We were both, you know, entrepreneurs in Philly. We met in our mid-20s, 25, 26 years old. Two entrepreneurs building businesses and just, you know, kind of, like, hit it off quickly and just, you know, been like brothers ever since. And look, you know, he is like, I think I'm pretty good at business. He's next level. I mean, Michael, I was going to.

[Josh Brown]

Ask you in your 20s, did you look at him and say, this guy's.

[Michael Batnick]

Going, well, you know, I just looked at him and I said, okay. At least I have a friend that's like running it like you. Because I had a lot of friends that were like lawyers or accountants or whatever, and like, you know, they're kind of like done at like 6:00 and like, I'm not turning off and I'm like, you know, is there something wrong with me? But to have like Another friend who's 24, 7, I was like, all right, maybe that's what our normal is. Right? And so we would just kind of grind and go and go and have ups, have downs, things like that. But, like, we weren't afraid to take a bat, take a swing. And so, you know, watching him build his businesses and do what he's done has been unbelievable. I mean, what he did with, you know, kind of selling his old company, rolling out fanatics, building the platform around it, what he's done with collectibles right now and cards and trading and now, you know, I have no doubt that he will be a differentiator in the sports he's in.

[Josh Brown]

He's an empire now. It's like beyond. It's beyond just a collection of businesses.

[Michael Batnick]

It is.

[Josh Brown]

Okay. And then he had to sell his stake in the teams. And you were ready. You had had a previous opportunity, but now you were really ready to do it.

[Michael Batnick]

Yeah, it's, you know, to be able to own your childhood team is, you know, very cool. And so when, you know, as people know, Michael had to sell his stake in the Devils and the Sixers because of the sports betting. You can't be an owner of a team and doing that. Right. You know, Michael knew that, you know, I had wanted to get into the professional sports business and we'd looked at some other stuff and when this came up, he was like, listen, we'll just do it between us. Like, it was like a, you know, literally like a 30 second conversation. Like family. Like, here's what I think is fair. I think this is fair. And like, we did it and that was done.

[Josh Brown]

What'd your wife and kids say at the time? Were they like beyond excited or they like, are you ever going to be home?

[Michael Batnick]

You know, they were kind of like, you know, look, they kind of like, they got it like, like first of all, the Sixers, they kind of understood the dev took a minute and, you know, we talked about this earlier, like, growing up in Philly, you know, I was a Flyers fan and, you know, now, like, you know, it took me a minute to start wearing Devil's gear in Philly. Like, am I going to get Hate, like, I had to kind of like get her, get around that a little bit. But like, honestly, like, our fans, the Devil fans are amazing. Like, the Prudential center has like a vibe. Like, so I'm all about energy. You know, we haven't talked about, you know, I'm going to build a new arena for the Sixers and the Flyers in Philadelphia. And so, like, I'm all about energy and hospitality and environment. The Pru is just a really cool place.

[Josh Brown]

So let's go there. Now you want to build something for the Sixers and it's obviously hard to do anywhere. I feel like on the east coast and cities on the east coast, it's even harder than if you're like in Arizona. Just from a space constraint standpoint, I feel like the competition with arenas and stadiums has been ratcheted up substantially. When you look at what Steve Ballmer has built for the Clippers, you look at Sofi like the, the, the new standard.

[Michael Batnick]

Oh, yeah.

[Josh Brown]

Is significantly above 20, even 20 years ago.

[Michael Batnick]

Oh, it's not even close.

[Josh Brown]

It's not even close because Billion dollar facilities.

[Michael Batnick]

Oh, multibillion in some cases. Because like, you think about, like, you think about the old facilities that were, you know, started in the 90s and I put like, you know, Wells Fargo center where we play, Boston Garden where Chicago plays. Those were designed with a purpose to be multi sport. Right.

[Josh Brown]

Yeah.

[Michael Batnick]

And be good for anything. And they were like the first generation of like new and new. Right. Before that it was probably more smaller.

[Josh Brown]

Intimate facilities, like municipal arenas.

[David Adelman]

Before that.

[Michael Batnick]

Right.

[Josh Brown]

Like Coliseum.

[Michael Batnick]

Exactly. Or like the Forum. Right. Where the Lakers played before Crypto or Staples center was built. Exactly. So this evolution is happening. And so, you know, for me to be able to build our new home, we just, you know, we had a big announcement this week about us and Comcast coming together to do it together. We spent the last two and a half years kind of pursuing our own home for the Sixers, separating from the Flyers. You know, I'm happy to say that us and Comcast came back together and we're going to build the best arena in the world in Philadelphia. You know, I'm fortunate that I get to lead that effort.

[David Adelman]

How long does it take?

[Michael Batnick]

Construction is about 30 months. Design's about a year.

[David Adelman]

And what about just like permits and.

[Michael Batnick]

Oh, well, now you're talking about city stuff. Right, right.

[Josh Brown]

Well, like they. Like the Chase center that they built in San Francisco for the Warriors. I think that was a seven year.

[Michael Batnick]

Sounds odyssey.

[Josh Brown]

Ish.

[Michael Batnick]

Have you seen it?

[Josh Brown]

I haven't Been yet.

[Michael Batnick]

It's very cool. They did a great job.

[Josh Brown]

State of the art.

[Michael Batnick]

And what's really, you know, there's a new. So there's a new generation of arenas, you know, so that generation was Milwaukee Fiser. Very cool there. We've been intimate. Right. Chase, Very cool. The Krakens place in Seattle, if you haven't seen it, they did a really cool job of taking the old site and building a really, to me, like, that intimate fan experience. So the seats are much closer together, kind of like a Nassau Coliseum or a forum or, you know that.

[Josh Brown]

Because you want that vibe in the arena part of, like, the product. Like, why do I go to the game?

[Michael Batnick]

Right.

[Josh Brown]

Versus watching on your sort of feel like it's an. It's an experience.

[Michael Batnick]

And so, you know, for me, everyone's got a different opinion. Steve Ballmer did a very cool thing at Intuit. Steve is a basketball fan, a basketball fanatic, and he designed it based on how his experience is. So Steve's like, I want all these bathrooms there. So you are back in your seat very quickly. I don't want you to have courtside food service, because I don't want anyone interviewing blocking your view.

[Josh Brown]

They don't have TVs at the vendors in the hallway. They want you to get your food and get back into the game.

[Michael Batnick]

Correct. And that's Steve's probably.

[Josh Brown]

I like that choice.

[Michael Batnick]

Look, I think that's his choice. So for me, I look at it and I say, like, you know, and you guys, we were talking about games before. When you go to a game with someone or a sporting event, like, that's an experience. Right? You know, if it's a friend, if it's a client. Right. That schmoozing that goes on isn't just at the seat. It's while you're getting a cocktail, having a meal, running back and forth. So I want to make it transferable, but that's my opinion, right?

[Josh Brown]

Yeah.

[Michael Batnick]

And so we want to create a fan experience that is a premium experience from the seat to the restaurant to wherever they want to go.

[Josh Brown]

We brought the whole media team last week to Madison Square Garden for a Knicks game. And we sat in the Madison Club, which means none of us were pinned into a seat. We could walk around sofas, stools. That's, like one of the best ways. From my perspective, I think I'm more on your side. I don't need to be that locked into every game I sit at.

[Michael Batnick]

I just think it's the experience and who you're with in entertainment and you're gonna make me stare at that Knicks hat the whole time, aren't you?

[David Adelman]

You don't have never seen. Maybe it's logistically impossible, but you see this at football stadiums, at baseball stadiums, that when you're getting a hot dog, you could still see the field at a basketball arena.

[Michael Batnick]

I've never seen it, so it's funny.

[Josh Brown]

City field that way.

[Michael Batnick]

I think I like that. And so we're talking about that. Like, how do you create club areas that allow you to lounge, watch the game, kind of do a little of both for, like, the casual fans.

[Josh Brown]

And, yeah, you have a line of sight onto the main event, but you're also not sitting in the seat.

[David Adelman]

So this is a dumb question, because I know the answer, but is running, is owning an NBA team a good business?

[Michael Batnick]

So here's the answer. The answer is, I say this to everyone. Owning sports teams is really fun when you're winning.

[Josh Brown]

Yeah. Because it's your. It's your reputation in the town now, right.

[Michael Batnick]

When you're not winning.

[David Adelman]

And especially when there's an expectations of winning. Like, there was in Philadelphia going into this season.

[Michael Batnick]

And, you know, look, we've. We've gotten pegged with some bad luck and injuries. Like, no one saw this coming.

[David Adelman]

Who saw Joel getting hurt?

[Michael Batnick]

Not nobody. You know, I mean, brutal. I mean, look, last night, like, you know, I'm not proud of it. Like, there were a lot of Knicks fans in our building. I was like, you know, like, I mean, you know, and I knew it was a bargain. You guys are close. And our. But our playoff series last year, Amazing. It was amazing. Like, I gotta tell you, like, for me, I just love sports because I sat in an MSG and I could feel the energy of the fans. And I. I go sometimes when the Devils play the Rangers or, like, when the Sixers are there, and, like, that energy is awesome. And to me, that's what sports is all about.

[Josh Brown]

And so, like, you have that at Eagles games.

[Michael Batnick]

We do.

[Josh Brown]

100%, notoriously. But you have that passion, fan passion.

[Michael Batnick]

Well, I feel like, you know, everyone's biased to me. Philly are the most passionate fans in the world. Right. I mean, look, I guess you could argue New York fans, because people still show up for the Jets. Right? Like, but, like, you know, at the end of the day, like, our fans are rabid. They know what they want.

[David Adelman]

There's something different than the Northeast.

[Michael Batnick]

Yeah, I agree with you.

[Josh Brown]

I think, like, as far as, like, the passion of the fan base, I think most people would say, like, it's the Bills and it's the Eagles and then most other teams is, you know.

[Michael Batnick]

I agree with that.

[Josh Brown]

I think the old school Raiders maybe kind of had an element to that.

[Michael Batnick]

Correct. But by the way, it's like generational. Right. Like, like, literally, like we're at the press conference on Monday. Okay. Announcing this new arena. Okay. And one of the things that we did is also worked a deal with Comcast that they're going to join our bid. We're going to go get, try and get a WNBA team in Philadelphia. It's important to me, important to my partners. Like, I'm really passionate about it. I'm a girl, dad. Like, I, I think that.

[Josh Brown]

And it's hot. And it's hot.

[Michael Batnick]

Right?

[Josh Brown]

People are into it. People are into it.

[Michael Batnick]

One of the people that's going to be part of our ownership group is Wanda Sykes. She's a Philly girl and she's, you know, loves it. And so we had her just say a few words kind of as part of our bid and then she's like, go Birds. Right. Like, I mean, like, like everyone is that, that is the Philly vibe.

[Josh Brown]

Yeah.

[David Adelman]

How are you feeling about this week?

[Michael Batnick]

I don't want to get cocky at all, but I, you know, I'm kind of happy that we're playing the Rams and not the Vikings. I don't know, it just felt like.

[Josh Brown]

You guys got, I think you guys got.

[Michael Batnick]

It felt like the right matchup.

[David Adelman]

So Jalen hurts. His limitations have been pretty visible. This is like his arm strength pretty visible.

[Josh Brown]

You wanted to comment on that?

[Michael Batnick]

Is that a comment or a statement?

[David Adelman]

Right.

[Michael Batnick]

Is that a question?

[David Adelman]

I'm a Giants fan.

[Josh Brown]

Sorry.

[David Adelman]

I'm just saying.

[Josh Brown]

All right. But you're having, but you're having fun and I am. The team is in the playoffs every year.

[Michael Batnick]

Look, to answer your question, like, is sports a good business? Yeah, sports, you know, sports is. We were talking about like investing earlier. Sports is like a long term investment. Like your 401k. Right, right. You're not gonna get immediate benefit from it. It's back end. Hopefully you build a good business. You do right by your fans. And like, you know, as you know, Josh Harris and David Blitz are my partner. Like they always say, like, like, like we all agree, like we're. It's not our team, it's the community's team. Like, you're a steward of it for a moment in time. Right. That's gonna be there long past. I'm on this earth and you're on this earth. Like there'll Be a team. Someone will own it. Someone will make sure that it's got a great organization. And so it's a great business. But it's hard. Like, I'll tell you a funny story. Like, last year, like, Pat Beverly was on our team, right? And Pat's a fun guy. He's fun. And by the way, like, sitting courtside and hearing Pat talk, his shit is, like, just a full. Like, it's amazing. And, you know, Daryl trades Pat and does it all. And literally, my wife calls her. She heard it. She's like, what the. You traded Pat? And I'm like, you know, honey, it is a business. And she's like, this is bullshit. But, like, that's what happens.

[David Adelman]

And Cam, now we got Cam campaign, right? I hated him last year. I was like, that guy's so annoying. We love him now.

[Josh Brown]

We like him being annoying now to other teams.

[David Adelman]

What about private equity money coming into the NFL? That's a big story.

[Michael Batnick]

Look, I think it's great for a couple reasons. One, I think that it becomes the democratization of sports, where now mom and pop are retail investors or, like, not, you know, once other people can participate in that, right? Because it is a great asset class.

[Josh Brown]

Rather than one family owning it, you can have a fund where people own the fund and the fund has a stake in the team. I agree. And just look at how invested the Green Bay community has always been around Lambeau and that team. They feel like the community owns the team.

[Michael Batnick]

Well, the other piece that it does that I don't think people are thinking about is, look, I personally believe that, like, closely held ownership of sports teams is good. So that way there's some, like, someone in charge, made decisions are made and all that.

[David Adelman]

I'm a Giants fan. I don't think it's good.

[Michael Batnick]

I saw the planes flying around. But, like. But you. You think about what happens generationally, like, there's estate taxes or you need more money or the families, because these, you know, some of these sports, you know, don't. You know, NFL is different because the NFL makes a lot of money. But, you know, other teams, like, basically, you know, hockey, basketball, you make most of your money in the playoffs, right? You don't make the playoffs, things happen. So your ability to sell a stake, raise capital to invest in the team, which you saw, you know, some people do, I think that's great. I think it also allows passionate owners not to have to sell when they're diversifying their estate planning stuff that you guys would advise. You'd say, hey, you know, One of your clients owns, you know, 80% of his wealth is in one asset, you're gonna say, that's not really smart. Well, this might allow that owner to diversify a little bit, take some chips off the table.

[Josh Brown]

It's so funny. You talk to people who are part of a fan base when the team gets sold, right? And they have this preconceived notion of, oh, well, our team just got bought by a hedge fund manager, and he was compounding at 18% a year for two decades. So I think we're in good shape.

[David Adelman]

Panthers fans have entered the chat.

[Josh Brown]

Well, it work. It works out great for the Mets. Eventually. Doesn't maybe work out so great on other teams. Or then you have the stereotypical situation where it's venture capital and everyone thinks they're about to be the warriors, right? And it's like, okay, those guys are probably great owners, but also they got Steph Curry at eighth in the draft. So it's like, there's not one way that things will go based on who the owner is.

[David Adelman]

But usually the problem with new owners is they try to make a splash. Like the Walmart family did with, with signing Russell Wilson. That's pretty.

[Josh Brown]

Or Phoenix last year.

[David Adelman]

Yeah, like ishp. That's very typical.

[Michael Batnick]

Well, I, I, I think it's a couple things, and Russ is a friend, so no offense. Yeah. But you know, what I would say is I think that owners, it's a business, Right. And I think successful business owners have to remember whatever made them successful in their business, which is probably building a great management team and having, you know, kind of a deep bench of people to help run the organization. Needs to transfer to sports.

[David Adelman]

But, you know, it's ego. Like, how do you not.

[Michael Batnick]

It is. But at some point, I think the best run teams like the Eagles, Right. Like, you know, Jeffrey Lurie is a great owner, but, you know, and Howie.

[David Adelman]

Rose, been there forever.

[Michael Batnick]

Howie Roseman, he, you know, I'm sure he's behind the scenes doing it, but you have to trust your gm, the people who are in charge of talent and personnel and data analytics and all that stuff, and you can't run it with your gun.

[Josh Brown]

Last thing we want to do, and then we'll, and then we'll, we'll let you get out of here. Want to talk a little bit about private equity and wealth management, because that's, that's our business and your business, and they seem to be melding more and more. And I know you have RIAs as investors in some of your funds, and we Just love to hear how that, how that works and what that experience is like from the ownership side, from your side, working with wealth managers and their clients.

[Michael Batnick]

Yeah. So we started a business in 2006 called FS Investments, used to be called Franklin Square. We're now at about 84 billion of AUM and all diversified products, but all bringing alternatives to the masses. And we partner with firms like yours to say you guys might have an expertise in stock and bonds and munis and things like that. Alternatives is kind of a little different. And we thought it made sense to kind of bring that alternative market to more people, where wealthy people and high net worth people have been investing in hedge funds and private equity funds for years. But if you could make it more mainstream, which was what our goal was, and we could do something with RIAs and wirehouses and things like that. It is a partnership, right? You're looking out for your client, you get pitched a lot of stuff. Some of it might be total dog shit and you have to do your proper diligence on it. And what we're trying to do is create a transparent product so that you and ultimately your client feel like their capital is going to someplace that's safe. And it's been a good business for us. It's been a good business for the people we partner with who put their clients in it.

[Josh Brown]

So the typical RIA is most concerned when allocating to a third party. Like the RIA know. The advisor at the RIA knows that in the end they're answering for whatever goes on. So that must be like a big part of that effort is just transparency and making sure the advisor knows they're not going to look like a schmuck.

[Michael Batnick]

Look, in any business you're in, right? It's like no one wants surprises yet. So like I.

[David Adelman]

Surprises maybe.

[Michael Batnick]

Right, right, right. Upside, but we'll take those. But you know, I say to everyone, I'm like, listen, like, bad news doesn't get better with time. Okay. If there's a problem in any one of our businesses, I'm like, tell me now, because it's not gonna get better and let's just find a way to fix it. Because like, if there's a problem with an underlying investment that your clients made, you wanna know early, right?

[Josh Brown]

Yeah.

[Michael Batnick]

And so that you can talk to the client, you can figure out what.

[Josh Brown]

Happened, even if you can't do anything about it, there's no sense in putting off the conversation 100%.

[Michael Batnick]

So like, if you can figure out how you have that transparency and look in your business, particularly, people are looking at you for that trust, that confidence, that education. I think that's really important. And they take that seriously. No, definitely at campus Apartments. You think about what my asset is. I have somebody's most valuable asset, which is your kid. We wake up and tell our employees every day nothing else matters. You have somebody's child living in our.

[Josh Brown]

Building, riding the elevators.

[Michael Batnick]

Doesn't matter what it is, right? Think about what is your North Star in any business, right? And so as long as you. And I say this to all the people I mentor, like, what is your North Star? Okay. What is the right and the wrong? Okay, you might get away with the wrong thing for a small period of time, but it won't be forever. And the last thing I say is you get one reputation. If you guys did something inappropriate to your clients, how are you guys ever gonna be in that business again, right? So, like, your brand is everything. And so I say that to everyone I mentor. I say it to everyone I partner with. I'm like, we're gonna be partners. You will ultimately have some bad news. Not everything goes like this. You can come to me with that bad news, okay? But come to me early and make sure I don't hear from it from somebody else.

[Josh Brown]

David, we want to thank you so much for your time and wish you congratulations on the partnership with Comcast for the new arena. I'm sure people in Philadelphia are, like, over the moon that this is going to happen. Great for the team, great for the fans, great for the whole city. So congratulations on that and. And all your success with Campus Apartments. It's an incredible story. I love how it started. I loved how you paid your dues as a kid and that those lessons are still with you in the way that you're mentoring young people today. So we just. We think it's awesome, and I appreciate it. Thank you so much for being here.

[Michael Batnick]

All right, good to be here, guys. Thank you.

[Josh Brown]

All right, awesome. That's it from us. Thank you guys so much for watching, like, and subscribe and do all the things and follow David literally in the parking lot on the way to the game. You don't do social shit.

[Michael Batnick]

I do.

[Josh Brown]

What do you do? Instagram.

[Michael Batnick]

Instagram's my biggest.

[Josh Brown]

I think I follow you on Insta.

[Michael Batnick]

Yeah, we do Instagram.

[Josh Brown]

You can follow me back. I don't know if you know. I don't know if you know. All right, follow David on Instagram, follow the 76ers, follow campus apartments, and we'll. We'll talk to you soon. Okay. We're not gonna drop the ball tonight like Kansas City. We're gonna, we're gonna win this one tonight. What do you think about that? You feeling bullish on the show?

[David Adelman]

Super bullish.

[Josh Brown]

Is that the worst?

[David Adelman]

Did you hear? That's the joke. Did you hear that? Super bullish.

[Josh Brown]

Got it. Is that the worst. Was that the worst game that you can remember? Super bowl game that you can remember.

[David Adelman]

There was one other clunker like 15 years ago, but where it's like 10.

[Josh Brown]

To 6 or something.

[David Adelman]

No, I'm just trying to think that the, the Seahawks got killed by the Panthers or the Panther, vice versa. Either way, the Broncos killed the Panthers. This was horrible game. Horrible game.

[Josh Brown]

Terrible. And they actually managed to hit the original over because they had some garbage time, drives and touchdowns. But like the first, the first two and three quarters of the game is.

[David Adelman]

Just like the better team won. Clearly they were the better team. They would have won that game eight out of ten times or whatever. They, they were better team. They won. They deserved it.

[Josh Brown]

I fully agree. You know what's funny? Like all the teams watching that are going to overcorrect now and they're going to be taking over these like all these like front four guys from the draft. Like everyone's gonna say this is the new way to play football.

[David Adelman]

Well, yeah, everyone knows if you could get pressure with the four guys, you're in good shape. Giants did that a couple, couple of decades ago or a decade ago.

[Josh Brown]

Yeah, it's the way to do it. Well, it's, it's over. It came, it went. And tonight is an all new edition of what are your thoughts? My name is Downtown Josh Brown. Talking to the mic.

[David Adelman]

Talking to the mic.

[Josh Brown]

Okay. My name is Downtown Josh Brown here with my Michael Batnik. As always, Michael, say hello to the folks.

[David Adelman]

Hello. Hello.

[Josh Brown]

All right, got all kinds of people in the chat tonight. Regulars, newcomers. Jay Minter is here. David Graham, Dr. Horton, Benjamin. We see you. Chris Hayes. We see you. Joey Gao, James Sykes. Who else is here? John, Evan, Bosher, everyone. Dude, Trump and dad is here. All right. All right. We got a full. We got a full house. I'm pretty excited. Nicole's in the chat, patrolling. Everybody be on their best behavior. Tonight's show is brought to you by a new sponsor to the show. I'd like to introduce you guys to Kelly, ETFs and Michael. They have a particular suite of ETFs. That's what they call it, right? When there's a couple of ETFs.

[David Adelman]

Let me tell you something, Kelly. US cash flow dividend Leaders Index. That's a cash flow cows ETF index is tracked by the cows and HCO ETFs. Hcow tracks the index and then writes calls on the constituents. So what are we talking about here, Josh? What are we even talking about? These are cash cows, okay? Free cash flow. This is not.

[Josh Brown]

So wait a minute. Cash flow Dividend leaders index is tracked by cows and hcow. If you want to just own the equities that make up the cash flow Dividend Leaders Leaders. The cash cows. You would buy cows. If you want the hedged version against options overlay to bring in income, you would do hcal. What's like the, what are the, what are the stocks in here? We have a, we have a couple of graphics.

[David Adelman]

So look, the top 10. This is like not a closet index or anything like this, right? Like this. These are not. This is not the max 7. This is the real free cash flow. So. So matter of fact, the Wall Street Journal, our friend Spencer Jacob. Our friend Spencer Jacob wrote an article today. The Mag 7 are sold last year. Cash cows are the new kings. So good timing with today's show. So free cash flow, that's the name of the game.

[Josh Brown]

Cash cow is kind of cool because it's like a. It's like a proxy for quality, I think like in a, in a. Well, it's hard to generate free cash.

[David Adelman]

Free cash flow, yeah, exactly.

[Josh Brown]

Yeah. But I like that it surfaces companies that people don't talk about a lot. So. All right, very cool. Here's how you can find out more. Go to kellyintel.com that's k e l l y intel.com to learn about cows and h cows and all the related disclaimers and disclosures apply. Okay. I wanted to start with just a roundup of where we are year to date in the stock market because this year is turning out to be a little bit different from the experience of the start of 23 and 24. And different in sort of a good way.

[David Adelman]

Yeah.

[Josh Brown]

On how. Depending on how you're allocated. I, I like a tape like the one that we're experiencing right now. I. These are the types of markets that I, that I enjoy the most. So I wanted to kind of walk you through what, what's. What's happening here and get your take. Let's start with the Degen Dow. We launched the D Gendao last fall.

[David Adelman]

Created. Created. We didn't launch anything.

[Josh Brown]

We didn't launch it. I'm sorry, apologies. What we were trying to illustrate, last fall was like all of these junk companies that were left for dead in 2022 were starting to make a price comeback. Like they were starting to rip again. And it was a lot of fun because here were the tips for people listening and not watching. It's like Nvidia, of course, not junk, but being the people that are involved in the stock were increasingly acting like degenerates via the options market. But like Palantir, Roblox, Reddit, Riot, Blockchain, Rivian, a lot of them start with an I, which is interesting. SMCI, which is super micro.

[David Adelman]

Wait, I'm sorry, GameStop. What do you mean a lot of them start with an I R?

[Josh Brown]

Oh, well, just did like six in a row.

[David Adelman]

I thought you said. I said I'm a start. My bad.

[Josh Brown]

No, you got the coin related stocks, you got the Carvanas, you got the Gamestop, AMC contingent, Robinhood's in there. MicroStrategy, which I know is now just strategy, but like, here's the DJ and year to date, up 5.6% and doing better than a lot of the mega cap tech names, which we're going to talk about in a second. What are your, what are your thoughts on the DJ DAOS, prospects for 2025?

[David Adelman]

Throw that chart back on, if you will, please. So the chart on the left, that looks very much like Ark, and I'm looking at ARC on my screen right now and it looks identical. And that's, that's not disrespectful, but like these names are coming back.

[Josh Brown]

These are her stocks. These are DraftKings. These are her stocks.

[David Adelman]

Like Teladoc. I mean, Teladoc. Yeah, draft.

[Josh Brown]

Not in here. We don't have Teladoc in the dj.

[David Adelman]

I'm just saying. But a lot of these stocks that were the 2021 darlings that got annihilated, their. They're coming back. Yeah, Signs of life.

[Josh Brown]

ACHR is in here.

[David Adelman]

What's that?

[Josh Brown]

Archer? Okay, I think it's flying cars. Like, it's like that's what's in, that's what's in the D gen. Do we.

[David Adelman]

Have the Rigatonian here Or the Rigetti Computing? Do we have those names in here?

[Josh Brown]

Is that quantum computing?

[David Adelman]

Do we have.

[Josh Brown]

They don't make the, they don't make the cut yet. They're too small, if that, if that makes sense. We have to, we have to have a cutoff with like. You can't have the tiniest stocks in here.

[David Adelman]

I haven't looked at these in a few weeks. They're rolling over, they look like.

[Josh Brown]

Again, we will have to revisit the weightings here, though. I think at some point this quarter, like, not the weightings, the. The holdings consistently, I think we're equal. Waiting. If I'm not, if I'm not mistaken, I don't think this is a market cap weighted.

[David Adelman]

All right, what else inside the market has your attention these days?

[Josh Brown]

Bitcoin and gold. Here's three months, obviously Bitcoin blue, gold, yellow Bitcoin. Up 21% over the last three months and off to a pretty good start this year. But gold really is doing better. If you just start from New Year's, gold is sort of taking off here. And I think that's just a function. I mean, who the hell knows what moves gold these days? I think it's a function of, of socioeconomic volatility, geopolitic, you know, geopolitical issues that refuse to go away and just people wanting to look for some sort of an asset that's not being controlled by one political party or the other. I think that's as simple as that. I don't think it's that complex. And just look at the central banks, China in particular, loading up on gold.

[David Adelman]

Dude, it's okay to say we don't necessarily know why gold is golding.

[Josh Brown]

Well, we get. No, but we do get reports of large purchasers, foreign central banks. Like, that's not, that's not really open to interpretation. They're.

[David Adelman]

No, but like during the. If you're saying there because like geopolitical, like Trump, stuff like gold was golden into anything during Trump's first administration.

[Josh Brown]

No, I think more. I think more like certain foreign countries looking at the example of the United States and its allies trying to cut Russia out of the financial system and Russia finding a workaround by selling oil to China. And you have companies now very comfortable reserving in gold and selling U.S. treasuries. And that is not a new phenomenon, but I think it's accelerated.

[David Adelman]

Okay, what else is on your mind?

[Josh Brown]

I don't really have a story for why bitcoin is up other than. And it's 2025 Mag 7 ETF. Let's throw this up. We're going to spend a minute on this because I think it's probably the most interesting thing going on. Adam Parker did this really great walkthrough of did this really great walkthrough of what's happening with the Mag 7 and why it might be a time to sell these stocks. We chart off for a second. So according to chart kid Matt that the Mag 7 is actually detracted from S&P 500 year to date performance. Not by much. The other 493 names are up 3.4 or 5% year to date. The Mag 7 is slightly negative like less than half a percent.

[David Adelman]

You know what I love about the Mag 7 right now? Like they're all doing their own thing. Yes, it's not one trade at all.

[Josh Brown]

It's not one trade. But. But the point is what's different about this year versus the last two years is that the rest of the market is carrying the index and the mag7 is not contributing.

[David Adelman]

I love it.

[Josh Brown]

So that's a change of pace. The other thing worth saying is that Mag 7 companies are a pawn in the US versus China trade war. And there's a bunch of stories Bloomberg wrote about this. China is considering launching an antitrust investigation into Apple's app store practices. China's State Administration for Market Regulation or samr, announced that it's opening an antitrust investigation into Google. Some of the Mag Sevens have nothing, have no business in China. Meta being an example. Some of them have big business like Nvidia. Here's another story. Financial Times. Chinese officials are considering launching a probe into intel on top of an ongoing investigation into Nvidia.

[David Adelman]

Oh stop. They're already dead. Leave them alone.

[Josh Brown]

It's all a part of China's effort to punish the US's most prominent companies and inflict its own pain on the US as the two nations battle that. Okay, so that's the thing that's happening. So Adam Parker wrote, over the last several years we've maintained the view that long only US equity managers should be at least market weight the MAG7. And they had a whole list of reasons don't underweight these stocks. He has just said now he's changing his mind. Now it's time to equal weight them. Meaning if you're going to own them, bring them down to bring them down to size relative to the rest of the index and not own them in a market cap weight. So it's not quite a get out call but I think it's a little bit ballsy.

[David Adelman]

It's like a, it's a chill out call.

[Josh Brown]

I like it, I kind of like it a little bit. And basically what he's saying is that the company specific risk, put that chart back is fairly low for the MAG7 stocks. All seven are more macro than the average stock in the S and P 500.

[David Adelman]

This surprises me. I would have guessed like there's more idiosyncratic risk with like Tesla than Apple.

[Josh Brown]

And it turns out that there wasn't. So the rationale for being at least market cap weight was that the amount of returns but the factor, the seven factors for why these stocks work. Equity market beta, two different size factors. Mega versus large versus mid cap and mid cap versus small cap. Substance, high quality versus junk style. Growth versus value and then there's the liquidity factor. These are easy stocks to buy when you want to get long really fast. And momentum, that which is going up will continue to go up up. So those were the factors that drove a lot of the rationale for being market cap weight. These names and not trying to be smarter than the market. Adam is basically saying things have changed and these stocks might be a sell at this point. We have one more. I think we have one more.

[David Adelman]

What's his reason? What's his reason?

[Josh Brown]

What, what are we looking at here? So this is just Wall Street. So this is a way to look at sentiment. 404 buy ratings, 76 hold ratings, 24 sell ratings. The percentage of sell ratings on the MAG7 names is 4.8% of all ratings.

[David Adelman]

And ex Tesla it's like much lower.

[Josh Brown]

Yes. One other thing that one of the things worth pointing out is exposure of the top seven in the top 500 US equities. Let's put that chart up. He's saying the beta here is at a 25 year high and interesting. Problematically capital intensity has also evolved and I wanted to get your take on this last chart for this set. Basically part of the allure of these. Nope, not that one. We're looking at this is it. Capex to sales of Magnificent Seven now at 12% and projected to rise.

[David Adelman]

Yeah.

[Josh Brown]

One of the primary selling points of why you want it to be in these names. I don't want to say asset light but high profit margin.

[David Adelman]

Yeah.

[Josh Brown]

For as far as the eye could see. And that's what's really changing here. If you just listen to the Capex plans that they laid out on their last calls. They're talking about spending a combined $300 billion.

[David Adelman]

Amazon's in for 100.

[Josh Brown]

Yeah. So it's like it's getting to the point where can we really say that these are not capital intensive companies.

[David Adelman]

Well nobody's saying that their margins are still ludicrously high and I think they're doing a really good job telegraphing to the street exactly what their intentions are. And they sold off Google, Amazon. They're giving the benefit of the doubt. So yeah, there's going to be a point in time, I don't know when, where the market says, hey, ladies and gentlemen, like we got to see some revenue behind these, these numbers. A lot of spending.

[Josh Brown]

You're going to be, you're going to be 14.5% capital spending to sales ratio by the end of 2025. If you don't have the concomitant increase in earnings guidance for 2026, you're going to have a problem here big time. Okay, wait, I'm going to go ahead icon.

[David Adelman]

Throw the chart back on. Josh, keep talking.

[Josh Brown]

The, the, the multiple backwards capital intensity.

[David Adelman]

No, no, the medium PE of the Max 7 versus. There we go. There we go. So this is the ratio of the top seven versus the 493 and the median forward PE. And so, yeah, Josh, you're right. These stocks, as we've discussed, are getting the benefit of the doubt that all the spending is going to turn into revenue and it better soon.

[Josh Brown]

Well, profitable revenue and sustainable moats. And what might be happening is an arms race where Amazon spends 100 and Microsoft spends 75 and Meta spends 60. And no one is doing it to any sustainable end. Like, like there's, there's no moat because the technology is rapidly advancing to the point where competitive advantages are being flattened. Okay, that's a, that's a concern.

[David Adelman]

Well, not yet. Not yet it is. I mean, it will be. But these companies, they're all saying the same thing to investors. This is an existential threat and we would rather overspend than underspend. And so right now, investors are giving them the benefit of the doubt and we will see what happens.

[Josh Brown]

Yeah, there's a lot of building and they will come. Arguments being made and we have to spend now because, you know, if we underinvest and someone else is going to overinvest, they're basically saying, like, give us.

[David Adelman]

Give us 12 months or whatever.

[Josh Brown]

Well, the market's not. So this is the point I want to make to you. The market has decided so far we're not interested in that story as much as we were last year. Yeah, well, every single mag7 was negative after reporting other than Meta, which is spending the least and does not run a cloud data business. So take that however you want to take it. Apple. That is the reality.

[David Adelman]

Apple too. You're right. You're right, you're right.

[Josh Brown]

Apple to.

[David Adelman]

There are. There are chinks in the armor forming. You're definitely right.

[Josh Brown]

Here's the MAG7 equal weight ETF. Does this look bullish to you.

[David Adelman]

If you listen, if you zoom out.

[Josh Brown]

Yeah, but I'm not zooming out. I'm saying this is intermediate term. I'm showing you. I'm showing you the last 90 days. Okay, well, this looks, this looks like it looks fine. A. No, Nowhere's Land looks fine. Okay, I'm going to tell you that I think.

[David Adelman]

How about this? Dude, wait, well, hold on. If. What do you want? You. I know you don't want these names to go up forever, indefinitely. Like, I think a pause here is very healthy.

[Josh Brown]

I think this is, I think the Mag 7 at equal weight, it'll be negative in 2025. Good, fine. Would you bet against that?

[David Adelman]

It goes. It's been up 30% a year for the last 10 years. Take a year off, take a break.

[Josh Brown]

Would you bet against it?

[David Adelman]

Meaning would I bet on them being higher?

[Josh Brown]

Would The Equal Weight Mag 7 up or down on 2025?

[David Adelman]

I'd say up.

[Josh Brown]

10 months from now.

[David Adelman]

I have no conviction. Up.

[Josh Brown]

Say up. Okay, I'm going to say down.

[David Adelman]

Okay.

[Josh Brown]

I don't know anything more than anyone else, but that's how I'm starting to feel. Let's put Nvidia up. This is the only one that hasn't reported yet. Not great. Trend wise, it's had a good week or two. But just generally speaking, this, ladies and gentlemen, is what we would refer to as a short term downtrend. Come on, pull the chart back three years and it's different. Of course, we all understand that. I'm just describing the price action year to date.

[David Adelman]

Okay.

[Josh Brown]

Things are, things are sort of a little bit different.

[David Adelman]

It's. Well, yeah, it's, it's fine. I mean, it's, it's, it's more. It's in the gap from that deep seq debacle that was down 70% that day. It's recovered a decent amount of it, but yeah, it's trendless.

[Josh Brown]

It's not. Yes, but not all of it. But, but next week will be a little bit of a moment of truth. They'll report on the 25th. All right, winners and losers this year, sector wise. Here's the best performing sector, xlc, which is the communication sector.

[David Adelman]

So that's Facebook.

[Josh Brown]

Yeah. A lot of the companies in here people look at as tech. It's Netflix, it's Meta, It's Alphabet. Up 6.6% on the year. Let's put up XLY. This is the worst performing sector, Consumer discretionary. Up. Up 0.9%. Up less than 1%. Not bad.

[David Adelman]

Well, this is, this is Being dragged down by Tesla. What's Tesla? 20%. Well, let's see.

[Josh Brown]

So I was going there next, Tesla, 15%. Okay, Tesla from, from December 17, which was the top. I'm just, I'm not cherry picking a date. I'm saying Tesla has added 791 billion in market cap over the last three months. Right.

[David Adelman]

No, wrong. So this chart, we shared this on the show on December 17, which just so happened to be.

[Josh Brown]

That was that, that turned out to be the top.

[David Adelman]

That was the exact top. So the next chart shows where we are today.

[Josh Brown]

Leaking market cap on a daily basis.

[David Adelman]

So on December 17th it had a historic three month run. Added $791 billion in, in market cap over the last three months. It's given away 67. So it's. Right now it's in. This is kind of wild. I had Sean do some work for me. So it's in a 32 drawdown. Maybe there's some, I don't know. Investors are concerned that the CEO and founder changed his name to Harry Balls and put circumcisions at a discount. 50 off in his body.

[Josh Brown]

Maybe like Heil Hitler at the inauguration.

[David Adelman]

Yeah, maybe people are not, maybe people are not into that. So anyway, but my point is on the stock itself. Tesla is a wild, wild company. Stock wise. Chart on please. Thank you Sean for doing this. So over the last. Try it on please. The annualized returns. Here we go. So over the last five years Tesla has annualized the shares at 45 compounded, which is insane. Insane. If you, if you rewind back, if you zoom out 10 years, 37 a year, one of the top, I don't know, 10 performing stocks, just crazy numbers. But, but, but, but, but at any point in time over the last five years, if you threw a dart or if you were a shareholder over the last five years at any point in time you were 31.6% away from its all time high. It is a wild stock.

[Josh Brown]

So if you, if you look at certain enclaves of social media which are non maga enclaves, some of the most shared and retweeted articles and headlines are about European sales of Tesla cars plunging. Like Germany and France and, and kind of like people just finally they've had enough of Elon Musk. I don't think that really matters. I understand that sales might be down and you're watching the stock price go down and you're drawing some sort of correlation. I think the shareholder base is not here for the quarterly European sales of Model Threes. I think what's really keeping people invested in the story is the robot stuff. And as long as he can keep that stuff sent like center stage in his public commentary on Tesla. I think that I don't, I don't think you'll lose the entire gain that you got from the election. Like, I think, though, yeah, I agree with you. Some of that.

[David Adelman]

I agree with you. My take on this is that the chart that we just shared, a 791 billion dollar increase in market cap over the last prior three months was an insane run. And I think things got out of control. And this is like, it's hard to say. A 32% correction is like healthy, but this stock does this all the time. This is not, this is not new or unique to today. This is just what the stock does.

[Josh Brown]

I think a lot of people who politically are not happy watching what he's doing right now. They are wishcasting and they're looking at this falling stock price and leaking market cap and they are dream weaving this story where finally, like Elon's about to get it and I just, I don't see it.

[David Adelman]

I think it'll be fine. Okay, I want to talk about.

[Josh Brown]

Although, Although, put the tweet up. I mean, this is like, this is what we're doing. This is where we are now.

[David Adelman]

So he changed his bio, but he.

[Josh Brown]

Changed, he changed his name so that the newscasters when they comment on him would have to show this because they like show his, they like show his tweets to like dunk on President Trump or on Elon. So like, this is, this is like the meta joke that, that his sense of humor is not mine. So it's fine. But like, this is what's going on.

[David Adelman]

Okay. I believe. Was it Nick Colis or Semblus, One of the two geniuses told us that one of their favorite economic gauges are ISM New Orders. Do you remember one of them saying that? Okay, so we got some good news. This is from Sentiment Trader. The ISM New Orders Index, a key gauge of future manufacturing activity, climbed above 55 for the first time in 32 months, hinting at a manufacturing rebound. Similar upturns have signaled strength in stocks, particularly in cyclical sectors and manufacturing driven economies. Now, who knows how much of this is, you know, wishful thinking. And it's a survey, so. But whatever. But like, still, this is a. Historically this has been a good thing.

[Josh Brown]

So they call people that are like managing these plants and assembly businesses and they kind of get like, they kind of get a survey of like what's happening with business. And you know, it's a survey. So to follow it week to month to month is probably not that meaningful. But when it breaks out like this, there's probably something there.

[David Adelman]

So of course a lot of this, like every other survey is political.

[Josh Brown]

But.

[David Adelman]

But I've said a bunch like this could be self enforcing. If people are feeling better about the future prospects for the economy, they're going to spend more. Yeah, that's how it works.

[Josh Brown]

So you know what's tough about this? We don't know who they're talking to, like what industries and how many people are in this survey. We just, we have no idea. This is one of the surveys that Neil Dutta told us throw out.

[David Adelman]

Just.

[Josh Brown]

Yeah. Do you know what this company is? Doximity.

[David Adelman]

I have never heard of it.

[Josh Brown]

So this is like why. One of the reasons I love this market. Almost every day you have a stock doing what this stock did last week and just absolutely exploding out of nowhere. And not for no reason, but because of an earnings report. And you, you're basically in a situation now where moving away from Mag 7 and finding other ideas and other names is no longer hurting your performance. Remember how lopsided 2023 was? You had like almost no stocks beat the index. That's again, I made a, I made a prediction a few minutes ago. I think you'll see the Mag 7 underperform. Excuse me, that's not what I said. I think you'll see the equal weight mag 7 be negative on the year. That doesn't mean necessarily it won't be a good year for investing. Yeah, because I can envision a year's worth of this sort of thing.

[David Adelman]

So this is a digital platform for us medical professionals.

[Josh Brown]

Yeah, it's like converting digital records into cloud based. Blah, blah, blah, blah. Let me show you. Let me show you some shit. Here's Cloudflare. This hit the best stocks in the market list a couple of weeks back and look what it did since then it just absolutely exploded. This is why we keep that list. This is cloud data. It's like Snowflake, but a better version these days. Like they don't blow up every time they report earnings. And they had an incredible report. Just like. Let's just listen to the numbers. I know that you don't know the business that well. Fourth quarter 2024 revenue 460 million 27% year over year increase. Last quarter was a 27% increase as well. Customer expansion added a record number of customers spending over $100,000 with them annually. That increased 27%. They now have 3,497 six figure customers. And customers spending more than a million grew to 173, a 47% increase year over year. So their biggest customers are growing in number and spending more. Improved profitability. Non GAAP operating income 67 million. Operating margin of 14.6. Big improvement year over year. 47 million in free cash flow for the quarter. 166 for the year. Big guidance. Projected revenue 2 billion revenue. 25% growth this year. Like these companies are out there and they, they're not. Trillions of dollars in market cap you can find.

[David Adelman]

I love. You know what I love? That your list of the best stocks is purely technical. But these stocks aren't on the list for no reason. They're, they're, they're breaking out because the fundamentals are.

[Josh Brown]

So glad you said. I'm so glad you said that. You can't get on my list and stay there because somebody memed you, you, you can't it like you can't be a meme stock and be on my list. And if you're there is a very good bet you're doing really well. Yeah. Okay, a couple more. So here's Doximity Docs. Great Ticker Docs up 56% year to date. Dude. So Cloudflare is the number one stock of the year, up 60% in the S&P. Russell 1000. This is number 56.

[David Adelman]

Number two, this is a big company. It's 60 billion. I know that's not. My bad, my bad. My, my bad. Net is 66.

[Josh Brown]

No net's much bigger.

[David Adelman]

Yeah, yeah. Docs is 16.

[Josh Brown]

All right, so this is an IBD stock. Docs, the stock went up last week, 36% in one day. Breaking out of a consolidation. It had a massive, massive one day rally. And obviously we're not saying go chase the stock, but again, here's another company. Earnings surged 55%. They beat the street by 34 cents. Which means the people covering this company have no idea what's going on with it. Sales up 25% destroyed the analyst expectations. There's an analyst, Ryan Daniels, covering the stock for William Blair. Described the quarter as, quote, pristine. Put simply, it was a stellar quarter for the company across all key operational and financial metrics. Just a beast. Here's number three on the year. Palantir plus 54%. We've talked about the stock last week. We don't have to rehash it. An incredible earnings report and just an awakening on the Street. That this thing is serious business. Constellation Energy is 4. Up 44% year to date. These utilities all got whacked during the deep sea thing. This stock has gained almost all of it back. Just incredible. They got a government contract at the end of January. $1 billion 10 year contract to supply power to federal agencies. They are the largest carbon free energy producer in the United States and blah, blah, blah. Last one. Spotify plus 43%. You're in this or.

[David Adelman]

No, no, it's my biggest regret at.

[Josh Brown]

Oh my God.

[David Adelman]

I know.

[Josh Brown]

Revenue up 16%. 4.5 billion. Blew the analysts away. Achieved its first full year of profitability. Net income 1.21 billion for 2024. So this is like a real. This is. This thing has arrived. A billion dollars in profit for the year. There's not that many of these.

[David Adelman]

Josh, I wanted to. I wanted to just speak of individual stocks. I wanted to give you a pat on the back last week, but I forgot to. Crowdstrike hit an all time high. You caught some shrapnel as if you caused the glitch when this stock got creamed. But all time high haters are quiet these days and. And Reddit also credit to you.

[Josh Brown]

Do you know you bought it after.

[David Adelman]

The gap higher, right? Yeah, and it's like doubled since then.

[Josh Brown]

Do you know some psychopath called the firm and started yelling at a girl that answered the phone about crowdstrike like blaming me for the IT outage and the stock collapsed to 200. Nothing surprises me now it's 450. Can you call us back?

[David Adelman]

I forgot to tell you, he called last week. I wanted to thank you.

[Michael Batnick]

Yeah.

[Josh Brown]

What do you want to tell me now, tough guy? I'm not responsible for global IT outages. I don't know if you know that. Last thing. Last thing. How many? Take a guess. Don't close your eyes. How many users globally does Spotify have? How many new record this quarter?

[David Adelman]

Okay.

[Josh Brown]

Hold on. Let me give you the amount they added this quarter as a clue.

[David Adelman]

Well, I was gonna say 37 million.

[Josh Brown]

37 million total.

[David Adelman]

I don't know.

[Josh Brown]

Okay. They added 35 million last quarter. How many think it is now? Wow. I wouldn't have known either. I'm just curious.

[David Adelman]

What?

[Josh Brown]

You all right?

[David Adelman]

So what is Netflix like 300 million users or am I making that up? Something like that.

[Josh Brown]

That sounds like. Sounds like it's right.

[David Adelman]

Okay. What's Spotify? 200 million.

[Josh Brown]

Dude, 675 million users. Wow.

[David Adelman]

Yeah, dude, they're crushing it.

[Josh Brown]

Now that. Now that is the cue to buy the stuff. Stock. Prior. Like, prior to it. Like when they get to 500 million users, you just buy the stock.

[David Adelman]

I can't. It's too late for me.

[Josh Brown]

No, no, I'm just. I'm saying revisionist history. I didn't buy it.

[David Adelman]

Idiot sandwich.

[Josh Brown]

Any. Like, any company that can amass 500 million users. Paying. Paying users, you just. You buy the stock. Yeah, they're going to find a way to make money from an audience that size.

[David Adelman]

Enough. I know, I know. I can't. I can't anymore. All right, okay. Just launch it. That's the, that's the headline for this topic. Everything is coming to market. Josh Balchunas tweeted, There's already been 100 ETFs launched this year on pace for a thousand. For context, the record 20 a week. The record was last year, 720, which blew away the previous record of 515. So this will shock no one. Trump wants to manage your investment portfolio. As a headline from the Wall Street Journal, Trump social media company Trump Media and Technology said Thursday that has applied for trademarks on a series of ETFs and SMAs. They include funds labeled Made in America and Energy Independence, which will launch later this year. Sure, why not? Annual leveraged ETF launches again from, from the folks at Bloomberg. Listen, I'm not even mad about it. Like, if there's, if there's a demand from users, there will be supply from the asset managers.

[Josh Brown]

Let's look at some, let's look at a few of these, though. I don't even know what the hell is going on here. Like, all right, that's a bitcoin one.

[David Adelman]

Now listen to this, listen to this.

[Josh Brown]

What, what are, what, what are they launching?

[David Adelman]

Val Chuna tweeted. Holy hot sauce. Trader, which is an ETF provider, is proposing a 2 times Rigetti, which would have an estimated 90 day volatility of like 600%. For context, that's triple 2x micro strategy ETF and 50 times the S&P 500. Half of these in the same. Okay, so Belcher is like, what's hotter than a ghost pepper? Because I need a new metaphor. So we're looking at 2x long, the quantum computing stocks. Because, you know, why not?

[Josh Brown]

You met when people used to get like mad about like how many ETFs were launching. It was like a big. That was like a big fin.

[David Adelman]

Oh yeah, there's more. There's more ETFs than stocks.

[Josh Brown]

Yeah, but what are you, right? What do you care if people, if people want it they buy it. If they don't want it, they don't buy it. Is there a gun to someone's head that they have to buy? Like what? I don't even know what These things are. IShares, large cap, max buffer, December, whatever. Like buy it or don't buy it. What do you care what other people do? I never really, I never really understood that rage at like all the ETF launches. If these things don't raise money, they go away. There's right. There's no press release. They just are quietly strangled and put out of their misery for the most part.

[David Adelman]

I guess the thing is like, you know that a lot of these are like just money incinerators. Like obviously not all, but people on balance. But I guess to your point, people can do whatever they want.

[Josh Brown]

I want stupid people to have their money incinerated. I don't, I don't think that we, I don't think that we're doing anyone any favor by like not letting them learn hard lessons. How do you go from stupid to smart? You incinerate some money. There's no other way. Yeah, how do you wake, how do you wake up out of your TikTok induced stupor and start figuring things out? Probably it's not going to happen because somebody like does a motivational post on Instagram or TikTok. It's going to happen because you're tired of getting over. I think that's like the best, the best version of the markets policing themselves is for people to get the real world education that only 2x levered Rigetti computing can provide.

[David Adelman]

I'm looking for a tweet that makes fan, but all right, so you want more, so why stop at 2 times more?

[Josh Brown]

8 times? Let's see, let's see, let's see how quickly we can teach these lessons. And you know, not everyone will learn them, but the people that do, it's like, oh yeah, When I was 24 years old, I blew up $700 in ETFs. Now I have $500,000 and I don't do things like that. That learned.

[David Adelman]

That's generally my take. I wish these products didn't exist, but whatever. It doesn't matter what I think.

[Josh Brown]

I don't, I don't. I. I'm almost like these days, dude, I'm bordering on just complete nihilism. Somebody sent me a link showing that Google Maps changed the Gulf of Mexico to the Gulf of America. And I said that we live in North Korea now. That's it, it's over. I mean, come on, there's no more. There's no more norms. There's no more rules. All right, it's just like.

[David Adelman]

I get it. That's. That's a. Come on, it's a big. That's a bit of a leap.

[Josh Brown]

I'm saying, like focus on yourself in this era. Like, don't rely on anyone or anything or any institution. Nobody's going to be there for you. You've got to learn a little bit of self reliance in the new wild west era that we're in.

[David Adelman]

That is true.

[Josh Brown]

You might love it. It. You might love it, you might hate it, but either way, nothing you could do about it. It's going to run its course and either this is how things are for the rest of our lives or the pendulum will swing back and all of this stuff that's happening now will be repudiated. I don't know which outcome we're going to get.

[David Adelman]

Remember and don't be madness. When. When one of the Wayne's brothers like message. Which one was that? That was you just now.

[Josh Brown]

Okay.

[David Adelman]

Not Damon.

[Josh Brown]

That's. Don't be. Don't be. Don't be a menace to society. It's Dame Marlon Wayans.

[David Adelman]

It wasn't. It was older.

[Josh Brown]

South Central is. No, it's Marlon Wayans.

[David Adelman]

But the guy that said message, it was like the older one.

[Josh Brown]

Oh, that's. Damn. That was Keenan Ivory Wayans. Yeah, like a mailman uniform.

[David Adelman]

Yes.

[Josh Brown]

Here's the message. Nobody's going to save you from these ETFs.

[David Adelman]

You just deliver them.

[Josh Brown]

These stupid products.

[David Adelman]

Yes.

[Josh Brown]

Okay.

[David Adelman]

Yeah.

[Josh Brown]

Smarten up.

[David Adelman]

Smarten up. You're right.

[Josh Brown]

Pay more attention to us and we'll get you through it. And we ain't crying about ETF launches. We're. We're adults. We're over it. Okay. Bill Ackman really likes Uber, so. I like Bill Ackman again now.

[David Adelman]

Josh, text me twice this week. Don't sell Uber, dude.

[Josh Brown]

I almost DM. I almost DM'd him. I don't think he would respond, but I was almost like, smart decision on Uber. And then I looked at. I looked at. I looked at X and I'm not following him. So I just. I didn't do it. So here's what's going on. I was getting killed in Uber since last summer, basically when the cyber taxi stuff started and the Waymo stuff. And there was this idea out there that, like, autonomous vehicles, therefore no need for there to be an app or a network or human drivers or. Sure. Uber reported an Amazing. Quarter stock sold off. Anyway, somebody bought the dip.

[David Adelman]

We bought more.

[Josh Brown]

I bought more. I bought Pershing Square, bought millions of millions of shares worth of stock.

[David Adelman]

I bought like 11 more shares.

[Josh Brown]

Let's do the chart. Ackman tweeted about Uber on February 7. He said, beginning in early January. Note the beginning part. Beginning in early January, we have. We began acquiring a position at Uber today. We own 30.3 million shares. Uber added $7 billion the day of Ackman's tweet. And I think that. I think that he's going to do well with this because these are his types of stocks where it's like this name brand, great company where there's a misperception of the market that something they're struggling with now is like this insurmountable problem, and it turns out not to be the case. And a really great example of that with Ackman is Chipotle. He started buying Chipotle in 2016 when this thing was like a few months removed from the E. Coli crash, right? And it was like seven stores across the whole country where they were mishandling the fresh ingredients. They had an E. Coli issue. I don't mean to minimize that. The Stock is up 600% since Ackman came into the name. And I don't. I don't know if he came in with a 13D right off the bat and was instantly a large shareholder, but he bought it. They were calling him Taco Bill.

[David Adelman]

So what does he want with. What does he want a lot of stock? What does he want with Uber? Is he looking for like board seats or.

[Josh Brown]

No, it's not activism. He's like, Dara. Dara is good at this. He's like, I've been aware of the company. Some story about, like, Ed Norton, the actor, introduced the app to Bill Ackman in San Francisco. Sometimes, I don't know, I don't really understand that, but he's like. He's like a fan of the business. He thinks it's well managed. He's not a. He's not going activist, at least not yet. If the stock goes down a few points, that might change. But I think. Listen, listen. I think he sees what I see. It's great that there's autonomous cars. Uber will make a lot of money. Their highest expense is the take rate to the human driver. Nobody wants autonomous vehicles more than they do. But somebody has to manage the fleet and there are going to be times when there aren't autonomous vehicles. So if you're just on the waymo app. It's not like they could flex you over to a human driver if you're getting an autonomous vehicle on Uber and one is not nearby. Okay, fine, I'll get a human driver. I don't care. I just want to get picked up. That's what Dara is, is building. And there's room for multiple autonomous taxi apps. I still think Uber will end up being the biggest by far and I think they'll be the center of the ecosystem. And I think that that reality, when it dawns on the rest of the market will take the stock above 100. So. Nice great minds. Bill Ackman and myself are thinking alike here and that's. I'm pretty, I'm pretty bullish on his involvement. What are your thoughts?

[David Adelman]

Yeah, it's going way higher. I mean I agree with you. Agreement.

[Josh Brown]

Buy more.

[David Adelman]

It sounds like it. Well, listen, they're buying back stock. He's buying stock. Why would you sell it?

[Josh Brown]

Yeah, I think he has two and a half billion worth of stock. Stock. Here are his other large holdings. This is as a percentage of Pershing Square. He takes huge positions. I mean Brookfield, Hilton, Chipotle. These are 13% positions in the fund. QSR, Restaurant Brands International, that's Burger King and Howard Hughes holdings which I think he's the chairman of now. But he takes, he takes big swings. So two and a half billion might just be, might just be the opening like the, the appetizer for what could potentially happen here.

[David Adelman]

Okay. All right. I'm going to make the case for financials. This is, this is bullish man. I gotta tell you. This is. XLF is the second largest sector in the S&P 500 behind technology stocks. And you mentioned that the Max 7 are down on the year. Well guess what is way the hell up up financials. So even like we've spoken, we always speak about Morgan Stanley and Goldman. We follow their reports. They're, they're, they're kicking ass. Those stocks are doing great. But like look at, no offense, Citigroup, bank of America, Wells Fargo. These are 10 year charts and they are in some cases at the upper end of their range. Or in the case of Wells Fargo. And who's talking about Wells Fargo? Fresh 10 year highs. So these are the financials that I own personally. Next two charts in capital markets. I own S and P Global which broke out to a new all time high today after reporting earnings and Intercontinental Exchange with this, which is the New York Stock Exchange. This broke out to new all time high the other day. So any Capital market stocks look good. NASDAQ looks good. They all look good. Next chart, please. In private equity, I own Blackstone and Blue Owl. These have, you know, pulled back, giving you a better entry point.

[Josh Brown]

Blue Owl is like private credit. Right.

[David Adelman]

Blue Owl is the biggest GP staker as far as I know, in, in that space. So they are, yeah, the private credit as well. These names are. The businesses are on fire. The stocks look great. Financials looking good is a good thing. I looked at stocks that were within 5% of their 52 week high and there's 100, what was it, 127 names in the S and P. Yeah, I'm sorry. So 112 names in the S&P, 500 are within 5% of a 52 week high. So one out of five, pretty good. And 20, 27 of those are financials. So these are the names that are within 5% of their 52 week high.

[Josh Brown]

Yeah. 88% of S&P financials are above their 200 day.

[David Adelman]

So every, every, all of them, every subsector is working.

[Josh Brown]

It's really hard to not be making money in that space this year. It's just, it's, it's, it's game on.

[David Adelman]

And these have been dead forever. Like Wells Fargo.

[Josh Brown]

Yeah. John put the chart back up with S and P Global at the top of it. So I pitched Al Michaels, the competitor to S and P Global, which is Moody's. But they both are effectively in the same business. They're selling credit research and credit analytics to hedge funds, private equity firms, private credit firms, issuers, buyers.

[David Adelman]

Moody's looks so sick.

[Josh Brown]

Moody's looks sick right now.

[David Adelman]

I should buy this too.

[Josh Brown]

This is the same chart though. S and P Global. I think, I think like Moody's, there's no, there are no sellers in the stock right now. I don't know if that'll change. But like people want to be in that business. It's an amazing business, selling data, sell us credit ratings, selling insights.

[David Adelman]

Well, Howard talks about the degenerate economy all the time. These are the biggest winners. People are trading their asses off.

[Josh Brown]

Well, every issuer has to get like there. You need published opinions on credit, on bond issuers, and every buyer, every investor in the credit markets, they rely on third party ratings and insights. And then you've got this whole AI play where these companies are selling like a hundred years worth of financial data to all these people that want to build AI trading models and blah, blah, blah. There's just so many different ways for these companies to win and they are like systemically important to the whole ecosystem. You almost can't do business without paying them. They are the toll takers of the financial markets.

[David Adelman]

So I would say the risk to some of these names is like they are really front running capital formation if there is, if the window does not open, these names that got ahead of themselves. So to me that's the biggest risk. But game on so far.

[Josh Brown]

Yeah, great, great area of the market to be in. And you know, I don't think that necessarily needs to change anytime soon. Probably. Look, we just went from a 24% probability of a rate cut at the next meeting to a 5%. They're going to keep that rate high for better or for worse. And I can't help but conclude that that higher rate means more profit for financial sector in general. That's why they all look like this.

[David Adelman]

By the way, last year you made the case that like these companies, I think JP Morgan was worried that they were going to have to lose some money, that they would have to raise their rates in order to keep customers. That never happened. They're taking it all.

[Josh Brown]

Yeah. I think part of the rally in financials last year was like the reserves being dropped back to the bottom line because they just weren't needed. When companies think that there are credit risks coming or losses coming for their own lending, they will reserve, they will put money aside literally to deal with that. And then if those losses don't materialize, they drop those reserves right back and it becomes net income.

[David Adelman]

Hard to be bearish when financials look like this. And again, things could change, but for now they look pretty damn good.

[Josh Brown]

Yeah. And politically no one's. With this part of the economy that's just not on, that's not on the agenda. There was some talk, Trump made an offhanded comment about the carried interest, the carried interest loophole for income tax where obviously KKR and Blackstone, they, the way they make their money is carried interest on the investment portfolios that they oversee.

[David Adelman]

They're not an adventure.

[Josh Brown]

I don't, I mean, he made an offhanded comment. People were like, what?

[David Adelman]

Yeah, come on.

[Josh Brown]

A reporter went to all these private equity companies and asked them for comment. Nobody had any comments. The worst thing they could do is turn it into an issue. It's the kind of thing that like just kind of slipped out and they were just going to pretend it didn't. And it'll be business as usual for these stocks.

[David Adelman]

Am I going to get your mystery chart? What do you think?

[Josh Brown]

No, you're not going to. And it's not your fault.

[David Adelman]

I had a feeling.

[Josh Brown]

I think you're more of an ETF person than a stock person. And I've given you a stock, so I won't think any differently about you.

[David Adelman]

Okay. Okay.

[Josh Brown]

This is. All right, so let me set this up. It's a Dow stock, so I'm narrowing it down to 30 names, which is a pretty good hint. Okay. And company reported earnings today.

[David Adelman]

The company report. Oh, is this Dupont?

[Josh Brown]

No.

[David Adelman]

Okay. Who else reported earns today? Could you give me anything else?

[Josh Brown]

Ask me for something.

[David Adelman]

Is this a. Is the company based on the. Is a company based on the West Coast?

[Josh Brown]

No.

[David Adelman]

Okay. Is the CEO's name Paul?

[Josh Brown]

Excuse me. Excuse me. Reported yesterday. My bad. Okay, so it all blends together. Reported this week.

[David Adelman]

I don't know. Give me like something.

[Josh Brown]

I gave you some shit, dude. It's a Dow stock. I gave you a 1 in 30 chance. You guessed Dupont, so now you're 1 in 29.

[David Adelman]

Okay. You know what? I will submit. Oh, Coca Cola.

[Josh Brown]

Close.

[David Adelman]

Oh, Pepsi.

[Josh Brown]

No, not that close.

[David Adelman]

Okay. All right. What is it?

[Josh Brown]

The reveal. The reveal.

[David Adelman]

McDonald's. Oh, shame.

[Josh Brown]

So here's what's notable here. They actually did not have a good quarter and the stock ripped higher. This is the Journal. US store sales and earnings fell at McDonald's as the burger chain dealt with the fallout of an E. Coli outbreak. I don't even remember that. I guess that was last quarter. The company said its U.S. same store sales declined 1.4% in the three months ended Dec. 31. Customers spent less money per visit. That's interesting. Also a slowdown in the pace of price increases. So McDonald's finally ran into a price increase they couldn't get away with.

[David Adelman]

Well, they did that last year. So what happened? The guidance.

[Josh Brown]

Yeah. Expects to open 2200 restaurants globally this year. That's a lot. That would be up slightly from the original total projected last year. 600 of those locations would be in the US but it doesn't matter. The stock ripped because markets are forward looking. Put that chart back up. And I am happy to announce McDonald's yesterday hit our list of the best stocks in the market. Here's my question to you. You see that resistance at 320from last October?

[David Adelman]

I don't consider that resistance, but I see what you're.

[Josh Brown]

Well, we were filling that gap. I think it's gonna. I think it's gonna chew through that, that, that level. What do you think?

[David Adelman]

I agree with you.

[Josh Brown]

It's a little overbought here. 75 RSI.

[David Adelman]

I made money on the stock last year. I bought it and I sold it.

[Josh Brown]

Do you see that bounce off the. Off the 200 day, how legendary that is?

[David Adelman]

Yeah, it's pretty good.

[Josh Brown]

I mean, dude, that's like as. That's as telltale as you get, right?

[David Adelman]

Would you say that's. That's textbook?

[Josh Brown]

Yeah, it's a textbook bounce off the 200,000. All right, we're gonna wrap up. I want to remind everybody, tomorrow is Wednesday, which means an all new Animal Spirits podcast with Michael and Ben, Spotify, Apple Podcasts, wherever you like to listen and live on YouTube slightly later in the morning. We're trying to get those videos up to you guys. Early ask the Compound will be later in the day and an all new edition of the Compound and Friends to end the week. We are en fuego here at the Compound. We love you guys. Thank you so much for joining us for the live. Thanks for listening, subscribing, watching. However you consume us, we love to be consumed. And we'll talk to you soon. Whether you're just getting started as an investor or you're managing a multi million dollar portfolio, Ritholtz Wealth Management has the solution for you. It all starts with building the right financial plan. To speak with a certified financial planner today, visit ritholtswealth.com don't forget to check us [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 Squad Spirits. Thanks for listening.