Midsummer’s Melt-Up, Robinhood, SpaceX and Palantir Report, Chips Rip, Leopold’s Margin Call

Summary

The Compound and Friends

Episode: Midsummer’s Melt-Up, Robinhood, SpaceX and Palantir Report, Chips Rip, Leopold’s Margin Call
Date: August 4, 2026
Hosts: Josh Brown (Downtown Josh Brown), Michael Batnick
Summary by podcast summarizer

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Episode Overview

In this packed episode, Josh Brown and Michael Batnick dive deep into the latest hot topics in markets and investing. The core theme is the “Midsummer Melt-Up”: a surprising, broad-based stock market rally powered by robust earnings, dramatic earnings reactions, AI sector excitement, and major trading stories including SpaceX’s first public quarter, Palantir’s blowout results, the historic margin call surrounding Leopold Ashenbrenner, and the continued evolution of “lawless” trading culture with Robinhood and prediction markets. The hosts dissect data, share expert perspectives, and debate what’s hype versus what’s healthy, all in their trademark irreverent yet data-driven style.

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Key Topics, Insights & Noteworthy Quotes

1. SpaceX’s First Quarterly Report as a Public Company

Timestamps: [02:22] – [09:42]

• Blowout Numbers Across Segments

  • Revenue: $962M vs. $835M expected;
  • Starlink Revenue: $4.29B vs. $3.83B expected;
  • AI segment: $2.56B vs. $2.18B expected.
  • “All three were ahead of expectations. They lost a ton of money… but we knew that.” – Michael Batnick [03:32]
  • Connectivity (Starlink): Operating income of $1.66B, while Space and AI segments lost money.
  • Over $100B in cash, liabilities up sharply to $36.8B.

• Subscriber Growth and Mix Shift

  • Starlink now at 12M subscribers, with ARPU down from $85 to $66 due to shift from military/professional to global consumer base.

• Elon’s Conference Call—Bold Claims and Tech Bets

  • “It’s not out of the question that at some point Starlink will deliver the majority of the world’s internet.” – Citing Elon Musk [06:20]
  • Announced exclusive build on Nvidia’s Vera Rubin architecture.

• Stock Price and Short Seller Drama

  • Stock down ~8% after hours, but context: “It went up 9% and gave it back.” – Michael [07:03]
  • 34% short interest due to anticipated share unlocks: “I don’t think that people are going to be in a rush to dump the stock at 110 bucks.” – Josh [08:14]
  • Ongoing lockup expiration will see tranches released every five weeks: “We are going to see that start within two days… I think we’ll get a chance to see this thing under $100.” – Michael [09:33]

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2. Palantir’s Extreme Growth and the AI Enterprise Arms Race

Timestamps: [09:44] – [15:33]

• Historic Quarter

  • “Our Q2 results are unprecedented but entirely unsurprising… 93% year over year revenue growth, our highest ever… US business now comprises over 81% of revenue, grew 150% YoY.” – Quoting CRO Ryan Taylor [09:48]
  • US government and commercial growth each up nearly or over 90% YoY.

• Company Narrative Shift

  • Palantir is now positioned as the main enterprise AI/data ops provider: “People are going to Palantir and saying help me… they have a very nontraditional way of closing business. But it works.” – Michael [10:45]
  • “That conniption [Alex Karp] threw on Squawk Box… resonated. He said, ‘I am speaking up for every CEO who’s afraid to say this… we are not just handing our businesses’ alpha to the LLMs and waiting for them to disrupt the shit out of us.’” – Michael [12:10]

• Valuation Debate

  • “Is this a trillion dollar company one day?” – Josh [13:16]
  • “Neck and neck with SpaceX as the most egregiously overvalued… but who’s to say. There are cases where earnings catch up.” – Michael [13:24]
  • “67 times sales… but they’re growing sales 100% a year. The market’s not dumb.” – Josh [13:46]

• Alex Karp: Polarizing, Pro-West Stance

  • “People don’t like him because he’s unapologetically pro-West, pro-America, pro-Israel… but he says American companies should have the best tech.” – Michael [14:54]

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3. Earnings Season: Hyper-Volatility and ‘Healthy Melt Up’ Thesis

Timestamps: [15:33] – [26:23]

• Earnings Reaction Extremes

  • “I don’t know that I’ve ever seen companies gain 30%, fall 30%… there’s a lot of massive moves after earnings.” – Josh [15:33]
  • “But not all these moves are sticking… on day two, we’re seeing retracing.” – Michael [16:04]
  • Example: Meta, Amazon, Roblox, Reddit — wild first moves, then reversals.

• Toast (Restaurant POS)

  • Continued growth, strong quarter: “Revenue $1.9B vs $1.8B, EPS $0.26 vs $0.20… 9,500 net new locations…” – Michael [17:19]
  • “I took some off at $32… not because I don’t want to be in it… but there are other fish in the sea, and I’ll have time to accumulate.” – Michael [18:21]

• Market Breadth & Melt-Up

  • S&P 500 at all-time high; “It’s not just one or two stocks… it’s a melt-up.” – [19:24][19:33]
  • Not the usual Q4 rally—“This is a midsummer melt-up. The best kind.” – [19:37]

• Brown’s ‘Steel Trap’ Rally Checklist

  • “I’d write: earnings beats in every sector, leadership rotation, defensive rallying with cyclicals, small cap and large cap up, real revenue growth, analysts raising for next quarter, international support, healthy IPO mix…” – (Paraphrased from [19:56]–[22:02])
  • “Literally you couldn’t script it better.” – Josh [22:05]

• Key Stat:

  • “86% beat rate versus long-term 77% — every sector, every industry.” – Michael [26:23]
  • “100% of health care reporters beat… even the worst sector is still up 75%.” – Michael [26:20]

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4. AI Mania, Semiconductor Selloff, and Margin Calls

Timestamps: [28:00] – [37:40]

• AI-Driven Optimism vs. Market Reality

  • Quoting Gavin Baker:
    • “I look at what’s happening in the market and feel like a foolish optimist… I’m bearish relative to essentially everyone out here.” [29:24]
  • Margin call as the hidden culprit behind unusual sector drawdowns.
  • “Semiconductors imploded while the broader market barely dipped… this dynamic never happened before.” – Josh [30:02]

• ETF Flow Anomaly

  • “Semis were down 30%, but ETF flows were massively positive… people capitulated on stocks and dove headfirst into the ETF. Two things can be true.” – Josh [33:23]

• Not 1999: Key Differences from Dot-Com Bubble

  • “The market looks nothing like 2000… everything is going up and to the right, not just a handful of tech names.” – Josh [34:44]; Michael [35:20]
  • “I’m sympathetic that a lot of the market is rallying on the AI theme. But it’s not one narrow group of stocks. It’s literally the opposite.” – Michael [36:20]

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5. Leopold Ashenbrenner’s Margin Call and Trading Culture

Timestamps: [38:22] – [47:48]

• Who is Leopold Ashenbrenner?

  • 24-year-old, ex-OpenAI, embarks on massive, leveraged AI stock bets; margin calls wipe him out, but leaves him with huge Anthropic position.

• Risk Management Lessons—No Shame in Blowing Up

  • “He was up 1000% and remained four times leveraged. He just didn’t know how to manage money… but that can be fixed.” – Michael [39:44]
  • “The best investors blow up once. You give them money after the first blow-up.” – Quoting Mark Rubenstein via Josh [44:19]
  • “The people he lost money for are billionaires. It’s not like Madoff stealing from teachers. They love this shit. They wear failure as a badge.” – Michael [41:28]

• San Francisco vs. New York Risk Culture

  • “San Francisco is more philosophical about swinging for the fences… he speaks their language, not ours. That’s why the primes just wrapped him up and threw him in the river so quickly.” – Michael [46:00]

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6. Robinhood’s Exploding Business Lines & Lawless Prediction Markets

Timestamps: [47:48] – [57:16]

• Robinhood’s Growing Revenue Diversity

  • “13 lines of business each doing $100M or more… options trading, margin, equities, crypto, events contracts…” – Josh [47:59]
  • “$215M of the $389M in margin interest alone.” – [49:04]
  • Debate over whether Robinhood is encouraging risky margin use (Batnick: “They’re not making it less obvious.” Josh: “As a power user, I don’t feel pushed.” [50:23])

• Event Contracts/Prediction Markets Surpass Crypto Revenue

  • “Doing more in events contracts than crypto.” – Josh [51:27]
  • “There’s always a new bubble. People are eventing their ass off.” – Josh [51:51]
  • “It’s bundled in with an investment account… I just don’t think that’s healthy for a population of predominantly young males.” – Michael [55:14]
  • “These are public companies… they have a profit motive and will get away with whatever they can for as long as they can. Don’t be naive about that.” – Michael [56:15]

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7. Make the Case: Floor & Decor (FND) and “Less Bad” Value Investing

Timestamps: [57:19] – [64:23]

• Stock Thesis: Contrarian Bet on Housing-Related Retail
  • Floor & Decor: Down 70% since 2022 highs, business isn’t great, but “stock just broke above its 200-day moving average.” – Josh [60:19]
  • “All of the bad news is in the price. It just needs to get a little bit less catastrophic.” – Josh [61:31]
  • Discussion about value investing: “Most of the money is made on less bad. When you start making money on less bad, you’re buying things so utterly sold out by everyone that it almost doesn’t even matter.” – Michael [62:01]
  • “I’m blessing the trade.” – Michael [64:21] (jokingly gives his stamp of approval)

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Notable Quotes & Memorable Moments

• “What a difference seven days and one gigantic margin call make.” – Michael Batnick [01:49]
• “Earnings beats in every sector… rotations… everything you’d want. We have all of it. Literally you couldn’t script it better.” – Josh Brown [19:56]–[22:02]
• “A healthy bull market takes out the trash, its own trash.” – Michael [22:35]
• “I bet you [Leopold Ashenbrenner] could raise himself another $10 billion with his eyes closed… give him money now, he’s never going to do it again.” – Michael [41:28], [44:19]

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Important Segment Timestamps

• SpaceX public quarter: [02:22] – [09:42]
• Palantir blowout report: [09:44] – [15:33]
• Extreme earnings reactions: [15:33] – [19:56]
• Midsummer melt-up, market breadth: [19:56] – [26:23]
• Retail and ETF flows in AI/semis sector: [28:00] – [37:40]
• Leopold margin call & Silicon Valley risk: [38:22] – [47:48]
• Robinhood business lines and prediction market explosion: [47:48] – [57:16]
• Floor & Decor contrarian value case: [57:19] – [64:23]

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Tone and Style

Mix of irreverent banter, informed skepticism, expert analysis, and practical wisdom. Frequent use of inside-joke language, meme-aware references (e.g., “lawless times,” “blessing the trade”), and frank talk about risk, trading culture, and market psychology.

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For Anyone Who Missed the Episode:
This was a can’t-miss, data-heavy, wide-ranging session spanning the effects of AI and margin culture on the market, the best and worst of trading psychology, and why the current rally is as “healthy” and broad as any market veterans can remember. If you want to understand the 2026 melt-up, what’s happening under the surface in trading culture, or just want expert-hot-take companionship, this is essential listening.

Transcript

[Michael Batnick]

You right, yeah. Oh. All right, here we are. I'm sorry, I had it. I had a YouTube. I had a YouTube link open and I was looking at us on both.

[Ben]

All right.

[Michael Batnick]

Hey guys, it's all new edition of what are your thoughts? It's 5pm on a Tuesday night, so you know what, what's about to go down. It's Michael Batnik and myself and all of the biggest topics in the markets that you care about. We're super excited to have everybody who's here for, for the live chat. Can I give some shout outs, Michael?

[Josh]

Go ahead.

[Michael Batnick]

All right. Brian Grill asks, is that Kurt Russell? It might, it might be. Masterpiece says what's up pounders? Let's see. Sodak, Jason has the bumblebees up for the Duncan Hive. Yup, Duncan's here. John's here too. By the way, guys, let me say, Matt Evans need a game show version of the compound. How would that work? What would that, what would that be like? I'm open to the, I'm open to the idea. What do you think?

[Josh]

I'm great at Wheel of fortune allegiance.

[Michael Batnick]

All right, some shout outs to Nicole is in the chat, guys. Who else is here?

[Ben]

Everyone.

[Michael Batnick]

Everyone's here. And you know what? This has been an incredible turnaround between last week and this week. Like what a difference.

[Josh]

The tape, tape feels a little different, doesn't it?

[Michael Batnick]

What a difference. Seven days and one gigantic margin call make. So pretty, pretty excited for the show tonight. We do have a sponsor, Michael, who's sponsoring the show.

[Josh]

It's Janice Henderson. At Janice Henderson Investors, we believe working together is the way to work better. I believe that too. Like combining your portfolio plans and our in depth strategy, your valued assets and our valuable insights, your mission and our vision always working in perfect harmony to find the right investment opportunities. Janice Henderson investors investing in a brighter future together.

[Michael Batnick]

All right, very nice. Nicely done, sir. Okay, I guess let's, let's do the, the elephant in the room. SpaceX reported its first quarter as a public company about one hour ago. And the conference call started 30 minutes ago. Were you tempted to jump into the conference call live or you want to experience it later?

[Josh]

No, I'll do, I'll do it later.

[Michael Batnick]

I think I'm, I think I'm going to do it tonight. But not yet, not until, not until a few hours goes by.

[Josh]

It's playing right this second, right here, right now.

[Michael Batnick]

Yeah. So let's get to the, the expectations very quick. Let's get to the results very quickly. This was, I think as good of A first quarterly report as you could have possibly asked for, if you're long the stock. We'll talk about the. We'll talk about the. The reaction on price in a second. But I mean, this is what you want right out of the gates. They did 962 million in revenue versus 835 expected. The connectivity segment, which is Starlink, and the only profitable part of the business, did 4.4.29 billion versus 3.83 billion. So add that to the billion or so in space, and we're talking about some decent money. And then the AI segment, 2.56 billion versus 2.18 billion expected. So between space, connectivity, AI, all three were ahead of expectations. They lost a ton of money, which we know the operating loss for space was 542 million. The AI unit lost a billion and a quarter, and Connectivity actually had operating income of 1.66 billion. There's a couple of other things in here that I thought were notable. Based on the IPO, they now have over $90 billion in cash.

[Josh]

100.

[Michael Batnick]

Is it 100. Okay. 36.8 billion in debt and financial leases that they've committed to, and that's up from 22 billion. So the liabilities are up a lot, but they're sitting on a ton of cash. StarLink subscriber count, 12 million. And we know that they are now signing people up at a smaller dollar amount per user because they're going from like, military contracts to consumers and places like Brazil where you're just charging less. But average revenue per user is still $66, the same as last quarter. It was $85 a year ago, but that's been explained. It's not falling because people find it less valuable again. It's falling because the mix shift is changing over from professional users to regular consumers. What jumped out at you besides the

[Josh]

things that I just mentioned right off the bat, the. Whereas Mars, my doc, they said that they demonstrated the power of extreme vertical integration, delivering revenue growth of 92% year over year. Extreme vertical integration sounds. Sounds a little bit sexual, does it not? I've never heard that.

[Michael Batnick]

Yeah, well, vertical integration is like extreme. Well, hear me out. Vertical integration is like farm to table. Like, we grow our own ingredients and then we bring them into the kitchen and we make them. In the case of Space X, they're launching their own payloads, which are the Starlink satellites. So this is actually a very key difference between, like, what, let's say Amazon, Leo. So they want to do satellite phones also. The thing is they rely on other people to launch those satellites into space. Whereas in the case of SpaceX, the Starlink satellites are going up on a Space X rocket. So that's extreme. And then the AI piece which they're doing in house, so that is the extreme vertical integration of which he speaks.

[Josh]

Well said. Two things. Yahoo Finance grabbed this. Elon said on the call it's not out of the question that at some point Starlink will deliver the majority of the world's Internet. That is, I suppose nothing's out of the question, but that is an extremely ambitious statement. Not surprising to hear him say that. He also said this. This is interesting. Going forward, we've decided to build exclusively on Nvidia because we think the Vera Rubin architecture is the best architecture. We think it's the best AI computer

[Michael Batnick]

and the most expensive.

[Josh]

Not good enough. The Stock is at 116 after hours, down about 8% or so.

[Michael Batnick]

Can I just make the point that it had its best day since the day it came public or something.

[Josh]

Well, guess what, Took back all the gains of.

[Michael Batnick]

No, I know, but it was front run. Like it's not like it was down 5% and then fell 9%. It went up 9% and gave it back.

[Josh]

Okay.

[Michael Batnick]

So I, I actually, I thought that there was a good chance that this thing would rip after the report. I'm not betting on it. I don't have any position here, but I thought they could rip it because it's such a tiny amount of shares outstanding and you already have a lot of hedging in here. A lot of short selling connected to the shareholder unlock Zero Hedge, which we've talked about.

[Josh]

Zero Hedge tweeted massive SPX. SPCX, excuse me. Shorting ahead of earnings. 95% of SpaceX stock available to borrowers out on loan account amounted to 34% short interest as a percentage of the float. Wow. And Elon said, I tried to warn them but they just doubled down.

[Michael Batnick]

Well, but again, I think that's people that know that they're about to have their shares unlocked and they're kind of hedging the price falling any further. They're locking in a price and I think there's a lot of professionals in the market that are involved in that particular aspect of the trade. I don't think they're shorting the stock because they think the results were going to be bad. I could be, some people could be.

[Josh]

We'll find out. I could be way off here when the unlocks happen. I don't think that people are going to be in a rush to dump the stock at 110 bucks.

[Michael Batnick]

Yeah, you've said that. I don't think they're going to be in a rush to. I just think that people are going to try to get money out, and if the price is lower than they had hoped, so be it. Not everyone, of course. And if you're an employee there, you're probably more bullish than you've ever been, given how good the results are and how much they're growing. So those people will probably be able to hold it. But every other investor that was involved pre ipo, are they all, like, going to be like, oh, no, I'll wait till it goes back to 120? I don't think so. I think people want liquidity. If they couldn't get the top, so be it. So it'll be interesting. We, we are gonna see that start within two days. So that's, that's how the, the lockup expiry is written. It's two days after they report the quarter starts the clock, and then it's. Every five weeks there's another tranche of stock that's available until the first week of December. So I think it's just, it's all year. It's going to be more stock, more stock. And we're talking about like a billion shares at a club. Like, we're talking about a crazy amount of stock. So even if only a small amount of people decide to transact in two days, I still think we're going to get a chance to see this thing under 100 bucks. What do you think?

[Josh]

Yeah. Yeah. So do I.

[Michael Batnick]

Okay. We should also do Palantir.

[Josh]

All right, let me, let me, let me read this to you. This is from Ryan Taylor, the chief revenue officer. Our Q2 results are unprecedented but entirely unsurprising as the abrupt market shift in LMS that we've been warning you about for years is now here. We delivered 93% year over year revenue growth, our highest ever. Holy. The story of this quarter is once again our US business and now comprises over 81% of total revenue and grew 150% year over year and 23% sequentially. Our US commercial revenue growth accelerated to 149% year over year and 28% sequentially. Our US government revenue grew a remarkable 90% year over year and 18, 18% sequentially. Rule of 40, score of 155. Unbelievable. We closed 220 deals worth $1 million or more, of which 98 deals were worth 5 million or more. And 73 deals were worth $10 million or more. Record highs across the board. Holy shit. Stock up 30%.

[Michael Batnick]

Yeah. They have 650 something commercial. So non government customers and the whole narrative about like people are just going to hand over their business to anthropic and other LLMs and try to harness the power of AI turned out not to have been true. Palantir is going to be one of the. I think we could say this now with a lot of confidence. Palantir is going to be one of the leading companies that help other companies figure out what is my data actually worth and how can I make more money as a result of using AI. Like this is going to be this, this company. You contrast this report with what IBM just told us. It's very clear companies, corporations and governments are going to Palantir and saying help me. And they do not have a traditional salesforce. Alex Karp has gone out of its way to point out they are not, they do not look like a traditional enterprise SaaS business with salespeople covering this person, covering that person. They've got a very non traditional way of closing business. But it works. I also think that conniption he threw on the air the other day on Squawk Box, I think that resonated what happened.

[Josh]

I missed it.

[Michael Batnick]

So he went on Squawk and just like threw this shit fit about. And I think he said their names open AI and Anthropic. He's like you're just going to give these people the alpha of your business and rely on them to not launch competing products. Like what do you. And he said I am speaking up for every CEO who's afraid to say this, but this is what they're all saying behind the scenes. We are not just handing over our businesses alpha to the LLMs and waiting for them to disrupt the shit out of us. And that was the gist of what he was saying. He said it in a very high pitched, almost like it was very disorderly whatever he did. But the results that Palantir just put up I think are a testament to this idea that that's, that is not what people want. They actually want help and they want Palantir under, under the, under the tent and not necessarily anthropic. So I think that's notable.

[Josh]

And the stock is the company, excuse me, it has a $390 billion market cap. Is it going to. Is this a trillion dollar company one day?

[Michael Batnick]

I think it's neck and neck with Space X in terms of price to revenue as the two most egregiously overvalued stocks in the market. But, I mean, who's to say where this settles out there? There are cases where a company can maintain an extraordinarily high valuation and have it. Grow into it, have the earnings eventually catch up.

[Josh]

67 times sales. Yeah, I mean, that's. That's trailing, but let's see.

[Michael Batnick]

But again, what.

[Josh]

But.

[Michael Batnick]

But why. Why is it 67 times sales? Because they're growing sales 100% a year.

[Josh]

Yeah. The market's not dumb. I don't laugh. I don't. I don't laugh at these numbers. The market's not stupid. I listen to the call today.

[Michael Batnick]

No.

[Josh]

Okay.

[Michael Batnick]

It's on my list.

[Josh]

Dan Ives was the first call. I listened to the Q and A portion.

[Michael Batnick]

Wait, where does he introduce himself from the new firm that he's at? Right.

[Josh]

I think he had some technical difficulties, so I don't even know if he introduced himself.

[Michael Batnick]

York lives.

[Josh]

I listened to. I don't know it. If you're just listening to it and you don't know anything about the business, which I think is a lot of people. He didn't really talk about anything other than just galvanizing the troops, which he is. Which he is very talented at.

[Michael Batnick]

Did you watch it or listen to it?

[Josh]

I listened to.

[Michael Batnick]

Because they do this as a video.

[Josh]

But you. You heard him, like. You heard him, like, beating the pen onto the table.

[Michael Batnick]

Yeah, I. Listen. I know he's very controversial.

[Josh]

And, oh, he went. He went after the DSA a million times.

[Michael Batnick]

And, yeah, people. People get mad at him. They don't like him because he's, like, unapologetically pro West God, pro America, pro Israel. He's. He's like. He's. His attitude is, like, very staunchly saying, like, everyone's gonna have this technology. I want American companies to have the best version so they win.

[Josh]

It's an us against the world mentality.

[Michael Batnick]

Yeah. And our military should have the best AI and blah, blah, blah. And so, okay, it's not controversial for me, but I understand why it's controversial for others. And I don't. We don't. We don't go there.

[Josh]

Let's talk more about the earnings season more broadly. What is. What's sticking out to me? I think the first thing is the market's reaction to various earnings reports. Like, I don't know that I've ever seen companies gain 30%, fall 30%. And not just. Not just a few. A lot of companies are making massive moves after reporting earnings.

[Michael Batnick]

Yeah. In both Directions. Yeah, I agree.

[Josh]

Roblox and Reddit. Roblox down 30. Reddit down 20. Palantir today up 30.

[Michael Batnick]

Although. And I, I can't confirm this with data. Another thing that I'm noticing though, in line with what you're saying, is that on day two, some of those extreme moves are being retraced.

[Josh]

What? Google and Matter.

[Michael Batnick]

Microsoft. Amazon just gave back a whole bunch today.

[Josh]

Wait, did Microsoft give some back?

[Michael Batnick]

No, Mike. Microsoft had a horrible reaction and then bounced.

[Josh]

Noted it.

[Michael Batnick]

Yes, it did.

[Josh]

No, that.

[Michael Batnick]

Up 7%. It's up 7% last week. Yes, Ned.

[Josh]

No, it didn't. Microsoft. Microsoft was up like 15% after earnings.

[Michael Batnick]

Oh, no, I'm saying, I'm saying the wrong stock. Meta has come back.

[Josh]

Meta came all the way back in two days after falling 7%.

[Michael Batnick]

Yeah, and then, and then Amazon the other way, like they had, they had an incredible response and then probably related to Jeff Bezos selling another 4 billion worth of stock, but that retraced some of its gain. So you're getting an extreme first day move. But not all these moves are. Not all these moves are sticking.

[Josh]

I got some charts. Got some charts. Chart kid.

[Michael Batnick]

We have, we have to do one more. We have to do toast, right?

[Josh]

Everybody, everybody, everybody is dying to hear what happened with Toast.

[Michael Batnick]

Well, it's down 5% after hours, but we have talked about the stock a lot on the show, so we should at least get into it. Top line beat. Bottom line beat. Revenue 1.9 billion versus 1.8 for the quarter. Earnings were up 100%. Earnings per share, $0.26 versus $0.20. Expected 9,500 net new locations in the quarter. They're at 180,000. Restaurants are running on toast. That is a 22% year over year increase. GPV, which is like total payment volume on the system. 22% up year over year to 60.7 billion. ARR. Up 25% year over year to 2.4 billion.

[Josh]

Wow.

[Michael Batnick]

And they bought back 19 million shares for half a billion dollars year to date. And I. So I took some of my Toast off the table at 32, by the

[Josh]

way, the stock is flat after hours. Stock looks great.

[Michael Batnick]

Yeah. So I bought a ton of it in the 20s after it got killed. The last earnings report.

[Josh]

Good for you.

[Michael Batnick]

It ran right back up into the low 30s. I took some off not because I don't want to be in it because I still have a bunch, but.

[Josh]

You on.

[Michael Batnick]

No, I just, I saw how easily one quarter could knock this thing down 40% and I just said, you know, What? There's other fish in the sea and I think I'm gonna have time to accumulate this. So I'm still long for people that care. I'm not going anywhere. It is an investment, but I don't need to own as much as I did. But when they killed this thing last quarter, I had to buy more in the 20s and I'm glad I did it.

[Josh]

And that was a good move.

[Michael Batnick]

Yeah. Okay, let's keep going. All right.

[Josh]

So corporate profits, I mean it's been an incredible, it's been an incredible earnings season for a lot of companies. Throw this chart up, please. We're looking at adjusted revenue growth and adjusted EPS growth and of course they're going the same direction for most stocks. Looking pallet here in Micron. I mean Micron, you know, broke the

[Michael Batnick]

chart so like it almost doesn't fit on the chart pretty good.

[Josh]

All right. I don't know if you noticed chart off the stock market in an all time high today. I know you noticed. And it's not just one or two stocks. It's a lot of stocks that are doing really well.

[Michael Batnick]

It's a melt up.

[Josh]

It's a melt up. And you know what? We haven't said that phrase in a long time.

[Michael Batnick]

It's a mid summer melt up. The best kind of melt up.

[Josh]

It has been a long time.

[Michael Batnick]

It's not your traditional December, you know, Thanksgiving into Christmas run. This is something different. It's a midsummer melt up. And I have very strong views on what that means for the, for the balance of the year.

[Josh]

We'll keep going.

[Michael Batnick]

I want to hear, okay, this is my 29th year on Wall Street. I got Series 7 license in 1997. I got a mind like a steel trap. I remember everything as you know, every slight, every horrible thing that's ever happened to me, every offhanded comment. People thought I didn't actually hear what they had to say. But I heard it. I store it all up and my memory of, of market rallies is equally, is equally powerful. I almost, if I close my eyes, I can re experience some of these moments. And I'm going to tell you right now, this particular tape, I would say is one of the healthiest tapes I have ever experienced. If, if I wrote down, if you gave me a legal pad and say fill the first page, yellow, yellow pad. Fill the first page. With every characteristic you would want for a market rally in order to feel confident, to stay long. Like write down all the things. Here's what I would write down. Okay. Earnings beats in every sector. I think we have 10 out of 11 companies are on average beating or something like that. So check rotations. Leadership stocks getting killed and other stocks becoming new leadership. Defensive rallying was cyclical growth rallying with value. Large cap rallying with small cap. Revenue growth ahead of expectation. Not just games with earnings or buybacks, but like actual sales growth ahead of what's being expected. Analysts raising their expectations for next quarter during this quarter across the entire S&P 500, which is what's going on. International stock support, lots of IPOs, but not too many IPOs. Like every single thing that I would write down on the pad to say healthy market. We have all of it.

[Josh]

One more ingredient. Economists getting cautious.

[Michael Batnick]

Oh yeah, fuck them. That's part. I love that every minute that those people spend analyzing Kevin wash his suit and tie is another minute I have to make money in stocks. But literally you couldn't script it better. Couldn't script it better. And you got bitcoin falling, right? You got like, you can't say it's a speculative mania because you have stocks that went up 100 and then fell 40%.

[Josh]

The DJ and Dow is in a 50 drawdown.

[Michael Batnick]

Yeah, all the. Or remember what we said? A healthy bull market takes out the trash. Its own trash.

[Josh]

Its own trash.

[Michael Batnick]

So we had all those 2x memory people knocked out of the box. We had Leopold Ashton Kutcher, margin called into the stone age. Like all of that excess leverage in the Korean psychopaths like that all cleaned itself up. And you know what the word was today, out of the street. Is the bull market over? No, the bull market was reset. That momentum crash in July reset the bull market. It gave us a new foundation upon which to build future gains. We got a lot of leverage out, a lot of margin calls, a lot of 24 year old effeminate German boys trading stock for the first time knocked out the box. And now we're in a really good, I think a really good position to enjoy the rest of the year. This is a mid summer melt up. It's, it's not, it's not very common. But, but when you get it, I think it says a lot about people chasing the market into year end. They're really going to do it. So I'm very happy.

[Josh]

You and me both. All right, here's another one from Truist Wealth. Earnings revisions. Look at this shit. This is abnormal, folks. The average year since 2000, you're looking at the calendar year, earnings revisions. And the longer the year goes on, analysts are usually too optimistic and they take their, their earnings revisions down. This is the exact opposite. The exact opposite.

[Michael Batnick]

Yeah. I mean how much like are we normalizing this by all the write ups of private market assets like Amazon and Alphabet obviously had big write ups in their positions and things like anthropic is what you're showing me just straight up operating earnings?

[Josh]

I don't know but I think operating earnings look just as good. So there's obviously an asterisk here but

[Michael Batnick]

just as good but not as extreme.

[Josh]

It's all working and it won't forever obviously but it's, you know, these are the good times. Enjoy them while they last because they won't last forever.

[Michael Batnick]

Yeah. Chart kid Matt as of Friday. So this is a little bit out of date but directionally it's the same. 64% of companies have given results. 29% earnings growth for the second quarter. 137s and P 500 companies will report this week.

[Josh]

What's revenue growth do we have that?

[Michael Batnick]

It's 14.1% year over year which is 200 basis points above.

[Josh]

That's insane.

[Michael Batnick]

The estimates at the beginning of the season.

[Josh]

Why does I know we, why does Nvidia report in like three weeks or like it's, it's like so anti climatic at that point.

[Michael Batnick]

I don't even know is it, is it late or is it early for next quarter? 10 of 11 sectors posting a year over year increase in profits as I mentioned.

[Josh]

Do we know which one was down? I'm curious.

[Michael Batnick]

The lowest growth rates are health care staples and real estate. So let's assume one of those three is negative year over year real estate. But 11 of 11 sectors have beaten beginning of season growth estimates and put up the one day reactions. So Palantir today. No, the chart kid Matt's thing. Palantir today one day price reactions to earnings from select S&P 500 company was by far the biggest to the upside followed by Zebra Tech, Gartner, Emcor, Lam Research, Quanta, Garmin, Micron, Microsoft.

[Josh]

Those are monster moves.

[Michael Batnick]

Yeah. 29 and a half percent for Palantir. So it's, it's pretty notable. I do have some stuff from Nick and Jessica data track that I wanted to just run by you. 86% had beaten the consensus of Wall Street's analysts Earnings expert estimates which we know the 1:5 and 10 year averages are 80, 78 and 76. Like the, the long, long, long run average is like 76, 77%. And it always is that we're so far above health care 100% beat. Did you hear me? 100% of health care reporters beat. Industrials, 90%. Materials, 89%. The worst sector, consumer discretionary, was 75. So Nick and Jessica say the fact that more companies than usual are beating expectations is an unalloyed positive in terms of signaling strong corporate fundamentals. And then he gets into some of the technicalities. But like, just from a big picture standpoint, you can nitpick and you could find examples. But what about this? What about that? If I'm telling you that this is the overall environment, why nitpick? Why not just accept it's one of those moments in time where corporate America is shocking people left and right, Every sector, every industry. Like, why not just say, yeah, that's going on? Oh, hold on, hold on.

[Josh]

Before you move on, this is very important. If you're listening to us and you're getting nervous because we sound overly bullish or whatever, I understand that impulse. Like, I get it. You have to understand and remember that all time highs are bullish. Statistically, the one year forward return at an all time high is above the average for all other days.

[Michael Batnick]

Very counterintuitive.

[Josh]

So you might want to fight it and say, oh, Josh, Mike are so bullish. Ding, ding, ding, ding. I got to get it. Okay, fine. Good luck. Statistically, Right. Statistically, these are not times to get afraid. What's your last point?

[Michael Batnick]

S and p? Net margins? 14.7% in the second quarter. Pulling out Amazon and Alphabet.

[Josh]

Ridiculous.

[Michael Batnick]

Big write ups.

[Josh]

Ridiculous.

[Michael Batnick]

Ridiculous. The 5 year average is 12.4.

[Josh]

Dude, I remember when 10% was as good as it was going to get. That was GMO's whole bearish thesis, which

[Michael Batnick]

I understood at the time version of profit margin. Right, right.

[Josh]

No, no, no, no. Okay, we're going to talk about some of the stuff in semiconductor blow up land that I know we want to get to Leopold later, so we don't need to go there, but let's start with this clip from the second podcast in 45 days or whatever. Patrick O' Shaughnessy and Gavin Baker. Have you met anyone in your travels out here that you would say is

[Michael Batnick]

like way more bullish than you? And if so, what do they believe that you don't?

[Ben]

I mean, essentially everyone out here is more bullish than me, man. You know, I read this thing that Dorkesh wrote, you know, forget my like Bayesian probability space of expected outcomes that wasn't even in my considered, but dismissed his totally unlikely outcomes. I look at what's happening in the stock market and I feel like A foolish optimist. And then when I talk to people, whether it's people at the labs, whether anyone in this ecosystem, like I'm like bearish relative to essentially everyone. Which is just a strange state of affairs.

[Josh]

All right, so that was so great. So him and Patrick are talking about what's going on and Gavin Baker is like the fundamentals have never been stronger. They're accelerating. Like I thought I was bullish on the east coast. I come out here and everybody's psychotically bullish and they're trying. He's trying to wrestle with like why are stocks going down so much? Obviously we understand now this is like probably eight days ago. So it was pre finding out that there was a margin call. But the market looked past this because something really weird happened last week. Let's throw up. The semis imploded chart. Please skip the first one. So chart kid made this the. He showed the Russell 3000 drawdown when 88% of Russell 3000 semiconductors are in a bear market. And most of the time the market is in a bear market. Right. Most of the time there's a complete washout in semiconductors when the rest of the market is falling apart. And in the last week this was happening when the market wasn't just a three and a half percent drawdown from its high. That dynamic had never happened before. So investors, the rest of the market participants were correctly looking past the blow up and they bought. Shot off please. And they bought the ever living out of the dip. Let's use the first chart from. From Goldman Sachs. While the stock there's from Chris Lucas. While the SOX index has faced one of its worst months of performance in nearly two decades, semiconductor ETFs are on track to have their best month of fund flow since the inception of S

[Michael Batnick]

M H. That's Debbie.

[Josh]

One final one from Todd from Todd Sohn. Check this out. Todd is showing that semis were down a good clip in July, yet the ETF flows. And this is unlevered exposure work. We're content with adding on weakness. I mean this is just what an outlier of a month like we've never seen anything like that. And investors rightly so. The butter up. Buckle up buttercup crowd. Who's gonna get their comeuppance one day? They nailed it again.

[Michael Batnick]

Meaning no, they just got their comeuppance. They're gonna get their revenge one day. The cut the come. They got their comeuppance.

[Josh]

Oh whatever. You know what I meant.

[Michael Batnick]

No, I know. I'm fixing it. Never worry about that second chart. Would an accurate way put. Put up the scatter plot one. Okay. Would an accurate way to explain this be that in normal times when a whole sector is selling off, it's being driven by the index ETF or derivatives thereof.

[Josh]

No, but, but no, no. What this is showing is that so the, the red dots is showing the 20 day sum the of flows and normally on the Y axis when you have a 30% decline, obviously people are selling the ETF. They're saying.

[Michael Batnick]

No, no, no, you didn't. Let me ask my question. Hold on. Would a way of explaining this be in a normal sector sell off like specific to the sector you would see outflows from the ETF because people are selling off the etf. But in this case the semiconductor sell off was concentrated more in the individual names than in the ETF because it was being driven by a hedge fund. Margin call Specifically, yes.

[Josh]

Okay.

[Michael Batnick]

So that's what's different. That, and that's why you see them buying the ever loving shit out of the dip and plowing into the ETFs because they weren't the people selling the stocks. The sellers of the stocks were very concentrated. Although wasn't the whole retail crowd selling semis? They never sold.

[Josh]

No, they sold the stocks. This is such a. I'm glad you mentioned this. So Gungeon tweeted last week. So this was on Tuesday of last week, which I think was the bottom data from Vander Research. Retail investors sold $285 million worth of individual stocks.

[Michael Batnick]

Oh wow.

[Josh]

Which was the largest outflow since I think Liberation Day. So individual stocks were sold aggressively. Maybe they sold the stocks for a tax loss and rolled into the etf. Who knows, doesn't matter. But both of those things, two things could be true. People capitulated on the stocks and they dove headfirst into the etf. So it was an interesting dynamic. All right, this is very, very important. There has been a lot of 1999 comparisons over the years. And I want to make a very important point. This is nothing. The stock market looks nothing like 2000. Nothing at all. This chart is incredible.

[Michael Batnick]

Haven't we been saying we? You and I have been saying that for three years now.

[Josh]

I'm going to say it louder.

[Michael Batnick]

Nobody wants to hear us.

[Josh]

It looks nothing like the dot com bubble. The chart on the left is JC's favorite. And all technicians point to this chart. You had ample warning because on top is the S&P 500 advanced decline line. And a lot of stocks peaked in 1998. Financials materials industrials, like a lot of stocks peaked two years prior to the tech, to the, to the actual index peaking. And look at the chart on the right. Do they look anything alike?

[Michael Batnick]

Opposite. It's the opposite.

[Josh]

Everything is going up into the right.

[Michael Batnick]

It's the opposite. The advanced decline line is making a record high. People are making money in biotechs. People are making money in retailers and making money in health insurance companies making money in REITs. It's, it's, it's oil stocks. It's a literal opposite of 1999. I know it didn't feel that way for a lot of last year, excuse me, for a lot of 2024 when it felt like it was all Mag 7 and, and that was legitimate to talk about that concert. But that was just the first phase of the AI bull market. Now we're like in the third phase and you've got companies involved in the AI trade that are going up. You have companies that have nothing to do with the AI trade also going up. Take a look at JB Hunt. Take a look at Insight, which I talked about on the air today on tv. Biogen Idec, or we don't call it that anymore, Biogen Inc. They have nothing to do with it at all and they're going straight up into the right. We talked about on the show Casey's General Store. It's, it's fucking gas station pizza in Nebraska. There are so many of those, hundreds of those that I can off the top of my head this idea that the 1999, oh, it's all. Now I am sympathetic to people saying the rally in the financials is based on AI and its concentration and it's 1999 esque. That part I will grant you. When I looked at the earnings reports from Morgan Stanley and read their commentary after there are 10 trillion in assets and they specifically on the wealth side they added nine. I forget the number on, on the wealth side it was some obscene number for the quarter and they were saying yeah, this is companies going public and we have all their shareholders as, as wealth management clients. And they said there's going to be more of this. So I am sympathetic to the argument that a lot of the market is rallying on the AI theme. I would not say that's not true but I would just make the point. It's not one narrow group of stocks. It is literally the opposite.

[Josh]

The best case that I've seen or the best comparison that I've seen recently to the dot com bubble or just bubbles in general, I saw A chart from bank of America Global research that showed the prior manias. So the Nifty50, the dot com bubble, Japan and now AI all peaked at around 40% of market cap. And that's where we are today. So if you want to say that this is a bubble mania, that would be the chart. And is it possible? Of course it's possible. We'll see. All right, let's keep it moving.

[Michael Batnick]

Can we like, have one company miss earnings?

[Josh]

Right, right, right.

[Michael Batnick]

So, okay, I know AMD reported today after the close. We're not going to. We're not going to. We don't have time to do that one. But like, so, Josh, we get one

[Josh]

AMD miss before you share your thoughts on Leopold, I thought it was so funny listening to. Not ha ha, just interesting. Listening to Gavin, who is, you know, obviously on the forefront of this entire move. He's, he knows what he's talking about. And he was like stress testing all his ideas over the last couple of weeks. Like, what the am I missing? Like, everything that I'm hearing and like, literally not just seeing from the earnings reports, everybody that I'm talking to, everything is accelerating. What am I missing? And he wasn't missing anything other than a margin call. And they were looking for signal and noise or noise and signal.

[Michael Batnick]

Okay, so this is what I wanted to run by you. I like this kid. He's got chutzpah. Like, I, I like that he, like, got fired from Open. I. I didn't even know who this was until 10 minutes ago, so I'm not going to do a whole biography. But basically he got fired from OpenAI, allegedly for sharing information with people that worked at Anthropic. He's dating a girl that works directly for Dario and I think got married over the weekend to the chief of staff for Dario Amadei at Anthropic. And he spent a year or two inside of OpenAI. That's after working at FTX. LOL. So he went from FTX to OpenAI. And maybe there was one stop in between. But he's a child. He's 24 years old. So I give him tons of grace. He's not a Wall street guy, he's a San Francisco guy. And this is not his world. And the problem with mocking him is that even being wiped out on all of these public stock positions, he still somehow managed to blunder his way into a fight $5 billion position in anthropic, which could be one of the biggest IPOs of all time later this year. And the way he was able to raise money was not because he grew up with this person or his dad is a VP at this place. He wrote something that resonated with really smart people. He wrote a paper after getting fired called Situational Awareness. He stated his intention, he's going to make a big all in bet on the companies that are going to benefit from his thesis. And he was right. He just didn't trade it. Well, the fundamental issue seems to be he was up 1000% and remained four times leveraged. The other problem is he doesn't know what a hedge fund is. So he had longs and shorts, but they all put the same trade. So his longs got killed. And the things he was betting against were the counterbalance to those and they went up. And you can't have your shorts running up at the software stocks and your semiconductor longs going down simultaneously at 4x leverage.

[Josh]

It was a one sided trade.

[Michael Batnick]

Nobody doesn't know what he's doing.

[Josh]

It's a one sided trade with leverage.

[Michael Batnick]

Right. He's a very smart person and he accurately, accurately called almost everything in the right direction. He just doesn't know how to manage money. That part could be fixed. I bet you he's better, I bet you he's a better risk today than a lot of people running money that have not gone through this with fresh cash. And I bet you he could raise himself another $10 billion with his eyes closed. People say, oh, Leopold Ashenbrenner. I've heard that name. Yeah, I forgot why I know the name. Whatever. What? Like he's fine, People mocking him. He's a billionaire. Shut the fuck up. He, he didn't lose your money. What are you mocking this kid for? And he just learned the most important lesson there is to learn when it comes to managing money. Don't take the knockout punch. He's not gonna do it again. So I bet you he, he's going to have a long and distinguished career going forward. And by the way, the last thing the people he lost money for are all themselves billionaires. They're fine. This is not like Madoff stealing from nurses and teachers. They're billionaires in Silicon Valley. They love this shit. They wear failure as a badge of honor. And where they're coming from, they probably think it's the most entertaining thing on earth. I'm sure they're not thrilled that they're down $100 million. But again, they're billionaires. And I don't think, I don't think we've heard the last of of this, this young man. Well, what are your thoughts?

[Josh]

The fund is not shuttered. He's not going away.

[Michael Batnick]

Right.

[Josh]

All of his lever positions got sold at a 10% discount. And I'm sure he was down all of it on that lever position. He still is. Yeah, he's going to be fine. And I agree with you, the impulse to like kick somebody when they're down, especially like a 24 year old.

[Michael Batnick]

What does it say about our casino culture? He just took the largest, I think the largest trading loss in history on dollar. On a dollar basis.

[Josh]

The fund.

[Michael Batnick]

Bigger than Bill Wang.

[Josh]

The Fund peaked at 45 billion. And what was it after the wipeout?

[Michael Batnick]

Whatever. It's the anthropic stake. And he had the. Yeah, yeah, it's the anthropic stake which could be worth 10 for all we know by the time it comes public. But. But it's the biggest trading loss in history, I think.

[Josh]

Wow.

[Michael Batnick]

And it happened in two weeks and he's going to be fine. What does this say about the culture that we're in?

[Josh]

I mean, it's a great story. It's a juicy story. So obviously it deserves all the press that it's getting. Mark Rubenstein wrote a substack. He writes a net interest. It's phenomenal. And he said, I forget who he was quoting, but somebody that allocates money said the best investors have blown up once. Right. Like you blow up once.

[Michael Batnick]

Like that's my point. Give him money now, you're never going

[Josh]

to do it again because what do you think?

[Michael Batnick]

So if you think this kid is smart and he did this like generational deep dive into the AI rabbit hole to come up with this thesis that once again, let me reiterate, was exactly correct. What do you think he's going to do on risk management now?

[Josh]

Well, you know what? What? It doesn't matter. Do it because Sanders is not going up another 1800%.

[Michael Batnick]

Tough fact to follow. I agree. I don't think having a little bit of situational awareness myself, I don't think it says target which of an environment as it maybe was in 2024. But again, the question is not is he smart or is he not? We know he's smart.

[Josh]

Everybody's smart. What does that matter?

[Michael Batnick]

Well, my point is if he spends 1% of the time learning how to structure trades and do risk management that he spent learning AI, I'm pretty sure this would be a pretty good time to give somebody like that money if you were so, so inclined. I don't like the comparisons to Bill Wang, yes, he was reckless but I feel like Bill Wang was running a scam.

[Josh]

Bill Wang was tricking the prime brokers.

[Michael Batnick]

Tricking the prime brokers. This kid I honestly think just believed he was allocated correctly for what he thought was going to happen. He was not shopping prime brokers and pretending that this assets not leveraged yet. Like Bill Wang was a fraud. Like going to jail fraud. This is just a bad trader.

[Josh]

Yeah.

[Michael Batnick]

Okay, so I don't, I don't love that. I don't love that. I want to share one thing with you. So I mentioned he's from the San Francisco world. There was a funny anecdote in the New York Times piece. I think it was Rob Copeland wrote it. When this star of San Francisco arrived in New York during his fundraising tour around last summer, he received a relatively cool reception according to three people from whom he tried to raise money. They said they viewed him as a lightweight and a one hit wonder. The asset management colossus Blackstone passed on investing. One wealthy New York investor who did take the meeting welcomed him, gave him a grilling and asked him what, what's your plan if the AI revolution doesn't pan out? Quite as hoped, the hedge fund founder had no detailed response. The investor recalled Mr. Aschenbrenner simply truly believed it would all work out. Yeah, that's my, that's my read. And, and I think it's interesting the difference between San Francisco risk taking versus New York, New York is much more hand to hand combat. San Francisco, I think they're a little bit more philosophical about taking losses and swinging big for the fences. I think some of that is cultural and I think some of that is just like this kid speaks their language and doesn't speak ours. That's probably why the primes wrapped him up in a box and threw him in the river so quickly because they just, they looked at each other and said we extending this credit another second? No, we're not. And he had to go out and find a buyer and he did, fortunately for him. But again I still think he'll, he'll, he'll be okay. And if I were a betting man, I would bet that he's going to get really good at risk management going forward.

[Josh]

All right, let's talk about Robinhood. This is pretty impressive. They have 13 lines of business that are doing $100 million or more in annualized revenue.

[Michael Batnick]

What are all 13 businesses?

[Josh]

Chart on options trading, margin, interest equities trading, crypto trading. I can't read the rest.

[Michael Batnick]

Margin based securities lending, cash Gold subscriptions, which is like their top tier clients. Instant withdrawals. I don't know how it's a business, but. Okay. I can't believe it's a production markets.

[Josh]

Holy. If you want Robin Hood.

[Michael Batnick]

What's Robinhood legend?

[Josh]

Robin Legend? That I don't know.

[Michael Batnick]

Okay. I think that's like their top. Top tier.

[Josh]

Okay, so next chart their trading volumes. I mean, unbelievable. The Equity notionals up 85 year over year, 50 quote over quarter. Options contracts up 50 year over year. Obviously an incredibly lucrative business for them. Crypto down bad. We'll get to that in a second. Next chart. This is so nuts, dude. $215 million of the 389 from margin interest. Holy shit.

[Michael Batnick]

Well, that's what the. That's what the clientele is doing.

[Josh]

I mean. I know, I know we know. And guess how much. How much. How much of this margin interest is in levered ETFs.

[Michael Batnick]

Yeah, but that's not actually the right question. The right question is how much is Robinhood doing culturally to encourage people to use margin in their brokerage accounts?

[Josh]

Do it more. I don't know what they're doing now.

[Michael Batnick]

I know there's no regulation anymore. I understand that. And the pendulum will swing back, though.

[Josh]

But. Wait, what do you. What do you mean? I don't think they're doing anything to encourage you. Don't. What could they be doing? We think Vlad's calling people.

[Michael Batnick]

No. Like making it available.

[Josh]

It's way cheaper than other places. I don't think. I don't think anybody really gives a shit what they're paying.

[Michael Batnick]

All right, let's do a thought exercise. You're the CEO of Robinhood and I'm the chairman of the board. And I come to you and say the board has met and we've decided it is not in the long term best interest of Robinhood to have as much margin per account as our users have. We think it risks. In a bear market, it risks blowing us up for a year. So what I want you to do is encourage less margin going forward. And I want you to give me the results at the end of this quarter. What would you do?

[Josh]

What would I do?

[Michael Batnick]

Yeah. To stop people from raise the minimum account size that can use margin, you would raise requirements on certain securities. You would take the button and instead of it being bright purple, you would bury it at the bottom of the page.

[Josh]

I don't think they have a bright purple button like you.

[Michael Batnick]

Understand what I mean?

[Ben]

You can do.

[Michael Batnick]

What's with the user interface to make it less Apparent to people that margin is even available. My point is they're not doing that. So are they going the other way? They are they as soon as you open an account, sending you an email, hey, did you know rather than the $3,000 you put in, you could trade with six? I'm not saying they're doing that either.

[Josh]

No. So I am a Robinhood power user. That is my app of choice for seeing what's happening in the stock market. I've got my list. Everything is on Robinhood. And I don't feel like I'm being pushed to trade with margin.

[Michael Batnick]

Okay.

[Josh]

What also is super notable in here is they are doing. Next chart, please. Actually, they're doing more revenue from events contracts. $156 million in the most recent quarter than they are from freaking crypto.

[Michael Batnick]

Well, there's always a new bubble.

[Josh]

Credit to Vlad. I, I told him to his face, I said, I think you're drunk. Like, I think you guys are drunk on the prediction market events contract stuff. I said, stipulating, I think it's going to be, I think it's going to grow. I think it's be big. But I think that you're way overestimating how big the market is. And Obviously I was 100 wrong. Poly Market just spoke about raising at a 20 billion dollar valuation. People are eventing their ass off.

[Ben]

Yeah.

[Michael Batnick]

And it's extremely profitable. And I don't know if it's a bit ask spread business, but like you could probably drive a truck through where the sellers are, where the buyers are, and it's almost completely unregulated. In fact, there are lawsuits in states all over the country. A lot of people, a lot of states are angry because it's a workaround. They have prohibitions on gambling on sports. And then you can just buy like, all right, I won't game on sports. But will the Chicago. Will the Chicago Bears win 12 games

[Josh]

this season or it's a total workaround. The states make a lot of money from regulated betting. Entities like DraftKings and FanDuel are paying 50% of the revenue or something like that. And Cashy is paying nothing.

[Michael Batnick]

I saw John Mellencamp last weekend and played Jones Beach.

[Josh]

Play Jones beach, speaking of betting.

[Michael Batnick]

And he opened the show. If you ask like, is John Mellencamp more likely to be a Democrat or a Republican? I don't, you know, he played at farm age, just fucking rocks.

[Josh]

I don't know what his political relations are.

[Ben]

Rocks.

[Michael Batnick]

Right. But he's like from Indiana. It's all about the Heartland and rural America. So it's like, it's like, not obvious that he's either one. Okay. Right. He opened the show with a song I've never heard before. It might be an old folk song or something, or maybe it's something he wrote, but the chorus is, my, my, my, these are lawless times. And he put a big sign next to the stage, and that's what, that's what's going on right now. Like, oh, that's illegal. Well, what if I just technologically do it this way? Then I have enough of a loophole that buys me time to get an equity position to Donald Trump Jr. And then, all right, come after me.

[Ben]

Now.

[Michael Batnick]

I bet. I bet you I could. I bet you I can innovate myself into a loophole that you can't do anything about in the time that it takes you to bring an attorney general to sue me.

[Josh]

That's.

[Michael Batnick]

That's the markets right now.

[Josh]

Tarek from Kashi was on with Sorkin, I believe, talking about, like, the affiliation with Donald Trump Jr. And Tarek was like, he's always been very into technology. And Andrew's like, he's a real estate guy. What are you talking about?

[Michael Batnick]

He owns a stake in both Polymarket and Kalshee.

[Josh]

Yeah. Diversify, which is.

[Michael Batnick]

Which is bullet. Bulletproof. Bulletproofing. Both businesses, basically, for at least the next two years. And this prediction market stuff, I think it's fascinating. I have a whole bunch of bets. I have a Kalshee account. I'm not anti. But I know, but I know, like, what I'm doing is, like, within reason. I'm not going to blow my life up over it. I know if I were 18, the results would probably be different.

[Josh]

Throw up this last chart. June 2026, monthly metrics. Right. Look at the bottom. Right. These are event contracts. Now, obviously, a lot, A lot of this is sports. It just is. This is. There's World cup in here, but whatever. There's a lot. I mean, that is a lot of volume. Holy.

[Michael Batnick]

People should be. People should be able to bet on the World Cup. People should. I don't understand, like, I don't understand the mentality of, like, oh, you could bet on the price of oil 10 minutes from now, but you can't bet on a soccer game. You want to watch? I'm pro. I like it. I think it's good.

[Josh]

Really? Since when?

[Michael Batnick]

I. What I don't love is that it's bundled in with a. An investment account. And I'm not, I'm not saying, like, Robinhood shouldn't be allowed to do it. I just, I don't think that that's healthy for a population of predominantly young males. Yeah, and I know they're, they're trying to get women to get into prediction markets. They're doing a lot of bets about like Bravo shows and the shit that young girls care about, but most this activity is young boys. And I don't like the bundling of this is your investment portfolio. And then also like, why don't want you take, why don't you take a soccer game out of the same pool of money? I just, I'm not saying like it's illegal or I want to prosecute it. I just don't think it's good. I think it's societally not great. But these are public companies. They have shareholders, they have a profit motive and they're going to do whatever they have to do and get away with whatever they can get away with for as long as they can. And we should not be naive about that. It's what it's going to be. Can I show you one thing?

[Josh]

Yeah, go ahead.

[Michael Batnick]

Give me my chart. All in on prediction markets. This is what I want to underline here. The event contracts in in gray. So that's for the second quarter. Now to your point. Bigger than Crypt. They flipped crypto. So the stock, let's say the stock and options trading is effectively going to be what it's going to be. In a bull market, you're going to see more of it, right? In a bear market, you'll see less because people lose money and lose interest. But then they always have like this other layer, this like bubble layer. Not bubble in price. Bubble in activity, which sometimes comes along with bubble in price. They lost Bitcoin this year. It's one of the. I think it's the worst asset of the year. But they found something even better and maybe even more profitable. And that's why Robinhood is $100 stock and not a $60 stock. And is. Does not look as bad as Coinbase looks, which is not in. In these other markets to the same extent.

[Josh]

Okay, we're going to skip the next topic and go straight to make the case.

[Michael Batnick]

Okay.

[Josh]

I thought I did this before, but apparently I haven't, so. Florin Decor. Now I've spoken about the stock. Maybe I did it with Ben. So this is a company that came on my radar from a guy, Alex Morris, who has a substack called the Science of Fitting that I like to follow. Alex was on TCAF a couple of Years ago. And Alex is a value investor, an actual investor. How about that? I am no such thing. But I read his. I read his work because I like his ideas and I like his writing and whatever. Whatever. So Flora Decor is a company that is not where you want to be. They are in the home improvement category. And I don't know if you know this, but Home Activity is at zero.

[Michael Batnick]

It's a bear market.

[Ben]

It's a bear market.

[Josh]

It's a. It's an ice age mortgage rates are at 7%. It's brutal. So let me tell you the story real quick. Chart on this is from Alex. So I probably read this back in March or something. This is when it came on my radar. So Floor and Decor has taken market share from Home Depot and from Lowe's because they specialize. They are all in on this one category. Not just flooring, but any type of home improvement work. You can go right there. They have a much, much bigger warehouse. They dedicated a lot more square foot to these, to these categories. And Home Depot does. So this is becoming like the place of choice for people that are doing work. My Mudroom, for example, my guy went to Florida Core. Okay, chart off. The stock is. Has gotten the shit.

[Michael Batnick]

Knew this was mud. I knew this is Mudroom related.

[Josh]

Totally related.

[Michael Batnick]

Okay.

[Josh]

So the stock obviously like, like a lot of other home related stocks, has gotten destroyed. The Stock fell almost 70% from its high in 2022. And it's not. And the business is not really doing awesome. So they reported earnings the other day and the CFO said our outlook assumes that consumers will remain cautious and project demand will continue to be influenced by the pace and sustainability of any improvement in housing market activity. Following our better than expected second quarter earnings and the anticipated greater impact from the repurchase of common stock, we have increased our fiscal 2026 earnings per share outlook. So why am I presenting the stock to you? A couple of things. I know that this is like 101 type stuff. This is extremely basic. But as we are looking at stocks today, we are reacting to what's in the headlines. But that's not how actually, that's not how investing works. Stocks are looking forward. So Stanley Druckenmiller said, never, ever invest in the present. It doesn't matter what a company's earning, what they have earned. Soro has taught me that you have to visualize the situation 18 months from now. And whatever that is, that's where the price will be, but not where it is today. And too many people tend to look at the present. So look at their comparable sales growth. It's bad. Obviously the Stock didn't fall 70% for no reason, but it's getting a little bit less bad. And the stock just broke violently above the 200 day moving average.

[Michael Batnick]

Now listen, that's the first thing you've shown me that I liked. All right, so now you have my attention.

[Josh]

I'm not done. So obviously it's in a shitty, shitty position. The business is not doing well, but that's why the stock was down 70%. So all of the bad news, all of the frozen housing activity, it's all in the price. Now here's the final thing I will say. Obviously this has the, the, the bears are still in control. Technically. I think they still, they still, they still have the benefit of the doubt because the 200 day moving average is firmly sloping downward. But I think this breakout is notable in spite of all the challenges. And I am not selling them up 20% or so since I bought it. And I'm sticking with it.

[Michael Batnick]

All right, so the good news is you got the earnings already. So like that potential landmine is, is out of the picture. So you have 90 days until. Until they're going to report, I guess, aren't there? There are a lot of stocks like this right now in the market that are waiting for this turnaround in housing volume and existing home sales to pick up and new home sales to pick up. Like this is one of many. And I don't, I don't think you

[Josh]

need a massive turnaround for the stock to work. It has already digested. All of the bad news is here. It just needs to get a little bit less catastrophic.

[Michael Batnick]

Yeah, I was looking at one in the same category, which was a good. Mohawk Industries just made a monster move. It went from 100 to 136 in the last few weeks. Same thing. They didn't get a fundamental turnaround.

[Josh]

I should buy this instead.

[Michael Batnick]

This looks better than yours. They didn't get a fundamental turnaround. It's just to your point, it's like less bad. We had a conversation with. We had a conversation with what's his name? Ken. Ken Fisher. And he was saying we did most. Yeah, well, maybe you weren't part of the conversation. It stuck with me is a long time ago. He was saying most of the money. Maybe that's not true anymore. But historically most of the money is made on less bad. Because when you start making money in a. On less bad, not as bad as expected news, that means you're buying things that have Been so utterly sold out by everyone that it almost doesn't even matter. You almost can't lose money anymore. Now, that works against you when you have a company that's literally going to zero, like a JCPenney or a Kmart or Sears. Like there's a limit to that idea. I don't think that's what this is.

[Josh]

No.

[Michael Batnick]

Right, right. So you're saying is like, we don't need a housing boom. We just need a little bit of a thaw in the ice age and nobody's expecting anything good.

[Josh]

Correct.

[Michael Batnick]

And yeah, I think there's something to that. I have to tell you is the polar opposite of the way that I invest because I've been caught in a lot of value trap situations or I'm going to get in ahead of the turn and I just don't have. Good luck with that. I did it recently with Rocket.

[Josh]

Well, it's really hard. Most of the time. It doesn't work out.

[Michael Batnick]

Of course, we know I'm still in rocket. It's still $13 a share. It might be $13 a share till I die.

[Josh]

Now, Rocket needs that needs lower mortgage rates.

[Michael Batnick]

Yeah.

[Josh]

Like that is a levered bet on the housing story turning right.

[Michael Batnick]

But it's the same. It's the same group of stocks. And then what will happen with Rocket is they're not going to. They're not going to grow. Like it's in video, but like, not as bad as expected. Starts to turn into okay, actually pretty good. And then, wow, that's really good. And then by the time it gets to great, sell it you. But you could have a 400% return on a stock like that. The problem is like one of the problems is the timing. When does that process start? So maybe that's already started with FND based on that rally that you're showing me. So for that reason, I'm blessing the trade.

[Josh]

Thank you.

[Michael Batnick]

Blessing the trade.

[Josh]

I'll take.

[Michael Batnick]

All right, no mystery chart tonight, guys. We're running late. I did want to say thank you to everybody who joined us for the live comment section is rocking. As always, we appreciate all of you. Thanks so much to those of you listening on Spotify, Apple podcasts, please make sure leave a rating and review. It goes a long way. If you're watching us on YouTube, make sure you subscribe to the channel and we love you. Right back. Tomorrow is Wednesday, which means you'll get an all new animal Spirits, every podcast platform under the sun audio video, Mike and Ben. What? What? What could be bad? We'll do? Ask the Compound later this week. And then another all new edition of the Compound and Friends to close things out on Friday. Keep it locked. We'll talk to you soon. Thank you,

[Josh]

Sam. I'm not giving up. I am selling the building. Only love the final season of FX is the Bear.

[Michael Batnick]

The restaurant is flooded. Everything's either gonna be okay. No, stop. Or not.

[Ben]

We are outgunned and we are outmanned.

[Josh]

But we have each other. FX's the bear, the final season. All episodes now streaming on Disney.