← The Compound and Friends
The Compound and Friends
Next Trillion Dollar Stock, Why US Is Still Exceptional, Trump vs Powell
01:13:59
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A
Ladies and gentlemen, welcome to the Compound and Friends. Tonight's show is brought to you by public.com and the public trading app. More on public in just a moment. Tonight, Michael Batnick and I talk about the next trillion dollar stock or the stock that we think has the highest potential of becoming the next trillion dollar market cap company. We also take a look at some of the stuff going on between Trump and Powell and what that means to the market. We reacted live to Tesla's earnings, which were pretty bad, but there was not much of a reaction to the stock price, which I find really interesting. We did bitcoin, we did gold, we. We did it all. And you get to listen to it all right now because with no further delay, I'm going to send you over. All right, boys, let them in. Welcome to the Compound and Friends. All opinions expressed by Josh Brown, Michael.
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B
Batnick and their castmates are solely their.
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A
Own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Yup, we're back. Let me tilt my thing a little bit. We're back. It's. It's Tuesday. It's 5pm East coast time, which means it's time for another all new edition of what are your thoughts, those of you tuning in for the first time? My name is Downtown Josh Brown. I am one of two hosts. The other host name is Michael Batnik. Michael, say hello to the folks.
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B
Hello. Hello. How's everybody doing? Good.
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A
That was good banter, Michael. Michael and I will be your host this evening. We're going to talk about the biggest topics happening on Wall street, in the economy, in the markets at this very moment. And we have a lot to get to tonight. I have one big announcement and then I want to shout out our sponsor. You know what? I'm going to call an audible. Let's do the sponsor first. Public. Michael, tell us about public and the public trading app.
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B
I mean, what can you do on the public trading app? You want to do everything you want.
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A
Stocks, yield, bonds, options, crypto, forex.
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B
Just kidding. No forex.
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A
No. So. So public is cool. I use the app. I actually use it every month. Sweep some cash into some things that are outside of my regular asset allocation.
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B
You do a little sweep?
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A
I do a little. I do a little sweep. I do some bitcoin etf. I do. I do some stuff. I do some gold etf. And I have been for months and thank God for that. So public makes it really easy. You can open account in like five seconds. You could transfer money in really fast. You get your money out when you need it to the place to go. If you want to learn more public.com w a y T Paid for by Public Investing Full disclosures in Podcast Description okay, here's what I want to tell you guys. If you are fans of the show and you live in Chicago or surrounding areas, Chicagoland as they. As they say, we are doing a live edition of the Compound and Friends from the city of Chicago on June 3, 2025 in the evening after work. Not too late. We will be there. Our special guest, Kanal Kapoor is the CEO of Morningstar. So super exciting to be Michael, myself, the whole gang, Duncan, Nicole, everybody's coming. And we are there to celebrate the opening of our second headquarters in the Salt Shed district of Chicago. So what better way to celebrate than with our fans. We're super excited to see you guys. Nicole is putting links up as we speak so you can buy tickets. I think we'll put it in the comments section as well. So hope to see you there, guys. And hey, Chicago is one of my favorite places in the country, so this is gonna be a good one. You excited for this?
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B
Great rappers in Chicago for sure.
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A
Do you know any?
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B
I am very excited for Chicago.
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A
Okay. Twister was a pretty good Chicago rapper.
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B
He was.
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A
I'd say. Yeah. Oh, all right, guys, we're pumped for that. Okay, so tonight we have to lead off with Tesla's earnings. It's kind of. Would you. Would you agree this is like the biggest report in terms of, like, media interest of this particular quarter? I'm not saying it's the most important report to the market. I'm saying just in terms of like, how bad is. It is like people were waiting for this.
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B
I might be overstating it, but he's the most.
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A
He's the most divisive figure in certainly in America and maybe in the world right now.
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B
Yeah, but we've had.
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A
It's not Donald Trump, but we've had.
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B
We've had a. You're right. We have had a preview of how bad things have been at Tesla. We've been getting some numbers and the stock has been cut in half. So we're about to talk about what, what the company reported and the market's reaction, but it's muted because, yeah, we know it's bad.
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A
I think people expected bad, I think, yet a lot of analysts downgrade it. Way before now going into the report, Barclays yesterday, I want to say came out with a pretty substantial downgrade of Tesla. And I think the question is like can they still sell cars in America and elsewhere in the world at the rate that they were selling cars? The growth has gone from really, really fast growth to moderately fast growth to slow growth to now no growth in and, and in reverse. And I think it's shocking to people that that could happen. And this definitely the stock is priced in a lot of it. Has it already priced in all of it? Because I don't see a big reaction here after the close, do you?
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B
I always say that you don't know what's priced in until you find out. It's very different.
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A
Really? No, but for real, that's profound.
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B
Listen, listen to me. If you think that a good team is going to beat a bad team in a game and you want to bet on it, the good team might be minus 700. In other words, you have to win. The odds are priced in immediately. You have to bet 700 just to win 100 because there's no way in the world that the underdog is going to upset them. Okay, with the stock market, you don't have any of that.
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A
That's a good point. They don't publish the odds.
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B
They don't publish the odds. So now Tesla is flat in the after hours after an abominable report. So going into this you could have said like I don't know what's priced and we'll find out. And we just found out because the report itself was terrible. Let's go to some numbers chart.
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A
Apparently everything was, apparently everything was priced and if it's flat because this is a pretty bad quarter.
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B
This, the quarter was so bad. And listen, we'll see what happens tomorrow, right? Like I don't know, be down 10%. Probably not, but after I don't always tell the full story. So. All right. Automotive revenues down 20% year over year 20. Income from operating income down 66%. Operating margins down 343 basis points from 5 and a half percent which is shitty enough to begin with, down to 2.1%. If you told me that the stock was down 18% in the after hours on this report, I would have said yeah, makes sense.
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A
How about if I asked you if this were any other company other than a cult or if this were a non technology stock. Like let's, let's say this were, let's say this was a company that made regular cars, not electric. Like if Ford announced this what would this stock would be pancaked.
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B
It'd be a dollar down 190%.
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Like it would lose all of its equity value immediately if, if, if, if that were the report. So I think like it's, it's amazing. But he still like he still has an investors trained to think about the next five and ten years and not the next five and ten months. Like he, he, they, they, they listen to him. They've gotten the message. It's pretty impressive.
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B
They missed on almost every metric. Throw this up, John. So as we just discussed, it's just blood red across the board and not just red like horrifically red. And nevertheless the stock is flat. Really interesting.
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A
So keep this slot, keep this slide up just for people listening who are, who are not watching. This is giving you the degree to which they beat or missed on a given metric. So Michael did Automotive, it's a 26% miss. So was down 19.6% year over year. But they missed their own or they missed the forecast too. They on the energy and generation and storage business, which is small, they missed, they missed the forecast, Wall street forecast by 11%. Gross profit missed by 12.2%. So these numbers are getting smaller. But also the company missed shrinking numbers. They missed on adjusted ebitda. They missed on the margin too. They missed on operating cash flow by 36%. They, I mean it's just, it's disgusting. Free cash flow. They missed by 60%. If this were any other stock and not a cult, it would absolutely be pancaked. And I understand it's already down 40 something percent going into this report. I don't know if that's enough just given the valuation it has.
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B
Down 50. Down 50. Let me ask you this Josh. Does this, is this a generational top? Let's look at the market share of Tesla vehicles by region. So Tesla was just up and to the right, especially in the U. I mean everywhere really. It started at 1% in Q2, 2019 in terms of market share in the US and Canada got as high as 4% and is rolling over pretty aggressively competition I think.
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A
Look, I think you would have to argue that this, that, that Tesla created one of the best selling cars in America and in the world. Because they did like the Model Y was insanely popular. They followed up with the Model 3. Not as popular but they absolutely sold a ton of them. They outsold most of the like just in, in terms of cars, not, not trucks, just in terms of cars. They outsold like every other car brand for multiple years. But then they made it, you know, the, the, the founder, CEO, visionary behind the company made a really interesting move. He decided to get heavily into politics. He chose a side, he chose the opposite side of the people who were buying the cars before. So I think you and I would agree, most people, most people would agree. Like people in the center and on the left were the predominant consumers of Teslas. Just because it was about, originally it was about the environment. It's a, you know, it's about an affordable car and not having to pay a lot for gas. But like the thing that initially made these so popular was that it was electric vehicle and nobody, nobody, one side.
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B
Of the country, nobody's dumping their pickup trucks for.
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A
Right. So then he got very heavily involved in politics and that the half of the country and the center that he's been alienating lately, like those were the most likely buyers of new Teslas and they're not going to.
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B
So what Tesla did, obviously what he and the company did, you know, miraculously impressive. And that's why it garnered a trillion dollar market cap at one point. Now down to 770 billion. Still enormous, still in the MAG7. So I don't, you know, I don't really have a strong opinion on, on the future of this company. I'm more interested in the stock.
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A
Let's put up this first price chart. Does. Does. Is 50, is 50% the bottom? No, not this one.
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B
So that, that's a three year. That was three years. Stock is down 29% over three years.
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A
Show me the percent off high. Thank you, John. Is that it could be. I don't think so. The next one is the, the next One is the three year look. So it's in a 30% drawdown if you held it for three years. I mean the Elon cult is still strong. They're still standing, they've been battered. They talk about robots, they don't talk about cars anymore. They're really excited about, they're not excited about the cyber truck, they're definitely not excited about the next model Y. If you ask them why they own the stock, they say robots. And it's very likely he has the iPhone of robots. It's also very likely he doesn't and someone else does or that that market develops just like the automobile market. And it's insane that it's hardware.
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B
Those are low margin businesses.
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At the end of the day he would argue that his AI is better than other people's eyes. And, and that will be the differentiation.
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B
The robots are hardware.
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Yeah. So you're not buying this step. I'm not either.
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B
I've. I don't think I've ever owned Tesla.
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A
No, you know what? It's, it's, it's, it's the type of. It's the type of thing where. Here, let me show. I don't think we have a graphic for this, but I want to, I want to share this with you. This came out at CNBC today. So they do this thing called the All American Survey, All America Economic Survey, and Steve Leesman oversees it, and they ask people a range of topics about the economy, the markets, et cetera. This is Leesman. Tesla. Tesla. Wait. Oh, they asked in the survey about Elon Musk, and they found that half of the public, which is what I would guess, has a negative view of mosque, compared with 36% who see him positively and 16% who are neutral or don't really care that much. Obviously Among Democrats, it's 82. It's 80, minus 82.
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B
And that was his customer base.
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A
That's his customer base. Minus 49 for independence. That's really interesting. And for GOP respondents, he's plus 56. So he basically turned Tesla into a Republican company. And I assume you could sell a ton of cars to Republicans. I don't know if you could sell a ton of all electric cars to Republicans. I'm not sure that that's necessarily what they're into. 35% of Americans are. Overall, 35% of Americans are negative on EVs, 33% are positive. Men, however, are plus 11 in net approval of EVs, but evenly divided right down the middle. On Tesla, young people aged 18 to 34 are plus 19 on EVs, minus 23 on Tesla. So what do you do with that? So, in other words, people 18 to 34 are your most likely customer for electric cars over the next 10 to 20 years, like you would think. And they're, they're so enthusiastic about them, but they're minus 23 on buying one from Tesla. Like, that's not great if you sell a consumer brand and young people have turned on you to that degree. And maybe, maybe it's not for long and it could be reversed. But that's wild. Among Democrats who are plus 20 on EVs, they are negative 74 on Tesla. Now, here's what's funny. Republicans are strongly positive on Tesla, but net negative on EVs. So that's what I'm asking you. Can you sell electric vehicles? If the center, the independents and the left absolutely hate your guts, can you Sell a lot of electric vehicles or at least can you be the number one selling EV brand for long? I think it's be tough. I'll tell you one other thing. I will not get into a Model 3 Tesla when I order an Uber because I order Uber Black or Uber Premier or whatever it's called. I'm willing to pay a few extra dollars for a nicer newer car, but if it says they're sending me a Model 3 and nothing to do with Elon Musk, I don't like sitting in the back of them. The seat goes straight up and down. It's vertical, it doesn't recline at all, the back seat and you feel literally every bump in the road. So I don't care if Elon Musk disappeared tomorrow, I don't ride in the back of Model threes, especially when I'm paying a premium for an Uber. Finally I got so sick of canceling them and booking a new one, I called up and she goes, man, if there were a button, I swear to God this is true. She's at a call center somewhere for Uber. If there were a button that said no Tesla half my day, I'd have, I'd have half my day back to do other things. Is that interesting? I think so. So Uber was running this like promotion with Tesla to help sell a lot of these things during the pandemic and after, like they had a partnership and a lot of Uber driver, a lot of Uber drivers ended up buying Teslas or they leased them from people or whatever. So that there's a huge amount of Teslas in the Uber fleet.
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B
I took one last night.
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Yeah. And they're using them for Premier, which should be illegal, honestly, because it's not a, it's not a Premier ride. Like, like it really just, it really isn't. Maybe the cybertruck might be, but a model, Model Y is a Model 3 is just not. So anyway, I thought that was interesting. So on balance, this is the type of report where I think you're going to get a bunch of Wall street notes tomorrow. Just talking about like this is all in the past and next year looks better because they will have launched the lower priced car, which is everybody everybody seems to be waiting for. And maybe that's why the stock's not reacting negatively.
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It's down 50%. It already did. We had the delivery numbers. This is not a surprise. I mean it's pretty bad.
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But they yanked their full year guidance, which is never historically a great sign. But maybe that works in their favor in the absence of guidance. The next time they report they're not quite as under pressure to meet whatever they said they could meet. I don't know. I'm trying to find like a, trying to find a silver lining for people who are sitting in this stock over three years and down 30. It's pretty bad.
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B
So. All right, moving along, let's talk about the, the end of the empire trade that is, is a bit, is a bit hyperbolic to say the least. So, John, throw up this chart by Lisa Abramowicz. The S P 500 this month is underperforming the ACWI X US index by the most in 32 years. It's, it's a, there's a 8% gap this month. And Adam Parker is, is fading. This.
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A
Yeah, I mean, I thought this was a really interesting report, but the, before we get into some of the details, that's the upshot is that this, this whole idea that American exceptionalism means relative underperformance for US Stocks for as far as the eye can see is not gonna be a winning trade. And he thinks at best, you got about a year of this kind of thing before people snap out of it. I'd love to hear if you think he's right, but I wanted to just share some of the things that he was saying. We have heard several times in our recent meetings, read articles and watched scrolling on the screens of popular financial news media that this recent week, period, likely marks the end of American exceptionalism in terms of the relative performance of US Equities. And then he says, we, you know, there's a whole lot of other stuff in here about that the US Stock market's more expensive, that it's already massively outperformed. You know, look at the recent performance. But then he says, we disagree. Our view is that this dynamic of US Underperformance likely lasts less than one year. And some of the first. Let's put this chart up so we give people a little bit of context. Michael. So this is basically showing the United states as of April 19th, year to date, negative 10.2% and the NASDAQ negative 15. And when you look at Brazil, it's plus 14.6, euro, STOXX 50, plus 10.9.
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B
That's in dollars. That's for.
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In US dollar returns. So if you're hedging out the foreign currency with a fund or an ETF, Footsie 100 + 7.6%. German Dax + 17.2. Spain is 22.6. So it's like almost across the board, you can find markets that are down, like Taiwan, but there are not many of them. When you factor in the currency effects like Japan is way worse than the negative 3.8 in its own local currency. It's down 13. But like just across the board you have a lot of green markets whether you're hedging the currency or not. And I think that's what's gotten people talking this way.
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B
You said it backwards just for the record. If, if you're hedging out the currency, then you're getting the local return.
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A
You're getting the local return is better. Right? So I think that, I think that it's a, it's a worthy conversation, but not just because of what's happened year to date, but because of what's happened over the last 10 years. It was embedded in the investor expectation eventually, after so many years of outperformance by the s and P500, that these markets and these economies are just inferior, like by, by nature, just based on the way these countries run their economies and therefore they deserve lower premiums and investors in those countries should expect lower returns. And now in the last three months, all of that is being rethought because of course all react to whatever just happened yesterday and it, and it helps us form our opinion about what's going to happen tomorrow. What do you think about the debate itself? Do you feel like there's been this just earth shattering change in how people are talking about this concept?
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B
I do. And I think that a lot of it is obviously being driven by macro uncertainties, tariff headwinds, dollar dumping, that sort of stuff, the flight away from, from U.S. assets. I am in Adam's camp. I think ultimately once we move past this and, and the, the rhetoric and there will be a de. Escalation at some point and then there will be deals done and all that sort of stuff. Ultimately it comes, it comes down to the companies and we, we just have better.
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A
We. I agree with that. We just have better companies.
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B
We just have better companies. And so I don't know how long this lasts. I don't think that the US is going to out form the rest of the world forever, indefinitely. This is proof that that's not the case. But I do generally believe that, that if there is any like end of American exceptionalism. To me that seems way overblown. I just, I'm not buying that.
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A
Adam points out that even in drawdowns globally, like when all stock markets are selling off, the US has outperformed the world ex US 8 out of 21 of its own drawdowns. That here he's saying that implies nearly half the time something global in nature is occurring that causes non US equity markets to sell off more than the US market. So in a true risk off global market, the US actually ends up doing better than most of the rest of the world. I don't think that would be controversial, but I think it's an important reminder. He also points out this year is the fourth worst relative performance for US versus non US equities in the last 56 years. You can count the other three events on literally one hand and have two fingers left over. When we've seen anything like this. 1976 to 1978, the 1987 crash and the 72 to 74 period, the inflation nightmare. That's it. You've never had double digit underperformance for the S&P 500 versus the rest of the world. So this is a really unique occurrence which to me gives you an even better sense that it's probably not going to last very long.
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B
I don't know how long it lasts, but throw up. This chart of the median gross margin for the top 500 U.S. companies is also from Adam. It's around 45, 46%. And a lot of this is because our companies are phenomenal. But lot of this is tech based, software based high margin business. I would have to believe that if you compare this with the rest of the world, we are close head and shoulders above.
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A
Here's what Adam says about this gross margin chart. It's clearly true that gross margins valuation are very closely tied. Hence if tariffs and other US policies crush the gross margins of the average US company, that will most likely continue to cause multiple contraction. The median company has close to all time high gross margins in the us. If we see tariffs cause margins to contract back to 2018 levels, that could cause enough relative multiple contraction for the US market to continue to underperform. We can't promise this is not going to be the case, but we don't think that's likely. And here's why he thinks most of the relative damage is already done. Because the United States over the next decade has exposure to the six most important growth themes. AI, semiconductors, AI software, electrification, industrials, power and utilities, life sciences and healthcare services and housing structures. Those are like the big things that demographically and technologically are going to be driving equity investors to place their bets. And when they do that, it's inevitable that they end up back in the S&P 500.
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B
Well, let me ask you this. Do you, do you think anybody, like really and truly anybody is being like, you know what, dumping my, my U.S. stocks. I'm going international.
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A
Yeah. I think foreign investors. I don't think Americans are. I think, I think foreign investors bought up a ton of the US Stock market because for a long time it was the only game in town. And when you see people coming out of the woodwork to sell the Nasdaq, it's already down 4% on the day. The. That's not a sentient, thinking, breathing American retail investor. That's either a fund manager who's, who's getting redemptions and has to sell here in the US or it's a foreign investor repatriating. Because who the wants to deal with this anymore? This is like a full month of this tariff shit and no end in sight. No deals like. Nope, nope. He announced this on April 2nd. We already crashed going into that announcement. Then he announced that we crashed again. Today's April 22nd. It's 20 calendar days of the same nonsense. If you're a foreign portfolio Manager, you have 100% of your pie to allocate. I don't know, I feel like, I feel like it's a really easy decision to keep selling United States now. At a certain point they'll be underweight and will rebound and that'll look like a mistake. But right now probably feels like the right move.
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B
I don't know. I don't know.
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A
Well, who else would be, who else would be selling? I don't think it's people with margin calls blowing, blowing out of JP Morgan and Bank of America like the, the sellers, the sellers of US Blue chip stocks. My opinion, I think it's like foreign pension funds, sovereign wealth funds. I doubt they're dumping all of their US exposure, but if they reduce it by 5%, it's like trillions of dollars. So I think it's pretty clear that somebody still has stock left to sell because we have absolutely rerated the entire stock market and yet you still have days like yesterday. Yesterday was one of the worst days yet. So a lot of stocks made new lows and the sellers continued to sell right into the close. So today reversed that, which is great. But I have to guess it's foreign portfolio managers or other entities that foreign insurance companies where, hey, we were 60% US stock, now we're going to be 50% maybe just because it's a lot of money.
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B
All right, let's, let's play this. Jerome Powell audio clip.
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A
Now, some people believe the Fed will intervene if the stock market plummets.
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B
The Fed put. Are they correct? I'm going to say no with an explanation. So what I think is going on in markets is markets are processing what's going on, and it's really the policies, particularly the trade policy. And really the question is, where's that going to come in? Where's that going to land? And we don't know that yet. And until we know that, you can't really make informed assessments. Would still be highly uncertain. Once you know what the policies are, will still be highly certain what the economic effects will be. So markets are struggling with a lot of uncertainty, and that means volatility. But having said that, turn this off. Functional, conditional.
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A
So anyone but me, dude, I have.
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B
I have CNBC on. And it just said, breaking news. President Trump no intention of firing Federal Reserve Chair Powell.
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A
Good idea.
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B
That's. That's good news.
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A
I don't know. What do you think his next move is? He should be cutting, not because Trump is threatening the firearm.
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B
So, yeah, I was, I was talking about this with Ben today, and I think that Warren said it best with us. Like, this is not a four and a half percent overnight economy. It's just not.
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A
Doesn't feel that way. None of the headlines give you that impression that we need to be this tight. I should be cutting.
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B
I do believe that Jerome Powell is genuinely, like, as apolitical as you can be, but he's also a human being and he probably doesn't want to feel like he's being bullied by the president to do something. And so if I had to jump inside his brain, I think that's where he's at. It's also difficult when to cut rates when you have inflation expectations spiking. I think he should be looking past that because he's not right.
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A
The Fed is the Fed. Cutting is not the source of the spike in inflation rates. And he knows it. Yeah, everyone knows it.
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B
So I think, I think Trump's right about this. Like, rates should be lower. I think the message of calling him a loser is probably not the best way to do it.
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A
But yeah, okay, so I think Trump. I think Trump is right that rates should be lower, but Trump is the reason why the inflation expectations are rising. So, like, it's. Look, what, what I want to say is not political. And if this upsets people, it's because they're unable to hold two opposing thoughts in their head at the same time. That's called cognitive dissonance when you are forced to weigh two opposing Ideas, and you can't reach a resolution between the two. It makes people really uncomfortable and they get emotional. And so you could love Trump, but acknowledge that what's happening in the economy right now is 100% not being caused by the Fed. It's not Powell being too late on rates. So. So it's hard, like, because people think, oh, so you're saying Biden would have been better? Nope. You're saying Kamala would have been. Nope. Definitely not saying that. Not a fan. But I think what's going on here is that Trump is setting Powell up as his scapegoat if things get materially worse this summer and into the second half. And it reminds me of the way he used Dr. Fauci. Like, every time there were negative headlines about the disease or the death count or something that was reopened, having to close again, he got. He got. He got Fox News people all day long to say, foushee Fauci. He basically turned Dr. Fauci into, like, America's foremost villain. And it feels like he's been using Powell that way. I'm glad to hear that he's not going to keep doing it. I think most people understand that if we have a recession in the second half, Trump 100% owns it and Powell doesn't. Do you think, like, 90% of reasonable people would agree with that statement? Whether they think it's justified or not is not what we're debating.
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B
I think most people are reasonable.
- [32:40]
A
Like, 90% of people would say, yes, Trump's trade policy caused a recession. Now, half of them would say, but he had no choice because it was a fake economy under Biden or because he has to get the debt down or whatever, whatever they concoct. But, like, I think most people would not say, Jay Powell did this. Like, 90% of people would say, Jay Powell is not at fault if we have a recession in the second half. What do you think about that?
- [33:06]
B
Yeah.
- [33:07]
A
Okay. To Powell's credit, he just orchestrated a soft landing that most people said was impossible.
- [33:16]
B
He didn't.
- [33:17]
A
Well, he caused the problem, but he fixed it.
- [33:19]
B
Come on.
- [33:19]
A
No, we got a soft landing, dude.
- [33:21]
B
He tried. He tried to crash the economy. Couldn't do it.
- [33:25]
A
Okay, what would you describe the situation we were in as recently as December, January, February, you had balance sheets healthy, record low unemployment, corporate earnings at all time, highs, extremely low credit market volatility, financial markets that were the envy of the world. This is not three years ago. This is like a couple of weeks ago. And that's a soft landing.
- [33:51]
B
He does not deserve credit for it.
- [33:56]
A
We agree that a lot of mistakes were made leading us up to the 9% inflation spikes of 2022. We all are on the same page there. Okay, I think the point that I'm making is he did figure it out and orchestrate a soft landing when most people thought a recession was the only way, including the Fed. But like, it didn't happen that way.
- [34:18]
B
But so he. So he didn't orchestrate anything. We did. Our companies and our people orchestrated it.
- [34:25]
A
Fine. But he was the Fed chair at the time. He was calling the shots on policy. He was deciding on cutting rates or not cutting rates. Whatever you want to say. We had a soft land. We had a soft.
- [34:36]
B
We had a soft landing. And the more important point is that if we do go into a recession, this will have had little to do with Jerome Powell.
- [34:43]
A
The conversation last week shifted from recession or no recession to the question of like, is America still going to be America? It was a different conversation. And I think people are getting in his ear now and saying the Powell stuff on Twitter. You got to stop and suicidal.
- [35:02]
B
Yeah. So what would lower rates even do? I mean, certainly they would help the housing market, which is in a. Still in a deep freeze.
- [35:11]
A
I could fix the economy in 10 minutes.
- [35:13]
B
Please.
- [35:14]
A
I told you. Federal. A federal interest rate for just first time homebuyers. You've never bought a home before. You're starting a family. Here's a 3% mortgage. Don't worry about interest rates. Don't worry about it. We're not giving you free money. You're borrowing it and you're paying interest on it. You're just not paying 7% on it. You're paying 3%. Here's. It's not a giveaway, it's not a handout, it's not welfare. You're still borrowing the money. Fannie and Freddie are enabling you via pass through with the banks to have an ultra low interest rate, or what we would call the normal interest rate five years ago. Here's what that does. It immediately changes the conversation for the entirety of the millennial generation who have really been screwed around by a lot of financial crises and a lot of volatility in rates and boomers living longer than ever and not selling their homes, lack of supply. It's just been a horrendous experience. Sure, let's. Let's give them the opportunity. The second thing that accomplishes is it unlocks this freeze in the housing market. People that aren't selling their homes because nobody wants to take out a 7% mortgage to buy their home. We can alleviate part of that distress as well.
- [36:34]
B
How? For first time homebuyers, how do you do that?
- [36:36]
A
Because if you're the seller, you have a first time homebuyer who is now more active than they ordinarily would be. You have more potential buyers for your home. So if you're trying to get out.
- [36:47]
B
But if you own your home, why would you. Or if you have a 3% mortgage, you're going to go into a 7% mortgage.
- [36:52]
A
No, you might go into a rental. If you're a boomer, it's very likely.
- [36:56]
B
I like, I like the sentiment, but like, come on, what about.
- [36:58]
A
No, no, no, Mike, you talk to realtors. I can't sell my house. Nobody wants to take out a 7% mortgage to buy it. I know now all of a sudden, oh, I can sell my house. Because there are young couples in the neighborhood with lower priced mortgages and they're willing to come in.
- [37:15]
B
And what about all the people that just got six mortgages? Do you, do you make them whole? Do you give them something?
- [37:19]
A
I think, I think we're going to have a recession in the second half and they're all going to be, they're all going to be refinancing lower anyway because I don't know if we get four interest rate cuts, I don't know if we get 100 basis points here.
- [37:31]
B
That a recession is happening, going to happen.
- [37:33]
A
45%.
- [37:34]
B
All right. So I'm not really that confident.
- [37:36]
A
I mean, I would have said 10% two months ago. Yeah, I know I sound like everybody else.
- [37:41]
B
Yeah.
- [37:41]
A
I'm not saying anything that's out of consensus. I don't think I can predict the future. I think most people think it's almost even odds at this point.
- [37:49]
B
Yeah.
- [37:49]
A
So that's where I am.
- [37:51]
B
Yeah.
- [37:51]
A
You know, anyway, look, I don't know what lower rates do, but I tell you what they don't do. If we're going to have a recession, lower rates are not going to make the inflation problem worse. Demand is going to fall off a cliff.
- [38:04]
B
Yeah, I agree.
- [38:04]
A
So you're going to have trade related inflation that has nothing to do with fed funds rate. So I can't imagine why he's not moving immediately toward doing that. It seems weird to me.
- [38:16]
B
The next meeting is in 14 days.
- [38:20]
A
Yeah, he'll cut.
- [38:24]
B
And it's not looking likely.
- [38:25]
A
Yep, he'll do it.
- [38:27]
B
Okay, well, the market saying there's a 96% chance of no cut.
- [38:30]
A
How do you think things are going to Go in the next 14 days. If you had to guess, only 68% of companies this earnings season are beating. It's usually like 75 earnings season bad. What do you think the tone of the markets will be from here on out for the next 14 days?
- [38:48]
B
I have no idea. Neither do you.
- [38:50]
A
No, I don't. What do you think though, if you.
- [38:54]
B
Had to guess higher or lower? I don't know. I really don't know. I think, I don't know. Who's to say? Hard to say.
- [38:59]
A
Absent. Absent a deal on trade. I think you're gonna. I think. Well, no, obviously, but it's not just stock prices. I'm talking about the dislocations and volatility in the bond market and in the dollar. I think are going to force him to get easier. Like I, I think he's. Hang on one sec.
- [39:21]
B
And I'll also say, Josh, I think.
- [39:24]
A
He'S gonna have no choice.
- [39:25]
B
The, the bottom market has settled down.
- [39:28]
A
Yes. So we settled on the ten year at about what, four spot three, five to four, four. A much tighter range than what we had before.
- [39:38]
B
Yeah.
- [39:39]
A
Okay, let's do gold. So this first chart is gold and US Dollars. As of today, it's a new all time record high. So 3500 per troy ounce. As you can see, we are up. I don't know, what is that? 65% from where we were a year ago at this time, early 2024, we were about 2000, breaking out for the first time in a long time. And now we're already in the mid-3000s and no end in sight. I don't know, doesn't this feel like 5,000 to you?
- [40:14]
B
5,000.
- [40:19]
A
Historic gold, bull markets. The price at least doubles.
- [40:24]
B
It's hard to say anything bad about gold. You know what's interesting? If you look at like gold and Euros, for example, way different chart.
- [40:30]
A
Yes.
- [40:31]
B
Like this is a, this is a dollar story.
- [40:34]
A
Yes. But gold is in a bull market all over the world. Just not to this extent. For sure, not to this extent. I think the fear that's driving money into gold is people wanting to get out of a lot of US assets and then people following that on as a momentum trade. I think it's like both things.
- [40:52]
B
Yeah, it's working obviously very well.
- [40:54]
A
So people don't like the idea that the President basically is setting himself up to like upend the dollar as a reserve currency. Or maybe he deliberately is trying to like wreck the post World War II Status Quo World order. Whatever your pet theory is, all roads lead to Gold. The minute you start worrying about the United States as the world's reserve currency, that's like the only game in town. You're not going into yen because the yen is backed by the United States implicit military guarantee. You're not going into euros because that's still dysfunctional.
- [41:32]
B
Well, if you're thinking about like mutually assured destruction with tariffs which are attacks on everybody and you know, escalation. Yeah. Gold is immune from all of that.
- [41:42]
A
Yeah. There are people asking about bitcoin recently acting more like gold than like tech stocks. Kind of find that. I kind of find that interesting. I don't know. What are, what are people, what are people in the bitcoin world saying? Told you so.
- [41:57]
B
I, you know, I don't know. I am very much not as online as I used to be.
- [42:03]
A
Okay.
- [42:04]
B
So I don't know. But it, it is interesting. I was, I was debating this with Ben yesterday. The S P at one point was down 3% on the day and Bitcoin was up 4%. Very unusual because to date bitcoin has been a levered risk on play. It just has been. The narrative about, about digital gold has not materially taken hold in price action until yesterday and today. So the question is, is bitcoin acting more like gold as a safe haven?
- [42:35]
A
That's the answer.
- [42:36]
B
Or is it front running an, eventually an eventual surge higher in stock prices and we'll find out.
- [42:44]
A
Oh, I see. Like, are people jumping in that because they think the NASDAQ is going to turn.
- [42:48]
B
Yes.
- [42:49]
A
And risk appetite is going to come.
- [42:50]
B
Back and this happens quicker?
- [42:52]
A
I don't know. I, I think it's the former though, if I had it, if I had to guess.
- [42:56]
B
So if it is the former, that is a big deal.
- [42:59]
A
Yeah. Because that's the point.
- [43:01]
B
Right.
- [43:02]
A
Because that's the whole point of it, right. It's getting your money out of USD, getting your money away from government control, blah blah, blah. All the fairy tales that these people have been telling each other for. I don't know, is it 20 years of this shit now? Like if they finally come true and bitcoin trades with gold while everything else continues to sell off.
- [43:21]
B
It's a mic drop for the bitcoiners.
- [43:24]
A
Not only that, it attracts a lot of attention from traditional investors and ultimately attracts flows and then that kind of thing could feed on itself 100%. Okay.
- [43:34]
B
And Bitcoin is still so, so, so, so under owned. Like nobody really owns bitcoin.
- [43:42]
A
Nobody in traditional finance owns it in size. You hear people talking about a 1% break in their asset allocation. Put up the one year performance of GLD. So it's up 43% in the last year. That's a, that's a pretty big one year rally.
- [43:58]
B
And a lot of it, a lot of it is like, you know, recent.
- [44:02]
A
In the last month just got, it's been up and to the right and then it just exploded. Total return over the last six months. Bitcoin plus 34%. GLD plus 24 acqui x US plus 1 Barclays aggregate bond index 0.7%. So barely positive. Nobl, which is this dividend. Aristocrats. Nobl.
- [44:27]
B
Noble. Noble, I forget.
- [44:29]
A
Okay, well whatever that is, it's negative 8%. Not a safe haven, whatever that is.
- [44:37]
B
Aristocrats, yeah.
- [44:38]
A
S&P 500, negative 9. Q's, negative 9.5. I would have thought it was worse. This is just the last six months. Russell negative 15. So you got basically two assets that have worked this year. One is bitcoin, the other one's gld. I have, I find that really interesting.
- [44:54]
B
I saw a tweet maybe last week that bitcoin has outperformed the S and P on like every single year, one through 15.
- [45:03]
A
I mean, not supposed it's a penny stock.
- [45:06]
B
No, I know, like, but. 1, 2, 3, 4, 5.
- [45:10]
A
Put that in your investor deck. All right, let me show you a chart from Ari Wald. Ari is one of our favorite technicians of Oppenheimer. He is talking about the gold miners are cheaper than gold. I'll just quote him while you look at this chart. We've maintained a bullish outlook on the price of gold since the start of 2024. And I've preferred the commodity over the equities that mine for the commodity meaning the publicly traded gold miners. Our relative preference has now shifted toward the gold miners. GDX is the ETF for gold miners based on a decade long base position to inflect higher versus spot gold. Of course, both the yellow metal and the miners have become tactically overbought with each trading 20% above their 200 day average. For a shopping list, our top buy ideas within GDX are those that have also cleared the year 2011 peak. And I'm going to show you the stocks Ari likes. But what you're. I'll go back to the first chart. So what you're basically looking at here is the GDX in the top pane which is breaking out. That's the gold miner index etf. And then on the bottom he's showing that relative to gold which you can see is almost. It's a basin pattern that goes back a really long time and it's almost a breakout. What do you think of this chart? What do you think of the concept? I like it.
- [46:34]
B
I don't know. Coal miners suck. I mean but every time, every time.
- [46:38]
A
There'S a time and place. Okay, I agree. Everyone, everyone agrees. The worst stocks there are.
- [46:44]
B
Yeah.
- [46:44]
A
All right, next chart. Here are some Ari's names. Agnico Eagles. Agnico Ego Minds. He put this out over the weekend. So I don't know what happened yesterday and today I assume these stocks are higher. I mean this is as clear all time high breakout.
- [46:59]
B
They look great. What are you going to say?
- [47:00]
A
Wheaton wpm, huge breakout after a really long consolidation. Franco Nevada, which I've never heard of. And Royal Gold rgld.
- [47:12]
B
All right, but I'm looking at, I'm looking at. These are so ridiculously overbought. Which is a good thing, right? Like short term.
- [47:19]
A
He's saying it.
- [47:20]
B
An overwhelming amount of demand for anything is never bad. But in the short term, I would just maybe let me say overbought means.
- [47:29]
A
Like if you want a more constructive opportunity, let it breathe, let it, let it pull back to where it broke out and spend a few days cleaning up sellers. That's always good advice. And the downside of taking that advice is you miss the trade that could happen. So what new trade? Let me show you. Newmont. So this one hit me in Sean's list of the best stocks in the market. This is not one of Ari's favorite names and I think I understand why this has not broken out yet. Technically it could double top here a longer term chart, it looks better. But this Stock is within 5% of 52 week highs. RSI is not yet overbought. And you just got within the last two days, you just got a golden cross. Your 50 day breaking above the 200 day meaningless. That level is 55, 56 or 57. Back to last fall, but this name has not cleared its. Its 2011. This is the largest gold miner in the world.
- [48:31]
B
It's the only one in the S and P, right? Is it still in the S and P?
- [48:34]
A
It's in the Russell 1000. I think it's also in the S and P and it might be.
- [48:39]
B
This chart is a piece of dog shit. It looks terrible.
- [48:43]
A
Like in a good, like in a good way.
- [48:45]
B
No, not in a good way. Like bad dog shit.
- [48:47]
A
It looks terrible as what though? As like for a long term investor.
- [48:51]
B
Zoom all the way out let's say, like, you will not find a technician that says, like, yeah, this chart looks good.
- [48:56]
A
No, no, because look, because look at, it's horrendous. Look at the 20. Look at the 22 highs. I think, I think there's a tactical trade to 75 in this stock. I mean, I don't think it's a long term investment. I think, I think if it can clear last fall's highs, the narrative around the stock will shift and it'll look like the other ones. You'd bet against that?
- [49:17]
B
Yeah, I mean, I would. If I had to buy one of these, I'd buy the ones that are already working.
- [49:21]
A
Right.
- [49:22]
B
Agneco and Franco look much, much, much better. There's already buyers there.
- [49:27]
A
Oh yeah. Looks Agnico looks like a, like an animal. But it's, it's the tree. I think he missed it like when, when it broke out above 85. You had to buy it.
- [49:39]
B
All right, listen, it's enough.
- [49:40]
A
It's 1. It's 120.
- [49:41]
B
It's enough gold miner talk. Sorry. It's enough.
- [49:44]
A
All right, let's do this next trillion dollar stock thing.
- [49:46]
B
All right. What do you got? So Netflix.
- [49:51]
A
We're both long. We're both long.
- [49:53]
B
Nope. I sold it.
- [49:54]
A
You sold it?
- [49:55]
B
I sold it. I was six months ago.
- [49:56]
A
I was going to say this has become a consensus long on the compound.
- [49:59]
B
Yeah.
- [49:59]
A
Now you're out.
- [50:00]
B
Okay, I, I think I was up. I made 100% or more. So I took my. I saw too early, but that's fine. All right, so tr. Look at this wildebeest I'm showing for listeners. I'm showing Netflix compared to the other streamers, including Disney. This is over the last three years. Netflix is up 180%. 10Xing the market up 18%. The S&P, Disney is down 35% over the same time. Warner Brothers is down 67% and Paramount Not Nice is down 69%. So it is absolutely demolishing the competition. And you could have said chart off. Listen to me, a skeptic, a no skin in the game skeptic could have easily said this stock is priced for perfection. Oh yeah. Oh yeah.
- [50:46]
A
Well, it's perfect. So.
- [50:47]
B
So look what the company is delivering. Chart on, please. Revenue, 12 and a half percent growth. The most important thing is the operating income. Operating margin exploding higher thought. This next wide charts chart long term. Look at revenue and the operating margin. The leverage in here is massive. Massive, massive, massive. They are absolutely killing it. And this next chart from Alex Morris is the Chef's kiss of all. Chef's kiss. Josh, do you remember years ago when Netflix was spending like $7 billion a year on content?
- [51:22]
A
Unsustainable, hemorrhaging money.
- [51:24]
B
People were apoplectic. So this chart from Alex Morris shows the Netflix Netflix cash content spend as a percentage of revenues. And yes, they used to spend 80% of their revenue on content and now much more of it is flown to the bottom line. It's under 40% and trending lower. They are absolutely killing it.
- [51:43]
A
Right. And, and what, what ends up happening is as revenues grow, but content costs grow at a slower rate or stay the same. The leverage here is like, it's just a. It becomes a better business model the bigger it gets, which makes it a better investment. So a lot of people look at a stock that's just tripled and said it's not a good investment anymore. Wrong. It's a great investment when the fun. When the fundamentals are doing. In the comments, Edward Dorn Blazer reminds us it's streaming with no theme parks and no theater exposure. None of those discussed in cruise ships either. Which means it should do better in a recession. I think it's, I don't want to say recession proof. We did, we said it's recession resilient. You and I did a show at the beginning of April, I think, where we, like we were saying, like, what is the best stock to hold through this kind of volatility? And I think Netflix was the name that we picked. I went long the stock soon after we talked about it that way.
- [52:43]
B
I should have. But, but wait, hold on. But, but here's the thing. It's a stock and in a bear market, it will get killed like every other stock. But it is not, it is not first to recover. It is not. I agree. But also a lot of their growth, a lot of their growth is coming from the ad platform. And ads are the first thing to get yanked in a recession. So it will absolutely get hit. Now, people won't cancel, but the signups will slow and the ads will pull back and the company, the stock will get hit.
- [53:10]
A
I disagree.
- [53:12]
B
Okay, which part?
- [53:14]
A
The ads will pull back. I think they get a bigger piece of the overall ad spending that offsets weakness in the ad market. And they are tiny. This is not meta or Alphabet. This is a tiny, tiny, tiny player in ads. It's very possible they continue to take market share in ads because they have the attention of the. And they don't experience a cyclical ad spending slowdown the way they would if they Were meta if they were Facebook.
- [53:43]
B
Oh, I mean certainly they're too.
- [53:44]
A
They're not big enough.
- [53:45]
B
Yeah, yeah. No, that's definitely spot.
- [53:47]
A
So if you're an advertiser, you might say we're cutting our ad budget for next quarter by 25% but we're upping our Netflix budget by 100% because the engagement on Netflix is stronger than it's ever been. And I can't say that about, I don't know where else they spend money. Cbs.
- [54:05]
B
Yeah.
- [54:05]
A
So I, I don't know that I believe that that's true. That's 1, 2 actually on the ad supported tier. It's actually turns out to be more profitable. Get somebody to pay 7 99amonth and be advertised to. That's a better customer than the family plan. Full boat 2199 premium sub. So in a recession, as people pull back their spending, they might drop down from premium Netflix to save $70 that year into the ad supported. They don't go to no, they don't go to no Netflix. They drop down.
- [54:38]
B
Yeah.
- [54:39]
A
So having that strategically I think is what makes it recession resilient. I'd also point out highly international business. Two thirds of the users are in other countries and you know, it's got a premium valuation now.
- [54:55]
B
40 times earnings. Yeah, yeah. Deserved. Yeah.
- [54:58]
A
Who else is, who else is executing like this?
- [55:00]
B
It earned it. They are, they are. Clearly they won. I mean, they won. So the question is, is Netflix a trillion dollar stock? It's right. It's $400 billion right now. A trillion sounds like a lot.
- [55:10]
A
But they had an annual business review last week and the Journal picked this up where they were actively talking about being a trillion dollar company. Like being the next Mag7 company. They were like, that's. They think by the end they think they're going to. What did they say?
- [55:26]
B
Double revenue executives have a goal of tripling Netflix's operating income by 2030. Tripling operating $10 billion last year. By the way, they address this on the call. Ted and Greg.
- [55:37]
A
Well, if they. So if they go from 10 billion to 30 billion in operating income should.
- [55:43]
B
Mean A trillion is.
- [55:45]
A
If it trades 30. If it trades 30 times that, it's a trillion dollar stock. Now this is not even yet a return cash to shareholder story. It could definitely turn into that. I mean, I don't think they should be buying back stock. I think you should be making more content.
- [56:01]
B
They are, they are, but not in a meaningful way.
- [56:03]
A
Right. What they really should be doing is putting their boot on everyone else's Neck on the content side and just doing things that no one else can do, like overpaying for live events. More Jake Paul, Mike, Mike Tyson fiascos. Because that's what drives new signups. So Ultimate Fighting, wwe, now they're in, now they're in football. Like they, they should, they should keep doing that because that is just absolutely crushing their competitors. They're forcing competing services to spend even more than they ever have on live events and sports. And Netflix can afford it.
- [56:41]
B
They should open a theme park.
- [56:42]
A
Warner Brothers can't. Like Paramount can't. I understand they have Larry Ellison money, but they don't have Netflix money. So this is, this is the game now. I think there's a really, there's a really strong argument that the only problem with Netflix is nobody will let them buy anybody. Like if Peacock ends up being up for sale, for example, or HBO Max. I don't think, like regulatory. I don't think they could be the buyer.
- [57:10]
B
But I think they also have, they have access to almost every library anyway. They don't even need it.
- [57:14]
A
They don't need it. Okay, last thing. Finfluencers. Did you read this article in the Journal?
- [57:20]
B
I did.
- [57:22]
A
I almost went into a rage about it, but then I calmed myself down.
- [57:25]
B
Really?
- [57:26]
A
Yeah. I was so mad about this.
- [57:28]
B
I was so unbothered by it. I thought this was such a fluff article. It was just like. It was a nothing burger to me. What, what part of it enraged you?
- [57:35]
A
I think it's people. I think it's people who don't know what they're talking about. Hijacking the market volatility to, to quote unquote, influence their peers and ultimately sell them high interest rate credit cards as they amass their, their following. Just like, I just don't like, just don't like when people make hay because of like the market volatility in a deceptive way. Like, oh, hey, I'm your friend. Like, here's like the Fed had a meeting today, let me break it down for you and do a little dance and blah, blah, blah. And they get like impressionable people in their 20s who think, oh, this must be an expert. They're using words I've never heard before. And then like two months later they're like selling whatever sponsor, you know, I just, I don't know. For me, it's, it's not great. But there are some really, I think caring, thoughtful people doing this kind of thing. It's not all of them.
- [58:31]
B
Like Douglas, who was mentioned, Doug had.
- [58:34]
A
A quote in here I guess here's the first question I wanted to ask you. Are we influencers? Am I, am I one? Are you one? I think we sort of are, I.
- [58:46]
B
Guess, but not in the same vein as, as the people that they were quoting because they were talking.
- [58:49]
A
Because we're older.
- [58:50]
B
Because we're old. Yeah.
- [58:52]
A
So I would draw the line somewhere else. I would say because we're licensed, we're registered. Like we, we have, we have boundaries that we can't cross without getting into trouble. And most of these people don't. They can say whatever they want.
- [59:05]
B
Right.
- [59:05]
A
So I would say that that's a pretty important line of demarcation. Put this chart up. This is where people go for advice by generation. So this interesting is interesting to me. Like gen Z, over 70% say they go to social media and the Internet, not to the exclusion of friends and family, which is at 70% or financial professional 50%. For all the other generations, they significant. They rely on social media significantly less. Millennials social media 56%. It looks like Gen X under 40, boomers under 20. Now, some of this is because going to a financial professional as a Gen Z, there are less professionals who actually want to talk to you. So you kind of get pushed into looking for advice on social media because where else are you going to get it? You think there's some truth to that?
- [60:09]
B
Yes.
- [60:10]
A
You want to elaborate or yes, you think there's truth to it? I. I mean, are you trying to be, like, diplomatic right now? Is that you worried about. You worried about somebody getting upset with you, maybe? Honest? I don't want to. I don't want to start any wars.
- [60:29]
B
I don't. Yeah, I don't want to, like, I don't want to ruffle too many feathers.
- [60:32]
A
All right, this is what I'll say. I think it's great that there are finfluencers on TikTok and Instagram reaching people where they are and trying their best to help them understand what's happening. I think where it crosses the line for me is when they start giving advice and they're not licensed. I think that's the part that like, needs to be cleaned up a little bit and, and there's nobody watching. There's no regulator. So anybody could say anything.
- [61:00]
B
But is your premise that these people are, are purposely. They're being scumbags?
- [61:05]
A
No, not all of them, but let's. If it's 20% of them, shouldn't there be regulation? I guess if you're not licensed or registered, should you be able to say oh, guys, this is just entertainment. But wait, here's the part where I tell you what to do. And, like, I feel like if you're giving advice, then say, I'm giving advice.
- [61:26]
B
All right, so, you know, so here's the thing. I'm so far disconnected from what these people are doing. Like, I don't know what sort of advice they're giving. I'm not on TikTok.
- [61:35]
A
Some of them aren't giving any advice, and some of them are shuffling people into chat rooms and charging a monthly fee to, like, continue to influence them as like a club or a membership. And they're like, they're effectively selling financial advice in some cases without a license. Not. Not everyone. So they're selling insurance. There's a lot of IUL sales happening, so Index Universal Life. Like, there's a whole. There's a whole subculture of people selling insurance policies to each other, but they might not be selling them. They might just be influencing on behalf of a company that ends up selling them.
- [62:14]
B
All right, well, this will never get, like, regulated or policed because, you know, the state of.
- [62:18]
A
Not now, not now. They're firing the regulators. It's not enough for them. It's not enough them to actually police real finance. So are there enough regulators to police TikTok finance? I don't think so. So, I. Look, I think there's like everything else, there's nuance. There are people that are good at this who are actually helping people, and then there's people just taking advantage of the volatility and doing and saying God knows what. And for the regular person, I don't think they know how to stop it. I don't think they know how to gauge whether or not they should stop listening to somebody. I think it's really hard to be able to tell who's. Who's legit, who's not, which is why we have licensing in this country to begin with. Like, we. I don't. Like, licensed people are not telling you to buy crypto coin A. It's just. They never would do it. But people don't know that if they don't understand, like, the way our. Our laws are written. So, you know, I think it's like, it's a mess. And I don't. I don't know what you do about it.
- [63:22]
B
Tell people to be.
- [63:23]
A
Tell people. Be vigilant, but they don't even know what to watch out for.
- [63:26]
B
Yeah. So anyway, they're not going to.
- [63:30]
A
You made it through the segment without offending anybody, so you're good now you're good. Now I'm going to make the case and then we'll do a mystery chart. We'll get out of here.
- [63:38]
B
Okay.
- [63:40]
A
Robinhood long at first blush. What do you think of this idea? You see the way the stock acted today.
- [63:50]
B
So I did see the way it acted today.
- [63:53]
A
Okay, Robinhood, this is my thesis. It's on the best stocks in the market list. Technically it looks okay. Doesn't look great. It looked much better. It looked much better when the market was higher. But it's hanging in there better than a lot of stocks. I think anything that draws more attention to the stock market for Gen Y and Gen Z is a net positive for the company. I think they don't get hurt by a bear market the way a traditional brokerage stock would. Because young people, their customer base sees volatility as more of an opportunity or like recreation, like it's fun. Then they see it as something that's like to be run from. So they see it as a game. And the game drives more bets when it's a heated game and not the opposite way. That's different from boomers at legacy brokerage firms that really don't like seeing volatility. And volatility does not convince them to take more action and do more trades. So Robinhood almost acts in the reverse way. I think the Robinhood customer than customers at a traditional brokerage firm. So I think this is actually a great moment for them. Even though the stock price is off its high. I want to show you the chart it held. The 200 day did not close below. So if we were to zoom in on those candles from the last two weeks, probably one of the only financial stocks that didn't close below. So it's. I wouldn't say it's in a bull market right this second, but that's a really good sign.
- [65:32]
B
Yeah, it's in an uptrend for sure. Yeah, well, time frame I guess so it's.
- [65:38]
A
It's bouncing right off that 200 day. And look, I think, I think if you look at this company versus the other companies in its peer group, they really have no peers. I asked Sean to take a look at this. There are nine companies in the Capital Markets Industry Group that trade on the NASDAQ or the New York Stock Exchange. They have a market cap with a market cap over 10 billion. The median return for all those companies is negative 6%. Only three of them are up on the year. Robinhood is up 15%, Schwab is up 3% and TW which is a bond market broker.
- [66:16]
B
TW what is.
- [66:17]
A
Yeah. Trade Web. Oh so Trade Web is also on best stocks in the market list I think. Anyway. Robinhood last thing. Robinhood reports on April 30th which is really soon put this thing, this graphic up. The estimate is for 909 million in revenue. That would be over the 618 million they did a year ago in the same quarter. If they hit that number or better that's 47% revenue growth. EBITDA is supposed to be up 100% if it over the last year. That's right. Earnings should be a 52% 37 cents. What if they do a billion dollars in revenue this quarter like this stock is going much higher if they can. So my thesis is that this has been good for them. Not bad for them. This, this bear market. I think it's driven a ton of activity and I think that this is a company that could blow their numbers out. They report eight days from now. So can I give you like I make the case. How do you like my make the case?
- [67:20]
B
All right. So I don't hate it here. I have a few things to say. Number one, interestingly I'm looking It used to trade at a similar. I don't. I'm looking at price of sales whatever. It used to trade a similar price of sales of Schwab both like six to eight times pretty try pretty closely actually. And then it just exploded into the stratosphere. Now at 13 times sales.
- [67:43]
A
Is Schwab ever as long as you live going to grow its earnings by 52% one quarter over another?
- [67:48]
B
Of course not.
- [67:49]
A
Right.
- [67:51]
B
I think if I wanted exposure, this is not the exact same exposure to let's call it the aggressive trader. I'd rather be in cme but I don't hate it.
- [68:04]
A
But that worked already.
- [68:06]
B
CME looks so good and won't let me in. Right.
- [68:09]
A
That's my point.
- [68:10]
B
You want cma?
- [68:11]
A
No, but it's. It's on our. It's on our list. I didn't take the trade I showed but that already that or yeah it looks great.
- [68:17]
B
It looks unbelievable.
- [68:18]
A
So does. So does. So does Trade Web. All the. All the exchanges that. That have exposure to volatility trading look good and Robinhood is off its high. Like you're not. You're not paying a 52 week high for the stock right now.
- [68:32]
B
Well I guess let me ask you this. Like how big do we think this company can be?
- [68:37]
A
Well if they get to a billion dollar run rate quarterly revenue like they become A company that does 5 billion in revenue a year. I don't know. Wouldn't you guess that's like. Wouldn't you guess that's like a $30 billion market cap? 40 billion dollar market cap.
- [68:52]
B
All right, so it's already there.
- [68:54]
A
What's the mark?
- [68:54]
B
It's already 37 billion.
- [68:56]
A
Yeah. All right, so maybe they're already pricing in this company as a $5 billion annual run rate.
- [69:02]
B
So the company is getting the benefit of. Of the explosive growth. Like they are getting the benefit. Schwab's a buck 40, for example. And I know it's different, but Schwab's also a bank, and Schwab is Schwab.
- [69:14]
A
Here's the. Here. All right, so here's the bull case here. It's 30 million users. We had Steve Quirk on the show. It's 30 million users. Now, those users are probably within five to 15 years of their peak earnings years like they're not there yet. How many other things can you sell them now that they're already on platform? And you don't have to spend $30 to acquire them as customers like Schwab and Fidelity have to the customer acquisition costs for the legacy brokerage firms. Don't ask. Yeah, you have no idea how expensive it is to acquire a new customer. Robinhood just gets them because it's like in the ether amongst that age group, they're all sharing the app with each other. They have like this organic customer acquisition strategy that works really well. And none of these people have spent a lot of money yet on financial services. That's the bold case is like, there's 30 million of them there. They probably get to 40 or 50 million. And now you've got this population of people who are going to need mortgages, going to need life insurance, going to need wealth management, going to need all types of services and support. And this is a company that they've grown up with.
- [70:25]
B
Yeah.
- [70:26]
A
So, I mean, you can't. You can't say that about any other publicly traded financial services company. Like what. What other publicly traded financial services company could you say the average age of the customer is 29. Yeah, I can't think of any.
- [70:41]
B
I would just say the stock has more than quadrupled because of everything that you just laid out in the last year. So.
- [70:46]
A
So. All right, well, we shall watch with. We. We shall watch with great interest when they report names.
- [70:53]
B
Yeah. I mean, I love covering the stock.
- [70:55]
A
We'll. We'll revisit.
- [70:56]
B
Okay. I have a mystery chart.
- [71:01]
A
Surprise me.
- [71:02]
B
I mean, I Think this is obvious.
- [71:06]
A
This is, this is percentage return.
- [71:09]
B
It's year to date.
- [71:10]
A
But is that what it's showing gains and losses or in this case, two losses?
- [71:14]
B
It's, it's, it's year to date returns that we, we have discussed. We discussed this on the show today.
- [71:19]
A
More so today.
- [71:21]
B
Yes.
- [71:22]
A
You're the date losses on the show today. You could call it.
- [71:25]
B
All right, you want me to give you a layup or not?
- [71:27]
A
No, Give me. No, just give me one more hint.
- [71:29]
B
Okay, I'm gonna give you too good of a hint. You could call it a decoupling.
- [71:36]
A
I would call it a decoupling.
- [71:38]
B
Yeah.
- [71:39]
A
Okay. NASDAQ is orange and bitcoin is purple.
- [71:45]
B
Yes.
- [71:46]
A
Look at me.
- [71:48]
B
So I don't know.
- [71:51]
A
All right.
- [71:52]
B
I got distracted earlier. I looked at my screen. I saw that Bitcoin was 93, 000. I'm like, wait, what, what just happened?
- [71:57]
A
Yeah.
- [71:58]
B
And eth is up 11 today. Like was there. And it's just took a huge heard.
- [72:03]
A
The, the bitcoin Fed cut interest rates by 25 satoshis. Yeah, I don't know if you, I don't know if you saw that announcement. That was enough to do it. Yeah, it's really, I think it's one of the most interesting things to develop over the last week or two is bitcoin acting risk off. I think it's, I think it's fascinating.
- [72:19]
B
Really, for the first time. Like, really. I mean, as far as I can.
- [72:21]
A
Remember, I think it's fascinating. All right, we're gonna leave it there. I want to, I want to say thank you to everybody who joined us in the live chat. I know I didn't do shout outs earlier. Brent, we see you. Alvaro Cliff, Jason Chen. George Arthur Munier, jmi Adam Giovanelli. Thank you, guys. Thank you so much for joining us. All the regulars. We love you too, guys. Tomorrow's Wednesday, which means an all new edition of Animal Spirits. Don't forget to subscribe to our channel, as the koala bear on screen says. Also a reminder, get your tickets. Will be at the Chop Shop, which is a really cool theater in Chicago on June 3, 2025, in case you didn't know. But we'll be there and we're gonna have a great, gonna have a great night with our fans and friends and we'd love to see you. That's it from us tonight. We'll see you next time. Thanks so much for listening. Whether you're just getting started as an investor or you're managing a multi million dollar portfolio, Ritholtz Wealth Management has the solution for you. It all starts with building the right financial plan. To speak with a certified financial Planner today, visit ritholtswealth.com don't forget to check us out at YouTube.com thecompoundrwm. Make sure to leave a rating and review on your favorite podcasting app. If you love investing podcasts, check out Michael and Ben every Wednesday morning on Animal Spirits. Thanks for listening.