Price-Chasing Donkey

Summary

Podcast Summary: The Compound and Friends – "Price-Chasing Donkey"

Release Date: February 28, 2025

Hosts: Downtown Josh Brown, Michael Batnick, and guest Jim Leventhal

Overview: In episode "Price-Chasing Donkey" of The Compound and Friends, hosts Josh Brown and Michael Batnick welcome Jim Leventhal, Chief Equity Strategist and Partner at Serity Partners, to discuss a myriad of topics ranging from his naval experiences to deep dives into current market dynamics, stock analyses, and economic policies. The conversation is rich with insights into investing philosophies, corporate strategies, and macroeconomic trends shaping the financial landscape in 2025.

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1. Introduction and Personal Insights

Jim Leventhal's Naval Background:

• Jim Leventhal shares his seven-year tenure in the Navy from 1990 to 1997, highlighting his service during the tail end of the Cold War.
• Notable Quote:
  • “Right at the tail end, the Cold War... when you got to 1995, this was Yeltsin talking to Clinton...” [00:20]
  • “I'll tell you the truth, not a day goes by I don't think about it. And it was the best time of my life.” [00:10]

Submarine Service:

• Detailed discussion about life aboard a nuclear submarine, emphasizing the small crew size (130 sailors) and the youthful age of submarine operators.
• Notable Quote:
  • “The captain is asleep in the stateroom, it's two in the morning. It's a bunch of 24 year olds and 19 year olds driving nuclear submarines.” [01:24]

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2. Market Dynamics and Stock Analysis

Nvidia's Earnings and Market Reaction:

• Josh Brown analyzes Nvidia's outstanding earnings report, noting significant year-over-year growth in GAAP operating income (77%), net income (80%), and earnings per share (82%).
• Despite impressive numbers, Nvidia's stock fell approximately 6% post-earnings, attributed to high valuation and limited upside potential.
• Jim Leventhal argues that Nvidia is a bargain at its current price, with a PEG ratio of 0.7, indicating it is undervalued relative to its earnings growth rate.
  • Notable Quote:
    • “The PEG ratio is like 0.7. PEG ratio of price to earnings over the growth rate of earnings... it's phenomenal.” [17:00]

Post-Earnings Sentiment:

• Discussion on investor behavior, particularly the role of speculative trading (e.g., zero time to expiry options, leveraged ETFs) affecting stock prices without reflecting fundamental values.
• Jim Leventhal emphasizes focusing on valuation over market sentiment.
  • Notable Quote:
    • “What I do every day is I wake up in the morning and I say, where is it? Where is there a dollar's worth of value selling for 50 cents.” [38:45]

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3. Corporate Strategies and Management

Intel's Strategic Missteps:

• Jim Leventhal critiques Intel's failed 10nm process and subsequent strategic moves, including foraying into foundry services, which were hampered by internal issues and lack of trust within the semiconductor ecosystem.
• Reflects on lessons for investors regarding the importance of strong management and the ability to pivot strategically.
  • Notable Quote:
    • “There are good lessons to be learned from the intel story... a good CEO is essential.” [24:50]

Cisco Systems as a Value Pick:

• Jim Leventhal highlights Cisco as an undervalued stock with a PEG ratio suggesting potential for re-rating. Discusses Cisco’s diversification into software and cybersecurity, particularly through the Splunk acquisition.
  • Notable Quote:
    • “They've got partnerships with Nvidia which keeps that business humming along and it gets to use the letters A and I...” [65:59]

Airline Stocks – Delta vs. Competitors:

• Analysis of Delta Airlines’ robust performance compared to peers like American Airlines, attributing success to effective management, operational efficiency, and strategic cabin segmentation.
  • Notable Quote:
    • “Demand is good. Fuel prices are low. Contracts with their major unions have been done...” [69:03]

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4. Economic Policies and Reshoring

Reshoring and Supply Chain Realities:

• Jim Leventhal discusses the shift from just-in-time supply chains to reshoring manufacturing closer to home, influenced by policy directions and past supply chain disruptions (e.g., semiconductor shortages).
• Emphasizes the necessity of balancing autarky with international partnerships, particularly with Mexico and Canada, to sustain production capacity and resource availability.
  • Notable Quote:
    • “Policies right now are designed to bring production back home... you really need that production capacity, resources.” [48:32]

Impact of Tariffs on the Economy:

• The hosts debate the inflationary effects of tariffs, with Josh Brown positing that tariff-induced downturns can create buying opportunities once the immediate impact fades.
• Jim Leventhal concurs, suggesting that initial negative reactions to tariffs often reverse, leading to stock market gains once uncertainties are resolved.
  • Notable Quote:
    • “The problem goes away. And... the bulls make everything back and then some.” [52:31]

Federal Workforce Reduction and Economic Efficiency:

• Jim Leventhal contends that reducing the federal workforce reallocates talent to more productive sectors, aiding economic efficiency despite short-term pain.
  • Notable Quote:
    • “It's very good for the country... private sector workers tend to be more efficient.” [60:03]

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5. Investment Philosophies and Strategies

Valuation vs. Market Sentiment:

• Jim Leventhal advocates for a valuation-centric investment approach, focusing on intrinsic value over market hype or bearish sentiment.
• Josh Brown and Michael Batnick engage in discussions reinforcing the importance of sticking to investment theses despite market volatility.

Long-Term Growth and Capital Allocation:

• Emphasis on investing in companies with strong free cash flow generation and disciplined capital allocation, such as through share buybacks.
  • Notable Quote:
    • “They have $12 billion in the last few months... share buybacks are crucial.” [43:36]

Lessons from Warren Buffett and Corporate Leadership:

• Josh Brown reflects on Warren Buffett’s strategic decisions during the pandemic, highlighting the importance of leadership in navigating corporate crises.
• Jim Leventhal underscores the necessity of owning industry-leading companies to minimize risk and capitalize on growth.

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6. Stock Recommendations and Final Trades

Cisco Systems (Ticker: CSCO):

• Jim Leventhal recommends Cisco as a strong buy due to its diversified business model, strategic partnerships, and potential for valuation re-rating.
  • Notable Quote:
    • “They have a nice run to it right now. That 3.2% keeps you warm.” [69:34]

Delta Airlines (Ticker: DAL):

• Highlighted for its operational efficiency, customer satisfaction, and strategic cabin segmentation, positioning it as a resilient investment in the airline sector.
  • Notable Quote:
    • “They do things like fly their planes on time...” [69:44]

Citigroup (Ticker: C):

• Discussed as part of the banking sector, with emphasis on strong management under Jane Fraser and a focus on deleveraging and value creation.
  • Notable Quote:
    • “They're generating about 3,4 billion of free cash flow a year against a debt load that's around in the high teens.” [43:22]

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7. Closing Remarks and Personal Reflections

Hosts’ Personal Anecdotes:

• Jim Leventhal expresses admiration for Josh Brown's integrity and investing approach, highlighting the importance of accountability and humility in financial discourse.
• Josh Brown shares personal milestones, including his 50th birthday celebration, emphasizing the camaraderie and mutual respect among the hosts and guest.

Final Thoughts:

• The episode concludes with reflections on maintaining a disciplined investment strategy amidst economic uncertainties and market fluctuations, reinforcing the value of staying informed and adhering to fundamental investment principles.

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Key Takeaways:

• Focus on Valuation: Prioritize intrinsic value and growth potential over short-term market sentiment.
• Corporate Management Matters: Invest in companies with strong, adaptable leadership and strategic foresight.
• Reshoring and Economic Policies: Understand the long-term implications of policy shifts on manufacturing and supply chains.
• Market Dynamics: Recognize the role of speculative trading and the benefits of patient, value-driven investing.
• Diversification and Sector Rotation: Embrace diversification across sectors to mitigate risks associated with market concentration.

Notable Quotes for Reference:

• “I'm buying a dollar's worth of value at like 70 cents on the dollar.” – Jim Leventhal [38:45]
• “The PEG ratio is like 0.7... it's phenomenal.” – Jim Leventhal [17:00]
• “It's very good for the country... private sector workers tend to be more efficient.” – Jim Leventhal [60:03]

Conclusion: "Price-Chasing Donkey" offers a comprehensive exploration of current financial trends, investment strategies, and economic policies, enriched by Jim Leventhal's expertise and candid discussions with the hosts. Listeners gain valuable perspectives on navigating the complexities of the market, underscoring the importance of informed, disciplined investing.

Transcript

[Josh Brown]

Jimmy, tell me about your time in the Navy.

[Jim Leventhal]

Seven years. It was great, actually.

[Josh Brown]

Rob reads a lot of, like, espionage thrillers and military novels. He likes his stuff.

[Jim Leventhal]

I'll tell you the truth, not a day goes by I don't think about it. And it was the best time of my life.

[Josh Brown]

Seven years.

[Jim Leventhal]

Seven years.

[Josh Brown]

What years were those?

[Jim Leventhal]

90 to 97. So right out of the war, you.

[Josh Brown]

Were a cold warrior.

[Jim Leventhal]

Right at the tail end, the Cold War. Cold War ended. And in fact, that informed my decision to get out. Because I know I'm not sharing too much information here, but when you got to 1995, this was Yeltsin talking to Clinton, and they would meet in Reykjavik. And Yeltsin last ghost. Well past that. So Yeltsin would go like. You got submarines banging into my submarines in the Barents Sea. What the are you doing? Excuse my language.

[Josh Brown]

No, it's okay. You have no idea what a lot of rip.

[Michael Batnick]

A lot of rips.

[Jim Leventhal]

But because of that, like the standoff distances, when you were doing Cold War ops, it was getting to like 50 miles. So I was out there doing Cold War stuff, and I'm like, well, why are we so far away from land? Yeah. And it was just a very clear indication that the Cold War was over. Great. You know, go usa. We won. What was the Austin Powers thing? Go Communism.

[Josh Brown]

Where were you? Like, what part of the world?

[Jim Leventhal]

Norfolk, Virginia. Which classified.

[Josh Brown]

No, no, no. When you were on a sub, like you were in the North Atlantic or.

[Michael Batnick]

The Arctic, did you see down periscope?

[Josh Brown]

Yeah. Was it just like that? So wait a minute. So you were on a nuclear sub? How many sailors are on the sub?

[Jim Leventhal]

130 people. Longest we went out for was 10 weeks submerged, which. Look, I know it sounds crazy, but when we're 24, you do things that are. The craziest thing is you have 24 year olds right now driving nuclear submarines. I mean, the captain is asleep in the stateroom, it's two in the morning. It's a bunch of 24 year olds and 19 year olds driving nuclear submarines.

[Josh Brown]

Oh, my God. So how do you end up on a sub and not like an aircraft carrier, for example? Because who makes that decision?

[Jim Leventhal]

The. That's what I volunteered for.

[Josh Brown]

You wanted to do that?

[Jim Leventhal]

Yes.

[Josh Brown]

Why?

[Jim Leventhal]

Because aircraft carriers, you are 100% of the time in the engine room below the water line. On a submarine, 130 guys isn't enough to actually really be that specialized. You've got 14 officers and you're doing everything. You're doing the engine room Your torpedo room, you're actually driving the ship. A nuclear engineer on an aircraft carrier is never going to drive the ship.

[Josh Brown]

You're just, they just sit in one room the whole time and it's below.

[Jim Leventhal]

The water line and it kind of sucks.

[Josh Brown]

It's not like shore leave and like. Right. You're just under.

[Jim Leventhal]

Well, exactly. And with submarines the idea is stealth. So you come out of Norfolk, Virginia, you transit eight hours and get past the continental shelf, you submerge and you don't get seen again. That's the whole idea is like if a satellite goes over Norfolk, Virginia at 9am they see there's six submarines at the pier. They come back for the next pass, they see there's five submarines and they don't know where that sixth submarine went.

[Josh Brown]

And that's the whole point of the submarine is the can't be detected.

[Michael Batnick]

By the way, this is timely. Rest in peace. Gene Hackman, Princeton Tide I know that.

[Jim Leventhal]

Was a good movie. I actually saw that movie of all things with my commanding officer in 1994 in the submarine. Actually, no, we were in I think Kings Bay, Georgia, but we were on Denzel also. It was Denzel, but it was the most uncomfortable two hours, this mutiny movie. And I'm sitting next to my captain. I'm like, hey, she's.

[Josh Brown]

What's better?

[Jim Leventhal]

What are we going to talk about? How are we going to debrief this?

[Josh Brown]

So there's, there's a bunch of great submarine movies. It's like its own subgenre.

[Michael Batnick]

What's one? Sean Conroy, the Hunt for Red October.

[Josh Brown]

October classic.

[Jim Leventhal]

Yeah.

[Josh Brown]

Well, did they like get it right? Crimson Tide. They nailed it.

[Jim Leventhal]

Well, I wasn't on ballistic missile submarines. Totally different thing, but pretty much they've got fail safes for what happens if you get a. If you get a garbled message, which was the crux of that movie. I don't think you shoot on that. I mean again, I wasn't a ballistic missile submarine, but the premise is something that has certainly been thought so.

[Josh Brown]

Yours was more like a leisure submarine.

[Jim Leventhal]

Yes.

[Josh Brown]

Okay, no, what's this ballistic missile? What's the other. What's the kind that you own fast.

[Jim Leventhal]

Attack submarines, the goal of which is to go into the Soviet's backyard and keep track of everything they're doing with their Navy so that, you know. You remember Hunt for Red October? The USS Houston? That was a fast attack submarine, same class that I was on. The idea is to get behind their ballistic missile submarines. This was Cold War doctrine. So that if it ever went Hot. The first thing we would do is put torpedoes on ballistic missile submarines before they had a chance to launch.

[Michael Batnick]

You think Josh could have made it in a submarine?

[Josh Brown]

Absolutely not.

[Jim Leventhal]

In some ways, yes.

[Josh Brown]

One hour. Well, what are the amenities? I don't know.

[Jim Leventhal]

The lido deck does not exist.

[Josh Brown]

I could make it on the Four Seasons ballistic sub.

[Jim Leventhal]

You would have been very welcome. You would have been very welcome. Some people that we, you know, hang out with on the show would not have been very welcome. We're not going to name names. You would have been very welcome. I don't think you would have enjoyed it.

[Josh Brown]

A lot of Jews on these submarines generally, or not?

[Michael Batnick]

You were the only one.

[Josh Brown]

Were you the only one?

[Michael Batnick]

Josh, can we play this clip before we get started? It's 40 seconds.

[Josh Brown]

It's, it's a good one because I like you. Okay, thank you. The answer is of course, yes. All right, bear with me.

[Michael Batnick]

This is Kevin Hassett, economic advisor to the president, author of the famed Dow 36,000. Okay, not wrong, but early volume up.

[Josh Brown]

Hold on, hold on. Volume up.

[Jim Leventhal]

Mr. Waltz, on these potential checks that.

[Michael Batnick]

You might send out from Doge, is.

[Jim Leventhal]

There a concern, as you're thinking through this, that they could be inflationary?

[Michael Batnick]

Oh, absolutely not. Because imagine if we don't spend spend government money and we give it back to people, then if they spend it all, then you're even. But they're probably going to save a lot of it, in which case you're reducing inflation. And also when the government spends a lot, that's what creates inflation. We learned that from Joe Biden. And so if we reduce government spending, then that reduces inflation. And if you give people money, then they're going to save a bunch of it. And when they save it, then that also reduces demand.

[Josh Brown]

The smile on his face is what sells it for me. He looks like he's about. He looks like he's trying to sell a monorail to Springfield.

[Jim Leventhal]

Like that's a great reference.

[Josh Brown]

So he's the guy that wrote Dow 36,097, 99 as the Dow was breaking 11,000. After which of course it went straight to 6,000. And he eventually was right. We did do 36,000.

[Michael Batnick]

Give the man his flowers.

[Josh Brown]

He's also a George W. Bush retread. I think he's been hanging around different Republican presidents for a long time. That's a great explanation for how doge stimulus might work. Disinflationary. Cuz people will save it. All right, we ready to go? Let's go.

[Michael Batnick]

All right, let's pod.

[Josh Brown]

Nicole's, rocking the sweatshirt today.

[Michael Batnick]

Combine Friends episode 180 and now a word from our sponsors. At Betterment, imagining a better future is the first step.

[Josh Brown]

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[Michael Batnick]

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[Josh Brown]

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[Michael Batnick]

Learn more at betterment.com advisors Investing involves risk performance not guaranteed.

[Jim Leventhal]

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

[Josh Brown]

Episode 180 Jim is like, what's going on, dude? I can't believe it took us this long to have you on the show.

[Jim Leventhal]

I'm delighted to be here. Thank you.

[Josh Brown]

To send from Wall Street Royalty, which we're going to talk about later in the show. We are we're going to give the Leventhal family their flowers. Let me give you the official introduction. Jim Leventhal is the Chief Equity Strategist and Partner at Serity Partners. He has over 25 years of experience managing investment portfolios and is a regular contributor on CNBC to literally the best show on cnbc, primarily the Halftime Report. Prior to joining Celebrity Partners, Jim served as the Chief Executive Officer and Chief Investment Officer of Labenthal Asset Management, was a financial advisor for Goldman Sachs, and a partner of the investment firm Levy Harkins. Jim Leventhal, welcome to the Compound of Friends.

[Jim Leventhal]

Josh, I am truly delighted to be here. I was going to say, can we get these applause tracks for the halftime?

[Josh Brown]

Maybe laugh tracks. All right, first things first, we're so excited to have you. And I have to tell you, of all the people that I appear on TV with, I think you're one of the longest lasting castmates on Halftime. You've been with us, I don't know.

[Jim Leventhal]

Since I think it's 12 years.

[Josh Brown]

12 years? I believe so. I'm slightly senior to you and I remember your first appearance.

[Jim Leventhal]

It was.

[Josh Brown]

Do you remember your first appearance?

[Jim Leventhal]

Well, my first appearance was actually on the 5pm show that one.

[Josh Brown]

I was on that with you too.

[Jim Leventhal]

Okay. So I was called on to pitch a stock, and it was Caterpillar. I don't know why I remember it.

[Josh Brown]

Yeah.

[Jim Leventhal]

This was the late summer of 2013.

[Josh Brown]

Okay.

[Jim Leventhal]

I pitched the stock. You, whoever else was on the show asked me some questions. Fairly innocuous. What's R and D going to be in the third quarter? Whatever.

[Josh Brown]

I got that wrong, by the way. I'm sure, if I recall correctly. Okay.

[Jim Leventhal]

But then for whatever reason, I went away and said, all right, that's that. And the next day I got invited back and it happened again and again. This is kind of a funny story. Can you give me a little Runway on this?

[Josh Brown]

I want it. I want it. That's what you're here for.

[Jim Leventhal]

Okay. But I don't know the time length, so I'll watch it out.

[Josh Brown]

There's literally no length of time.

[Jim Leventhal]

Okay. So for the next several weeks, I would get called on to the 5pm show, fast money, Halftime Report. And I had no idea what was going on. They'd call me up. Remember Lydia?

[Josh Brown]

Yep.

[Jim Leventhal]

She'd say, come on.

[Josh Brown]

So, ooh, that's a deep poll. Shout out to Lydia.

[Jim Leventhal]

And then all of a sudden, I was getting these month ahead schedules. I was like, all right, I'll just go with it. Got to a point. I was still doing enough. Talk to you about this. I was still doing some other channels which shall not be named, you know, the Lord Voldemort of channels. And I was on a 5 o'clock appearance and Lydia called me up the next day and said, we can't have that. We can't have you appearing on our show. And, you know, so make me a contributor.

[Josh Brown]

What's up?

[Jim Leventhal]

So they made me a contributor. And then that was it. And the rest, as they say, is history.

[Josh Brown]

You having fun still?

[Jim Leventhal]

I am having fun.

[Josh Brown]

You are?

[Jim Leventhal]

I am having fun.

[Josh Brown]

I could tell that you're having fun these days. I also remember. Cause I remember my own. We all have like these rough patches where it's like, I don't know if I could do this anymore. But then you come through to the other side and it's like, this is the best. There is no better gig in financial media. I would say.

[Jim Leventhal]

I completely agree. I'll even admit there are some days in the last year where I'm like, oh, man, that just really stunk. But our friend, mutual friend, Michael Farr said something to me about three years ago when I was, whatever, bitching about something that had happened on the air. And he just really shut me down in a good way. He said, lebenthal, there are thousands of people who would crawl over broken glass anywhere you are. And it just, you know, that. Thank you, Michael. That is just always in my head. It's true. Gratitude is the right way to be. Certainly there are things we can be upset about, but it is very wise philosophically to be grateful for everything that happens.

[Josh Brown]

Well, I could tell that you're having a good time. And by the way, you've been mostly right on the big picture. And a lot of people don't realize how hard it was to be bullish. Not just in 2020 when we had that recovery. Everyone enjoyed that. That was a lot of fun. You stayed bullish through 2022, and you never gave up. And then in 23, there was like a bank panic and 100% chance of a recession. You would not give in on that. No recession call. And then, of course, by the end of 23, it became fashionable. But, like, no, but you really stuck to your guns and you were mocked a little bit ridiculed sometimes when the market was down big. And I always admired that you were able to do that.

[Jim Leventhal]

Side note, which is important. You are a wonderful friend to me and I appreciate it. Just, you know, seriously, sometimes you. You rip me. I know it's in good jest, but at the end of the day, I know that if. If I'm hurting, you're gonna come to my rescue. And I really appreciate that. I know it's true.

[Josh Brown]

This is true.

[Jim Leventhal]

But back just. I just wanna say one thing that I think you and Michael will probably agree with, is that going into 2023, there were people coming on the air routinely and saying things like, our economic model shows a 100% chance of a recession.

[Josh Brown]

Yeah, that was like the Bloomberg consensus of economists was 100% chance of recession.

[Jim Leventhal]

Ridiculous. Not the call, but the 100% probability. Jim Grant, who I think is a friend of yours. A friend of mine as well. When I was coming out of the Navy, I spoke with him and he impressed upon me in a very memorable way the ability to predict the future. Like, he asked me how long. Like, showed me a chart of the s and P500 going up through the 90s. He said, how long do you think this will last and how certain on you? I said something stupid like, I know it'll last another two months. He raised his eyebrows at me and said, really? And that's all he had to say.

[Michael Batnick]

I think the reason why.

[Josh Brown]

Wait, why? Because of how certain you are on the certainty.

[Jim Leventhal]

So when people tell you, you know, I'm pretty sure you guys agree with this. When people say I am 100% certain of something that's going to happen in the future, I know this is going to happen in the future. It's almost tell to go the other way.

[Josh Brown]

Yeah, well when everybody agrees too is like that's an even better tell.

[Michael Batnick]

Well, this is why in my opinion we avoided the recession because everybody knew it was coming air quotes and they prepared ahead of time. I think corporate America especially said, all right, the game has changed. Dara was the earliest to this at Uber and said we have to do things differently because we're being judged differently. And that's S and P America. But even Main Street America everybody braced for impact and therefore we avoided the impact.

[Jim Leventhal]

I think you're exactly right. Particularly as you were speaking, I was thinking about the degree to which corporate America bonded out the debt side, the liability side of its balance sheet.

[Josh Brown]

Yeah, that's right.

[Jim Leventhal]

At incredibly low rates.

[Michael Batnick]

That's it.

[Jim Leventhal]

I think you're right and honestly that actually wasn't my thesis that just happened. I was just looking at all these news flows of hundreds of billions, hundreds of billions of dollars of capex being reshored and something that I've said a lot, and I said this to you a second ago, Mike, right now you gotta separate politics out from policies. The politics is emotion and it will get you going in every direction. Least likely is the direction you wanna go. Policies at that time were such that people were, you know, every Taiwan semi in those Arizona semi plants that was announced in 2020, I mean that was well before the chips act, this was going on and I was looking at that, I was saying these hundreds of billions of dollars are gonna come home to roost. Yeah, that's what I thought was gonna come.

[Josh Brown]

We're gonna do a whole bunch on the reshoring theme which is another thing that I think you were early to. But I wanna start with Nvidia. So the reaction today in the stock was really interesting. We're recording this like 3:00 on Thursday.

[Michael Batnick]

So it's pretty gross.

[Josh Brown]

Of course things can change. This is one of the best earnings reports by any company ever in the history of earnings reports just on its surface. But this is also a Stock that's gone up 5x in the last three years and it's become really hard for them to produce upside shocks. Like it's almost like they've run out of superlatives. And so you have GAAP operating income for the quarter, up 77% year over year, which is amazing until you consider that the comp is like 150. Right. So like that's the situation Nvidia's in. Net income up 80%. Earnings per share up 82%. Data center revenue up only 93%, 16% sequentially over just the last quarter. So these numbers are huge in terms of like growth rates, Cagres, etc. But it's in video. Everybody already owns it. Second largest company in the world. You know, shock me again to the upside. And it's really hard for them to do. That's my read on the post earnings reaction today. The stock is down about 6% on.

[Michael Batnick]

The day today after opening up 3%. That is. That is fugly.

[Josh Brown]

Yeah. What are your thoughts on the post earnings reaction here?

[Jim Leventhal]

So, you know, Josh, I tend to hue. I tend to pay attention to valuation. And I'm looking at this stock from a valuation point of view versus its growth rate of earnings per share, which I feel pretty confident about for the next year at least. And I'm saying this is kind of a bargain at this price. Maybe you're right that nobody is left to buy it, but I actually think there are a few people I feel like on our show, I feel like there are times that people come on and they're like, oh, I don't own it. I'm like, okay, well, now's your chance.

[Josh Brown]

The people who bought AMD can sell that and buy this.

[Jim Leventhal]

Yeah, well. And you know, just to be kind, some people probably bought Broadcom and are feeling like, okay, well, now's my chance to switch out.

[Michael Batnick]

But Jim, you're right. Like if you're a growth at a reasonable price investor, this is reasonable.

[Jim Leventhal]

It's very reasonable. I mean, the PEG ratio is like 0.7. PEG ratio. I don't know how you guys know it, but PEG ratio of price to earnings over the growth rate of earnings. It's a way of saying, at least for a guy like me, is 28, 29 times earnings. Is that expensive or cheap? And I will tell you, if you've got a peg ratio below 1 for a company of this quality, it's phenomenal.

[Josh Brown]

Right. What's the earnings growth estimate for full year 25. Is it like 60% or something?

[Jim Leventhal]

I think it's 50%, but.

[Josh Brown]

So it's 29 times earnings, but the growth, growth rate is 50%. Like, why wouldn't the stock be a buy here?

[Michael Batnick]

So you like to make up reasons for why stocks are selling off. So what do you think? Why do you think investors are good?

[Josh Brown]

I thought I just spent 10 minutes articulating that.

[Michael Batnick]

Why do you think? Yeah, yeah.

[Josh Brown]

Should I do it through interpretive dance this time?

[Michael Batnick]

I wasn't impressed. I wasn't impressed.

[Josh Brown]

Okay. I think I need more bullshit. I think a stock like this needs upside shock to continue to go up. And you didn't get it.

[Michael Batnick]

So what are they buying? What are they buying today? Cause they come out of Nvidia. Where are they going?

[Josh Brown]

They're buying Starbuck, obviously.

[Michael Batnick]

Josh is a big. They're selling this and buying that guy.

[Josh Brown]

No, I am because I believe that the money does go somewhere. I don't think people sit with cash in a portfolio for more than 15 minutes. That's my personal view on the investing public, not institutions is a little bit different. The investing public, they take a profit in something and then what? They slam the laptop.

[Michael Batnick]

He doesn't get that when the stock is down 6%, the money just disappears. He thinks it all comes out.

[Josh Brown]

Of course it doesn't. It goes somewhere else.

[Michael Batnick]

Yeah. Okay.

[Josh Brown]

People sell a stock at 128. Stop and buy another stock at 54.

[Michael Batnick]

Embarrassing.

[Josh Brown]

Why? Where does the money go? Look, the fabled like. Like money heaven.

[Jim Leventhal]

I completely agree. You should separate the buy and the sell. But as I'm listening to you, all I'm thinking about are these zero time to expiry options and people. I mean, I know I'm going a little tangential at that 0dte guy. Yeah.

[Josh Brown]

You feel that that's really your world that you inhabit.

[Jim Leventhal]

But I mean, that is the ultimate roll of the dice. And it's just a matter of time until you. Until the, you know, snake eyes appears and they wipe out the craps table.

[Josh Brown]

I do think that Nvidia has this kind of circus next door that's an options slash, leveraged ETF circus. And it's kind of like. It's like its own casino that's like built alongside the hotel Nvidia. Right. And there's a lot of activity that happens intraday with the stock that has of course zero to do with anyone's fundamental outlook for the company. Nobody engaging in that behavior is looking at PEG ratio. And if you're along in a name like this, you kind of have to just accept like a lot of the things that are going to take place on your screen have absolutely no bearing on what you're doing in the stock. And I've come to terms with that a very long time ago. And I don't know what's happening today. Like to me it's, I don't know, outflows from a 2x leveraged ETF that collected $12 billion in the last few months. Maybe that's what's going on.

[Michael Batnick]

I bet you they're finally selling nvdl, the double levered etf.

[Jim Leventhal]

That makes a lot of sense.

[Josh Brown]

And that hits the common. Of course. Of course it does.

[Jim Leventhal]

Here's a what if. And I think this is actually what may be occurring. Just the law of large numbers here. What if the stock from here to year end was up 10% or 15%? Yeah, that actually down. That's my point is people are going to feel lousy about it, but it's still going to be like well ahead of what the S and P long term average is. Yeah. By the way, I mean look, I have to give you credit on.

[Josh Brown]

You did take all your contract there.

[Jim Leventhal]

There was a funny time. It wasn't funny at the time, but this was five years ago when I was intel and defending intel and it came out with some crappy report and I was trying to defend it and you absolutely body slammed me on.

[Josh Brown]

I'm sorry.

[Jim Leventhal]

No, it was okay. It was, it was f. It was right. And eventually I got out of it.

[Michael Batnick]

But so what. I remember that. That was. Yeah, I'm sure that was fun for you. Welcome to my world. One of the, one of the things that we talk about is like the, the idea that there used to be so much turnover in the top 10 stocks from the 70s to the 80s to the 90s to the odds. It was always turnover. There's always something else. And now the Mag 7 seemed completely. The moat seems to be impenetrable. It's miles wide. There's not going to be a new entrant. I think we forget that like Nvidia did it right. Nvidia was nowhere like Nvidia. They did it. So they have throw this chart on. Chart. Coach Sean made a chart showing Nvidia's revenue by segment. And this was a gaming company? Yes, like straight up. It was a gaming company.

[Josh Brown]

So gaming is in green. So go back 10 years. If you were long Nvidia, you were long because of console sales. Yeah, like that was what drove the stock.

[Michael Batnick]

And then it was crypto. And then of course crypto got destroyed in 22 and so did Nvidia fell almost 80% and holy shit. Now it is a. An AI company and 88% of the revenue is from data centers. That was like effectively 010 years ago.

[Jim Leventhal]

Yeah, I mean I think I'm looking at it and I'm saying to myself, they captured lightning in a bottle, and it's been known to happen. And that shift that you were just talking about, Michael, from gaming GPUs and finding out that, oh, my goodness. I mean, forget the crypto just for a second, because it turns out to be immaterial. But finding that the gaming GPUs are exactly what artificial intelligence needs. Yeah, that just like, okay, somebody's going to get.

[Josh Brown]

Now, somebody at intel, for example, should have, like, somebody high up at intel sometime around this inflection point in 2016, 2017. There's no AI. Okay, so 2016, 2017, maybe a tiny bit of crypto excitement in the stock, but there's clearly also something else happening there. I think it was virtual reality and augmented reality at that time. But somebody at intel should have said, wait a minute, we're a CPU company in a world where all of a sudden GPU sales are starting to take off. You don't have to be able to predict ChatGPT, but, like, somebody high up at intel should be thinking that way. And of course, nobody can do this in real time.

[Michael Batnick]

Why didn't you do something?

[Josh Brown]

No, no, no. I don't mean a shareholder. I mean like a. A CEO, God forbid, a cto. Because it would have forced them probably to either cannibalize some of their CPU business if they start talking up gpu, or it would have forced them to, like, make a really big investment in something that they weren't good at. And that's really hard for incumbents to do in every industry.

[Jim Leventhal]

Absolutely true. There are good lessons to be learned from the intel story, and I don't want to now just be dunking on intel because I've been out of it for a few years. But there are literally good lessons for investors here. Number one, you're absolutely right. A good CEO. That's what you hire CEOs to do. You may or may not recall this, but the CEO at the time starts with a K. I'm gonna mess him up with coaches. I'm gonna mess him up with coach basketball. Yeah, exactly. Chris Anish. Yeah, sorry, folks, I've forgotten, but he got kicked out.

[Josh Brown]

He had a me too moment.

[Jim Leventhal]

He had a me too moment. And here's. And it was from 10 years earlier. Now, I'm not defending any of the behavior.

[Josh Brown]

Yes, you are.

[Jim Leventhal]

No, I'm really not this on tape, but there. Go ahead, light me up. But it was clear that there was something else that was kicking him Out. The board wanted him out for some other reason. And it came to light after that that there were significant operating problems getting down to then 10nm which was the leading edge for computer chip.

[Josh Brown]

Where are they at now?

[Jim Leventhal]

Two, four, I think three or below. But they just couldn't get it right. And the CEO was so focused on that he wasn't getting that done. He certainly didn't have time for strategy. One other just really, when they kicked.

[Josh Brown]

Him out though, the new guy said, hey, here's the new strategic move we're going to make. We're going into foundry. I mean we're going to be the Taiwan semi of North America. I mean that's what they did.

[Jim Leventhal]

Yes.

[Josh Brown]

They said we're going to make chips for everybody else.

[Jim Leventhal]

That was two CEOs later.

[Josh Brown]

Okay.

[Jim Leventhal]

It was a terrible strategy because it's well known in the semiconductor industry, you guys certainly know this, that the customers really don't trust Intel. Like there's really bad blood that intel has set up within the ecosystem of semiconductors. So the idea that, oh yeah, intel going to produce your chips for you when these competitors don't trust them in the slightest bit, that was kind of a failed strategy. There's one other thing though. Good takeaway from this.

[Michael Batnick]

Only the paranoid survive.

[Jim Leventhal]

Well, the irony, that's good one.

[Josh Brown]

That was Andy Grove's biography.

[Michael Batnick]

One of the founders.

[Josh Brown]

That's what it's called.

[Jim Leventhal]

Yeah.

[Michael Batnick]

Yeah.

[Jim Leventhal]

So I didn't, I didn't know. I know Andy Grove, but I didn't know that.

[Josh Brown]

Oops. Enough.

[Jim Leventhal]

When a company starts going down, the problem is, is you can't good talent get good talent to come in. You guys will probably remember Mellanox was acquired by Nvidia and there was a bidding war between intel and Nvidia at the time. And Mellanox basically looked at the landscape and said we want to go with the winner.

[Josh Brown]

And what they were like networking, I.

[Jim Leventhal]

Forget exactly what they were.

[Michael Batnick]

But that's how the market impacts the economy or like the real economy because it's, it's the, it's the currency of this, these companies.

[Jim Leventhal]

Yes.

[Michael Batnick]

And people know, hey, you're losing, you're winning. I'm just looking at the lines on the screen. I'm going to go there.

[Jim Leventhal]

Exactly right.

[Josh Brown]

Yeah. When you have momentum versus when you don't have momentum. There are so many follow on effects that come from that, such as a potential acquisition target not being interested in being bought by you. And the ripple effect of something like that can go on forever.

[Michael Batnick]

So Cowan put out A note last week, channel checks indicate U.S. data center lease cancellations by Microsoft. Microsoft refuted the note. But I think this is a really interesting moment in the market because the talks over the last 10 years have been the max seven, counting the market, which has been not untrue, and now there are cracks, at least in the stock prices. The Max 7 Nvidia is weighing on the market. Market's now down over a percent. But I think that this is a good thing for a few reasons. Number one, the reintroduction of risk is healthy and normal. Right. And you're also seeing a lot of really healthy rotation. Financials are acting really well. Healthcare one of the leaders. REITs are doing okay. This broadening out, not at the highs or close to the highs. I think it's a really good thing. I think you must love it.

[Jim Leventhal]

I do love it. I mean, you know, my positioning, which is while I own Nvidia, I don't own enough of it. You can't. And I'm significantly underweight the Mag 7 to begin with. But what I think is very, very interesting here is that if the three of us were looking at this a year ago, we would have said for the broadening out to happen, what's probably going to happen is a washout, a market washout. Everything gets taken out and it's on the way up. Or this is what is presumed to be the cure of the concentration, Michael, that you were talking about earlier. What we're seeing now is despite, okay, the NASDAQ's off the momentum names have come off the last couple of weeks. The market overall is kind of hanging in there. This is a rotation without a washout, which is very, very unusual. And it's great.

[Josh Brown]

Yes, because you have names like Berkshire Hathaway, which is a trillion dollar company, it's the size of a max 7. They just reported $50 billion in earnings for last year over the weekend. That breaking $500 today, it's not enough to fully offset Nvidia, but it doesn't hurt. And there's not a lot of those. But then you've got this next tier down of, I don't know, the 200 to $500 billion stocks. They're generally acting well in almost every sector that they're in, especially in finance.

[Michael Batnick]

So like everybody else, I'm not oblivious to the apparent risks that are out there. Right. Policy, uncertainty, a slowing down maybe of growth and all that sort of good stuff. But at the end of the day, this is still a consumer driven economy. People are still spending People are still employed. And I think, again, the reintroduction of risk, God forbid we get a pullback, right? Like a correction, 10%. It's okay. Stocks can't go straight up and up forever. You need the wall of worry to climb.

[Jim Leventhal]

Yes. Ed, you know, we may be in the middle innings of what happened last summer. And I think, you know, Josh, I know you've spoken about it on air and I've spoken about it on air. This hilariousness, if you remember, it was like a Wednesday, the Fed met, didn't cut rates, okay? And then Friday, literally two days later, you get a soft labor market report. And over the weekend, everybody's like, the Fed should cut rates. It should be an emergency rate cut. It was absolutely hilarious. But it is to the point you just made, Mike, absolutely necessary to reintroduce risk. A little bit of a correction here. Reset the animal spirit so that you can grow again. If you think about what happened in August, after that happened, you were off to the races.

[Josh Brown]

Yeah, the growth scare, but then the confirmation from all the Mag 7 names that they're going to continue to spend. And we know, we know that, like, if their stock price is pancake, they could change their minds on a dime. But like, they all on their earnings calls three weeks ago, two weeks ago, they all said, no, we're full speed ahead and actually we're spending more than we said originally.

[Michael Batnick]

The AI story's not over, right?

[Josh Brown]

Put this Apple graph up.

[Michael Batnick]

To that point, Apple came out and said what Apple's.

[Josh Brown]

So this was kind of like a little Tim Cook special where he kind of like tricked Trump into thinking that he's responsible for something that Apple already said they were going to do. But $500 billion in new spending committed over the next four years in US in USD.

[Michael Batnick]

There's no way. By the way, that's a fake number.

[Josh Brown]

Well, no, they say that they want to make what they say they're going to make in the United States. Apple, do you remember? I don't rem something like AI server, blah, blah, blah. 2.9 million jobs currently supported 20,000 new Apple hires in the next four years in the US 24 US factories producing silicon for Apple products. They make their own chips now. Tim Cook said, quote, we are bullish on the future of American innovation. Proud to build on our longstanding US investments with this $500 billion commitment. Doubling our advanced manufacturing Fund to build in Texas.

[Michael Batnick]

Smart decision. Hedging monster. This, this is, this is the upshot. So Gene Monster says the company is avoiding tariffs and Channeling those savings, air quote savings into US investments. I estimate that the US accounts for about 35% of overall sales. That means the US will generate about $147 billion in revenue this year with roughly 120 of it coming from product revenue segment at a risk of tariffs. So had Apple not increased its UN's investments and thus been subject to a 20% tariff which would have negatively impacted sales and markets by 20% it implies Apple will save $23 billion a year by avoiding the tariff. So in other words, the bottom line is that tariff avoidance effectively pays for 60% of the $39 billion incremental U.S. investment announced today.

[Jim Leventhal]

That makes perfect sense to me. I'm going to take this just one level up about something we've been talking about is is this a growth scare in the markets overall? And when I look at what we just had up there about Apple, what I see are the highers and I think to myself that at worst this is a growth scare right now. You cannot have a recession unless you have layoffs. You don't have layoffs because profits are growing. You mentioned Mike 70% or maybe that's you said consumption led economy at 70%. You need to have people employed for the economy to grow. Yeah, there's a little wobbliness in the weekly jobless claims this week. Big whoop. We have companies like Apple as we just put up there desiring to employ people in the United States. Yes, there are legitimate concerns about hey, the federal workforce is going to get reduced. Guess what, there's going to be a lot of demand for jobs not just from Apple but also from the fact that baby boomers are retiring. So you know, this is. I don't see the crisis. We were talking earlier about 2022. There were times that I felt like what am I on laughing gas here? Like what's wrong with me? And I keep evaluating, am I seeing things through two rose colored of glasses. I just don't see the layoffs.

[Michael Batnick]

I think a lot of corporate Americ America that thought they might have been susceptible to higher rates in 22 and 23, they got religion fast. They're already active, they already right size. And if they don't see a recession because that's why would they. They're not going to lay off people only to bring them back in three quarters.

[Jim Leventhal]

Not while profits are growing. No, profits are growing meaningfully. 16% fourth quarter year over year. You lay off people when your profits are declining. When your profits are growing. As a corporation you want to lean into it.

[Michael Batnick]

And that could happen. It's just not right now.

[Jim Leventhal]

Well, you mean layoffs.

[Michael Batnick]

I'm saying the economy could slow, corporate growth, could stall. It's just. We're not seeing that right now.

[Jim Leventhal]

We're not seeing it right now.

[Josh Brown]

There's some. But there's also some theater involved here. So Martin Pierce and the information talks about this $500 billion Apple spend. This is. Martin, that sounds like a big deal until you read further down in the announcement and realize it's simply describing the money Apple spends in the normal course of business. Apple's announcement was essentially a promise that it will continue to operate in the US over the next four years. The 500 billion. So it's like Apple puts these grand statements about investment plans every few years. In 2018, the headline number was 350 billion. In 2021, it was 430 billion. So the size is getting bigger. And the company routinely spends far less than any other tech companies on capex. I guess proportionally is what he's saying. But, like, part of this is just how Tim Cook has to manage the political situation, because the reality is China's a super important market for Apple. It's also Foxconn and super important manufacturing hub. So he has to make these grand pronouncements. It's almost like this is his job.

[Jim Leventhal]

Yeah, I think they're all doing it. I mean, I think the inauguration was a key sign that certainly didn't happen in the first Trump administration. These guys were not there at the inauguration. They know how the game's played. And at the end of the day, what is their job? Their job is to maximize profits. That's it.

[Michael Batnick]

So, Jimmy, people are scared right now. And I think a lot of this is due to politics.

[Jim Leventhal]

Yes.

[Michael Batnick]

But it's also due to the fact that some of their favorite stocks are falling. Nvidia, a lot of the Max 7 is under pressure. And we've got this incredible dynamic in the market where you look at AII bearish sentiment, and these are the same investors that are pulled forever. These are typically, I would say probably boomers, because who answers polls these days? And right now, we were in a 3% drawdown before today, and 61% of respondents were bearish, which is a dynamic we've never seen. You've never seen this many bears this close to the highs. Check this out. So for context, people that are listening, you had higher readings and bears over 60% in 2022, in 2008, for context, in March 2020, during the pandemic, the crash in a 22% drawdown, only 52% of people were bearish. So this is a weird dynamic that we're seeing today.

[Jim Leventhal]

So it. Let me, let me give the throwaway line first. I think all three of us are looking at that and just salivating. Right? I mean, we're just drooling at what that means.

[Josh Brown]

Except we're only down 3% from the.

[Jim Leventhal]

High, except for the momentum names and Nasdaq, et cetera. And that's the epicenter of what's going on.

[Michael Batnick]

Well, Jim, just a little bit more me, then I'll throw it back to you. Bespoke tweeted. If the NASDAQ 100 closes below 2106, et cetera today, it will be the fastest 5% decline from an all time high since September 2020. So there is some funky shit happening, but it's nothing.

[Jim Leventhal]

Yeah. Look, you and I talk about this on the air a lot and I think you actually said this today. I was listening to you. I tend to be more valuation oriented. You don't. I don't think I'm talking out of school here.

[Josh Brown]

No, I'm astrolog.

[Michael Batnick]

He's a price checking donkey.

[Jim Leventhal]

No, you just, just so I don't sound like a jerk here. You were having a long treatise about relative strength indicators. Totally get it. And that's, that's core to you. Valuation is kind of like not that important.

[Michael Batnick]

Jimmy's like, all that bullshit is well and good.

[Josh Brown]

Valuation's really important. If I'm considering taking one of these companies private, but since I'm not, but since I'm not, it's like number four on my list.

[Jim Leventhal]

I got it.

[Josh Brown]

But these are three things on the list.

[Jim Leventhal]

These palantirs and applovins of the world. And you know, this is not where I play. And I'm watch, I'm like, hey, this is kind of interesting. I kind of know how it's going to end. We all know how it's going to end. It's going to end in a washout. And it's actually not the end. It will come down to some reasonable valuation. These are real companies. Palantir definitely a real company. This is like the future of defense spending is Palantir. But now all of a sudden, price matters. And so you've got to have this reset and it's healthy in the long run. I'm not making fun of anybody. I hope I don't come across as that way. But when we talk about zero time to expiry options, that is at least in part what drove these things to such highs? It's just people rolling the dice. That's not what I do. I'm gonna dare to say. Josh. Mike.

[Michael Batnick]

Oh, I do it all day long.

[Jim Leventhal]

It's antithetical to investing, Jimmy.

[Michael Batnick]

I say that a pullback only looks healthy in other people's stocks.

[Josh Brown]

Well, but how important to you is sentiment overall in the way that you think about, like, the forward opportunity? Do you, like, would it stop you. Would it stop you from adding the next stock to your portfolio or adding more exposure to equity if there was, like, sky high bullish sentiment? Do you give a shit? I don't.

[Jim Leventhal]

No. And here's where people are bullish in a bull market.

[Michael Batnick]

Duh.

[Josh Brown]

I don't care about that stuff.

[Jim Leventhal]

To a fault, okay? I really mean it to a fault. What I do every day is I wake up in the morning and I say, where is it? Where is there a dollar's worth of value selling for 50 cents? And I know it's out there, and.

[Michael Batnick]

I love looking for it. Come on.

[Jim Leventhal]

You can. Mike. But here's. Here's.

[Josh Brown]

But you have to buy the worst stocks on the planet. But you will find it. You will find it.

[Jim Leventhal]

You don't have to buy the worst stocks on the planet, okay? But you have to be patient. And there's time. You know this, right? There's times that I'm just sitting there like, man, this sucks. Josh is beating up.

[Josh Brown]

No, you could go out further. You could say, this is not selling at 50 cents on the dollar today, but based on the earnings, I think in three years. Exactly.

[Michael Batnick]

Sometimes you think you're buying a dollar for 50 cents and you're buying 50 cents for $3, you're 100% right.

[Jim Leventhal]

Which is another way of saying whatever your investment philosophy is, you're going to make mistakes. I make mistakes. I was on the air. I'll do it again today, but then I want to retire it. I was remarking two days ago on J.C. penney and Paramount, just absolute disasters. And at the time, I thought I was getting. Mike. 50 cents. You know, a dollar's worth of value at 50 cents, nobody bats a thousand. But if you do it long enough, you kind of. What you. More than anything is you test your thesis every day. Am I right? Am I wrong? What am I missing? What's the market missing? And if you get a comfort level with that, you can stick in there through thick and thin. But there's times that, like, you would probably stage an intervention like, jimmy, look at the rsi. Like, I'm Gonna lift your hand off of the buy boat.

[Michael Batnick]

Not that we need to spend too much time on empowerment.

[Josh Brown]

But wait, when he said, every day I wake up and I was gonna.

[Michael Batnick]

Say, what's the morning retirement?

[Josh Brown]

I'm buying a dollar fifty cents. It reminded me of the meme where somebody texted somebody, like, I thought I saw you last night at whatever. And the response was, was I creating shareholder value? And the person goes, no. And he goes, then it wasn't me.

[Michael Batnick]

I would have thought that Paramount. I know, like, there's been obviously noose around in the stock, but I would have thought just like, like with the Taylor Sheridan phenomenon, that the stock would have been doing well. Maybe that's like too.

[Josh Brown]

Because the problem with it and I, I, I lost money in Warner Brothers discovery.

[Michael Batnick]

Like, the streamer's working.

[Josh Brown]

The problem with both of these names is the debt level. And then in the case of Paramount, the between Shari and the board and Mario Gabelli.

[Michael Batnick]

But that's like, mostly behind us given the, what is it, an 80% now?

[Josh Brown]

It's acquire.

[Jim Leventhal]

They're going to buy Sky Dance.

[Michael Batnick]

No, no, no.

[Josh Brown]

It's buying Sky Dance.

[Jim Leventhal]

They're going to buy Skydance for stock.

[Michael Batnick]

Yeah.

[Jim Leventhal]

Which is the dumbest thing. Like, don't use that currency you just said. And I agree, like, the streaming's working.

[Josh Brown]

And they've got good people taking it over.

[Jim Leventhal]

I'm intrigued to see what they do. I'm obviously out of it, but I'm watching. And I watched it once.

[Josh Brown]

Don't.

[Jim Leventhal]

I'll do an intervention there. I actually, you know, on air when you did the Warner Brothers, I was like, twitching like, oh, please. But with Paramount, just let's see how much they dilute the share base to buy Skydance. That's what the thing is. And listen, we learn from our mistakes. Right? Here's a critical mistake. Everybody should know this. If you invest in a company with dual class shareholders, you don't have control. And Sherry Redstone will do things that have nothing to do with your interest.

[Josh Brown]

But you might not want it because you know what else is dual class meta. I hear you Google Alphabet. And they're not shy about promoting the reason for why they're dual share class. Like, so here's what happened. Here's what really happened. They watched the situation at ebay when, like, Carl Icahn got involved and demanded they spin off PayPal. And I think Andreessen was on the board and, like, Carl, like, went after Andreessen. And then they watched the same thing happen at, at Apple. They Watched Carl Icahn beat up Tim Cook. Now, in both cases, it worked out well for the shareholders, but it was really public and it was really acrimonious. And very shortly after that, you started seeing these companies reorganize. And they said, look, here's the deal. We've rewritten the constitution, and shareholders have no say in how we run this company. And if you don't like it, now is the time to sell. Because we think tech people should run tech companies, not hedge fund managers from West Palm.

[Jim Leventhal]

Yeah, and look, you're absolutely right. There are exceptions to every rule. But I'm telling you, you've gotta be careful with dual class shareholders, especially smaller companies.

[Michael Batnick]

What about dilution, huh? I'm sure you're not a fan of dilution.

[Jim Leventhal]

Well, what I'm a fan of, what we're all a fan of, is companies that generate free cash flow and return that free cash flow in the form of share buybacks. I love share buybacks, Even something like a stock I've had to be patient on Citigroup Group that we've talked about over the years, right? They've shrunk their share count by about 40% every year.

[Josh Brown]

And they didn't get credit for it until recently.

[Jim Leventhal]

Exactly 40%. And they're buying these shares back below tangible book value, which is apropos of what I was saying about. I wake up in the morning, what I'm looking for, they're buying a dollar's worth of value at like 70 cents on the dollar.

[Josh Brown]

What's her name? Jane Frazier.

[Jim Leventhal]

Jane Frazier.

[Josh Brown]

So she's an axeman. Like, she came in and just started chopping things off and getting rid of them and funding a huge buyback. And it worked.

[Jim Leventhal]

Yeah, well, it's working now. For the last year, year and a half, she's been in the office CEO for about four years. I've never seen the absolute absence of a honeymoon. Okay, Wall street, as soon as she came in, just sold the stock. And I get it because, you know, Chuck Prince, Vincram, Pandit, you know, whoever. Corbett, Michael Corbett, I think. And I'm not like, I'm not just slamming these guys. They did their best to manage what Sandy Weill put together. It frankly, was unmanageable. So when Jane Frazier came in, the street just said, we don't believe anything you're gonna do. You know, we've seen it before. We've seen the announcements. But she did it. She said, it is unmanageable. So we're gonna start hiving things off. We're gonna start with the international operations. Anything that's not core, we're gonna get rid of. Then when that was done, and there's still one step left to come, which is the Bantam X ipo. That'll happen maybe later this year, maybe early next year. It's only delayed because you gotta deal with the Mexican government, but. Okay. Pretty much done with international. Right. Sizing. Then she went to the domestic businesses. If something. I mean, this is what the three of us would do if we're running a company, right? If something isn't earning, the cost of capital, it's gone.

[Josh Brown]

You know who else is doing that now and not yet getting the credit? And maybe you'll be.

[Jim Leventhal]

I'm listening.

[Josh Brown]

Maybe you'll be vindicated in this. GM doesn't stop selling shit off. Yeah, yeah, but this stock is. I want it to work. No, I do. I know you want it to work more than I do because you're in.

[Jim Leventhal]

No, I'm actually.

[Michael Batnick]

The stock is a roller coaster.

[Josh Brown]

I mean, this stock just. It seems like it just. No matter what they do, it's almost magnetized to go back to $38 a share. But they're pursuing that playbook like they just got out of Cruise. They're not gonna do autonomous. The street doesn't wanna see them do that, apparently.

[Jim Leventhal]

Well, what the street is holding against them is the tariffs, because these guys have an 8% overall net profit, but.

[Josh Brown]

Every year it's a different problem for them.

[Jim Leventhal]

Fair enough, Fair enough. I mean, I sold it in November when Trump first announced that he was gonna put the tariffs on, because the math is just that, that wipes out profits. I don't need to go through it. It absolutely wipes out profits. I had to sell it on that news. I can't imagine that we let this company just get decimated by tariffs. Maybe I'm wrong, but in the meantime, they're looking like. Without tariffs, they look like they're gonna generate $11 a share in earnings. What are they selling for? 47.

[Josh Brown]

7 multiple. It's crazy.

[Jim Leventhal]

I don't know. I think it's like a five multiple.

[Josh Brown]

Five multiple.

[Jim Leventhal]

I mean, what, because people think the profit's going to go away with terror.

[Michael Batnick]

That's a selling for a dollar. So when, when you. When you're looking at these stocks, how do you make. How do you say, like, okay, I'm going to buy Citi versus Wells Fargo, bank of America. Because it's not just. It's not just the quantitative numbers. This is selling for 20 times tangible book this some 1.1. There's got to be some sort of story that gets you to buy Citi versus Wells or bank or something.

[Jim Leventhal]

A very important point is management. And that's, that's with Jane Frazier. That's where I got big in the name. I mean I owned a few banks at the time that she came on. I really concentrated on Citigroup. By the way, side note, if you're going to be in any industry, you have to own the best company in the industry.

[Josh Brown]

Oh, preach.

[Jim Leventhal]

I love this in financials.

[Josh Brown]

You have this all the time now.

[Jim Leventhal]

So if I'm going to own Citigroup, that has to be after I own JP Morgan. There, there can't be a, oh, I own Citigroup but not JP Morgan.

[Josh Brown]

And you might be leaving money on the table by not buying the third best, but you're also probably leaving risk on the table too.

[Michael Batnick]

You said this last night to John Ford is such a great point. People that went looking for value in an AMD got smoked. Just buy the winner.

[Josh Brown]

Yeah, names down. Down 50% in an AI bull market, darling.

[Jim Leventhal]

Two years ago it had a great.

[Josh Brown]

Run, but it's never the best in anything. And this I want to get, I want to get to the reshoring thing while we're on tariffs.

[Jim Leventhal]

Let's do it.

[Josh Brown]

Okay, so this is something that you started talking about I think around the time the infrastructure bill came out or maybe even before that. But you had this notion that one of the biggest risks to like American prosperity became really obvious to us when we couldn't get chips for SUVs. You had parking lots filled with Chevy Tahoes waiting for a chip from God knows where to be implanted into the truck. The longshoremen and all the stuff going on at the ports and there's like 50 other examples. But like you pointed out, the corporate America is not just gonna sit here and go back to just in time supply chains. That's a thing of the past. They're going to have to find a way to do things closer to home. Either friend shoring in Mexico or just find a way to be more efficient with manufacturing operations here in America. Are we in the third inning of that, the first inning, the seventh inning? And like how does that inform the way that you look for investment opportunities if you think that that's still gonna be something that's in force?

[Jim Leventhal]

So the answer to the question comes down to something that I very strongly believe and I mentioned earlier and it's something I've been saying to clients A lot recently focus on policies, not politics.

[Josh Brown]

Trump believes in this.

[Jim Leventhal]

Yes. Okay, not to be facetious, but this is not the first time he's been in office. Right. So we had the indications from him of what he wanted to do. Then you had the pandemic, which showed up the liabilities. Okay? If you talk to, like, real economists, they're gonna say the one thing that you should count on in economics is specialization, industries and geographies. Doesn't matter. Okay? It doesn't matter if that's what economists believe. The policies right now are designed to bring production back home. There's this new word.

[Josh Brown]

No matter what the cost.

[Jim Leventhal]

No matter what the cost.

[Josh Brown]

You're right.

[Jim Leventhal]

And, you know, there's this new word that I didn't know existed two months ago called autarchy. I may be mispronouncing it autarchy. It means doing everything yourself. Being a closed economy, getting everything.

[Josh Brown]

That's autoerotic asphyxiation. Is that the word?

[Jim Leventhal]

It's a. It's not a good policy from an inflation point of view.

[Michael Batnick]

You keep talking about that.

[Josh Brown]

What if you edit that? If you ask that out, I quit.

[Jim Leventhal]

All right, dad, it's going to be inflationary. Look, we're going to run out of workers, okay? You're going to run out of. You're going to run out of fresh water. We're building semiconductor plants in Arizona, for crying out loud. You're going to run out of fresh water. Okay? But it is the direction we're going, regardless of whether you agree with it or not, okay? So we can fight about it, we can feel bad about it. And I'm not not making light. I know people really are upset with what's going on in Washington, D.C. our job is to make money no matter what the environment is, no matter what we feel about it. And you've got to focus on policies Elon is making.

[Josh Brown]

Elon is making 2 million Teslas a year, and more than half of them are being made here. We absolutely can make things here.

[Jim Leventhal]

We can, but we don't have that many more.

[Josh Brown]

Always.

[Jim Leventhal]

Here's what I think. Here's what I hope. Okay, here's what I hope. I hope that the Mexica Canada tariffs are a negotiating ploy. I think they are, right? Whether it's fentanyl, whether it's the border, whether it's renegotiating the U. S. Mexico Canada Act. Let's hope that's the case, because you really need that production capacity, resources. Whether it's plants, whether it's people Whether it's raw materials, you need that from the north and from the south. We simply can't do the autarky that is being talked about here.

[Michael Batnick]

We can't build tequila here.

[Josh Brown]

Can I just. Not good tequila. Can I tell you the thing that I've learned over the years that the bears hate the most, but the bulls aren't even aware of it? I almost think I might be the only person that understands this sometimes because.

[Michael Batnick]

No one else get on his level, people.

[Josh Brown]

Nobody else ever talks about this, but I bet you've thought about it. There's this thing in the markets. And what's going to happen with tariffs is, I think, going to be perfectly emblematic of this. You ever see like a company come out and cut earnings guidance and then the stock sells off and the new earnings got. Let's say they were supposed to do a $10 and they say, sorry, we're actually going to do a dollar. And, and the stock, let's say, goes from 50 to 40. So 20%. Correction.

[Michael Batnick]

Where does the money go?

[Josh Brown]

Wait a minute, stop. Oh, Starbucks. So wait a minute. So follow me on this. The stock falls 20%. They cut their earnings guidance from $1.10 to a dollar. Then they come out and report earnings and they do a $4. The stock doesn't just go to 50, it goes to 70. And this is the thing the bears hate the most. Don't people understand yet how this is going to play out? The tariffs going to roil the markets, freak everybody out. Everyone on Wall Street's going to have to rewrite their S and P earnings estimates, their price targets, markets, and then Trump's gonna save the day by canceling his own tariffs. And the market's not just gonna go back to where it started selling off, it's gonna go 20% higher. This is the thing that the bear. I don't.

[Michael Batnick]

I think you're right. I think you're right.

[Josh Brown]

I wish there were like a German word for this. Like one of those nine syllable German words. No, but you know what I mean.

[Michael Batnick]

You're right. It's a great take.

[Josh Brown]

This is the thing that routinely happens with individual stocks and with the overall market where a problem is created, everybody comes out with lower estimates and gets bearish.

[Michael Batnick]

Starbucks is a great example.

[Josh Brown]

The problem, right? The problem goes away. And it's not like the bulls just get back what they lost. They get back that plus 30% and the Bears like, wait, I don't understand what just happened. This is, this is obviously how the tariff thing will play out. I just don't know if it takes a year or one bad poll. Like, I don't like. You know what I mean? But, like, this is going to be the ultimate bear killer. The people who are getting all beared up on tariffs. This is going to suck so much for them. This is going to suck so much for them when the problem gets solved and the bulls make everything back and then some. That's my take.

[Jim Leventhal]

Totally agree.

[Josh Brown]

Have you observed that before? What part?

[Jim Leventhal]

Well, yeah, that exact scenario.

[Josh Brown]

Right. Have you observed this before?

[Jim Leventhal]

Yeah. I mean, no.

[Michael Batnick]

He's talking about his genius at work, right? That's what you're talking about.

[Josh Brown]

No, this concept. You've seen this before, right?

[Jim Leventhal]

In 1.0, I remember one Seymour. So we all remember, like, you woke up and you looked at your. At Twitter, and what was he tweeting today.

[Josh Brown]

Right, exactly was yesterday.

[Jim Leventhal]

And so. And so one day I'm in Constellation Brands. It's a liquor beer company that owns Corona. I think. It's been a long time.

[Josh Brown]

I think they own Modelo, they own Mexican beers.

[Jim Leventhal]

So he wakes up one day in, like, 2018, and he's pissed off at Mexico for I don't know what. And he just tweets out, gonna put whatever, like, 50% tariffs on Mexico. I wake up in the morning, I'm like, looking at the futures. What's happening to Constellation Brands? It's getting pummeled, right? And then he takes it off and it goes back up. I mean, I don't remember if it went back past the highs. That stock was very difficult.

[Josh Brown]

People don't even understand. There's gonna be a press conference where he says, I have saved America from tariffs. And the S and P is not just gonna gain back what it lost. It's gonna be euphoric.

[Jim Leventhal]

But that's what stocks do. Do they go up. They go up. I mean, look, I. I have sold short stocks in my life. It's a miserable business. You wake up in the morning. I don't know if I've ever done it. You wake up in the morning and you hope for bad things.

[Josh Brown]

I never. I've bought puts on stocks to speculate.

[Jim Leventhal]

Okay?

[Josh Brown]

I've never made money.

[Michael Batnick]

I shorted Amazon in 2011. I got out of that business.

[Jim Leventhal]

It's miserable. You wake up in the morning, fundamentals. You're hoping for bad things to happen.

[Josh Brown]

Right?

[Jim Leventhal]

And you're always a fish swimming against the current.

[Josh Brown]

Always.

[Jim Leventhal]

Right.

[Josh Brown]

I think there are people that do that for a living. And that's different. I think, for most people, like you and I, it's not ever going to be our forte because we don't have it within ourselves to be rooting for bad outcomes.

[Jim Leventhal]

Exactly.

[Michael Batnick]

But if you zoom out long enough, people are motivated to make more money. And that drives capitalism and it drives earnings and it drives the stock market higher over time.

[Jim Leventhal]

Yes, we grow. Yeah, we grow.

[Josh Brown]

This is going to take a minute to go through, to listen to, but I think it's really important for this conversation. Bear with me.

[Michael Batnick]

If it's a severed head, I'm going to be very upset.

[Steve Cohen]

Where there's really a lot of uncertainty. And I have pretty strong views here. When you take it's a brew of tariffs, I mean, tariffs cannot be positive. Okay. I mean, it's a tax. And you can imagine, and tit for tat, if the US does something, implements a tax on somebody, somebody else is going to perhaps raise the stakes and raise their tax back. So taxes are never positive. On top of that, we have slowing immigration, which means the labor force will not grow as rapidly as previous overlap, say five years. And so, and in addition, now you have Doge. Right. And you know, wherever you lay on the Doge issue, I mean, that's austerity. And austerity, you know, when that money's been coursing through the economy over many years and now potentially will be reduced or stopped in many ways has got to be negative for the economy. So you have, you have tariffs, you have, I mean, I could see a situation where growth could, we think growth is going to slow to one and a half percent from two and a half percent in the second half. And yet unemployment is, the unemployment rate is actually going to go down, which, which because of.

[Josh Brown]

All right, so that's Steve Cohen speaking at Miami this week at the FII Priority Conference, which I think is like how Saudi Arabia reintroduces itself to the world as a benign. Okay, great. Congratulations on all that. So what do you think, though, about that concept in the second half of this year? At least based on how things seem to be going now? You will have the austerity that comes from the Doge layoffs and all the spending cutting, which, which I guess is good for the taxpayer, but maybe not great for economic data, at least not right away. You've got tariffs, which who the knows what those will look like and for how long they'll be on. And then you've got slowing immigration, which we all know one of the principal forces acting on inflation is the lack of being able to find workers for various industries, all three of Those things at the same time, probably not great. And even Treasury Secretary Scott Besant is publicly saying there might be a little bit of pain for us to achieve our objectives. It's hard to stay bullish on economic growth and cyclical stories. And you know, Steve Cohen doesn't do this often. He's not Druckenmiller, who like every six months, you know, it's not Ray Dalio where it's always 1937. Like, he does not do this very often. Often. And he sounds pretty dour and he's.

[Jim Leventhal]

Made a lot of money.

[Josh Brown]

So now the question is, are you smarter than Steve Cohen?

[Michael Batnick]

I don't know.

[Josh Brown]

Better investor though?

[Jim Leventhal]

No.

[Josh Brown]

Okay, all right.

[Jim Leventhal]

No, it's certainly not a better trader. But I'll give you my thoughts.

[Josh Brown]

What do you say to one and a half percent gdp down from an estimated two and a half to three? That's like. That would be a material difference from people's expectations.

[Jim Leventhal]

There may be some short term pain. And I do think the tariffs are gonna be inflationary. Let's just start with what to me is obvious. You know, the promoters of the tariffs like to say, well, the exporting countries are going to pay for it and this, that and the other thing. Sure, right. And it's the methodology. If you say something loud enough and repeat it often, maybe it'll be true, but it's not going to be inflation.

[Josh Brown]

Plus austerity plus wage pressure.

[Jim Leventhal]

Here's my hot take. I actually like what I'm seeing in Washington D.C. okay. And I. On the, on the workforce reduction, anybody who's watching this and is thinking that I'm an asshole and insensitive, I don't want anybody to lose a job. That's not my point. I feel terrible about that. But I think in the intermediate future, not the distant future, it's very good for the country. One of the economic dogmas, at least that I think is dogma is that private sector workers tend to be more efficient than public sector workers. I have a small window many decades ago into being in the federal workforce and I honestly believe that. I'm not denigrating federal workers, but I do think that they will be put to more productive uses elsewhere. It's gonna be painful right now.

[Josh Brown]

And the best will stay. The best will stay. And the ones who don't wanna be called out on not working that hard, this is their opportunity to get out of there.

[Jim Leventhal]

Yeah. And go find another job. Now, I'm not being stupid, or at least I'm not trying to be stupid. A federal Like a Pentagon procurement officer is not gonna immediately overnight become a semi truck driver. Like, that's not, you know, there's going to be friction and there's going to be pain. And I'm not minimizing that. But the good of the country is both getting these workers to where they're most productive. And as we've been talking about, we're going to need workers for all the production we're bringing back to the United States. We're going to need workers. The other thing, and this is a little bit esoteric, but give me just a little Runway on this. It is the American government philosophy to not do anything until a crisis makes it unavoidable.

[Josh Brown]

Oh, yeah, I agree with that.

[Jim Leventhal]

Okay. So the fiscal position of the federal government is going to end in tears if we don't do anything about it. This is the first time I've ever seen a federal government action that is designed to get in front of a crisis. And by the way, the crisis, when the rest of the world says we have enough Treasuries, thank you very much. It's gonna be brutal. I mean, 5%, 10 year treasuries. No, think a lot higher.

[Josh Brown]

Is it realistic, though, to go from a 7% deficit to 3% inside of Trump's four years that he has with the clock already ticking? That is economically ruinous. If you think you can get through to the other side, great. I don't know.

[Jim Leventhal]

I mean, here's the ugly thing that you know is how do you really do that? You kind of inflate the economy so that the percentage of GDP that you're looking at.

[Josh Brown]

Yeah. Matters less. Yeah. So it sounds like you actually.

[Jim Leventhal]

Nobody's gonna admit that. Right. That's the quiet part.

[Josh Brown]

Out loud, it sounds like you agree with Steve Cohen, but you disagree with the outcome. Like you're saying, you're saying you agree that this is not gonna be great for economic growth, but that the pain will be worth it.

[Steve Cohen]

It.

[Josh Brown]

Because these things are overdue and they should happen.

[Jim Leventhal]

Yes.

[Josh Brown]

Okay.

[Jim Leventhal]

And I think it's common sense that there. Will the market be able to see.

[Josh Brown]

Through it the way that you do?

[Jim Leventhal]

I don't think it is right now.

[Josh Brown]

Okay.

[Jim Leventhal]

I don't think it is right now. But let's do the numbers. You know, look, you know I like to live in numbers. Right. Let's just say that 20% of the federal workforce gets let go. I think that's a big number. Maybe they'll do more, but that's 500,000 people.

[Josh Brown]

Yeah.

[Jim Leventhal]

We're creating jobs at a 175,000amonth clip. That's three months right there. There. It's 0.3% of the working age population or the working population in the United States. That's 160 million which is going down as baby boomers retire. That's not me making stuff up. That's just like it's a fact. Baby boomers are retire. The working population is going down. It sucks. And I'm not making light of people who are losing jobs, but they should be able to find other jobs.

[Michael Batnick]

Well, the other part of this is they're getting paid through. I don't know what month it is. September.

[Josh Brown]

I think if they tweet the right things.

[Michael Batnick]

Right. It's not like they're being, they tweet.

[Jim Leventhal]

The right things like, and being told.

[Michael Batnick]

To off like you can't pay your mortgage tomorrow. Now I'm not, I'm not minimizing it. Yeah, right.

[Jim Leventhal]

No, no, yeah.

[Michael Batnick]

But hopefully in the next, in the next several months they'll be able to find work and we'll find out.

[Josh Brown]

Do you see the article this week in the Journal? 50% of consumer spending is coming from the top 10% of wealthy households.

[Jim Leventhal]

Not being facetious, isn't that always the case? I feel like, I feel like my whole life.

[Michael Batnick]

No, it was lower than that.

[Josh Brown]

They say it used to be 35%. Looking recently.

[Michael Batnick]

So then, so then with that being considered and looking at this just through the lens of, of the human, Human impact aside, what matters to spending is that the rich keep spending. And what's going to cause them to stop spending? Is it the stock market? Is it 20% lower? What's the number?

[Josh Brown]

I think it's the stock market.

[Jim Leventhal]

Well, also the housing market too, because the amount of wealth that's been built up in these houses.

[Josh Brown]

Is that what's fueling spending now though? Given how frozen the housing market is, I think it's 401 balances. People just feel rich.

[Jim Leventhal]

I think it's all of the above.

[Josh Brown]

And obviously employee stock based compensation.

[Michael Batnick]

So when do people stop feeling rich? Where's the s and P500? Is it 5,000?

[Jim Leventhal]

I think it's not just how far it goes down, but how long it stays down. So I go back to last August. You know, that was actually a correction. I think we actually got almost a 10% down from peak to trough, but it was over in literally two months. So like nobody had time to register. Your neurons didn't have time to register.

[Josh Brown]

It between, between September of 2023 and September of 2024. So one year the highest earners, the top 10%, increased their spending by 12% spending. My working class and middle class households meanwhile, dropped over the same period. And if you. This is data going back to 1989, that top 10% of spenders was more like 30% and now it's over 50%. Like that's the should size. Is that sustainable?

[Jim Leventhal]

Not if you're a shareholder of Dollar General. And again, sorry, I'm going to do this again.

[Josh Brown]

Think about that though. When you're looking at stocks, you kind of don't want to be necessarily in the trades that cater to the lowest end consumer.

[Jim Leventhal]

I don't think so. And again, I'm just going to be insensitive again. There's never really been a time in my economic thesis that I've said let's depend on the lowest quintiles of consumption. Yeah, okay, sorry, I feel like an asshole, but I'm just.

[Michael Batnick]

No, we're talking about the stock market, by the way. That's a disgusting close. It accelerated. Nvidia's loss is down 8.5%. All right, let's see what happens tomorrow.

[Josh Brown]

Can we do some stocks to close things out?

[Jim Leventhal]

Let's do it.

[Josh Brown]

All right. I want to hear about what you're buying these days and why and throw out some names.

[Jim Leventhal]

Yeah, it's like let's do final trades.

[Josh Brown]

Let's do final trades.

[Jim Leventhal]

Cisco Systems. I really do like Cisco Systems. We all know it, right?

[Michael Batnick]

Cisco looks good.

[Josh Brown]

Let's take a look.

[Michael Batnick]

What's happening? What's the story? I don't know anything about it.

[Josh Brown]

Stock is uptrending, looks really good, combination.

[Jim Leventhal]

Of hardware and software. Okay, so you know the hardware, it's the switches and routers and they've got partnerships with Nvidia which keeps that business humming along and it gets to use the letters A and I and it's earning releases. So that makes things good.

[Josh Brown]

That helps.

[Jim Leventhal]

It also has been over many years growing its software business to diversify its business. And the Splunk acquisition really boosts its security business.

[Josh Brown]

Cyber.

[Jim Leventhal]

Yeah, yeah. Which obviously is a growth area. But I think really what you're seeing in the stock as a stock market participant, you're seeing a RE rating of the multiple. And there's a direct analog in my opinion to Oracle, which for many, many years was just bebopping around at a mid teens multiple. It was about two years ago Oracle Cloud Infrastructure Services, they started catering to AI and the stock got re rated, doubled into the. Yeah, but the multiple went up 50%. And that's what contributed to. You had earnings growth and a multiple rerated.

[Josh Brown]

What's multiple on Cisco?

[Jim Leventhal]

Sixteen and a half.

[Josh Brown]

What should it be?

[Jim Leventhal]

You should be market multiple 21, 22.

[Josh Brown]

So if they just continue to execute, ultimately the multiple will go back to a market multiple.

[Jim Leventhal]

Yes.

[Josh Brown]

This stock is now making highs not seen since the year 2001.

[Michael Batnick]

And nobody's talking about it except for you. Yeah, that's great.

[Josh Brown]

Reminds me of IBM in that way.

[Jim Leventhal]

I love the comparison. I love the comparison and I love the fact that IBM is surging. Cause remember there was like a 1012 year period, I think I was in and out of it three times. Never made money or it just didn't go anywhere. What happened to Cisco is like every company in the world, it got beat up during the pandemic. It was out of sync in terms of its supply chain. First that was clogged up. Then customers came in and said because of the supply chain we're going to over order. What happens when you over order? Eventually the supply chain fixes itself. You've got high inventories and the order book went down. So you had to go through that. And they came out of that about a year ago. Now when a stock gets, has a series of bad earnings reports, it's in the penalty box. And you don't get out of the penalty box with one good earnings report. Yeah, I think it was, I think it was like the April quarter of last year, they had the first good earnings report. Stock traded up in the after hours, Next day got pummeled and I was like, all right, we got to do this. But when you get that second good earnings report, third good earnings report, it gets people's attention.

[Josh Brown]

Like, all right, maybe this isn't a fluke. Yeah, so we did Citi. We'll skip that. Abv.

[Jim Leventhal]

Yeah. You know, we talk about good management and sometimes I think like, what does that mean? Like why would you say that? So here's a company that had a melting ice cube. Its main business was Humira, the anti inflammatory arthritis.

[Josh Brown]

But they do Skyrizi also.

[Jim Leventhal]

So what? Humira came off patent and they had to replace it and they replaced it with these two drugs, Skyrizi and Rinvoq, which have been gangbusters.

[Josh Brown]

Great song too. Nothing is everything. Like it's one of my favorites. I think I'm actually the one I like the best is I'm lowering my A1C. That's my. Who's, what's, which one is that? Does anyone know? No. It's like. It'll come to me. Okay. Sky Wizzy is. Is skin.

[Jim Leventhal]

Yeah.

[Josh Brown]

Okay.

[Jim Leventhal]

Exactly. Eczema, psoriasis, all that sort of stuff. Okay. But they've completely replaced. Replaced Humira. They've completely replaced the revenue, and they keep getting these new indications for it. So they grew that business organically. They've made some really good acquisitions.

[Josh Brown]

Jardiance. Sorry, Jardiance is lowering my A1C.

[Michael Batnick]

Nobody knows what you're talking about.

[Josh Brown]

Where's Murphy with Jardiance? Easy to see I'm lowering my A1C.

[Michael Batnick]

You watch these? Watch commercials?

[Josh Brown]

Yeah. All right. Go on. No, you have it. Okay.

[Jim Leventhal]

So those are the sort of things that we talk about when we talk about good management, those actions. Stock trades at around 16 times earnings, 3.2% dividend yield. So, you know, even if you have to wait, I don't think you do, because it's got a nice run to it right now. That 3.2% keeps you warm.

[Josh Brown]

All right, Delta, this one's on my list of the best stocks in the market. Dal looks amazing. Why is this going to. This. This is up a lot, though, Delta. Why is it going to keep going?

[Jim Leventhal]

I hate using the term Goldilocks, but I think it's what you got here.

[Josh Brown]

For the better best. The best carriers. So Delta and United.

[Jim Leventhal]

United, yes. American just has too much debt.

[Josh Brown]

Okay?

[Jim Leventhal]

Too much debt. But look, here's what you've got. You've got low fuel prices. We've seen. Look at Delta, right?

[Michael Batnick]

I know, I sold it.

[Jim Leventhal]

You've got.

[Michael Batnick]

I know, I know.

[Jim Leventhal]

It's down a little bit from the high. You can pick it back up. Demand is hanging in there like people are still traveling. And it doesn't seem until you get layoffs, they're going to keep traveling. Traveling. All right, now, look, this is not a stock you want to own into a recession. But apropos of everything we're saying, I just don't see that happening anytime soon. So demand is good. Fuel prices are low. Contracts with their major unions have been done over the last few years. So you don't have to worry about that. That's kind of as good as it gets. So here's a stock that looks reasonably like it will earn $7.50 this year, maybe $8.50 next year. They've actually been performing so well over the last few years that they've been delevering their balance sheets. Why do airlines and similar companies get such crummy multiples? And this is trading around 7, 8 times multiples. A lot of times it's because it's capital intensive and you gotta fund that with debt. And equity markets don't like that. They don't like being behind a ton of debt. So as you delever, as you knock down the debt on the balance sheet, they're generating about 3,4 billion of free cash flow a year against a debt load that's around in the high teens. Right. It starts to come down where the equity holders look at this and say, well wait a second. More of the earnings, more of the free cash flow are coming to me. I should trade this at 10 times. So 75, $85 a share unless you get a recession, I think that's where you're going to see the stock by the end of the year.

[Josh Brown]

There was a time five years ago that Warren Buffett was the largest shareholder in all five major airlines. I think he was going to be right. And then the pandemic happened and he had to sell because they all needed bailouts. They could not have stayed in business absent the bailouts and the optics of. At that time he was the richest man in the world and he confirmed that here's the richest man in the world is the largest shareholder in five companies that are getting federal assistance. So he almost had to take the loss to save those companies. And nobody gives him credit for having done that. Cuz I think if it weren't thus, he would have written it out. Like people like Buffett got scared. He sold the airlines. No, dickhead, he saved them. He had to be. He had to get out of them in order for them to get bailed out. And they needed to be bailed out during the pandemic.

[Jim Leventhal]

That is really interesting. I agree with you. I hadn't thought about that at all. I think you're absolutely.

[Josh Brown]

That was my theory.

[Michael Batnick]

He confirmed it at one of the meetings two years ago. He confirmed it.

[Josh Brown]

What did he say?

[Michael Batnick]

He basically. He basically said that.

[Josh Brown]

Yeah, yeah. Like he, he martyred himself so that the airlines could survive.

[Jim Leventhal]

Okay.

[Josh Brown]

And I thought that was. But I think he would have been right any anyway because those stocks were doing well. So now they've resumed doing well and they don't act like the airlines used to act. They act. They're acting different. Right, right, differently. What did Delta do right that the other ones haven't done as well?

[Jim Leventhal]

There's a few things here, but the.

[Josh Brown]

Customer experience is really good.

[Jim Leventhal]

The customer experience is really good. They do things like fly their planes on time notwithstanding. What happened with crowdstrike was crowdstri strike.

[Michael Batnick]

Partnership with amex, the lounges got hot. Like they're, they're connecting with the consumer, I think.

[Jim Leventhal]

Yes, Michael. But also, you know, what they've done and everybody's followed them is really segmenting the cabin so that, you know, you go back 20 years ago, I don't.

[Josh Brown]

Want to sit with the riff raff. I agree.

[Jim Leventhal]

Well, go back 20 years ago. Where did they make their money? The front of the plane. Where business people were going to spend $4,000 to fly across, you know, cross country. And I don't know about your company. I know my company. That ain't going to fly. Right. But you know, you can buy a regular ticket and if you, Jimmy, want to upgrade it, that's fine. And I may choose to just go to Economy plus, get a little extra room.

[Josh Brown]

Comfort plus, whatever. Yeah, Comfort plus is a great deal.

[Jim Leventhal]

That's where my waistband is going. But I think that's one thing they did is segmenting the cabin. They do really fly their planes on time. And I gotta tell you, I'm in American Airlines. That's where I fly the most. Cause whatever. Or 40 years ago, I signed up with them on their frequent flyers. So now I've got almost a million. But the number of times that they cancel or delay a flight is insane. Yeah, but I also think you. I'm sorry, I forget. One of you just said, hey, the airlines are doing something differently. It goes back 15 years ago to the great financial crisis. That's when they did all the things that the customers hate but the shareholders loved. Right. They stopped flying empty planes just to get, you know, get a route empire. And they started segmenting what they were spending on or what they were charging on. Right.

[Josh Brown]

So that's charging for bags, extra bag. Yeah.

[Jim Leventhal]

Do you remember 20 years ago you didn't have to pay to actually check your bags?

[Josh Brown]

30 years ago, you could smoke a butt on the plane. I remember all of it. I remember all of it. Did you have fun on the show today?

[Jim Leventhal]

Had a great time. You guys are awesome.

[Josh Brown]

I can't believe how long it took for, for us to get you on. It's. It's me.

[Jim Leventhal]

I knew, I knew, I knew one day someday over the rainbow.

[Josh Brown]

Dude, we had so much fun talking to you. We could do this for hours. But we won't. But I do want to tell you that, and this is from the heart, truthfully, I think you're one of the best people on financial tv. And I want to give you three reasons that I thought about as to why you probably could guess what I'm going to say number one, I have never seen you run away from a situation where you were wrong or down in a stock or forced to change your mind. Not only do you show up in those moments and a lot of people don't, we know who they are. Hang on. I'm being told we have a caller, Steve W. From Short Hills, New Jersey. You have something you want to ask Jim?

[Jim Leventhal]

Yeah. Jim sucks.

[Josh Brown]

Whoever. Steve, we lost Steve. You don't run away and you face the music. And I think I do, too. I like to be you.

[Jim Leventhal]

Absolutely.

[Josh Brown]

I think I say I'm an idiot, I missed the stock, or I was wrong on this stock. But you do that. And not a lot of people do that. And you take the punishment, which we, frankly, we deserve sometimes. So I admire you for that. That's number one. Number two, when people mess with you, you stick up for yourself, but you never make it personal. And that's sort of a lost art in 2025, especially when you throw in the Internet and Twitter. Like, people are horrendous to each other. People do not give each other an inch when they're wrong about something. It's like you were wrong and now you should probably die. That's how people speak to each other. I've never seen you do that. Okay, number three, as I mentioned at the top of the show, you are descended from one of the great gentlemen in the history of Wall street. And I never got to meet him personally.

[Jim Leventhal]

You and he would have gotten along.

[Josh Brown]

You told me that a long time ago.

[Jim Leventhal]

You would have been such good friends. You would have been up until eight hours.

[Josh Brown]

Talk about your family and your dad and, and maybe give us some, some wisdom that you learned from the great Mr. Leben. What was his first name?

[Jim Leventhal]

Jim.

[Josh Brown]

He was Jim. Gentleman Jim. Lebenthal is what people said.

[Jim Leventhal]

He was a great man. He was a great man. And I, I really. And like you. Just incredibly charismatic. No, just incredibly charismatic.

[Josh Brown]

I will take that.

[Jim Leventhal]

Like, people want to be around you. They wanted to be around him. He was not a guy like, he actually wasn't like me. He wouldn't get into like Macaulay. Duration of the bond portfolio. He had no interest in that. What he had interest in was what municipal bonds, which were his baby. That was the ad line, what they built. So he loved the subways, the sewers, the bridges, the hospitals. I mean, he really had that civic minded attitude.

[Josh Brown]

LeBenthall & Co. Was a municipal bond at its brokerage. It's like the name in muni bonds.

[Jim Leventhal]

It Was. Now, listen, God bless Dad. He did something in the 70s, 80s and 90s that you can't do today, which was he just bought advertising like crazy. It's too expensive to do it today. But he was like Ed Carvel and Frank Perdue, and he would just. By advertising like crazy, which gave this image of being like a national powerhouse. He was the Greater New York City Bond House.

[Josh Brown]

But he was like, everybody knew Lebenthal and they thought of Muni bonds.

[Jim Leventhal]

Yeah. I honestly have thought about this. Like, you and he, like, I would want to just be around the table with the two of you until two in the morning with a bottle of whiskey, because it would have been legendary. But I also. Not just to repay the compliment, but I do want you to know something. You teach me every day. Day. Every time I interact with you.

[Josh Brown]

Oh, wow, look at this.

[Jim Leventhal]

You teach me. No, I'm serious. You teach me not just information, but how to carry myself.

[Josh Brown]

Yeah.

[Jim Leventhal]

I have learned from you. Stop taking myself so goddamn serious.

[Josh Brown]

That's right. That's right.

[Jim Leventhal]

And it's like every day I'm with you.

[Josh Brown]

Well, people really appreciate. People really appreciate you for who you are. And I do think that when people flip on the tv, they see whatever the cast is going to be for the show that day. Day. Everyone has their favorite people. Everyone has people they can't stand listening to. I know I fall into. I polarize the audience a little bit. I understand that. It's perfectly fine. But I have to tell you, when I get the email and it says who the cast is that day, and you were on the show, the first thing I say to myself is, all right, we're gonna have some fun today.

[Jim Leventhal]

Likewise. And I want to include Mike in the. In the. The general fanfare.

[Josh Brown]

Michael could never do that show.

[Jim Leventhal]

No, I. Listen, I. I have followed what you guys have done here at RITHOLTZ over the 12 years that I've known you, and it's absolutely fabulous. You have built a culture, and it's hard to do. We're doing it at Serity Partners, too. But it's hard to grow and maintain a culture, maintain an esprit de corps where everybody knows what the mission is and we're all doing it together, and it comes from the top. And you guys have done that. You've said that. I watch what you do.

[Josh Brown]

Thank you. Thank you very much, Jim. We appreciate it. And I want to tell people, Saturday Partners, do you have, like, commentary that comes out or how do people. Is the best thing to do. Just watch the show our thought leadership.

[Jim Leventhal]

Is up on the web.

[Josh Brown]

Okay.

[Jim Leventhal]

You know, we're a name that maybe you haven't heard that much if you're outside the industry, but we're about 120 billion in assets under management.

[Josh Brown]

Big firm, 1200 people.

[Jim Leventhal]

Look, this is the space. This is the space the three of us are operating in, right? It's the registered investment advisory space. I remember coming out of business school, everybody was like, you gotta go to Wall street and be an investment research analyst. Right? And then Henry Balajit screwed that up, and then it.

[Josh Brown]

We're in the right.

[Jim Leventhal]

You got to be a hedge fund, and then you got to be private equity. Ria is the right place to be. And it's not a flash in the pan.

[Josh Brown]

I love it. What's the thing you're most looking forward to in the future?

[Jim Leventhal]

Oh, the calming down of this may be so naive. Right? The calming down of what's going on with Washington D.C. it's about to get so much crazier. I know, but then it's got to calm down, right? Like, we all need a summer vacation fair.

[Josh Brown]

Michael, what's the thing you're most looking forward to?

[Michael Batnick]

I'm looking forward to warming up a little bit. It's.

[Jim Leventhal]

It's.

[Michael Batnick]

I'm just done with winter. It's enough already. Right?

[Josh Brown]

It's right about that time.

[Michael Batnick]

It's enough. We're thawing out.

[Josh Brown]

We're coming close.

[Michael Batnick]

What are you looking forward to, Josh?

[Josh Brown]

I'm going to. For Charles prime rib tonight, which is my favorite restaurant in New York.

[Michael Batnick]

Restaurants in the city.

[Josh Brown]

I think it's. I think it's literally the best restaurant in the city.

[Michael Batnick]

It is.

[Josh Brown]

So I'm. I'm going with some of my oldest friends, guys I used to coach baseball with when the. When the boys were little, and we'll have a little mini reunion. And it's my birthday, so I'm. I'm 50. 50 that they're gonna pay the bill. Thank you very. My birthday was two days ago. Thank you very much, though. I appreciate it. All right, that's it for us this week. Want to thank our special guest, Jim Leventhal. One of the. One of the best. And special thanks to the whole compound crew. You guys did an outstanding job last week when we were away with the live show with Belsky, Daniel, Duncan, Rob, Sean, Chart, Kid, Matt, Nicole, Graham, Keith, and our special guest today, Travis. Travis, welcome to the fold. All right, guys, that's it from us. Thank you so much for listening. We'll talk to you.