Reasons to Remain Overweight

Summary

Podcast Summary: "Reasons to Remain Overweight"

Podcast Information:

• Title: The Compound and Friends
• Host/Author: The Compound
• Description: Join Downtown Josh Brown, Michael Batnick, and a rotation of their friends every Tuesday and Friday for expert insight and hot takes on the latest in business and investing.
• Episode: Reasons to Remain Overweight
• Release Date: July 11, 2025

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1. Introduction to the Episode

The episode begins with a warm welcome as Josh Brown and Michael Batnick reconnect with their guests, Ryan Dietrich and Sonu Vargas. The casual banter sets the tone for an engaging discussion on the current state of the economy and investment strategies.

2. Current Market Overview

Michael Batnick (00:08:24 – 00:09:33):
Michael initiates the conversation by highlighting the unusual market situation: "The S&P is having just below average but still pretty good year. Tech is on fire once again..."

Sonu Vargas (00:09:13 – 00:09:48):
Sonu concurs, emphasizing that despite global economic noises like tariffs and Fed policies, there are no immediate signs of a recession: "I think the market's got momentum and despite all the noise... there's no sign of a recession yet."

3. Economic Growth Outlook

Sonu Vargas (00:09:48 – 00:10:28):
Sonu elaborates on economic growth estimates, suggesting the economy is growing at approximately 1.5%, which, while below previous expectations, is not recessional.

Josh Brown (00:10:02 – 00:11:03):
Josh introduces the concept of "denominator blindness," explaining that while consumer spending might seem sluggish, the stock market's performance is driven by different factors, particularly the AI megatrend.

4. Consumer Duality and Its Impact

Michael Batnick (00:12:00 – 00:13:07):
Michael discusses the concept of a two-speed or K-shaped economy, where top-income households continue to drive market performance, while the bottom 20% of households experience stagnation and reduced spending.

Josh Brown (00:13:07 – 00:15:54):
Josh elaborates on how the struggling lower-income households have minimal impact on the overall market, as "the bottom 20% of spenders account for like 15 basis points of consumption for the S&P 500 or Fortune 500 companies."

5. AI as the Driving Force

Michael Batnik (00:17:03 – 00:19:11):
Michael posits that AI is the central innovation fueling the current bull market: "AI is single-handedly powering this current bull market wave."

Sonu Vargas (00:19:42 – 00:20:47):
Sonu reinforces this by noting the impact of AI on various sectors, leading to substantial profit growth and stock market gains.

6. Market Breadth and Sector Performance

Josh Brown (00:16:52 – 00:19:42):
Josh presents a chart from Duality Research, illustrating the relative performance of S&P 500 sectors since the April lows. He points out that defensive sectors like Healthcare and Utilities are lagging, while cyclicals such as Technology, Communication Services, Industrials, and Financials are leading the market higher.

Ryan Dietrich (00:19:42 – 00:20:47):
Ryan adds that the strong performance in cyclicals indicates market optimism about the second half of the year: "That's the market's way of saying maybe the second half of this year is going to be okay."

7. Leading Economic Indicators

Sonu Vargas (00:34:26 – 00:36:45):
Sonu introduces Carson Group's proprietary Leading Economic Indicator (LEI) index, designed to provide a more accurate snapshot of the U.S. economy. He explains that the current LEI indicates the economy is growing below trend but remains non-recessionary.

Michael Batnik (00:36:45 – 00:38:25):
Michael discusses the importance of these indicators, noting that traditional metrics like GDP are lagging and often revised, making real-time investment decisions challenging.

8. Household Balance Sheets

Sonu Vargas (00:52:21 – 00:56:00):
Sonu delves into household balance sheets, highlighting that asset values (real estate, stocks) have grown significantly, enhancing disposable income despite rising liabilities: "Household balance sheets are in good shape... debt as a percentage of disposable income is relatively low compared to where we were even in 2019."

Josh Brown (00:53:08 – 00:56:11):
Josh emphasizes the shift from selling assets to buying against them, a trend that supports sustained consumer spending without forcing asset liquidation.

9. Tariffs and Policy Impacts

Michael Batnik (00:21:40 – 00:23:02):
Michael speculates on the potential impact of President Trump's tariffs, discussing scenarios where persistent tariffs could have adverse effects on various sectors: "They would have absolutely thrown the housing market off a cliff... forced the Fed to hike rates."

Sonu Vargas (00:23:14 – 00:23:49):
Sonu counters by suggesting the market bets that such tariffs won't materialize significantly, thereby minimizing their impact on current strategies.

10. Travel and Las Vegas as Economic Indicators

Michael Batnik (00:44:40 – 00:51:40):
Michael uses Las Vegas as a barometer for consumer behavior, noting declining tourism and high prices as signs of restrained discretionary spending: "Nested price hikes in Las Vegas are stopping people from going."

Sonu Vargas (00:47:18 – 00:51:54):
Sonu adds that while international tourism has decreased, domestic sectors like Delta Airlines have reported strong performance, indicating varied consumer segments.

11. Profit Margins and Forward Earnings

Ryan Dietrich (00:57:09 – 00:57:29):
Ryan presents a chart showing forward earnings for the S&P 500 at an all-time high, driven predominantly by AI-related sectors.

Sonu Vargas (00:59:07 – 01:00:16):
Sonu breaks down S&P 500 returns, attributing 49% to sales growth, 26% to multiple expansion, and 20% to margin expansion, indicating a healthy mix supporting market valuations.

12. Investor Sentiment and Future Market Trends

Ryan Dietrich (00:62:10 – 01:03:03):
Ryan discusses historical data showing that years with strong first and second halves tend to continue upward, reinforcing the bullish outlook. He emphasizes the importance of behavioral factors and sentiment in sustaining market momentum.

Josh Brown (00:64:04 – 00:66:42):
Josh highlights the low VIX as a sign of reduced market volatility and high investor confidence: "VIX is at 15. It's unbelievable. It's on the mat."

13. Conclusion and Final Thoughts

The episode wraps up with personal anecdotes and future plans from the guests, reinforcing the strong bond among the panelists. Michael Batnick thanks Ryan and Sonu for their insights, emphasizing the importance of diversified portfolios in the current economic landscape.

Notable Quotes:

• Sonu Vargas (00:25:21): "We think this is a great time for a diversified portfolio going forward."
• Ryan Dietrich (00:27:56): "The shorts are increasing, but the market's action suggests we are in a bull market and it's still going to go higher."
• Michael Batnik (00:26:33): "This is AI. It is single-handedly powering this current bull market."

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Key Takeaways:

• Market Resilience: Despite global economic challenges, the U.S. stock market, particularly tech and cyclical sectors, remains robust, largely driven by AI innovations.
• Economic Indicators: Proprietary indicators suggest the economy is growing below trend but not recessionary, supporting continued market strength.
• Consumer Behavior: A two-speed economy persists, with high-income households driving investment markets while lower-income groups face stagnation.
• Investment Strategy: Maintaining an overweight position in equities, with diversification across international markets and managed futures, remains a favorable strategy.
• Future Outlook: Historical data and current market behaviors indicate potential for continued growth in the latter half of the year, supported by strong profit margins and forward earnings expectations.

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This comprehensive summary encapsulates the key discussions, insights, and conclusions from the "Reasons to Remain Overweight" episode of "The Compound and Friends," providing valuable information for both regular listeners and newcomers.

Transcript

[Josh Brown]

Josh, did you miss potting?

[Michael Batnik]

I did. I missed our friendship. I feel like half of our conversations are on the air.

[Ryan Dietrich]

For everybody here.

[Michael Batnik]

So what's going on with Mike? I hope we have a podcast episode scheduled soon, so. All right, boys, this is truly a treat. I'm so excited that you're here. You're staying in New York for how long?

[Ryan Dietrich]

Go home tomorrow. Got in yesterday.

[Michael Batnik]

You got here yesterday?

[Ryan Dietrich]

Yesterday.

[Michael Batnik]

Okay, what were the rounds? What you do?

[Ryan Dietrich]

I did CNBC this morning at 6 o', clock, which was fun.

[Michael Batnik]

Is that pre Squaw? What is that?

[Ryan Dietrich]

No, it was pre Squaw. It was Squawk. It was a Joe.

[Michael Batnik]

Okay, Joe. Oh, yeah, right there.

[Ryan Dietrich]

You know, three blocks.

[Michael Batnik]

Super bearish.

[Ryan Dietrich]

No, no, I don't know what I was. I went super bearish, though, you know? You know, Ra guys did some Yahoo.

[Michael Batnik]

Yesterday and John's not here, but somebody's got to make this thing work. All right, guys, Nicole's birthday this week, so I don't know if he brought. I don't know if he brought any gifts or anything like that. All right, so you did. You did Squawk. What else?

[Ryan Dietrich]

Some Yahoo Finance yesterday as well. And then we got the Stock Twits. CMT Summer social. As soon as this is over. Which Jay Woods.

[Josh Brown]

Sona, what about you? They let you on tv?

[Sonu Vargas]

No, it's just him.

[Josh Brown]

Just this guy.

[Michael Batnik]

You get him ready for it, though.

[Ryan Dietrich]

Exactly, I say. So what should I say?

[Michael Batnik]

Where's the Stock Twits event? I wish I could go.

[Ryan Dietrich]

It's down by the New York Stock Exchange somewhere on Stone street at a sports bar.

[Michael Batnik]

And Jay woods is organizing it. It's not going to be very far from the exchange.

[Ryan Dietrich]

No, it's not. And it's at a sports bar down there.

[Michael Batnik]

Shout out to Stock Twitch. Shout out to the mta. All right, so listen, I'm super excited about this. The last time we talked officially was October. Came to Omaha, had a great time there. And you guys can watch your bid for a second.

[Ryan Dietrich]

Josh, you had staked twice in one day when you went to Omaha.

[Sonu Vargas]

It was a.

[Michael Batnik]

Three times.

[Ryan Dietrich]

It was three times. I was trying to. Okay, it was three.

[Josh Brown]

You did.

[Ryan Dietrich]

He's smiling. Look at.

[Michael Batnik]

I had three meetings at three different steakhouses all in the same day. And I ate at all three of them. One of them was just supposed to be a drink, but I'm like. But like, I'm having a drink. Like a filet.

[Ryan Dietrich]

Yeah.

[Michael Batnik]

All right. Omaha's cool that way. You guys have a lot of great. You guys Have a lot of great restaurants. But what I wanted to say was it was really awesome being on your show, and now the tables have turned. We have you on our show.

[Sonu Vargas]

Thank you.

[Michael Batnik]

So now we get to ask the questions, and you guys get to show us how smart you are. Carson's pretty big in Omaha. Like, one out of every three people I met worked at Carson at this event. It was a FPA event or whatever. So what's it like being when you're. When you're there? Cause I know you guys. Do you live in.

[Sonu Vargas]

I'm in Chicago.

[Michael Batnik]

You're in Chicago. So when you guys are there, you're there in town. What's it like being like we're the Carson people?

[Sonu Vargas]

It's mostly a steak. Yeah.

[Michael Batnik]

More steaks, more stakes.

[Sonu Vargas]

But it's nice to be around everyone because we work remotely.

[Michael Batnik]

Yeah.

[Sonu Vargas]

So it's nice to, you know, be around the prop.

[Josh Brown]

Is there a giant water cooler?

[Michael Batnik]

Basically like a giant building.

[Ryan Dietrich]

Yes.

[Michael Batnik]

I didn't get to go visit in person. I was supposed to, but I just couldn't. So I'll come. Next time I come, I'll come visit. Yeah.

[Ryan Dietrich]

Carson's a big RAA.

[Michael Batnik]

Yeah.

[Ryan Dietrich]

42 billion. Going about 41 or 42 states, depending on they're signing some people like as we speak.

[Josh Brown]

How many advisors?

[Ryan Dietrich]

Approximately 500.

[Sonu Vargas]

500.

[Josh Brown]

Have you spoke to all of them?

[Ryan Dietrich]

Jeez.

[Sonu Vargas]

Sonu probably has maybe about 350 or so. There are a lot of new ones, but it's true.

[Michael Batnik]

It's two firms. So half my understanding the way it was explained to me by a Carson person, half the building is Carson platform, which are like advisors that have their own doing business as ria, but then they use Carson for support and tech and compliance and research. And then the other half are people that are actually Carson reps at the Carson Corporate. Ria. Yes.

[Sonu Vargas]

Yeah, that's Carson wealth. Carson Group.

[Michael Batnik]

Carson.

[Sonu Vargas]

Carson Group.

[Michael Batnik]

Yeah. Okay. All right. Very cool. All right, so let's. Let's get on the way, guys. How we looking? Good. Hit me good.

[Ryan Dietrich]

All right, Here we go.

[Michael Batnik]

Episode 199. Oh, my God.

[Josh Brown]

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[Michael Batnik]

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[Josh Brown]

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[Josh Brown]

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[Michael Batnik]

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[Josh Brown]

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[Michael Batnik]

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[Michael Batnik]

Welcome to.

[Sonu Vargas]

The compound and friends.

[Michael Batnik]

All opinions expressed by Josh Brown, Michael.

[Ryan Dietrich]

Batnik and their castmates are solely their.

[Michael Batnik]

Own opinions and do not reflect the.

[Ryan Dietrich]

Opinion of Ritholtz Wealth Management. This podcast is for informational purposes only.

[Michael Batnik]

And should not be relied upon for any investment decisions.

[Ryan Dietrich]

Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.

[Michael Batnik]

Ladies and gentlemen, welcome to one of the best investing podcasts in the world. Not quite the only great investing podcast in the world.

[Josh Brown]

Well, one of the best.

[Michael Batnik]

One of the best.

[Josh Brown]

You lost your fastball. You went to Italy. You lost the fastball.

[Michael Batnik]

No, we're in the presence of podcast greatness.

[Josh Brown]

That's true.

[Michael Batnik]

So I pulled it back a little bit. All right, ladies and gentlemen, we are very fortunate to have two special guests here in the studio. You've met Ryan Dietrich before. Returning champion to the show. Ryan is the Chief Market Strategist at Carson Group, an advisory firm with more than $42 billion in assets. Prior to Carson, Ryan spent that. The pointing is my move. Ryan spent more than a decade at Shaffer's Investment Research and six years at LPL Financial. Ryan also hosts a top investing podcast, Facts vs. Feelings, alongside Carson Group colleague Sono Vargas. Welcome to the show.

[Sonu Vargas]

Thank you.

[Ryan Dietrich]

February 24th, last time I was here and lots of different discuss.

[Michael Batnik]

Yes, for sure, for sure. Sunu, you're a VP and global macro strategist at Carson. 20 years experience before joining Carson, partner and director of research at Convex Capital Management where you co manage portfolios, advise clients and led the research team. Welcome to the show.

[Sonu Vargas]

Thank you.

[Michael Batnik]

Can we do this? Can we talk about the shirts for a minute?

[Ryan Dietrich]

Yes.

[Sonu Vargas]

Yes.

[Michael Batnik]

All right, so you have Michael Batnik on a Hawaiian shirt. And Ryan, you have downtown Josh Brown. Did you just have those lying around or like always?

[Ryan Dietrich]

I, I just said to him about a month ago, we need to do something for your show. And I know you guys like your Hawaiian shirts. And one thing led to another and like I said, I mean, we're staying at a hotel about three, four blocks away and I had two people stop me, they thought I was Josh Brown. I said, no, I'm not Josh Brown. I don't wear my own shirt. But no, it's, I mean, listen, we're a huge fan of you guys. This is a huge honor. I mean, everything you've done in this industry and it means a lot and it's just, I worry we're gonna run out of time in a hurry with the four of us, but it's gonna be fun, whatever, we're gonna make it work. Whatever we talk about, we're gonna make it work.

[Michael Batnik]

And you guys have one of the best shows, obviously should go without saying. And I think there's probably a ton of overlap. A lot of our listeners probably listen to you guys, A lot of your listeners probably listen to us. So this will be very enjoyable for the audience, hopefully. And look, it's a great time to have this conversation, kind of high level conversation, economy, markets. Because I can't remember a weirder situation than the one that we're in right now. But I don't even, I don't even want to set the stage and give you my take because I really want to focus. People have heard enough of me. I want to focus on what you guys think is happening right now. We're halfway through the year. The S and P is having a just below average but still pretty good year. Tech is on fire once again. The tariff thing never went away, but also didn't seem to become a huge issue. Earnings are growing, the economy seems okay. Fed isn't doing anything and this is just kind of like a status quo. The same stasis we've been in for a long time. What do you think is happening?

[Sonu Vargas]

I think the market's got momentum and despite all the noise of tariffs and Fed policy, we could talk about all that, but there's no sign of a recession yet. I think that's the reality and that's always good for profit growth.

[Michael Batnik]

Yeah. What's good is that you said that a year ago and six months ago and you've been right. And a lot of people said there were plenty of signs of recession and maybe there still are. But your larger point is it's not happening yet.

[Sonu Vargas]

Right. Which doesn't mean the economy is growing at 3%. When we came into this year, I think that was the expectation for a lot of people. Oh, the economy is growing at 3%. We were in the camp that wait, 2023, 2024, the economy grew at 3, near 3%. That's not going to continue. Maybe closer to one and a half, 2% or so. But that's not recessionary.

[Michael Batnik]

Yeah. Is it good enough?

[Sonu Vargas]

I think it's more than good enough for profits, especially when you talk about large cap tech.

[Michael Batnik]

What do you think the economy is growing at right now?

[Sonu Vargas]

One and a half percent.

[Michael Batnik]

Okay.

[Sonu Vargas]

Yeah.

[Michael Batnik]

And is that above expectations? Weren't people saying flat growth this year? Was it below? I don't even know where the consensus.

[Josh Brown]

Remember GDP now? Yeah, the Atlanta Fed Tracker. Holy mackerel. Did that get bearish in a hurry?

[Sonu Vargas]

Yeah, and now it's bullish. Now it's a two and a half, something like that.

[Michael Batnik]

But some of the surprises are. Now to the downside is the thing that you'll hear people say recently, and I don't follow it closely enough to have a strong opinion on whether or not it is or it isn't. But do you agree with that? Take that. Some of the downside surprises are becoming increasingly noteworthy.

[Sonu Vargas]

It's slowing. That's why if you just look at aggregate income growth, right, which is a product of payroll growth, which is non farm payrolls, wage growth in hours. Hours is soft. Wage growth is slowing. Payroll growth is slowing. So aggregate income growth is growing around 3% or so. So think of that as nominal GDP growth.

[Michael Batnik]

Okay.

[Josh Brown]

Yeah, but so you say all the time, like the, the consumer is the economy. 70% of the economy is consumer spending. But for the stock market, which is being led by the AI megatrend, which is being powered by Amazon's balance sheet and Microsoft's balance sheet, maybe consumer income is less relevant to power the stock market today. Is that fair?

[Sonu Vargas]

I think to an extent, yes. But ultimately, you know, the economy is where profits come from. At an aggregate level. Right. But then, you know, with the big hyperscalers, you have capex spending and one business is, or even one person spending is another business's revenue and profits. Right. So that's, I think, what's happening.

[Michael Batnik]

So we're going to do this a little bit later, but I can't, I kind of can't not say that we really need to retire this phrase the consumer, because it's descriptive of literally no one. We really have this two speed K shaped economy, whatever you want to call it. You have one consumer that effectively is driven completely by what the stock market just did in the last week. And you have another consumer that right now is showing all signs of throwing in the towel. And we can talk more about like what those signs are. But the bottom, I think 20% of households by income have now completely stopped traveling. Like they're not even, they're not even on the radar anymore. That same bottom 20% are making huge switches in their discretionary spending at retail stores. It's showing up in credit card data. It's showing up in. So like, is that the consumer or is the consumer like Jeff Bezos nephew who's got, you know, just for fun, 300,000 shares of Amazon and every passing hour his net worth increases by $17 million. Like, who's the consumer?

[Josh Brown]

Well, for the purposes of this discussion, the stock market discussion, it's the latter, obviously.

[Michael Batnik]

Right. So that's one of the hardest things, I think, when I said this is one of the weirdest times ever. I really think there's a huge portion of the American public that is struggling, but none of that struggle is reflected at all in the stock market. It doesn't seem to matter to earnings, doesn't seem to matter to valuations, doesn't at all seem to matter to the money that's being spent on AI and defense tech and all these other things. And so it's like, well, yeah, the consumer is the most important thing in the economy, but who's the consumer? What is the consumer? You got thoughts on this?

[Ryan Dietrich]

Yeah, I'll take a little different angle on it. You know, three months ago today was the lows. Right. 63 trading days ago was the lows in April.

[Michael Batnik]

I was so bearish.

[Ryan Dietrich]

Yeah. And what was everybody telling us? I mean, recession, recession, recession. So like Sonu just said, the economy's growing, you know, a little below trend, but it's not a recession. That's why I think we've had this huge, huge comeback. And I just looked, you know, so today we're going to be up 25% in three months. Only five other times in history have we gained 25% in a three month period. You're ready for these. Off the lows in 75, off the lows in 82. Off the lows in 2009, off the lows in 2020 and then in early 1999 in there one year later, higher every time. 22% average every single time up double digits. Yeah. Different this time. I know 99 was at the end. I get it. That's just for the people who like to point that out. But Josh, it's something we kick around on our team all the time because the consumer's pretty solid. But like you said, it's the upper incomes that are moving it. But as stewards of assets, our job is to understand are we going through recession, what's being priced in, what's not. You bring up good points, but at the same time, it's why we've been over at equities. We still think people are still buying stuff that move the economy.

[Michael Batnik]

So it's a tough discussion. So Sinu just said like one person spending is another person's income. For me, the question is that bottom two deciles that we talked about who have completely walked off the game board at this point and they're just paying their bills and trying to survive. By the way, these are the people that just nominated a almost full on communist as the mayoral candidate for the Democratic Party in New York City. So this is who I'm. So that group of people, how big, how much bigger can that cohort grow to where their lack of spending starts to actually impact the income of the Fortune 500, the S&P 500?

[Josh Brown]

No, no.

[Michael Batnik]

@ no point in time will they ever matter.

[Josh Brown]

To certain companies and sectors and industries.

[Michael Batnik]

Probably, but not to the overall market.

[Josh Brown]

Savita had this data point. I think it was her. The bottom 20% of spenders account for like 15 basis points of, of consumption for the S&P 500 or Fortune 500 companies.

[Michael Batnik]

Again, they don't even show up.

[Josh Brown]

Not talking about in real life, in the stock market, purely. These people matter for the stock market.

[Sonu Vargas]

They do not even generally. I, I think if you just look at overall aggregate consumption, a lot of it comes from the upper, let's say Quintiles. Right. 40 to 100 or even 60 to 100 in terms of income.

[Michael Batnik]

Yeah. So that's not new. That's not new. That's always that way. Like the distribution might accordion in and out, but just Generally speaking, here's what's new. A situation where the, the lower income household is still struggling with inflation now going on four years, while everyone else, especially people who have big assets in the stock market or own private businesses or whatever, the valuations for their assets grow to the point where they don't even feel inflation anymore and they're probably causing it.

[Josh Brown]

All right, let's talk about the stock market. Okay, so there's this incredible chart. I'm sure you guys have seen it. Do you know who's this? Duality research?

[Ryan Dietrich]

Not sure, but they share some good stuff.

[Josh Brown]

Okay, so this is pure eye candy. So for people that are listening, here's what we're looking at. They have a chart of the S&P 500 and at the bottom, at the bottom in April, they show the relative performance on a different axis. The relative performance of each sector compared to The S and P 500. Since the bottom. And what we're showing is what's happening is exactly what you want to see in a bull market bounce. So what's lagging dramatically? The most defensive names. Healthcare nobody wants. Staples and Utilities, nobody wants. What is leading us higher since the bottom and if you were to update it today, probably looks even better in terms of technology, communication, services and where I said it probably looks even better. Industrials and financials are on fire. So if you tune out everything and you are merely looking inside the market under the hood and you didn't know anything about the economy or tariffs or inflation or the Fed or anything, you would say this is about as technically healthy as a bull market could probably possibly be. The sectors that you want leading are doing just that.

[Ryan Dietrich]

I'll chime in. I mean a couple hours at the CMT thing we're going to talk about that. Because what's leading are the cyclic and we get the worries and concerns that everybody knows. When you see industrials, financials, communication services and tech making new weekly all time highs last week, that's the market's way of saying maybe the second half of this year is going to be okay. Maybe the economy's going to be a little bit better than we think. And you know the one thing and.

[Josh Brown]

Then the market's not wrong, you're wrong.

[Ryan Dietrich]

Yeah, well we've all learned that the hard way.

[Michael Batnik]

This is all one thing though. This is AI.

[Josh Brown]

Industrials and banks are.

[Michael Batnik]

AI industrials are 100% rallying on AI banks that like Caterpillar. Caterpillar is a great example of this. All the defense stocks, everything is the AI tailwind For spending. They have to physically move earth to build the facilities that financials. That's not AI. Yeah, it is the return of IPOs, return of M and A, booming bond markets, booming stock markets, wealth management, blah blah blah. It all comes back to the AI theme. It is single handedly powering this current bull market, the wave. Look, every bull market's powered by an innovation wave. Like none of. We're not breaking new ground saying that whether it's electricity or automobiles or the telephone, it's always something.

[Josh Brown]

You're right. Okay, here's another great one. This is from sentiment trader Ryan. I know you love this stuff. So the S&P 500 after the percentage of cyclical sub industry groups with a positive one year return that cycled from less than 20% to. To greater than 80%. So this is another way of saying the breadth, there's wide breadth thrust. If you look at the green arrows and you look at forward returns like by definition this happens at bottoms from oversold bearish to overbought bullish on a 12 month forward basis. This is the good stuff.

[Ryan Dietrich]

So I'll just say this. I thought last week's podcast was the best ever. Was there something different about it?

[Michael Batnik]

Yes.

[Ryan Dietrich]

I was GI Joe on Joe Fami and Joe pointed out this why Brett Thrust. You guys about are talking talked about it all over the place. And, and that's what it is where you have these short term extremely oversold to short term extremely overbought. And that's that flush out. Right. If everyone's thinking like somebody isn't thinking. General Patton, I love that one. And that's what we've seen. And we've seen that. You know Michael, every major bottom, you know we continue to see that. And it's just market psychology.

[Michael Batnik]

You really like that data point about all of the periods of time in history where we've had this kind of a thrust and a race to new highs.

[Josh Brown]

It's the most reliable bottom signal.

[Ryan Dietrich]

I can just chime in here. April 9th, right. We gained nine and a half percent of the S&P 500, 98% of all the volume was higher that day. So I got data back to 1980 from Bloomberg. That's like a top five day. All those days were the bottom. That was it. And then I said, you know what we really want to see is what we were talking about over Carson. Want to see another strong day sometime soon. April 21, we saw another day with like 95% of all stocks.

[Michael Batnik]

I remember that.

[Ryan Dietrich]

Yeah. And when you have back to back super duper strong days like that, within two weeks of each other, the lows are in. We were on record. At least I was. Maybe Sony was, but I was on record. So the lows are in. Like this is it. Like unless something really bad happens, the lows are in. And then we had the best May since 1990, one of the best Junes of all time. And now here we are making new highs maybe today by the time we're done talking. And I think that's just.

[Michael Batnik]

I want to ask you guys, there is a universe in which Trump does not rescind the tariffs or pushed the deadline out or whatever he did. I know it's some combination of the two. There's a universe where he says, you know what, I don't really care about the stock market that much this time. I'm a second term president. It is what it is. I have bigger problems to fix and the stock market will take care of itself. And we are at this point will have already implemented those original 145%, 110% taxes on penguins.

[Sonu Vargas]

I don't even know 50%.

[Michael Batnik]

Details, like, escape me now. But like there is a universe where he sticks to his guns because Lutnick loses a few fights in front of him and Navarro wins. You know? You know what I mean? Like he likes to watch them battle it out and then he says, I'm going with you. So there's a universe where Navarro wins and doesn't get put into a capsule and shot into the sun.

[Ryan Dietrich]

So more black eyes in the White.

[Sonu Vargas]

House, Navarro around more.

[Michael Batnik]

But you're not getting that first bread thrust is my point. On April 9th. You're definitely not getting the one on the 21st. In that universe, we're still in a 20% bear market and maybe worse because those tariffs had been, had they been implemented in those amounts, would have absolutely thrown the housing market off a cliff, would have absolutely forced the Fed by now to probably be hiking, would have taken the US Auto industry and cracked it in half like as implemented. So the bearishness around those tariffs wasn't totally crazy. Things just didn't play out that way. You had to take the position that Trump's not really going to do this.

[Sonu Vargas]

Which I think he reversed them. Right? Temporarily.

[Michael Batnik]

But I'm talking now picture a world where he didn't like things would look much different today than how they turned out.

[Sonu Vargas]

I think the market's bet maybe is that it's not going to happen.

[Michael Batnik]

Oh, definitely.

[Sonu Vargas]

That is the bet.

[Michael Batnik]

I would say definitely. Okay.

[Sonu Vargas]

But I Think ultimately where the impact is. And we talked about this all the time. The biggest impact of the tariffs is really it keeps pushing the Fed further and further away from a rate cut.

[Michael Batnik]

Okay, right. That's the biggest, like, takeaway from all this.

[Sonu Vargas]

And that's not good for the housing market. We talked about, you know, the duality of consumers. I think there's a duality across who owns homes at a 3.5% mortgage rate, effective mortgage rate, versus those that don't have a home.

[Michael Batnik]

So Trump two days ago tweeted 50% tariffs on copper, and then today I demand the Fed cut interest rates. These two things are a little bit incompatible with each other. Are you guys still monitoring the tariff front? Or at this point, is it not really a big factor in what you're telling clients?

[Sonu Vargas]

You kind of have to. Right, with the tariff thing, I mean, you know, just talking about portfolios as well. One thing we've talked about over the last couple of years, really, is that you need to diversify, diversifiers as well. So beyond bonds, do things like manage futures. And we saw the impact of that two days ago when he said 50% tariffs on copper. Copper jumped. All these managed futures funds, whatever they are, all of them have a big position in copper too. So that did well. And that's why we say, okay, you need to have some exposure to supply shocks, things like this as well.

[Josh Brown]

One of the other things that the market has going for it is you saw an insane amount of rotation in the second quarter. So the MAG7 are still below their highs. Bespoke has this great table showing that investors are selling winners and buying losers. So far in July. So so far In July, the 20 worst stocks in the first half of the year are the best performing, followed by the 50 worst, followed by the 100 worst. And it looks the exact opposite when you're talking about the 20 best stocks. They're being sold. The 50 best, 100 best.

[Michael Batnik]

This is just rebalancing, right? ETFs.

[Josh Brown]

I don't. I mean, I don't know, but I don't think. I don't think the ETFs are rebalancing into the junk.

[Michael Batnik]

Yeah, they are.

[Josh Brown]

What are you talking about?

[Michael Batnik]

Rules based to.

[Josh Brown]

To rebalance out of quality growth and into bullshit. No, it's not.

[Michael Batnik]

It depends on the staff.

[Josh Brown]

All right, here's another chart. Second quarter rebounds saw low quality being king. So these are a lot of Goldman Sachs baskets. So the meme stock basket was up 44%. You think they're not rebalancing? Into memes. Quantum computing was at 68%. So you're seeing this massive rotation inside the market which is. Ralph Hackempora said it was the lifeblood of a bull market.

[Ryan Dietrich]

Yep. You know, look at Ark, right. We had Kathy on our on facts versus feelings on April 23rd and the comments that we got, people weren't real happy about it.

[Michael Batnik]

You almost have to turn them off.

[Ryan Dietrich]

Well, I mean not towards he and I, but towards the guest. And I said damn. I said oh my goodness, Ark's about to go bonkers. It's up 51% since she joined the negativity toward Kathy. They were so mad at the stu that was lagging. And now you look at what's happened since those lows and it's just been like the beach ball, the ball under the water. You let go and it goes. But you're right, the lifeblood of a bull market is rotation. And we're seeing it. I'll tell you, bitcoin's hitting all time highs. Like I think the second we're doing this, we're not really get too into bitcoin. I'll just say this is anyone even talking about it. Is it? I was on cnbc. You know, I did a couple media things. Everyone saw about Nvidia 4 trillion. That's a real popular thing. I get it. But nobody's talking about bitcoin. I mean we all remember 2021 when it was going crazy and you had day trader Dave bangin hammer. I remember he looked out his window and he saw a deer. So he bought deer the stock and it went up like that was crazy times. You talk about cinnamon now. But it did work. I mean but, but like sentiment now. There's some optimism maybe, but we know the hedge funds missed it.

[Michael Batnik]

Do you get bothered when you see like the lowest quality stocks and the Cathie Wood stuff? Like when you see that take over market leadership, which I don't think it is by the way, but fine. Like let's say, let's say it started to do better. When you guys look at markets, do you say all right, this is a sign that we might want to get more cautious or do you just like look through it?

[Ryan Dietrich]

I'd look through it I guess when I see industrials financials also along with the party. So I'm that way.

[Michael Batnik]

That's kind of like I could accept that there's a lot of stupid shit going on.

[Josh Brown]

We're at all times.

[Sonu Vargas]

It depends on how long it goes on for too. Right.

[Michael Batnik]

But then I'm looking, I'm like, oh, wait a minute, Boeing is rallying. And for Boeing to rally you need like three acts of God, basically. But so I'm the same way as you. Like, I can acknowledge like, all right, there's really dumb stuff happening all around us, but also the fundamental underpinning is not all junk. There's like a lot of quality rallies.

[Ryan Dietrich]

So I want to hit rewind on something we said a little bit ago. But when we came into this year, what did we know? Well, we had back to back 20% years. We knew this the first quarter after 20% years, usually not that great. The first quarter in a post election year is like one of the weakest quarters in a four year presidential cycle. Oh, by the way, the last 20 years, the first quarter has been the worst. We were on record saying there could be a 12 to 15% peak to trough correction sometime during this year prior to the first half.

[Michael Batnik]

And I'm on record saying that every year, by the way.

[Ryan Dietrich]

Well, you're right, I mean, I hear you there, but you know, we can't, you know, so we, we said that and, and, and then it happens, right, and everyone freaks out and we get why the emotions of everything. But it's just incredible how it happened again and everyone got all beared up and now you realize the economy's not as bad as they said and things aren't as bad.

[Michael Batnik]

Are you surprised though at the strength of the.

[Ryan Dietrich]

And you have to be. I mean you guys share, you guys talked about it on Anal Spirits, quickest ever from down 15 to back. But at the same time, you know, look at credit markets. I mean, in April, one of the reasons I was fairly optimistic, I said junk bonds would be getting crushed if this, if this was saying that all of April. Thank you, I was listening to you. Yeah, but like then people kind of ignored it. They said, oh, look at this, look at that. It's like, no, high yield bonds are actually high yield. Spreads are hanging in there. Trust me, they spiked because we're in a darn near bear market. But those were those little clues and like you said, Josh, and then Taco, whatever you want to call it, happened on April 9th, 9th. And then it was off to the races.

[Michael Batnik]

You know what a really good tell in hindsight, which I certainly didn't pick up on at the time. But now that I look at it and I say like, oh, people should have been talking more about this, like foreign country stocks. They called his bluff better than the. So the US stock market had a conniption. It sold off 19 and a half percent. Granted, the comeback's been amazing, but like, overseas stocks were rallying, they were laughing like foreign investors. They got the whole game really easily and we didn't.

[Ryan Dietrich]

So I'm gonna set this up and turn it to Sonu. So we manage about $5 billion. You hear us talking like we manage real money along with talking about these things. We've been overweight, the US for two years, heavily overweight. The US People didn't like it, but it's worked. And where we were at the start of this year, I've been heavily overweight.

[Michael Batnik]

For two years too.

[Ryan Dietrich]

So, yeah, you're right for a while, you're just on vacation. You're allowed to be. But I mean, what do we think about International Senate?

[Sonu Vargas]

No, look, coming into this year, like I said, we were pedal to the metal on equity, overweight and US Equities. And then we were thinking about, look, one tailwind international stocks have had is the dollar going down, especially for US dollar based investors. And we are like, okay. And you think about why does the dollar go up or down generally? I mean, not over the next day or two. It's expectations, relative expectations of growth coming into the year. You know, people are expecting 3% growth in the US, maybe 0% growth in Europe. That's changed now, especially even before Liberation Day in March. You're talking about German fiscal spending, things like that. I sort of like, okay, maybe something is changing here. Let's move to a neutral weight. US versus international. That's what we did, you know, back in February and March. And we saw, you know, expectations for us going down.

[Michael Batnik]

So you guys trimmed us and added to international even while being, you know, overweight.

[Ryan Dietrich]

March 3rd, we did some pretty big trades and we, we did that so before all the trouble started.

[Josh Brown]

And okay, so you guys aren't like, you're likely as you should to look through a lot of the silliness because an all time high, there's always tons of silliness. Not easy to point that out. What about something like this? This week we saw bank of America and Goldman both hit the S and P with upgrades after downgrades earlier in the year. Does that say, all right, maybe. Maybe we're due for a little bit of a pause or is that too cute? You don't think about that sort of stuff.

[Sonu Vargas]

It kind of reflects momentum, right? The market's going up, everyone's moving up targets. Market goes down, everyone's moving down targets. But sentiment going back to something Ryan just said Sentiment doesn't seem very overextended.

[Josh Brown]

It's not.

[Michael Batnik]

You can't react to the strategists in real time because all they're doing is marking their own calls to where the market just went. David Costa net Goldman this is the big news today raised his year end s and P500 target to 6600 which would be 6% from the latest closing level. That's where we are lifted his 3 month and 12 month price targets to 6400 and 6900 nice respectively. Previous 2025 target was 6100 which he set in mid May during the trade war. So like most of the strategists on the street had to lower their targets in April when it looked like we were going to have a man made self induced recession and then when that came off the table it was only a matter of time before they had to chase the market higher. Definitely my, my comment to the listeners and the viewers is definitely do not try to align what you're doing in your account with year end price targets.

[Ryan Dietrich]

Well you know so Costin also said with while narrow breadth often signals the risk of larger than average drawdowns like we just talked about, I'm not sure where this narrow breadth argument's coming from because I'm simply not seeing that one.

[Josh Brown]

Here's how I would describe the sentiment and sentiment is very hard to describe as one sentiment because who are you talking about? Maybe a rally of disbelief. So for example this is from the daily chart book which I get a lot of my stuff from shout out to them. The estimated short interest is that estimated short interest for the top 10 stocks for the top 10% most shorted stocks is rising. It's up until the right there is a lot of fighting the tape and these are probably the junkie names and.

[Michael Batnik]

This is probably fueling like if we had to guess what's what's in here.

[Josh Brown]

I'm making this a peloton and a lot of those sort of the small.

[Sonu Vargas]

Growth mid cap growth names but also.

[Michael Batnik]

Maybe like the Modernas and Sure, yeah.

[Josh Brown]

And Moderna's rallying hard.

[Michael Batnik]

Yeah so the zooms.

[Ryan Dietrich]

Right.

[Josh Brown]

I think I don't think that this is further fueling fire to the fact that this is exactly what you want to see in terms of bull market both technically and on the sentiment side. I'm not seeing a lot of excess just in terms of like enthusiasm. Everybody in no, don't worry about risk. There's still a dose of disbelief.

[Ryan Dietrich]

I travel the country all the time do this and talk to financial advisors and their clients. Then you do Q and A. I've never in the last several this year been asked, hey, it's really good out there. How high is this going to go? You're always asking, what's wrong with it? What's bad out there? Look how bad this is. And I get it. But at the same time, the short interest is one example and we kind of hinted at it. Hedge funds, from what I see and hear, they've been fighting this thing up the whole time. And this is maybe another way of showing that they just keep increasing their shorts.

[Michael Batnik]

We know they were net sellers throughout the course of the spring.

[Ryan Dietrich]

Right.

[Michael Batnik]

Like, they didn't. It's really retail that jumped in with buy orders in size.

[Ryan Dietrich]

Congratulations.

[Michael Batnik]

Or any other category of professional. So that's notable. All right. You guys have your own proprietary leading economic indicator index, I guess would be the way to put it. You have your own. So what does that mean? You looked at the way it's typically done and you change the components or the basket of things that you look at for your own indicator.

[Sonu Vargas]

This is about 12 years ago when he created this. This is at my previous shop. We looked at the conference board's lei and we were like, wait, this doesn't quite capture what the US economy is.

[Michael Batnik]

What was wrong with it?

[Sonu Vargas]

It was mostly geared towards the industrial manufacturing sector rather than consumer, which is shrinking. And this was 2013. Right. And at that time you're like. And then every now and then they change the indicators and they, you know, do whatever it is they do. So you're like, we need to create our own.

[Michael Batnik]

Okay.

[Sonu Vargas]

And we said we want something that. And it's mostly for a sanity check. Right. I am not a believer in, like, indicator macro. There is a silver bullet indicator and I just certainly don't think RLE high.

[Michael Batnik]

Is this Magazine covers. I'll save you some time.

[Sonu Vargas]

Especially the economists. Yeah, so, but yeah, no, we created something that hopefully captures the US Economy. And because every day we get different indicators. Today we get claims, you get ism, PMIs. And then you're like going from one to another like, oh, this is bad. That's good. This is really bad.

[Michael Batnik]

That's the worst game that the media plays the game because the news comes out and they're like, have to cover it.

[Sonu Vargas]

Right.

[Michael Batnik]

So it's like, oh, markets are red because let's find an indicator that was worse than expected.

[Sonu Vargas]

The yield curve is inverted.

[Ryan Dietrich]

All of that.

[Sonu Vargas]

Right. So what was that April 1, two years ago?

[Ryan Dietrich]

April Fool's. Day of 22 is when the yield curve inverted. I've called that the greatest April Fool's joke of all time.

[Sonu Vargas]

So we put together the index just for the sanity check on like. Okay, let's put what we think are. It's not a data mining exercise. We could do that. But 200 indicators together. No, this just has about 25 indicators. That captures the.

[Michael Batnik]

What's the goal? To capture a more real snapshot of the state of the economy at a given moment.

[Sonu Vargas]

Exactly.

[Michael Batnik]

Because you can't wait for GDP data. It's on a big lag and by then nobody cares.

[Sonu Vargas]

No, exactly. Like the famous semblance chart, which shows that, you know, the market bottoms before gdp. First of all, you don't even get gdp. That's much later. And then it gets revised.

[Michael Batnik]

Right, right. So that's not useful for investing. Okay, so what do you. So what are you doing with your Lei and what is it telling us about the state of the country?

[Sonu Vargas]

It tells us whether the average indicator, so let's say representative of the economy, is not growing on trend, above trend or below trend. And right now it's telling us the economy, economic growth is growing below trend, but not recessionary.

[Michael Batnik]

Okay.

[Sonu Vargas]

And we do actually we have 30 of these for 30 different countries. Well, 29. We stopped doing Russia a few years back, but we have 29 of these and each of them are tailored towards those respective economies. In the US it's more about consumption. In China, more about investment. Germany, South Korea, it's more about exposure.

[Michael Batnik]

Oh, so you can create a different basket and weight things differently depending on the country.

[Sonu Vargas]

Yes.

[Michael Batnik]

So what is the. What is the U.S. same store sales at McDonald's. Like, what are the things that. What are the things that are going into your. It's more aggregate tickets.

[Sonu Vargas]

It's more aggregate indicators that we have a history for. So it's got things like retail sales, food services, auto sales, housing, starts building permits here, standard indicators. Like I said, it's a sanity check. Put everything together. What's the picture?

[Josh Brown]

So if you saw this really roll, what would you guys do?

[Sonu Vargas]

We would start getting cautious. And this goes back to the fact, even back in 2022 and everyone was calling for a recession. Well, even 2023, for that matter. We didn't see a recession at that time. We weren't, you know, we were overweight, equities, and we were like, I don't think there's a recession coming. Which is not to say it'd be correct, but the odds are in favor of no Recession.

[Michael Batnik]

So this, I don't know what you mean by rollover. I guess it would have to cross below. What is the Z score?

[Sonu Vargas]

A Z score is how far above or below trend is the average indicator.

[Michael Batnik]

Growing for you to say to Michael's point, all right, things have now materially changed and we are tipping into recession.

[Sonu Vargas]

Just to put a number around. Negative 0.5, negative 0.6. So we're not down there. We know where.

[Michael Batnik]

We're obviously not there.

[Sonu Vargas]

No, no, we're close.

[Michael Batnik]

And you could have a false alarm if you dip into that. It's not a guaranteed recession. It's just, I guess you back tested it and usually it's pretty bad.

[Sonu Vargas]

Right. And what you're essentially seeing is sort of a back test anyway. Right. Like we weren't doing this in 2001 or 2006.

[Ryan Dietrich]

So I'll chime in here. So in early 2023, we wrote our outlook. The second line of our outlook said we don't see a recession and we could hit new highs this year. Now, we didn't hit new highs in 23, but rallied a lot. And a lot of this was the work Sony did, which went contrary to just about everybody else saying the economy's better than you think here. And liter, we just released our mid year outlook and we talk about a lot of these concepts. And the reality is I'll just give Sonu a pat on the back. I mean, there's Neil and Sonu and a few others that really look at this economic data differently than so many other people. They don't just look at, oh my goodness, manufactured ISM, sub 45 yield curves inverted. The end is here because it has to be because every time it's done that the last six times, but you actually peel back that onion like he does. I don't even know what's in this thing. I just listen to it say, hey, how's it looks? I'll do. And he tells me, I look at other stuff, but the reality is it's, it's, it's worked, you know, so it looks okay.

[Josh Brown]

I love that you're giving him his flowers, by the way. When did you realize that the old way of thinking about the economy, with all the gobbledygook that Ryan mentioned, is no longer the playbook it was originally.

[Sonu Vargas]

When we were thinking about how do we want to model the economy and you know, do it from the perspective I need to manage real money. Right. Think about markets. Right. And what's the connection between markets and the economy? Profits. Right. So when you think about the aggregate economy, you range, you know, like you take a sectoral balance approach. Right. You got households, businesses, the government too, back in 22, 23. The other part of it was there was a lot of government spending coming down the line. Right. The IRA and CHIPS Act, Bipartisan Infrastructure act, the American Recovery act that hadn't finished putting all its funds out. So all of that is happening and we thought, wait a minute, that's good for corporate profits. Right. So the idea was how do we capture, you know, snapshot of the economy that can sort of tell us what's happening to aggregate profit growth?

[Michael Batnik]

Do you use stock prices at all?

[Sonu Vargas]

Yes.

[Michael Batnik]

How important are they?

[Sonu Vargas]

They're quite important, but in this, I tell you, it's about 5% of the index.

[Michael Batnik]

So I'm a wealth effect.

[Sonu Vargas]

I mean he does all the, you know, equity part anyways. Right.

[Michael Batnik]

So you would have gotten a false signal had you just gone by the performance of the stock market in 22.

[Sonu Vargas]

Yeah.

[Michael Batnik]

You would have been all over the recession call. And I kind of was like late 22. I'm not a, I don't predict the economy, but if I had to guess, I would have said recession for 23.

[Sonu Vargas]

Yeah.

[Michael Batnik]

Thank God we didn't have one.

[Sonu Vargas]

And the odds were higher. Even if you go back and look at the chart, it was inching towards negative 0.4.

[Michael Batnik]

Looking at it right now is as close as it gets without crossing fully over.

[Sonu Vargas]

And at that time I was saying, you know, the odds of a recession about 35% or you know, it's higher.

[Michael Batnik]

But again, here's the thing that's not that nobody can know if you're just looking at your leading economic indicator, without a doubt, three months later at that trend, you're in recession.

[Sonu Vargas]

Yeah.

[Michael Batnik]

None of us can know that. ChatGPT was just released and it has the potential to unleash what looks like it's gonna be 5 trillion worth of spending inside of 24 months. Nobody could possibly know that.

[Josh Brown]

So it's like more fiscal stimulus.

[Michael Batnik]

It's better than fiscal stimulus cuz it's almost entirely driven by the private sector and did not require interest rate cuts. The entirety of the AI boom so far is happening with higher than normal interest rates with restrictive policy in place. And look, you could not have said that in 99. The Fed had a huge emergency rate cut in 98, the summer of 98. And I know that fueled the next 500 IPOs because I was there. You don't have that this time.

[Ryan Dietrich]

So I know Sony's gonna jump on that. Hold that for one second. So this is kind of how we work together. So he's got what we're showing on the screen. But remember the end of that bear market? Yeah, exactly. That October 22nd low. Yeah. About a 25% bear market ended in the middle of October 22nd. Your average non recessionary bear market is 24 and a half percent. So we're in that range where you can have a bear market without a recession. As everybody knows when you have a recession it's about 35% bear market. That Friday we had that CPI, I think it was CPI Tuesday or when. Wednesday, Wednesday it was high. Right. Remember inflation? The market gapped down like 2% at the Open. By the close on that day I think it was like October 12th or 14th one or the other closed up 2%. So you had a 5% swing intraday. And that's the stuff I look at and I'm like oh my goodness. Like I shared it that literally that day. So that's how lows happened. Literally that's how lows happen. That was still. That was the low. We didn't know it at the time.

[Josh Brown]

October.

[Ryan Dietrich]

Yeah. 1214, whatever that CPI was.

[Josh Brown]

We were on the show that day. Remember we drove into the city, we were in the car when jobs, when the inflation number came in.

[Ryan Dietrich]

Inflation cpi.

[Josh Brown]

We were on the show that day with, with Basani.

[Ryan Dietrich]

Felt like the end of the world. It felt like the end of the world.

[Michael Batnik]

You know what it was about that week? The VIX had this insane move and then it completely reversed itself. And I think that was the convers and Pisani was like kind of schooling everyone. Like you guys don't understand. The VIX is about the next 30 days. It's not about six months from now. It's literally people pricing in the risk that they think is going to happen tomorrow. And then when tomorrow comes, it unwinds. That's why the risk mean reverts or oscillates or whatever. So I do remember that period of time. I just think we got really lucky. At the end of 22 we did and into 23 if we didn't get.

[Josh Brown]

Chachi BT, I think there would have been a recession eventually because we say there wasn't a recession but there was a lot of parts of the economy, specifically Silicon Valley, 100% recession. There was a website updated, real time layoffs, real estate still in a recession. So there were areas of the economy, not overall that absolutely got up by higher interest rates. Commercial real estate still.

[Sonu Vargas]

You still Argue like, over the last six months, the tech sector has lost about 10,000 jobs.

[Josh Brown]

There's no more software jobs being added.

[Sonu Vargas]

So. Yeah, and.

[Michael Batnik]

But not because of the economy, because of innovation. And it's a little bit of a like. In other words, Microsoft didn't just say 9,000 layoffs because times are hard or because profits are hurting. They said it because they can.

[Sonu Vargas]

And they went on a hiring spree. If you look at the Numbers back in 2021, they all did.

[Josh Brown]

They overhired.

[Sonu Vargas]

Yeah. They overhied. And now I think they're still recovering from that.

[Michael Batnik]

I think that's right. I wanted to. Hang on a sec.

[Josh Brown]

You want to talk about Vegas?

[Michael Batnik]

Well, yeah, I want to talk about things that are not traditional indicators, but kind of force. Kind of force you to pay attention. I wanted to ask you guys your thoughts when we talk about the consumer. What's the most important behavior of the consumer to be thinking about or keeping an eye on? Because I think it's travel. And. And then as a subsector of travel, I think it's gambling. So what do you think about that?

[Sonu Vargas]

Travel, full service meals, restaurants.

[Michael Batnik]

Okay, that.

[Sonu Vargas]

And that's been actually flat once for me. It's.

[Michael Batnik]

For me it's Vegas. I. I feel like Vegas is like the throbbing tip of the whole. Like, is that the right.

[Josh Brown]

It's probably the throbbing tip.

[Michael Batnik]

Probably the wrong way of phrasing. Oh no, Josh, I think it's like the. I think it's like where the real nerve center of like appetite, consumer appetite.

[Josh Brown]

I like nerve center shit.

[Sonu Vargas]

And you mean like gambling as an entertainment? Not as opposed to a professional.

[Michael Batnik]

Like specifically, let's bro. Let's go to Vegas. I feel like that only is in good times. It is the most dispensable of potential trips you could take. Also corporate spending in Vegas, obviously that's the first thing to go. I guess we're not going to do the Vegas junket this year because we just missed earnings last quarter. Like, for me, that's a. That's a big one to watch. They are. Here's why I bring this up, guys. We're going to talk about inflation. Vegas is basically committing suicide.

[Sonu Vargas]

Mm.

[Michael Batnik]

By suicide by price. So this is. I've read 20 of the same article in the last week. This is the DailyMail.com Las Vegas. High prices, putting off potential tourists. New visit. According to new visitor figures, tourist numbers have fallen every month this year with 6.5% fewer visitors than in 2024. International arrivals at Harry Reid Airport down 8.7% in May versus May of 2024. A visitor recently shared her shock after she was charged $26 for a bottle of Fiji water. A British magician was left outraged. How dare you? $74 for two drinks at the Sphere. The buffet at Bellagio is like $175.

[Josh Brown]

It's always been this way. Nonsensical.

[Michael Batnik]

No, it's. It's worse than ever. And notably. And it's stopping people from going stocks on fire.

[Sonu Vargas]

Some of this is international tourists. A lot of it is. They're not coming anymore. I mean, if you just look at tourism from abroad, which actually shows up as a service export that's gone down. Travel and tourism from abroad. Yeah.

[Michael Batnik]

What do you think of this as an indicator to just look at the way people are? Cause when you go to Vegas, when you do that, you're really spending on things that nobody on earth needs. That's like the. To me, that's the pinnacle of like the consumer is doing great. So the first Vegas is not doing great right now.

[Ryan Dietrich]

Yeah, the first week of April. Went out west, which is obviously a fun family trip. Went to Bryce Canyon and Zion National.

[Michael Batnik]

Way better trip than Las Vegas.

[Ryan Dietrich]

Well, we went to Vegas for a couple days too. I'm worried about my 14 year old, by the way, the way his eyes lit up in Vegas like they got one of those. Threw like a hundred bucks on a couple parlays and they lost the course on the last game. I said, well, that's gambling. That's why we don't do it. But. But I didn't think it was as crowded as I remember because I was in Vegas the year before for a work thing with Carson and I was looking around thinking, huh, this is interesting. It's like spring break and Vegas truly didn't feel as crowded. And then some of the softening that Sonu talks about. But I guess that's the key thing. Is it recessionary or is it softening? And like Mike, you just said the stocks are doing pretty good all of a sudden, but over the past year they haven't done as much.

[Michael Batnik]

Well, in a recession, they're giving away the rooms just to get you to.

[Ryan Dietrich]

And they're not doing that now. You're right.

[Michael Batnik]

Can I show you some charts?

[Ryan Dietrich]

Yeah, let's do it.

[Michael Batnik]

All right. This is a one year price performance of Caesars. You wouldn't buy this chart. You would buy this. For what? For a capital loss you want to harvest. It looks like it might in a month or two.

[Josh Brown]

It doesn't look terrible.

[Michael Batnik]

Ryan, how do you feel a little messy.

[Ryan Dietrich]

Yeah.

[Michael Batnik]

Okay, here's mgm. Another horrible downtrend. Very obvious downtrend. They continue to sell lower highs. Here's win. This one's. This one looks good. They're in the process of building what's going to be the next hot.

[Josh Brown]

Dude, Wynn looks great.

[Michael Batnik]

Yeah, they're building something crazy.

[Sonu Vargas]

It's the buffet. Better.

[Josh Brown]

Wind looks great.

[Michael Batnik]

No, they're building a new brand new resort like the first one that's opened in a long time. And people are excited about it also. But there's like Chinese exposure mixed in here. And it's really hard to disentangle Vegas from China. Here's, here's another LVS Las Vegas Sands. This is China. This is not Las Vegas. Even though it's for Las Vegas Sands.

[Josh Brown]

So I would argue that there was absolutely softness. There's no doubt about it. Vegas and excess cash and money to burn. That should end it.

[Michael Batnik]

And high prices.

[Josh Brown]

Yeah, no doubt.

[Michael Batnik]

Would normally be playing.

[Josh Brown]

That's absolutely true.

[Sonu Vargas]

And even at an aggregate level, you're just talking about the. Yes, it is aggregate. But you look at wage growth, right? Wage growth three years ago was growing about 5, 6%. Now it's come down to 3%.

[Michael Batnik]

And people act differently as a result. No doubt. I totally agree with you.

[Josh Brown]

But we heard from Delta this morning, which had a lot of softness in the first quarter. A lot of foreign travelers pulling back. Okay. And Delta stocks got destroyed. Delta got crushed. Well, today it's having one of its best days. Over the last five years it's up 13%. They reported a record quarterly revenue for the second quarter. Record.

[Michael Batnik]

This is a big day for Delta.

[Sonu Vargas]

Record high margin businesses, which I imagine is business class.

[Michael Batnik]

Open the show. When we talk about a K shaped economy, you basically. So in the back of the plane they can't sell seats. In the front of the plane, they're putting in golden toilets. That's the economy right now.

[Josh Brown]

That's absolutely right.

[Michael Batnik]

United just built first class suites. So now when you're in first class, you have a door. Like open the door to come talk to me. Otherwise get out. This is my private suite on a United flight.

[Josh Brown]

You know, it's weird. Emirates in Singapore have had that for a long time. It's kind of curious that we don't. That we're only just getting that.

[Michael Batnik]

Dude. We looked at the price to fly Emirates to, to Italy. Oh, from here to 2X. The price of first class flight on an American, was it nine grand more? It would have been 10 or 11 grand.

[Sonu Vargas]

You have to Go to the Middle east and then back up to Italy for that.

[Michael Batnik]

No, the flight direct to Europe. Those are the sickest planes ever. With all the amenity, anything you could ever want. Which is kind of wasted on me, cuz I would rather just do drugs and fall asleep.

[Josh Brown]

But this. Okay, so this is the story of the economy. And you're not seeing it in the stock market because we're at all time highs.

[Michael Batnik]

But it's two consumers. That's my point.

[Josh Brown]

But you're seeing it in surveys and you're seeing it in elections. People are pissed off and there are.

[Sonu Vargas]

Prices that are going up. I mean overall aggregate inflation, you know, you can talk about the issues with how official shelter and all that is, you know, measured. But you look at electricity and gas prices, something I've been tracking recently. Electricity, gas prices, utilities, basically it's up 6% year over year.

[Michael Batnik]

Oh wow.

[Sonu Vargas]

14.5% last three months annualized. So you talk about wallets, especially on wage growth is going lower from 6% to 3%. A lot of people may not even get wage increases, but your utility bills are rising at like a 10% annualized rate.

[Josh Brown]

Did car insurance cool off? Remember how pissed off people rightly were about that?

[Sonu Vargas]

It's cooled off. I mean, but I think it's still, you know, it's still, it's still high.

[Josh Brown]

Well, let me tell you this. I got a notifi. I got a notification before we started the show that my jet ski insurance went down a decent amount.

[Ryan Dietrich]

There you go.

[Michael Batnik]

That's because of how good you are as a rider.

[Josh Brown]

Yeah, exactly.

[Michael Batnik]

No, but that's, that's been watching my social media prices.

[Josh Brown]

Prices dropped like fairly dramatically for me and I didn't do anything.

[Michael Batnik]

Let's talk about household balance sheets. All right, we have a chart for this.

[Josh Brown]

That's the throbbing tip.

[Michael Batnik]

It sure is. What's the. Did I say I don't say. I feel like I said stop.

[Josh Brown]

Let's just, let's just leave it alone.

[Michael Batnik]

Okay, what's the message of this in aggregate?

[Sonu Vargas]

Household balance sheets are in good shape and for two reasons. Home prices have gone up, especially over the last five, six years. And stock prices have gone up, but that gets to. Okay, who owns the stuff, right. At the upper income, quick.

[Michael Batnik]

So you said in aggregate. Because that's the point.

[Sonu Vargas]

That's the thing. Right.

[Michael Batnik]

Okay.

[Sonu Vargas]

And the other side of it is that debt, you know, as a percentage. This is as a percentage of disposable income that's relatively low compared to where we were even in 2019. And remember, 2019 was the end of a big deleveraging cycle. So that's actually a good spot to compare it to.

[Josh Brown]

Why are you pulling these other periods of time?

[Sonu Vargas]

Just to look at what the top of the cycle is. Right. Just to compare.

[Michael Batnik]

So can you walk us through this? As of Q1, 2025, you're showing the asset layer of the household which is above the 0% line. Things that are assets. So real estate would be their houses.

[Sonu Vargas]

Yep.

[Michael Batnik]

Consumer durables with cars.

[Sonu Vargas]

Cars.

[Michael Batnik]

Okay. Corporate equities.

[Sonu Vargas]

Stocks.

[Michael Batnik]

Stocks, debt securities, treasuries, muni bonds. And then I guess cash and business ownership.

[Sonu Vargas]

Yeah.

[Michael Batnik]

And that's at a record high.

[Sonu Vargas]

Yep. That's 833% of disposable income. Again, this.

[Josh Brown]

Is that good?

[Michael Batnik]

That sounds really good.

[Sonu Vargas]

Well, compared to before the pandemic, 2019, Q4, it was 769%.

[Josh Brown]

Nice.

[Michael Batnik]

Okay, so liabilities are. What does the -93% signify?

[Sonu Vargas]

It's just 93. It's just negative liability being negative. So 93% of disposable income is, you know, mortgage debt is mostly that. And then consumer credit.

[Ryan Dietrich]

I'll put it like this. So you got that negative 93. That's as a percent of disposable income. Everybody hears 37 trillion. We walk by the debt clock, by the way, just randomly. It's wherever it is a block or two away, you hear all that and 1.2 trillion credit card debt and what, another couple of trillion here, a couple trillion there. But as a percent of denominator blindness, we all talked about. You guys talk about all the time. Denominator blindness, that's the numerator. You got to look at the denominators. Right?

[Michael Batnik]

That's what there's the size of the.

[Ryan Dietrich]

Economy, no equity in the asset. Disposable income, disposable income in this case. But people are worth a lot more. And we get it. This conversation we've been having for the past 45 minutes, it's not perfect, but this is why the stock market's hitting all time highs. This is why at the start of 23, Sony was sharing this chart saying, listen, if, if we had a recession in 23, it might not be as bad as they're telling us because of this. Because people were still worth a decent amount of money, all things considered, especially relative to 25 years ago, at the end of 1999. Because again, yeah, we've got more debt overall because every three months when that Fed data comes out and it's a New record in credit card debt. Media go crazy, but they just seem to ignore all the wealth that was.

[Michael Batnik]

Created more so that's spending that fuels the wealth creation. The problem is it's not balanced amongst.

[Ryan Dietrich]

Everyone and they're not going to Vegas.

[Michael Batnik]

Let's do these charts. Rising home prices and stock prices boosting households.

[Ryan Dietrich]

What we just talked about.

[Michael Batnik]

Another way of looking at the same idea over time.

[Sonu Vargas]

And I think this gets to something.

[Michael Batnik]

What is this up. What is the 215%.

[Sonu Vargas]

Yeah. Equities. Right. Equity stocks as an asset, as a percentage of disposable income as 250%. Home prices as a percent of disposable income, again, in aggregate, 215%. But this gets to what could damage household balance sheets. And then you look at this. Well, if home prices come down or if stock prices come down, I think that's why I think the stock market is really tied to the economy right now through this balance sheet.

[Michael Batnik]

I'm screaming this.

[Josh Brown]

Well, Josh always talks about this. You know what that line is? That line represents asset back loans. Right? These people don't need to sell their securities to buy anything. They'll just borrow against it at a.

[Sonu Vargas]

Very low interest rate because then you don't have to pay the taxes on capital gains. Right?

[Josh Brown]

That's the story.

[Michael Batnik]

A lot of. A lot of the way we used to think about the economy was from a time where you had to sell something to buy something else.

[Josh Brown]

Not anymore.

[Michael Batnik]

We have an entire generation of people who have done securities based loans, and they've had their cake and eaten it, too. They've kept their portfolio intact and they've bought the vacation home utilizing very low, very low interest loans that are being backed by a combination of Apple, Nvidia and U.S. treasury bonds.

[Josh Brown]

Yeah. Thank you, Jensen Wang. I will buy a second house and borrow against my portfolio.

[Sonu Vargas]

This gets back to also what you were talking about. Like, you know, the more of Navarro that we see, if things start going down, it can go down only so much.

[Josh Brown]

You know what? He was on CNBC on Monday morning.

[Sonu Vargas]

He's coming out.

[Josh Brown]

Not gonna be a good day. The market was down a percent.

[Ryan Dietrich]

Right.

[Josh Brown]

Give me a break.

[Michael Batnik]

Send him. Send him back to the dark side of the moon. But, Daniel, can you please put up chart 15? Let's do forward earnings. I want to make sure we get to all this stuff because you guys have awesome charts.

[Josh Brown]

This is remarkable.

[Michael Batnik]

Tell us what. Tell us what's going on here.

[Ryan Dietrich]

Well, this is like the name suggests, forward earnings on the S&P 50012 months out, $281 a share, all time record.

[Michael Batnik]

Who could have imagined.

[Ryan Dietrich]

Who could have imagined that? Honestly? Nobody was. Three months ago.

[Michael Batnik]

This is what. What is this? This is the consensus Wall street expectation for s and P500 earnings in the next 12 months.

[Sonu Vargas]

Yeah, exactly.

[Josh Brown]

All right, so trading just on the 24 times forward, it's not cheap.

[Michael Batnik]

But why should I know where that number was two years ago?

[Sonu Vargas]

Two years ago and June of 20.

[Michael Batnik]

232. 30.

[Sonu Vargas]

Yeah.

[Michael Batnik]

Okay. This is. This is incredible.

[Ryan Dietrich]

It is.

[Michael Batnik]

Can we all agree it's AI and.

[Ryan Dietrich]

In 2026, expect to be up 13%. That's about where we were at the start of the year.

[Michael Batnik]

But like, all kidding aside, this is not coming from pharmaceuticals, home builders.

[Josh Brown]

It's all AI.

[Michael Batnik]

It's all AI. All of it. So great. No complaints. But I'm just saying let's all. Let's all acknowledge what's going on here. Okay.

[Ryan Dietrich]

The neat one's. The next chart, too. Profit margins. Literally last week, profit margins just hit a new high this cycle. Cycle, which we hear. All we hear is profit margins of one way to go. And that's down. For three years now, we've been hearing that.

[Michael Batnik]

Yeah.

[Ryan Dietrich]

And I call this the dual tailwind to a bull market. When you have these two things going up, stocks are going to follow. You know, keep it real simple.

[Josh Brown]

And multiples will expand.

[Michael Batnik]

So Profit margins now 13.7%, the highest cycle, which. Right. So people are like, looking at the valuation, it's like. Yeah, no, it's not. The market's not cheap. But guess what? But companies have never made as much money as they're making right now. Took home.

[Sonu Vargas]

Yeah. Operating leverage. Right. As sales go up, they're expanding margins.

[Josh Brown]

If we're in the middle of an AI revolution or the early stages or who knows where we are. Why would you expect multiples to be cheap?

[Michael Batnik]

Right. Bubble chart. Do you still hear this as a bubble? You hear this from a lot of people? I don't.

[Ryan Dietrich]

No. Not as much, but frothy, I guess. And this is something Sony just stated recently.

[Sonu Vargas]

Yeah. Breaking down. You can break down S&P 500 returns or anything really, into how much is coming from multiple growth, how much is coming from EPS growth and dividends. And then you break down EPS or earnings growth into sales and margin growth. And over the last. Well, since the end of 2019, last five and a half years, the equity market's up 112% total, out of which 49, close to 50% has come from sales growth. Which is just the economy growing. But 20 percentage points has come from margin expansion.

[Michael Batnik]

Right?

[Sonu Vargas]

Right.

[Michael Batnik]

How much from multiple expansion?

[Sonu Vargas]

26 percentage points. Multiple.

[Michael Batnik]

So a quarter of the rally can be explained by people just paying up for stocks. Another quarter can be explained by profit margins growing and then what was the remainder?

[Sonu Vargas]

And then sales growth and dividends too. Dividends. About 17 percentage points.

[Michael Batnik]

Right. So is that a healthy mix?

[Sonu Vargas]

Yeah, I would say.

[Michael Batnik]

What do you think?

[Josh Brown]

Very healthy.

[Michael Batnik]

Like, what would you want it to be? No March? Nope. No multiple expansion. Why?

[Sonu Vargas]

And the comparison is relative to 2019. So we weren't talking about, oh, this is the bottom of a recession, anything like that. If you go back to 2009 and plot it, yes, you will see multiple expansion because multiples are like 8 or 9 or 10 or something like that. Right. But this is from 2019 and it's been a story of profitability.

[Michael Batnik]

So. All right. Trump tweeted something from the multiverse today. There are so many twists and turns within this one truth social post that it's almost, it's almost incredible. Like, you would have to. You would. I don't know how to get on this level where any of this makes sense, honestly. Let me just read it. Tech stocks, industrial stocks and NASDAQ hit all time record highs. Crypto through the roof. Nvidia is up 47% since Trump tariffs. USA is taking in hundreds of billions of dollars in tariffs. Country is now back a great credit. Fed should rapidly lower rate to reflect this strength. USA should be at the top of the list.

[Josh Brown]

No inflation dude get on his level.

[Michael Batnik]

So in other words, Nvidia is up 47%. The country has never been doing better. Hurry up and cut rates.

[Josh Brown]

Yeah, reflect the strength.

[Sonu Vargas]

That's actually, that actually reveals a lot. He thinks of the US as even the treasury market as a credit, you know, product.

[Josh Brown]

So new. Reflect the strength.

[Michael Batnik]

Just reflect the strength.

[Sonu Vargas]

Yeah. So the better the economy is doing, the better stocks are doing, the better home prices are doing is like the.

[Josh Brown]

Lower interest rate should be lower interest rate.

[Michael Batnik]

Can I say one really positive thing about stuff like this? I think the market just doesn't care anymore. It really has to be something big like a, like a press conference or something. His tweets really can't change people's mind about what they're doing on any given day. It really has to rise to the level of like, all right, here's new policy and I'm about to sign it into law. Then you get the market's attention. And I actually like that because the alternative Is like every day. Why is my portfolio down 4%? Oh, he tweeted whatever. So I kind of like that. It's just at this point, it's a punchline right at the beginning and nobody really reacts to it. I think that's where we are.

[Ryan Dietrich]

Vix is sub 20. I think so.

[Josh Brown]

I mean, Vix is at 15. It's unbelievable. It's on the mat.

[Sonu Vargas]

He did move markets the last couple of days, like the Brazilian market and the copper, you know, so he's still got some of that power.

[Michael Batnik]

We want to hit any of the. Any more of these.

[Josh Brown]

It's up to these guys.

[Michael Batnik]

I'm guys. What else in here did we not.

[Ryan Dietrich]

Get to jump ahead? Just maybe we're the stock stuff or the one that's called the sweet spot.

[Michael Batnik]

Yeah, let's do that.

[Ryan Dietrich]

So, you know, this year up about 5, 6% at the middle of the year. So it's kind of one of those times. Okay, let's take a look at that. You know, there have been year the worst second half of years usually are after the worst first half. 2000, 2001, 2002, 20 or 2008, and then 2022 and then there's 87, which are up a lot. And you come back and 76 is up a lot. And you come back and somewhere in the early 80s, up a lot and come back. So this is kind of right there. The average first half is up about four and a half percent. This one again, five or six. So I look at all the times you're up between 5 and 10% at the middle of the year. What happens next? And well, as you can see on the screen, I'll tell the listeners, s. P is up 13 out of 15 times the rest of the year with above average return. So that's, you know, just. I call them these what it is, what it is type of studies. Just we're in the sweet spot is what I call it. The next chart is when you're higher. May and June. May and June usually aren't that great. We know they were higher this year. Substantially higher. Again, what happens next? The final six months of up 15 out of 16 times with an average return. I believe it's right around. Yeah, 8, almost 9%. Almost double the. The average second half of a year. So you just stack those two little nuggets and I get it, people. I do these on social media and oh, it's a sample size of this sample size. That. That's fine, I understand. But when you stack all these like.

[Michael Batnik]

For Example on the May and June one. How many instances?

[Ryan Dietrich]

Oh, 16. There's 16. There's 16 of them. Like my joke as well. If there are more, I'd use it. It's not five, but I'm just saying when I, when you stack all these different studies that I look at and share and Sony looks at and shares, it is said for a while the stock market wants to go higher. I have a CMT behind my name. Charter market technician, disciple of John Murphy. It's all about the market. What's the market telling us? Are we listening? And to me the action we're seeing is saying we are in a bull market and it's still going to go higher.

[Michael Batnik]

So the reason why these things are worth paying attention to, like when the market's up, May, June, it's not. But it's not voodoo because what we're saying, by saying that that has meaning and that you found these 16 other episodes of that, we're saying that like human behavior is the constant here. And for whatever reason, if the market has a really powerful summer, it probably does lend itself to people chasing in the next six months of the year.

[Josh Brown]

Of course it does.

[Michael Batnik]

Right. But that like that's our point is that buying begets even more buying.

[Josh Brown]

This is fomo. This is. Come on, people.

[Michael Batnik]

Yeah. So it's a lot of career risk. It's a lot of people that are behind. They have to catch up or people won't give them money for next year. There's a lot of that going on. So that's what you're saying when you look at this data.

[Ryan Dietrich]

You know, maybe one more. I know we're getting near the end year three of the bull market. I sent that chart and you guys talk about this. I talk about. But year threes of bull markets are usually choppy. Let me see, where is that usually frustrating? Down a couple more. Usually choppy, usually frustrating. But usually the bull market doesn't end. I found five. Well, not. I found there are five bull markets last 50 years that made it this far. The average before the bull market was over was eight. The shortest was five years. So once I call it like a cruise ship, once a bull market gets moving like a cruise ship, they're hard to stop. They're really hard to turn around. Yeah, maybe 100 year pandemic, maybe some crazy stuff for tariffs going. But the reality is year three is that catch your breath moment. Like Sona and I talk about this a lot on on Facts versus Feelings, our podcast with our Carson advisors. Expect some choppiness Expect some trouble during year three. We had it. I think it's in the rear view mirror now. And now I think we're past that indigestion period in years four and five tend to be strong and these are just things we look at. When you stack it all together with new highs on advanced decline lines and credit markets still hanging in there, those are the two things I follow and people say, what do you look at? I say advanced decline lines and the credit markets. If those two are worrisome. Yes. Sonu earlier, you know, with his lei. If I see credit spreads breaking above where they were in 2022 and I see Vance decline lines breaking down, then that's when I'm thinking, okay, this is going to get a lot worse. We're not seeing it at all. Josh and the other stuff we just said suggests again to be overweight equities, have a little international exposure, have some em. We do have a little bit of gold. I'm going to get into that. But just in case bad stuff happens, we still think, you know, this is a great time for diversified portfolio going forward.

[Michael Batnik]

Ladies and gentlemen, Ryan Dietrich. Anu vargaze. Thank you guys.

[Sonu Vargas]

Thank you.

[Michael Batnik]

You guys are awesome.

[Josh Brown]

This is fun.

[Michael Batnik]

This is good.

[Ryan Dietrich]

That's awesome.

[Michael Batnik]

Probably a few more F bombs on our show than your show but I think, hey, I think you guys are two of the best to do it. So we, we're big fans of yours. We didn't have shirts made up next time I was away. Otherwise, otherwise I would have gotten to it. But thank you guys so much being on the show. We end the show these days by asking people what they're most looking forward to and could be anything. Be personal, professional. You tell me. Let's start with you. What are you most looking forward to?

[Sonu Vargas]

Not talking about tariffs.

[Michael Batnik]

Come on.

[Sonu Vargas]

No, no. Actually I have a trip with the family out to the same kind of, same neck of the woods.

[Michael Batnik]

Where are you going?

[Sonu Vargas]

Bryce Canyons arches fly back to Chicago from Vegas so you know, maybe catch a show or Cirque du Soleil. I have eight year old twins. They've never been there.

[Michael Batnik]

Bryce Canyon. You ride horses through that canyon, right? I think I did that as a kid.

[Ryan Dietrich]

I did bikes. You can buy horses. Yeah, E bikes.

[Michael Batnik]

All right. Dude, that's amazing. Congratulations. Congratulations. What about you?

[Ryan Dietrich]

I love doing this market stuff with him all day but like from a personal point of view, both my boys play football and once you get to July it gets serious. My one son is a freshman and they had a pretty Good high school. So I'm looking forward to watching my boys play some sports.

[Michael Batnik]

Specifically, how big are they?

[Ryan Dietrich]

Football.

[Michael Batnik]

You're a big dude.

[Ryan Dietrich]

I'm big. I hope they both grow more. I mean, let's see. My freshman's about 5, 8, 5 9. And my seventh grader, he needs to grow a little bit.

[Michael Batnik]

So, okay, what position do they play?

[Ryan Dietrich]

Let's see, my sophomore is a safety, and then the seventh grader is wide receiver slash cornerback.

[Michael Batnik]

How do they get those positions? Is that where the coach says you would be great here, or did they gravitate toward that and want to do that?

[Ryan Dietrich]

Gravitated toward it, I would say.

[Michael Batnik]

Okay.

[Ryan Dietrich]

He loves being. He loves.

[Michael Batnik]

You played ball in high school?

[Ryan Dietrich]

Well, I played golf and basketball in high school, so. Not football.

[Michael Batnik]

Okay. Why are you afraid of getting hit?

[Ryan Dietrich]

Yeah, I just. I was afraid. I got my problems with my head already.

[Michael Batnik]

You didn't want to go to the Black Sabbath tribute show, Ozzy's.

[Ryan Dietrich]

I. When I watched that. Let's talk about that for a second. I was sick. I wasn't there. But Steven Tyler truly stole that show. I mean, who would have thought that? The way Steven Tyler came out there and did his thing and every. That was awesome. As an old school metalhead, you know, Black Sabbath started all for me in 97 at OzFest, Polaris Amphitheater. When Ozzy didn't show up, they literally tore the place down and burned it up. You can Google it and find it. I said, ooh, I like that. And I've been into that music ever since. And you know, Ozzy's one of the best in Blackstone.

[Michael Batnik]

You and I go to the. Did you and I see ACDC with Axel?

[Ryan Dietrich]

Well, you want to answer this one?

[Josh Brown]

I was there.

[Ryan Dietrich]

I don't know if you were there because you left really early. He left early. You left early. Josh got us backstage. Chris Jericho's walking around there for the show.

[Josh Brown]

Joe got us downstairs under the guard.

[Ryan Dietrich]

Under the guard. That's what.

[Michael Batnik]

Not the same show. This. You're talking about Motley Crow.

[Ryan Dietrich]

No, no, it was acdc. It was Axl Rose singing for AC dc.

[Michael Batnik]

I was at that entire show. I remember the encore.

[Ryan Dietrich]

Okay, then you left before we went in the back.

[Michael Batnik]

I didn't go. No, of course. I don't wait to go back. I'm a celebrity myself. I don't do backstage. The guy Meet in Greece. Are you kidding me? All right. I was at that show with you, though.

[Ryan Dietrich]

We had a blast.

[Sonu Vargas]

That was 2016.

[Michael Batnik]

2016 is when I tell people about that first of all, people have to Google it. They don't believe me that it happened.

[Ryan Dietrich]

Yeah. Axel saying.

[Michael Batnik]

They're like, what do you mean? Axl Rose in AC dc?

[Josh Brown]

Oh, yeah, we did. We saw that.

[Sonu Vargas]

We were there.

[Michael Batnik]

I'm like, I was there. You could trust me. It happened and people will still Google it.

[Ryan Dietrich]

Charlie was there too. I don't know. A bunch of us were there.

[Michael Batnik]

Who did? Who else did you think sounded good at the Aussie thing?

[Ryan Dietrich]

Oh, Charlie.

[Michael Batnik]

I was super impressed by all these guys.

[Ryan Dietrich]

Just. Just Ozzy on a throne. The guy could barely stand up singing Crazy Train. I mean, that is. I thought it was cool. And. And Bill ward, the drummer, 78 years old. 70 years old. He's out there doing the drumming with the shirt off and everything. It was just really, really.

[Michael Batnik]

I liked how much buy in they got. Everybody was there.

[Ryan Dietrich]

Like, everyone.

[Michael Batnik]

I thought that was super cool.

[Ryan Dietrich]

Metallica didn't have a show for that. They opened. They were right before Metallica came out to show show props.

[Michael Batnik]

I thought that was cool.

[Sonu Vargas]

All right.

[Michael Batnik]

My thing I'm looking forward to is getting back on on east coast time. I was up at 2 in the morning today for the day.

[Josh Brown]

I'm still going.

[Michael Batnik]

I'm still going, so I'll be asleep in an hour. All right, guys, this has been amazing. We appreciate you so much. Let's tell people where they can follow your continued insights and research. What's the best way to follow Sanu and Ryan?

[Ryan Dietrich]

Easiest is facts versus feelings or podcasts.

[Michael Batnik]

Or podcast.

[Ryan Dietrich]

Ryan Dietrich. Twitter.

[Michael Batnik]

Okay.

[Ryan Dietrich]

A lot of people.

[Sonu Vargas]

So new s. Workies. Yeah.

[Ryan Dietrich]

All right. And then carson group.com research is our blog.

[Michael Batnik]

Okay, very good. That's widholdswealth.com. all right.

[Josh Brown]

You guys are the best.

[Michael Batnik]

Hey, I want to thank. I want to. I want to close by thanking one person. I want to thank, obviously the whole crew, but Michael Batnik really held me down. I was away for seven days. This kid did 12 podcasts by himself. He had 500 guests. On Tuesday night, he had his own Black Sabbath farewell tour. It was pretty epic. So that. Thank you, my friend. I appreciate it.

[Josh Brown]

Oh, thank you.

[Michael Batnik]

You're never gonna get a chance to do that again because you were too good and I got a little nervous. All right, that's it from us, guys. Thanks for watching. Thanks for listening. Shout out to the boys for joining us, and we'll see you next time. Have a great weekend.

[Sonu Vargas]

All right. Thank you.

[Michael Batnik]

Thank you so much.

[Sonu Vargas]

That.