Retail Investors Just Plowed $100 Billion Into Stocks. THIS MONTH.

Summary

The Compound and Friends: "Retail Investors Just Plowed $100 Billion Into Stocks. THIS MONTH."

Date: October 10, 2025
Hosts: Josh Brown, Michael Batnick
Guest: Scott Nations

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EPISODE OVERVIEW

This episode features Downtown Josh Brown and Michael Batnick, joined by veteran markets expert and volatility index pioneer Scott Nations. The trio dives deep into the unprecedented surge of retail flows into U.S. stocks, memes, bubbles, volatility, and the blurred lines between investing and gambling. Scott shares market history perspective, lessons from past crashes, and a dose of humor as the group unpacks what today’s record-setting retail participation means for markets, trading behavior, risk, and the broader financial landscape.

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1. MARKET CULTURE: PUMPKIN LATTES, INSTAGRAM, & TRADER ONRAMPS

00:00–10:36

• The opening banter explores Josh’s local viral sensation: people drinking pumpkin spice lattes out of hollowed pumpkins for Instagram likes. This segues into a larger reflection on performative consumption and social media’s influence on behavior.
  • Quote (Josh, 04:09): “Sick picture, bro. Send me that. Definitely send me that.”
• The trio jokes about how traditional masculinity and local businesses have been overtaken by performative social media trends, likening the transformation to changes in Wall Street's own culture.
• They reminisce about Scott's time on the trading floor at the Chicago Mercantile Exchange, contrasting the high-testosterone environment of open outcry trading pits with today’s digital, PhD-driven markets.
  • Quote (Scott, 10:36): “We were just talking about when men really were men … the floor of the Chicago Mercantile Exchange.”
  • On the new professional onramps: "The career on ramp to professional trading now is a computer science degree." (Josh, 13:14)

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2. MARKET EFFICIENCY, LIQUIDITY & THE PHYSICS OF TRADING

10:36–16:37

• Scott reflects on the pros and cons of today's hyper-efficient markets: anyone can trade, regardless of size or stature; proximity and connections are less important than skill and smarts.
  • Quote (Scott, 15:29): “Markets are so much more efficient now ... opportunity exists for anybody.”
• The hosts note that while this democratization is positive, it also amplifies the impact of new behaviors and products, and raises the stakes for both retail and professionals.
• Discussion of the physicality of the old exchanges, and how even things like “tall Big Ten football recruits” had access advantages in the pit.

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3. RETAIL INVESTORS, COORDINATION & THE RISE OF BUBBLES

16:37–21:23

• The group unpacks the phenomenon of modern bubbles, citing Richard Thaler’s research on how online forums (notably WallStreetBets) have allowed retail investors to coordinate and sustain price runs.
  • Quote (Scott, 18:49): "We all know that … it probably went up another hundred dollars a share that day. And I’m probably, I don’t know, maybe I’m an idiot."
• Self-aware, “tribal” retail bubbles are new—people recognize they're part of a bubble but still participate for the camaraderie or thrill.
• Fantastic Markets: Scott describes people feeling “physically closer” to visionary executives like Elon Musk or Steve Jobs just by owning shares or products, showing how identity and investment intertwine.
  • Quote (Scott, 21:04): "Now I own an iPhone. So Steve and I are friends. We're close."

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4. LEVERAGED ETFs, OPTIONS, AND THE LOTTERY MENTALITY

21:23–32:41

• Explosive growth in single-stock leveraged ETFs: $100 billion in net flows from retail in the last month (directionally correct).
• The hosts critique leveraged and inverse ETFs as “money incinerators,” and marvel at how their popularity persists even as most users lose money.
  • Quote (Scott, 24:55): “Nobody should do that … the manager has to roll that product from one expensive futures contract to an even more expensive futures contract every month.”
• Today's retail option traders are savvier than prior generations: using options for payoff shaping, not just leverage.
• Retail “lottery ticket” trades remain perennially attractive, despite academic warnings.
  • Quote (Michael, 29:20): “I know it’s bad for me, but I like it.”

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5. PROCESS VS OUTCOME, MYOPIC LOSS AVERSION, AND INVESTOR BEHAVIOR

32:41–34:40

• The classic challenge of “process versus outcome” in investing: luck can produce great outcomes from poor processes, while good processes can sometimes yield bad outcomes.
• “Myopic loss aversion”—the less you look at your portfolio, the better you’ll perform (echoing Richard Thaler).
  • Quote (Scott, 31:21): “The less often you look at your portfolio or monkey around with it, the better your returns are.”
• Provocative thought experiment: what if the market only opened one day per year?

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6. $100 BILLION RETAIL INFLOWS: HOW BIG A DEAL?

34:41–38:02

• The crew breaks down the record $100 billion surge in US stock purchases by retail investors this past month.
  • It's the single largest monthly inflow on record, but in the context of a $50T US stock market, Scott suggests it’s not (yet) destabilizing.
  • He hopes retail will keep buying "if the market drops 25%"—true long-term investing.
  • Quote (Scott, 34:41): "100 billion out of 50 trillion is actually not that big a deal."
• Discussion of buyback timing errors by companies and how professionals aren’t immune to the “buy high” human bias.

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7. SPECULATION FEVER: TINY STOCKS, MASSIVE VOLUMES

38:02–44:47

• Certain speculative “lottery ticket” stocks are seeing as much dollar trading volume as trillion-dollar megacaps like Google and Netflix, highlighting the shifting focus of retail and algorithmic attention.
  • Quote (Michael, 37:14): "Rigetti ... trades as many dollars as Netflix and Google ... is this wild or what?"
• Similar bubbles have always existed (e.g., dot-coms in 1999, blockchain renamings in 2017), but the scale and ease of today’s trading is new.
  • Quote (Scott, 39:32): “It was much more difficult to physically trade stocks in 1999.”
• These speculative dynamics are seen as a “permanent feature of bull markets” in the digital age.

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8. GAMBLING, MEMES, & THE INVESTING-ENTERTAINMENT BLUR

44:47–51:29

• Robinhood’s business model and its metamorphosis into the cultural icon for “fun” trading, with massive growth relative to legacy brokers like Schwab.
  • Quote (Josh, 48:05): “That’s Pumpkin Latte’s guy’s broker.”
• The arms race for retail attention, as finance, sports betting, and entertainment all blur together.
• Historic perspective on the shifting marketing of brokerages, from “get rich quick” messaging in bubbles to “serious business” in busts.

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9. VOLATILITY, DRAWDOWNS, AND THE “NEXT CONTRAPTION”

51:29–59:04

• The volatility market now normalizes rapidly after shocks—panic and “vol crushes” disappear in hours, not years, possibly muting news-cycle hysteria and media fear-mongering.
  • Quote (Scott, 56:33): "It reverts very, very quickly, surprisingly quickly, to the point where guys that are my age, are kind of shaking their heads."
• Is retail trading or zero-DTE (zero day to expiry) options the “next” source of systemic risk? Scott thinks not; the size/leverage can’t mount enough to create a crash.
  • Quote (Scott, 58:05): “I don’t think the system can build up enough size, enough leverage in these things to be the next contraption.”

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10. PRIVATE CREDIT: THE REAL RISK?

59:04–68:28

• The conversation pivots to private credit, now a popular asset class for both retail and institutional investors, often packaged through Business Development Companies (BDCs).
• Scott is deeply skeptical: high fees, opacity, lack of liquidity, and overconfidence in low volatility pose real dangers.
  • Quote (Scott, 61:19): “Stay away. I am not a fan at all for a lot of reasons. One, it’s almost completely opaque. Fees are huge.”
• Spotlight on recent blow-ups (First Brands bankruptcy and related double-factoring fraud) that shake confidence in credit markets.
• Comparison to “subprime” leading up to the GFC and echoes of 2007’s Bear Stearns hedge fund collapse.

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11. GOLD, BITCOIN, AND THE INTEREST RATE PUZZLE

71:07–74:31

• An unexpected bull market for both gold and bitcoin during a stock market boom year, with both assets making new highs. Treasury-bill ETFs are also seeing record inflows.
  • Quote (Josh, 71:33): "Are you shocked that we're in a stock market bull with both gold and bitcoin also making record highs?"
• Scott’s take: with unemployment moderate and inflation still near target, the Fed is prematurely cutting rates, risking new bubbles.
  • Quote (Scott, 73:40): “The Federal Reserve does 10 times, maybe 100 times more damage by keeping interest rates too low for too long than they ever do by having rates too high.”

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12. CULTURE & INEQUALITY: THE DELTA FIRST CLASS METAPHOR

76:01–78:31

• Josh presents Delta’s earnings shift as a metaphor for the “K-shaped” economy—most airline revenue now comes from elite, premium “first class” travelers, leaving the masses behind.
• Scott shares another illustration: $450 average Broadway ticket prices, showing the spread between “the well-off” and everyone else.
  • Quote (Scott, 77:30): "There are so many businesses … where the well off are happy to spend money … whether it’s travel or dining or entertainment … or cocaine."

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13. CLOSING MOMENTS & RECOMMENDATIONS

78:31–End (83:05)

• The group wraps up with what they're looking forward to—movies, Broadway, and a special live event with Jim Cramer.
• Scott reflects on the enduring importance of financial education amid today’s overwhelming noise.
  • Quote (Scott, 78:49): “To the degree that people are educated when it comes to a retirement or a kid’s education, then God love you.”
• Where to follow Scott: X/Twitter @ScottNations and nationsindexes.com.

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MEMORABLE QUOTES & TIMESTAMPS

• "Pumpkin spice latte was the beginning of the end for civilization." — Scott Nations (04:54)
• “Everybody knows that … it probably went up another hundred dollars a share that day. And I’m probably, I don’t know, maybe I’m an idiot.” — Scott Nations (18:49)
• "We all know that … kind of get cut off at the knees because of what we've been talking about. So many investors and so many people who are now willing to fade a big move like that." — Scott Nations (17:41)
• “The less often you look at your portfolio or monkey around with it, the better your returns are.” — Scott Nations (31:21)
• "Nobody should do that … the manager has to roll that product from one expensive futures contract to an even more expensive futures contract every month." — Scott Nations (24:55)
• “Stay away. I am not a fan at all for a lot of reasons. One, it's almost completely opaque. Fees are huge.” — Scott Nations on private credit (61:19)
• “The Federal Reserve does 10 times, maybe 100 times more damage by keeping interest rates too low for too long than they ever do by having rates too high.” — Scott Nations (73:40)

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KEY INSIGHTS

• Retail flows and meme stock behavior are now an expected and permanent feature of bull markets, supercharged by online communities and new financial products.
• Efficiency and access have eliminated old barriers to entry for trading, shifting the professional field to quants and physicists.
• Speculative tools (leveraged ETFs, options) are widely misunderstood and mostly destructive to those who buy and hold them, but use continues regardless of warnings.
• Process vs. Outcome remains one of the most challenging gaps to bridge with both clients and the broader investing public.
• The next “systemic risk” may lie in private credit, where bad underwriting, opacity, and diffuse ownership could spark shockwaves—echoes of 2008, but not identical.
• Rising inequality and stratification are apparent in everything from stocks to airline tickets to theater, reinforcing the sense of a bifurcated economic boom.

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LISTENERS' TAKEAWAY

This episode offers a sharp, often hilarious but deeply knowledgeable dissection of the new “golden age” of retail investing and its consequences—from bubbles and blow-ups to new risks and enduring behavioral bias. It’s both a snapshot of today’s frothy environment and a historical primer on what never changes in finance.

Transcript

[Josh Brown]

I want you to know I look great. I just spent five days in Boca at the gym eating salads and. And sushi and string beans. I know you were grinding, and I'm doing that so I could fit into regular sized chairs. I saw you grinding on Instagram.

[Michael Batnick]

You look skinny.

[Josh Brown]

I'm trying. I'm finally trying. I blamed it all. You do.

[Scott Nations]

No, you do.

[Josh Brown]

I said, how'd you let me get this fat?

[Scott Nations]

You look great.

[Josh Brown]

And she said, oh, now this is me. She's like, are you kidding me? Do you see what I eat?

[Michael Batnick]

All right, come on in, Scott.

[Josh Brown]

We'll have you over here. All right, Scott, I gotta tell you a story. When was the last time we saw each other until today?

[Scott Nations]

You know, I think it was in Vegas years ago for a CNBC event.

[Josh Brown]

Vegas. It's gotta be 10 years then.

[Scott Nations]

I bet.

[Josh Brown]

Yeah. Okay. All right.

[Scott Nations]

You know, we may have bumped into each other.

[Josh Brown]

No, for sure. In the old days, when I used to do the Fast Money 5 show, you were on the desk.

[Scott Nations]

That's probably.

[Josh Brown]

Or sometimes you were the options guy. I was the option guy that they would cut to. Yeah, yeah. Did they ever ask you to change your name to Najarian to do the options hits? Was that on the table?

[Scott Nations]

When I re upped my contract, we put it in there that they wouldn't ask anymore.

[Josh Brown]

All right.

[Scott Nations]

I got $150 every time they asked.

[Josh Brown]

What do you think of my pumpkin situation?

[Scott Nations]

It's. It's good. Which leads me to believe you had absolutely nothing to do with.

[Josh Brown]

No, everything to do with it.

[Scott Nations]

You had nothing to do with it. I think you hired somebody.

[Josh Brown]

Nick. Is that in the right place?

[Scott Nations]

What?

[Michael Batnick]

He's a sister. It's weird.

[Scott Nations]

It is.

[Josh Brown]

Isn't it? Usually here. All right.

[Michael Batnick]

It's definitely. It's definitely.

[Scott Nations]

All right.

[Josh Brown]

So we have this thing in my town called. It used to be called Dairy Barn. It was literally a drive through for eggs and milk.

[Michael Batnick]

Drive through 7 11?

[Josh Brown]

Yeah. Like, you're on the way home from work, your wife's like, I need a. I need a gallon of milk.

[Scott Nations]

You know, they have those in. In Ohio for booze.

[Josh Brown]

Okay. So this is for dairy, but it, like, sold and had different owners, and then it closed down. And then this new group comes in and they call it the Barn. And I'm just glad it's reopened because it's super convenient.

[Michael Batnick]

Don't tell me private equity is not a genius.

[Josh Brown]

I don't know what. I don't. I didn't know what they were about to do. With this place, they turned it into this, like, viral Instagram sensation that is now backing traffic up, like, literally closing an entire lane of the main street through my town. People wrapped around the block, they're coming from, like, New England and the Bronx and Brooklyn and Queens and all over the place to, like, drink these viral iced coffees with donuts on top or. All right, so there's a new drink that they just launched, which of course creates a, like, DEFCON 5 traffic situation. It's an entire pumpkin. Not a mini pumpkin, like a pumpkin pumpkin. They cut off the top, they hollow it out, they fill it with, I guess, pumpkin spice latte or something. They cover the whole thing in whipped cream, two giant cinnamon sticks, and they serve it to people sitting at picnic tables right out on the street. So I've never seen it before. So I pull up next to this, this thing. There's, I don't know, a hundred people waiting in line for to drink out of a pumpkin. There's a dude my age sitting at a picnic table with his wife. The wife's holding the camera. This is getting. Look at the look on your face. It's getting worse and worse, right? The guy takes this pumpkin with two hands, lifts it to his face and like, chugging out of a pumpkin. And the wife is filming him. And I just. I couldn't stop myself. So I just got back from the airport, I pull up to the corner, my wife is in the passenger seat. I lower the window and she's like. She's going, oh, no, no, no, no, no. Don't do it, don't do it. Do it.

[Scott Nations]

This is not gonna be good.

[Josh Brown]

I'm like, quiet. This has to be done. So I yell to the guy, he literally has the pumpkin to his face. I go, sick picture, bro. Send me that. Definitely send me that. I need that pic, bro.

[Scott Nations]

What a dick.

[Josh Brown]

I know the worst. He slams the pumpkin down. There's whipped cream in the air. His wife starts laughing at him or his girlfriend. So I speed off, of course, because I don't want to confrontate. So my wife's like, what if he. What if he follows you? What if he kicks your ass? You know, what if that dude kicks my ass? The universe is telling me I deserve it by a pumpkin sipping freak who's got an Instagram girlfriend. Like, if that's right, what do you think?

[Scott Nations]

I think he's going to be a fake tough guy. Listen, somebody who's drinking a whole pumpkin full, can you imagine a pumpkin spice latte with the whipped cream? It's probably got cherries on top handed. Oh, no.

[Josh Brown]

Like a maniac.

[Scott Nations]

No, that guy is. No, listen, pumpkin spice latte was the beginning of the end for civilization.

[Josh Brown]

I sort of think that the timing coincides with when I think everything started to suck.

[Scott Nations]

Yeah, I think we. When we quit drinking black coffee and we started drinking everything has to have an umbrella in it.

[Josh Brown]

Now they're not even drinking it, though. It's so this look.

[Scott Nations]

You think it's performative?

[Josh Brown]

I know it is. God bless them. I want them to make money because it's my town and I want all the local businesses to thrive.

[Scott Nations]

Sure.

[Josh Brown]

So it's not really a comment on them. Like, if it's just like the stock market, they're doing all these secondaries now. If people are willing to buy it, you should sell it. But when did men start having this need to have their significant other film them sip out of a pumpkin, drink whipped cream out of a pumpkin, broad daylight. When did all. I don't even know when this started.

[Scott Nations]

Well, when are their children gonna see that photo and start making fun of them?

[Josh Brown]

There will be no children. That's the point. This is emasculation on a level, like, previously unimaginable. How can you mate with a person that's doing this? I don't think they're gonna be a next generation. Honestly. I think this is it.

[Scott Nations]

Well, that's great news. Well, that means it ends for the climate. No, it ends with them. It's like a corollary of the Darwin Award.

[Josh Brown]

I think it's over. It's gotta be close to being over, right? Anyway.

[Scott Nations]

All right.

[Josh Brown]

Sorry, I had to get that off my chest. You okay? Are you going through the dairy bar? Are you going through the barn today for. Have you seen the shit that's going on on Instagram?

[Michael Batnick]

I now have to avoid Hewlett Avenue. I'm glad I moved.

[Josh Brown]

Have you seen what's going on here?

[Scott Nations]

Give me a little bit more.

[Michael Batnick]

It is ridiculous.

[Scott Nations]

Give me a little bit more insight into where this is. So I stay away. It's.

[Josh Brown]

It literally.

[Scott Nations]

All right.

[Michael Batnick]

Just.

[Josh Brown]

Just like, oh, here it is.

[Scott Nations]

Look at.

[Josh Brown]

Look at this guy. Holy shit. Oh, come on, come on, come on.

[Scott Nations]

Good for them. Listen. Oh, my God. The place is huge and they're selling a ton of this. How much is one of those?

[Michael Batnick]

Gotta be a lot.

[Josh Brown]

Look at this. Look. He's gonna pick it up and drink out of it.

[Michael Batnick]

It's a bowl of.

[Josh Brown]

It's a pumpkin filled with whipped cream.

[Michael Batnick]

Wait a minute. What if the guy that you were harassing. Was the owner trying to promote his.

[Josh Brown]

No, Trust me, this guy doesn't own anything.

[Scott Nations]

And how much they charge for one of these giant pumpkin things?

[Josh Brown]

Oh, I'm gonna guess that's like it's 13. You know what?

[Scott Nations]

Oh, no. I bet double that.

[Josh Brown]

Maybe 20 bucks. I hope they get. So here's the other shit. Like, this is like an iced coffee with a. With a donut or a piece of pie on top. Hold on. That's the place. This literally used to be like, you just buy cigarettes on your way to the. To the. To the bar. That's what the.

[Michael Batnick]

Back in my day.

[Josh Brown]

In my day.

[Scott Nations]

Mmm.

[Michael Batnick]

Apple cider donut.

[Scott Nations]

We'd be better off if they're back to selling cigarettes in a 40.

[Josh Brown]

Look at me with my apple cider donut ice cloth. I hope you drown in it. The whole purpose of this place was to get Parliament lights. Daniel's having an aneurys, and then go. And then go to. And then. And then go to the club. Go to the bar.

[Scott Nations]

I'm just glad that. Listen, we split our time between Chicago and New York. I'm glad that we don't go to Long Island.

[Michael Batnick]

You guys want to talk.

[Scott Nations]

You guys want to talk to the stock market, Wherever that is.

[Josh Brown]

Stay away from Long Island. Here we go.

[Scott Nations]

It is. It's got to be Long Island. Tell me it's not Long Island.

[Michael Batnick]

Of course it is. Where else would it be?

[Josh Brown]

It is. We own this disaster. You're right. All right, let's go.

[Michael Batnick]

The most Long island ever complained about Long Islands. Whoa, whoa, whoa. Stop the clock. Here's a word from our sponsor.

[Josh Brown]

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[Michael Batnick]

Batnik and their cast mates are solely.

[Josh Brown]

Their own opinions and do not reflect the opinion of Redholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Big show, guys. Ladies and gentlemen, welcome to the best investing podcast in the world. First time guest, Scott Nation. Scott is the author of the Anxious Investor as well as a history of the United States in five crashes. Scott is also the president of Nations Indexes, the world's leading independent developer of volatility indexes and options strategy indexes. Scott, it's so great to be here. You had some other stuff that you wanted us to know that you had done in the past. Can we talk about the Chicago Mercantile Exchange for a few. A few minutes?

[Scott Nations]

Yeah. I mean, we were just talking about when men really were men.

[Josh Brown]

Yeah.

[Scott Nations]

And you want to talk about a place where that was going on in spades. The floor of the Chicago Mercantile Exchange.

[Josh Brown]

Yeah.

[Michael Batnick]

Pure testosterone.

[Josh Brown]

And you were in the pit.

[Scott Nations]

Yeah, I was in the pit.

[Josh Brown]

You worked with Jonathan Novy.

[Scott Nations]

I stood next to Jonathan Novy for years in the S and P option pit at the Mercantile Exchange. And I'll tell you, you really get to know somebody when you stand next to them in a trading pit. And that's. Jonathan and I are still friends.

[Josh Brown]

You could, you could see the other guy's soul, basically, because you're watching that fear and greed stuff. Well, and how they react to pressure.

[Scott Nations]

And how they act and if they're a stand up guy or if they're a weasel.

[Michael Batnick]

Okay, and how would you describe Jonathan more for the Weasley side?

[Josh Brown]

Big weasel.

[Michael Batnick]

Now, Jonathan is one of my, one.

[Josh Brown]

Of my favorite advisors, one of my favorite people in the world, actually.

[Scott Nations]

Honestly, you could be in a pit with 500 people.

[Josh Brown]

He's not answering the question.

[Scott Nations]

And I'm going to answer your question. You could be in a pit with 500 people. And so I probably got to know. I probably came across thousands of traders in my time there and I am still connected to maybe five of them, maybe a half a dozen. Jonathan is one. Two of my business partners were guys. I mean, I stood next to Bob Ward in the pit. That's how I met him. But 99.99% of those people, everybody was just there trying to make money. There's no reason to stay connected except to guys like Jonathan.

[Josh Brown]

Yeah. Is it, is the, is the market missing something? Not having something like that or have we like moved on without it and everything's more efficient now?

[Scott Nations]

Yeah, it's a, it's A great question. And so for people to get the visual. I was one of those guys in a bright red polyester jacket with a gray mesh back jumping up and down.

[Josh Brown]

Like, what was your first year there?

[Scott Nations]

My very first year trading on my own was 1989. I just got started. But to your question, yes, we're missing something in that it was a place where young people could get started as traders and you paid your dues. I started as a clerk at a great job. Out of school, quit, moved to Chicago to become a clerk at the board of trade. And you can't do that anymore now. And so that's probably missing. On the other hand, it is so much, it is so insanely efficient now. Markets are.

[Josh Brown]

Yeah.

[Scott Nations]

That it, I can't look back and say, oh, I wish we'd go back because it's just, it's a step back.

[Josh Brown]

The career on ramp to professional trading now is a computer science degree.

[Scott Nations]

Or physics.

[Josh Brown]

Or physics or physics.

[Scott Nations]

Yeah. I mean we have a, we have an advisor who has a PhD in math from Caltech is on our board and he has told me that there is in Finance now, physics PhDs trump math PhDs.

[Josh Brown]

Why is that?

[Scott Nations]

I don't know.

[Josh Brown]

Trump like they do better or they're.

[Scott Nations]

More, they're considered more valuable. A physics PhD is considered more valuable than a math PhD.

[Josh Brown]

What about phys ed? Not the same that used to be.

[Scott Nations]

Well, phys ed is great if you're the guy who's emptying the trash cans and sweeping up at the end of the day.

[Michael Batnick]

But that's weird because I forget who I'm stealing this from. Somebody said markets are way more like biological than they are like physics. Anytime you think you've cracked something with math, they change the lock or they change the code. I mean, you just said the markets are more efficient now than ever. What do you mean by that?

[Scott Nations]

If you want to trade size now, and I don't care if it's interest rate futures or Nvidia shares or the S and P, you can trade immense volumes with very little market impact cost. You can move the market against you to a very small degree and there are millions of people on the other side who are happy to make markets and they're happy to make, I don't know, 1/20 of a penny a share and they'll do it until their heads cave in.

[Josh Brown]

Right.

[Scott Nations]

And that wasn't always the case.

[Josh Brown]

So more efficient and there's a lot of liquidity.

[Scott Nations]

There's. Yes. Okay, I can. Long time ago when we were trading treasury bond options at the Board of Trade. I can remember when Pimco came in, Bill Gross came in and he just sold a ton of strangles. And he essentially killed the market by the time he sold about 150,000 of them. But he was like, yeah, I'll sell these strangles. And if the market goes down here, I'm happy to buy more. If it goes up here, I'm happy to sell some.

[Josh Brown]

I'll sell these strangles.

[Scott Nations]

Oh, and we bought. Oh, we. We bought them and bought them and bought them and bought them until our heads caved in.

[Josh Brown]

Okay. Those are. Those. Those were the days.

[Scott Nations]

But on the other hand, the markets are so much more efficient now, which is great for everybody. And now opportunity exists for anybody. I don't care if you're male, female, five, two, whatever. If you're smarter than the next person, then you're gonna do well now. And that wasn't. Unfortunately, that wasn't always the case. Okay.

[Josh Brown]

It was more about who you knew, how close you could get physically. Proximity to a trading post. Right. Like lineage. Like, this is my grandfather's seat, like that kind of thing.

[Scott Nations]

Yeah. Not so much that proximity in the trading pit mattered, but, for example, in the Eurodollar futures pit at the Mercantile Exchange, there was nobody on the top step who was shorter than 6, 4.

[Josh Brown]

Actually, Jim. Jim Urio showed me that. And he's not a tall guy.

[Scott Nations]

No, he's not.

[Josh Brown]

And he told me that. He explained that same story to me.

[Scott Nations]

Right. And when the brokers in the Eurodollar futures pit were looking for a new clerk, being taller. A clerk being taller was even more important. So the prime place where they would recruit from Big ten football and basketball programs.

[Josh Brown]

Wow. That makes sense.

[Scott Nations]

Yeah.

[Michael Batnick]

So, Scott, I can't think of a better person to have here for this week. Specifically, you're a market historian, you're a trader, you're a math guy. You know all about what we're gonna talk about today, which is retail having a real moment. There's a new book, an old book that is being updated by Richard Thaler and Alex Amos. The book is called the Winner's Curse. And our friend Jason Zweig interviewed them in the Journal this weekend. And here's what they had to say about bubbles. The main difference between then and now is the presence of the Internet. Forums like WallStreetBets allows people to coordinate their actions on a massive scale. Bubbles typically burst when some people start selling and others can't viably coordinate in the holding position. But phrases like Diamond Hands inspire people to collectively hold a position for much longer than before information technology was so widespread. And then secondly, the Internet allows many more assets, assets to become bubbles in the first place and now can take only a small group of people coordinating stocks like Kohl's or AMC to start what seems to be a trend. The end result is many more bubbles that will potentially last longer than in previous periods.

[Scott Nations]

That's interesting. Let's talk Thaler, literally winner of the Nobel Prize, one of the smartest guys in finance. Listen, I watched from the sidelines during that whole meme stock thing and kind of like a lot of people maybe like you guys shaking my head, just, holy cow, come on. I actually think that in general, big bubbles kind of get cut off at the knees because of what we've been talking about. So many investors and so many people who are now willing to fade a big move like that. So the meme stocks, that was an entirely different story. That was purely emotional, purely behavioral. I remember talking to a college student at the time when that was going on and very smart girl, she said, young woman, very smart. And she said, well, I'm long GameStop because we know it's going to go to $1,000 a share. I'm like, well, how do you know that it's going to go to $1,000?

[Josh Brown]

Everybody knows that.

[Scott Nations]

We all know that.

[Michael Batnick]

Yeah, how do you not know that? Dumbass, right?

[Scott Nations]

And it probably went up another hundred dollars a share that day. And I'm probably, I don't know, maybe I'm an idiot. So it's easy for people to get together now. And I'm not saying they're colluding, but it's all reinforcing and it's a self aware bubble.

[Josh Brown]

They say, yeah, we know it's a bubble. Jump in, we're going to bumble it up even more. That's one aspect. The second aspect is if they can keep the balls in the air long enough, the corporation can a raise money via secondary and get itself out of the sort of trouble that made it a $3 stock. That's one. We saw that with the movie theater. The second thing is they could pivot and adopt a new business model. So Gamestop is gonna be a bitcoin treasury now or whatever. Like, you know, that's a new phenomenon. To Michael's point, this level of coordination was heretofore not possible in the age when people looked at a newspaper for stock ticker info and couldn't communicate with another million people who were involved.

[Scott Nations]

And you were nice enough to mention my book, the Anxious Investor. In there. I talk about herding, the herding behavior that is much more common now. And it's very easy for you to see somebody talk about something on social media and then you look at the stock, oh, yeah, it's up 5% this month. Let me get. Let me climb on board. And that's very common. And also, there's another thing that I write about in that book, that people feel like they're part of a tribe.

[Josh Brown]

When it becomes part of your identity.

[Scott Nations]

When they're on board. And one of the favorite things that I write about, phenomenon that I write about in that book is this thing called Fantastic Markets. And it written, the idea came from a couple of British guys, so they spell fantastic with a pH. But in the 1990s, the idea was people felt that if they owned Microsoft or Apple, either the shares or the products, they felt physically closer to Bill Gates or Steve Jobs. It was almost like they were buddies.

[Josh Brown]

If it works out, it's like, yeah.

[Scott Nations]

I mean, oh, now I own an iPhone. So Steve and I are friends. We're close. And that one strikes me as really dangerous because whether you love Elon or hate him, there are people out there who think, Oh, I own 100 shares. He and I are best buddies now.

[Josh Brown]

Yeah. Well, so long as the stock price has been going up most of the last 15 years, people that have taken the ride love them more than ever.

[Scott Nations]

Yeah. I mean, sure. How can you not? He's iconoclastic in a way that some investors have been begging for.

[Josh Brown]

Yeah. I want to ask you about what you make of all of the. What you make of, like, all of the new ways to speculate. So I'm definitely going to ask you about what's happening in the option market. But before we go there, let's just take a quick look at leveraged ETFs. This is not that new of a phenomenon. These have been around for a long time, but the popularity of them is at a fever pitch. I don't know if that's because of just the length of this bull market and the degree to which it's been running. Michael, what's in this chart? This is a Todd chart.

[Michael Batnick]

So Todd Sowen updates his chart, just taking the temperature of the market and levered long. The ratio of how much money is in long versus shorts. It's about as high as it's ever gone. We've had. We've had six and a half billion dollars come into these markets in the first nine months. Of the year. I'm talking about. I'm sorry, single stock levered ETFs, which is a little bit different than this. Six and a half billion dollars in single stock ETFs. In the first nine months. There's almost $30 billion in single stock levered ETFs, which I don't even know if that shows up in this chart. But what does this tell you about where we are? And is this just now, Scott, Is this just now a part of the market? Like, is there any going back or is this just not a signal here anymore?

[Josh Brown]

So before you answer, like, it's 10 to 1. So you got $140 billion in levered long. I guess these are index ETFs, Michael.

[Michael Batnick]

Yeah.

[Josh Brown]

Okay. And 14 billion in. In inverse. So. Or, or, you know, betting on a negative outcome.

[Scott Nations]

Right.

[Josh Brown]

I mean, it's about what you'd expect at the high of a bull market. Right.

[Scott Nations]

The thing that stands out to me is. And to your question, to, to answer your question, no, we're never going back. We don't go back. When these sorts of products get invented and created and sold and boy, they're selling the hell out of them, aren't they? Then we don't really go back. The thing that surprises me is that there's not more inverse. And it's not. I'm not saying that people ought to be loading up on inverse products because the market's gonna tank. You would just think that just kind of through Browning in Motion, people would be have more of that stuff on in relationship to the broad market. And they don't.

[Michael Batnick]

Well, the problem is as a hedge.

[Scott Nations]

Yeah, as a hedge or speculation.

[Michael Batnick]

The problem is almost nobody makes money in these products, even on the long side. So our friend Jeffrey patak showed the MicroStrategy double levered long. Daniel, chart three. So this thing is up 98%. This is. This is the total assets in here. This thing is up 98% since inception, just the price. And somehow investors have lost $397 million in the aggregate. And that's on the long side. So there's some really funky shit where Jeffrey said investors at Investors Traders actually made money on the short side, which is neither here nor there. But these things are pure money incinerators and nobody cares.

[Scott Nations]

Yeah, well, and there are a couple of things like this. You know, we're involved, we're in the volatility space. And so the same thing happens in Vix ETFs, levered or not. You know, people want to be Long VIX systematically. And so they buy some of these.

[Josh Brown]

ETFs, like an ongoing insurance premium that they're paying.

[Michael Batnick]

Horrible idea.

[Scott Nations]

Oh, it's terrible.

[Josh Brown]

Nobody should do that.

[Scott Nations]

No, because the manager has to roll that product from one expensive futures contract to an even more expensive futures contract every month. And talk about money incinerator between the roll costs and the actual expenses. So if you want to trade those products, trade them, use them tactically. You can't. But these sorts of products, what is.

[Josh Brown]

The right tactical use of a, of a vix, of a VIX flavored ETF or etn? Is it like ahead of a Fed meeting where you think the market's about to be shocked? Or like what, how should that be used, if at all?

[Scott Nations]

Probably not at all. Let's talk about the specific situation you're talking about before a catalyst.

[Josh Brown]

Hold on. Our sponsor today is VIX etf. No, I'm just kidding.

[Scott Nations]

Go ahead and quickly. Cboe, for example, hates us. They think that we're a competitor to vix. CBO would be happy to kill us just to watch us die. But Vix is the 800 pound gorilla. But no, traders are very smart now when it comes to these sorts of things. So if you buy something, if you buy VIX options before a catalyst, whether it's a Fed meeting or a big unemployment number, if we ever have one of those again, then as soon as the data is out, I mean instantaneously, those options are worth less than they were 30 seconds ago. And so we call that the volume crush. Volatility crush. That is a headwind that's almost impossible to overcome.

[Josh Brown]

Right. So if you want to express that bet, why not just buy puts on an index of stocks? Like, why even bother trading a VIX like a volatility product?

[Scott Nations]

Well, the puts are going to, even if the underlying doesn't move, the puts are going to be worth less 30 seconds later.

[Josh Brown]

Yes.

[Scott Nations]

So options have become much, much, much more popular over the past five or ten years, and for good reason. Twenty years ago, people were all about options because they got leverage. All they wanted was more and more and more and more leverage. Now people have come to the conclusion and some pretty sophisticated retail traders have come to the realization that the benefit of options is not leverage. It's not more, more, more. It's that if you combine an underlying with an option, you can create a payoff profile that's absolutely superior to the 45 degree line that is owning or shorting the stock.

[Michael Batnick]

But don't you think that's why People are in these leveraged products. So there's 100, whatever we said $140 billion. It's the off chance that you're in the AMD double levered ETF before the announcement like we had last week. And it's, there's like a fun component.

[Scott Nations]

In here, I think that people are in these, these sorts of products or some of these buffered products. That sort of thing is because they understand the value of the strategy but they don't want to be bothered to do it themselves. Yeah, it's an easy button to a certain degree. It's like going out to dinner. Yeah, I could make that or I can pay somebody a little bit more money and make it for me.

[Josh Brown]

Retirement account that can't use margin. Hey, I don't need it anymore. Now I buy this product, I get 2x AMD.

[Scott Nations]

Right.

[Josh Brown]

And if Lisa Su has a great appearance at a conference somewhere, Instead of making 5% on that day, I'll make 10.

[Michael Batnick]

They made 45% last week in that one day.

[Josh Brown]

45 times 2, literally divided by 6.

[Scott Nations]

But that's one name. And how many of those things are out there that lost?

[Josh Brown]

But Michael's point is nobody cares. Lottery. Yes.

[Michael Batnick]

So Scott.

[Scott Nations]

Yeah, well that's unfortunately, yeah, there's, there's.

[Michael Batnick]

No but that's what it is. So Jason Zweig wrote an article and again, he knows he's screaming into the void. Nobody actually cares, but it's, it's astounding. So there was this new double levered software platform, etf, whatever it was, and it was small. This guy was just launching the product and he said the swaps were 1.7% a month. And so right off the bat, the manager and this guy is credit to him. He's like, I'm sure this is crazy. I can't justify this. The swaps alone were like 20% annualized. But if you're in this thing for a week, a day, a month, who they don't, people don't care. So there's no amount of warning, there's no amount of tobacco warnings on the labels. People just don't care.

[Scott Nations]

People, they're. Unfortunately, people have gotten to the point where they're like, you know, even if they have a great advisor, I know.

[Michael Batnick]

It'S bad for me, but I like it.

[Scott Nations]

And they're like, say they're 65, 30 and they have that 5%.

[Josh Brown]

Yeah, great.

[Scott Nations]

They're like, you know, I'm gonna roll the dice with some of this stuff.

[Josh Brown]

I agree. And in some cases it's working out really well and that's why it's so hard to talk them out of doing it. Well, think about all the financial advisors who told their clients, don't buy Tesla, it's a money losing company. Don't buy Bitcoin, it's Internet fake shit. Listen to what Warren Buffett, Jamie Dimon, Charlie Munger and the rest. Like, if you are on the receiving end of that advice, don't do this, don't do this, don't do this. And then you make a million dollars doing it. You're probably done being talked out of recreational activities in the market.

[Michael Batnick]

What you're talking about, it's not what he's talking about. Nobody's making a million dollars buying the double levered.

[Josh Brown]

I think. No, but directionally a lot of crazy shit has paid off in the last 15 years.

[Scott Nations]

Well. Or something even worse happens, Josh, you don't make the million dollars.

[Josh Brown]

Oh, that's.

[Scott Nations]

But your friend or neighbor does. And that's it.

[Josh Brown]

That's it. Then you're done and you're like, oh, it's whiskey. Okay, how about this?

[Scott Nations]

Give me more of it.

[Josh Brown]

Here's five times the amount, right? How you like me now, right?

[Scott Nations]

100% idea, give me more of it. Oh my God, you mean my idiot brother in law, he made all this money? Yeah, and you told me not to.

[Josh Brown]

Do you agree this is one of the hardest parts about knowing the markets is communicating to people the difference between process and outcome. And sometimes you could have no process whatsoever and an incredible outcome. And sometimes you can have an amazing process that historically works really well with a terrible outcome. And it's very, very hard to disentangle those two ideas.

[Scott Nations]

Yeah. One of the things I write about in the Anxious Investor and Thaler is the guy who actually first kind of started writing about it was this myopic loss aversion idea. Which means that essentially we'll put it this way. The less often you look at your portfolio or monkey around with it, the better your returns are.

[Josh Brown]

Yeah.

[Scott Nations]

And so I like, I like a thought experiment. How much better would the average investor do if the stock market was open one day a year? You could only rebalance, you could only trade. You could only invest one day a year and the other 364 days a year you had, you had to sit on your hands.

[Josh Brown]

Can I introduce him to private equity?

[Scott Nations]

Yeah.

[Michael Batnick]

Well, no, it is an interesting thought experiment, but.

[Scott Nations]

So you would.

[Josh Brown]

Except you get liquid once every seven years.

[Michael Batnick]

But you would say, like, obviously poo would perform better. But what if on that one day people are like freaking the hell out?

[Josh Brown]

Yeah.

[Michael Batnick]

This is my only chance to get out.

[Josh Brown]

By the way, everyone's a seller on that one day. No one's a buyer.

[Scott Nations]

You think?

[Michael Batnick]

So the stock market goes to zero when it opens.

[Josh Brown]

Yes, because the people are buying other things. They find something to do besides stocks. They're in crypto, they're in real estate. So on that day, close the market for a year. Guys, it's only open on Wednesday.

[Michael Batnick]

Point is well taken.

[Josh Brown]

The more you're selling, right?

[Scott Nations]

Then if it's. If everybody is selling on that one day a year, I want to buy.

[Josh Brown]

You want to buy.

[Scott Nations]

I want to be the buyer.

[Michael Batnick]

So, Scott, as you. So you are a quantitative investor, you are looking at the math and objectively saying, things are this way, things are that way. It doesn't mean you know the outcome, of course, but you're giving yourself a chance. There is. We are in this moment right now where there are so many outside forces, people acting in ways that may or may not make sense in the long term. But in the short term, whatever, it is what it is.

[Josh Brown]

So they're drinking out of pumpkins, right? Yeah, it's like a whole thing going on right now.

[Michael Batnick]

So Marlin Capital, it says all flows estimated from public data. So let's just say it's directionally right, even if it's not 100% precise. Who knows? We have just witnessed the largest retail investing buying ever. Retail has bought over $100 billion of US stocks in the last month. The largest 1 million buying. Largest one month buying on record. Surely this amount of money coming into the market, into these names has to have a dramatic impact on everything.

[Josh Brown]

Retail Investor just bought $100 billion of US stocks. Is this aggregating individual stocks and funds?

[Michael Batnick]

I don't know the methodology, but maybe. Maybe the next chart is a good setup for this. So Deutsche bank has this chart that shows a basket performance relative to the rest of the market. And they're showing the stocks with the most net call volume, which, as we know, is what the retail investors are buying. And it's also showing the most shorted stocks. Again, what retail investors are buying. And these things are on absolute fire. And it's hard to tell somebody this isn't rational. It's like, what, making money is not rational? It feels pretty rational to me on its surface.

[Josh Brown]

Is it totally irrational to be buying the most shorted stocks? I don't think so. I don't know. I mean, they're not going to be the Most high quality stocks we know.

[Scott Nations]

That I hate for retail investors fired up about some of these metrics and I would expect listen markets at all time highs. I'm trying to do the math in my head. What's the market cap of the US stock market?

[Michael Batnick]

Almost 50 trillion 40.

[Scott Nations]

So 100 billion out of 50 trillion is actually not that big a deal. And so I would expect that. I think the fact that retail investors as opposed to retail traders continuing to put money in the stock market is a great thing.

[Michael Batnick]

Agreed.

[Scott Nations]

I just, I hope if the stock market is off 25% from the time from highs, let's say next year, middle of next year. If it's down 25% from here, I hope that they're still buying and in fact they're buying more. And one of the things that drives me crazy when it comes to professionals is stock buybacks. Companies who are doing stock buybacks are the worst traders in the world because they double up at the high. Yeah, yeah, yeah, yeah. If XYZ Co. XYZ announces a stock buyback or increases the size of their buyback, I'll bet you the stock has done really well over the past 12 months.

[Michael Batnick]

Unfortunately, that is way it works.

[Josh Brown]

But it's not human. That's like human nature. That's like, when are you the most confident in your own stock? Probably after it's just gone up 40%.

[Scott Nations]

These guys are supposed to. The CFO and the CEO of XYZ company are supposed to be professionals. They're supposed to be not devoid of emotion, but they're supposed to have steeled themselves against.

[Josh Brown]

Here's the other side of that, though. Berkshire Hathaway had a buyback and they said publicly we're buyers below 1.3 times tangible book value. I think that's what it was. The stock never even got close to that. So now it's just like, all right, fine, we're not going to buy as much as we thought because we don't have an opportunity. In your mind, that's the right way to handle it?

[Scott Nations]

Well, you can't. I think the mistake there is you can't say this is what we're going to pay because it's never going to get down there. You have a natural put option.

[Josh Brown]

Maybe that's brilliant though.

[Scott Nations]

Well.

[Josh Brown]

Scott, come on.

[Michael Batnick]

You just spoke about like, okay, $100 billion. Yeah, it sounds like a lot of money, but if you normalize it for the size of the market. All right, we did normalize it. Hold onto your face because it's about to be Blown off your body. Daniel, chart five please. So the retail stock chart. Kid, make this chart. We're looking at some of the most in favorite speculative names. So I'm Talking about Rigatoni, RGTI O. Coreweave, MicroStrategy. So what Matt did was he adjusted for the 20 day average volume not of shares of dollars traded. Okay, Dollars of shares traded against the Mag 7 and holy shit, Rigetti which is a ten $15 billion market cap and Oclo and Cor Weave which is approaching 100 microstrates. 100. Those names trade as many dollars as Netflix and Google which are. Google is a trillion plus dollar company. Is this wild or what?

[Scott Nations]

Well this is a function of what we were talking about earlier. Markets are incredibly efficient. Companies are able to. Brokers are able to sell their order flow. And there are a bunch of institutional hedge funds who are willing to buy it and make a twentieth of a penny on all that volume and gin it up. And we talked how it's becoming more like gambling for those names. Somebody's going to, I don't know, trade 100 shares or some call options and it's the 5% that's not in the S and P or in Treasury.

[Michael Batnick]

But when you see this type of behavior, are you of the mentality that listen, if this is your 5% money, trade your ass off, have a great time or does this bother you?

[Scott Nations]

No, this is human nature. Yeah, I mean this is human nature.

[Josh Brown]

Can I say one thing about this also? What are there 10, 11 stocks in this group?

[Michael Batnick]

I mean I could have given you 20.

[Josh Brown]

Okay, fine. But like in every market era these stocks exist. They're just different stocks. So here are the names.

[Michael Batnick]

Not to this degree, you're right, but not to this degree.

[Josh Brown]

So you have Qubit and Rigetti in here which are nqs. This is Quantum Computing. What's Iran? I don't even. I still haven't bothered to Google it. Do I care? Stock goes up $5 a day.

[Michael Batnick]

Quantum Aviation.

[Josh Brown]

Get the out of here.

[Scott Nations]

All right, fine. What is that?

[Josh Brown]

OK, nobody knows. It almost doesn't matter. Orbs and BMNR are these digital asset currencies.

[Michael Batnick]

MicroStrategy.

[Josh Brown]

One is Tom Lee, one is Dan Ives. Dan Ives. Core Weave is AI strategy is.

[Michael Batnick]

What's the point of naming all these companies? That's not the point.

[Josh Brown]

Well I'm just saying like if you pull these Joby circle. If you pull these names out and you go back to 2000.

[Michael Batnick]

Nah, nah, nah, stop right there. Stop it right there.

[Josh Brown]

You will find the same version of that.

[Michael Batnick]

There's no way. I'm guessing School, school him. Hold on. There's no way I am guessing that in 2000 that the companies that were in the bottom 20% of market cap, we're trading as much daily volume as IBM and Cisco and Yahoo. There's just no way. That's gotta be different.

[Josh Brown]

Because not in 2000 because the market was crashing, but in 99.

[Michael Batnick]

There's no way, dude. The small stocks were not trading as much as the giants.

[Scott Nations]

No way. It was much more difficult to physically trade stocks in 1999. But how about this? One of the things I write about in the Anxious Investor is that, and there's some wonderful research done this. In 1999, if a company changed its name to include Web.com, any of that, it didn't matter what they did. They could be a cafeteria, but if they now became cafeteria.com, then the stock would zoom. It was like crazy.

[Josh Brown]

We saw that in 17. They all became blockchain companies.

[Scott Nations]

There you go.

[Josh Brown]

We saw that in. They're probably going to do that now with Quantum and there's.

[Scott Nations]

And the. And. Or anything having to do with blockchain or crypto or anything. And. And I guess if you, if you're a shareholder, don't you want your guys to do that? Oh, we own this boring cafeteria company.

[Michael Batnick]

Depends how long you own the share for a long bit at least.

[Scott Nations]

But now you have an option to shell to sell at a much higher price.

[Josh Brown]

Of these guys who owned a deli in New Jersey, those are good guys.

[Scott Nations]

I thought they were guys, but they were on Long Island.

[Josh Brown]

Oh, that might have been.

[Scott Nations]

I thought they were next to the place that sells the pumpkin latte and a hollowed out pumpkin. But one thing real quick. In 2002 and 2003, the guys who wrote the paper about what happened in 1999 with renamings, they turned it on its head. And the companies in 2002 and 2003 that renamed themselves away from.comWeb, they outperformed the names that didn't.

[Josh Brown]

Yeah. So because everyone wanted to be in traditional value stocks in that era, right?

[Scott Nations]

Yeah. So if gm.com changes, changes its name to GM and we don't have anything to do with the web, but we're going to make some great cars. And a whole bunch of them people were like, that's for me. Now I want all the economy.

[Josh Brown]

We had real world examples where DLJ spun out DLJ Direct. DLJ Direct was going to be its online brokerage. Arm. They spun it out as a tracking stock for the first six months that outperformed regular DLJ and then it flipped. So yeah, we do the. So I guess I would argue we do this all the time. But to Michael's point, this might be the most extreme version we've ever seen. Cuz those companies that he's showing, they're small companies. I was gonna say some of them are telling investors we won't have a commercialized product till 2029. And they're trading as much volume as Google.

[Scott Nations]

Right. And I am firmly convinced that a combination of AI fusion energy, which is probably 10 years away and quantum computing is going to be massive. It's going to be absolutely massive. But how in the world do you invest in a quantum computing business? Now that's darts at a dart.

[Michael Batnick]

But that's the point. They're not investing, they're trading.

[Scott Nations]

Well, that's.

[Josh Brown]

Here's my question for you. Does that turn you off from the overall market? Like it's an expensive relative to history S and P, it's a very expensive nasdaq. And then you have that activity as like a sideshow. But it's not even a sideshow. It's the main event for a lot of investors.

[Scott Nations]

Yeah. Well I hope that the main event for a lot of investors is putting money from their 401k into spy or TLT every month. I hope, I think it probably is.

[Josh Brown]

I self direct an investor with a Robinhood account is not doing TLT and SPY well.

[Scott Nations]

And I would take, I would argue with your describing him as self directed investor. Those aren't investors.

[Michael Batnick]

Well, in 2022 they were. Remember they were diving headfirst.

[Josh Brown]

TLT was put up the evolution of meme. This is such a great chart.

[Michael Batnick]

All right, so we love the round. We love the roundtable guys. So this is no disrespect to them, but it is just hilarious that they have a meme ETF that was listed towards the end of 2021.

[Josh Brown]

Good timing.

[Michael Batnick]

We know what happened. They got delisted in 2023. And I'm overlaying this with the ARK price just because I guess it's the closest proxy. And yesterday it's back. They resurrected a dead etf. I don't know if that's ever been done before. I'm sure it has.

[Josh Brown]

I've never heard of that before. But because the stocks are in favor.

[Michael Batnick]

Again, because we're back.

[Josh Brown]

So this is meme priced in ark or ARK price in.

[Michael Batnick]

No, it's not priced in Anything. I'm merely putting the dots on the ark Price. I could have done the S and P, but this is a better proxy.

[Scott Nations]

All right, I'm going to do something I probably shouldn't do.

[Michael Batnick]

Do it.

[Scott Nations]

What is the management fee? Annual management fee for meme now. Do you know?

[Michael Batnick]

70 basis points. I made that up. I could. I could check this.

[Scott Nations]

I bet I have an Internet. I bet you it's over a buck.

[Michael Batnick]

No way.

[Josh Brown]

No way.

[Michael Batnick]

These are. These are not those guys.

[Scott Nations]

You can get away with it now because people are completely price 69. Okay, all right.

[Josh Brown]

You're right, Scott. You can get away with anything right now. If Tom Lee dropped the time travel etf.

[Scott Nations]

Well, that's my point.

[Josh Brown]

People would put a billion dollars.

[Scott Nations]

That's. People are completely priced when it comes to stocks.

[Michael Batnick]

I want to ask your opinion on this because Paul Tudor Jones was on CNBC this week saying it feels like 1999. And maybe it does. I wasn't around in 1999 trading stocks. But this type of thing that is happening now is a new permanent feature of bull markets. It will never not. They will. The ability to speculate as we open the show with. It's so easy. You just got to get used to this.

[Scott Nations]

Yeah, I don't disagree with that. And to the degree that people are paying attention to the stock market in a way that they didn't 30 or 40 years ago is fantastic. The stock market is a great way to build wealth and provide for your retirement, finance your kids educations, as long as you only put a little bit of money in some of these knucklehead names.

[Michael Batnick]

And to be clear, I do think that most people that are being reckless are doing it responsibly. Like, I don't think that people are taking. Now, of course there's exceptions, but I do feel like, generally speaking, people are like, yeah, I eat my vegetables and potatoes and meat in my 401k and I'm having a hell of a lot of fun doing this. And guess what? I'm making money, assholes. So shut up.

[Josh Brown]

What do you make of the blurring though of the lines between gambling in things outside of the stock market and the stock market? So.

[Michael Batnick]

Oh, the stock exchange yesterday.

[Josh Brown]

So ICE is not the immigration ice, the other ICE that controls the New York Stock Exchange. They made a $2 billion investment into Polymarket at a valuation for Polymarket of what? 10 billion. Whatever the number, some insane number. They're not even operating in the United States yet. And I assume they will be able to soon. Kalshi is operating United States. But this is a prediction market that ICE has now decided is worth more than like the biggest casino corporation.

[Michael Batnick]

I love a prediction market. Don't call it gambling.

[Josh Brown]

Yeah, prediction market. But like if Robinhood is going to combine sports gambling with prediction markets, with investing in an ira, stocks and bonds, and the next generation investor is going to grow up in an environment where you could just do all those things simultaneously. We really are in a very different world.

[Scott Nations]

Very different world and much more dangerous. I hate the intersection of investing in gambling because over time, investing is not gambling. There are, there's never been a 20 year period where the S and P lost money once you account for dividends. Doesn't happen.

[Josh Brown]

We're doing our best to make that happen, though.

[Scott Nations]

Well, yeah, you get to a high like this. So I, and I have a dear friend, dear friend who we're on a text chain for fraternity brothers and on Sundays he'll send us his goofy parlay bets. He has 20 and you know, he's risking $20 on a 20 like parlay.

[Josh Brown]

Yeah. For fun.

[Scott Nations]

And I'm like, yeah. I'm like, you know, go with God. That sounds fantastic. I think you're wrong here. But, you know, I think the chiefs are going to win, but he's having a good time and that's fantastic.

[Josh Brown]

Yeah.

[Scott Nations]

You know, some, some people spend a bazillion dollars on fishing gear. So but the intersection where people think that, that investing in gambling. Yeah. It's. That's incredibly dangerous. So not.

[Josh Brown]

It's going to happen whether, whether people like me and you like it. It's inevitable. There seem to be any restrictions against doing anything at this point.

[Scott Nations]

I don't, I don't like fishing, but I. If you don't, if you want to be a, you know, go buy a bunch of fishing crazy.

[Josh Brown]

We show you a ratio chart.

[Michael Batnick]

This is, this is. So one of the beneficiaries and one of the inventors of this new meme world that we're living in is of course, Robinhood. And this chart really and truly is a miracle. What I'm showing here is the market cap of Schwab divided by the market cap of Robinhood. And at its peak, the discrepancy was 22 and a half times. So in other words, only two years ago, Schwab in.

[Scott Nations]

At.

[Michael Batnick]

In 2023, Schwab's market cap was 23x Robinhood. And two years and changed later, it's converging on 1. It's 1.3 times Robinhood's market cap is 135 billion and Schwab is 170 billion.

[Josh Brown]

It could have been like one of the greatest pure alpha pair trades I've ever seen.

[Michael Batnick]

Holy mackerel.

[Josh Brown]

If you had put this trade on in 23, I want to be long Robin Hood short Schwab.

[Michael Batnick]

Holy cow. If this touches one, go the other way.

[Josh Brown]

Oh, you think that's the moment.

[Scott Nations]

That's interesting. I will say this, and I had this conversation with some people on social media right after Robin Hood launched. And as long as you understand what your. What the deal is with Robinhood, what your relationship is with them, then fine, then use Robinhood. But I had a number of people say, well, it's free. Robinhood is free. I said, well, it's not really free. It's just that you don't see where they're making money off of you and they're like, no, it's free to me. And at some point you just have to slap your head and say, fine, okay, I'm not gonna waste any more time. If you understand their value proposition, then good.

[Josh Brown]

Options. The other brokerages are now all in the payment for order flow business. Any.

[Scott Nations]

Yeah.

[Josh Brown]

So that's number one. So there's no alternative. That's one and then two. Yeah, I guess to somebody that's going to buy Apple and hold it for 10 years, does it matter if they pay a penny higher than a normal bid ask spread? Probably not.

[Scott Nations]

Well, and now it becomes a marketing problem.

[Josh Brown]

Yeah.

[Scott Nations]

Schwab is your great grandfather's broker. Yeah, Robinhood is, you know, for a 20 something. And that's the. That's the marketing.

[Michael Batnick]

That's Pumpkin Latte's guy's broker.

[Josh Brown]

I already pitched. I pitched this to Schwab. I said, you guys, Chucky S. And Chucky S. Has a skateboard. Let's like, let's do. I don't. Look, I don't think. I don't think Schwab has a. Has a image problem. Because if you look at the amount of wealth at Schwab versus Robinhood, it's still a huge difference. But in Wall street terms, Wall street is purely interested in what is the future path of earnings growth. And the story at Robinhood is we're basically gonna allow people to do whatever they want.

[Michael Batnick]

We know what the numbers are. I think. I think Robinhood has 350, $400 billion worth of assets.

[Josh Brown]

I mean, not nothing more than that. It's way more than that. No assets under management.

[Michael Batnick]

Robinhood.

[Josh Brown]

Oh, no, no, no. I thought you said Schwab No, Robinhood.

[Michael Batnick]

Is like 350 to 400.

[Josh Brown]

Right.

[Michael Batnick]

And Schwab is 10 trillion.

[Scott Nations]

Yeah, yeah, well, but you say, you say you don't care, but let's walk it back. What if you're a Schwab shareholders?

[Josh Brown]

Oh, no, they. I agree.

[Scott Nations]

I'm saying they're lighting their hair on fire.

[Josh Brown]

As a. As a user, I don't care.

[Scott Nations]

And, and I know, I'm not saying it's an investment problem. I'm saying it's a marketing problem for. For Schwab shareholders.

[Josh Brown]

Yeah, you know what? It could be, but in a bear market, we just made that point. The companies that took dot com off their name did better. You get into a substantial bear market for this type of trading activity, and all of a sudden that's going to look like a bad word. And you'll see the Schwab's of the world come back into favor on the stock market.

[Michael Batnick]

Last thing to be clear, Schwab's shareholders are fine. The Stock is up 45% over the last year. The thing is, Robin is up 500.

[Scott Nations]

Well, and it's like we were talking about before at Thanksgiving coming up, your idiot brother in law is going to say, oh, you're still invested in Charles Schwab stock. I've been along for the Robinhood ride for the last two years. So the red car out in front, that one's mine. And, you know, I see you still got that Buick and you're just gonna. You're gonna wanna throttle your idiot brother in law.

[Josh Brown]

I tell this story in one of my books about the ad campaigns on CNBC and other channels. Frankly, every channel, every sporting event, the difference between 1999 and 2001. In 1999, it was like, Phil Jackson, what's your next big trade going to be like? People thought it was basketball. And he's like on his laptop in the limo. Anna Kournikova picking stocks. Shaquille o' Neal giving stock tips. Jackie Chan kicking a trade into the laptop that's in air while fighting off assailants.

[Scott Nations]

He's got money coming out the wazoo.

[Josh Brown]

Do you remember the commercial? Do you remember the commercials? Do you remember the commercials in 2001, it was Sam Waterston from Law and Order in a suit. And the tagline went from Jackie Chan kicking his laptop to place a trade to investing in serious business. And he did this whole direct to camera monologue with, like, somber tones. Because the marketing of this stuff mirrors the recent experience of the people who are market participants. So I guess my Point is, I don't know how excited you would be to be a Robinhood shareholder in a bear market. And I kind of feel like you'd see the action rotate back to people wanting to be invested in Schwab because of its perceived permanence stature.

[Scott Nations]

Let me ask you this. In 2001, if you had been Schwab, would you have hired Sam Waterston or in 2001. In 2001, and said. And had our marketing message is now eat your vegetables, or would you have just gone quiet?

[Josh Brown]

No, they did they eat your vegetables.

[Scott Nations]

What would you have done?

[Josh Brown]

Probably the same.

[Scott Nations]

I would have gone quiet.

[Josh Brown]

Why?

[Scott Nations]

I don't think you get anything from. By reminding people how badly they've done over the previous 18 months and that you were part of that, even though it's not your fault. I'm not saying you hide.

[Josh Brown]

You know who went quiet?

[Scott Nations]

Who?

[Josh Brown]

They put the E Trade baby to bed for a little while.

[Scott Nations]

Well, it's. And they did E Trade. Wasn't it E Trade that did. He's got the money coming out the wazoo.

[Josh Brown]

Yep. E Trade did the one. Maybe it was E Trade. Did the one with the truck driver who owns his own private island from trading in the stock market. Remember that?

[Scott Nations]

Yeah.

[Josh Brown]

He's got a picture taped up on his sun visor. They go, what's that? He goes, my island. So some of these were, like, incredibly egregious. And they all stopped on a dime. And I really feel the same thing could happen this time.

[Scott Nations]

I think there's one difference.

[Michael Batnick]

Going out on a limb.

[Scott Nations]

And we were talking about it before. I think there's one difference here in that when the market sells off, people do rush in to buy. Buy the effing dip. They rush in to buy the dip. And we were talking about before in the volume space. We are now in a market where traders are so accustomed to seeing volume normalize after a volatility spike. And we saw it happen in April.

[Josh Brown]

April.

[Scott Nations]

And we saw it happen twice last year. There was December, and then there was another one, I think, in July of last year. And now traders are so it's so commonly rush in to sell that volatility spike. They just want to sell option. Just sell them like. Sell them like crazy when they see these volume spikes, because they know, if you will, that volatility is going to revert to the mean.

[Michael Batnick]

You know, it's so interesting.

[Scott Nations]

And so they have to get. And quickly. I had just gotten started in 87, and the option market took years to recover after 1980. 7. And now it takes about 18 hours. Yeah.

[Josh Brown]

And what level is like how does the Vix ever get to 35 if people are already. No, it's not feeding.

[Michael Batnick]

Just can't stand there. And I think that I never thought about this until just now. Josh mentioned earlier that the stock market can affect these businesses if they're able to feed the shareholders more stock raise money, pivot, whatever. I never thought of this until just now. How the volume spikes and I'm sorry, the volume crushes can impact the world in a real way because this is what ends up on the newspapers. And as soon as these volatile crushes happen, it dampens the hysteria. Not that the media needs any more of it, but it dampens their ability to try and scare investors and generate clicks and all that stuff. Because the volatility disappears pretty quickly.

[Scott Nations]

Yeah, it reverts very, very quickly, surprisingly quickly, to the point where guys that are my age are kind of shaking their heads a little bit. Because I think what's going to happen is this is going to involve, this is going to continue to happen. Something crazy will hit the wire. Stocks will be down 10%, volume will be up a bunch and traders will rush into sell volatility and they'll pat themselves on the back. And then at some point volunteer stocks are going to take another 15 or 20% down leg, volume will spike again and these people will all be like, well, this trade always worked in the past.

[Josh Brown]

Yeah, what'd we just do?

[Scott Nations]

Stretchers? And now I've lit my portfolio on fire by shorting volume. And I think we will eventually, unfortunately have that happen. One thing I will say, I get to ask this question a lot because in my crash book I talk about contraption. So there's always some financial contraption that injects leverage at the worst.

[Josh Brown]

Portfolio insurance.

[Scott Nations]

And you know, the world only, Josh, the world only really broad world only learned about Portfolio Insurance on October 11, no, October 12 of 1987 when somebody wrote about it in the Wall Street Journal. A lot of people didn't even know it existed until then. But portfolio insurance or mortgage backed securities, subprime. Subprime.

[Josh Brown]

Right, right.

[Scott Nations]

And so people ask, is retail trading on this? Retail trading and volume selling and that sort of thing and zero DTE options. Is this the next contraption? And the good news is I don't think it is. I don't think the system can build up enough size, enough leverage in these things to be the next contraption. I think if the next contraption, if we have some sort of problem in the next few years. And crashes are very rare. Thank God. I write about five in that book. First one in 07, last one in 2010, the flash crash. So they're very rare. And thank God because they do incredible damage to psyches. But if we do have some sort of big downdraft in the near future, I think it's going to be private credit is going to be the.

[Josh Brown]

I totally agree. And can we skip ahead and just go to that story now?

[Michael Batnick]

Stut.

[Josh Brown]

Okay. We might go back to this gold bitcoin thing because I want to get Scott's take on it. Private credit. It's not an anti private credit message. What I'm about to say sounds like.

[Michael Batnick]

It'S going to be.

[Josh Brown]

No, no, no. But to your point, like what's the mechanism by which the market actually gets nervous about something? Well, it's probably going to have something to do with one of the areas where the most money has been going that's sort of aberrant relative to history. You have a lot of new holders of funds that are private credit. So two things in the last couple of days. The first is the BDCs. So for people, business development corporations, these are publicly traded vehicle vehicles usually sponsored by larger organizations with leverage. They dole out leverage as lenders and they themselves are backed with leverage. And the goal is to capture the spread in between. Right. The designation BDC is they're paying out all the income in the middle. Can I show you a chart? This is the VanEck BDC Income ETF Ticker Bizd Biz D so this is an index of I guess the 20 biggest, 25 biggest BDCs that are publicly traded that Vaneck puts into an index and they created a product. You can see now that we are below the April lows in this BIZD ETF price wise. And what I'm showing you, I'm sorry.

[Michael Batnick]

The pricing is kind of ridiculous. This is a total return product but they look shitty.

[Josh Brown]

Well, I'm so glad you brought that up. The reason why this is falling is because the total return is being lowered by the fact that dividends are being cut. So a lot of these nominally look like they're going to pay out 9, 10, 11%. But investors are smart and they're realizing as interest rates fall and God forbid accruals, non accruals or non payment of debt starts to bubble up, the dividends have to be cut and that's why these are falling. The pain at the bottom is volume. I think I did 30 day average volume. So you have volume spiking as people try to get themselves out of these ahead of dividend cuts, which we know are likely for 26 because rates are coming down. Do you have a strong opinion on the popularity of private credit amongst retail investors or even institutions?

[Scott Nations]

Stay away. I am not a fan at all for a lot of reasons. One, it's almost completely opaque. Fees are huge. We were joking earlier about private equity. Not a fan of that in a retail portfolio either for the same sorts of reasons. It's opaque. Fees are high, returns are not particularly good. No liquidity. No liquidity. It's worse than a hedge fund slamming the gates in 08 or 09. And these companies are going to, these managers are going to say, yeah, but we have so much less volatility.

[Josh Brown]

Next chart. Daniel. This is just a list of the. These are the BDCs. These are all very reputable sponsors. Aries, Blue Owl, Blackstone, Main Street, Hercules Golub, kkr, Morgan Stanley, Goldman Sachs. These are their BDC products that they've listed as tradable vehicles.

[Scott Nations]

Right. And I'm not taking aim at the sponsors. If there's a market for something and sophisticated investors want to buy it, then, then they should fill the market niche. But my point is that to the degree that these, the stuff gets sold because they say less volatility, you got to remember who's coming up, who's pricing the stuff that's inside these portfolios. Yeah, it's, it's, it's the managers. So of course they have less volatility.

[Michael Batnick]

So the story here is, and full disclosure, I tried to catch a fall and if I sold that, I took a 5% loss and moved on. In one of these BDCs, the story is that one of the big borrowers blew up.

[Scott Nations]

Yeah.

[Michael Batnick]

Recently they said that there's $2 billion or God knows how much, many billions of dollars where they, they don't know where it was.

[Josh Brown]

First Brands.

[Michael Batnick]

So an auto, there's some financing aspects of this where they're selling and buying the parts and the leases and the Whatever, whatever.

[Josh Brown]

So I want to not conflate two different things. But to Michael's point, this is part of the same stress now that we haven't seen in credit markets. Clos are a really big business. They have been for a long time. And basically the collateralized loan obligations. And there's a company called First Brands, which is kind of like this conglomerate of like auto parts businesses, different brands in the auto parts space. Auto is always the first thing stressed in any economic downturn. The Auto market itself is fine. This is about the companies in that ecosystem that sell parts.

[Michael Batnick]

So investors are getting worried that this is maybe systemic. That holy. If there's a God knows how many billion dollars lost here, are they actually reading the covenants? Like what do these deals even look like? So there's a lot of doubt there. I will just say this. The idea that this is going to be the first of the next leg to drop high yield credit spreads are doing nothing basically. And if you look at the size of the private credit market relative to the rest of the loan market, it's. It's tiny. It's a couple trillion dollars of. It's. The slice is absolutely tiny. So maybe. Should investors be careful? Perhaps. Yeah.

[Scott Nations]

And that's actually I've had this conversation with a couple of people recently. Is it big enough to spawn some sort of real disaster?

[Josh Brown]

Subprime was tiny too.

[Scott Nations]

There was a time when.

[Michael Batnick]

Forget now that's possible. Whether there's just way more than we know about.

[Scott Nations]

Well, think about people.

[Josh Brown]

Subprime, nobody cares about that market. It was the bottom layer of something that was unstable above it.

[Scott Nations]

And are you guys, you guys are probably both old enough to remember Long Term Capital management.

[Michael Batnick]

I was 12, okay.

[Scott Nations]

Bastard. But there were. I mean those were supposed to be the smartest guys in the world. A bunch of Nobel prize winners big.

[Josh Brown]

Enough to be so systemic that the head of every bank was called in to meet with the New York Fed to figure it out.

[Scott Nations]

And what was their number? Their number was $300 billion.

[Michael Batnick]

But the leverage, what was it? 50?

[Scott Nations]

Well, but the number. The amount of capital was $300 billion. There's a lot of money, but it's not all the money in the world. Even back in 1997 when that was. So the point is, if this gets spread out over enough names, then any of these things can cause problems. I was in.

[Josh Brown]

It causes a shaking of confidence. Which ripples First Brands is the stone that you throw into the middle of the lake. It's inconsequential. It's the ripples. And just to barge in here with some numbers, this is a company that ended up in its, in its bankruptcy filing, which will now be a three year fight amongst creditors. 11 billion in liabilities on 3 billion in revenue. Which is not even the problem. The real problem is double factoring. They took the same collateral and used it for multiple loans. So now people are looking at everything they own. Like whoa, whoa, whoa, whoa, whoa. This is going on. That's the problem.

[Scott Nations]

Yeah. To Michael's Point there's about the number I saw today, $2.3 billion, that they think was essentially double factored. In other words, they sold it twice. There's also. And quickly, try to be quick here. Every crash not only has a financial contraption, it has a catalyst. And often the catalyst has nothing to do with finance. People Forget that in 1987, the Friday before the crash of 1987, we essentially went to war with Iran. Column one of the Wall Street Journal on that Monday morning was not, oh, stock market lost a bunch of money last week. Column one, page one of the Wall Street Journal that Monday was that we were essentially at war with Iran. Why do I bring this up? Because in 1929, what really, really got the crash going was a fraudster in London, guy name of Hatley, I think, Hatry. He had started forging stock certificates, and then he was selling these stocks or borrowing against them. And eventually somebody figured out, oh, my God, this is a counterfeit stock certificate. I wonder how many of these we have. And the number was actually relatively small. But nobody trusted anything.

[Josh Brown]

That's the thing that happened.

[Scott Nations]

That's right. And so they said, I don't know if this stock certificate's genuine. Why am I going to wait around to find out?

[Josh Brown]

Sell them anyway.

[Scott Nations]

Right.

[Michael Batnick]

And you bring that up because the weather In October of 1987, before the crash is not too dissimilar than what we're seeing today.

[Scott Nations]

Again, I'm not a. I'm not. I don't. I'm not a crash guy. I'm not one of those guys who thinks that you have to buy gold now because it's going to triple by the end of the week because the stock market's not that guy.

[Josh Brown]

The First Brands ownership is diffuse enough that we're not going to see one major player take a substantial hit just because of First Brands. Jeffries has a $700 million exposure, which sounds like a lot of money, and it is, but not really. UBS has one specific fund where 30% of its assets are first brands, about $500 million.

[Michael Batnick]

Okay, so not knowing anything.

[Josh Brown]

So that's not taking anyone down, but that's forcing everybody to rethink the way they're investing in some of this stuff and maybe to ask some questions they weren't asking a week ago, but hang on.

[Michael Batnick]

But not knowing anything, because I am certainly a Taurus in this space. The likelihood of this blowing over or turning into something, holy shit. I'm just gonna take the odds of it'll blow over. And obviously this could age very poorly.

[Josh Brown]

Well, there's another one. It's called Tricolor and it is involved in auto finance as well.

[Michael Batnick]

And yes, sentiment is weighing on the group right now. There's no doubt about it.

[Josh Brown]

This is another CLO story that. It's not.

[Scott Nations]

No, it is.

[Michael Batnick]

It is.

[Scott Nations]

Well, I'm with you in that. Crashes are rare, thank God, because not only is a lot of money lost, but a lot of psychic energy gets, gets, you know, wasted.

[Michael Batnick]

But think about the stock market. How many stories over the years have blown over, people were worried and then they weren't right.

[Scott Nations]

Well, and we talked about Long Term Capital Management. That was really ugly. I think the stock market was down 14% in that month and it bounced back. But let's look at it a little differently in that. And what I'm going to mention is two Bear Stearns hedge funds in 06. I thought it was 07, but okay, 06, 07 were focused on mortgages and subprime mortgages blew up. They went to zero. One used no leverage and one used some leverage. And the one that didn't use any leverage fell 90%. And the one that used a little bit of leverage.

[Josh Brown]

The opening shots of the financial crisis.

[Scott Nations]

That's right. And people were having exactly the same conversation then that we're having now.

[Michael Batnick]

Was it October?

[Scott Nations]

No, it was.

[Josh Brown]

I think it was summer. I think It's August of 06, to be honest with you.

[Scott Nations]

Okay.

[Josh Brown]

And then within 18 months, Bear Stearns is zero.

[Scott Nations]

Right. And everybody is terrified and the market is seized up and nobody can get any money out of their money market fund. So it's the same situation then as now. We don't know. I don't think that the same out that we're going to have the same outcome. But sometimes the market gives you a little notice.

[Michael Batnick]

It's not just the B2C's it's the equities too of the private equity companies.

[Josh Brown]

Correct. So it's very possible we never speak of this again a week from now. And there is no other first brands. I agree with Michael. Where you still have to give the system the benefit of the doubt that this is not widespread fraud and people doing crazy shit everywhere. But it does, it does get people asking new questions and looking a little bit more closely. And that's new. I want to finish by getting your take on this gold versus Bitcoin masterpiece from Chart Kid Matt at exhibit A. Michael, not at exhibit A.

[Michael Batnick]

Just to be clear, this is a Chart Kid Matt production.

[Josh Brown]

What do I. It's too many it's too many names and things to keep track of. What, What. What are we looking at?

[Michael Batnick]

I mean, you tell the story. This, this is. This is great stuff.

[Josh Brown]

Gold versus Bitcoin on a calendar year basis. Are you shocked? For two questions. First, are you shocked that we're in a stock market bull with both gold and bitcoin also making record highs?

[Michael Batnick]

And before you answer that, one last thing, the number one category of inflows of ETFs this year is treasury bills.

[Josh Brown]

Yeah.

[Michael Batnick]

This is a weird, weird thing. Really? That's a weird.

[Josh Brown]

Like, how crazy is going on right now?

[Scott Nations]

That makes no sense because you can explain all of the other ones with lower interest rates.

[Josh Brown]

Anyway, gold outperforming bitcoin this year. It underperformed last year, underperformed the year before. Just a straight ratio. I find that really fascinating. People are. Gold is not what you would typically associate with a stock market bull market. And you definitely don't expect to outperform crypto in an economic expansion like this. What the hell is going on?

[Scott Nations]

You would expect both of them. You would expect crypto gold and the stock market to do well together when interest rates are coming down.

[Michael Batnick]

Sure.

[Josh Brown]

Okay. All right, I'll buy that. I'll buy that explanation.

[Scott Nations]

It's not like gold is doing well because the stock market's doing well. They're all riding the same ride. That doesn't really mean anything to me. Okay, I will say this, though, that in an environment where unemployment is at 4.5%, and I understand it's looked kind of crappy over the last few months, and you can look at the revisions, but unemployment's at 4.5%. Why in the world does that demand cutting interest rates? Inflation, depending on how you look at it, is anywhere between 2.5% and 2.9%. And the Fed's bogey is supposed to be 2%. So why in the world are they cutting interest rates? So I have a bigger beef with the Fed, giving into public opinion and cutting interest rates when it's really not appropriate. And the final thing I'll say, and this is, I talk about this in the crash book. The Federal Reserve does 10 times, maybe 100 times more damage by keeping interest rates too low for too long than they ever do by having rates too high. They fostered the bubble in 1929 by refusing to raise interest rates even though they knew. And the quote they used at the time was speculative orgy.

[Josh Brown]

Yeah.

[Scott Nations]

And my favorite type, they're the only good kind. And the same thing happened in 2000, 4, 5, 6. When Alan Greenspan refused to raise interest rates, thought that the banks were their own regulator. Should referee themselves. Nobody knows their risk better than they do. They'll modulate and forget. You cannot forget the whole I'll be gone, you'll be gone concept.

[Michael Batnick]

Yeah, what's that concept?

[Josh Brown]

Don't worry about it. Because by the time this matters, I won't be in this job and you won't be in the job that you're in.

[Scott Nations]

I will have gotten my bonus check.

[Josh Brown]

Right.

[Scott Nations]

I will actually have my own private island.

[Josh Brown]

Yeah.

[Scott Nations]

I'll be retired somewhere.

[Josh Brown]

Somebody else clean it up.

[Scott Nations]

That's right.

[Michael Batnick]

I don't disagree with you, but Chicago guys hate, typically don't like the Fed. I've noticed that.

[Josh Brown]

Yeah. You guys, the Chicago contingent is very suspicious of anything central planning, especially the Federal Reserve.

[Scott Nations]

Yeah, I get that.

[Michael Batnick]

Because the Bears haven't won since 85. No, I'm a Giants fan, so I can't talk.

[Scott Nations]

They won in 86. And it's not like everybody in Chicago has to know that in order to get into the city.

[Josh Brown]

The season was in 85. The Super bowl was in 86.

[Scott Nations]

That's right. And they beat the Jim McMahon put Jesus out of. Out of the Boston cake eaters. So my point is, I don't hate the Fed. I think we need the Fed. It has a role. It should be a backstop. I'm not one of those guys who thinks that the Jekyll island meeting that created the Fed was some sort of sabotage or larceny Jewish plot.

[Josh Brown]

All right, last.

[Scott Nations]

Quickly. I'm a fan. I just think that they do make policies.

[Josh Brown]

He's in on it. He's in on it. Hey, what kind of last name is Nations? What is that? Is that English?

[Scott Nations]

It is English.

[Josh Brown]

It's unique though, right?

[Scott Nations]

It is. The first member of my first American in my family came over from Somerset, England in 1740 as a 14 year old indentured servant. Oh, wow. Think of the average 14 year old today. Do you think that guy would get on a boat and come over as an indentured servant?

[Josh Brown]

I can't indenture my kid to take the garbage out, Right?

[Scott Nations]

Yeah, or shovel the snow.

[Josh Brown]

I want to end the show with what I think is a perfect metaphor for the current economy and state of the world right now. Tell me what you think of this, Scott. This is an article cnbc.com Delta Air Lines customers are getting used to first class revenue from the pricier, roomier seats toward the front of the plane. Could eclipse sales from standard coach seats for at least a quarter or two next year, Delta executive said Thursday. Today in the last quarter, Delta said ticket revenue from its premium cabin rose 9% from last year to 5.8 billion, while main cabin ticket revenue fell 4% from a year earlier to just over 6 billion. And the CEO said so just do first class fights.

[Michael Batnick]

That's it. No coach.

[Josh Brown]

Why, why, why are we putting coach people on the plane at all?

[Michael Batnick]

Do I have to think of everything?

[Josh Brown]

I think that's called a private jet. During an investor day last year, Delta said just 43% of its 2024 revenue was coming from main cabin tickets markets, down from a 60% share in 2010. Basically, it's flipped and now all the revenue is going to come from 5% of the customers. 4, 3%. How perfect is that of a metaphor for the K shaped bull market?

[Scott Nations]

There are so many businesses, it seems like where that is the case where the. Not the uber wealthy, but the pretty wealthy, the well off, are happy to spend money.

[Josh Brown]

Yeah.

[Scott Nations]

Whether it's travel or dining or entertainment.

[Michael Batnick]

Cocaine.

[Scott Nations]

I'll leave that one to you. I actually had drinks last night with a good friend, longtime friend, who's a Hollywood, not a Hollywood, a Broadway promoter and producer. And he was talking about they just had a show open. Average ticket price $450. Have absolutely average, average ticket price.

[Josh Brown]

One ticket.

[Scott Nations]

450 bucks for one ticket. So that's 1,000 bucks. You take your spouse, you take your husband, pack theater. Absolutely sold out. They sell all that they can get at 450 bucks average. And you know what that means? That means that the ones up in front are probably double that.

[Josh Brown]

Yeah.

[Scott Nations]

And you know, if you're a kid who's, you know, a college student who wants to go see a. Good luck with that.

[Josh Brown]

Wait till it's on Netflix. All right, Scott, did you have fun on the show today?

[Scott Nations]

I did. You guys are fantastic. I love this show. A lot of fun, fun.

[Josh Brown]

We, we're just big fans of yours. You're, you're great on tv, you write great books. You know, you have such a great breadth of knowledge and just a appreciation from us for everything that you do. Thank you.

[Scott Nations]

Well, thank you. I appreciate what you guys do to, to entertain and educate, most importantly investors. Because it can be tough out there. It can be overwhelming. And to the degree that people are educated when it comes to financing a, a retirement or a kid's education, then God love you.

[Josh Brown]

Oh, look at that. Wonderful. What a wonderful way to end the show. Hey, we always finish with asking people what's one thing they're looking forward to or anything, like anything at all that you want to share with the audience that you think they should hear about. And we'll let you go last. Michael, you go first.

[Michael Batnick]

Okay.

[Josh Brown]

What are you looking forward to? Apparently you haven't been home in a few days.

[Michael Batnick]

I was thinking about it. I'm happy to be home. Looking forward to sleeping in my bed. Amazon Studios, I guess. MGM is reportedly making Heat 2, which I am quite, quite excited about.

[Josh Brown]

All in. I just saw one battle after another. I went in Florida, I went to Fort Lauderdale to the. They have a museum there that has a 70 millimeter IMAX.

[Scott Nations]

Oh, wow.

[Josh Brown]

And they show real movies on it from time to time. This is one of the best movies I've seen in the last 10 years. And on the big IMAX screen, it just. You feel like you're on a roller coaster ride.

[Scott Nations]

My wife actually just saw that and she loved it. I'll stay with the movie theme. We have an apartment on the Upper east side and we see the cast of devil verse Prada 2 all over the neighborhood.

[Josh Brown]

Anne Hathaway, Stanley Tucci.

[Scott Nations]

That's right.

[Josh Brown]

And.

[Scott Nations]

And as you can tell, I'm not the world's biggest fashion guy.

[Josh Brown]

Yeah.

[Scott Nations]

Never read Vogue, but I loved the movie for some reason. Oh, it's actually a lot of fun.

[Josh Brown]

It's good. It's not a chick flick or whatever you would guess that it is. It's a nice time capsule of Manhattan in that period of time too.

[Scott Nations]

Yeah. But also, you know, some businesses are tough to be in and let's pay, let's face it, is probably none tougher than publishing fashion magazine over the past few years.

[Josh Brown]

Is there even one left? That's what the movie will be about.

[Scott Nations]

Books or newspapers.

[Josh Brown]

Yeah.

[Scott Nations]

And so it's a time capsule, if you will, of when that business was really in its sweet spot. Making a lot of money, fun to be around, that sort of thing.

[Josh Brown]

I got. I got my thing that we're looking forward to. We are doing a live recording of this show, the Compound and friends in Manhattan on October. What's the date?

[Michael Batnick]

October 24th.

[Josh Brown]

October 24th. It's a Friday night. Doors open at 6pm and it's me, it's Michael and our special guest Jim Cramer coming on the show for the first time and super excited about that.

[Scott Nations]

Is this the one at the New York Stock Exchange?

[Josh Brown]

No, this is at the South. This is at. Near the stock. I can't say the location until people buy tickets. Actually I just. But it's close enough. It's in the financial district.

[Scott Nations]

Where can they find out about it?

[Josh Brown]

I'm going to tell people to, I don't know, I guess in the show notes. We'll have links and all over the compound, social media. We still have some seats left and we would love if you guys are fans of the show and you haven't been to New York in a while and you're looking for an. Excuse me, Michael, Jim Cramer, Duncan, Nicole, John, Daniel, the whole gang will all be there. And we're going to have drinks, we're going to have food, we're going to have some signed copies of Jim's new book. And I promise it's going to be an epic night.

[Scott Nations]

Final thing, final question, when is that again?

[Josh Brown]

October 24th.

[Scott Nations]

Sounds like fun.

[Josh Brown]

Thank you so. Thank you so much. All right, guys, that's it from us this week. Thank you so much for watching. Thank you for listening like and subscribe. Do all the things. Scott, where can we follow you?

[Scott Nations]

Well, you can follow me on I still call it Twitter X Scott nations or check out our offerings if you're interested in volatility. Nations indexes.com we provide bespoke volatility indexes for retail traders and sophisticated institutional traders help you create the best possible trade structure.

[Josh Brown]

Nations indexing.com all right, we're out. Thank you, guys.

[Scott Nations]

Thank you.