Signs the Bottom Is In, Yardeni Sees Resolution, Buying Winners, New QQQ’s

Summary

The Compound and Friends

Episode: Signs the Bottom Is In, Yardeni Sees Resolution, Buying Winners, New QQQ’s
Date: April 7, 2026
Hosts: Josh Brown & Michael Batnick

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Episode Overview

This episode dives into the current turbulent market environment, debating whether a bottom has been reached amid geopolitical tensions in the Middle East, and explores major themes in recent investing trends. The hosts analyze volatile headlines, investor behavior, sector rotations, new ETF launches, and discuss the implications of recent moves by key financial institutions. Notable moments include expert insight on market psychology, Yardeni’s takes on market bottoms, the rise of active ETFs, a close look at the shake-up in technology leadership, and reflections on Jamie Dimon and OpenAI’s latest moves.

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Key Discussion Points & Insights

1. Is the Market Bottom In?

[03:19 – 07:50]

• The hosts debate whether the worst is over for markets, noting the VIX at a relatively moderate level (~25-26) despite ongoing Middle Eastern conflict.
• Josh and Michael hypothesize on what could further escalate risk – e.g., an oil tanker on fire in the Strait of Hormuz (04:16).
• The market seems to be discounting even the most aggressive rhetoric by the President, not pricing in existential threats.

Notable Quote:

• Josh, on the market's reaction:

  "The stock market right now is like, oh, that sounds bad, but he probably won't do it." (06:58)

2. Ed Yardeni’s Perspective & Market Sentiment Data

[11:42 – 13:42]

• Yardeni claims "Monday was the bottom," citing investor relief at signs of a possible resolution and resilience in the face of high oil prices due to US energy exports (11:42).
• Jason Getz's data: For the third time ever, small traders have spent one-third of their volume buying puts—mirroring panic seen during COVID market lows (12:51).
• Massive cash flows into money markets and cash-like ETFs, typically coinciding with market bottoms.

Notable Quote:

• Yardeni:

  "One way or another the oil is going to come out of the Persian Gulf." (12:16)

3. Analyzing the Rally: Rebalancing or Dead Cat Bounce?

[14:07 – 17:04]

• Tech sector rebounds, but not uniformly; some stalwarts like Apple are down significantly.
• Discuss if early April’s rally is merely a technical rebalance after a bad quarter, or evidence of a genuine bottom.
• Estimation banter: 60% chance the bottom is in (17:13).

4. How Well Do Investors Understand Dividends?

[18:34 – 23:44]

• Most individuals do not correctly understand dividends; many think they’re “free money.”
• Meb Faber’s survey: Only 25% of the general investing population gets dividends’ impact on share price (22:32).

Notable Exchange:

• Michael:

  “Why wouldn't a company pay out 100% dividend yield?” (23:11)

5. BlackRock Launches New NASDAQ 100 ETF – A Threat to QQQ?

[23:44 – 32:28]

• BlackRock is set to introduce a competitor to Invesco’s QQQ at a potential 12 bps fee (vs. QQQ’s 18 bps).
• Discussion on whether entrenched holdings will shift, with consensus that embedded gains make most retail money sticky, but big/institutional money may migrate (29:06).

Notable Quote:

• Michael:

  "If the moat has been penetrated? Yes, most definitely." (29:27)

6. Buying Winners, Avoiding Losers: Historic Dispersion

[32:28 – 38:03]

• Net outflows from the MAG7 are flowing directly into other S&P components like Exxon, Chevron, Micron, and biotech.
• The market isn’t moving in lock-step; dispersion is at historical highs.
• Notably, suffering stocks are mostly those retail investors love (Tesla, Disney, Meta, etc.), whereas industrials, energy, and heavy asset businesses are carrying the index.

Notable Commentary:

• Josh:

  “It went into Exxon and Chevron and it went into pharmaceutical stocks. Biotechs… All right, Josh, people are doing.” (33:41)

7. Value vs. Growth and the Unseen Rotation

[38:09 – 40:45]

• Value stocks have outperformed growth by the greatest margin since 2001 in Q1, but few are talking about it due to war headlines absorbing attention.
• Skepticism remains about the durability of the rotation after previous failed “value runs.”

Notable Quote:

• Josh:

  “How many times have we seen this? ... You're not gonna trick me again into buying the 10 PE stocks. That’s why.” (40:19)

8. Jamie Dimon, JPMorgan & the New 'Oracle'?

[41:28 – 50:15]

• Jamie Dimon’s annual letter is compared with Warren Buffett’s – hosts agree it won’t gain the same cultural cachet, but is invaluable for those in financial services.
• JPMorgan’s dominance: Reports 20% ROTC, unmatched growth and stability.
• Dimon praised for both winning and “not losing” (prudence/acquisitions).

Notable Exchange:

• Michael:

  “Could he have done this at Citi? Maybe that’s too, too tall a task.” (49:19)

9. OpenAI’s $122B Raise & The Tech Funding Race

[51:03 – 54:17]

• Massive capital raise led by Amazon, SoftBank, Nvidia; OpenAI hits $852B valuation.
• Comparisons with Anthropic’s $30B revenue run-rate: the sheer scale is unlike anything in tech’s history.

10. Why Did OpenAI Buy a Tech Podcast?

[54:58 – 62:11]

• OpenAI’s purchase of TBPN, a daily tech podcast, for ~$100 million surprises industry insiders.
• Hosts speculate the buy was for controlling the narrative—as a PR platform for OpenAI and Sam Altman in a world dominated by adversarial coverage.

Notable Quote:

• Josh:

  “If he owns his own media, he has [his] own way now of getting out the Open AI message that he wants to get out… Now that's no longer the case.” (61:23)

11. Biotech Sector Rotation

[62:12 – 63:56]

• Strong technical strength in biotech (XBI vs IBB); hosts cautiously bullish, suggesting this is more fundamentally justified than prior speculative runs.

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Timestamps for Key Segments

| Topic | Timestamp | |-----------------------------------------------|----------------| | Introduction & Current Market Setup | 00:00 – 03:19 | | Is the Bottom In / Geopolitical Spiral | 03:19 – 07:50 | | Yardeni’s Take & Sentiment | 11:42 – 13:42 | | Market Rally: Real or Rebalance? | 14:07 – 17:04 | | Understanding Dividends | 18:34 – 23:44 | | New QQQ ETF from BlackRock | 23:44 – 32:28 | | Trading Flows: Buying Winners | 32:28 – 38:03 | | Value vs. Growth | 38:09 – 40:45 | | Jamie Dimon’s JPMorgan Letter | 41:28 – 50:15 | | OpenAI’s Monumental Raise | 51:03 – 54:17 | | OpenAI Buys TBPN Podcast | 54:58 – 62:11 | | Bullish Biotech | 62:12 – 63:56 |

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Notable Quotes & Moments

• Josh, on dividends:

  “Most people could explain to you, ‘oh, yeah, the bank uses my money, they invest it…’ They think a dividend is similar, but it’s not.” (20:46)

• Michael, on market bottoms:

  “If traders took [the President] at face value that he was going to wipe out a civilization, the VIX would probably not be at 26, and the S&P would probably be down more than 70 basis points.” (07:55)

• Josh, on Jamie Dimon vs. Buffett:

  “As a shareholder, this sort of is at that level now... But, to your point, somebody working in Silicon Valley probably doesn’t give a shit what Jamie Dimon has to say.” (43:02)

• On OpenAI’s motivation:

  “If he owns his own media, he has [his] own way now of getting out the Open AI message that he wants to get out.” (61:23)

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Tone & Style

Conversational, irreverent, and informed. The hosts mix sharp market analysis with jokes and unfiltered opinions, continually challenging each other's assumptions and poking fun at Wall Street tropes. Professional but approachable, they give context for both sophisticated and newer investors.

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Summary

This episode captures an intense moment in markets where geopolitics, investor psychology, and sector rotation collide. The hosts see tentative signs of a market bottom, but temper their optimism, acknowledging how quickly sentiment and outcomes can change with new headlines. They focus on data showing historic panic (increased put buying), contrasting it with resilient price action and sector rotation out of mega-cap tech. They highlight persistent investor misunderstandings (dividends), the coming ETF fee wars (BlackRock vs. QQQ), and spotlight winning stocks (energy, industrials, biotech) as the new market leaders.

Josh and Michael also zoom out to discuss lasting financial industry trends and personalities, from Jamie Dimon’s growing Buffett-like stature to OpenAI’s audacious business moves and its surprising purchase of a tech podcast as a new kind of corporate PR strategy.

If you missed the episode, this summary provides the essential debates, key metrics, and sharp soundbites—with just enough finance-nerd banter to bring the show’s original vibe alive.

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Transcript

[A]

Foreign. It's us. Here we are. Hey, we're not live. We're recording during the day. But we're like as up to, we're on the cutting edge anyway. We're as up to date as we need to be, I think. But I just wanted to make that clear. I want to give a shout out to everyone who's here for the debut chat. You guys are still welcome to come, of course. We just, we beat you to the punch. But thank you for being here. Today's what are your thoughts? Is being broadcast from a combination of Long island and Southern and Southern Long island and tax free Florida. So yeah, Southern, right. The Nassau county of the south. I'm coming to you from Boca Raton. Michael is, Michael's on Long island and it's great to great to be here with you guys. If you're new to the show, on what are your thoughts? We talk about all of the biggest topics affecting investors, traders, the markets, the economy of the week. We have tons of stuff to get to today. Super exciting. But before we do, we're going to give a quick shout out to our sponsor, Franklin Templeton. Michael, what's going on with Franklin?

[B]

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[A]

All Investments all investments involve risk including possible loss of principal. Franklin Distributors LLC Member FINRA SIPC all right, shout out to Franklin. Today's show is sponsored by Janice Henderson Investors where we believe working together is the way to work better. Like combining your portfolio plans and our in depth strategy, your valued assets and our valuable insights, your mission and our vision always working in perfect harmony to find the right investment opportunities. Janice Henderson Investors Investing in a brighter Future together visit Janice henderson.com so all right, I'm giving you the first topic because to me this is the most interesting question. We're still getting these Insane headlines about the Middle east, which we'll get to in a second. But markets are not nearly as rattled as they were 10 days ago. And I guess the question is, is the bottom in? Many people are saying this despite the fact that entire civilizations will die tonight. Many people are saying the bottom's in. And why don't you take it, take it from here.

[B]

It's like the former President of the United States said, fool me once, can't get fooled again. What would have to happen?

[A]

George W. Bush.

[B]

This is saying in Tennessee, In Texas maybe they say in Tennessee too. Yeah, yeah, great stuff. Okay, so the Vix is at 25, 26.

[A]

Right, right.

[B]

Despite the absolutely insane tweet from the current president, The S&P 500 is at down 67 basis points after a pretty, pretty decisive four day rally. So I don't know if that was the bottom. Sure looks like one. But the question that I have to ask you is what would have to happen for this not to be the bottom? Because investors are looking past whatever's happening today, whatever's being said.

[A]

Oh, like what would it, how would it escalate and get worse?

[B]

Yeah, what would we, what would have to happen for us to retest those. Like, go ahead.

[A]

Yeah. A European oil tanker on fire.

[B]

Sure.

[A]

Global. Global news. Like, like a French. Because they're all paying Iran under the table.

[B]

So my point is this like absence something that we're not seeing today, such as an, you know, an escalation of the events. Yeah, I would say that was about him.

[A]

Well, we're gonna start focusing on earnings tomorrow. So we're, we're getting the banks coming up. We're getting, I think Delta reports tomorrow, which I'm long like we're getting. Important companies are going to start reporting and that's where the market's focus is going to go unless and until an oil tanker owned by Total in France, for example, is on fire. In the straight. I'm, I'm making up an imaginary scenario. I'm not predicting that will, that will give you your 30 Vix and that will end the talk about the bottom is in. Because right now basically everything hinges on whether or not we can get the 45 day ceasefire that's apparently being discussed or an end of the war with Iran, which seems unlikely. But basically the, the way that I, the way that I look at this is it's a hostage situation. The hostage is not a person. It's the Strait of Hormuz. It's being held for ransom. I don't quite understand why the Department of Defense didn't appear to have planned better for this. They're talking about landing troops on Carg island and all these things that I don't fully understand, and I'm not giving a military opinion here, but it just seems like, wasn't this obvious? Like, this was the only pressure point that Iran had to apply on the international community. And, and were there plans to do anything about this? Or was it like, hey, we'll knock out all their military installations and all their, their navy, which is great. Their, their, their air power will take air superiority, but, like, we're going to allow them to choke 20% of all of the oil that has to move on the sea. Like, we're, that we're just going to cede that to them. So that's what it's, like, starting to feel like. And I think Trump's frustrations, which we're reading about and hearing about, probably have something to do with that. So I want to, I mean, we'll just, we'll reread what he said. Okay, go ahead. All right. President Trump escalated his aggressive rhetoric toward Iran, threatening to wipe out the entirety of the country's civilization if Tehran doesn't cede to his demands by 8:00pm Tuesday, quote, a whole civilization will die tonight. I'm not laughing because I think it's funny never to be brought back again. I don't want that to happen, but it probably will. It probably will. A whole civilization. But then he's like, God bless the people of Iran. So I don't, I don't. I guess nobody, nobody knows fully what he means, but what we do know is he is doubling and tripling down on this. 8pm I'm guessing Eastern, because that's where he lives. 8pm Deadline for compliance or midnight destruction will begin. And he's talking about wiping the city, the country out in four hours. So I'm guessing that means blowing the bridges and taking out the electrical infrastructure. And so the stock market right now is like, oh, that sounds bad, but he probably won't do it. Is that the, is that your, your take on the reaction or lack of reaction?

[B]

Yeah, I was saying that's not my take. That's the market's take.

[A]

The markets, the market's take.

[B]

The market is barely responding. The Vix is at 26. I don't know if, if traders took him at face value that he was going to wipe out a civilization. The VIX would probably not be at 26, and the S and P would probably be down more than 70 basis points.

[A]

So I listen to the political people and the military people at a time like this, not because I think they know what's going to happen. I don't think anyone does. But it's a more informed take than listening to a guy that manages a mutual fund, for example, on Wall Street. And what they're saying is that he really thought you could. You could drop $100 million in someone's bank account and have somebody to negotiate with. Like, he thought this would be like Venezuela, where it's like, you want to get nuts? Let's get nuts. And then somebody reasonable is like, whoa, Whoa, whoa, whoa, Mr. President, we can talk. And then you have some sort of agreement and money is changing hands, and maybe there's an oil deal, like, I think that's what. Or this is what the military and the political commentators are saying about this. Nothing to do with Wall Street. They're saying, like the appearances, that the White House thought somebody rational. But we're not talking about rational people. We're talking about absolute maniacs.

[B]

Right. Okay. So whatever the market thinks the bottom is in, I think the bottom is in.

[A]

Okay. Well, I don't know if you're right, of course, but I'm rooting for that. You're right. This is what Ed Yardeni. Oh, I got to show this. John, can we put this on screen before we get to. Citrini sent a analyst on a ship through the Strait of Hormuz. And to see. To see what's really going on. Can we scroll through this? All right, so the markets are relying on satellite data Citrini actually sent. They call him analyst number three with $15,000 recording gear and a speedboat to enter the street of Hormuz. This is really. This is really demonstrating that you can't replace analysts with AI I guess The Strait is not closed. Basically, what's going on is Iran is taking tolls, which I think people understood, but I guess this guy had to go prove it for. For his research.

[B]

Thank you for your service.

[A]

Here's. Here's Stacey Razg on. We got Citrini raising the bar on what I expect from my associates. That's a great tweet. If it's a tweet, I'm not reading all this. It's on screen. I don't know. Is. Is. Is any research job on, on Wall street or off worth. Worth this, this sort of effort? What are your thoughts?

[B]

This is this. Is this.

[A]

You're the head of research at Redholtz. Stop asking. Is this. I'm not the head of research, whatever you are. Is this the kind of thing that you would kind of thing that you would expect of your associates?

[B]

Well, you know, I'm a team player. So would you do. Absolutely. I don't ask. I don't ask anybody. I wouldn't do.

[A]

I'm going to guess that whoever analyst number three is, this person has been to the Middle east before. Like, this is not somebody that I'm guessing. This is not somebody that grew up in Connecticut and went directly from boarding school.

[B]

I don't think. I don't think analyst number three is. Kevin.

[A]

I don't think analyst number three is. Well, this is pretty ballsy. And maybe when this person gets back, they will reveal themselves and be celebrated as one of the gutsiest researchers in Wall street history.

[B]

Well, thank you for your service. All right, let's talk about the market. So the this is from Jason. Oh wait, you want to do what Yardeni said. What did Yardini say?

[A]

Quote, I think Monday was the bottom. He said this on tv pointing to US President Donald Trump's recent speech and accompanying reports that suggest that a resolution to what investors feared could become an endless conflict. The market's reactions these developments has been swift and positive. On the question of elevated oil prices, Yardeni expressed confidence in the US Economy's ability to weather the storm. He noted that as an exporter of oil and gas, the US Actually benefits from higher prices, unlike many overseas economies. Quote, one way or another the oil is going to come out of the Persian Gulf. Okay, one way or the other. What's the other way? That's a bottom. It's a bottom is in guy and that's as good as it gets if you wanted to have somebody on your side of the argument.

[B]

Now listen, I so this is short term stuff. I don't know if the where the market's been six months but I think that absent something else happening, the market will will be less surprised by what's happening. I mean it just is. All right, whatever. We'll see.

[A]

You have some signs that the bottom is in the most.

[B]

The most speculative trader is panicked. This is from Jason get for it's Are they still sentimentary? Yeah. Second trader. Okay. For only the third week ever, the smallest option traders spent one third of their volume buying put options to open. The only other weeks were at the height of the COVID washout. All right. So the people with the smallest dollar amounts who probably tend to be a little bit panicky are objectively panicking. Here's another Avro in the Quiver.

[A]

I like it. I like it.

[B]

Investors are in one of the biggest rushes to cash in history. Macro charts is looking at the flows into money markets and cash like ETFs over a three month rolling period usually coincides with market bottoms.

[A]

But this could get way more extreme. You could see mu. Like you could see two more weeks of this.

[B]

Sure. Yeah, of course. Yep.

[A]

I don't know if this is a timing tool, but I like it as a.

[B]

You're in the zone.

[A]

A confirmation that there is enough panic. It just might not be the most.

[B]

You're in the. You're in the zone.

[A]

Yeah.

[B]

Char kid made me a chart. I asked him, hey, what stocks bounce the hardest since the low. And we're looking at the percentage of stocks in the S p that are up 5% since the local bottom. Ooh, and this is good.

[A]

Hold on. This is by sector. So the number is the percentage of stocks in that sector.

[B]

55%. 53% of tech stocks are up 5% since the bottom. Interestingly, you know, it's really not getting much love at all. Servicenow sitting at the bottom. Salesforce right there.

[A]

Yeah. Not all tech stocks workday.

[B]

I mean, right. Apple's down 4% today. That's a pretty big 4 and a half percent today. It's pretty big move. Not sure what the story is. I didn't see the news.

[A]

Can I ask you. The low was 330 the last day of March.

[B]

Yeah. Yeah.

[A]

And April 1st starts the April 1st was last Wednesday starts the beginning of a new quarter. And this quarter was the worst quarter for stocks since 2022. So is it possible? We think it's the bottom, but all it is is a rebalance out of fixed income into stocks.

[B]

Yes.

[A]

Because the move in the first quarter lower in stocks was so extreme that all these wealth management firms and institutions did a rebalance. And that's what we got to start off the first week of April and nothing more than that.

[B]

I know you're a big. I know you're a big story guy. Like, oh, is the rebalance. I don't quite buy that.

[A]

Big story guy.

[B]

You are my ass. You're a big story guy. But I definitely buy the fact that. Could this just be a dead cat bounce because stocks don't go into coinciding with the.

[A]

With a.

[B]

Yes.

[A]

A Q2 rebalance.

[B]

Stocks don't go down in a straight line. Yeah, um, we'll say.

[A]

So let me ask you a question. If you're the CIO at a $200 billion RIA and you run the, you know there's an internal tamp and you run the asset allocation model for 300 financial advisors.

[B]

Dude, you're talking, you're talking around the errors. What you buy, you buy a billion or $2 billion worth of stocks.

[A]

But, but it's emblematic.

[B]

Yeah.

[A]

What everyone's doing. So if you just come out of, let's say it's March 30, it's the last day of the worst quarter for U.S. stocks in four years. Isn't your instinct, let's rebalance now and capture that negative and make the most of that drop in equity prices. So if a lot of people were

[B]

thinking the same way, dude, a 6040 portfolio is down.

[A]

It's not that enough. It's not extremely. It's not down enough for.

[B]

Yeah.

[A]

To feel like everybody all of a sudden decided to rebound.

[B]

But, but I do buy, I don't buy the rebalance part of it, but I buy the end of month, end of quarter type of. Let's take a look at what's happening. And stocks are down straight. Right. Then let's buy. Yeah, I totally buy that. So this could very easily. Despite me saying that I think this was the bottom. I don't know what's my confidence level there? 59%. I mean I'm not like pounding the table.

[A]

Okay. Related. Do you think a majority of investors understand how dividends work?

[B]

Before you get there, 59 is a very soft level. I do believe it's, I'm going to say 69% chance that that was bottom. 59 is very, that's very wishy washy.

[A]

60% chance that we saw the bottom. 40% chance.

[B]

I would say like if I'm a betting man and you know I am like minus 130. Yeah, I think that was the bottom.

[A]

I'm going to give it, I'm going to give it a 40% chance.

[B]

So 6. So. Well, hold on, let's define this. You think that we retest the lows over the. I'm saying like in the next like 10 trading days.

[A]

My strategy is more about being right on camera than doing anything with my own money for this particular subject. So let's just put that out there.

[B]

Okay.

[A]

If we don't bottom if there's an, if there's a wrong. Oh, let's say there's a full scale invasion of Iran tonight and we start blowing up meaningful shit, possibly creating like a starvation. Like it's really bad. Okay then I can come back on in two days. Whenever the next time we're Together. And I could say, well, I told you there was only a 40% chance that it was the bottom, and I look pretty smart. If it is the bottom, none of us will even remember this conversation. But if we do and say, yeah, I said, there's a pretty strong chance it was the bottom, I said 40%.

[B]

That is how you do it.

[A]

This is.

[B]

You're a pro. Yeah.

[A]

You're talking to a professional market commentator, arguably the best in the nation.

[B]

You know why I'm not good so. Because I'm actually like a human being.

[A]

You're committing. You're, like, committing to. You're talking about 59% like a. Like a crazy person.

[B]

No, because I'm not afraid of being wrong. It happens, you know, you, on the other hand, you've got a very, very soft.

[A]

I'm not a soft. I'm not afraid of being wrong either, because I can't be wrong in the way that I phrase things. So I'm definitely not afraid of being wrong. Do you think a large portion of the investing population understands the mechanics of how a dividend is paid?

[B]

Which population?

[A]

Just the. All right, start with the general. Everybody?

[B]

No.

[A]

All investors.

[B]

No, of course not.

[A]

You think it's like half and half?

[B]

Which part of the dividend story are we talking about?

[A]

All right, you call your dad. He's been investing. He's been investing his whole adult life. You ask him to explain.

[B]

No.

[A]

He owns 100 shares of Johnson Johnson. It pays a 3% annual dividend. Where I'm making this up, or he has. Let me put it differently. He has $100,000 in J&J, and it pays him $3,000 in annual dividends. Could he explain what happens to the share price as that money is paid out?

[B]

No. No, he couldn't explain anything.

[A]

He understands ex. Dividends.

[B]

No.

[A]

Okay. I'm gonna say. I'm gonna give you actual polling, but I'm gonna say it's like nine out of ten people can't.

[B]

Yeah.

[A]

You think you'd agree with that?

[B]

Yeah.

[A]

They understand that it's money that hits their brokerage account because they see it when they log in and it gives them their account.

[B]

People like my dad, 10 out of 10, don't know. How would my dad or anybody like my dad know dividend treatment?

[A]

Yeah. I just think it's interesting because dividends are such a huge component to the return. Well, less than before, but still important to the returns that people get in their retirement accounts. But they honestly don't even. They have no idea how it works. They could tell you how bank account interest is paid. And I think they think a dividend is similar, but it's not, you know, that. You agree with that?

[B]

Yeah.

[A]

Like most people could explain to you, oh, yeah, the bank uses my money, they invest it. Oh, look at this guy.

[B]

Look at this little guy. Why are you giving me money?

[A]

What's the money for? He bought bottoms and he wants to invest.

[B]

He bought a toy from Walmart yesterday and said he's got to pay for it. So thank you for that $7. I'll invest it for you. All right, go. All right. Love you.

[A]

What a good boy. All right, let's get into this. MEB Faber on screen. I'll read it. This explains a lot. We did a survey on how dividends work and received thousands of responses. The question is, which of the following best describes how dividends work for Stock Investor? Answer 1. A stock yields 5%, the stock is trading at 100 and pays a 5% $5 cash dividend. After distribution, the investor now has a stock worth 95 and a $5 cash dividend. Or answer two, a stock yields 5%, the stock is trading at $100, pays a $5 cash dividend. After distribution, the investor now has a stock worth $100.00 and a $5.00 cash dividend. Now, obviously, if you are watching the show, you probably know chart off. You probably know the answer is a 1. The stock price adjusts for that payout. And that's why we think of dividends as part of the total return for the stock. He is saying the audience mostly gets it. 90% of pros understand how dividends work and 80% of individuals. I don't think so.

[B]

MEB's audience. MEB's audience mostly gets it.

[A]

Right. So this is where I'm going.

[B]

Yeah.

[A]

Mebs audience are the smartest, nerdiest, most sophisticated individual investors that exist.

[B]

Correct.

[A]

Because that's why they're in his audience.

[B]

Yeah.

[A]

He does not put on a red nose and do a tap dancing.

[B]

He's not doing. He's not doing 40% chances.

[A]

He's not like my audience. No, no. So he says, however, for the broad based audience, so this is outside of him. 60% of pros understand how dividends work. Only 25% of individuals understand how dividends work.

[B]

Chances are 25.

[A]

I think it's less. Right?

[B]

Yeah.

[A]

But still, isn't it interesting? Even if he's right, 75% of individuals think that dividends are just free money that a company pays out like it's a bonus.

[B]

Yeah. Then why would. Why wouldn't a company pay out 100% dividend yield?

[A]

Because they think it's like a checking account where the. Where the bank like drops $5 on you because it's interest. They don't.

[B]

Well, think about it this way. Think about it this way.

[A]

That's what they equate.

[B]

This way. If a business has a hundred thousand dollars in its checking account and it sends $10,000 back to its owners, how much money is left in the business?

[A]

Well, that's how you're supposed to think about it, as a shareholder.

[B]

Right?

[A]

But they. They think about it like a bank account. It's a brokerage account. It's a bank account. I got income. I got income.

[B]

Thought.

[A]

I thought that was interesting. All right. Somewhat related. Even less related than that last thing. And then we'll move on. BlackRock launching its own NASDAQ 100 ETF. I saw it. Balchunas thinks they'll price it at 12 basis points. First, let me just show you. This is BlackRock's chart. Five years, just level setting here. What's going on now? Let me show you. Invesco BlackRock shareholders have not done materially better than Invesco shareholders since the pandemic. Are you surprised by that?

[B]

Say that one more time.

[A]

BlackRock's shareholders, common stock, have not done. They've done better over the last five years than the Invesco shareholders. But have they blown them out of the water? I'm not sure. Like the stock BlackRock's peak was in 2021. It broke out again in 25.

[B]

Wait, why are we asking this? I can't check it.

[A]

What do you mean check it? I'm showing it to you. You look.

[B]

No, you're not. Dude, that's a number.

[A]

I'm all right not giving the percentage return. I'm giving you what the ride has been like.

[B]

You're joking, right?

[A]

Well, I'm basically showing you.

[B]

You're saying people don't understand how dividends work. You don't even understand a stock price work. You're showing me a. A number.

[A]

Well, why can't I just show you the price action? Why do I have to show you the percentage return? You could run, I don't know, seconds. You could run that in two seconds if you needed to. But suffice it to say, BlackRock shareholders have done better than Invescos. But I'm making the point that even the dominant ETF franchise, it hasn't exactly been a smooth ride in the last couple of years without. Without getting into like head to head comparison. Because that part's not as interesting to me. Just the ride itself. But here's the point. QQQ is an incredibly successful product. One of the most successful ETF ETFs in the entire industry. It's $376 billion in assets under management. This is an Invesco product. 45% of the queues is institutional assets and then 55% is retail investors or traders. It's a 20% expense ratio. I saw Baltuna speculate 2020 basis points. Excuse me, Balchuni speculates can be the competitor, which will be IQQ from the BlackRock iShares franchise. Could be 12 basis points. So here's my question to you. How much of that $376 billion is actually at risk if BlackRock's competing product is a 40% discount to the granddaddy Triple Q product?

[B]

It's a great question. So also I saw that State street is now getting into the game. So a little bit of background here. I'll answer your question. I do wonder if there's like a lot of behind the scenes relationships going on here that we don't know about. There's got to be. Because there's no reason why Invesco is the only one to own the NASDAQ 100. Or like tech stocks. I'm using aircraft.

[A]

They have a license. Did they have a license that went out?

[B]

So the NASDAQ 100, the QS are what, 18 basis points? I asked Chat, I said how much money does Invesco actually net on qqq? Because there's like a lot of interesting stuff going on in here. So this is an old UIT structure. Remember this has been reported on many times. Okay, yes, so, so here's some. Claude the punchline. Invesco built the third largest ETF in the world with $400 billion in AUM for 26 years, pocketed almost nothing from it all because of how the original 1999 UIT licensing deal was structured. The Nasdaq got paid $500 million a year to let them use the index. BNY got $109 million to be the trustee and Invesco sponsored the whole thing essentially as a loss leader that drove brand recognition and bought flows into their other products. Now they finally monetize it, but they had to cut the. Okay, so like there's all sorts of. They have to spend a certain amount of marketing. Like it's a whole, It's a whole convoluted thing. So to answer your Question how much, how much is at risk here? So there's.

[A]

I have a different question now.

[B]

Yeah.

[A]

So something must have happened where a time limit ran out. Maybe there was some exclusivity on the NASDAQ 100 for an ETF that is now no longer exclusive. Or maybe it's about to run out.

[B]

Maybe because you.

[A]

To your point, why is there so much motion right now? Yeah, yeah, I should probably have looked. I probably should have looked into that.

[B]

That's okay. So is there a relationship? So is BlackRock is BlackRock licensing the NASDAQ 100 or is it creating just a competitor that's going to be its own index?

[A]

You can't use the term nasdaq.

[B]

That's what I'm asking you.

[A]

I think they have to be and I don't think they would bother doing cues. Two cues in the ticker. I don't see BlackRock is trying to do something like semi deceptive. I feel like they would just pay the freight.

[B]

All right, so there's an obvious, there's an obvious black and white answer that you and I don't know about right now. But let me answer your question. Is, are the Qs at risk? So number one, no, because of, think about the embedded gains in here and taxable accounts. Anyway, if you own the queues, you have a lot of money. So nobody's going to be selling.

[A]

Not everyone.

[B]

Okay. Nobody is going to be selling the queues because they pay 18 basis points and buying the IQQ to pay 12. Now, however, however, new money and big money and non taxable big money. Why would you not save 6 basis points in fees? So is, is the moat, has the moat been penetrated?

[A]

It could be 8 basis points.

[B]

Has the mope been penetrated? Yes, most definitely.

[A]

Wait, I'll do you on better. What about for tax taxable? For, what about for tax loss? Harvesting the ability to. Are you able to swap between.

[B]

Yeah.

[A]

Triple Q and IQQ if they.

[B]

Yeah.

[A]

And IQQ if they're both mimicking the same index.

[B]

This is not tax advice. But think about all the, all the institutional non taxable dollars.

[A]

Yeah.

[B]

Their fees. Why wouldn't they save 6 basis points if it's, if there's no tax impact.

[A]

Yeah, we saw, we saw something similar.

[B]

Iemg. Is that where you're going?

[A]

I was going to say IEMG instead of em.

[B]

So IEM was.

[A]

I, EMG took the crown and it's huge now.

[B]

Yeah.

[A]

And that's a shitty asset class. But for about 12 years, EEM was the first thing people thought of when you said emerging markets, it was like the default. It was like Q tips. Right. Like, if you said emerging markets, people thought eem, yeah. And then IEMG came along with a lower basis point. And it's bigger. Is now bigger than I am.

[B]

It's 136 billion to 25 billion. But they pick the punchline here is that this was self cannibalization. Those are both iShares products.

[A]

Yes. They wanted to capture more of the institutional. So because here's the thing with basis point fees, if you're trading, you want the liquidity of triple Q right now, you don't care about the annual basis point fee. You ain't gonna be in it for an annual period of time. You're not paying it.

[B]

Right.

[A]

So you. And, and think of all the derivative products that are built on top of triple q, all the 2x long, 2x short inverse, all the options trading that takes place based on triple Q. It's an, it's like an extremely important part of the, the solar system, that is the stock market. So for that reason, I think the moat is somewhat defensible. But like. So here's the question. Where are the assets? Which half of the QQQ ownership is more susceptible, the institutional half or the retail half?

[B]

It depends. Which institutional half? The trading half. No, they're staying with the queues because

[A]

the hedge, Hedge funds will stay with trading queues at least, at least at first. I think that's right, because they, they would, they want the daily liquidity more than anything else. Is that why. Yeah, they need to move in and out of it in size. Okay. And they're hedging it. They could use futures to hedge it like it's, it's valuable to them for more than just the. They don't care about the basis points.

[B]

I don't know enough about market structure to understand the differences in liquidity depth. Because he's on. It's underlined at the end of the day, but whatever. Over my skis there. But this is interesting. So I'm sure, I'm sure there's a pattern that expired or something. It's got to be something.

[A]

Nasdaq, you have two great guests to talk about this with coming up on the Compound and friends this week. So we'll, we'll leave, we'll leave it there and you could break, you could pick it back up. All right, let's do, let's do topic two.

[B]

Okay. Oh, my God. All right. This is really, this is an interesting market, as we keep saying, an interesting Market, a weird market. Rob Anderson from Ned Davis Research. The benefit from buying winners and the drag from buying losers has rarely been greater. The magnitude of return dispersion for the S P 500 stocks is more than 5 standard deviations above the long term average, only higher. And following the dot com crash, the GFC and the COVID reopening. And what's so interesting is that this is happening in a period of heightened volatility. But like correlations have not gone to one. Not even close. Not even close. Yeah, last week we were talking, we were talking about how 75 of the decline has come from the max 7 this year. So I asked Char kid like, hey, what if, if 75 of the market decline is coming from the max 7, what's on the other end of the barbell? Like, what's holding the market up? So he made me two pretty charts. John, let's go. The cap loss first. The red bars. So $2 trillion husk has come out of the mag seven. Josh, where did this $2 trillion go?

[A]

God. It went into the best stocks in the market, of course.

[B]

Of course.

[A]

It really literally did. I'm not even joking. It went, it went into Exxon and Chevron and it went into pharmaceutical stocks. Biotechs went into the shit that's going up. All right, Josh, people are doing.

[B]

Josh, you sitting down right now?

[A]

Yeah.

[B]

Hold on to your face. Previous chart. Look how pretty this is. So Matt charted, he did a bubble chart showing the MAG7 stocks. They're waiting at the start of the year, how much they've ripped out of the S P500 year to date. And then he looked at the other 492. So the 4, the Mag 7 plus Broadcom I guess is.

[A]

This is what it is.

[B]

But look at the other 492. Isn't this nuts?

[A]

Wait, their contribution to year to date return. So they are holding them. They're holding the market up.

[B]

Yes, Josh. And there was this talk for years. Chart off for years. People were like. And thank God we were batting this away. Not saying that we could have foreseen this. I definitely would have predicted this. The market is so concentrated, when the leaders go, the rest of the market is to go with it. And the opposite has happened. It's amazing.

[A]

Now we said no, every time we said, we said 40 chance, 40% at minimum. No, but the, the big thing was like these stocks are too big to not take the market down.

[B]

And that was.

[A]

Yeah, true. Until the other stocks are the beneficiaries of the outflows from the stock. And I know you hate this, that I'm aware is the money go guy, but I think I've been vindicated today. And you can, you could extend in a. Not an apology, but like, wow, maybe you're onto something. Maybe people don't just go to cash in their account. They actually buy new stocks. I mean, just give me, give me this much that it could be true.

[B]

I'll give you this much. Let me take the other this much. If the market gaps down 1.5% at the Open, where did the money go?

[A]

Temporarily into a money market, only to come back into the next wave of leadership stocks. Right?

[B]

Yeah, that's how it works.

[A]

All right, so I've only ever seen that. I've never seen anything other than that.

[B]

Furthermore, I asked Matt for a chart. All right, so what literally is holding the market up? Up next chart, please. So this is some great stuff in here. So naturally it's ExxonMobil adding 30 basis points, or 29 to be precise, to the, to the S P and then it's Walmart. And dude, this blew my face right off my body. Micron.

[A]

Yeah, Micron has big now.

[B]

So do you know how big Micron is? It's so much bigger than I thought.

[A]

Is it like 250?

[B]

Okay, that's what I said this morning. I said it was a 200 billion dollar stock. Yeah, it used to be in October. Now it's 430.

[A]

Get the out of here. Really?

[B]

My credit is a $430 billion stock?

[A]

Put it in the Dow so I can call the top. Wait, can you put that chart back up? I love this.

[B]

So look at the other.

[A]

So for people, listen. For people listening, not, not watching. These are the top 20 contributors to this year's S&P 500 return, which is not a good return. But these are the stocks holding the market up to Michael's point. After Mike 1, you have Chevron, J and J, Applied Materials, Sandisk, Caterpillar, Costco, intel, ge, Vernova, Lam Research, Corning, Conoco, Phillips, or now Conoco, Western Digital, kla, Merck, Seagate, Vertiv, Lockheed, all halo. Like very obviously halo. None of them are. You can chart off. There's no ambiguity. Every one of these companies, physical infrastructure. These are not asset light businesses. They don't sell software or information. They're not in the data game. These are right, like these are the definition of heavy assets and low obsolescence. Many of those companies have been in business for 100 years. Many, many, many on that list. Ben did to this point, Ben did a really great post called Bottom Fishing. I guess this was last Thursday and he was just talking about like the nature of the stocks that are down and how, like, like and how much they're down. And I think you and I said one of the weirdest parts about the current environment is the types of stocks that are down this year are the stocks that are popular with retail, stocks that people are. Individual people are less likely to own the types of stocks that we just talked about.

[B]

Dude, look at Tesla. Like Tesla is getting whacked hard. Look at this.

[A]

Yeah, here are the beatings. Adobe, Salesforce, Core weave, Apollo, Blackstone, KKR, Ally Financial, Capital One. Visa down 20%. Mastercard, American Express down 22%. Robin Hood down 54. Coinbase down 60. Yeah, block down 80. Nike down 75. Walt Disney down. Do you know, Michael, that Walt Disney is in a 55.0percent drawdown? Target down 55%. Josh Meta 27. Microsoft, Netflix. These are the stocks people own. They're all down.

[B]

When did Palantir peak?

[A]

I'm going to say November.

[B]

Nailed it. Freaking November. Dude, in retail world, that's a long time ago.

[A]

It's forever. No, you can't. November, you bought a stock because it was going up and it stopped going up five months ago. You can't be in it.

[B]

All right, so absent the war, assuming that the, the current market still existed. Absent the war. Okay, if the market was looking like this, this is a story that is not getting any attention. Really throw up this value versus growth chart. So the spread between total index, the Russell 3 value versus growth value has outperformed growth in the first quarter by the widest margin since 2001.

[A]

Dude, let's light this candle.

[B]

Nobody's talking about it.

[A]

Well, I'll tell you want to know why nobody's talking about it?

[B]

Yeah, it's the war.

[A]

But go ahead because what you said earlier, rebalancing no, fool me once, can't get fooled again.

[B]

Yeah.

[A]

How many times have we seen this? Wait, put the chart back up. Can you see any consecutive quarters where it continues?

[B]

Yeah.

[A]

For what?

[B]

Once. Yeah, look at.

[A]

But look how many more consecutive quarters. There are the other ones, these runs in, in growth stocks. So how many, how many of these value sucker rallies are people gonna right, lose their money from where they just say, oh, I'm not doing that again.

[B]

Right?

[A]

You're not gonna, you're not gonna trick me again into buying the 10 PE stocks. That's why.

[B]

Yeah, and I think, I think this has legs. I really Do.

[A]

So you. So wait a minute. So you think we could go again? Q2, value add, performance?

[B]

Yeah. Now, I don't think it's. I don't think it's gonna necessarily the same where it's like value up, growth down. Maybe it is, but yeah, I think it's going to continue.

[A]

Okay, what's this last one?

[B]

I also think. I also think. You know what? We can skip this. You know what's interesting also, Josh, a lot of this, the reason why the market isn't working just at like a high level is the transition from asset light to asset heavy and the pressure that's coming for cash flows and margins. But it's funny because. And this makes total sense, these companies are being penalized. They're spending too much money. The beneficiaries of the semiconductors, these stocks are still working bigly.

[A]

Yeah. And semiconductors are part of the AI trade, but they're physical.

[B]

Right.

[A]

They're halo.

[B]

So the AI trade is not just one trade. It's the spenders versus the spend.

[A]

These recipients.

[B]

Recipients, yes. All right, next topic.

[A]

Jamie Dimon's annual letter to shareholders. We've talked about this. Is this the new Berkshire Hathaway Warren Buffett letter? I think it is.

[B]

I think so. It's 48 pages. I don't know if I have time for this.

[A]

There's a lot of charts, though. It's not like 48. It's not like 48 pages of reading.

[B]

Is the tone. Did he say anything that he doesn't always say?

[A]

I. Well, I guess what I'm asking is like, this is his stature. He's not a pure investor. He's a CEO. But you're the CEO of a bank. You are making asset allocation decisions. Like, by default, is his stature and his longevity and his place in running the biggest bank in the world. It's a 227 year old bank.

[B]

Yeah.

[A]

Like, is he earned that level of investor attention?

[B]

No.

[A]

Or will there never be another Warren Buffett for reasons that have nothing to do with Jamie Dimon or any shortcomings that JP Morgan may have?

[B]

Yeah.

[A]

There.

[B]

There are tens, hundreds of thousands of people that read the Warren Buffett letter every year. Nobody's reading millions.

[A]

I would say millions around the world translated into Asian languages.

[B]

Yeah. I would say by comparison, nobody is reading Jamie Dimon.

[A]

Could it. Could it ever. If he stays there for another 10 years, could it get to that point?

[B]

No.

[A]

If JP Morgan held an annual Shareholder day in an auditorium somewhere in Manhattan, would people from all over the world come to see him on stage?

[B]

No.

[A]

Right. I don't think so either.

[B]

No chance. But for me, yeah, no, it's great. It's good stuff.

[A]

For me as a shareholder, this sort of is at that level now. I think it's this, It's Larry Fink, BlackRock. Because these things have like major impact on my business. I need to understand what these guys are saying because I'm in the financial services world. But to your point, somebody working in Silicon Valley probably doesn't give a shit what Jamie Dimon has to say.

[B]

No.

[A]

Or not everybody there I should say. Okay, so I agree with you. That being said, this is one hell of a publication and not just because I'm a shareholder. I just, I get a lot out of looking through it is the first chart I wanted to show you. The yellow line is the earnings per. I mean, I'm squinting myself. The yellow line is the earnings per share. I think the most important thing here though is that blue dotted line running across. That's the return on tangible common equity. So the way to think about this is it's, it's not really a measure of profitability like an earnings per share or net income number. It's a, it's a measure of the efficiency which, with which they convert dollars to profitability. So what, what tangible common equity does is it strips out. What this measure does is it strips out goodwill from, you know, like accounting related stuff where they make an acquisition and they record a certain amount of goodwill, blah, blah, blah. This just takes the hardcore chart off. This just takes the hardcore activities of the bank itself. The lending, the net interest margin, the capital raise. How's the business doing investment banking? I mean it's the point, the point is the business is unbelievable. 2025, another year of ROTC at 20%. And then just for fun, I wanted to look back at their competitors. Wells Fargo's like 14%. So not as efficient. Bank of America 15 Citi is like 7 or 8. But there's all sorts of asterisks with that because they've been restructuring for 48 years. Let's put up this next chart. Just stock total return analysis. They're going back to this date. Not to cherry pick. It's. I think they're just trying to show you, they're trying to show you the year 2000, but then that 2004 to 2025 is relevant. That's when Bank One merger took place which brought Jamie Dimon into JP Morgan Chase. So he was running Bank One. And this is, I think there's A guy named Harrison was the CEO at JPMorgan Chase. And this is how diamond effectively got bought out but took over the parent. Right. Look at these returns.

[B]

It's insane.

[A]

It's, it's completely insane. Right?

[B]

So like look at 1, 5 and 10 for, for the bank versus the financials index. Yeah, I mean, it's insane. 20 versus 15 for 5 years, 20 versus 13 over 10 year period. Are you kidding me?

[A]

Right? So diamond is not one of these people who like loves the sight of himself on camera and can't wait to run his mouth and just talk and talk and talk with very little to back it up. There's a lot of, there's a lot of people working in finance, especially in the investment side. People run a bond fund that's returned 1% a year. They have opinions on everything under the sun, political technology. Like, you know, this is a guy that literally delivers for shareholders on every time frame. And yeah, he's opinionated. He has opinions about what's best for America, what's best for New York City, should people work from the office. Like, he has opinions. But let's look at what he's actually accomplished before we dismiss it as, oh, here's another billionaire running his mouth. No, no, no. This guy is delivering for millions of people around the world. Shareholders, employees, customers. All right, Tangible book, an average stock price per share. I mean, it speaks for itself. If you're listening and not watching. I'm not sure how to describe this, but it is extraordinarily up and to the right. This is the assets. So they call this next chart assets entrusted to us by our clients. Look at this evolution from 2005 to 2025. The, the dark blue is basically client assets. And it's just remarkable how large this bank has gotten.

[B]

Yeah.

[A]

And everybody can see these charts if you go to JP Morgan's website and look for the letter. But we're talking about like a 40 trillion dollar bank. Well, you know, here's the assets under custody, 41 trillion dollars.

[B]

It's all this part of the same story. JP Morgan has been the biggest beneficiary of one of the greatest booms in the history of capitalism in terms of all of these people. With $30 million, $100 million. JP Morgan has won that race.

[A]

But I also want to say it's not just they didn't just win by winning, they won by not stumbling and then picking up the pieces from those who did. They were able to, I think they bought Washington Mutual, Bear Stearns and one other one Other bomb, the financial crisis. They picked up First Republic, incredible franchise. They picked that up for almost nothing. Once again, that was only three years ago. Like they have along the way, as other players have blown up JP Morgan with the Fortress balance sheet. The relentless focus on risk management, the willingness to say no to business that they don't think is worth the risk. It's not just about how great they are at winning, it's how great they are not losing. Well, and that's so Buffett esque.

[B]

Could he have done this at Citi? Maybe?

[A]

I don't think so.

[B]

Maybe that's too, too tall a task.

[A]

But at a different bank, I don't think so. And I also don't think he could have grown Bank One into what JP Morgan is. There is something magical about a bank that's been around for over 200 years and is so endemic to not just the banking system, but like the pipes of how everything works. And it's just so important, not just in America, but around the world. So I think he needed to be in the seat at this company to have become Jamie Dimon. It's a great question. We could, we could skip over everything. I just want to do one more of these. Give me the Fortress balance sheet chart. This is the most important to me some in this stock for, I don't know, it could be decades by now. I mean, I was buying this when they were selling it off on the London Whale. I don't know if you remember that. You might have been in elementary School.

[B]

20, 2010.

[A]

I was, I don't know, whenever that was. But this is the, this is the answer. People like, oh, such and such firm just downgraded shares of J.P. morgan from a buy to a neutral. And then somebody asked me like, oh, what do you do about this if you're an investor. If you're an investor, you laugh hysterically. Oh, okay. Oh, it's a, it's an equal weight, not an overweight. Okay, that's great. I'll be sure to remember that the next time I'm on Jeopardy. Thanks. Thanks for sharing. So I don't sell because the Fortress balance sheet is the point. It's not. Stock's not gonna go up every year. Guess what? I don't need it to dividends. We invested too real balls to the wall.

[B]

All right, let's, let's, let's quickly do. On the opposite end of the spectrum, let's do open AI. I don't know if this has been

[A]

not a Fortress balance sheet.

[B]

I don't know if this has been underreported, that maybe sounds ridiculous, but also I think it kind of has based on the scale. They just completed a deal to raise $122 billion from investors at an 852 billion dollar valuation. Do you. Did you know that?

[A]

Yes, but only because I. Only because I read the same article you read. It's a lot.

[B]

You know what? You know what it is? It's the war. The war is just sucking up all the oxygen because otherwise this would be. This would be all we're talking about.

[A]

Massive.

[B]

So they raised Amazon, agreed to invest $50 billion. There's contingencies there. SoftBank and Nvidia each put in 30 billion. Sure, why not? Oh, 35 billion of Amazon is contingent on OpenAI going public or reaching the technological market.

[A]

So the contingent is like, is there actually stock for sale? Because they're going public.

[B]

Okay, so Claude made this chart for me. I said, like, how big is OpenAI's raise compared to the biggest races in the history of, of IPOs? So there's nothing even close. The next, the biggest one prior to this was Saudi Aramco raised $25 billion. Alibaba raised 25.

[A]

But you know what this is like, show me Michael Jackson's record sales compared to the rest of the Jackson 5.

[B]

Pretty much, it's most insane.

[A]

Same thing.

[B]

So they just raised $122 billion.

[A]

Yeah.

[B]

Okay.

[A]

From some very important strategic partners too, which should be pointed out, not Dingalings

[B]

biggest corporations, biggest investors. So in the interest of time, we'll skip over some of this. There was an article in the Journal and. But what I want to talk about is, is some of the decisions that they're making before that though. So Anthropic put out announcement last night. Google, Broadcom Partnership, they said demand from Claude. So this is Anthropic. Demand from cloud customers has accelerated in 2026. Our run rate revenue has now surpassed $30 billion, up from approximately 9 billion at the end of 2025. When we announced our Series G fund raising in February, we shared that over 500 business customers were spending over a million dollars on an annualized basis. Today that number exceeds a thousand, doubling in less than two months. Now the way that Claude or Anthropic is calculating their revenue is a little bit weird. They're booking the cloud revenue and then booking that as a cost of goods sold, which seems like double counting in a bizarre way, but whatever. If it's not 30 billion, it's 22 billion.

[A]

Because these are Amazon cloud customers. That are accessing Claude via that, via that relationship.

[B]

So it's a bit bizarre their accounting methodology, but whatever. It's, it's so much money so fast for comparison. So let's just say that all right, $30 billion annualized revenue run rate and let's say it's probably going to be 40. I don't know where it stops or slows down. Charles Schwab did $27 billion in the last 12 months in revenue. McDonald's that. McDonald's did $27 billion in revenue in the last 12 months. And they have barely. It's hard to say they've barely just begun. But I don't know what any of these companies are. It still seems very, very early opening.

[A]

Last thing through that prison, seen through that prism. The sell off in enterprise software makes sense because these dollars to spend on this shit don't just materialize out of nowhere. They have to come from somewhere.

[B]

This is coming from somewhere. So chat GBT said it's ad pilot program hit $100 million in annualized revenue after six weeks.

[A]

So that could be 200 million like the next month.

[B]

All right, so here's so, so the, the news this weekend. There's. There's been a lot of news. So there's a podcast called TB pn.

[A]

It's like a tech. I've. I've seen a few episodes, great guests. I've a tech podcast.

[B]

I always only. It's a daily podcast where they cover tech. I only became aware now listen, I'm not in the tech world so whatever. But I only became aware of this podcast literally two weeks, two or three weeks ago when they had Travis on formerly of Uber. I listened to the first 15 minutes. I was like, wow, that's a big guess. Who are these guys? So what? I didn't even like look into it. And then I woke up to news yesterday, the day before that Open AI is buying this company for about $100 million. And here's what's. Here's what Ben Thompson from Stratechary had to say about this purchase. A few necessary disclosures. First, I have appeared on TVPN a few times. A few different times, and I assume I will again. Second, more importantly, I would for the record accept low hundred of millions of dollars for this trajectory plus family podcast. I would certainly want the money in cash, not open AI stock. Okay? Indeed, this deal makes that distinction all the more important because I honestly don't know what in the world Open AI is doing here. This isn't a deal that is going to make or break open AI's fortune. The company just raised $122 billion, and it's not like TBPN is going to be using up scarce compute. Rather, it's simply a deal that makes no sense. And when you put it in such basic terms, it makes you consider how many things Open AI has done over the last few years that make no sense. And here's the coup de gras if Twitter is a clown car that fell into a gold mine. That's what Zuckerberg famously called Twitter. OpenAI might be the short bus at the end of the rainbow. There's supposed to be a pot of gold there, but it never quite seems to materialize. The colors are fading. And worst of all, there just isn't much evidence that anyone knows what they are doing or that there is any sort of overarching plan. So Sam Altman was just featured big time in the New Yorker. There's just so much smoke. There's so many weird things going on at Open A lot of but we

[A]

don't actually know what the dollar figure paid for this podcast is. We don't really know.

[B]

Let's assume it's $100 million. 5050 stock in cash.

[A]

Let's. Okay, fine, so they wrote a $50 million check. What is that like an AI engineer salary for. For 12 months.

[B]

But the Ben's point why they do

[A]

it with their pay? Well, so I have a good answer for that. I don't know Ben personally. I'm a big fan of Strathecary, as most people are. He's terrific writer. But whenever somebody gets bought out, that's in roughly the same lane. There's always a little bit of professional jealousy. Or even if you look down on that show, if you're bad and you're like, my content's better than theirs, they just happen to do a daily livestream. How long could they keep doing that for? Will the audience keep showing up for that once they're open? Once they're owned by Open AI, is it just going to become a chat, GPT, cheerleader show, blah blah blah blah blah. What did they really buy? What if the two partners on screen, one of them hates the other one, etc. Etc. Etc. Okay, but a lot of that boils down to like, why didn't they buy me out?

[B]

Why did they buy us? That was my first reaction.

[A]

Why did they buy the Thoughts would

[B]

be perfect for Open Air.

[A]

Imagine. Yeah, my life's ambition is to go work for Sam Altman. So now I'm going to tell you something. I don't watch that show. I've seen it. Not for us. It's not for us. It filled a hole perfectly. We have cnbc. We're investors, we're traders, we're professional financial advisors, asset managers. We have the daily go to. All right. These people are speaking my language. And it's, you know where it is. It's all day. If you don't have cable now, you have the clips on YouTube, you're comfortable with it. You know the people, you know the voices, you, you know the structure, the format of the shows, it just works. Where do you get that? If you're in tech, it's all in podcast. You have to listen to those guys or you're a sit on Twitter all day, which sucks. It's the most soul sucking, miserable, depressing environment that exists. Where do you like actually get daily tech market commentary? Yeah, that's not Wall Street. So it was a great idea they had. They made it look like cnbc.

[B]

What's on the bottom of the screen? Yeah.

[A]

And they won. But if I were a competing tech creator, whether I had a podcast or a blog, I would be pissed.

[B]

But the question is, what did OpenAI buy? Because these people, these guys were very. No, I know.

[A]

They bought a PR machine, they bought an outlet.

[B]

But they're not gonna do that. Like the whole point. I think that.

[A]

Right.

[B]

You don't believe.

[A]

I mean, Sam gets mad because. Because the guy at New Yorker magazine shreds his whole life, spends 11 months investigating him and makes him look like a scumbag. You don't think he wants to have his own PR outlet with a million people watching where he gets to tell his side?

[B]

Sure.

[A]

Everything is content now. Everything is media. There is no business, it's not a media business where they're gonna build their own with the person. You imagine the personalities there.

[B]

But it's still weird, like, because these guys ostensibly. See, I said it. Are still going to produce the same content that they do on a daily bas. They'll talk tech. What does this do for open AI?

[A]

I think Sam gets. I think Sam gets to jump in the seat. I think Sam gets to put friends of the company, whatever.

[B]

How about this? How about this? Doesn't. Doesn't even matter. The fact is this.

[A]

It doesn't matter. In your role it does.

[B]

No, it doesn't.

[A]

Tell you why everybody, everybody had the

[B]

same reaction is what are they doing?

[A]

Because they don't know what I know.

[B]

Oh yeah. You know a lot more than Ben

[A]

Thompson when was open AI's worst moment in the last two years.

[B]

We know when Sam was on the podcast.

[A]

When Sam was on a podcast that he doesn't control. Now why was he on that show? Because he had things that he wanted. Silicon Valley and big tech and politicians and everyone paying attention. He needed a forum to say certain things and that was the forum that was available. Sorry, that was the forum that was available to him. Now that's no longer the case. He. If he owns his own media, he has own way now of getting out the open AI message that he wants to get out. I'm not saying he's going to turn the show into an infomercial. I'm saying if and when he has news to communicate, they're going public. This.

[B]

Okay, fine.

[A]

That's what they're doing. That's they're doing.

[B]

Be that as it may, let's assume that he will hop on the show from time to time time to promote the company. The knee jerk reaction that everybody watching was, oh my God, this makes no sense. What other bigger decisions are they making that also make no sense?

[A]

I agree with you. That was the reaction. My reaction's different. My reaction is, oh, look, another. Just like Elon Musk was a. Who somehow has a company worth a trillion dollars before it even goes. Look at this idiot. What? What in the world is he doing this? Who has a trillion dollar business?

[B]

Okay, you might be right.

[A]

Who has partnerships with Nvidia, Amazon, Microsoft? What? What's this R word doing now?

[B]

You might be right.

[A]

All right, that's my reaction.

[B]

I'm gonna make the case for biotech stocks.

[A]

Let's do it.

[B]

Remember, like how shitty healthcare was acting all of last year. And then. I don't know this story. I'm sure you do, but they're working. So first chart is xbi. This is the equal weighted version. The next chart is ibb. This is the cap weighted version. The IBB has already done a lot better.

[A]

This looks great.

[B]

All right. But then I divided one by the other and I think I like the XBI more. This is XBI divided by ibb. Seems like there's room to run there. Not that you have to pick one versus the other. Maybe you do both, maybe you do neither. But XBI looks very good. Very, very.

[A]

Can I ask you, can you put that last chart up if you. No, I guess, I guess just give me the total return level on xbi. If you wanted to handicap this by a fundamental to say that spike in 2021 was more speculative than this spike what fundamental would you, would you use ebitda?

[B]

Oh, I don't even know how these things valued honestly.

[A]

Well, they're not valued on earnings because. But cash flow. I guess on the XBI this would be less important. Maybe on the ibb you might want to know some valuation metric, but it doesn't. Maybe it's price sales.

[B]

I couldn't tell you the first thing but.

[A]

But my point is like to feel good about buying it at the same level. It peaked out in 21. You'd probably want to know one more metric about the fundamentals today versus then. And I think if you did a priced sales, which I'm sure you could do in two seconds, it's way cheaper today than it was in 2021.

[B]

Fine. All of that aside, this thing is acting great technically.

[A]

Yeah, I think you'd be right on this.

[B]

It's consolidating. 130 looks like the trigger. On the upside it looks really good.

[A]

We have a bunch of biotechs in our best stocks in the market list, Sean and I and there are some really good charts in there. So I, I like the call. Let's do mystery chart and then we'll bounce out of here.

[B]

What do you got?

[A]

All right, I won't even give you a hint then. Are you joking?

[B]

I'm joking.

[A]

All right. It's an individual stock and you are.

[B]

Oh, I do know. This is.

[A]

You are involved. Look at you. You're really good at this. How did you know?

[B]

Because I look at Netflix's chart every day. I don't own it anymore, but I'm thinking about buying it again.

[A]

All right, before we move on to the next chart. Well, put that back. What do you make of this? It's about to explode.

[B]

It's acting very well.

[A]

I think 120 is the next resistance. I think you make an easy 10, 11 points right now. If and when it gets above 100 and stays there, is there anything stopping it from getting back to 120 which is where it was trading before they announced the Warner Brothers deal. That is no longer gonna happen.

[B]

Speaking of fundamentals, this company is dripping. Forget about the one time cash infusion. They just raised prices. Nobody's gonna blink. Stock is acting lovely. Relative strength looks great.

[A]

They have every live sporting event you want, including new ones that I didn't even know existed. They're involved with every league. Well, let's do. So basically I'm just showing you the stock versus the earnings. Yeah, this trailing twelve months fully diluted earnings per share. This thing is screecher to me.

[B]

Yeah.

[A]

So I don't, I own some. I don't own enough of it. I think I have one more. This is the technical. So JC would have yelled at me for asking you the technical. Read on the price chart. Oh, looks at this. So where does that go?

[B]

Held the gap.

[A]

Say it for everyone who's watching.

[B]

90.

[A]

Well, like the most obvious. The most obvious in the world.

[B]

Yeah.

[A]

You risk nine points to make 20 points.

[B]

Yeah.

[A]

Is. Is this one of the biggest no brainers in the market right now?

[B]

It looks very good.

[A]

Looks very good on a risk reward basis. Right?

[B]

Yeah.

[A]

Let's wrap up, guys. Thank you so much for watching. Thank you for listening. We love you. We appreciate you. And I want to let you know, tomorrow is Wednesday, which means an all new edition of my favorite show, Animal Spirits with Ben Carlson and Michael Batnik. Later on we'll do Ask the Compound with Duncan and Ben and then Michael will return with an all new edition of the Compound and Friends on Friday. And he's got some great guests and you're going to love the show. Thank you guys again. Yeah, we'll talk to you soon.

[C]

Ritholtz Wealth Management is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Ritholtz Wealth Management and its representatives are properly licensed or exempt from licensure. Nothing on this podcast should be construed as and may not be used in connection with an offer to sell or solicitation of an offer to buy or hold an interest in any security or investment product. Past performance is no guarantee of future results. Investing involves risk and possible loss of principal capital. No advice may be rendered by Ritholtz Wealth Management unless a client service agreement is in place.