Software vs Semis, Trump Accounts for Babies, Sell-Side Indicator

Summary

The Compound and Friends

Episode: Software vs Semis, Trump Accounts for Babies, Sell-Side Indicator
Date: January 6, 2026
Hosts: Josh Brown ("A"), Michael Batnick ("B")

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Episode Overview

In this high-energy kickoff to 2026, Josh and Michael dive into the shifting dynamics between software and semiconductor stocks, analyze Wall Street’s ever-controversial Sell-Side Indicator, break down major announcements from Nvidia and Amazon at CES, discuss the new “Trump accounts” set to seed investment accounts for every baby born in the U.S., and reflect on the broader implications of democratizing market participation. The episode is filled with sharp insights, candid market skepticism, and a signature dose of humor.

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Key Discussion Points and Insights

1. Software vs. Semiconductor Stocks (01:59–13:00)

• Michael’s “Bad Take” and a Historic Spread

  • Michael shares how his recent optimistic take on software vs. semis was instantly upended: “AI is not going to replace software companies like Adobe and Salesforce…then the market said, oh yeah, watch.” (04:38)
    • On the same day, semiconductor stocks soared +4.2%, software stocks fell -3%, marking an all-time daily performance spread between the two (+7%—never seen in 25 years).
    • Josh: “That’s like God throwing a Thunderbolt at you.” (05:49)
  • They discuss possible mean reversion, considering whether the outperformance of semis is sustainable, or if software will stage a comeback, or semis will simply drop.
    • Michael: “I think this might be a blow-off top...but I’m not a trend fighter.” (06:07)
    • Josh: “You could get that mean reversion because software’s great, or semis crash.” (07:51)

• ETF Construction Woes

  • Both note shortcomings in software ETFs (e.g., IGV) vs. the cleaner composition of semiconductor indices; many “software” companies are actually diversified tech conglomerates.
    • Michael: “Build a perfect software index. … It’ll look the same.” (09:59)
    • Josh: “The top 10 semi index, those companies are making chips.” (09:28)

• Market Cap Divergence

  • Michael highlights how Adobe and Salesforce’s market caps tracked in lockstep until a recent sharp divergence.

• Price vs. Narrative

  • A debate on whether markets or narratives drive changes — with a strong nod toward price action being the better signal.
    • Josh: “That’s why I’m a price person first, and then I try to figure out what’s the narrative...A lot of people are vice versa.” (11:37)
    • Michael: “Usually the market is right and we’re wrong.” (12:02)

2. Savita Subramanian’s Sell-Side Indicator & Wall Street Sentiment (13:00–22:38)

• Contrarian Indicator Background

  • Josh reviews how Savita’s indicator measures strategist equity allocation and its long-term use as a contrarian signal (bullish when Wall Street is bearish, and vice versa).
  • The indicator is now near—but not at—a sell signal (current: 55.9%, “neutral but closer to a sell”). (14:23)
    • Josh: “It’s taken a long time and up year after up year, and now it’s completely gone the other way.” (13:38)

• Debating the Signal’s Value

  • Michael: "This is literally noise." (15:33)
    • Contrarian indicators work better in bear markets. “It’s a lot easier to say everybody’s gotten way too bearish than way too bullish.” (15:43)
    • Current strategist consensus is for 10% S&P return in 2026, 12% in 2025—so Josh notes, “there’s no holdouts... It’s not a bad thing, but the dry powder is dwindling.” (21:22)

• Asset Allocation Trends

  • Risk appetite rising: Bond allocations lowest since 2022; cash is up but still low; equity allocations near highs.
    • Michael: "That looks like excessive risk taking." (18:58)

3. Market Structure, Debt, and AI Capital Intensity (22:38–30:09)

• Corporate Debt & CapEx

  • S&P net debt to EBITDA is not alarming—less dramatic than expected despite hype over ‘debt entering the room’ (Sam Ro’s charts).
  • CapEx to Sales rising but debt-financed CapEx remains historically low, even among high-spending tech:
    • “Shockingly low in a good way.” (24:10)

• Worker Productivity Boom

  • Real revenue per worker is at highs only recently, despite years of cloud and automation hype.
    • Michael: “Only now...has it really been busting up and to the right. Pretty remarkable.” (25:29)

• Valuation Rationality

  • The market is paying more for better businesses—higher price-to-book for higher ROE stocks—i.e., “the internal logic of valuation in the market.” (26:43, 27:33)

• Bubble Talk Rejected

  • Cites the small and shrinking share of “young unprofitable tech” stocks relative to total market cap. “That’s not what’s driving the market...That’s very healthy.” (29:27, 30:09)

4. Trump Accounts for Babies: A Policy Shift (30:09–43:57)

• Program Details

  • Every baby born 2025–2028 gets a $1,000 federally seeded account, invested in the equity market, with up to $5,000 in annual contributions allowed, tax-advantaged until adulthood.
  • Backed by bipartisan support, philanthropists (e.g. Michael Dell, Ray Dalio), and major companies like BlackRock and Schwab offering matching contributions.

• Market/Social Implications

  • Josh: “It addresses arguably the biggest societal problem we have right now in this country.” (33:21)
  • “We have too many people who are not feeling the benefit of the growth of the stock market and the equity value of American business... This is a better way to fight communism than on social media.” (34:45)
  • Highlights mid-20th-century anti-communism strategies and their links to property ownership; draws a line to modern policy for “stock market Americans.”
    • “The way to fight communism is this big idea that Brad Gerstner had and that now the Trump administration has embraced: let’s make more stock market Americans the best way we know how.” (40:43)

• Michael’s Take:

  • “If you don’t like this, you really need to have your head examined. This is all good.” (43:01)

5. Sector Leadership Rotation: The Mag 7 vs. S&P 493 and Risk Appetite (43:57–49:38)

• Leadership Transition

  • Michael spotlights a chart showing the Mag 7’s ratio vs. the rest of the S&P (“the 493”) breaking down—risk-on trades remain hot, but leadership is rotating.
    • “The Mag 7 might be passing the baton to the 493 like it might actually be happening…” (46:09)

• AI Benefits Broadening

  • Goldman’s AI basket: companies outside tech and AI, but who have specific implementable AI plans, are already seeing earnings growth divergence. (49:01)
  • Josh: “This is the whole kit and caboodle. It’s a big story of 2026.” (49:43)

6. CES Highlights: Nvidia and Amazon (50:12–61:07)

• Amazon at CES

  • Showcases new Ember Art Line TV, Alexa browser experience (Alexa.com), expanded AI in advertising products, ring security hardware, Fire TV/gaming upgrades, and Zoox autonomous vehicles.
  • Josh: “The Alexa AI-enabled browser...got people thinking, ooh, maybe they are on the consumer-facing AI side and it’s not just AWS.” (54:43)

• Nvidia’s Physical AI & Autonomous Vehicles

  • Jensen Huang introduced the Rubin GPU architecture: new integrated platforms for datacenters and AI.
  • “Physical AI” and robotics: Nvidia previewed major advances, but the real revenue isn’t here yet.
    • “The baton is going to be passed from data center build-out to the autonomous age... this is going to be the transition year.” (57:00)
  • In one year, Nvidia rolled out autonomous driving tech that took Tesla eight years, making its “Drive” platform the new centerpiece for automakers’ self-driving ambitions.
    • “Every major auto manufacturer...is going to get access to Nvidia’s software plus automotive chipset. That’s what hit Tesla today and what boosted Uber.” (59:18)

• Market Response

  • While Nvidia and Amazon stocks ticked higher, Josh notes that much of the “robotics” upside still isn’t in the price.

7. Notable Quick Takes and Segments (61:07–68:47)

• Personal Moments
  • A reflective interlude on old Instagram photos; Josh reminisces about childhood and long-term investing.
• Bank Stock Pitches
  • Josh pitches Fifth Third (FITB) and PNC as super-regionals benefiting from mergers and market re-ratings. (63:18–64:42)
• Mystery Chart: Micron (65:01–66:09)
  • Michael reveals Micron’s (MU) meteoric rise — from $120B to $386B market cap in under a year, illustrating wild price moves and “blow-off top” potential in semis.

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Notable Quotes & Memorable Moments

• Michael Batnick:

  • “My take was this: this is the year where we realize AI is not going to replace software companies... then the market said, oh yeah, watch.” (04:38)
  • “This is literally noise because...this is not even close to euphoria.” (15:33)
  • On Trump accounts: “If you don’t like this, you really need to have your head examined. This is all good.” (43:01)

• Josh Brown:

  • “That’s like God throwing a Thunderbolt at you.” (05:49)
  • “The way to fight communism is not being a dick on Twitter to people who are struggling. The way to fight communism is this big idea… let’s make more stock market Americans the best way we know how.” (40:43)
  • On the decline of the “circus” stocks: “The presence of a circus...is not indicative of the idea that the entire market is a circus.” (30:09)

• Other Notables:

  • “You don’t grow up to be a loser automatically just because your parents weren’t rich. We have people...growing up with no assistance...and it’s creating all sorts of crazy political shit. I love anything that seeks to counter that.” — Josh (43:31)

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Timestamps for Key Segments

• 01:59: Start of substantive discussion — 2026 market kickoff energy.
• 04:38 – 13:00: Software vs. Semis: blow-off top, ETF problems, price vs. narrative.
• 13:00 – 22:38: Sell-Side Indicator, Wall Street bullishness, strategist allocations.
• 22:38 – 30:09: Market structure, debt levels, CapEx, productivity, valuation logic.
• 30:09 – 43:57: Trump accounts for babies; social, cultural, and policy impact.
• 43:57 – 49:38: Sector rotation, the Mag 7, S&P 493, risk-on evidence.
• 50:12 – 61:07: CES: Nvidia, Amazon, autonomous driving, new AI narratives.
• 63:18 – 64:42: Bank stock pitches: FITB, PNC.
• 65:01 – 66:09: Mystery chart: Micron's historic run as AI-fueled semi.
• 67:23 – 68:47: Reminiscences and “stocks of our youth” returning in the AI era.

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Tone, Language, and Style

• Direct, energetic, conversational, blending sharp market analysis with humor and irreverence.
• Frequent use of light-hearted banter and self-deprecating comments (e.g., “That’s noise,” “Find a perfect set. ... Whatever. … I’m such an idiot. I didn’t even look to the left.”)
• Willingness to openly revise views, debate, and highlight both conviction and uncertainty.

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Closing Thoughts

This episode captures a pivotal moment in markets, with shifting sector leadership, burgeoning new programs meant to democratize investing for a generation, and an undertone of optimism (tempered with realism) about both the American economy and the ongoing AI revolution. The hosts blend sharp takes with accessible explanations, making this a valuable listen for anyone following finance, policy, or technology.

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Transcript

[A]

Ladies and gentlemen, welcome to the Compound and Friends. Tonight's show is an all new edition. First one of the Year of what are your thoughts with Michael Batnick and I? And we got directly into it software stocks versus semi stocks for this year. Savita Subramanian, Sell side indicator. We took a look at some of the big stuff that was announced by Nvidia and Amazon at the Consumer Electronics show yesterday. Did a little bit of a level set on the AI trade with some really great charts and my recipe for fighting communism in the year 2026. We looked at the Trump accounts, which are going to include a federal seed contribution of $1,000 into a stock market account for every baby born between now and and December 31, 2028. I love this idea and I want to see it continue to take take root and take flight. And we'll get into that as well. So thank you guys so much for listening. We're sponsored by Public Tonight. More on Public in just a moment. I'll send you into the show right now. Welcome to the Compound and Friends. All opinions expressed by Josh Brown, Michael Batnik and their castmates are solely their own opinions and do not reflect the op of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Oh, my God, it's. What are your thoughts, Michael? Can you believe it?

[B]

I really can't.

[A]

Starting all over again. 2026, first show of the year. Like nothing ever happened. We are back. The energy in the chat is palpable. You can. You could feel it through the screen. Can you not?

[B]

I sure do, Josh. I feel good. I feel really good.

[A]

Yeah, you look way better than the last time I saw you. Hey, let's. Let's do some shout outs, shall we? We have a full house. I'm told somebody named Seth Hansen made a famous funny joke. We were 400 comments in on the live chat and he goes first, which I appreciate. That's my brand of smartassery. I appreciate it. All right. Akbar Muhammad is here. Brian Lichter. Rachel is back. Josh681. David. Graham. Sodak. Jason. Let's see who else. Magnus is back. Oliver Ruff. Charisma Spigot. He says he. Charisma Spigot is palping.

[B]

I'm palping. Brian Lichter. I haven't heard that name in a while. What's up?

[A]

I know, I know. That's. That's a Blast in the past. All right, Suzanne Newman is here. Jamie Newsome. Vanessa Arson says. Hey boys. Hey back Vanessa. Let's have some fun tonight, guys. First things first, we have a sponsor. I'd like to give a shout out to one of the greatest sponsors of all time. Maybe the greatest. Some say public.com and the public trading app is the investing platform for those who take it seriously.

[B]

That's right, Josh. On public you can build a multi asset portfolio of stocks, bonds, options, crypto, and now the big reveal, generated assets. What am I talking about? I'll tell you. This allows you to turn any idea into your own investable index. With AI, it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% a year. You can literally type any prompt. Any prompt and put the AI to work. It screens thousands of stocks built a one of kind index. Unless you back test it against the S and P. Unbelievable. Then just a few clicks, boom, you're invested. Generated assets are like ETFs with infinite possibilities, completely customizable based on your thesis, not someone else's. Go to public.com w a y t and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com wat paid for by Public investing.

[A]

Full disclosure in podcast Description all right. What a read.

[B]

It's like we finish each other's sentences.

[A]

Really are. You really are back? It's incredible. I think you're up first. What about.

[B]

That's right, Josh. So I. I don't know the last time, I'm sure it's happened before, where a take of mine has aged so sour so fast. On Friday morning, as I was about to just throw in the towel and hop off the mic with you and Ben, I said I got to get one more take in. And my take was this. I think this is the year where we realize that AI is not going to replace software companies like Adobe and. And Salesforce, but it's going to actually enhance what they do. And then the market said, oh yeah, watch. So on Friday. On Friday. Oh wait, was it. Yeah, it was Friday. Chart on. Chart on, please. So the semiconductor index was up 4.2%.

[A]

Yeah.

[B]

The software ETF felt 3%. A spread of. Holy. Is that a record? Next chart. Yeah, it is, dumbass. An absolute record. Never in the history of this, these two indies, indices, whatever, which goes back 25 years has the spread been 7%. Like really look. Really something else that.

[A]

You know what that is? That's like God throwing a Thunderbolt at you.

[B]

Yeah, I mean, it's. Yeah, keep talking.

[A]

More on Chart back on now. It's. It's one day, but it's a, It's a really bad. It's comedy because you said it on Friday morning and that's where the market closed.

[B]

Okay, next chart. Josh, I didn't realize. So, all right, what strikes you about this? I want you to go first.

[A]

This is semis versus software. Yeah, and what, just stock performance, like the index versus the index?

[B]

Yeah, I don't need to keep you guessing. I'll just say this. I didn't remember or realize the degree to which software. I'm sorry, Semis got the shit beat out of them relative to software. From 2024 to 20. Like that. That's a massive spread. And now. Yeah, that's liberation day. So chart off please, for a sec. So during that time period, tariffs, obviously semis were in the, were the epicenter. Not the epicenter, but semis were going to be hard hit. Right. If all those tariffs were placed so soft, like the, the Salesforce and all and, and Intuit and Apple often. And like all those names were hit, but not nearly to the degree. So that round trip that we had is wild. And let me go out on a limb and say something that might age even worse. Actually not. Nothing's going to age worse than my Friday comment. Like, nothing Chart back on. I think this might be a blow off top. And I hate to like say something so outlandish and I'm not a trend fighter, but I think we might have got a blow off top in this. In this.

[A]

So let me ask you a question though, because there's two versions of how that would play out. In one version, all of a sudden software stocks start to rally and outperform and semis are like just okay. In another version, this happens because semi stocks crash and software stocks weren't up as much, so they just sort of like meander listlessly.

[B]

Wait, say that one more time.

[A]

This could work two ways. It could be you could get that mean reversion between those two sectors. Software versus semis. You can get it because software stocks are great or you can get it because semis crash.

[B]

Okay? So I think it's going to be something in the middle. I don't think that. Listen, I'm not calling for a crash. That's like a.

[A]

You're getting ratioed into the stone already.

[B]

Good. Okay, that's not, that's not what I do. But like some of the charts that we see today in memory Land in, in semi land are straight up and some wild. All right. Anyhow so we'll see where this ends.

[A]

Of the year so I got one, I got one for you. Dawson says blow off top in a ratio chart is a new one.

[B]

No it's not.

[A]

No, it's not. It could happen. No, that could happen.

[B]

Listen, I've been here about blow off tops and ratios since I met JC in 2012. That's not. I didn't make that up.

[A]

Well, I suppose it's pot. I suppose anything's possible. I wouldn't say like it can happen. But is that like the, is that the bet you want to make?

[B]

That's not. No.

[A]

Software stocks would you use to express the trades? You know what's an igv?

[B]

I do. I will say this. That is a high degree of difficulty trade. Okay. And there are no points for complexity. So no, it's not the bet that I want to make. IGV etf. Let's see the holdings.

[A]

It's not soft. I'm going to give you, I'm going to, I'm going to upset some people but it's not a, it's actually a very bad software index.

[B]

Whatever. It's Microsoft, Palantir, Salesforce, Oracle, Intuit, Apple Oven, Adobe, Palo Alto, ServiceNow, CrowdStrike. Those are the top 10 names right.

[A]

Now Oracle's building data centers. Microsoft is the biggest data center other than us. Like Palantir is more like a consulting company that has a software arm. Like all I'm saying, all I'm saying is it's not like a well composed index. Whereas the top 10 semi index, those companies are making chips.

[B]

Find a perfect set. Find, build a perfect software index. Now you could do it on, on.

[A]

On public generated assets.

[B]

It'll look the same. Dude, it doesn't matter. You're picking this. It'll look the same. This is, this is interesting. Next chart. I didn't realize the degree to which not just these stocks move together but like the market caps of Adobe and Salesforce were like identical. I mean it doesn't really get closer than that until the hard recent break. Isn't this interesting?

[A]

Yeah, this is market cap. I'm looking dumb in Adobe already. I think I'm down 15 sticks and they're just, you know, it could be one of these things where the second half of the year is an about face from the first half. Like we could spend the whole first half selling off these enterprise class software stocks with the exception of cyber which I think are not involved in that but any software company that's selling workflow, automation or like I'm, I'm thinking about the really great companies, like the workdays, the servicenows, the Mondays, the. Who else is on this list?

[B]

Like, dude, now is getting pummeled and everybody raves about.

[A]

It's a great company. So my point is this could go on for another two quarters.

[B]

Just people saying, of course it could.

[A]

Or guess what, these guys are dead.

[B]

Or guess what, their narrative could change on a dime. And I, I respect the trend. Okay, so until proven otherwise, of course these names are guilty and you should assume that the trend persists always. Yeah, but I'm just saying that narratives change quickly.

[A]

They do. No, we've seen, We've seen it. And that's why I'm a price person first. And then I try to figure out what's the narrative that's making the price do what the price is doing. A lot of people are vice versa. They decide this is the story and the market's not cooperating. But I will be right. The market will be wrong. And I'm not saying one, I'm not saying one is necessarily always better than the other.

[B]

I mean, yes, it is, dude. Usually the market is right and we're wrong. You're wrong.

[A]

No, no, no, no, no, no. Obviously. But there is a universe where the market takes things too far. And the contrarian that has a better grasp of the fundamental story steps in and says, this has gone far enough. And Alphabet, Alphabet and Apple last year are two perfect examples of that.

[B]

Yeah, I'm not a major contrarian, but I do think that this ratio is getting a little stretch, not a little stretched. It's getting stretched.

[A]

It is stretched. Our friend, I don't. We call her friend of the show. We haven't even had her on.

[B]

She's never been on the show. Yeah, no, we love her. Shit.

[A]

But yeah. No, I know her personally. Like, we hang out Savita Supermanian's famed sell side indicator. Savita started the year off throwing a bombshell into the crowd, saying finally, after 15 years, it's getting very close to flashing a sell signal. And the sell side indicator, just to give. I'll get a little bit deeper into it. She created this as a contrarian indicator for when her colleagues in sort of top down sell side strategy calls were like, to build up on stocks. So she was always looking at this as a contrarian bullish indicator because the, the strategists were so bearish in 20 2009-2010-2011-2012. The strategist had such low expectations for the stock market. So her indicator was a great contrarian signal. And it's taken a long time and up year after up year, and now it's completely gone the other way. Let's put this chart up. Okay, so there's very simple way to explain. The very simple way to explain this is she is capturing the buy and sell signal. She is generating a buy and sell signal based on rolling 15 year plus or minus one standard deviation from the rolling 15 year mean. So it's a very long signal that she's figuring out, and she's just basically looking at the percentage of equity that strategists are recommending. Do I have. Am I explaining that? How. How bad of a job am I doing it? And saying what?

[B]

I only laugh because rolling 15 years I saw a hilarious input. I never heard that before. But no, you're. That tracks the sell side.

[A]

All right, this is Savita in her own words, contrarian sentiment. Signal that tracks sell side strategists. Average recommended allocation to equities in a balanced fund. The indicator was unchanged at 55.9% in December after rising the prior two months. Despite strong equity returns this year, the SSI fell 1.1 percentage point. Overall, the indicator declined 2 1/2% percentage points from January to April, as yet to fully recover. Since then, declining equity allocations were offset by a move into cash and commodities. But now we're less than 2 percentage points away from a sell signal. Savita says this has been a reliable contrarian indicator. It has been bullish when Wall street was extremely bearish and vice versa. The indicator remains in neutral territory, but is much closer to a sell than a buy. Although the SSI is more bullish than bearish, its current level of 56% is still below levels reached in prior market peaks. So we still have time.

[B]

There's nothing here. I'm sorry, this is literally noise because.

[A]

It'S not an extreme yet, but directionally, that's two things.

[B]

Number one, I don't love to. I know it's very popular to fade euphoria. This is. This is not even close to euphoria. No, I think that contrarian signals always work better in bear markets. Like, we know this, right? It's a lot easier to say, okay, everybody's gotten way too bearish than way too bullish, number one. Number two, this is in the range. I mean, there's not even. There's nothing going on. It's unchanged month over month. There's nothing here.

[A]

I think she Sees it threatening that downtrend. Stop it. All right, last thing. According to Bloomberg's monthly survey, the average strategist expects the S&P 500 to rise 10% this year, slightly below strategist expectation of 12% price return in 2025. At this time last year, if the S and P achieves this forecast, the index's total return since the end of 22 would exceed 100%, the best four year gain since 1999. Savita goes on to say that her 2026 price target is only 7100, which is 4% higher from here. She's at the low end of strategist forecasts. Why? Growing capital intensity of big tech spenders that make up an outsized share of the index. Elevated multiples, cracks in the labor market downside linked to AI upside. And this argues for a more cautious stance. What are your thoughts?

[B]

I hope she's right. Not a popular opinion. I would love. I would sign up right now for a 4% return for the year. Like, I would prefer that than a. I don't want a 27% return like that sets up first. We know how that ends, right? If, if you go up another 2015, 20 like that sets up for a fall. If we can build the wall of Lowry, consolidate some of the gains, go sideways, gain 4%. I'd sign up for that today. No problems, no questions asked.

[A]

The Street's expectation for earnings growth this year is close to 15%. You'd sign up for a 4% return on that. So basically a year of better than average earnings growth, but multiple contraction. What would be on that?

[B]

No, no, no. I would not like. I would not love that.

[A]

You said I'd sign up for that, right?

[B]

Stop it. Stop it. I didn't say. With 15% earnings growth. If we have 15% earnings growth, well.

[A]

That'S what we're going to have.

[B]

Finish. If we have 50% earnings growth and severe multiple contraction. That would be weird. Something would have to happen in order for that to happen.

[A]

So I think sign up for it.

[B]

You said the 15% after I said 4%.

[A]

Okay.

[B]

I'm saying that would. That would be weird. There would be some bad news if. If I could get. Not that, just a 4%. 7%. I take that 4%. 15. That's weird.

[A]

Okay. Adam Mtronic says a 4% return. What is that a return for ants?

[B]

Yes.

[A]

Yeah, it is.

[B]

We don't need 17% a year. Every single year.

[A]

All right. Chart on Kaiju show you two more from Savita on the Left is bond allocations declining this year now at the lowest level since 2022. So anything here?

[B]

Yes. Yeah, that looks like excessive risk taking.

[A]

That looks right. That looks like an all out of bonds. And I think I saw a van.

[B]

But dude, but dude, there's a cash component in here.

[A]

Sure, of course. However, cash is not yielding nearly as much as it, as it had been a year ago.

[B]

But I'm just saying if you put, if you put cash and bonds allocation, that would look much different.

[A]

I'm going to. Well, I'm going to do cash next. That's in the right pane. I think I saw Vanguard say the right allocation for this year is 40, 60. Did you, did you see that?

[B]

I did see something like that. I have not read it. Is that about what's their problem?

[A]

Chart on the right is cash allocations increased this year but remain low versus history. So again, again, a very high equity allocation recommendation from strategists for a balanced portfolio. The lowest allocations to bonds since 22.

[B]

But it's like a recommendation and it's noisy. Put the chart back on.

[A]

Yeah, right.

[B]

Like there's. If you would overlay and do some quantity stuff. Is there any signal in here? I don't know. It doesn't seem like extreme and even. Even. So What? Look at 17 and 18. That was really low. What did that mean?

[A]

Yeah, I guess on the cash, it's like one of the things that like, you can't really say, like, like cash on the sideline, like in. All right, so what's my point? Go chart back on. Last time on the right pane, like in 2016. I don't know if you remember how we went into the year. People were absolutely terrified of Trump being elected and Brexit. Both of those things happened. But look at the cash allocations. They were like 7%. And a thing that a strategist could have said was, yeah, people are really cautious. Look at the degree of cash allocation. Like, we don't have things to say right now. What do you mean? On the left side is average recommended allocation to cash by Wall street strategists.

[B]

And 16 doesn't look like seven.

[A]

What does it look like to you going into 16? It looks precisely seven. I mean, I didn't draw a line across, but. All right, I guess here's my takeaway. Tell me what you think. We have now reached the point in this bull market where pretty much even if their price target's only slightly higher than where the S and P is, the strategists are In. There's no holdouts. There were bears ago.

[B]

Is Savita the most bearish?

[A]

She's at the lower. She says that she. She says that they are at the lower end of the. Of the field. But nobody's negative. We did this, I think we did this last week. Nobody's negative. So I mean we're at the. It's not a bad thing, but like it's a thing that you have to say is like the, the dry powder is dwindling from people that are non believers. Everybody know.

[B]

It's so weird. Okay. Yes. And I was talking with Ben today. Todd had a chart, Todd Son had a chart that showed like beyond record inflows into ETFs in December. Yeah, like there's just. There's infinite money.

[A]

We are get. We're getting some help from the chat. Brian Westbury is the most bearish according to. But Brian Breezy. Barry Bannister is the most bearish. Where does Bannister do research from these days?

[B]

The Avengers.

[A]

Ellamit is saying Vanguard basically said bonds will be a better bet than us large cap stocks. Okay, maybe I didn't see the piece. I gotta go look at it. All right, you're up.

[B]

Okay, I've got some charts. Josh. Sam Rowe, friend of the show, did a post yesterday that I grabbed some charts from 27 charts for 26. Or maybe, maybe it's 26 or 26. Who knows? Okay. We spent a lot of time. We do spend a lot of time talking about how quickly the hyperscalers are adding debt to their balance sheets and off balance sheet. There's like. This is different. This is a different part of the cycle. Debt has entered the room. Okay. Actually this is pretty interesting. Net debt to EBITDA for the S and P and S P X financials and like kind of really not a lot here to hem and haw about.

[A]

Interesting though, if you started this chart not in 1997 but like 10 years ago, it would probably be more dramatic. It's. It's not a. Either way, it's not a huge number.

[B]

This surprised me. I would have thought that it would be more up and to the right. Okay, here's another one. Here's another one from Semblist. Despite the recent rise in Capex, the amount financed by debt was still very low. So if you're listening, this is a chart with two lines. One is Capex to sales, which as we know is going up and to the right. But look at that. The yellow line shows the share of Capex and dividends that are financed with debt is. I mean that's like shockingly low in a good way.

[A]

I would have thought it'd be more like I would have thought there would be more debt spending but I don't know. I guess it's just not necessary yet for most. Put that back up. Who are the companies in this group?

[B]

This is the, this is also 3000. So finance with finance with debt rather than internally generated cash flow?

[A]

No, it's Russell 3000 tech and communications.

[B]

Okay, my bad. Okay, so even, even more striking then. Wow. Even more striking because these are the companies that are spent that are taking out debt. But the point is that they're, they're, they're still there.

[A]

But he's trying to show you now versus the late 90s. That's the point that he's, that's the point that he's making here. Okay, I'm with this window.

[B]

I'm such an idiot. I didn't even look to the left.

[A]

The point. He's showing you the late 90s, early 2000s versus now to draw this distinction. But I think the takeaway is the blue line capex to sales. If we're really going to have an all out bubble that can go much higher like I mean it has historically, like we ain't seen nothing yet if we're going to do 1999 and I don't know that we are but like that's, I think that's the, I think that's the point that he's trying to illustrate is that we're not there yet.

[B]

So S&P 500's revenue per worker. I don't know that I realized this. In fact I'm gonna say I didn't realize this went nowhere. Despite the cloud revolution, despite like a lot of the automation. It went sideways on a real basis for I don't know, 20 years. And only now, only in the past few years has it really been busting up into the. Right. Pretty remarkable.

[A]

We're going to get to this later in the show.

[B]

Okay.

[A]

It's part of, it's part of the pro. This is part of the problem. One more time. This is revenue per worker record highs. Holy.

[B]

Great. For the stock market.

[A]

I mean obviously this is, I'm sorry real revenue per worker. This is 21 cent. Is that, what is that? What is that scale? What's, what is the y axis?

[B]

So it's revenue worker.

[A]

Oh, per million. Per million 1980 micro.

[B]

Micro units. All right, one more from Michael. Actually we got a few more from Michael. This, this, this chart Shows that the stock market makes sense. We're looking at the sense.

[A]

I like this one.

[B]

The consensus forward return on equity for various sectors. And then the chart on the right adds a couple of stocks in there and versus the consensus forward price to book.

[A]

And you know what? He's right. What he's saying is we are giving the highest price. We are giving the highest multiple. He's doing price to book rather than price to earnings. But I doubt it's much different. It probably just illustrates it better to the best businesses. The best. Right. The companies with the highest margins. The best return on equity are also the ones being most highly valued. And it's. And it's happening monotonically. It is. So it's. Right. What he called it in his piece was the internal logic of valuation in the market. Right?

[B]

Yeah.

[A]

And I think that's a fine, fine, fair point. Better hope. There's no. Better hope. There's no mean reversion to margins after all. Because those are the stocks that are up the most and they'll come down the most. But. Yes.

[B]

All right, two more and then we'll get out of here. I thought this was fascinating. We're looking at the PEG ratio and that normalizes for growth, which of course is a very important driver of returns and valuations and all that good stuff. So the PEG ratio for, for the All World Equity Index, that's the blue line versus the MSCI All World Tech Index. And yeah, it's, it's the spread. The spread ain't there. It's. It's justified.

[A]

Right. The PEG is price to earnings growth. So they're taking year two forward earnings per share growth and they're saying stocks, if you correct. Not correct, if you adjust for what their actual growth is. The tech world is in line with the rest of the world's equity index. And yeah, these are all mitigating factors that if you just look at these things in a vacuum and you say it's up how much or it's being valued at what. Okay, but what is return on equity? What is the growth rate like? You need more. You need more information. The market is not just randomly assigning valuations to stocks for no reason.

[B]

Okay, lastly, so today we had, we had Dow 49, 000 all time high. Right. The S P close in an all time high today. Yes, it did. Man, that's a beautiful site. Iwm, I believe, or no, not quite, but rsp, the equal weight. Yeah, it's all, it's all happening, Josh. So this last. And we're doing it without a lot of the nonsense. Now you could always find nonsense, okay.

[A]

But this specific nonsense SanDisk up 25 today.

[B]

Yeah, no, yeah, no, there's nonsense. There always some shit. There's some, yeah, but, but not this nonsense. So what we're looking at is the market cap of young unprofitable tech stocks. And we remember, we all remember this surged in 2020, 2021 to a peak of about 5%. And it's now, I don't know, one and a half percent, one and one and three quarters, whatever it is. Michael also has a chart showing the spending by young unprofitable tech stocks. Like, this is not, this is not, not, not, not what's supporting the market. And I know that there's, you know, speculation and whatever, the irons and Oculus and whatever, whatever. But like, that's not what's propagating. That's not what's driving, that's not leading the market. It's just not. That's very healthy.

[A]

We did a show last year where we were. I think the thing that we explained really well is the presence of a circus does not, does, is not indicative of the idea that the entire market is a circus. Correct. Like you, like you could, or you could have a three ring circus and you can have a fairly tame lion or elephant act in, in one ring, which is expected. And then in the ring next door you could have literally people setting themselves on fire. Yes, but it's the, the big show is not like always represented by the craziest thing that you can find happening is the way that I would put that. All right. I guess they're being called Trump accounts now, so. And it's fine, I don't care. We have Obamacare, we have Trump accounts. All good. Brad Gerstner, friend of mine, Brad Gerstner came to Future Proof, I think in year two. So that would have been 2023. And on Sunday night, the opening night of the show, he got on stage, he had to run back to the all in podcast event, which was happening at the same time. But he came on stage at Future Proof and he announced this thing that he was getting political support for. And I called it jokingly, baby equity. But the idea was that every time a baby was born, the country would put $1,000 into an account that would be automatically invested in the index fund in the stock market and that parents could actively contribute to that account. So like the same logic as an ira, but rather than having people start when they're working age, we do it for them when they're born. And the general idea is we have too many people who are not feeling the benefit of the growth of the stock market and the equity value of American business. And I loved it. And that's why I brought him on. I let him do his, his thing. He ended up, I guess via the all in guys who became very closely aligned with Trump, he ended up getting this to the point where Democrats loved it and Republicans loved it and they were able to do it. And it was, it became signed into law because they wedged it into the Big Beautiful Bill. So it wasn't its own standalone thing, but it was, it's a provision of the, the, the, the bill that was signed this summer and it's taking effect. You can open an account now. The funding starts in July. Okay. And I think it's a really big deal. Not that it'll have an effect on the market right away, but I think it's like really important. It addresses arguably the biggest societal problem we have right now in this country. So let me just read this to you and get your reaction. Created under the One Big Beautiful Bill act that give children born between January 1, 2025, so that's now and December 31, 2028, a $1,000 federal seed contribution and allow parents, relatives, employers and others to contribute up to $5,000 per year on the child's behalf. With earnings growing, tax deferred until the child reaches adulthood. Because the program applies to almost all U.S. children born during that period, tens of millions of accounts are expected to be open over the next few years as eligible families enroll before the accounts become available for funding in mid-2026. And now you've got this other thing happening. Maybe it's virtue signaling or maybe it's genuine, like out of the goodness of their hearts. But you have a lot of people like Michael Dell and Ray Dalio kind of jumping on this and being like, here's a billion dollars. Like they wanna Schwab. Right. So I like it. I love the, I love the momentum of this, that people want to be associated with this. It's like basically has no enemies, nobody's for any reason against this. Last thing here during the growth period is according to a notice from the treasury, contributions can only come from five sources. The thousand dollar federal pilot payment. That's the government ceding it. Two qualified general contributions by states, nonprofits or tribal governments for defined groups of children. Three employer contributions up to $2,500 per year under new Section 128 of the IRS Code, which is called Trump account contribution programs.

[B]

We should do this for red hot. 12 babies.

[A]

Hello. We got a lot. We got a lot of babies being born. Hold your horses. For rollovers from a previous Trump account. That's interesting. Or five voluntary contributions by parents up to five grand per year indexed for inflation after 2027. Bloomberg wrote about this. BlackRock said they will match government contributions to Trump accounts for their employees, making it one of the first major US Companies to lay out plans for supporting early childhood savings program. So I guess if you work at BlackRock and you put $5,000 into one of these accounts, maybe they'll match it up to a certain amount. That's kind of cool, right?

[B]

We should do it.

[A]

You want to do it?

[B]

Yeah.

[A]

Are we gonna all of a sudden, like, be encouraging too many babies though?

[B]

I love. I love this so much. It's like it's all good. There's nothing bad about it. I love. I love the spirit of it. I love that it's happening. I think it's wonderful. I love the FOMO that it's creating to give more. I just think it's all good.

[A]

Michael Dell and Susan dell will give 25 million American children $250 each.

[B]

It's amazing.

[A]

Jumpstart an investment account for their futures. That's 6.25 billion. Michael Dell is the man.

[B]

Unbelievable.

[A]

Ray Dalio is going to do this in Connecticut. Bank of New York Mellon. Charles Schwab. So it's. I think it's all right. So this is what I actually really wanted to say. We have a problem in this country with communism and Marxism. And we have this generation of young people who were born after the Berlin Wall fell in 89. They don't really understand why Cuba looks like the dark side of the moon compared to the rest of the Western hemisphere. They don't understand all of the fact that Mao Zedong killed more people than Hitler and Stalin combined. They just don't understand that collectivism is not a solution to anything. And it's certainly not going to solve their problems. And they're chanting slogans and they're watching nonsense on TikTok. And many of them come from middle class households. They've been indoctrinated by this combination of social media that is deliberately designed to mislead and tear our country apart. They've got Marxist leaning professors at some of the top schools in the country and they're just learning bullshit. And it's fine. Some of them will grow out of it and some of them will have Horrible lives. But like, it's a serious problem. And we've got cities in this country that are electing people. It's amazing. You look at the background of some of these people, they're well educated, they're not stupid, they just have terrible ideas. And unfortunately, there's this groundswell of support for these ideas from young people. I understand why it is really, really hard to come from nothing and make something of yourself and do so without your parents help. And even if you have your parents help, it's almost like humiliating to be in your 20s and see no end in sight to the credit card debt and the endless costs of living in a place like Seattle or New York City and trying to live a lifestyle that's like congruent with the childhood you grew up in. It's a huge problem. One of the big reasons for this is that people who are stock market Americans are able to spend an unlimited amount and that crowds these people out. And I think that this is a better way to fight communism than on social media. Like I think bringing people who are not currently in this system and creating more stock market Americans from birth. And it'll take a while before we see the results of this. I genuinely think that that's a better way to fight off this trend of young people embracing socialism. And, you know, people don't know the history here. In the 1950s, we had something called the Red Scare. And you've probably heard of McCarthyism, they probably forced you to study this in high school, but it was basically a witch hunt. They were trying to root out people with communist or socialist or Marxist leanings. They went after a lot of the Hollywood screenwriters and directors and actors and they. Blackball people. Yeah, absolutely. So. And one of the most interesting externalities of the fight, the Red Scare, the fight against the Red Scare, the term pinko comes from that, by the way, in case I never heard that term. Right. So that would be a thing that they would call a socialist, a pinko. One of the interesting things is they invented the suburbs. So people born today, they don't understand. Like if you're born into the suburbs, that suburb probably did not exist prior to the 1950s. And most of it were built in the 60s and 70s. They built the interstate highway system in order so that they could get working class people out of the city to live on property that they themselves owned. Because they looked at Europe and they looked at the working class people in cities all over Europe, becoming socialist, becoming Marxist. And they said, we got a real problem here. They Literally invented the suburbs in order to fight that. The prevailing theory was if somebody owns property, it's very hard for them to become a Marxist. It's very hard to become a communist if you yourself own property. And it worked. And we created the most successful economy in the history of the world. Boiler rooms, malls, dude, it's like they basically emptied the cities of working class people and they put everybody in houses. Levittown by us was like one of the first examples of this built by William Levitt. This is an actual quote from William Levitt. No one who owns his own house and lot can be a communist. He has too much to do. So this was like the Eisenhower era. Build the highways, make it so people can commute to work, commute home. They built commuter trains, they built roads, they built the malls. This is where Sears comes from. This is kmart. This is McDonald's. You needed roadside hamburger stands for people who were constantly traveling back and forth. The way to fight communism is not being a dick on Twitter to people who are struggling. The way to fight communism is this big idea that Brad Gerstner had and that now the Trump administration has embraced. It's, let's make more stock market Americans the best way we know how. Literally here, now you're invested, own Apple. You still wanna have blue hair and walk around the streets with a sign or you wanna do something with your life, right? So I like this better than culture war. It's like, look, here you go. You're part of this now. You got a small piece. Your parents can contribute, philanthropists can contribute, corporations can contribute. But like, you're in the game now. You're going to be part of the investor class. You're not going to be part of the sign carrying class. So I, I feel that this is a really positive thing that we're doing. You could love this and still hate Trump. I give you permission. I give you permission. What are your thoughts on this whole concept?

[B]

I have nothing to add. Really? I thought you said it beautifully and I could not be in more agreement. I think this is. If you don't like this, you really need to have your head examined. This is all good.

[A]

Yeah. I haven't been inspired by a piece of legislation. The way that this thing has captured my imagination in a long time. But I'm just picturing millions of kids with half a million dollars when they turn 21.

[B]

Like, I mean, with the cape. With the cape ratio at 40 now, I'm not.

[A]

Half a million dollars may not be that much money in 21 years. But maybe it'll be like 50 grand or 80 grand now. It's not zero.

[B]

It's great. It's great.

[A]

You don't, you don't grow up, you don't grow up to be a loser automatically just because your parents weren't rich. We have a huge problem right now. We have people who are growing up with no assistance whatsoever from the prior generation, and they cannot keep their heads above water. And it's creating all sorts of crazy political shit. And I love anything that seeks to counter that.

[B]

Me too. It's wonderful. Okay, well done, Josh. Let's move on to what I think is a very, very interesting potential development in this here stock market. First chart, please, John. So I had Sean look back going back to the last, last week of December 2024. Kind of amazing that 2025 was going to be the year of AI and continued tech growth. And the Max 7 did all right. I mean, more than all right, but it didn't beat the market since this time period.

[A]

Yeah. Now, because as much money as they made, they're also. Now, you can't call any of these companies Asset light anymore. No, they're just, they're not the same stocks that they once were.

[B]

So more interestingly, we've got a ratio of the Mag 7 relative to the 493. And what do you see, Josh? Because I sure see a potential breakdown. Now I'm not, you know, who knows, maybe this is an oops, as JC likes to say, but you got to be, you got to put this on your watch list.

[A]

And this is, this is like controlling for, for the overall market. Like this is one versus the other.

[B]

Yeah, dude, it's one versus the other. There's no overlap here. It's literally the seven versus the 493. And okay, check this shit out. Chart Goat, the legend that he is. This is a bit confusing, so stay with me. So the light blue line, that's pure risk on, okay. That is the equal weight discretionary, which we've used a million times, versus the equal weight staples. And like everything else, it's going up to the right, breaking out to new all time highs. And this pretty much has tracked the ratio of the Mag 7 strength. Like it's risk on. This is a risk on chart. And this right here, divergence is very interesting.

[A]

Wait, I'm, I'm, I'm, I'm a tiny bit confused. So the light blue were. So is the point to say that Discretionary and Mag7 are like one half of the, the growth part of the Market and then equal weight staples and S&P493 are another.

[B]

The point is this. The point is this. Chart off please let me explain this. The point is that the Mag 7 might be passing the baton to the 493 like it might actually be happening because the light blue line I could have used. I could have used sp. I could have used high beta divided by low vol or I could have whatever.

[A]

The staples is a proxy for the defensive part of the market for risk on.

[B]

The point is we are in a risk on market. The Dow is at an all time high micro caps rocking like everything is working and yet you've got a breakdown in what? In previous leadership normally when the market was rocking and risk was on, it was being led by the Max 7. That's the point. And now it's not.

[A]

You don't give yourself enough credit because this is one of the things that you spent a lot of last year talking about is like there has to eventually be this transference of the benefits of AI from the companies that sell it to the companies that use it. Right now the only hitch in that story is that I told you the S and P is supposed to grow earnings by 14.6% for this coming year. Guess how much the tech sector, just tech, not communications or any of the. Guess how much tech is supposed to grow earnings in 26 according to consensus 18, 29%.

[B]

Yeah, yeah, but, but as much as.

[A]

I would love to see that breakdown, it's not going to be because of earnings.

[B]

But if we, if we do see like so this is the type of 1520 gain that I would sign up for in 2 seconds if it happens because of the 493 which have not done amaz over the last couple of years. If they start to go and it's a new bull market like then it's game on. Let's go. You know what I mean?

[A]

I was just talking to somebody that said what happened last year. Who was I talking to? The most interesting thing that happened last year is that we had multiple contraction in. In large cap tech they had the opposite. In every market around the world they had some earnings growth. But like there are countries in Europe and Asia that were up 35, 40% they didn't have earnings growth like that. So we had like the mother of all RE ratings for international stocks.

[B]

Oh yeah.

[A]

And here we had the mother of all earnings growth years with an actual D rating. So glad you're driving. It isn't that interesting.

[B]

So that's what this is showing Basically, we've had no. The forward PE has gone sideways for the last three years. So, like, you just. I'm sorry, you just got to reject the bubble talk. Like, there's no bubble. This is not a bubble. This is not the behavior of a bubble. It just.

[A]

I wish it would.

[B]

It just.

[A]

I wish it would be a bubble.

[B]

Okay, last.

[A]

Do it. Give me a school year bubble. You'll never see me again.

[B]

It's not speaking about the rest of the market. So this is. This is from. I pulled these two charts from Daily Charpa, who does great work. Okay. The blue line is non tech. Non tech. Non AI companies that have mentioned specific plans to implement AI into their workflows, leading to lower costs and higher margins. This is from Goldman. Earnings for this group has already started to diverge since the third quarter of 2024. And this is. Man, this is the whole king caboodle.

[A]

Like, this is what's in. What's in here. What's in this.

[B]

So.

[A]

Right.

[B]

Yeah. I don't know.

[A]

Like. Like you're in Caterpillar and McDonald's and.

[B]

Mac Charcoat, if you're listening, actually, you know, Goldman basket. So these baskets are on Bloomberg. You have to pay extra for. We don't have this.

[A]

But that's for the. Go for the Goldman baskets.

[B]

No, that's a chart. That's a. That's really good.

[A]

These are companies that's. That have specific implementable AI plans, but they are not themselves AI companies.

[B]

Or tech.

[A]

Or tech. Or tech at all.

[B]

Or tech. So, Josh, what happened at CES today? Because I did not have time to look.

[A]

All the shit went down yesterday. So ces, Consumer Electronics Show. Historically, this was like consumer electronics and gadgets, but it's like, obviously way bigger than that. It's one of the biggest technology events of the year. A lot of the largest technology companies like to use this to set the tone for the year ahead because of where it falls on the calendar. And I just wanted to pull out two and just like, give you a rundown. I wanted to do Amazon and Nvidia run me down. Amazon was one of the weaker of the Mag 7 in terms of share price. Returnable chart on 41% total returns over the last three years. Again, that's versus an S& P that's doubled and. Right, okay. Amazon used CES to showcase a lot of different stuff. Like they went across the whole company. And I'm just going to give you the highlights. One of the things that got the most attention is a 4K television. That's got a matte finish to the screen and it's meant to showcase art. It's called the Ember Art Line tv.

[B]

So dude, Ben has one of those. I don't know if it's like this one exact but in his house. It looks amazing. It looks like art. It's beautiful.

[A]

So it's gonna come preloaded with 2000 works of art, but then also it'll use your own photos and motion sensing technology that will adapt to what's shown on screen and Alexa integration. Blah blah. Okay. They also finally got around to launching Alexa as a browser experience. Alexa you only experience with voice like using the Echo or the Echo Dot or one of their speaker devices. Now it's a full on AI browser experience. Alexa is available on Alexa.com and it's meant to incorporate the people, the users of Alexa. I think there were 600 million devices out there or something now will have access to things they've said to the device as part of like the online experience. So Alexa.com has just entered the LLM wars I want to say which I think is sort of interesting. They're also, they had a lot of stuff with AI for advertisers. Amazon's the third largest advertising business in the world. A lot of people don't realize that. So they rolled out a whole, a whole suite of tools for ads. All right. Ring. New security hardware. A mobile off grid security trailer designed for construction sites and temporary locations. New ring cameras with wider fields of view. New sensors for doors, windows and glass break detection. And a fire watch feature that provides alerts during nearby fire events. So they are not giving up on Amazon in the home, I should say giving up. They have not stopped innovating their Fire TV and gaming. New interface upgrades to Fire tv. Faster navigation, improved content discovery.

[B]

Fire TV like the fire stick, I haven't heard.

[A]

Expanding cloud gaming Support with Nvidia GeForce now blah blah blah. Automotive. They own their own autonomous robo taxi platform. It's called Zoox Z O X. I we talked about this once. I put one on the screen. This is like the little bus that picks you up at Las Vegas Airport and goes forward and backward and never has to turn. Like it's like it has no front and no back. So whichever direction it's going, that's the front and it's like it's meant to get people from the airport.

[B]

Oh yeah. It's cute.

[A]

It's cute, right? Yeah, you would, right?

[B]

Ravens Fire. John Harbaugh. For real.

[A]

Wow. Why you put the wrong kicker in wow. What do you want? What do you wanted to do? Wow.

[B]

All right, sorry, back to you.

[A]

Anyway, Amazon, I think Amazon made a very big impression and the stock has been doing well since. Since yesterday, dude.

[B]

I feel. When's the last time Amazon had a up three and a half percent day? I feel like it's been a minute.

[A]

I think the Alexa AI enabled browser like, like Alexa by browser, I think got people thinking, ooh, they maybe they are on the consumer facing AI side and it's not just aws.

[B]

I don't quite follow an Alexa browser.

[A]

Like if you are one of the people who regularly use Alexa, all of that is context for the types of answers you might want to type into the thing the way that you would type into Gemini. So it's like a browser enabled version of your current interactions with Alexa. Anyway, stock's going up. Doesn't matter. It is challenging. It's November 5th high. I just bought more. I think it's going to break out and I did a big average. I did a big average up because I'm up a lot in it. All right. Nvidia, this thing, this thing got some legs. They absolutely crushed it. At ces, Jensen Huang was the keynote on the AI computing platform front. They introduced Ruben, the Rubin GPU architecture. Ruben is the successor to Blackwell. So again they're on an annual cadence at this point of releasing the next GPU. The next GPU. The Ruben platform integrates CPUs, GPUs, networking and software into these massive systems. And the power, the efficiency improvements, basically like this is going to be the next foundational platform. All the hyperscalers are going to have to have access to it. Their customers will demand it. Robots. People had not been thinking about Nvidia as more than a chip maker for robots. But like the physical AI strategy I think is having its coming out party right now. Physical AI is the next five years of earnings growth for Nvidia beyond just data center. And they will be every bit as important in robots as they are in cloud and data center.

[B]

How much do you think like that is in the price if this robot shit ends up being very little?

[A]

Okay, very little, Very little because it's not here yet. But there's a lot going on with robotics and I don't want to do a whole thing on robotics right now because it deserves more time and attention. But I think the baton is going to be passed from data center build out to the autonomous age. And I think that's like probably this is going to be the transition year.

[B]

So who are the. Who are the non. Who are the non obvious winners?

[A]

Qualcomm. Qualcomm released a robot brain people don't even understand. They built a set of chips combined with. With software that's designed to function as a robot brain so that anyone who wants to build robotics can skip ahead 10 years worth of R and D and just literally put this brain into whatever robot they're building and have it instantly be able to do things like, you don't have to do 10 years worth of research. Like Tesla and Savita's bearish.

[B]

We got robot brains.

[A]

What's wrong with her anyway?

[B]

4060. 4065.

[A]

75. All right. Anyway, the big thing that Nvidia did, though, they changed the entire narrative about autonomous driving. It took them one year to do what took Tesla eight years. They put a car on the road, drove completely through San Francisco with no human intervention with technology. That is basically a year's worth of work. And why that's important is that Nvidia's OEM customers in automotive is a who's who of companies that are not just going to sit back and watch Waymo and Tesla carve up the entire autonomous opportunity. Nvidia has agreements and does business with gm, Jaguar, Land Rover, Mercedes Benz, Toyota, Volvo. Every major auto manufacturer around the world is going to get access to. They want it to. Nvidia's software plus automotive chipset, which is called Drive, that they can turn their cars into autonomous cars. They'll be at level two immediately.

[B]

This is what hit Tesla today.

[A]

This is what hit Tesla today, and it's what boosted Uber, because Uber showed up with their own version of an autonomous vehicle that's been built just for their platform. They're not the manufacturer or the owner of the car. That's Lucid and an AI company called Neuro. And it's been built with Uber's help. Uber designed the cabin. It holds six passengers. The thing looks sick. They showed it in black. It's got racks of sensors on the roof, sensors on the front. They're going to build a hundred thousand of these things, dude. Lucid is an $11 stock. I'm really surprised by that LCID, but that's the OEM partner for this particular product. And it's running Nvidia. Here's the point. It's running Nvidia. And that got people really excited about the possibility of Nvidia arming all these OEMs, which would then be able to put fleets of autonomous taxis on the Uber network.

[B]

Nvidia's kind of stuck in the mud. Like, the stock's not really. I mean, it's fine, but it's not really doing much.

[A]

Dude, Robots.

[B]

Brains.

[A]

Robot Brains by Qualcomm.

[B]

All right, good stuff. Thank you for. Thank you for bringing me up to speed.

[A]

Anyway, that's what, that's what happened today. It was a big narrative shift. Oh. Oh. Nvidia is an autonomous driving stock and a robot stock. Oh. Like, people were not thinking, like, I know it's not brand new. People that really understand the technology understand this, but I'm saying, like, stock market people were like, you know what I mean? Like, it was like it was a vibe shift. It was a vibe shift. And I. And I felt it in my soul.

[B]

Before I do the mystery chart, I.

[A]

Want it before you. Before you. Before you do that. You mentioned that Nvidia stuck in the mud. Let's do some quick price target updates after Jensen Wang's keynote. Wells Fargo Overweight 265. Highlight. Analyst Aaron Rakers highlighted the design of Rubin with six new co design chips as a key differentiator. JP Morgan overweight 250. Quote. Rubin GPU confirmed to be on track for calendar second half. 26 ramp. Leaning even further into physical AI opportunity. Take that, take that. Application specific integrated circuits. Morgan Stanley overweight 250. Joseph Moore said Nvidia's Rubin will quote again raise the bar for performance.

[B]

Bearish. I get it.

[A]

UBS 235. Piper Sandler 225. Everybody saw this.

[B]

Where's. Where's, Where's Wedbush? Where's.

[A]

Back in.

[B]

Where's Dan? Did he get Dan AI? He's at 493,000 million. All right. This. This morning. This morning I saw Sam posted something on Instagram that like, you can go to your settings and look at your earliest liked shit on Instagram. Right? So I did that. And the photos that I saw of you and the kids, like, almost made me cry.

[A]

Oh, my God. Yeah.

[B]

Like 20, 2012. Like early. Like. So for me, the early shit that I liked, it was like you with the kids in 2012 was wild to say.

[A]

My kids were you. I could carry them both in 20.

[B]

Justin. Justin was Iron man.

[A]

Them both in my arms.

[B]

I think he was Iron man in one of the photos for Halloween.

[A]

Yeah, it was amazing. Thanks for making me cry. Let's do make the Case, then we'll do mystery and we'll get out of here.

[B]

Wait, don't we do mystery chart first? What do we do first?

[A]

Make the case.

[B]

Go ahead.

[A]

I'm pitching you two stocks.

[B]

Okay.

[A]

I'm very lightly pitch these. Sean and I wrote these up yesterday for CNBC Pro. We have a column there called the Best stocks in the Market. We write twice a week. These were really interesting ones. Here's fifth third bank fitb. So fifth third. Last year announced one of the biggest regional bank mergers ever. They're buying Comerica for $11 billion. They're claiming $850 million in synergy by 2027, which means clearing out a lot of redundant operations, maybe closing some branches. And this is going to be, I think, one of the top 20 banks in the country when it's done.

[B]

All right. Who cares? The stock looks great.

[A]

Stock looks unbelievable, right? Yeah, I think, I think it's going to 60. Let me show you. And it's a 3% something yield PNC. This is run by a guy named Bill Demchak who they call Jamie Jr. It's like an amazing growth story where they're going into the fastest growing markets in the country. Florida, Texas. This thing just looks like it's ready to roar. It's been consolidating for a year, but this is like a pretty obvious breakout.

[B]

And you know what I was about to say, like pnc, these, these stocks don't war. Oh yeah, Citi was up 70% last year. Maybe they sometimes, sometimes they were because.

[A]

They'Re going to get re rated. They're not regionals anymore. They're super regionals. It's a different category. It's a, it's a, it's like a robot brain being inserted directly into these stocks. They, they just there be. I think they both will have earnings growth from synergies of big mergers, but also they'll get a little bit of a, of an upgrade in, in the multiple. And I think these could both be like 10, 15, 20% growers without taking a ton of risk. So.

[B]

Yeah, I love, I love, I love the pitch. One more thing. Shari looks the same. You don't.

[A]

Yes. Fair. Yeah.

[B]

Okay. All right. I got, I got a mystery chart coming on and I'm going to be letting the clues chart on. This is the price. Next chart. This, this is the market cap. I mean, this is, this is insane. So for people that are listening, this is a stock. The market cap was, I don't know, $120 billion seven months ago. Not even. It's $386 billion now. So this is obviously a stock that, you know, it's going literally vertical. What are we talking about here?

[A]

Can I Go back to the first chart. The price.

[B]

Yeah.

[A]

Oh, my Palantir. Micron.

[B]

Yeah, Micron.

[A]

All right. I knew it was one or the other.

[B]

I mean, dude, throwing the market cap chart on. Look at. What is that? This is mental. So Josh. So Josh, my call about maybe being there being a blow off top in smh. Igv. Like, dude, that's, that's. That went vertical.

[A]

Sandisk, Micron, West, Western Ditch. What's so funny about.

[B]

We both just said Western Ditch.

[A]

These were. These were the stocks of my youth. These were the high flying tech of. Of 25 years ago when I got into this game. Or 27, 28 years ago. And they did nothing for two and a half decades. And this AI build out just like resurrected all of them. Dell, Corning, glw. These were my stocks. Sienna, Cisco. That's where the. If there is a blow off top, it's in the stocks of my youth. It's an incredible thing to see these things come back 30 years later.

[B]

The stocks of your youth. You sound like Barbra Streisand and Meet.

[A]

The Fox are the stocks of my youth.

[B]

These are the fruit of my loins.

[A]

Please. I traded these stocks when I was 20 years old.

[B]

Dude, I think Cisco just made a venture deal.

[A]

Do you know. Do you know who JBull circuit is?

[B]

Not personally.

[A]

This is one of the hottest stocks in the galaxy. It's on my list of best stocks in the market. I used to make a market in this stock. I worked at a boiler room that owned like 30% of the float. Before it was New York Stock Exchange, it was jbil. And I could still do the pitch. The founders names were Jay and Bill. That's why.

[B]

Shut up. Shut up.

[A]

My life. And it was called. And it was called J Bill Circuit was the full name of the company. And they literally were an electronic contract manufacturer where like Dell and all these companies that made PCs and keyboards, they would outsource it to Jabil, and Jabil would make boxes and then ship them in a Dell box.

[B]

Wait, why are we talking about jbl?

[A]

Because that is a stock of my youth that is now one of the best stocks in the market, along with Sienna.

[B]

Wait, what's the ticker of J Bill?

[A]

Jbl.

[B]

Oh, jbl. Jbl.

[A]

Nobody know? No, but people don't understand. This was a NASDAQ small cap. We used to pitch this. It was like making keyboards and servers in Asia for IBM and Compaq and Dell. Like the fact that this is one of the biggest players in the AI age. It's so much fun for me.

[B]

So maybe it is 1999, but it's.

[A]

Just, it's awesome to see these stocks get like a second crack at it. So anyway, all right, that's the show for tonight. I hope you guys had as much fun as Michael and I did. We love you. We miss you when we're not here. Thank you as always for joining us on the Live. I want to let you know tomorrow is Wednesday, which means when you wake up, brand new Animal Spirits on the podcast app of your choice. That's Ben Carlson and Michael Batnik. My favorite podcast, hands down. And if you like this show, you'll love that show, too. We'll do Ask the Compound later this week. We'll do the Compound and Friends at the end of the week with a very, very bold name, Fancy Famous Guest. And you guys are gonna love that as well. So keep it locked on the Compound all week. We are going to deliver in 2020 stinks. Thank you all for coming out. God bless. Good night. Sa.