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The Compound and Friends
SpaceX IPO With Rupert Mitchell, Consumer Discretionary Is Not an Econ Signal, Halo ETF Launches
01:05:43
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- [00:14]
Rupert Mitchell
Getting.
- [00:14]
Josh Brown
We're getting roasted in the chat for being a minute late. Michael, what are you gonna do? Right? Aren't we doing the best? Aren't we doing the best we can?
- [00:22]
Michael Batnik
I always am.
- [00:24]
Josh Brown
Okay. Jonathan7768 says Josh must be combing his hair. You're not totally wrong. Not totally wrong. All right. Hey everybody. Welcome to what are your thoughts? The world's greatest investing podcast. At least in my opinion. We are back because it is Tuesday. It's 5pm East coast, so you know what that means. It's time for an all new edition of what are your thoughts? And with me today, my co host, Michael Batnik. Michael, say hello.
- [00:54]
Michael Batnik
Hello. Hello.
- [00:55]
Josh Brown
All right, the live chat is is going off right now. Happy Tuesday, compounders from Real Manny. Yes, I made it live. Zeke316. Welcome, brother. Jo Altamoro says. Well, what's up, pounders? Daniel Cooks says Micron is bigger than Walmart and JPM combined. Can't be right. Just bigger than. Bigger than both.
- [01:23]
Rupert Mitchell
All right.
- [01:23]
Josh Brown
They had to change into Knicks gear. Biff Grebels. We didn't have to change it to Nick's gear. We haven't taken it off and I don't see it happening anytime soon. Tonight's show, we're going to get into all the biggest topics in the market. The economy, stocks, bonds, IPOs, interest rates, all the things. But before we do, we have a sponsor tonight. Michael, who's the sponsor?
- [01:48]
Michael Batnik
That's right, Josh. This podcast is sponsored by dbmf, a market leading managed futures ETF alternatives should do two things. Be uncorrelated to traditional asset classes and deliver strong performance. But many alternatives don't do those things very well. That's where DBMF comes in. With its revolutionary low cost approach, DBMF has grabbed the attention of savvy allocators looking to deliver both alpha generating returns and genuine diversification to portfolios. And find out why managed futures should be a foundational part of any alternatives allocation@www.dbmf.com WAYT. The Fund's investment objectives, risk charges and expenses must be considered carefully before investing. The statutory and summary prospectuses contain this and other important information about the investment company. It may be obtained by visiting www.imgp.com the IMGP DBI Managed Future Strategy ETF is distributed by Alps Distributors, Inc.
- [02:45]
Josh Brown
This episode is sponsored by Clearbridge Investments. Amid rising geopolitical tensions and continued market uncertainty, investors are looking for stability. Even before recent developments in the Middle east, stocks backed by real assets were gaining momentum and can offer More predictable cash flows as volatility increases. Position your investment portfolio for wider equity participation with fundamentally driven Clearbridge active equity strategies. Clearbridge, a Franklin Templeton company. Go to clearbridge.com to learn more. I think we really need to start with the SpaceX S1. We sort of touched on a. Ooh.
- [03:28]
Michael Batnik
What in the world? Who could that be?
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Josh Brown
Oh, my God. It's Rupert Mitchell from Blind Squirrel Macro. How did you get here?
- [03:37]
Rupert Mitchell
Hey, Jim.
- [03:38]
Josh Brown
See you.
- [03:39]
Rupert Mitchell
Good to see you guys.
- [03:42]
Josh Brown
It's so crazy that you're here because we were going to talk about some of your research that you've been putting out. What. What an unbelievable coincidence. We're so excited to have you. Thank you, Rupert.
- [03:54]
Rupert Mitchell
It's a pleasure. It's a pleasure. Pull my ass out of bed for you guys anytime.
- [03:57]
Josh Brown
All right? And you and you just happen to be in the neighborhood, AKA in Hong Kong. So it works out perfectly. All right. It works out perfectly. Let's. Let's get into space. X. You have been writing a lot and speaking a lot about the topic, and you've got a lot of experience in the investment banking world and you have thought a lot about the sheer size of. Of the. Let's call it the opportunity. The basic argument. I'm going to quote you to you and then have you react. The basic argument that you're making here is that a lot of people already own this stock. All of the people who are going to be speaking positively about it, not only are they extremely long, but they're long from pennies. They own this thing. I don't know from, from seven years ago, nine years ago, ten years ago is. Yeah. People with a cost basis that it's almost. They almost own the stock for free. And that's a very important point. This is not as though venture capitalists or Wall street players participated in like a Series D round two weeks ago at roughly an equivalent valuation. We're talking about people who are up huge. This is your actual quote. You are currently being submitted to a continuous barrage of propaganda. You must tune out CNBC. Bubble Vision Rockets, Mars. Wow. SpaceX has also co opted the entirety of Wall Street. The assembled syndicate is probably looking at a fee pool of $850 million, which is an underwriting commission of 1%. Let's put this graphic up. This is from Blind Squirrel Macro on substack. This is everyone. I can't think of anyone that's not on here.
- [05:52]
Rupert Mitchell
To your point, there is one missing. Josh, who's that? Jeffries is not on there. And they've Got a very highly ranked aerospace and defense analyst. So keep an eye out there.
- [06:02]
Josh Brown
Okay. Do we know, has there been any public comment about why they're missing or.
- [06:07]
Rupert Mitchell
No, no, but I've got my ear to the ground.
- [06:09]
Josh Brown
Okay. All right, so tell, tell us, tell us to start with why you think we're on the receiving end of this barrage. Surely it's not because people genuinely think that they need to promote this. It sort of promotes itself. It's Elon Musk.
- [06:28]
Rupert Mitchell
Yeah, okay, well, let's, I mean, the world is, world is motivated by constraints and opportunities and incentives, right? And right now everybody is on one side of the incentive bus, right? Pretty much anyone who's anyone has had the opportunity to buy SpaceX and has bought SpaceX at significantly lower valuations over the course of the last 20 years. And trust me, everybody owns it, right? There's not a sovereign wealth fund, there's not an institution, there's not a mutual fund, there's not a private equity shop. There's not a crossover hedge fund that doesn't own this thing in size at a much lower price than what is being offered to the market. Now, I don't want to. I have given views on valuation. You can read it in the note. I don't want to clutch my pearls around the governance stuff. I just want to focus on the size. Right, so let's do the numbers. They're talking about a $75 billion primary raise, by the way. 20 billion of that is going back to pay the bank. So this is, that's not exactly a growth stat story. But $75 billion, that's just about 4 point. Well, what you need to do is you need to add the green shoe, the overallocation option. So actually they need to find a home on day one for $86 billion worth.
- [07:47]
Josh Brown
Oh my God. In one, in one shot.
- [07:50]
Rupert Mitchell
In one shot. One day in June when everyone. That's big now, trust me, there's going to be a lot of performative participation in this deal by big Wall street names. They're just averaging up, right? By a tiny bit. Right? So you have to tune that out. You just got to. Look, I have no doubt that there are a lot of people that are really excited about owning the Rocketship company. I have no doubt. Right. And so first thing, how are they solving this? First of all, they are co opting the passive funds effectively. The rules have been changed with the NASDAQ and the S and P and the Russell indices. This thing's going into the index as fast as humanly Possible. Now, I've run the numbers, right, And I've looked at all of the funds that are both passively benchmarked to these indices and those that are sort of closet benchmark, they're benchmarked against it. They can't afford to completely ignore it. Right. If you assume you've got almost full compliance, full compliance by the passive guys and reasonable compliance by the closet benchmarkers, you get to a number of about 44, $45 billion of that, 86 then, and this is quite an amazing stat. They reckon they're going to place 30% of the deal with retail, right? That's $26 billion. I don't know if that's 100 or 150 times more than it has ever been placed with retail, is that it's a staggering absolute and relative number.
- [09:28]
Josh Brown
26 billion. And we were talking before we went live, you were saying of the millions of deals that you've seen in your career, 5% to retail is considered risky or high.
- [09:42]
Rupert Mitchell
So I'll tell you a story. So, I mean, I, you know, we used to get twitchy if we had to place more than 5% with retail, right? And then we'd go, well, that's great. If retail, if retail flips completely. Flips a deal completely. We've still got a 15% green shoe. We don't really have. We need to just worry about how tight the top of the institutional book is, Right?
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Josh Brown
Okay.
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Rupert Mitchell
And I remember this was, this is in my, my, my city days, back at the time of the Facebook IPO I was running, I was, I was doing US listed deals out of Asia. Think, you know, think Alibaba and others back then. I remember getting, getting the, getting. I was on the, on the chat with the guy that ran the Smith Barney retail network just as the IPO was going out. And he was saying, hey, by the way, do you want any Facebook stock? I said, you got. So I said, yeah, you can have as much as you want. And I, at that point I went,
- [10:33]
Josh Brown
whoa, yeah, that's not great.
- [10:35]
Rupert Mitchell
We all know what happened to Facebook.
- [10:37]
Josh Brown
Yeah.
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Rupert Mitchell
Out of the.
- [10:38]
Josh Brown
Opened at 40, ended up at, I don't know, 18.
- [10:43]
Michael Batnik
Okay, what if, what if everyone just sells 10 shares of Micron, Boom. We pay for the whole deal.
- [10:49]
Rupert Mitchell
That's a really good point, right? It's, it's, it's, it's not as easy as that. So let's get to the scale point. So just, just to finish on the layout, right? That leaves 16. Assuming we get all the, the index guys get that, that retail sticks, that's a big ask. You've got another 16 and a half billion dollars just to get to one times covered, right? Then the next problem is, is that Vanguard, BlackRock, State street and Invesco, the guys that run the big ETFs. Well, SpaceX isn't yet in the index. They can't come into the order book. So essentially the hedge fund community writ large is going to have to warehouse this stock until this thing goes into the index. And they're going to need to hedge, you know, hedge that position. I mean, and the prime broker community has never supported that kind of quantum of warehousing before. You know, these aren't treasuries.
- [11:44]
Josh Brown
This is, it's a handoff. So if Blackrock, State Street, Invesco, the big index ETF houses, they have to wait, it's 10 days.
- [11:57]
Rupert Mitchell
Well, I mean the NASDAQ 100 is going to be the first to admit, right?
- [12:01]
Josh Brown
And 15 days.
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Rupert Mitchell
15 days, but that's, that's, that's only $6 billion right out of the 34. So there's, there's actually quite an extensive waiting period. Right?
- [12:12]
Josh Brown
Yeah. Okay. So the hedge funds are going to be the bridge from the IPO date until the index providers and all of the active funds that are mimicking the index de facto can come in and buy. So you have this two week period where it's almost like, well, who else is left to buy it? And it's unclear who that's going to be.
- [12:34]
Rupert Mitchell
It's a bit like the Spider man meme, right? They're all going, no, I'm going to sell it to Invesco. No, no, I'm selling, I'm going to sell it. So I mean I, I think, you know, they're going to look around and they're, all of their peers are doing exactly the same trade. And I think that the, the risk managers at the big investment banks are going to be going, how much of this stuff are we really warehousing? Right, yeah, being paid, they're paying, being paid a small fortune to do the deal. But hey, I think this is hard. I think this is really hard. And then the other thing is, right, you know, for the, the, the, that's, let's, that's to get to one times covered, right? You know, if, if this thing's gonna, if this gonna, if this thing's gonna pop off the bat, right, we need to raise what we need to get to two or three or at least four or five times covered. You're gonna see Some, you, I mean listen, ignore the, ignore the. No, if you, if you, if you, if you're hearing a number that's more than twice covered, that's, that's, that just isn't that kind of money going around.
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Josh Brown
It's impossible.
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Rupert Mitchell
It's impossible. Right?
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Josh Brown
It's not 5 trillion in demand for a $2 trillion IPO. It's impossible.
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Rupert Mitchell
Well, yeah, I mean it's, it's, it's. Well, where's coming from? 2 trillion market cap. Right, but you make a really good point, Josh, because if you look, if you read the S1 in a bit of detail, the lockup agreement reads like a sieve. Right. Essentially all of the X elon floats. So that's 60 roughly of the economic interest, you know, basically is unlocked by November of this year. And it all happens in stages. Now I'm not necessarily opposed to the idea of avoiding a cliff edge, a cliff edge vesting for insiders because that, that, that looks like a sort of, you know, runaway locomotive coming at you. But what I'm saying is that as these guys get unlocked into the free float and it happens much faster than normally happens in an ipo, just, there's just going to be constant supply to absorb any, any and, and you know, any people. There's constant supply to support, support the passive index demand that's coming in. So it isn't a short squeeze on the passive community. There's going to be a, not more than enough stock for them to buy as, as these shares become unlocked. So if you think this is some kind of opportunity to play a short squeeze on the backs of the vanguards and the, and the, and, and the invescos of this world. I think, think again.
- [15:05]
Josh Brown
It's 3% of the float trading or something.
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Rupert Mitchell
Well, what's the out of the gate? 4.3%. But you know, you have got shares coming into the float incredibly quickly. Right. Okay. Within 30 days. Right. Then if the, if, if the share price performs by 30% from IPO price, a whole load more gets unlocked. So just as, just as this thing's really getting going, there's a whole load more stock that comes out to hit.
- [15:33]
Josh Brown
It's not a six month lockup, which is what investors are accustomed to.
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Rupert Mitchell
It would be a, typically would be a typical clean 180 day lockup. Right.
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Michael Batnik
Why don't you think the market is big enough to absorb this? Or do you? I don't want to put words in your mouth.
- [15:47]
Rupert Mitchell
No, I actually am. This is where I'm really concerned about the Broader market right now because top of book liquidity in equities is not what it used to be. Right. And actually, I don't know if you follow the work of Mike Green on passive. You've got this inelastic market effect coming into play right now whereby, you know, 44 billion of 44 billion of money that needs to be raised from those passive funds to fund their participation is going to create an awful lot of damage on the top of the S and P. Right. All that liquidity vanishes at any kind of pressure. And if you've got all of the passive guys trying to sell 50 bits of Google, Nvidia or Nvidia, who's picking that, who's picking up that tab?
- [16:40]
Josh Brown
Right?
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Rupert Mitchell
Right.
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Michael Batnik
How much money, how much money is coming into index funds on any given week?
- [16:46]
Rupert Mitchell
You know, you get the drip, drip, drip of the 401k flows every month. You used to have the drip, drip, drip or the suck, suck, suck of the buybacks every, every month, provided you weren't in nowhere. They're all the hyperscalers are all spending money on, on data center CapEx right now. So that, that bid, that bid has gone away. You know, you've got people worried about their jobs in 401k land. So you know, there, there is, there is, there, there is. You know, I think that could go in that, that could become, could become a net supply of equity into the market over the next few years. So all of the positive US de equatization dynamics that we've lived through for the last 10 years, like the perpetual money machine, a lot of that stuff is, well, I'm not saying screaming into reverse, but maybe kicking back into neutral right now, which is a really bad time to be really testing the depth of liquidity when these.
- [17:39]
Josh Brown
I want to do one of your charts real quick to the first point you made. All of the people that we're going to hear from are super long from a super low price. Put this SpaceX stock chart up. So with the caveat that obviously this is privately held, but it's, I mean this is the perspective. So this goes back to 2020 and you could see that this company had a valuation of a couple of billion dollars. What do you think the valuation was in 2020? 20 billion.
- [18:13]
Rupert Mitchell
It's a fraction there. I don't know if you've got the other chart with the cap table. No problem, it's in the note and people can look it up. And by the way, all of my stuff on SpaceX is, is, is completely free Anyone can, anyone can take a look at it. But essentially, I think the really important, important point here, guys, is that for this 2 trillion dollar company, have a guess what the total quantum of equity checks written to it are over the last 20 years.
- [18:41]
Michael Batnik
Oh, is it a, is it like, is it like a stupidly small number? A billion dollars?
- [18:47]
Rupert Mitchell
No, no, not that stupid. Like, like just under $11 billion.
- [18:52]
Michael Batnik
That's, yeah, well, all right. Well, this is why everybody loves Elon. He's, look how much money he makes, people.
- [18:57]
Rupert Mitchell
Well, he's the greatest. He's the better stock promoter that ever lived, right?
- [19:00]
Michael Batnik
And he's, and he's a decent, decent, decent company runner, inventor, whatever. Like, I understand that there's a lot of parlor tricks that he plays that pisses people off, but like, he's done some incredible. Let me ask you this, Rupert. And I'm not, I'm not like neon stand, far from it. But I think credit where credit is due. So I think everybody understands what you're saying and I would encourage listeners to go read the piece because it was excellent. Very, very well done. Whenever people speak about or call some warning shots, which is very fair game, nothing that you're saying is like hyperbolic or inaccurate. There is going to be a lot of supply hitting the market. Not to, I'm going to put you on the spot and not to make you look like a jackass, because I'm genuinely curious. The level of concern, zero. You have no conviction. 100. You have all the conviction in the world that this is going to go south for the broader market. Like, where are you in your conviction on that?
- [19:54]
Rupert Mitchell
15 to 20 Delta, roughly.
- [19:56]
Michael Batnik
What does that mean?
- [19:58]
Rupert Mitchell
15 to 20 chance chance of this get really nasty, which is a high
- [20:02]
Josh Brown
chance, which is a high, high percentage,
- [20:04]
Rupert Mitchell
which is high, which is, it's high. It's high. When you think about the stakes around, about, around this transaction, right? It's enough to be pretty wary, right? And you know, people have not got their left tail, they haven't got their downside insured right now. It's just something to keep a close eye on. Now personally, you know, I am almost in the camp where I think this is too, too big, right? I think that this might not happen. And let's agree, let's agree on one thing, right? It makes sense for all of the Elon companies to be under one roof, right? Ultimately, the car company's got to go with the rocket ship/AI company and all, all makes sense. I, I, this is, this is tinfoil hat territory. But okay, let's get nuts. Let's get nuts. So, so, so Goldman Sachs, my, My former employer got appointed left lead. Now Morgan Stanley has been Elon's banker over the last few years. They went through a ton of pain. Michael Grimes. Michael Grimes. Financing the Twitter buyout and were left holding the bag in terms of the LBO loan for a long period of time. And that must have been really painful. And then suddenly, you know, just because apparently DJ Soul slides into Elon's DMS on Twitter, picks up the, you know, the, the trophy equity capital markets mandate of all time. Right. Let lead left on the SpaceX IPO. I just wonder, I just wonder if Grimes is working on plan B in the background. I mean, he's, he gets, he gets, gets to be lead advisor on the shotgun marriage of SpaceX and Tesla when they realize he gets to represent Tesla.
- [21:41]
Josh Brown
He gets to represent Tesla.
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Rupert Mitchell
Yeah.
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Josh Brown
Okay.
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Rupert Mitchell
I mean, the lead advisor on the combination. Listen, that's crazy. It's a 1% probability priced on polymarket right now of a Tesla SpaceX merger announced by June 30th. 100 to one shot. I think that's, I think that's, I think that's worth doing. It's worth.
- [21:58]
Michael Batnik
Crazier things have happened.
- [22:01]
Josh Brown
Can I have. Rupert SpaceX IPO layout analysis. So.
- [22:07]
Rupert Mitchell
No, no, that's not it. That's something else. But we could do that shows SpaceX on the chart.
- [22:13]
Michael Batnik
Yeah, that was, that was a. Why. So, yeah, this is great. This is great stuff. What are we looking?
- [22:16]
Josh Brown
So this is, this is incredible. And the red number toward the bottom middle, the shortfall. So I know you gave us the, the, the 50,000 square foot view, but basically like that's the dollar amount that you think we don't know where it's going to come from to get to the amount of money they're raising.
- [22:36]
Rupert Mitchell
I'm being pretty charitable, right. About 42 billion. That 30% sticking with retail. Right. And also giving full credit to the passive demand where with the proviso that that's got to find a warehouse right before the passive guys can buy it. Right, right.
- [22:54]
Josh Brown
Okay.
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Rupert Mitchell
So you have to stress out of it. And anyone can download this from the, from the, the research piece.
- [23:01]
Michael Batnik
Rupert, I have a question for you. Obviously I hope you're wrong and not because you don't seem like a very lovely guy, but nobody wants you to be. Right? Right. Okay.
- [23:08]
Rupert Mitchell
I don't want to be Pollyanna either. I, I mean, I just, I'm just. Well, you know, that's why I was
- [23:12]
Michael Batnik
asking how how much conviction you. Actually, I feel a lot better now. If you were saying, like, no, I've been in this business a long time, I've done these deals, 90%, I would have said. All right, Josh, so I feel, I feel better about that. But let me ask you this. I would have, I would have thought that if, if this was going to go south and obviously it might, we'll find out in a couple of weeks. I probably would have thought that shares of Tesla, in anticipation of raising money to buy this deal, I probably would have thought that shares of Tesla would sell off in front of this. And it hasn't. Does that, is that, is there any signal in there to you whatsoever?
- [23:47]
Rupert Mitchell
So, you know, for me, the, the mid curve trade into the SpaceX IPO was to short the hell out of Tesla, right? Because all of the fanboys were going to migrate into Musk's favorite baby, raise
- [23:58]
Josh Brown
capital for the new one.
- [23:59]
Rupert Mitchell
That's the one thing that makes me think that 1% Poly market price on the merger is the wrong price. Right. Okay. Because the shorts would get completely run over if that trade happens. Right?
- [24:15]
Josh Brown
Yeah.
- [24:16]
Rupert Mitchell
So that makes me pause for thought, certainly. Yeah. I mean, I think that there's an interesting dynamic just if it happens, right. Think about all of that transit. You've got 60% of a 2 trillion and rising company transitioning, you know, from transitioning into the passive world. Right? Because all of these guys that have got these really low basis, they've made their 40, 50, 60 baggers. They're selling now, right?
- [24:50]
Josh Brown
Yeah.
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Rupert Mitchell
You know, they've got a, in most cases, they've got a fiduciary obligation to sell now that they've been in, in the investment for 10, 15 years. And this one you're going to hate, Josh, because I know that you don't like equal weight indices, but I, I think that I, I, I think that the rsp, the equal weight S P is going to outperform the Mag 7, right. Until this deal is fully seasoned. Right. That's my prediction.
- [25:21]
Josh Brown
If this is the season, the seasoning is what, two years before they take,
- [25:26]
Rupert Mitchell
it's gonna take, it's gonna take 912 months for this all to sort of equalize. Right. So even if I'm not predicting sort of fireworks of, you know, doom at 11, which I, you know, I think there's a risk. Right? But I think if, if the D, if the syndicate and everyone thought that that was going to happen, right, I think they would move to plan B pretty quickly because, you know, there's A lot of people that have got a lot of skin in the game here. And you know, it's the investment banks, prime broker balance sheets. They're going to have to support that transition to the passive funds. And if, if they're worried about liquidity, generally, you know, that's going to contribute towards a plan B. I want to
- [26:06]
Josh Brown
ask you, during the Snowflake ipo, this was a situation. So this is the fall of 2020. It was the biggest IPO ever, I think, at that time, or maybe like neck and neck with Alibaba or something. But like it was huge. And a lot of the hedge funds that were sort of had like a VC bent to them.
- [26:27]
Rupert Mitchell
I don't know. The O2s, the. Yeah, those guys.
- [26:30]
Josh Brown
Yeah. So what they ended up, some of them ended up doing, rather than make the sell decision or the hold decision, they distributed the stock to their LPs, which is the third option that people forget exists.
- [26:43]
Rupert Mitchell
Yep.
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Josh Brown
Depending on the fund, many funds have the ability to say, you know what? We don't know if it's the right time to sell Snowflake. We were smart enough to get you into it 100x ago, and now we're going to put that decision in the hands of the LPs. We're actually going to distribute the shares that they got. Do you think in a situation like this where like, everybody understands that this is the ultimate unknowable, like there's no multiple, there's no real cash flow, like everybody gets that this is pixie dust. Do you think there will be a higher likelihood of, of funds just saying as soon as they're able. You know what? You figure it out.
- [27:26]
Rupert Mitchell
We made you money.
- [27:28]
Josh Brown
Take it.
- [27:28]
Rupert Mitchell
I think, I think that would be the right thing to do. That's what I would do. Cio.
- [27:33]
Josh Brown
That's what you would, that's what you would do if you were running a fund that owned this.
- [27:37]
Rupert Mitchell
Because the insider stock is all loose anyway. Right. So you're not protecting your investors by staying strong and, you know, keeping the float tight. That's all loose. So you, you, you should absolutely distribute in specie this investment to your LPs and say. Right. You call it right. This is, this is a stock at 100 times revenues. You know, that may, may, may make sense in some universe. And we can talk about universes here.
- [28:08]
Josh Brown
Okay, last one I wanted to ask you. Do we start saying mag 8, like right out of the gates? Because this is, I think instantly going to be 5 or 6 in market cap and as sort of an Ancillary. A lot of people are saying Nvidia is the thing that's going to get sold the hardest in order for people to own SpaceX. And I don't know why, but I'm seeing that everywhere. Do you have any insight into why people think that?
- [28:39]
Rupert Mitchell
Doesn't make a great deal of sense to me. I mean, you know, Elon with a lot of money building space, building colossuses and colossuses too. And he's a big customer. He's, he's gonna, he's gonna keep the flywheel going for Jensen, right? Yeah, but I, I, I, I just think it's, I wouldn't try and single out, I, I, I'd keep it much more high level. Look at, you know, long rsp, short mags. Right. And I think that, I think that, I think that works as a, as a trade. Once this thing's priced, I, you know, once this thing's out of the gate, then the, the machinery is rolling now. And that is just going to put a huge amount of pressure at the top of the stack, on the top, at the top of the S P.
- [29:24]
Josh Brown
Okay, we, I, I told you 15 minutes. We kept you for 30. I, I, I can't tell you how much the audience and I and Michael appreciate having your insights. This is obviously a major historic moment for the stock market and your, your writing has been really making this much more clear to people that don't have insights directly into these types of deals. So we really appreciate it. Thank you so much, Rupert.
- [29:51]
Rupert Mitchell
Thanks so much for having me on. Guys, it's been fantastic.
- [29:54]
Josh Brown
And guys, we'll drop a link to Rupert substack. It's a blind squirrel macro and he's also got a podcast. So if you enjoyed learning from Rert the way that Michael and I have, there's more where that came from. Thanks again, Rert. Have a, have an awesome day. All right.
- [30:09]
Rupert Mitchell
Cheers.
- [30:12]
Josh Brown
What do you think?
- [30:14]
Michael Batnik
You know, it's interesting. I thought that a lot of the narratives that I'm seeing out there are an artificially low flow to inflate the stock.
- [30:22]
Josh Brown
Yeah.
- [30:23]
Michael Batnik
And then the index inclusion is just further pumping. So you know what? Who cares what I think? Throw up this poly market thing, by the way, this, to me, this is, this is the vision and the premise in my opinion of prediction markets. This can't be gamed. Nobody knows where this is going to lay. But I take, I take a decent amount of signal in something like this.
- [30:46]
Josh Brown
I think this is very cool. The dollar amounts are tiny, though.
- [30:49]
Michael Batnik
Still, I wish I mean, well, they'll get there. They'll get there. But that's not. It's not nothing, dude. So most of the money is. And this is the closing market cap, I guess, on day one, most of the money. And to Josh's point, it's not a gigantic. But it's $143,000. Not nothing is between two and $2.5 trillion.
- [31:09]
Josh Brown
Okay. So that's where the market on Poly Market has settled out in terms of people's expectations of where this thing will. So that would be bullish if that happens. Frankly, no.
- [31:21]
Michael Batnik
Yeah. So there was two different conversations that we were having with rer. One is what happens in the first two weeks in terms of like, who supports the float until the NASDAQ 100 comes along and starts to buy. And then longer term, I think the valuation stuff to me is kind of boring. I think we all.
- [31:36]
Josh Brown
He didn't. He didn't even want to do that. Right? We all, like everyone said. Anything that you could say has already been said.
- [31:44]
Michael Batnik
The. The mission. The mission did read a little Weworky. The consciousness of the hell did this.
- [31:52]
Josh Brown
Read it.
- [31:52]
Michael Batnik
Our mission is to build the systems and technologies necessary to make life multi planetary, to understand the true nature of the universe. Come on.
- [31:59]
Josh Brown
Yeah.
- [32:00]
Michael Batnik
And to extend the light of consciousness to the stars. All right.
- [32:03]
Josh Brown
The light of. Extend the light of consciousness to the star. All right, I'll buy the crystal.
- [32:08]
Michael Batnik
Right. So. So Eric Newcomer said this may be one of the largest leaps of faith Musk has ever asked investors to take.
- [32:14]
Josh Brown
And what a great tagline that is. That's like for a movie.
- [32:17]
Michael Batnik
It's good. And you know what? I'm so excited to see how far they leap with him. Like, he is a singular inventor, creator, founder, entrepreneur, carnival barker. Like, he is a one of one.
- [32:30]
Josh Brown
I was going to say it's like a combination of jobs, Edison, but then also. Right, but also P.T. barnum, one of one. Like all rolled up into one. It's.
- [32:41]
Michael Batnik
He's a one one. So. So here's another good quote and. And think about something clever to say. Oh, Malik said at $1.75 trillion, SpaceX is asking investors to price in the orbital data centers, the Mars mission, the chip manufacturing and the plan to build the infrastructure of a type 2 civilization. The believers won't know the difference. The faithful have been well rewarded before. They have also occasionally learned that their messiah is known to blow air hotter than the exhaust of those rockets. Well done, sir.
- [33:08]
Josh Brown
So I said this on TV the other day, not in defense of Elon or. Not that anyone cares if I defend them or not, but he does deliberately do this thing where he says, self driving cars in three years. And then seven years goes by and they don't exist.
- [33:23]
Michael Batnik
Yeah, they're coming.
- [33:24]
Josh Brown
But he, but he has. I don't know if this is in the Isaacson biography, but he has, like, explained that he's like, well, if I give a realistic timeline that's further out, then everybody just takes their time. If I put a more ambitious timeline up, people break their neck to get there. And they may not get there, but imagine if they weren't killing themselves to get there, how long everything would take. So there's a, There's a methodology to this. It's not. He's not crazy, or he might be crazy, but this particular thing that he does is. There's a point. I guess there's a point to it. And how about raising money?
- [34:03]
Michael Batnik
You need to be a little bit crazy with, with your goals in order to raise the amount of capital that he has. Here's another really good one. And this is the stuff that pisses people off. Musk's company. This is from. I think I pulled this from the Journal. I can't. Forgive me, I can't remember who I pulled this from. So SpaceX bought. This is nuts, dude. SpaceX bought $131 million of cybertrucks. What are they? Armageddon? Remember the movie Armageddon? They had the cyber truck on the
- [34:27]
Josh Brown
planet, so they bought a million of them.
- [34:29]
Michael Batnik
$131 million of cyber trucks at the manufacturer. Suggested retail price. Like, he can't even get a discount. Here's another one, okay. In 2025, SpaceX also purchased $56 million worth of mega pack energy storage products from Tesla. Meanwhile, Musk's Xai has paid Tesla about $731 million since the beginning of 2024 through February 2026. It's funny, a lot of people, myself included, thought that I thought Starlink was the company. Like, I really thought that that's what it was. That was like the backbone of this company. And apparently he's, he's selling it like, no, forget about Starlink. Not forget about it. But it's, it's. It's the enterprise application at the, at the AI level. Show this Tam that he made $22 trillion. So Starlink is. Whatever. The Starlink broadband is sort of an afterthought. I thought that was the whole company.
- [35:26]
Josh Brown
It is the whole company. Fundamentally. It's the only. It's the you know, there are NASA contracts and then there's the Starlink revenue. But like the, the, the, the cash flow is coming in from Starlink which is hugely successful and is not even close to full penetration of its own individual TAM and really doesn't have, and really doesn't have any competition to speak of. It's got companies that would like to compete and might in five years. Last week we talked about Amazon, Leo and you know, some of, like the, some of the things holding them back, starting with they don't have their own rockets. They have to rent space on other rockets to put their satellites in space. Whereas Elon's already got 8,000 satellites in orbit. Not a pipe dream. It exists right now.
- [36:14]
Michael Batnik
I have a.
- [36:15]
Josh Brown
So like Starlink is a great business but he has always done this where he's bootstrapped the growth of the company from like a starting point of like here is some revenue coming in that we can then build on. Like, that's not that. If you're, if you've been long Tesla, then you recognize this playbook. He's not selling this as though Starlink is the end point.
- [36:39]
Michael Batnik
Starlink had 2.3 million subscribers at the end of 2023. The year later was 4.6, then it was 9.2, now it's 10.3 million. You know, I said this to Ben on the pod today. I love people that do the work. There's a lot of people that read the headlines and they look at the numbers and they don't read. And the one that got all of the headlines or all the attention was Starlink's arpu. The average revenue per user going down dramatically. And people like, what in the world? You got to be kidding me. Okay, well, thankfully we have people like o' Malik who actually took the time to read it and he said there's an explanation for this. It started with maritime terminals. They paid between 250,000.
- [37:15]
Josh Brown
The highest paying customers.
- [37:17]
Rupert Mitchell
Yes.
- [37:17]
Michael Batnik
And then it was.
- [37:18]
Josh Brown
Right.
- [37:19]
Michael Batnik
And then it was, then it was in the airplanes and they spend 12,500 to $25,000 per month. He said consumer residential is where the growth is now. It is the lowest paying tier and outside of North America, increasingly price sensitive. Fast forward.
- [37:39]
Josh Brown
So the mix selling this to households in Brazil. But he said like they're not paying what the original buyers were paying.
- [37:45]
Michael Batnik
It's not, it's not a mystery is my point. That mix explains the slide from $99 to $66 an RPO in three years. Maritime and aviation grow slowly and pay well. Consumer grows fast and pays less each year. But I think the bigger point that I am genuinely so curious to fast forward. How does the market absorb all of this supply that is coming? And yes, it's a $2 trillion market cap. The float is, is, is relatively small. The numbers are big, 50, $75 billion. But to Rupert's point, like if there was success early on, it unlocks more float faster and what might that do to the market? So chart can made this chart. This is not inflation adjusted, but whatever now whatever. It's not inflation adjusted. Okay. In the dot com bubble, what fueled the bubble was a true. And Josh, you were there a true IPO mania.
- [38:34]
Josh Brown
Yep.
- [38:34]
Michael Batnik
Like an unsatiable amount, like three to
- [38:37]
Josh Brown
three to five a day, five days a week.
- [38:39]
Michael Batnik
Okay. So in 1998, the US markets, the US IPO has raised 34 billion dollars in money. Then 65 and then 65 the year later. From 1998 to 2000 nominal dollars SpaceX, OpenAI anthropic are estimated to surpass all of the money raised in those three years.
- [38:59]
Josh Brown
Yeah, and these are the big differences. Obviously the quantity of deals was much higher than, but lower quality. Not that I'm saying like these are all high quality or there aren't issues with these. People would buy, would, would go to VeriSign and buy a URL and call Goldman Sachs and start working on IPO paperwork. Like it was literally like we just, we launched a website. You also had existing companies build a tracking stock for the online part of their business and IPO that. So like a really funny example, Donaldson, Lufkin, Generat, dlj, sort of like a smaller version of Goldman Sachs. But it was a big deal. 25, 30 years ago they had an online brokerage website, barely any customers. They called it DLJ Direct. They IPO'd it. Like you could do that just for just, just because it would be like a way to raise equity capital to build your, to build your website. So we just, we just had, I don't know, a thousand IPOs. And most of them were kind of a joke. We had some good ones, but most of them were a joke.
- [40:18]
Michael Batnik
So coming back, coming back to today, I think that, listen, I don't know if this is going to be a top or, or this, the, you know, the obvious. I feel like in hindsight, if this is a top, this would be, with the benefit of hindsight, the most obvious top we've ever seen.
- [40:32]
Josh Brown
Which is why I have. That's what I. Exactly what you just said is what I have in the back of my head. It's too obvious.
- [40:37]
Michael Batnik
It's too easy.
- [40:39]
Josh Brown
How could it be so obvious that the biggest IPO of all time coming public via the biggest showman of all time who will literally say anything. And every big. Every major investor is already looking for the exit. They've been in the stock forever. Like, how could this. How could it be so obvious? Of course it won't be the top.
- [41:03]
Michael Batnik
You know. You know the Breaking Bad scene where Mike is like, you stupid bastard, we had it all and you it all up or something like that?
- [41:10]
Josh Brown
Yeah.
- [41:10]
Michael Batnik
Oh, is that how we're gonna look back at Elon is like, you dumb asshole, you did.
- [41:15]
Josh Brown
The combination of this anthropic and OpenAI or going public inside of a year might be too much.
- [41:21]
Michael Batnik
It might be too much.
- [41:24]
Josh Brown
I don't know. I'm, you know me, I'm the primary, where's the money coming from? Guy like, this is my whole thing. So for me, I just don't believe that there's $2 trillion on the sidelines.
- [41:38]
Michael Batnik
Stop saying that. It's not. It's not $2 trillion. That's the market cap. It's not the buying power.
- [41:42]
Josh Brown
I understand. I don't think there is 80 billion for him. There's another 40 billion for OpenAI, another 40 billion for anthropic.
- [41:50]
Michael Batnik
It does sound like a lot of money when you put it that way.
- [41:52]
Josh Brown
I don't think it's in cash. I think it's. It's got to come from somewhere. Where is it going to come from if they sell my stocks to buy this thing? I'm going to be pissed.
- [42:05]
Michael Batnik
All right, all right. I like your next topic.
- [42:08]
Josh Brown
All right. This is one of those things where this is. We're going to provide a service to the public. We're going to. We're going to put an end. We're going to put an end to something that too many people do. Way too many people do. They look at the consumer discretionary sector of the S and P, and then they look at the consumer staples sector of the S and P, and they tell a story about the economy, and it's nonsense. It's a great intuition, like, ooh, if we look at maple syrup and canned fruit, that's like the stuff people have to buy. And we compare that to the things that people might want to buy, like leather jackets and pickup trucks, and we can sort of see, like, the priorities of the consumer. Or we could see how the investor, institutional investors are betting. Are they buying the staples because they're worried or are they buying the discretionary because they're bullish on the economy? Throw it out. It's garbage. It's always been garbage, but never more so than it is right now. Here's what I want to show you. This is the consumer discretionary etf. Just the price. Okay? It is at or close to highs. That's fine. Let's not use this as a story to say that the consumer spending appetite is this or it's that or it's the other thing. Because when you actually decompose what's in here, you realize this is just being led around by two very large, very important stocks. But I want to make a different point which goes a little bit further. This is the Staples etf. Put this one up. And we're dividing it by the. Excuse me, we're dividing discretionary by staples here. So it's a ratio chart. So 1.4. The way to think about that is 40% move by the discretionary versus the staples. And a lot of people would look at that and say, well, that's, you know, indicative of how strong the consumer is or how good investors feel about the strength of consumer appetites. Do I have you so far? You with me on that so far? These are the things people would say, okay, all right. Now when we take a look at the equal weight consumer discretionary, this is going to control for those two gigantic stocks, which I'll mention in a second, that's the purple line. So now obviously doesn't look as good. So we're comparing this to the consumer discretionary. The regular sector is in orange, the one that everyone talks about, that, of course, over the last year is up 16%, but the equal weight is up only 6. And so if we're going to say that this says anything about the consumer, we're going to have to say that the equal weight is the more legitimate. I don't agree with the premise that it's saying something about the consumer, but I would say, like, if we have to, let's at least equal weight it. And here is why. This is. The price of gasoline is in blue, up 58% over the last year. And what you can see in this chart is that the orange line, which is just the regular consumer discretionary sector holding up pretty well, and the purple line starting to break down right around the time that gas prices really accelerated. And that's not an accident. I think that is the true state of the consumer discretionary situation is in purple. And I think the driver of a lot that happens in that Equal weight index is the price of gasoline. Not the only, but right now the most important one. This comes from Ed Yardeni. Give me the next chart. I want you guys to understand what's actually in the consumer discretionary. 10% is apparel, retail apparel. So this would be like Abercrombie and Fitch and Lululemon and Gap. Then we've got like all retailers 9.3%. And then when you look at everything else in this index, this is year to date. This is year to date. So all of that gain is coming from those two categories that I mentioned. Everything else is detracting. Casinos are down 17%. Auto parts are down 13. Home improvements down 10. Even hotels, resorts and cruise lines are down almost 10. Home building, we know the story there. It's shit. Restaurants are down. Automobile manufacturers, which are also indiscretionary, are down. This sector is not in good shape. It's being artificially propped up. Ed points out. Give me this next chart. This is market cap and, and the earnings. And we're talking about the share of the index. So the sector is 9.8% of the S&P's market cap. Next chart shows you Amazon and Tesla, which are 62% of the market cap weighted consumer discretionary 62 and rising pretty much every week for the last, I don't know, the capitalization share is in blue. That's the percentage of them. So in 2018 they were 18%. Now they're 62%. They're almost the entire average when you think about that. And last one, this is just breaking it down. In capsize, The S&P 500 is in blue. This is the consumer discretionary stock price, but by cap size. So the discretionary names in the S&P 400, those be mid caps, that's in red, they look much worse than blue. And then of course small cap discretionary in The S&P 600 look, the worst actually are negative versus 2021. So the more you go down and capsize or the more you equal weight, the more the consumer discretionary theme comes back down to earth and it's all being distorted by those two gigantic stocks that are now almost two thirds of the index. So doing ratio charts, doing storytelling, so surrounding surrounding like consumer discretionary, consumer staples, it's always been nonsense. But these days what you're really saying is, you know, stocks versus two gigantic companies. And that's my shtick.
- [49:00]
Michael Batnik
I agree with almost everything you just said. I don't think it's always been nonsense. I think there used to be simpler Times the market wasn't as dynamic and it used to make a lot more sense than it does to today. But I completely agree with the premise of looking at these two, these two areas of the market and concluding anything about the economy pump the brakes. Here's why. Look at restaurants for example. A lot of them are doing really poorly. Oh, the consumer must be not able to afford a lot of these prices. Yeah, partially true. Obviously it's a part of. Part of it is an inflation story. You know what else is part of the story? Supply valuation. The valuations of a lot of these quick service restaurants were so stupid that they're now normalizing. Comps are tougher. There's too many sweet greens and cavas and, and the Miami pure of this. The competition tells you nothing about the consumer. Okay. That's number one. Another area worth looking at or thinking about is the performance of the stock might tell you the opposite about the consumer and who knows in which case. So for example, is Dollar General with Dollar General or Dollar Tree be ripping because the lower end consumer is in good shape and they're able to buy more stuff or would generally be doing poorly because people that are trading down can no longer like where else are they going to go or, or a third scenario. No, the consumer is doing poorly but the middle class is now trading down and therefore the stock is performing better. Like it's so messy and you can craft.
- [50:23]
Josh Brown
Middle class people are going to Dollar General, therefore the economy's bad. But it's both helps Dollar General stock.
- [50:30]
Michael Batnik
Yeah. Okay. It's just, it's very convoluted. Yeah. So I think you have to, you really have to look under the hood with this one. I totally agree.
- [50:37]
Josh Brown
Yes. And. And for God's sake, again, Tesla and Amazon are almost 2/3 of the index. So you're not saying anything about the consumer. You're saying something about whether or not people want to buy those stocks or not.
- [50:54]
Michael Batnik
Amen, sister. All right, let's skip topic through that's Evergreen. We could do that next week. Let's. Do you want to do immune to the news or do you want to.
- [51:03]
Josh Brown
Well, this was just a question I wanted to ask you.
- [51:05]
Michael Batnik
Okay.
- [51:05]
Josh Brown
Are we immune to the, to the news, Michael?
- [51:08]
Michael Batnik
No, no, no. I reject that.
- [51:10]
Josh Brown
Okay. This is the, this is the way I wanted to phrase it though. You have Iran, whatever the is going on there this week, it's either a ceasefire or going to wipe them off the earth. Like one or the other. A truce or World War 3. Okay. Oil prices related. The Fed now On hold, maybe hiking, also related inflation related tariffs, sort of orthogonal. All of these things though have basically become background noise. Made a record high last week. The dow is over 50,000. So you can't tell me that people are actually reacting to the news in any meaningful way. I think they're just ignoring it. The next thing that's going to. I bring this up because I think like in a few weeks we're having the midterms conversation.
- [51:59]
Michael Batnik
Like I don't want to have it.
- [52:01]
Josh Brown
I don't either. But it's going to happen in the market. It's going to be in all those stupid surveys and it's going to start whipping the stock market back and forth. Are the Republicans going to lose the House? What does this mean for tax reform? What does this mean for this? What does it mean for that? That's going to be like the market conversation. And part of me feels like, oh, that's going to be so annoying. But then part of me is like, actually no, we're just going to ignore it. We're ignoring everything. Maybe this will be the thing that we don't ignore. I don't know. What are your thoughts?
- [52:30]
Michael Batnik
Yeah, no, I just disagree with the whole premise of we're ignoring the news. The reason. And you say ignoring it because with the backdrop of the market is at the all time high and therefore we are ignoring the news. No, that's the part that I reject. Market's at an all time high because earnings and profits are at all time high. The market would be.
- [52:47]
Josh Brown
Therefore we're ignoring the news and focusing on earnings. That's the question. That's what I'm asking you.
- [52:52]
Michael Batnik
The premise of that. And maybe not you per se, but when everybody's saying why aren't we reacting to this and this. Why are we ignoring everything? We're not. We're focusing on what matters and investors are focusing on the bottom.
- [53:03]
Josh Brown
Stop. I agree, but that's. You're not disagreeing with me. I know you want to. You don't like the premise. But that's what the premise is. The premise is, yeah, there's shit going on in the Middle East. There's geopolitics, whatever that means. The market doesn't care because it's focused on fundamentals, not news. The fundamentals are the earnings.
- [53:27]
Michael Batnik
Yes.
- [53:27]
Josh Brown
So we agree the market is better than ever at tuning this all out. I don't think Kevin Warsh got even a 24 hour cycle like in the minds of the average investor. We used to talk about the new Fed chair like it was the new Pope.
- [53:46]
Michael Batnik
This is so much better.
- [53:47]
Josh Brown
And we were, and we were Catholics. We just know it's like, all right, new Fed chair. It's, it's Trump's son in law. Who is it? Whatever, I don't care. Next. Like we're not doing, we're not doing these news discussions anymore in the stock market and I'm sure at some point there will be big enough news. There's a guy outside the White House like two days ago firing an automatic rifle. Do you even know that it happened? Does anyone?
- [54:15]
Michael Batnik
I saw that briefly.
- [54:16]
Josh Brown
Could you imagine if that would have happened in 1997?
- [54:19]
Michael Batnik
No, it's crazy.
- [54:22]
Josh Brown
It would have been on the, like, it would have been on the news for five nights straight. So I think, I'm sure something crazy is going to happen and that's going to make this look crazy. Crazy. What I'm saying, I think we're sort of like in a post macro geopolitical news backdrop for a little while until something gets extreme enough.
- [54:43]
Michael Batnik
It's because the AI story is so all encompassing and engrossing.
- [54:49]
Josh Brown
Yeah. All right. That's all I wanted. That's all I wanted to ask you on that.
- [54:53]
Michael Batnik
All right, let's keep moving. Let's skip everything else. Let's just go to your make the case. We could do the Micron stuff on tcf.
- [54:59]
Josh Brown
Good idea. Oh, we have good guests for that too this week. Okay. Oh, I did want to mention the Halo etf. So this actually ended up happening. We got the Halo ETF finally began trading and I have to read a disclosure because I am involved in it. Halo is offered through Round Hill Financial. I me, Josh Brown, have a outside business activity where I act in a limited consulting role for Roundhill to advise in their marketing efforts. Investing involves risk, possible loss of principal capital. Nothing discussed should be considered personal financial advice or a solicitation. All opinions are expressed on my own, not the opinions of Rural's wealth. The way that they built this, I have the top 10 holdings. So basically it's a rules based strategy. Round Hill is the ETF company behind dram, which I think is the most successful ETF of the year. And they've done some other thematics. What jumps out at you about this top 10 holding screen that we have up here?
- [56:06]
Michael Batnik
Obviously you have a limited role because I see this is equal weighted. So of course they don't care what you think at all.
- [56:11]
Josh Brown
They don't care what I think Now. I didn't create the index at all.
- [56:14]
Michael Batnik
I know, I'm teasing What jumps out to me, these are names that. These are not individual stocks anybody buys except for Philip Morris.
- [56:24]
Josh Brown
Okay, so for people listening, autozone, tfi, Cummins, JB Hunt, Lamar Advertising, Lennox International, Rider System, Magna, Philip Morris and Autoliv. I would say nobody in our audience owns these stocks individually except for maybe Philip Morris.
- [56:42]
Michael Batnik
Philip Morris is at. Yeah.
- [56:44]
Josh Brown
So no tech, no financials. And in fact, the index was built by a company called Acros, which is an index provider to the ETF industry. And financials are explicitly ruled out of being owned by the. The Halo ETF ticker is loha, by the way, for people that want to check it out. Apparently Halo was actual. Halo is taken by a biotech company can own financials because the rules that they're applying to determine heavy assets, low obsolescence risk don't apply to financial companies.
- [57:23]
Rupert Mitchell
Right.
- [57:24]
Josh Brown
There's one tech stock in the index and I've never heard of it. Right now the index will change, but right now, the companies that meet the criteria. And there's one communications services stock, that's it. So in other words, like tech is 1% communications.
- [57:41]
Michael Batnik
Do you know what it is?
- [57:43]
Josh Brown
I think communications is charter.
- [57:47]
Michael Batnik
We need to have a broadband conversation. We'll do that one of these weeks. Holy shit, dude, what's that?
- [57:53]
Josh Brown
A broadband conversation.
- [57:54]
Michael Batnik
Oh, my God. They look like they're going to zero.
- [57:57]
Josh Brown
And then the other thing, the other. All right, so I have two charts of some holdings in here. Here's Cummins cmi. Okay, so we're not talking about sleepy stocks. This thing is, I want to say it was $150. It was $200 a share a couple years ago. It's almost 700. And the other one, Southern Copper, obviously, like, this is a rock and roll stock. It doesn't only go up, of course, it goes up and down. But like nobody else, here's a name that's gone from 60 to almost 200. The reason I bring those two up is I think they're very. They're emblematic of this moment. They're Halo because they have heavy assets and very low obsolescence risk. No one's going to disrupt the copper mine. Like for obvious. Like for obvious reasons. And you know, Cummins is making engines. You can't just decide, I'm going to chat GPT, myself an engineer. So these are like quintessential Halo stocks and they're in the index, but they also benefit from the AI story. So while we're betting on stocks that we think aren't disruptible by AI. We also sort of in some of the names, get the tailwind of all the AI activity. I think 36% of the portfolio is industrials.
- [59:18]
Michael Batnik
Oh, wow.
- [59:19]
Josh Brown
And you bet. Yeah. And you better believe a lot of the industrials in that index are AI beneficiaries. So just thought it was interesting the way they constructed the index. Anyway, that's my spiel on Halo. I know we talked a lot on the show about me suing people. We're going to do the next best thing. I'm going to help Brown Tail out with their products. And I'm pretty excited that I've birthed this into the world. And in many ways, you're a midwife to this product.
- [59:49]
Michael Batnik
Whoa, whoa. I've never heard that before.
- [59:51]
Josh Brown
You have helped to shepherd its birthday. So that's the story.
- [59:56]
Michael Batnik
Love it. All right, let's. Was that. Wait, you have a different. Make the case, don't you?
- [60:00]
Josh Brown
Yeah, we're not gonna do that tonight. Yeah, we're out of time.
- [60:02]
Michael Batnik
All right, good. Let's do a mystery chart real quick.
- [60:06]
Josh Brown
Let's knock it out.
- [60:07]
Michael Batnik
All right.
- [60:08]
Rupert Mitchell
Ooh.
- [60:10]
Michael Batnik
Okay, so the purple line is the s and P500. All right, this is the last five years. The orange line. And don't guess yet. The orange line is a country. Okay, next chart. This is an equal weight version. This is an equal weight sector version. You're definitely not going to get this. You're probably not going to get the other one. But I just want.
- [60:35]
Josh Brown
Stop, stop, stop, stop. Equal weight sector version. What does that mean?
- [60:38]
Michael Batnik
It's equal of that country. So chart. First chart. All right, this is a country that has beaten the. Yeah, you could say beat in the pants.
- [60:47]
Josh Brown
So the orange becomes purple in the next chart.
- [60:52]
Michael Batnik
The orange is a country etf. Let's start.
- [60:55]
Josh Brown
All right, what am I guessing at, the second chart or the first chart?
- [60:58]
Michael Batnik
Let's do. Let's start this one.
- [61:01]
Josh Brown
All right.
- [61:03]
Michael Batnik
And it's a.
- [61:04]
Josh Brown
It's a country.
- [61:05]
Michael Batnik
Is this a G7? I don't know what that means. This is.
- [61:08]
Josh Brown
I'm going to say. I'm going to say. I'm going to say Korea.
- [61:10]
Michael Batnik
No, that would have been more vertical. This is a neighbor of ours.
- [61:14]
Josh Brown
Ooh, our neighbor to the north.
- [61:16]
Michael Batnik
Yeah.
- [61:17]
Josh Brown
Is it Canada?
- [61:19]
Michael Batnik
How'd you know?
- [61:23]
Josh Brown
Oh, this is oil.
- [61:25]
Michael Batnik
Okay.
- [61:26]
Josh Brown
Oil and gold.
- [61:27]
Michael Batnik
Okay. I'll better one do you. Next chart. You're not gonna guess this, so let me just tell you. This is. This is equal weight Financials of Canada. What in the world is happening here?
- [61:36]
Josh Brown
Ooh, that's Interesting. Literally, like it's the. Wait, it's equal weight that it owns all the Canadian financials.
- [61:44]
Michael Batnik
How bizarre is this? The bank.
- [61:45]
Josh Brown
What is the Canadian financial like the, like the five big.
- [61:48]
Michael Batnik
The cartel banks like Royal bank of Canada, Nova. Is there a Nova Scotia?
- [61:52]
Josh Brown
I guess they benefit. Well, they benefit from higher oil and gas prices and activity and probably a little bit of. Sprinkle a little bit of gold on that. And so that Jason in the chat is saying it's all Brian Belsky. That could also be so for as
- [62:09]
Michael Batnik
much as we rightly talk. So by the way, by the way, it's 40% of the index is financials. 40% is financials. Then it's 90% energy, 15% materials and 10% industrial. So it's not just. It's not just energy. Financials are rocking and rolling.
- [62:28]
Josh Brown
But can I say one funny thing?
- [62:30]
Michael Batnik
God.
- [62:31]
Josh Brown
Everyone thinks Belsky is from Canada.
- [62:34]
Michael Batnik
He's from Minnesota.
- [62:35]
Josh Brown
He's from Minnesota. He worked at a Canadian bank called BMO for a long time. He's no longer there. People just, they think he's Canadian. He's gonna be back on the show this summer. It drives him up a wall.
- [62:48]
Michael Batnik
Well, people think he's. Because he sounds it too. That's a problem.
- [62:51]
Josh Brown
He used to write research on Canadian stocks also, so he kind of did it for himself.
- [62:56]
Michael Batnik
Anyway, just do the exercise if you're thinking that the valuations don't make sense. Warg ignored the news. It's a bubble. Look at global stock markets. They're doing really well. It's not just us.
- [63:08]
Josh Brown
That's a really great point. It's a great place to end. As Michael mentioned, we have an all new edition of the Compounded Friends coming at the end of the week. So much to talk about. I'm super excited about it. Once again, special thanks to our guest Rupert, who joined us to talk about SpaceX. It's. If you were into his stuff, make sure to check out Blind Squirrel macro on substack. Tomorrow's an all new Animal Spirits coming out with Michael and Ben. Any next talk? Ben doesn't give a at all. He doesn't want to hear it. All right. And we'll do Ask the Compound this week. So there's a lot happening. I also wanted to mention we dropped this like two hours ago. Also on the chat channel, we did sort of like. I don't know if you'd call it a trailer or a mini documentary. It's three minutes. But we had a. We had a big launch party for our porterhouse portfolio strategy and a lot of the people that you guys have seen on this channel, a lot of the financial rock stars in our orbit came out and I think it'll be a fun watch for you. So go look for that. It's on the compound channel. All right, that's the that's it from us. Thank you guys so much for tuning in. Thanks for coming live. We'll talk to you soon.
- [64:32]
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