Stock Shortage

Summary

Podcast Summary: "Stock Shortage" | The Compound and Friends

Episode Information:

• Title: Stock Shortage
• Release Date: February 7, 2025
• Host/Author: The Compound
• Guest: David Giraud, Portfolio Manager at T. Rowe Price Investment Management

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1. Introduction to Guest: David Giraud

David Giraud joins the show as a distinguished guest, bringing his extensive experience from T. Rowe Price Investment Management. He is the portfolio manager for the Capital Appreciation Strategy, including both the Capital Appreciation Fund and the Capital Appreciation ETF. David boasts an impressive track record with six Morningstar Outstanding Portfolio Manager of the Year nominations and two wins, alongside 22 Lipper best fund awards.

Notable Quote:

• Josh Brown (07:33): "David, welcome to the firm."
• David Giraud (08:24): "Thanks for having me."

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2. T. Rowe Price Insights

David delves into the unique culture at T. Rowe Price, emphasizing its singular focus on investment management without the distractions of other financial services like banking or insurance. He highlights the firm's commitment to long-term, fundamental research in an era increasingly dominated by passive investing and short-term quantitative strategies.

Key Points:

• Longevity and Culture: T. Rowe Price has maintained a consistent focus on active investment management since its inception in 1998.
• Adaptation to Market Changes: David notes the shift from long-term fundamental analysis to more short-term, quantitative approaches in the investment landscape.
• Active Management: The firm continues to set prices and make informed bets, distinguishing itself from purely passive strategies.

Notable Quote:

• David Giraud (10:56): "We're not in the game of trying to call the quarter. We're not trying to decide if organic growth is going to be three and a half or four."

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3. Market Valuations and Stock Shortage Thesis

A significant portion of the discussion centers around the high valuations in the stock market, particularly within the S&P 500. David articulates concerns about market multiples being elevated due to a limited number of available stocks, a phenomenon he refers to as the "stock shortage thesis."

Key Points:

• Valuation Metrics: The market is trading at approximately 22 times estimated earnings and 26 times free cash flow, indicating overvaluation.
• Sector Analysis: Traditional growth sectors like information technology remain overvalued, while cyclical sectors such as financials are facing high multiples despite favorable fundamentals.
• Potential Risks: David warns that high multiples may not persist, citing examples like General Electric (GE), which stagnated before experiencing a significant upturn.

Notable Quotes:

• David Giraud (23:08): "The market mix has changed dramatically. You just can't compare... you have to compare apples to apples."
• Josh Brown (30:46): "Drifting. Why not? Bullish. What else do you see in front of you?"

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4. Economic Outlook and Recession Risks

David shares his skepticism about the imminent risk of widespread recessions, attributing it to the evolving structure of the economy. He highlights the increasing dominance of the service sector, which historically exhibits more resilience compared to manufacturing and industrial sectors.

Key Points:

• Service Economy Dominance: The shift towards a service-oriented economy has reduced the overall volatility and susceptibility to traditional recession triggers.
• Recession Frequency: Historically, recessions have become rarer, with stable service sectors absorbing economic shocks more effectively.
• Economic Indicators: David emphasizes mean reversion in economic indicators, suggesting that current economic conditions are likely to stabilize over time.

Notable Quote:

• David Giraud (56:21): "Recessions are rare as it is. Just, just even without any other just it's a rare event."

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5. ETF Strategy and Active Management Transparency

The conversation transitions to the challenges and strategies associated with managing active ETFs. David explains how T. Rowe Price has navigated the transition from traditional mutual funds to ETF structures without compromising their investment strategies or exposing their trading activities prematurely.

Key Points:

• Active ETFs vs. Mutual Funds: T. Rowe Price adopted the ETF wrapper to meet market demand for daily liquidity without altering their core investment approach.
• Transparency and Trading: While ETFs offer greater transparency, David assures that their trading frequency remains manageable to avoid disadvantaging investors.
• Operational Adjustments: The firm ensured that the ETF does not negatively impact existing cash shareholders by maintaining a balanced and less frequently traded portfolio.

Notable Quote:

• David Giraud (60:59): "We have no taxable gains and we'll never have a capital gain. But if we try to trade every day in tcaf, we would."

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6. Stock Picks and Portfolio Highlights

David shares insights into specific stock selections within the Capital Appreciation ETF, highlighting companies poised for growth and robust earnings.

Featured Stocks:

• Revity (RVTY): A life science tool and diagnostic company with strong growth prospects and increasing margins.
• Thermo Fisher Scientific: A leading life science tool company benefiting from consistent earnings growth.
• PTC Inc.: A niche software company with rapid growth and high earnings potential.
• Amazon (AMZN): Despite past challenges, Amazon is forecasted to have significant earnings growth, driven by leadership under Andy Jassy.

Notable Quotes:

• David Giraud (62:58): "Revity is a company that sold off its industrial and a lot of its applied businesses a couple years ago and really became a software reagent. Immunodiagnostics play, you know, 75% of the business today."
• Michael Batnik (66:23): "We don't see too many portfolios that look like this."

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7. Deficit and Treasury Yields Discussion

The hosts explore recent statements by Treasury Secretary Scott Bessant regarding Treasury yields and federal deficits. David provides his analysis on the structural challenges of lowering long-term interest rates without addressing the underlying deficit issues.

Key Points:

• Treasury Yields: Bessant emphasizes focusing on the 10-year Treasury yield rather than short-term rates to manage borrowing costs.
• Deficit Concerns: High federal deficits are a primary driver of elevated long-term interest rates, making it challenging to achieve lower rates without significant fiscal adjustments.
• Policy Impact: David critiques the feasibility of significantly lowering deficits in the near term, suggesting that effective deficit reduction is essential for long-term economic stability.

Notable Quotes:

• David Giraud (53:23): "Get to debt to GDP back down to 3% by 28."
• Josh Brown (55:20): "David, this has been such a pleasure... We're gonna wrap up."

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8. Closing Remarks and Personal Insights

The episode concludes with personal reflections from the hosts and David, highlighting future plans and personal interests outside of finance.

Key Points:

• Future Episodes: David expresses interest in returning to the show for further discussions.
• Personal Interests: Hosts share their excitement for upcoming events, such as the Outlaw Music Festival featuring Willie Nelson and Bob Dylan.
• Final Thoughts: David emphasizes the importance of strategic investment and maintaining a long-term perspective amidst market fluctuations.

Notable Quotes:

• David Giraud (69:59): "Look forward to seeing my wife tonight."
• Josh Brown (71:19): "Tprice.com. How simple could it be?"

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Conclusion

The "Stock Shortage" episode of The Compound and Friends offers a deep dive into active investment strategies, market valuations, and economic outlooks through the expertise of David Giraud. David's insights into T. Rowe Price's disciplined approach, coupled with his cautious stance on current market valuations, provide valuable perspectives for investors navigating complex financial landscapes.

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Notable Transcription Exclusions:

• Casual banter about sports at the beginning of the episode.
• Advertisements and sponsor messages.
• Introductory and closing remarks unrelated to content discussions.

Transcript

[Josh Brown]

I'm not. I'm not normally dressed this way.

[Michael Batnik]

You have any rooting interest in the game?

[David Giraud]

I do not.

[Michael Batnik]

Okay. Are you not a sports fan? Are you just not an Eagles or Chiefs fan?

[David Giraud]

I'm. I spend. Don't have a lot of time for sports.

[Michael Batnik]

Good for you.

[David Giraud]

But. But I would probably be rooting for the Eagles against.

[Josh Brown]

You would.

[David Giraud]

Just because.

[Josh Brown]

Geographically.

[Michael Batnik]

Just because what?

[David Giraud]

Well, we have. Well, first of all, we have. We have an operation in Philadelphia and they're great goal. And those are good guys on our high yield side. They were all rooting for the Eagles.

[Michael Batnik]

There are no good guys. Eagles fans. I'm sorry, Those are.

[Josh Brown]

I don't. This is so. This is so exciting. So I have a lot of stuff in the doc about T. Rowe Price in general.

[David Giraud]

Sure.

[Josh Brown]

Which I think it's a great story. One of the longest lived asset management firms in America. Okay. And. Oh, go ahead.

[Michael Batnik]

Our best and worst guests. Don't bring a computer. So we'll let you know how you did after the show.

[Josh Brown]

Yeah. David's gonna kill it.

[Michael Batnik]

David, you're a T ro lifer.

[David Giraud]

I am.

[Michael Batnik]

Are there many like you?

[David Giraud]

There are, yeah. There are some who've only worked at tiro.

[Michael Batnik]

That's a sign of a good company. There's like a few in financial services that the average 10 years just like forever.

[David Giraud]

Yeah. Yeah. I think that's kind of place that you want to. You want to be. You like the people, you like the atmosphere, like the culture, and no reason to leave.

[Josh Brown]

That's more rare these days, though, I feel like.

[David Giraud]

Right. I think that's fair. That's fair.

[Josh Brown]

And you do the Barron's Roundtable. What was your first year on the Roundtable?

[David Giraud]

Oh, boy. That was, I think, either 21.

[Josh Brown]

2021, yeah. Did they do that one remotely?

[David Giraud]

They did that one remotely, yes.

[Josh Brown]

Yeah, I remember that era. A lot of things that used to be in person were remote for that year.

[David Giraud]

Yes, that's right. That's right.

[Josh Brown]

But I think it was important. You want to get it done. You want to not skip a year. You want the continuity that we're still doing this. And then they moved to like a half year format, so now they do the six month update.

[David Giraud]

Yeah, the six month update's not in person, though.

[Josh Brown]

Okay.

[David Giraud]

So we just do that. We just do that remotely.

[Josh Brown]

So can you tell me. Can you tell me a little bit about what that's like behind the scenes? Cause I've been reading Barron's for. Since 1998, so I've always been curious. Everybody Gets together in like a ballroom somewhere. Yeah, there's photographers, a lot of picture taking. Okay. There were so many of you though. Like, how do you get through all of the content?

[David Giraud]

It is a long day. I mean it literally all one day. It starts at 8 and we kind of ended dinner at 9.

[Josh Brown]

Wow.

[David Giraud]

So it is, it is a long day with a lot of photos in the way in the middle.

[Josh Brown]

Now does Mario prolong it or does he like keep his comments a little bit shorter?

[David Giraud]

No, he know. He. He's fair. He's fair.

[Josh Brown]

Okay. All right. I've done TV with Mario.

[Michael Batnik]

Is he the longest tenured?

[Josh Brown]

He is.

[Michael Batnik]

The longest night of the round baron table.

[David Giraud]

He is. And Scott. Scott came on right after Mario.

[Josh Brown]

Scott Black.

[David Giraud]

Yeah.

[Josh Brown]

Yeah, he's great. I think they're all great. And Abby's great. So Michael and I were talking about this on a recent podcast though. It's really hard because you're coming up with these picks in mid December and then the world changes, not just in one year, but in any year. And you guys don't have the opportunity to log back in and make any changes to what you were doing. So you kind of like, if you like a stock in December, that's what you're riding for the year.

[David Giraud]

Yeah, we do it so we usually do like the first week of January, so depending. So the first week out you get one third of the recommendations. So this week, this time I was the third. So you know, you know, once, I mean we, I think we had rivety in at like 103, it was. Or 113, it was 120 when it. The public seat. So there's a lag effect, you know, basically like, I don't know, probably three weeks essentially between. Yeah.

[Josh Brown]

But you have to live with that like till December.

[David Giraud]

That's fine.

[Josh Brown]

That's.

[David Giraud]

That's fine.

[Josh Brown]

Okay, I get.

[David Giraud]

I guess we're not, we're not.

[Josh Brown]

You're not rapidly changing your portfolio anyway in real life. So that's, that's the reality that you live with to begin with.

[David Giraud]

Absolutely.

[Josh Brown]

Okay. Are there certain types of investment strategies that, that approach obviously short term trading, but like certain types of investments that you wouldn't bring to the roundtable that you would own in a fund just because, you know, you might have to make a decision to get out of it before a year is up?

[David Giraud]

Well, I think. Well, first of all, I think we would. You never know what's going to happen. There are situations where like you recommend GE one year and it goes nowhere, then it goes Up a ton. So I think you have flexibility. I never know which of my names is going to work and which of them is not going to work.

[Michael Batnik]

Yeah, they asked for your best idea.

[David Giraud]

It's your best idea.

[Josh Brown]

But I guess what I'm asking is you might have an idea that you think is your best idea, but you don't want to be married to it for the full year because something might change.

[David Giraud]

Yeah.

[Josh Brown]

Whereas something else you're like is a pretty low bet that I'm going to get out of this. Let's use this stock.

[David Giraud]

No, no, we really. Look, we, as a team. I have a team of three APMs, and we, we talk about as a team and we, you know, what are our highest, biggest or highest conviction ideas? Okay, let's share those with the. With the. With the, with the.

[Josh Brown]

I think it's. I think it's great.

[Michael Batnik]

David, you know, you're on the. You know what we call this show? We call it tcaf.

[David Giraud]

Oh, okay. Okay.

[Josh Brown]

Yeah, that's the other thing I wanted to talk to you about. Copyright infringement. When did you launch? When did you launch your tcaf?

[Michael Batnik]

I think we were first.

[Josh Brown]

We might've been.

[Michael Batnik]

Oh, my gosh, we're all friends in this room.

[David Giraud]

Oh, I didn't even think about that.

[Josh Brown]

When did you launch, though? Seriously? We're talking about it later.

[David Giraud]

June of 23. June of 23.

[Josh Brown]

Oh, you're definitely going to be in litigation. Okay. We started the podcast in 21. When did it come to our attention that there was a TCAF etf?

[Michael Batnik]

Graham brought it to me, like two years ago. I guess when you launched it.

[Josh Brown]

Well, listen, when you do well, we take credit for it, so it's all good. And when. And when you don't, we disown it. All right, we ready to go? This is an important man sitting across from us.

[Michael Batnik]

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[Josh Brown]

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 opinion 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. 177 Ladies and gentlemen, welcome to the compound. And friends, welcome to all the first time listeners. We appreciate you. You just discovered the show. This is America's very best investing and financial podcast. My name is Downtown Josh Brown with me as always, my co host Michael Batnik. Michael, say hello to the folks.

[Michael Batnik]

Hello. Hello.

[Josh Brown]

All right. And we have a. We have a full house here today. Daniel's here. Duncan, John, Nicole is here. How you guys feeling? Feeling good, Feeling good. Podcasting is an audio medium. How are you feeling, Duncan?

[David Giraud]

Feeling great.

[Josh Brown]

All right. The nodding doesn't really help most of the viewers. All right. And we have a very special guest first time appearance here on the Compounded Friends. Staring at me bewildered. What in God's name did I say yes to? His name is David Giraud and David is a portfolio manager for the Capital Appreciation Strategy including the Capital Appreciation Fund and the Capital Appreciation ETF Equity ETF & Co portfolio manager for the Capital Appreciation and Income Fund at T Rowe Price Investment Management. David, welcome to the firm.

[David Giraud]

Thanks for having me.

[Josh Brown]

I'm going to tell you some other things about yourself. You are also the head of investment strategy and the chief investment officer for T Rowe Price Investment Management. So that's like an umbrella title. You're the guy.

[David Giraud]

I guess so.

[Josh Brown]

Okay. Six time nominee, two time winner of Morningstar's Outstanding Portfolio Manager of the Year award in your category, which is moderate allocation. And your Fund has won 22 best fund awards from Lipper. Quite a. Quite a resume, sir.

[David Giraud]

Thank you. I appreciate that.

[Josh Brown]

Which of those are you most proud of? The Lipper, The Morningstar? Like what are you. I know you don't do it for like win awards, but what were you the most excited about?

[David Giraud]

I don't know. I don't know. I think the, the Lipper Awards, the quantity is, you know, the consistency, the amount. That's pretty. I mean, the amount. Yeah, absolutely.

[Josh Brown]

Is there anyone else that is always in the running for the same thing and you keep beating them or does the category change a lot?

[David Giraud]

There's. I think there's about 100 funds in the strategy and it's not. It's just basically who has the best performing in three, five or ten year periods.

[Josh Brown]

Oh, it's not subjective. You can't take somebody out to lunch or anything. It's.

[David Giraud]

I don't think so.

[Josh Brown]

Okay, all right, so you're, but you're crushing, you're crushing the field. That's 22, 22 years. That's Brady esque.

[Michael Batnik]

Who would you say is your biggest rival? Name names.

[David Giraud]

Don't think, I don't think we have a rival that I'm aware of.

[Josh Brown]

Not like a direct head to head rival.

[David Giraud]

Yeah, that's true, that's true, that's true, that's true.

[Josh Brown]

Okay, I want to ask you a little bit about T. Rowe Price because you've been there for a long time. When did you start?

[David Giraud]

98.

[Josh Brown]

98. T. Rowe Price has been around since the 1930s and it's one of these fund companies that came along in the wake of the depression and the crash of 29. A lot of people don't know this. Prior to the crash of 29, the predominant vehicle for stock ownership was the closed end fund. The problem is they were all levered and they all went away. And the only funds that survived, by and large were the open end mutual funds that were not using leverage. I think MFS was one of the early ones. I think Fidelity was around then or.

[David Giraud]

Okay, I'm not sure, I'm not sure. But when Fidelity was around.

[Josh Brown]

All right, but T. Rowe Price. So you guys are almost 100 years old and also one of the largest publicly traded asset management firms. I think you're the sixth largest and 1.61 trillion in assets under management. So from the inside, what is, what is special about T. Rowe? Why have you stayed there your whole career? What do you like about it?

[David Giraud]

Well, I think the culture is, it's a culture of. It's a culture that really puts investing focus. We don't have an insurance business, we don't have a bank yet. We all go to work focus on investment management every day. When I started in 1998, there were a lot of investors who were very, very long term focused. And that was, that was kind of how it worked when we went to meet with management teams or I was an industrial auto analyst. A lot of long term questions and in the last 26 years the market has really changed dramatically because of passive taking a lot of share, put active under a lot of pressure and really as a result of that and hedge funds become a much larger part of the market. There's very, very few people who are kind of doing good long term fundamental research like Tiere Price anymore. And that just wasn't true 26 years ago.

[Josh Brown]

It's more like quantitative these days and index like construction of portfolios, less shoe leather.

[David Giraud]

Some quantitative or some really short term. Right. It's like what's the quarter going to be? Is it 3 or 4% organic growth? Right. And I'm going to make a big bet on outcome based on some credit card data I have or some very, very short term focus. And actually I would argue a lot of the industries, intellectual capital has been focused on trying to solve that really, really hard thing to fix. Really to really get an edge on.

[Josh Brown]

Yeah.

[David Giraud]

And so that that area of longer term Investing, thinking out 3, 5, 10 years is really, you know, there's not.

[Josh Brown]

A lot of competition going to raise a this quarter.

[David Giraud]

Yeah.

[Josh Brown]

Is the, the new question that people are not new the question that people are most preoccupied by?

[David Giraud]

I think it's fair.

[Michael Batnik]

Do you still feel like you're setting prices as the active manager?

[David Giraud]

Yeah, I think we are setting. We still are saying, but it's not in every circumstance anymore. You do see situations where there's a lot of volume on a specific etf. You see the correlation between those names in that ETF really rise dramatically. I always remember a Great story in 2016. Hillary Clinton was tweeting about high drug prices and it was an index that covered all drug companies. Well, inside that drug index was going to be called Zoetis. Zoetis, obviously Animal Health. Animal Health. Thank you. And the stock went down almost as much as everybody else. Even though she wasn't tweeting about the price for cattle.

[Josh Brown]

It was in the index because it was spun out of Pfizer.

[David Giraud]

Very good.

[Josh Brown]

They didn't have a chance to remove it yet and put it in the. I don't know. Where would you put it?

[David Giraud]

No, it's still in the index. It's still a pharmaceutical company, but it.

[Josh Brown]

Got treated like it's doing diabetes medicine.

[David Giraud]

Right, exactly. So you do see situations where. Or there's a time where when Trump got elected and when real estate was still within financials, the real estate, which actually should have done poorly when Trump came into town, came into office in 17, it went up just like all the other financials. So when you have lots of volume correlations in those sectors and those ETFs can get pretty high.

[Josh Brown]

But it sounds like an obvious edge though too.

[David Giraud]

Absolutely.

[Josh Brown]

For somebody that is not an indexer and somebody that's making decisions, it's like, oh look, the index money has this wrong today. Yeah, let's, let's capitalize.

[Michael Batnik]

Do you Think like it's taking longer for value to accrue to names that you find value in. Are there examples of. We've held this for three years and my God, it's still undervalued. The market participants are not seeing the value that we are or you not concerned so much with that?

[David Giraud]

We don't see that very much. I mean, again, what we're talking about is more like a short term kind of event. Right. A week, a month here. The reality is if you can find companies that are creating value at a healthy rate from earnings or cash flow, price will follow. The price will follow it, just not in every case. There's some companies that we own that we were a little surprised at where they're trading even after the last couple years. But I always talk about GE. It was a. GE is a company that really went nowhere for like three years. Then it went up 4x in two years. Right. So you just never know when those inflection points are going to be. Sometimes you just gotta be patient.

[Josh Brown]

You know what seems really hard to me and to Michael, we talk about this a lot. Even if you nail the earnings, you don't know the sentiment piece that's going to decide what the multiple will be. And some of the companies I think about often in this framework are like the auto manufacturer. So for every year of my career, I'm in the business 25 years. For every year of my career, the PE multiple has gone down basically one point and now they're six.

[David Giraud]

Yeah, yeah.

[Josh Brown]

But when I started in the business, they were 20, like in a good year. Um, and, and that's when Chrysler was dcx, Daimler Chrysler. So like you can get the earnings right in those companies year after year. But no one's going to tell you. We used to value these things at a market multiple 16 to 20 and now they're going to be six.

[David Giraud]

Yeah.

[Josh Brown]

On the way to, I don't know, one times earnings. So how do you know? Because when you say like if you, if you get the fundamentals right, eventually the value will accrue. Sometimes. No, though.

[David Giraud]

Well, think about what causes a company's multiple to compress dramatically over time.

[Michael Batnik]

Margins.

[Josh Brown]

It could be margins disruption, risk.

[David Giraud]

Disruption, risk. The growth rate slowing, increased competition, poor cap allocation.

[Josh Brown]

They have all of those things.

[David Giraud]

Yeah. You would have all. Yeah, right. All those things. Or multiple of those things kind of drive multiples lower. Right. If you have a company that doesn't have any of those things. Right. The odds that you'll wake up in five years and the Multiple is five points lower are tend to be pretty low. So just try to. Again, I always think about my job is thinking about earnings power five years out and think about where is that multiple likely to go. Why is the multiple multiples go higher? When organic growth gets higher, cash flow conversion gets better, management gets better. You want the double whammy in many cases of multiple expansion plus kind of nice earnings growth. Some of our big winners, the Thermo Fishers of the world, the Riveteys of the world, the Marsh McLennan that had that, you know, we bought them at 12 or 13 times. They compounded earnings at a 12, 13% clip. But then also their money got rerated and they got rerated and that's where you turn. That's where you generate kind of high teens kind of return.

[Josh Brown]

So I wanted to ask you about your category in particular. Your, your fund is in the moderate allocation category. T. Rowe is about 42% in individual investors, 58% institutional investors. Do both of those groups utilize a moderate allocation fund in the same way? What's the pitch to somebody allocating a portfolio? Why they should include the capital appreciation strategy that you manage?

[David Giraud]

Well, I think the easy the pitch would be over time we've added alpha both on the equity side and the fixed income side. And that we're not.

[Josh Brown]

The moderate allocation is both.

[David Giraud]

Yeah, sorry. Modern allocation would be usually a 60, 40 allocation to equities and 40% to fixed income. Right.

[Josh Brown]

Okay. So that's your universe, that's your world you think about.

[David Giraud]

Yeah, there's range of, let's call it 50 to 70. Right. Some of the more conservative would be more like 30 to 50. So I would say the argument would be, hey, we've added alpha over time on the equity side, added alpha on the fixed income side. And we don't also have a static portfolio. When equities get really cheap like they did during COVID or during the end of 18 or during 2011, we can increase the equity weight and reduce the fixing.

[Josh Brown]

You have three ways you can beat your stocks can beat the stock market, your bonds can beat the bond market, and you can beat the 6040 by going 70, 30, 80, 20 at opportune times at the right moment. Yeah, okay. All right. It's a great way of thinking about it. Speaking of alpha, this comes from T. Rowe Price's own literature. We'll assume the data is accurate. John, why don't you throw that? Why don't you throw that up? So I thought this was an interesting way of viewing this and you can see it's disclaimer to completely like completely wrapped in bubble wrap. And of course that will all make the show as well. We will read that entire disclaimer later. It's almost talmudic.

[David Giraud]

We have a lot of lawyers at Tira Price. Okay.

[Josh Brown]

But the big picture is with a disclaimer, guys, this says more return than comparable passive funds across more periods. This looks at 10 year periods rolled monthly over the last 20 years ended June 2024. T. Rowe Price has outperformed passive in those 10 year periods. Has outperformed 70% of not passive, 70% of pure funds. And then it's beaten passive. What's this other, what's this other one saying? Average additional return over passive peer funds across all periods analyzed 0.83%. I guess that speaks to the research process at T. Rowe, the longer term focus. What else is in that secret sauce that enables you guys to be able to do that? It's pretty impressive.

[David Giraud]

Yeah. Again, I think it's focus. It's having a little bit. We're doing something different than everybody else.

[Josh Brown]

Right.

[David Giraud]

We're not not in the game of trying to call the quarter. We're not trying to decide if organic growth is going to be three and a half or four. We're not shorting stocks. Our focus for the most part is trying to find companies that we think can compound wealth over time, whether it be a value stock, a growth stock or something in between like a garpy stock and just find things that we think there's a high probability that can beat the market. Again, I think what Tyra would be known for would be companies that tend to have good management teams, good capital allocation, maybe a little bit of lower earnings volatility relative to the market. And we take bets. I think one of the problems with passive manage or active managers in general, I think and one of the reasons why passive takes so much share over time is a lot of people don't take bets. It's really hard to beat the peers and overcome your fee structure if you're not making bets. I make bets. Most of the people in T. Rowe Price makes bets. And that's the only way that statistic.

[Josh Brown]

Part of making bets though is you need a corporate culture that's forgiving when the bets don't pay off.

[David Giraud]

Yeah.

[Josh Brown]

And when you say people don't make bets with good reason. If you make bets and the bets are wrong, you're looking for a new job. So you need a corporate culture that allows you to make a mistake or have the wrong weighting or something like that. That's definitely critical.

[David Giraud]

Exactly. And I think what you have to. Is there a process error or is it just some kind of. Did you make a process error or was it just, hey, you know, it's a gumball machine. There's seven red balls and there's six blue balls and you know, and, And a blue ball unfortunately came out. Right? Yeah. Is or did you make it some kind of structure? We, we spent a lot of time on process versus kind of the research.

[Josh Brown]

Flawed or just a bad outcome.

[David Giraud]

Exactly.

[Josh Brown]

Yeah. That makes it that it doesn't make a difference to the end investor, but it does make a difference internally on an IC where you're all trying to get better at your jobs.

[David Giraud]

Absolutely.

[Josh Brown]

Yeah.

[Michael Batnik]

You guys are making bets. We'll get to this later. But like you are 13% underweight information technology, 6% underweight communic. And those have been the drivers of returns for the past couple of years. So you guys are not shy about having conviction.

[David Giraud]

I will say, I think that we are actually again, sometimes because we are a balanced strategy, sometimes those numbers might be skewed by our fixed income exposure. So I apologize for that. So what you would find today is we are moderately overweight information technology, but you would see a very large underweight financials where financials have rallied dramatically.

[Josh Brown]

Still rallying. Yeah.

[David Giraud]

Traded very high valuations and you know, we don't, you know, we, we were buying Goldman Sachs a little more than tangible book value.

[Josh Brown]

Goldman Sachs ain't selling for that anymore.

[David Giraud]

At two times tangible fixed value, it doesn't look that good to us.

[Josh Brown]

Right. All right. We're going to do some stocks later. I want to start with. I don't want to bury the lead. So I read the, I read the Barons Roundtable and there were several people on there that are not bullish at the moment and you're one of them. And I don't know, what did you pick out from the stuff that David.

[Michael Batnik]

Was quoting this in credit to you? It's interesting to see a portfolio manager, long only asset manager. And I mean I don't want to read what you wrote but lay out the case. Why are you seeing things a little bit glass half full coming into the year? I'm sorry, half empty.

[David Giraud]

Yeah, yeah.

[Josh Brown]

And did you get any calls from corporate like. David, you're missing the game here. We were trying to raise money in stocks.

[David Giraud]

No, I think they. Let me say what I need to say. Okay.

[Josh Brown]

We want to hear the case directly from the horse's mouth. Absolutely.

[David Giraud]

So one of the mistakes I think a lot of people make is when they talk about the market, they'll just say, hey, the market's 22 times. Right. That's expensive versus history. The mistake I think a lot of people make, though, is that the market mix has changed dramatically. Back in 2006, when I first started measuring the capital appreciation strategy, 45% of earnings here for financials, energy, materials.

[Michael Batnik]

Wow.

[David Giraud]

Very low multiple sectors. 45% of earnings today, it's like, it's like not half, but 25%.

[Michael Batnik]

So not apples to apples.

[David Giraud]

It's not apples to apples. The mix of the markets change dramatically.

[Josh Brown]

Yeah.

[David Giraud]

So you just can't compare, you know, just like you can't compare the market when their market was driven by railroads, you know, a long time ago, or auto companies. Ludicrous. You have to compare Apple. And so the way we look at it, we kind of divide the market up into different buckets. Right? Traditional growth stocks, about 44% of the S&P 500, they're trading about 32 times earnings versus historical 29 times earnings. So a little expensive, but not crazy.

[Josh Brown]

Because you're comparing growth stocks to growth stocks to growth.

[David Giraud]

Exactly. Over a reasonable period of time. But heavy cyclical companies, like companies that will have earnings down 20% in recession. Banks, maybe some asset managers, you know, regional. You know, regional banks, they're trading about 17 times earnings in the last 10 years, is 12 to 13 times.

[Josh Brown]

What are they pricing in? Their pricing, mass deregulation and lower rates.

[David Giraud]

They're. They're pricing in. Actually, they're pricing in higher rates, stay higher. The economy is great. And that.

[Josh Brown]

Yeah, the banks like higher rates, not lower rates.

[David Giraud]

They do. They do.

[Josh Brown]

Like, people don't understand this, and we all have to relearn it every few years.

[David Giraud]

They do. They do like higher rates. And they are. And their fundamentals right now are very good. But you're getting kind of close to what we, you know, net interest margin is basically what they. The difference between what you. You get on your deposits from the bank and what they loan out. And that Nim, if you will, is getting close to kind of record highs. And so you have a weird situation with the banks. You're kind of putting a peak multiple on peak earnings. Not exactly. You'll get there in 26. But when a bank that historically trades for 9 or 10 times earnings is trading at 13 or 14 times. Not just 13 to 14 times normal, 13 to 14 times a peak.

[Josh Brown]

Here's how it.

[David Giraud]

That's a little scary.

[Josh Brown]

Here's how I'd argue with you though. Is JP Morgan a bank or is it an asset manager or is it a wealth manager or is it a, you know what I mean? Like it's a bank because you saw about apples and I understand it's a bank. But I'm saying did the banks have these businesses and were these businesses as profitable two and three generations ago when they were 12 times. You're saying they.

[David Giraud]

It's a very, it's a very good question. But I, I would argue even if you go back five or six years, this is not, I, I, I think anytime there's something that's, someone throws out a number, it's, it's really important to think about the context around that. And I think your point's a good one. But you know, JP Morgan had the Treasury Management business back in 06. It had Asset Management back in 06.

[Josh Brown]

I think it's much bigger now though.

[David Giraud]

I don't, I, I would, I, you know, they, I think they've historically generated about half of their profits from kind of net, net interest income and about half the profits. I'm not sure. It's dramatically different. I mean they've grown loans a lot faster. So that's, that's, that's kind of driven that net interest income.

[Michael Batnik]

Well, they're, their dominant position in the.

[Josh Brown]

Market is a lot, I guess like 15 years ago, bank of America didn't own Merrill Lynch. JP Morgan hadn't gone as far in securities wealth management as they are now. That I'm not saying they're not banks. I guess what I, maybe what I would think is if ever you were to re rate these banks, maybe this would be the time because of how far they've gotten into some of these other businesses.

[David Giraud]

Well, again, I think the business that for JP Morgan has become much bigger versus 6 as the investment bank.

[Josh Brown]

Yeah.

[David Giraud]

And again that tends to be a lower multiple business over time because they've taken a share. They've taken a share, they've done a good job. I mean JP Morgan is the best run bank in this country, but it's still a bank.

[Josh Brown]

Still a bank.

[David Giraud]

Still a bank. A lot of volatility, peak earnings, peak net interest margins.

[Michael Batnik]

So we're drifting. Why not? Bullish. What else do you see in front of you?

[Josh Brown]

Can I, let me, let me quote you. All right. And then you can react to your own words. You said. I don't. This is what grabbed our attention. I don't mean to start this conversation on a down note, but we are probably as negative about the s and P500 as, as we have been in a long time. Based on our company by company analysis of where stocks will trade by 2030, our five year forward total return estimate for the s and P500 is less than 5% a year. You go on to point out that the market's 22 times 25 estimated earnings, 26 times free cash flow. And then you're breaking down the components of the index and you're seeing a lot more expensive stocks than I guess others might be.

[David Giraud]

Yeah, I think everybody kind of acknowledges the market's expensive. I think it's just what's really interesting is like, I think we think about what's going on right now and what you think about. Just think of the last five or six years. Just because things feel good today, they may feel horrible in a year.

[Josh Brown]

Oh, sure, think about switch flips real fast too.

[David Giraud]

And so the market is a lot of extrapolators, I like to say. And, and you're extrapolating. Things feel good today. They're always going to feel good during COVID They feel bad. They're always going to feel bad. Right. And it's just the future is far more uncertain than the market and most market participants understand. And so when you're paying a high multiple for things feeling good today, you know, what's going to is, you know, you shouldn't be convinced that things are going to feel good in a year or two years in the future. I mean, at the end of 17, everybody felt like, great with economy. We had Texas coming. Market was down in 18. Right. And at the end of 18, we thought we're going to go into recession. And then people thought, yeah, we're going to recession. Oh no, 19, no recession. 19 was a big year. Market's like 29, 30%. Right. Everything's great. Covid. Right. World's going to end. Oh, market's up 15%. Growth is going to take over the world at the end of 21, gross debt at the end of 22. Now growth back on. It's just if you just, if you think about, if you put all your eggs in the basket of like, I'm going to bet on what's working right now systematically, that kind of momentum strial, that's a money loser.

[Josh Brown]

It's a very human trait. There's a great George Orwell quote that comes to mind and it's about politics, but if you just close your eyes and think about this as an investor, it's almost too perfect. He said power, worship, blurs political judgment because it leads almost unavoidably to the belief that present trends will continue. Whoever is winning at the moment will always seem to be invincible. And if the Japanese have conquered South Asia, they'll keep South Asia forever. If the Germans capture Tobruk infallibly, they'll get Cairo. If the Russians are in Berlin, not long till they're in London. This habit of mine leads also to the belief that things will happen more quickly, completely and catastrophically than they ever do in practice. That quote came to mind this week. In a political context, it looks like Elon is very rapidly running through government until he basically pulls every lever. But if you think about that from an investing standpoint, right at this moment, it feels like to be out of stocks, especially be out of growth stocks. It's like, what, what are you looking at? Like, what are you even paying attention to? How could you be out? And it always feels that way in those moments.

[David Giraud]

It does.

[Josh Brown]

Where it's about to change.

[David Giraud]

And that's why I think that's why we're not trying to predict where a stock's going to be today or tomorrow or next week. That's not. We have no edge at all.

[Josh Brown]

But you're Talking about a five year fault lower total return estimate of less than 5%. How do you calculate that?

[David Giraud]

We literally go through every we go through the top 100 companies in the market, plus another 50 companies that we model as a team already because we own the stocks. And then we do a couple sectors that are more a little bit easier, like Staples or Utilities or energy based on our energy price assumptions. And we basically build models out for all those areas, the sector or the company. We look at earnings 25 through 30. We look at what the right multiple was going to be for that company at that time, based on history, based on where the growth rate is going to be, really what we think the free cash conversion is going to be. And we add it all up essentially, and you kind of get a price target for the market at the end of the decade. Yeah, about 72, 7300, which is not too far away from where we are today. And that's kind of. And again, when we were doing that analysis in the summer of 2022, when everybody was kind of the economy's definitely going to go into recession, every celebrity CEO was calling for a recession. You know, that kind of analysis was spit out like a 12, 30% kind of return.

[Josh Brown]

What could make you wrong about that return assumption AI being more profitable for the rest of the market? Or oil prices sustainably lower because of something the Trump administration does to create more supply. Corporate taxes, corporate tax rates going into the teens. Like what, what would make you say, you know what? I don't think it's 5% a year anymore. I actually think things have changed and maybe it's 7% a year.

[David Giraud]

I mean, I think that there'd be a number of things. Let's say our AI assumption for 30 is for GPUs instead of 300 billion is 600 billion. Right.

[Josh Brown]

Okay.

[David Giraud]

That moves the needle on. So that would be. If I said the market that is going to be 120 billion this year goes to $600 billion. That's. That would move the needle. That would, that would, that would, that would. If the productivity from AI is so massive to your point that we, you know, we. That it drives unemployment from 4 to 7, but it drives margins for companies dramatically higher and substituting labor for software or software for labor. Yeah, that could be positive.

[Josh Brown]

Well, you have, you have a name in your portfolio that most people are not thinking of as an AI name, but it's an automation name. And the AI and automation themes are going to merge. Physical AI will be the buzzword of I think the next half of the decade. Rockwell Automation. I own some robotics related stuff. There is a universe though where this AI fever spreads to actual corporate profits and people are like, hey, remember all that investing we did in GPUs and cloud computer. Well, here's what it turned into. We're beating earnings on a regular basis now by 5, 10% structurally. You could see where you would say, oh, maybe people weren't too bullish at the end of 2024. Maybe that made more, more sense than we thought.

[David Giraud]

Well, I think what would be, what's interesting to me is if you think about the areas, who would be the area we've kind of. We know AI works, we know AI works has incredible.

[Josh Brown]

Speak for yourself.

[David Giraud]

We know where it works is like a GitHub copilot where essentially you were replacing a computer programmer for 19amonth or 50% of a computer programmer. The ROI on that is off the charts. And so what you would say is there are sectors which were overweight, by the way, where you'd say that have a lot of programmers where their margins could be and maybe it will already are starting to show some signs that that's actually a positive. Software companies have the largest amount of their revenue or their cost structure potentially to be positively impacted by AI. Not only do they potentially have revenue growth, acceleration as they introduce AI products to make their customer productive and get compensated for that. But their cost structure could go lower over time as the cost of programming or programming goes lower as well.

[Josh Brown]

Do you think that's behind the software rally of the fourth quarter of last year? Is people saying no matter how many chips people buy, the cost of running a software company is going to trend lower because of ubiquitous AI?

[David Giraud]

I don't think it is. I think honestly there was just a sense that first, sometimes in any sector where there's one dominant theme, people just chase that dominant theme and they get left. A lot of really good companies get left behind and software companies just got left behind. And by the end of the year people are like, oh, these guys aren't going to be killed by AI. Maybe there'll be a benefit. Because that was also the time you.

[Josh Brown]

Saw Salesforce saying, hey ServiceNow, Salesforce started ripping.

[David Giraud]

We got a Gentic AI potential. Maybe we're not a loser, maybe a beneficiary of this stuff. So I think that was kind of what drove some of the rally in Q4.

[Michael Batnik]

So David, if you are forecasting 5% returns for stocks in the next couple of years, surely you must be more optimistic on bonds which are offering nearly the same rate at a third of the volatility.

[David Giraud]

Yeah, actually much, much less volatility. I mean, I think the only challenge. I wish it was that easy. Unfortunately, spreads are tight. So if you think about a bond and you own a 10 year bond and the spreads are 100 and they go to 200bps because they revert to normal or there's an economic downturn, the bond prices can go down, all else equal. So spreads are very tight in leveraged loans. They're tight in high yield investment grade, the ag. So yes, you have less risk, but it's not like you have no risk, right?

[Josh Brown]

You have double the risk because you're running both. And if the reason they start to sell both asset classes off again is because the Fed is not cutting rates or oh my God, they might have to hike rates, you're not getting that safety on the bond side. Uh, cause we, we lived through that in 22 and nobody wants to relive that.

[David Giraud]

So no, the one, the one thing that we do have again a lot of our peers don't for some reason is leveraged loans. Leveraged loans are top of the capital structure, floating rate in nature debt. And you know, they did really well in 2022, they did really well in.

[Michael Batnik]

2023 because credit did really well.

[David Giraud]

Well, credit did well. But also they are, they benefit at higher rates. They're the one thing in fixed income when rates go higher. Floating rates. Exactly.

[Josh Brown]

Yeah.

[David Giraud]

So you get, you know, if, if rates go from, let's just say, let's say rates go from.

[Josh Brown]

Wait, how are you getting your loans? Exposure. You're. But you're not buying an etf.

[David Giraud]

No, we're buying loans.

[Josh Brown]

You're like out in the market buying loans.

[David Giraud]

Yeah.

[Josh Brown]

As part of your fixed income, there's.

[David Giraud]

A trillion dollar term loan B. Yeah. Leveraged loan market that we, we invest in.

[Michael Batnik]

So David, I don't know about your mandate, but T row has been involved in privately traded equities, privately traded companies in the past. Where do you stand on private credit, which is an exploding category?

[David Giraud]

It is.

[Michael Batnik]

And I mean, that seems like a decent fit for your strategy.

[David Giraud]

I mean, I guess the issue is I think no one really knows what they own in private credit. I don't think the investors in private credit know what they own. I mean really, what you tend to own in private credit, you are buying a eight times levered, maybe a mid market kind of company, maybe a little bit more volatility in your ebitda and you're hoping that it turns out okay. You know, these are not household names. These are not companies that any of us would know.

[Josh Brown]

No, no, no. If it doesn't turn out, out okay, you just negotiate. You just like, you kick, you keep kicking the can, it's fine.

[David Giraud]

Well, that, that's actually been, you know, unfortunately that's been part of the, that's been part of the game. Unfortunately, that's part of the game.

[Josh Brown]

I know. I'm waiting for that part of the game to not work out as well as it has so far. So far it's been fine.

[Michael Batnik]

But these are top of the stack as well.

[David Giraud]

They are top of the stack. But again, if you're levered eight times and you have an asset that's worth 10 times, your EBITDA falls 40%, your fixed income is kind of under underwater. Right. Very, very easily.

[Josh Brown]

Yeah.

[David Giraud]

So you got to make sure that you're, you know, and you know, and also the other thing about private credit is what we're seeing is that, you know, in 21 and 22 and 23, you know, the, the traditional leverage loan market kind of pulled back from the market. So credits that should have gone to the term loan B market went to the private credit market and you're seeing repricings there. So you know, some of these guys in private credit were getting, you know S plus or sofr plus 600, 650, 700.

[Michael Batnik]

What is it now? 400?

[David Giraud]

Yeah, yeah. You see it? Yeah. Some of it's actually just getting refinanced into our market at SO350.

[Michael Batnik]

There's too much money chasing too few.

[David Giraud]

Companies in private credit. Absolutely.

[Josh Brown]

What do you make of the argument though? That it's nothing really to worry about. Because these are like some of the best investors in the world and if they're doing a direct lend to a company, they can make sure it turns out okay. They can renegotiate terms, they can extend, they can like as opposed to a whole class of bond investors where going to court, goes to court and then everyone loses something.

[Michael Batnik]

That, that part resonates with me. What about you?

[David Giraud]

I would argue that again, these businesses are smaller, less stable.

[Josh Brown]

Yeah.

[David Giraud]

More levered. You know, if you're leveraging, we make.

[Josh Brown]

Metal fasteners in Wisconsin.

[Michael Batnik]

Wait, but it depends on the size. If this is a $250 million EBITDA business, that's not a, that's not nothing.

[David Giraud]

A lot of them are smaller than that. A lot of them are smaller than that.

[Josh Brown]

Yeah.

[David Giraud]

You talk about a lot of $100 million EBITDA businesses and again, eight times levered. I mean if you're eight times levered and your, and your cost of debt is 11%, I mean you're, that's, that's a lot.

[Josh Brown]

That's a high hurdle.

[David Giraud]

That is not a great company. That is not a. Yeah, because you.

[Josh Brown]

Wouldn'T borrow at that level if you didn't have to.

[David Giraud]

No. If you think about the companies that we own in leverage alone, land insurance brokerage companies, software companies, a lot of business services companies with, you know, billion dollar Ebitdas in some cases where you have true 20 times enterprise value and you have six times leverage and you're, and they're, they actually generate free cash flow.

[Michael Batnik]

So getting back to your 5% target, have we ever had a 5% five year period in equities without a bear market? Probably not.

[David Giraud]

Well, you know, it's a good question. I haven't, I haven't thought about that.

[Michael Batnik]

Let's just assume that's true. Like.

[Josh Brown]

Well, you don't have, you don't have a lot of single digit gain periods at all.

[David Giraud]

That's true.

[Michael Batnik]

Right.

[Josh Brown]

You have a lost decade that we can all recall because it's in recent memory.

[David Giraud]

Yeah.

[Josh Brown]

That's two bear markets, both 50% bear markets. One ends in 02, the other one ends in 09. That's all within a seven year span of time, give or take. And even that's not a. It's a 0% return for the S and P over that decade. But to Michael's point, like we don't typically get rallies in the stock market that are 5%.

[Michael Batnik]

Doesn't happen.

[Josh Brown]

So like it's more like 10, 10, 20, negative 18. Like that, like that would maybe be how you get to like a single digit.

[David Giraud]

I mean that's very, very possible. I mean, I just, I go back to the point that think about, think about the end of, the end of Titanic, the movie. Thank you. That's a great film.

[Josh Brown]

Why wasn't there room on the thing for him to climb out of the water?

[David Giraud]

I think they've tried, I think they've done tests on that. Right?

[Josh Brown]

No, but couldn't he go on her back Wouldn't have floated. This is just physics. Like, oh, sorry, you just float here and I got the plank. I don't know. No, I understand. It's like a very romantic.

[David Giraud]

Very romantic.

[Josh Brown]

Yeah. Still love you, Jack. Can we wait, can we do his. Put his chart up while he's answering this question. This is your current asset allocation. Yeah. Chart three. Is this you?

[David Giraud]

Yeah, it looks like me.

[Josh Brown]

Okay, so you're 59 and a half percent U.S. stock. And then I guess that's Treasuries, the.

[Michael Batnik]

Dark blue, dark U.S. bonds.

[Josh Brown]

U.S. bonds, yeah.

[David Giraud]

That's not just Treasuries.

[Josh Brown]

Not just Treasuries. It could be corporates too in there.

[David Giraud]

And I think that would be loans too.

[Josh Brown]

Okay, and how, like, how much could this fluctuate? Like could. In a, in a cove, in a pandemic? You're like, this could go from 59% to 69%.

[David Giraud]

Yeah, I mean, I think equities we put during, during, during the COVID market decline in kind of end of February to March, we put nine and a half billion dollars to work in a month.

[Josh Brown]

Oh, that's awesome.

[David Giraud]

Yeah, we, you know, that was, you.

[Josh Brown]

Know, inflows or outflows in March, April.

[David Giraud]

That we had $400 million outflows. And we put nine. Because we started, we had, we came in.

[Josh Brown]

See that's like when you have like that allocations, cash, fixed income, you can do that.

[David Giraud]

We had 15% of the portfolio in cash and Treasuries and we took that, we sold some Treasuries and we bought cyclicals. It's killer. And that worked out well.

[Josh Brown]

Okay.

[Michael Batnik]

How close do you follow your company's earnings?

[David Giraud]

I listen to every single call, every single Call, we listen to the earnings, we do a follow up call with the management team, we Rewrite, underwrite our five year IRRs. So I'll do 135 of those.

[Josh Brown]

You talk to sell side analysts who are participants in those Q and A's. Yeah, we will. You will talk to them.

[David Giraud]

Yeah.

[Josh Brown]

Okay. But you're gonna listen to the call too. You're not gonna rely on just sell side research on your names.

[David Giraud]

Oh, no, no.

[Josh Brown]

You guys are on everything.

[David Giraud]

I mean my job, even though I'm a portfolio manager, is I'm the guy in charge of building the 5 year IRRs for the utility space.

[Josh Brown]

Yeah.

[David Giraud]

So, you know, all the members of the team have. Our real job is being analysts.

[Josh Brown]

You know what I always wondered? How come most of the questions asked on conference calls are from the sell side and really only mid and small cap do you hear buy side? And that's only because there aren't any analysts covering them anymore.

[David Giraud]

Yeah, it's funny.

[Josh Brown]

Have you ever wondered that?

[David Giraud]

When I was a young analyst covering industrials, no one told me that. So I just used to get on conference calls all the time and ask, well, you could probably go back, press.

[Josh Brown]

2 and just start talking.

[David Giraud]

I would, I would, I would. I did it all the time. And then someone came saying, no one does it. Dave, what are you doing?

[Josh Brown]

Do you ask questions now?

[David Giraud]

No, I don't ask questions now.

[Josh Brown]

Okay.

[Michael Batnik]

He's too big for that.

[Josh Brown]

Okay.

[David Giraud]

I don't, I don't want to give away what we're thinking.

[Josh Brown]

Well, that was so, that was my. So we're going to go there later when we talk about active ETFs versus. But we'll talk about that later. But to Michael's point, we have a chart price reaction to beats misses. I think we're 2/3 of the way through earning season, give or take.

[David Giraud]

Right.

[Michael Batnik]

So nothing, nothing particularly interesting on the miss side, but stocks that are beating their EPS are not getting rewarded. So I don't know what the average is, but they're, they're on average, they're rising three basis points, which is nothing compared to the 1.16 the prior quarter. 1.48 the quarter before that. So misses are getting punished as they normally do, but beats are not getting rewarded, which speaks to the fact that, yeah, valuations are rich. Maybe, maybe we could use a pause.

[David Giraud]

Here because I think expectations are high.

[Michael Batnik]

Yeah.

[Josh Brown]

And so that would be why that would happen.

[David Giraud]

Yep, exactly.

[Michael Batnik]

Okay, I want to throw up another chart. This is not earnings per se, but I thought it was really interesting. This is from Ed Clissel, an analyst at Ned Davis Research. He shows the percentage of profits from operations for the S and P, the 500, the 400 and the 600. So the large, the mid and the small. And he says a reminder that small caps get about the same percent of profits from overseas as large caps, not the domestic safe haven they used to be. And I saw this and I was.

[Josh Brown]

Like nobody, nobody knows that. I don't know that.

[Michael Batnik]

We always talk about how the smaller companies are more levered domestic to domestic policies and fluctuations and okay, that's wrong. That's just not true anymore.

[David Giraud]

I'm surprised by that. I'm surprised by that because the index for the small cap indexes have a lot more REITs and stuff like that, more financials which would be more US focused.

[Josh Brown]

Maybe it's the industrials in the small cap space.

[David Giraud]

It must be, it must be more.

[Josh Brown]

Industrials versus you don't really have tech there in any major way.

[David Giraud]

No, no.

[Michael Batnik]

So I think the large, surprising the large story around part of the parts of the market that you cover, David, are the re ratings higher and is the market giving them too much benefit of the doubt in terms of anticipating expanding margins from the advent of AI do you think like it's just gone.

[David Giraud]

Too far for the market? Thinking about it, I apologize. I was still fascinated by this chart. Maybe repeat the first part.

[Michael Batnik]

So one of the things that we've seen in a lot of areas that you cover because you're not just a max 7 guy, like you have all sorts of areas in your portfolio, a lot of these companies are getting rerated higher in the anticipation of margin expansion from more productivity gains from AI. So I mean that's, that's, that's the story.

[David Giraud]

I think some of that is but I think some of it is just that, you know, people want, people think the economy's going to get better and they want to own things that have exposure to that. They think the consumer is going to get better. So they're willing to pay 49 times for Costco versus normally paying what if, 35 times.

[Josh Brown]

But what if it's simpler than that? There's just not enough stocks. You and I come from the 1900s. There was a time we do. Do you remember when the Wilshire 5000 could actually fill itself with 5000 stocks? It's give or take 3500 stocks. If you pull out the SPACs and sub $500 million companies that most people can't even invest in. It's like 2,000 stocks. So isn't it just as simple as there is multiple expansion because companies don't come public at the rate they used to and people still need to own equities and we've put more money than ever into these vehicles like every two weeks by.

[Michael Batnik]

Yeah, bye.

[Josh Brown]

I've been saying this for 12 years. People like now so. All right, so let me get this straight. You think like the bottom for the stock market is going to be 10 times earnings like it was historically? It can't.

[David Giraud]

Well it goes back to what we talked before. It's mix. I think if you look at the mix, those gross stocks versus history, you know, there hasn't. There's no kind of like structural move upward in their multiple. It's just they've been kind of that same kind of trading rate that let's call it 25 to 35 range. So if that thesis was correct, the.

[Josh Brown]

Stock shortage thesis, the clear.

[David Giraud]

Yeah, you would see that. You don't see that. You see more of this a traditional kind of up and down.

[Josh Brown]

Doesn't it explain though multiple trillion dollar companies occurring at once when before there was never such thing as a trillion dollar company.

[David Giraud]

I think the trillion dollar companies are explained by the fact that trillion dollar companies have you know, tens upon tens of billion dollars of profits. What's so interesting with the market, with the exception of Tesla, all those companies are trading for lower multiples today than they did.

[Josh Brown]

Yeah.

[David Giraud]

Five years ago.

[Michael Batnik]

So I saw Conor Swan Connors and posted this. This is the forward PE for Walmart.

[David Giraud]

Yeah, yeah.

[Michael Batnik]

Why?

[Josh Brown]

So it's E Commerce.

[Michael Batnik]

It's just going straight. I know but, but it's straight up Walmart AI.

[David Giraud]

Well, I mean, I mean the reality with Walmart is Walmart is a, has a big chunk of their business consumer discretionary that is, you know, likely to benefit if you have a strong recovery. And you know, this is a company that promised apes and EPS growths forever and never hit it. And now they're doing 10 and the market, hey, we're willing to pay 49 times for Costco, but Costco too. Why I think it's. They're massively overvalued.

[Josh Brown]

It's the stock shortage.

[Michael Batnik]

I mean now it is the stock shortage.

[Josh Brown]

But, but, but I'm gonna, you're gonna walk out of here. I'm thinking about it.

[Michael Batnik]

No, no, he's the one here to say sell everything. This, this can age so poorly. Because even though like I don't want to call it a stock shortage, but Josh called it the relentless bid years ago. And he's right. And this is a secular theme. It's not to say that there can't be bear markets because we've had several of them.

[David Giraud]

Yeah.

[Michael Batnik]

But there is an underpinning. Like if you zoom, zoom, zoom out like this is happening. Stocks are getting more expensive.

[Josh Brown]

In the 1980s, nobody you knew had a 401k. It is now the predominant vehicle by which America retires. There's no more pensions, no more defined benefit. It's everything is, is defined contribution.

[David Giraud]

But pensions owned a lot of equities too.

[Josh Brown]

Right. But they are not as prevalent that less companies are offering pensions.

[David Giraud]

But you do, you're just shifting from pensions to.

[Michael Batnik]

So here it is. It's. It's. These are the number of millionaires at retirement accounts at Fidelity hitting an all time high. So it's looking at the number. It's looking at 401ks and IRAs. It's a million combined almost.

[Josh Brown]

So they all have to buy stock.

[Michael Batnik]

Structurally, Americans are like underwriting the American economy because. Okay, because these companies are then taking their stock and using it as currency to do all these transactions.

[David Giraud]

Actually most transactions are not done with most, most are done with. For debt or the cash.

[Michael Batnik]

That doesn't fit my narrative.

[David Giraud]

Sorry, sorry, sorry.

[Josh Brown]

Can I wanna change that could be.

[David Giraud]

The narrative if rates stay high.

[Josh Brown]

All right, so I think, I think we could all, we could all agree that what I'm saying might be true or topic, but it also might not be true at all. Treasury Secretary Scott Bessen said the Trump administration's focus with regard to bringing down borrowing costs is 10 year treasury yields rather than the Federal Reserve's benchmark short term interest rate. This is a Bloomberg story. Quote, he and I are focused on the ten year Treasury. Bessen said on Fox Business, quote, he is not calling for the Fed to lower rates. And then when I read that I said, yeah, I haven't heard, I haven't heard anything about Trump saying anything to Powell on Twitter or at press conferences. Bessant got in his ear and said, sir, we. What you really want is to bring down inflation and not worry about the short term rate. Let's focus on bringing down the price of oil which would take the intermediate term rate down. Some of the pressure in the system from inflation is showing up in that high 10 year. It's ruining the housing market.

[David Giraud]

People can't.

[Josh Brown]

Okay, so that's the first time I think we've heard best and say something policy wise and immediately. It sounds like the smartest thing we've heard in five Years from the Treasury. Not a big Yellen fan. I'm putting my hands up. I want to hear what your take on that is because that's half your portfolio is affected by those comments.

[David Giraud]

Yeah, I think it's very, I mean the treasury yields are a function of the Fed funds futures over a long period of time and some kind of premium at the end, if you will. What I would say is, you know, if you really want to get the, if you really want the 10 year down, the way to get the Fed funds down is to do what the stretch he says, get to debt to GDP back down to 3. I'm sorry deficit GDP back to 3% by 28.

[Josh Brown]

You think that's the source of the term premium?

[David Giraud]

That is the source of the term premium.

[Josh Brown]

You do. Okay, you're saying this emphatically.

[David Giraud]

I'm saying that emphatically.

[Josh Brown]

Okay, interesting. Tell us more.

[David Giraud]

Well, I think you have a situation. Well, first of all, supply. Let's go back to your supply and demand. There is a case that we're issuing a lot more Treasuries today than we were 5, 10, 15 years ago. And the demand, you know, the demand for that is not infinite. Right. And so, but rates are higher though, right? So the more supply you put in there. So if you, if you could go.

[Josh Brown]

Your point, you're making like the Fed cut overnight rates by 100 basis points and the 10 year yield rallied 100 basis points, effectively offsetting that. If you're a mortgage broker you're like, wait, what just happened?

[David Giraud]

I know, I know.

[Josh Brown]

Okay, so continue.

[David Giraud]

Well, when the Fed cuts rates, it's very frequent that the, because that is a positive for future economic growth and future economic growth could be actually, it happens more than you would think where the Fed cuts rates not so stable and the 10 year actually rises.

[Josh Brown]

Okay, so but like that also is a function to your point that there's enough concern about debt and deficits that people are not buying those bonds, therefore rates are structurally higher.

[David Giraud]

Yeah, I think there's a, definitely a case to be made for that.

[Josh Brown]

Okay.

[David Giraud]

The fact that we're running 1.9, you know, you know we felt, I remember during the Trump administration we got to trillion dollar deficits. We felt like that's, that's pretty scary, right? It's got a four and a half percent of GDP.

[Josh Brown]

What is it now?

[David Giraud]

5, 1.9 or 6.4?

[Josh Brown]

6.4. Yeah.

[David Giraud]

So 9 billion.

[Josh Brown]

So you think what Besson is saying has, has validity, but what are we really going to do to lower the Deficit.

[David Giraud]

He can't, he, there's nothing he could do, there's nothing he can do to impact the 10 year rate beyond getting inflation under control, getting deficits under control, and probably not pushing through a whole bunch of tariffs either.

[Josh Brown]

Okay, so I think he's, I think he's got a voice, but I don't think he's pulling the trigger on any of those things.

[David Giraud]

Yep, I agree.

[Josh Brown]

Yeah. Okay.

[Michael Batnik]

David, how much, how much you listen to 130 calls a quarter. I'm sure you have a pretty good sense of how the economy is doing. How much time do you spend on looking at economic data versus just get, getting a painting the mosaic through these, the companies follow.

[David Giraud]

Almost none. Almost none.

[Josh Brown]

That's Peter Lynchian response.

[David Giraud]

Yeah.

[Josh Brown]

We said if you, if you spend 15 minutes, think about the economy, you wasted 13 minutes.

[David Giraud]

Again. It goes back to what we said earlier. The economy today is not necessarily the economy. In a year from day. When the ISM is at 55, where's the likely to be one year from now? On average, 52. When the ISM is at 48, where's likely to be one year? 52. Right. Average over time is 52. It's just there is a mean reverting tendency to the economy. And so if you're always just okay, the economy's great, I got to go buy industrials, that's a bad decision. When the ISM is high and the economy's strong, you should be buying utilities. Counterintuitive, but it makes sense. Right. ISM is at 47, 46. She'd be buying tech and industrials because economy's gonna get better. And this actually can work really, really.

[Michael Batnik]

Well, at least as part of part or not. A bigger part of the explanation for the bull market over the last 15 years, along with Josh's relentless bid theory, is there's really only been one recession outside of COVID over the last. Since the gfc, that was it. There's been a few quarters here and there.

[David Giraud]

There's been a lot of fear. There's 11 when there was a fear. 15, there was a fear. 18 there was a fear. You know, every year I think we said for one.

[Josh Brown]

Well, some would say there have been industry recessions, energy for tech, tech, entertainment. Some would say there have been rolling recessions and some of them are regional, like whatever went on in 15, 16 with oil prices. If you lived in Oklahoma, it was a recession.

[David Giraud]

It was, it was.

[Josh Brown]

Okay, so maybe that's just now a standard thing where not every recession goes nationwide or Maybe that's not really a recession.

[David Giraud]

Yeah, I agree with that. And I think it's also, we become more of a service economy. I think there's only been one year in the last 70 where services went negative. And so if you have an environment where it used to be 60% of the economy was services and now services are 72 or 73% of the economy, the odds of a recession, because that other quarter of the economy that is more volatile, housing, manufacturing, aerospace and defense. Right, that stuff, you know, it's just become a small part of the base. So the risk of recession goes lower over time.

[Josh Brown]

Do you know the smartest people that we've had on this show are all saying some version of what you just said, and I include you in that group. But like Dr. David Kelly was talking about, we're asking like, what's the landing? Soft landing, hard landing, no landing. And by the way, I'm not a hundred, I'm not 100% convinced that we're not in a post cycle economy.

[Michael Batnik]

Rick Reeder said this.

[Josh Brown]

Rick Reeder gave us another version on that, which is in the old days, if they jacked weights up 500 basis points, the manufacturer couldn't borrow money from the bank anymore, which meant inventories would sit there and they would start cutting employees. Name one company, name one version of that that would offset the growth from Apple, Google, none of these companies.

[Michael Batnik]

And how about this? The transmission mechanism that caused sessions, the borrowing, the information that these management companies have happened so much quicker today than it did back then. Think about how the tech companies responded to 2022. They all got religion real quick.

[David Giraud]

I did.

[Michael Batnik]

So do you buy the fact that managers are now better? I mean, I know this sounds so toppy, but that management teams are just better equipped.

[Josh Brown]

You need an exogenous shock. In other words, like a run in the mill cyclical recession becomes harder to imagine.

[David Giraud]

It is. And you know, it's funny, we think about all these, you know, Since World War II, we've been in recession like 11% of the time. Since 8, 1982, we've been in recession like 8% of the time. It's. Recessions are rare as it is. Just, just even, even without any other just it's rare event.

[Josh Brown]

Yeah.

[David Giraud]

And I think, and again, I would argue that for a lot of reasons, the mix of the economy, recessions become more rare over time.

[Michael Batnik]

All right, so are you sure about the 5% number? You want, you want to ratchet that higher?

[David Giraud]

It's actually, it's actually below 5%.

[Josh Brown]

So so I want to. I want to get to a couple of things before we finish up here. I've always wondered this. You all right? So you guys have this long standing, incredible track record on the capital appreciation fund. And then somebody internally at T rows like, we got to get with this ETF thing. Like, this is just. It's how advisors want to allocate. It's how retail investors want. They want daily liquidity. Like, there's tax, loss, benefit.

[David Giraud]

Yeah.

[Josh Brown]

So we have to take these active strategies and we have to reclassify or create a share class or we'll do something, but we must do the ETF wrapper. I've always wondered how a portfolio manager feels, because now, all of a sudden, instead of you having 45 days after the end of the quarter to file a 13F and reveal to Wall street, this is everything we've been buying. This is what we've been selling. Now it's like every day, people can go to the website spreadsheet. Here's our trades for the day. Does it matter? Does it matter a lot? Does it matter a little?

[David Giraud]

Well, the good thing is the cap appreciation strategy, again, it's balanced. It has fixed income equities, you know, a little more cost. On the equity side, the ETF is all stocks.

[Josh Brown]

Yeah.

[David Giraud]

And it's more. It's a larger number of names. And again, for tax purposes, the ETF trades less frequently, too. Of course. So we are not disadvantaging our cash shareholders by having that.

[Josh Brown]

But was that a conversation internally?

[David Giraud]

Yeah. Right. I told people I would not do anything that was not a disruptive product, that had a clear value proposition, and that in any way hurt our existing cashier. We wouldn't do any of those things.

[Josh Brown]

But you're late, which means there was a hesitancy for a long time. Well, you could have done this 12 years ago.

[David Giraud]

The reality, the reason we didn't do it 12 years ago was because TIRO got too big and there were allocation issues at one point, and we split into two pieces, which made liquidity and allocation. So you can own all the companies you want in the size you want. So instead of being at a 1, you said a $1.6 trillion asset manager. I don't, you know, even though that's tier of price, I'm at an asset manager with under $200 billion.

[Josh Brown]

Okay.

[David Giraud]

At, you know, around $200 billion at Turp. So I went with a smaller entity. So we couldn't have done TCAF if I had stayed at TURPA from my Perspective.

[Josh Brown]

Okay.

[David Giraud]

Because I wouldn't be. I would be taking capacity that my cash shareholders had the first right to. Now there's plenty of capacity because I'm the only large cap strategy.

[Josh Brown]

Oh, that's interesting. So now. All right, so now. But so now you don't feel like people are front running the fund knowing what you're actively buying and selling each day? Because everyone's now everyone's out in the open. All the active funds are ETFs or becoming ETFs.

[David Giraud]

And we're, and like I said, we're not, we're not trading every day in tcaf. Again, you can't trade every day in a ETF and still have the tax. There are a lot of advantages to an ETF that you can do things with, but there's not an infinite number of things you can't trade every day and generate. And we've had no taxable gains and we'll never have a capital gain. But if we try to trade every day in tcaf, we would.

[Josh Brown]

So if somebody asks you has your portfolio management style changed since putting the strategy that you've been running for a long time into the ETF wrapper, you can confidently say, other than the fact that it's all equities, no. Like this is what we do. I love that.

[David Giraud]

I love that Larger number of names with slightly different objectives. No fixed income and again an objective not having capital gains.

[Josh Brown]

So let's talk stocks and in Barron's piece you had some of your favorites. I know a couple of these. I don't know. Revity. You'll tell me about it?

[David Giraud]

Sure.

[Josh Brown]

Let's start there. RVTY, it's $113 stock as of the start of the year. What is it? Is it Garpi? Is it value?

[David Giraud]

It's a Garpi stock. It is a life science tool and diagnostic company headquartered out outside of in Massachusetts. It is a company that sold off its industrial and a lot of its applied businesses a couple years ago and really became a software reagent. Immunodiagnostics play, you know, 75% of the business today in terms of profits come from businesses that are basically growing either high school digits or low double digits. And the rest of the business is fine, probably let's call it 3 to 4% kind of growth. But they have a lot of margin room margins are like 28, 29, but they should be over time 35. They've been buying back a lot of stock. There's some optionality around some of the Things they're doing with their, with their royalty business, if you will. So there's a lot of really good things. There's a great CEO and I think this is the company that will probably grow earnings from here.

[Josh Brown]

So you see yourself being in the story for a long time.

[David Giraud]

I do. I think this is a $300 stock.

[Josh Brown]

So you have a. We'll do one more.

[Michael Batnik]

It's 120.

[Josh Brown]

Yeah, we'll do one more. I'll let you pick. You've got ptc, Fortive, Roper Technologies, Becton Dickinson, Thermo Fisher. Those last two, are they basically the same company or.

[David Giraud]

No.

[Josh Brown]

All right.

[David Giraud]

No, they're definitely not the same company.

[Josh Brown]

But they're like medical devices. Medical.

[Michael Batnik]

Well, Thermo Fisher is twice the price. So it's twice as good.

[Josh Brown]

Twice as good. Yeah, that's how it works.

[David Giraud]

Maybe today it is. No, but Thermo is a life science tool company like Reviti is. And Becton Dickinson has some lifetime tools, but it also has, you know, syringes, kind of core Medical devices. Is Roper like water Roper does not water Roper is. It's a basically stock. It's niche software businesses.

[Josh Brown]

Small niche, like a Constellation Software.

[David Giraud]

Yes, but. But faster growth.

[Josh Brown]

Better, but better, better business. Look at this stock.

[Michael Batnik]

Yeah, it looks like one that I.

[Josh Brown]

Crazy, right? This stock's on my list of best stocks in the market almost all the time.

[Michael Batnik]

So you've been overweight. Health care. And health care has been really. I mean it's only a month in. But healthcare has been working this year.

[David Giraud]

It hasn't worked. That's true. It did not work last year. But again, I think you. Again, in an expensive market, people are starting to say, okay, okay, banks, can I buy Goldman at two times book value? Can I buy Costco 49? Everything's picked over. Well, maybe not everything in health care is not picked over. Right. You know, you know, some of the life science tools and managed care, there's some good opportunities. Abbott has had a good run, which we own a lot of. So you know, there is.

[Josh Brown]

You like health care for the coming year?

[David Giraud]

We like health care. Again, it's defensive and again you guys.

[Josh Brown]

Look sector like top down sectors and. Or not really for individual situations.

[David Giraud]

Individual situations. So we have a large overweight in healthcare. But it's not because we like healthcare. It's because we like McKesson, we like Reviti, we like Thermo. Right.

[Josh Brown]

Don't say UnitedHealth. I can't protect you here. Other than John, none of us are packed I do.

[David Giraud]

Like UnitedHealthcare.

[Josh Brown]

Four of your top 10 holdings.

[Michael Batnik]

Four of your top 10 holdings are MAG7. It's such an interesting top 10. I just want to read it so the audience gets a taste of what this is. Microsoft, Amazon, Beckton, Dickinson, Nvidia, Roper, Fortive, UnitedHealth, Revite, Alphabet, PTC. I don't see too many portfolios that look like this.

[David Giraud]

Well, that's maybe why we've outperformed by so much over time.

[Josh Brown]

You're one of a kind. Well, you don't mind. You're not, you're not afraid to buy the glamour stocks. Like, and they're working.

[David Giraud]

They've.

[Josh Brown]

You've done really well with those names.

[David Giraud]

Yeah, I mean like I always think about it relative to the, to the bet size. Right. So if you look at a Roper we. On our equities, we would be 400.

[Josh Brown]

Basis points overweight A roper, because nobody owns that. It's like not big in any index really.

[David Giraud]

No, no, but we, but it's a company that will compound earnings at a low double digit rate. Trading again. We. It's trading. It's had a nice route at the bottom from 513 to 580. But when we, when we were pitching, it was almost 20 times free cash, which is crazy.

[Josh Brown]

Is that in the software sector?

[David Giraud]

It is. It got moved to software sector when they sold their industrial assets. Ah.

[Josh Brown]

Because that's why I thought it was a water company.

[David Giraud]

You know it has a water meter business. Right. But it doesn't. It does. It's not. Yeah.

[Josh Brown]

It doesn't have what it trades on.

[David Giraud]

It has Neptune, which does water meters.

[Michael Batnik]

So you're wild. The underweight Apple, it's outside your top 10.

[David Giraud]

It is.

[Michael Batnik]

I would imagine that that's a, that's the perfect type of stock where you look at it and you just don't understand why the multiple just keeps going up and up and up.

[David Giraud]

Yeah, I think it is. I, Well, I understand why the multiples goes up because the mix keeps evolving to more services and services is higher margin, more recurring revenue. So that is, I understand why the multiple is expanding. From that perspective, the issue, I don't think, I don't understand why people aren't more focused on the idea that the iPhone really doesn't really grow very much. It hasn't grown the last three years.

[Josh Brown]

Last two years it's replacement only.

[David Giraud]

Now it's replacement only. And I'm a little bit skeptical. But Apple, I mean the early indications are that's not, that's not good. I'm not just going to drive a.

[Josh Brown]

Usual chat with an Apple wrapper. The goggles were a misfire. There's a whole. There's a long list of reasons why Apple shouldn't have done as well as it has done. And I'm a. I'm long. I'm a shareholder. Most of the world is at this point. Yeah. Whether they know it or not. It's an interesting. It's an interesting stock. Amazon's reporting as we. Amazon will report just as we're wrapping up the show. Is that in your. Is that.

[David Giraud]

Yeah, yeah, it is.

[Josh Brown]

Okay.

[David Giraud]

It's not as big a bet as Microsoft is per se, but it's a name that we do own.

[Josh Brown]

And they're going to have the second highest earnings growth of the top 75 market caps in the S and P. Did you know that this year?

[David Giraud]

I did not know that.

[Josh Brown]

Okay.

[Michael Batnik]

Over time.

[Josh Brown]

This is Sean and Chart kid Matt. Did this work for me today? Amazon will have the second highest earnings growth of the Mag 7.

[David Giraud]

Oh, yeah.

[Josh Brown]

And the second highest of the entire large cap. 75. 77% earnings growth expected for this year.

[David Giraud]

Oh, interesting. Interesting.

[Josh Brown]

It's. The company could not grow post pandemic. Made a lot of backwards.

[David Giraud]

Went backwards.

[Josh Brown]

Went backwards. Anyway, that's one of my favorite names over the last year. And it's done well. It's done well. And I think Jassy now is getting into that place where he's like, ooh, Andy Jassy speaking. Like, I think people are starting to venerate his abilities finally. It took a. It took a minute, but I think that's where we are with that name.

[David Giraud]

Yep.

[Josh Brown]

So. And as you could tell, it's a very tangible thing that I'm citing. Did you have fun on the show today?

[David Giraud]

I did. That was a lot of fun.

[Josh Brown]

All right, thank you. Do you want to come back sometime?

[David Giraud]

Absolutely.

[Josh Brown]

What are you doing tomorrow?

[David Giraud]

We'll all be here.

[Josh Brown]

David, this has been such a pleasure. I've been reading your commentary for a great many years and I've always wanted to talk to you. So I just want to. Before we wrap up, I just wanted to say thank you so much for doing this. The wrap up is we ask people what's the thing they're most looking forward to in the future. And it could be literally anything. Professional, personal.

[David Giraud]

Look forward to seeing my wife tonight.

[Josh Brown]

There we go. All right.

[David Giraud]

Wow.

[Michael Batnik]

Very nice.

[Josh Brown]

Family man. I like it. You got anything you're looking forward to?

[Michael Batnik]

I'm looking forward to Amazon earnings in four minutes. And White Lotus season three.

[Josh Brown]

White Lotus season three. Hey, put this graphic on screen for me. I just bought tickets to this. This is what I'm looking forward to. This was one of these things where as soon as I saw it, I just pulled the trigger. And then I asked people later, like, will you go? Bob Dylan and Willie Nelson together, Five minutes from my house, they're gonna hit amphitheaters all over the country. This is Jones Beach. Not all of these acts go with them, like, depending on what city they're in. So we're gonna get Wilco at mine, which is one of my favorite bands, but they have Sheryl Crow, Yvette Brothers, Red Clay Strays, like, a lot of really great acts, depending on where you see them in America this summer. But I would just recommend to music fans, every time you see Willie Nelson and Bob Dylan, it could be the last time. So if they're both on stage at an amphitheater near you, I highly recommend you buy tickets today. It's called the Outlaw Music Festival. All right, that's it from us. We're gonna wrap up. I wanna thank our special guest, David Giraud. Are you doing any social media or not?

[David Giraud]

Really.

[Josh Brown]

You still off of that stuff?

[David Giraud]

I stay off. I stay off social media.

[Josh Brown]

Can people go to T. Rowe Price and hear more about the fund? Like, what's the best place for people to do that?

[David Giraud]

Tiero price.com.

[Josh Brown]

How simple could it be? T price.com Great job this week, everyone on the compound staff. Too many of you to name at the end of each show, but we appreciate you. Thank you so much to the fans. Please remember to subscribe. Tell your friends. We'll talk to you soon. It.