Stocks After an Oil Spike, Internals Gone Wild, Bcred Problems, Nvda Stuck

Summary

---

The Compound and Friends: "Stocks After an Oil Spike, Internals Gone Wild, Bcred Problems, Nvda Stuck"

Date: March 4, 2026
Hosts: Downtown Josh Brown (A) & Michael Batnick (B)

---

Episode Overview

This episode dives into how markets have reacted to a recent oil spike amid Mideast conflict, analyzing unusual stock market "internals," sector rotations, Bcred private credit fund's redemption spike, and whether Nvidia (NVDA) has finally run out of momentum. The hosts bring their candid, sometimes irreverent tone to breaking down market reactions, fundamentals, psychological shifts, and what savvy investors should watch for next.

---

Key Discussion Points & Insights

1. CrowdStrike Earnings and Cybersecurity Sector

• Strong Numbers, Weak Reaction: CrowdStrike reported a textbook "beat" across the board — $1.12 EPS vs $1.10 expected, revenue up 24% YoY, $5.25B annual recurring revenue — but the guidance didn't blow the doors off ([04:12]).
  • Quote (Josh):

    “It is the fastest pure play cybersecurity software company ever to reach that scale. And the growth rate is still strong. ... The reason the stock’s not rallying more in after hours is the guidance wasn’t a knockout.” ([04:12])

• Investor Psychology & Multiples: CrowdStrike and cybersecurity names got sold off like the rest of SaaS during the recent market anxiety — a reminder that in times of panic, no sector is “safe” ([06:00]).
• Industry Consolidation Coming?: Hosts expect massive consolidation in cybersecurity; only a handful of dominant platforms will remain ([08:21]).
  • Quote (Josh):

    “I don’t think there’s going to be 15 publicly traded cybersecurity companies. Eventually everyone coalesces around two or three platforms…” ([08:21])

2. Market Reactions after an Oil Spike

• Mideast Conflict and Stock Resilience: Despite a major oil spike after US/Israeli strikes on Iran and the Strait of Hormuz situation, stocks proved resilient. Intraday, the Dow reversed from -1200 points to closing down only 400 after Trump’s White House comments steadied markets ([12:27]).
  • Quote (Josh):

    “We erased 800 points of losses into the close… That is a major intraday reversal — one of the biggest we’ve seen.” ([12:27])

• Energy’s Role: Keeping some energy exposure as a hedge is validated; Exxon and oil-related names are standout winners ([13:24]).

3. Sector Rotations & Market Internals

• Internals "Gone Wild": Exceptional dispersion beneath the surface—S&P 500 appears stable, but the average stock moves 10% in a 30-day period; 97th percentile for dispersion in 30 years ([40:41]).
  • Quote (Josh):

    "Over the last 30 days, the S&P 500 is down 1.4%... while the average stock... moved 10%... in the 97th percentile over the last three decades." ([40:41])

• Rotation is the "Get Out of Jail Free" Card:
  • AI-driven disruption battered software/SaaS, now recovering.
  • Momentum and "halo" stocks just got hit; software names like Intuit and ServiceNow bounced sharply ([20:10],[23:35]).
  • Quote (Michael):

    "There is a rotation and this just keeps happening. So many stocks are getting killed, and yet the index is going sideways." ([24:57])

4. Oil, Commodities, and Energy Sector

• Oil Spike Not as Extreme as Expected: Despite the dramatic news, oil moved “only” 6-7%; Iranian oil already embargoed; more muted knock-on than many expected ([28:20]).
  • Quote (Josh):

    “If you would have told me … that the US and Israel would take out the entire Iranian leadership, I would guess crude’s at 100. It just goes to show how much things can change.” ([29:15])

• Energy Sector Rally Anticipated the News: Oil stocks like Chevron, Occidental, and EOG had run up prior to the event.
• Historical Data After Oil Spikes: On previous oil 5% two-day rallies, S&P 500 up 22% median over next 12 months — with an 83% win rate ([32:22]).
  • Quote (Josh):

    “83% of the time, stocks are higher 12 months after one of these two-day oil spikes. I like those odds.” ([32:44])

5. Emerging Markets Under Pressure

• Korea’s Sharp Drop: South Korea’s market, heavily concentrated in memory-chip makers and reliant on imported energy, fell 9% — worst since COVID — as oil imports became more expensive ([19:33]).

6. Software Recovery and Activist Involvement

• Intuit, ServiceNow, Toast, and other SaaS names sharply rebounded on stabilization from AI fear ([21:05],[22:01]).
• Noted activist funds (e.g., ValueAct) are increasing stakes in some names; hosts discuss the importance of activists in driving corporate change and value.

7. Momentum Stocks & Style Rotation

• Momentum ETFs (MTUM, SPMO) “wrecked” as rotation cycles into beaten down groups ([24:12]).
• Defensive names like healthcare also hit; rotation is keeping the index afloat despite big sector drawdowns.

8. NVIDIA Plateau ("NVDA Stuck")

• Great Quarters, No Price Reaction: Nvidia continues to crush estimates — major revenue leaps, strong guidance — but the stock has gone sideways since August 2025 ([45:56]).
  • Quote (Michael):

    "It's not just... what more can they say for this stock to go up? It's impossible." ([47:02])

• Too Big for Multiple Expansion: NVDA now trades at a market-matching forward PE (~22) as competition mounts; forward returns may flatten ([47:28]).
• Structural Change: Cloud customers developing their own chips reduces need for NVDA’s GPUs in some cases.

9. Private Credit & Bcred Redemptions

• Redemptions Spike: Blackstone’s Bcred private credit fund saw record 7.9% redemptions, with Blackstone waiving the normal cap ([62:22]).
  • Quote (Josh):

    "They said, ‘No, you know what? Actually, no problem. Here’s everything.’ That kept the people pulling out quiet." ([62:25])

• Why the Panic?: Negative sentiment around private credit, especially with high exposure to software companies under AI pressure. Questions about portfolio quality and liquidity ([54:09]).
• Cynicism on Private Credit Marketing: Hosts question the full-court press sales tactics; true quality investments need less aggressive salesmanship ([55:28]).
  • Quote (Josh):

    “My cynicism… when I see a gold rush, an activity bubble, I just call bullshit on it at first glance… In this case, I was right.” ([54:42])

• Mark Rowan Clip: Emphasizes that correction is coming, but real risk management and diversified portfolios will emerge stronger ([64:00]).

10. Market Psychological Takeaways

• Stock Picker’s Market: High dispersion benefits active traders but is typical of market crises (2000, 2008, now) ([40:43]).
• Rotation is Key: As long as the market continues rotating leadership (tech, energy, momentum, SaaS, etc.), top-level indexes remain robust.
• Active Management & Risk: Internals warn that a true trending decline may eventually override the current choppiness.

---

Notable Quotes & Timestamps

• “The $5 billion ARR milestone is huge. ... The fastest pure play cybersecurity software company ever to reach that scale.” (Josh, [04:12])
• “Nothing’s really safe in the end when there is that level of anxiety… They're going to hit every stock in the sector.” (Josh, [05:30])
• “I don't think there's going to be 15 publicly traded cybersecurity companies. Eventually... two or three platforms.” (Josh, [08:21])
• “We erased 800 points of losses into the close… That is a major intraday reversal.” (Josh, [12:27])
• “The S&P 500 is down 1.4%... while the average stock... moved 10%... 97th percentile over the last three decades.” (Josh, [40:41])
• "Every time crude gained at least 5% two days in a row... the average 12-month return after is 21.9%. Win ratio: 83%." (Josh, [32:22])
• "It's not just... what more can they say for this [NVDA] stock to go up? It's impossible." (Michael, [47:02])
• "Some of these stocks are going to set up generational buying opportunities. ... The headlines are going to continue to get bad... outflows, unfortunately, have probably only just begun [in alternative managers]." (Josh, [65:54])
• “So long as he continues to pay and perform... the loan is worth what I say it is. ... And that's the nature of it… That's the difference between publicly traded bonds… and this asset class.” (Josh, [60:53])

---

Notable Discussion Segments (with Timestamps)

• [02:45] CrowdStrike earnings deep dive and cybersecurity sector introspection.
• [12:27] Oil spike, White House intervention, and intraday market reversal analysis.
• [14:35] Software stocks bottoming amid risk-off trade.
• [17:28] Historic divergence between EM and S&P 500.
• [20:10] Software sector’s sharp bounce; Table of top-performing SaaS names.
• [23:55] Internal market dynamics and the case for style rotation.
• [32:22] What crude oil spike means statistically for forward returns.
• [40:41] Citadel’s report on record sector and factor dispersion.
• [45:56] The "NVDA Stuck" phenomenon: Nvidia’s outstanding results but sideways stock.
• [54:09] Private credit skepticism and the Bcred redemption process.
• [62:22] Blackstone’s response to redemption pressure and discussion of fund mechanics.
• [64:00] Mark Rowan’s perspective: correction inevitable, but the best managers will thrive.

---

Tone and Style

• Direct, irreverent, and fast-moving, the episode features playful banter, industry analogies, and candid market opinions. The hosts freely admit mistakes, debate sector risks, and consistently ground hot takes in fundamental metrics and market psychology.

---

Final Takeaways

• Despite dramatic headlines, the market’s resilience and continuing sector rotation point to underlying strength, albeit with fragile internals and heightened dispersion.
• Oil and energy names remain effective hedges in global crises, while software’s AI-driven selloff may have provided a shopping opportunity for discerning investors.
• Issues in private credit and alternative asset managers may just be getting started — the path forward will reward true risk managers and savvy active participants.

---

For further insights, charts, or guest disclosures, see show notes at: ritholtzwealth.com/podcast-youtube-disclosures

Transcript

[A]

Holy cow. We're back.

[B]

Believe this. We are back doing it again. Yeah.

[A]

My God. All right, ladies and gentlemen. Welcome to an all new edition of what are your thoughts? We are live from the Strait of Hormuz. I'm here with my co host as always, Mr. Michael Batnik. Michael, say hello to the folks.

[B]

Hello. Hello.

[A]

All right. And for those of you who don't know, my name is downtown Josh Brown. Every week we get together Tuesday night, 5pm Eastern to talk about the biggest stories moving markets. And we are so appreciative of those of you who come to the live. So let me say hello to the chat. The Chase 22 is here. He says there it was waiting all day for that. The straight of Hormuz. Strait of Hormuz is always on time. Best2252 says. Sick hoodie, Josh. I know it's lit, right? Alex P. Keaton is here. Hi. Hello. I have a feeling that's not his real name though. Bob Sakamono. I see. You see Marie. Hi, Marie. Good. See you. John Mellot is here. We need a halo etf. Stay tuned. More to come on that. All right. All the gangsters are here. We have a sponsor, Michael, who's sponsoring the show tonight.

[B]

Who is sponsoring the show today. I'll tell you who sponsor the show tonight. It's to Crim. Nice, Josh. Are you looking to diversify your portfolio beyond stocks and bonds? Commodities are getting more and more attention as we enter into 2026. Two Creams Agricultural ETFs offer a way to access the future prices of essential crops. These funds may help manage inflation risk and add diversification to your portfolio. Ask your financial advisor or explore two cream ETFs on your own. Visit tucrium.com clink the link. Click the link in the show notes. Clink it. Clink it. Click it. You know what to do. For more this episode is sponsored by ClearBridge Investments. A manufacturing comeback combined with resilient consumer spending and the tailwinds of monetary and fiscal stimulus confirm a healthy economic backdrop that should continue to support broadening equity leadership going forward. Position your investment portfolio for wider equity participation with fundamentally driven Clearbridge active equity strategies. Clear Bridge, a Franklin Templeton company. Go to clearbridge.com to learn more.

[A]

All right. You hear my coughing fit just now? I. I swallowed water down the wrong. What does they say? The. Down the wrong pipe.

[B]

Piper Tube. Nobody's tube.

[A]

Tube. No tubes in your throat.

[B]

Pipes pipe.

[A]

All right. Crowdstrike reported. Those of you who have been with us a While are aware CrowdStrike is a core holding of mine. I ride it up, I ride it down, I ride it back up. That's just how I roll. Stock started to recover over the last couple of days.

[B]

Yeah. You know why? Because I bought it at 355. I don't ride it. I swing in, I swing in, I swing out.

[A]

You're a genius.

[B]

Thank you.

[A]

I think the threats of cyber terror or hacking being part of whatever's about to happen in the Middle east dawned on people and they said, oh, yeah, wait a minute. Of course Anthropic didn't solve cybersecurity with a bug detector. Oh, how could I have been so ridiculous? Anyway, here are the numbers. It looks like a textbook beat across the board. Earnings were $1.12 versus A$10 expected revenue, one spot.3 1 versus 13 0. So they're on a $5.25 billion annual recurring revenue run rate, which is amazing. And that's up 24% year over year, year over year. Revenue growth plus 23% overall net new ARR. This is the big number for Wall Street. ARR. Annually recurring revenue. So the street wants to know how much net new ARR. And it was 331 million. Subscription revenue, $1.24 billion. Free cash flow is a beat. They have 5.23 billion in cash now in the bank. And I think the only. It's not a weakness. The only reason the stock's not continuing to rally that much in the after hours is the guidance wasn't like a knockout number. But the $5 billion ARR milestone is huge. I've had George on this channel. We've talked to him about that. It is the fastest pure play cybersecurity software company ever to reach that scale. And the growth rate is still strong. And they spent a lot of the press release, it looks like, leaning into the AI security as the new growth driver, positioning Falcon as protecting AI workloads. So if the whole world is now about AI, CrowdStrike's answer is, yeah, duh. More AI workloads means more things that need to be secured by Falcon and our products. I don't know. What are your thoughts on the run up into the numbers and the reaction?

[B]

I thought you said net new AR is 1.1 billion DOL.

[A]

What did I say?

[B]

I think you said 300 million.

[A]

No, that's a different number. Okay, my bad. Yeah, it's. Listen, it's a. It's a crazy thing, but I guess I shouldn't be surprised that they caught the cyber Names like Palo Alto and Zscaler, they caught these up with the whole SaaS sell off. They were the last to get hit, but they got hit. And I think the lesson here is like, nothing's really safe in the end when there is that level of anxiety sector, they're going to hit every stock in the sector.

[B]

So I bought the stock on the, the second big red down day. I don't follow the company as close as you do, obviously on the Monday where I'm like, I don't know anything about this stuff. It just makes no sense. You know, when we were like this, the Schwab sell of just fundamentally doesn't make sense. The business models are not changing that dramatically where it's warrants itself. Now ultimately it might not matter because perception is reality, but, um, I guess depending on your time horizon, you know, it will matter. But it just. The sell off was too extreme. It didn't make sense to me. Now why is the stock not rallying on a good number? The market's still, you know, not really on firm. On firm footing. And also it is an expensive stock. Like it still trades at 20 times sales. And this is just not the environment for a name like that.

[A]

Right? We're not the only people, Right. We're not the only people who are bullish on cybersecurity and crowdstrike. Therefore, it's not like it went into this volatility at a, at a, at a like a margin of safety sort of multiple.

[B]

So I'll tell you right now that $5 billion in revenue, the company's trading at $100 billion market cap. I don't know about the debt. They've got to deliver. Like this company cannot stall or slow down at 7 billion. They have to like sprint to 10 to 15 to 20 billion dollars, otherwise they're toast.

[A]

The stock is to get murdered in the meanwhile. This might be, look, I'm not going to say the last chance, but you have this thing under $100 billion market cap, which, which it's. It's been a minute since the last time you've been able to get it this cheap. The high is November. $557 per share got down to as low as. What was the ultimate low? Three, it looks like. Did you literally nail the bottom?

[B]

355 is what I'm in at.

[A]

I mean, dude.

[B]

Well, I do. I bought on that Monday. But let me tell you this.

[A]

You should go. You should go into like something on Wall street maybe. That's pretty, it's pretty great. That's a pretty great trade.

[B]

Well, I also, I sold the bottom on Blackstone today. We'll talk about that later. If this is going to be the best of breed cybersecurity name, and I think it is, I know this is very, this is way overly simplistic, but $100 billion market cap is not big enough now for, for today, it's justified. But if you are the type of buy and hold investor, which I am not with these individual names, but if you are, you could easily see a path to this becoming a much bigger company.

[A]

So here's what's interesting. There are still too many of them publicly traded, more than there need to be. We haven't really seen massive consolidation, although Palo Alto did a really big acquisition, they bought another one. And Crowdstrike's been making acquisitions, but they're buying startups. CrowdStrike's got, got this thing where they invest in a ton of cybersecurity startups and then every once in a while they'll snap one of them up. They just did two of those, which I had George Kurtz on to talk about recently. But like nobody in the public markets in this space is like gobbling up a lot of competitors. But I don't know. I don't think there's going to be 15 publicly traded cybersecurity companies because I think the way the world works is eventually everyone coalesces around two or three platforms and the platform provides like everything. Like there are so many different. There are so many modules within cybersecurity. There's identity, there's threat assessment, there's like when a breach happens, there's a whole category of products that you come in with after to figure out what happened. There's just, there's so many. And I think for most Fortune 500 companies, they don't want to have five different vendors. Dude, there's, there's one and a half to get bigger.

[B]

There's one and a half ride sharing apps. Right? There's not going to be. There's not going to be. You're right, there's not going to be 15 of these. No way.

[A]

Like even in semi capital equipment, when I started in the business there were like 20 of them and now it's amat lamb and, and KLA. And I know those three of them have bought a lot of their competitors and I know there are other companies in the semi capital equipment business, but there's three gigantic companies and that's every market. That's how this ends up going. So I don't see CrowdStrike as being bought by anyone. It's too big. And George is a force of nature within the industry. So for me, what you did makes a lot of sense. My average cost is significantly lower, so I wasn't looking to add to it, but maybe I should have because I just think it's a steal here.

[B]

Yeah, I think, I think over time if they continue to execute, you'll be proven right. Let's talk about the stock market over the last two days. So here's, here's my sense of the market's reaction on Sunday night when futures were down a measly one and a quarter percent or whatever it was. I thought to myself, and I can't prove this, I have no text messages, but I genuinely thought to myself, yeah, I wouldn't be surprised. The market is green tomorrow and the market ended up green on the day. And you had an equal number of advancers, decliners even like stocks that you would, that traditionally would have gotten destroyed on something like this like Delta, like closed at near the highs of the day. And then I woke up this morning and I opened my phone, I checked the market as I always do and I said this is gonna get ugly because that false, that false security that we, that investors felt that might have chased the, the high close right on Monday because there was a really, really strong tournament. You said, all right, see where investors are looking past this. And then I woke up this morning, I saw the future like okay, this is, get this get ugly because you had a chance to get out yesterday. How could you have been so complacent? The market over down two and a half percent and I thought that they were going to kill them because the S and P has been within 2 1/2% of an all time high for 65 days. Even if we just use this as an excuse to sell like whatever, just take profits normal. And the fact that the market couldn't even muster any sort of downside follow through I found to be surprising and extraordinary. Now it's not to say that we can't, you know, that we can't close 3% lower tomorrow, but the strength and the resiliency of this stock market after these two days, I was really surprised not by Monday, but by today in particular.

[A]

All right, the turn started when Donald Trump came on TV from the White House. He was sitting with the President of Germany.

[B]

Is that today or yesterday?

[A]

Today.

[B]

Ok.

[A]

All right, so the market was down at its worst this morning, like 11, 1200 points. And then Trump came on in the Middle of the day, like around 11, something. He took questions for, I don't know what seemed like 40 minutes or so. And I think it was the first time that the press had a chance to ask him things about the strike. And I guess enough of his answers seemed like, I don't want to say coherent because that's the wrong way to phrase this, but I think enough of his answers seemed rational enough that the market, maybe that gave the sellers a reason to take a break from selling and we ended up erasing 8. I know you're not a points guy, but I am with the downs. All the real guys are. I'm a points guy. We erased 800 points of losses into the close. We were down 1200, closed down 400. That is a major intraday reversal, one of the biggest we've seen in a long time. On the Dow, not the nasdaq, not Tech. I'm just saying on the index that really matters, that was a big one. The other thing is that the energy spike is. Now, look, this is the thing, like Nick Colis taught me this a long time ago, you never sell your energy stocks, even when they go through a prolonged period where they're a drag on returns. You gotta keep some energy exposure because that has been the bright spot. And so when energy spikes and spooks the rest of the market, at least you have some green on the screen. And like Exxon has just been an absolute standout. I did sell Devon Energy, which is still on the best stocks of the market list. I don't dislike the stock, but I took it off. I wish I had bought more of these energy names, but my Exxon position is pretty decent. I also wanted to mention, wanted to mention some of the big movers.

[B]

But wait, hold on. I want your take on the market. Were you as surprised as I was that we didn't see more downside follow through today? That we closed 2.2% of the highs? Are you kidding me? That's it.

[A]

I'm watching some of the software stocks individually bottom out. And that's why I wasn't totally surprised. Because if you think about what was going on before the strike on Iran, the market was like just in one of its most miserable funks that we've seen in a long time. And it was all about AI driven disruption. So when I started to see those stocks go green individually, one after another, it told me that this could be more meaningful. Like this could be, this could be a real bounce.

[B]

I also, and not, not kidding like I looked, I thought that Bitcoin would have gotten just destroyed on a. In a risk off tape like this and it didn't. It stabilized.

[A]

Matthew Bird in the chat. Josh forgot ASML exists. Okay, first of all, ASML is in Europe, not the United States. Second of all, not quite a competitor to a mat. They're. They're doing lithograph, advanced lithography. And it's an amazing stock, but it's nothing to do with what we're talking about. So. All right, I want to. Wait, what did I want to. Where did I want to take. Can we put up the. Can we put up the. The tiles?

[B]

So this, I screened this at about 2 o' clock in the afternoon and

[A]

to me this is all the ETFs.

[B]

Yeah, the obvious standouts. The international just blood red for obvious reasons.

[A]

Yeah, I mean, well, I'm trying to think of like where were the places that you could hide.

[B]

Looks like internationally.

[A]

The short sold. No, just period. Like the short ETFs were all green. I mean for obvious reasons. USO was green. That's oil. UNG was green. That's gas. Not. I mean there was not much here to. To work with.

[B]

Software was up 1.6% today. I added to service. Now, by the way, me and the CEO, I'm buying 20 shares or whatever it is and he's buying a little bit more. We're in this together, buddy.

[A]

You know what they finally got to today and yesterday? They finally got to the halo stocks. That's just classic like risk off behavior in the market. Put up the bottom 20 performing S&P 500 stocks.

[B]

But dude, this is, this is nothing like. Are you kidding me? On a. On what? What very easily could have been a very risk off tape. This is like pretty.

[A]

No, I just pretty muted. I think it's notable like these 7, 8, 9 and 10% individual stock sell offs. None of these are the stocks that were hurting us prior. It was like a new. It was a new reason to sell a new batch of stocks.

[B]

Yeah, these were, these were winners.

[A]

You got Ford, Newmont, NRG Carnival, Albemarle, Norwegian Cruise. You know, they, they were hitting some stuff that really had nothing to do with the sell off prior to. Let's do the scatter plots.

[B]

All right. This was. This is wild. So going back to 2012, we've never seen a day like today. How about that? Normally these, these. The. So we're looking at the S, P 500 and emerging markets indexes. And of course, generally speaking, they move in line with each other. One goes up the Other goes up. Generally speaking, we've never had a day where international. I'm sorry, emerging market stocks fell nearly 5% where the S&P was down under 1%. Really interesting day.

[A]

It's. Yeah. And it's just like I, I just feel like the emerging market stocks have been so strong for so long and a lot of times people don't understand this. A lot of times when you see something like what you just showed us, it's not because people are now bearish. It's because you sell what you can. And when you're up 20% in a position and you need to take risk off or you need to lower your exposure or you're trying to like chill the volatility out of your overall portfolio. It's so easy to sell the thing that you're up 20% in. Like not sell all of it, but like sell some of it. It's a much easier trim than to sell something that you're already down 10% in. And people misinterpret that. They look at that as like some sort of like opinion being rendered on whatever the asset is, whether it's gold or emerging markets. Sometimes, especially if you're a professional and other people are judging you, it's easier to sell the thing that you're up in a lot. And I'm a, I'm a case in point. I'm not bearish on Devon. I needed liquidity. There's some other stuff that I want to do. It was an easy sale. I was upping it from the minute I bought it. It moved fast. Next.

[B]

So South Korea was an example of that. South Korean stocks. But, but there also was a legitimate reason to sell them. So South Korean stocks prior to the last two days were up 160% year over year. Like these things have gone vertical and the index is weird. It's like all Samsung and a few other big electronic companies. Not all, but it's like highly concentrated.

[A]

Half. It's half SK Hynix and Samsung, it's half memory chips basically. Yeah.

[B]

So this, the. Their market fell 9% today. Worst one day drop since COVID But

[A]

there's a big super concentrated.

[B]

So they are heavily reliant on importing imported energy. So check this out. I had Claude make this net energy imports as a percent of energy use. And they got nothing internally.

[A]

Yeah, yeah. So it's not like, it's not a shocker that people, that people would want to be sellers there.

[B]

All right, so you mentioned software stock stabilizing. This is over the last five days. I grabbed this chart at about 2 o', clock, so it might be not exactly right, but it's close enough. So over the last five days, IGV is up 8%. And to me, Intuit is the poster child. And it's a cycle we haven't really spoken much about, but it really is the poster child of, of software because of AI. Into it is TurboTax, it's Mailchimp, it's Credit Karma. And one other thing that you would be like, this doesn't need to exist.

[A]

It's literally, it's literally a collection of software products where you would say to yourself, why am I paying for this?

[B]

Right. But, but the. It's. It bounced 22% in five days.

[A]

Let's see that chart.

[B]

What? Let's go. Here we go into it. So up 22%. ServiceNow up 12%.

[A]

Intuit gains back 22% of its market cap in the last five. Okay, that's interesting. What else is on here? ServiceNow, Workday, Salesforce, Adobe. Right. These are all the poster children for the AI threat to SaaS.

[B]

Apparently. Apparently Burry got long. Adobe. I saw.

[A]

I already did my knife catching act in Adobe. It didn't go well.

[B]

I cut my hand at Adobe, but I'm in service now in Salesforce.

[A]

Anecdotally, I got a really nice bounce in toast which I added to at like, I don't know, 27 maybe.

[B]

Good.

[A]

So a big activist Value act just bought 4 1/2 million more shares there. They're at I think 8 million shares now or something like that. And that is Mason Morphit's firm, used to be Jeff Up. And Value act is one of the best activist hedge funds there is.

[B]

You know you love your activists. Can I tell you something? I forgot to tell you this. I was listening to a book about General Electric called Lights out. And as I'm listening to it, my ears perked up because they said financial. What did they call you? Financial, I don't know, financial pundit, blogger, whatever they called you. Josh Brown tweeted, Nelson Peltz is a genius.

[A]

Yes.

[B]

This is a tw. This is a 2017. Do you remember sending that tweet?

[A]

No, but he is a genius. 2017, multi billionaire.

[B]

You do love your activists.

[A]

I do. Service titan. Caught a little bit of a bid to the other one. I'm.

[B]

Which one? Oh, this was for construction.

[A]

The stock I'm just destroyed in. This is the toast for the trades.

[B]

Right.

[A]

So they handle all the billing and they handle all the software and all the job scheduling for all of the trades. And what's the ticker here? Tta. And it's, it's only been public for a year and two months. Nobody knows what it is. I'm one of the only people that even know that it exists.

[B]

But you don't think that your handyman is going to be vibe coding for some reason?

[A]

I just highly doubt electricians are going to try to create their own billing software. I don't know why, I don't know why I have this out of consensus opinion, but I really like that business. I really like their market share position and it reminds me of Toast. I think both of these stocks have an amazing opportunity to be the AI providers.

[B]

So obviously nobody knows where software stocks go from here. I wouldn't has. I would shudder to make a one year prediction, let alone like a one day or two day. So who knows, maybe, maybe this is not the low. But if this is not like a local low, like if these stocks roll over and take out the most recent lows, oh my God, is it going to be.

[A]

So wait, is it, Wait, wait, is it too far to ask the question of, is it a rotation? Because if all these software stocks are bottoming. Now let me show you the other side. Momentum got absolutely demolished this week.

[B]

Yeah. Yeah.

[A]

So give me, give me these two charts one after another. Let me see. All right, this is mt. Um, this is like when people talk about momentum, this is the first ETF that people think of. It's the granddaddy of Momentum style ETFs. They sort of finally got around to wrecking this thing. Here's, here's another one. This is the Invesco S&P 500 Momentum ETF SPMO. I'm not really fluent on the differences between these two. This one seems to have lower beta for some reason or.

[B]

I don't track, I don't track the Invesco one. But for example, one of the names that's been working is like healthcare stocks have been working and they whacked them off today big time.

[A]

They whacked them off hard.

[B]

Yeah, I agree. There is a rotation and this is like this just, just keeps happening. There are so many stocks that are getting killed and yet the index is going sideways. I don't know in the short term, if you're, if you're just looking at the stock market, forget about the news, okay? I'm not talking about earnings or macro or interest rates or any of your opinion. If you are merely looking inside and at the. It's hard to be bearish.

[A]

Don't you think so? I think Santoli, Michael Santoli was saying, like, we keep escaping.

[B]

Yeah. And refuse to go down.

[A]

And we're escaping the same way via rotation.

[B]

What could be better?

[A]

That's how, that's the get out of Jail Free card so far. Like, why are we hovering within 5% of the S&P 500 all time high with all of the insane things going on? The get out of Jail Free card has been rotation and it's. Look at this. Like this, just what the NASDAQ has been going through. And we're alive.

[B]

Yeah. So I have a bad. Make the case for tonight. Spoiler alert. I should have made it American Express. So American Express is one of these companies that got whacked off hard. Excuse me. By the. By the AI fears. Right. Because this was like the white collar worker. Like the white collar worker is, is, is going to get hit. So this stock was down 20%. And this is like, this has been the secular winner for the upper K. And they said, okay, the upper, the upper K is like a little bit wobbly. This Stock was down 20%. Like, not overnight. But why? Because people are afraid about 10% unemployment and worker.

[A]

They hit everything. They got. Like, they got JP Morgan under 300. They got Berkshire back under 500.

[B]

And meanwhile, the index is 2.2% from the high.

[A]

I know. Well, it's, it's sort of miraculous. But that's the, that's been the secret so far. Let's do oil. What did you expect to see more when you saw the future Sunday night? You expect to see a bigger move out of oil? I don't think I did.

[B]

I actually felt big. 6%. Was that what it was? 7%?

[A]

Yeah. I sort of think that, I sort of think that oil could, Oil could be a sell. Like they took out the Iranian navy, the Strait of Hormuz stuff. The ships are not going through the Strait of Hormuz now because they're nervous, not because they can't. But that was one of the first things the Israelis and the American pilots went for the ships. Trump said the ships are at the bottom of the strait. I'll take his word for it. I think that's why you didn't get such an extreme reaction. Also, Iranian oil is not on the market. Like, it's literally, it's embargoed. Like it's. The Chinese buy it. So if the Chinese have to substitute Venezuelan oil and Iranian oil and they have to come to the regular market or whatever the mechanics are Maybe there'll be a little bit of a squeeze of supply. But like, this is not like the whole world was awash in oil from Iran. That's not how the oil market works. That's why you're not seeing a 20% move in crude. Like, I think in people's imagination that's, that's what they would expect. It's just not the reality of how that oil market weren't.

[B]

I. So I don't follow this stuff closely at all. Didn't European natural gas prices go nuts?

[A]

Yeah, but they just. That's a reality. They always do. They always go nuts because they don't produce their own natural gas. They are wholly reliant on Russia and then whatever we can ship out of our LNG terminals from New Orleans. The Europeans require natural gas from off continent, similar to what we were just saying about South Korea. So the moment there is some sort of geopolitical event, that's one of the knee jerk things that happens in the commodity markets. Give me my WTI crude spot price. I don't know, man. If you would have told me even 10 years ago, you would have told me in 2015 there's gonna be a thing that happens on a Saturday night where the United States and Israel team up to knock out the entire leadership of Iran. I would Guess Crude's at 100. And it just goes to show, like how much things can change. And I thought this was really interesting. Give me the next. Give me the xle. Little bit blow off. Toppy. The last two days. I think a lot of profit taking.

[B]

Yeah.

[A]

Just look at the way, but look at the way these oil stocks anticipated this.

[B]

Yeah.

[A]

Look at like January, January 1st for the XLE stocks, which is Chevron, Exxon, Conoco, et cetera, all the big guys. January 1st was like somebody waved the green flag. And, and it was like, gentlemen, start your engines. And these, these stocks just methodically ran right up. I think the oil, I think the oil sector as a sector is up 28% year to date, which is incredible when you think about it.

[B]

Chris Marron said to us, news always follows follow price or any surprising news. Right. Like it almost always goes in the direction of the prevailing trend.

[A]

Yeah, well, the market. Right. Because the market figures it out before the journalists do. And that shouldn't be controversial. Give me Chevron. Like, this thing looked incredible going into this. The investing public understood that all these warships being sent to the region, they weren't just going to go home. Something was going to happen. And you can see it. Give Me, EOG Resources. This one looks interesting. Breaking out of a fairly long consolidation now, retesting the breakout level. This is the type of chart people won't buy because they think they missed it. And that's how you know it's gonna work. Let me see what else I have here. Diamondback Fang. This one's gone. Say goodbye, Occidental Oxy. I mentioned before, you got a gap and go in this chart, you got a golden cross happening. This thing will probably be lazy for a couple of days. Work off that overbought RSI and then it's going to launch again. I just know it. Target Resource, Targa Resources. Trgp. Gone. Forget about it. Forget about it. All of these were on the best stocks in the market list. I wrote about all these this year with Sean. We asked chart kid Matt for this. This is a. This is a Chart Kid Matt special. Michael, what's going on in this chart?

[B]

So, man, this is pretty, huh? We're looking at the red dots. Those represent every time where crude gained at least 5% two days in a row. And of course it only happens for a very specific reason. And then what did the stock market do on a forward return and outside of September 2008?

[A]

We won't talk about that one.

[B]

Outside of that. Pretty.

[A]

Pretty damn green for the listeners. The average 12 month return after crude oil goes up 5% two days in a row, which just happened, is 21.9%. The median is 22%. And the win ratio, which is the thing I care most about is 83%.

[B]

That's quite strong.

[A]

Very strong. 83% of the time stocks are higher 12 months after one of these two day oil price spikes. So. And it doesn't. 83% win rate means 17% of the time it was lower. Okay, so it's not a guarantee of anything. But I like those odds. Do you like those odds?

[B]

I love those odds. We have 12 prior instances. One of them was 2008. Let's assume this isn't then. Okay, so pretty good.

[A]

Let me. Let me show you something else. Is the first I've even heard that this thing exists. There's an ETF company called Defiance. You probably know those guys, right?

[B]

Yeah. I don't know the person, but I know the company.

[A]

Okay. Did you see the movie Defiance?

[B]

Daniel Craig?

[A]

Yeah.

[B]

Yeah, Loved it.

[A]

It's an incredible movie, right? It's about. It's about a family in Eastern. A Jewish family in Eastern Europe. Like a whole town. They get chased into the woods and they decide to fight back. And it's a true story. And they end up liberating all of these towns from the Nazis. And that family, I guess some of them ended up in the United States, specifically on Long Island. And the founders of the CTF family are the family depicted in the movie.

[B]

No shit. I had no idea.

[A]

That's right. I learned that today. The girl, I guess their chief strategist or whatever was on Squawk and she retold that story. But. So this is like. This is a family that fought off the Nazis and saved God knows how many. How many Jews in the woods. I don't know if it's Poland or wherever it is. And then they named the ETF company Defiance after the story of their family. Anyway, they have a stock, great ticker, Jedi J E D I. And it owns all of the drone warfare and munitions stocks. And this is apparently the way that we wage war now in the 21st century. We were sending some of these one way drones where they're almost like kamikazes. The drone is not expected to make it back. Its job is to crash into a building. We are fighting with those things now. And you could imagine how expensive they are and how much it costs to replace them. Sounds pretty bullish. This is the ETF that owns all the drone warfare stocks. Put the chart up for me. It's called the Defiance Drone and Modern Warfare etf. I'm not recommending it. Everybody relax. I'm just pointing out that it exists. And I guess I would have expected it to have done more. Here are the top holdings.

[B]

It does exist. You're right.

[A]

Here are the top holdings. L3, Harris, of course, RTX. You know it as Raytheon. Rocket Lab, Elbit Systems, Thales, Saab. So it's international. A lot of these are European. Kratos, Defense. Palantir's in this. Who else is in this that I know? All right. Some of these companies I don't know very well at all. And some of them I don't know how to pronounce. So I'm pretending that it's not important to read their names, but I thought it was interesting that something like that exists. When Anduril comes public at probably $100 billion valuation, it'll instantly be one of the bigger weights in this fund. I would guess that's the one everyone's. That's the one everyone's waiting for. What you think of the bitcoin reaction to all of this?

[B]

I told you. I was shocked. Like, Monday morning. This made me feel really good. Like, okay, Bitcoin's up 5%. Like we're going to. We're going to be okay. This is not going to be a serious sell off and it's hovering at 68,000. So the fact that Bitcoin found the bottom and software found the bottom has me feeling pretty positive.

[A]

I'm going to share a take with you on Circle, which had a nice bounce. I should have made the chart.

[B]

Huge bounce.

[A]

I think I asked for the chart but they didn't get around to doing it. So anyway, Circle had a huge move. And this is, this is from Mizuho. Our friend Dan Dolev does unstable Mideast help stablecoin. He says Circle shares were up 15% yesterday, resulting in a 35% increase relative to SPX. We believe that yesterday's rally was in part driven by the rise in oil prices as Mideast tensions ameliorate. Why is that positive for Circle? Rising oil prices could drive up inflation, lowering the odds of rate cuts. How does it impact Circle's revenue? Although more muted, rate cut expectations drive just a 1% increase in to our 2627 revenue expectations. The 2x increase in right tail risk of no rate cut scenario likely adds more torque. So in other words, if you think there's no rate cuts and of course an oil price spike might keep the Fed from cutting rates, Circle, the stock is the beneficiary. It's a little bit of a Rube Goldberg machine. You have to follow that logic through a lot of twists and turns out. I think it's maybe more simple than that. I think it's. Oligarchs might be more likely to want to plow more of their money into this international digital monetary system and some of that ends up in Circle. Or maybe just it was time for the stock to rally. I don't really know, but I thought that was an interesting take. Gold, not much of a safe haven.

[B]

I mean it's.

[A]

Would you, would you have expected a bigger rally in, in gold as like a risk off trade Monday morning?

[B]

So Monday it rallied. I don't know if it hit new highs. It was damn close.

[A]

That's the thing. It's already at like, you know what, it's up.

[B]

It's up 100 year over year. Almost like what do you want from it?

[A]

Yeah, I guess it's like been pricing in these tensions ever, ever since Trump got reelected. I feel like it's sort of been pricing this stuff in and also the distance.

[B]

I'm just eyeballing this from its 200 day moving average has got to be, I don't know, a 40 year record. You know what I mean? Like so it's going sideways and so. Yeah, let's still, I mean it still looks good.

[A]

Okay.

[B]

Still looks good.

[A]

All right, let's do this thing on internals. Citadel securities had I thought a really interesting piece talking about the record levels of dispersion amongst stocks beneath the market surface. So we were just saying that rotation has been the get out of jail free card. It's the thing that we keep that keeps saving us. Well, the reason you get that sort of rotation is because there's a lot of zigging and zagging going on amongst individual stocks.

[B]

You should see my trading account telling

[A]

you they're not all acting as one asset class per se. So this is Citadel. And then I'll get your reaction to this. Only 31 trading sessions into the year, the index may appear relatively stable, but the magnitude of sector and factor reallocation beneath the surface, anything but. Retail participation remains historically elevated. ETF flows are at one of the strongest early year paces on record. And liquidity has thinned during episodic selloffs. At the same time, AI driven disruption narratives have accelerated repricing across vulnerable business models, which intensifies the rotation. They say. Over the last 30 days the S&P 500 is down 1.4%. This is as of last week. While the average stock in the index has moved 10% in absolute terms placing the 8.6% dispersion spread in the 97th percentile over the last three decades.

[B]

So that chart up.

[A]

So this is what a stock pickers market looks like. That. But, but that is the dispersion.

[B]

This only the only other two times this happened was in catastrophic markets. That's why so, so weird.

[A]

Yeah, this usually. So we have a couple of instances of this. It's the year 2000 and it's 2008 and it's now. So I don't feel, I don't feel great about that.

[B]

No, I don't feel good about it either. So for as bullish as I think the stock market is acting. And I say that because. Don't take like. It's not that I'm bullish. I think the stock market is behaving bullish.

[A]

I have another, I have another chart on this.

[B]

Hold on. Let me just say, let me just say this one thing. It's hard for, I think it will be hard for the market to continue to shrug off these blow ups. Like they have to slow down if, if, if investors keep believing that AI is going to kill everything. And you just keep having these individual names fall 18% because of a clot announcement. Like, I think the market could only take so much. At some point. I think we'll see lower prices. But if this can cool off and this is mostly behind us, then I think we're set up very nicely.

[A]

I said this last week, and I'm fairly convinced that everything that's happened since has proved me right. I really do think that there was a conversation between the SaaS industry, which is a huge spending powerful group of CEOs, and some of these AI platforms. And I think they're finished with these types of shock and awe announcements and allowing the media to run with this narrative conspiracy. Josh, it's not a conspiracy. I think there was a dialogue though, because they're not doing it anymore. And actually the last few big AI platform announcements were made in conjunction with existing incumbent companies as partnerships.

[B]

Dude, These stocks fell 60% and now they bounce a little bit.

[A]

I know, but I think the Jensen Huang commentary after the Nvidia earnings sort of set a new tone. Like saying to the business media and the tech media, you guys are getting this wrong. You don't understand. These tools exist and they work. The. The agents are not going to invent their own tools for no reason. They're going to be trained on the existing products that exist out there. Even if you don't believe that's true, and I'm sure plenty of people don't, just the fact that that's how the AI industry is speaking now is a change in tone. And I don't think it's like totally accidental.

[B]

So one of our advisors said to me, hey, I've been playing with these tools over the last couple of weeks, and I don't think we're going to need company X, company Y, company Z. And my first internal reaction was, if you're able to do something kind of cool, what do you think these companies that you're talking about are doing right now? The companies that you think that we're going to eliminate? You think they're just like, oh, la de da. We have no idea what's going on.

[A]

Like, yeah, what's AI? Right, of course, that's that. Well, that's the point. So that's the point. And it, it might be case by case, like, of course it is, but just like, not to just keep talking about my stocks, but, like, take over.

[B]

Like take Uber, for example.

[A]

Well, Uber, right. Uber has been utilizing AI and machine learning for 15 years. But even if you think about Toast, for example, Toast IQ is their AI product. They're selling this to a guy standing behind a bar with a rag on his shoulder and an apron. That guy's not like, oh, cool, I think I'm going to make my own.

[B]

Right.

[A]

Like Toast IQ will be one of the highest penetration AI products in the hospitality sector. How do I know? Because of course it will be. And so it's not like. And that doesn't mean Adobe's AI will be successful. They want to be a layer for the creators. Doesn't mean that Agent Force will be. I think it's going to be case by case. I just don't think it's going to be as black and white and as obvious as everyone thinks it will. I just, I can't imagine that it's one way or the other. Either there's no disruption or there's total disruption.

[B]

They sold these stocks off 60% in most cases.

[A]

Yeah.

[B]

And now we'll see.

[A]

I agree. Biff Grebel says Toast doesn't need an AI product. Okay. But Toast is the billing and payment system for every restaurant in a Marriott all over the world. That's a, that's, that's a partnership with Marriott where they are. So do you think Marriott doesn't want AI derived insights from their billing and other activities delivered to them? I'm pretty sure they do.

[B]

All right, let me. Are you done?

[A]

Last chart on this back to single stock volatility. The implied volume spread from now to year end suggests that single stocks will be more volatile versus the index at a degree. Last implied in October 2008.

[B]

That's great.

[A]

Is this the craziest thing you've ever seen?

[B]

Yeah. Love it.

[A]

Okay. All right, you're up.

[B]

All right. Nvidia. So Nvidia reported last week and very similar to what happened the last time it reported when we were in Austin. Great report. Beat raised the whole thing. Stock can't go up now. If you zoom out, the stock is behaving totally fine. Okay. It was in one of those, one of those stocks that was so extended three miles above every moving average. And it's digested it really well. It. But it's gone sideways since August 2025. Like it's a. It's a long. Right. So it just bounced at the 200 day moving average which finally, it finally caught up to it. So it's fine. It's not like, you know, nothing to be like alarmed about, but I think in video just might be too big to move. So. Turning point Market research shows that shares their, the post earnings performance since the introduction of ChatGPT. And this is three quarters in a row where like what, what more can they say?

[A]

Every one of these quarters was a great report, dude.

[B]

And it's not just okay, turn off please. What more can they deliver and what more can they say for this stock to go up? It's impossible. Now I'm not saying that it will never. Like they, the, the, the quarter that they just had was the biggest sequential increase in revenue I think ever. And the guidance was not bad. And the stock still can't find the buyer.

[A]

It's the biggest stock in the world. And I think this is just plain old like, like, like good old multiple compression. It's not. Nothing fancy happening here. I think it's now a Forward PE ratio of 22.

[B]

You know what, this, this stock is way too big to trade at a market premium.

[A]

Yeah, it's too big. And there's nobody that doesn't know about its dominant market share. So I think you have just multiple compression. But then the other thing that you have is real competition. And I'm not talking about amd. Like a lot of Nvidia's customers are now looking to ship their own chips to other Nvidia customers. Like we're hearing about tensor processing units. They don't replace GPUs, but they maybe make it so that companies don't need as many GPUs. They still will need them. But there are a lot of like inference things that can happen with a tpu, which is significantly cheaper. It's a more narrowly focused thing. It's not a replacement for Blackwell chip or a Rubin. Like no one's saying it's like Coke and Pepsi, but these cloud data centers are going to be somewhat cost conscious going forward. And as things get replaced, they're gonna be looking for what, all right, what are my options? And there are options now in the marketplace. Amazon's working on silicon. Like it's. So it's not, there's not one big Nvidia competitor that Nvidia shareholders need to worry about. There's like 10. And a lot of those would be competitors offering new solutions like application specific integrated circuits are Nvidia's biggest customers. And I have to believe that that is having an impact on the multiple, on the, on the forward earnings multiple and people just a little slightly less confident that Nvidia is going to maintain its market share and its gross margins.

[B]

Here's the head that I don't love. Blackstone plans Public public company. Okay. Blackstone plans public company for AI Data center buying spree so Bloomberg said Blackstone is launching a publicly traded acquisition company that will snap up data centers, giving millions of mom and pop. Are we democratizing data centers? Millions of mom and pop investors a chance to bet on the artificial intelligence boom. And why wouldn't they? I mean look at this chart of digital realty Trust and Equinix versus versus the index. These data center REITs are working really, really well. But man, I just don't.

[A]

Can I say the very obvious thing? This is exit liquidity. Well, of course for the data centers that they're already building or have built.

[B]

It's, it's ones that, it's only ones that are, that are built. This is not. No contracts.

[A]

No, I understand, I understand. But like we, you and I went to the, you and I went to listen to B reit. We went to listen to them speak and I think like, what is it? 20 something percent of the portfolio is data center. And they, they are, they are very much an important part of the infrastructure of all of this on the financing side and now building a vehicle so that there could be like shareholder ownership makes sense to be the next.

[B]

So I know exit liquidity sounds really bad obviously and I don't know enough about this just to talk super intelligently, it is my understanding that these are already contracted out, that there are obviously tenants in each one of these things.

[A]

Yeah, they go to, they go to. Right. They're building it. They finance it. They're building it. And Meta kicks in money on the equity side and Meta signed something saying that they're going to be utilizing it for five years or for 10 years. It gives you the confidence to want to build one of these things. The. What's really interesting is that there's like a scarcity play here, almost like cell phone towers. Nobody communities do not want new cell phone towers. Even if you tell them it's going to make their, it's going to make their 5G work better or whatever. Like people don't want it. People do not want these data centers. They're coming out and voting against them. So it's, it is an important asset and there is a scarcity value. They can't just throw them up as quickly as they were.

[B]

Yeah. So this is a nice segue to be credit redemption. So you know how somebody could be right for the wrong reason, like you can make money. Even though your thesis was, was incorrect, I think I was wrong for the wrong reason on some of its alternative Asset managers. And what I mean was, I think not. I think the reason for it now there was obviously smoke, right? It started with, we don't want to like do all the history of this, but it started with things that I thought could be hand waved away. Oh, this makes sense. This is like understandable. This is not news to anybody. Oh, this is an isolated incident. And then all of a sudden it was the software stuff and that's it. So I sold Blackstone today and I probably sold it for the bottom. I was telling Ben, listen, this is, I think that this, the, the sale that I did of Blackstone is going to look really stupid. And I don't know if it's six months or two years or whatever because these are, these are predictable fee related earnings. But whatever, it doesn't matter. So for, so this is my trading account. This is my not, this is my don't lose money account. This is not like my get married to a losing stock account. So I'm just not interested in the headache because right now the sentiment is so bad on these alternative asset managers. And I think it's going to stay there for a while. Rightly or wrongly, like whether or not the fundamentals deteriorate to catch down with the news, I don't know, nobody does. But I don't even think that matters because so long as investors are want more money out than they're putting in, these stocks are going to be under pressure.

[A]

They have John Gray on CNBC today from Blackstone. This is like the full court press now. They are. And it's not just Blackstone. All of them, they're sending their thought leaders out to do as much media as possible. You're seeing these guys pop up everywhere. Seeing them on tv, on Bloomberg. You're gonna start hearing more of them on the podcasts. And look, I wrote this thing last fall or last summer. Why would you buy any of these BDCs or these illiquid vehicles? Just be an, just be a gp like just own the equity.

[B]

Well, that didn't work out well either.

[A]

Well, it turns out neither. Neither of these things are good.

[B]

But what's we haven't even seen, the cycle hasn't even turned. Like the portfolios I'm using, air quotes are fine. There's no the fund when they keep saying the fundamentals are fine, the fundamentals are fine. Nobody cares if the fundamentals are fine today because B CRED, for example, 26% of their portfolio is in software. So yeah, there might not be stress today, but these middle market software companies are doing 250 or $300 million of EBITDA. You don't think there's stress? Are you kidding me?

[A]

Sometimes my cynicism keeps me out, keeps me from making money. But I find that more often than not, my cynicism, when I see a gold rush and I see an activity bubble, I just. In my head, I just call bullshit on it at first glance. And sometimes I'm wrong, of course, but, like, in this case, I was right. I just saw, like, whole teams of RIA people being flown into New York City and wined and dined so that, like, the employees of these RIAs could be taught how to sell a private credit fund. And I'm just like, who does that? If the product's any good, like, it shouldn't need it. A great investment doesn't need to be. To be sold that way through.

[B]

There's. There's nuance there, though, because I know,

[A]

of course there's always nuance, but. But I'm generalizing for a reason.

[B]

Yeah.

[A]

When I see that level of full court press making unsophisticated yokels get on. Get on a plane, come to New York, take them to, like, a Yankees game, and then, like, put. Put them on the. In the penthouse office of one of these companies for, like, the. The timeshare pitch, how could that possibly be a good outcome?

[B]

You are right. You are right. You are 100% right. And also in 2022, the bond market had its worst year ever, basically. Like, no bond investor has ever seen a year like that. And so we had this really weird environment where you had increasing interest rates increasing very rapidly and sort of unbelievably no credit deterioration. So with private credit, investors got the benefit of higher interest rates without the duration and no credit losses. So private credit did amazing in 2022. Did amazing. And these, these asset managers, they said, we have to strike the iron will never be this hot. We will never, ever have this opportunity past performance. Correct.

[A]

Dude, I was at Delivering Alpha, which was at the Glass House, the CNBC event. And it's like, I don't even know what. Like, I don't even know. The audience is weird. It's like, it has a lot of retail investors, but then it also has institutions. And then there were, like, hedge fund people. I don't know, but, like, the guys walking around like, they just won the Super Bowl. Private credit. We're all private credit guys. And they were strutting around. I never even heard of these people. They were getting out of, like, they Were getting out of like black Yukons out front on 10th Avenue with the tents. And they were just walking around like they just invented a cure for cancer. And I really, that was the first inkling that I had that, oh, all right, something has changed. Because my entire career, nobody cared about this asset class. They were like keynote speaking their asses off. And that was 23. So that's almost three years ago. That's like the spring of 2023. And they were selling past performance, basically. But in the end, credit is credit. I don't care if it's held privately or publicly. And these are all great firms. They're not bad firms. I'm not saying they're bad products. The fundamental flaw is they're presupposing that they can teach financial advisors and their retail clients to act like they're on the board of a hospital. It's never going to happen.

[B]

Correct.

[A]

Sorry, Correct. Never.

[B]

Correct. Okay. And also, let me. Before we get to the B credit thing, let me ask you this. Do you think that in three years private credit will be bigger than it is today? Maybe substantially so? Or we're going to look back in 2025 and be like, can you believe how drunk people.

[A]

I'm so glad you asked me that question. Ironically, if you're an investor in private credit, what's going on now is the best thing that could possibly happen.

[B]

Get rid of the weekend.

[A]

The valuations, the valuations, the marks. This is private credit and private equity. Panic in the private markets will create better opportunities prospectively for new dollars going into the asset class when you have less competition, bidding up or putting out loans at price. And that's just like, right, like, like the pricing on some of these loans is there's like no margin of safety. It's tightrope walking. And that has to, that has to work itself out. And I don't know how long that takes.

[B]

So we're going to see. We're going to see. So my suspicion is that private credit will continue to grow in size.

[A]

So.

[B]

But we are going to see what these portfolios are really made of. Because you know what? Let's, we'll put a pin in this. We'll get to Mark Rowan in a second. Let's talk about.

[A]

So I want to, I want to show people like there's been no problem here. This is a table of the historical net asset value of B cred, which I think is the. Is this the largest?

[B]

Yeah, it's $80 billion. Now listen, this is not private equity fake marks, okay? These are loans. So, yeah, they're not liquid. I mean, they're not going to be marked every day. They shouldn't be.

[A]

But.

[B]

But this is like, you know, this is.

[A]

The nav is fluctuating like 30 to 40 cents per quarter. It's stuck right where it should be. And then there's a yield on this.

[B]

Yeah, it's a bond.

[A]

So it's a bond. But, like, it is remarkably stable. Now, the cynic would say, so far. Wait, okay, fine, we'll see. Right now, they're doing their job for their investors. I want to also show the growth of $100,000. Real money has been made in this space. And Michael is right. In 2022, when people's publicly traded bond portfolios, including Treasuries, got absolutely murdered, this did act as a safe haven. Now, if you hate these people, then the thing that you could say is, yeah, they cheated. They never moved the valuation because there were no transactions and they got away with it. I personally don't think that's the case.

[B]

That's the whole point. It's loans. It's illiquid loans.

[A]

I'm making this point. In a lot of cases, it's not syndicated. It's a bilateral agreement. I'm a lender. Michael's the borrower. He and I decide what it's worth because if he. So long as he continues to pay and perform, and I'm not selling it to anyone else, the loan is worth what I say it is. And that's the nature of the. It's the difference between publicly traded bonds where the whole market has a verdict.

[B]

Yeah.

[A]

Or a syndicated loan where you have 40 different buyers and they all end up in court for three years to. To. To work something out in this asset class. It doesn't work that way. And I don't think people understand that. That nuance.

[B]

All right, so I. I'm so. I'm so curious to see where this goes. If the fundamentals do deteriorate and you start to see some defaults pick up, oh, my God, the press is going to have a field.

[A]

All right, so the reason we're talking about this today is because it came out that investors pulled 7.9% of their redeemer record, 7.9% of shares from the B CRED Private Credit Fund. Now, I thought what Blackstone did was a great move. They have a cap where they could say, no more than 5% in any one period of time. And they said, no, you know what? Actually, no problem. Here's everything. And that kept the people pulling some of their money out.

[B]

7%. It's 7%. That's what they.

[A]

So they said, here's 7.9. No problem, no cap, we got you. That's number one. Number two, they actually had inflows, not on a net basis, but they said $2 billion in new money.

[B]

That's shocking.

[A]

Came in. Came in at the same time that. 3 points. So they had 3.7 to sell. People wanted out, but 2 billion to buy. And so the net was a negative number. Ooh. But the other power move they made is they say $400 million worth of the buying came from employees. So employees at BlackRock maybe. And maybe they'll be judged on this come bonus time. Did they. Did they put up or shut up? But like, I find that to be an admirable solution. And they said, if anything, this aligns us even more with our investors. Our employees are buying into the fund. Yeah, I thought that was super dope.

[B]

So I took a 30% loss in the stock. Won't be the first or last loss that I take, but I think. I think it will look. I think it will look foolish in hindsight, but that's okay. I'm fine with that.

[A]

I mean, this stock is a falling knife. I fairness.

[B]

I usually catch falling knives. Now I'm selling a falling knife. Played the first. Let's hear from Mark Rowan.

[A]

The.

[B]

One of the adults in the room

[C]

is kind of slightly riskier on the face of it. Lending has been outsourced to professionals like you and to people who know what they're doing. The worry is that suddenly you're now getting. In Britain. We call Aunt Agatha coming into these markets more worrying. Look, we're going to have a correct correction, but it's no different than the correction that happening in banking. If you look in banking, the dominant banking institutions of today were not as dominant pre crisis. Those that sat out the subprime lending have arisen and become magnified in terms of their fortress, balance sheet and market share because they were good managers of risk and good managers of underwriting. I believe the same thing is going to happen in investment markets. Investment markets, people made choices. If you wanted a higher dividend, you could take more risk. You could lend to smaller companies. You could do more pick. You could invest in equity and preferred, not just first lien. And you could run with a lot of leverage. That felt really good on the way up. That's not going to feel so good on the way down. And there are companies of which we are one, but not the Only one who went all first lien, who went almost all cash pay, who went large companies who work with low leverage. I like where we sit. And we. Jamie Dimon said it. There's always going to be fraud. There's always going to be underwriting mistakes. But the question is, who's a good risk manager and who's not a good risk manager? If 30% of your portfolio is in one industry and that one industry is being impacted by technology, you have not been a good risk manager.

[B]

Pretty good.

[A]

Some of these stocks are going to set up generational buying opportunities. Some like. They're not all going to be Blue Owl, and they're not all just. They're not all just going to keep going down and down and down and down. I do think that the portfolios of these companies, both on the equity and the credit side, they got a lot of stuff that people don't want. There's a lot of software. There's a lot of commercial real estate. There's a lot of stuff that people

[B]

just do not want this stuff. The headlines are going to continue to get bad. They haven't even started to get bad. And the outflows, unfortunately, have probably only just begun.

[A]

To your point, be CRED. You know what? Be for all this talk B. CRED's performance. 9.8% annualized total return since inception.

[B]

Yeah, it's been great. And guess what?

[A]

Almost no default doing, like, they've done a great job. And we already are hearing panic. Like, it's. I mean, I agree with you. I think. I think that's why I'm not. That's why I'm not. Like, I'm buying Apollo. I'm buying that eventually you will hear me do that.

[B]

I will.

[A]

I don't know when that's gonna be.

[B]

Damn right I'll be back. You damn right I'll be back. All right, let's. Let's.

[A]

What are the. What are these IPOs?

[B]

It's enough. It's. We don't.

[A]

We could skip so much already.

[B]

All right, so I've got. I've got a pretty. I've got a pretty.

[A]

Wait, are we gonna make the case? We're gonna make the case.

[B]

Yeah. Yeah. This is a very tepid. Make the case. So I was. I've been noticing, as I'm sure you have, like, is New York City back? And I'm just talking about. Just based on the train station. Dude, it is packed early. I took a 7:15 train the other day. I was like, are you kidding me?

[A]

I think economic. I Think economic anxiety is back and people are showing up, showing their faces in their offices more. So look, that's an economic story. I think it's a labor market story. People are worried about their future.

[B]

Okay, very well. Could be. Very well could be. Look at. Throw this chart up of SL Green's occupancy rate or vacancy rate rather.

[A]

Yeah.

[B]

Going in the right direction.

[A]

I don't know if this is the same number of. Oh, it says same store. Okay, so it's the same amount of buildings we're tracking. Look, anecdotally and because I have inside information from Barry Finkelman, who is the commercial realtor to the stars in New York City. Barry explained this to me very well three years ago, and it enabled me to know what I was talking about because I don't really know this market. But the way that Barry explains it, there was a flight to quality after the pandemic. All of the biggest and best companies, not just public companies, law firms, accounting firms, they wanted to be in the best buildings because they recognized they needed more amenities and nicer scenery to keep people coming into the office and almost like reward them for coming into the office. So that flight to quality wasn't just about class A buildings in the best neighborhoods. They wanted to be in the top third of the stack. They wanted to be upper third of these buildings. The best views. So it's top floors in top buildings. Those rents are all $250 a square foot. Like nothing ever happened. The real. The real knife fight is in class B is in dilapidated 1960s buildings nobody wants. Ceilings nobody wants. I know that's the real knife fight, but that's not the SL Green portfolio.

[B]

SL Green Ball A.

[A]

So.

[B]

So I almost.

[A]

SL Green is one Vanderbilt.

[B]

Yeah.

[A]

And I think one Madison, which is Madison Square Park. It's the best, most brand new towers.

[B]

So I thought. I suspected that SL Green was under pressure. I thought it was like. It was a big Mom Donnie thing, like less demand. All of these office real estate, all of these office REITs around the country are getting murdered. It has nothing to do with. With Mom Donnie. I thought that was interesting. Anyway, I'm not making the case for this, although maybe I should have. I'm making the case. I actually bought the stock today. So I. I sold. I sold Blackstone and I bought DraftKings. And. Let me take you through my thesis, which I.

[A]

Why are we talking about commercial real estate? I'm lost.

[B]

I almost made the case for SL Green, but I didn't.

[A]

I'm making the Case for now we're doing your. Okay, we're doing your B roll and then we get to the A roll. Okay, Got it.

[B]

You should have seen it. I had a whole thing on SL Green. I said, you know what, I don't want to do this.

[A]

All right, now that's conviction.

[B]

Nope. Because a lot of the fundamentals, like don't really look great Anyway. All right. DraftKings.

[A]

Thank God you were never a stock broker.

[B]

DraftKings. Yeah, I have no conviction.

[A]

I starved. You would have starved.

[B]

I have no conviction. I should have said, yeah, you probably should sell a stock. It's not, it's not really that Great. All right. DraftKings. I think DraftKings is in the same position as the software stocks in terms of. Software is under siege by AI and DraftKings and FanDuel are under siege by prediction markets. And I think it is way overblown. Way, way, way overblown. So let me.

[A]

You're going to be wrong. Go.

[B]

Oh yeah. I'm only looking for 12% so shut up.

[A]

Well, that. I couldn't help you.

[B]

All right, so draft things. The stock fell 60%. It fell from like 50 something down to 20. It was, it was. So this is, this is not a great business. Let's be clear. This is not a good business. And it was trading way too richly. It was at six times sales earlier in January 2024. Nobody wants anymore. You can't give it away. It was under one, it was under two time sales. All right. In their most recent report and their CEO is a real guy. He said we are not seeing a discernible impact from predictions on our revenue. So this chart on we're looking at leading prediction operator versus regulated Sportsbook. I kind of don't believe this. These numbers, there's probably something in the fine print because this seem. This makes it look like there's no impact whatsoever. Everybody knows or everybody thinks that the prediction markets are going to take a huge bite out of. Out of these companies. They cleaned up their stock based comp in a big, big way which is totally out of control. Next chart. As a percentage of revenue, it has gone in the right direction. They finally had a positive gap quarter. Their operating income is going up in the right direction. And next chart, I think I found the short term bottom. So I don't love that I made the case for this, but I just think that it's way over. So I don't, I don't believe the prediction markets are going to destroy DraftKings at FanDuel.

[A]

No I think it's actually worse than that. They destroy their own customers.

[B]

DraftKings.

[A]

All of them.

[B]

Yeah.

[A]

Terrible. Nobody. I never would. So I know you're trading and you probably make some money. I would never invest in companies that are bad for that are like fundamentally like they need to. The cost of acquiring a customer is so high in part because they have to keep acquiring customers because everyone gets burned. Nobody's a winner. Nobody gambling on sports for a year is up. Sorry. They're just not. So the higher usage of the platform, the worse off you are as a customer. That's a shit business. And it's not. There is no comp. There's no. Do not compare these to the brokerage stocks. The people who have had accounts of Charles Schwab for 20 years are significantly wealthier.

[B]

All right.

[A]

He's already done to say that. Will not be able to say that about any of these. And now there's this free for all that number's bullshit. The prediction markets have only taken 1% market share. No way that's true. I don't know how they're measuring that. That can't be right. We just use your brain you know it's fake. And then consider how much competition there is. Not just from the prediction markets. Like now you have fanatics is in the fray. All the casinos are using this as a lifeline because they're losing money.

[B]

Yeah. FanDuel and DraftKings have 80% market share. Listen, I said at the outset in my defense, this is the worst make the case I've ever made in my life.

[A]

All right. That was super bullish. I loved it. Let's do a mystery chart. Pop me up. Okay. We alluded to a commodity tonight during the show. And this is the publicly traded company that is most associated with that commodity. And I thought of this as a really obvious buying opportunity. If that trend line test where to hold Newmont. Do you know what it is? Say it. Newmont, you are the smartest man alive. Round of applause for Michael.

[B]

Well, I mean that was.

[A]

That was not first guess. Well, no. You could have gone oil, could have gone bitcoin. I don't know. What do you think about this?

[B]

What do you think about this setup?

[A]

You don't trade these types of setups, do you?

[B]

No, it's too easy.

[A]

It's too easy to trade. I love that. I love what. Put it back up real quick, guys. I love when a stock hasn't revisited its uptrend. It's moving average in a long time and then it falls in there on a completely exogenous event that has nothing to do with the company. I feel like this is a super low risk, super high reward if you set your stop right. Why wouldn't everyone trade this way? I truly don't get it, but I don't know. It had a big downward flush today, recovered about half of it. Intraday. I feel like this is what people should be doing when they are short term.

[B]

People think that they either missed the move or just my luck, I'm going to buy it and it's going to stop working. That's just right.

[A]

But that's where the stock. That's why the stop. I agree, I agree. If only people understood you want to buy dips in stocks in powerful uptrends and you want to buy retests of the major supportive moving average. If only people did that, they wouldn't have to be on flutter or whatever the betting on nonsense that's literally impossible to win at. Like if only people understood there's actually a rhyme and reason to how consistently profitable traders operate.

[B]

All right, I'm sure DraftKings he convinced

[A]

me, but they won't listen. Okay guys, thank you so much for listening. My favorite podcast, Michael and Ben's Animal Spirits is on tomorrow morning, the podcast app of Your Choice and YouTube later in the morning. Don't miss that. We have an all new Ask the Compound later that day with Duncan and Ben and of course an allnew edition of the Compound and friends at the end of this week. New guest for us and we're super excited to bring this guest to you. Thank you guys so much for watching, listening. Thanks for all the likes and the subscribes. We'll talk to you soon.

[D]

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