The Blue Chips of Junk

Summary

Podcast Summary: "The Blue Chips of Junk" | The Compound and Friends

Release Date: January 24, 2025

Hosts: Josh Brown, Michael Batnick, and Bob Elliot
Guest: Bob Elliot, Co-founder, CEO, and CIO of Unlimited Funds

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1. Introduction and AI Innovations

The episode begins with light-hearted banter between Josh Brown and Michael Batnick, quickly transitioning to a discussion about OpenAI’s latest release—the agentic AI. Bob Elliot introduces the topic by showcasing OpenAI’s new AI agent, highlighting its capabilities such as booking reservations and managing grocery lists through services like OpenTable and Instacart.

• Notable Quote:
  • Bob Elliot (00:36): "The killer use case, the app for crypto is here."

Key Points:

• OpenAI’s agentic AI can perform tasks like booking tables and handling grocery orders.
• Concerns are raised about the security and practicality of granting credit card access to AI agents.
• Discussion on the future potential of AI in automating everyday tasks and the necessary safeguards required.

2. Apple's Siri and Conversational AI Integration

The conversation shifts to Apple’s efforts in enhancing Siri’s conversational capabilities. Michael Batnick criticizes Siri’s current functionality, emphasizing the need for a more advanced, ChatGPT-like interaction to make it truly conversational and useful.

• Notable Quote:
  • Josh Brown (03:20): "They're using ChatGPT, so of course they'll get there."

Key Points:

• Apple is investing heavily to upgrade Siri, aiming for more natural and intuitive conversations.
• Current limitations of Siri include disjointed responses and lack of memory between interactions.
• The importance of making AI assistants more personalized and context-aware to meet user needs.

3. Market Expectations and Asset Valuation

Bob Elliot and Michael Batnick discuss the current market sentiments, highlighting the high expectations placed on the stock market, particularly on high-growth sectors like AI and tech.

• Notable Quote:
  • Michael Batnick (25:15): "The growth rates expected for MAG7 companies are still high, but they're expected to slow."

Key Points:

• The market is pricing in exceptionally high earnings growth, especially for MAG7 (top tech) companies.
• Concerns about whether these high expectations are sustainable given broader economic indicators like GDP growth.
• The potential disconnect between stock valuations and real economic performance.

4. Earnings Reports and High Valuations

Josh Brown uses Netflix as a case study to illustrate how high-growth companies with elevated earnings multiples can thrive despite skepticism. The hosts analyze Netflix’s recent earnings, recognizing its success but questioning the long-term sustainability of such high valuations.

• Notable Quote:
  • Josh Brown (34:55): "Turns out it was cheap. But who could have known?"

Key Points:

• Netflix’s record subscriber growth and revenue increases beat analyst expectations.
• The challenge of valuing companies like Netflix, which defy traditional valuation metrics due to their innovative business models.
• Discussion on how the success of such companies affects overall S&P 500 valuations and investor behavior.

5. Bond Markets, TIPS, and Portfolio Diversification

The hosts delve into bond markets, focusing on Treasury Inflation-Protected Securities (TIPS) and their role in portfolio diversification. Michael Batnick explains the attractiveness of current TIPS yields and how they compare to stocks in terms of risk and returns.

• Notable Quote:
  • Michael Batnick (59:08): "The term premium expansion is a pro-growth story, reflecting high growth expectations."

Key Points:

• TIPS are offering attractive real yields, making them a compelling option compared to traditional bonds and cash.
• The significance of term premiums in assessing the bond market’s outlook.
• Strategies for incorporating TIPS into investment portfolios to balance risk and enhance diversification.

6. Hedge Funds, Fees, and Investment Strategies

Bob Elliot and Michael Batnick discuss the challenges within the hedge fund industry, particularly the high fees and liquidity issues. They critique the traditional 2 and 20 fee structure and introduce Unlimited Funds as a more cost-effective alternative that democratizes hedge fund strategies.

• Notable Quote:
  • Michael Batnick (86:57): "Fees are too damn high, and they're essentially taking 100% of the alpha."

Key Points:

• Hedge funds often charge high fees that can erode investor returns, especially for underperforming funds.
• Unlimited Funds aims to offer hedge fund-like strategies with lower costs and greater transparency.
• The importance of aligning investment products with investor liquidity needs and performance expectations.

7. China’s Market Dynamics and Political Influence

The discussion touches upon the divergence between US and Chinese stock markets, emphasizing the significant impact of political decision-making in China on its market performance.

• Notable Quote:
  • Michael Batnick (80:56): "They can determine whether or not the market goes up or down."

Key Points:

• Chinese stock markets are heavily influenced by government policies, making them unpredictable and risky for investors.
• Contrast with US markets, where macroeconomic fundamentals play a more significant role in driving stock performance.
• Caution advised against investing in markets where political factors override economic indicators.

8. Bond Market Insights and Real Yields

The hosts analyze current trends in the bond market, discussing the implications of falling real yields on TIPS and the overall attractiveness of bonds in the current economic environment.

• Notable Quote:
  • Josh Brown (68:22): "We're pricing a set of conditions over the next five or ten years that look as good as the pre-GFC boom."

Key Points:

• TIPS are currently offering some of the best real yields in decades, making them attractive for long-term investment.
• Rising bond yields in conjunction with strong stock performance indicate a pro-growth market sentiment.
• The importance of understanding term premiums and their reflection of growth expectations.

9. Conclusion and Final Remarks

The episode concludes with promotional content about upcoming client meetings in Naples, Florida, and a brief reflection on the discussed topics. The hosts encourage listeners to consider diversification and cautious optimism amid high market expectations.

• Notable Quote:
  • Josh Brown (93:07): "How much gold do you guys have in your strategic portfolio?"

Key Points:

• Emphasis on the importance of diversification through bonds and gold to mitigate potential market downturns.
• Encouragement to explore innovative investment strategies that align with the current economic landscape.
• Final thoughts on maintaining a balanced and informed approach to investing in volatile markets.

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Notable Quotes

• Bob Elliot (00:36): "The killer use case, the app for crypto is here."
• Josh Brown (03:19): "They have an unlimited amount of money and they're using ChatGPT, so of course they'll get there."
• Michael Batnick (25:15): "The growth rates expected for MAG7 companies are still high, but they're expected to slow."
• Josh Brown (34:55): "Turns out it was cheap. But who could have known?"
• Michael Batnick (59:08): "The term premium expansion is a pro-growth story, reflecting high growth expectations."
• Michael Batnick (86:57): "Fees are too damn high, and they're essentially taking 100% of the alpha."

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Insights and Conclusions

Throughout the episode, the hosts emphasize the critical balance between market expectations and underlying economic fundamentals. They express skepticism about the sustainability of current high valuations, particularly in the tech sector, and caution against blindly following market sentiment without considering macroeconomic indicators. The discussion highlights the importance of diversification, advocating for investments in bonds and gold to protect against potential market downturns. Additionally, the critique of the hedge fund industry's fee structures underscores the need for more transparent and cost-effective investment solutions, pointing listeners toward innovative alternatives like Unlimited Funds.

The conversation also underscores the complexities of navigating global markets, particularly with the unpredictable nature of Chinese stock markets influenced by political decisions. Overall, the hosts advocate for a disciplined and informed approach to investing, leveraging diverse asset classes to build resilient portfolios in an environment of high expectations and potential market volatility.

Transcript

[Josh Brown]

So how's life?

[Michael Batnick]

Good. Good.

[Josh Brown]

Yeah. What's going on?

[Michael Batnick]

Rock and roll me Slide down here.

[Josh Brown]

What's. What's the latest. What are you up to?

[Michael Batnick]

Working on some new stuff coming out.

[Josh Brown]

Are you all work, no play, or.

[Michael Batnick]

Oh, no, I got plenty of play, no work.

[Bob Elliot]

So we saw. We. The Royal. We. OpenAI just dropped something big an hour ago. John, show the screen. So the killer use case, the app for crypto is here. Oh, no, not crypto for AI. It's here.

[Josh Brown]

What do you mean? The killer use case?

[Bob Elliot]

Check it out.

[Josh Brown]

What is it? Operator. Oh, this is the agent, yeah.

[Michael Batnick]

Oh, the agent, yeah.

[Bob Elliot]

So they just agentic.

[Josh Brown]

AI.

[Bob Elliot]

So look, what can I do?

[Josh Brown]

Book a table so It'll talk to OpenTable for you.

[Bob Elliot]

Yeah. John, go to the next one when you get a chance. So they show getting dinner reservations. This is pretty cool. So if you write out a grocery note and upload it, it will read.

[Michael Batnick]

The grocery notes, just go right into the fresh direct and just deliver it for you. Write it out.

[Josh Brown]

I bet you it's gonna be Instacart. It's instant cart.

[Bob Elliot]

Yeah.

[Michael Batnick]

Well, the good thing is then it goes to a person. And you only get about 50% of the shit that you order.

[Josh Brown]

No, no, no.

[Michael Batnick]

I mean.

[Bob Elliot]

But anyway, so it's actually. It's going to be every Instacart competitor, and then also.

[Josh Brown]

And it will be a robot doing the Instacart in two years.

[Bob Elliot]

And Stub up, they do one with StubHub, but you could get tickets. So all of the shit's here.

[Michael Batnick]

What I. What I want on this is if I'm like, planning a vacation or whatever, just, like, just know my preferences, find the flight, it's coming, hotel, just. Just deal with all of it.

[Josh Brown]

So a lot of people say that that would be the last thing they would want because of how specific people are with travel. And a more obvious thing would be get me two tickets to see, like, the new Star wars movie.

[Bob Elliot]

So that's in there.

[Josh Brown]

Yeah. No, I'm saying, like, I feel like.

[Michael Batnick]

Travel, but it depends, how much does that save you?

[Josh Brown]

You could do that yourself, too.

[Bob Elliot]

You're very specific with travel.

[Josh Brown]

Not everybody else maniacally so.

[Michael Batnick]

But it'll learn your preference. Like, ideally, what you do is you learn your preferences. You only fly, you know, I don't know. You only fly between. Between 8 and 10pm yeah. And, you know, take an aisle seat and stuff like that. Like, why. You know, I think that's the benefit is the complexity.

[Josh Brown]

I think the next. The next thing is also like, how many people want to give their credit card access to a bot and just have it start completing transactions for them? So probably there's going to be a step in between where like the agent comes back to you and says, okay, this is what it's going to cost. Yes or no. Like. Like you'll be able to say yes or no.

[Michael Batnick]

Buy it. Yeah, you certainly don't want to say, buy me some Taylor Swift tickets. And it's like $12,500.

[Josh Brown]

Right. I think you're going to need like an interim step, at least for a while, when you're trusting one of these things with your. With your purchase.

[Bob Elliot]

So they built all this. It only cost $3 trillion. That's it. That's it. Now we could.

[Michael Batnick]

This is. This is where the $500 billion of investment happening in the next 12 hours.

[Josh Brown]

That obviously this is where Apple has to get to. And they're playing.

[Bob Elliot]

They're not getting there.

[Josh Brown]

Of course they will. Pretty crazy.

[Bob Elliot]

I don't think so.

[Josh Brown]

They have. Well, they have an unlimited amount of money.

[Bob Elliot]

Yeah.

[Josh Brown]

And they're using ChatGPT, so of course they'll get there. They need Siri to be conversational right now. You have to say, hey, Siri. And then Siri responds. And then the next query you ask is independent of the previous one. What they need Siri to be able to do is get us a reservation for four people at that Chinese place we went to in Rhode island last year. And then Siri will say, you went to two Chinese places in Rhode island last year. Did you want to go to this or that?

[Bob Elliot]

Siri will say, you want to see what movie? Siri has not improved at all.

[Josh Brown]

But my point is they're. They're built rebuilding Apple intelligence on the op on the ChatGPT chassis, and they need Siri to become conversational and useful right now.

[Michael Batnick]

Yeah, it sucks.

[Josh Brown]

Any person literally sucks. Like, but they're playing.

[Michael Batnick]

It's not even worth trying. That's the issue.

[Josh Brown]

But you're not accustomed to seeing them play from behind to this degree. But they are.

[Bob Elliot]

The divergence of the stock price right now is pretty interesting. Like, they're getting walloped relative to the other mags.

[Josh Brown]

Even Buffett sold it. Buffett hates.

[Bob Elliot]

Well, Pelosi top picked it.

[Josh Brown]

She sold it, right?

[Bob Elliot]

Yeah. At least part of it. Hey, what's with the closed blinds today?

[Josh Brown]

They're always closed.

[Michael Batnick]

Really? Yeah.

[Bob Elliot]

I am so oblivious.

[Michael Batnick]

Those books are ordered by colors as well, in case you were wondering. We all. And can I just ask a simple Question.

[Josh Brown]

Yeah.

[Michael Batnick]

What the is this?

[Bob Elliot]

Yeah, nobody knows.

[Josh Brown]

It's decor.

[Bob Elliot]

Nobody knows, Bob.

[Josh Brown]

It's decor. Like these.

[Bob Elliot]

They're bocce balls.

[Michael Batnick]

I understand they're bocce balls or whatever.

[Josh Brown]

Okay, they're croquet balls. I'm gonna have a heart attack.

[Michael Batnick]

Oh, you did this. Is this a croquet ball versus this is a bocce ball or.

[Josh Brown]

See? All right, if you've watched the show on YouTube, one of the things that you'll notice. So this is in the foreground for the main shot.

[Michael Batnick]

No, I saw that last week.

[Josh Brown]

This is in the backgrounds. This is an echo of that. It's what we call a motif. Okay. So the colors are literally identical to the way that we set up the colors on the bookshelf. So there's a visual. Duncan, am I explaining this right? Daniel, you look like you want to chime in.

[Michael Batnick]

Duncan takes no responsibility.

[Josh Brown]

You have a microphone in front of you.

[Michael Batnick]

I asked this question when I walked in, and Duncan was like, I absolve all my stuff, all responsibilities, and threw you right under the bus about it.

[Josh Brown]

Thing is, what I was saying, he.

[Bob Elliot]

Said one time it was super curb.

[Josh Brown]

But what am I trying. What's the scientific explanation for why you would want to repeat something in the foreground that's in the background? Get the out of here. All right.

[Michael Batnick]

I have to say, you're really film school. You seem a little sensitive about this.

[Josh Brown]

I barely graduated high school.

[Michael Batnick]

You can't help me.

[Bob Elliot]

Who knew this was a trigger?

[Michael Batnick]

No, I didn't realize that I'm never going to be invited back here. Questioning his.

[Bob Elliot]

I had a nerve with the motif.

[Josh Brown]

I have painstakingly designed this set. If we let Michael design the set, it would literally.

[Michael Batnick]

This wasn't here like two weeks ago.

[Bob Elliot]

Yeah, go on.

[Josh Brown]

It would be like a half ripped Pam Anderson poster from 2002 and maybe, I don't know, Kobe Bryant. I mean, he's on the wall.

[Michael Batnick]

You guys looking for the next 100,000 subscribers?

[Josh Brown]

I think replicating this guy breaking my balls.

[Bob Elliot]

All right, I don't want to go.

[Michael Batnick]

Replicating his childhood bedroom is probably a good idea.

[Josh Brown]

I'm an artist, Bo.

[Bob Elliot]

I was watching Meet Their Parents to go to sleep the other night, and there's little Kim poster in.

[Josh Brown]

Yes, the guy's. What's his still funny, dude.

[Bob Elliot]

It's so funny.

[Josh Brown]

It held up.

[Bob Elliot]

It's so funny.

[Josh Brown]

It held up.

[Bob Elliot]

There's a scene where Greg is just getting acclimated. Greg Focker to Bobby D. And his wife Pam or his fiance goes so how's work, Greg? And he goes, it's. It's good, Pam. Thank you for asking.

[Josh Brown]

Oh, you know who's funny? That Owen Wilson is great in that. So I was thinking ex boyfriend.

[Bob Elliot]

Owen Wilson and Ben Stiller had an epic run.

[Josh Brown]

Yeah.

[Bob Elliot]

Between that and Zoolander was huge at the time.

[Josh Brown]

What else?

[Bob Elliot]

Starsky and Hutch.

[Josh Brown]

Oh, that was good too.

[Bob Elliot]

Love that movie.

[Josh Brown]

I meanti I just watched the opening scene of that because it was on.

[Bob Elliot]

It's so good.

[Josh Brown]

And Snoop Dogg is Huggy Bear. Yeah.

[Bob Elliot]

And Vince Vaughn in that movie. Great movie. Let's go start the show.

[Josh Brown]

All right, we're doing the show coming in. All right.

[Michael Batnick]

Episode 1 75.

[Bob Elliot]

Whoa, whoa, whoa. Stop the clock. Here's a word from our sponsor. Today's show is brought to you by Crane Shares. Ben and I just spoke to Greg Bond of the Man Group discussing bio on Animal Spirits. That's B u Y O. We described it as Moneyball meets private equity. It's an index designed to replicate characteristics of PE buyout funds using publicly traded companies.

[Josh Brown]

That's right, Michael. This fund targets small to mid cap public companies included in the Russell 2500 index that exhibit the following characteristics. They belong to sectors favored by PE buyout funds. Think it consumer discretionary industrials and health care. They also match the profile of companies in which PE buyout funds tend to invest by screening for fundamental metrics. To learn more, go to kraneshares with.

[Bob Elliot]

A K.com bu yo do it today.

[Josh Brown]

Welcome to the compound and friends. All opinions expressed by Josh Brown, Michael Batnik and their cast mates are solely their own opinions and do not reflect the opinion of Redholtz 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. 175 Ladies and gentlemen, welcome back. Literally the greatest investing podcast that ever was or ever will be with the best motif with motifs out the ass. We have a very special guest today. Returning champion Mr. Bob Elliot in the house. Bob is the co founder, CEO and CIO of unlimited funds and asset manager providing easier access to hedge fund strategies. Bob was previously the head of Ray Dalio's research team at Bridgewater. Bob Elliot, welcome back.

[Michael Batnick]

Thanks for having me.

[Josh Brown]

Would love that you're back. Not too much going on these days though. It's hard to hard to even guess at what we might talk about. Are these some of the more entertaining and exciting days of markets in the course of your Career. Because I would say that for me, like, I just. Every day is insane these days.

[Michael Batnick]

Yeah, it reminds me of about, you know, four to eight years ago ago, when.

[Josh Brown]

21.

[Michael Batnick]

Yeah. No, no, I'm saying. I'm saying it reminds me of the 16, 17, 18 period.

[Josh Brown]

Oh, okay.

[Michael Batnick]

Always something new. New policies, new incremental news. You got to, you know, deal with everything on Twitter. What's happening, size it. Is it real? Is it not? How do you deal with all that? That, you know, that's, you know, finally things are getting a little exciting.

[Josh Brown]

Today. I was on TV and Trump made a remark at Davos, looking at Brian Moynihan from Bank of America, like, you better stop unbanking or debanking conservative people. He didn't say crypto, but I think he meant that. But apparently there's controversy that, like, gun companies couldn't be banked. And then the banks came out and they were like, oh, no, no, no. We debunked these people, not because they're in the gun business, but because they were doing business with Cuba, which is illegal. Like, the banks fought back a little bit, but I think Moynihan was a little bit dear in the headlights. I was on TV right after that happened. It derailed the entire show we spent almost an hour talking about. So to your point, every day, you don't know who's gonna hijack or what topic is gonna hijack. The commentary of the day.

[Michael Batnick]

Yeah, that's. I mean, good for the financial media. You have plenty of content here. Talk about every week. Main thing is, how do you keep your head straight? So how you just look right through it.

[Josh Brown]

Well, you ask yourself, will this affect earnings?

[Michael Batnick]

Right. Will it affect earnings? Will it affect growth?

[Josh Brown]

If the answer is maybe or no, look right through it.

[Michael Batnick]

And the key thing is, you could chase these things. Look at tariffs, like incremental news, incremental news. Chase, chase, chase, chase. That'll eat you alive. Versus. You have to be disciplined to wait. Wait until you actually see what's gonna be on the field, then have edge in figuring out how big a deal it is. Right. Once policies actually come. Look, he sits in the Oval Office, first day, he's like, 25% tariffs on Canada and Mexico. Who knows? You could say anything in the Oval Office.

[Josh Brown]

Doesn't mean that he could say 35. Could say 15.

[Michael Batnick]

Right? He could say 15. Until we know what's actually gonna happen. Yeah. You gotta be patient. And I think that's the thing that's hard, because the media and Twitter, all this stuff you know, you're looking at all the Wiggles trying to catch the Wiggles. You're not going to. You're not going to win this game by trying to catch the Wiggles ahead of the news. You think the market will always beat you.

[Bob Elliot]

Do you think the market will stop reacting, stop being so wiggly as he continues to just throw ideas out?

[Michael Batnick]

No, no, because, you know, there's a whole. Everyone's trying to get to have a faster and faster response. Right. And. And to be clear, like, if you're on Twitter reading the headline and trying to respond like you're later than every single AI bot that is trading, you know, as the. Are hitting the literal screen in terms of the incremental news. And so people are. There's just a race to try and be the most responsive. Get ahead and buy the.

[Josh Brown]

Here's where I think the puck is going next. If he's starting up with the banks about not making loans to Christian organizations, I don't know if any of this is true. I understand it's an issue, and I'm not dismissing it. And the stuff Andreessen was saying about Operation Choke Point and how the crypto industry was literally debanked. I know that's true. I watched what they did with Signature Bank. They said, oh, you. You want to bank?

[Bob Elliot]

Boom.

[Josh Brown]

Yeah, you want to. What was it? So you want to bank Silvergate?

[Bob Elliot]

Yeah. You're out of business.

[Josh Brown]

Yeah, that.

[Bob Elliot]

That was a thing.

[Josh Brown]

Rock a buy, baby. What's the. What did the girl say in New Jack City when she put a gun to the guy's head?

[Bob Elliot]

God.

[Josh Brown]

Right?

[Bob Elliot]

That's a lot.

[Josh Brown]

Anyway, I watched them assassinate three banks that were crypto adjacent. So I know it's real, but where the puck is going next is ESG. They just. They got rid of DEI in 24 hours. I don't think people understand how willing corporations were to be like, okay, no problem. Like, they literally outlawed DEI in 24 hours. The next phase of this is to go to Vanguard and go to Blackrock and go to State Street, I'm guessing.

[Bob Elliot]

But ESG is over.

[Michael Batnick]

Yeah. I mean, yes, she's been gone.

[Josh Brown]

Does it matters? There's still billions of dollars in these strategies, and I think they're going to try to outlaw it. They're going to say any decision that you are making that is antithetical to, like, profits or not antithetical, but any priority that you're putting ahead of making investors money is anti fiduciary and therefore illegal. They're going to do it they're going to go after the colleges, too. Like, this is gonna be. Every day is gonna be a new story. I think we can look through it, but some of this stuff is gonna leave a mark.

[Bob Elliot]

Like, what if you had to guess? Like, what do you mean?

[Josh Brown]

Adina Friedman is the CEO of nasdaq, and I actually have a lot of respect for her. She's at Davos, and she came out and said, no, actually, we don't regret the inclusion stuff that we've been doing. And nasdaq, I think. I think, was just forced to appeal something where they wanted all public companies listed on the Nasdaq. Like, the rule was going to be that you had to have at least one female board member and one LGBTQ board member maybe. And that's getting whacked. Well, it's gone. It's over. And I think they asked her, like, do you regret that you tried to do that? And she's like, no. Like, I think we've made a lot of progress for society with what we've been doing at nasdaq. And she didn't back off it. I think she said, like, we're going to be a little bit quieter about it. And obviously the term DEI can no longer be used publicly, but I think, like, there are going to. There's going to be, like, a real impact to this stuff. It's just hard to quantify. Does this mean I buy or sell, you know, any given sector or stock?

[Bob Elliot]

No.

[Josh Brown]

I'm not sure anybody can really do that.

[Bob Elliot]

No. So I'm not surprised. But it is amazing how quickly everybody bent the knee. Like, who? All. All the executives, Bezos, Elon and Zuckerberg and Sundar at. At the inauguration.

[Josh Brown]

They have a fiduciary responsibility to bend the name.

[Bob Elliot]

I get it. So Sam Altman tweeted this morning or yesterday. Watching POTUS more carefully recently has really changed my perspective on him. I wish I had done more of my own thinking and definitely fell in the NPC trap. What does npc?

[Josh Brown]

Non playable character.

[Bob Elliot]

Okay.

[Josh Brown]

It's a video game term for somebody that doesn't think for themselves on. In a video game.

[Bob Elliot]

I'm not going to agree with him on everything, but I think he will be incredible for the country in many ways. Exc.

[Josh Brown]

Okay. He had to do that because Elon surfaced something where he was congratulating Reid Hoffman at LinkedIn for all the money he raised to support Biden. So this is. All of. This is defense.

[Bob Elliot]

Yeah.

[Josh Brown]

None of these guys are excited about. None of these guys are excited about Trump I don't know about that. They might be excited about the policies. They're not thrilled that they have to, that they have to kick in money for inaugural.

[Bob Elliot]

I think these large tech companies are very excited that he's there. They could buy anything they want.

[Josh Brown]

Bezos is excited or Bezos is forcing himself to get.

[Michael Batnick]

I mean you talk about what's the investment implication. The M and A stuff is a big deal. And particularly, you know, being able. If you're, if you're a venture backed company and you're trying to get an exit like it has been a disaster.

[Bob Elliot]

How many deals are getting blocked next year? Zero.

[Josh Brown]

I think Zuckerberg is the most exciting.

[Michael Batnick]

And so if you're Meta. Yeah, right. You're out there your Alphabet, you're out there being able to acquire today anything you want. Right.

[Josh Brown]

I think Zuckerberg was the most under pressure from the left. I think he's thrilled to have that pressure completely washed away. And that interview he did with Rogan sounded like a gigantic exhale.

[Bob Elliot]

He was very happy.

[Josh Brown]

He was. I think he genuinely, first of all, he wants to get back to doing M and A because that's essentially the success of Meta is buying WhatsApp, buying Instagram, like these, this is important to him. So I agree with you on that. I think some of them are more like, all right, we have to navigate this. I would throw Sundar Pichai into that boat Alphabet. Not happy, not upset. Just like, all right, this is what it is.

[Michael Batnick]

Yeah. And you know, new leadership comes in. It feels like a big change because we're in week one and everyone has to change their rhetoric. But everyone changed their rhetoric in 2020 and the years before that. And so it's not. This is just the normal path where. And rhetoric is also not what rhetoric is not policy. Rhetoric is not policy. Rhetoric doesn't influence what they literally do meaningfully.

[Josh Brown]

I think investors like the rhetoric though. I think I look at the Russell, I look at bank stocks, I look at industrial stocks. I think the investor class likes this rhetoric better than it like Biden era rhetoric, especially Lena Khan type of rhetoric. Nobody liked that. Nobody wanted to hear from Elizabeth Warren. Nobody wants to hear from her ever again. Nobody wants to hear AOC or Bernie, even Democrats. I think people want to get down to business in the investor class and that's where we are.

[Bob Elliot]

So, so is that, how is that. Are you as excited about, about the markets as everybody else seems to be?

[Michael Batnick]

Well, the, the, the expectations in the market right now are incredibly high.

[Josh Brown]

Right?

[Michael Batnick]

Yeah. Everyone thinks that this is going to be the, the most pro business, you know, pro growth, somewhat disinflationary environment.

[Bob Elliot]

Can that be self fulfilling if everybody believes it that they're more likely to invest?

[Michael Batnick]

Well, I think that's, I think that's the question is are the expectations so high that they're not going to be met? Right. You talk about a $500 billion deal of claims of $500 billion of AI investment. Is that going to happen? Probably not at that scale. There's obviously more AI investment coming, but amongst those companies there's just very high expectations that the question is, does the policy actually do it right? And there's certainly, if you. And I think there's a lot of ambiguity out there on that which is if you look at a certain subset of the policies, they're not particularly pro business. Right. If you look at the policies on immigration, that's not a particularly pro business set of policies. If you look at the policies on tariffs, that's not a particularly pro business set of policies. So the question is really where is it actually going to play out? So far we don't know. We don't know. I think that's an important thing to recognize. Hope is at max levels and reality is still totally ambiguous.

[Bob Elliot]

So how much of this is going to be like macro? Employment, labor markets, interest rates, path of fed funds, futures versus okay, what does Nvidia actually earn next quarter?

[Michael Batnick]

Well, I think for Nvidia itself, what they earn? Well, not just infinity, but just the.

[Bob Elliot]

Macro versus the bottom up.

[Michael Batnick]

Here's the thing, I'm a macro guy, so I'll tell you the answer, which is I think it's going to be macro driven. But the things that are the macro drivers, like presidential policy and even congressional policy, isn't that influential on the macro drivers in general. It's just not that influential. All the other things that drive the underlying.

[Josh Brown]

But it could be inflationary or disinflationary.

[Michael Batnick]

For sure, on the margin it could be inflationary, disinflationary. So that's the question is are they actually going to deliver? Are tariffs going to 60% on China or not? Right, right. Or is it just rhetoric? Those are two totally different paths.

[Bob Elliot]

If you knew what he was actually going to do over the next 12 months, do you think you'd be able to nail the trade?

[Michael Batnick]

Yeah, yeah.

[Josh Brown]

You would know how to express it.

[Michael Batnick]

Yeah. If you have, let's say tariffs are at 60%, there are winners, there are losers. Right now those two are priced basically to be the same. Right. There's no differentiation in the market between tariff winners and losers in terms of earnings expectations and all that, I guess tariffs, yeah, probably. So that's a good example where if you knew that tariffs were going to be 60% and versus zero, those are two totally different outcomes.

[Bob Elliot]

I'm afraid to say this out loud, but it does feel like this is just a tough environment to fit. I understand everybody's bullish, which is never, like, a great thing. And analysts are now chasing. You don't want to see that.

[Michael Batnick]

Right.

[Bob Elliot]

But the economy's still growing. The Fed is easing. It does seem like a pretty, you know, AI is gangbusters. It does seem like a pretty favorable.

[Michael Batnick]

Time, but that's totally consensus.

[Bob Elliot]

Yeah, I know.

[Michael Batnick]

And that's the issue.

[Josh Brown]

But if you sell and this keeps going, people that you sold for be like, what on earth made you sell, though? Because other people were bullish. That was why you sold. Like, it's a really hard thing, I feel like, to like, give people a reason for why you would get off right now.

[Bob Elliot]

You're like, consensus is what I just said. Consensus, 100%.

[Michael Batnick]

Right. And it's across everything. It's across earnings expectations, it's across bond market positioning. It's across, you know, it's real yields, all credit spreads. So that's why I think everything's bullish.

[Bob Elliot]

We've been talking a lot about this, where we are in the cycle, first year presidential term, third year, in a bull market. It is setting us up and obviously, who knows, for a sideways, choppy market, if we could just digest the last two years, I think that'd be great. Nobody's gonna want that, but I think that'd be a pretty healthy outcome.

[Michael Batnick]

Yeah. And just because if you pencil. Everyone's penciling out S and P and 7,000 and all that stuff.

[Bob Elliot]

Oh, that's gonna happen. It's a lock.

[Josh Brown]

That's Michael's Lock of the Week Lock podcast, brought to you by FanDuel7000. I mean, that's where the consensus is. Just, they're galloping after the market. It's crazy, but they are.

[Michael Batnick]

They are. And so you could easily get. The issue is you could easily get a sideways, choppy market. Some slightly less than desirable fiscal policies that come in, tariffs, things like that. It doesn't take a lot. When expectations are that high, it doesn't take a lot to unwind them.

[Josh Brown]

So a couple of things. My research associate, Sean and I keep a list of the best stocks in the market. And it's fundamental and technical. Basically, what we're Trying to figure out is like, where are people making money right now? Where are the highest quality names that are going up, that are not too overbought but that are working? And of course it changes. But like all those Mag seven names just came back on the list this week. So every time people say it's like, oh, it's a rotation, it's like not really like small caps are beating large caps this year. But Amazon just popped back on the list. It's going up Alphabet the last three weeks. No, like this week, this week Alphabet came back on the list. That's with Russell starting to do as well or better than the S and P. And it's just so hard to not be in when that's happening. And it's. We're going to talk about Netflix in a second. This is emblematic of this concept.

[Michael Batnick]

Well, I think one of the things that's interesting about that is if you look at the earnings expectations, MAG7 earnings expectations, you know, the growth rates are still pretty high, but they're expected to slow.

[Josh Brown]

Yeah.

[Michael Batnick]

The thing that is driving the overall market earnings expectations surging is expectations of the rest of the 493 surging from, you know, single digit, low single digit type earnings growth to 15% by the end of the year. Yeah, that's where the gap doesn't make a lot of sense. Like look, betting on how, how, how much disappointment would have to happen for Nvidia not to, you know, deliver earnings in the ballpark of what's expected. Right. You know, the rest of the, of the market delivering earnings that are going to accelerate from low single digits to mid double digits. That's a real question. Tell me the story about how that's going to happen with a stronger dollar.

[Josh Brown]

AI.

[Michael Batnick]

Right, exactly, exactly. But where are those companies actually delivering increased earnings using?

[Josh Brown]

What is the source of that?

[Michael Batnick]

What's the source of that? I understand people are buying chips flowing dollar, the dollar's up.

[Josh Brown]

I know, but falling dollar could be the source of that. If it actually falls.

[Michael Batnick]

If it actually. But I mean that's like.

[Josh Brown]

No, I understand it's tech spending.

[Michael Batnick]

Right. So that's, that's the question.

[Josh Brown]

But no, the ROI from last year's tech spending, the people who gain in.

[Michael Batnick]

The tech spending are the people delivering the tech infrastructure.

[Josh Brown]

No, no, no, the ROI from the tech spend of last year. Like hey, we bought all this shit from Oracle and Amazon and look, earnings surprise. Because it turns out we were able to not have to hire the next 2,000 people and instead we're getting by with more tools and we're making more money.

[Michael Batnick]

Right. And that's the hope in the market.

[Josh Brown]

That's the hope.

[Michael Batnick]

And there's one set of, if you talk about, let's say the AI focused tech, whether they'll get the sales and the profits is pretty clear. Right. People are investing in.

[Josh Brown]

Yeah. Where are the customer's yachts is the question.

[Michael Batnick]

Right.

[Josh Brown]

Yeah. Well, all right, so Hypothetically, you got 10 gigantic drug makers all selling at 10 pe multiple multiples right now, effectively getting no credit for anything they're doing. Sat out the bull market last year. Sat out most of the bull market, 23 as well. Okay, what happens when one of them comes along and says our drug discovery costs are actually trending lower because we're replacing people in lab coats with AI?

[Michael Batnick]

But those, those, they don't, they haven't, they don't discover any drugs.

[Josh Brown]

They make acquisitions of companies, venture back.

[Michael Batnick]

Small businesses discover drugs. That AI benefit. I just, I just.

[Josh Brown]

It's an R and it's an R and work in this space. That's a benefit.

[Michael Batnick]

And the people who are benefiting from that are the small scale companies that are, that are, that are using AI to find, to do drug discovery.

[Josh Brown]

So that'll show off the smaller ones before the larger ones.

[Michael Batnick]

Absolutely.

[Josh Brown]

Okay.

[Michael Batnick]

Yeah, they're benefiting from it. There's been, I mean, there's been a stepwise change in that, in that over the course of the last even couple of years. But the big companies, they're paying top dollar for those products, not the other way around. They're marketing companies.

[Josh Brown]

I think people are bullish just on the idea that there will be continued margin expansion at the 493.

[Bob Elliot]

Well, there better be.

[Michael Batnick]

Right. And that's what it comes down to, is there Margin expansion of the 493 in an environment of relatively tight labor markets. Not super tight, but tight labor markets. And if there is margin expansion, who's paying for it? Right. Because the flip side of margin expansion is less hiring. Less hiring, less labor. And so this is the macro. The AI story cannot be divorced from the macroeconomic dynamics. And those are, if you have margin expansion, which is effectively priced into elevated expectations, then it has to be paid for by somebody else. So either the government has to expand its deficit or households have to massively desave. Have to save considerably.

[Josh Brown]

What about the magic of productivity?

[Michael Batnick]

Not enough, but productivity. Let's just talk about productivity. Let's say basically Overall S&P 500 sales or whatever, corporate sales have to align with GDP. Right. And so Then you go to margins, which is just essentially labor's share of that GDP number. Productivity supports the nominal GDP number and then gets distributed based upon labor share. And so if you increase productivity, let's say we increase productivity 2% which would be a huge impact over the course of say a five year time frame. Computers increase productivity by one to one and a half over 20 years.

[Josh Brown]

Right.

[Michael Batnick]

So let's say we increase productivity growth by 2%. All you're doing is increasing nominal GDP growth by 2%. Right. And amortized over a 10 year timeframe. Let's say we have the level. GDP goes up instead of 80% over a 20 year timeframe, it goes up 110%. That's a big deal. But it's only 30% increase in nominal sales. That is not that big a deal.

[Josh Brown]

Right.

[Michael Batnick]

And so the only way to get the sort of earnings growth. So if you go from nominal GDP growth of 5 and a half to 7 and a half, which would be huge, I mean that would be incredible nominal GDP growth. That's not even close to what you need to get the sort of mid teens earnings growth that is being priced in by the AI boomers.

[Bob Elliot]

But these companies have grown way faster than GDP for the last forever.

[Michael Batnick]

Right. Percentage points. But it all has to reconcile back to gdp. Right. They can't grow outside of beyond gdp. Their sales growth can't be beyond GDP growth.

[Josh Brown]

Global GDP though.

[Michael Batnick]

But global GDP growth is.

[Bob Elliot]

Well, who's saying. I'm not saying forever, but it has been for the last decade.

[Michael Batnick]

Yeah, true.

[Josh Brown]

But they can grow their share within gdp. But it's got to come from somebody else.

[Michael Batnick]

It's got to come from somebody else and it's got to come from somewhere. And productivity, all it does is it increases GDP growth by a few percentage points. And that is not close to what's necessary to get the type of earnings growth that the AI boomers are expecting. Mid double digit earnings growth requires that you have margin expansion of something like 1% a year over the next 10 years. Okay, where are you going to get that 1% a year?

[Bob Elliot]

What about just efficiency?

[Michael Batnick]

Somebody has to dissave 1% a year because if you fire people, if you don't hire people, all margin expansion is, is less money to labor relative to sales. Somebody has to fill that gap because labor getting money, labor's income is spending.

[Bob Elliot]

I'm lost. What are you trying to say?

[Josh Brown]

Sell head? This is not complicated. No, you're saying these earnings expectations cannot be met, cannot be met without economic.

[Michael Batnick]

Growth alone, without margin Expansion.

[Josh Brown]

Yeah.

[Michael Batnick]

And the only way that you get margin expansion like that is if some other sector of the economy to saves. So you either have to have the government budget deficit. Like part of the reason why how have they continued to have margin expansion is because the government deficit is widened which is just a transfer pain.

[Bob Elliot]

You didn't Netflix could raise their prices because of the deficit.

[Michael Batnick]

Yeah.

[Josh Brown]

Let's talk about Netflix at an economy wide level.

[Michael Batnick]

That's exactly how it works.

[Josh Brown]

John, put this chart up. So Bob, when I was watching Netflix report earnings and the reaction to this, I was thinking about you were coming on the show later this week. Just because I feel like this is so emblematic of why so many macro investors miss the boat on the upside in equities over the last five years. It's impossible to imagine a company like Netflix until it happens. So this is a company that actually benefits from increased competition. We don't have history books on companies like these where the fact that so the bear case on Netflix 10 years ago. Wait a second, everyone's going to do streaming. Therefore it's a, it's a competitive threat to Netflix. It worked in the opposite way. The more companies did streaming, the more it validated Netflix's place in the budget of every consumer. And it kind of like enshrined them as oh, this is how we consume content now we just Netflix it. And it's really hard if you're looking at things like cape ratios and trying to figure out like what are stocks worth when a company this paradigm breaking comes along. So what I'm showing you here is the reaction to the last earnings report and this only goes back to last January. They've had bad reports, the stock has gotten killed when they've had a not so great quarter. But just generally speaking, how does anyone envision this is a company that actually continues to find growth in year 20 of what they're doing.

[Bob Elliot]

It's a consumer staple company. It really is. It's a consumer staple that trades with growth, profit with growth, margins.

[Josh Brown]

This is what they reported. Record subscriber growth this quarter. Record added 19 million paid subs in Q4. The new total is 302 million globally. Revenue increase 16% year over year to 10.25 billion for the quarter beating analyst expectations. Earnings 427 beating expectations 102% increase from the previous year. There's a lot of reasons for that. NFL games help. Mike Tyson back in the ring helps. WWE helps. Bringing back Squid Game, which is a global hit helps of course. But just the Point. It would have been really hard for somebody five years ago looking at Netflix selling at 50 times earnings and saying, you know, I actually think the stock is cheap.

[Bob Elliot]

All right, now kill him, Bob.

[Josh Brown]

Turns out it was cheap.

[Michael Batnick]

It was.

[Josh Brown]

Turns out it was cheap. But who could have known? Like you could have said to yourself five years ago, it's not cheap. I'm buying it anyway because I think it's going to grow. That would have been the right call. Nobody could have said 50 times earnings is too cheap, given what Netflix is. But like, that's how it turned out. And this is just one example of I could give you 50 off top of my head. I give you service now I could, like, I can give you all these cybersecurity plays. There are a lot of these stocks and that's what I think has made it so hard for people, whether they're running long short equity or they're running like value based strategies. So I just wanted to get your take on this phenomenon and whether or not it's gone too far at this point or maybe not far enough.

[Michael Batnick]

Well, I think any, I mean, why did Netflix succeed is because they were an innovator in taking market share. Right. And so there is a raft of companies that we don't want to talk about that have, that are basically dead as a function of Netflix.

[Josh Brown]

Yes.

[Michael Batnick]

Right. And so.

[Josh Brown]

Or had to change their business model.

[Michael Batnick]

Or had to radically change their business model, et cetera.

[Josh Brown]

So throw Disney, Warner Brothers.

[Michael Batnick]

Exactly.

[Josh Brown]

Put all those in that pile.

[Michael Batnick]

All of those in that pile. And not to mention all the cable companies, which aren't necessarily all public. But that, if you could, that's, that's a, that's a wealth shift within the economy away from laggards into innovators. Right. The world.

[Josh Brown]

But the net benefits of the S and P is undeniable for sure. So you had five companies, 10 companies threatened with extinction by Netflix, and then some of them decided to join it because they couldn't beat it. But the net effect for the s and P500, higher, multiple, higher price. So it's a net. Even though it's one company taking away from other companies. For the investor class and net positive, I don't think those companies lost as much market cap as Netflix gained, is what I'm saying.

[Michael Batnick]

Yeah, that's true. And, and the question is how long can that continue and how much can essentially the s and P500 gobble up the world's market share? And of course they're picking up market share on a global basis. Et Cetera. And so I think there's circumstances like this that I agree with you that traditional value metrics are not necessarily good indications of high market share grabbing companies. In fact, they're quite bad indicators of high market share.

[Josh Brown]

They're not designed to capture that because.

[Michael Batnick]

They'Re designed to cap. They were designed like in the 50s when we had a static set of companies out there. And so they're not good indicators of what's going on. The question is at the aggregate level, do you start to build up from the bottoms up to a set of aggregate assumptions that make sense or don't make sense? That's why I think when you, I draw on the Mag 7 or you could say the expectations of some of these, of these high flying tech stocks actually seem pretty reasonable, plausible. But the question is, is that going to extend to every company in The S&P 500? No, but that's what's being priced in, is that it is going to extend to every company.

[Josh Brown]

You think the median valuation for S and P companies is pricing that sort.

[Michael Batnick]

Of enthusiasm in that type of earnings growth expectation. Remember what's in the, what you see? Well, first of all, the median, we don't have a chart here, but if you look at the median S&P 500 valuation, it's still pretty elevated. Right? It's not as elevated as the, it's.

[Bob Elliot]

What, like 72, the market cap?

[Josh Brown]

Yeah, it's not 22, but it's not 14.

[Michael Batnick]

But it's not 14. And that median valuation is typically lower than the market cap pe. And you look at that, and that's on earnings growth expectations forward 12 month earnings growth expectations that are extremely elevated. And like just people look at 12 month forward PE charts and they take 12 month forward earnings as if it's true. And 12 month forward earnings is not true. Right. Those are expected earnings. Expected earnings are not real earnings that.

[Bob Elliot]

Always comes down over time.

[Josh Brown]

They come lower.

[Michael Batnick]

Right. And so the reality is that's something like a high, high level for the median company for a set of earnings growth that is already expected to be extremely elevated.

[Josh Brown]

Okay, so is that the bear case that we're pricing in? That we're pricing in? There's too much enthusiasm for companies to be able to pull off Netflix like feats on earnings and they're just not gonna materialize and that disappointment will ultimately lead to lower prices.

[Bob Elliot]

There's no value for safety, there's no margin of safety.

[Michael Batnick]

No margin of safety for the companies that are not high flyers. Right, right. And that's not like we're having a financial crisis type story, but that's a stagnation, an asset price stagnation story because.

[Josh Brown]

The starting values are just too high relative to what they'll be able to.

[Michael Batnick]

Deliver values and expectations. Yeah.

[Bob Elliot]

So credit markets are the same optimism as in credit spreads.

[Michael Batnick]

Sure. But that story in credit spreads, I think is different in the sense of credit spreads ultimately arbitrage to whether people default.

[Bob Elliot]

And there's no defaults and there's no default.

[Michael Batnick]

And I think, you know, famous last words, but like there's nothing obvious in the next 12, 18, 24 months that's going to lead.

[Bob Elliot]

So why shouldn't valuations be high? Like, given the backdrop, it makes sense.

[Michael Batnick]

Well, no, no, the valuation. Why shouldn't credit. That's an answer for why credit spreads should be low and why they might even be good value at low levels.

[Bob Elliot]

Given the motif that we're painting. We painting a motif here.

[Josh Brown]

It's actually more of a tableau would be the way I would phrase it. It's more of a tableau. But I guess Michael's ad, the equity.

[Michael Batnick]

Expectations are unbounded at the top side. Right. That's the issue is that there's no. The expectations can be totally divorced, are divorced from the reality of what you're actually seeing in terms of the, the bottom half, earnings growth.

[Josh Brown]

So Michael's asking, Michael's asking slightly differently. If we're in a, if we're, if we're in an environment of very little, if not no default activity, why wouldn't the median multiple on earnings for public companies be higher? And it is, it is higher. But why isn't that justified?

[Michael Batnick]

Because default and earnings growth are two totally different things.

[Josh Brown]

Yes, but you would pay up for something that you deem to be. You would pay up for something that you deem to be less risky, wouldn't you?

[Michael Batnick]

Sure, but the credit spread defines what the risk of default is, which is so far out of the money in this sort of environment that it's not, it's not particularly relevant to the equity price.

[Josh Brown]

Okay.

[Michael Batnick]

Right. Because the. They just happen to moderate value of the equity is. A set is, is, is zero at this point. Right. Because the odds that it goes to zero are, you know, the odds, but.

[Josh Brown]

I guess don't default. Don't you normally get high earnings multiples and low credit spreads concurrently? Don't those two things often go confirming each other? Because they're both expressions of like, fearlessness.

[Michael Batnick]

Right, right. But you can have unrealistic upside expectations around earnings growth at A time when you have essentially no default risk or very low default risk.

[Josh Brown]

So that's right now.

[Michael Batnick]

Or you can have reasonable expectations of earnings growth at a time when there's little.

[Josh Brown]

You could have low credit spreads but a 17 multiple earnings growth. Exactly, exactly.

[Bob Elliot]

What if we get low single digit earnings growth and even more margin expansion? That'd be fun.

[Michael Batnick]

Yeah. Well then you know, a few more value investors are going to throw themselves out of the window.

[Josh Brown]

I made an observation on the show that they're just going to quit. People didn't agree with. But I think I'm right about this. We were talking about. Oh, J.C. was on the show. We were talking about credit spreads and junk bonds in general. And I made the point and it was not my original thought. I think maybe Nicolas told me this. The, the comp. The companies that are in these junk bond ETFs are the highest quality version of themselves that we've ever seen because of this explosion of non bank lending happening in the private markets. If you are a, A C weighted borrower, you have like 10 people dying to give you money. Right. That was not the case even two years ago. Which I think should give us all pause. If we're trying to take our cues from the publicly traded debt markets, we're probably not seeing the real story.

[Michael Batnick]

Right, right. All of the bad.

[Josh Brown]

You understand what I mean by that?

[Bob Elliot]

Yeah, I got it.

[Michael Batnick]

All the bad credits are pushed into the.

[Josh Brown]

They're not in hyg.

[Michael Batnick]

They're not in hyg.

[Josh Brown]

HYG is the blue chip of junk.

[Michael Batnick]

Right.

[Josh Brown]

Okay. That's a different situation than when most people started following junk bonds looking for blowouts or credit spread. My point is you just might not get the warning there.

[Bob Elliot]

But even lower quality bonds are trading at very tight spreads historically, even like outside of hyg.

[Josh Brown]

Yeah, I mean off market.

[Michael Batnick]

Off market.

[Josh Brown]

Yeah, for now. They're performing.

[Michael Batnick]

Yeah, for now.

[Bob Elliot]

So Bob, just don't, don't you think that something. There has to be a trigger to like for people to change their minds for like narratives to get reset?

[Michael Batnick]

Right. And so I think the question is, I mean what's the story? That is the trigger is disappointment. And that's how.

[Josh Brown]

Oh, that's enough.

[Michael Batnick]

Other than earnings.

[Josh Brown]

Disappointment is enough.

[Michael Batnick]

Other than credit shocks.

[Bob Elliot]

Yeah, I agree. Disappointment is enough.

[Michael Batnick]

Right. Disappointment is actually what turns market cycles through time, which is you get. Let's say that there's. If you just go back to historical cycles, environments where there was minimal credit growth, which is kind of what's going on right now. There's no credit problem in the economy. Credit growth is actually recession like levels right now. So what creates a turn in an economy where you don't have a lot of credit growth being responded, slowing down as a result of monetary tightening? It's that people build expectations to extremes and then ultimately conditions come in worse than those expectations and people start to reprice asset valuations as a function of that disappointment.

[Josh Brown]

So that's in, in an.06 scenario where we started to hear about. Bear Stearns has these two hedge funds that are loaded up with mortgages and some of those mortgages are no longer paying and they have to take a write down to the asset value of these funds, which means the investors in the funds have to take a hit.

[Michael Batnick]

Right.

[Josh Brown]

Have to take a haircut. It's on paper, but they have to take it. And that is disappointment. And what that leads to is people asking questions that they weren't asking the day before of the other hedge funds that they're invested in and the other asset managers and the other holdings at banks. And that triggers some sort of a waterfall or a cascade effect of just people not being bullish anymore and being more suspicious. And so when people say, well, we need some sort of exogenous shock, I'm not sure I think I agree with you. I think you just have people start asking questions that they weren't asking yesterday. Right.

[Michael Batnick]

And they're just a little more reserved.

[Josh Brown]

And households a little bit, but that feeds on itself.

[Michael Batnick]

And households are like, well, instead of using my OpenAI bot to do another dinner reservation and expensive tickets, they're like, yeah, we'll stay in and have some pizza.

[Josh Brown]

That hedge fund story that I tell was the summer of 06 and by March of 08 it leads to the bankruptcy of Bear Stearns. It's less than two full years. It's 18 months of just slightly less bullish. Slightly less bullish, exactly. And it's not Bear Stearns. In a vacuum, of course this is taking place.

[Michael Batnick]

Yeah. I mean, lots of other things were going on in terms of the credit boom, but if you just look, I think people are coming into the year and they're thinking it's just like the beginning of 2020, 23 and 24. Remember, beginning of 23 there was 100% chance of recession.

[Josh Brown]

It is not right.

[Michael Batnick]

Beginning of 24, people thought that there was going to be seven cuts. Right. And that the economy was aggressively slowing. And in both those circumstances, kind of connecting to what's driving stocks here. From a macro perspective, what drove stocks up in both years 23 and 24 was that growth ended up being a lot stronger than the terrible expectations thanks.

[Josh Brown]

To AI spending or whatever. But yes.

[Michael Batnick]

Well, AI surprised continued. The economy is more resilient to interest rate hikes than people expected, et cetera, et cetera because of income growth. Okay, well you enter 25, totally different story. Growth expectations are at 2.5 to 3%. They're even stronger in what's priced into the equity market. And so we just have a totally different set of expectations in the market. And so it's just a lot harder to beat very elevated expectations. Totally different than when we came into 23 and 24.

[Josh Brown]

Yeah, you have this deregulation story. You have like, you have like the financials valuations have gone way up because now they're making a lot more money on, on a steepening curve and Nim. And there's just like a lot of drivers now that have already been in place that were not in place a year ago.

[Michael Batnick]

Right. That are priced in.

[Josh Brown]

Yeah.

[Michael Batnick]

Everyone's expecting things to be great.

[Josh Brown]

Yeah.

[Michael Batnick]

And, and what that means is if things are great, you know, we could have a fine year in asset prices. But if anything, if, if there's a. In the, in the series, if anything disappoints. Right. Labor markets are a little weaker than expected policy.

[Josh Brown]

Well, let's go there. Here's another thing that could disappoint you. You got a, you got another labor market report that I think is. It's not like emergency but claims going up today. So that's like trending not in the best possible direction. It's not as stable as it was. Now it feels like it's a little instable. It's not bad enough to make you feel like the Fed is coming in with the seven cuts. So it's kind of like in a no man's land where the labor market is for sure slowing down and deteriorating a little bit. Some people would say that's healthy, it's normalizing. Some people would say that's a canary in the coal mine. What's this chart that we have? Labor.

[Bob Elliot]

70. 70% of spend of GDP or of spending is consumer spending. And as long as we have jobs, as long as people are employed, they're going to continue to spend because that's just what we do.

[Michael Batnick]

That's right.

[Bob Elliot]

But our friend Warren Pies has a chart showing labor concerns payroll breadth deteriorating to levels associated with recession. So what Warren and Fernando did was show the percentage of industries with job gains on a year over year basis and it just went negative, which typically, at least historically, has preceded a recession. So maybe cause for concern here.

[Josh Brown]

What do you think when you see this?

[Michael Batnick]

Yeah, the labor market's slowing down. It's gradually. This is totally normal. We're late cycle. There's been a tightening and there's just these gradual cracks that slowly but surely emerge in the economy. And this is highlighting the fact that like, you know, this isn't dropping off like a cliff, but it is slowly but surely weakened. The economy slowly but surely weakened.

[Josh Brown]

This isn't layoffs as much as it is companies just not hiring as many.

[Michael Batnick]

People just not hiring. Right. And that is, you know, part of that was essentially a payback, a bullwhip from the fact that they hired anyone they could find.

[Bob Elliot]

Yeah. This is hard to take at face value. Look how weird this chart is. Like, look how weird the pandemic was. Like, there's still many distortions that we have to work through.

[Josh Brown]

See this moment in the mid-80s.

[Michael Batnick]

Tell us about that.

[Josh Brown]

Well, you, you, you do dip into that kind of recessionary lack of job gains, but then you recover without an associated economic event. And I don't know, I don't know that there is like a specific reason why that looks like it's 1986. I can't think of anything economic that would have mattered. But I just make the point. You did get a reversal without a recession being the reason for the reversal. And I wouldn't be shocked if we start to see more hiring now that the election is over and people have all this irrational or not confidence about Trump and his policies. Like if this line now reverses off of that level, I don't know that anybody would be totally surprised. What do you think?

[Michael Batnick]

Well, you know, confidence is not. Confidence is partisan driven. If you.

[Josh Brown]

Big time, it's all political. We agree.

[Michael Batnick]

And what if you, if you look at person driven rises in confidence relative to subsequent economic activity, they're totally unrelated.

[Josh Brown]

Wow. Okay.

[Michael Batnick]

Totally unrelated.

[Josh Brown]

So it's not going to bleed into any kind of real life.

[Michael Batnick]

If you look at that like down at the county by county level and things like that, it's unrelated. And it's why when you look at things like NFIB or ISM is influenced by this or confidence measures, those are simply measures of partisan views. They offer no macroeconomic.

[Josh Brown]

They're not a predictor of what people are going to do.

[Michael Batnick]

They have lost all predictive abilities because they are entirely driven by partisan.

[Bob Elliot]

So what are some leading indicators that you still find value in?

[Michael Batnick]

Well, I think like How Traditional hard data indications like permit construction, permits of leading, you know, of leading sectors of the economy. So look, if you look at what's going on with housing permits, housing units under construction, they're falling not great, basically at the most rapid pace that we've seen, except for back of the gfc, new home building, new home building, units under construction is plummeting.

[Josh Brown]

Would mortgage rates with a 5 handle change that overnight or not necessarily.

[Michael Batnick]

Probably not. There's a lot of. I mean, there's a lot of. There's a lot of underbuilding and then a lot of overbuilding. I mean, you can't go anywhere without seeing another apartment building being, you know, near completion and then being completed. Right. This huge supply coming into the market that's falling. So far we haven't seen construction job losses, but at some point we will see construction job losses as those units plummet.

[Josh Brown]

That's a meaningful leading economic.

[Michael Batnick]

That's a meaningful leading economic indicator.

[Josh Brown]

Yeah.

[Michael Batnick]

Or you look at something like manufacturing investment, which surged as a function of the CHIPS act and to some extent the ira. Well, that peaked already. The peak is behind us and that's starting to slow as well. So the question is, is AI investment, stuff like that going to pick up? But I think it's certainly slowing considerably. And if you get that investment which had held up the economy in. It was a reason why in 23 and 24, the economy was stronger than people expected. That's now slowing rapidly. So you got the housing sector slowing rapidly, you have manufacturing weak and you have business structure investment slowing rapidly. Those are all things that were kind of surprises to the upside of the economy in 23 and 24. They're all moving in the wrong direction.

[Josh Brown]

The stock market is not pricing any of that.

[Michael Batnick]

And the stock market, it's ignoring it. It's totally ignoring it.

[Josh Brown]

Yeah. So for how long could that happen? Could we do this trade policy uncertainty thing? How is this measured? This is a chart showing trade policy uncertainty. You can see that the only other time it spiked to this degree was under Trump first term. And now we're right back here. I guess this is surveyish kind of soft data. I don't know. What does it say?

[Bob Elliot]

It measures media attention to news related to trade policy uncertainty.

[Josh Brown]

So they're counting the articles.

[Bob Elliot]

So automated text search results.

[Josh Brown]

Automated. So whatever.

[Michael Batnick]

There's a series. There's an index for anything.

[Josh Brown]

All right.

[Michael Batnick]

Is trade policy.

[Josh Brown]

Well, we're ignoring this too, would be my point, big time.

[Michael Batnick]

And I think this is a good example. Where is the upside case on trade policy relative to what's priced in.

[Josh Brown]

Where is the upside case?

[Michael Batnick]

What's the upside case on trade policy relative to what's priced in.

[Bob Elliot]

Well, what do you think is priced in?

[Michael Batnick]

That it's all bluster.

[Josh Brown]

Oh. And that's what the market is saying. Ignore this because none of it's going to happen.

[Michael Batnick]

Can we go to the next chart? The earnings expectations. This is what you see is tariff winners and losers. Earnings growth expectations are the same. Actually, tariff winners are a bit lower, but expectations are the same. There's basically no expectation that tariffs are going to have a meaningful influence on economic conditions.

[Josh Brown]

Yeah. We have not separated the tariff winners and losers in the stock market.

[Michael Batnick]

In the stock market. And so if these two things are the same, if people are saying, look, if you're a tariff winner or a loser. Right. Your life is the same.

[Josh Brown]

Bob, what's in the winter bucket? Just for argument's sake, like what types.

[Michael Batnick]

Of stocks, domestic oriented industries are big.

[Josh Brown]

Winners where they don't have to worry about.

[Michael Batnick]

They don't have to worry about tariffs. So any global retail, Walmart and stuff like that is in it would be in losers. Right.

[Josh Brown]

Because they're going to pay up for merchandise.

[Michael Batnick]

They're going to pay up for merchandise and whether they can pass it through, etc.

[Josh Brown]

Okay. Chart 10 Similar story. This is I guess Bloomberg chart Relief rally and tariff exposed Stocks equity baskets exposed to trade risks gain on Tuesday. Yeah.

[Bob Elliot]

So noisy.

[Josh Brown]

Yeah. It's tough to say that the market is worried about tariffs, but you know.

[Michael Batnick]

If you really thought that the market was meaningfully worried about tariffs, you'd see tariff lose. You know, tariff winners have much better expectations than tariff losers. You'd see stock prices move strongly in the favor of tariff winners relative to tariff losers. And that chart doesn't show because it's just in the last six or eight weeks. But if you just look at it beforehand, it's basically winners versus losers is.

[Josh Brown]

So you're saying the market's current base case is the upside case right now. And we don't have. We're not pricing in the potential downside of tariffs yet.

[Michael Batnick]

The market's expectation is that there will be no tariffs.

[Josh Brown]

Yes. Okay.

[Michael Batnick]

Which is interesting because if you look at global assets, Mexican peso, Chinese yuan, their stock markets, they believe, they believe it directly. So it's like all the em investors are like, this is going to be, this is going to be tough.

[Josh Brown]

Yeah.

[Michael Batnick]

Right. And all of the US Company investors are like, it's all bluster. Nothing's going to happen.

[Josh Brown]

I remember on election night sitting at the New York Stock Exchange and I remember Adam Parker sitting next to me watching the peso before they said it's Trump. The peso had already reacted and it was crashing against $. Let's do this rotation into European stocks.

[Bob Elliot]

This from the bank of America fund manager survey.

[Josh Brown]

Super interesting to me.

[Bob Elliot]

This surprised me. It could just be noise, but it shows the monthly change in allocation to eurozone equities. And everybody seems to be vocally very bearish. But yet this had a spike that you haven't seen in.

[Josh Brown]

Can I ask you a question? Do you think this is just portfolio rebalance in January because Europe underperformed so people just like pressing the button? Nope. Europe. Europe's supposed to be 20%, not 18%. Add 2% Europe.

[Bob Elliot]

I'm shocked. I would just think that people are just running away, but they're not.

[Josh Brown]

But I'm saying like nobody's bullish Europe but they're just like pressing the rebalance button and buying it. Do you think that's possible?

[Michael Batnick]

I think that's probably what it is. So do I. I haven't talked to a single person who is, is bullish on, on Europe.

[Josh Brown]

Right. I don't, I don't think there's like a story that people are passionate about. I think they're just getting back up to whatever their weight is supposed to be.

[Bob Elliot]

Let's get the China stuff. Bob, I want to talk to you about, about bonds. So we talk about all the, all the risks that is not being priced into the market. Bonds are offering safe haven, good alternative.

[Michael Batnick]

Yeah. I mean look what you got. We had a couple years where the expectations, the pricing favorite stocks relative to bonds. Now as we talked about expectations have flipped pricing of bonds. TIPS are giving you 2.5% on the long end. Bonds are starting to look like a good deal relative to stocks on a risk match basis.

[Bob Elliot]

What you have any thoughts on the term premium? That's been a big topic of conversation the last couple of weeks.

[Michael Batnick]

Yeah, I mean the, the term premium part of what we're seeing in the bond market with the term premium steepening during a period where equity markets have held up is an indication that there is stronger growth expectations being priced in the market. Because part of what defines the term premium is essentially what's your choice to take cash today versus you know, versus to lend it out and get a return in the future. And so if you saw the term premium rise sharply with the dollar falling and stocks selling off meaningfully, that would be indicative of people being Worried about an inflation story and the dollar and all that stuff. But that's not what you're seeing. What you're seeing is stock prices at all time highs and term premiums steepening. That combination of things is a pro growth story.

[Josh Brown]

Okay, that's the market saying the market is pro growth.

[Michael Batnick]

That term premium expansion is pro growth. And the thing that's interesting about it is term premium now is at, essentially the last time it was this level was pre gfc. And so what that's implying, I mean, it's just one of many indicators that are in the rates market that look like we're basically pricing a set of conditions over the next five or ten years that look as good as the pre GFC boom.

[Josh Brown]

Pimco is saying bonds are better positioned to play a crucial role in portfolios in 2025. We believe bond yields are attractive at a time when equity valuations and credit spreads are not.

[Bob Elliot]

And the barber says Bob needs a haircut.

[Josh Brown]

Giving. Sure, giving high quality fixed income a favorable starting point. Unlike cash, bonds stand to benefit from capital appreciation as policy rates fall, enhancing their role as a diversifier and stabilizer for equity exposure and portfolios. Look, it's been very easy for a couple of years to just be long cash and not worry about bonds because who cares? So I guess they're arguing that that time has now passed. I think a lot of people are making that argument. Would you agree? Like, is lengthening duration the right move for most people at this stage in where we're at?

[Michael Batnick]

Part of the question is bonds were challenging relative to cash in an environment of a lot of inflation volatility and.

[Josh Brown]

And high overnight rates.

[Michael Batnick]

And high overnight rates.

[Josh Brown]

Yeah.

[Michael Batnick]

And so a lot of that the pat that's changed, right?

[Josh Brown]

Yes. Overnight rates, overall rates are falling, have already fallen a little and then are.

[Michael Batnick]

Likely to fall more. And inflation volatility has come down and.

[Josh Brown]

Intermediate term rates have gone up.

[Michael Batnick]

They're more attractive and rates have gone up. Yeah, or we, you know, we were on the high side when, when we were moving up in this most recent period. To me it looked like a good buy because the negative effects of bond yields rising had started to emerge in that 4.75 to 5 range 18 months ago or a year ago when we saw it in the summer of 2023. And so we basically were bumping up to that same point again. Except inflation wasn't at 6%. It was, you know, it's at 3%.

[Josh Brown]

A lot of the commentary this winter has been, oh, maybe people are sick of Lending to the treasury because of, you name it, debt to GDP or deficits or both. Do you buy that or do you think.

[Michael Batnick]

No, that's total garbage.

[Josh Brown]

Okay, so I.

[Michael Batnick]

Total garbage.

[Josh Brown]

So I agree with that. Colis agrees with you.

[Bob Elliot]

Wait, Cook, why go on?

[Josh Brown]

Rick Reeder agrees with you. Like the, the, the real people who seem to know what they're talking about scoff at that.

[Michael Batnick]

Well, you could see the triangulation in the intermarket action, which is if people were really concerned about lending to the.

[Bob Elliot]

US treasury, why would the dollar be so strong?

[Michael Batnick]

The dollar wouldn't be strong. Stocks would be crashing.

[Josh Brown]

Correct?

[Michael Batnick]

Right.

[Josh Brown]

We would be in a panic.

[Michael Batnick]

We would be in a panic. And you see that in traditional emerging market economies, bond yields rise, the currency goes down.

[Josh Brown]

Okay, right. So it's politicians saying this, not intermarket analysts.

[Michael Batnick]

And then there's a fundamental story which is all of this talk like the US is going to default on its debt, it can't pay back, the debt's too high, it's total garbage. Debt spiral, debt spiral, all that total garbage. And the reason why that is, is if yields are too high, given economic conditions, the Fed will just buy the bonds. Like who, how many of those people who are talking about the US debt spiral, talk about what's going on in Japan. Is Japan having a debt spiral? Right. Japan's having, yeah, the currency's declining, but arguably that's actually beneficial. They actually need a currency decline. Right. To stimulate a depressed economy. Right. But the bonds, the bonds are paying exactly what the yield has always said. There's no default on the bonds and their debt levels are a multiple of what the US is.

[Josh Brown]

Ok, so part of that narrative. So the Fed is cutting overnight rates, yet the 10 year yield is going in the opposite direction. It rises 100 basis points while the Fed funds rate is cut by 100 basis points. And the people who, everything they look at, all they do is see politics. They come out on TV and they say this is bond vigilantes, the first stage. And they are rejecting Trump plans for the economy, they're rejecting what Biden did and deficit spending in general. And we're seeing the opening stages of a serious financial problem.

[Michael Batnick]

But they're myopically looking at one market and not looking at cross market and seeing the holistic picture of what's going on. The reason why bond yields rose in response to the Fed coming in with a 50 basis point easing is because the Fed was too easy relative to conditions, which meant that stocks and gold rallied relative to bonds. Right. That's That's. That's a. That's a positive return story. Yeah, right. That's a positive set growth, positive set of pricing related to a bond yield.

[Josh Brown]

And not indicative of a debt spiral.

[Michael Batnick]

And not indicative of a debt spiral.

[Josh Brown]

Okay, thank you for clearing that up for us.

[Michael Batnick]

You'll see a debt spiral when the dollar falls relative to other currencies and when stocks start to fall meaningfully in response to bond. And bond yields continue to rise while stocks are falling.

[Josh Brown]

Okay, we haven't had that yet.

[Michael Batnick]

We haven't had that.

[Josh Brown]

We've had rising bond yields with rising stock prices.

[Michael Batnick]

We've had rising bond yields with rising stock prices. And what we've also seen is when bond yields get too high, stock prices start to fall, which sow the seeds of bonds rallying. That's literally what we saw in the last.

[Josh Brown]

People go to bonds. Yeah, yeah. It works like a charm. Every time.

[Michael Batnick]

It works like a charm. Right at five.

[Josh Brown]

Yeah. If we were to burst through five, would you say maybe something's changed or. Not necessarily.

[Michael Batnick]

No.

[Josh Brown]

Can we talk about tips with you?

[Michael Batnick]

Yeah. Are we talking about tips here on.

[Josh Brown]

Pro tips or anti tips? I love tips. Reflective of very elevated expectations to kick off the year. Much higher than the last couple of years. This favors bonds versus stocks ahead outlook to kick off the year. So you wrote about this. Let's put this chart up of annual real GDP growth.

[Michael Batnick]

This is what I was talking about. If you have one chart to characterize how to think about what's going on right now is this chart.

[Josh Brown]

Okay.

[Michael Batnick]

Which is 2023. Here's what the expectations were. Zero growth, recession, 2024, the expectations were 1%. And actually in December, they were even lower than 1%. Today they're actually a little bit higher as we get as we've entered into January, they're like 2.5% growth. So why did stocks rally? Well, actual growth came in way above what the expectations were.

[Josh Brown]

Look at the size of the surprise in stock price. The size of the surprise in stock prices makes sense in the context of how big the economic surprise was.

[Bob Elliot]

And that's not gonna happen again.

[Josh Brown]

You're not gonna get a. You're not. I mean, that would be 6% GDP.

[Bob Elliot]

Exactly.

[Michael Batnick]

The only way you get a similar sized positive response is 60%. Correct.

[Josh Brown]

This is a great chart. So we don't know what the yellow line is going to be by the end of 25, but it's highly unlikely we surprised to the degree that we have in the last two years. So we ran out of that rocket Fuel of upside economic growth. Surprise.

[Michael Batnick]

Exactly. And that is when we talk about how you can have disappointment, create a turn in asset prices. This is a classic setup.

[Bob Elliot]

Classic shit doesn't work anymore.

[Michael Batnick]

Classic macro setup.

[Josh Brown]

Put up the tips charge on I think in 16.

[Michael Batnick]

You guys talk about these individual companies and this is the only chart that.

[Josh Brown]

Okay, let's go. What's going on here?

[Michael Batnick]

Tips.

[Josh Brown]

Okay, say more. Good, good. OK. OK. Why are they. Why are they a buy here?

[Michael Batnick]

Two and a half percent real yields.

[Josh Brown]

Okay.

[Michael Batnick]

You can lock in a two and a half percent real yield, no risk for 20 or 30 years.

[Josh Brown]

So why were they. So why was it negative directly following the pandemic? It's just a function of the degree to which people expected the fed funds rates to dropped.

[Michael Batnick]

Yeah.

[Josh Brown]

Okay.

[Michael Batnick]

You know, the economy needed massive stimulation and what that meant was negative real yields for.

[Josh Brown]

So TIPS were a terrible buy.

[Michael Batnick]

They were a terrible buy.

[Josh Brown]

And now they look. So the higher. This, this. So right now it's 2% plus 2 real yield percent. So this is as attractive as TIPS have been in the last 20 years, since the global financial 25 years.

[Michael Batnick]

Yeah.

[Josh Brown]

Okay. Are the flows showing that people are taking advantage of this situation right now?

[Michael Batnick]

Oh man. Nobody wants to talk about tips.

[Josh Brown]

Okay, well, because I guess two and a half. Why do you think that is? Like two and a half percent is not that exciting.

[Michael Batnick]

Two and a half percent real yield.

[Bob Elliot]

Dude. If you could get 47,000% in Trump.

[Michael Batnick]

Coin, why would you buy. There you go. I know it's. I know it's old school.

[Josh Brown]

From an allocation perspect perspective though, TIPS versus what?

[Michael Batnick]

Well, certainly. Why would you buy nominal bonds unless you think we're entering a deflationary spiral when you could buy TIPS and just take the inflation risk off the table? Maybe there is inflation that's too high right now. It's priced to be essentially 2 to 2.5% forever. You could buy these tips and not worry about it. That's number one.

[Bob Elliot]

I thought so. It's number two.

[Michael Batnick]

Well, number two is if you just look at what's the expected long term return of bonds relative to stocks here you're getting a guarantee. There's no risk. 2.5%, no risk. So the question is, how much real return do you have to expect to get in stocks over the next 20 or 30 years in order to hold equity risk relative to bond risk? Because here you get 2.5% for free, guaranteed. You don't have to get out of bed, you don't have to do anything. You just Buy these bonds, sit on them 30 years, and you'll, you will have compounded 2.5% real. Right. So how much do you need in stocks? You need six and a half percent real. Right. For something like 4% above what this, what this yield is. Okay, well, 6% real. I mean, you don't see a lot of six and a half percent real growth over 30 years in equity markets.

[Josh Brown]

Right.

[Bob Elliot]

Are you surprised? I thought like positive real rates were bad for gold.

[Michael Batnick]

Unless the Chinese are buying.

[Bob Elliot]

So what's the story? Why do you think gold is strong?

[Michael Batnick]

Yes.

[Josh Brown]

Well, it is.

[Michael Batnick]

Central banks buying gold's a global asset. That's the most important thing to think about when you're trading gold. The vast majority of gold demand happens outside the United States. And so most gold buyers are not looking at U.S. yields. They don't care about U.S. yields. If you're in China, gold is one of the few assets that you can basically hide capital in these days without facing government either surveillance or problems. Because you can't move it offshore because there's intense capital controls. You can't really put it in bitcoin and cryptocurrencies. Gold's like your only choice. And so you're seeing, particularly in China, you're seeing this. There's a deleveraging, somewhere between deleveraging and depression going on in China. Bond yields are falling rapidly, house prices are falling rapidly, the currency's falling. What do you put your money in?

[Josh Brown]

They're using gold.

[Michael Batnick]

You use gold.

[Josh Brown]

Yeah. And then the central bank saw it too.

[Michael Batnick]

There's this underlying dynamic that has supported gold for an extended period of time, which is that central banks are buying gold and they're strategically under allocated to gold. And there's lots of reasons, geostrategic reasons, why you'd want to wean yourself off with dollars and hold other assets.

[Josh Brown]

Well, they all watched what we did to Russia after the invasion and they said, okay, what can we do that's not dollar denominated and sitting in banks that the United States could effectively shut off.

[Michael Batnick]

Right.

[Josh Brown]

And the answer is gold.

[Michael Batnick]

And the answer is gold. And so they're buying basically as much gold as they can, and that's an underlying structural bid. And then on top of it, you've got a story where there's a global easing going on, which on a global basis, a global easing is generally beneficial to gold, particularly in those countries that, you know, typically are big gold buyers.

[Josh Brown]

And then there's Diwali season that. Okay, hold on. You have a comment? Another reminder. You probably don't have enough gold in your portfolio.

[Michael Batnick]

How much gold do you guys have in your, in your strategic portfolio?

[Josh Brown]

It's not part of ours.

[Michael Batnick]

Zero.

[Josh Brown]

Zero.

[Michael Batnick]

You and everybody else don't need it. What are you talking about?

[Josh Brown]

Works with it, works without it.

[Michael Batnick]

How many bonds you got?

[Josh Brown]

Tons.

[Michael Batnick]

Tons. How's that done for you?

[Josh Brown]

Well, it depends on the investor.

[Michael Batnick]

Sucked.

[Josh Brown]

Sucked in some years. Sucked in some years. In some years, gold sucks.

[Michael Batnick]

But that's the thing is if gold. Let's say if you're looking for a diversifier for stocks, gold outperforms bonds in 50% of equity drawdowns.

[Josh Brown]

Yeah.

[Michael Batnick]

Yet you hold piles of bonds and.

[Josh Brown]

So no current income requires sale of principal for retired investors. Not quite the same risk profile either. Much more.

[Bob Elliot]

A lot of investors don't think in sharpe ratios. Like, I know, like that's your world, but.

[Michael Batnick]

Well, it's not. Forget about sharp ratios. Just think about drawdown terms, which is what lots of investors think about. You definitely want gold in your portfolio. From a drawdown perspective. I think gold is the time in which bonds are not helping you diversify your stocks, is the time in which gold often is a beneficiary. I mean, just think about the last couple of years.

[Josh Brown]

Yeah, it's definitely worked the last couple of years. Let's put your table up.

[Michael Batnick]

You're showing us it's not just the last couple of years. It's the last 50 years.

[Josh Brown]

Well, you're going to show us 1973 to 2024.

[Michael Batnick]

This is. Yeah, this is from, from Faber. You know, basically shows, you know, take two portfolios, stocks and gold. Stocks and bonds. It's the same outcome.

[Josh Brown]

So the volatility in stocks, bonds is nominally lower. Okay. I think most people know that offhand. Gold is at the end of the day a commodity. It's not the most volatile commodity, but it's not a bond either.

[Michael Batnick]

Right.

[Josh Brown]

Okay.

[Michael Batnick]

All right.

[Bob Elliot]

But you know what? Gold is a line item eyesore for investors.

[Michael Batnick]

Like it hasn't been a line item. I know, for the last 25 years.

[Bob Elliot]

I'm just saying. But if you're in a stock bull market and bonds are lagging deeply behind. Well, that's what bonds are. Nobody gives a shit if you're in a stock bull market and gold has just gone sideways and not kept up for the previous decade.

[Josh Brown]

So that's 2011 through 2021. That's a 10 year period where gold does nothing equities are doing. Roughly. I mean, this is crazy, but like 15% a year tech is maybe 25% a year in that period, give or take. Having an allocation to gold pisses off your end investor more in that environment than an allocation to bonds. Bonds didn't do great, but they weren't as volatile as the price of gold was and they actually did make progress. Total return, especially if you're reinvesting. You could not say that about gold over that 10 year period from 22, 23, 24. Gold looks great, bonds look like shit. So it's flipped. Right. My point to you earlier, works with it, works without it. If you tell me you want to own gold because it's non correlated and it's a diversifier, I agree. If you tell me you want to own gold because it hedges inflation, I think stocks are better at that. I mean, I know stocks are better at that. 200 years of history.

[Michael Batnick]

I'm just saying. No, that's a. But the 200 years of history argument is who cares about 200 years is a bad argument. Fine, 150 years of that.

[Josh Brown]

Yeah.

[Michael Batnick]

We were on a gold standard. So the price of gold was zero, the return of gold was zero. So that's not at all the monetary regime we're in right now. So the only monetary regime, the only reasonable corollary time is once the gold peg was broken and we floated on gold.

[Josh Brown]

Okay, right. The technicians, which is wildly bullish. Gold right now, gold looks great and silver too. Are you bullish specifically right now or.

[Michael Batnick]

Yeah, well, what I'd say is gold is a better asset to hold than to trade because there's a lot of idiosyncrasies that happen in it. And so the point is buy it. 10% of your allocation.

[Josh Brown]

Oh, don't trade it and don't trade it.

[Michael Batnick]

Just hold it and just let it go.

[Josh Brown]

I want to talk to you.

[Bob Elliot]

Oh, wait, hold on, hold on. During the massive inflationary run up of the early 2000s, like 20, 20, 23, Colt did shit.

[Josh Brown]

Yeah, but this is the catch up now after that break, I'm just telling you that's the problem.

[Bob Elliot]

Gold's hedge, inflation.

[Josh Brown]

That's the problem with trading it. That's the problem with trading it.

[Michael Batnick]

That's why you don't trade it.

[Josh Brown]

Because. Because it could be a lag or a lead.

[Bob Elliot]

Whether or not gold is definitely a diversifier.

[Michael Batnick]

It's a diversifier for sure.

[Josh Brown]

Yeah, we agree with that.

[Michael Batnick]

That's where I would say just think about it as a diversifier. Don't get too hung up on is it precisely inflation hedge or not.

[Bob Elliot]

It's not.

[Michael Batnick]

If you look Back through time. It's very good at hedging extreme or even moderately high inflationary environments.

[Bob Elliot]

There's one instance of that it did in the 70s.

[Michael Batnick]

No, that's, that's not. I mean, if you look back in developed economies over the last hundred years, right. You're focused on the US and the US Experience.

[Bob Elliot]

I am a US investor.

[Michael Batnick]

But if you broaden your horizon to think about all developed economies over the course of the last hundred years, like gold outperformed in depressionary environments, 2008, the Great Depression, et cetera, and in highly inflationary environments. And that represents like 20 or 30% of macroeconomic environments across developed economies over the last hundred years. So if you just look at the US and you look at this disinflationary period, and that's what, you know, what you've grown up on. That is an unusual circumstance relative to the history.

[Bob Elliot]

But investors don't live in the last 200 years, they live in today.

[Michael Batnick]

Sure, fine. But, but okay, let's look at today. Let's look at post 2020. Does the popularity bonds or gold.

[Josh Brown]

Does the popularity of.

[Michael Batnick]

Then why don't you hold any gold?

[Josh Brown]

Because it works without it.

[Michael Batnick]

Also, you don't hold plenty of bonds. You don't hold any gold because it.

[Josh Brown]

Works with it or without it. I mean, we know this empirically.

[Bob Elliot]

Listen, I think there are a lot of things that we would own if investors never got to look at them. But that's not the real world. People line at him their portfolio, for better or worse. Like, talk to Corey about this. For better or for worse, people line at them their shit and they just do.

[Josh Brown]

It would be easier if they didn't. You have a certain type of investor that you talk to. No matter how much money you just made them, the only thing they focus on is the one holding that's down.

[Michael Batnick]

Yeah.

[Bob Elliot]

So Bob, if we could say.

[Josh Brown]

Yeah, but why do we own this?

[Bob Elliot]

If we could say, listen, but why.

[Michael Batnick]

Don'T they do that with bonds? Why aren't they beating.

[Josh Brown]

We just told you why, dude. People don't care about it. People one way or the other.

[Bob Elliot]

People don't care about their bonds. They know what it is. You don't want to get like stock like volatility and no returns of gold. Sometimes I'm not saying that's like the rationale, but that's how people invest. We lie to them.

[Josh Brown]

Nobody's mad when bonds lag. A stock market. If you give people a 10% allocation to anything, I don't care, 20, 20.

[Michael Batnick]

They must have been.

[Josh Brown]

I don't care if it's gold, I don't care if it's whatever. If you give people a 10% allocation to something other than bonds and cash and that thing significantly lags stocks or worse, goes down. In a stock bull market, you have to answer for it like every day. So if you're trying to build portfolios for people that they can actually live with and stick to, that's a consideration, don't you think?

[Bob Elliot]

I think managed futures are another great example of things that in a vacuum improve portfolio returns, volatility, drawdowns. People can't stick with them because they're.

[Josh Brown]

Too not worth sell them at the wrong time. They will absolutely parachute out right when they should be like getting more bullish.

[Bob Elliot]

Hey, let me ask you about this separate topic. Are you. So I feel like the Chinese stocks are the opposite of US stocks in terms of everything imaginable. Right. Like as one sided as optimism is for US stocks, China's the exact opposite. Would you be so bold in your personal account maybe to take a flyer or. This is just dead money.

[Michael Batnick]

I don't trade markets that are not determined by macroeconomic fundamentals. And the Chinese stock market is a product of political decision making by Chinese authorities. I mean even you just one day they decide that they should go down in order to hit all the wealthy people. The next day they decide the Benjamin bunch should invest in them.

[Josh Brown]

You think they're that powerful? They can determine whether or not the market goes up or down?

[Michael Batnick]

Yes.

[Josh Brown]

Then why are they allowing it to fall for three years?

[Michael Batnick]

Well, I think that's a good, it's a good indication of the fact that maybe things that are not traditional macroeconomic drivers are driving the set of policy behaviors that we're seeing. Okay, Right. So that's the sort of circumstance, you know, in the US Case you kind of know like stocks fall, the economy weakens, central banks ease.

[Josh Brown]

They fired a bazooka in September. They were able to pull off a pretty good three minute rally.

[Michael Batnick]

Right.

[Josh Brown]

And then that was it.

[Michael Batnick]

Well, I think part of the reason.

[Josh Brown]

I don't know how on command it.

[Michael Batnick]

Is, part of the reason why it hasn't progressed is because they haven't delivered anything.

[Josh Brown]

They just announced.

[Michael Batnick]

Yeah, yeah, like I joked, at the beginning of the year they had their big fiscal stimulus which is to give people money to buy toasters. Yeah, $10 billion. You know, it's an almost $20 trillion economy. They're allocating $10 billion so that people can buy toasters.

[Josh Brown]

It's like stimulus for the toaster business, it's almost.

[Michael Batnick]

They're either totally incompetent or they know exactly what they're doing, which is that they don't care about stimulating the economy.

[Josh Brown]

Right, right. They care about toast.

[Michael Batnick]

They care.

[Josh Brown]

I get it. We want to ask you some hedge fund stuff because you are one of the people that we know who are among the most knowledgeable given your experience as a GP. What are all the new LPs in wealth management missing as they allocate to alts and private equity and hedge fund like strategies and things that they just haven't in the past. You've sat on the other side, famously at Bridgewater during a massive run up for Macro hedge fund investing. What do you think people are missing now who are coming from where Michael and I are in the wealth management space because they seem to be voraciously allocating. So talk a little bit about what you're seeing and what you think might be being missed.

[Michael Batnick]

Yeah, well, I think one of the big things is everyone's into these illiquid products.

[Josh Brown]

Yeah. They love it.

[Michael Batnick]

And not recognizing that you're not getting your money. So I don't know. If you pull up chart 19, one of the biggest things that you see is what is this? What this shows is the quarterly distribution rate of private equity, venture capital, et cetera. And it is.

[Bob Elliot]

Yikes.

[Michael Batnick]

It is.

[Josh Brown]

You can't distribute because there's no exits.

[Michael Batnick]

That's right.

[Josh Brown]

Okay.

[Michael Batnick]

That's right. So that's. So when you talk to somebody about investing in venture capital, used to be, you know, you'd allocate your capital calls over the first two and a half years.

[Josh Brown]

Five years, six years, you get your money.

[Michael Batnick]

Five, six years, you get your money back. The way it works now is your. All your capital gets called and you never see your money.

[Josh Brown]

Yeah. Until companies can go public or get acquired.

[Michael Batnick]

Right. Which, you know. And now we're seeing venture capital distribution rates at 5%. You know, essentially you're just never seeing. You're just never seeing the capital.

[Josh Brown]

Yeah.

[Michael Batnick]

And that has all sorts of consequences around liquidity of portfolios because people aren't. Particularly when we talk to like big institutional investors, they don't. They are stuck in a pickle, which is they expect the money to be coming in the door and the money's not coming.

[Josh Brown]

They have nobody to sell assets to.

[Michael Batnick]

Right.

[Josh Brown]

They can't sell at. They can't turn these companies fast enough to return capital.

[Michael Batnick]

And in particular, when you think about, part of the whole story is very strong irrs in These. And when you had venture capital you allocate in two and a half years, two, three years and then you get exit starting in year five, et cetera. That's where you get very, very strong IRRs. Well if it takes 10 years or 15 years to get your money, then it totally blows out the IRRs. Why would you ever invest in venture capital? Pay all those fees. Take that illiquidity. When the cash flows are so extended.

[Josh Brown]

The interval is becoming so long that it's limiting how much you can make per year.

[Michael Batnick]

Exactly. And so basically in this sort of circumstance it makes no sense to invest in these sorts of investments relative to investing in the public markets. You're having a negative penalty. A negative.

[Josh Brown]

Is that. So is that one of the big drivers for why the private equity and alts people are coming so hard at wealth management? Yes, because they need liquidity. They need another pool of capital to come in well in while they're waiting for institutional capital to get back out.

[Michael Batnick]

In particular, I mean the way it used to work is you'd, you know, you'd invest in a fund vintage, you get your money paid out and then.

[Josh Brown]

You go back into the next.

[Michael Batnick]

Go back into the next vintage.

[Josh Brown]

But you can't re up if you don't get your money out.

[Michael Batnick]

Exactly. And so what are these companies? These companies have to grow their assets. So the only way to grow them is to go talk to people like yourselves to try and get, you know, smaller scale investors to come back in.

[Josh Brown]

I shudder to think who they go to after us when they're done with wealth management. Where do they go to fanduel like what's, what's the next. They go to Robin Hood.

[Bob Elliot]

Bob, there's an article in the Journal Hedge fund fees eat up half of clients profits. Do you think this is a salacious headline? Do you think like or because you were insider? Do you think that it's. Yeah, it's true. Yeah, it's true but. Or it's total garbage.

[Josh Brown]

Put it Just over half the industry's total gross performance was eaten away by fees over the past two decades according to LCH Investments. That compares to about 30% between 1969. Nice and early 2000s said the company which manages and advises on hedge funds on behalf of. Whatever this increases, the proportion of gross gains being paid away in fees is clearly.

[Bob Elliot]

Stop eating.

[Josh Brown]

I'm reading the advantage of investors.

[Michael Batnick]

Okay, it's 50%.

[Josh Brown]

Hedge funds have earned 3.72 trillion since the late 60s and kept 1.8 trillion of that in fees. Not Bad. Not bad. What's the problem here?

[Michael Batnick]

Fees are too damn high.

[Josh Brown]

Okay. But people are still paying them.

[Michael Batnick]

I mean, just think about this. Happily, the fees at this level.

[Josh Brown]

Yeah.

[Michael Batnick]

It's not just that they're taking 50% of the returns. It means they're taking essentially 100% of the alpha. More than 100% of the alpha.

[Josh Brown]

Yeah.

[Michael Batnick]

For themselves.

[Josh Brown]

Because a lot of these are underperforming funds. And on top of it.

[Michael Batnick]

That's right. That's right. The fees happen. Whether you're outperforming or underperforming.

[Josh Brown]

As long as you're net positive, the.

[Michael Batnick]

Fees are happening even if you're not net positive. Right. You still take your management management fee.

[Josh Brown]

Okay.

[Michael Batnick]

Right.

[Josh Brown]

Yeah. These numbers are eye popping. Citadel is the most profitable money manager since inception. Earned clients 83 billion since 1990.

[Bob Elliot]

That is unbelievable.

[Josh Brown]

And returned 9 billion in net gains to clients last year.

[Bob Elliot]

Hey, how do I get into this fund?

[Josh Brown]

The problem is you don't know Citadel is going to be Citadel in 1990. Because nobody knows that.

[Bob Elliot]

And by the time you know, you can't get in.

[Michael Batnick]

Right.

[Josh Brown]

Well, now they don't know.

[Michael Batnick]

And that's, I mean that's the biggest. That's a big issue is that why.

[Bob Elliot]

Won'T Ken Griffith democratize his gains?

[Michael Batnick]

Because he doesn't want to deal with democracy.

[Josh Brown]

One more for you on the same topic. This looks like a PR firm packaged this headline and sent it directly to the reporter at the Wall Street Journal and then the reporter just published it. When I see stuff, when I see stuff like this. John put this image up. This hedge fund created an XL on steroids. The need to analyze an overwhelming influx of stock data and do it fast pushed Man Group to become its own kind of tech company.

[Bob Elliot]

This feels like a headline from like 10 years ago.

[Josh Brown]

Yeah. Like everyone's a tech company now. I don't know you, I mean, you're at Bridge. You were at Bridgewater. So arguably you were at one of the most cutting edge data crunching hedge funds ever.

[Bob Elliot]

Excel on bath salts.

[Josh Brown]

This seems like whatever they're doing is just like sort of par for the course. It's not like it's not that impressive. Oh, they have a souped up Excel.

[Michael Batnick]

I don't know. I think in the industry the differentiator is not how good your tech is in general. Right.

[Josh Brown]

Even like for the De Shaws and the Citadels.

[Michael Batnick]

I'd say the one area where that's not true is if you're in high frequency trading. It matters a lot.

[Josh Brown]

But I Think about James Street.

[Michael Batnick]

Yeah, those companies, in many ways those companies are, they're called hedge funds, but they're not really hedge funds. They're not taking market directional positions on assets. Right. They're market makers.

[Josh Brown]

Yeah, yeah, right.

[Michael Batnick]

And yes, if you're a market maker.

[Josh Brown]

Sorry, liquidity providers, they're taking a rake.

[Michael Batnick]

They'Re taking a break. Right. And look, if you can be in the business taking a vig, like it's a great, it's a great business to be. But it's not a hedge fund. It's not directional positions. When you're talking about directional positions like, yeah, you have to have a certain quality of tech in order to do that. But it's not the thing that's going to differentiate one firm from another. The thing that differentiates it is the quality investment strategy.

[Bob Elliot]

Should Seth Klarman have owned more gold?

[Josh Brown]

So this everyone should have pulled. Now this one sounds like a story that the PR firm begged the reporter not to publish, but they did anyway. Clients of Seth Klarman's Baupost Group pulled roughly 7 billion from the hedge fund in the past three years, losing patience with the famed value investor after a decade of lackluster returns. BAO post annualized at 4% a year since 2014. I just told you, the S and p did like 15%. It's now $23 billion. Fund performance over the last decade is about a fifth of its historic returns lagging. Virtually everyone lost money in 3 out of last 10 years. Not easy to do, although not steep drops. I don't know. This guy wrote the book on value investing. Probably the most respected value investing hedge fund manager, I want to say, of all time. Would I be right? Okay. Does anyone not worship Klarman in that corner of the world? I think this illustrates how long you could have a style that's out of favor for and there's nothing you could do about it.

[Michael Batnick]

I mean, I think it's kind of incredible how long it survived.

[Josh Brown]

It's still 23 billion and they're underperforming for a decade massively. And John, we have this chart by the way, just. I know these aren't all great comps, but Vanguard 6040 pivotal path multi strategy. Third point, Elliot and Black is bow post is very little things that you could have allocated to 10 years ago that would have had a worse outcome. Not that they've lost people money, but like, wow, you pay a lot in fees for that.

[Michael Batnick]

I think the thing going back to the how can the funds take 50% of the returns and fees is because allocators are so incentivized to invest in blue chip managers, brand names, even if they suck.

[Josh Brown]

Yeah. And so they don't get fired for that as fast.

[Michael Batnick]

There's some managers that are out there that have done poorly for a decade. Yeah, right. They've 15 years. And yet they are some of the biggest asset managers, you know, some of the biggest hedge funds out there. And the reason why that is is because if you talk to allocators taking a risk on a new manager or, or a, or a smaller manager, it just never makes sense from how they're incentive.

[Josh Brown]

You're up in Boston and you work at one of those colleges and an endowment and you're like, yeah, we're gonna give 7% to Bao Post. Nobody's bothering you about that. Even if it doesn't work out. Cause it's just like this, what you do. Okay, so there's a lot of inertia there then. And it survives.

[Michael Batnick]

And that's why the problem of the hedge fund fees is not when the returns are good, because when they're a good manager, it's totally worth it. Right. If you can get, of course, 15%, pay your 2 and 20. Totally fine. Of course the problem is when you get 5% returns for forever 15 years and they're taking basically all of it.

[Josh Brown]

For themselves, well, they don't give it back. Bob, do you have fun on the show this week?

[Michael Batnick]

Of course.

[Josh Brown]

We love, we love hanging with you. I want to tell people a little bit about unlimited funds and then we'll wrap up the show. But give people kind of like the elevator pitch who haven't heard of your company.

[Michael Batnick]

Yeah.

[Josh Brown]

You allocate to bow post. What else?

[Michael Batnick]

I was a 2 and 20 manager for most of my career and starting a few years ago, decided to flip that and bring low cost indexing to 2 and 20 and make it.

[Josh Brown]

You're on like a little bit of a. It's not a crusade. You're not like you feel like it is. I know you're on a mission, but do you feel like you're trying to overturn the industry or not really?

[Michael Batnick]

Well, I think it challenged the industry challenge.

[Josh Brown]

Okay, that's a good question.

[Michael Batnick]

There's a lot of bad. Like that headline said, there's a lot of bad stuff that exists in the industry. And in the same way, in a lot of ways, Vanguard brought massive consumer surplus to millions of investors. That's what we're trying to do with the world of 200.

[Josh Brown]

So it's hedge fund like strategies in an ETF wrapper that's a little bit more customer friendly, but trying to do it intelligently. You're not doing alpha cloning.

[Michael Batnick]

No.

[Josh Brown]

You're not trying to mimic people's portfolios. Exactly. You're trying to capture the various styles and strategies, popular strategies within the hedge fund world.

[Michael Batnick]

That's right. That's right. We built technology, basically, that allows us to look over the shoulder to the hedge fund manager, see how they're positioned in pretty close to real time. And then, you know, we put that, we package that into. Into an ETF wrapper. And the good thing about that, it's tax efficient, liquid, you know, easy to invest, and you don't need to be accredited or anything like that. You can do it at $20 or 20 million. If you have 20 million, give me a call.

[Josh Brown]

Are your old friends from, like, Bridgewater, et cetera, like, yo, dude, can you shut up? No. Cause I had a little like, I had stockbrokers be like, is there any way you could stop? Just because I was talking about commissions and conflicts and retail brokerage and telling all the stories you hear from people that are like, dude, we get it. Shut up already.

[Michael Batnick]

Oh, I mean, out on Twitter, you see it all the time, where even the suggestion that you could build something that looks like how hedge funds are performing in an ETF wrapper, the venom is. It's quite remarkable, actually.

[Josh Brown]

Yeah, I get it.

[Michael Batnick]

People are sensitive, right?

[Bob Elliot]

Nobody wants to be their livelihood threatened.

[Josh Brown]

Yeah, people. Look, people are overpaid in every type of line of work under the sun. But I think in the hedge fund world, like most people in it would acknowledge, we are being paid a lot of money and we can't always deliver to. And that's really all you've been saying.

[Michael Batnick]

That's exactly.

[Josh Brown]

All right. Dude, you crushing on the show this week? I wanted just one item of housekeeping. Michael and I and many members of the Ritholtz wealth gang are coming down to Naples, Florida, and we're doing client meetings and prospective client meetings. So if you are a fan of the show and you're interested to learn more about how we manage money, I would tell you to go to infoidholtswealth.com, send an email subject line, Naples and certified financial planners from the firm will be reaching out to see if a meeting makes sense and help you get on our calendar. And we'd love to say hello to you in person. Anything you want to say on that?

[Bob Elliot]

I am excited to speak with Brian Belsky we sold out. No more tickets available. But we're. We're going to be busy, so I'm excited.

[Josh Brown]

Yeah, we have a lot to do while we're down there. Okay. Wanted to ask you what you're most excited about for the future.

[Michael Batnick]

What do you got in the short term? I don't care. This cold.

[Josh Brown]

What's that?

[Michael Batnick]

I'm going to Florida next week and, man, I need it.

[Josh Brown]

Let me tell you, our lives are.

[Michael Batnick]

Not built for this goal.

[Josh Brown]

Let me tell you a fun fact. The next time we'll have a sunset that happens before 5pm is November 2025. You with me on that? Feel good about that, Duncan?

[Michael Batnick]

Yes, definitely.

[Josh Brown]

John. You feel good about that?

[Michael Batnick]

It can't get any colder.

[Josh Brown]

How about that?

[Michael Batnick]

It can't get any darker.

[Josh Brown]

Bob. Thank you so much, guys. Please follow our friend Bob Elliot everywhere. He is the man. Twitter, Twitter, LinkedIn. All the places go to unlimitedfuns.com tick tock and and hey, everyone, thanks so much for listening. We'll see you soon.