Things People Say in a Bull Market

Summary

Podcast Summary: The Compound and Friends – "Things People Say in a Bull Market"

Episode Information:

• Title: Things People Say in a Bull Market
• Host/Author: The Compound
• Description: Join Downtown Josh Brown, Michael Batnick, and a rotation of their friends every Tuesday and Friday for expert insight and hot takes on the latest in business and investing.
• Release Date: August 12, 2025

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1. Introduction and Current Market Overview

The episode opens with hosts Josh Brown and Michael Batnik delving straight into discussing the prevailing sentiments and narratives circulating during the current bull market. With the S&P 500 approaching a new record high of 6400 and various sectors trading higher—some previously held back awaiting rate cuts—the conversation sets the stage for a comprehensive analysis of market dynamics.

Notable Quote:

• Josh Brown [00:00]: “Tonight we're gonna get right down to business... we'll talk about why that's the case right now.”

2. Earnings Season Performance

A significant portion of the discussion centers around the performance of the earnings season. With 90% of S&P 500 companies having reported, the blended earnings showcased a robust 10.5% year-over-year growth, surpassing initial estimates by a staggering 770 basis points. An impressive 81.2% of companies beat expectations, outperforming the five-year average of 77%.

Key Highlights:

• Sector Performance: Communication, Services, Technology, and Financials led the growth, while Energy, Materials, and Consumer Staples lagged.
• Comparison to Past Seasons: Matt from Exhibit A highlighted that this beat rate is the largest since 2013, excluding the anomalous COVID-19 period.

Notable Quote:

• Josh Brown [05:11]: “81.2% beat rate. Which is better than the five year average of 77%.”

3. Inflation Data and Consumer Price Index (CPI) Insights

The hosts analyze the latest CPI data, which showed a 2.7% annual increase for July, slightly below the consensus estimate of 2.8%. Monthly inflation rose by 0.2%, with goods and services inflation exhibiting distinct trends.

Insights:

• Goods Inflation: Concentrated in tariff-affected products such as household furnishings, apparel, and vehicles.
• Services Inflation: Stalling, with no significant increase outside of rent, comprising 60% of CPI.

Visual Aid:

• A chart displaying core CPI trends over ten years, highlighting fluctuations and potential "head fakes."

Notable Quotes:

• Cali Cox [05:54]: “Services inflation is inching higher again.”
• Josh Brown [14:16]: “Core goods on the right looks concerning. I don't, I don't think you have to predict like, oh, that's tariffs.”

4. Bear Cases and Market Concerns

Despite the optimistic earnings reports, the hosts explore potential bear cases that could threaten the bullish trajectory. The primary concern revolves around a possible bubble in hyperscaler capital expenditure (capex) spending. Additionally, unforeseen risks lurking on the horizon remain a wildcard.

Discussion Points:

• Bubble in Hyperscaler Capex: The risk of overinvestment in cloud and AI infrastructure without sustainable returns.
• Unexpected Risks: Emphasizing that market downturns often stem from unforeseen events rather than predictable factors like inflation or tariffs.

Notable Quote:

• Michael Batnik [16:00]: “Real risk is, it's what you never see coming.”

5. Investor Sentiments and Fund Flows

Analyzing data from Schwab Wealth Management, the hosts discuss the shifting investor sentiments, particularly the significant outflow from small-cap stocks. Over $80 billion has been exited from the Russell 2000 this year, marking the largest withdrawal on record.

Key Points:

• Investor Demographics: Younger investors gravitating towards high-growth sectors like crypto and meme stocks, while older investors remain cautious.
• Insider Buying Trends: A decline in insider buying among S&P 500 companies, indicating potential lack of confidence at the executive level.

Notable Quotes:

• Michael Batnik [18:59]: “There's a K-shaped investor base as well.”
• Josh Brown [40:21]: “Corporate executives are dumping stock like it's radioactive waste when insiders won't even touch their stocks at current prices.”

6. Dominance of Mega-Caps vs. Small Caps

The conversation delves into the growing dominance of mega-cap companies, often referred to as the "Mag 7," and their expansive acquisitions across various sectors. This aggressive expansion blurs traditional industry boundaries, positioning these giants as versatile conglomerates.

Discussion Points:

• Acquisition Strategy: The Mag 7 have collectively made 846 acquisitions, spanning industries from media to autonomous vehicles.
• Impact on Small Caps: As mega-caps absorb smaller companies and diversify their portfolios, small-cap stocks struggle to compete, often leading to their underperformance.

Notable Quotes:

• Josh Brown [32:22]: “These companies don't respect horizontal boundaries.”
• Michael Batnik [34:46]: “They do more with the same.”

7. Insider Buying Trends

The hosts examine insider buying trends, highlighting a decline in purchases by executives within S&P 500 companies. This downturn is portrayed as an indicator of diminishing confidence among corporate leaders regarding current market valuations.

Key Insights:

• Low Insider Buying: Only 15.1% of S&P 500 companies saw insider buying last month, the lowest rate since 2018.
• Implications: Executives may perceive current stock prices as overvalued, choosing to liquidate holdings rather than invest further.

Notable Quote:

• Josh Brown [40:08]: “Corporate executives are dumping stock like it's radioactive waste when insiders won't even touch their stocks at current prices.”

8. AI Hedge Funds and Market Speculation

A critical segment discusses the surge in AI-focused hedge funds, likening the phenomenon to past speculative bubbles like the dot-com era. The hosts express skepticism about the sustainability of these funds, noting the risks associated with concentrated bets on AI-driven transformations.

Discussion Points:

• Proliferation of AI Funds: New hedge funds are rapidly raising capital to invest in AI-related stocks, often led by young, tech-savvy managers.
• Risks: Overreliance on AI predictions without considering broader market cycles could lead to significant losses if the AI trend faces setbacks.

Notable Quotes:

• Josh Brown [54:07]: “We're definitely going to do great on investing. Can you even say that?”
• Michael Batnik [55:50]: “This is really hard to predict.”

9. Efficiency and Revenue per Employee

Chart kid Matt's analysis reveals that S&P 500 companies have significantly improved their revenue per employee over the past three decades. In 1991, it took 2.46 employees to generate a million dollars in revenue, compared to just 1.55 today, highlighting unprecedented efficiency gains.

Sector Breakdown:

• Healthcare: Exhibited the most substantial increase in revenue per employee, driven by enhanced spending and expansion.
• Technology: Although a significant contributor to efficiency, its high employee costs balance out some gains.

Notable Quote:

• Michael Batnik [47:02]: “It's making a million dollars again. Real less people than ever with almost one full less employee than they were.”

10. Mystery Chart: Paramount Changes

In a segment involving a mystery chart, Josh Brown reveals insights into Paramount's strategic overhaul. Formerly Viacom, the merger with Skydance and acquisition of UFC signify a pivot towards catering to younger demographics, particularly young males interested in action and entertainment.

Key Points:

• Strategic Acquisitions: Paramount's $7 billion acquisition of UFC solidifies its position in the entertainment sector.
• Market Positioning: By focusing on culturally resonant content, Paramount aims to capture a loyal and engaged audience base.

Notable Quotes:

• Josh Brown [63:03]: “This is Netflix for young men.”
• Michael Batnik [64:21]: “Love them.”

11. Rate-Sensitive Stocks and Make the Case

Towards the episode's conclusion, the hosts advocate for investing in rate-sensitive stocks, such as small caps and homebuilders, anticipating potential rate cuts. They argue that these sectors are poised for growth should the Federal Reserve reduce interest rates, which the market is already pricing in.

Discussion Points:

• Rocket Companies: An example of a rate-sensitive stock showing significant gains, reinforcing the potential upside in this sector.
• Contrarian Signals: Despite negative fund flows from small caps, the hosts suggest that such movements may present buying opportunities.

Notable Quotes:

• Michael Batnik [61:56]: “I think that they are a screaming buy if we are going to get rate cuts, which is what the market is pricing in.”
• Josh Brown [62:05]: “I would sell it for 30, but I would not sell it right now at 18.”

12. Closing Thoughts and Final Insights

In wrapping up, Josh and Michael reflect on the complexities of the current bull market, emphasizing the importance of discernment amidst widespread optimism. They caution against following herd mentality and highlight the need for strategic investments based on solid fundamentals rather than fleeting trends.

Final Remarks:

• Sentiment Indicators: With indicators like the NASDAQ 100 showing signs of narrowed leadership, the hosts suggest that a market correction may be imminent.
• Investor Advice: Focus on defensive sectors and maintain a balanced portfolio to navigate potential downturns effectively.

Notable Quotes:

• Michael Batnik [57:00]: “We could use a slap on the wrist. People are feeling themselves.”
• Josh Brown [61:22]: “There's nothing on earth that Pete, you, you will get if you start conversation. Hi Michael, it's Josh Brown.”

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Conclusion:

In this episode of "The Compound and Friends," Josh Brown and Michael Batnik provide a nuanced analysis of the ongoing bull market, dissecting earnings data, inflation trends, and investor behaviors. They balance optimism with caution, urging listeners to remain vigilant and strategic in their investment approaches. The discussion underscores the importance of understanding underlying market mechanics and avoiding the pitfalls of herd mentality, ensuring that investors are well-equipped to navigate both the highs and potential lows of the market landscape.

Transcript

[Josh Brown]

Ladies and gentlemen, welcome to the Compound and Friends. Tonight's show is sponsored by FM Investments, More on FM in just a moment. Tonight we're gonna get right down to business. We're going into an all new edition of what are your thoughts? It's Michael Batnik and myself and we're gonna talk about things people say in bull markets. Pretty apropos given that the S and P is knocking on 6400. That's a new record high. And all the usual suspects traded higher today, including some areas of the market that have really been held back waiting for rate cuts. And we'll, we'll talk about why that's the case right now. We're also going to look at earnings, we'll do some inflation data, we'll have a make the case. We'll have a mystery chart and all the stuff you guys love. Without any further ado, I send you into the show right now. Welcome to the Compound and Friends. All opinions expressed by Josh Brown, Michael.

[Michael Batnik]

Batnick and their castmates are solely their.

[Josh Brown]

Own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Well, if you're hearing that sound, our theme song you already know. It's five o'. Clock. It's time for an all new edition on a Tuesday. Five o' clock on a Tuesday. Of what are your thoughts? Those of you tuning in for the first time? My name is Downtown Josh Brown. My co host is here as always and his name is is Mr. Michael Batnik. Michael, say hello.

[Michael Batnik]

Hello, everybody.

[Josh Brown]

All right, the chat is pumping. I don't know if you've been taking a look, but we've got. All the pounders are here. I got someone named Mike Bloomberg saying Batnik's biggest fan here would love to see it. I think I'm Batnik's biggest fan, to be honest with you, Mike, I have to tell you the truth. And then he says queens college representation. All right, that's true.

[Michael Batnik]

I'm an alumni.

[Josh Brown]

Yeah, let's see. Craig in the house said actually blocked my calendar so I could join the live version for once. Craig. We appreciate that, bro. Ledge says, who's ready to get pounded? I know I am. For those of you wondering about my location, those of you watching in the live, I am in a. In a college apartment across the street from University of Miami where I have spent the last eight hours setting my, setting my kid up for her sophomore year. So that's what's going on with me. We're going to talk about all of the biggest topics on the street and the markets today. First, I want to shout out our sponsor. Tonight's show is sponsored by FM Investments. With bond yields so attractive today, many investors have rediscovered fixed income investing.

[Michael Batnik]

That's right, Josh. But there's a catch. Those regular, those, I'll tell you, those regular income distributions, they, they pull money out of your portfolio. They make it hard to stay fully invested and slow down the magic of compounding. So here's the good news. FM Investments just launched two new ETFs designed to solve the fixed income distribution problem.

[Josh Brown]

Powered by NASDAQ index innovation, the FM Compounder ETFs are designed to help investors grow their fixed income holdings and compound their capital gains without taking interest distributions that have to be reinvested after paying income taxes. CPAG, the FM compounder U.S. aggregate bond ETF and CPHY, the FM compounder High yield ETF help investors take control of both the timing and the character of the income that their fixed income investments generate.

[Michael Batnik]

To learn more about FM Compounded series and their additional ETF Easy products, check out the link in the show notes.

[Josh Brown]

All right. I love how they named it Compounder. Pretty good. It's almost like a match made in heaven. Also want to remind everybody, August is portfolio review month at Ritholtz Wealth Management Certified financial planners are standing by to take a look at your situation, review your portfolio and maybe shed some light on how your allocation may or may not fit your long term goals. Go to ritholtswealth.com to get in touch. Okay, so we're basically done with earnings season other than the biggest, most important company still waiting to report. But we are 90% through. We've had 452s and P500 companies report so far the blended earnings. So this is where we take the actual. Already reported for The S&P 500 grew at. We take the actual, we add the estimates of who's left but there's not much left. Grew at 10 and a half percent year over year. That is 770 basis points above estimates at the beginning of the season.

[Michael Batnik]

Wow.

[Josh Brown]

81.2% beat rate. Which is better than the five year average of 77%. And now if you just look at the actuals. So take out the estimates. 452 companies reported grew 8.1% year over year 8 of 11. This is all thanks to Chart Kid Matt of Exhibit A, eight of 11 sectors posted the year over year increase in blended profits. The highest growth rates you can probably guess. Comm, Services, tech and financials. The lowest were energy, materials and staples. You probably could have guessed that to 11 out of 11 sectors, Mike have beaten beginning of season growth estimates. So of the sectors that have beat estimates, the average beat rate is 6.7. These are. I'll do chart kid Matt's big takeaways and I know you have some, some images for us. The analysts were looking for a 2.8% year over year increase in profits this quarter, which would have been pretty weak relative to recent prior quarters. Now it's looking more like 10 and a half percent again. So it's a huge surprise. And according to Matt, that's the largest beat rate in all of the data we have access to back to 2013 outside of the weird COVID 19 period. So it's not just a good earnings season on most metrics. It's a way better earnings season than most of us would have, obviously than the consensus expected. But it's a great earnings season chart, it turns out.

[Michael Batnik]

Yeah, here we go. Look at this. So why are stocks rallying? Look no further. I mean literally, figuratively, metaphorically, look no further. This is it. This is it.

[Josh Brown]

I like that. I like in this visual, visual how we're pulling out the pandemic because it was so bizarre and like how, how does anyone estimate earnings during a government mandated shutdown? It's kind of stupid.

[Michael Batnik]

Yeah.

[Josh Brown]

So I do like that. But then like, just look at the last, look at the progression of the last four quarters. I am like, of course stocks are at record highs if that's the progression. So I think the big takeaway here is we are hearing about headwinds, quote unquote from CFOs and CEOs related to tariffs. But the companies that are struggling the most with them just aren't that consequential. And even the companies that are struggling with them are still finding ways to beat. So either the tariffs have worked their way into the estimates to the degree where companies could just leap over them, or they weren't that big of a factor to begin with. And I don't know. What do you think is the, what do you think is the answer to that puzzle?

[Michael Batnik]

I think we're still working through it. It's too early to tell. It really is.

[Josh Brown]

Keep hearing that though, like, so when. So next quarter.

[Michael Batnik]

Yeah, I mean, okay. Things keep getting. The cans keep getting kicked. We really haven't seen exactly where it's going to settle out. But this is. Stop ringing. I saw this, Ben. Today we talk all about like the K shaped economy.

[Josh Brown]

Yeah.

[Michael Batnik]

Particularly through the lens of the consumer. It really is in the stock market more than anyplace else or as much as it's in the real economy. There are obviously winners that we can't and won't stop talking about and there's a lot of losers and companies that are lowering guidance or are missing are getting demolished. So Bespoke tweeted. Stocks that have lowered guidance this earnings season have averaged a one day drop of 10%. That's the worst performance we've seen for stocks lower in guidance since at least 2001. And there's not like a few of them. There's a lot of them. So yes, the index is at an all time high.

[Josh Brown]

Why are they. Put that back up. Why are they lowering guidance? Would you say it's like 90% of the company's lowering guidance. It's in some way related to tariffs.

[Michael Batnik]

A lot of it. A lot of the ones that are getting killed are office adjacent. Kava this afternoon. Sweet green.

[Josh Brown]

Okay.

[Michael Batnik]

A lot of it is AI shit. Trade Desk being one of them. I know that's like a, that's also like an Amazon story. Just the ad build up platform. There's this one company, Chegg, which is an education platform in China. They had a $15 billion market cap. It's now $100 million.

[Josh Brown]

Yeah.

[Michael Batnik]

Google search is wreaking havoc. The switch to Gemini is, is killing a lot of companies. So there's all sorts of reasons, but those are the two big ones.

[Josh Brown]

Yeah, you know what, it's a really good point. Like I've been, we, I've been reading about companies that are struggling with this like AI changeover where. And Trade Desk is one of those. So Trade Desk has it on both ends. Number one, Amazon is coming to their market and the CEO is like no, actually we think Amazon's going to be a great partner.

[Michael Batnik]

Yeah. Lol.

[Josh Brown]

Dude, I saw that Amazon has lots of great partnerships. Sure. But then the other thing that's happening is like a lot of the, a lot of the behavior of how consumers even encounter ads. To your point, like it's just, it's shifting now that we are going, you know, utilizing Gemini results rather than scrolling lower on the page to actual blue links. And of course all the searches that aren't happening at Google to begin with and restarting on ChatGPT, which is now the way that I'm operating.

[Michael Batnik]

So, so One more thing on earnings, we've got, if you, if you listen to what the companies are saying, they have no reason to not tell the truth. For the most part they are trying to give guidance that is reasonable. If they don't, investors won't trust them. Their stocks will get killed. So they tell you what it is. And all of the financial companies from SEC so far all the way up to MasterCard and American Express and Ally and everyone in between, they're all saying the same thing. They're not seeing a slowdown, they're just not. We see it in the headlines and, and, and the, from the publications. Everybody's stress, anxiety everywhere. People are still spending obviously to varying degrees as it always is the case. But we're going to hear from retailers this week or maybe next week. We've got Walmart and Target. We haven't heard from them yet. And then of course we've got the big one. We've got Nvidia which by the way.

[Josh Brown]

When I said 90% of earnings season is in, I didn't, I wasn't thinking about the fact that we still have. Forget about Nvidia. Not hearing from Target and Walmart means earnings season is nowhere near.

[Michael Batnik]

Yeah, we got big retailers.

[Josh Brown]

Maybe that's why you made a up face at me. You're right though. I'm wrong. I'm wrong. You're right.

[Michael Batnik]

So there are, there are a lot of cross currents, a lot of narratives and a lot of them are valid. Like a lot of people are saying a lot of different things and it's hard to get to the bottom of what's happening.

[Josh Brown]

Okay, 3% screaming hot rally for Russell today. I think I know why CPI came in. Some people are saying on target. Some people are saying tame, tamer than expected. We, we have some insight from Cali Cox at Red Holtz Wealth. Let's do the headline and then I'll just, I'll relay her comments and then I want to get your reaction. The Consumer Price Index rose at an annual rate of 2.7% for July. The consensus estimate was 2.8%. So that, that's, that's always good. CPI rose point 2% in July compared with June, the month, the month over month. And that was in line. Goods and services inflation rose year over year for a second straight month. Services inflation is inching higher. Goods inflation is screaming higher again. This is coming from Cali. Cali says goods inflation heat is concentrated in tariff affected products like household furnishings, apparel and new used, newer used vehicles. I think we knew that that would be the case. Services inflation, which is 60% of CPI, is stalling from heavier than expected increases in most items outside of rent. I think she means stalling from falling fast and faster. She says, sure, inflation could complicate decisions in this moment, but the chances of a price led crisis pale in the face of job market woes. And let's put up, let's put this chart up. So the dotted line is core cpi. The yellow is core goods taking out food and energy. The blue line is core services. I don't know what strikes, what strikes you as interesting in this chart? For me, the obvious one is the yellow line. But what do you think?

[Michael Batnik]

Yeah, I mean the yellow line, that's where your, that's where your eyeballs go. But then also core services maybe bottoming out and hopefully it's not hitting too much higher.

[Josh Brown]

Look, I, it looks like it wants to turn up, but who the hell knows? You can see a lot of, a lot of head fakes in, in the history. This goes back, this chart's going back 10 years. You can see that there have been head fakes all the time. It's, I don't know if it's very noisy compared to other economic data points, but I know it's at least noise adjacent.

[Michael Batnik]

Yeah.

[Josh Brown]

All right, let's put this next one up. Here's core inflation. And look, I think when you look at the center shelter, this was one of these, quote unquote, the stickier parts of inflation that we were most concerned with for the entirety of the 2021, 2022, 2023 period. But you can see that's like a staircase down and I don't know if it's bottomed, but I'm just saying it's significantly.

[Michael Batnik]

Yeah, but, yeah, but the rate of change doesn't even matter anymore. It's. The damage has been done. So much damage.

[Josh Brown]

Okay. Core goods on the right looks concerning. I, I mean, I don't, I don't think you have to predict like, oh, that's tariffs. Spike the blue line.

[Michael Batnik]

Right, the blue line you're talking about.

[Josh Brown]

Yeah, it's tariffs. Yeah, of course. Okay. And then, and the green is. I don't know how to read that. That one, that one's sort of sloppy. I wanted to ask you, okay, so you have July CPI, we're 90% through, through earnings season. And I understand we don't have the two biggest retailers and we don't have in video, which is a lot of market cap. But like given the fact that we just did a 10 and a half percent growth quarter. What is the bear case for stocks right now? And you can't answer valuation because that's not a catalyst. Valuation will matter if something bad happens. But like what's the, what's the something bad? What do you, what do you think it is right now? If you had to, if you had to name like the big obvious bear case.

[Michael Batnik]

All right, the big obvious bear case is there's a bubble in hyper, in hyperscaler capex spending. But nobody doesn't know that. Okay. Like we heard.

[Josh Brown]

No, there are people that think it's not a bubble. There are people that.

[Michael Batnik]

No, you asked me what the, with the obvious bear case and that's it. Now we heard from all of the Mag 7 except for Nvidia. Nvidia is not going to surprise. I'd be very surprised just based on what everybody else said. Like we know what they're spending, we already saw it. Why do you think video is rallying? We heard, we heard from their biggest customers. We know what's going to happen. So outside of the usual, you're right, valuation is not a catalyst. We've been having this discussion for eight years already at this point, maybe longer than that. I think the, this is a lame answer but real risk, like actual risk is, it's what you never see coming. Right. So whatever we're discussing for the most part inflation tariffs, this, that the market discounts it like that. So I don't know what's out there on the horizon that's going to surprise us but it's probably not what we're all talking about every day.

[Josh Brown]

One of the things that took place in this earnings season and maybe I'm just over indexing or maybe it's the recency effect but like I really do feel like we have more quote unquote name brand bellwether companies that are really struggling right now on a scale like some really bad shape. Well last week we did ups. That was an obvious one decline, whatever. No, I understand. But if you would have said like 5 years ago ups is making 50 week lows, I would say that's got really bad read through for the economy. I don't think anyone's really saying that now. I don't know. I know Intel's been rallying for a couple of days on the, on the heels of the CEO meeting with Trump and the, the semi tariffs being made, being made public, what they're going to be like, I understand that, but the stock is still at multi year lows. We did, we talked about, you And I talked about Chipotle, like these are not insubstantial companies that I do think are meaningful. I guess just nobody really cares so long as the AI capex spend continues and the consumer doesn't tap out. I don't know, it just feels like a really weird time.

[Michael Batnik]

So if you say what's the bear case versus like what is the less bullish case?

[Josh Brown]

Those are different companies. A lot of companies, a lot of bellwether companies, not bellwether for the S&P 500 by market cap, but bellwether for the economy. A lot of them struggling all at once I think would be part of my bear case. But I agree with you. The big one is one of the hyperscalers pulls back and then it's like Wiley Coyote off, off the cliff and finally looks down.

[Michael Batnik]

Yeah, I agree with you.

[Josh Brown]

That's, that's it. If you're bearish, that's what you think is going to happen or want to.

[Michael Batnik]

Have happen in the short term. We do have a bear case coming up later in the show. Everybody is, yeah, I don't know everybody. People are bullish. There is obviously a feeling of euphoria in the air. You need the wall of wire to climb, which we already did it with the earnings, but you're still seeing. So Schwab publishes their S tax report which we have later in the show. And that's $11 trillion asset manager. It's the biggest in the world, their second biggest. And those people, those, those, that cohort of investors is still kind of nervous which makes me think like maybe that.

[Josh Brown]

Cohort of investors that boom, like, like.

[Michael Batnik]

Boomerang, I would say over, over 40. That like that cohort is not, you know, I think there's a K shaped investor, investor base as well. You have the younger people that are flocking to the crypto treasury companies, to the meme stocks, to the, the high flyers of the world. And then you have the people that are over 40 that are like this doesn't make sense. And they're not all jazzed up.

[Josh Brown]

So the live chat is lit up right now with kava stuff. I know that was a popular momentum trade. Cava is doing what sweet Queen already did.

[Michael Batnik]

That's an office story.

[Josh Brown]

That's so the story there. And I think Chipotle in part the story, not, not to the same extent, but like Cavas are located in midtown locations where young men and women wear button down shirts and blouses, occasionally vests and eat a seventeen dollar bowl of shit that they preorder on the app.

[Michael Batnik]

It's pretty good.

[Josh Brown]

Yeah, I know everyone, everyone says that. I have no, I have no comment. But like these are, these companies are significantly, these companies are significantly in need of five day a week. Like that's what they were built for and they're never going to get it again. They don't have it now but Sweetgreen already, I mean that stock looks like, looks like a, like a, like somebody shot it in the head. Now Kava, I guess will look somewhat similar. Those are not economic bellwethers like those are to me. We should not look at, we should not look at that and say oh, the consumer's in trouble because doordash, which we're going to talk about later in the show is saying the opposite. Best tea in the chat. Safe to say Josh is short salads in size. All right, I want to read you something about Barry Bannister. Do you know him?

[Michael Batnik]

I don't.

[Josh Brown]

We invited him on the show. He blew us off. He's good though. Barry is like a chief strategist or chief economist for Stifel and she's. No, not British. But he's warning in a note this morning. So let me read this. This is I guess probably CNBC.com I'm quoting Barry Bannister wrote in a Monday note that an economic slowdown could be in the cards. That in turn can mean bad news for stocks as quote as markets charge to all time highs with very extended valuations, we are left to wonder what can break up the party like it's 1999 atmosphere. The lesson of history is that it's usually a sudden economic slowdown which is what we forecast for the second half of 2025. Bannister said to expect stagflation which is marked by high inflation and unemployment as well as stagnant economic growth. This type of environment is already slowing areas of consumer spending though the artificial intelligence capex build out and tariff pre buying have helped mask problems. They say they're uncomfortable with the S and P being more than 30% off its intraday low on April 7 as the economy slows to a crawl quote. Valuation doesn't matter until it does. True, 1929, 1999, 2021. But then here's the problem. I'm with them on all of that. I'm totally with them. Not that I think they're going to be right. I just agree with the premise.

[Michael Batnik]

Yeah, it's all sensible.

[Josh Brown]

Okay, here's the problem. Their downside target is 14% from the recent high. Oh, so who cares 5500, 6400 BFD. And that would be a six and a half percent year to date decrease from where we started. So that's one. It's low relative to all of their competitors. But like come on. But this is worse. This is the last quote I'm going to read. Quote Hopium is a powerful drug but we abstain by recommending investors overweight defensive value which is Staples health care utilities quality.

[Michael Batnik]

He lost you at home in front.

[Josh Brown]

Of a sudden likely Q3, 2025 a few months in advance of the late 2025 GDP S&P 500. Correction. If you say the word hopium, I'm taking 20% off your score.

[Michael Batnik]

Yeah.

[Josh Brown]

As a strategist.

[Michael Batnik]

Yeah.

[Josh Brown]

What is that shit?

[Michael Batnik]

It's just an old childish.

[Josh Brown]

That is.

[Michael Batnik]

It's people from the 80s say that.

[Josh Brown]

It'S a portmanteau of hope and opium as if everyone who's long is on everyone's dumb.

[Michael Batnik]

But wait a minute. It's not hoping we Barry, we're just talking about the earnings are at all time highs. Earnings expectations are at all time highs. Beats are at all time highs.

[Josh Brown]

It's now it's Hopium that by pay 22 times for the S&P or 30 times for the Mag 7 on average. It's Hopium that like there's still upside or that we haven't fully priced in AI I understand. I understand the premise and I'm not even saying that that they'll be wrong with that call. But when you start talking like you're on Twitter.

[Michael Batnik]

I know, I know.

[Josh Brown]

Or like you're subscribing to too many Malden contributors. That's when I. That's when I get off.

[Michael Batnik]

But I think we would agree people are. People are obviously pricing in a lot here. They just are.

[Josh Brown]

Yes, but with good reason. Pro business president, pro business Congress tax cut extension rates coming down a high capex cycle probably not in the ninth thing that there was a reason.

[Michael Batnik]

It's did you. Did you participate with next topic? Did you give John two topics or. No, two things for people saying I.

[Josh Brown]

Don'T give anything to John. I have it in my head. I didn't know I was supposed to give it to John.

[Michael Batnik]

Okay, all right, I'll go first then. All right. I have a feeling we. So I picked two things.

[Josh Brown]

I'm so sorry.

[Michael Batnik]

What we.

[Josh Brown]

What we had. We had other stuff. We had other stuff to do here though. All right, let me just do this really quickly and then we'll move on.

[Michael Batnik]

I'm sure. This is very important. Go ahead.

[Josh Brown]

All right. We mentioned the Trade desk, and I said we'd get to it. That's why I just want to get to this, Put this up. They cited ad spending limited due to tariffs and macro uncertainty. They're still growing like 19%. But the multiple here was so high. I want people to understand, even high growth companies, if they start blaming tariffs for a downshift in their growth expectation, it slides out like this literally could happen to any company. And there's other stuff going on with Trade Desk, but, like, I don't. I don't know. I feel like that's a. That's a key stock because of how embedded they are in the advertising market. Here's Lily. So we know what's going on here. Tons of competition for the drugs and probably sky high expectations. Dude. But, dude, do you know how much, how much in dollars this company has lost in market cap? It's hundreds of billions of dollars.

[Michael Batnik]

Yeah.

[Josh Brown]

And this was a bellwether stock, too. For the, for the, for the health care sector. I think it's the biggest pharma stock by market cap. Shopify went the other way. It's an earnings reaction. Anyway, I asked Sean, like, what were some of the more notable earnings reactions in the companies that we talk about? And these were them. I just wanted to show that part. All right, you know what?

[Michael Batnik]

Know what? You go first. Why don't you start? What. So the topic is this. I asked Josh to bring two things that people say in a bull market to convince themselves that it's whatever. I was about to give away a thing that I was about to say. But why don't you go? Why don't you go. You start first.

[Josh Brown]

All right, so these are both Livermore. These are the things that. These are the quotes that people trot out. And it's so funny because I can find diametrically opposed Livermore quotes that say the exact opposite for when people are talking about selling and getting out of bull markets. But here are the ones that they trot out. This is one of my favorite, actually. These are my two favorite quote. After spending many years in Wall street, by the way, back then, they said in Wall Street. Wall street, which is very British, and after making and losing millions of dollars, I want to tell you this. It was never my thinking that made the big money for me. It was always my sitting. Got that. My sitting tight. Have you heard that one before? During the bull market.

[Michael Batnik]

And he definitely said that in a bull market, obviously.

[Josh Brown]

Oh, for sure.

[Michael Batnik]

He did not say that in 1931.

[Josh Brown]

No way. He said. He probably said that in like, in like 27 or 28. All right, here's the other one. Also Livermore quote. Men who can be both right and sit tight are uncommon. I found it one of the hardest things to learn. So this is to me the most emblematic. When people start quoting the Jesse Livermore Index Fund quotes, sit tight, do nothing, buy and hold. That's really when. And I'm. I don't know anecdotally because I'm not. Not really on social media that much. And there's no blogs anymore. Are people using this stuff or.

[Michael Batnik]

No. So you took. You took the assignment more literally. But those are. But those are two very good ones. So what I meant was, are people trotting out Livermore quotes? I don't think so. I feel like.

[Josh Brown]

I think.

[Michael Batnik]

So you call Livermore in a bull market. I mean, in a bear market, I.

[Josh Brown]

Feel like no people. This is what I see people do when. When we're like in the eighth inning of a bull market to just like tell each other like, sit tight. Okay.

[Michael Batnik]

All right. So John, I brought some, I guess, up to John. John. What did I do? There we go. All right. We're still so early.

[Josh Brown]

Is this AI?

[Michael Batnik]

This AI.

[Josh Brown]

Okay. All right. Yeah, I was gonna say these guys don't exist.

[Michael Batnik]

This. Oh, they do. This is very much something that you hear people say in the bull market. And I brought an actual IRL example. So the transcript pulled out a quote from Jassy last week. I say this frequently, but remember that 85 to 90% of a worldwide IT spend is still on premises versus in the cloud. In the next 10 to 15 years, that equation is going to flip further accelerated by companies excitement for leveraging AI. So to that end, you could. You could.

[Josh Brown]

True.

[Michael Batnik]

That's pretty wild, right?

[Josh Brown]

Holy shit. You know how bullish that makes me.

[Michael Batnik]

So here's the thing though. Here's the thing that about the two things that I'm bringing for things that people say in a bull market that sound like bullshit after the fact, that they're not always wrong. They're not always wrong.

[Josh Brown]

I agree. Bitcoin's a really great example.

[Michael Batnik]

I was about to say bitcoin, people were saying like two years ago, we're still early. And you're like, at 6,000.

[Josh Brown]

It turns out we were. And it turns out we were. People were saying that at 17,000. And then it. But then it fell to 4,000 on. On its way to 120. So like, yeah, people say it's still early. They might be right. They also might look stupid in the short term.

[Michael Batnik]

Correct.

[Josh Brown]

For saying it, which is why you.

[Michael Batnik]

Have to sit on your hands or whatever Little Moore said. All right, next one. Oh, okay.

[Josh Brown]

Jesus Christ.

[Michael Batnik]

People. People say it's different this time.

[Josh Brown]

The way. Give them. Give the listeners the quote.

[Michael Batnik]

Sir John. So I have Sir John Templeton.

[Josh Brown]

Yeah.

[Michael Batnik]

Saying the four most dangerous words in investing are quote, it's different this time. However. However, it really was different this time. John, throw my tweet up, please. This is from 2017. This is a long time ago. This is thousands of S and P.

[Josh Brown]

Oh, this is such a killer. I remember this. This is so. Because. So you're saying the 12 most dangerous words in investing are quote, the four most dangerous words in investing are it's different this time.

[Michael Batnik]

So what I meant by that was people, there are a lot of really, really intelligent investors who are experts of an earlier world and they think that history has to rhyme. They remember the dot com bubble bursting. They remember all the lessons of previous bare markets. But that was 2017 and this time was so different because the driving forces of this bull market are unlike any leadership group that we have ever seen previously. So, John, if you would. What did I. I pulled some stuff from Baltunas. All right, so Balchunas did this thing this week where he showed that the Mag 7 companies have made like 890 acquisitions or whatever it was. There it is. 846. Yeah. So some notable.

[Josh Brown]

These are just the ones that. These are just the ones that the regulators said yes to.

[Michael Batnik]

So like I think people forget that Amazon owns Whole foods, it owns MGM and Google owns YouTube and Microsoft owns Activision and LinkedIn and. And. And Meta owns Instagram. I mean, obviously we know that. And on and on. And then we've got one more. So he breaks down that each Mag 7 stock is in multiple themes, whether it's sports, AI or frontier technology, Metaverse, autonomous vehicles. You know, it's not even on here. Media. Like media. Apple is now a media company. Amazon is a media company. And so Eric said.

[Josh Brown]

We said this so long ago too.

[Michael Batnik]

Yeah, dude, this is like the mag. We call it the Mag 7. There's like 800 companies in here. And so for people that were astutely observing, everybody doesn't understand. You're looking at the wrong metrics. You don't understand the story. We had expanding profit margins. We have never seen anything like this before. It absolutely was different this time.

[Josh Brown]

I have a sizzling hot take on. On this top we, we've been saying this for so long that you're acting like these are companies in this monoline business, like they sell oil or they, or they make light bulbs. To try to compare these companies to companies in the past.

[Michael Batnik]

Come on.

[Josh Brown]

They don't respect horizontal boundaries. Forget about the fact they've built these vertical monopolies in many cases. Like they, they also don't respect the borders from one industry to another. Amazon wants to get into prescription drugs. What the are you going to do about it? You can sue them, you can lobby against them, but in the end they're going to get there.

[Michael Batnik]

How about telling somebody 10 years ago that Amazon was going to show the Christmas NFL game? It would be like, wait, on what? How.

[Josh Brown]

Yeah, yeah, right. On a fire phone. They would have left. Right? So these companies don't respect boundaries. They really don't care. They go wherever they want to go, wherever they think the consumer wants them to be. They'll make an acquisition or they'll build. They'll build from scratch. They have the cash flow to enable a lot of experimentation and it doesn't always work. But when it does, your whole valuation model, throw it in the garbage. Because you're missing the fact that they're eating into another multi trillion dollar tam and, and taking no prisoners as they do it. And we, we have been saying this, you and I for a forever time about why it is different and for the people that, nope, it's not different this. But my sizzling hot take is that one of the people that have missed out over the last 15 years or we're pounding the table underweight or US stocks will have low returns. What do they all have in common? They're all from fixed income. They don't know shit. Not one of them listens to conference calls with Jeff Bezos or Sundar Pichai or they're not stock guys. They're all bond guys talking global macro, doing global macro slides or value investors.

[Michael Batnik]

All value their value.

[Josh Brown]

Value. But from the people that I'm the people and I'm subtweeting right now and thinking of specifically. They're fixed income guys. They don't know what these companies do. I'm sure they know the rating on their paper. But like, they're not like thinking about the way, the way that they were shifting into the cloud and now the way that they're building an AI. They don't care about that. They're bond people whose job it is to argue against stock allocations so that they can get more into fixed income and for me, those are the people that have missed the moment. When I say moment, I think what's going back to like 2010 or 2011 at this point. But they're fixed income guys. It's really that simple if you ask me.

[Michael Batnik]

All right, so let's move on to the next topic, which ironically is things that people say in a bull market close to the top. So why don't you please continue the thread, Josh.

[Josh Brown]

Wait, what do you mean things that people say?

[Michael Batnik]

Like you're about to, you're about to say like small caps don't matter ever, they're dead forever?

[Josh Brown]

Well, yeah, they are dead forever.

[Michael Batnik]

Yeah, exactly. Yeah.

[Josh Brown]

Well, I understand that they can rally, but like, do you think there's going to be a 10 year period where small caps outperform large caps?

[Michael Batnik]

Yes.

[Josh Brown]

Then you have to be valid. Then you have to think that it's because of the value effect and you have to think we're going to have a lost decade. There's no other possible way that that could take place.

[Michael Batnik]

Well, that's not true because, well, anything.

[Josh Brown]

It is true.

[Michael Batnik]

No, no, no. That is the only explanation.

[Josh Brown]

Show me, show me a 10 year period of small cap outperformance that didn't include a lost decade for large caps. It only ever happens coming out of a massive stock market bubble where the large caps are just destroyed for two or three years and small cap value catches a bid. But like, think about it. I'm Talking about a 10 year period of outperformance. You're telling me a collection of small cap companies over 10 years is going to outperform like cloud computing mega caps? Maybe, but only if it's a lost decade.

[Michael Batnik]

Well, I didn't say that they're going to. I said they can. And I think that at some point they probably will.

[Josh Brown]

I think you get like six to eight week rallies for small caps relative to large caps and then it reverses.

[Michael Batnik]

Okay, so go ahead.

[Josh Brown]

I mean, this is, look, is my recency bias talking, but I'm just telling you, over the last 25 years the only example of a sustained period of small cap outperformance coincided with the bursting of the dot com bubble combined with the financial crisis. So really unique. We should not study the decade 2000 to 2009 like it contains any kind of information for us about small cap outperformance.

[Michael Batnik]

Yeah, I agree with that.

[Josh Brown]

All right, I. Look, I think, I think today was a great day for people that have this kind of small cap, overweight or lean in their portfolios and I'm look, I'm looking at you dimensional fund people. I think it's great. I think it's healthy. We want to see these stocks rally. Garrett Baldwin wrote about this over the weekend. I don't think he was not saying the Russell couldn't have a big day rallying, but I just thought it was interesting. Up until today, we don't know what the flows will be this year. Garrett says turn your attention to where the money isn't crowding. It is not flowing to the Russell. 2000 small caps have seen an $80 billion exodus this year. That's the biggest exit of all time. I didn't know that. The Russell's momentum has turned negative and is signaling further pressure on the horizon. Well, not today, but okay, we get it. Look at this chart. This could be the greatest contrarian signal ever to, to get overweight. Small caps. What do you think?

[Michael Batnik]

So I, I was that a small cap would be my make the case today. And then I saw this topic and I saw the rally today. I thought that was too cute. I. But I'm still gonna make the case. It's not going to be the case. I think that they are a screaming buy if we are going to get rate cuts, which is what the market is pricing in. Which is why I think you're seeing the move that you're seeing today.

[Josh Brown]

So why have they lost $80 billion in in fund flows this year? Negative 80 billion. So Garrett's answer is, in a world of infinite money printing and mega cap dominance, who needs small companies? You could buy Nvidia or Microwave. Microwave Microsoft and ride the AI wave. Why mess around with a regional bank in Ohio? So I do think that's the mentality out there.

[Michael Batnik]

Things people say at the top or in the bull market.

[Josh Brown]

Yeah. Why buy any of the 30 plus energy producers on the Russell trading for less than their book value? The money is flowing where the Federal Reserve liquidity goes. Big tech, big pharma, big everything. Small caps represent the real economy. But in our financialized casino, the real economy is so 2019. So he's making the case for why, you know, small caps, if you're a serious investor would be bought here. It sounds like that's the case that he's making and.

[Michael Batnik]

Well, wait, maybe, maybe inadvertently or is he being sarcastic? I can't tell. What do you mean?

[Josh Brown]

He's like, I think he's like sarcastically talking about the people who pulled out $80 billion from small caps.

[Michael Batnik]

Oh, so. Oh, so he's saying this ironically.

[Josh Brown]

Yeah, he's with you. He's on your side of this.

[Michael Batnik]

Oh, okay, okay, okay. I couldn't if he was earnest or not.

[Josh Brown]

Now he's also pointing out insider buying is drying up. And I thought this one was interesting too.

[Michael Batnik]

We did this last week.

[Josh Brown]

Yeah, so? So Garrett pays close attention to this stuff. Put this chart up. It's. I think it's a Bloomberg chart. Only 151s and P500 companies had insider buying last month. That is the lowest rate since 2018. The insiders know these markets are costly. Corporate executives are dumping stock like it's radioactive waste when insiders won't even touch their stocks at current prices. That's your canary in the coal mine. All right, so I have a little bit of a different take from Garrett on this. I wonder if you agree with me or with him. I don't think that they think their shares are waste. What I actually think is like this is endemic to any like prolonged bull market. People have massive, massive gains in their corporate stock. You know, stock based compensation.

[Michael Batnik]

Yeah. No, this chart tells you nothing. Selling stocks are up 30% in 10 weeks. Why would they be buying here? What?

[Josh Brown]

It'd be pretty stupid for them to be buying.

[Michael Batnik]

Make no sense.

[Josh Brown]

Right? And they were getting issued stock every year.

[Michael Batnik]

Yeah. So that chart is not a house. That. That chart is exactly what you would think.

[Josh Brown]

So I would write. I would not expect to see a huge wave of insider buying after a three year almost straight up bull market.

[Michael Batnik]

You saw the. The CEO of him. The CEO of hims just dumped the largest position of his personal portfolio in the history of that company.

[Josh Brown]

That's still a meme stock. Is that still doing its weird shit? I don't have it on my screen.

[Michael Batnik]

Yeah, stocks have gone straight up since April.

[Josh Brown]

They should. Yeah, they should be selling. All right, let's look at this. Large cap versus small cap. What. What's going on here? It's a time shift.

[Michael Batnik]

The. So on the left is a long term view and the right is zoomed in.

[Josh Brown]

Okay, so on the left. So on the left you can see this. Really? I. I guess it's. It's so it's relative. All right, so the trick is we're using the small cap 600, you hear? Not the Russell 2000.

[Michael Batnik]

So dude, the small cap 600 outperformed from.06 all the way to 2019.

[Josh Brown]

Right. So the reason why I sort of call bullshit. I think you have to use the Russell. The small cap 600 gets rid of all the unprofitable companies. But that's the Nature of small caps. Some of them are profitable for three years, unprofitable for two, then profitable again. I think it's like a little bit bullshitty to. To only use the small cap 600. And they do diverge. They are not the same trade. There's a lot of overlap. But the Russell 2000 to me is the true approximation of what small cap America looks like. And I do not think that it looks as good as small cap 600.

[Michael Batnik]

Yeah, yeah, I agree. I agree.

[Josh Brown]

Yeah. I don't. I don't. I don't like that. I don't blame anybody for doing it. I understand it. I just. I'm. I'm a purist in that way. Let's look at the sector exposure breakdown. What jumps out to you here? So we're looking at the percentage of market cap by sector, comparing large cap, mid cap, small cap.

[Michael Batnik]

Well, I mean, the obvious One is technology stocks. 33% for large cap, 15% for small cap. And this is a. It is a value growth story because.

[Josh Brown]

That'S all it is. Yeah, that. So that's what jumped out to me. Both the mid cap and the small cap are 73% value stocks. The large cap universe is 50. 50. That's. That's one of the only things you have to know.

[Michael Batnik]

That's it. That's it. That's it.

[Josh Brown]

If you can't memorize the sector breakdown, that's okay. You don't have to. If you just need to know one big thing. And this could change over time, of course. But the one big thing you have to know is that small and mid is a de facto bet on, unless you're active stock picking. If you're just allocating on a size basis, you're making a value versus growth bet, period.

[Michael Batnik]

Hold on. I have to do some hedging trades.

[Josh Brown]

What do you. What are you hedging?

[Michael Batnik]

No, I'm kidding. But I literally am selling some stuff. It's too much already.

[Josh Brown]

All right, we could skip the next. Let's go to efficiencies.

[Michael Batnik]

I missed. I missed one thing. I missed one thing. So I mentioned earlier, listen, it's a weird market. It really is. So I mentioned this on the show a couple of weeks ago that over at Schwab, investors were dumping Nvidia like there's no tomorrow. So every month they release their report on what their investors are doing. And they said Nvidia set new highs in July. And this time, Schwab clients heavily bought shares of the AI giant after issuing it in May and June. So in May and June it was the biggest net seller. And in July they finally bought it. But even this. But even higher. But even despite flocking into Nvidia, Schwab clients made infotech the biggest net sell sector on a dollar basis. For Josh. The sixth month in a row. The sixth month in a row. So they said the heaviest net buying. That doesn't matter. With Nvidia exiting the net cell leadership in July, another mega cap took its place and was by far the stock's most heavily net sold by Schwab clients. Which stock do you think that is?

[Josh Brown]

Apple.

[Michael Batnik]

Bingo.

[Josh Brown]

Good. So yeah, I, I mean these are. Because I don't. Because I don't think individual investors have strong opinions on the others.

[Michael Batnik]

That's it. You're right.

[Josh Brown]

You ever meet an individual investor who like has a strong opinion on Microsoft?

[Michael Batnik]

No.

[Josh Brown]

They just own it.

[Michael Batnik]

No. No. So. So even though there was a lot of craziness with crypto and the treasury companies and, and the meme stocks and the all time highs and this and then that, there's still a wall of worry in that Schwab clients, which, let's be honest, a lot of people are really not buying it.

[Josh Brown]

Yeah, I.

[Michael Batnik]

It's very bizarre.

[Josh Brown]

What could account for that?

[Michael Batnik]

So when you say like everyone's. Do every. Everyone is this. No, they're really not. No, they're really not. Robinhood investors are very different than Schwab investors. There's a lot of people out there.

[Josh Brown]

It's, it's, it's interesting. All right, go to.

[Michael Batnik]

Let's do this.

[Josh Brown]

Efficiency.

[Michael Batnik]

So Chart Kid Matt has, has a blog and it's called Chart Kid matt.com. there you go. And he threw up some charts this week that I think are.

[Josh Brown]

I love how you named him. And he loves it. And it's like his whole Persona. It's amazing.

[Michael Batnik]

It's very cute.

[Josh Brown]

This kid is the best.

[Michael Batnik]

So I want to talk about some efficiencies that he highlighted. So $642,000. That's the average revenue generated per employee in the s&p. 500.

[Josh Brown]

642,600.

[Michael Batnik]

$642,000 per employee. So takes 1.55 employees for S&P 500 companies to generate a million dollars in revenue today. 1.55 employees in 1991. So for adjusted for inflation, in 1991 it took 2.46 employees to make a million dollars. So they're making a million dollars again. Real less people than ever with almost one full less employee than they were. How many years ago is That a lot? Yeah, 30.

[Josh Brown]

So it is different this time. It turns out it is.

[Michael Batnik]

All right, so trot on. So Matt's got revenue per employee for different sectors in 1991 versus today. And I mean, look at communication, look at healthcare. This is some wild.

[Josh Brown]

Look at real estate. Oh my God.

[Michael Batnik]

Yeah.

[Josh Brown]

I mean that's the biggest to me that just at a glance, utilities and real estate and healthcare. Oh my God, healthcare.

[Michael Batnik]

So the next one plots, it plots the difference. And Josh, you're right, it's healthcare. I mean, unbelievable.

[Josh Brown]

So. So healthcare has the most growth in revenue per employee since 1991.

[Michael Batnik]

Not, I guess, not surprising. Although maybe I would have picked tech. But health care, I guess makes sense too.

[Josh Brown]

No, tech is the sector that's enabling all of this. But ironically they are in the back of the pack and the reason why is their employees cost so much money. Right. Wouldn't that. Isn't that. Or I guess we're just talking about bodies. I don't know. And then there's weird stuff like Amazon has a million factory workers, not quite tech workers. And that's a discretionary name anyway. It's not even in tech. So I wouldn't even focus on the, on the middle of the distribution on the left. That's amazing. I think part of this is just the story of how much bigger health care has become as an industry and how much money we spend on health care. We like the whole world, it's just skyrocketed. So I think that's part of it. It's not just efficiency. It's like certain sectors have just grown so large in terms of what they cost, what the products and services cost. Healthcare is, Healthcare is like just enormous for the government, for, for individual people. Just an amount of spending probably explains most of that growth.

[Michael Batnik]

It does. And then lastly, employee growth in the s and P500. So it was 16.6 million in 1991, we're at 20 and a half million today. And this doesn't look great, I gotta be honest.

[Josh Brown]

All you. Is that all us or is it global employees?

[Michael Batnik]

No, but, but, but look like, I don't think this gets to 30 million that quickly.

[Josh Brown]

Why not? Where else go work. Don't you want to work for ups?

[Michael Batnik]

Yeah. No, dude, it's. Look, it's got. It's gone sideways for two, three years.

[Josh Brown]

Yeah, but you know what, dude, there's a few exceptions where there were massive corporate layoffs. Like look at 2006, 2007. But this, this chart is only going in one direction. This is the Rich get richer. This is the law of large numbers. This is the relative. You talk about these mega cap companies taking over all these industries. How do you think they're doing that? More people, they're putting other companies out of their way and people that work in that industry go work for them where they're acquiring.

[Michael Batnik]

Yeah, they're just, they're doing more with, with the same.

[Josh Brown]

Yeah, but this, but this is a. Yeah, I get, I, I don't know, I think it, I think it's destined for 30 and higher. I mean.

[Michael Batnik]

Yeah, at some point.

[Josh Brown]

At some point. All right. I, I thought this Wall Street Journal piece about all the guys launching these AI hedge funds, this is bubbly to me. Not like, oh no, it's gonna, it's gonna be this crash. But like this is what happens. So now you have this like new category of peop of person that, that has really successfully been picking stocks in this AI Capex build out, which, let's be honest, hasn't been that hard to do. But fine. They did it like right. So did a lot of other people. But now it's like, yeah, and also I have a fund and look at my year to date performance in like arguably one of the craziest tapes ever for AI tech technologies and pay me 2 and 20 and I'm going to keep picking the winners of the AI capex. So I saw so much of this in the dot com era. I saw so much of this during the BRIC emerging market bull market. I saw so much. I've like, I've seen this so many times and I just want to quote a little bit from the piece and no judgment. Here's the subhead. Billions, here's the header.

[Michael Batnik]

Billions.

[Josh Brown]

Billions. Floated new hedge funds focused on AI related bets. A 23 year old former OpenAI researcher quickly amassed more than 1.5 billion for quote, brain trust on AI. So now you have guys that are saying like, well, we're based in San Francisco, so we're at the epicenter of this and we know more than the people in New York. That'll be a popular thing to say. Now you have, now you have people that are like, I worked in AI so I'll be better at spotting the winners than a hedge fund manager in Connecticut. There probably is truth to that. The downside to that though is they're too close. They know way too much about the technology and way too little about like what stocks look like through a full cycle. And they're so bullish on AI that they're launching an AI Strategy. What would, what would it take to get them to come out or to sell or to bet against. In fact, one guy in the article is saying he's betting against companies that are going to be. The hedge is betting against companies that are going to be displaced by AI. So it's not only an all in bet on AI theme, which, I mean, just buy the, buy the semiconductor ETF and call it a day if that's what you want to do. But now it's like, not only are we betting on AI, we're betting on the AI disrupted to the downside. So this is like, I don't know, don't you feel like this is toward the end when this stuff starts to happen?

[Michael Batnik]

I do. I mean, how could you not? I mean, listen, this is a cop out. This is really hard to predict. Right? At the one hand, on the one hand, we are at the vanguard of a truly, truly technological revolution. And these.

[Josh Brown]

Yeah, with, with $300 billion startups.

[Michael Batnik]

Yeah. Well, there's. And that's the other.

[Josh Brown]

How much do we think is left?

[Michael Batnik]

Right. No, dude, preach. I mean, yes.

[Josh Brown]

Can I just read this quote? So one of the guys started a fund called Situational Awareness. Great name. Here's a quote. Quote. We're going to have way more situational awareness, get it? Than any of the people who manage money in New York.

[Michael Batnik]

True.

[Josh Brown]

Ashton Brenner told the podcaster last year, quote, we're definitely going to do great on investing. Can you even say that?

[Michael Batnik]

No. I mean, come on.

[Josh Brown]

We're definitely going to do great on investing. Put that on the COVID of the, of the, of the offering memorandum. That's crazy. This kid, though, is up 47% after fees in the first half of the year. So it's not going to look like that when the NASDAQ has a correction. I think, like, I think we all agree, I'm sure he would agree with. So this is just like, all right, what's the biggest bull market in the world? Awesome. I'm going all in on that. I hope it, I hope it runs 10 years. I really, I really do. I, I don't think it will, but I hope it does. And then they talk about some of the. This. All right, last thing. Then they talk about some of the established hedge fund guys, like Steve Cohen, who just tasked one of his portfolio managers to start an AI focused hedge fund. So the fund is called Turian, after AI theorist Alan Turing, as in the Turing Test. They raised like $2 billion for this. So he took one of his PMs and set him aside to start a new AI focused fund. Here's the thing guys. After like a three month bear market, Cohen will be completely out of these stocks. He's not sitting through an a negative 40 drawdown in AI related stocks if and when it happens. So it's easy to get in, not as, not as easy to get out. I don't know, I, I think this is like seventh or eighth inning stuff.

[Michael Batnik]

Really?

[Josh Brown]

Yeah.

[Michael Batnik]

So I think that not before I'll.

[Josh Brown]

Crash, but before a huge correction.

[Michael Batnik]

Okay. It certainly feels like a top should be coming pretty soon. Whether it's the top, I mean obviously impossible to say. I would not speculate like that because who the knows. But let's do this. N sentiment trader the NASDAQ 100 just did something it's never done before, not in a good way. For the first time since inception, the index closed at a record high with less than 48% of its members trading above their 50 day moving average. Over the past 40 years, an average of 76% were above their 50 day when the index reached a high. So this is telling us what we very much already know, that the leadership is narrowing. But as we've said throughout the years. Chart off please. Every time there's been a divergence like this, you've seen the equal weight catch up and hopefully the. This time is no different. But I think we need a slap on the wrist. People are, people are feeling themselves. The Vix is below 14. There is definitely a little bit of throw risk to the wayside. We, we could use slap on the wrist.

[Josh Brown]

I look seasonally, we're getting into September, October, like if there's going to be a catch down correction in tech because like you look at the healthc care sector like if the rest of the market looked like that. Yeah, like so, so all of a sudden do the, do the hundred names in the health care sector of the Russell 1000 catch up to AI stock.

[Michael Batnik]

And not catch up to. But Josh, do you also know that the longer this goes into the calendar year, the more people are like, all right, I guess I got a chase.

[Josh Brown]

Yeah, I think we, I think we saw it. You know how everything happens faster. I think that's what happened this summer.

[Michael Batnik]

I hope we got a pullback. People need to sober up.

[Josh Brown]

All right, you're up last.

[Michael Batnik]

All right. This is a company in a stock that I don't know if this is the thing I've been most wrong on because there's a long list to choose from, but certainly this surprised the dickens out of me too.

[Josh Brown]

I was never bullish on this.

[Michael Batnik]

Okay, DoorDash is a hundred billion dollar stock. Trot on, please.

[Josh Brown]

My God.

[Michael Batnik]

So it like it 5x since 2023. And not because of, not because of any other reason than they're delivering. They just reported a record quarter. 25% growth, orders, spending, like everything's working. Chart. Next chart please. You got the revenue, I mean, just demolishing free cash flow credit to them. I, I just, I just figured that every time. Trot off, please. Every time I use DoorDash I want to punch myself in the dick. I'm just like, this is, it's so expensive.

[Josh Brown]

How are. But you are so lazy and you're paying it. And that's why that chart looks like what it looks like.

[Michael Batnik]

So can you. Can, can things be bad when DoorDash's chart is doing that?

[Josh Brown]

No. And actually there's a counter cyclicality to the doordashes and, and the ubereats of the world, which is that if, if and when the economy finds itself on tough footing, more people need to drive for them. So in an autonomous era, maybe I would point out uber started in 2008. It was like perfect timing. You had millions of people that needed work part time work, whatever. So like it remains to be seen, the last quarter they reported. Oh, you have one more.

[Michael Batnik]

So I just, I just wanted to sneak this in here. This is really apropos of nothing other than we spoke with a couple of weeks ago. Oh, Adam Parker. He told us he was at an institutional investor conference. And I think it was somebody from Run Mac who was on stage and, or maybe at a dinner or whatever the case may be. And they said like, give us one thing like what's like the indicator of indicators. And the guy said a low price per share. Yeah, like lol. And it was like, no, no, actually low price per share. So I saw this tweeted the other day by Julian Klimoszko and the Wall Street Journal reported that the 10th of the market with the lowest share price at the start of July. Now this is a short term thing, but still, it's just kind of funny. Had a median gain of 16% by July 23 when the new meme stocks peaked, while the 10th with the highest price was only 1.4%. The starting share price was by far the best predictor of performance. And obviously chart off. Obviously this works when it works and it doesn't work all the time. But this will have, this will continue to have moments for the rest of our careers just based on the way that retail trades like this will have fits and starts. Yeah, it will.

[Josh Brown]

Loves. Dude, I, I pitched, I pitched stock to retail investors for 11 years. I prom. I promise you there's nothing they like more than a seven dollar stock or.

[Michael Batnik]

A dollar stock and go to three.

[Josh Brown]

You tell them it could go to 25.

[Michael Batnik]

Yeah, yeah.

[Josh Brown]

There's nothing, there's nothing on earth that Pete, you, you will get if you start conversation. Hi Michael, it's Josh Brown. I have a stock at 7 that I think is worth 25 minimum over the next six months. Do me a favor, grab a pen, grab a piece of paper. I want to tell you a little bit about it and then I'll talk to you about how we're going to make some money. If you do that. If you get 100 people on the phone and do that, 80 people will listen to you. Yeah, and I, and I know because.

[Michael Batnik]

Now how about 100,000 people on the Internet all at once? Well, right thing.

[Josh Brown]

You do that shit on Twitter.

[Michael Batnik]

Yeah.

[Josh Brown]

You do that on Reddit. Same, same thing. But now scaled global boiler room.

[Michael Batnik]

Yeah.

[Josh Brown]

Which is, which is my next endeavor. All right, why don't we jump to make the case and then we'll do the mystery chart and we'll get out of here because it's already. We're time.

[Michael Batnik]

So really and truly, I swear I was going to just straight up do IWM because they're hated. They've gotten nowhere for years and years and years and years. And we all know rate cuts are coming. Like we all know it. So piling, piling people rate into rate sensitive stocks. So I'm talking small caps, I'm talking home builders, you and their services.

[Josh Brown]

Rocket, what are my rates and what did my rate sensitive bet do today? What did Rocket do? Surprise, surprise of 7%.

[Michael Batnik]

So rocket is a stock that both you and I own.

[Josh Brown]

I would, I wouldn't sell that. I wouldn't sell that for anything right now.

[Michael Batnik]

Well, I would, I'd sell it for 30.

[Josh Brown]

Yeah, no, I guess I would sell it for 30, but I would. You couldn't talk me into selling it right now at 18.

[Michael Batnik]

How about this?

[Josh Brown]

Not gonna do it.

[Michael Batnik]

So as my handle says, I'm not talking about your 401k because for me, I don't care where the stock market goes. I don't care how high it trades. That is buy every two weeks forever and ever and ever and ever and ever and ever and ever. Okay.

[Josh Brown]

Yeah.

[Michael Batnik]

And. And if stocks fall 50, good, I'll buy more. I mean, I Don't really mean that. But you know what I mean. On the good part, I will buy more. But if you are. If you're in a brokerage account and you were fortunate enough to pick up some stocks in April and May, and you're like, you're really feeling yourself right now, like, oh, my God, just like, sell.

[Josh Brown]

What's the next. Well, yeah, what's the next stock? You don't need the next stock.

[Michael Batnik]

You don't need a next stock. And in fact, you might need some less. So just sell a little bit of something. Anything. Tomorrow, just sell a little bit of something. Light enough.

[Josh Brown]

All right. All right. But you're making the case for rate sensitive stocks simultaneously.

[Michael Batnik]

Yeah, I don't.

[Josh Brown]

Yeah, buy and sell, Mr. Mystery Chart.

[Michael Batnik]

All right.

[Josh Brown]

This is a media company. It's one of the worst stocks in the market. The opposite of what I tend to talk about. I'm getting interested in it, though, as a falling knife. Okay, I'm showing you here. This is 40 years of garbage. One other clue. It's a family run media company, which is possibly the worst kind.

[Michael Batnik]

Yeah.

[Josh Brown]

What is it?

[Michael Batnik]

But it's Paramount.

[Josh Brown]

Look at you. So you're so good at this, dude.

[Michael Batnik]

Well, yeah.

[Josh Brown]

Now call. So this used to be Viacom. It's now called Paramount. Skydance. The merger. Larry Ellison's kid bought it and put this whole new board in charge of it. They kicked out all these losers from cbs and, and they. They paid a bribe to the Trump administration to get it to close. They gave him a check for $16 million for interviewing Kamala Harris and editing the clips or whatever. But that's all in the past now. So, like, Barron's has a piece about, like, it's a clean slate. Like, don't worry about where the stock came from. Now you have all these hitters involved. Ellison's got literally limited. They're unlimited dollars. They're worth hundreds of billions of dollars. The father and son. Why not. Why not Paramount?

[Michael Batnik]

I looked at this stock a couple of weeks ago as a potential buy.

[Josh Brown]

They just paid $7 billion for the rights to all of UFC. UFC will not be broken up amongst five different networks, like the NFL. All of it. All of it on Paramount. No, no pay per view.

[Michael Batnik]

It's a big deal if you're.

[Josh Brown]

If so now, if you're a young man in this country, right, you're between the ages of 16 and, and 35. What are the things you. You like on TV? You probably like these Taylor Sheridan shows with the cowboys and the hot girls.

[Michael Batnik]

Love them.

[Josh Brown]

And you love ufc. This is Netflix for young men. I think they nailed it. They're getting this cultural shift, right? Like in the culture where like it's, it's okay to be like a young, a young male who likes to punch people and, and appreciates good looking girls. Like, that's like the whole culture shift now they're investing directly into that. Ellison's Friends with Trump. Like, I just, that CBS stuff that they were doing with like the constant investigation, like they're going to stop that. I don't think that's helping them at all revenue wise. And they're going to double down on things like ufc.

[Michael Batnik]

I like it. I like it.

[Josh Brown]

So I'm, I'm taking a look. It's not my type of thing, but anyway, good, good job on the, on the gas. All right, guys, I want to close the show by saying thank you to everyone who joined us for the live. We appreciate it. Tomorrow's Wednesday all new edition of Animal Spirits. We'll do Ask the Compound and we'll do an all new edition later this week of the Compound and Friends. And that'll be a surprise episode for some of you guys. I'm looking forward to it. All right, that's it from us. Thanks for watching like and subscribe. Talk to you soon.