Podcast Summary: The Compound and Friends

Episode: "This Is Your Last Chance to Get Rich, Mag 7 Earnings Week"
Date: January 28, 2026
Hosts: Josh Brown & Michael Batnick

Overview

This episode dives deep into the most anticipated week of Q1 2026 earnings season—the “Mag 7” technology titans (Apple, Microsoft, Meta, Tesla) and their outsized impact on markets. The hosts mix timely analysis with humor and honest market skepticism, taking listeners through sector performance, AI-induced labor fears, “Mag 7” stock malaise, shifting investor behavior, and the global equities resurgence.

Key Discussion Points & Insights

1. Earnings Week Setup: The “Mag 7” in Focus

• Scope: 32.9% of S&P 500 market cap reports this week (102 companies).
• The four “Mag 7” reporting: Apple, Microsoft, Meta, and Tesla.
• Earnings Contribution: S&P companies expected +8.6% yoy growth, with a disproportionate amount from tech. Ex-tech, S&P growth is only +2.9%.
  • Quote: "For the people that are like, why is the financial media so focused on Mag7 on tech? Well, this is why." —Josh Brown [05:17]
• Beat Rate: 78.1% of reporting S&P companies have beaten expectations, about average.
• Actual reported tech earnings growth: +24.7% (significantly outpacing estimates).

2. Mag 7 Deep Dive: Expectations, Pressure, and Investor Sentiment

• Sentiment: "The Mag 7 is not cool right now...the bar is low for the first time in a while." —Michael Batnick [05:21]
• Meta:
  • Uncertainty persists about monetizing AI investment:
    "The number one thing you’re missing [as a bull] is just clarity about the strategy...it’s not the LLM...It's not getting anyone excited at this point." —Josh Brown [12:15]
  • Last earnings report focused on Reels/algorithm; Capex and AI business strategy are the new focal points.
• Tesla:
  • "It's not a car company anymore...literally not, not a single investor cares about the cars. So it's gonna be all about Optimus or whatever." —Michael Batnick [13:46]
  • Elon Musk’s promises (robo-taxis, humanoid robots) drive stock, not delivery numbers.
  • Guidance and narrative more important than fundamentals.
  • Quote: "If he comes out and says by 2030 half of all American households will have a robot. ...this stock is going to go up 20%. It doesn't even matter." —Josh Brown [14:49]
• Microsoft:
  • Most pivotal for the market: “For the stock market that is the most important call that we’re going to hear this week.” —Michael Batnick [16:24]
  • "The next six weeks, I think the AI trade is going to be queued off Microsoft’s reaction, not necessarily what they say." —Michael [15:29]
• Apple:
  • Bar set low after eight weeks down in a row; potential for "sideways to lower" is built in.
  • Watch for consumer strength and AI developments, especially in partnerships (Google, Siri).

3. Market Breadth, Sector Rotation, and The Great “Broadening”

• The rest of the market is finally participating:
  • "The best thing that could have happened to the rest of the stock market is that those [Mag 7] names do nothing...The money is finding other places to go." —Josh Brown [20:39]
• Retail Flows: Money is rotating out of US large-cap growth (Mag 7) into international equities, industrials, and utilities.
  • "Retail cumulative purchases of the Mag 7 and Palantir…really the only game in town was Nvidia. And then a massive gap—and then Tesla." —Michael Batnick [31:43]
  • Retail’s new love affair: materials, gold, utilities.
  • "The Mag 7 are just not as sexy as they used to be...they're just different stocks than they used to be." —Josh Brown [33:10]

4. "Chasing Winners” vs. “Contrarian Value"—Updated Investor Mindset

• Modern retail and “trader” behavior: sell what’s not working, jump on what is.
  • "The way that you make money by trading is by buying stocks that you think are going to go up. And the stocks that are going to go up are the stocks that are already going up...I reject that [this is just chasing]." —Michael Batnick [34:08]
• Adam Parker’s research: cheap stocks that keep getting cheaper usually underperform; it’s the expensive stocks with expanding multiples that deliver upward earnings surprises.
  • "Companies that are cheap are much less likely to beat earnings estimates..." —Josh Brown [58:47]

5. AI Disruption, Labor, and Existential Dread

• Lively debate on AI’s impact, referencing Silicon Valley’s growing paranoia around unemployment, UBI, and “money becoming worthless.”
  • Quote: "Humanity is about to be handed almost unimaginable power. And it is deeply unclear whether our social, political and technological systems possess the maturity to wield it." —Josh Brown (quoting Dario Amadei, Anthropic CEO) [37:45]
  • Hosts are worried but not apocalyptic, split between pragmatic optimism and concern for youth, open jobs, and how quickly disruption accelerates.
  • "If you just say, okay, AI is going to do everything and then everybody gets a dividend from that, it’s not going to feel good. And I don’t think it actually would be good for people." —Sam Altman, quoted by Josh Brown [41:54]
• Key tension: is this just another wave of creative destruction, or something fundamentally unprecedented?

6. SaaS, AI, and Software Stocks: Defensive Castles or Melting Ice Cubes?

• AI is depicted as an existential threat to horizontal SaaS (e.g., Salesforce, Adobe), especially versus vertical/niche software (e.g., Toast for restaurants).
  • "Things could change really fast...the disruptors are infinitely disruptible too." —Josh Brown [47:25]
• Valuation reality check: median SaaS company now close to breakeven on EBIT—“not good.”
  • "Even though the rule of 40 is intact, if you look at the median SaaS company, the Gap EBIT margin is freaking break even. Like not good." —Michael Batnick [51:17]
• Hedge fund positioning is heavily short software, long semis—trend is extreme and may be due for a reversal, but the hosts are skeptical of “catching falling knives.”

7. The Global Rotation: U.S. vs. International Equities

• The U.S. underperformance vs. global markets is material for the first time since pre-GFC.
  • "It's happening. Global breadth measured by % of ACWI markets within 5% of a one year high hit a new cycle high of 92%...highest since 2007." —Michael Batnick [65:43]
• India and EM equities: strong flows, positive technicals, and favorable fundamentals—narrative is back, and "the chase is on."
  • "The fundamentals and the technicals are lining up. The chase is on, and people are under allocated. That is a nice setup." —Michael Batnick [69:02]

8. Hedge Funds: A Resurgence

• After years of lackluster performance and outflows, hedge funds saw strong returns in 2025, substantial inflows, and new media interest.
  • "Hedge funds secured net inflows of $71 billion during the first three quarters...A major reversal after a decade of outflows." —Josh Brown [60:09]
  • "You know why I love it? ...A lot of money in these hedge funds are pension funds and foundations...I want these pools of capital to go up. This is a benefit for society." —Michael Batnick [62:24]

Notable Quotes & Memorable Moments (w/ Timestamps)

• On Earnings Focus:
  "For the people that are like, why is the financial media so focused on Mag7 on tech? Well, this is why. It's, it's basically the most important fulcrum that moves the entire market." —Josh Brown [05:17]

• On the Mood Toward Mag 7:
  "The Mag 7 is not cool right now...the bar is low for the first time in a while." —Michael Batnick [05:21]

• On Tesla’s Narrative:
  “It's not a car company anymore...literally not, not a single investor cares about the cars. So it's going to be all about Optimus or whatever.” —Michael Batnick [13:46]
  “If [Elon Musk] comes out and says by 2030 half of all American households will have a robot...this stock is going to go up 20%. It doesn't even matter.” —Josh Brown [14:49]

• On Market Broadening:
  "The best thing that could have happened to the rest of the stock market is that those names [Mag 7] do nothing...The money is finding other places to go." —Josh Brown [20:39]

• On AI Labor Risk:
  “Humanity is about to be handed almost unimaginable power. And it is deeply unclear whether our social, political and technological systems possess the maturity to wield it.” — Josh Brown, quoting Dario Amadei [37:45]

• On Changing Trader Behavior:
  "I think traders are getting better because ...the way that you make money by trading is by buying stocks that you think are going to go up. And the stocks that are going to go up are the stocks that are already going up." —Michael Batnick [34:08]

• On Cheap Stocks as a Trap:
  "Buying a cheap stock that just got cheaper is a bad idea...companies that are cheap are much less likely to beat earnings estimates..." —Josh Brown (Adam Parker research) [58:47]

• On International Stocks:
  "It's not just a bull market United States, it's a global bull market." —Michael Batnick [66:24]
  "The fundamentals and the technicals are lining up. The chase is on, and people are under allocated. That is a nice setup." —Michael Batnick [69:02]

Timestamps for Key Segments

• [04:26–11:04] Earnings season preview, Mag 7 setup
• [11:04–17:55] Meta, Tesla, Microsoft, Apple—earnings narratives and expectations
• [20:15–21:49] Market broadening, sector flows, and investor rotation
• [34:08–34:41] Chasing winners vs. contrarian trading
• [37:45–43:49] AI: labor risk, UBI, Silicon Valley paranoia
• [44:03–51:17] SaaS performance, software vs. semis, AI risk to software companies
• [60:09–63:10] Hedge Funds’ comeback story
• [63:42–69:02] International and emerging markets equity case

Final Thoughts

The episode captures a complex market moment: Mag 7's dominance is under scrutiny, market breadth and global equities are reviving, AI is both exhilarating and deeply unnerving, and investors are adapting faster than ever—whether in sector rotation or attitude toward value vs. momentum.

Listeners are left with the sense that while some old narratives are waning (“Mag 7 only, US only”), new stories and risks are coming into focus—and adaptability and a wide view remain essential.