Twelve Rules for Riding a Bubble With Jeff deGraaf, Micron and Sandisk (Finally) Pull Back, Housing Stocks Crash

Summary

The Compound and Friends: “Twelve Rules for Riding a Bubble”

Episode Date: May 12, 2026
Hosts: Josh Brown & Michael Batnick
Special Guest: Jeff DeGraaf (Renaissance Macro)

Overview

This episode centers on market bubbles, specifically in the semiconductor and Korean stock markets, the recent wild behavior of memory chip stocks like Micron and Sandisk, and the crash in housing-related equities. Jeff DeGraaf, renowned technical analyst, joins to share rules for identifying and managing exposure to bubbles. The hosts dig into whether the AI-fueled semiconductor rally is justified, dissect current market psychology, and compare capital expenditure bubbles to past eras. They round things out with sobering stats on housing stocks, "value" names being redefined, and a technical read on Goldman Sachs as a market signal.

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Key Discussion Points & Insights

1. Market Bubble Thesis and Rules (Jeff DeGraaf Interview)

• Bubble Definition: If an index or sector DOUBLES in value over two years or less, Jeff considers it in “bubble zone.”
  • Example: The KOSPI Index (heavily weighted toward Samsung & SK Hynix, ~43%) and semiconductor sectors recently hit this threshold.
  • "If you double the value of that index over a two-year period or less, you're usually in a pretty good definition for a bubble." — Jeff DeGraaf (05:42)
• Bubble vs. Rational Uptrend:
  • Not anti-rally but a signal for caution: Position sizes, not immediate shorting ([10:01]/[10:59]).
  • Bubbles often fade with V-shaped “Eiffel Tower” tops, not gradual plateaus.
    • “When you have the bubbles, the risk is that you have a V — you have an Eiffel Tower. You're straight up and you're straight down.” — Jeff DeGraaf (10:59)
  • Bubbles don’t “ring a bell at the top.” It's a yellow flag, not a sell ticket ([13:33]).
  • Asymmetry: On average, selling after a run-up is more profitable than trying to time the top (14:20).
  • "Time is a bear's best friend"—not immediately, but the odds of a drawdown are much higher 6-12 months after the bubble signal (15:38).

Jeff DeGraaf’s “Bubble Rules” ([13:27]-[17:19])

• Don’t short bubbles prematurely—“Shorting a bubble is an expensive mistake.”
• The signal is for “sizing, not shorting.”
• Use volatility-adjusted position sizing; risk increases as volatility surges.
• Terminal wealth is maximized by selling on the way down rather than up.
• Asymmetry is brutal: The drawdown after a bubble is disproportionately painful.
• The win is in the de-risking process, not in nailing the exact top.
• “Ride, de-risk, exit on break; don’t fade early.”

2. Semiconductor & Memory Stock Mania

• Micron, Sandisk, SK hynix: Massive parabolic run-ups, e.g. Micron doubled in one month.
  • “Micron doubled in the last month — not in two years.” — Michael Batnick (19:46)
  • 12-month forward EPS for MSCI Korea quadrupled in a month, matching skyrocketing prices ([20:35]).
• Justified Mania?
  • Demand and fundamental outlook for memory chips (especially for AI applications) have shifted drastically.
  • “It would be weirder if they weren’t parabolic because the earnings outlook just literally went up fourfold.” — Josh Brown (20:51)
  • “This is not a bubble based on nothing—it’s driven by extreme EPS growth.” — Michael Batnick (21:14)
• Caution on Valuations:
  • Low P/E multiples for memory names are misleading—cyclicality means they deserve discounted valuations ([31:36]).
  • “Do not look at the P/E and get it twisted that these stocks are cheap… especially at this size, they deserve a discount.” — Michael Batnick (31:36)
• Shifts in Index Composition:
  • Micron becomes largest stock in the Russell 1000 Value Index ([32:37]), and ranked 10th largest in the S&P 500 after meteoric rise (33:30).

3. Market Reactions and Momentum

• Earnings Season Volatility:
  • Market extremely sensitive: Mild beats = tepid upside, any disappointment = severe punishment.
    • “We love the stocks we love too much and we hate the stocks we hate way too much.” — Jim Cramer via Josh Brown (26:23)
  • S&P 500 Momentum Index: Never seen a six-week performance as large as the current +30.5% ([27:04])
• AI Capex Bubble Debate:
  • Historic data shows more Capex usually leads to worse shareholder returns.
  • Cloud and “AI industrials” are getting heavier on assets; could signal future pain or a permanent shift.
  • Tech’s historical advantage was high margins on low capital expenditure. That’s radically changing.
  • “We have this chart... Nobody would mistake these for asset-light companies anymore. These are AI industrials.” — Josh Brown (34:00)
  • “Nothing controversial in the idea that more spending is worse than less spending because the spending is guaranteed, the returns are not. However… sometimes things change and they change forever.” — Michael Batnick (38:26, 39:50)
  • Profits may accrue to platforms, models, or a to-be-determined layer (software, data, “plumbing”).
• Can We Know Where the Profits Will Go?
  • “All we know is if you don’t go for it right now, you remove yourself from being in the running. And that’s what none of the hyperscalers are willing to do.” — Josh Brown (41:30)
  • Neither confident the heavy Capex spenders will outperform or underperform in the next decade—can’t be sure, just as with telco networks 20 years ago ([41:48]-[45:23]).

4. Housing Stocks Crash

• Housing-Related Equities in Depression: Whirlpool down 81% in 5 yrs, Pool down 55%, Lennar halved, Zillow hammered ([45:40]-[47:11]).
  • “The economy and spending has been what it is despite the fact that one of the actual largest parts of the economy is in a depression… Is remarkable.” — Michael Batnick (45:40)
• No housing price collapse, but turnover/transaction volume is frozen—killing housing supply chain and related stocks ([47:25]).
  • “There is nothing good happening in this group of stocks.” — Josh Brown (47:11)

5. Rise of Mega-Caps & Changing Indexes

• The Hundred-Billion Dollar Club:
  • S&P now has 115 companies over $100B market cap (31 in tech); compared to 20 in 2005.
  • No $100B financials after 2009 GFC—now multiple giants back above that mark ([49:26]).
• Former Value Stocks Redefined: Micron, classic cyclical, is now a top “value” stock by screeners ([32:37]).
• Tech Mega-Caps and Market Structure: 2016 had 6-7 $100B tech stocks; now 25+ more, mostly semis and hardware players ([50:15]).

6. Goldman Sachs as a Market Signal

• Stock treading water near old highs; potential breakout above $1000 seen as a bull market “mood ring” ([53:39]).
  • “If this thing takes out a thousand to the upside, isn't that indicative of the investor crowd saying another six months of bull market?” — Josh Brown (53:39)
• Technicals: up 70% YoY, 23% annualized over 5 years—now outperforming Morgan Stanley and JP Morgan ([55:05]).

7. Fun Segments & Final Notes

• Netflix & Spotify Mystery Chart: Both stocks trading in lockstep; even on bad days, move together ([56:28]-[57:52]).
• Show Wrap: Light banter about Knicks, suits, and upcoming guests ([57:52]-end).

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Notable Quotes

• Jeff DeGraaf ([05:42]):

  “If you double the value of that index over a two-year period or less, you're usually in a pretty good definition for a bubble.”

• Jeff DeGraaf ([10:59]):

  “When you have the bubbles, the risk is that you have a V—you have an Eiffel Tower. You're straight up and you're straight down.”

• Michael Batnick ([19:46]):

  "Micron doubled in the last month — not in two years.”

• Josh Brown ([20:51]):

  "It would be weirder if [Micron] weren’t parabolic because the earnings outlook just literally went up fourfold."

• Michael Batnick ([31:36]):

  “Do not look at the P/E and get it twisted that these stocks are cheap… especially at this size, they deserve a discount.”

• Josh Brown ([34:00]):

  “These are AI industrials would be the way I would phrase it. Now… nobody would mistake these for asset-light companies anymore.”

• Michael Batnick ([38:26]):

  "It is an AI industrial bubble…but it’s that [the fiberoptic buildout] on steroids."

• Josh Brown ([41:30]):

  "All we know is if you don’t go for it right now, you remove yourself from being in the running. And that’s what none of the hyperscalers are willing to do."

• Josh Brown ([47:11]):

  "There is nothing. There is nothing good happening. Nothing good happening in this group of stocks.”

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Timestamps for Major Sections

• Bubble Signal, Market Parabolics, and Rules (with Jeff DeGraaf): [04:02] – [19:27]
• Semiconductor Mania, Rational or Not?: [19:32] – [34:15]
• AI Capex Bubble: Momentum and Capital Spending Analysis: [34:15] – [45:27]
• Housing Stocks Crash: [45:27] – [48:05]
• Rise of $100B+ Mega Caps & Financials: [48:08] – [51:03]
• Goldman Sachs as “Mood Ring” for Markets: [52:22] – [56:15]
• Mystery Chart/Netflix & Spotify: [56:28] – [57:52]

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Tone & Style

Conversational, fast-paced, and occasionally irreverent. Hosts blend deep market insight with humor and accessible analogies, keeping things relatable even when diving into advanced concepts or data.

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Key Takeaways for Listeners

• Parabolic moves in sectors or indices often mark dangerous territory—doubling in under two years sets off “bubble” alarms, but doesn’t demand immediate selling.
• Much of the recent chip stock mania is based on unprecedented shifts in fundamentals (EPS), not mere speculation.
• Beware of low P/E multiples on cyclical companies during boom times; valuation screens misclassify such stocks as “cheap.”
• The current AI buildout mirrors and even dwarfs past bubbles in infrastructure investment—uncertainty about where the profits will finally land is higher than ever.
• Massive underperformance continues in housing-linked equities, yet market and spending remain resilient overall.
• The rapid expansion of $100B+ market caps, especially among semis and tech, shows how much US equity market concentration has changed.
• When watching for signs of bull or bear conditions, keep an eye on bellwethers like Goldman Sachs for technical and sentiment signals.

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For more expert analysis, visit the Compound's YouTube or subscribe for future episodes. Stay tuned for Ben Carlson’s studio appearance next week!

Transcript

[Josh Brown]

I'm telling you right now, there's greatness in the air. This is gonna be one of those shows. How do you feel?

[Michael Batnick]

I smell it reeks.

[Josh Brown]

The Knicks in four. Team is resting up the next round. Whoever we're gonna play. Starting to think maybe Cleveland. What about you?

[Michael Batnick]

Nope. I'm.

[Josh Brown]

I don't think so.

[Michael Batnick]

Nope.

[Josh Brown]

All right, ladies and gentlemen, welcome to an all new edition of what are your thoughts? If it's Tuesday night and it's 5pm in the east, that means it's time to. It's time to crush some tickers. And we, we have a lot to go over tonight. I'm super excited to have the live chat with us here. I want to say a couple of hellos. I see. See Paul Breezy in the chat. What up? Tuesday afternoon, pounders. I like that. Georgie's here. Who else is here? Michael's 2502 taking care of business. Loco is here. We got. I mean all the pounders. I'm just scrolling through everybody's. Everybody's here. Pretty much everybody that we need for the live. Appreciate you guys. Random trends checking in from Portugal. That is flames. I appreciate that. Good to see you, Sam. Smith says Cleveland in six against y'. All. Yeah, I doubt it. I don't think so. All right, the whole gang is here. Guys. Thank you so much for joining us in the live chat. We have a sponsor tonight. We're going to talk about Betterment. Michael, take it away.

[Michael Batnick]

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[Josh Brown]

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[Michael Batnick]

Neil DeGraff.

[Josh Brown]

Oh, my God. Gentlemen, Neil DeGraff. Tyson.

[Michael Batnick]

Neil DeGraff. Dutta. Let's go.

[Josh Brown]

Ladies and gentlemen, the legendary, legendary technician Jeff DeGraaff of Renaissance Macro, aka Renmac in the house. I'm just watching the reaction in the live chat. Jeff. People are going wild for this. People are very excited.

[Jeff DeGraaf]

Had I not known better, I thought that was an introduction to Mr. Rogers. That sounded exactly like what I would expect, like Mr. McFarlane at the door or whatever his name was.

[Josh Brown]

Anyway, if you want to laugh, we tested Duncan and I probably 10 different doorbells before we settled on that one.

[Jeff DeGraaf]

It's classic. It's a classic for sure.

[Josh Brown]

It's like a 1970s, almost like a. Like a sitcom doorbell. Anyway, thanks for stopping by. It's so funny that you stopped by because we were about to discuss your incredible call that you made over the weekend and do a couple of your charts. It's just. It's just this amazing coincidental thing. I can't leave you here. Yeah.

[Michael Batnick]

But I love it.

[Josh Brown]

But I love it. All right. I thought what you said over the weekend was the right reminder for active traders, for investors just to kind of set the table for what typically happens after these types of parabolic spikes, like what we're seeing with Korean stocks, US Semiconductors, specifically memory stocks. And I want to pop up your chart, have you explain it because you say the KOSPI has entered bubble zone. And of course this is going up due to the insatiable demand for memory. And memory chip makers are a really big part of the Korean stock market.

[Jeff DeGraaf]

Yeah, I mean, they're between Samsung and SK Hynix, it's 43%, right? So if you compare that to where it was, say in 20, you know, it was closer to 18 or 20%. So about actually less than half of where it is today. We've got a very simple rule, Josh, and it's one that we developed. And I will just say, you know, for your listeners and, you know, for you guys too. You know, I've been in this business for 36 years. I've stolen math from, you know, communication science, I've stolen it from, you know, astrophysicists and escape velocity. There's a lot of different formulas that we've tried to use to measure when something is up so much that it's actually not good and you want to be a seller and it's incredibly hard to find. Usually up is good and you just kind of have to grin and bear it until it tells you differently. The one thing that we did find though, particularly when it comes to indices, so something that's diversified, it doesn't apply to a single stock, but something that's diversified is if you, you double the value of that index over a two year period or less, you're usually in a pretty good definition for a bubble. Now let's be very careful on what that means. It doesn't mean that we identify a bubble today and it's down tomorrow, but it just tells you that you're in an environment that generally produces these V tops and something that we call kind of the hypoxia of the market. So if you recall, hypoxia is when you get into certain altitudes and you don't have enough oxygen to kind of function properly. And I think that's kind of what we're getting.

[Josh Brown]

That's great. I've never heard that term before, but I love it.

[Jeff DeGraaf]

So there's actually four. There's four physiological distinctions of hypoxia. The first one's indifference, and that doesn't really make any difference. That's between about zero mean sea level and 10,000ft. Between 10 and 15,000ft, it's called compensatory.

[Josh Brown]

Compensatory.

[Jeff DeGraaf]

Compensatory. Thank you. You start to get fatigue, a little bit of impaired judgment. And then from 15,000 to 20,000ft, it's called disturbance. That's where you get dizzy and you actually get this euphoria. And you've probably heard it from, you know, people that climb Mount Everest, right? They kind of get into this euphoric state. And I think that's like the Mile High Club also, I think that's a little different.

[Michael Batnick]

But Jeff, are you, are you a fellow climber?

[Jeff DeGraaf]

I am not a climber, but I am a pilot. So I do understand the, you know, the, the impact. I'm presuming the climber is in reference to you, not Josh, but we're not,

[Michael Batnick]

we're not, we're definitely not climbers. But with, with the climbing, with the index doubling, like you mentioned earlier that SK and Samsung are approaching half the index, doesn't that. I'm not trying to defend the price action because it's, it is what it is. But does that change at all? Have, has there ever been an index this concentrated that's done what this has done?

[Jeff DeGraaf]

Well, that's a good question. I don't know if that's the case. But we also do it for sectors, so we'll use it for, like the Sox and the Sox got to that level about two weeks ago now. So the Sox doubled within a two year period of time. And I'll tell you what, when we look at that, that's happened five times in basically the Sox's history and you basically don't want to be there 612 months out. It's something that you're going to have a drawdown that's pretty painful. And, and you know, let me be very clear. When you look at the, when you look at the news flow and you look at the headlines, nothing is screaming at the top that you want to be a seller. In fact, it's just the opposite, right? That's kind of why you get that, that vacuum that just sucks people in. So I think you're getting into that rarefied air here. And that's just what we're very careful of. And this doubling, you know, one, it's simple doubling in two years, I mean, anybody can remember that, but it also went back in and you flagged the peaks in the Hong Kong Hang seng in the 90s. You did it in China, you did it in the nasda. The NASDAQ was early. The NASDAQ was early by about two years. But it's been a very good kind of reference point of just saying, hey, I'm in a different kind of environment here. And with that I have to make sure that I'm not just whistling past the graveyard or, you know, maybe more importantly, I'm not out on the risk spectrum a lot more than I should be just because I think, you know, quote unquote, this time is different.

[Josh Brown]

So, Jeff, I want to make, make it clear what you're what you're saying you are not anti stocks going up or markets rallying and you are not a knee jerk. All right? It made a new high, therefore it must be a sell. You're saying that specifically a 2x inside of two years for an entire sector or an entire index, that's where people are no longer acting rationally. And if there is an exception, it's going to be such an exceptional exception that you can stay long, you don't have to sell. You know, I mean you're not telling people go short it, but just mind your, your position, size and, and, and that can keep you in the game if you need to stay in the game. And a lot of people, if they're competing with the averages, especially if they're emerging market growth investors, they have to stay in this game.

[Jeff DeGraaf]

Yeah, 100%. 100%. That is absolutely right. The signal is not for shorting, it's for sizing. I think that's the best way to think about it. And if you're using volatility to help size, well, you want to make sure that you recalibrate that, right? Because the volatility of these names are going up. So you're carrying a lot more risk than what you're thinking you are if you haven't recalibrated for the current volatility. And so the real message is that you don't usually have these kind of doming top formations, right? So most of the time you're going to have plenty of time to get out of a name or an index because you're going to have these kind of doming top formations. When you have the bubbles, the risk is that you have a V, you have an Eiffel Tower, you're straight up and you're straight down. And look, even Isaac Newton, you know, if you go back and look at the South Sea bubble back in the 1720s. Isaac Newton bought into the South Sea Company back in December of, I think it was 1719. Officially he sold out with about a 3x gain in February of 1720. So about a three month holding period. He thought he was a genius. And I think we can all admit that he probably was a genius. But even he about six, eight weeks later got sucked in, took all his winnings from the first round, put them back into the South Sea Company and they actually sold shares in the bank of England to buy more shares of the South Sea Company which popped within about three weeks of him putting it back in. So when he died about 10 years later, pretty substantial Portion of his estate was still locked in the South Sea Company. So, you know, even he was. Was, you know, a casualty of bubbles.

[Josh Brown]

They made. I think they made up a fake. They made up a fake quote that he never actually said.

[Michael Batnick]

Something like, it's a good one.

[Josh Brown]

I can calculate the trajectory of heavenly bodies. But something. Something. I don't know how to the men. The madness of men. I doubt he ever said anything like that. Nobody who loses, nobody who loses to that degree then comes up with a quote that lasts 500 years.

[Jeff DeGraaf]

It's too good to be true, even for Isaac Newton.

[Josh Brown]

I wanna do some bubble stuff with you. So you put this out as part of your note. I think people should take a screenshot of the screen right now and they should save this forever. When would have been the first time that I ever saw you put this out? It's gotta be a long time ago, right?

[Jeff DeGraaf]

Yeah, we've. Yeah. I mean, probably. I mean, it had to be in the 2000s when we were talking about it the first time.

[Michael Batnick]

So.

[Josh Brown]

Okay, what bubbles are and are not. And I want to go through these for the people that are listening and you can react to them along the way. Okay, sure. Bubbles don't ring a bell at the top. It's a yellow flag, not a sell ticket. Shorting a bubble is an expensive mistake. Base rates favor trend, something we say all the time. Asymmetry is brutal and evaluation thesis without tape is premature. Let's stop there. Right? Because in the 1997 example, stocks were overvalued, and then they ran for another three years and became even more overvalued. So if all you have is. Is a valuation metric, you better keep an eye on the trend. And I think that's a really key

[Jeff DeGraaf]

one for people when we do the work, Josh, and we're always looking for terminal wealth. The most amount of money you could have out of a situation without perfect foresight and calling the top the right way to do it is you actually sell on the way down. Now, the problem with that is that that means that you're going to run up your account to, say, $1 million. But on the way down, you know, you might only be left with 800,000. And you're saying to yourself, son of a gun, you know, I left 200,000.

[Josh Brown]

I left 200 grand on the table, right?

[Jeff DeGraaf]

But. But the reality is if you tried to sell it on the way up, you probably only have 500 grand, right? So the terminal wealth is better selling on the way down. It's the mental anguish that People can't take and they say, and they kick themselves like, oh, I should have, could have, would have, but, but that's an illusion that, that peak is an illusion to try to get that, that last right.

[Josh Brown]

If you anchor to it and you decide I'm sticking around until I see it again, you, that's not a professional anymore. Now, right now, okay, signal is for sizing, not shorting. What does that mean, correct?

[Jeff DeGraaf]

Well, it just means like, you know, don't look at this as, as bubble. Now I'm going to get short. It's bubble. Let me readjust my position sizes and make sure I'm not carrying too much risk in this particular index or this particular sector.

[Josh Brown]

You say something here that Michael and I probably don't know what you mean. Time is a bear's best friend. What do you mean by that? So I always learned it the opposite. Learned it the opposite.

[Jeff DeGraaf]

Which is true. Right. In 99% of the instances, the time is the bull's best friend. In a bubble though, what you end up with is short term asymmetry where it can run and go against you. But as you start getting out 612 months, the probabilities really start to shift that you're going to have a major drawdown. So that's, in that case, you're, you know, if I were to play it just by the numbers, I'd say, okay, bubble signal, set my watch, give me six months and now I'm going to look to be shorting it. That's, that's, you know, I mean that doesn't work every time, obviously. But if I was to use that just as kind of a cadence of how we think about it, you're not, you're not better off shorting it. When you get the signal, you, you're not better off being short three months from now, but you are six months from now starting to get into a pattern where that unsustainability. And that's why it's important with the bubble. It's that unsustainable rise that you're now kind of on the back end of. And that's where it becomes.

[Josh Brown]

I want to do these last, I want to do these last three. Reduce gross as conditions deteriorate. The win is in the de risking sequence, not calling the top and then the bottom line. Ride de risk, exit on break, don't fade early. So all three of these are sort of saying the same thing, but they are like three separate expressions of that same idea.

[Jeff DeGraaf]

Yeah, I mean, a lot of times you have to tell people Something the same thing five different times before they get it, but that's it. Yeah.

[Josh Brown]

Okay. Do you think something's changed with the way the semis and the memory stocks acted today?

[Jeff DeGraaf]

You know, I wasn't glued to the screen as much as I'd like to be, but I did note, I mean, if you looked at Korea as an example, it had an outside reversal day today, which is pretty interesting. It opened up and opened above the previous day's high and then closed below the previous day's low. So that's a pretty uncomfortable candle.

[Josh Brown]

Those are not good on the way down.

[Jeff DeGraaf]

Right, Right. So, you know, after a parabolic move, that's kind of like the real Rodney Dangerfield, you know, no respect here. So. Yeah, I mean, I felt like there was something in that. I'm not a big candle guy. It's just, you know, one day is going to mark the peak. But certainly those are the types of little indications, those grains of sand that I look for.

[Michael Batnick]

But Jeff, on the other side, you had micron down as much as 9% today, I think, and it closed down 4. Like they couldn't even stick the landing. The bears on one day. Same thing with smh. Like a really attractive looking candle on the long side.

[Jeff DeGraaf]

I think you're in a good spot with that though, when you look at it doesn't have to be a bearish candle and stay there. But if you start getting into the point where we've got bulls and bears slugging it out together now you're getting into that distribution. Right. And look, a lot of managers are going to need the liquidity on the upside to trim those positions. They can't do it on the downside because they're just going to be pro cyclical and push into that weakness. So you're going to have a lot of professionals that are doing that trimming that we're talking about because. Because they know that you get while the liquidity is good. And the liquidity is good on the way up more than so on the way down.

[Josh Brown]

Jeff, really appreciate you coming by. Even though it was unexpected, we're huge fans of your work. I wanted to let people know you guys are on YouTube at renmac and I wanted to put this QR code up. Guys, if you want to follow more of Jeff's commentary and follow the renmac channel, this is the easiest way for you to do it. And I think Ms. Nicole will drop a link in in the live chat as well. Thank you so much for coming by. We, we, we're huge fans. Thank You.

[Jeff DeGraaf]

Thanks guys. Always good to see you. Be good.

[Josh Brown]

All right Jeff, we'll talk to you soon. Guy. That guy, that guy's awesome.

[Michael Batnick]

So Jeff was talking about indexes and sectors doubling over two year period as like a yellow flag or at least time to maybe pay attention and, and, and take, take some size down. Micron doubled in the last month on

[Josh Brown]

April 12, not in two years.

[Michael Batnick]

It closed at 420. On April 12 it ran up to 800. We didn't get into this with Jeff because he's obviously a technician and not a fundamentals guy but I think it's really important to point out that the buying is rational. And I'm not saying, you know, whatever like I'm not saying that prices aren't going to go down. In fact I'm pretty damn sure that Micro will go down at some point. We spoke last week, I think we both agreed 75 to 80% chance of a 40% decline at some point in the next 12 months. It's coming. I don't know when but anyhow fundamentals chart on. So Daniel Von Allen tweeted probably the craziest chart of the markets right now and I would agree with him. So for people that are listening what we're looking at is the 12 month forward EPS for MSCI Korea. As Jeff mentioned it's, it's, it's two of the biggest semi related companies in the world. They're AI related companies in the world. This went from 200 bucks.

[Josh Brown]

Oh my God to about 800 in a month.

[Michael Batnick]

So, so the 40ps quadrupled. Chart off. What would you expect the stocks to be doing? Would you not expect them to be doing what they're doing? The earnings per share quadruple.

[Josh Brown]

It would be weirder if they weren't parabolic because the earnings outlook just literally went up fourfold.

[Michael Batnick]

That would be the weird thing.

[Josh Brown]

It would be weirder if there, if you didn't have a wild reaction to the upside and you had it. Yeah, so. Well I think that's. Look, sometimes these speculative manias come out of nowhere and are based on nothing. This is not that this is something different.

[Michael Batnick]

This is fully rational.

[Josh Brown]

You had an insane change to the fundamental outlook for some very large important companies to that index and the stock prices you have, I would argue 99% of the people trading these stocks over the last month have never traded these stocks before in their entire lives. So it breaks anything you thought, you know about like the long term average multiple to earnings for these, like throw all of that out. It's an entirely new world. It's almost like they're IPOs in the eyes of people who are trading them.

[Michael Batnick]

Yeah.

[Josh Brown]

All right, so the s. So the semi mini crash this morning, the memory mini crash this morning. It was really much ado about nothing so far. Let's put up Micron. These are not candlesticks. These are just. JC would kill us.

[Michael Batnick]

These are just. I've got candlesticks later.

[Josh Brown]

All right.

[Michael Batnick]

So fast.

[Josh Brown]

Well, all I would, all I would tell you is wake me up at 600. What do you, what do you think about that statement?

[Michael Batnick]

Meaning what? Like, like down to 600 is nothing is the only thing.

[Josh Brown]

I think a lot of people that missed I think a lot of people that missed these stocks would love for this to have been the top. And maybe it is a local top. But let's not act like. Let's not act like their shareholder base in these names is not totally fine so far. I mean it's.

[Michael Batnick]

Keep going, go through some more charts.

[Josh Brown]

Sandisk.

[Michael Batnick]

Sandisk. It was 250 in January. It ran to 1500.

[Josh Brown]

It was a thousand three weeks ago.

[Michael Batnick]

It could go back to a thousand and the long term uptrend would still be ridiculously intact.

[Josh Brown]

Agree. Western Digital. Nothing. There's nothing here in. Could it be the start of something? Yes, you definitely want to make that bet.

[Michael Batnick]

No, let's, let's skip the, let's skip the heat map. Just show the. The VanX Semi ETF and so well off the lows I was mentioning to Jeff. Next is Micron.

[Josh Brown]

Those, those candles.

[Michael Batnick]

No, Daily, dude. Daily.

[Jeff DeGraaf]

Daily.

[Josh Brown]

Daily.

[Michael Batnick]

So it was down 9% at the lows. Buyers came right back in and throw up this, throw up this graphic. So I forget who I stole this. No, no, the bubble chart. So what we're looking at here is. This is from chart flow flea and look at the red dots. So this is intraday on the S and P today by sector. Okay, so you can see the red, the red dots on the bottom. That's micron. All right. And this is Intraday. So it's down all the way down to 9%. And what you're going to see is

[Josh Brown]

them coming back, moving or did I ingest one more time?

[Michael Batnick]

More time. Look at the red.

[Josh Brown]

Why are they, why are they doing this?

[Michael Batnick]

This is intraday. It's from nine.

[Josh Brown]

Why are they undulating like that? It's almost sexual. I don't like this.

[Michael Batnick]

Stop. It's from 9:30 to 4. So look at this. Look at the bounce off the lows. Look at that Micron feels, feels like a horse race. It was down over 9% and it closed down 4. Give me a break. The buyer stepped in. So yeah, listen, this could be down 10% tomorrow. I don't know if this was the

[Josh Brown]

top or not, but which buyers stepped in?

[Michael Batnick]

Some buyers did not.

[Josh Brown]

Not people that are up a th percent already.

[Michael Batnick]

Some got to be.

[Josh Brown]

This has got to be people that. People that missed it and are like, this is my chance.

[Michael Batnick]

Some buyers did short sellers covering. I don't know, dude. Last week we were talking about what happens to stocks that beat versus stocks that miss. We tracked it every quarter and. Is this a bubble? Isn't it a bubble? Earning season doesn't say so. So today. This is from John Butters at FactSet to date. The market is rewarding positive earnings surprises reported by the S and P for the first quarter. Slightly more than average. So just barely. Next topic, Next chart please. John. On the other hand, the market is punishing negative earnings surprises reported by the S and P much more than average. So the average price change is 1% basically in line. The average price decline when they lose is like double the average. It's like down 5 versus down 2.9 on average.

[Josh Brown]

I'm so glad you brought this up because this is literally the way that I'm personally experiencing this market. I have companies that chart off companies that had outstanding quarters like Amazon and Uber and they sort of went up, right? But then I have companies that didn't even miss or maybe missed a little or whatever or gave like a bullish outlook, but it wasn't as bullish as expected and went down 20%, 30%

[Michael Batnick]

bubble.

[Josh Brown]

I've been murdered this quarter in two names. Shake Shack and Toast. And they both reported one day apart from each other. If you actually look at what these companies had to say, their outlooks for this year went up. Shake Shack actually raised their store count growth estimate for a full year. They had a surprise. They had a surprise loss because beef and paper costs and the stock felt, I'm going to say it was 20%, 40% all in. Like it's. I think it's like 38% over four days or something insane like that.

[Michael Batnick]

There's a lot of stocks like that.

[Josh Brown]

Toast is down. Toast fell 14% after reporting. Then 4%, then another 4% because why not? They literally, they literally had nothing but bullish, bullish things to say. But if you miss one metric whisper number, it's like. So Kramer said this morning, I forget who he was talking about, but he was saying we Love the stocks we love too much and we hate the stocks we hate way too much. Like, like that was his comment and I think that's like anecdotally for me. I think that's sort of right. There's a lot of reasons, dude.

[Michael Batnick]

Not anecdotally. What do we say in the chat about momentum having the best what period over the last 30 years? Like the second best X day return period. Yeah, the winners are winning and everything. All right, so here it is. The S&P 500 momentum has a life history back to November 2014 and a back test extended back to 1972. Across both live and hypothetical history, the index has Never closed a six weeks performance as large as the current 30.5%. Never. Never ever, ever. So it's not anecdotal, it's literally in the data.

[Josh Brown]

Yeah. So if you're in that group of stocks that has the AI capex wind at your back and you have momentum, like the stocks have momentum, they're, they're being way overly loved. With the exception obviously today of the memory chips which looks like so far it was a one day event, but it's, it's. And then other stocks like dude, you can't say even one iota of negativity on one of these calls or caution they will rip your stock. 20% of the market cap ripped out overnight.

[Michael Batnick]

Retail stocks getting killed. I mean within there is is restaurants

[Josh Brown]

and what they did to Netflix. Netflix, Netflix traded one away to 80.

[Michael Batnick]

Yeah.

[Josh Brown]

On a, on an amazing quarter.

[Michael Batnick]

Spotify. All right, so I don't know who I grabbed this from, I don't know which bank this is, so forgive me, but there's a research report. AI token costs are eating Internet profits alive. So the guy the author wrote. My title is a tad bombastic, but it's worth noting that several Internet companies this quarter explicitly called out rising LLM token costs as part of their expense outlook. I have a very sneaking suspicion we are going to hear a lot more about rising AI costs as the year wears on. So I say all this because I bring that up because the demand for the picks and shovels the AI trade and the demand for the shares is fully warranted. It just is. Look at this next chart. Global semiconductor sales and Taiwan Export export orders are both seeing torrid growth rates. What would you expect the stock price to do in this, in this, in this example? So anthropic CEO said I hope that 80 times growth doesn't continue because that's just crazy and it's too hard to Handle. I'm hoping for some more normal numbers. I pull this from the transcript. Then Jensen said the second big idea is that in order for AI to go through understanding, reasoning, planning, using tools to take action, the amount of computation necessary compared to generative AI is like a thousand times more. So I understand that people are probably like sort of sick of this, whatever, just the talk and the this, but it is justified. People have not completely lost their minds.

[Josh Brown]

I have already solved this problem. You, you go on to the LLM and you prompt it. Find a way to use less memory. Find. Find a way to use less compute.

[Michael Batnick]

Who?

[Josh Brown]

You tell the AI to figure it out. Figure it out. Why are we using so much compute to employ you? Find a way. Find a way to give me the stupid answers to what I'm asking you. Like when was James Madison's birthday? Find a way to do it with less compute. I don't know. I feel like it's gonna. It's got. There's gotta be.

[Michael Batnick]

You're not doing that.

[Josh Brown]

No, me, it's not gonna be me. There's gotta be a solution. It just can't be like high cost of computer and the levels of demand that exist and it just goes on and on and on forever the model. But I think get more efficient.

[Michael Batnick]

I think what they're saying is the, the lower the lowering costs are accelerating demand. We're able to do more of it and we're just running out faster. Like demand continues to outstrip supply. I've got four more things I want to go through. This is from consensus gurus. He posted the sales growth for Micron Sandisk, 222% for Micron, 283% for Sandisk. And yet if you look at the. And the EPS growth. Forget about. It's a joke. 582 and 1728. So he's breaking down Micron, Sanders, Seagate and Western Dig. And look at the PE ratio for these memory names. Micron is 9 times 26 earnings. 7 times 27 earnings. Sandis is 11 times and 8 times. This is like not that far out. And you say to yourself huh, maybe these are cheap. No, stop.

[Josh Brown]

They always stop. They always traded those markets. I'm not done.

[Michael Batnick]

Not that I'm trying to educate. Okay, so why are these stocks so air quote cheap? Why are they only trading at 8 times earnings? Well the reason why is because these are the absolute most cyclical names on the planet. And investors aren't dumb. Not going to get fooled for the 11th time. So I had Claude do some work for me. Look at the operating margins for these four names and look at Micron swinging all over the place. All over the place. Plus 40, minus 60. Next chart shows the revenue growth year over year. Investors aren't dumb. So names like this, especially at this size, they deserve a discount. So do not look at the P E and get it twisted that these stocks are cheap. But what is crazy is because they are statistically cheap. And I'm using air quotes again. Micron is now the largest stock in the Russell 1000 value index.

[Josh Brown]

That's chart on. That's the best shot to Todd Sohn.

[Michael Batnick]

Isn't that wild, Josh?

[Josh Brown]

Yeah, that is the best. I love it. I'm a value, I'm a value investor allocating to Micron because on my screen it's the cheapest stock in the market.

[Michael Batnick]

So it's not, it's not the screen's fault. That's just what it does. So Todd says is a fairly consistent list over the last 20 years. Exxon, GE, JP Morgan, Berkshire, like legit value stocks. And now we've got Micron. So Micron has gone. I had Char do this. This is true.

[Josh Brown]

I, I love it.

[Michael Batnick]

I asked, I asked Chart Kit to map Micron's path in the S and P in terms of its ranking over the last 20, 15 years, whatever it is. And for the last five or 10 years, five years. It's averaged the 89th spot in the index. A year ago in April, it, it fell to 127. It skyrocketed at the Open today, it was the 10th largest holding in the S&P freakin 500.

[Josh Brown]

It's amazing. It's amazing. It's bigger than, it's bigger than every company you've ever heard of with the exception of nine others.

[Michael Batnick]

Bravo.

[Josh Brown]

I mean it's. Was it bigger than JP Morgan at 10J&J?

[Michael Batnick]

It's got to be right there. Like bravo. All of it, dude.

[Josh Brown]

All of it. Like every blue chip stock. That sound right to you? That doesn't sound right to me. That, that sounds, that sounds like one of these things doesn't belong.

[Michael Batnick]

When you say sounds right, does it make sense to me today? Yes. Do I think it will be like this in a year from now? Probably not.

[Josh Brown]

I can't imagine.

[Michael Batnick]

Probably not. I don't think so.

[Josh Brown]

I don't think so. But I literally can't imagine it.

[Michael Batnick]

But today, for the moment that we're in, it makes sense.

[Josh Brown]

All right, so keep it. Keeping on this, keeping on this theme. I want to point to A piece at the Wall Street Journal contemplating AI as an industrial bubble. And just we've been living in this reality for the last three years where more capex is better. And what they're pointing out in this piece is that historically that's just not true. More Capex spending is bearish, not bullish for obvious reasons. It's less, less profit for shareholders. And oftentimes if you think people are sloppy with buybacks or with M and A, you should see the history of Capex bubbles, how bad corporate managers historically have been allocating resources. And the reason why is because it's hard, especially in tech. You're trying to predict the future in real time and put the right amount of money behind projects that you have no idea what the ROI is going to be in advance. So I want to just share a couple of quotes here. One of the reasons why tech has done so well over the last 15 years or so is that we've always looked at them as high profit margin, low assets, like not capital intensive, not heavily industrialized. They were like these kind of software information technology businesses. And as a result we gave them systematically higher multiples than many other areas of the market and deserved because they earned a ton of money from whatever their revenue was. More of that became earnings than for most, if not all other sectors. Okay, this is the Journal, it's a guy. Greg Fisher being quoted from Quint Capital. We know from this 100 years of data that CAPEX is bad. The lesson has implications for the hottest stocks on the market right now. The Mag 7 became magnificent because they made huge returns on relatively modest capital expenditures. If Ford came out with a great car design or Boeing with a superb airliner, they needed to invest in factories to keep up with demand. Once Microsoft released Windows or Apple devised its Google search algorithm, or Meta created Facebook, the cost of every additional user was tiny. Even Nvidia, which sells physical objects, outsources the actual manufacturing. That was then. This is now. We have this chart. This shows the assets of these companies at the end of each quarter. And nobody would mistake these for asset light companies anymore. These are AI industrials would be the way I would phrase it. Now the light Blue is showing Q1 26 and the dark blue is showing the corresponding quarter from five years ago. And what you can see here is that the capital assets that these companies are carrying on their balance sheets are in every case twice as high. Apple is not on this, on this list, which is its own story. So these are basically the hyperscalers plus Meta, which thinks it's a hyperscaler. Jeff Bezos was calling AI an industrial bubble. Not in a bearish way. He said the winners will win big and society will benefit. Lol. But the overall return on all the money being spent today probably won't be great. What do you think about this idea? And do you think oh, and then they did one more chart. Low asset firms versus high asset firms. So they're showing the tech bubble from 96 to 2003 and what they're showing is the firms with high assets. Actually the stock prices fell way more than the companies that kept their capex low and were considered low asset firms. What do you think of this concept of an AI industrial bubble? And is this the kind of thing that ultimately a lot of people might start thinking which could shift the psychology and the stocks that are actually working?

[Michael Batnick]

It is an AI industrial bubble, I don't think. But in the same way that the fiber optic build out in the tech bubble was, it's the same thing. Well, that didn't end well, but it's that on steroids because the amount of money that we're spending is levels of magnitude bigger than that was. And we are doing that in anticipation, in anticipation of a completely different world which the Internet bubble, the Internet didn't turn out to be. So I don't think there's anything controversial in this idea that more spending is worse than less spending because the spending is guaranteed, that returns are not. However, I do think we need to be open minded to the idea that perhaps data from the last hundred years is not set in stone and permanent forever. Adam Parker did a piece last week that I have opened up that I haven't had time to read yet. I'll do it. Maybe we'll do this next week. Adam has a post, A research report 10 investment mantras that have changed since 2020. Sometimes things change and they change forever. Now this idea of asset light being better, it sounds like it's a permanent type of thing that's not like a cyclic but. But I'm open, open to the idea that maybe it is different this time.

[Josh Brown]

If you think the profits of all of this AI activity are going to accrue to the platform, to the platforms themselves, then you have to own the platform. And if you want to own the and if you want to own the platform that requires millions of machines being plugged in in data centers all over the world and that's what these companies are investing in now, that might turn out not to be true. It may turn out the platforms are not where the profitability of this accrues, it may not be about servers and GPUs and electricity. The profits may ultimately accrue to a software level that we can't yet imagine. We don't think they're going to accrue at the LLM level completely. But there is a world in which all of these data centers and all this profitability gets driven down into a commoditized state and the software layer becomes the most valuable part of AI. And if you believe that, you're probably calling people trying to get shares of OpenAI and Anthropic before they come public. But we just, we don't, we don't know for sure. Is it the platforms, is it the models, is it something else, a services business that we aren't sure about? Is it the transference and warehousing of data in the snowflake realm? Like we, we can't know who's going to have the most profitable slice of the pie. All we know is if you don't go for it right now, you remove yourself from being in the running. And that's what none of the hyperscalers are willing to do, including Meta.

[Michael Batnick]

Let me ask you this. Over the next 10 years, how confident are you that the mega cap tech, unless you use all of them and Throw in the LLMs in there, how confident are you that those names, including the ones that are now asset heavy, are going to underperform, say the S&P

[Josh Brown]

490 with how confident am I that which are going to do you all right?

[Michael Batnick]

Do you feel, do you feel super strongly one way or the other that the mega cap tech, all of these asset heavy names are going to outperform or underperform? Do you feel super strongly that?

[Josh Brown]

Because I really don't know because I don't think anyone can say for sure. Verizon and AT&T and T Mobile ended up being the only three mobile providers with any scale in the United States. Right? If you look at their stock prices over the last 15, 20 years, for all the money that they've invested in their network, 2G, 3G, 5G, all the shit, all the infrastructure, all the cell towers that have been built, all the billions of miles of cables that have been run, all of like all of that infrastructure and all of that expense into building out what is effectively a completely wireless map. The whole like, there's no, there's really almost nowhere on the map without service that matters at this point. What are the shareholders have to show for it? So they made the Bet. They made the bet 25 years ago I was here, they made the bet. They said we need to have the best grid. We have to have like literally the whole map covered. We need to invest all this money, billions and billions of dollars every year in infrastructure in order to cover the whole map. And they did it. And the stock prices are horrendous. Now you can argue that they did too many side quests. They bought Yahoo, they bought aol, one of them started buying cable companies, another one bought Dish Network. You could argue that they made bad investments. I would just say the bigger picture is they own wireless. They own it, and for what? To what end? Who did that help? Like what shareholder was rewarded for that race? So it's really hard for me to say that an industrial capex bubble like what we're going through in AI automatically equates to there even being any winners. There is a firm in Chicago, a prop trading firm, one of the most prominent commodities trading firms in the world currently having discussions about trading compute as though it's oil or electricity trading units of compute, allowing companies to make forward investments or hedge some of their capex spending just in case compute prices fall, whatever the case may be. That sounds like it's going to be an important innovation in financial markets that could ultimately bring down the cost of compute. If that happens, then I'm not worried about the profitability of all this investment. Right? Because I know the usage will be there. That's the one part we all know. No one's going to put anything back into Pandora's box. AI is not like, ah, we're bored with it, okay, so we know the usage will be explosive. We don't know what the cost is of that usage, to your point, but we also don't know the profitability for the companies that are making the investment to build it. We assume, we assume the profitability will be there, but how can we be sure? So what if, Right? So, so this is. So you asked me, am I sure one way or the other that the, that the capital heavy companies now that are dominating the data center biz will outperform or underperform the market? No, same can it. How can anyone be.

[Michael Batnick]

Yeah, I hate to be so wishy washy but like it's tough.

[Josh Brown]

Well, how could you know?

[Michael Batnick]

Right? Right, right, right, right. Okay, let's move on to an area of the market that we spend very little time talking about because it's an absolute barren wasteland.

[Josh Brown]

This is not a bubble.

[Michael Batnick]

Could you imagine a world where housing activity returns the Fact that the economy has been as resilient as it is, the fact that the stock market and spending has been what it is despite the fact that one of the actual largest parts of the economy is in a depression, that's a stretch. Is remarkable. So let's talk about the stocks of the housing stock apocalypse Whirlpool reported last week. I, I meant to grab some of the holy. But this is, this is durable goods like dishwashers and like that. Down 81% in the last five years.

[Josh Brown]

And weights have actually, and weights have actually come down since this, this is drawdown.

[Michael Batnick]

It's in an 81 drawdown. Pool, which is actually. Pools is literally down. This is not a drawdown. It's down 55% over the last five years.

[Josh Brown]

Holy cow.

[Michael Batnick]

Zillow just reported the Stock was at 90 earlier last year or mid last year. It's now at 39. And they said in terms of what we're looking for in the back half of the year and how we thought about it, we're planning for the housing market to continue to be effectively flat. You're right. Okay, whatever. We're expecting sales growth. Okay, not good, not good, not good. Home Depot multi year lows. And the stock just looks terrible, Terrible. There was support. No longer support. And Finally, Lennar was 185 in the.

[Josh Brown]

Oh my God.

[Michael Batnick]

In the summer of 2024, the stock is $85. This is just really ugly.

[Josh Brown]

Nothing. There is nothing. There is nothing good happening. Nothing good happening in this group of stocks.

[Michael Batnick]

So to me, this says, this says a lot about the economy in the market that we're able to just like brush this off.

[Josh Brown]

Yeah. And what's weird is you would think, you would think that there's like some desperation to unload houses afoot and there just isn't like there's no collapsing housing market anywhere in the country that's relevant. None of the 20 metropolitan areas have like a collapsing housing market. They have stagnant markets. But I think what that goes to show is these companies that are suppliers to the housing market, they need turnover, they need more buying and selling.

[Michael Batnick]

Existing home sales is just, there's, it's, it's basically low sales that's the problem.

[Josh Brown]

It's not the price of the houses. It's.

[Michael Batnick]

There's no activity.

[Josh Brown]

There's no activity.

[Michael Batnick]

There's no activity.

[Josh Brown]

The shit show. So let's do this next one.

[Michael Batnick]

All right. Yesterday I asked Chart kid, I'm like, hey, you know, it'd be a cool idea. Let's, let's Talk about, show me how many hundred billion dollar market caps there are by sector. Like, I don't know if you could do that. It's a, it's a big project because you have to. If you just look at the index today, half of the names weren't there in 2010. And if you go back to 2005, like a third of the names weren't

[Josh Brown]

or 2/3 of them weren't there.

[Michael Batnick]

All right, so Matt, Matt went inside the index. He, he unpacked it and he went year by year and he showed that we have 115 stocks that are $100 billion or more. We had 20 in 2005. I don't know, a handful.

[Josh Brown]

Is this more than you would have guessed? Is this more than you would have guessed there were right now? It's like if you just called, somebody said, how many companies are worth over 100 billion in the S and P? Would you have said 115 or higher or lower?

[Michael Batnick]

I think I would have said 100. I think probably.

[Josh Brown]

I think, I think so. I'm so out of it. I would have said like between 50 and 75.

[Michael Batnick]

Okay, well, I mean, listen, fair. It was between 50 and 75 not that long ago. So inside that 115, 31 of them are tech. And if you include comm services, it's another seven. So 38 or tech. And this is about what you would expect. No real surprises there. 90 financials. But Matt was like there was zero financials in 2009.

[Jeff DeGraaf]

Yeah.

[Michael Batnick]

Chart. None of them. There was no hundred billion dollar financial stocks after the gfc.

[Josh Brown]

Right now we have Berkshire and Morgan Stanley and Goldman Sachs and JP Morgan. I'm just trying to guess like off topic.

[Michael Batnick]

CME is probably close. I know. S&P. CME is $103 billion. S, P is definitely 100 billion. I mean, hey, what's the.

[Josh Brown]

There are two material stocks that are 100 billion. Can you guess either one? I can't.

[Michael Batnick]

Newmont's not 100 billion. No way.

[Josh Brown]

No way. No. It's a, it has to be a chemicals company.

[Michael Batnick]

Oh, Dow or dupont.

[Josh Brown]

It's got to be one of those, right?

[Michael Batnick]

All right. Lastly, Matt, charter the rise of the, of the $100 billion for tech. This is sick.

[Josh Brown]

Wow. So, all right, so to recap, in 20, like I'm just trying to put this in context. In 2016, there were like six or seven stocks that were 100 billion in the tech sector. And we all know what they are. And it's the same ones that are now but the story is that there's 20 new ones or 25 new ones and we know what those are. Those are Lamb Research and I don't know, Applied Materials. Micron, I don't know is Seagate or Western Digital. Are those now? It must be. Yeah, maybe Dell is. Dell joined $100 billion club.

[Michael Batnick]

Oh yeah. Western Dig is a buck 68. Dell has got to be. Dell is 154. Yeah. I mean.

[Josh Brown]

All right, timeout from the chat, Sam. Ebby says, Josh, the Verizon and AT&T underperformance is a consequence of government regulation. The companies became regulated utilities with pricing needing approval. They did that. I missed. I don't think that's the case. You might be. Sam, you might be saying like de facto they are having trouble raising prices. I think what actually happened is T Mobile bought Sprint, got its shit together and became a third competitor that was willing to out advertise the other two on lower prices while simultaneously somehow building a network that was comparable which crushed pricing for, I don't know, the last seven years. And I also think they did a lot of dumb stuff. All right. Yeah. So we're going to make the case. What, what do we skip? Oh, we're going to skip that. Okay, got it. All right. So I have this as one of my best stocks in the market. I actually think it's setting up for a breakout. It's okay. As an investment here. I wouldn't say like there's like urgency until. But I want to show you guys. Let's pop this chart up. So Goldman is making a lower high, but maybe it's not so. A pure technician would say call me at a thousand. Right. You agree with that?

[Michael Batnick]

I'm so glad you said that. Yeah.

[Josh Brown]

Okay. A pure technician would say, okay, I like the way it respected the 200 day twice in March and in early March and in late March it had every opportunity to break down. That's that blue line, that rising 200 day. You see that the buyers came in exactly where they had to to keep this thing in a statistical uptrend. It also had a recent gap which is earnings related and it's held that gap for the last couple of weeks. So it's sort of treading water. It has not broken out again. But part of me wants to say I think this is almost like a market signal. If this thing takes out a thousand to the upside, isn't that indicative of the investor crowd saying another six months of bull market? Yes, like we're going to get the IPOs we're going to get the sex, we're going to get the action, we're going to get capital formation and underwriting and trading and it's all happening. And if it fails to break a thousand, that has implications too that people might be thinking this is as good as it gets. I think Goldman is the ultimate capital markets mood ring. What are your thoughts?

[Michael Batnick]

I. I could not agree with you more.

[Josh Brown]

Mm. So what's it going to be? Break out or fail at that or fail at that winter high?

[Michael Batnick]

Well, it certainly might fail. Obviously that's a possibility. But all of the evidence suggests to me that this is a bull market. And so I think a thousand is more likely than 800. But I would, so I would say, I don't know, 70, 30, that we get a thousand before 800.

[Josh Brown]

Okay. So I'm looking at that 950 to 960 zone, which is sort of like the last top. Like for me, I want to see it break that level with conviction.

[Michael Batnick]

But I want, I want to, I want to see it go tomorrow. Like it is at the upper end of its recent couple of week trading range. I want to see it go tomorrow.

[Josh Brown]

Yeah. I also don't love chart back on. I also don't love how the last time it was in the mid-900s, look what RSI was doing. It was like 70 plus.

[Michael Batnick]

Yeah.

[Josh Brown]

And you sort of getting a negative divergence here. You could barely get, you could barely get to 60 RSI with this stock within spitting distance of the old high. They sort of don't like that either. But the case I'm making is not to buy the stock or not to buy the stock. The case I'm making is watch this stock for your signal that it's, that it's, it's almost like the groundhog, like it's party on for the next six months if this thing goes.

[Michael Batnick]

I think it's a great call. The longer it takes to go, the, the more likely I think it is to fail.

[Josh Brown]

The stock was. The Stock is up 70% over a year. So taking a breath right now actually makes a lot of sense. Here's something else interesting. Over the last five years, 23% annualized returns. Goldman has actually done better than both Morgan Stanley and JP Morgan. Remember when they were five years when

[Michael Batnick]

they were ready to throw out DJ Soli like, like head first. They were like writing articles about him. People were pissed.

[Josh Brown]

Yeah, there was some old line guys that didn't get the size bonus they wanted and they looked at the way he was spending on Fintech and they were just like, get this guy out of here. I want my money.

[Michael Batnick]

As he was making bad decisions. And they fixed it.

[Josh Brown]

Can I tell you something? I gave a talk at Goldman Sachs today. Not to brag. I crushed it. I spoke to their professional investor forum with Sonali as my moderator, and it was about the next generation of investors and the next generation of advisors. And the whole audience was Rias and Char Kid. Matt was there.

[Michael Batnick]

Hell yeah.

[Josh Brown]

So I brought Char Kid as my plus one.

[Michael Batnick]

Hell yeah.

[Josh Brown]

He was. He was working the room like a pro. Anyway, that building is. That building is insane. All right, do your mystery chart and then we'll get out of here.

[Michael Batnick]

All right, we've. We've done this bit before, but it persists.

[Josh Brown]

That's a hint.

[Michael Batnick]

Yes. Okay, these two stocks. This is three. This is. No. Yeah, this is three years. Zoom in. They freaking.

[Josh Brown]

The actual prices. 432 and 87.

[Michael Batnick]

They just trade almost exactly the same. And even today. So you could see both of these stocks have been under pressure for the better part of the last year. And even today, they were both up 2 or 3% or 4%. I don't know. But like, it seems like they're trading in lockstep. And I mean, it's fair. They. They are not competitors, although they trade off the same fundamentals, basically. And we've shown this before.

[Josh Brown]

So the only reason I have this is because I own the bottom one and I actually think it's hammering out a higher low. Hope so. But some people in the chat got this finance Cobra said Spotify and Netflix, great job.

[Michael Batnick]

They're fans.

[Josh Brown]

Maryland. Chaz said Suncoast Video and Blockbuster close. Levi Maitland got it right. Rabbler got it right. We have. We have very smart live. Live chatters. Thank. Thanks to the Pounders for showing up.

[Michael Batnick]

I just want, I want to say one last thing. On Netflix, it closed the gap. So if it can't find any, fine. If it can't find buyers here, I'm not particularly concerned that there's a lot lower prices, but we'll see.

[Josh Brown]

You know what? I actually think it's defensive. And I actually think as money comes out of some of the momentum stocks, this is the type of name that could catch a bid because people might not be excited about it, but they're not worried about it.

[Michael Batnick]

Guess what? If this thing pukes, pukes and like, rolls over into the 70s, I'll buy more. I don't care. I'm staying with it.

[Josh Brown]

Well, let's, let's, for my sake. Let's hope it doesn't. All right, guys, thank you so much for watching the show. We appreciate you. Thank you for stopping by. Please make sure hit the like button. Leave a rating, Leave a review. Tell Michael how handsome he looks in his Knicks gear. Tell me you like my suit. Whatever. Engage tomorrow's Wednesday, all new animal spirits of Michael and Ben. We have a new Ask the Compound coming this week. And on a very special episode of the Compound and Friends, Ben Carlson will be joining us live in studio. He's in New York from Michigan for this big party we're throwing tomorrow night. And we will have Ben in in the studio with us, plus another special guest. So lots of stuff coming your way. Keep it locked on the Compound. We love you. We'll talk to you soon.

[Podcast Disclaimer Narrator]

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