Warren Buffett vs American Capitalism

Summary

Podcast Summary: The Compound and Friends – Episode 192: "Warren Buffett vs American Capitalism"

Release Date: May 16, 2025
Hosts: Downtown Josh Brown, Michael Batnick
Guests: Chris Davis (Chairman and Portfolio Manager at Davis Advisors), John Authers (Senior Editor for Markets and Bloomberg Opinion Columnist)

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1. Introduction

The episode begins with a light-hearted exchange between Josh Brown and Michael Batnik about the concept of "Warren and Charlie GPT," setting a humorous tone for the discussion. Josh expresses excitement about transforming their conference room into a full-fledged studio, highlighting the evolution of their podcast setup during the pandemic.

2. Guest Introductions

• Chris Davis: A returning champion, Chris is introduced as the Chairman and Portfolio Manager for Davis Advisors, managing over $20 billion in Assets Under Management (AUM). He oversees the Davis Large Cap and Financial Portfolios.

• John Authers: Joining for the first time, John is a Senior Editor for Markets and a Bloomberg Opinion columnist. With a background as the former Chief Markets Commentator at the Financial Times, he authored the book "The Fearful Rise of Markets."

3. Warren Buffett's Retirement and Its Implications

The conversation shifts to a significant milestone in the investment world: Warren Buffett's retirement announcement. Michael Batnik plays a clip from John Authers, highlighting Buffett's recommendation for Greg Abel to succeed him as CEO of Berkshire Hathaway.

• John Authers' Clip (06:22 - 07:39):

  "The time has arrived where Greg should become the chief executive officer of the company at year end... I'll still hang around and could conceivably be useful in a few cases."

John discusses the emotional reception of Buffett's announcement, comparing it to witnessing the retirement of a legendary figure like Babe Ruth. He emphasizes the profound gratitude and respect the 39,000 attendees felt towards Buffett, illustrating it as both a natural and unnatural transition.

4. Discussion on Berkshire Hathaway's Structure and Future

Chris Davis provides an insider's perspective on the announcement's impact during Berkshire's annual meeting. He reflects on the company's enduring culture, integrity, and the rarity of CEOs who prioritize their successors' ease of transition as Buffett does.

• Chris Davis (12:43):

  "It's impossible to envision a scenario where somebody could have done it better."

The discussion delves into whether Greg Abel and Berkshire can maintain the company's legacy without Buffett's direct influence. Michael Batnik speculates that Berkshire may eventually split due to its sprawling structure, mentioning that conglomerates often face challenges post-founder leadership, citing Jack Welch and Exxon as examples.

5. John Authers' Column: "Warren Buffett vs American Capitalism"

Michael Batnik introduces John Authers' provocative Bloomberg Opinion piece titled "Warren Buffett vs American Capitalism." The title sparked significant reactions, including hostile feedback.

• Michael Batnik (25:00):

  "Only the wormy, envious parasites in the MSM find it necessary to write unsophisticated, passively aggressive drivel about Buffett..."

John authored the piece shortly after Buffett's retirement announcement, intending to critique aspects of American capitalism through Buffett's lens. The title was a deliberate choice to provoke thought and discussion.

6. Reactions to Authers' Column and Moats Discussion

The hosts discuss the backlash Michael received, including an extreme and derogatory letter from an anonymous reader. Michael shares his humorous and resilient response to the hate mail, emphasizing the overwhelmingly positive feedback from industry peers who appreciate any critique of Buffett.

• Michael Batnik (30:07):

  "Only the wormy, envious parasites in the MSM find it necessary to write unsophisticated... pathetic, insignificant little parasite you are."

The conversation pivots to Buffett's investment strategy centered around "economic moats"—companies with durable competitive advantages. They debate whether these moats equate to monopolistic practices, with Michael providing nuanced insights:

• Michael Batnik (29:27):

  "In the case of American Express, bear in mind that he also has Visa and MasterCard. It's only a triopoly."

Chris Davis adds that while moats are advantageous, they don't necessarily mean complete market domination. They discuss examples like Costco's membership model creating a unique moat without being a pure monopoly.

• Chris Davis (43:15):

  "Their NET margin is 2%. Their average markup is 10%... theft is half employees and half shoplifters."

7. Market Volatility and Current Trends

Transitioning from Berkshire Hathaway, the hosts examine recent market volatility. They highlight a significant rally in the NASDAQ 100, which surged 25% from its April low within four weeks, underscoring the market's resilience and efficiency.

• Chris Davis (46:51):

  "We are in the early innings of the implications of that transition."

Michael Batnik outlines three massive transitions impacting the market:

1. Monetary Transition: Shifting from low-interest rates and abundant liquidity to higher real interest rates and debt rollover challenges.
2. Geopolitical Transition: The unwinding of globalization, affecting supply chains, margins, and productivity.
3. Technological Transition: The rise of AI and its transformative impact on industries.

8. Inflation Trends and Political Perspectives

The discussion shifts to inflation, with Michael presenting a chart showing headline and core inflation trends. They dissect the political lens influencing inflation expectations:

• Michael Batnik (72:09):

  "The average Democrat said that was expecting inflation of 7% over the next year... Republicans expected deflation."

Josh Brown and Chris Davis express skepticism over these polarized and extreme inflation expectations, emphasizing the need for realistic outlooks.

9. Looking Ahead: Second Half of the Year

As the conversation nears its conclusion, the hosts speculate on the upcoming months' economic and market developments:

• Michael Batnik (79:22):

  "There is momentum behind stocks and that will be difficult to stop for a while. The most likely factor to stop it would be the bond market getting back above 5%."

They anticipate continued fiscal looseness, potential tariff-related M&A activities, and the impact of geopolitical maneuvers on the market. Chris Davis emphasizes the importance of focusing on resilient and durable investments amidst these transitions.

• Chris Davis (83:50):

  "I'm short term pessimistic and long term optimistic... think about what do they want to own that will get them through to the other side."

10. Closing Remarks

Josh Brown thanks the guests for their insightful contributions and acknowledges the hard work of the production team. He provides information on how listeners can follow John Authers and Chris Davis for more content, highlighting their continued influence in the financial and investment communities.

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Notable Quotes:

• John Authers (06:22):

  "I think they'll be unanimously in favor of it... the final word would be what Greg said in operations."

• Michael Batnik (09:25):

  "I don't think Warren Buffett is a genius, as normally understood, but when it comes to EQ emotional intelligence, he probably is."

• Chris Davis (12:43):

  "It's impossible to envision a scenario where somebody could have done it better."

• Michael Batnik (30:07):

  "Only the wormy, envious parasites in the MSM find it necessary to write unsophisticated... pathetic, insignificant little parasite you are."

• Chris Davis (43:15):

  "Their NET margin is 2%. Their average markup is 10%..."

• Michael Batnik (46:51):

  "We are in the early innings of the implications of that transition."

• Chris Davis (83:50):

  "I'm short term pessimistic and long term optimistic... think about what do they want to own that will get them through to the other side."

---

Conclusion

This episode of The Compound and Friends offers a comprehensive exploration of Warren Buffett's retirement, the future of Berkshire Hathaway, and a critical examination of Buffett's role in American capitalism. The discussion seamlessly transitions into broader market dynamics, inflation trends, and strategic investment considerations amidst significant economic and geopolitical shifts. The insights provided by John Authers, Chris Davis, and Michael Batnik offer listeners a nuanced understanding of current financial landscapes and the enduring legacy of one of America's most revered investors.

Transcript

[Josh Brown]

So nobody has done the Warren and Charlie GPT yet that I'm aware of. Doesn't that seem obvious?

[Michael Batnik]

It does rather. As soon as you mention it, I'm.

[Josh Brown]

About to do this. What would Charlie say?

[Michael Batnik]

The results. Warren chatgpt the problem is if you.

[Josh Brown]

Ask it certain questions, it would say I have nothing to add. Yeah, and I was looking for that.

[Chris Davis]

You'd be lucky if it didn't say asinine.

[Josh Brown]

All right, so John, thank you so much for doing this and Chris, it's great to see you again and this should be a lot of fun. There are going to be some sound effects in your ears, so.

[Chris Davis]

Yeah, don't put these on.

[Michael Batnik]

Okay.

[Josh Brown]

So for example. Got it. All right.

[Michael Batnik]

All right. I'm going to play those after. After my every intervention. Yes.

[Josh Brown]

Yes. All right. This is going to be awesome. I'm so excited to have you guys. How we looking, everybody? Warren, Charlie, you ready? Yes. All right, John, this used to be a conference room. And then in 2021, I said, we may never have an in person meeting again. What else can we do with this room? True story. And Duncan and John transformed it into a full fledged studio.

[Michael Batnik]

I. I at one point actually felt the need to make myself a rule that I had to talk to another human being in person out of the Bloomberg at least once a day.

[Josh Brown]

Yeah.

[Michael Batnik]

And obviously I only did that because if I didn't force myself to do that, I wouldn't. You could get through the day so easily without human contact.

[Josh Brown]

Yes. Increasingly more so these days.

[Michael Batnik]

Not good.

[Josh Brown]

Yeah, I agree.

[Chris Davis]

Although I did like to do see Jamie sort of dialing back his rant about in person being in person.

[Josh Brown]

Yeah.

[Chris Davis]

And it went sort of viral. And then somebody asked him about it. He said, well, I was emoting a little bit.

[Josh Brown]

He said, the great. He said the greatest thing I've heard on the subject. He said, I work from home on Saturdays and Sundays. That one wasn't very popular. Jamie has more equity than most of the people that that landed on. So are we ready to go?

[Chris Davis]

Yep.

[Josh Brown]

All right.

[Michael Batnik]

You good?

[Josh Brown]

All right.

[Michael Batnik]

Coming in with three claps.

[Josh Brown]

Hey, John, what episode number is this?

[Michael Batnik]

Josh, we are on the Combine of Friends episode 192.

[Josh Brown]

192.

[Chris Davis]

Whoa, whoa, whoa.

[Josh Brown]

Stop the clock. Here's a word from our sponsor. This episode is sponsored by Apex Fintech Solutions. The time to compete for next gen clients and is now like now now. Transforming your business for the future might seem like something that you can push off, but by the time it is a problem, it may be too late. Sure, you could sit this one out and your business will probably be fine tomorrow. But meanwhile, you are letting some new fintech win a generation of loyal customers around you. Augmented advice from Apex gives you the power to be what the next generation wants on your terms. It's not a robo, it's a modern on ramp to tailored advice using your brand, your personal touch and Apex efficiency. Learn more at APEX fintech solutions.com Augmented Advice welcome to the compound and friends. All opinions expressed by Josh Brown, Michael Batnik and their castmates are solely their 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. My word, can you believe we've done this 192 times? John we have, we have. Maybe more. Some would say more.

[Chris Davis]

Were you working up a list or down a list?

[Josh Brown]

All right, guys, this is, this is a real treat for me. I'm so excited. Chris Davis is our returning champion. Chris is a chairman and portfolio manager for Davis Advisors, an investment management firm with over $20 billion in AUM. Chris is a portfolio manager for the Davis Large Cap and Financial Portfolios. Welcome back, my friend.

[Chris Davis]

Thank you so much. Pleasure.

[Josh Brown]

Looking good. You're giving Peter. Peter o' Toole.

[Chris Davis]

Well, you know, the thing about wearing a sweater vest is my, my wife said to me, I, I love seeing you go out to work every day in your sweater vest. And I said, why? And she said, you like the way it looks? And she said, no, that way I know you're not having an affair.

[Josh Brown]

Oh, I love it. Love it.

[Michael Batnik]

The Rich Centauri.

[Chris Davis]

Yeah.

[Josh Brown]

And here with us for the first time, she John authors. John is a senior editor for Markets and for Bloomberg Opinion columnist. John is a former chief markets commentator at the Financial Times and he is the author of the Fearful Rise of Markets. John, thank you so much for doing this.

[Michael Batnik]

Thanks for having me.

[Josh Brown]

All right, can I ask you, when did you. When did you move from the FT to Bloomberg Opinion?

[Michael Batnik]

Six and a half years ago now. 2018.

[Josh Brown]

Six and a half years. Okay. Your columns, I think you're. Every two weeks.

[Chris Davis]

Ish.

[Josh Brown]

Or every week. How frequently are you publishing?

[Michael Batnik]

Well, I publish every night, the newsletter. Every night.

[Josh Brown]

Okay.

[Michael Batnik]

And now I'm doing a weekly column, which is a new thing, and I'm going weekly.

[Josh Brown]

Okay. And I mean, you cover the gamut because I read your last 10 columns or so in preparation for this. And you hit on sympathy.

[Michael Batnik]

Yes. Carry on.

[Josh Brown]

But that's. You're a polymath. Is that. Is that too. Is that too far?

[Michael Batnik]

I like to. I like to think so.

[Josh Brown]

Okay.

[Michael Batnik]

But if you want to boost my ego that way, I'm only too happy for you to do that.

[Josh Brown]

Okay.

[Michael Batnik]

And that's what I'm supposed to do. I'm supposed to cover the waterfront. That's the idea.

[Josh Brown]

You certainly do. And I appreciate all the stuff that you write and everything that you've done over the years. Guys, I want to start by playing a very short clip that I think sets the table for what we're going to discuss very nicely. John, if you would.

[John Authers]

The time has arrived where Greg should become the chief executive officer of the company at year end. And I want to spring that on the directors effectively and then give that my recommendation. Let them have the time to think about what questions are what structures or anything they want. And then the meeting following that, which will come in a few months, we'll take action on whatever the view is of the 11 directors. I think they'll be unanimously in favor of it. And that would mean that at year end, Craig would be the chief executive or officer of Berkshire, and I would still hang around and could conceivably be useful in a few cases. But the final word would be what Greg said in operations.

[Josh Brown]

Okay. Now, that, of course, was followed by probably 10 full minutes, would you say, of standing ovation at the Berkshire annual meeting? It was a pretty major milestone, I would say, for all investors. It kind of feels like the end of an era. Warren Buffett is now 94, and he's been at it since 1965. Is that right? Is it a full.

[Michael Batnik]

The Buffett partnerships might even have been before.

[Chris Davis]

Yeah, the Buffett partnerships went into the 50s.

[Josh Brown]

I was gonna say their tenure at Berkshire, though.

[Michael Batnik]

Berkshire is 60 years.

[Josh Brown]

Yeah, it's a full. It's a full 60 years. Pretty incredible. All right, first of all, I guess what I'd love to hear from you, John, is how that landed on you when you saw it.

[Michael Batnik]

As you said, I have known nothing. Berkshire Hathaway or Warren Buffett's position at Berkshire Hathaway is slightly older than I am.

[Josh Brown]

Okay.

[Michael Batnik]

Let alone in my professional life. So it's a very strange thought that he isn't going to be there as a constant. The second thought that occurred to me, which I think is one of the many candidates for smartest thing Warren Buffett ever said is what he's looking for. I don't Think Warren Buffett is a genius, as normally understood, but when it comes to EQ emotional intelligence, he probably is. And when he was starting to look for people to take over managing the portfolio again. Chris can correct me if I'm wrong, but I seem to recall that what he was asking for then was emotional intelligence. People who were in control of their own emotions, who knew their strengths and their weaknesses, and who could live with admitting mistakes and so on. And obviously, we're still living in the shadow of the tragic era Joe Biden made in not recognizing that it was time for him to hang up.

[Josh Brown]

Yeah, no, I think he was fine. A lot of people forget their wife's.

[Michael Batnik]

Name, but, you know, it's difficult to admit that it's time for you to stand down. It doesn't take a genius, but it does take somebody with the fairly special qualities to realize and accept that now is probably the time. I better go. The. My curveball isn't quite as good as it was, which in Warren Buffett's case, after 60 years, seems reasonable enough.

[Josh Brown]

That was the other thing I saw. I say this to Barry Ritholtz all the time, so. All right, but. So there's something emblematic, though, of that. He's not a boomer. He's greatest generation, I think.

[Michael Batnik]

Right.

[Josh Brown]

Born in the 30s.

[Chris Davis]

He was born. Conceived, I think, right after the market crash.

[Michael Batnik]

Yes, he was 29.

[Josh Brown]

29. So, okay, so he's of that generation. But I do think we are at a moment where the boomer generation, I mean, these were our clients. So we have these conversations with people. There's a huge number of Americans right now and over the last few years and over the next few years to come that are being faced with that idea of, I may not be fully aware of everything that's going on to the extent that I was.

[Michael Batnik]

Yes.

[Josh Brown]

The admission doesn't have to go further than that. It doesn't have to go into a place where I, you know, I can't take care of myself or I can't think for myself or. It's just I may not be what I was 10 years ago. And I think that a lot of people are faced with that right now all over the country. So I thought that was somewhat emblematic of this kind of changing of the guard that we're experiencing in the economy.

[Michael Batnik]

Yeah, it's the problem of life insurance developed because the problem then was that too many. Too many people didn't live long enough, and now it's all about pensions. Because the problem is too many people in Many ways live too long or live longer than they were ever planning to.

[Josh Brown]

Right.

[Michael Batnik]

And it's very emblematic that the guy who's done as much as he has for boosting the savings of many people also works out that he needs to. Works out that this is a good time to leave.

[Chris Davis]

Right.

[Josh Brown]

I think that's apropos. You are, Chris, you are a board director at Berkshire Hathaway. Tell people a little bit about from the inside when that came out, because I know it was a surprise. It was like a not surprise surprise. People understood the succession, but maybe not the timing of the announcement.

[Chris Davis]

Well, I'll give you first a big disclaimer. I've been going and attending Berkshire meetings since about 1989 and one of the first stocks I ever bought and am definitely a card carrying member of the cult. So everything I say I should be. I'm talking as a longtime investor and owner and deep fan of, of the company.

[Josh Brown]

However. It sounds like there's a however.

[Chris Davis]

Well, I just want to say that, that, you know, the. I just, I, I never want to ever be in a position as if I'm speaking for Berkshire or, or speaking as a director. So that is sort of a caveat. You know, what I'd say is if you went to see, you know, Babe Ruth playing, you know, late in his career and, you know, if he was 44 years old and had won the World Series and he announced his retirement, it would be both a surprise and not a surprise.

[Josh Brown]

Yeah.

[Chris Davis]

So, you know, the funny thing is I was sitting next to my dad when the, when he made the announcement. And I was at sitting next to my dad at my first Berkshire meeting.

[Josh Brown]

That's great.

[Chris Davis]

And it was shockingly emotional and surprisingly so, because in some ways, as I say, it's not a surprise. This has been a transition. I went back to that first meeting and realized that today, I'm older today than Warren was at that meeting. And one of the questions I asked him at that meeting is what about succession? So.

[Josh Brown]

We got your answer. You had to wait. You had to wait a minute. You got your answer. All right. When you say it was emotional in the room, can you describe it?

[Chris Davis]

Well, I think there was this sense, I mean, in a funny way, it was, you know, when Charlie died, he was 99 and three quarters. Right. Who could be surprised to get the phone call? And yet he was also eternal. Right. So there was something. He was so timeless and he had been so much a part of our sort of universe for so long that in that way it was Like a parent being gone. It's natural in the order of things. But you also, your whole existence, they've been there. So it feels very unnatural.

[Josh Brown]

It's incredible that he made it to 99¾.

[Chris Davis]

Yeah, yeah.

[Josh Brown]

Nobody asked for an autopsy after that one, to your point.

[Chris Davis]

Although I did. I did ask him what he wanted for his birthday and he said, oh, I'd like a paternity suit. I want some young good looking woman to accuse me of impregnating her in a moment of passion.

[Josh Brown]

Right.

[Chris Davis]

And you can get away with saying.

[Michael Batnik]

That when you're 19.

[Chris Davis]

And he said, I would wish for it to be in the LA Times for all my friends to read.

[Josh Brown]

Well, he escaped that one. But people in the room I thought I loved it seemed like very impromptu, like the standing ovation. And they stayed up. And I can't read him because I don't know him personally, but he seemed emotional about it.

[Chris Davis]

Yeah, it was. I mean, certainly he didn't start crying. But the sense I felt in the room was this incredible, incredible gratitude and the sense of an entire 39,000 people wanting him to feel that sense of job well done. You know, there's an old Episcopal hymn, Church of England hymn, Come labor on. And the last line of the last verse is, you know, at the end of all of this laboring through the morning, through the heat of the noon, through the afternoon, into the dusk. At the end of the last verse it says you'll hear your master's voice saying, well done. And I think there was this enormous outpouring from this crowd of wanting that to. To be conveyed. It was one hell of a run.

[Josh Brown]

If the job well done, if the job itself was creating shareholder value and building a company, it would be impossible to envision a scenario where somebody could have done it better.

[Chris Davis]

Well, but really it's not. In a sense the transition is even that will really. Warren would say that would be his legacy. He's built Berkshire to last. And you can think of so many iconic CEOs from Jack Welch, Sandy Hank. You know where that transition was, was really went out at a high and often left a success or something that was really stressed. And I think the culture at Berkshire is so much the opposite. I always said there are very few CEOs that want to make their successor's job easy, that feel a sense of duty to successor nearly as much as Warren and Charlie.

[Josh Brown]

John these days they come back like Howard Schultz had to come back. Bob Iger had to come back.

[Michael Batnik]

John Pepper a few years ago, procter and Gamble.

[Chris Davis]

Yeah. United Health has a returning.

[Josh Brown]

Yeah, it's Chris's point that's not easy to do with, with any type of organization. But something as sprawling and complex as this, it raises the stakes because.

[Michael Batnik]

Yes.

[Josh Brown]

How, how does any one person fill the shoes of, of a Warren Buffett?

[Michael Batnik]

Well, I suspect they don't. Yeah, I. My best guess, because this is what happens to conglomerates is that it probably will be split up at some point in our lifetimes. Not swiftly, but it's just so difficult to make this thing work. And it's hard to think of anybody. I mean, again, Jack Welch, we've just mentioned Jack Welch. That was an amazing conglomerate that ceased to function as harmoniously as it had been almost as soon as the great architect moved on. So I would imagine that. What not knowing. I've met Warren Buffett, but I can't say I know him. But I would imagine that what he's looking for in successes are people who will have the calmness and the judgment to see when it's actually in the best interests of their shareholders to begin to take that empire apart. I don't think they should be in a hurry for it. I certainly don't think they should take any less than they can. But there probably will become a point when it's not worth as much as the price.

[Josh Brown]

So he did go out on top and the stock hit all time high in market capitalization the same week that he made this announcement. I also think having to your point, it's not one person. So having Ajit Jain stay on at insurance and having Greg as CEO and then having the investment lieutenants running the portfolio, you don't need one person. And then having his son as the chairman. So you've got the nucleus of something that could continue in its current state.

[Chris Davis]

Well, I'd only push back to say I don't think that it's any way obvious that given the unusual structure of Berkshire, that there's a scenario where it should be worth more. Separately, there's enormous efficiencies to the structure that they have in the ability to allocate capital across the businesses. And Warren's made that case and I think it's unarguable. I think an interesting thing to think about is one company I like to think about is Exxon. And so let's say Standard Oil. If I was to ask you to name the second or third CEO of Standard Oil, I bet you'd be hard pressed. And yet Standard Oil was among the most valuable companies on Earth for 13 decades. And because it was built to last. And what I mean by built to last is you had two factors that the builder genius John D. Rockefeller did that are perfectly analogous. One, he built and put together incredibly long lived assets.

[Michael Batnik]

Yes.

[Chris Davis]

So think of the executive compensation plan at Exxon vest 10 years after the retirement of the CEO. Right. That's unique in corporate America. Yeah, that, that, and that ties to the second point about Exxon is it was also built with a very idiosyncratic culture that resisted Wall Street. Remember the old saying at Exxon was governments come and go, but we're Exxon.

[Josh Brown]

Yeah.

[Chris Davis]

It was a long term engineering, rational culture that resisted fads. And I would say those two things without any cult of personality after John D. Rockefeller enabled to this very day Exxon to be one of the most valuable companies on earth for whatever it's been.

[Josh Brown]

It's like a belief system. It's like a belief system and I think in the case of Berkshire is a pretty strong, you could call it a personality cult. And to some extent, of course, I mean obviously to some extent it is, but I also think it's a cult.

[Chris Davis]

Of ideas and rationality. Right. In other words, the idea is that it resists fad, it's hyper rational. You talked about emotional intelligence or thoughtfulness. It's very long term oriented and you have very long lived assets within that company. So I think in that sense I always think of that as the sort of model that I can imagine.

[Josh Brown]

Yeah. Wall street wrote a report, they said they need Greg abel to be 36% more folksy. That's, that's the bulk case is they need him tossing newspapers at, at fake doorways and eating lollipops. So if there's any way he can do that, it'll be interesting to see if and what, and you know, changes. And you both kind of sound like you don't expect any big changes anytime soon. I don't either.

[Michael Batnik]

Well, he's sitting on an awful lot of cash. So if some of the scenarios for a big market break come true, which I can certainly believe they might, then yeah, they might get the chance to do that.

[Josh Brown]

I want to make a deal quite.

[Michael Batnik]

Early on, but yeah, they built up.

[Josh Brown]

$300 billion worth of cash, which is in absolute terms a lot of money, but also in relative terms, it's one of the highest cash balances versus the rest of the investment portfolio the company has ever had. So in both relative and absolute terms, a lot of money. And my idea was probably he wants to leave a clean slate for the succession and to. Yes, of course there weren't huge opportunities in their mind. If there were, they probably would have jumped on it. But I also think a lot of the urgency wasn't there. And I want to quote you, John, something from the Wall Street Journal today, and I think this kind of feeds into that idea. A Wall Street Journal reporter got Buffett on the phone and asked him, why now? And this is what he said. There was no magic moment. How do you know the day that you become old? I didn't really start getting old for some strange reason, until I was about 90. I love him, but when you start getting old, it does become. It's irreversible. He began to lose his balance occasionally and sometimes had trouble recalling a person's name. Suddenly, the newspapers he read looked like they were printed with too little ink. So why do an elephant gun size deal? I suppose over the last four years, if that's the way that you've been feeling?

[Michael Batnik]

I mean, it's possible that you continue. I don't think he's lost his emotional intelligence. The fact that he recognized his own, you know, those elements of his decline shows that, yes, he probably has a higher bar. He needs to be even more convinced before he presses the button on a deal than he normally would be. Which is a wonderful example of what it is to be. What it is to be in control of your emotions and why that's what really matters. Just thinking of. I knew there was a quote. I was trying to think of that. The worst succession plan I ever heard was when Sumner Rebstone, who I think was late 80s, when they asked him this.

[Josh Brown]

Yeah.

[Michael Batnik]

Asked what his succession plan was, his reply was, I don't intend to die.

[Josh Brown]

Yes. And how did that go? Not great.

[Michael Batnik]

Amazing. To relate to the Turian of Boston Latin. But he was mortal.

[Josh Brown]

Yes.

[Michael Batnik]

Yes.

[Josh Brown]

Well, I think he spent 20 years fighting in courts with his daughter, and I think at one point his two caretaker nannies or nurses had control of the voting rights of the company. He was a living ghost for about five years and the nannies were running the show.

[Michael Batnik]

You might want to follow the Buffett example rather than the Sumner Redstone example.

[Chris Davis]

I think that is something you could extend to all sorts of aspects of life.

[Michael Batnik]

Yes, yes.

[Chris Davis]

Professional life.

[Josh Brown]

I like that. All right, so now let's. Now let's look at the dark side of Warren Buffett. Because John wrote a column that stirred up a lot of emotions. I sort of, I understood the premise of what you're saying, and I don't. I don't reject the premise out of hand, but I want to ask about the piece, and then I want to ask about the reaction to the piece. First, let's start with the title. Warren Buffett versus American Capitalism. Is that the editor? Is that you?

[Michael Batnik]

I signed off on it. It's the editor, but. All right, I'm given a choice, and that's aggressive. That was to decide whether people. Whether you're gonna. You've got to get. I mean, it's. With any matter of a headline, you've got to be something that somebody will. Well, yes, but I mean, yes, we do actually want people to click on our pieces.

[Josh Brown]

The answer is definitely.

[Michael Batnik]

Is this profit bait? Is this revenue bait? You know, so, anyway, can I tell.

[Josh Brown]

You a funny story about this?

[Michael Batnik]

Yes.

[Josh Brown]

You wrote it on May 9, 2025. Was that right before or right after the announcement? Right before the Berkshire weekend?

[Michael Batnik]

Oh, it was just after.

[Josh Brown]

Okay.

[Michael Batnik]

I was asked to write. I was asked to come up with some. Write a piece after it has happened.

[Josh Brown]

Okay.

[Michael Batnik]

And Basically, there were 2 million pieces stating correctly that Warren Buffett was wonderful. And so I.

[Josh Brown]

No, I like that you went that way. But I want to tell you the story.

[Michael Batnik]

Points of piling on with yet another. You just need to look at his investment returns to see the man was special. Let's at least see if there's something to defend.

[Josh Brown]

So before we get into the meat of it, the way I get my news, I'm off of Twitter. The way I get my news is Google News. So the algorithm knows me pretty well. And it has a for you column, and it tells me what you know, gives me my opinions back to me. But in the words of other people, no, it tells me what I'm going to want to read about. And all I saw was Bloomberg opinion and the title, Warren Buffett versus American Capitalism. And I said, if Barry Ritholtz wrote this article at Bloomberg, I'm literally going to drive to his house and choke him. Thankfully, it was you drive to my.

[Michael Batnik]

House and choke me. Which.

[Josh Brown]

No, no, no. That I could survive. That I could survive. Shout to Barry. All right, so. So I want to. I want to read your intro to the article and then. And then tell us what your. What you were thinking. Warren Buffett, in the eyes of JPMorgan Chase's CEO Jamie Dimon, represents, quote, everything that is good about American capitalism and America itself. Investing in the growth of our nation and its businesses with integrity, optimism, and common sense. 99% of the people who hear that quote would say, yup, John said Does he really?

[Michael Batnik]

Yeah.

[Josh Brown]

All right, give us the story.

[Michael Batnik]

Now, let's be clear that I never at any point questioned the final three or four words of Jamie Dimon's piece, that he did it with humor and integrity and whatever else it was.

[Josh Brown]

Okay.

[Michael Batnik]

I think there are two points I wanted to make. The first is I'm not sure he's an exemplar of what is great about American capitalism, because the mere fact that Warren Buffett's career happened and that he existed and that he could do what he did shows that there's something fairly inadequate about the way the rest of American capitalism is done from a wealth concentration standpoint.

[Chris Davis]

And.

[Michael Batnik]

Well, no, no, there is that, but I wasn't trying to get sociological about it. But the. The notion that if you look at the way most money is managed now, it tends to be written, tends to be done in a way that Warren Buffett shows you can do better than, or at least if you're as good as Warren Buffett, you can. The amount of money that Wall street makes offering new quantitative models to take, approaches which know for a fact they're not going to beat Warren Buffett or that only offer you impressive returns by taking the kind of risks that Warren Buffett would never take. In many ways, I also have great respect for Jamie Dimon. I don't think he is an example of everything that's good about American capitalism so much as showing up a large swathe of the rest of American capitalism.

[Josh Brown]

So he's very good at playing a game, but he's not an exemplar of something that you think overall is an.

[Michael Batnik]

Exemplar of something that would be wonderful if all of American capitalism were like that. But he tends to demonstrate that, in fact, American capitalism isn't all that wonderful. The idea of an American capitalism where every CEO of every company was as good at their job as Warren Buffett, it's never going to happen. I would like to live in that country.

[Josh Brown]

Okay.

[Michael Batnik]

The second point I wanted to make, which is the one that, that really got people angry, was that Warren Buffett has this very, very famous concept of the. The wide economic moat. Yeah. Which is if there is any one key to his success, arguably that's it. That what he's most interested in is.

[Josh Brown]

Non disruptible, difficult to compete with companies.

[Michael Batnik]

Yes.

[Josh Brown]

Yeah. I think most people would agree with that.

[Michael Batnik]

And obviously it's not easy to find them because everybody can see that it's a good idea to find such companies. And Warren Buffett has been better at finding them. Than anybody else who's ever lived. So I'm not saying it's easy to do that.

[Josh Brown]

That's the part that you got the most blowback from.

[Michael Batnik]

Simply because what that tends to be.

[Josh Brown]

Aside from Chris like other people.

[Michael Batnik]

Oh, no, no, Chris. I mean, I've got one of the rudest ones here.

[Josh Brown]

If you'd like me to read this, I would.

[Michael Batnik]

Okay, so Buffett versus American Capitalism article only. This probably sounds better in a British accent. I imagine the guy who wrote it doesn't have a British accent.

[Josh Brown]

It sounds more like me.

[Michael Batnik]

Only the wormy, envious parasites in the MSM find it necessary to write unsophisticated, passively aggressive drivel about Buffett and his incredible success. Your bloviation is even more ironic considering you are a W2 junkie working for a billionaire who made his own moats by becoming the largest and arguably most watched financial news purveyor. So let's bring Mike, poor Mike Bloomberg into this while, yes, I'm allowed to say this word on this podcast.

[Josh Brown]

Yeah, say whatever you want.

[Michael Batnik]

Who the are you? A writer. A craft with so much innovation and positive human impact to judge businesses that employ hundreds and thousands of people and purchase billions of dollars of inputs are not good for America, Unquote. In your insular, zero economic value opinion writer world, you create nothing but hot subjective air and yet have the hubris and ignorance to denigrate the world's greatest asset manager and ultimately philanthropist who has created massive, lasting economic value for millions of people all over the world, including donating his billions to many charities. What a pathetic, insignificant little parasite you are.

[Josh Brown]

All right, Duncan, do you want to.

[Michael Batnik]

Take a deep breath and tell us what he really thought?

[Josh Brown]

Hold on. Did this guy. Did this guy identify himself?

[Michael Batnik]

Yes.

[Josh Brown]

Oh, okay.

[Michael Batnik]

I'm not going to do that. I don't.

[Josh Brown]

No, no, no, it's okay. Is it somebody that works in finance or a professional investor or just like a regular person?

[Michael Batnik]

Seems to be just a regular person.

[Josh Brown]

Okay.

[Chris Davis]

Have you been issues?

[Michael Batnik]

Yeah, well, yeah. I mean, I've had letters which were not obviously as quite as over the top outspoken as that, but I've had note letters on. On a similar tenor from people's corporate email addresses and from their Bloomberg. Okay.

[Josh Brown]

I've been on TV for 14 years. You should see the shit people send to me.

[Michael Batnik]

Oh, yeah.

[Josh Brown]

If somebody owns a stock and you say the slightest thing that's not positive about that stock.

[Michael Batnik]

Oh, yeah.

[Josh Brown]

It just. You're opening up the floodgates. But how did you respond to that? Like how did that land on you?

[Michael Batnik]

To be honest with you, that particular one, I laughed uproariously, shared it with my daughter, my wife, my parents.

[Josh Brown]

What else could you do?

[Michael Batnik]

Shared it around the family. I mean, there comes a point when you can't respond to something like that. Like, dear sir, I am not a worthless parasite.

[Josh Brown]

Yeah.

[Michael Batnik]

Yeah. And I am not. You can't. You can't.

[Chris Davis]

I like what Bill Buckley used to do when people would write an angry letter to him at the National Review, and they would say, and finally, cancel my subscription. And he would send a postcard back that said, cancel your own damn subscription.

[Michael Batnik]

No, in general, it was interesting, I should say. I got quite a lot of very positive feedback as well, almost all of it from people in the industry who are just delighted for anybody to say anything negative at all about Warren Buffett.

[Josh Brown]

Yeah.

[Michael Batnik]

I did get.

[Josh Brown]

And by the way, you didn't say anything negative personally. You were describing a system in which Buffett has been able to thrive.

[Michael Batnik]

Oh, I may. I was very careful to make clear. I said this at the end, one of the most remarkable. There are so many remarkable things about Warren Buffett to have made that amount of money over that period of time. And I could count maybe two or three intimations of impropriety in the whole time he was making that kind of money. It's extraordinary that you can make that kind of money while still.

[Josh Brown]

And not even personal impropriety. Like.

[Michael Batnik]

Yeah. Stayed married to his wife until she passed away.

[Josh Brown]

Yeah. The guy from Precision Cast Parts was not great, but that had. Buffett got rid of him. The Solomon Brothers episode.

[Michael Batnik]

He bought the company the American Express salad oil thing very early.

[Josh Brown]

Right. These are so minor compared to.

[Michael Batnik]

Had to get out of that.

[Josh Brown]

Agree.

[Michael Batnik]

Yeah. So certainly if I tried to make some sort of scapeless attack on the man's character, that would have been. Seriously.

[Josh Brown]

Here's where I took it. Here's where I took issue. I'd love to hear what you guys think. It's true that he likes to invest in businesses with wide economic moats, to which I would say, a, who doesn't? And B, let's not act like for every Coke, there's not a Pepsi. For every American Express, there's not a Visa. For every Burlington Northern, there's not a. I don't know the names of the other railroads.

[Michael Batnik]

In the case of American Express, bear in mind that he also has Visa and MasterCard.

[Josh Brown]

Okay, fine, fine. Fair.

[Michael Batnik]

It's only a triopoly. But he does have all three of them.

[Josh Brown]

Yeah, I Do I do, I do think. I do think that there are countries and there are companies in countries, specifically in the emerging world where there are true economic monopolies. They're government mandated. They don't even try to hide it or pretend it's not that way. In the case of the Berkshire businesses, if you name one, and I know there are 400 businesses, he owns 300 for give or take, if you name one, I could probably without a Google search, tell you what their competitor is.

[Michael Batnik]

That's fair enough.

[Josh Brown]

Okay.

[Michael Batnik]

Obviously the word you can get into, you can get into, you can get into. Sort of very nitpicking about the language. You can, you could. A monopoly really does require just the one company. You can refer to monopolistic factors. When there's more than one company, you can change the words oligopolistic or you can just continue to say monopolistic. But yes, it's the same. It's only a somewhat watered down version of the same thing. So in terms of where the moats come from, I should also say I'm fascinated by this because I actually covered when I was at the Financial Times, I was the Mexico bureau chief for four years at the point when Carlos Slim took over as the world's richest man. And he basically had the deepest, most impregnable alligator filled moat you could possibly imagine built for him.

[Josh Brown]

He ran the cell phone company and.

[Michael Batnik]

Okay, but the thing that was interesting was that he successfully bid for the landline monopoly and then stayed so far ahead of the regulators and the lawyers that he parlayed that into the cell phone monopoly.

[Josh Brown]

Right.

[Michael Batnik]

And he made, he got the money to do that in the first place by doing. He, like Warren Buffett, recognized the importance of cash. He owned more or less every cigarette distributorship in Mexico. And the way that tax collection for cigarettes works in Mexico is that you, the company collect the tax when you sell the cigarettes to the punter and you only pay them over to Hacienda the, the, the, the treasury once a year. So you've got an even better version of a carry that you can, a float that you can invest than Warren Buffett got with before.

[Josh Brown]

You pay your taxes. You can earn money on that money.

[Michael Batnik]

And, but anyway, so I am fascinated by monopolies and how they stay on. But in the case of Slim, he was gifted a monopoly, almost literally gifted. He didn't even pay enough for it when they sold it and then stayed ahead of the law to make it a far bigger monopoly in far more areas over 20, 30 years now, for Buffett relevant example of something which is not a monopoly in the sense that there's no competitor, but where it's behaving in a way that isn't really what we like to think of as capitalism. Creative destruction, building, building the world. There is Coca Cola, which is the biggest. It's far more dominant over Pepsi than in Mexico than it is in the us. Mexico is its second biggest market total. Well, maybe that's out of date by now, but Vicente Fox was the head of Coke in Mexico and parlayed that into becoming the president. The Mexican recruitment of 711 Oxo belongs to Coke.

[Josh Brown]

So they start the shelves with what they want.

[Michael Batnik]

They have vertical integration. You don't get any Pepsi there. You get plenty of stuff that isn't Coke in terms of brands for products that they don't have a competitor to go to any tiny, pathetic, poor pueblo out in the countryside, there will be a beautiful table outside the restaurant with the Coca Cola logo on it, all the umbrellas have Coca Cola written on them, etc. It's not a monopoly in the sense that nobody can compete with them, but it's just very, it's very hard. But in terms of, they have built verticals from it to make themselves impossible to compete against in huge swathes of the economy and to make it very much easier for them to set their own price in many contexts. Now that is monopolistic behavior or it's, it's totally rational behavior for a capitalist to do. And if you've got a relatively weak government like Mexico which will let you do it, why shouldn't you do it? And they obey the law. But as somebody who cared about living in this middle income country that is forever trying to break through to becoming a wealthy country and failing to do so, I would have preferred a kind of capitalism that actually, you know, disrupted and creatively destructed and yeah, Coca Cola is one of his most famous holdings. I think that's a good example. Yeah, I'm not a socialist, but there are varieties of, there are varieties of capitalism and that's not necessarily the one I'm happiest with. Even if it's one that I guess.

[Josh Brown]

I get, I get the idea that that's an emblematic investment for Berkshire. It's one of the stocks they've made the most money on. It's also at an all time high right now, which I think would surprise people. What, what's always struck me as so funny about Coca Cola is that for most people you sit in a restaurant and you say I'll have a Coke. I'll have a Diet Coke. Yeah, we don't have Coke. We have Pepsi. Who cares? Sure. Like I always, I don't know, I always thought, I thought of those two things as being interchangeable and.

[Chris Davis]

Speak for yourself.

[Josh Brown]

Okay, yeah, all right, go on.

[Chris Davis]

But no, I'd say first, I read everything that John writes. I think he's one of the most informed, thoughtful columnists. And when you talked about if Barry had written it, you were going to go over and strangle him. I was going to go over and strangle John on this one. And the reason is, I think that the language of using a term like monopoly is provocative. And it's provocative in a way that the less you know, so unlike the points that you're raising, the less you know, the more you think of it as something illegal. Right. A monopoly bad, and so to say.

[Michael Batnik]

Now I think my readers are probably reading it to the level where that may not be, but I can't.

[Chris Davis]

Well, that's true.

[Michael Batnik]

I do take your point.

[Chris Davis]

But it's also, and then when I look at, you know, if I look at the portfolio of any successful large cap investor. Let's just start with that. You know, you're, you're looking at a couple of hundred companies that almost by definition exist in what you would call an oligopoly because three or four companies have a big position.

[Josh Brown]

This is a power law, though. This dominates everything.

[Chris Davis]

It's a power law. And so, you know, you think about the, in the history of Berkshire, they had huge investment in Wells Fargo, they had a huge investment in, in cap cities, abc, you know, these. So I think when you think about a moat as being inherently monopolistic versus the idea of a, A, for example, Costco is. Berkshire doesn't own Costco, but we own Costco for a long time. And you could argue Costco has no moat whatsoever. But I feel, by the way you were writing, you might argue that, oh, it's another oligopolistic advantaged wide moat business. And yet it's fiercely competitive. And it's competitive because it's low cost. Geico is competitive.

[Josh Brown]

I guess moats are not a negative thing. So if you open a Walmart next to a Costco, you're probably gonna take 20% of its sales away, but you're not gonna take 100% of its sales away because the shopper at Costco is paying a membership fee. And that is the moat that they have built so that they still exist. And Sears doesn't.

[Michael Batnik]

Kmart doesn't Gillette Razors. Once you've got the razor, you then.

[Josh Brown]

This is my handle, therefore I buy the bl.

[Chris Davis]

Want a cool Charlie, Charlie Costco story. Just because I'm looking at him here. But, but if you wanted to think of something extraordinary because you could look at that membership fee and say if instead of there's certain people that will not pay a membership fee. Right. Just they are against it in principle or they're disorganized. So there are customers that do not go to a Costco that would go to a Costco if they didn't have to pay a membership fee.

[Josh Brown]

Yes.

[Chris Davis]

And if Costco raised their prices, the membership fee I think represents about percent of revenue.

[Josh Brown]

But it drives the rest.

[Chris Davis]

Well, it's their tail that wags the very big. Their NET margin is 2%. Their average markup is 10%. Now, I think I could be wrong. I think Walmart's average markup is about 28%. But here's the interesting thing that Charlie said to me once is, is he said if you were to look at the difference in shrink, which is the fancy word for theft, shoplifting, stealing between Costco and the average big box retailer, that would be 100% of their profit margin.

[Josh Brown]

Yeah.

[Chris Davis]

So people steal less. And remember, theft is half employees and half shoplifters. And that's an incredible thing. And of course, part of that is the membership fee. Right. If you give it to us, it's.

[Josh Brown]

Very unlikely you're going to register as a Costco member and then try to loot the place.

[Chris Davis]

Well, in the same way that if you're a government employee, you are likely to be a safer driver.

[Michael Batnik]

So they give him.

[Chris Davis]

If you were a usaa, you're more army officers less likely to commit fraud against an insurance company. So you were intelligently choosing who you wanted as customers, but using a separate variable. And so it's an interesting part of Costco's model that I admire. But, but anyway, so I just felt that Monopoly was a bit provocative because it, it whereas moats, I think, is an. And I don't think they're the same thing. I think they are different things because of, you know, a culture can create.

[Josh Brown]

On the Middle Ages, many moats were, were, were, were taken. Were taken.

[Chris Davis]

Well, did you quote Elon Musk in your article or did I read that.

[Michael Batnik]

After I quote, I quoted. No, I quoted Elon Musk, made it fairly clear that I thought he'd been proved wrong.

[Chris Davis]

Yeah, but, but he said, what was it?

[Michael Batnik]

Moats?

[Chris Davis]

And he said moats are really, really shitty way to defend the castle, you.

[Michael Batnik]

Know, given what's happened.

[Josh Brown]

Moats are lame. Elon Musk. Moats are lame.

[Michael Batnik]

I then made the point, after what has happened to Tesla's sales in the last few months.

[Josh Brown]

Yeah.

[Michael Batnik]

Turns out he could use a moat.

[Josh Brown]

He might be looking for a moat. All right, let's.

[Michael Batnik]

His brand doesn't give him the motor.

[Josh Brown]

Let's close the chapter on the Berkshire stuff. I think the big story right now in the markets is obviously we just had this huge burst of volatility that came and went just as quickly. It's one of the most remarkable things I've ever seen. One of the stats that Sean put up, I forget, I think it's the second best 27 day return for the S&P 500 ever from the lows of April 8 to now. I forget if that's the actual stat, but it's something crazy like that.

[Michael Batnik]

Yeah, I've played around with the numbers. It's up there with the four or five biggest rallies ever.

[Josh Brown]

Yeah, I think we had a, I.

[Chris Davis]

Think there was a post Covid. There was a big one.

[Michael Batnik]

Yes.

[Josh Brown]

I think There was a 15 day stretch of all gains consecutive. It's just the, the NASDAQ 100 is up 25% from the low in, under, under four weeks. It's. So in other words, the largest technology companies added back a quarter of their market cap in like a month and.

[Michael Batnik]

They were the best, understood, best known companies on the planet.

[Chris Davis]

Yeah.

[Josh Brown]

So that tells you how efficient the market is.

[Chris Davis]

Yeah.

[Josh Brown]

All right, Chris, you added some notes here about the disruption of the turbulence in the markets. I'd love to get your take on this.

[Chris Davis]

Well, I think one of the most peculiar tensions in the market is that there are three massive transitions happening at the same time right now. So there's this monetary transition, right. We were, we had 15 years of functionally free money, no inflation. Magical thinking made up theories that deficits don't matter. You know, that interest rates are free. Earnings 20 years from now are worth as much as earnings today. Crazy optimistic growth rate. So obviously that began resetting about two, two and a half years ago. We saw some UK pension plans have a blip. We saw, you know, a few, you know, First Republic, Silicon Valley bank have a blip. We've seen some commercial real estate came and went back, boom, came and went. But I, I would say we're in the early innings of the implications of that transition. Yes, that, that is good, that, that has a long way to go. Return of real interest, real Interest rates and debt rolling over that was at 4%, that's going to be a 10 or 11. And, and so there'll be big changes there. There's a lot of hidden leverage in the system transition. One that's one transition to. Is this geopolitical transition. Right. We. My, my whole life has been the story of globalization. I just finished a beautiful biography on Keynes, you know and, and just in time. Yeah, exactly. Now I understand this and everything about globalization versus national, all of that is becoming unwound in a way that we don't know how it will play out. But it is a massive shift and it will shift supply chains, it'll shift margins, productivity, inventories, all sorts of things, returns on capital. Third transition is of course we are in what will be the greatest transition price since the industrial revolution, of course with AI and, and it's it. We are in the. Not even the first inning of a.

[Josh Brown]

The foothills.

[Chris Davis]

Yeah. So think of those three big transitions on one side and then on the other side you have the market at not an all time high valuation, but at high valuations.

[Josh Brown]

Elevated, elevated valuations, top decile for sure.

[Chris Davis]

High concentrations, very optimistic growth rates and essentially a belief that momentum is a good way to invest. Which the idea of momentum means that what happened in the past is going to continue. So you have.

[Josh Brown]

For a short time at least. Yeah.

[Chris Davis]

So you have massive disruption and we're.

[Michael Batnik]

Only in just after I've got out.

[Chris Davis]

Yeah. Coupled with complacency and that rubber band is very, very taut and so if you were to ask me if, you know, I think we've got seen the end of volatility, I definitely don't think so. I do think that the indexing wave has been a feedback loop like a momentum trade. The more that works, the more it tends to work. The US versus the rest of the world. Was it momentum trade that's worked for 20 years. Growth versus value momentum wave. That's worked, has it? So I think that we are in a period of huge transition and yet we have complacency in valuation.

[Josh Brown]

Well, I was going to say that.

[Chris Davis]

Makes it pretty interesting.

[Josh Brown]

This is what's so hard about being an investor. Now John, I'd love you to weigh in on this. You've got to hold two opposing thoughts in your head or else you will lose your career. So everything that you just said makes perfect sense. Then I look at the top stocks over the last two weeks or three weeks and I could have blindfolded myself and recited them by heart. It's Tesla, Apple, Microsoft Meta Nvidia. So the more things change, the more they don't change. And for the investor class, this is, at this point, this is all they know. They know it works. They know it works every time. And the experts keep telling them this is unnatural, it's not gonna continue. And then they're like, holy shit. For the 20th time in a row, it just continued.

[Chris Davis]

Capitulation works at both sides.

[Michael Batnik]

What that reminds me of is my first stint covering Wall street. When I first met Chris. 97 or 98 was in the late 90s. And as you probably remember, there was a succession of really quite scary market breaks. 97,89, irrational exuberance, currency crisis, LTCM, Hong Kong, the Asia crisis. And every time you were right to buy the dip. And every time it was retail at that point, the army of Schwab and Fidelity would. That's right, E trade then. And it just. Every time they were proved right and every time they were gained, they gained in confidence to keep doing it the next time. And then finally it didn't work.

[Josh Brown]

Well, the multiples eventually became irrelevant because what's the difference? Who cares what price I'm paying? It's going up.

[Michael Batnik]

Yeah. Which to be fair to Keynes is his definition has a very valuable definition of speculation is that when you don't. When all you are concerned about is whether the price will rise rather than. And you plainly had reached that point.

[Josh Brown]

Counterpoint, that period you describe is a very. I was there for it my formative years.

[Michael Batnik]

Yeah.

[Josh Brown]

A very compact three year period of time from, from 97 through the end of 99. You're absolutely right. How the way people were acting by the time it ended, it was in ludicrous mode. This has now been going on for 10 years.

[Michael Batnik]

True.

[Chris Davis]

Yeah.

[Josh Brown]

But the cloud computing era kicked off in 2015.

[Chris Davis]

Yeah. But 72 had a lot of this characteristics. 72 is a culmination, the nifty 50s, something that really started in the early 60s, you know, when Larry Tisch famously said, get me a kid. Like I, I can't keep up with this market, I need a kid. And you had a whole generation of investors that had gone through the crash of 29 and then you had a huge age gap and then you had the kids who had never seen the jerry size. Yeah. So I think the real question is that are we approaching something that's more like 72 or something that's more like 2000? And the difference between those two is that in 2000 the market went down 9%, the NASDAQ went down A hell of a lot more. But investors like us and investors that were sort of active stock, because we're up like 10%, 15%. So you didn't outperform by 300 basis points. You outperformed by 2000, 3000. And that was. Whereas when 72. And there wasn't much of a trigger in 2000. Right. I mean, of course there was 9, 11.

[Michael Batnik]

That was later.

[Chris Davis]

That was later. And that had the psychological effect, but you didn't have sort of economic calamity. You had psychological reset and bubbles being burst. 72 marked sort of the beginning of a calamitous change in inflation. So stocks collapsed. We had stagflation all the way through this as more.

[Josh Brown]

So you're saying you see this as more potentially akin to the 72 ushering in versus the 2000.

[Chris Davis]

I would say those are two bottles that people should keep in their head.

[Josh Brown]

God, let's hope it's. Let's hope it's neither.

[Chris Davis]

Well, but when you think of the inflationary pressures that could be unleashed, when you think of just some of what we went through in the last month in terms of geopolitical chaos, the loss of American hegemony, current huge currency fluctuations, a lot unfolded very quickly. And remember, just think of the oil embargo like something that had this huge change. And so you could see things like that and you go back farther. But I think those are the sort of two models that I think people can toggle between. But either way, it seems like a hell of a good time to focus on durability, valuation, cash that you're getting up front, that gives you a much more convexity. You have much more ability to adapt. Even Mark Zuckerberg wrote that fabulous memo about four years ago where he said, you know, the great thing about cutting costs and having more money now is it allows us to adapt to a changing world. Well, that was like ringing the bell that the end of free money was over. And I think that's where, you know, moving your portfolio. I think our portfolio is a. I don't know, 14 times earnings, but yet we've got companies like Meta in there. And so I think that. I just think the stuff that's got to grow 20% a year for another decade or two and have 50% margins for another decade. There's a lot of optimism in some of those.

[Josh Brown]

John, what do you think?

[Michael Batnik]

I can't disagree. I've been banging the drum for value for God knows how long, and every so often I'm proved right. But mostly I'm Not. But I think carrying on from what Chris just said, I certainly agree that there is a distinct element. There is a vibe of Richard Nixon ending, Bretton woods, the end of the gold peg in 71. There is a sense of a bunch of different trends coming to a fuition, coming to a conclusion that in many ways what Nixon was doing then was recognizing that this couldn't last. It wasn't sort of some immense.

[Josh Brown]

That the dollar was exchangeable for its equivalent value. He said, forget that. We're doing something different now.

[Michael Batnik]

And the Liberation Day tariffs, It's fascinating to work out exactly how. Well, we still need to see exactly where the tariffs end up. But in terms of a final, clear recognition.

[Josh Brown]

Oh, no, we know it's 30, but everything is exempt.

[Michael Batnik]

If they're that cynical.

[Josh Brown]

That's what the stock market decided.

[Michael Batnik]

That's what the stuff. I wouldn't. I'm prepared to leave some money on the table if necessary and let other people make that bet if they want to. But there is something very similar. There is a similarity of the moment in terms of the old way of doing things. Is. Isn't working and we're giving up on it, which is the gold peg and fixed currencies for Nixon, which is ultra globalization.

[Josh Brown]

So you and Chris share that insight about the end of globalization. We don't know what it means. We just know it's coming to an end.

[Michael Batnik]

Yeah. And it's changing direction. I mean, it's not suddenly moving to no trade at all tomorrow, but new patterns and new shapes will form. In the same way that we went through some very interesting gyrations before we settled on a sort of Reagan Thatcher model that worked very nicely after Nixon, but boy, was that a messy decade before we worked out, before we settled on Reagan and Thatcher.

[Chris Davis]

And what's interesting about what you said about value and beating the value drum, the one caveat I'd give is that with all of these transitions, there are a lot of models, business models that have been carved in stone that are not going to work. So if I describe this chaotic world that we've been in, and I told you that if your portfolio was Diageo, Estee Lauder, Nike, Starbucks, like Safe, Reliable, you know, Anheuser Bush, Kraft, you know, that's a nice, safe, secure portfolio. That portfolio is probably down 50, 60, 70%.

[Michael Batnik]

Yeah, yeah.

[Chris Davis]

And it's such.

[Josh Brown]

It's such a great point. You thought those were blue chips. Those are the most susceptible companies to the disintegration of globalization.

[Chris Davis]

Well, globalization and digitization and the AI Stuff all because, you know, it used to be if you could buy a 30 second TV spot, you, you. It was, it became, I won't say Monopoly, but it became. The bigger companies tended to get bigger because they could buy the ad space.

[Michael Batnik]

It became less competitive.

[Chris Davis]

Yeah. You know, so all beers collapsed to three beers. Right now. How many beers are there?

[Josh Brown]

Well, I could start a brewery, start an Instagram account, a YouTube channel, and I could be doing a level of sales completely outside of the traditional system of paying supermarkets for shelf space, paying NBC and CBS for NFL commercial time. Like that's a, I would argue that's a great thing.

[Chris Davis]

Well, you got fragmentation, but the fragmentation was driven by a change in the way technology, the way people, people consume information.

[Josh Brown]

Right.

[Chris Davis]

And that changed fragmented brands that you can't imagine, can you imagine going into a popular supermarket and they don't sell Crest, they don't sell Colgate, they don't sell Coke, they don't sell Pepsi, they don't sell Budweiser.

[Josh Brown]

Allow me to introduce you to Trader Joe's.

[Chris Davis]

Exactly, exactly. Or Whole Foods.

[Josh Brown]

Yeah.

[Chris Davis]

So that was technology disrupted brands. Now nobody thought of that when the Internet came around, like, oh boy, I have to worry about Budweiser. And I think AI will be like that. So I think the value trade of, oh, I'm just going to swing from growth to value is going to be overly simplistic this time. I think it's really going to have to be. You're really going to want this active overlay. I believe, and of course I'm talking my book, but that it is going to be the ability to have both a reasonable valuation, durable growth and the ability to adapt to changing times. That's a tiny fringe of companies.

[Josh Brown]

So I floated this theory on TV today and of course nobody likes it, which is probably why it's true. I think the stock market is the least cyclical it's ever been. The economy will always be cyclical. It's probably less cyclical than it was in the 70s because it's less reliant on bank funding and factory output. But I think the stock market has effectively become at the high end, collections of companies whose businesses are predominantly subscription based. And because they're not transactional companies, it's less likely that a weakening economy will have the same effect as it would have on the stock market even 10 years ago. So think about the largest market cap companies, Netflix. Is anyone canceling Netflix in an economic downturn? Probably not. I would argue Starbucks has turned itself into a subscription service with the app 30 million app users and your order is waiting for you. It's one button, I would argue that looks more like a subscription than a transaction. This is where all the market cap is. It's in Amazon, which is prime subscriptions, Spotify, which is music. And I guess my point is we're definitely susceptible to an economic downturn in the stock market. Without a doubt. But we used to look at companies like Alcoa and Caterpillar as bellwethers. I couldn't tell you when they report what they had to say or if anybody even reported on it.

[Michael Batnik]

Now Alcoa doesn't go first. Yeah. What have they even called these days?

[Josh Brown]

They could report every week. I don't think anyone would notice. So that observation is only important insofar as you remember that when we invest in the stock market, we're not investing in economic conditions, we're investing in corporate cash flows. We have companies that have made themselves more recession resilient by means of converting their business model from I need you to buy something today to you've already committed to buying this thing and you're probably too busy to cancel it unless things get really bad. And that's a different stock market than we've had through prior economic downturns. How crackpot of a theory is that to explain modern valuations?

[Michael Batnik]

So in terms of.

[Josh Brown]

John hates it.

[Michael Batnik]

No, no, I'm fascinated by it. I'm just trying to think in terms of the Warren Buffett theory of.

[Josh Brown]

Do you believe in inertia? Do you believe in inertia? Like the power, the power of inertia. This is what the whole stock market is now based on, people not canceling things.

[Michael Batnik]

Yeah. My bank account is still with HSBC for no reason. The reason I opened my bank account with HSBC was they had a special offer for students. I got four TDK cassette tapes.

[Josh Brown]

Right, right.

[Michael Batnik]

With my hs. Lord knows how much money they've made out of me.

[Josh Brown]

How bad would the, how bad would the economy have to get for people to turn off the services they're paying Apple for or turn off their Amazon prime membership? Like really, really, really bad. An ordinary run of the mill blip like 2022. That's why the stock market recovered so quickly, because it never happened. It never happened. I don't know what you do with that information, but if this were an economy based on choosing to buy a pair of Nikes or not, we would have a more cyclical stock market.

[Michael Batnik]

Yeah, it's an explanation or a justification. I'm thinking the Buffett metric of market cap as a proportion of gdp. Gdp, yeah, the one he never. That would be a justification for the stock market being a higher share of the economy than usual because so much money making capacities is tied up in a way that makes it safe that you can. I'm thinking it through and I will.

[Josh Brown]

All right.

[Michael Batnik]

In about a month's time. You'll see my column once I've.

[Josh Brown]

And it's not an anti value argument.

[Chris Davis]

No, no, no.

[Josh Brown]

But you know what it's an argument for? We used to argue do I want to invest in growth companies or, or do I want it defensive or cyclical? That used to be the paradigm. It's a bullshit paradigm now.

[Michael Batnik]

Yeah.

[Josh Brown]

The largest, highest multiple companies also these days tend to have incredibly defensive characteristics in terms of how their cash flows come in.

[Chris Davis]

I agree with you. Although I think you underestimate the cyclicality or sensitivity of advertising revenue, which is of course a huge driver of earnings at those companies. Right. When you think of Meta, when you think of Amazon.

[Josh Brown]

Here's my answer to that. I've heard this. Tell me what you think the portion of the advertising that is now moving to Google and YouTube and Amazon's the third largest advertising platform in the world. Do you know Walmart said their advertising business was up 50% year over year? Yeah, 5. Oh, okay. The percentage of advertising moving to those corporations, even if the overall pie is shrinking, is good enough for the stock market. You know where it's leaving mainstream media, Comcast, newspapers.

[Chris Davis]

Yeah, but there's not much left there.

[Josh Brown]

Not much left to take.

[Michael Batnik]

Okay. And so unless they sell Bloomberg time.

[Chris Davis]

But I mean you could just, you could look back at, you know, at what happened, you know, meta's revenue and you know, in the, the last sort of swoon and that caused the Stock went down 70% and now was that.

[Josh Brown]

Revenue or was that spending on the Metaverse?

[Chris Davis]

Well, it was both. It's that their revenue disappointed. So people saw slowing revenue and I huge spending. I think they actually had. They may have had negative revenue and what. But. And then there was the belief tick tock was rising and so on. But you've also got in those big companies, you have Tesla, you have Nvidia. And of course when you add up all their earnings relative to the earnings of The S&P 500, what you would say is well, we got. If those earnings might not be as sensitive, but what amount of the market is vulnerable. And I agree with you that the Nifty50 is a good analogy because the view was it was Coke, Proctor, Disney, Xerox, Polaroid. And out of all those companies that ended up, things like Xerox and Polaroid had huge risks.

[Josh Brown]

Very disruptible, it turns out.

[Chris Davis]

Yeah, and then there were, there were growth companies in there that were 10 year old racehorses, Tootsie Roll, Kodak and so on. But there was also Philip Morris and Coke and some others that if you bought them and held onto them, even if you went down 50% for a couple of years, you did great. And I think the adjustment that needs to be made with the tech investors is just recognizing that these have become stalwarts. Exactly like you say. But stalwarts don't grow 20%. And so having to figure out what is in the valuation expectations for these businesses, is it that they are high growth, you know, 20% year over year, or is it. No, they're growth stalwarts. They're the procter and gambles of this generation.

[Josh Brown]

So this year when I read the Netflix earnings report for this quarter and the Spotify report, I said it's both. Yeah, I said Spotify, think of this. 700 million users. How many companies in history have ever even had 700,000? 700 million?

[Chris Davis]

Yeah.

[Josh Brown]

So like from my perspective, will they be able to get away with another price increase this year? Maybe not. So maybe that limits the revenue growth. But just think of the size of that. That sounds defensive to me. Yeah, unless everyone cancels all at once. I want to ask you guys about inflation. We got a year over year CPI that was up 2.3% in April. It was the lowest CPI reading since February of 2021. I have a chart here, John, let's put up headline and core inflation trends.

[Chris Davis]

Yeah, John wrote a good article about this.

[Michael Batnik]

Thank you.

[Josh Brown]

Okay, is this the last of the tame inflation reports? This seemed really calm.

[Michael Batnik]

Remarkably right by all the criteria. Obviously we all know a bit more about inflation now that we've had some big wave. By all the sensible criteria, this was as good an inflation report as you could possibly hope for. Okay, coming into it, if you looked at the median, if you looked at the trimmed mean when you remove the outliers, if you looked at sticky prices which Atlanta looks at, the ones that are very difficult to cut, everything was gently trending downwards. And the one that they were most worried about, services excluding shelter, came down really quite sharply, down to 2.7%. So this was. There was nothing wrong with this. I mean it was still a bit too high for the Feds liking.

[Josh Brown]

There's no trade. There's no trade war stuff in it, it's tour, it's April. So what happens in May?

[Michael Batnik]

That's the problem we have with so much data because people knew that they didn't know what the tariffs are going to be, but they knew they were probably coming. So obviously first quarter gdp, you don't really know what to do with that. Ppi, which we've had remarkably fell.

[Josh Brown]

PPI was today, that was down.

[Michael Batnik]

My best guess is that next month we're going to see a bump because we can only see a bump because that's when the tariffs really were in effect.

[Josh Brown]

If most of them, if we, if we know that that embargo is over and China probably look through it so well, that's the question. Do you think, you think investors will look through an aberrant CPI print a month from. A month from this week?

[Michael Batnik]

Probably.

[Josh Brown]

Okay.

[Michael Batnik]

I mean, again, I've been doing this too long to be certain about anything. Probably. I think the balance, I think that you were saying earlier, I think the consensus on the market is too bullish. The overwhelming consensus on the market thinks tariffs are a bad idea and the lower they are, the happier the market is. My most likely final scenario for tariffs is a little higher than is currently implicitly being bet on by the. By the markets.

[Josh Brown]

Yeah. You know, it's so funny. They said 30% tariffs at the start of the year. The stock market was rallying into February. Everybody was fine with it, and they said 145% tariffs. We had a 20% lightning fast sell off. Now they're back at 30, which is what we assumed. And the stock market has gained back everything it lost. By which you can conclude the stock market never believed the fairy tale where we would get rid of income tax because tariffs would take care of it. Okay, that's not true. We also can conclude there's hardball and there's talking about playing hardball. And in this case, we were just talking about playing hardball.

[Michael Batnik]

But it really did look for a few days.

[Josh Brown]

Yeah, I agree.

[Michael Batnik]

Peter Navarro coming out and saying there were a few days until the first reversal was the day of April 9th. Right after the low in April when you really did begin to think, hang on, have I been wrong about this? Are they?

[Josh Brown]

Yeah.

[Michael Batnik]

My column from Liberation day channeling John McEnroe. The headline was, you cannot be serious.

[Josh Brown]

Yeah.

[Michael Batnik]

And it turns out you first takes are.

[Josh Brown]

You said first takes are dangerous.

[Michael Batnik]

Yes.

[Josh Brown]

You should not go with your first instinct. I'm happy to report to you that Peter Navarro has been spotted.

[Michael Batnik]

Oh, really?

[Josh Brown]

Yes. He is on Planet Neptune negotiating trade. They've sent him to the outer rim. You may never see him again. Hey, John, give me that second inflation chart you guys are going to kick out of this. Who's gonna look? Who's gonna look? Who's gonna look stupider? This is inflation expectations by political party according to University of Michigan. Democrats think 5%, independents think 4% and Republicans think 1%.

[Michael Batnik]

Oh, this is for one year inflation. Republicans think it's actually gonna be negative.

[Josh Brown]

Yes. Republicans think there'll be negative inflation because the beautiful trade war the independents are going with the Democrats. That tells you a lot about how the popularity of these policies, I mean.

[Michael Batnik]

I think with these numbers, which are hilarious. Hilarious. I do think the independent line is the important one. It shows that roughly two thirds of the population, half each on the left and the right, have got to the point where they're allowing their political lens to so completely obscure their judgment that they're saying things that are stupid. Yeah. So the average Democrat said that was expecting inflation of 7% over the next year.

[Josh Brown]

Right. Insane.

[Michael Batnik]

And Republicans expected deflation.

[Josh Brown]

Right. Both insane. Equally insane.

[Michael Batnik]

Equally stupid. Like, come on guys, think this one through. The fact that the independents seem to be getting that much into the bearish vibe of tariffs means inflation is probably one of the many good reasons why the White House is retreating from where.

[Josh Brown]

It was over the last week. In addition to retreating from the tariffs, the Trump administration has been on a new tack and I think Wall street likes this one. He took 40 CEOs with him to the Middle East. Yeah, I wanna read you something. Stock investors are much. This is Ed Yardeni. Stock investors are much happier now that President Donald Trump seems to be pivoting from pushing prohibitive tariffs to pushing American semiconductors and Boeing jets in the Middle East. So he said he went from tariff man to salesman. Trump used a state visit to Qatar today to announce a large purchase of Boeing jets 160 airplanes. MBS in Saudi Arabia is talking about multi hundred billion dollar AI investments and investments in the United States. The stock market loves this. And then as the capper, Nvidia's CEO Jensen Huang announced that the company will sell more than 18,000 of those chips. Go for a lot 18,000 of its latest AI chips to humane, which I guess is their big tech concern. Also announced partnerships with amd, AWS and GROK during the President's visit to Saudi Arabia. So this is, I guess Trump said, all right, tariff thing's not great, let's go sell some product in the Middle East. And I think Wall street. Absolutely loved it.

[Michael Batnik]

He's a transactional guy. He is good at transactional.

[Josh Brown]

He's good at this, though.

[Michael Batnik]

There's just no.

[Josh Brown]

What do you, what did you think? What do you think about that?

[Chris Davis]

Well, who was, who was the, the president who said America's business is business?

[Michael Batnik]

Coolidge.

[Chris Davis]

Was it Coolidge?

[Josh Brown]

Coolidge, yeah. Right before, Right before the end.

[Chris Davis]

Right before the end.

[Josh Brown]

But I, you know, business of America is business.

[Chris Davis]

Yeah. I think it all, it all comes down to it's, you know, if you're posturing for the headline or what really happens. And, you know, there are a lot of announcements. It's like when companies announce share repurchase, then you look a couple years later, you're like, what happened to that $10 billion? You know, but, you know, I, I certainly think that we, we have been it. You know, I'm, I'm a free marketeer, global believer in globalization, but, you know, we had an enormous disconnect in our system. And, and, you know, part of the anger is, is so obvious when you think about the fact that, you know, if you have a college degree in our country, you live seven years longer.

[Josh Brown]

Yeah.

[Chris Davis]

Like, that is deeply, profoundly unethical. We've had this sort of hollowing out. It's been good for the world, it's been bad for the US Finding some balance in there is certainly rational. And I think the trouble is we have such a polarized debate, which your chart showed perfectly, that you just, you know, Charlie Munger said to me one of our last conversations, he said, there are two true statements that none of my friends can believe, both of them. And one is that, you know, Trump has seriously profound character flaws. Right. So he said, he said, my Republican friends just don't want to acknowledge that. And then my Democrat friends don't want to acknowledge that. Just because Trump says it doesn't mean it's wrong. Yeah. And that's true.

[Josh Brown]

And Buffett repeated that very nicely.

[Chris Davis]

And I think that, you know, that's. It's a hard thing, you know, in this world where we try hard to be rational. We're in a world that's so intensely politicized and polarized. Even, even the good thing of getting a big contract for Boeing out of the Middle east, you know, will have people interested in putting a negative spin on that when obviously, that's a wonderful thing for.

[Josh Brown]

I would agree. And I think if this were the version of Trump's economic agenda going forward, I think the political rhetoric from the other side would be significantly less in there. We don't know if we're gonna get factories out of this or what type of factories we are now getting. Mergers and acquisitions, though. We have our first tariff era M and A. Dick's Sporting Goods, which is hugely reliant on sneakers, is acquiring Foot Locker, which is completely reliant on sneakers. All of those sneakers come from Vietnam and China. Nike, Adidas, you name it. Dick's Sporting Goods announced they're going to buy foot locker for 2.4 billion. So this is the first of the tariff era M and A. I don't know that this matters to voters or investors particularly, but I thought it was an interesting sign of the times.

[Chris Davis]

Yeah, so it's hard to know what to make of that. I mean, it also, you know, I, I don't know Foot Lockers business in terms of the value of their location.

[Josh Brown]

They make the people that work, they're dressed like the referees.

[Chris Davis]

I do.

[Josh Brown]

All right, that's that one.

[Chris Davis]

But you know, maybe the, the sense of being able to put more through those footprints than just shoes and you know, who, who knows? But, but yeah, I agree with you. The tariffs create that, that sort of pressure. And I think, I think we'll see a lot of M and A. I think that, you know, the Justice Department under Biden had a mindset that they were going to oppose everything, even if they thought it would eventually get through just to slow the world down and maybe the. It had gotten out of control in the other way. I'm sort of apolitical that way, but.

[Josh Brown]

Well, this will be a slight change.

[Chris Davis]

Now we are.

[Josh Brown]

So we're gonna have mergers, but you have to be nice to the White House. Yeah, I mean, I'm not, I'm not saying. I'm not saying that's good or it's bad. That's the reality. Shari Redstone is not getting her deal done with Ellison until. Unless and until he's satisfied that the news outlets are going to cover him differently. Like these are just. This is the reality on the ground. So now you have M and A. But there are a few conditions attached to it, maybe. And maybe that's better. Maybe that's worse. I want to ask you guys for just parting thoughts on the second half of this year. Hard to believe we're already. It's May 15th. We're already heading into that conversation. Okay, now we know how the first half went. What do we think in the second half? Don't give me an S and P year end target. But like, what do you think? We will be struggling with or excited about or what do you think is the next shoe to drop? I'd love to hear what you think.

[Michael Batnik]

John, short term for the next. We're thinking in Warren Buffett time. So six months to a year to 18 months is short term. I think the chances we have something very much like Trump 1.0 now, and we're probably going to get something pretty similar to the Trump 1.0 market that the stock market did pretty nicely then. People were surprised that the tax cuts went through. Then we overheated and eventually there was a revolt.

[Josh Brown]

2018.

[Michael Batnik]

Yes, in 2018. And that I think is a fairly good template that you just don't deny it. There is momentum behind stocks and that will be difficult to stop for a while. And the thing that is most likely to stop it would be the bond market getting back above. If yields break significantly above 5%, that will. Whether it should. But that I think will cause enough concern.

[Josh Brown]

I think 5% is the ceiling.

[Michael Batnik]

Exactly. Stocks and I can imagine if. And that we need, we now need to see exactly how inflationary, how fiscally loose the Trump administration turns out to be. Obviously, Doge.

[Josh Brown]

Mission accomplished.

[Michael Batnik]

Well, Doge, you can have plenty of problems about how they went around doing some of their things. These are honest people who they were firing in a way that robbed them of their dignity, which isn't okay. That said, what they were trying to do was, broadly speaking, the right thing, which is, yes, the government is spending more money than it can afford. We have to make some cuts from somewhere. Maybe the musk approach of moving fast and breaking things might be the best way to break the logjam. So you, at one point, you did look as though we were looking at some fiscal tightness at this point. There's a worryingly big consensus that we're bound to get an even wider deficit by the end of this year. You now have a much more interesting competition from German Bunz. They're going to be issuing more of them. They have much less debt outstanding, so they're a pretty safe bet. So you'll probably find that they make more of a competition for Treasuries. If you do get the European defense bonds off the ground. Again, they're not the same as Treasuries, but they are a really interesting alternative.

[Josh Brown]

It's a new entrant.

[Michael Batnik]

So the risks that the bear market in bonds continues and ultimately is what checks the stock market, I think that's, that's the dynamic to get used to for the next year. I think if there was any one factor that's caused the turnaround, you know, the, the walk back on tariffs. When it happened, it was the bond market, the yippee bond market, which is one way to, which is one way to describe it, but boy, that man has a way with words, you know. And I think we're probably now in a different era where it looks like we're getting fiscal looseness and stimulus. And again, the question will be, is it when is the bond market going to call time on it? Okay.

[Chris Davis]

I think anything that Trump can control going into the midterms, he will try his best. He will want the market high tax.

[Josh Brown]

Reform goes through by the end of this year.

[Chris Davis]

It's, you know, things are so tight in terms of majorities. I would say I am always short term, very pessimistic when the market's optimistic. I'm worried that we are the belief that somehow they can control the markets. I think John's exactly right. There's a hubris in that. And the moment the market loses faith in the ability for them to control it, you could get things going badly the other way. So I always say I'm short term pessimistic and long term optimistic and my short term pessimism has been wrong for a long time and I'm always pretty much fully invested. So. But I just think the focus on resilience and durability is where people have, they have to get away from the magical thinking that just because it's gone up, it'll keep going up and really think about what do they want to own that will get them through to the other side.

[Josh Brown]

Guys, that was so fantastic. I just want to thank you on behalf of the viewers, the listeners, for sharing your insights with us. We really appreciate it. I want to mention that Mike, Michael Batnik will be back next week and we missed Michael on the show today. Michael's out west on business, but we'll see him soon. I want to tell people where they can follow both of you guys so that if they want to read more of what you have to say or listen to more of what you have to say. John, your column at Bloomberg Opinion, they could just look for John authors and they'll find it pretty easily. Okay. Are you on social media anywhere?

[Michael Batnik]

I'm at John tweeting. I'm, yeah, I'm, I, I had it, I actually had my account taken over by a troll for a few weeks.

[Josh Brown]

Okay.

[Michael Batnik]

I was, I, I, I was sending out some, you know, sort of racy AI generated soft porn for a while. That, that was all right.

[Chris Davis]

I renewed my subscription.

[Michael Batnik]

There's. There is this. There's this scam, apparently where I was inviting people to. To interview and in the process of being interviewed by me, they would give me all the details I needed to put spyware on their computer.

[Chris Davis]

Oh my God.

[Michael Batnik]

I came out of that episode not wanting to ever turn on a computer again. Anyway. Ohnauthors J O H N A U.

[Josh Brown]

T H E and if. And if that account at John Authors offers you crypto or softcore porn, just. Just say know, Chris, where can people follow you?

[Chris Davis]

I think I. I think Davis Funds has website that they put up all sorts of useful stuff and.

[Michael Batnik]

Awesome.

[Josh Brown]

Oh, you guys are. You guys are incredible. Thank you so much for joining me today. Huge shout out to the team this week. Daniel, John, Duncan, Nicole, Rob, Graham, Keith, Sean, Truck, Kid, Matt guys did incredible work for us. We appreciate it. That's it from us this week. Thank you so much for listening and for watching. See you next time on the compound. Got it.