What Tom Lee's Worried About in 2026

Summary

The Compound and Friends – "What Tom Lee's Worried About in 2026"

Date: January 30, 2026
Host: Downtown Josh Brown
Co-host: Michael Batnik
Guest: Tom Lee, Co-Founder, CIO, and Head of Research at Fundstrat Global Advisors

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Episode Overview

This episode features Tom Lee discussing his outlook for 2026, the resiliency of the stock market, the current state of AI stocks and broader markets, and the rapidly evolving roles of precious metals and digital assets. The conversation dives into market cycles, risk factors, and the increasing influence of robotics and blockchain on the economy and investing. As always, Lee’s trademark data-driven optimism is balanced by the hosts’ pointed questions about risks, bubbles, and future shocks.

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Key Discussion Points and Insights

1. Market Outlook for 2026

• [06:33] Josh Brown: "Are you bullish still?"
• [06:43] Tom Lee: “We just think 2026 will look like last year. So our base case is we are strong in the first part of the year, but then we have a drawdown that feels like a bear market... But we’ll rally strongly and I think at least a 10% gain, maybe more now.”
• Lee sees the first half of 2026 as strong, followed by a significant but V-shaped drawdown (possibly 20%) not rooted in fundamentals but rather in policy shocks or externalities.

2. What Fuels Lee’s Market Calls

• [09:52] Josh Brown: “How do you stack the odds in your favor to be right more often than you’re wrong?”
• [11:51] Tom Lee: Describes cross-market analysis as "feeling your way around in a dark house," identifying where you are by volatility, credit, and commodities. He highlights "don’t fight the Fed" and "demographics are destiny" as core frameworks.
• [13:59]: Earnings growth and broadening market participation are not late-cycle features, suggesting more legs in this bull run.

3. Resilience and "Indestructibility" of the Market

• [21:12] Tom Lee: “If this was a company and we threw six events that should wipe out the earnings power … but the company grew earnings, we would consider it super resilient and re-rate it higher.”
• [21:47] Lee and the hosts discuss how the market’s ability to withstand “six black swans” (COVID, Fed hikes, supply shocks, etc.) speaks to its fundamental strength: “It’s acting more indestructible than many people appreciate.”
• [21:54] Josh Brown: “People have more faith in the earnings power of American companies than they have faith in any of our elected officials.”

4. Rotation and Breadth: Winners and Losers in Tech

• [23:44] Discussion on the market separating “the wheat from the chaff”—tech stocks are decoupling, with some (Meta) surging while others (Microsoft, Oracle) are in drawdowns.
• [24:05] Tom Lee: “I’d probably guess it’s misplaced. I think Microsoft’s been written off in the past … and it came roaring back.”
• Lee cautions against calling time on AI or software, noting the market might temporarily view software as the loser as AI displaces some business models.

5. Headwinds: Margin Debt and Policy Shock

• [30:45] Margin debt at record highs: “If you look at the year-over-year change, it’s actually positive for stocks until the percentage gain exceeds 38%. … it’s at 36 right now, so it’s almost there.”
• [32:23] If margin growth crosses that threshold, forward returns turn negative, making a market correction more likely.
• [26:08]–[26:47] Lee sees policy shocks (White House, Fed) as the likely sources of turbulence ahead.

6. Precious Metals and the Waning "Everything Bubble"

• [15:47] Precious metals are the star trade, with talk of gold at $8,900, driven by small shifts in asset allocation rather than wild demand spikes.
• [19:09] Tom Lee: “If you just do high net worth, half a percent allocation incrementally into gold, now you’re at $9,000.”
• [20:44] The "AI bubble" narrative has faded. Valuations have moved sideways through multiple crises.

7. Crypto, Blockchain, and Stablecoins

• [44:58] Energy, materials, and digital assets are Lee’s top sector picks for 2026.
• [47:42]–[52:37] Discussion about crypto’s sudden weakness. Lee explains the massive deleveraging event (the largest in crypto’s history) and posits that risk appetite will recover after a “reset.”
• [53:24]–[55:46] Lee discusses institutional embrace of blockchains (Fidelity, Standard Charter, UBS, Larry Fink), noting the real bullish case is increasingly for Ethereum.
• [57:38] “Tether is now possibly one of the top-5 most profitable banking operations in the world.”

8. Macro Themes: Broadening, International Stocks, and Economic Shifts

• [41:07]–[44:41] Breadth is returning—more stocks, more regions leading.
• [44:23]–[44:41] International equity outperformance is likely a multi-year story, bolstered by capital market reforms and dollar weakness.

9. Robotics, Labor Shortages, and Economic Transformation

• [66:30] Josh asks about the investment case in robotics as autonomy and automation move from hype to deployment.
• [66:39] Tom Lee: “Robots are force multipliers; it makes every human a superhuman—or unemployed.”
• Lee sees robots as a solution to structural labor shortages, with massive potential GDP and possibly even enough tax revenue to eliminate personal income taxes.

10. Social Implications and Optimism

• [68:05] Lee envisions a world where robots, not people, are taxed.
• [69:06] He draws parallels to prior technology-driven labor transitions, like farming after refrigerated transport, suggesting disruption will lead to a new era of prosperity.
• [71:05] Acknowledges the need for social policy updates and hopes for a positive societal adaptation.

11. Granny Shots Update

• [72:16] Tom Lee highlights the continued outperformance and growing assets in the “Granny Shots” strategy portfolios (now $4.8 billion total across three products).

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Notable Quotes & Memorable Moments

• [13:01] Tom Lee: “Don’t fight the Fed. And … demographics are destiny.”
• [21:12] Tom Lee: "If this was a company and we threw six events that should wipe out the earnings power … but the company grew earnings, we would consider it super resilient and re-rate it higher."
• [21:54] Josh Brown: "People have more faith in the earnings power of American companies than they have faith in any of our elected officials."
• [41:16] Tom Lee: “This is confirming a broadening, is confirming a bull market. It's very good for institutional stock picking.”
• [44:33] Tom Lee: “There could be a long tail to that story. The more I look at it, the like, the less I think it’s just a one year thing.” (on international equities)
• [66:39] Tom Lee: “Robots are force multipliers; it makes every human a superhuman—or unemployed.”
• [68:05] Tom Lee: “I think we could stop paying taxes because the robots are the ones that are taxed.”
• [69:06] Tom Lee: “Every American today is gonna benefit from the surplus generated by robots.”

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Important Timestamps

| Timestamp | Topic / Segment | |-------------|-----------------------------------------------------------------------| | 06:33–07:03 | Tom Lee gives his 2026 outlook: early strength, then sharp drawdown, ending higher | | 09:52–11:51 | Lee’s approach to market forecasting: cross-market analysis, cycle awareness | | 13:01–14:13 | Core investing frameworks: "Don't fight the Fed" and demographic trends | | 15:47–18:28 | Gold, silver, and everything rallies—are they late-cycle, or new regime? | | 20:44–21:39 | Fading AI bubble: major tech corrections despite AI hype | | 21:12–21:47 | Why the market seems “indestructible” | | 26:08–26:47 | Policy shocks and the probability of gains if early-year returns are positive | | 30:45–32:23 | Margin debt risks, and signals for forthcoming corrections | | 41:07–44:41 | Breadth and international allocations; are we early or late? | | 44:58–46:35 | Why energy and basic materials top Lee’s picks now | | 47:42–53:24 | Crypto market: deleveraging, pain, but possible end of the selling | | 53:24–57:24 | Blockchain adoption by institutions—why Ethereum may benefit | | 66:30–67:10 | Robotics: Lee’s vision of automation solving labor shortages | | 68:05–69:06 | Robots as economic/tax actors, personal income taxes disappear? | | 71:05–71:47 | Social adaptation to AI/robotics advancement | | 72:16–73:20 | "Granny Shots" portfolios’ assets and performance update |

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Overall Tone

The conversation is playful but deeply analytical, blending Tom Lee’s optimistic, quantitative perspective with the hosts’ skepticism about bubble narratives, margin excess, and tech corrections. Lee’s calm, data-driven optimism stands out, especially juxtaposed with the hosts’ energetic banter and tough questioning.

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Takeaways for Investors

• Expect choppiness but not doom: Lee projects a mid-year correction, likely policy-driven, but expects a robust recovery and strong year overall.
• Market resilience is real: Despite six market “black swans” since 2019, earnings and valuations have proven remarkably robust.
• Breadth and sector rotation matter: Bullishness in "basic" materials, energy, and international stocks is anchored in mean-reversion and new leadership.
• AI and robotics are real but disruptive: Not all beneficiaries are obvious and some, like software, may be “losers”—for now.
• Crypto: short-term pain, long-term development: Recent deleveraging signals a possible bottom. Blockchains are quietly being adopted on Wall Street, especially Ethereum.
• Society will need to adapt: Robotics could create surplus so large that old fears about economic displacement may be overblown—but only if policy evolves, too.

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Links

• Funstrat Research
• Granny Shots

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This summary captures the core debates (policy risk vs. market resilience), Lee’s unique frameworks, and the colorful moments that make The Compound and Friends essential listening for investors.

Transcript

[Josh Brown]

You like this weather. You're a skier, right?

[Tom Lee]

I was a skier, but I had. I know you got two ACL surgeries. So I'm. I'm only skiing from my mind. It's an imaginary skiing now.

[Josh Brown]

Yeah.

[Tom Lee]

I'm too old to have another injury.

[Michael Batnik]

Somebody asked me recently if I wanted to go skiing. I don't know how to ski. It's too late. I'm gonna die.

[Tom Lee]

No, it's not too late.

[Michael Batnik]

No, My body. I'm gonna tear something, too.

[Tom Lee]

If you like rollerblade or ice skate.

[Josh Brown]

No, your instinct is right. I was at dinner with Rob Seachen in Florida, like, 10 days ago, and he was telling us, like, stories of his ski injuries. Like, this guy, he is beating the shit out of himself. Yeah, he's got, like, titanium all over his body.

[Tom Lee]

He's kind of bionic. He has, like, a couple fake knees.

[Josh Brown]

He's almost an optimist. I told him, like, an optimist robot. He was. He was saying he was a mogul skier. I'm like, what? I know what a mogul is. What does that mean? He's like, just bumps the whole way down. Well, who the would do that? That sounds like the worst part of skiing.

[Tom Lee]

Skiing attracts some really extreme risk shakers.

[Josh Brown]

So he goes, oh, jb, I love it. I love the moguls. I ski the mogul, you know?

[Michael Batnik]

Isn't he from Pittsburgh? Where's that accent from?

[Josh Brown]

I don't know. It's amazing.

[Tom Lee]

Yeah, he did. He grew up in, like, Pennsylvania, but.

[Michael Batnik]

That accent is not from Pennsylvania. That's not a Pennsylvania accent.

[Josh Brown]

He's like, jb, you know, I love the moguls.

[Tom Lee]

Yeah, it's like. It's a little bit like. It's like a straw. Maybe he watched, like, Fat Albert growing up, you know?

[Josh Brown]

What is this what your.

[Tom Lee]

Your.

[Josh Brown]

My laptop said jfk.

[Michael Batnik]

No, no, no, no. I know that.

[Josh Brown]

I mean, you're so that's what's going on.

[Michael Batnik]

No, no. The actual color of your icons.

[Josh Brown]

Oh, that's dope.

[Michael Batnik]

I've never seen that.

[Josh Brown]

Yeah, stick around, kid. I, like, learn some shit. Stick around. Keep your eyes open. You never know how I'm going to surprise you.

[Michael Batnik]

I hit the. Speaking of Apple. Whatever. I hit the emoji button or, like, the emoji to, like, create yourself. And Apple's AI created me, but, like, I have, like, lots of hair. Like, it looks nothing. I'm a bald guy. Like, how is that?

[Josh Brown]

Must have bought the premium package. Yeah, right.

[Michael Batnik]

All right, here's. Here's your picture. Check this out.

[Tom Lee]

Yeah, I want to see it.

[Josh Brown]

I mean, oh, it's so.

[Tom Lee]

It's like. It's the.

[Josh Brown]

Dude, it looks like your son. Dude, that looks like your kid. Let me see it.

[Michael Batnik]

What in the world?

[Tom Lee]

He said, that's good, but you're, like, in a bubble. They put you in, like, a.

[Josh Brown]

However, we spoke in an event yesterday. Hard to believe it's yesterday. And they made those Funko doll. What are those called?

[Michael Batnik]

Oh, Funkos. Funkos.

[Josh Brown]

Funko. So they made dolls of us, me and Michael. And mine had a full head of blonde hair.

[Michael Batnik]

Mine is bald.

[Josh Brown]

And Michael's was, like, literally baby Stewie from Family Guy.

[Tom Lee]

That is reminiscent of you.

[Michael Batnik]

AI Is gonna take all of our jobs. Come on.

[Josh Brown]

Not the illustrator.

[Michael Batnik]

Come on.

[Tom Lee]

But that's like, a meta AI Remember how, like, you have the meta world.

[Josh Brown]

Or whatever on the board? Metaverse.

[Michael Batnik]

Yeah.

[Josh Brown]

Okay. All right, all right, all right, all right.

[Michael Batnik]

Let's. Oh, let's do.

[Josh Brown]

Let's do some pods.

[Michael Batnik]

We have a full house. I'm a little bit nervous. Big audience.

[Josh Brown]

Did I get to meet everybody? Hi, guys.

[Michael Batnik]

We have an Alexa, an Emily.

[Josh Brown]

Are you guys all Funstrat? Wait, from what's. What is it called? Will you hire my daughter? She's a PR major at University of Miami. She needs an internship.

[Tom Lee]

Yeah.

[Josh Brown]

All right.

[Tom Lee]

Josh, do you know Ron and Sana?

[Josh Brown]

Yeah, of course.

[Tom Lee]

Emily and Sana.

[Josh Brown]

No, really? I love your dad. How's he doing? Okay. All right. He's one of my. He's one of my faves. So say hi. Say hi for me. Say hi for me. All right.

[Michael Batnik]

All righty.

[Josh Brown]

The compound of friends. We're about business right now.

[Michael Batnik]

Whoa, whoa, whoa. Stop the clock. Here's a word from our sponsor. Today's show is sponsored by Franklin Templeton. Let's talk munis. Because for many investors, taxes are a big part of the return story, and municipal bonds generally provide interest that's exempt from federal and in some cases, state income taxes.

[Josh Brown]

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[Josh Brown]

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[Michael Batnik]

Franklin Distributors LLC Member FINRA SIPC.

[Josh Brown]

Welcome to the Compound and Friends. All opinions expressed by Josh Brown, Michael.

[Michael Batnik]

Batnik and their castmates are solely their.

[Josh Brown]

Own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Ladies and gentlemen, welcome to the world's greatest investing podcast, Compound and Friends. My name is Downtown Josh Brown. First time listeners, last time listeners, whatever it is. I'm here with my co host Michael Batnik. Michael, say hi.

[Michael Batnik]

Hello.

[Josh Brown]

Hello you guys. We have the goat in the house today. So every time I see this on the calendar, Tom Lee is coming to town. I get so excited. You know how excited I get, right? Okay.

[Michael Batnik]

All right.

[Josh Brown]

Tom is a co founder, CIO and head of research at Fundstrat Global Advisors. Previously, Tom was the chief Equity strategist at JP Morgan. He is best known for his data driven, often bullish market outlook and for being an early high profile advocate for Bitcoin, Etherium and other digital assets. Tom, what more can I say? It's pretty good, pretty succinct bio, right? Yeah.

[Tom Lee]

Thank you.

[Josh Brown]

All right. Are you bullish still? Yes, I heard you. At the start of the year, kind of being like, yeah, we'll probably get a correction in the first quarter. Did you say that?

[Tom Lee]

Well, we just think 2026 will look like last year. So our base case is we are strong in the first part of the year.

[Josh Brown]

Okay.

[Tom Lee]

But then we have a drawdown that feels like a bear market.

[Josh Brown]

Okay.

[Tom Lee]

But will rally strongly and I think at least a 10% gain, maybe more now.

[Josh Brown]

So we had that. How deep was the drawdown last April?

[Tom Lee]

Last March it was 20%. It was a bear market.

[Josh Brown]

Okay. And that did not. Did that start from an all time high or not really, I forget.

[Tom Lee]

Yeah, it did.

[Josh Brown]

It did. So it was rare. But maybe that's why it recovered so fast, cuz it wasn't based on anything other than words.

[Tom Lee]

That's right. If you have a decline and it's not leading to an economic downturn, those declines are usually V shaped and symmetrical.

[Josh Brown]

Okay. Do you think that this one, this year, that. I mean it's. We have one every year. You think this one might have the potential to be Based on an economic decline or probably not if I was.

[Tom Lee]

Guessing because it's like I'm just guessing.

[Michael Batnik]

Of course we're all guessing.

[Tom Lee]

Yeah, yeah, we're guessing.

[Josh Brown]

Educated guesses. That's what we're doing.

[Tom Lee]

Yeah, it's educated guesses that it can be a policy shock, like something coming from the White House or the market testing the new Fed.

[Josh Brown]

Okay.

[Tom Lee]

Or both. But that is probably like last year then. So it's a market decline. Cause people take risk off the table. But it's not really an economic downturn. So it's. So we end up recovering risk.

[Josh Brown]

We got two policy shocks in the last five days. We got the health insurance shock and the credit card shock. 10% cap on interest rates for credit cards. I didn't even get a chance to see what he said about the insurance companies. I just assume it's not going to matter and never really happened. But what was that about? Do you remember? It was like two days ago.

[Tom Lee]

Yeah. It's the reimbursement rates for Medicare and Medicaid. And it was. People were expecting it to be 6 to up to 9%.

[Josh Brown]

Right.

[Tom Lee]

And it's only 0.9%. It's actually consumer. These are consumer friendly shocks.

[Josh Brown]

Yeah. That doesn't sound like the type of thing that would derail the economy. It just sucks if you own unhealthy.

[Tom Lee]

Yeah. So if you're health insurer, it's bad.

[Michael Batnik]

Okay, can I interject and say one thing? So on this show and on every show, we talk about what's happening with opinions about what's going to happen in the future. That's what we do.

[Tom Lee]

Right.

[Michael Batnik]

I was listening to, you know the book by William Goldman, Adventures in Screen Trade. There's a line that's always quoted from that book. Nobody knows anything like that is so William Goldman wrote a Princess, wrote Princess Bride. He was a screenwriter and a novelist. And during the book he was talking, he said it's 1982. And literally the whole point of the book is nobody knows anything. People that are making movies don't know how the audience is going to react. Like nobody knows anything is the whole point of the book. He said, I know we have nine months left in the year, but there is no doubt in my mind that ET will win best picture. It was 1982. He goes, I don't care. Steven Spielberg, ET is going to win. Gandhi won. So all of the, all the stuff that we're talking about in the future, we're all doing the best we can.

[Tom Lee]

Yeah, that's right. It's just a guess. The future is uncertain. I agree.

[Michael Batnik]

It's true.

[Josh Brown]

What do you do to stack the odds, though, in your favor? If you have to. If you have to have a view and you have to make a call or people are relying on you to. All right, we get it. It's unknowable. But, like, still, what do you think? How do you stack the odds in your favor to be right more often than you're wrong and you're the right person for me to ask this question of because you are right more often than you're wrong?

[Tom Lee]

Well, yeah. Thank you.

[Josh Brown]

You're welcome.

[Tom Lee]

Which means I've been guessing.

[Michael Batnik]

I feel like we say that every time you come on, you are due.

[Tom Lee]

For a coach drink.

[Josh Brown]

That's why he has an entourage here. If you were wrong about the bull market the last three years, be nobody on this bench hanging out with you. You know how. That's how Wall street works.

[Tom Lee]

Well, I'd come in my McDonald's uniform.

[Michael Batnik]

Tom, can I tell you, I just spoke to a young man.

[Josh Brown]

Good. I didn't even get an answer to my question.

[Michael Batnik]

No, hold on. More flowers. I spoke to a young man last month and he mentioned how Tom is always bullish. I said, listen, you don't get it. You're a senior in college. It's easy to be bullish now. But there was a time, young man, not so long ago, when it was not cool to be a bull, where everybody was bearish. And anybody that had the nerve to make the bullish case was ridiculed. And you have not been bullish since 2022. You've been right the whole way. And I think that's a part of a big part of why you have commanded a legion of followers is because every time the market dipped, most people came out and said, it's going to get worse. And you were like one of the lone voices who consistently has said, it's probably going to get better. So you're right.

[Tom Lee]

Thank you.

[Josh Brown]

So how. So how do you. How do you do everything you can so that when you are making a call, it's got a reasonable shot at being right?

[Tom Lee]

Yeah. This is not a great analogy, but I'll explain it and then I'll explain how we do it. But. So let's say you're in your house, but the lights are off completely, but you're feeling your way around and then like. So you feel like something fuzzy and then you figure out it's your living room. Or if you hit your foot on a corner and then you know, you're in the kitchen.

[Josh Brown]

Right.

[Tom Lee]

That's what I think trying to navigate markets are like, because we don't really know where we are at any moment. But like, then you try to find what gives you situational awareness. And we do that by doing a lot of cross market analysis. So we take a lot of cues from volatility or what credit markets are doing or commodities, and that informs us of what the state of the equity market is. But a lot of our work also is trying to look at with this current snapshot of all that. Where does it place us? Does it put us back into 1950 or 70 or is this Hong Kong? And so we're trying to place ourselves.

[Josh Brown]

That's really important to you, the point in the cycle that we're at. You seem to pay a lot of attention to that. Is that something that you learned from someone else or is that something that you just figured out over time? Hey, this is like the real signal. This is what really matters.

[Tom Lee]

I don't remember where I heard it, but I remember hearing a few things in my early years. One was don't fight the Fed. And I think that's important.

[Josh Brown]

Another is that Marty Zweig, who is don't fight the Fed.

[Michael Batnik]

Ronald Reagan.

[Josh Brown]

Yeah, it was probably Ronald Reagan. Okay, go on.

[Tom Lee]

Yeah. Or it could be Uncle Martin. Do you remember that movie with Martin Short? He says, don't fight City hall.

[Josh Brown]

Right. Okay.

[Tom Lee]

But the second is demographics or Destiny. And I don't remember where I heard that. I could have heard it in college, but when I did wireless, that was a lot of the work I did when I was a cellular analyst was really building cellular penetration models based on what I call vintaging, like tracking what young people did. And then we figured when they become adults, they're going to control everything.

[Josh Brown]

Right. Okay. So based on those two things and you're feeling around in the dark, where are we? Like, how would you describe the position that we're in now? Because most people would say what goes up must come down. It's been too good for too long, valuations are stretched, blah, blah, blah, blah, blah. You know, all the whole litany of things. So what would you answer that, given that you're using those two ideas as a backdrop?

[Tom Lee]

Yeah, well, a couple things that are observable. One is earnings growth is picking up this year, not just in the US but globally. That's not usually late cycle.

[Josh Brown]

Okay.

[Tom Lee]

And market breadth has improved a lot.

[Josh Brown]

Okay.

[Tom Lee]

You know, like this year, someone said it's like a rolling risk appetite cycle. But a lot of things are going up. That means the market's broadening. Actually, it's also broadening outside the U.S. yeah. And then the third thing is there's arguably reasons to be optimistic incrementally, like whether it's AI or blockchain. I think especially coming out of Davos, you know, when I didn't go to Davos, but I've been. I was following a lot of the reports and the panels. It's clear to me traditional financial institutions are starting to build on blockchain as a productivity driver. That's a big story in the US especially.

[Michael Batnik]

Fidelity just announced their stablecoin. It's huge.

[Tom Lee]

Yep, that's right. And then today the SEC and CFTC had a joint announcement. They want to make sure the US is the crypto capital of the world. And then there's onshoring happening kind of everywhere. And defense. So there's things that are driving global spending.

[Josh Brown]

Materials rallies tend to be late cycle. And I would argue the biggest bull market rally right now in the United States at least, and maybe this is true in other places overseas, is energy stocks, gold miners, the base metals are rallying and all those related companies. I talked about a steel stock today as part of best stocks in the market. When was the last time a steel stock was one of the best stocks in the market? And yet here we are. There are multiple. So how do you square those two ideas? Or do you not agree that metals and oil rallying are late cycle? Do you think that's more mid cycle?

[Tom Lee]

I mean, one, the precious metals move is probably the trade, right? Silver and gold are. If I was just an average investor, that trade has been working every day and for weeks on end. So it makes sense. People are investing and they're astounding. And I talked to Tom Demark today about that. You know, he does think there's still room for that to extend.

[Josh Brown]

He doesn't think it's exhausted yet.

[Tom Lee]

No. He thinks gold can get to 8,900.

[Michael Batnik]

Oh my God, this is the best.

[Josh Brown]

Nobody's ready for that.

[Michael Batnik]

This is the best month since 2008.

[Tom Lee]

Yeah.

[Michael Batnik]

Unbelievable.

[Tom Lee]

I'm pretty sure at 8,900 the Fed's balance sheet like dramatically improves or the US treasury because we own so much gold.

[Josh Brown]

But the thing is, who is left to buy it at 8,900? Who's the next buyer? Like at that point wouldn't. I guess what I'm asking is to get to 8,900. You would assume every central bank that's got the. Wherewithal to buy has at that point already bought, or do I not understand how it works?

[Tom Lee]

It might be asset allocation because I had a brief conversation with Joyce Chang from JP Morgan.

[Josh Brown]

Hang on, let me just pick up all these names you're dropping. God. I'm kidding. I'm teasing. God.

[Tom Lee]

Oh, well, yeah. She was saying if you just do high net worth 1/2 a percent allocation incrementally into gold, it's now you're at 9,000.

[Josh Brown]

Wow.

[Tom Lee]

So it's, it's just small amounts of money moving into precious metals that could get us there. Okay.

[Josh Brown]

Is gold similar to the stock market where we should expect V shaped recoveries there because the, the, the primary trend is so powerful? Or could you envision a scenario where like a 15% drop in gold and a 25% drop in silver puts an end to the rally that we've been in? Like, what would be your, what would be your instinct if you saw a correction in these trades? And by the way, if both those two things happen, they would both still be in intermediate and long term uptrends. But like how would you look at an event like that?

[Tom Lee]

I mean, today's kind of a snapshot, right? Today there was a big intraday decline in gold and now it's like down 1%. And silver had a huge intraday decline and it's like barely down.

[Josh Brown]

The buyers just came flooding in.

[Tom Lee]

Yeah.

[Josh Brown]

Okay.

[Tom Lee]

And then someone's telling me I'm not a commodity expert, but now I'm like learning a lot on the fly. But like the physical market's even tighter, so the prices are actually higher in the physical than in these financial markets.

[Josh Brown]

Okay.

[Tom Lee]

And I'm going to quote Tom DeMarc. He says this looks more like 7980. So then it might be a topping process.

[Josh Brown]

Okay. I mean, it's sort of parabolic and.

[Michael Batnik]

No, it is parabolic.

[Josh Brown]

It is. Silver definitely is. I guess what I would ask you is can you think of a historical example where gold and silver were doing this and the stock market was rallying right alongside of them? It seems like it's rare. Like the bull market for stocks didn't start in the early 80s until after gold and silver were destroyed. This is a little bit different. This looks more like an everything rally.

[Tom Lee]

Yeah. I mean, someone pointed out, and I think it's correct, that. And again, we are not really sure exactly why, but if someone said this is everything but the dollar, then maybe it makes sense.

[Josh Brown]

Yeah. Okay.

[Michael Batnik]

Got two charts for you on this. First comes from our friend Todd So and we are looking at precious metal ETFs daily trading volume.

[Josh Brown]

That's a great graphic from Todd.

[Michael Batnik]

He, Todd calls it metal, he does great metal mania. This, you know this. The previous spikes got like maybe up to 20 billion and we're now at 64 billion dollars. So people are going absolutely mental about this. And then our friend Warren Pies has a chart showing gold secular bull markets. And the first bull he, he posts, which is the real crazy one, 1971 to 1980. Then we had the second one, he marks that from 1999 to 2011, that's the purple one. And today the green one, 2018 to 2026.

[Josh Brown]

So shorter and sharper than the last one.

[Michael Batnik]

Yeah.

[Josh Brown]

Okay.

[Tom Lee]

Yeah. By the way, if you do like Wall street bets top most talked about stocks. It's SLV and gld.

[Michael Batnik]

Unbelievable.

[Josh Brown]

I'm not, I'm not surprised by that.

[Michael Batnik]

No, no, no. Unbelievable where we are.

[Tom Lee]

Yeah.

[Michael Batnik]

So Tom, one of the things, one of the narratives going into 2025 that has cooled off dramatically is bubble, bubble and everything, especially the AI bubble. You don't hear much about that anymore. Oracle is in a 51% drawdown. Like 51% got cut in half. Microsoft is down 12% today. And then just the broader market. You have a great chart, John, chart for it please. Showing that we've had six black swans. Black swans might be extreme, but whatever. Six like events in the market. Since when does this go back to 20? What year is that?

[Tom Lee]

19. Yeah, the end of 2019.

[Michael Batnik]

Okay. And the PE has gone sideways.

[Josh Brown]

What are these events?

[Michael Batnik]

Where's the bubble?

[Josh Brown]

Covid shutdown, the supply chain. Supply chain inflation, fastest Fed hikes in history. Tariffs, USA bombs, Iran.

[Michael Batnik]

Yeah, there's been some shit.

[Josh Brown]

So some stuff has happened and I don't know. What's the message of the chart? What are you showing people when you show valuation alongside of those events?

[Tom Lee]

If this was a company and we threw six events that could should wipe out the earnings power of that company. But the company grew earnings. We would consider it super resilient and re rate it to a higher multiple.

[Josh Brown]

That's a great point.

[Tom Lee]

Right.

[Josh Brown]

You'd be willing to pay more for that asset? For the earnings of that asset.

[Tom Lee]

Yeah. Because it's indestructible. And so today when people say the market's expensive, I kind of think we just threw six black swans at it and it's still the same.

[Michael Batnik]

Do you think the stock market's indestructible? I know not forever, but is that how you feel?

[Tom Lee]

It Is acting more indestructible than many people appreciate.

[Michael Batnik]

For sure.

[Josh Brown]

Somebody.

[Tom Lee]

Because people don't tell me they think it's indestructible.

[Michael Batnik]

No, because who would say that out loud? It sounds crazy.

[Tom Lee]

Yeah.

[Josh Brown]

Somebody said to me that they can't under. They can't understand. They're not like professional investor, but they have money in the market. They're just like, I can't understand how it feels like the country, like the social fabric of the country is being torn apart and the stock market keeps going up. And my response was like, yeah, because people have more faith in Tim Cook than they have in Congress. What you're saying is not only not incongruous, it actually explains people have more faith in the earnings power of American companies than they have faith in any of our elected officials. And that's why they'd rather have their money in stocks than in a lot of other types of things that they could be doing. Yeah, I think there's a lot of truth to that. What do you think?

[Tom Lee]

I agree. I remembered about 10 years ago coming across a survey where it was millennials who were much younger back then, have more trust in tech companies than the government. So they're willing to share more information with the tech industry than the government.

[Josh Brown]

Yeah, Good bet. All right, let's get into Tom's outlook.

[Michael Batnik]

Well, one of the dynamics that I love about the market today is that the market is separating the wheat from the chaff, and the winners and the losers are diverging. So in 20. Whatever. Over the years, tech has been one trade. Right. Like, they've all gone up together. They've all gone down together. And now. Not just now, over the last six months. John, chart five, please. You see the big tech correlation breaking down in a big way. Or. Try the next one, John, please. So we're looking at the rolling six months, and it's. It's crashing. So, like, today is a great example. Next one, John. You have Microsoft down 12, Meta up 10. These names generally obviously move in the same direction. We've literally never seen a day like today. And it's. It's funny because they both reported Yesterday, same story, CapEx. Maybe the market is spooked that Microsoft's 45% of their outstanding orders are tethered to OpenAI. It's like, that's a big question mark. But their spending is up 66%. Meta's has doubled from year over year. But Meta is showing monetization in reels, and the market is speaking.

[Tom Lee]

Yeah, I mean, I hear people parsing the reasons why they're afraid of Microsoft. Right. Whether it's the value of the future revenue book or whether it's because AI can redo Excel and teams and a lot of the products. I think maybe it just shows you people are still trying to figure out how AI is progressing because now they're just deciding that Microsoft's a loser in the AI race somehow. But I would probably guess it's misplaced. I mean, I think Microsoft's been written off in the past. In the pre 2000 era, people thought it was just a software company and it came roaring back.

[Josh Brown]

Lost 400 billion in assets today. Now that money can come right back in tomorrow. So it's not like saying like a fund lost 400 billion in assets. But can we just pause for a second and think about that number that is the market cap loss of Microsoft in one day. It's pretty remarkable, right?

[Tom Lee]

I think it's $1,000 per American citizen, Right?

[Josh Brown]

It must be, right.

[Tom Lee]

Yeah. Because there's 330 million people.

[Josh Brown]

It's pretty remarkable. I want to get into your outlook, John. I can't see what slide. I think it's the first one. So walk us through what you're telling people they should expect in 2026.

[Tom Lee]

I think it's a lot like 2025 fundamental stories better. But one difference is instead of a hawkish Fed, we have a Fed that eventually the market will realize is dovish because we have a new Fed chair and they're also not inclined to hike anymore. So that's a positive. But the negatives are there are some signs of stress in the economy now because of high rates, whether it's consumer or private credit. And we know valuations are more expensive because we have three years of gains behind us back to back. And I think that this is the year where we've seen more policy shocks coming. I think the White House is being more aggressive. I don't know if it's because they want to get things done before the midterm.

[Josh Brown]

I would imagine that's part of it.

[Tom Lee]

Yeah. And so that makes it harder for people to hold things with conviction.

[Josh Brown]

Okay.

[Tom Lee]

So I think all of that means the market can look like last year, which we have a big drawdown. However, there is good news. The rule of first five days, which is on the right side, on the tailwind side, it came in positive, which is a good thing.

[Josh Brown]

But the first five days were up, in other words.

[Tom Lee]

Yes.

[Josh Brown]

Okay.

[Tom Lee]

But we just completed some additional work, and Matt Sermonero probably has, like, similar stats but if the first week is positive and then the first month is positive, the probability of an up year jumps to like 92%.

[Josh Brown]

Is that right? Yeah, I didn't real. I, I knew that was a thing. I didn't realize it was that extreme.

[Michael Batnik]

Some of that data sounds random, but.

[Tom Lee]

Like 92% is so strong and it's 75 years. So N of 75 is still a lot to look at.

[Michael Batnik]

Yeah.

[Josh Brown]

Which, which years fell into the 8%? Just out of curiosity, did you bother to look?

[Tom Lee]

I haven't looked.

[Josh Brown]

It's in the weeds. But that would be interesting to see what threw it off. It could be like 9, 11 or something. Yeah, like it could be like an obvious thing.

[Tom Lee]

What if it's like all, it's like 08 and 2000 and you know, 74 or something.

[Josh Brown]

Okay, so you have a bunch of headwinds here. And for the people listening that aren't seeing the slide, I just, I think it's worth sharing a couple of things we got to. The valuations are higher obviously because stocks have gone up low grade. Consumer stress in subprime and auto loans. We have been able to look through this not on the individual company level. Those, the stocks that cater to the lower income consumer have absolutely felt the pain of what's happening there. But for the most part like Apple stock does not care about that. You know, like the big stocks that matter are looking right through it. Do you think that that could be the source of the next correction? Is that there just becomes an overwhelming amount of evidence that there's too much struggle at the low end or do you think that that's a low probability thing to worry about?

[Tom Lee]

I mean it's probably one of those things where it's a social question because you know, it is a burden for consumers like all this inflation.

[Josh Brown]

Yeah.

[Tom Lee]

And, and then it can create problems for government leaders and so it can swing elections. Yes, but mathematically the consumer, the lower 50% isn't as impactful to GDP as the upper half. And I think that's why the market hasn't paid attention to that.

[Josh Brown]

That hasn't been a stock market story, that's been a political story.

[Tom Lee]

Yeah, but then it can become like a, that's why we've capping government credit card rates.

[Josh Brown]

At the rate things are going, he's going to lose the house and if he does, it'll be 80% because of the affordability crisis that the polls say is squarely being blamed on him. I'm not saying you should agree with that or not. Agree with it. I'm just saying that is what the polls are saying and then maybe 20% immigration enforcement chaos. But like to your point, that may not be a market story today, but a blue wave in the House would absolutely become a market story. Because part of the bull case right now is all the deregulation which will obviously grind to a halt once they have to actually start voting on things.

[Tom Lee]

Yeah, so that's why it makes sense. Like capping health care rates, trying to get oil down, credit card fees. Capping, like those are things that would help a lot of folks.

[Michael Batnik]

Well, also not to be the bearer of good news, and I'm not suggesting that the lower end consumer is on fire at all, but if a lot of those loans that are bad loans in the subprime auto market have it in 2022 and we're on the other side of that now. And if things were that bad, Ally Financial, which is the biggest lender to these consumers, the stock wouldn't be within, I don't know, 3% of a 52 week high.

[Tom Lee]

Right. And that's forward looking.

[Michael Batnik]

Like, come on, like this is the truth.

[Josh Brown]

You have margin New York Stock Exchange margin debt at an all time high. Michael and I would look at that and we're not as smart as you and we would just say yes, that's usually what you see when the stock market's at an all time high margin debt just because it's a function of the overall size of the stock market capitalization. Are you, by adding that into your headwinds, are you implying that there could be something more to that?

[Tom Lee]

Yeah, there is a little signal. So, and we're, we will probably start writing about it.

[Josh Brown]

Oh, here's margin debt. So 1.214. Is that 1.2 trillion? Yeah, as of November 2025. And that obviously is a record high. And for context, In July of 2023 it was 710 billion. So it's almost a full double in two and a half years.

[Tom Lee]

Yeah.

[Josh Brown]

Okay, what's the signal there?

[Tom Lee]

What we found was if you look at the year over year change, it's actually positive for stocks until the percentage gain exceeds 38%.

[Josh Brown]

The percentage gain of the margin debt itself. Yeah, we're there.

[Tom Lee]

Yeah. Actually it's at 36 right now. So it's almost there because what it means is most of the gain is now being fueled by the consumption of leverage to drive the gains. So in that top deciles in the last 30 years, the forward returns go from 70% positivity to 40%. So we're almost at the point where it might be a headwind.

[Michael Batnik]

So can I show you a chart from your protege chart? Go at Matt. So I do like what you showed, which is like the amount of money coming in and the year over year change. So what I had Matt do was show me, show me margin debt as a percentage of Russell 3,000 market cap. And it's pretty low, but it's accelerating like in a meaningful way. Check this out.

[Tom Lee]

Right.

[Michael Batnik]

So historically low or like nothing to be too concerned with. But look at that rate of.

[Josh Brown]

Look at that changed as a percentage. So it's 1.8%.

[Michael Batnik]

Yes, I normalized for the overall market cap, but it's, it's accelerating pretty violently.

[Tom Lee]

Yeah. And that reflects a cohort of people because a lot of people don't use margin debt and I don't think the Robinhood community uses margin debt. They're probably buying more zero day trading options.

[Josh Brown]

Oh, I would say they're doing both.

[Tom Lee]

Okay. Or maybe both.

[Josh Brown]

Yeah, I would guess both.

[Tom Lee]

Yeah. So when we think of it as a percentage market cap, it's not necessarily representing how the cohort is trading. So there's a cohort that's really employing this debt that they're exhausting. Their.

[Josh Brown]

So the 38% threshold, what happens then?

[Tom Lee]

Well, so forward returns turn negative. So that's would be stock market. Yeah, I mean that would be the case for the. Why? There could be a drawdown to kind of reset everything. Yeah, so.

[Josh Brown]

So if you get that drawdown and a lot of that margin debt comes out of the system and we normalize at a lower level, most people, yourself, myself included, would say, okay, great, we had the cleanse. Like you sort of need cleanses on the way toward higher prices. I don't even know that we would look at that as a headwind or a negative.

[Tom Lee]

Yeah. So for investors, drawdowns are good because everyone has more ability to allocate at lower price.

[Michael Batnik]

But what did you say? Like, like always. John, chart seven, please. The correction is happening under the surface. So Oracle, as I mentioned, cut in half. This is the Max 7. Microsoft's in a bear market. Tesla's 14, Apple's down 10. Like there's opportunity, opportunities, whatever. Like things are happening.

[Tom Lee]

Yeah.

[Michael Batnik]

And the market's broadening out. Like it doesn't. Does the market not need max 7 for the next, like higher.

[Tom Lee]

Yeah, I mean for me, if I'm an investor, I mean, and I didn't own Microsoft, I mean, they can buy it 22% cheaper, right.

[Michael Batnik]

You.

[Josh Brown]

You could, right? You could buy it at a lower valuation than at any time over the last two years. And all that premium from OpenAI, that's all gone. You could almost argue that's part of what's hurting the stock. I want to ask you about the. The software correction generally, not just Microsoft. So the. I think the IGV is in a 25% drawdown right now. And I don't know when the last time we've seen that. Probably 22. Every one of those names looks like shit. From Workday to ServiceNow, salesforce.com, like one after the other. Even the cybersecurity software names are down big.

[Michael Batnik]

Look at this bear market. So this is the application software sub industry.

[Josh Brown]

So you have. And here's why I'm bringing this up. I think you're thinking about AI as a bull. You just told us it's wreaking havoc on the stock market right now. It's not. The AI theme, if anything, is erasing market cap, not adding it, at least in software stocks. Now, I understand people are taking that money and buying utilities and God bless them. But are we so sure that AI is a tailwind and not a headwind for investors?

[Tom Lee]

Well, sometimes it's easier to see the losers and not the winners.

[Josh Brown]

Okay, I agree with that.

[Tom Lee]

Yeah. So software, I think, is now being chosen as a loser because now AI can write code and replace a lot of subscription services. And I don't know if you've seen the charts recently about tech employment, but it's actually declined. It's like one of the few industries where there's fewer people.

[Josh Brown]

Remember, they said to everyone, learn to code. Yeah, not great advice. Learn art history, it turns out, might be better advice.

[Michael Batnik]

Do you think the market is right to kill software like this?

[Tom Lee]

Usually it's a signal, you know what I mean? Because you know it's washed out when you have bad news and it doesn't go down. But if you have bad news and it's going down, that means how about good news?

[Michael Batnik]

And it's getting. So ServiceNow had great earnings, stock is mauled, and it was already getting destroyed.

[Tom Lee]

Okay, so that's also a bad sign.

[Michael Batnik]

It's very bearish.

[Tom Lee]

If you go down on good news, it's a bad sign.

[Josh Brown]

I would argue the reaction in Microsoft relative to what they actually announced is a really bad sign. Because there was like, nothing negative there. It was like slightly higher expenses, slightly lower Azure growth, it was 30, 38%.

[Michael Batnik]

It was 38%. Was their guide in Azure down from 39% and the market's like, all right, we'll take $400 billion, please. Thank you very much.

[Josh Brown]

So that's like not a. I know it's anecdotal, but that's not good. When one of the largest stocks in the market reports a quote unquote regular quarter and they act like it's the end of the world, I take that as like a negative sign, obviously.

[Tom Lee]

Yeah. And you know, I mean I learned when I was an equity analyst, like there's like a three quarter rule. Like if a stock misses, you know, you kind of can't touch it for three quarters or two or three quarters. So.

[Josh Brown]

Okay.

[Tom Lee]

But it's still an opportunity for a long term investor.

[Michael Batnik]

Can we say that two things are true? The reaction of Microsoft today is not bullish. Obviously it's stock since 12% it didn't say anything terribly bad. The street is worried about its open air exposure to which I would say good. I love that there's no bubble, that investors are actively rejecting the AI bubble again for the third time now. Oracle cut in half. Microsoft bear market in a bubble if the biggest stocks. So just in terms of building a wall of worry, I as a long term investor love that people are being cautious and discerning about risk.

[Tom Lee]

Yeah. And later this year, you know, many of these will actually become listed. So now you don't have to guess what it's worth or what its impact would be. I mean part of it is OpenAI is like a mysterious, like privately held. But now it'll be public and then now it looks like SpaceX Plus XAI will be public this year.

[Josh Brown]

Right. So, so you'll, so you'll remove some of the mystery and the people that want to affect trades on what they think those stocks are worth will be able to do that all day long.

[Tom Lee]

Correct.

[Michael Batnik]

Are large IPOs like, I don't know if historically is the right word. Isn't there something a little bit like too much supply?

[Tom Lee]

Yeah. Is it a top signal? Yeah, of course. I mean it's going to suck up demand. Right. Because it's a big amount of supply coming.

[Josh Brown]

Yeah. So I'll never forget I learned this lesson when Blackstone came public in 07. They were like the quintessential play on booming real estate. And they were like very heavily involved in emerging markets, mostly China. Like they were like in all of the quote unquote hot areas. And this is before we were talking about liquid alts and you know, the revolution. This was just about like this style of Investing is the best style of investing. And I think they bought equity office properties from Sam Zell at the top of the real estate market. I think if I remember correctly, that IPO was like a meteor or like an asteroid hitting the surface of the earth.

[Tom Lee]

Yeah.

[Josh Brown]

So when BX came public first, it wasn't a corporation, it was a partnership. Which meant if you were stupid enough to buy the stock for your clients, which I was, you got to tell them you just lost half your money and you have a K1. Like, that's your, that's your. That's. Tell your account you have another K1. That's your gift at the end of this. But I, I've always looked at those giant IPOs that Michael's talking about, and I think OpenAI qualifies. And SpaceX not as the beginning of, but as the end of something.

[Michael Batnik]

Where does the money come from? It's hundreds of billions of dollars, potentially.

[Tom Lee]

Well, yeah, but this might be different. Okay. And let me explain why. Like, SpaceX, when it goes public, is actually a huge wealth creation event for many of the people who invested in SpaceX. I know some people who are seed in it. 50,000. And I think their stake's worth 150 million.

[Michael Batnik]

That's insane.

[Tom Lee]

Because the company's worth one and a half trillion, so.

[Michael Batnik]

Like sounds inflationary.

[Tom Lee]

Well, I think that's the equivalent like of a massive tax refund for the US Economy.

[Josh Brown]

Well, they have to wait six months. They're locked up. They can't sell on the IPO date.

[Tom Lee]

Yes, but they might be able to get margin or they can.

[Michael Batnik]

We're going so much higher. So you're saying that these people that get liquid from SpaceX shares, they're gonna put it right back into the market and take out S blocks.

[Tom Lee]

Yeah. So think of it as like the alternative world who said no? Suddenly all these venture funds that are 99% of the fund's value is SpaceX waiting for xx has a huge distribution. So all that money going into the economy again.

[Josh Brown]

So you're saying I should have Michael start cold calling the SpaceX seed investors?

[Tom Lee]

Yes. Yeah. Ritholtz should actually do a pilgrimage to all the.

[Michael Batnik]

We have very cheap credit. Very cheap.

[Josh Brown]

All right. We did the January barometer, we did the FINRA margin cap. Where do you want to go next? Strategy.

[Michael Batnik]

Let's do the broadening. John, chart 12, please. So it's Thursday, it's 3:40. And Microsoft got killed today. Down 12%. What's XLK doing? Maybe that's not the bad XLK is down 2%. But that's a bad weighty. The NASDAQ 100 is down 96 basis points. Okay, 96 basis points for the NASDAQ 100. And the RSP equal weight S&P is down 2 basis points on the day flat. And this broadening trend that we're looking at. So this is a chart from Yuri and Timmer showing the equal weight versus the cap weight. And he showed that there was a clear narrowing earlier late last year and now it's broadening. So the S and P cap weight has turned sideways and you're seeing a breakout in the 4. 93. I love it. I'm. I think this. Now Listen, if the Mag 7 were really rolling over, I would say, all right, well that's not good. Right. Because there they are, the leaders. But the fact that they're going sideways and consolidating Microsoft notwithstanding, I think this is as bullish as you could possibly be.

[Josh Brown]

Is that part of your bull case for this year is that we'll have like the next hundred stocks up making a, making a play for new highs? Yeah.

[Tom Lee]

And I think this is confirming a broadening, is confirming a bull market. It's very good for institutional stock picking because they can't own that much mag7 and institutions can of course employ their own form of leverage through prime brokerage. So it means that you could actually have new dip buying coming from institutions. I think this would be really good news.

[Michael Batnik]

Your clients must love it. What are they asking you and saying about this?

[Tom Lee]

Well, yeah, I think they are breathing a sigh of relief that it's not just the Mag 7 anymore, finally. Yeah. And so people are seeing, especially the long, short folks, seeing good opportunities. A lot of them are doing non us. Yeah. I think that if someone's global, I think I understand now why they are looking at global because there's now, as someone pointed out, there's going to be two countries that are winners in AI, like the US and China.

[Michael Batnik]

Do we know that?

[Tom Lee]

Yeah, I mean, I think China's AI works really well and China has done a good job on EVs. And then I learned recently they're actually pretty big on healthcare and biotech innovation. Like, I think they are exporting more licenses than any other country.

[Josh Brown]

Okay.

[Tom Lee]

So like a lot of European drugs are actually licensed from Chinese labs. So then it means the supply chain, like the countries adjacent to China could be doing better. So it's good for stock picking. I mean, so there's more stories out there.

[Josh Brown]

I think the international story is so Interesting because last year they did not have earnings growth, but those markets went up 20 and 30% because it was like a mind, it was like a mindset shift. And I think a lot of the leadership in those countries and the people that run the stock exchanges, et cetera, they, some of them, it was just like jawboning. But some of them actually like passed rules like forcing companies to increase shareholder value. I think they all sort of looked at the United States recovery from the pandemic and said like what, what are they doing that we're not doing? And I think all at once they kind of got the memo, oh, their capital markets are on fire. And look at all the benefits. Like the domino effect when stock prices are rising. You get increased consumer demand for everything under the sun. You get like, you get executive confidence, you get more investment. It's just so, it seems so obvious. Even if you're a socialist country, you should root for your corporate champions to get bigger, not penalize them and find new ways to sue them. And I think that's the switch that flipped and that led to that rerating last year and then this year, to your point, now you're going to get the earnings growth in these countries. That explains the rerating of last year. And that's a pretty great like follow through story. And I think that's why you're seeing people allocating, going out of their way to allocate more to international large caps. My best guess is that's not like a six month phenomenon. That feels multi year to me and I don't think it's late in those markets at all. What do you think?

[Tom Lee]

Yeah, I think the more I look at it, the more I think what you said makes sense because then on top of that there's dollar could be kind of weakening.

[Josh Brown]

That could only help.

[Tom Lee]

Yeah. So then it could be along. There could be a long tail to that story. The more I look at it, the like, the less I think it's just a one year thing.

[Josh Brown]

Okay, I like that idea. I want to go to your, to your, your strategy again. So what, to own stocks that benefit from a stronger 2026. John, do you have this? All right, Energy, basic materials. Is there more to say on energy?

[Tom Lee]

Well, part of it is. So energy and basic materials were our top sector picks this year. Yeah, but, and I didn't anticipate precious metals to do so well or the metals, but it was really because they had underperformed so long. The level of underperformance last three years was something you've Only seen one other time in the last 75 years on precious metals. Yeah. So I think it might. Well, I think it. I don't know where the slide is, but there's like, what we have at Z scored how much standard deviations of underperformance. And it was at the same level you were at the 2000.

[Josh Brown]

You'd have the same thing about energy then.

[Tom Lee]

Yes.

[Josh Brown]

Energy has done nothing for five years.

[Tom Lee]

Correct. So it was energy and basic materials, and that's why we made it our top sector pick this year.

[Josh Brown]

Yeah, I think you're gonna be right on that one. And those charts all look outstanding to me.

[Tom Lee]

Yeah.

[Josh Brown]

Like, they're being. These stocks are under accumulation. I don't see any way around it.

[Tom Lee]

Yeah.

[Michael Batnik]

I have a question for you guys. Why do we say basic materials? Why don't we just.

[Josh Brown]

It's because they're not precious. There's precious and there's base metal.

[Michael Batnik]

But why not just materials? I mean, I never say basic materials, but I know that's what the sector is called. It's kind of weird.

[Josh Brown]

Wait, what do you mean?

[Michael Batnik]

Basic materials?

[Tom Lee]

Yeah, that's the GICS one.

[Josh Brown]

Yeah. Oh, right.

[Tom Lee]

Classification.

[Josh Brown]

How they classify all the equities.

[Michael Batnik]

Yeah. I'm saying, like, where'd basic come from? I don't know. Maybe we'll never know.

[Tom Lee]

Yeah. You know why? I think they were thinking of it as a manufacturing process. Like, these are the basic materials and then there's the interim goods. Yeah. And like industrial. It goes into the industrials. But you're right, the more, you know, that was like a. That's like an agrarian concept or something, right? Yeah.

[Josh Brown]

You have Bitcoin and Ethereum, not surprisingly, as what to own.

[Michael Batnik]

Tom, what the hell is going on? Bitcoin is crashing.

[Josh Brown]

Can you tell us. Can you tell us a little bit about the crypto market over the last three or four months? Because it was a very. It was like it was on fire. And like, the story made sense. Like, all right, you have pro crypto administration in the White House now. The SEC is on board now, like, everybody. Everything fell into place. And you had people on both sides of the aisle in Congress falling all over each other to collect money from the crypto lobby. And it just looked like, all right, finally, it's a regulated market, it's accepted, products are rolling out, people are using it, inflows are hitting the funds, and then it like, hit a wall. And I don't, like, have theories or whatever. We had J.C. perez on last week, two weeks ago. He's just like, oh, this is easy. They started trading options on bitcoin. That was the top, which I guess was someday in. In October. I don't know, what's your story for why it's been so directionless over the last few months?

[Tom Lee]

Yeah, crypto was doing well until October.

[Josh Brown]

So do you buy that story, the options story?

[Tom Lee]

A few things happened in October.

[Josh Brown]

Okay.

[Tom Lee]

So crypto was actually up like 36% and then from October to the end of the year, it actually had in some cases like a 40% drawdown. Yeah, one was there was a big deleveraging. There was basically a pricing exploit that took place on one crypto exchange that led to a, what they call an automatic deleveraging. Then that cascaded across all the crypto exchanges and it was the biggest deleveraging event in the history of crypto. Bigger than what happened with FTX after.

[Josh Brown]

So what happened? The people with leverage got unwound and they were forced out of longs and it kind of wrecked the trend.

[Tom Lee]

Correct. And it was a pricing error, but it liquidated over 2 million accounts globally. It wiped out I think a third of all market makers, which are important for they're the equivalent of central banks. And it crippled a lot of crypto exchanges. So their balance sheets had took a huge hit.

[Josh Brown]

Coinbase is in a 50% drawdown. I think it's second 50% drawdown since coming public. And Coinbase is a big company. So if that stock looks like that, you can only imagine the privately held players in the ecosystem, what that must have meant to them.

[Tom Lee]

That's right, yeah. So Coinbase, let's say is a fortress balance sheet. Then imagine those who have like, okay, balance sheets.

[Josh Brown]

Okay.

[Tom Lee]

Does that run its course in 2022? It took about eight weeks, eight to 12 weeks before risk appetite could recover. So we're like kind of in that outside window.

[Michael Batnik]

Well, Solana's hitting new lows today. So Bitcoin is down 6, ETH is down 7. It's not run its course. Maybe it might be accelerating to the downside. Yeah, but it's so weird with the juxtaposed to gold. It was supposed to be, supposed to be digital gold.

[Tom Lee]

Yeah, well, there's other things happening. So like in bitcoin, I think there is a turning of the holders because one of them is Bitcoin's like 14 years old. So the crypto punk, the 20 year old is becoming a mature person and many of them made fortunes. So they've been selling their bitcoin.

[Josh Brown]

Okay.

[Tom Lee]

And then as you know, there's this quantum risk that is more bitcoin specific because quantum developments are accelerating and about a third of bitcoin wallets are not upgradable. So they're actually quantum vulnerable.

[Michael Batnik]

Okay, can I ask you a dumb question? I don't know anything about this. Obviously, if quantum computing was a thing and we could hack the bitcoin blockchain, why wouldn't they hack, I don't know, the central bank or everybody's Chase account? Why would they go after bitcoin first?

[Tom Lee]

Yeah, so quantum operates like more like an asics, like a brute force of a repetitive calculation. So it can break encryption. So bitcoin's encryption is what can be broken. You're right. So you can break a lot of encryption. But banks hopefully would be upgrading all their customer passwords, force you to do a new type of password, and that's how you avoid quantum vulnerability. The thing is like a lot of bitcoin wallets, like satoshis haven't ever been upgraded. So the, and of course satoshi's wallet.

[Josh Brown]

How do you upgrade a wallet to make it so that the, the blockchain itself, that vulnerability to quantum computing will be protected against?

[Tom Lee]

You'd have to fork bitcoin, I mean, but. Or you have to contact the guy and say like upgrade your wallet if it's like a ledger wallet or whatever.

[Josh Brown]

So, but I'm saying if you upgrade your wallet, you're safe, but the price might not be safe.

[Tom Lee]

Well, if you like might be safe.

[Josh Brown]

From losing your bitcoin, but if there's a mass hacking event or there's some way that. And like Michael, not an expert, but if a lot of nodes just go away because they're worried about that risk, or if somebody even comes, somebody influential comes out and says I have information. And I think like literally there's a quantum computer right now in the process of hacking the bitcoin blockchain. You could upgrade your wallet, but the price is going lower.

[Tom Lee]

Well one, if someone developed a quantum hack, they wouldn't reveal it. Like a nation state would just steal those one third of the bitcoins until.

[Josh Brown]

Somebody starts to notice.

[Tom Lee]

Yeah. Now Ethereum for instance, upgrades twice a year, so they already developing quantum resistance. So a lot of blockchains are going to be quantum resistant.

[Josh Brown]

Okay.

[Tom Lee]

Just the way like Chase will upgrade all their encryption.

[Michael Batnik]

Have you ever seen sentiment this bearish outside of ftx? Like people are just seem totally done. And I know crypto is so weird that it can get its mojo back in two seconds for no reason. Could be up 15% tomorrow for all I know. But man, it looks like it's on the mat. It is right at multi month support and it just looks pretty gnarly right now.

[Tom Lee]

Yeah. So one actually from a technical perspective, crypto is. This is what Tom DeMarc actually is expected. So he's been hired as an advisor at Bitmine and he actually told us Thursday was an important day and it turns out today was an important day because we've had a big decline in crypto. But this is more akin to the end of the selling, not the beginning.

[Michael Batnik]

So you don't think we're seeing another leg lower?

[Tom Lee]

Well, for instance, Ethereum might go to 2400, but it's a touch. And then that's the bottom. But that's going to coincide with precious metals peaking. I mean remember, precious metals has sucked all the risk appetite out of speculation out of crypto. Right. A lot of it's come out of crypto into precious metals.

[Michael Batnik]

It's like unthinkable. Six months ago nobody could have foreseen back to we said nobody knows.

[Josh Brown]

I have heard that story that the people trading crypto have moved over to gold and silver because it's working, working better. They're probably telling themselves that they're being conservative right now. But there's another story that I've also heard from crypto people which is that if you thought bitcoin was a store of value away from the dollar. Now with the ready access to stablecoins and the full acceptance in the banking world of stablecoins and pending legislation that might even allow stablecoins to earn interest, stablecoin holders to own, what purpose does bitcoin serve? Like if we were using bitcoin to get money out of fiat currency or get it out of the traditional financial system. Well, now bitcoin is fully a part of the traditional financial system. That's number one and two, it moves too much to be useful as a store of value. It's useful as a trading vehicle. Stablecoins are amazing as a store of value because it's a dollar and it's always a dollar. So did the advent and mass popularity of Circle and all of these stablecoins. Now Fidelity launched one this week. Did that steal some of the use case away from bitcoin.

[Tom Lee]

Well, there's.

[Josh Brown]

Have you heard that before? I know I'm not the first person to say that I have. Okay.

[Tom Lee]

But there is a really big story around blockchains, which is Wall street dismissed blockchain and crypto as like just experiments but now financial institutions are rebuilding settlement layers using blockchains. That's what Standard Charter said at Davos. The UBS CEO says that in a few years there's a convergence between digital assets and traditional finance because blockchains offer finality and a lot more security. And Larry Fink says he thinks that the entire financial system is going to operate on one common blockchain.

[Josh Brown]

But why is that good for Bitcoin?

[Tom Lee]

Well, it's probably good for Ethereum because Ethereum is.

[Josh Brown]

You wouldn't be talking your book now would you, Tom?

[Tom Lee]

I haven't written a book on that.

[Josh Brown]

I'm so good at this. All right, go ahead, say more about Ethereum. So Ethereum's the useful blockchain that, that can actually help bring that sort of.

[Tom Lee]

Thing about because that's really where stablecoins have been built. You do smart contracts so you can lock information and prevent it from actually being altered. You could put a million page legal document on the Ethereum blockchain. If someone tries to change a period on that blockchain, the hash fails. So that's how you protect information. It's 100% uptime. This is what Wall street, as they think about the narrative around the future is they're building their entire system on contracts like Ethereum, which is really bullish for Ethereum.

[Josh Brown]

What is the timeline when you say they're building their entire system? I would say 99.99% of the whole financial system now has nothing to do with blockchain at all. In 10 years, is that 50% or is it 5%? Like what would be the bull case on the financial rails of. Let's just leave banking out of it. Let's just do Wall street for example. So trading settlement, et cetera. How much of that is running on Ethereum rails, if any?

[Tom Lee]

I might be able to give you a snapshot. Okay, so if we talk about stablecoins, Tether has about 160 billion of US dollars tokenized on their. Tether is a company, yes, but it's mostly running on Ethereum, even though it's only 168 billion, which is less than 1% of M1. So it's not even like risk assets. It's not credit equity tokenization. They're going to make $20 billion this year. Actually because of their balance sheet, they might be making like 24 billion.

[Josh Brown]

That's just the interest on the Treasuries that they own to back the dollar value of the.

[Tom Lee]

And because they're over collateralized, they actually own like now almost $30 billion worth of gold or something.

[Josh Brown]

Oh, wow.

[Tom Lee]

Right.

[Josh Brown]

Okay.

[Tom Lee]

But they're so let's say they make 20 billion, not 24, but somewhere between 20 and 24. They're top five most profitable profitable bank in the world.

[Josh Brown]

It's amazing.

[Tom Lee]

They make more money than Goldman or Morgan Stanley.

[Josh Brown]

That's amazing.

[Tom Lee]

And that's just a single monoline product with 300 employees.

[Josh Brown]

Okay. Now everybody is coming for that profit margin. As you know, JP Morgan, Fidelity, everyone will have their own in house Stablecoin. Because why on earth would they allow something like this to continue?

[Michael Batnik]

Yeah. What's better for the banks than a stablecoin? I don't have to pay you anything. We just have to keep it all.

[Josh Brown]

Yeah.

[Tom Lee]

Correct. Okay. And that's one product. So now you can build stock trading which you know, Vlad and others want to tokenize stocks.

[Michael Batnik]

Nice.

[Josh Brown]

E10 not using ETH though, right?

[Tom Lee]

They. Well, they'll use an L2.

[Josh Brown]

Yeah.

[Tom Lee]

They might try to use other chains. There's other chains and some banks are using these privacy chains which I'm not going to try to throw shade, but some have exploits. Throw shade. Some have had famous exploits in other countries. So.

[Josh Brown]

Okay.

[Tom Lee]

But I'm not like get mean Tom. I don't want to be suicided.

[Josh Brown]

You think if they, if they are built. If they are tokenizing assets. You think if they're smart, they either build it on. On eth in an existing L2 or they come up with a new protocol. But like that's the right world to build.

[Tom Lee]

Yeah. So let's say the Wall street tries to do their own blockchain because they want to control the narrative. Then there's going to be a new JP Morgan that is like Tether, that'll be built on the public chains. Because Tether is built on public chains. And it's better than you know, Jay Morgan has 3,000 employees. Tether is 300. And they make almost as much money as JP Morgan.

[Josh Brown]

Crazy.

[Michael Batnik]

Tom, I got to ask you about digital treasuries. This was all the rage. You entered the game, I don't know, eight months ago. You can correct me if I'm wrong. And this was the way that people got exposure to crypto with leverage. If bitcoin was up 2%, strategy was up a lot more than that. Strategy is now in a 70% drawdown. Bit miner is having similar pain. Given that nobody wants to own the underlying, let's assume that there is a bottom coming soon for these strategies for these assets. Assets. Why get exposure through a Digital treasury company as opposed to just owning the underlying.

[Tom Lee]

So digital asset Treasuries, really only two have been successful. I mean empirically, like since October, only two have actually been able to buy more crypto. Microstrategy and Bit Mine, both have bought more than $2 billion.

[Josh Brown]

It's a scale business.

[Tom Lee]

Yes.

[Josh Brown]

It's not a cottage industry. There shouldn't be 50 of these.

[Tom Lee]

Yes.

[Josh Brown]

Okay.

[Tom Lee]

Now Bitmine is still. Because the Ethereum, which is what it holds, generates revenue. Bitmine's got about a billion dollars of cash and its staking rewards from its Ethereum is going to be almost $400 million this year.

[Josh Brown]

Okay.

[Tom Lee]

And they're earning $40 million from their cash holdings. Okay, so it's a very profitable company.

[Michael Batnik]

Is it trading at a discount to the other line or not anymore?

[Tom Lee]

No, it's trading a slight premium.

[Josh Brown]

Okay.

[Tom Lee]

But just that, let's say you treat it as net income. It's like the 708th most profitable company in America today.

[Josh Brown]

Have you looked at like, have you looked at the correlation between, let's say the price of eth and the price of Bit Mine and come up with a rhyme or reason for like, like in other words, if somebody said what percentage of the decline in strategy or in Bitmine is due to the price movement of the underlying, I'm sure it's a moving target. But it's gotta be like almost all of it, right?

[Tom Lee]

That's right. And there's two betas. There's, there's decline beta.

[Josh Brown]

Cuz he's asking if those assets, not the stocks, if the coins stop coining to the downside and start coining up is the like, why would you buy the treasury version?

[Tom Lee]

You're going to make more money buying the Treasury. Because, see the, the treasury has a beta to the decline because the price of the underlying is falling. But when the price recovers, then you're unlocking the ability of the treasury to raise more money quickly.

[Josh Brown]

Okay.

[Tom Lee]

And Bitmine has what we call moonshots, made a, an investment in Beast Industries, one of the largest shareholders in Beast now, which is.

[Josh Brown]

Do you like him personally? Did you guys get on?

[Tom Lee]

Well, our corporate values are really aligned.

[Josh Brown]

Okay.

[Tom Lee]

Because you know, he's highly ethical.

[Josh Brown]

Okay.

[Tom Lee]

Kindness matters.

[Josh Brown]

He's a genius.

[Tom Lee]

He is the genius.

[Josh Brown]

Obviously. I know I'm not.

[Tom Lee]

Yeah. There'll never be another Mr. Beast maybe ever. Right? I mean someone with a billion followers.

[Josh Brown]

He was early and amazing at what he did.

[Tom Lee]

Yeah.

[Josh Brown]

Okay, so you're, so you're making investments like that that are not Directly correlated to the price of eth, but you'll probably always trade alongside them.

[Tom Lee]

But there's, but that is how you create on ramps to Ethereum because, you know, Mr. Beast audience, is he, you know, he's the biggest single person for Gen Alpha, Gen Z and a lot of millennials. Those are the next wave of financial consumers.

[Josh Brown]

Right.

[Tom Lee]

So Beast Financial is going to obviously be a really successful endeavor and a lot of.

[Josh Brown]

What is he doing?

[Tom Lee]

Well, they'll disclose, they've disclosed Beast Financial, but I don't want to share their plans.

[Michael Batnik]

Last question. I know a lot of our audience doesn't care about crypto, so apologies for those listeners. Where's the money coming from for you guys to continue to buy ETH when the market keeps going so much lower?

[Tom Lee]

It's institutional buyers. So Morgan Stanley, Ark Asset Fidelity, they're large holders of Bitmine.

[Josh Brown]

What percentage of all the ETH do you now hold? I know the goal was, was it 5%?

[Tom Lee]

Yeah. Currently it's 3.52%.

[Josh Brown]

So you're almost there.

[Tom Lee]

If you include the cash that's not been deployed, it's close to 4, so about 70% of the way there.

[Josh Brown]

Have you guys given public guidance when you think you'll hit that goal and if and when you do, are you upping that goal or would you then say, okay, mission accomplished? We are the war chest of eth.

[Tom Lee]

We haven't given guidance, but it's probably sometime this year. One thing to keep in mind, if at 5%, it's close to 500 million a year in net income.

[Josh Brown]

Wow.

[Tom Lee]

And if Ethereum recovers to its ratio to Bitcoin to its historical all time high, that's around 12,000 eth, it's, it's close to 2 billion a year in net income. So it's.

[Michael Batnik]

That ain't nothing.

[Tom Lee]

Yeah.

[Michael Batnik]

All right, stock market. Look at this candle for the close. Look at that bullish candle for spy.

[Tom Lee]

Wow. Holy buyers.

[Josh Brown]

Is it a hammer?

[Michael Batnik]

I mean, dude, I sort of like it near an all time high. They can't even take it down for one day. It's a bull market. I don't know what else to tell you.

[Josh Brown]

You have Mark, you have Mark Newton in house.

[Tom Lee]

We do.

[Josh Brown]

Okay, so what is he, what is he telling you on the technicals right now?

[Tom Lee]

He likes stocks in the interim, in the near term. He's also in the same camp that will have something that feels pretty bad sometime in the middle of this year.

[Michael Batnik]

Well, no, what's pretty bad? Because there's always a correction like you Said earlier, you think bear market, you think we'd get a 20?

[Tom Lee]

Yeah, it could be 20, but from a higher level. Right. So let's say we're 7300. I mean that could be 1400 points. Right. So then 5900 could be the low. I mean that would be painful.

[Josh Brown]

I want to do one more, one more with you. And not specific to the stock. But when people ask me, all right, A.I. everybody gets it. Going to be huge. Companies are spending trillions of dollars. We all understand that. Like what's the next leg to the bull market? My answer has been robots. I've been pretty clearly bullish on robots for 10 years now. Tesla last night told the street they're going to stop making Model X, they're going to stop making Model S. I think the models that really matter there now is like the Model 3 and the Y. That's like what they're really going to focus on. And then the Cyber Cab. But then the decision to, to stop making those cars is to focus full on autonomy, which is a fancy way of saying robotics. And he's talking about the humanoid robot being for sale to normal people by 2027. Now we know he's usually 5 to 10 years early on his projections, but that's like part of the charm, I guess. But that's pretty a, that's pretty notable that they're dropping two of their four top selling cars just to make robots and to make automated vehicles. What are your thoughts on that as a signal? And do you think the robot thing is going to be the next phase of the bull market?

[Tom Lee]

The way that I do robots could be huge.

[Josh Brown]

Not necessarily humanoid robot, but just the idea that autonomy is enough.

[Tom Lee]

Correct.

[Josh Brown]

To be a new bull market that we're not even in yet.

[Tom Lee]

Yeah. Because robots are force multipliers. Like it makes every human a superhuman or unemployed.

[Josh Brown]

But sure.

[Tom Lee]

Yeah.

[Josh Brown]

An unemployed superhuman.

[Tom Lee]

Yeah. If robots pay taxes then you still come out ahead. Right, Right. Because you might start taxing the robot.

[Josh Brown]

Makers at least will pay the taxes.

[Tom Lee]

Yeah. Or the doordash robot pays taxes.

[Josh Brown]

But you don't have this in your themes. Is it too early?

[Tom Lee]

We do have labor shortage as one of our investment themes because they will.

[Josh Brown]

Use robots to supplant or to fill the hole.

[Tom Lee]

Yes, there is a structural shortage of prime age workers that is going to be lasting for the next 10 years. So there's a use case for robots. But I agree with you, that is a really big unlock that in the real world you have agentic robots moving around that's very productive. Like, it could create a lot of gdp, but remember, it could generate so much tax revenue that the US Government doesn't have to tax people anymore. You might not even have to work.

[Michael Batnik]

Come on.

[Josh Brown]

So that's.

[Tom Lee]

Yeah.

[Josh Brown]

So that's what, that's no more taxes.

[Tom Lee]

Yeah. I think we could stop paying taxes because the robots are the ones that are taxed.

[Josh Brown]

And then what? How do we.

[Tom Lee]

People may not even work then because there's so much surplus generated by the robots.

[Michael Batnik]

Robots pay taxes.

[Tom Lee]

Yeah. You tax their activity. It's micro taxing. That's what you. But you would need a blockchain.

[Michael Batnik]

You are living in the future, my friend. I love it.

[Josh Brown]

You're not at all in any way pessimistic about, we'll be the animals, we'll.

[Tom Lee]

Be the robots, Visit us in the zoo. We're just like sitting.

[Josh Brown]

You're not in any way pessimistic about the combination of AI and robotics? So physical AI, like the number one occupation for men in the United States. Like, job title is driver. This is not about the future. This is right this second. Like, I understand it's the greater good and it'll be cheaper, better for consumers. Like the cost per mile. I'm, I'm, I'm, I'm all in. But I am worried about, like, the in between once everybody gets used to that. And that could be, I don't know, couldn't that be decades? That what we're seeing in the software stocks right now? Like, you're not at all pessimistic that, like, we might need a pretty vicious economic down cycle to get to that other side? Because a lot of people are going to get laid off all at once.

[Tom Lee]

I think the US Is going to come out certainly as a winner in China. So I think every American today is gonna benefit from the surplus generated by robots.

[Josh Brown]

You do?

[Tom Lee]

Yeah.

[Josh Brown]

Okay.

[Tom Lee]

But I'll give you an example. Like in 1935, before the advent of flash frozen, okay, 30% of Americans worked on a farm.

[Michael Batnik]

Right.

[Tom Lee]

And food spoilage on the supply chain meant you produce a lot of food, but it's spoiled. And so it couldn't go far.

[Josh Brown]

It couldn't get that far.

[Tom Lee]

Yes. And most grocery aisles were like, fresh.

[Josh Brown]

Yeah.

[Tom Lee]

Within 20 years, flash frozen allowed food to go from 20% of the wallet to 5. And it went and took farming employment from 30% to 5%. So if you were an economist in 1935 and said, in the next 20 years, 90% of all farming jobs are going to disappear because of this technology.

[Josh Brown]

That would have sounded scary.

[Tom Lee]

Yeah. People said like, oh, it's another depression. But instead it was led to a boom.

[Josh Brown]

There's a great Steinbeck novel, East of Eden.

[Michael Batnik]

Love that book.

[Josh Brown]

And they're farmers. And then toward the end of the book, they get into flash frozen and actually refrigerated train cars, I think is a big plot point there because it takes place in that era that you're describing. Made me think of it.

[Tom Lee]

Yeah. So that's like robots, because that's 25% of the entire world.

[Josh Brown]

So now worried about these adjustments between now and then and people wandering around for five years before they feel the benefit of the surplus. Cause right now, Tom, a lot of the benefit of all these things seems to be going to the top 50% of households. The bottom 50 don't have equity. And I just, I feel like that's the same thing, but on steroids. But maybe I'm too, maybe I'm too pessimistic about it.

[Tom Lee]

I mean, social policy. Yeah. Has to change. You know, hopefully people become productive with their extra leisure time. I mean, maybe everybody will have leisure time.

[Michael Batnik]

I don't think that's a good thing. I think people got to do something. What are you going to do, watch Judge Judy all day?

[Josh Brown]

Do people want to be needed?

[Tom Lee]

Yeah, we don't want people watching tv. Right. We want people to aspire to something.

[Michael Batnik]

Right. And so if the robots take that.

[Josh Brown]

So like Elon said, and I'm not sure if he was like joking around the way that he said it, but he said like he predicts mass civil unrest followed by mass prosperity. It's like, all right, well can you like ballpark the timeframes of these things? Cuz maybe I'll go on vacation for a few years.

[Tom Lee]

Yeah.

[Josh Brown]

So like, that's the thing that I, that I think about. And obviously, like, there's a lot of paranoia always about technological displacement. That's not new. But this time it just feels like really visceral.

[Tom Lee]

Yeah. And we're at a time when the country's really divided too, you know, and. But you know, we're seeing some good things. Like organized religion is making a comeback. And you know, like, I think guys like Jimmy Donaldson, that kind of push kindness and virtue. Like that's a good thing. Yeah. Mr. Beast. Like that's the. That's what I'd rather see people push than divisiveness. But, you know, I'm a bit of an optimist in how this all shakes out.

[Michael Batnik]

Well, one thing we can all agree on. Grannys unite. What's going on with the Granny shots? How are we doing there?

[Tom Lee]

Yeah, Granny's good. Last year Granny outperformed the broader market by I think, 700 basis points. Points.

[Josh Brown]

Holy shit.

[Tom Lee]

And this year it's outperforming by 150.

[Josh Brown]

What does the composition of that portfolio look like this year versus last year? Is it very different or not really?

[Tom Lee]

It is different. There is a tilt more towards industrial materials. Basic ones and some basic materials. Yeah, basic materials. Total assets of the three, there's now three grannies. There's the original Granny and then there's the small mid cap granny called Gray Granny. J, G, R, N, J.

[Josh Brown]

What is that? That's small cap Granny.

[Tom Lee]

Small mid cap, yeah.

[Josh Brown]

Okay.

[Michael Batnik]

What are the assets in the mothership?

[Tom Lee]

Granny is 4.4 billion now. In one year.

[Josh Brown]

That's crazy, dude. Is that all right? Did you break a record?

[Tom Lee]

I believe.

[Josh Brown]

Year one, I believe.

[Tom Lee]

Take three billion. It was the fastest for an independent equity, like for a non large house.

[Michael Batnik]

Last time you were on, I think you were at a billion and we were like, come on, how? Like in like three months?

[Tom Lee]

Yeah. So the total.

[Josh Brown]

The power of the Granny shot.

[Michael Batnik]

I never doubt the Granny.

[Tom Lee]

So the total of all three is like 4.8 now.

[Josh Brown]

That's amazing. And what's the. Wait, what's the third one?

[Tom Lee]

Granny Lo.

[Josh Brown]

Grannies.

[Tom Lee]

No, Granny International Grannies. No, that. That's coming.

[Josh Brown]

Of course it is.

[Tom Lee]

But Granny. Yeah, we're gonna give you a licensing.

[Josh Brown]

I gave you the whole suite. I laid it out for you. I want equal weight grannies and I want it right this minute.

[Tom Lee]

Yeah.

[Michael Batnik]

Wait, what's the third Granny?

[Tom Lee]

It's income Granny. So it's. Yeah, pay attention.

[Josh Brown]

You know, be great if you actually name them after the. The actual Golden Girls. Like just. I'm just, I'm just falling here. I think people would be into that.

[Tom Lee]

Yeah.

[Josh Brown]

So. All right, Tom, we love your optimism and we need it. We had Jeremy Grantham sitting in that seat last week. So we need, we need a little PH balance.

[Tom Lee]

Yeah. Yeah, a little.

[Josh Brown]

You ever meet him?

[Tom Lee]

I did a. I did a. A fireside chat with him once.

[Josh Brown]

Okay, what are your impressions of him?

[Tom Lee]

Well, he's very sage, Very wise.

[Josh Brown]

Yes, he's really into sage is what they say. You're saying he's older? Yes. Yeah.

[Tom Lee]

And he's really into extractive things like forestry and fishing and owning land. I mean, that's wise, right? Because those things have done well. But I didn't agree. And this was probably in 2012. I didn't agree with his dire equity outlook.

[Josh Brown]

Yeah, well, good call. One of the. One of the things that Grantham does not talk about. Michael and I were talking about it shortly after talking to him. He's probably given more money philanthropically to causes that he cares about than, like, anyone else the two of us have ever met.

[Michael Batnik]

Well, that's for sure.

[Josh Brown]

He's, like, one of, like, the. The. One of the great philanthropists. And he's not, like, in the doc before the podcast, like, hey, guys, bring up my. Bring up all my philanthropy. So we didn't get to it, and I actually feel like we should have. He's an amazing, amazing gentleman, so. And I'm glad to hear that you appreciated that as well. Where can we tell people to go if they want to subscribe to funstrat, learn more about the grannies? Like, what are the best URLs to send people to?

[Tom Lee]

Okay. If they're interested in getting our research, which is almost daily videos and notes, it's fsinsight.com like f. Like funstret fsinsight.com.

[Josh Brown]

Okay. What else?

[Tom Lee]

And if they want to learn about Granny Shots, the website is grannyshots.com.

[Josh Brown]

Okay.

[Tom Lee]

And we explain the process. We have weekly videos there explaining our holdings and how we own the stocks. It's a very transparent product, including. We talk about weekly performance, good or bad.

[Josh Brown]

Yeah.

[Tom Lee]

And of course, if they're interested in learning about bitmind, they can Google bitmind, I suppose.

[Josh Brown]

Awesome. I love what you're doing, and congratulations on all your success and just thanks for hanging out with us. We love seeing you and we'd love to have you back at some point this year.

[Tom Lee]

Yeah. This is my first of all. You guys have the best conference.

[Josh Brown]

Oh, thank you.

[Tom Lee]

Looking forward to future proof in Miami.

[Michael Batnik]

Hell, yeah.

[Tom Lee]

Can't wait.

[Josh Brown]

Awesome.

[Michael Batnik]

Wait, you're about to say something else. Nice. Keep going.

[Josh Brown]

Yeah. No, did you have one more nice.

[Tom Lee]

Thing that you want to say? Okay, you guys, you also have a great podcast because I like listening to your voices. Like, I don't have to watch you guys talk. I can just listen.

[Josh Brown]

We appreciate that. Amazing. And we'll see you again soon. Ladies and gentlemen, thank you so much for watching. Thank you for listening. Check out funstrat. Funstrat and Granny Shots. And remember, if you like the show and you want to tell people about it and help the algorithm throw a like on that, maybe do even, like a review is good, right, Duncan? Reviews help.

[Michael Batnik]

We love that.

[Josh Brown]

Why do the reviews help? People don't understand this just gives people.

[Michael Batnik]

Details about why they might like the podcast.

[Josh Brown]

Right? That's all you got for me?

[Michael Batnik]

I mean, it's important.

[Josh Brown]

Do it. You didn't have a monologue prepared about comments? All right, all right. We'll let you off the hook. All right, guys, we'll see you next week. Thanks so much. We did it.

[Michael Batnik]

Sa.