The Compound and Friends - Bill Sweet on the Tax Time Bomb, the Bull Market Turns Two

Episode Date: October 15, 2024

On this TCAF Tuesday, Ritholtz Wealth CFO Bill Sweet joins Josh Brown to discuss "The Tax Time Bomb", and what becomes of the tax cuts of late 2017, post election. Then, at 29:00, hear an all-new episode of What Are Your Thoughts with Josh and Michael Batnick! Thanks to YCharts for sponsoring this episode! Get 20% off your initial YCharts Professional subscription when you start your free YCharts trial and tell them WAYT sent you (new customers only): https://go.ycharts.com/which-asset-classes-perform-best-as-inflation-is-driven-lower?utm_source=WAYT&utm_medium=partnership&utm_campaign=CPI_Whitepaper Sign up for The Compound newsletter and never miss out: https://www.thecompoundnews.com/subscribe Instagram: https://instagram.com/thecompoundnews Twitter: https://twitter.com/thecompoundnews LinkedIn: https://www.linkedin.com/company/the-compound-media/ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Ladies and gentlemen, welcome to the compound and friends. Tonight's show is brought to you by the good folks at Y charts. Y charts allows you to do a lot of your own research, but then they also put out white papers and different ways of looking at markets that their own in-house people put together. And right now they've got a new white paper that dives into how different asset classes from US equities, international stocks, real estate have historically performed when inflation finally settles into the Fed's target range. This is really helpful stuff whether you're an

individual investor, an asset manager, a financial advisor, and I want you to check it out. So you will go to Ycharts and if you want to check out a professional subscription, you will save 20% off your first time subscribing to Ycharts if you tell them what are your thoughts sent you. So please go ahead and check out Ycharts. Thank you guys so much for sponsoring the show. Tonight is a big one. We had Bill Sweet, the CFO of Ritholtz Wealth Management on to talk about the tax time bomb. This is a real thing. We've got an election coming up in just a couple of weeks. And one of the big consequences of this election, not just the presidential election, but the Senate and the House, is what becomes of the tax cuts from late 2017. The Tax Cuts and Jobs Act will sunset at the end

of 2025 if nothing is done. We think something will be done and we want you to hear our perspective on all the different scenarios. After that, it's Michael Batnick, it's me, it's another all-new edition of What Are Your Thoughts. We come out celebrating the two- year anniversary of the current bull market. We take a look at Nike, the Tesla CyberCab announcement flop, the Apple Vision Pro flop that nobody seems to want to talk about. We look at the VIX versus the all-time high in the market, which is an interesting thing that people have been debating all week and so much more. So please stick around.

I'll send you there now. Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Fiance of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.

Hey guys, it's Josh. I am here with Bill Sweet. This November, the House of Representatives, the Senate and the White House are all in play. The races are close and taxpayers have a lot to gain or lose depending on the outcome. Congress does nothing. By the end of 2025, many of the tax cuts enacted in 2017 will expire. As a result, according to the Wall Street Journal, 62% of U.S. households will see their

taxes raised in 2026. Joining me today about what's at stake and to help me game out a few different scenarios, Bill Swede, again, our Chief Financial Officer here at Ritholtz Wealth Management. Bill is also one of the principals of our accounting practice, RWM Tax. Bill, what's happening?

How are you? Josh, I'm doing great. It's fall, it's beautiful. We've got three weeks till a big election. I'm excited to be here. It's honestly, it's happening? How are you? Josh, I'm doing great. It's fall. It's beautiful. We've got three weeks till a big election. I'm excited to be here. It's honestly, it's crazy. Somebody who's going to be a guest on The Compound and Friends this week had to leave the West Coast of Florida for the storms and ended up coming to New York a week early. And I said, you should be really thankful that you're here. I have

never seen it more beautiful in Manhattan than it is right now. Go walk around Central Park. Anything but watch the Weather Channel. It is nice. And we probably just have been beat down, right, for the last couple of years coming out of COVID. So yeah, maybe this is the new normal.

I'll take it if so. We deserve it. All right. Is this going to be, I know you're like a little bit tongue in cheek, but you wrote the tax reform time bomb. It's not really gonna be a time bomb. I mean, it doesn't have to be a time bomb.

Let's start there. Well, it takes me back about 20 years, Josh. The Bush era tax cuts, if you go back to when you and I were young bucks here in the industry, that was the thing. And I don't know for the life of me why Congress does this to us. Why did they set out these tax reform bills that are temporary in nature?

So yeah, the TCGA Tax Cuts and Jobs Act dates back to 2017. And in order to get in some budget reconciliation rules, they had a seven year window in order to meet some time horizon where it couldn't cost more than $10 trillion or something of that nature. So if you fast forward 2018 to 2025, all of a sudden that's right around the corner. And absent some changes from Congress, taxes are probably going to go up on most

Americans at the end of next year. Well, we, I think the obvious reason why they give us temporary tax cuts is the only way to get it done. They say, all right, we're going to do this tax cut. And within the next five years or seven years or 10 years, we'll figure out what we're gonna cut in order to pay for it. And then of course they don't cut anything. But that's why it's done this way. And all right, so they passed the TCJA at the end of 2017.

So basically Donald Trump delivers to his donors within one year, he gets a pretty big tax cut passed. And it's not just for the top 1%. Everybody gets a lower tax rate, corporations too. Tell us what parts of that are about to expire and like where the rubber really meets the road from your position. Yeah, you just hit it.

So Josh, as part of that package signed by President Trump, but Kevin Brady in the House GOP caucus was the key architect. The corporate tax reform rates were permanent. And that brought the corporate income tax rate from 35%, which was among the highest among the OECD, to 21%, which is basically around the middle. And the idea there was to stop this offshoring trend that

had really picked up steam during globalization in the early 2000s. And so 21% is the permanent corporate tax rate. That was permanent. However, again, to get through those budget reconciliation rules, a lot of the provisions that were relating to individuals and you, me, other taxpayers, we are the ones who pay the bill for the federal government.

Those tax rates, more or less to harmonize with the corporate tax rate, about a 3% decrease on everybody. And so if we do the math here on what that saved us in 2018 for somebody earning about a hundred thousand dollars is about a three thousand dollar cut for somebody earning about 250 to 300 thousand dollars about an eleven thousand dollar cut. And those things are all all set to to expire here depending on what happens to the election and going into 2026. Yeah, people are going to feel this. So what makes this really front of mind for a lot of investors is this is not only a close race in terms of the presidential election, but actually we could have like a toss up in the Senate. Uh, you know, I don't think either party is really going to have, uh, you know, tight control over the Senate based on the way things look. Um, but then the house and, uh, some things are going to have to happen because it's unlikely they won't be able to do some sort of a deal.

It doesn't seem likely that there'll be any bipartisanship right now. But after the election, I feel like both parties have a vested interest in shaping whatever the response to this is, rather than just letting it expire. Is that your sense from what you're seeing and hearing? Yeah, totally. Based on election betting odds right now, which is, to me, probably the best read.

I don't really like looking at the polls, because they fluctuate a little bit too much. But yeah, I think the GOP's got the edge on the House. I think it's going to be about 75-80% chance that the Republicans are going to control, excuse me, the Senate. And the House is a coin flip, similar to the presidency. It really is a coin flip based on a couple of state elections in Oregon and other municipalities. And if that's the case, yeah, I think you're exactly right that Republicans take a different view on how to shape the future of the tax code than Democrats

and vice versa, and how those two things are going to all come into play. But I think you're right in your instinct, which is what I'm hearing between the lines, which is nobody wins if the tax cuts simply expire. I think that, to me, is the least likely scenario that we just see a 3% above the board tax cut that starts all the way with folks earning $50,000 a year all the way to folks earning $5 million

a year. I think that's the least likely option here. Here's a quote from the Wall Street Journal. There is going to be a tax bill next year, no matter who's in the White House, no matter who's controlling the House and the Senate. That's Brad Close, president of the National Federation of Independent Business in the Wall Street Journal. Quote, what shape it's going to take, when it's going to come up, how big, how small, no idea. Right. That's the trick of it. All right. So let's get into some of these individual potential outcomes. So the first

thing that could happen is a Republican sweep. So they take the Senate by like one vote, you know, potentially they take the house and Donald Trump beats Kamala Harris. Um, if, if this is the case, it almost feels like it has the widest variety of potential outcomes because we've heard Donald Trump during the campaign, like making a lot of one-off promises to various types of taxpayers. He recently has been talking about getting rid of taxes on social security. Good luck with that.

I don't think that's an executive order sort of thing. He's talking about no taxes on tips. Maybe he was in a diner when he said that. So there's a lot of these things that are going to make the tax code more complex in that scenario because it's more deals. Um, if, if that ends up being the case, we could also see a push to make the corporate tax even lower, which is another thing that, uh, Trump has said multiple times.

So what would be your instinct if we were to get a Republican sweep? Like, what do you think would that tax reform conversation look like? And how likely would it be that there would be even further cuts beyond what happened in the TCJA? I think that scenario is very likely, in that at a minimum I would predict an extension of the Tax Cuts and Jobs Act cuts, but I think you scenario is very likely in that at a minimum, I would predict an extension of the tax cuts and jobs acts

cuts. But I think you're more likely correct that ultimately Republicans would come to the table, especially if they had a majority in the House, I think would really drive this because I think the Senate's going to land in their lap on how to do that. And Republicans time and time again have taken the argument that lower taxes put more income

into the hands of Americans and the productive Americans. And the lower the tax rates, specifically for folks who are earning more, that's more money that they're spending and reinvesting in the economy. That's their central argument, whether you buy it or not. I also think that they would likely pursue a salt cap extension, salt state and local income taxes.

They would likely want that to continue. And that basically means that folks like you and me in higher tax states aren't going to be able to enjoy the benefits of deducting state income taxes. That's been a Republican pledge to equalize the tax rates and certainly sits well with voters in Florida and Texas. But I also think that they take a business-friendly attack.

They would probably extend the 20% QBI small business tax deduction, which is set to expire on the personal side and do little tweaks such as restoring the 100% bonus depreciation. I think a business friendly tax package would be most likely in the event of Republican victory. I want to go back to the salt. So this is something where you had a high deduction that you could make if you were in New York, New Jersey, California, the states where this really matters because of the high tax rate.

And then there was a cap placed on that. Just walk me through the mechanics of it and that that part of it might be revisited. There are actually Republicans in the House that are fairly powerful Republicans from New York, from New Jersey, from California, that might successfully lobby Trump to raise the limit on that cap because it's in his own political interest to do so, which is obviously not something

that was successful the last time. So like, what's your handicapping of whether or not we'll see something different happen there? Yeah, you're totally right. In fact, Josh, they formed a House Salt Caucus. There is bipartisanship in Washington, bringing the coast together. And it's against the state and local tax deductions.

I think what's interesting about it is that not as is that a bipartisan sort of hack. I have to set aside my own feelings about state and local taxes. I'm sure you're in the same boat where you live. But yeah, my property taxes are well in excess of $10,000 a year. And my income taxes are no fun to look at as well.

So even though it directly benefit me, Josh, I think the salt limit is good policy. I think allowing an unlimited state and local tax deduction in a vacuum is not a great policy. Because why should a business owner in the state of Texas pay a higher tax rate than maybe somebody like you or me in New York or California?

I think that's a reasonable argument. However, like you said, votes are up for grabs. And so I think what I would handicap, what I would bet on is a compromise. And what I would bet on is probably a doubling something of that nature of the salt cap. And so it goes from $10,000 deduction to a $20,000 deduction.

And that's been played around with. And most importantly on some of these, some of these have a hidden tax in them, some of these tax code provisions, in that if a limit is not adjusted for inflation, there is this natural eroding where that limit becomes less and less powerful. In fact, in 2017, the salt cap of $10,000, in real economic value today, Josh, that's only $8,000.

So like the salt cap itself is 20% more painful for, again, self-interested folks like you and me than it was six years ago. Yeah, to answer your question, why should a business person in Texas pay a higher tax rate than a business person in New York, well, let them get their own Chuck Schumer. Exactly. Exactly.

Look, one of the interesting things is these are blue states, but with high income earners. So not all blue states have as large a concentration of high income earners as California, New Jersey, New York. So it is an interesting area where there might be something bipartisan there, but not for the best of reasons. Okay. Okay, scenario two is the Democrats somehow sweep and we have already heard Kamala Harris say nothing she does on the tax side will affect any households earning under $400,000.

I'm old enough to remember when that was a very high income. There used to be a lot of money. Yeah. Well, it's a high income and in a lot of of blue states, it's middle of the road income. But she's already said she's not going to touch. And that's like real middle class voters under 400,000. OK. So let's assume that she's going to stick with that.

That takes a lot of the pressure off worrying about Democrats taking control for many households, but not for all. She gave an interview to Stephen Colbert talking more about everyone's got to pay their fair share. She's highly enamored with these child tax credits, and I think she wants to raise them even higher. I think they were 3,000 during the pandemic, and she's talking about making them 6,000. I'm not sure if that's stimulative for the whole economy

or just kind of good policy, given the multiplier effect of young families with children. But these are some of the things that you're hearing. And then of course, there's the salt cap issue, which is an issue on the Democratic side as well. What do you, how do you envision that type of scenario playing out? And I know it's unlikely,

but where the Democrats take control of both houses and win the White House? Yeah, I think you hit it all in the head is that similar to the Bush era tax cuts, we can take a look back 15 years ago during the ACA 2010 negotiations during the whole sequester and all that other nonsense that we lived through. The end up compromise, Josh, was exactly what you indicated, that folks under a certain threshold, that $400,000 threshold, had their tax rates more or less frozen in exchange for a higher tax rate, all the way up to 40%,

roughly, for folks that are above that threshold. Why $400,000? I'm not sure. I think back then, 15, 20 years ago, that was around the one percentile, in that the one% of income folks. And today, just again due to inflation, that's about $650,000.

So we are talking about that hitting more people. However, they would make up for that exactly like you said in salt tax repeal. So if I'm lucky enough to earn $500,000 or more, and I'm deducting $50,000 of my state and local income taxes, hey, maybe that doesn't hurt me as much because I'm able to deduct my state taxes from that. However, the other thing, Josh, that they floated

is lower state taxes, and that estate tax is a relatively small portion of the tax code, doesn't impact a lot of taxpayers today because the estate threshold is so high at $13.6 million exemption. But the Biden campaign of 2020 floated a $3 million exemption, and that would touch a much higher percentage of taxpayers. And they would use these tax increases to get around the budget reconciliation rules that we talked about before,

probably again on another seven-year time bomb, in order to fund child tax credits, in order to fund this $25,000 first-time homebuyer tax credit that the Harris campaign has floated. There's a bunch of goodies targeted towards specific individuals. I would refer to them as the groups. And the group's clamor for these types of things, student loan cancellation was a big one over the last four to five years.

And that's generally what they would do. Democrats would raise taxes on higher income businesses. So let me jump in on that. Both parties have made noises about the tax cuts have to be paid for somehow. So obviously the Republicans would say, we're going to pay for it with less spending or we're going to grow our way. You know, if Trump is the president, the economy's growth will be large enough so that we don't even feel these lower taxes.

And then the Democrats, you know, the proclivity is like, okay, we're going to take it from billionaires. We're going to take it from cent to millionaires. And we're just going to make sure that everyone is, you know, paying a fair share. I don't really know what that word means. It could mean anything. It could mean anything. It's in the eye of the beholder. Yeah. We know most of the taxes in this country are already paid for by the wealthiest people. It's by design. It's a very progressive tax regime. But if they adopt the stance, the Democrats or anyone, frankly, they adopt the stance

that we have got to pay for an extension of the tax cut. You're talking about like, you have to find like $2 trillion worth, and no one's gonna be able to do that. So like, it's almost like it's a little bit of theater, and whether or not they can pay for the extension is probably not gonna be the thing that the extension hinges on. Yeah, I could not agree more.

And ultimately, they're both playing with monopoly money. When it comes to this stuff, it's a lot of budget math. And the other thing you'll notice, the reason that you can tell this is the case, you mentioned the Trump let's exempt tips from income. And I think servers, restaurant people, they're hardworking people, they're great Americans, and maybe they do deserve some help.

However, I don't see a lot of difference between the person who is working at the front of the restaurant versus the person who's working at the back of the restaurant. If you exempt tips from the servers, but not the cooks as an example, but you'll notice that just due to the political Kabuki theater-

Sorry, do we think people getting tipped at restaurants are paying a lot of that tip money in taxes? Right, are we joking or are we being serious right now? It might be possible that a lot of that money is not being reported right now. People sometimes speed on the highway too, I'm told. I've never seen it as a professional tax preparer. But that said, yeah, but you'll notice that the Harris campaign almost immediately seized

on that proposal. And a campaign promise went out basically similarly saying, so yeah, I think a lot of this is political theater, Josh. You're 100% right. And regardless of which party gets elected, this might be cynical, but there will probably be another trillion dollar hole in the deficit, depending on how this goes, just depending on how we see things. And you're right.

A $2 trillion hole in the deficit, that's about 8% of GDP. There's no tax policy. There's no change that could fill that gap in one to two taxes. Yeah, I just really don't think that anyone is going to be able to do anything there, at least not right now. And they will say anything they have to say.

So Trump might say something like, tax cut for people who will vote for me. Take a picture with your phone in the booth after you've pulled the lever. Kamala Harris just put something out. Crypto regulation to protect black men. It's almost like at this point, we're three weeks away from the election and people will just say anything and that's kind of where we are. But you used to have Joe Manchin and Kristen Sinema and they sat in the way of massive democratic led tax increases.

And they're both out of the picture. So it's not like the Democrats are not going to be somewhat aggressive on raising tax rates on some people. And maybe that's part of the big thing that's hanging over this election right now. What will that look like? Yeah, and I think, Josh, back to the we

were here a couple of minutes ago, but I think a compromise is the most likely path forward because there's too much money at stake. And it's political suicide, frankly, to sit back and let a 3% tax increase hit most Americans. That will get anybody voted completely out of office. So caveat emptor, buyer beware. Whoever wins this election is going to be stuck with that.

Billionaire tax, this seems highly unlikely. I don't know. It would seem like it would be an easy thing to do because almost no one is a billionaire. But there also isn't a ton of energy behind it, even on the left. Senator Ron Wyden's Oregon, he's got a bill out there. He's got some co-sponsors, but he doesn't have the whole party on board. It's just, I don't know, this seems like it's not a 2024, 2025 thing.

What do you think? I think the most likely scenario is the tax code next year, two years from now, looks pretty similar to today. And there's so many economic arguments out there against wealth taxes, not to say it's not a valid thing to think about and propose. We do have a wealth tax here in the US. It's called the estate tax, as you know.

But when they've tried to roll these things out in Sweden and other Nordic countries primarily, the cost of maintaining these programs has well exceeded the revenue. And as you're aware of, really wealthy people have the ability to pick up and move in a way that- Yeah, I was going to say. And then there's a whole cottage industry of bankers

and law firms and offshore stuff. And they will find a way not to pay if you get it to a certain level. Yep, broaden the tax base. And you said it before, the economic distribution very much is, a lot of the incidence of tax falls on wealthy income folks. It's just the way it is.

And I don't necessarily think it's a bad thing. So leveraging that even higher, again, I think could have disproportionately poor impacts. Without revealing my personal political preferences. I don't see it as politically viable as well. All right. Back to the journal, the last scenario. And paradoxically, it probably is the scenario with the, A, highest likelihood of happening,

but interestingly, the highest likelihood of leading to some sort of a compromise, divided government, like, you know, you would think you're definitely gonna have a showdown if there's a divided government, not definitely. Split control of government, a very likely possibility, could bring the messiest scenarios if lawmakers take firm positions as the December 31st deadline for expiring taxes approaches. It also has the easiest off-ramp. 31st deadline for expiring taxes approaches. It also has the easiest off ramp, one Congress used in 2010 and in 2013 to extend tax cuts. So if Harris and the Democrats do not stand on ceremony and do not stand on Biden's stance, which is we have to pay for any extension of tax cuts, let's say they don't care about that as much as Biden sounded like he cared about it. You might just get a deal here. And I know it sounds like that's

what you think is most likely. That looks like a silver lining. You might not like the result of the election in terms of who won what, but you might like the outcome because it practically forces everybody to decide to do something rather than do nothing. That's true. And I think, Josh, that's a great way to think about how representative government's supposed to work, right? Is it supposed to get together and hash out a compromise?

And I would agree. I would agree. And when the Tax Cuts and Jobs Act rolled out in 2017, I was pretty critical about some of the provisions in the tax code. But I think as time has gone on, Josh, we've been able to find ways for our clients to use that to their advantage. And so I think looking back with the benefit of hindsight, a lot of the directional cuts were in the right direction.

So I wouldn't look sideways against an extension of certain things that specifically benefit small business owners. Just a philosophical question to end on. If you extend the temporary job cuts more than three times, eventually they become permanent tax cuts in all but name, and it sort of reminds me of the debt ceiling charade. Yeah, that's a great one from 2010, 2011.

And there's nothing more permanent than a temporary tax cut in the end. Yeah. That's a great place to leave it. Tell us about RWM tax. What's happening? I know this is like, you guys are never not busy, but we're really getting into busy, busy season.

Yeah, and we run a 12 months a year, Josh. We're not just part-time accountants, as you know. And so we're doing work with a lot of our clients, putting together tax projections. And there is a sprint going on right now between now and the end of the year. We're going to be interrupted in about three weeks, because I think we will have some light shed on what

direction tax reform could go on. But we're not sitting around waiting for the election to happen. We're putting tax projections together right now. We're going to be crossing a 500-client threshold here pretty soon. And we're very, very excited to be offering world-class tax services to Ray Holtzweil clients. So as you know, we are one of those 500 client households now for the first year.

Our prior accountants effectively retired. So we hired you guys. How useful are those tax projections just in not just this year, but like just in general, what's the benefit that the tax client gets from getting a document like that in October? Yeah, I'll give you two scenarios. One is very real and one is not. There are certain things, Josh, that need to happen before the end of the year to realize. So if you're the type of investor, type of taxpayer,

that's sitting down to look at your tax scenario in February and March, you missed a window to fund a 529 contribution. You missed a window to fill up a low tax bracket with a Roth area conversion. You missed a window to contribute some of your Nvidia shares to a donor advice fund and benefit charity while reaping a tax benefit. So that's concept number one is that there are certain things that when 1231 passes, it's too late.

But the other thing is back to financial planning. You knew of this because this is what we founded the firm on. The financial plan is not meant to be a descriptive document. It's meant to be precisely wrong but approximately right. And it helps you make decisions. And so that process of going through the numbers, taking a look at revenue, taking a look at expenses, and really going through that process

helps to inform your future decision making. Similar, the analogy is all models are wrong, but some are very useful. All projections are wrong, but most of them are very useful in our experience. So I think you're pretty excited about this. We haven't really spoken about it, but we are opening or we have just opened a headquarters for RWM tax. You guys have your own ground zero, so to speak. And it's in Ambler, Pennsylvania, which is a suburb of Philadelphia.

And we've got full-time staff working for clients on the tax side all year round out of Philly. Pretty exciting. Very exciting. And Bill Arzerni and our CPA has been leading the charge there and has been the architect of the tax business going back to 2021. We hired Everett Taylor last week in Hartford.

And so he actually was just there, Josh, this weekend to work with the tax group, which is great. And Emily and Dom are a kick and button taking names. So the only problem with me with Ambler PA, just a bunch of Philly's fans. It's a bunch of 76ers guys. Well, we're going down there. I timed my first visit to the new tax office

to coincide with the Knicks playing the Sixers. So we're all going to go down there, and we're going to have some backup. I think the Knicks fans are going to come out and force that night. We'll come correct. But the thing is, have you really lived until you've been hit in the back of the head

by a battery in Pennsylvania? Yeah, it's a fair point. All right. Shout to shout to Philadelphia Bill Swede. Thank you so much for shedding some light on what's at stake here We really appreciate it. Hey guys, if you enjoyed the show Please leave us a rating and review on the podcast app of your choice and we'll talk to you soon Now stay tuned for what are your thoughts. What up, what up? Five o'clock Eastern means it's another all new edition of What Are Your Thoughts? John is in charge tonight. Daniel's here.

Dude, I just gave John a chart at 458. No problem. Dude, John's a beast. Legend. John's been holding us down. Hey, shout out to everybody that's here for the live chat. By the way, Daniel too. John and Daniel controlling things. Everything's gonna be great. Hey, I wanted to say hello to some folks really quickly.

Sean Graylish is here, Speedrunner. Zoe is back, Donna Ski. Hi Donna. Nick Ramell is here, Speedrunner, Zoe is back, Donna Ski. Hi Donna. Nick Romel is here. Roger and Magnus, John Carlo, Jerry Gould. Everybody's here, Michael. You excited? You fired up for this?

Absolutely. It's a big show tonight. So I was thinking like, yeah, we got a lot going on. I was just thinking, one day you and I, or I will be doing a podcast with someone else and it won't be going well and I will demand that they bring in Michael Batnick. What do you mean? The way that Aaron Rodgers was able to wave a wand and get Devante Adams back, which I kind of respect his gangster.

Basically like, if you don't get me my receiver, this is not gonna work. I can't be throwing Hail Marys for 45 minutes every night. Why do the Jets play in prime time every week? They do that on purpose this year? What do you think that's about? Why do I have to watch them on night games every week? No, no, no, no, no, no, no, no, no, no, no, no, no, no, no.

They played the Vikings in London, and they played the Broncos, definitely not in prime time. I think your recency, that's called recency bias, sir Did they just play a Sunday night and a Monday night or am I dreaming that or a Thursday and a last week? No, there was a Thursday. They played I think they played Buffalo on a Thursday. No, they played but I don't know It's a Thursday last night. Yeah Either way, I like so the thing is I really like Aaron Rodgers and I don't care about the Jets at all You really like Aaron Rodgers. You're the one No thing is I really like Aaron Rodgers and I don't care about the Jets at all

You really like Aaron Rodgers. You're the one No, I like nobody likes I like I like him. I think he's nuts, but I kind of like that energy I like how he I like how he loses a game and then goes on a podcast He cracks me up oh the funniest thing he ever did when they all had to get the vaccine and they asked him, did you get a vaccine? He goes, I've been immunized. I don't know. He did. He went to some like voodoo ceremony and that was good enough.

All right. We have a sponsor tonight. Thank you so much to our friends at Y charts. Michael, what do we want to say about Ycharts? So not only does Ycharts give me all of the data that I need for everything, economic data, stock market data, fund data, model portfolios, the whole kit and caboodle. Is it kit and caboodle? Yeah, you got that right. Okay. You did that one good. Okay. The whole kit and caboodle is it kit and caboodle? Yeah, you got that right? Okay

Did that one good? Okay. They also put together some pretty killer research. So I don't know if you know this Josh There's an auction coming There's interest rate cuts coming. They've got you covered If you're not sure where to go go to white charts if you're a new listener or a new I'm sorry If you're a new customer, you'll get 20% off Tom. We sent you yeah So how do you get 20% off with white? I just told you you're not listening You tell them that we sent you but we have our own URL. Is it a custom URL? It's custom. It's custom That's like Aaron. It's I've been customized just go to white charts

Tell them Josh and Michael sent you why charts is indispensable to us making the show as you guys are about to see All right, you're in charge tonight. What's going on? So the bull market turns to although it does it though because last week we would say like But seriously, so okay. Here's what we could say definitively not an opinion the market bottom two years ago today Okay, that's a turn to let's just say all right. Okay, the. Okay. That's what happened. I'd say a tone two. Let's just say a tone two. All right. Okay. The markets too. That feels good.

So, uh, as everybody remembers, we spoke about this a lot of the time. Nobody was bullish and I'll say, hand up. I wasn't exactly padded to the table to buy stocks. I'm pretty sure I wasn't. Um, and so Cali, our chief strategist put together some good charts, just looking back on how market participants felt at the bottom and they didn't feel very good. Chart on please. This is the American Association of Individual Investors and that might be the first time

I've ever said those four words without tripping all over myself. This is the poll that basically asked people, are they bullish or they bearish? Do they expect the market to be higher versus lower? And we got to an extreme in the bottom of 2022. And as is so often the case, that was pretty good for a bottom. You know what's so, leave this up for one sec. You know what's so funny about this? So you can clearly see now, not just in hindsight, but even in that moment, you could see that the amount of respondents

to AAII who said that they were bearish was in that moment, extremely extreme. But the thing is, and this is why this is so hard, that number had been going lower and lower and lower, and it was already extreme four weeks before. So in other words, it didn't act as like a great signal for bulls the whole way down and it had remained extreme for a while. Correct. Yeah. If you zoom in, you're right. If you zoom in, it was not like it was one extreme week. It was an extreme year. Yeah. You know, so that that's one thing about it. And then like the second thing is whenever it hits that extreme It doesn't hit an extreme bearish reading in a vacuum

Like things are bad when it hits things are bad and they seem like they're getting worse When it hits that extreme, that's how it gets there It's not like it's a sunny day and it's like a couple of lunatics running around an umbrella, right? Things are bad in that moment and I think that's you know, it's so easy to look back at that and say, oh, look how dumb everybody was. No, no, no, no, no. There was unanimous, unanimous agreement that we were headed into a recession in that moment. Morgan said something like every previous panic seems like an opportunity.

Every future panic seems like a crisis. Something like that. And it's true because, yeah, stocks don't go down 20% for no reason. They don't go down 30% for no reason. Things are really f***ed up, and it was. And so we talk about this current bull market, and we're going to get to that today. But it's easy to forget. We were in a bear market for two years, and your favorite names,

almost all of them, maybe not Microsoft, but all your favorite names got cut in half and worse. Amazon, Google, Meta, Netflix, NVIDIA, down 75%, 75! Yeah, that was the worst one. 75! Meta was the worst of the fangs off the high. Horrendous. It was brutal. Horrendous, okay, next chart. So how does this

current two-year recovery from the low stack up against the other previous bull markets? It's 1970. Where's the line? So it's the big thick blue line and it looks like it's like middle of the pack. The light blue line. It's average. It's an average, what is it, 65%? Yeah. So ish on the S&P. I know the NASDAQ's more. The NASDAQ got hurt more. So kind of makes sense. Some data from Cali. On October 12th, we closed at a two year low. And since then, the S&P is up 62%.

Since 1932, bull markets have lasted an average of 4.4 years, yet only nine of 16 bulls lived to see their third birthday. Interesting. If the Fed applies the right touch to the economy, Callie says we could be in for more good years ahead. With an average annual gain of 38% on the bull market, the bigger risk has often been missing out on the bull rather than buying right before market peak. Can I, can I, all right, I read her piece.

I should have asked her. An average annual gain of 38%? Really? Is that right? Oh, I did just say it. Didn't I? Yeah. I think I know what she means. Like she's counting like the whole, like the recovery, like in 2009, didn't didn't the market run up like, like 35% or something as the recovery from the

low? To when? Yeah. So at some point, no, till infinity, till now. I'm just saying like in a real bear market, you have like these huge, you know, you have these huge gains that form the bottom. Usually they don't like gradually recover. So chart genius genius Matt sometimes

chart kid chart boy still chart kid chart goat made a chart showing the sector contributions to this very nice 69 percent gain total return since the bottom and yeah a lot of it is tech I mean no surprise there yeah of course and why wouldn of it is tech. I mean, no surprise there. Yeah, of course. And why wouldn't it be tech? Because if we made this same chart and instead of stock price gains, we did earnings growth. Guess where the lion's share of the earnings growth would be. This chart would not, in my best estimation,

would not look materially different. I think the gains in the sectors would roughly line up with the gains in earnings. Perhaps even, yeah, for sure. I would say perhaps even like the gains in the earnings might even be more so than the gains in the stock price. Sean Russo shared with us a crazy face blower of a staff matter friends at OSAM, he said the R&D, the research and development from tech on a percentage basis is higher than the profit margins for six of the 11 S&P sectors. So said better, tech is spending more on a percentage basis of their revenue than the profit margin for six of the 11 S&P sectors. Is that out of control?

Yeah. So assume they're not just lighting dollars on fire. Guess where the earnings growth will materialize next year and the year after. So we were talking about the AI thing, the tech trade, and I was listening to Joe and Tracy and the guy from Apollo talking about how AI is impacting the private credit market. And he made a really good point that's not lost on anybody, is that if you're looking for like froth or signs of exhaustion or leverage or people are tapped out, no, no, no, no.

You think Amazon is going to or Google is going to run out of money to keep this party going? Yeah, that was a really good point. I listened this morning. That was a really good point. And the concept was, sure sure it's just like the dot com bubble except the dot com bubble was fueled by IPO money. This thing is this this particular wave of tech spending is being funded by a combination

of the US government via the Inflation Reduction Act and several stimulus programs for you know the CHI Act, etc. And the most well-capitalized companies in the history of the world, Apple, Microsoft, Amazon, Alphabet, not IPO money. How much cash does Apple have on their balance sheet? I don't know, 200-ish? They have a long run. Billion?

Earning more every day? So it's a really important point. So it's a trillion dollar build out or whatever for everything from GPUs to the buildings they're going to put the GPUs in and the power that's going to provide electricity. And it's not being spent by funny money. It's not IPO. There are no IPOs. This is coming out of the cash flows of the most profitable companies in the world. I thought that was really important. Can we do that chart back on please, John, for a second? We're going to get into this in a minute, but the sector one, if you don't mind.

Thank you. So communication services, again, that's tech, that's Google and Facebook. So that's 40% of the rally. But look at financials and discretionary and industrials coming up with a proverbial rear. Yeah, we're going to talk about financials in a little bit, so I don't want to step on that. Nvidia hit an all-time record high yesterday. It hit 138 or so.

At 70, it was the next Cisco. I don't know if you remember that. It's doubled since the Cisco comparisons were, it's doubled, it's blown through that. Apple hit a new record high and Apple has not particularly had great news flow this year. 20% of their sales come from China. I got bad, this doesn't make sense to me,

the Apple stuff, I'm not sure, what's the story here? Why is this not coming? I just got out of a thing with Alex Kantrowitz and that was what he asked. Or was it Alex? Yeah. Is that who I was talking? Yeah.

Did he say why is Apple at all? To my honesty, I have no idea. Well, the reason is that I think they get the benefit of the doubt as long as the cash flows and the earnings are there and they are. And Apple just, all right, sell our stock, we'll buy more. Benefit of what, dad? That they're gonna figure out the AI thing?

Yeah, because the AI launch was not great. It's an open question about whether this phone upgrade cycle is going to stack up well against the last few. And they had a huge product flop a year ago, which we're gonna talk about later in the show as well. The news flow for Apple is between China, the product not hitting, and now the iPhone AI thing kind of being a little bit of a stumble, maybe out of the gates. Why is the stock making new record highs?

The answer is the earnings is still there thanks to services and people are gonna give it the benefit of the doubt. Listen, it's not a cheap stock. Nobody thinks it's a cheap stock. The other thing that you could say is when there's a wall of money coming at equities at an all time high, Apple is in every index ETF. It's like it's in every ETF that's taking in capital. All right, counterpoint. Apple's been in every ETF in every whatever it's been the biggest. In April, the stock was getting hammered. Rightfully so because the business wasn't performing. Nothing really has changed since then, except for the fact that it's now 35% higher than

it was in May, dude. It was 170, now it's 235. Nothing changed. Yeah, counter counterpoint. How long was it in the drawdown? Not long. They buy this stock back fast, dude It went it peaked in December bottom in May and off to the races. Yeah, uh That timeline also coincides with the first sales from Berkshire Hathaway They were a bit they were they still own a ton of it, but they were a size seller I wouldn't be surprised if they're selling even more right now actually Into a record high. What's the multiple on the stock? It's way higher than I was about to say, way higher than it should be. Who am I to say what

the multiple should or should not be, but it's high. 35 times is not the multiple they bought of that. So we know that. All right. I want to talk about the VIX a little bit. This kind of, I don't know if this is subsiding, but there's a lot of chatter over the last week about that. And I don't know where this thing started, but people were pointing out that it's really strange to have the stock market at an all time high at the same time that you have a slightly elevated VIX.

Meaning people are in the options market buying protection against a near term correction in the options market buying protection against a near-term correction in the market while the market is making an all-time record high. And there were a lot of people saying, this is weird or you don't normally see this kind of thing. So my take on it is it's entirely related to the election. The election falls within the next 30 days. The election is obviously a time where if you were to see some sort of

Gappy kind of dislocated activity it would be now and therefore it makes sense that people are in the options market buying protection and That's kind of like how you can wrap your head around. Why are we making record highs while the VIX is climbing alongside? head around why are we making record highs while the VIX is climbing alongside stock prices. Kind of say one thing, hold on. I wish I did this. So I used to make this chart of the rolling 30-day return of stocks overlaid with the VIX and it lines up pretty damn well.

There's definitely divergence right now. Yeah. Yeah. No, it's not. Listen, it's an interesting thing to point out and we did a couple of things We took a look back at Like is this so anomalous? Do we really never have a rising VIX for the rising stock market or a rising VIX at an all-time record high?

So let me show you a couple charts. Okay chart kid Matt The dots are representing when we're in a bull market and the VIX is above 20. Do you see a lot of dots here, Michael? I do. They're all over. This is like sprinkles on an ice cream sundae.

It's all dots. So the VIX is above 20, 26% of the time when the S&P 500 is in a statistical bull market. A lot of people would not guess that this happens this often. It turns out that it does and it's not necessarily indicative of a turning point. Wow. I can't believe Matt is calling 2009 a bull market. He doesn't listen to us. Yeah. All right. Here, two to S&P 500 with dots Representing when we are making new all-time highs and the VIX is over 20 There are a hundred and three instances of this back to 1990 So it's not zero times the average 12 month forward return when this happens

Oh, it is fairly rare. It's fairly rare because from 2003 to 2007, it didn't happen a single time from 2009 to 2019. It didn't happen a single time. So it's not unprecedented, but it's pretty it's pretty abnormal. Yes. But let me finish. Because this is really the main point. It doesn't matter if it's rare or a little bit rare or not rare at all. Medium rare?

Medium rare. No, I think what's important here is it's not a death sentence for the rally. So this has happened 103 times where we've had all-time highs and a plus 20 VIX. The average 12-month forward return is 16%. The median 12-month forward return is 16%. The median 12 month forward return is 18%. Those sound like better than normal for a 12 month period.

And the win ratio is 89%, which means almost all the time when you have a higher than 20 VIX and an all time high. That's nonsense. Sorry, I love you. It's just nonsense because it happened. It happened in a hundred. It happened during the Asian contagion in the late 90s. And then it happened.

It happened during the pandemic. So come on next time. Who gives a shit twice. Well, right. But these things are clustered together, but that's always the case. We don't have 10,000 years of data. Exactly. Throw it out.

We have what we have. We have what we have. That's true. We have what we have. Let me ask you a question. This is unscientific. From what I've seen and read, it seems as though the same people who were bearish because of concentration in the market have now converted over to their bearish because the VIX is rising as the market is peaking and or as the market is making new highs is it sort of the same type of people I don't know I freed myself from that aggravation I really truly don't know okay I want to show you some stuff from Andrew Thrasher on the same topic

Thrasher is like a VIX Jedi and he does he does a great I don't know what to call it. It's kind of like a monthly thing maybe. Maybe it's more frequent, but I only get the monthly. But he does a lot of work on whether or not you can predict an earthquake in the market using the VIX. Oh yeah, that was a good one. That's his big thing. It's like.

He's a VIXologist. He's a VIXologist and his big thing is like, no, you don't want to react to like normal volatility You want to pay attention to when there's something seismic happening beneath the surface and I think a lot of people Are you know think that way but Andrew actually does the work on it and Here's here's what he had to say about the topic a big topic over the last couple of weeks has been the elevated VIX This is partially due to the upcoming US election. But I took a look at this week at the data of when historically the VIX has been above

the 25th percentile. There has been just a handful of instances and the majority did lead to a short-term pullback. The median loss has been relatively low, but it's something to be aware of should we start seeing any weakness in equities. Chart one. So he says this is concerning for equities, the elevated risk. Part of why it's above 20 is the election is within the window.

But we rarely see the VIX at such a high percentile when the market is at a fresh high. The study shown below notes a red arrow when the VIX is above the 25th percentile. Currently it's at the 32nd percentile as of the time he published. But now we're going to show you the median reaction to the S&P 500. Chart please. Okay. Here's a look at the median change in the S&P since 2004 when the VIX is above the 25th percentile and the stock market is at a 52-week high.

Only 12 occurrences, Michael. The equity index was lower 63% of the time 15 days later, but the median return is only 1.5% negative. So it's not that it's not a concern. It's that come on, what are we really talking about when the median drop off from this type of a situation is less than 2%. And I thought that was a really important point.

Separate from what CharKidMatt was saying. What are your thoughts? Yeah, I have a thought to add. I think he's right. Yeah. I think we should have Andrew come by sometime soon. It's been a minute Yeah, I haven't seen him in a while. Okay. Yes. Nope. Nicole is telling me that the chat thinks my TV is huge And I'm flattered. Oh, I didn't even notice that

Normal size it's normal size 70. What is that? No, no, no, no, no, I think it must be the angle. Oh 70? What is that? No, no, no, no, no, no. I think it must be the angles. Oh, is it on a what's that kind of arm called? I don't know. It's not that big. It's a name. Somebody in the chat. What is it called when the arm could do that? Swivel? No, is a better is a better word for it. Something like meticulating arm or something. Have you ever heard of that? I have not. Let's talk bank earnings. So it was interesting.

Articulate articulating arm articulating. Thank you, everybody. All right, God. So I grabbed this in the middle. I grabbed this chart about 2 o'clock. It was a weirdish day where the large cap growth was getting hammered. It was primarily all chips

Look at look at all that blood red Nvidia Broadcom AMD Texas just name applied materials just nasty stuff. Oh United got killed the Dow today energy stocks had a bad day But the health really that's one of the worst days for that stock ever saw took 300 points off the Dow I think it was the biggest holding in the Dow, which is kind of hilarious. But anywho, banks reacted positively today. It's been a bull market for banks. So let's get into some of the stuff that we saw. You know that, I think I said this last time, Bank of America puts out my favorite chart book, just very representative of the economy. They serve everybody. So grabbed a few things that I wanna talk over. Chart on, please.

This is showing the average deposits and paid rate, I'm sorry, rate paid trends. And it breaks it down for listeners into corporate, consumer, global banking, and global wealth and investment management. And the thing that I wanna highlight is the total rate paid, which is the blue, I'm sorry, the gray line in every chart. And you could see that it is the steepening obviously is in the past. The steepening killed bank earnings.

Sorry, this is the rate that Bank of America pays to the customers in these buckets. That's correct. What's so remarkable, at least to me, is look at consumer banking. You're talking about a trill, a trillion dollars at Bank of America alone that was satisfied with 65 basis points, even though a lot of money, $7 trillion went to money market funds. Not enough. Still, there's a trillion dollars earning 65 Bips at Bank of America alone. I guess we don't know if that's savings or checking accounts like is that money and that's just perpetually in motion in people's checking accounts like they pay a bill that comes back in and it looks like it's just sitting there but it's not. The thing is they have so many

customers that you could be talking 900 here, 2000 there, but nevertheless, it's still so much money. But anyway, it is important that total rate paid as flat lotty and will start to come down as the Fed continues to cut. All right, next chart, they showed digital adoption. And the thing that I want to point your eyes on or your ears on is the bottom right chart. The check deposits. I think we spoke about this or Ben and I spoke about this, but this is a real face blower.

So 68% of checks are deposited digitally. That's how I do it. I get a check. I take a picture at least on JP Morgan Chase, boom, into my account. Same. 8% of people go to the ATM. Okay, reasonable, but 25% physically go into the bank and deposit the check which just blows me away. That number will be 10% three years from now. Correct. Not secular, of course.

It's just old people that are continuing to old habits die hard. One in four checks is deposited at the branch that number is that number will just continue to shrink though It's it's uh, it's so easy. I'm some Bank of America same thing the app just take a picture of the check It's done. You get a record of it. Everyone's happy. What are we doing? What are we doing here? So I didn't grab You know why I go to the bank. I go to the bank though. I went to the bank twice this week You saw me go to the bank last week. I did? Yeah. Yeah.

Yeah, we needed a notary. My daughter turned 18. Oh yeah. And we needed to do this thing with her health forms so that God forbid something happens, we can make, as her parents, we can make decisions for her. I don't know why all of a sudden we had to do this.

It was like an emergency, but we did it. And then the week before that, you need cash to pay people for stuff. You need cash. Landscaping, goals. Got to have it. Like all that stuff. That good, good fiat. All right. So there was another chart in Bank of America's earnings today, which by the way, they beat on the top line or the bottom line. And I didn't grab this chart because I just, for the sake of time of time and moving on. Total loan volume.

It's really not growing. Not really growing that much. It was like 1% growth. Not a lot. I'm so glad you said that. It is growing. Okay. It's not growing at the banks.

Right. Right. Fair. Okay. We'll get to that. It's growing everywhere else. We'll get to that. Okay.

Goldman Sachs reported. I think they also beat on the top of the bottom line. Stock closed at an all time high today, hell of a run. Yeah, this thing looks good dude. Kudos to them. Did you pick this as you make the case recently? Yeah, a couple of weeks ago. You crushed it with this call.

Well, I don't own it so it doesn't matter. No, but it's good for the listeners. Try it back on. So net revenues versus the third quarter year go up 13%. Pre-tax earnings up 55%. That's got to be some sort of one-time thing I would guess. But yeah, no, Goldman Sachs is doing well. I listened to the call today on the walk home. Kind of boring.

Not really a whole lot to say, but you know, there's a lot of brand stuff. Goldman Sachs is healing. Yeah, like they like they're not it's not like exciting. What's going on is they've gotten out of all these businesses they didn't belong in. And they're going back to what they do better than anyone else on earth. Yeah. So they got rid of back to United Capital gone. Marcus consumer consumer facing stuff gone. BlackRock, absolutely killing it. No surprise that they are the market. Grabbed a few quotes from Quarter on their call.

All right. We sounded optimism about our growth trajectory in the second half of the year and in the third quarter. Organic growth surged and BlackRock delivered some of the best financial results in our history. We generated $221 billion of net inflows, our highest net flows quarter ever. And by the way, this is me speaking not them.

The fourth quarter tends to be their biggest quarter. So we'll see what happens next quarter. Getting back to them, we delivered record levels of quarterly revenue and operating income. We expanded our margin by 350 basis points the over year, pretty damn good. iShares fixed income ETF assets now stand at over $1 trillion, nearly 40% higher than at year end 2021.

And Josh, just two more things and I'm going to give it over to you, sticking with the ETF thing. This is from Larry Fink. ETFs remain a secular growth driver, adding $97 billion of net inflows in the quarter and 248 billion year to date. We're seeing a broadening of ETF adoption globally, leading to increased levels of utilization, which we believe will only continue. And lastly, our iShares, this is a coup de grace, our iShares fixed income ETF platform

recently crossed a trillion in assets and standalone, it would be a top five bond manager by itself. Assets have nearly doubled over the last five years and that's been in a bond bear market. Yeah. And, well, I'd say three things. The the expanded our margin by 350 basis points year over year. How they do that? Do you think? I don't think I know a lot of it is the alt stuff. Okay, so they're selling a lot of alternative strategies that just pay them more than the iShares suite of of plain vanilla index ETFs.

Okay, that's impressive. JP Morgan had the same thing to say. The growth in JP Morgan asset management and their ETF business, all that stuff is just absolutely on fire. I don't know whose hide it's coming out of. Well, that doesn't change the margins. It's the alt stuff.

That's what does it. Well, no, the mix, right? So JP Morgan is selling a ton of alternative and active stuff in the ETF category. And BlackRock apparently is really good at that as well. And listen, if you're a top five asset manager and you're in a bull market like this one for both stocks and bonds and alts, you better have something good to say. And they- Check this out And they delivered. Check this out.

There's some very, let me think. The growth of private markets is underpinned by the continued rise of infrastructure. It presents a generational investment opportunity. By the way, this is the CEO of the biggest asset manager in the firm in the world. Do not take this lightly. He just said that it presents a generational investment opportunity. Over the next 15 years, we'll need to invest $75 trillion to repair aging infrastructure to invest in new projects like data centers, decarbonization technology, the current cash flow inflation-protected return profile of infrastructure makes it an attractive sector

for our clients. He spoke about private markets, of course. Okay, we don't have to get to all that, but it was a lot of private market stuff. Well, BlackRock's going to be one of those gateways to this kind of infrastructure investing that institutions want to do, hedge funds want to do, private equity wants to do, wealth managers want to do, regular wealth management wants to do. Everybody wants to be wealth management wants, everybody wants to be part of the run. And again, I agree with what you just said, like, this is Larry Fink talking. Yeah, pay attention.

Right, you might be one of these f***ing know-it-alls sitting on the internet, you know, in your house and you have a view on the sentiment of Piers Frothy. Dude, they're spending actual dollars. Like this is not a conjecture. This is the money that's going into these types of investments. So they spent, I think 11 billion is a number in my head to buy global infrastructure partners.

Here's what they said. Here's what they said on the call today. Or yesterday, whatever it was. We're doubling private markets run rate management fees at BlackRock, okay? Doubling in the transaction. Think about GIP adding, that's global infrastructure products or partners.

As we said on the call, annualized north of $400 million of earnings at 50% margins, $250 million in management fees, we expect to come in the fourth quarter. So I'd model sort of $ billion dollars with an FRE margin North of 50% so it's meaningful like really really really meaningful All right, let's move on to okay. So about you just tweeted this today getting back to the ETFs IVV which is Black Rocks S&P 500 ETF has now taken over it has now taken in over 51

$500,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000 all this money coming from? People's paychecks. It's unbelievable. There's no other answer. I mean, no, there's no other answer. All right. So Schwab reported decent earnings. Yeah. Let me take Schwab.

Go ahead. This is one of the best post earnings reactions Schwab has had in its share price in quite some time. It's been a really long bear market for Schwab that started toward the end of 2021. They announced the biggest deal in the history of online brokerage when they bought TD Ameritrade and that deal coincided with the onset of a bear market for both stocks and bonds and a big interest rate hiking cycle and a bank run and a well, the for real, the bank bonds, and a big interest rate hiking cycle. And a bank run. Well, the-

No, for real. The bank run is related to the interest rate hiking cycle. But yeah, it's been a winter for Schwab, and they're coming out of that winter. It's still in a downtrend technically, but I think it could break out here because not only have they now

probably seen the worst of this, they think they've seen the worst of this, they have a leadership change. So let me read this from, the stock popped 6 or 7% today, which is not crazy, but the stock, you know, it's a fairly, it's a fairly, normally a fairly calm situation. It's not Robinhood. Charles Schwab shares jumped after reporting earnings per share that topped analyst estimates and curbing some of its expensive debt. A sign the firm has moved past the bout of turbulence last year. Adjusted earnings per share for Q3 were

$0.77, which was a beat. Adjusted net income was $1.5 billion, up from last year, not up a lot, but up, not down. Client transactional cash sweep, which took a hit when customers shuffled funds in search of better yielding options, that was cash sorting, we were calling it, climbed $9.2 billion sequentially, helping the firm reduce costly bank supplemental funding by $8.9 billion. Here's Walt Bettinger who is the CEO, outgoing CEO. Some might refer to it as an inflection point. Yeah, I might put this chart up. This is good. This is good news for Chuck. Core net new assets, 157 billion. So the money is coming back in, which is nice. Um, that's 17% year over year growth and new brokerage accounts.

So, uh, they opened about a million new brokerage accounts last quarter, a million in the quarter before. So the business is, the business is okay. Uh, what's this next chart saying? I just thought this was a really neat chart. So on the left, we're looking at households under 40 and households under 30. Households under 40 accounted for 56% of total new retail households on a year-to-date basis. Now, I guess that shouldn't be too surprising given that listen, if you're 65, you probably have got plenty of accounts at Shrobber, Fidelity, or wherever you have them. But that's nevertheless, it's impressive.

56% of households under 40 account for all the growth. That pink circled graph is RIAs. So what does that mean? So this is showing that there's $88 billion in net new assets. Net new assets. This is year to date. Year to date. And it's showing that 42% of those flows came from what I would call, I guess, medium sized

REs, $500 to $5 billion. 22% came from mega REs or large REs, which is us, not to brag, $5 billion plus. And then the other 36% came from relatively smaller REs. I was going to say Schwab. Pretty healthy mix. So Schwab's net new assets from REs year to date through the end of Q3 is a total of $88 billion. Are we like a billion of that? I would not quite that. Let's round up. Let's be generous. Let's round all the way up.

I feel like Wittholz is helping the cause here. All right. What's the last one? What's the last one? Okay. This is a big one. All right. So wonderful charts here. Thank you to the Schwab's corporate investment team for putting this together. So we're looking at cash as a percentage of total assets on the left. That's the blue line. So it peaked at 15% and got all the way down to 9.7%. And by the way, there's no just eyeballing it. It doesn't appear to be the amidst those are new lows, right? So the cash flow now, the slope of the decline is maybe moderating, but it's still new lows. And what are they doing with that cash in 2024? 57% of that is going to buy money market funds.

And guess what? That's not, that's no bueno. That's not good for Schwab. They would much prefer the 29% the cash sweep to just be chilling in that. Let them take, that let them take the margin. So I w I do think that, listen, I, I sell the stock. I don't own it anymore. So I do think that, listen, I sell the stock, I don't own it anymore. The cash sorting, it's 98%, I'm making up a number.

Most of it is behind us, right? If you were going to get the 5% that was available, well, it's not available anymore. Like if you were going to go, you probably already want. Yeah, I think that's right. I think it's a wave that already crashed on the shore. So the water is still coming on, but we've seen the crashing of that. And rates are already on their way down.

So getting 0% sitting there versus 5.5% is one thing, but if we get Fed funds down to 3.5% and money markets are like 3% or 3.5% You're the guy. I don't want to move it. So I think that part's the hard parts over. Let me sum up the story here. The opportunity in Schwab going forward from today's price. The story is they are now lapping the quarters of the problems that higher interest rates

caused. They went upside down on their long term bond portfolio. People were really concerned with this around the spring of 2023. Like people were very, very nervous about Schwab's bond portfolio. That's less of a problem now. Also, when people were pulling deposits in search of higher yields, not only was that a problem for Schwab's earnings, but they were forced to find other sources of funding because those deposits are effectively how they're funding the business. So they had to get supplemental funding and supplemental is a euphemism for borrowing

at a higher rate than zero. So that problem appears to have sorted itself out. They are not forced to pursue as much Supplemental funding as they were meaning their cost to borrow money is is falling. So those were the two problems with the stock and If those we've now seen the worst of both I think you could buy this thing. I'm not in it but I think they're set up well for a lot of big themes like generational wealth and the options trading is still going crazy there.

And then the other thing I mentioned, Walt Bettinger has done an incredible job, grew this business substantially in his time as CEO. He has now stepped down. The new guy, Rick Wurster, takes. And they have a new CFO too. So it's like brand new management at the same time that the problems from the last two years are going away. So the major negatives still hanging over the stock

is they're not growing. It's like they're expecting 1% growth next year or something. So they need to find a new avenue of growth. What do you think they're going to do? Well, they announced today, I think it was today a partnership with iCapital to bring alts to high-knowledge investors. Also the answer to everything. Right, of course.

All right, so they'll do that. I think they're going to do more tax stuff. I don't know what the laws are. They're a bank. But I think they're going to go more heavily into tax. That's my bet. That's a shitty scale. That's not scalable. I don't think so. I mean, the compete with H and R block and, and into it, you know, I feel like they're, they're ready to bring it. Uh,

I also think they're going to get more heavily into advice, uh, in general, which, you know, it's been something they've been doing. And I think they just have to look at that and say, yeah, we'll ruffle a few feathers, but we should be we should be bigger than that business. Yeah. What are you going to do? All right. So if everyone does alts, is it actually an alt? Yes, it is. Yeah. If every member when you don't remember this. You were probably just born. There was a moment where alternative music was the entire top 40. Alternative rock. What the f*** is alt music? Yeah, exactly. Oh, Nirvana. Nirvana was alternative rock.

It had the number one, two, and three albums at the same time. Wasn't it called Grunge? It was also called that only for the alternative rock bands that were from the Pacific Northwest because they all wore flannels. Soundgarden. Don't tell me I was just born then. How disrespectful. So if everybody is listening to Nirvana, Soundgarden, Stone Temple Pilots, Blind Melon, et cetera, if that's the whole top 10, is it alternative? Not really. That was the pop music of the era. The thing is, the opportunity is 30% of institutional investors' portfolios are already allocated. The juice has been squeezed. The average holding to alternatives for retail investors is around zero. So no, not everybody's in alt. In fact, it's the opposite.

So I'm now in 100% alts. I'm way ahead of my time. All right. Let's go. What's next? Tesla. So this was a bomb. By the way, you sent me and Chris the link.

I was like, dude, what time is it? I think I was in bed. I'm mentally ill. They were supposed to go live at 10 PM East Coast time last Thursday. I was out eating Chinese food. Where was that? Home? I don't know. You... I don't know. Wait, I thought you were with Chris last week. I was with my college friends at Nomad Tea Parlor. You never

answered me. How was it? Strong recommend. We're going back. Anyway, they were supposed to start this event at 10. They started at 11 they did an hour of mushroom music and like like Trippy graphics on the screen You know, I think Elon likes the mushrooms and There it was no it was like EDM, but it was like trippy EDM and then finally the camera cuts to or the screen cuts to this like really highfalutin intro and They're on the Warner Brothers lot and it's a cityscape. Why did they do it? Why did they do it there? Well, they wanted to show the cars in action in what would be a city, but the cars aren't really ready

So you couldn't do it in Los Angeles? So they did it in a facsimile of Los Angeles which is on the Warner Brothers movie lot. And that way they could take the whole thing over. They had the media there, the tech press and people seemed excited to be there on screen but the reaction like online was nothing like what I would have expected. People were like, all right, I guess that that kind of looks cool. And then the next day, Wall Street was like, no, like there's no there were no specifics, no real timetables.

They're talking about putting this thing out. We have some pictures. Maybe let's just let's do the pictures. All right. So that that toaster oven thing in the back was probably the coolest thing they showed. Yeah, it's a robo van. The design is actually taken or inspired by something that used to exist in the art deco era. And Elon wants you to pronounce it roboven. He doesn't want you

to say robo van. Is that from demolition man? Maybe that looks sick. Um, yeah, it looks cool. It looks cool. Here's a problem. This already exists. Jeff Bezos backed the company called zooks and those robo buses or robo vans are already transporting people. It's roboven. Roboven. Uh, those things are already in operation in Miami, Seattle, San Francisco, Austin.

Really? They exist, yes. They're autonomous vans. They use them near the airports. So it's very cool looking. And I do think that those things are going to be very useful. But it exists already. And it's on the road.

So it's a new design, it's not really typical of Tesla to be that far behind, because this is a prototype. It's not a production. Well, stock fell 7% in no bounce, no bounce in the three days since. The car, you could say, it's a two-door, what the fuck do we need a two-door taxi for? What is that good for? Dude, it's a two door. What the, what the do we need a two door taxi for? Who is that good for? It's a prototype, not two door, two seats.

No, it's a prototype of something they're going to build. It's a two seater. Take my family to the airport. I'll take two, please. I don't really understand. Maybe a golf cart would be better. I don't really understand maybe a golf cart would be better I don't really understand that and then the other big thing that they did and Guys, I'm not like anti Tesla or or Elon I think he's a genius and I think the company and all the Elon's companies are doing insanely sick stuff I'm just talking about the cab itself they had the robots and There's talk that these things were being tele-operated by people hiding in the bushes. I don't even know like

they're able to do some stuff but not others but they just kind of wanted them to be. What did Elon say these things could do like bartend and be your friend? Yeah I don't I don't I'm not I don't need either of those two things here's Gene Munster's tweet this is him the night of mega AI use cases are getting real I can't stop thinking about my interaction with optimus one of the several jaw droppers was when I asked it to speak Spanish and it didn't miss a beat. It was a person in the bushes Speaking Spanish to you gene. Are you a tech analyst? My most important thing are blah blah blah the next day. Here's what he tweets

Reports that optimist bots were tele operator fooled me Wish the full autonomy for optimist was further But still gave me a window into the potential around these part dude Really what you never been fooled before don't don't make don't make guys I get fooled every day Anyway, I'm not gonna read all the analysts comments, but even the Tesla bulls were like this is not it and Dan eyes defended the stock He thinks that we're gonna look back and see this as a historic announcement years from now I'm not so sure I think people were expecting the consumer app

That's gonna turn your existing Tesla into a rideshare vehicle while you're at work or while you're asleep Of course, that's not gonna happen now if you've seen a Waymo vehicle, you know, it's covered in sensors and cameras and equipment. And people's Tesla Model 3s in their driveway aren't. So how could it possibly be a robo taxi? I almost don't even understand. They rallied Tesla 40% into this. Like thinking that the app was coming.

The app didn't come. What app? Oh, to turn the... Okay, got it, got it, got it. I'm sorry. So that the whole fleet becomes a robot taxi, which probably he will be able to do someday, but we're like just not there. And people thought we were there.

So the biggest reaction was not in Tesla. Biggest reaction was in Uber. Creditio. Full disclosure, I own Uber. Creditio. Full disclosure, I own it. Full disclosure, I sold it. Whoops. Okay. I never believed this Tesla robot taxi story from the second he tweeted it. You've been set that. It seemed like a Hail Mary. Like that were years away. Yeah. And they sold Tesla off. I don't know if you know this, it was 80. It went to 59 in April when they first tweeted about this event.

Now it's back at 80. Chart please. Stock jumped 11% the day after the RoboTaxi event. And I'm going to say again what I've been saying. Uber is 150 million current users, they will be the demand that Waymo and eventually, maybe in two years, Tesla, CyberCab will rely on to get to scale. The riders are already on the Uber app. If you have an autonomous taxi like a GM Cruise or Waymo, just plug your network right into

Uber's demand aggregator and instant business for everyone involved. So that's the way that I see the Uber opportunity. You're not wrong. I would just say switching costs out of Uber in terms of, yeah, they've got the network, but like it costs you nothing to get off Uber and onto a different app. Correct. Making the giant assumption that onto a different app. Correct. Making the giant assumption that they can actually deliver. Correct.

But here's the thing. If the riders are already there and Uber is the best at connecting passengers with riders, if you need very quick usage on your autonomous fleet, because every day that fleet exists and it's not being used to capacity, you're burning money. You plug it right into Uber. They've already struck a deal with Waymo. So that's how I think this shakes out. I could be wrong, but this event was confirmation for me that that's what it is.

You were 100% right this whole time. You and I were in a car speaking about this. I don't know if it was a year ago and you were right. Okay. All right, let's talk about Nike real quick. So the new CEO started his job yesterday and here's what he's inheriting. This blew my mind. Enface, global retail sales of sports footwear totaled $165 billion in 2023. $165 billion? Yeah. It's wild.

What? It's a big number. That's up 23% from 2018. Think about it. Think about how many people live on earth and almost all of them have two feet. Just saying. That's true. Well, the other thing is that a lot of people are now buying sneakers more athleisure because they're not in the office as much.

Yeah. Or they wear them through the office. So imports of athletic shoes, and in the US we import 99% of our shoes. Imports of athletic shoes are at more than 10% year-over-year compared to a rise of just 1% for all footwear. So athletic shoes specifically on fire and Nike is not participating. They're being left to the dust. Why? Because they f***ed up big time. They changed their strategy to to compete with their partners and it backfired in a big way

So in 2017 is from the FT in 2017 the industry leader announced an aggressive plan to shift its sales strategy towards a direct-to-consumer model Moving away from what it called mediocre retail this opened up shelf space at chains like footlock for other brands And guess what other brands came on? opened up shelf space at chains like Foot Locker for other brands. And guess what? Other brands came on. Hoca, OnCloud, whoever, whoever. So really not- New balance. So hot right now. So hot right now. So on their most recent conference call, tell me if this is good or not. Given our CEO transition and with three quarters left in the fiscal year, we are withdrawing

our full year guidance. We intend to provide quarterly guidance for the balance of the fiscal year. This provides Elliot, that's a new CEO, with the flexibility to reconnect with our employees and teams, evaluate the current strategies and business trends, and develop our plans to best position the business for fiscal 26 and beyond.

To that end, we have also decided to postpone our investor day. Yikes! So... This is exactly what they should do. No, you're right. It's kitchen sink. So bearish sentiment at Nike is at an all-time high and strategically, I completely agree as dumb as it sounds. No, no, no. Everything, everything. Get it out. Get it out. So I just want to throw up some charts, talk about where they're at, courtesy of Y charts. So their revenue is down. And this is, come on, you don't want your, this is Nike, you're

Nike, come on, fix your shit, you don't want your revenue going down. Total return compared to the S&P 500, look at this Josh, it is where it's been, it hasn't outperformed the S&P since freaking 2008. Next chart please. So this is showing actually the comparison. From October 2008 to today, Nike has underperformed the S&P 500, one of the greatest companies of all time over the last 15 plus years has underperformed the index. So I would say that bear sentiment has never been higher, but I don't know what it's about either. This is a tough turnaround. I bought a pair of Hokos six months ago for the first time.

You loved them, right? I immediately bought two more. I have three pairs in six months. They fit, they're comfortable, they're great for everything I do. Nike is still getting by on selling retro Jordans, dunks, Air Force 1s, Air Max 95s. And they just like have not,

they also have an aging fleet of signed athletes that people are not excited about, like Durant and LeBron and Giannis. And the shoes aren't, don't even look good. They're just like out of step with what's in style. I also think there's a decline. I also think that there is like kind of a transition in pop culture away from hip hop over the last year or two.

And that Nike and Adidas kind of both brands like kind of really need that to be a bigger thing than it is right now. I think it's hurting them. Like outside of Kendrick Lamar's summer that he had, calling Drake a pedophile, we went almost the whole year without a number one hip hop song on the pop charts. It's all about like, it's the girls now running the show,

like Taylor and Olivia Rodrigo and Sabrina Carpenter and Chapel Rowan and then country music. And like just, it's not Jordans. And it's not airflares. Olivia Rodrigo and Sabrina Carpenter and Chappell Rowan. And then country music. And like just, it's not Jordans. And it's not Air Force Ones. Like that's just not what kids are wearing when they go to school.

So I'm not throwing me, it doesn't matter what I think. I'm just talking about like pop culture in general has moved away from Nike basketball shoes and is moving, and I don't know when it stops but it's just a really tough time right now. Kind of wild. Is Nike the biggest the most iconic retail brand in the world? It's got to be top three, top five yeah. Who's bigger than Nike and 16 years they haven't beaten the index. Because again they're resting on their laurels.

They're selling retro designs from the 1980s and 90s. And you know, during the pandemic, they had this surge of people that wanted to reconnect with their childhood and they had like this nostalgia thing going on where everybody like was buying, you know, buying Nikes and they had drops and they had bots buying the sneakers and it pissed off their clients.

They stuck their middle finger up to Foot Locker, which was one of their most important channels. Big mistake. They thought that they would sell on Nike.com and the sneakers app and Amazon, and they didn't need a physical presence outside of their own stores. Yeah, they thought they could cut out their partners.

This is like a case study of what not to do. 100%. So now they have to reconnect with the running community, which they lost to New Balance and OnCloud. They have to find a new in in terms of pop culture. They have to get on a new wave and they have to repair relationships with Brick and Mortar and they have to do all three things at the same time.

So I am generally of the opinion that when you have like a global dominant brand, that's down 50%, you just hold your nose and buy, but this is going to be tough. Uh, in the chat, in the chat, speed runner is saying Caitlin Clark, Nike deal will pay off. I'm sure they'll make money on that. I don't know if that's big enough. Okay, so it's not that it's not the wave right now. That's all I know what else to say.

Vision Pro. We can't spend a ton of time on this because we're already, Apple has not disclosed any sales figures for the Vision Pro, but analysts say, oh, they cut their first year Vision Pro shipments to between 400,000 and $450,000 down from $700,000 to $800,000 units.

Nobody will make apps for this thing. This is one of Apple's biggest product launch flops ever. The new apps for the Vision Pro have slowed every month since the launch in January. and some of the biggest virtual reality software developers are just saying no, they don't want to do it. And it's a chicken or an egg problem. If the apps aren't there, people don't want the device and people aren't going to make apps if they don't have the device selling well. So this is like really crazy. The strategy was they're gonna make a premium version, sell it for $3,500 and count on developers to come

in with killer apps for it and it sort of didn't work. Here, only 10 apps were introduced to the Vision App Store in September, down from the hundreds released in the first two months. There were 1,770 apps available for the App Store, and this is bad. In 2008, for the first iPhone, there were already 50,000 apps. There were 10,000 apps for the Apple Watch inside of the first six months when it first came out. Meanwhile Meta has 74% share of the what are we calling this the visor market. No they are.

It's not wearables. So Apple calls it spatial awareness. What does Meta call it? That's a bad name. Augmented reality. Yeah. Meta has 74% share. Apple is not used to playing from behind.

And now Metta just teased something called the Orion, which is a step above the Raybans. Yeah, so we said like, Apple owns the handheld version of the internet. No question. They own it. All the profits of the handheld version of the internet have gone to Apple Meta is the front-runner for the augmented reality era and not many people would have predicted that three years ago Definitely definitely that's the story there Yeah, all right. Let's make the case very quickly and then I know you have a mystery chart for me. What are we doing?

avoid falling knives I Making the case that this is and I'm guilty of this I have a couple of stock. I have maybe one stock right now at a 52 week low We don't want to buy falling knives. No, just if you want to roll with me if you want to be down with my posse This is not what we do. We do not scour The multi-year low list looking for opportunities. It's just not the game that we play. Here's Boeing. This is such a piece of shit, this stock.

Great company, blah, blah, blah. I know. Don't get mad. It's only up 43% over the last 10 years versus 275% for the S&P 500. It is embroiled in constant problems. It almost never seems to stop. It's like honestly one of the worst blue chip three-year performances I have ever seen in my time in this business. And I don't really understand how you fix this. It's like cultural but then it's also execution. It's constant leadership turnover. And this is happening against the backdrop of airlines

making more money than I think they've ever made and placing tons of orders for planes. This stock can't perform. What is it doing in a recession? So I don't really know what the solution is here. I wanna show you one more. This is somehow worse. This is Walgreens Boots Alliance.

I just, on the name alone, I reject it out of hand. Garbage name. Walgreen Boots Alliance? Who thought that was a good idea? They bought some stupid British thing. It used to be WAG was the ticker, W-A-G, and this stock was a performer. Bring back WAG, change the ticker.

Well, at this point, it looks like it's going to the pink sheets. Walgreens was always the best operator in the pharmacy space. They were always better than CVS, always, always, always. And now somehow they're worse. This stock is down 76% over the last 10 years. And again, the S&P has more than tripled. It's like a nightmare wrapped in a phantasmagorical debacle. And it's, I mean, does this go to $5?

I don't even know how you pull the stock out of a tailspin like this. It's just it's beset on all sides by competition and secular reasons why people are not going into these stores. I love this advice. I love this advice. If you're going to catch a stock in a downtrend, which I have done and I unfortunately continue to do at a bare minimum, at a bare minimum, wait for a higher low. Oh, which I'm so glad you said that because people are in the chat shit talking my Pfizer holding.

Pfizer has been flat for a year. That's not a falling knife. No. It's not good. No, it's a shitty stock. It's not a falling knife. No, big difference. How do we define falling knife?

Can we like? Yeah, I'll tell you. A stock that continues to make new 52 week lows. Yeah, with like no upticks if you if you have a 52 week low every month for the last for the 16 or less 18 months, that's a falling knife Yeah, I want to do something a little way I want to actually define falling knife wait for a higher low not now but how about this how about this if you've been below your 200 moving average for a

Hundred eighty days yet, whatever it is, we know what a falling knife is. Right. So that's not a buy signal. No, it's the opposite. People have trouble with this. I used to. I don't know anymore.

You know what? Honestly, buy low, sell high has cost investors more than any other shitty phrase that's ever been invented. Now people will say, well, wait a minute, Meadow was a falling knife. You know what? Meadow was a stock in a crash. You didn't have to catch the low to make money on Meadow.

I literally caught the bottom of the bracket. I know you did. Yeah. I know you did, and I don't like it. I don't like that you did that. It's not repeatable. No, no, but you buy panic. You buy, if people are on TV crying, you could buy that.

You buy absolute panic. That's not what this is. This isn't panic. But falling knife, a falling knife is because the business is in secular decline. There's a big difference between secular decline and a huge overreaction when a stock, when a blue trick name gets down 22%. Like there's a difference. You could buy panic. You could buy panic. You can't buy a falling knife. Yeah, Sharag Nirmal is saying Starbucks. Yeah, that was a panic. That was not a falling knife. I bought Starbucks. I was not a falling knife. I bought the panic.

We're gonna define this term next time we do this stuff. So that's what I do. I buy panics all the time. But I don't buy falling knives. Give me a mystery chart. I got pastrami on the counter waiting for me. Here we go. Alright. So these are two sector ETFs. Give me a mystery chart. I got pastrami on the on the counter waiting for me. Here we go All right So these are two sector etfs One of them goes all the way back to the beginning of the sector etfs and the other one came about a bit later But it's the same sector just maybe a little bit different. That's a that's a lot of clues. Anyway, these are sec

Wait, they're the same. They're the same sector the same Just two different etfs on the same sector. Yeah, a little different flavor. A little different flavor. You want me to guess both? Well, it's the same sector. They both closed at a 52-week high today. It's confirmation.

The big ones, the medium-sized ones, it's all working. Oh my. Sector? Like, US stocks? Sector, a US sector. All right. I'm going to a US sector. All right. I'm going to solve the puzzle. Go ahead.

It is IHB and what? It is neither of those things. Not home builders? No. All right. That was a good guess though, right? XBI and IHB. Yeah, not bad.

Look at 2007, 2008. Something happened to the sector. Ooh. All right, all right. It's banks? Pretty much. Okay, so it was 1XLF? Yeah. And is the other one,

what's the other financial sector ETF? Give it! It's right there on the screen, it's the Equal. Oh, what is it? It's the Equal, yeah, 52 COS. I didn't know that existed, I didn't even know that existed, I never would have gotten screen. It's equal. Oh What is it? It's the equate? Yeah, 52 cars that exist I don't even know that exists that I never would have gotten it all time highs Yeah, how do you like that the whole time the all-time? How do you like that? Hey, buddy? Thanks so much for watching the show. Did you know that tomorrow morning is Wednesday, which means another all-new edition of

Michael and Ben and Animal spirits my favorite podcast in addition Duncan and Ben are doing an all-new edition of Ask the compound and that is on YouTube during the day Wednesday Look for the alert and of course, we'll be back at the end of the week with the compound and friends Thanks so much for watching tonight. We love you. See you soon Thanks so much for watching tonight. We love you. We'll see you soon.

Whether you're just getting started as an investor or you're managing a multimillion dollar portfolio, Ritholtz Wealth Management has the solution for you. It all starts with building the right financial plan. To speak with a certified financial planner today, visit ritholzwealth.com.