The Compound and Friends - Mag 7 Falls Behind, How David Adelman Bought the 76ers, Bill Ackman Buys Uber

Episode Date: February 11, 2025

On this TCAF Tuesday, Josh Brown and Michael Batnick sit down with David Adelman, CEO of Campus Apartments, co-founder and Vice Chairman of FS Investments, and the founder of Darco Capital to discuss his early start in real estate investing, the growth of his portfolio, his experience in venture capital, and the mindset that has driven his massive success. Then at 49:25 hear an all-new episode of What Are Your Thoughts with Josh Brown and Michael Batnick! This episode is sponsored by Kelly ETFs. To learn more about Cows and HCows ETFs, visit: https://kellyintel.com/ David Adelman Interview: https://www.youtube.com/watch?v=RBHWvBVf87k   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 Kelly's ETFs. Kelly U.S. Cash Flow Dividend Leaders Index, also known as the COWS ETF index, is tracked by the COWS ETF, that's C-O-W-S, and the H-COW ETF. H-COW is tracking the same index as COWS, but it then will write covered calls on the constituents to bring in some income and reduce risk. So the index itself that they're basing these ETFs on,

invests in companies with a blend of high trailing and future free cash flow yields that have a history of growing and paying dividends. So they're cash cows. That's where the name comes from. It has a 98.6% active share versus the S&P 500. So this is not a clone of the index. These are very different stocks in very different weightings.

I want to send you over to kellyintel.com to learn more about cows and H-cow. Check it out for yourself. All right. We talked to David Adelman, who is currently an owner of the Philadelphia 76ers. He is also the founder of a business called Campus Apartments. There are college campuses all over the country that have these high end, very nice apartment buildings for students as an alternative to living in dorms or living in decrepit student housing. It's been an incredible concept. It's a billion dollar

business and David Adelman started as a child basically sweeping up for the owner of a college campus apartment building in Philadelphia and became the CEO in his 20s as they began to expand the business all over the country and the rest is history and I want you to hear that history because it's an incredible story. David was super generous with his time and we recorded that for a new channel that we launched called Ownership by Ridholtz Wealth. So ownership, I wanted to give you guys this sneak preview. Ownership is going to be a little bit different than what we do on the compound. On the compound we talk about investing and trading and markets and the economy.

What we're doing on ownership is talking to business owners and not just founders, but you think about how many employee shareholders there are at all of the public companies in America and then all of the venture-backed startups. This is really the modern route to building wealth in this country is to either own a business or become a shareholder of a business someone else owns, but to share in that upside, the equity upside, the profitability distributions, et cetera. So this is a channel that's really talking away from markets and talking a little bit more toward people who are trying to become a part of the ownership class of America.

So whether you're a business founder or you've gotten shares as part of your compensation at the company you work at, or you would like to be on the track to be able to do that, or you own real estate, or you come from a background with an inheritance, or any version of ownership, the content that we're gonna do there

will be relevant for you. So what you're gonna hear tonight is a conversation between Michael Batnick, myself, and David Adelman. We'll talk about basketball, of course, but we'll talk about business and life and the intersection between the two. And I think you'll really get a lot out of that conversation

immediately following. It's back to markets. It's Michael, it's me. An all new edition of What Are Your Thoughts? We'll talk about the Magnificent Seven, something I'm calling the Twilight of the Magnificent Seven. We'll talk about the broadening out of the market and some of the biggest winners of the year

we look at some names that you probably don't hear much about that are making people a lot of money and We'll get into some stuff about the ETF market too. It's a it's a whole thing and I promise you'll get a lot out of it You'll love it. So with no further Introduction, I'm gonna send you over. Thank you guys so much for listening. Duncan, Daniel, John, take it away. Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Badnick, and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any

investment decisions. Clients of Riddhold's Wealth Management may maintain positions in the securities discussed in this podcast. Hey guys, it's me, Downtown Josh Brown here with Michael Batnick. Welcome to The Ownership by Riddhold's Wealth Management. We are super excited for our guest today. We are talking with David Adelman. David, welcome to the show. Thank you so much for being here. Thanks for having me, guys.

I'm going to read your official bio. The one my mom wrote. And you can stare into space. David Adelman is an American businessman and entrepreneur. He is the CEO of Campus Apartments, co-founder and vice chairman of FS Investments and the founder of Darko Capital. David is also a limited partner of Harris Blitzer Sports and Entertainment, an industry leading sports and entertainment group.

And your portfolio is the Philadelphia 76ers, the New Jersey Devils, Crystal Palace, which is English Premier League Soccer, football, and the Prudential Center. That's part of the portfolio? Yes. Okay. And you have, in my opinion,

one of the coolest all-time origin stories for how you got started in business, how you learned to do business, and how you got to where you are today. And I would just, I would love to just prompt you and have you tell us all about it. But it starts with you as an 11 year old, making a bet, writing a check that you couldn't cash

on the basketball court. It's hard to start young as a gambling degenerate. Yeah, okay. So yeah, so great to be here guys. Thanks for having me. So yeah, the story and lots of people know this. I'm a Philadelphia guy, grew up there. And you all have a guy who's like your uncle,

but not really your uncle, family friend type guy. So I have one of those. His name's Alan Horowitz. His mother and my grandmother were best friends. He was a big brother to my mom her whole life, and he was Uncle Alan to me, and still is. Your closest could be. And so I'm 11 years old playing basketball with Uncle Alan,

and I said, I bet I can beat you. And literally like most people let the 11 year old kid win, okay? Not Uncle Allen, and I said, I bet I can beat you. And literally, most people let the 11-year-old kid win. Not Uncle Allen, right? And so not only does he not let me win, but I guess I had a thing as a kid, I'd be like, I'll bet you, I'll bet you. I was like, you know, he's like, oh, you wanna bet? I lost my basketball, my football, my baseball glove,

and my little bank book that you had as a kid. Which is everything you own. It was like all my shit, okay? And so baseball glove, and my little bank book that you had as a kid. Which is everything you own. It was like all my shit, okay? And so literally I had to go to, it was a business, campus apartments, which is the business I run today, as an 11-year-old kid every Saturday,

and I had to stack lumber or sweep sawdust. And at the end of each session, I got one thing back. Literally, they were sitting in the, I remember this, he had like a Corvette back then, and they were sitting sitting in the glass trunk and he would like make sure I saw it like taunting me. Oh, well there's your stuff for next week. You gotta come in and work and get that. What do your parents say while you're working off this debt? They thought it was great. They're like, oh, you...

They like the message behind it. Right. Work, don't be a gambling degenerate and you gotta pay your debts. You're in the suburbs affiliate this time? Yes. What was the business? What was campus apartments back then? So back then, you know, smaller version of what it is today, but Alan had a great vision as a kid. His father passed away when he was 10 years old,

and him and his mom started really early on. And the vision was that student housing was a captive audience. So he started systematically around the University of Pennsylvania, buying small properties, renovating them, leasing them to kids. And just kept, back then he would like, just kept rolling it into more property,

growing, growing, growing. And then basically what happened for me is, so after the 11 year old, I got my stuff back. Two years later, I'm 13 years old, I have my Bar Mitzvah, I have a whopping $2,000. And my grandfather was actually in your guys' business. And they're like, oh, do you want to give it to your pop-up to put it into stocks?

And I'm like, no, I want to give it to Uncle Alan. I want to do what he does. I'm 13. Real estate. OK, really, literally, I'm 13. And my parents are like, no one thought of school. So Alan's like, all right, great. So he's like, well, what do you want to invest in?

I'm like, what do you have? So literally, we got in his car, and we're driving around University City, which is around Penn, and I'm seeing, he's like, well, we have this, I have that, and I'm finally, I'm like, that one. And these are all students living in these? All student housings, yeah.

And he's like, well, why that one? I'm like, it looks like the biggest building. How did I know how to value real estate at 13 years old? Did you ask what the cap rate was? Well, I already knew that, right? I'm like, well, we're stuck, so I literally, you know, like cap rate was? I didn't know that, right? I'm like, all this stuff. So like, I literally like, you know, like a mob guy, I hand him a brown paper bag with like two grand in it.

And that was my baptism into real estate. Is student housing like the least cyclical business? I guess COVID was a, you know, but outside of that, like. So during COVID, we collected about 94% of our revenue. And every other, what's always close to 100? Close to 100, right. Give or take, some defaults, whatever. Give or take, some defaults or some family issues,

stuff like that, but it's almost 100 always. Good business. And so for us, what I learned is it was just a slow and steady business. I learned that it was so highly fragmented that at every school there was an Alan Horowitz, like a mom and pop business. Yeah, literally mom and pop. Which, you know, Alan started small

and then became more than mom and pop. So you came in like Vince McMahon and you unified the whole thing? So we did, right? We said, like, let's bring it together. Let's make this popular. And so my thesis was this. If you guys, when you guys were in college

and you went to go to the dining hall, the person serving you kind of lunch, like, you know, was like usually a university employee, then somebody is just like, why the are we having our own employees serve food? Let's outsource to Aramark, Sodexo, Levy, one of those companies that does that. And so I was like, well, why can't I be the Aramark,

Aramark's based affiliate, why can't I be the Aramark or Levy of real estate? The school doesn't want to manage properties. It's not their core competence. But when did this idea in Septon's get broken? So that happened, so I came into the business. Let me, I'll. So you're 14 now.

I'm in that, yeah, so he's. CFO. Weekends, yeah, yeah, I'm in charge of construction now. But he did, so systematically from the time I was like 13 through graduating college, I worked, he had me do every job, okay? Work in the office, leasing, accounting, maintenance, construction, plowing walkways,

like when it snowed, like all that stuff. So literally I graduated college on a Thursday and started working for him on a Monday. You were at University of Ohio State. Ohio State. The Ohio State. The Ohio State, so were you scoping out? Playing for the National Championship on Monday night, just wanna, you know. Sure, Notre Dame, right?

Yes. Okay, good luck with that. Were you scoping out the campus housing situation even while you were in school? Like was the, were the wheels turning? Like, oh my God, we have an opportunity. I'll tell you a great story. So I'm actually going to the game

with the guys I lived with in college, some of them. And so we're all living off campus, after we lived in the fraternity house, did that whole thing. We live in a house, like a seven bedroom, like one or two bathroom house, like kind of a shitty house. And there's one outlet in my bedroom, one. And so I go to the management office, I'm like,

hey, I don't know what's going on here, but there's only one outlet in my bedroom. Could you guys install some more? And they're like, no. I'm like, that can't be right, because I've been working at a real estate. So I literally, so I'm 20 years old, 21 years old. I go down to the city of Columbus, building code building.

And I'm just a kid in line, like the guys there, but like, you know, it was like a nice, Columbus is like a nice parochial town, they actually like, how you doing? Like can we talk to you? It's not like here or Philly, we're like no one else. And I'm like, excuse me sir, I'm like, you know, can you tell me the building code for like outlets in a bedroom for a house?

And he photocopies it and it's like, oh, one every eight feet. Right, so you could have more. So I take it. If they had a willingness to do it. Well, I take the piece of paper, I go back to that leasing office, I was like, my whole house would like outlets in all their bedrooms every eight feet, thank you.

Yeah, that's great. So that was like my first, you know, kind of doing it. I graduate, I go there, Alan starts having me do everything, I want to learn all the jobs, it's great. And I immediately saw that that this was highly fragmented and there was an opportunity to do this in a big way nationally.

So literally, I'm 25, 26 years old, and I'm like, hey, I think we should start doing this in other places. And Alan's just a great, easygoing guy. He's like, I don't know, man, we got a nice thing going here. I was like, no, no, no, I'm gonna do this. He's like, well, then you should run this thing.

And so literally, at 25, 26 years old, he's like, you should be, you can run this and like, you're the CEO. Yeah. How many employees are there at the time? 40, 50. Holy shit. You know, so how do you make this decision for which school is next after Penn? Is it we want to move out regionally or stay in Philly? So we went, we actually left Philly. We went to, you know, we did something in Columbus.

We went to North Carolina. Why? Opportunity, we just saw some opportunities. Just went bang, bang, bang. Like just started, you know, kind of doing it. And then what really happened, you know, put us on the map in 2004, 2005, I was like, you know, maybe I should, I got approached from some banks

to go public as a student housing company. There was already one or two others. There was ACC, which I was like, you know, maybe I should, I got approached from some banks to go public as a student housing company. There was already one or two others. ACC, which I was invested in. American Campus Communities. There was one called Educational Reality Trust. None of it doesn't exist anymore. Blackstone by ACC?

Blackstone by ACC, doing a great job with them. And so they were like, you should go public. And I was like, yeah, I guess I'll do that. And then, you know, we talked about it before. One of my really closest friends is a guy named Michael Rubin who was a Philly guy. We've been friends since we're 24 years old. And he was running a really small public company

at the time. He's like, you sure you want to do that? Like maybe you should do something else. I was like, oh, maybe I don't want to do that. Like, I don't know. I just kind of didn't know. But you needed capital. I needed capital. To was like, maybe I don't wanna do that. Like, I don't know, I just kinda didn't know. But you needed capital? I needed capital.

To that date, what we did in real estate is you would develop a project, create value, refinance it, and just keep rolling the dollars, right? So you do one project at a time. I was like, I wanna do more than one project at a time. So I needed capital. I wind up running a process and I wind up getting a global sovereign wealth fund

to give me $300 million in 2005. And it's a pretty funny story because like I told the bankers taking me around, I want 300 million. Not a hundred. Like, and they couldn't understand why. I'd never raised a nickel before. Okay. We finally, I said, look, after you raise it, like, I'll tell you why.

But you have the cash flow to show that, like, there's a return on this money. I had the experience to show that if we put money to work and we did it one deal at a time, I wasn't investing all that money at once. It was accessible from the investment group. Long story short, we get a $300 million commitment from a global sovereign wealth fund, and now I can say of equity.

So I'm like, oh, I want the, I'm kind of young and I wanna like, oh, we can say a billion dollars of real estate 300 million of equity 700 million of debt. That's how the leverage works I was like I just did a billion dollar joint venture with a global, you know So that guy that wants the big novelty check so I go. Oh, yeah So we got so but that put us really and then we quickly grew very, you know We're in you know, we've been anywhere from 18 states to 28 states, you know, kind of fluctuates, you know, as you kind of grow, create.

So I noticed that trend while I was in school. We had the Knox boxes at the University of Maryland. Sure. I know. Well, yeah, we're developing something in Maryland. Are you? Okay. So that was like where you basically had to live and it was upstairs, downstairs, It was a mom and pop, literally the worst. They're gone now. But then Hartford Towers and then like it, it seemed to be going more toward the route where parents were like willing to help the kids afford these places and they started to look more

and more like hotel style living. What happened and is happening is a lot of these schools where that were like state schools where it was mostly in-state Yeah started getting out of state kids you get the Long Island kids and stuff I mean amenities right and then all of a sudden mom comes down from Long Island was like oh no No, this isn't gonna do right and so like if you see our gyms our fitness centers our rock climbing walls like it's insane What we're building for these students right now. Yeah All right rock climbing walls, like it's insane what we're building for these students right now. Yeah, all right, so what you're looking for then

when you select a campus area and you say we should have a presence here, I guess part of it is a dearth of other players where you could kind of like grab the mind share of most of the students. You don't want to like walk into a situation where everyone's already set up. Right, well it's supply and demand, right?

If there's already enough supply, you're not adding value. You want a school that's growing. Growing or you think is about to grow. I always tell a story that 10, 11 years ago, it's probably 11, Clemson, before their football program was what it was, was not what it was, right?

It wasn't even a top 20, it was never a top 25 team and all of a sudden, but when you see some of these predominantly state schools all of a sudden rising, that actually, that popularity gets more out of state students. Out of state students pay more than in state students. All of a sudden, bingo, those out of state students

could afford to pay rents of what a new construction product costs. Yeah, so my daughter, we're from Long Island, my daughter has friends at Clemson and at University of Georgia. Five years ago, nobody from my town was going to these places. So is it the football team is like kind of what leads it. It's the tip of the spear. It is.

It's sports and the awareness. And then the schools get smart about marketing and they say, Oh, we're going to get these out of state students. You know, if you look at the out of state tuition, you know, I told you, my daughter's at students. If you look at the out of state tuition, I told you my daughter's at Boulder, right? The difference between out of state tuition, in state tuition, it's four to five X. It's great revenue for these schools. Yeah, the schools have to balance

having enough opportunity of slots for local kids. Right, but there's- Versus like, let's broaden- You see it change rapidly. Are you getting, or was there a point where you started getting phone calls versus going out and scouting new deals? Well, two sides. One is, you know, there's what we do predominantly is off campus, right?

You know, most schools house their freshmen, so that's 25% of the capture rate. The rest is kind of to the open market. But there are times where the schools are looking to improve their housing or, you know, kind of I give you the food thing saying like, we don't need to be involved in, but we want to have a little control over it. And we'll do these what's called a public private partnership. We're actually doing that at Maryland right now. Okay, so they'll say we need you to build something great Here's a piece of land and we want you to put the capital in so they'll put the land in and we put capital in bring Our expertise and that's how it goes. Okay, so somewhere along the line

You get to the point where there's there's The industry takes notice of what you're doing and you win an award in 2009, multifamily real estate executive of the year. And I want to point to a decision it seems like you made that in hindsight, I would guess you would say this is probably one of the best decisions you've ever made. And this is related to the area around Penn. They needed some investment. They needed somebody to step up and believe in the community.

And I just want to quote something that was written about this episode. With crime spiraling out of control in the neighborhood, Penn asked local stakeholders for a financial commitment and political support to start the University City District, a special services district to improve the safety and cleanliness around campus. Edelman became the largest private sector supporter of the district, contributing $500,000 over 10 years to help Penn establish a $4.5 million operating budget for UCD.

Somebody said something really nice about you. They said when most landlords in West Philly were hunkering down, he was the only one who contributed to this. You must have seen that your business and the state of the neighborhood are kind of intertwined and you can't win if the neighborhood doesn't win and probably vice versa. And you stepped up at a pretty critical time. Yeah, look, that's exactly what it was. And, you. And my partner, Alan, he was still my partner today. We were talking about it. And we're like, what happened was, Penn was always an elite institution and all that,

but the neighborhood was kind of iffy. There would be like a kind of a safe zone and a fringe zone. And then there was this kind of like, I hate to publicize, a famous murder of a professor like off campus, like near where our stuff was too. Like, so like all of a sudden you're like, wow, this is really bad. And so Alan, my partner and I were like, we have to like off campus, like near where our stuff was too. Like, so like all of a sudden you're like, wow, this is really bad. And so Alan, my partner and I were like,

we have to like do something, but like we're realistic. Like we're not like public service. What do we do? Like what do we do? And so this whole consortium came together and they asked us for money and we were like, Alan and I were like, we have to do this. Like thank you for setting it up.

At least, you know, we're just money. Like let us like, we got to save this. And by the way, if you're successful, like, it was easy to see if you're successful, this is gonna be good for our business, right? Like, so, you know, like, two things can be true. We could do something good for the community and it can be good for us.

Yeah, I think there should be more of that. I know there have been attempts with things like opportunity zones over the years, et cetera. But, like, for better or for worse, if you have a facility that's on a campus and the campus is in a city, you need the city to prosper in order for people to want to go to that school and pay rent to you.

It all has to work in concert with each other. David, that $300 million that you took, that was for a particular deal. That wasn't equity in the company, was it? So yeah, great question. So we never took equity at the parent company. So why? It's a great question.

And I believe it's funny, because I mentor a lot of investors. My family office does a lot of investing in companies where I'm like owning less of something big is better. I had a vision on the real estate side. I thought I needed to maintain control. And I thought real estate was unique at your kind of asset class where I could maintain control

of day-to-day of employees, business, things like that. But then you could venture with capital at the real estate level. So I felt like you could have a win-win there. So we have investors at the real estate level. You create value with those deals. It's good for the investor, good for us. We share those profits with our employees.

Like, you know, how do you do that? But yet still, you know, I didn't want anyone coming and telling us how to run the business or who to hire and fire. So, but that was- Sounds familiar. That was a personal preference though. I don't always give that advice to entrepreneurs

that are building businesses. Right. We sort of have that same mentality here. We're in an industry that's rapidly seeing private equity investment being made in RIA firms. We're not opposed to it happening. We just don't want it to happen. We want to be the last one standing.

We don't want it to happen to us. Well listen, culture sometimes gets harder to maintain, depending on how that works. And is the investor coming in, have the same vision that you do? And look, candidly over those times, I didn't know how to kind of quantify that. Will that person want to be there,

or are they gonna, at your worst moment, say, well, it's time to sell? So the parent company for everything is Darko Capital. Parent company for the real estate is Campus Apartments. Campus Apartments, okay. Darko Capital's my family office. That's your personal, okay. You've got this concept of treating private equity like it's venture capital investing

We definitely want to hear more about that you make venture type investments But you're in the private equity world so your expertise I guess straddles both elements of building and running a company Yeah, I mean the way I describe it is I have this unique I don't know if it's unique, but I have really bad ADD and I have OCD. Okay, so I have both. Oh, you have both? I have both, and so I focus on things intently

for a short period of time, and then I'm on to the next one. So I am good at kind of thinking through strategic issues, putting things together, getting something going. But like, you know, like. And then other people do it. Correct, so like campus apartments. I've had a partner there, Dan Bernstein,

who's been with me 26 years. He's our president and chief investment officer. He is way better at running the business than I am. Right. Like, much better. And so, like, knowing that, like, you can have partners or, you know, people you work with that can play off your strengths

or weaknesses, to me is like how you create success. We have the same thing here. We have somebody who's focused full time on actually implementing the ideas that we have. And that's me. That's me. All right. Rise Cold Brew Coffee, Cred.ai, Margot,

American Harvest Vodka, Olly Pets, you're involved with Fanatics, which we'll talk about in a second. Tell us about your portfolio. What gets you to yes when people come to you with ideas, and what do you bring to the table? So, you know, and each of those companies are very, very different.

So for example, American Harvest Vodka is, we own, I own, a alcohol business platform, American Harvest Vodka, another brand called Beach Whiskey, and that is a vertically integrated spirits company. So it's under the umbrella of Darko Spirits. I have a CEO who runs that, no outside investors. We have about 15 people who work there. So a little different than my norm of just being more like passive or non control investor.

Usually I'm a large shareholder, but not the largest. It depends on the situation. Cred.ai based in Philly, one of my favorites, one of my larger holdings too. Interesting scenario, two guys had built ING Direct, which was the first internet bank, if you remember back in the day. You would remember that. So kind of the FinTech gurus, and then these two brothers who are like brilliant, smart tech guys,

and they figured out an algorithm about how to take a debit card, and using this debit card creates credit, okay? And I won't bore you with the technical way it works, but that partnership has now worked where we have a deal with Starbucks, for example, where we now are working with Starbucks and their 400,000 employees for their baristas and employees

to just deposit their paycheck on our debit card. And that swiping of the card is building their credit. We created a project called EWA, Early Wage Access, where we can lend people money against their paycheck before it happens and a few days before. Yeah, and so like there are things that we've done in that financial services space that are pretty interesting.

You know, other ones that, you know, what other ones? So, you know, Margo, okay, run by two brilliant women based here in New York, who their Harvard business plan was, why do women's shoes like for a working woman like have to be uncomfortable to look good. And so their whole thesis was like,

can we create shoes that are like fashionable? Transition. Affordable. Because like you see women like New York or Philly, they're walking to work in their sneakers and they've got their other shoes in their bag. In the bag. Right, because they don't want to do that.

They were like, that's insane. Like let's create something. So the Alexa and Sarah just created this great company. They also, I learned this from it, that women's feet aren't the same size necessarily. So, one of their lines is custom shoes. You step in a thing, it measures your foot, boom, it ships you the shoes to that.

Oh, your left and your right foot might be slightly different. Might be slightly different. So, and so that was one. Ollie Petz, you just mentioned, for me that was kind of early on the dog food. If you have dogs, which I never had them growing up, and now you've got my kids, my wife, my dogs, I'm kind of last in line, right?

But the way my dogs get treated with their food and their treats and all that stuff, and so this premium product that is delivered to your home, order on app, all of that, just like high end food, not the stuff that's sitting in the can for like three years is the new thing and we got in early. So one of the things about venture capital these days is that everyone has money.

Money's not really the problem. Attention is the problem that needs to be solved. So I would imagine you have a platform where when you come to the table, all terms being equal, the difference is, hey, look what else I can do besides just write you a check. So I pride myself on really two things. One, the traditional venture fund will be great for your company when it's 80 degrees and sunny, okay? But like when it's cloudy and there's storms coming,

like during COVID, you know, I can't tell you how many of our companies that were venture backed needed capital, but those funds, you know, they would, they invest out of Fund Two and they couldn't put more out of Fund Three. And we were giving lines of credit to our portfolio companies. And so like for me,, if we invest in something,

every now and then, I'm sure you see these guys all pass the hat and it's a cool deal and I know nothing about it, I do that less and less. I like it when I know who the founder is, I know what the product is. And by the way, is it adjacent to campus apartments or one of my other businesses where I can add value? Right, it could be some kind of cross promotion.

Well, you think about campus apartments. We have got 25,000 students that live in our buildings. And you think about like the disposable income they have, they're kind of taste makers. I can't tell you how many consumer brands are like, hey, here's a product. We'd love you to put it out to your students, right? Like think about that. So if I think something's interesting and you know, it's testing well in our kind of ecosystem, I'll invest. Where do you tend to invest in terms of like revenue stage where these companies are?

Early, early. So pre-revenue? Pre-revenue and where I'm betting on the jockey. Okay. Right, and so to me, you know, by the way, I hit a lot of zeros. Like I don't want to look glamorous here. Like we lose a lot of money.

Pre-revenue, it's part of the, it's part of the bet, right? You got to do that. But like part of the Right, you gotta do that But like, you know If you have the right product and then I look at it I'm like, well, what's the barrier to entry for the next guy who might be smarter or have more capital to beat us? And if there's like a moat around that I'm like, well, that's interesting. I like the guy or gal who's doing it There's somebody I want to back. I want to get into

Fanatics a little bit your relationship with Michael Rubin and then we'll talk about how you came to own a piece of the Devils and and the 76ers Which tough game against the Knicks last night. We don't have to spend a lot of time on that So it's awesome me a little bit about you you mentioned Michaels almost a childhood friend of yours Tell us a little bit about, you mentioned Michael's almost a childhood friend of yours. How did that all come into being? Because from my point of view, the ability to do business with people that you're also friends with is like one of the greatest.

The best. I mean, it's got to be right up there with the greatest feelings in business. Yeah. And so, you know, Michael and I live, you know, we grew up in kind of outside Philly together. We were both, you know, entrepreneurs grew up in kind of outside Philly together. We were both entrepreneurs in Philly. We met in our mid 20s, 25, 26 years old, two entrepreneurs building businesses and just kind of like hit it off quickly and just been like brothers ever since. And look, you know, he is like, I think I'm pretty good at business.

He's next level. I mean, Michael, I was going to ask you in your 20s. Did you look at him and say this guy's going? You know, I just looked at him and I said, OK, at least I have a friend that's like running it. Like, you know, because I had a lot of friends that were like lawyers or accountants or whatever. And like, you know, they're kind of like done at like six o'clock and like, I'm not turning off. And I'm like, you know, is there something wrong with me?

But to have like another friend who's 24, seven, I was like, all right, maybe that's what our normal is. Right. And so we would just kind of grind and go and go and have ups, have downs, things like that. But like, we weren't afraid to take a bat, take a swing. And so, you know, watching him build his businesses and do what he's done has been unbelievable. I mean, what he did with, you know, kind of selling his old company, rolling out fanatics, building the platform around it, what he's done with collectibles right now and cards and trading. And now, you now, I have no doubt that he will be a differentiator

in the sports business. He's an empire now. Yeah. It's beyond just a collection of businesses. It is. Okay. And then he had to sell his stake in the teams and you were ready.

You would have had a previous opportunity, but now you were really ready to do it. Yeah. Okay. To be able to own your childhood team You were ready. You had had a previous opportunity, but now you were really ready to do it. Yeah, no, it's, you know, to be able to own your childhood team is, you know, very cool. And so when, you know, as people know, Michael had to sell his stake in the Devils and the Sixers because of the sports betting.

You can't be an owner of a team in doing that. Right. You know, Michael knew that, you know, I had wanted to get into the professional sports business and we'd looked at some other stuff. and when this came up, he was like, listen, we'll just do it between us. Like it was like a, you know, literally like a 30 second conversation, like family, like here's what I think is fair.

I think this is fair. And like we did it and that was done. What your wife and kids say at the time, were they like beyond excited or are you ever going to be home? You know, they were kind of like, you know, look, they kind of like, they got it. Like, first of all, the Sixers, they kind of understood. The Devils took a minute, and you know, we talked about this earlier, like growing up in Philly, you know, I was a Flyers fan, and you know, now, like, you know, it took me a minute to start wearing Devil's gear in Philly.

Like, am I going to get hit? Like, I had to kind of like, get around that a little bit. But like, honestly, like, our fans, the Devil fans, are amazing. Like, the Prudential Center has like a vibe. Like so I'm all about energy. You know, we haven't talked about, you know, I'm going to build a new arena for the Sixers and the Flyers in Philadelphia. And so like I'm all about energy and hospitality and environment. The Prue is just a really cool place. So let's go there now.

You want to build something for the Sixers, and it's obviously hard to do anywhere. I feel like on the East Coast, in cities on the East Coast, it's even harder than if you're like in Arizona. Just from a space constraint standpoint. I feel like the competition with arenas and stadiums has been ratcheted up substantially. When you look at what Steve Ballmer has built for the Clippers, you look at SoFi, like the new standard is significantly above 20, even 20 years ago. Oh, it's not even close. It's not even close.

These are billion dollar facilities. Oh, multi-billion in some cases because like you think about like, you think about the old facilities that were started in the 90s. And I put like, you know, Wells Fargo Center, where we play Boston Garden, where Chicago plays, those were designed with a purpose to be multi-sport,

right? And be good for anything. And they were like the first generation of like new and new, right? Before that, it was probably more smaller intimate facilities. It was like municipal arenas before that. Like the Coliseum. Like the National Coliseum. Exactly, exactly.

Or like the Forum, right? Where the Lakers played before Crypto or Staples Center was built. Exactly, so this evolution is happening. And so, you know, for me to be able to build our new home, we just, you know, we had a big announcement this week about us and Comcast coming together to do it together. We spent the last two and a half years

kind of pursuing our own home for the Sixers, separating from the Flyers, you know I'm happy to say that us and Comcast came back together and we're gonna build the best arena in the world in Philadelphia You know, I'm fortunate that I get to lead that effort It's high ones is a take Construction is about 30 months. Well designs about a year and what about just like permits and oh now you're talking about city stuff Right, right. Well like they like the Chase Center that they built in San Francisco for the Warriors, I think that was a seven year

odyssey-ish. Have you seen it? I haven't been yet. Very cool. They did a great job there. Imagine a state of the art. And what's really, there's a new generation of arenas. So that generation was Milwaukee, Fiserv, very cool.

There we've been. Intimate, right? Yeah. Chase, very cool. The Kraken's place in Seattle, if you haven't seen it, they did a really cool job of taking the old site and building a really, to me, like that intimate fan experience. So the seats are much closer together,

kind of like a Nassau Coliseum or a Forum or, you know that. Because you want that vibe in the arena. 100%. As a big part of like the product.au Coliseum or a forum or, you know that. Because you want that vibe in the arena. 100%. As a big part of like the product. Like why do I go to the game? Right, versus watch it on your sofa. You should feel like it's an experience.

And so, you know, for me, everyone's got a different opinion. Steve Ballmer did a very cool thing at Intuit. Steve is a basketball fan, a basketball fanatic, and he designed it based on how his experience is. So Steve's like, I want all these bathrooms there so you are back in your seat very quickly. I don't want you to have courtside food service

because I don't want anyone blocking your view. They don't have TVs at the vendors in the hallway. Correct. They want you to get your food and get back into the game. Correct. And that's Steve's product. I like that choice. Look, I think that's his choice.

So for me, I look at it and I say like, you know, you guys were talking about games before. When you go to a game with someone or a sporting event, like that's an experience, right? You know, if it's a friend, if it's a client, right? That schmoozing that goes on isn't just at the seat. It's while you're getting a cocktail, having a meal, running back and forth.

So I want to make it transferable, but that's my opinion, right? And so we want to make it transferable, but that's my opinion, right? And so we want to create a fan experience that is a premium experience from the seat to the restaurant to wherever they want to go. We brought the whole media team last week to Madison Square Garden for Nick's game,

and we sat in the Madison Club, which means none of us were pinned into a seat. We could walk around sofas, stools. That's like one of the were pinned into a seat. We could walk around, sofas, stools. That's like one of the best ways from my perspective. I think I'm more on your side. I don't need to be that locked into every game I sit at. I just think it's the experience and who you're with in entertainment.

And you're going to make me stare at that Knicks hat the whole time, aren't you? You know what I've never seen? Maybe it's logistically impossible, but you see this at football stadiums, at baseball stadiums, that when you're getting a hot dog, you can still see the field. At a basketball arena, I've never seen that. So it's funny. You, but you see this at football stadiums, at baseball stadiums, that when you're getting a hot dog, you can still see the field. At a basketball arena, I've never seen that.

So it's funny, I think I like that, and so we're talking about that. Like how do you create club areas that allow you to lounge, watch the game, kind of do a little of both for like the casual fan? And I agree with that. You have a line of sight onto the main event, but you're also not sitting in the seat.

So this is a dumb question, because I know the answer, but is running, is owning an NBA team a good business? So here's the answer. The answer is, I say this to everyone, owning sports teams is really fun when you're winning. Yeah, because it's your reputation in the town now. Right, when you're not winning. And especially when there's an expectations of winning,

like there was in Philadelphia, going into this season. And you know, look, we've gotten pegged with some bad luck and injuries. Like no one saw this coming. Who saw Joel getting hurt? No, no, right. Just kidding. I mean, oh man, brutal.

I mean, look, last night, like, you know, I'm not proud of it. Like there were a lot of Knicks fans in our building. I was like, f***, you know, like, I mean, you know, and I knew it was a bargain. You guys are close. But our playoff series last year, That was amazing. It was amazing. Like, I gotta tell you a bargain, you guys are close. But our playoff series last year, it was amazing. I gotta tell you, for me, I just love sports

because I sat in an MSG and I could feel the energy of the fans. I go sometimes when the Devils play the Rangers or when the Sixers are there. And that energy is awesome. And to me, that's what sports is all about. And so like- Well, you have that in Eagles games.

We do, right? Like, 100%. Notoriously. But you have that at Eagles games we do right like a hundred percent notoriously But you have that passion fan passion. I feel like you know everyone's biases I have to be Philly are the most passionate fans in the world right? I mean look I guess you could argue New York fans because people still show up for the Jets right like But like you know at the end of the day like our fans are rabid. They know what they want There's something different than Northeast. Yeah, I agree

Oh, I think like as far far as the passion of the fan base, I think most people would say it's the Bills and it's the Eagles, and then most other teams is, you know. I agree with that. I think the old school Raiders maybe kind of had an element to that. Correct, but by the way, it's generational, right? Like literally, we're at the press conference on Monday,

announcing this new arena. And one of the things that we did is also work to deal with Comcast that they're going to join our bid. We're going to go try and get a WNBA team in Philadelphia. It's important to me, important to my partners. I'm really passionate about it. I'm a girl dad. I think that would be awesome.

And it's hot, and it's hot. People are into it. People are into it. So one of the people that's going to be part of our ownership group is Wanda Sykes. She's a Philly girl and she loves it. And so we had her just say a few words kind to be part of our ownership group is Wanda Sykes. She's a Philly girl, and she loves it. And so we had her just say a few words as part of our bid, and then she's like, go birds.

Right? I mean, everyone is, that is the Philly vibe. How are you feeling about this week? I don't want to get cocky at all, but I'm kind of happy that we're playing the Rams and not the Vikings. I don't know. It just felt like the right match-up. I think you guys got it.

It felt like the right match-up. Jalen Hurts's limitations have been pretty visible. This is like his arm strength, pretty visible. You wanted to comment on that? Is that a comment or a statement? I'm a science fan, so I'm just saying. All right, but you're having fun. I am.

I mean, the team is in the playoffs every year. Look, to answer your question, is sports a good business? Yeah. Sports, we were talking about investing earlier. Sports is like a long-term Sports, you know, sports is, we were talking about like investing earlier. Sports is like a long-term investment, like your 401k, right? You're not gonna get immediate benefit from it.

It's back-end, hopefully you build a good business, you do right by your fans. And like, you know, as Josh Harris and David Blitz, my partner, like they always say, like we all agree, like it's not our team, it's the community's team. Like you're a steward of it for a moment in time. That's gonna be there long past I'm on this earth

and you're on this earth. There'll be a team, someone will own it, someone will make sure that it's got a great organization. And so it's a great business, but it's hard. I'll tell you a funny story. Last year, Pat Beverly was on our team. Pat's a fun guy. He's fun, and by the way,

sitting in court side and hearing Pat talk his shit is just a full, it's amazing. And Darrell trades Pat and does it all. And literally my wife calls her guy, she heard it, she's like, what the fuck? You traded Pat? And I'm like, honey, it is a business. And she's like, this is bullshit.

That's what happens. And Cam, now we got Cam, honey, it is a business. And she's like, this is bullshit. I'm kind of like, that's what happens. And Cam, now we got Cam, campaign. I hated him last year. I was like, that guy's so annoying. We love him now. We like him being annoying now to other teams. What about private equity money coming into the NFL? That's a big story.

I think, look, I think it's great. For a couple reasons. One, I think that it becomes the democratization of sports where now mom and pop are retail investors or like not you know once other people can participate in that right because it is a great asset class. Rather than one family owning it yeah you can have a fund where people own the fund and the fund has a stake in the team. I agree and just look at how invested the Green Bay community has always been around. Lambeau and that team,

they feel like the community owns the team. Well, the other piece that it does that I don't think people are thinking about is, look, I personally believe that like closely held ownership of sports teams is good. So that way there's some like someone in charge, made decisions are made and all that. I'm a Giants fan, I don't think it's good. I

Saw the planes flying around but like but you think about what happens Generationally like there's a state taxes or you need more money or the families because these you know Some of these sports, you know don't you know NFL is different because NFL makes a lot of money But you know other teams like basically, you know hockey basketball you make most your money in the playoffs But you don't make the playoffs, things happen. So your ability to sell a stake, raise capital to invest in the team, which you saw, you know, some people do,

I think that's great. I think it also allows passionate owners not to have to sell when they're diversifying their estate planning stuff that you guys would advise. You'd say, hey, you know, one of your clients owns, you know, 80% of his wealth is in one asset. You're gonna say, that's not really smart. Well, this might allow that owner to diversify a little bit,

take some chips off the table. It's so funny, you talk to people who are part of a fan base when the team gets sold, and they have this preconceived notion of, oh, well, our team just got bought by a hedge fund manager, and he was compounding at 18% a year for two decades, so I think we're in good shape. Pantas fans have entered the chat.

Well, it works out great for the Mets eventually. Doesn't maybe work out so great on other teams. Or then you have the stereotypical situation where it's venture capital and everyone thinks they're about to be the Warriors. And it's like, okay, those guys are probably great owners, but also they got Steph Curry at eighth in the draft. So it's like, there's not one way that things will go

based on who the owner is. But usually the problem with new owners is they try to make a splash, like the Walmart family did with signing Russell Wilson. Right. Or Phoenix last year. Yeah, like Ishby, that's very typical. Well, I think it's a couple things.

And Russell is a friend, so. No funds. Yeah, but you know, what I would say is, I think that owners, it's a business, right? And I think successful owners, it's a business, right? And I think successful business owners have to remember whatever made them successful in their business, which is probably building a great management team

and having kind of a deep bench of people to help run the organization needs to transfer to sports. But you know it's ego, like how do you not? It is, but at some point I think the best run teams, like the Eagles, right? Like, you know, Jeffrey Lorie is a great owner, but you know, Howie Roseman. Howie Roseman, I'm sure he's behind the scenes doing it,

but you have to trust your GM, the people who are in charge of talent and personnel and data analytics and all that stuff, and you can't run it with your gut. Last thing we wanna do, and then we'll let you get out of here, wanna talk a little bit about private equity and wealth management because that's our business and your business and they seem to be melding more and more and I know you have RIAs as investors in some of your funds and we just love to

hear how that works and what that experience is like from the ownership side, from your side, working with wealth managers and their clients. Yeah, so we started a business in 2006 called FS Investments, used to be called Franklin Square. We're now at about 84 billion of AUM and all diversified products, but all bringing alternatives to the masses.

And we partner with firms like yours to say, like, you guys might have an expertise in stock and bonds and munis and things like that. Alternatives is kind of a little different. And we thought it made sense to kind of, you know, bring that alternative market to more people, right, where wealthy people and high net worth people have been investing in hedge funds

and private equity funds for years, right? But if you could make it more mainstream, which was what our goal was, and we could do something with RIAs and wirehouses and things like that, it is a partnership, right? You're looking out for your client, you get pitched a lot of stuff,

some of it might be total dog shit, right? And you have to do your proper diligence on it. And what we're trying to do is create a transparent product so that you and ultimately your client feel like their capital's going to someplace that's safe. And it's been a good business for us, it's been a good business for the people we partner with, you know, who put their clients in it. So the typical RIA is most concerned when allocating to a third party. Like the RIA know, the advisor at the RIA knows that in the end they're answering for

whatever goes on. So that must be like a big part of that effort is just transparency and making sure the advisor knows they're not gonna look like a schmuck. Look, in any business you're in, right? It's like, no one wants surprises. Yeah. So like I've had surprises maybe. Right, right, right, right, I'm sorry.

We'll take those. But you know, I say to everyone, I'm like, listen, like bad news doesn't get better with time. Okay? If there's a problem in any one of our businesses, I'm like, but like those but you know I say to everyone I'm like listen like bad news doesn't get better with time Okay, if there's a problem in any one of our businesses I'm like fucking tell me now because it's not gonna get better Let's just find a way to fix it because like if there's a problem with an underlying investment that your clients made you want to Know early right yeah, and so that you can talk to the client you can figure out what happened Even if you can't do anything about it There's no sense in putting off the conversation. 100%.

So like, if you can figure out how you have that transparency. And look, in your business particularly, people are looking at you for that trust, that confidence, that education. I think that's really important and they take that seriously. No, definitely at campus apartments.

You think about what my asset is. I have somebody's most valuable asset, which is your. Yeah. Okay, like we wake up and tell our employees every day like nothing else matters. You have somebody's child living in our building. Riding the elevators, breathing the air. Doesn't matter what it is, right? Like so like, like you think about what is your North Star in any business, right? And so as long as you, and I say this to all the people I mentor, like what is your North Star? Okay, what is the right and the wrong? Okay, you might get away with the wrong thing for a small period of time, but it won't be forever.

And the last thing I say is you get one reputation. If you guys did something inappropriate to your clients, how are you guys ever gonna be in that business again? Right, so like your brand is everything. And so like I say that to everyone I mentor, I say it to everyone I partner with, I'm like we're gonna be partners

You will ultimately have some bad news. Not everything goes like this. You can come to me with that bad news Okay, but come to me early and make sure I don't hear from it from somebody else David We want to thank you so much for your time and and wish you congratulations on The partnership with Comcast for the new arena I'm sure people in Philadelphia are like over the moon that this is gonna happen. Great for the team, great for the fans, great for the whole city. So congratulations on that and all your success with Campus Apartments. It's an incredible story. I love how it started. I loved how you paid your dues as a kid and that those lessons are still with you in the way

that you're mentoring young people today. So we just we think it's awesome and I appreciate it. Thank you so much for being here. Good to be here guys. Thank you. Awesome. That's it from us. Thank you guys so much for watching. Like and subscribe and do all the things.

And follow David literally in the parking lot on the way to the game. You don't do social shit. What do you do? Instagram? Instagram's my biggest thing. I follow you on Insta. Yeah, we do Insta.

Okay. You can follow me back. I don't know if you know. All right. Follow David on Instagram. Follow the 76ers. Follow Campus Apartments and we'll talk to you soon. Okay. We're not going to drop the ball tonight like Kansas City. We're going to win this one tonight. What do you think about that? You feeling bullish on the show?

Super ball is at the worst. Did you hear that? That's a joke. Did you hear that? Super bullish? Got it. Was that the worst game that you can remember? Super Bowl game that you can remember? There was one other clunker like 15 years ago, but Where it's like 10 to 6 or something? No, I'm just trying to think that the the Seahawks got killed by the Panthers or the Panthers, vice versa. Either way, the Broncos killed the Panthers. This was bullshit. Horrible game.

Horrible game. Terrible. And they actually managed to hit the over because they had some garbage time drives and touchdowns. But the first two and three quarters of the game is just like, it was unwatchable football. The better team won. Clearly they were the better team.

They would have won that game eight out of 10 times or whatever. They were better team. They won. They deserved it. I fully agree. You know, it's funny, like all the teams watching that are going to overcorrect now and they're going to be taking all these like all these like front four guys from the draft like everyone's say this is the new way to play football.

Yeah everyone knows if you can get pressure with the four guys you're in good shape. Giants did that a couple of decades ago or a decade ago. Yeah. It's a way to do it. Well it's over. It came it went and tonight is an all new edition of what are your thoughts? My name is downtown Josh Brown. Talking to the mic. What? Talking to the mic.

Okay. My name is Downtown Josh Brown here with Michael Batnik. As always, Michael, say hello to the folks. Hello, hello. All right. Got all kinds of people in the chat tonight. Regulars, newcomers, Jay Minter is here, David Graham, Dr. Horton, Benjamin, we see you.

Chris Hayes, we see you. Joey Gao, James Sykes. Who else is here? John, Evan Beauchamp. Everyone, dude. Trump and Dad is here. All right. All right, we got a full house.

I'm pretty excited. Nicole's in the chat patrolling. Everybody be on their best behavior. Tonight's show is brought to you by a new sponsor to the show. I'd like to introduce you guys to Kelly ETFs and Michael, they have a particular suite of ETFs. That's what they call it, right?

When there's a couple of ETFs. Let me tell you something. Kelly US Cash Flow Dividend Leaders Index. That's a cows ETF index. It's tracked by the cows and H-cow ETFs. H-cow tracks the index and then writes calls on the constituents. So what are we talking about here, Josh?

What are we even talking about? These are cash cows, okay? Free cash flow. This is not- So wait a minute. Cashflow dividend leaders index is tracked by cows and H-cow. If you wanna just own the equities

that make up the cashflow dividend leaders, the cash cows, you would buy cows. If you want the hedged version, that rights covered goals against, options overlay to bring in income, you would do H-cow. What's like the, what are the stocks in here? We have a couple of graphics. So look, the top 10.

This is like not a closet index or anything like this, right? Like these are not this is not the Mag 7. This is the real shit free cash flow. So matter of fact, the Wall Street Journal, our friend Spencer Jacob, our friend Spencer Jacob wrote an article today. The Mag 7 are sold last year. Cash cows are the new Kings. So good time with today's show.

So free cash flow. That's the name of the game. Cash cow is kind of cool because it's like a proxy for quality, I think. Well, it's hard to generate free cash flow. Yeah, exactly. Yeah. But I like that it surfaces companies that people don't talk

about a lot. So, all right. Very cool. Here's how you could find out more. Go to kellyintel.com. That's K-E-L-L-Y-intel.com to learn about cows and hcows and all the related disclaimers and disclosures apply. Okay. I wanted to start with just a roundup of where we are year to date in the stock market because this year is turning out to be a little bit different from the experience of the start of 23 and 24 and different in sort of a good way. Yeah. Depending on how you allocated.

I like a tape like the one that we're experiencing right now. These are the types of markets that I enjoy the most. So I wanted to kind of walk you through what's happening here and get your take. Let's start with the DGEN DAO. We launched the DGEN DAO last fall. Created, created. We didn't launch anything. We didn't launch it.

I'm sorry. Apologies. What we were trying to illustrate last fall was like all of these junk companies that were left for dead in 2022 were starting to make a price comeback. Like they were starting to rip again. And it was a lot of fun because here were the tech for people listening and out watching. It's like Nvidia, of course, not junk, but being the people that are involved in the stock were increasingly acting like degenerates

via the options market. But like Palantir, Roblox, Reddit, Riot, Blockchain, Rivian, a lot of them start with an I, which is interesting. SMCI, which is a super micro. Wait, I'm sorry. What do you mean a lot of them start with an I? R. Oh.

Just did like six in a row. I thought you said I. I misheard. My bad. No. You got the coin related stocks. You got the carvanas. You got the GameStop AMC contingent.

Robinhood is in there. Micro strategy, which I know is now just strategy. But here's the DGEN DAO year to date, up 5.6% and doing better than a lot of the mega cap tech names, which we're going to talk about in a second. What are your thoughts on the DGEN DAO's prospects for 2025? Throw that chart back on if you will, please. So the chart on the left, that looks very much like Arc. And I'm looking at Arc on my screen right now, and it looks identical.

And that's that's not disrespectful. But like these names are coming back. These are stocks. These are draft Kings. These are her stocks like Teladoc. I mean, Teladoc. Yeah, not in here. We don't have Teladoc in the DJ.

I'm just saying. But a lot of these stocks that were the 2021 darlings that got annihilated, they're they're coming back. Yeah. Signs of life. ACHR is in here. What's that? Archer. Okay.

I think it's flying cars like it's like that's what's in. That's what's in the DJ. Do we have the rigatoni in here or the reggae computing? Do we have those names in here? Quantum computing we have they don't make the they don't make the cut yet They're too small if that if that makes sense we have to we have to have a cutoff With like you can't have the tiniest stocks in here. I haven't looked at a few weeks there. They're rolling over. They look like shit again We will have to revisit the weightings here though. I think at some point this quarter I haven't looked at these in a few weeks. They're rolling over. They look like shit again.

We will have to revisit the weightings here though, I think at some point this quarter. Not the weightings, the holdings. I think we're equal weighting if I'm not mistaken. I don't think this is a market cap weighted thing. What else inside the market has your attention these days? Bitcoin and gold. Here's three months, obviously Bitcoin blue, gold yellow, Bitcoin up 21% over the last three months and off to a pretty good start this year,

but gold really is doing better if you just start from New Year's. Gold is sort of taking off here and I think that's just a function. I mean, who the hell knows what moves gold these days. I think it's a function of socioeconomic volatility, geopolitical issues that refuse to go away, and just people wanting to look for some sort of an asset that's not being controlled by one political party or the other. I think that's as simple as that. I don't think it's that complex.

And just look at the central banks, China in particular, loading up on gold. It's probably not a trade that's about the stock. It's okay to say we don't necessarily know why gold is golding. Well, we get, no, but we do get reports of large purchasers, foreign central banks. That's not really open to interpretation. No, but like if you're saying there because like geopolitical like Trump stuff, like gold was, gold didn't do anything during Trump's first administration. No, I think more like certain foreign countries looking at the example of the United States

and its allies trying to cut Russia out of the financial system and Russia finding a workaround by selling oil to China. You have companies now very comfortable reserving in gold and selling US treasuries. That is not a new phenomenon, but I think it's accelerated. Okay. What else is on your mind? I don't really have a story for why Bitcoin is up other than it's 2025. Mag-7 ETF, let's throw this up. We're going to spend a minute on this because I think it's probably the most interesting thing going on. Adam Parker did this really great walkthrough of what's happening with the

MAG-7 and why it might be a time to sell these stocks. According to Chart Kid Matt, the MAG-7 has actually detracted from S&P 500 year-to-date performance, not by much. The other 493 names are up 3.45% year-to-date. The MAG 7 is slightly negative, like less than half a percent. You know what I love about the MAG 7 right now? They're all doing their own thing. Yes. It's not one trade at all. It's not one trade. But the point is, what's different about this year versus the last two years is that the rest of the

market is carrying the index and the MAG7 is not contributing. I love it. So that's a change of pace. The other thing worth saying is that MAG7 companies are a pawn in the US versus China trade war. And there's a bunch of stories. Bloomberg wrote about this. China is considering launching an antitrust investigation into Apple's app store practices.

China's State Administration for Market Regulation, or SAMR, announced that it's opening an antitrust investigation into Google. Some of the Mag-7s have no business in China. Meta being an example. Some of them have big business like Nvidia. Here's another story. Financial Times. Chinese officials are considering launching a probe into Intel on top of an ongoing investigation

into Nvidia. Oh, stop. They're already dead. Leave them alone. It's all a part of China's effort to punish the US's most prominent companies and inflict its own pain on the US as the two nations battle that. Okay, so that's the thing that's happening. So Adam Parker wrote, over the last several years, we've maintained the view that long

only US equity managers should be at least market weight the Mag-7. And they had a whole list of reasons. Don't underweight these stocks. He has just said now he's changing his mind. Now it's time to equal weight them. Meaning if you're going to own them, bring them down to size relative to the rest of the index and not own them in a market cap weight. So it's not quite a get out call, but I think it's a little bit ballsy. It's like a chill out call. I like it. I kind of like it a little bit. Um, and, and basically what he's saying is that the company specific risk, put that chart back is fairly low for

the mag seven stocks. All seven are more macro than the average stock in the S and P 500. This surprises me. I would have guessed there's more idiosyncratic risk with Tesla than Apple. It turns out that there wasn't. The rationale for being at least market cap weight was that the amount of returns, the seven factors for why these stocks work, equity market beta, two different size factors, mega versus large versus mid cap and mid cap versus small cap. Substance high quality versus junk, style growth versus value, and then there's the

liquidity factor. These are easy stocks to buy when you want to get long really fast and momentum. That which is going up will continue to go up. So those were the factors that drove a lot of the rationale for being market cap weight, these names, and not trying to be smarter than the market. Adam is basically saying things have changed and these stocks might be a sell at this point. We have one more. I think we have one more. What's his reason?

What's his reason? What are we looking at here? We have one more. I think we have one more. What's his reason? What's his reason? What are we looking at here? Oh, so this is just Wall Street. This is a way to look at sentiment. 404 buy ratings, 76 hold ratings, 24 sell ratings. The percentage of sell ratings on the Mag 7 names is 4.8% of all ratings. And ex-Tesla, it's like much lower. Yes. One other thing that one of the things we're pointing out is exposure of the top seven in the top 500 US equities. Let's put that chart up.

He's saying the beta here is at a 25 year high and interesting problematically capital intensity has also evolved. And I wanted to get your take on this last chart for this set. Basically part of the allure of these, uh, no, not that one. We're looking at this is it capex to sales of Magnificent 7, now at 12% and projected to rise. One of the primary selling points of why you want it to be in these names, I don't want to say asset light, but high profit margin for as far as the eye could see. And that's what's really changing here.

If you just listen to the CapEx plans that they laid out on their last calls, they're talking about spending a combined $300 billion. Amazon's in for a hundred. Yeah. So it's like it's getting to the point where can we really say that these are not capital intensive companies? Well, nobody's saying that. Their margins are still ludicrously high. And I think they're doing a really good job

telegraphing to the street exactly what their intentions are. And they sold off Google. Amazon, they're giving the benefit of the doubt. So yeah, there's gonna be a point in time, I don't know when, where the market says, hey, ladies and gentlemen, like we ought to see some revenue behind these, these numbers, a lot of spending.

You're going to be, you're going to be 14.5% capital spending to sales ratio by the end of 2025. If you don't have the concomitant increase in earnings guidance for 2026, you're going to have a problem here. Big time. Okay. Wait, I'm going to go back on the chart. Like Josh, keep talking.

The multiple backwards, capital intensity. No, no, no. The medium PE of the max seven versus. There we go. There we go. So this is the ratio of the top seven versus the four 93 and the median forward PE and so yeah, Josh, you're right. These stocks have we've, as we've discussed are getting the benefit of the

doubt that all the spending is going to turn into a revenue and it better soon. Well, profit profitable revenue and sustainable moats. And what might be happening is an arms race where Amazon spends $100 and Microsoft spends $75 and Meta spends $60 and no one is doing it to any sustainable end. There's no moat because the technology is rapidly advancing to the point where competitive advantages are being flattened. That's a concern. Well, not yet it is.

I mean, it will be. But these companies, they're all saying the same thing to investors. This is an existential threat, and we would rather overspend than underspend. And so right now, investors are giving them the benefit of the doubt, and we will see what happens. Yeah, there's a lot of build-in will come arguments being made and we have to spend now because if we under invest and someone else is going to over invest. They're basically saying like give us 12 months or whatever.

Well, the market's not. So this is the point I want to make to you. The market has decided so far, we're not interested in that story as much as we were last year. Yeah. Well, every single Mag-7 was negative after reporting other than Meta, which is spending the least and does not run a cloud data business. So take that however you want to take it. Apple II.

But that is the reality. Apple II. You're right. You're right. You're right. Apple II. There are chinks in the armor forming. You're definitely right. Here's the Mag-7 seven equal weight ETF does this look bullish to you uh if you listen but if you zoom

out yet but I'm not zooming out I'm saying this is intermediate term that I'm showing you I'm showing you the last 90 days okay well this looks this looks like it looks far a no no where's's land. Looks fine. Okay. Uh, I'm going to tell you that I think. Wait, well, hold on. If what do you want? You know, I know you don't want these names to go up forever and indefinitely. Like I think a pause here is very healthy. I think this is, I think the mag seven at equal weight, it'll be negative in 2025.

Good. Fine. That again, would you bet against, would you bet against that? It goes, it's been up 30% a year for the last 10 years. No, I know. You're right. Fine, good. Take a year off.

Take a break. Would you bet against it? Meaning, would I bet on them being higher? The equal weight mag seven, up or down on 2025? I'd say up. Ten months from now. I have no conviction. Up.

Say up? Okay. I'm going to say up. Ten months from now. I have no conviction. Up. Say up? Okay. I'm going to say down. Okay. I don't know anything more than anyone else, but that's how I'm starting to feel. Let's put Nvidia up. This is the only one that hasn't reported yet. Not great trend-wise.

It's had a good week or two, but just generally speaking, this, ladies and gentlemen, is what we would refer to as a short term downtrend. Come on. Pull the chart back three years and it's different. Of course, we all understand that. I'm just describing the price action year to date. Things are sort of a little bit different. Well, yeah, it's fine.

I mean, it's more, it's in the gap from that deep seek debacle. That was down 70% that day. It's recovered a decent amount of it, but yeah, it's trendless. It's not, yes, but not all of it. Uh, but, but next week will be a little bit of a moment of truth. Um, they'll report on the 25th. Um, all right. Winners and losers this year, sector wise, here's the best performing sector. XLC, which is the communication sector.

So that's Facebook. Yeah. A lot of the companies in here, people is the communication sector. That's Facebook. A lot of the companies in here, people look at his tech, it's Netflix, it's Metta, it's Alphabet. Up 6.6% on the year. Let's put up XLY. This is the worst performing sector. Consumer discretionary up 0.9% up less than 1% not bad.

Well, this is this is being dragged down by Tesla. What's Tesla 20%? Well, let's see. So I was going there next Tesla 15% okay, Tesla from from December 17th, which was the top I'm just I'm not cherry picking a date, I'm saying, Tesla has added 791 billion in market cap over the last three months, right? No, wrong.

So this chart, we shared this on the show on December 17th, which just so happened to be. That was, that turned out to be the top. That was the exact top. So the next chart shows where we are today. It's leaking market cap on a daily basis. So on December 17th, it had a historic three month run, added $791 billion in market cap.

Over the last three months, it's given away 67. So it's right now, it's in, this is kind of wild. I had Sean do some work for me. So it's in a 32% drawdown. Maybe there's some, I don't know, investors are concerned that the CEO and founder changed his name to Harry Balls and put circumcisions at a discount 50% off

in his buyout on Twitter. I don't know, maybe like, Heil Hitler at the inauguration wasn't like the best look. Maybe people are not into that. So anyway, but my point is on the stock itself, Tesla is a wild, wild company, stock-wise. Chard on, please. Thank you, Sean, for doing this.

So over the last, chard on, please, the annualized returns, here we go. So over the last five years, Tesla has annualized the shares at 45% compounded, which is insane. Insane. Insane. has annualized the shares at 45% compounded, which is insane. If you rewind back, if you zoom out 10 years, 37% a year, one of the top, I don't know, 10 performing stocks, just crazy numbers, but, but, but, but, but, but, at any point in time over the last five years, if you threw a dart or if you were a shareholder

over the last five years, at any point in time, you were 31.6% away from its all-time high. It is a wild stock. So if you look at certain enclaves of social media, which are non-MAGA enclaves, some of the most shared and retweeted articles and headlines are about European sales of Tesla cars plunging like Germany and France and people just finally, they've had enough of Elon Musk. I don't think that really matters. I understand that sales might be down and you're watching the stock price go down and you're drawing the stock price go down and you're drawing some sort of correlation.

I think the shareholder base is not here for the quarterly European sales of Model 3s. I think what's really keeping people invested in the story is the robot stuff. As long as he can keep that stuff center stage in his public commentary on Tesla, I don't think you'll lose the entire gain that you got from the election. I agree with you. My take on this is that the chart that we just shared, a $791 billion increase in market cap over the last prior three months was an insane run. I think things got out of control and this is like, it's hard to say a 32% correction is healthy,

but the stock does this all the time. This is not new or unique to today. This is just what the stock does. I think a lot of people who politically are not happy watching what he's doing right now, they are wish casting and they're looking at this falling stock price and leaking market cap and they are dream weaving this story where finally like Elon's about to get it and I just, I don't see it. I think it'll be fine. Okay. I want to talk about, although, although put the tweet up. I mean, this is like, this is what we're doing. This is where we are now.

So he changed his bio, but. He changed his name so that the newscasters, when they comment on him, would have to show this. Because they like show his, they like show his tweets to like dunk on President Trump or on Elon. So like, this is like the meta joke that that his sense of humor is not mine. So it's fine. But like this is what's going on.

Okay. I believe it was a Nicholas or Sembilist. One of the two geniuses told us that one of their favorite economic gauges are ISM new orders. Do you remember one of them saying that? Okay. Yeah. So we got some good news. This is from Sentiment Trader.

The ISM new orders index, a key gauge of future manufacturing activity climbed above 55 for the first time in 32 months, hinting at a manufacturing rebound. Similar upturns have signaled strengthened stocks, particularly in cyclical sectors and manufacturing driven economies. Now, who knows how much of this is wishful thinking and it's a survey. But whatever, but still, historically this has been a good thing. So they call people that are managing these plants and assembly businesses and they kind of get like, they kind of get a survey of like what's happening with business and you know, it's a survey. So to follow it week to month to month is probably not that meaningful, but when it breaks out like this, there's probably something there. So of course a lot of this, like every other service political,

but I've said a bunch of like, this could be self-enforcing. If people are feeling better about the future prospects for the economy, they're going to spend more. Yeah. Like that's how it works. So you know what's tough about this? We don't know who they're talking to, like what industries and how many people are in the survey.

We just, we have no idea. This is one of the surveys that Neil Dutta told us to throw out. I was it? Yeah. All right. Do you know what this company is? Doximity.

I have never heard of it. So this is like why one of the reasons I love this market. Almost every day you have a stock doing what this stock did last week and just absolutely exploding out of nowhere and not for no reason but because of an earnings report. And you're basically in a situation now where moving away from mag seven and finding other ideas and other names is no longer hurting your performance. Remember how lopsided 2023 was? You had like almost no stocks beat the index.

That's again, I made a prediction a few minutes ago. I think you'll see the mag seven underperform, excuse me, that's not what I said. I think you'll see the equal weight mag seven be negative on the year. That doesn't mean necessarily it won't be a good year for investing. Because I can envision a year's worth of this sort of thing. So this is a digital platform for US medical professionals? Yeah, it's like converting digital records into cloud-based, blah, blah, blah. Let me show you some shit. Here's CloudFlare. This hit the best stocks in the market list a couple weeks back, and look what it did since then.

It just absolutely exploded. This is why we keep that list. This is cloud data. It's like snowflake, but a better version these days. They don't blow up every time they report earnings. They had an incredible report. Just listen to the numbers. I know that you don't know the business that well.

Fourth quarter 2024 revenue, $460 million, 27% year over year increase. Last quarter was a 27% increase as well. Customer expansion added a record number of customers spending over $100,000 worth of them annually. That increased 27%. They now have 3,497 six-figure customers. Customers spending more than a million grew to 173, a 47% increase year over year. Their biggest customers are growing in number and spending more. Improved profitability, non-GAAP operating income, $67 million, operating margin of $14.6, big improvement year over year, $47 million in free cash flow for the quarter, $166 million

for the year, big guidance, projected revenue, $2 billion revenue, 25% growth this year. These companies are out there and they're not trillions dollars in market cap. You could find them. You know what I love? You know what I love? That your list of the best stocks is purely technical, but these stocks aren't on the list for no reason. They're breaking out because the fundamentals are breaking out.

I'm so glad you said that. You can't get on my list and stay there because somebody memed you. You can't be a meme stock and be on my list. And if you're there, it's a very good bet. You're doing really well. Yeah. Okay. A couple more. So here's Doximity, D-O-C-S, great ticker, Dox. Up 56% year to date, dude. So CloudFlare is the number one stock of the year, up 60%. And the S&P? Russell 1000. This is number 50. This is number two. This is a big company. It's $60 billion. Oh, no, that's not my bad. My bad. My bad. Net is $6.

No, net's much bigger. Yeah, yeah. Docs is 16. All right. So this is an IBD stock, Docs. The stock went up last week 36% in one day, breaking out of a consolidation. It had a massive, massive one day rally. And obviously we're not saying go chase the stock. But again, here's another company.

Earnings surged 55%. They beat the street by 34 cents, which means the people covering this company have no idea what's going on with it. Sales of 25% destroyed the analyst expectations. There's an analyst, Ryan Daniels, covering the stock for William Blair, described the quarter as, quote, pristine. Put simply, it was a stellar quarter for the company across all key operational and financial metrics.

Just a beast. Here's number three on the year, Palantir, plus 54%. We've talked about the stock last week. We don't have to rehash it. An incredible earnings report and just an awakening on the street that this thing is serious business. Constellation Energy is 4%, up 44% year to date. These utilities all got whacked during the deep seek thing.

This stock has gained almost all of it back. Just incredible. They got a government contract at the end of January, $1 billion 10-year contract to supply power to federal agencies. They are the largest carbon-free energy producer in the United States and blah, blah, blah. Last one, Spotify, plus 43%. You're in this or no? No, that's my biggest regret.

Oh my God. Revenue up 16%, $4.5 billion, blew the analysts away, achieved its first full year of profitability, net income $1.21 billion for 2024. So this is like a real, this is, this thing has arrived, a billion dollars in profit for the year. There's not that many of these. Josh, I wanted to, I wanted to just speak of individual stocks. I wanted to give you a pat on the back last week, but I forgot to crowd strike, uh, hit an all time high. You caught some shrapnel as if you caused the glitch when this stock got creamed, but all time high, uh, haters are quiet these days. And, uh,

and Reddit also credit to you. Do you know what you bought? But after the gap higher, right? Yeah. And it's like doubled since then. Do you know some psychopath called the firm and started yelling at a girl that answered the phone about crowd strike, like, like blaming me for the IT outage and the stock collapsed to 200. Nothing surprises me. Now it's 450.

Call us back. I forgot to tell you, he called last week. I wanted to thank you. What do you want to tell me now, tough guy? I'm not responsible for global IT outages. I don't know if you know that. Last thing, last thing. How many, take a guess, don't look, close your eyes.

How many users globally does Spotify have? Just hit a new record this quarter. Okay. 37 million. Hold on. Let me give you the amount they added this quarter as a clue. Well, I was going to say 37 million. 37 million total?

I don't know. Okay. They added 35 million last quarter. How many do you think it is now? Wow. I wouldn't have known either. I'm just curious what you would guess. All right.

So is Netflix like 300 million users or am I making that up? Something like that? That sounds like it's right. Okay, what's Spotify? 200 million? Dude, 675 million users. Wow, yeah dude, they're crushing it. Now that, now that is the cue to buy the stock.

Like prior to, like when they get to 500 million users, you just buy the stock. I can't, it's too late for me. No, no, no, I'm just, I'm saying revisionist has to be added by the- I'm an idiot sandwich. Any, like any company that can amass 500 million users, paying, paying users, you just, you buy the stock.

Yeah. They're gonna find a way to make money from an audience that size. Enough, I know, I know, I can't. I can't buy the stock anymore. All right, okay. Enough. I know. I know. I can't, I can't like this anymore. All right. Um, okay. Just f**king launch it. That's the, that's the headline for this topic. Everything is coming to market. Josh.

Balchun has tweeted there's already been 100 ETFs launched this year on pace for a thousand for context. The record 20 a week. The record was last year, 720, which blew away the previous record of 515. So this will shock no one. Trump wants to manage your investment portfolio is a headline from the Wall Street Journal. Trump's social media company, Trump Media and Technology, said Thursday that it has applied for trademarks on a series of ETFs and SMAs. They include funds labeled Made in America and Indigene Independence, which will launch later this year. Sure, why not?

Our annual leveraged ETF launches again from the folks at Bloomberg. Listen, I'm not even mad about it. Like if there's a demand from users, there will be supply from the asset managers. Let's look at a few of these though. I don't even know what the hell is going on here. Like, all right, that's a Bitcoin one. No, listen to this. What are they launching?

Valchunas tweeted, holy hot sauce. Trader which is an ETF provider is proposing a two times reggae, which would have an estimated 90 day volatility of like 600% for context. That's triple 2x MicroStrategy ETF and 50 times the S&P 500. Half of these in the same. Okay. So about what's hotter than a ghost pepper because I need a new metaphor.

So we're looking at 2x long the quantum computing stocks because why not? You remember when people used to get mad about how many ETFs were launching? because, you know, why not? You remember when people used to get mad about how many ETFs were launching? That was a big fin twig thing. There's more ETFs than stocks. If people want it, they buy it. If they to buy? Like, I don't even know what these things are. iShares Large Cap Max Buffer December. Whatever.

Like, buy it or don't buy it. We don't care what other people do. I never really understood that rage at like all the ETF launches. If these things don't raise money, they go away. There's no press release. They just are quietly strangled and put out of their misery for the most part. I guess the thing is like you know that a lot of these are like just money incinerators.

Like obviously not all, but people on balance. But I guess to your point, people can do whatever they want. I want stupid people to have their money incinerated. I don't think that we're doing anyone any favor by not letting them learn hard lessons. How do you go from stupid to smart? You incinerate some money. There's no other way. How do you wake up out of your TikTok-induced stupor and start figuring things out? Probably it's not going to happen because somebody like does a motivational post on Instagram or TikTok,

it's going to happen because you're tired of getting f***ed over. I think that's like the best version of the markets policing themselves is for people to get the real world education that only 2X levered reggae computing can provide. I'm looking for a tweet that I can't find. But all right, so you can provide. So, I'm a huge fan. So you want more, so why stop at two times?

More, eight times. Let's see how quickly we can teach these lessons. And you know, not everyone will learn them, but the people that do, it's like, oh yeah, when I was 24 years old, I blew up $700 in ETFs. Now I have $500,000 and I don't do things like that because I learned. That's generally my take. I wish these products didn't exist, but whatever.

It doesn't matter what I think. I'm almost like these days, dude, I'm bordering on just complete nihilism. Somebody sent me a link showing that Google uh, Google maps changed the Gulf of Mexico to the Gulf of America. And I said that we live in North Korea now. That's it. It's all right. Come on.

There's no more. There's no more norms. There's no more rules. It's just like, I get it. That's, that's a, come on. That's a big, that's a bit of a leap. I'm saying like, focus on yourself in this era. Like don't rely on anyone or anything or any institution.

Nobody's going to be there for you. You've got to learn a little bit of self-reliance in the new wild West era that we're in. That's true. I love it. You might love it. You might hate it, but either way, nothing you could do about it. It's going to run its course and either this is how things are for the rest of our lives

or the pendulum will swing back and all of this stuff that's happening now will be repudiated. I don't know which outcome we're going to get. Remember in Don't Be a Menace when one of the Wayne brothers was like, message, which one was that? That was you just now. Okay. Not Damon. like message, which one was that? That was you just now. Okay. Uh, that's don't be, uh, don't be, don't be a menace to society. It's Dean, uh, Marlin Wayans. It wasn't, it was the older South Central.

It was no, it's Marlon Wayans. No, I'm saying, but the guy that said message, it was like the older one. Oh, that's Dave. That was a Kenan Ivory Wayans. Yes. Yeah. Not like a mailman uniform. Yes. Here's the message. Nobody's going to save you from these mailman uniform. Yes. Here's the message.

Nobody's going to save you from these ETFs. You just delivered the message. Stupid products. Yes. Okay. Yeah. Smarten up. Smarten up.

You're right. Pay more attention to us and we'll get you through it. And we're not crying about ETF launches. We're adults. We're over it. Okay. Bill Ackman really likes Uber. So I like Bill Ackman again now.

I'm moving on. Josh texted me twice this week. Don't sell Uber. Dude, I almost DM'd him. I don't think he would respond, but I was almost like, smart decision on Uber. And then I looked at X and I'm not following him. So I just, I didn't do it. So here's what's going on.

I was getting killed in Uber since last summer basically when the cyber taxi stuff started and the Waymo stuff and there was this idea out there that like autonomous vehicles therefore no need for there to be an app or a network or human drivers or sure. Uber reported an amazing quarter stock sold off anyway. Somebody bought the dip. We bought more. I bought more. I bought more.

Pershing's Pershing square bought millions of millions of shares worth of stock. I bought more shares. All right, let's do the chart. worth of stock. I bought like 11 more shares. Let's do the chart. Ackman tweeted about Uber on February 7th. He said, beginning in early January, note the beginning part, beginning in early January, we began acquiring a position at Uber. Today we own 30.3 million shares. Uber added $7 billion the day of Ackman's tweet. I think that he's going to do well with this because these are his types of stocks where it's like this name brand great company where there's a misperception of the market that

something they're struggling with now is like this insurmountable problem and it turns out not to be the case. And a really great example of that with Acme is Chipotle. He started buying Chipotle in 2016 when this thing was like a few months removed from the E. coli crash. Right. And it was like seven stores across the whole country where they were mishandling the fresh ingredients.

They had an E. coli issue. I don't mean to minimize that. The stock is up 600% since Ackman came into the name. And I don't know if he came in with a 13D right off the bat and was instantly a large shareholder, but he bought it. They were calling him Taco Bill. So what does he want with Uber? Is he looking for board seats? No, it's not activism. He's like, Dara is good at this.

He's like, I've been aware of the company. Some story about Ed Norton, the actor, introduced the app to Bill Ackman in San Francisco. I don't know. I don't really understand that. But he's like a fan of the business. He thinks it's well managed. He's not going activist, at least not yet. If the stock goes down a few points, that might change. But I think, listen, I think he sees what I see. It's great that there's autonomous cars. Uber will make a lot of money. Their highest expense is to take rate to the human driver.

Nobody wants autonomous vehicles more than they do, but somebody has to manage the fleet. And there are going to be times when there aren't autonomous vehicles. So if you're just on the Waymo app, it's not like they could flex you over to a human driver. If you're getting an autonomous vehicle on Uber and one is not nearby, okay fine, I'll get a human driver. I don't care. I just want to get picked up. That's what Dara is building. And there's room for multiple autonomous taxi apps. I still think Uber will end up being

the biggest by far. And I think they'll be the center of the ecosystem. And I think that that reality, when it dawns on the rest of the market, will take the stock above 100. So nice, nice, great minds. Bill Ackman and myself are thinking alike here. And that's, I'm pretty, I'm pretty bullish on his involvement. What are your thoughts? Yeah, it's going way higher. I mean, I, I agree with you.

Agreeing with him. You think he's gonna buy more? That sounds like it. Well, listen, they're buying back stock. He's buying stock. Why would you sell it? Yeah. Um, I think he has two and a half billion worth of stock. Here are his other large holdings. This is as a percentage of Pershing Square. He takes huge positions. I mean, Brookfield, Hilton, Chipotle, these are 13% positions in the fund. QSR, Restaurant Brands International, that's Burger King, and Howard Hughes Holdings, which I think he's the chairman of now. But he takes big swings.

So 2.5 billion might just be the appetizer for what could potentially happen here. Okay. All right. I'm going to make the case for financials. This is bullish, man. I got to tell you. XLF is the second largest sector in the S&P 500 behind technology stocks. And you mentioned that the MAG 7 are down on the year. Well, guess what is

way the hell up, financials. So even like we've spoken, we always speak about Morgan Stanley and Goldman. We follow their reports. They're kicking ass. Those stocks are doing great. But like, look at, no offense, Citigroup, Bank of America, Wells Fargo. These are 10 year charts and they are in some cases at the upper end of their range or in the case of Wells Fargo and who's talking about Wells Fargo fresh 10 year highs. So these are the financials that I own personally next two charts and capital markets. I own S&P Global, which broke out to a new all-time high today after reporting earnings. And Intercontinental Exchange,

which is a New York stock exchange, this broke out to a new all-time high the other day. So any capital market stocks look good. Nasdaq looks good. They all look good. Next chart, please. In private equity, I own Blackstone and Blue Owl. These have pulled back. I mean, you've got a better entry point. Blue Owl is like private credit, right? Blue Owl is the biggest GP staker, as far as I know, in that space. So they are the private credit as well. These names are the businesses are on fire.

The stocks look great. Financials looking good is a good thing. I looked at stocks that were within 5% of their 52-week high, and there's 100, what was it, 127 names in the S&P? Yeah. No, I'm sorry. So 112 names in the S&P 500 are within 5% of a 52-week high. So one out of five, pretty good.

And 27 of those are financials. So these are the names that are within 5% of their 52-week high. Yeah, 88% of S&P financials are above their 200-day. So that's effectively all of them. Every subsector is working. It's really hard to not be making money in that space this year. It's just game on. And these have been dead forever. Like Wells Fargo.

Yeah. John, put the chart back up with S&P Global at the top of it. So I pitched Al Michaels, the competitor to S&P Global, which is Moody's, but they both are effectively in the same business. They're selling credit research and credit analytics to hedge funds, private equity firms, private credit firms, issuers, buyers. Moody's looks so sick. Moody's looks sick right now.

I should buy this too. This is the same chart though, S&P Global. I think like Moody's, there are no sellers in the stock right now. I don't know if that'll change, but like people wanna be in that business. It's an amazing business. Selling data, credit ratings, selling insights.

Well, Howard talks about the degenerate economy all the time. These are the biggest winners. People are trading their asses off. Well, every issuer has to get like, you need published opinions on credit, on bond issuers. And every buyer, every investor in the credit markets, they rely on third-party ratings and insights. And then you've got this whole AI play, where these companies are selling like 100 years worth of financial data to all these people that want to build AI trading models and blah, blah, blah. There's just so many different ways for these companies to win. And they are like

systemically important to the whole ecosystem. You almost can't do business without paying them. They are the toll takers of the financial market. So I would say the risk to some of these names is like they are really front running capital formation. If the window does not open, these names that got ahead in the sales. So to me, that's the biggest risk, but game on so far. Yeah. Great area of the market to be in. And I don't think that necessarily needs to change anytime soon.

Probably, look, we just went from a 24% probability of a rate cut at the next meeting to a 5%, they're going to keep that rate high for better or for worse. And I can't help but conclude that that higher rate means more profit for financial sector in general. That's why they all look like this. By the way, last year you made the case that like these companies, I think JP Morgan was worried that they were going to have to lose some money, that they were going to have to raise their rates in order to keep customers.

That never happened. They're just taking it all. Yeah, I think part of the rally in financials last year was like the reserves being dropped back to the bottom line because they just weren't needed. When companies think that there are credit risks coming or losses coming for their own lending, they will reserve, they will put money aside literally to deal with that. And if those losses don't materialize, they drop those reserves right back and it becomes net income.

Hard to be bearish when financials look like this. And again, things could change, but for now, they look pretty damn good. Yeah. And politically, no one's f**king with this part of the economy. That's not on the agenda. There was some talk, Trump made an offhanded comment about the carried interest loophole for income tax where obviously KKR and Blackstone, the way they make their money is carried interest on the investment portfolios that they oversee.

They're not an adventure. He made an offhanded comment and people were like, what? Yeah, come on. A reporter went to all these private equity companies and asked them for comments. Nobody had any comments. The worst thing they could do is turn it into an issue. It's the kind of thing that like just kind of slipped out and they're just going to pretend it didn't. And it'll be business as usual for these stocks. Am I going to get your mystery chart?

What do you think? No, you're not going to and it's not your fault. I had a feeling. I think you're more of an ETF person than a stock person and I've given you a stock. So I won't think any differently about you. Okay. Okay. This is all right. So let me set this up. I've given you a stock so I won't think any differently about you. Okay. Okay.

This is, alright so let me set this up. It's a Dow stock so I'm narrowing it down to 30 names which is a pretty good hint. Okay? And company report and earnings today. The company report, oh is this DuPont? No. Okay. Who else reported earnings today? Could you give me

anything else? Ask me for something. Is this a, is a company based on the West Coast? No. Okay. Is the CEO's name Paul? Excuse me. Excuse me. Reported yesterday. My bad. Okay. So it all blends together. Reported this week. I don't know. Give me like something. I gave you some shit dude. It's a Dow stock. I gave you a one in 30 chance. You guessed DuPont. So now you're one in 29. Okay. You know what? I will submit. Oh, Coca-Cola. Close. Oh, Pepsi? No, not that close. Okay. All right. What is it?

All right. Dr. Bell? The reveal. The reveal. McDonald's. Oh, shame on you. So here's what's notable here. They actually did not have a good quarter and the stock ripped higher. This is the journal. US store sales and earnings fell at McDonald's as the burger chain dealt with the fallout of an E. coli outbreak.

I don't even remember that. I guess that was last quarter. The company said its US same store sales declined 1.4% in the three months ended December 31st. Customers spent less money per visit. That's interesting. Also a slowdown in the pace of price increases. So McDonald's finally ran into a price increase they couldn't get away with. Well, they did that last year. So what happened? The guidance was better?

Yeah, expects to open 2,200 restaurants globally this year. That's a lot. That would be up slightly from the original total projected last year. 600 of those locations would be in the US. But it doesn't matter. The stock ripped because markets are forward looking. Put that chart back up and I am happy to announce McDonald's yesterday hit our list of the best stocks in the market. Here's my question to you.

You see that resistance at 320 from last October? I don't consider that resistance, but I see what you're saying. Well, we were filling that gap. I think it's gonna chew through that level. What do you think? Yeah, I agree with you. It's a little overbought here, 75 RSI. I made money on the stock last year. I bought it and I sold it.

Do you see that bounce off the 200 day, how legendary that is? Yeah, it's pretty good. I mean, dude, that's as telltale as you get, right? Would you say that's a, that's textbook? Yeah, that's a textbook bounce off the 200 day. All right, we're going to wrap up. I want to remind everybody tomorrow is Wednesday, which means an all new animal spirits podcast with Michael and Ben, Spotify, Apple podcasts, wherever you like to listen and live on YouTube slightly later in the morning.

We're trying to get those videos up to you guys early. Ask the Compound will be later in the day, and an all new edition of The Compound and Friends to end the week. We are En Fuego here at The Compound. We love you guys. Thank you so much for joining us for the live. Thanks for listening, subscribing, watching, however you consume us. We'd love to be consumed. And we'll talk to you soon. Whether you're just getting started as an investor or you're managing a multi-million

dollar portfolio, Ridholtz 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 RIDHOLT's Wealth.com. Don't forget to check us out at youtube.com slash the compound RWM. Make sure to leave a rating and review on your favorite podcasting app. If you love investing podcasts, check out Michael and Ben every Wednesday morning on Animal Spirits. Thanks for listening.