The Compound and Friends - Sam Stovall on the Year-End Rally, Millennium Wins by Not Losing, CVS Gets an Activist

Episode Date: October 1, 2024

On this TCAF Tuesday, Josh Brown and Michael Batnick are joined by Sam Stovall, Chief Investment Strategist of CFRA Research for a live Q&A! Then, at 41:53, hear an all-new episode of What Are Your Thoughts! This episode is sponsored by KraneShares and Public. . Visit: http://public.com/compound and discover how you can lock in a 6+% yield until 2028. . Visit: https://kraneshares.com/ to learn more about their innovative investment solutions tailored to three key pillars: China, Climate, and Uncorrelated Assets. 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: LinkedIn: https://www.linkedin.com/company/the-compound-media/ Public Disclosure: A Bond Account is a self-directed brokerage account with Public Investing, member FINRA/SIPC. Deposits into this account are used to purchase 10 investment-grade and high-yield bonds. The 6.9% yield is the average annualized yield to maturity (YTM) across all ten bonds in the Bond Account, before fees, as of 8/28/2024. A bond’s yield is a function of its market price, which can fluctuate; therefore a bond’s YTM is “locked in” when the bond is purchased. Your yield at time of purchase may be different from the yield shown here. The “locked in” YTM is not guaranteed; you may receive less than the YTM of the bonds in the Bond Account if you sell any of the bonds before maturity, or if the issuer calls or defaults on the bond. Public Investing charges a markup on each bond trade. See public.com/disclosures/fee-schedule   Bond Accounts are not recommendations of individual bonds or default allocations. The bonds in the Bond Account have not been selected based on your needs or risk profile. You should evaluate each bond before investing in a Bond Account. The bonds in your Bond Account will not be rebalanced and allocations will not be updated, except for Corporate Actions. Fractional Bonds also carry additional risks including that they are only available on Public and cannot be transferred to other brokerages. Read more about the risks associated here: public.com/disclosures/fixed-income-disclosure and here: public.com/disclosures/apex-fractional-bond-disclosure. See public.com/disclosures/bond-account to learn more. 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 sponsored by our friends at CraneShares. Visit craneshares.com to get up to speed on what's very rapidly becoming one of the hottest investment themes in the world, the Chinese stock market, just absolute blistering returns. Lately, it's been a tough few years to be an investor in anything related to China That seems to be turning around and if you want to learn more about all of the risks and potential upside Involved with the Chinese equity market in my opinion. There is no better place to learn more than to visit quaint shares calm Okay, I want to tell you right up front. This is an

Action-packed show we went absolutely crazy on what are your thoughts? Okay, I want to tell you right up front, this is an action packed show. We went absolutely crazy on what are your thoughts. We got into tons of data on the wealth that's been generated in the markets since the end of the pandemic. We took a deep dive into Gen Z investors thanks to a new research report from the JP Morgan Chase Institute. Michael did a Meta versus Apple segment that I thought was really good as well. We celebrate $10 trillion in the ETF market, which was a milestone we just hit, I think,

last week. And we took a look at the new Wall Street Journal profile of one of the best hedge funds in the world, Millennium. And there's not a lot of information coming out of Millennium on a regular basis. So Greg Zuckerman's piece was really interesting to read. Okay. I think Greg did that? I don't know that. All right. I want to send you right there. I don't want to spend any more time. Thanks so much to the crew who helps us produce this show each week. They don't get as much credit as they deserve. We are absolutely on fire from a content perspective. Last week's The Compound and Friends with

Tom Lee is now approaching 200,000 views. And that's not just, hey, let's have Tom Lee come over and chat. There's a lot of work on the production and promotion side that goes into something like this So shout to Duncan John Daniel, Nicole Graham Rob Chart-kid Matt and Sean they work their asses off on the content that you love So I just wanted to make sure we acknowledged all that they do. All right, that's it for me I'm sending you right into a new conversation that we had with Sam Stovall of CFRA. And then following that, it's what are your thoughts with Michael and I? I think you're going to love the show this week.

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

Hello everybody. It's Monday night so this must mean we're doing something special. So nice to see everyone in the live chat. My name is Downtown Josh Brown. I'm here with my co-host Michael Batnik. As always, Michael say hello. Hello everybody. And guys, we are here for a special edition of Live from the Compound with an extremely special guest. I'm so excited to get to chat with him. He reminded me backstage that we haven't been on air together since probably before the pandemic. He is, in my opinion, one of the brightest market minds, one of the great market historians who's got insights spanning really decades.

And this is going to be a lot of fun. Before we go to our special guest, Michael wants to tell you about our sponsor. And before we do that, I would be remiss if I didn't mention, great quarter, guys. We did it. We just wrapped up the third quarter, the S&P 500, an all-time closing high. Not so bad. I thought there was seasonal weakness in September, Josh.

What happened? Yeah, not this year. Not this year. OK. All right, our sponsor for today is Public. They've got this really neat, cool new feature where you can select a basket of bonds from individual companies. You could choose your maturity.

And Fed is going to be lowering rates for the foreseeable future. They got a fast start too. They sure did. So who knows how long these deals are gonna be around for, but it's super neat and really interesting and easy and intuitive. Click, click, clickety clack.

Get some bonds, Apple, Google, whoever you want in your name at Public. You guys, you can go to public.com slash compound to learn all about the risks, the rewards, how this works. I urge you to do so. All right, let's bring in Sam. Hey, guys, everyone say hello to Sam Stovall. Sam, so great to have you here.

I'm going to read your bio in a moment. Let me just make sure you're all good. You can hear us. I certainly can. I'm happy to be here, Josh. All right. Terrific. So as mentioned, the eminent Sam Stovall is the chief market strategist at CFRA, an

independent equity research firm that acquired S&P's equity research department in 2016. Prior to the acquisition, Sam was the chief equity strategist for S&P Capital IQ. He's also the author of The Seven Rules of Wall Street and two other investment books and currently writes weekly commentary for CFRA's advisor platform. Sam, so great to have you tonight, especially Momentous. We just ended the third quarter and I know you have some commentary on where we stand. So everyone's really excited to hear it. Thank you again. No, my pleasure. Let's go.

All right. Let's get in. Let's get right into it. You sent us a really cool table and let's start right here. So I'm going to have you walk us through this in a moment, but I think one of the things that you've been doing for a long time and you do it better than most is giving investors the context that they need in order to not just make good decisions, but also avoid making poor decisions. Why don't you walk us through what we're looking at here and why it's relevant to you right now?

Well, what I like to do is I use history as a guide. I say it's never gospel, but it certainly can offer investors a good idea as to what is likely to happen going forward. I'll go do a little bit of history and to say when we started 2023 after declining almost 20% in 2022, because we had an up January and we also had the first quarter low that did not undercut the prior December low, it basically said every time that that has happened

since World War II, the market was up by about 25% and rose in price 100% of the time. 2023, we were up more than 25% on a total return basis. Heading into 2024, then the question was, okay, it's an election year. January was a positive performance. Every time since World War II that we've had a positive January in an election year,

the market was up close to 16%, rising 100% of the time. But it doesn't mean you cannot have volatility. What this table shows is that in the first quarter of this year, we posted the 11th strongest first quarter return since World War II. But since it's sort of like that old Milwaukee beer tagline, it just doesn't get any better than this. That's how it felt. Yeah. Oh, exactly.

So my question was, okay, well, we probably are going to have a couple of pullbacks, declines of 5% or more, maybe even corrections. And interestingly enough, 14 of the top 15 indeed had those declines of 5% or more. Whenever those declines were less than 10%, essentially all of them had a second decline in the same calendar year. I had written that investors, in a sense, should be aware of but don't let your emotions become your portfolio's worst enemy because they'll probably end up being pretty nice buying opportunities. We got two this year.

We did get two 5% decline, so good call. Thank you, thank you. What were the two? What were the two? You call them, hey Sam, you call them entry year trend interruptions. So I noticed that you're not using corrections. Is there a specific reason or not really?

Yes. I'm not sure I was smart enough to use the phrase you just came up with, but I tried to break the declines into noise, which is zero to 5%, pullbacks, which are 5% to 10%, corrections 10% to 20%, and then bear markets 20% plus, some being garden varieties, some being mega meltdowns. Why? Well, that's because people are departmentalizing. They like to compartmentalize things, mainly because when you deal with like a pullback,

five to 10% decline, we've had 63 of them since World War II. The amazing thing is it's taken only a month and a half to get back to breakeven. And even with the near 25 corrections that we've had, it's taken only four months to get back to breakeven. So I tell people, look, by the time you've worked yourself up into a frenzy to say, oh my God, I want to lighten up on my exposure, call your advisor, harass them, and when they finally say, okay, I'll do it if you stop calling,

by then the market is probably already on its way back to breakeven. Sam, I bet in recent years, if you look at the data, the recoveries are even quicker than they had been historically. Would you say that's probably accurate? Yes, typically with the fact that more computerized trading has been taking place,

that these recoveries have been quicker. And if you look to the NASDAQ itself, while those sell-offs are sharper and quicker, so too are there bounce backs. You pointed out that when you get off to this strong of a start, including Q1 and Q2, it's 14 out of 15 years, historically, you end up with a double digit, full year price increase and the average is 23%. Before you mentioned the 100% win rate,

100% win rates definitely get my attention for obvious reasons, because it doesn't mean that the next time you won't go from red to black, but for me, when you can collect and amass probabilities so far away to one side versus the other, even with a somewhat limited sample, to me, it speaks to human behavior. Do you have an explanation for why markets that start off with a blistering first and second quarter

typically follow through as you get to December. I'm guessing it's behavioral, but maybe it's not. What do you think? I think a lot of what happens is behavioral. Well, maybe the fact that the first quarter return was so strong was more of an indication by the smart money that we really don't have a recession to be fearing anytime soon, that the Fed will likely to be cutting interest rates. And traditionally, at least what I say is wanting is more profitable than having, meaning that the market has gained about 18%

in the period between the last rate hike and the first rate cut, but only sub 5% six months after that. So if we can make some money, make some hay between the beginning of the year and when the Fed finally does cut rates, then that's really good. And then FOMO starts to kick in. So traditionally, investors are buying in because they don't want to miss out.

So we have a bunch of prepared questions for you. And I just want to remind the live viewers, if you guys want to ask some questions of Sam, this would be a great time to start submitting those. We're going to comb through. And if we have time, we'll get to some of the really good questions that you guys have. And if we don't have time, Michael will come on. What are your thoughts tomorrow when he'll just answer them for you? All right. So the first thing I want to ask you, Sam, just to set the stage is, can you tell us about your time on the Investment Policy Committee and what the committee does?

And what exactly is CFRA in distinction to S&P Global, which I think more people are familiar with. Sure. Well, first off, S&P Global, because it's an older firm, there really was a guy named Henry Varnum Poor, who wrote research reports on railroads back in the 1860s. They were merged with the Standard Statistics Company in 1941. Jokingly, I say they were going to call themselves Poor Standards, but then decided to go with Standard and Poor's. But I think S&P wanted to get out of the fairly narrow margin business that Equity Research has offered, and they sold it to CFRA which originally stood for the

Center for Financial Research and Analysis. Well Peter DeBoer who is the CEO and the founder he basically says you know I want to put together a whole host of independent research available to investors so the forensic accounting which was started by Howard Shillit in the 1960s, is part of the organization. We have the wealth management research, which is the old S&P. We picked up Lowry Research,

which is a technical analysis firm. And then we also added Washington Analysis. So a lot of political strategy. So a full gamut that people can learn about by going to CFRAresearch.com. Okay, great. Sam, I want to ask you about categorizing and classifying stocks in today's economy, which looks very, bears very little resemblance to companies of yesteryear. For example, Apple, they make TV shows now and they also sell watches and AirPods. Amazon does delivery and they've got the cloud. Google is developing AI, of course, and they're also doing taxi rides.

If I look at home builders, they're not a real estate because they're not real estate, they're industrials. Airlines are industrials, but cruises are discretionary. It seems like the classification is just very complicated. Talk to us about how the committee thinks about these things. Well, first off, we don't establish the different sectors, industries and indices themselves. That is the S&P index that does that. But I do know that, let's say you take a company like Walmart, you say, well, shouldn't that be in retail? Well, the answer is no, it's actually in consumer staples retail, not primarily because more than 50% of the revenues come from food. So yeah, it is when you have conglomerates

that are involved in many different activities. Amazon is in consumer discretionary, yet Google is in communication services. Apple is in technology. Really, it's sort of a best guess as to where most of the revenues, and therefore most of its impact will be felt. So we do have more than 100 analysts who are following stocks in the large, mid and small

cap arenas as well as overseas. They are given different sector assignments. So a lot of times it can be tricky. So we either look at intrinsic value calculations, discounted cash flow, but also some of the parts to be able to figure out what should be the appropriate price targets for these firms. So I think the index committee got one right when Uber became one of the largest publicly traded transports. I'm sure there was a temptation to just throw that into tech or consumer discretionary,

because really it could be both. But it's nice to see finally there be like a high margin, high growth business in the transport index and not everything in there be an old cyclical. So I like when that happens in the markets. I'm not sure where they put Airbnb. Hopefully, it's with the other hotel chains. I don't know, might not be. But I guess the purpose of the question is really maybe just to reinforce to people. We have all this research on what sector, what industry, what's leading, what's lagging, which industries are most levered to Chinese stimulus or the Fed.

That seems to be getting harder as the years go on, not easier. And maybe that's why you really need sector experts like yourself to kind of elucidate you into what's really happening below the surface. Well, you're absolutely right because with companies being so intertwined with different areas like Uber is in the passenger transportation group. Now transportation used to be its own sector but now it's part of industrials. Interesting that transportation was one of the sort of one of the earlier moving groups within an economic cycle, and industrials being among the latter. So together, they end up sort of smoothing each other out.

The problem is that when you look to the different sectors, you have a small number that are actually really dominant, with technology being above 30%, communication services, consumer discretionary above 10%. But what about utilities? What about energy? What about materials? All of which are below 5%, even around 3%. So you sort of wonder after a while how long will they be their own sectors. So I think that's why people are moving beyond looking just at sectors,

but looking at the industries that companies are found in. And also overlaying the momentum and technicals to decide which companies move more in tandem than the others. Sam, Josh ought to take so good, maybe a decade ago. It was so good that I think he stole it from somebody else. There's no way that he's clever enough to come up with it,

which is that semiconductor, semiconductors are the new transports because of the way that they transport digital information, which is the backbone of this new economy. No, I made that up. Did you? I swear. You sure?

I don't lie about stuff like that. Yeah. Sam, what do you think about that distinction or that classification from Josh? Well, I think that's good. Certainly from a deeper dive, Dave Keller, who until recently was doing the final bar on stockcharts.com and he has his own program now on the web, he basically said that the old Dow theory really should be changed to the Dow plus the NASDAQ instead of the Dow industrials plus the transports.

Basically as you're saying that we don't have a Star Trek transporter just yet, but in a sense semiconductors are doing that or technology itself is doing that for us. So- I mean, Dow theory is from what? Is that, or technology itself is doing that for us. So- Doubt theory is from what? Is that from the early 1900s? 1890s. Absolutely. 1896.

I know that's when the... Yeah, 1896 is the date that they launched, but that theory is ancient. It is, but it certainly makes sense in that, yes, you want to see whether the industrials are doing well, but at the same time, it's like the old corrugated box index. You take a look at whether more and more boxes are being ordered. If that's the case, there's the anticipation of an increased fulfillment of those orders and so forth. So it's really more of a confirmation of what people are anticipating.

Sam, I want to pivot and talk about ETFs, which I think unarguably is the investing megatrend of the last 25 years. And this week, ETFs just broke above $10 trillion in assets under management for the first time ever. And that's 10 trillion US only. So this does not account for the growing popularity of ETFs around the world. This chart comes from a piece by Isabelle Lee at Bloomberg. She writes that the asset class has been doubling every five years.

The last double only took three and a half years. So we went from five to 10 just since the pandemic. And she says assets held by ETFs in the US hit 10 trillion for the first time. A combination of inflows and market gains carried total assets over the milestone this week. Investors have poured $691 billion into the funds this year as US stock gauges have notched repeated records. So it's not just that the S&P is rising and taking that ETF AUM with it.

You had another $700 billion in the first eight months of this year already coming into these funds. First of all, what is the impact of that much money in this wrapper? We know how concentrated the money is with the ETFs. Are index funds distorting the market at this point, or do you think that there is a level at which they might? Well, that's a pretty compound question. I actually reached out to Aniket Ulao, who is our ETF expert at CFRA, and saying, you know, when you look at the flows of ETFs, the growth that we've been seeing over the

last several years, is that really just new money? And the answer is no, because if you look at each of the last five years of the long-term mutual funds, meaning equity funds, bond funds, et cetera, they have been in a very large net outflow environment. The money is going into money markets that then end up going into ETFs. I think several reasons for that. First off is, you know, you have the ability to decide when to take capital gains.

You don't end up with a negative year and then have a very hefty tax bill as a way to say thank you. That's the kiss of death. That's the worst. It is. So you decide on capital gains. Also, because of a like kind transfer, you can have a switch, let's say a seasonal rotation, like mine, SZNE, the seasonal rotation ETF. But because it's a like kind, there's no tax consequence. Also you have more institutional activities, you have hedge funds that invest in ETFs rather than investing

into mutual funds, and also because you have more of the factor-based ETFs, something that goes beyond your vanilla index ETFs or mutual funds. So I think there are a variety of reasons why ETS are exploding in terms of assets under management and indexes are just part of it. Is it too big though? Do you worry that it's too many people allocating in the exact same way with too many dollars? Or does the market sort itself out regardless of the wrapper? Well, I think you're bringing up the point where, let's say, things do turn around, and we do end up taking profits, etc. Does it end up being a very accelerated downward decline because so many people think they're

diversified when in fact, really, they're just overlaying the same stocks from different ETFs. Well, I think that's where an educated investor or a financial advisor would assist the client by saying, look, you think you're diversified, but you're really just coming up with multiple ways of adding the MAG-7. So I think that has been a consistent problem ever since the S&P 500 index mutual fund was created in the mid-70s. I want to ask you an add-on to that. That's a little bit like a question about capitalism itself. A few years back, there was a lot of talk mostly coming from firms that run actively

managed portfolios on Wall Street saying that the popularity of passive investing and indexing is kind of like a road toward communism or Marxism or maybe both other than laughing What's your what's your reaction to that sort of commentary? Is that something that we need to be concerned with that if so few people are willing to take risks away from the market or make active choices, we're going to end up with a market that no longer works or worse turns us into a communist country? What do you think when you hear stuff like that? Well, my first thought is if it's being stated by active managers, it's probably a lot of sour grapes because as spindices.com will tell you with their SPIVA S&P index versus active

report that it's very hard to beat the indexes, primarily because as John Maynard Keene says, the market can remain irrational longer than one can remain solvent. So while an advisor would be probably trimming their holdings as valuations get higher and higher, the index is just run with it. And so over the longer term, they do tend to outperform the active managers. I think the real question would not really be with indexes, but what about AI? If AI is going to be running portfolios, then after a while the question is if everybody is putting in the same parameters into the programs, then maybe we end up only seeing appreciation that equals earnings growth in and every year.

So I sort of wonder what the effect will be for AI on investing and returns. Oh, could AI be so logical that it eliminates the potential for anyone to earn excess return because it will perfectly calibrate share prices to earnings? Is that what you're saying? Yeah, that's pretty much what I'm saying. Of course, every human has the ability of tweaking their own model to try to gain a front edge on others. But if AI is also self-learning, then maybe it learns from others as well. And after a while, it's simply based on the growth of earnings and interest rates.

Sam, why do you think it's become increasingly hard to beat the index? Is it a function of AI in terms of the AI trade, not the AI that you were referring to in terms of data becoming more ubiquitous, the leveling of the playing field, the access to all of these sort of alternative pieces of data? Was it ever easy to beat the index? What's your take on all this? Well, I think it's all of the above that you had mentioned in terms of more people being involved,

more data being available, et cetera. But I also feel that a lot of it has to do with human behavior, that fear is a much better or greater motivator than greed. When you look to all bull markets since World War II, only 15% of the days had moves of 1% or more. Yet when you look at bear markets, the average is 45%. And so I like to say that my best bit of investment advice came from Clint Eastwood.

When you played Dirty Harry in the movie, Magnum Force, he kept mumbling through grit teeth, a man's got to know his limitations. So basically, it's people are still, as long as humans are involved in the investment decision-making process, we will have volatility and we will definitely have underperformers and outperformers. I thought you were going to say the Dirty Harry line, do you feel lucky? So getting to what you said about the fact that bull markets see a lot less volatility, bull markets are a grind. And if you're a bear, they can be exhausting because they just, it's not like there's gigantic gain after gigantic gain like a bear market,

it's a slow grind higher. And to that point, people would say, Oh, an index fund is just a momentum strategy, as if that's somehow a bad thing. When you hear people say that, what's your take? Well, you were fading in and out there. I'm sorry. So if you could summarize it quickly, take out every other word, then I can answer. I guess we're asking like one of the, like, one of the derisive things that you hear about indexing is that the S&P 500 is just a momentum strategy.

They say just a momentum strategy, as though that were a bad thing. Does anyone want to be invested in negative momentum? It sounds like a compliment when people say it, but they don't mean it that way. Momentum is a very big part of the success of the S&P 500 as an investing strategy. You would agree with that, right? Absolutely. I'm a big fan of James O'Shaughnessy's book from the early 1990s called What Works on Wall Street.

And when it comes to momentum, he basically proved, and I did my own due diligence and basically reconfirm what he had said, that you want to let your winners ride and cut your losers short. Actually, CFRA, wealth management side, along with Lowry, did a similar study and basically said if you can merge the highest power rating relative strengths from Lowry with our stock appreciation ranking system, the frequency of outperformance does not go to 100, but certainly improves

the index itself. And the advance itself is a couple of 100 basis points per year. So essentially, adding momentum with fundamentals, basically, think about it. If a stock is an under performer, it has an awful lot of overhead resistance. When it gets back to a level where somebody bought in,

they're probably thinking, let me get rid of this dog and move on to something else. So you have a long way to go before you can really start to shine. But with a high momentum, how many people are gonna brag about a stock that they have owned? How many people listening are not gonna do their research

and are gonna buy into those stocks, which typically maintains that momentum for another year or so? I wanted to ask you about one of the, I don't know if it's a problem with indexes and sectors per se, but do you think at all about people front running stocks that are about to get added to the S&P 600, the 500, the mid cap. Is that robbing investors of gains that would have come had the news been a little bit more of a secret? Because Michael points out the inclusion criteria

for the most part is public. And we saw this with some pretty well known big names. We saw this with Tesla notably. Everyone knew of ultimately they would have to get added. Super micro. Once they became profitable. Super micro is another great example where you have a small cap with a gigantic market cap. And so of course, it's going to get bumped up into the big leagues. How do you think about that? Is it something that maybe is a minor concern and not really worth worrying too much about? Well, it's something that I do know that S&P index people have to take into consideration. I was never on the index committee, so I don't know specifically what they do. But

yeah, they try not to allow people to guess who's going to be added or whatever. Took Microsoft years to be added to the S&P, mainly because of the ownership rules that more than 50% of the shares were owned by insiders. So until that had changed, when was that? Back in the early 1990s. And when also you have to look at companies that are profitable. So that's why you're not going to have 2000 stocks like the Russell does within the S&P small cap 600, they have to be profitable. But the thought about, oh, you know, where do most of the gains come from, when a stock is announced to be

added to the 500? Well, they come from the stock that's in the 400. So that's why you own the 400 along with the 500 so you can benefit from those who get promoted to the large cap benchmark. It's a really good point, actually. Sam, on the flip side, I don't know if you saw this, but research affiliates is launching a product that is based on the premise that once stocks are removed from the index, and by definition, stocks get removed after a prolonged period of really lousy performance,

once a stock is booted out of the index, there's this phenomenon that it has, at least I would guess in the short term, it tends to outperform. Any thoughts on this and maybe capturing it as a profitable strategy? Well, it's certainly something that's interesting. I'd like to see the back test on it, but as a profitable strategy? Well, it's certainly something that's interesting.

I'd like to see the back test on it, but I've Don't worry. It looks good. I've heard it as well about the Dow, you know, companies being kicked out of the Dow, companies being removed from the S&P 500. What could be the case is that now you have many fewer people who are actually following the stock

probably increases the inefficiency potential. So therefore, one could make some money based on that. But it is an interesting phenomena because you would think that, well, first off, the momentum has been down for a while. So that would be a negative. But as I was taught back at NYU in the 1980s about technical analysis, even dormant bottoms can reverse themselves after a while. I want to go to the live questions being floated by the fans. And there are many people here watching us right now.

And we really appreciate you guys. Dave Ari makes this is more of a comment than a question, but I'd love your take on it. He says, I don't see how ETFs get into the 401k market given pricing during the day versus end of the day. So this is always a big debate. Like is the best use case for mutual funds still 401k given the way money has to come in and buy proportionally? It's a little bit harder to do that if everything's a moving target before four o'clock. Do you have a strong point of view about whether or not ETFs will finally colonize that final frontier?

I think it probably will because if people demand it, then sooner or later those demands get satisfied. Good point though about how the 401k's tend to be marked to market at at the close. Yeah. You know so that really wouldn't change too much and it really wouldn't matter to do the intraday trading because it's all going to be taxed at an ordinary income basis. So you know in terms of trying to time situations or whatever. So, you know, I would tend to say that ETS probably will be made available.

I know they were when I was at S&P. You did have the ability to go into more of a brokerage kind of an environment. That was an option. But for the more pure vanilla kind of 401Ks, yeah, they primarily stick with mutual funds and more so with indices because of they also want to make sure that the unsophisticated investor employees do not then turn around and sue the company for putting them into highly speculative investments. I guess what is the benefit of an ETF in a 401k if we're not going to take advantage of intraday liquidity, which, God help us, let's hope that's not what's going to happen,

or B, we're not going to take advantage of the better tax treatment because it's unnecessary. Is there a reason that we would prefer there to be ETFs versus their counterparts as like plain vanilla index mutual funds? Can you think of a good reason why somebody should be pushing for that? Well, I think that there could be different strategies that are used in ETFs. More and more more we do end up having them be actively Engaged. I mean there used to be the pseudo active like the dividend aristocrats or low volatility ETFs etc Yeah, and many of those are really not found in mutual funds

And so I think more of the creative portfolio structures are being enacted in ETFs today because their capital base is expanding, whereas the mutual funds are shrinking. Someone asked an individual stock question. I know you can't answer it directly, but I got it. Uma Venkatesh asked, do you think Nvidia will be added to the DAO, replacing Intel? So without the specifics of Nvidia and Intel, just broadly speaking, it's not the first time we've had a blue chip company that's really important in the indices. And in Intel's case, it was a big weight in the DAO, in the S&P, and in the NASDAQ. It was kind of a stalwart tech blue chip. And it is obviously not that anymore just based on market cap, profitability, etc.

How hard is that decision to make for the index providers? Like, what do you think are the things that have to be thought of before they just take the hottest stock in the world and throw it into the indices? It's already the biggest or the second biggest market cap in the index for the S&P. Before you do something like that in the Dow, I feel like that's got to require a lot of internal debate. What do you think goes on? Oh, I'm sure there is. But I think what the Dow, as well as the S&P, is really trying to do is to say, is this a good reflection of the US economy? Is this a good representation of the exposure

within these 11 sectors? So swapping Nvidia for Intel probably could be something that would be easily justified. Also the price of Nvidia is only 10 times that of Intel. It's not like going into Berkshire Hathaway because the Dow being a price weighted index versus the cap weighted index like the S&P.

So that is certainly a possibility, but it's all speculation on my part. If Nvidia were to come in, it would be a bottom third stock, probably making its inclusion more likely than less likely. Right, if it was an average of $900 share price, forget about it, no chance. No, I would agree with that,

that it would be less of a divisor impact also rather than being the 800-pound gorilla within the Dow, but it's still a company that within the tech sector but also within the semiconductor industry. So in many ways it could end up being a fairly logical performer. I think some people would probably like it to take place because the Dow typically has about a 96% correlation with the S&P 500, but since the MAG 7 that correlation has been slipping, so I think the originators and the maintainers of the Dow probably would rather have it come back up to that kind of close approximation.

Sam, I wanna say thank you so much for your time this evening and I wanna tell people where they can get your research or learn more about CFRA and the various products and services you guys offer. Where would be the best place for them to go? Best place for them to go would be cfraresearch.com. They can get a free trial to our MarketScope advisor platform and our Lowry research. And if you have a an advisory service like whether it's Schwab, whether it's Morgan Stanley, etc. A lot of CFRA research is available free on their website.

And you are active on social. I know you're LinkedIn and you're also, are you tweeting? Yes, I'm tweeting but with some help from people who know better than I. I understand. You probably don't want to wade into all the trending topics each day. All right, so everyone follow Sam on Twitter, on LinkedIn, check out the CFRA's website. Sam, this has been so much fun for Michael and I. We're huge fans of your work over the years and decades. Thank you for all that you do. Let's not wait so long for the next time, okay?

I look forward to it. Thanks, Josh. Thanks, Michael. All right. And thanks to everyone for joining us on the live. We appreciate it. We will see you tomorrow night right here for an all new edition of What Are Your Thoughts?

Have a great one. ["What Are Your Thoughts?" by The Bachelorette plays in background.] All right, all right. 5 p.m. East Coast time, Tuesday night. You know what time it is. We are here for a new edition of What Are Your Thoughts? My name is Downtown Josh Brown. I'm here with my co-host Michael Batnik as always. Michael, say hello. What's up, everybody?

Josh, you know what? Sam Stolfel, straight shooter. Yeah, we really enjoyed. I hope you guys got to see that. Sam is a legendary dude, and he was a lot of fun on YouTube. What? Sam Stofel, straight shooter. Yeah, we really enjoyed. I hope you guys got to see that. Sam is a legendary dude. And he was a lot of fun on YouTube. And we should do that again.

Hey, we got a fan in a live chat from Portugal, random trends. Portugal represent, what's up man? All the regulars are here. Got some new faces, some new names here too, which is really exciting. And guys, we appreciate you. Thank you so much for making it this evening. We have so much to cover.

But before we get into the biggest topics of the week, I want to mention our sponsor, Crane Shares. Michael, last week, did you know, last week was one of the biggest weeks ever for China? Did you know, I knew that, but did you know that mainland China, meaning like the actual Chinese people, volumes were 326% of the one year average? That's like a lot. Yeah, they're buying into this. As of September 30th, K-Web is up 30% year to date, making it one of the best performing investment themes of the year.

Small cap stocks went crazy in China to Shanghai, the Shenzhen mainland markets, and of course, Hong Kong. So there's a lot happening in China. Listen, US investors or anyone who's been owning these stocks have been eating a shit sandwich for a while. So it's nice to see them rip. Yeah, really nice that you could work in shit sandwich into a sponsor, Ed Reid.

It's been a tough ride. I'm saying. Now we're up only. Let's go. There's one place that I go for all things China to learn about what's happening, to read, to study. It's crane shares dot com. Make sure you are checking out China last night, which is their amazing blog.

Yeah. Shout to Brandon and the whole team at Crane shares. Check out Crane shares dot com. Tell them we sent you. OK, Michael, I want to share this one really big idea I have and I'm actually putting together a presentation on this for a couple of speeches I'm giving in the fall. Americans got really, really rich in the post-pandemic years and I don't think we have yet come to terms with what the levels of wealth creation that we've seen are going to mean for the stock market, the economy, society. I really think we've just experienced this once in a lifetime moment.

And I don't think that we've really thought through what's to come as a result. First of all, what do you think about that big idea? I love that big idea and I have had similar thoughts. Maybe you accepted it into my brain, maybe I accepted it into yours, but we've got a lot of money. This is just disrespectful. I'm talking to you, you're reading the chats. We can't pod this way.

No, I'm looking at you. We can't do a show like this. I'm trying to you. You're reading the chats. We can't pod this way. No, I'm looking at you. We can't do a show like this. I'm trying to figure out who's on your shirt. What do you mean, trying to figure out? This is Julius Randall. You ever hear of him? You're wearing a Julius Randall shirt this week of all weeks? Yeah, it's a send off.

All right. We'll get there later. It's a send off. I'm with you 100%. But so you don't think that idea has been well understood just yet either? Not at all. It's a big idea.

And I think that we've been talking about it, not just you and I. It's been in the discussion. But I think it's underappreciated. We are so, so rich. We have so much money. And there's a reason why this is not the only reason, but certainly part of the reason why multiples have been elevated for as long as they have.

There's too much money and there are not enough assets as ridiculous as it sounds. I agree with that too. We're short about a thousand IPOs, honestly. Quality. Yeah. Quality. And we're not going to get them for a whole host of reasons. We're all competing for these index funds.

Yeah. Like for real, I'm with you. And this in part explains the rush for private market assets. It's not because people wake up and are like, oh, I'd love to own private companies. It's because what else are you going to own? So all right, there's a lot of that. Okay. So let's start with the data itself. This is from the Federal Reserve this month, the latest look at household net worth.

And as you can see, like just look at, just look at, focus on this period of time. You could see the drop in 2020. And then just look at the explosion. We are above trend. So that number grows pretty steadily over the years. And then you have this explosion in 2021, a little bit of a dip back in 2022, and we are right back. And we are, I think it's safe to say, like fairly above trend. And the trajectory seems, itself seems to have

been altered. Let's go to this next chart. This is just a breakdown of where the money is coming from, right? But here's what I want to get into the numbers themselves. This is via Barron's household net worth increased 2.76 trillion or 1.7% from the quarter before to 163.8 trillion. The value of real estate held by households climbed by 1.75 trillion, the most in a year, while the value of equity holdings rose about 662 billion. And obviously, the stock market, the US stock market is the driving force behind that. But I want to put that in perspective for you. This is from Finomize.

Net wealth, so this is wealth minus debt, has grown by $47 trillion since the pre-pandemic peak, which is less than five years ago. Net wealth is now 785% of disposable personal income. That means investors are in the best financial well-being they've been in in two years. And consumers. Yes. So there are concerns about rising credit card debt and delinquencies, but US households are effectively managing their debt very well. As a share of GDP, it's fallen to 71%. That is the lowest level in 23 years.

Over the last five years, household financial wealth, which is assets, has risen by 38% to 120 trillion. And that dwarfs the amount of money that Americans have in house and home equity, their real estate wealth, which is only 35 trillion. So financial assets are now bigger than real estate assets on a net basis and growing. And I really think, I really think that it's like,

it's still early for us to like understand what's about to happen next. I mean, maybe it, maybe it means inflation resumes. I, I, I can't even, I can't even emphasize the degree to which I feel like something really different is coming along. I saw, I was talking with Ben about this. I saw an ad on Instagram today for a single egg opener, an egg cracker, a little thing

that cracks an egg for you and opens it up. You think you see that type of shit in a bad economy? We are addicted to spending money on everything. There is so much money flowing through the system. There is way more money than pre-pandemic levels at every level of age and income for the most part. I know you can pull it, but for the most part, we're all much better than we were before. Well, I'm really glad.

Uh-oh. I might need to pull the brakes on that one. Not all of us. Don't at me, but the Royal us. It's a very wide, it's, look, it's of course, it's never every- There's always winners and losers, I know. Okay, but I'm glad you said young and old or whatever you said, because every generation,

that's a really good segue, because what I wanted to go to next is younger investors. I mean, just to like really hammer this point home, in the old days after a big stock market rally, the articles they would write would be about how the baby boomers are pulling away from everyone else because they had already accumulated assets and other people were in the stock market to a much lesser degree. That is no longer a case that can be made. And I want to share this with you. This is from a Barron's piece this June about younger investors starting their investing

careers much sooner than previous generations. Gen Z, which is people born between 1997 and 2012, began saving and investing at 19 years old, according to a survey they did. Baby boomers, which are people born between 1946, 1964, didn't start until age 35 on average. Think about that. Think about the compounding in that extra, I don't know, is it 20 years? It's huge, wow. So this is a thousand Americans surveyed, ages 21 to 75, plus another 200 Gen Z people. And that's where that number comes from. Gen Z still has the smallest percentage

of people investing today, only 45%. Oh, oh, oh, interesting. Yeah, 54% of millennials are now investing. That's people born between 81 and 96. Can I ask you a question? Maybe you don't know this, but when they say investing, what does that mean? Money, they have money in the market. Probably.

Including retirement accounts, obviously? Yeah. Okay. Yeah. Gen X is 58%. That's 1965 to 1980. And boomers are 63% invested. So I think it's really interesting because this morning, JP Morgan Chase Institute dropped a hell of a research report. This is the first time

we're getting accurate data on what the next generation of investors actually are doing in the markets. Before we get to their behavior, I just want to make the point that back in the day, you had to go in your car to a branch to open an account. It was effort, it was time. We spoke a lot during the pandemic, rightfully so, perhaps not too kindly of the type of behavior that Robinhood was facilitating, right? But guess what? It was not all bad.

We said it at the time too, that they did bring a lot of people to the market that would have otherwise not been invested in the market. And they got people in the game. Yeah, some were doing dumb shit, who wasn't at that, when you were 21 years old or whatever, but they made it really easy for people to access the markets, which is awesome. 100%. If you were 19 years old trying to make a trade in my generation, you had to call your

dad's broker at Merrill Lynch, which is a true story that I did, and you would be ridiculed. You would feel ridiculous and you would sound ridiculous, even asking a basic question. And those guardrails have come off a long time ago and everything has accelerated since then. All right. This is what JP Morgan had to say. They looked at how retail investors reacted to the pandemic and why it made them rich. And it's really fast.

Not just young investors, all investors, but the focus here, here, the share of US households with at least some stock holdings reached a record high as of 2022. The monthly percentage of individuals moving money from checking accounts to brokerage accounts was three to four times higher during the pandemic than in the preceding years. So it was a bit, it was a bonanza. Prior research on behavior of retail investors predates the recent growth in investing and does not provide a direct measure

of the potentially changing connection between financial markets and household portfolios. So JP Morgan got a hold of a new data set of 500,000 investors spanning the years 2019 to 2023. No one else really has a data set this rich and deep and wide. And they went to town on it. And here are some things that they pulled out. First of all, investors establishing new accounts in 2020 and 2021 took on more risk than investors

in adjacent periods, likely influenced by unique market conditions and heightened attention to trading during the pandemic. There was nothing else to do. Also, the riskier stocks were working. Those were the ones going up a lot. We also find that women's portfolios held less investment risk than men's, which is consistent throughout history. And younger investors took more risk than older, also consistent. All right, let's put this up. This is average portfolio beta. So portfolios

took more market risk in the pandemic bull market. That's beta. Average portfolio beta began to rise sharply in March 2020, peaking in December 2021 at nearly 15 percentage points higher than what people are doing in 2019. So people were largely riding the market. And that's a really important point as opposed to taking different types of risks. They were taking straight up market risk and getting super low in the market. Next chart is decomposition of portfolio beta changes by active trading and passive returns. What I would say here is that both active and passive factors contributed meaningfully to the rise in active portfolio

beta. So whether they were buying ETFs or individual stocks, they were taking more market risk. And you could see that peeking out just as the market peaks out. Here, the large contribution of active trading to increase in beta suggests investors had a strong appetite for straight-up market risk Next one is average portfolio risk by investor cohort so the people who came in before the pandemic and versus the people came in during and then the people who came in late and

What you can see is in the height of the pandemic, people just wanted pure market exposure. JP Morgan says, here, let me get to the point. It doesn't matter. Let's go to the next one. This is average portfolio risk metrics by gender. So green is men, blue is women. You can see- men are more reckless. No, they were taking less than average market risk. So low beta portfolios. No, no, no, no. Who?

Women. Right. That's what I said. I said men are more reckless. Yes, you're right. The middle chart is interesting because this is likeness to market benchmark or R squared. So women's portfolios did look more like the market. Well, no, no, no, this is consistent. It's consistent. It means that

they're deviating less than men. So it's the same thing. It's just that's what I'm saying. Yeah. JP Morgan says the pandemic cohort of investors were two and a half times more likely to be men to be men and 1.1 times more likely to be Gen Z and millennial. So it's mostly millennial, it's mostly Gen Z men that first came, that first opened their brokerage accounts during this period of time, which we would have said anecdotally. Yeah, of course. It was the bros and they didn't have sports and they couldn't go outside and play and this is what they did instead. I think this is the last one. This is average portfolio risk metrics by investor generation.

So the pink, they grouped together Millennials and Gen Z. The purple is Gen X. Then the dark purple is Boomers and Silent Generation. I think what's interesting here is just the willingness to take idiosyncratic risk. You're seeing that the older investors are less willing to do the types of things that younger generations are willing to do. But the market risk one on the left is really fascinating. So you basically have, I guess that's like levered long plays or directionally maybe

options, but they looked at everything. They looked at every type of fund, every type of stock. So it's good stuff. It's really interesting. What do you think are the biggest implications here? A couple of things I thought of was wilder markets, bigger bubbles, but then I'm not sure if it results in increased

or decreased volatility over longer periods of time. Well, the amount, the dollar amount that Gen Z is coming with is not moving the needle, right? It's such a small percentage of the overall. Yeah, but they're gonna eventually, it's only gonna grow in proportion to the whole, and in 10 years, they're gonna be probably where millennials are.

All right, I think the implications of this are that Gen Z ultimately is gonna be the same thing, hopefully the same, God willing, the same thing with every generation. The next generation will be the richest one ever. Hopefully it should be that way from until the end of the time, right? They are going to have more time to compound than their older brothers and sisters who were millennials who started later. Yeah. And they'll have much more time to compound than their parents. The Gen Z parents are Gen X and they, you know, they just, they got started earlier and they got more aggressive earlier. And if they stay that way, they're going to be richer

than any generation. Yeah. No, it's great. I love it. Okay. Next topic, similar theme, in terms of how much money there was out there. We spoke about this briefly with Sam Stovall, but ETFs did it, $10 trillion, which is not nothing. It's a lot of money. This year saw $691 billion in inflows so far this year. Balchunas tweeted, speaking of records, ETFs just had their best quarter ever led by VOO, SPY, IVV, and VTI, which are all either S&P 500 or total market ETFs and BND. And again, to the point of what we're talking about, where is all this money coming from?

I don't know, man. People are rich. $280 billion came into ETFs in one quarter. I don't even think people understand how much money that is. And $691 billion in inflows this year. In flows. And it's not coming out of money market funds because- No, those are at record highs too.

Those aren't moving. No. So a lot of it is act as conversions to mutual funds, but whatever. Let me pause you. JD Roarin on 20 says 401ks No, no, no is ETFs are not part of or not part of that next chart So all of this wealth we're talking about is to say nothing of money in retirement accounts This is of course the great work of chart can Matt who is doing outstanding work for us

This is breaking down the retirement markets by defined benefits plans. Of course, the big one is defined contribution plans. There's so much money in here. And these are not ETFs. I don't know if ETFs are less than 1%, probably less than 50 basis points of 401Ks. They're nowhere. It's unbelievable. So 401K is 11 trillion.

That's where it says DC plans that define contribution. Were you surprised that IRAs are bigger? I'm shocked. Very surprised. Here's what I thought of. Here's what I thought of. Well, I know what it is, but it's still very surprised. What is it?

I think it's the self-employed IRAs and the business IRAs and stuff like that. Like that are able to- Yeah, not everybody has access to a 401k. They're able to stuff a lot more money in IRAs and 401k limits in certain cases. Yeah, because that includes like SEP IRAs, Roths. Other things. Other stuff. No.

All right. But I would not have guessed that I would have guessed because of the amount of people that are contributing and the set was $21,000 contribution limit for the average person I would have never suspected that there's more money in IRAs that's wild what are we doing what what are we doing with you don't we okay what do we doing with this XLK chart? So a few things in here blew the proverbial face off. Number one, I had no idea that XLK is a $69 billion ETF, did you? $69, you said?

Yeah. Nice. Very. I mean, that's crazy, no? No, I don't know. That's a huge amount of money. So the journal did a really interesting piece on some of the funkiness that's happening with these ETFs because of the crazy weightings of these technology stocks.

So here's the deal. Try it off. Although I like where your head's at, John. Under federal, this from the Wall Street Journal, under federal security rules. John's the best. Love it. One step ahead, John. Under federal, this from the Wall Street Journal, under federal securities rules. John's the best. Love it, love it. One step ahead of me.

Under federal securities laws, no more than 25% of a fund's assets can be invested in a single stock. And the sum of the weight of any companies that individually exceed 5% of the funds can't top 50%. So something really weird happened. So to comply with the 50% rule S&P Which XLK tracks? standard and pours

Index S&P had traditionally kept the weight of the smallest Constituent with a greater than 5% weight until the index was back below the concentration threshold So what this did was in early July? Microsoft and Apple those were the two biggest right? Those are the two biggest market caps Yeah, they each had a 22% waiting in the fund 44% total In early July, Microsoft and Apple, those were the two biggest, right? Those were the two biggest market caps. Yeah. They each had a 22% weighting in the fund, 44% total. So the third, Nvidia had to be capped at 6%. How crazy is that?

So if you thought that you owned the tech sector, you really didn't because the ETF wasn't allowed to. What should Nvidia have been if not 6%? It should have been 19%. It was right there. So because the first two were 22, they had to cap Nvidia at 6%. And then it got so wonky that they had to rewrite the rules.

So John, chart on, please. So to address the issue, S&P changed its methodology to comply with the rules ahead of its rebalance. So now, so the blue line is what it was before the rebalance, okay? So you had Microsoft and Nvidia at 22% and Apple down at 5%. What? So they changed it because at this point, Nvidia had leapfrogged Apple.

Oh, so then they gave Apple the stub. Exactly. Exactly. Exactly. Exactly. Oh, this is weird. It's not supposed to be this. So anyway, they changed the rules and now they're more or less equally weighted. The three of them, as you could see, but just a wild scene that nobody could have anticipated at the time. And again, $70 billion, $70 billion. This is real money implications. Did enough time go by for us to look at what the tracking error is now?

A lot. Well, investors would have been much better off because when Nvidia leapfrogged Apple, Nvidia had much less returns on a go-forward basis. So had they owned Apple at 22% and Nvidia at six, the phone would have done much better. So they fixed it. But it's kind of a lot. I wonder who benefited from that. Like maybe these people that are selling like a pure tech fund without those kind of rules or like if you're buying the Q's, you're basically investing in tech anyway.

Like you know what you're investing in. So maybe people said, oh, this is weird. I just want it. I want Nvidia to be bigger and I'm just going to buy a pure tech fund. Right? Like, what do you do about that? I'm looking right now. Yeah, they're close.

But over the last year, over the last year, yeah, over the last year, it's 35 and 35. So it's really nothing with nothing. But it is interesting nonetheless. It's a lot of buying power. So anyway, shout to ETFs, $10 trillion. It's a lot. Yeah, I mean, one of the things we, I,

what did I talk about this? We talked about this with, we talked about this with Sam last night, that the ETF total assets under management had been doubling every five years until this period of time where it took three and a half, three and a half years to double. I mean, can that pace be maintained? And if, and if it does, like, when are we, when are we looking at $20 trillion in 2000? In 2028, 29? I mean, that's, that's like, that's a, that's a big number. The show is sounding very topic. Yeah. All right. Millennium Wall Street Journal story dropped. A lot of people knew this was

coming. The Wall Street Journal did like a deep dive into Millennium. Millennium is fascinating for a lot of reasons. Number one, a lot of the old guard hedge fund legends have either retired or fallen from grace. You think of like Lee Cooperman, Carl Icahn, some of the 70 and 80 year old hedge fund legends that are still with us. A lot of them just went family office or like Soros or they've lost a lot of AUM in recent years just because they're kind of slowing down. But one person who's been bucking, Jim Simon's dead. One person who's been bucking, Jim Simons is dead. One person who's been bucking the trend of that era is Izzy Englander. And his fund, Millennium Management, is fascinating,

A, because of his presence there after all these years, but also the structure of the fund. And it's a pod shop. And there were a few of the, well, there are a lot of these now. There are a few large pod shops, but effectively the way the fundamental are controlled the whole industry basically Yeah So the way Millennium Works is similar to the Citadel hedge fund where it's hundreds of different teams of traders

Each of them gets an allocation they basically do what they want to do, whatever their strategy is, and they kick up a percentage of the gains to the mothership. And so when the mothership reports its gains to the LPs, it's an amalgam of all of the profitable and unprofitable activity of all of these pods. And people join these funds, they might be a pod within Millennium for 20 years and they might last 20 minutes. And the risk management is super tight. So let me read this. Millennium parcels, this is from the journal's story, which everyone should read. Millennium parcels

out to roughly 69 billion it manages for clients across more than 2,600 traders, analysts, and other investment staffers working on hundreds of teams. Each team operates independently, betting on things like bonds converging, or which companies get added to stock market indices, or the outlook for commodities, everything under the sun. But all of them face unusually tight limits on risk taking. For example, portfolio managers who are allocated a billion can only lose $50 million before that buying power will be cut in half. If they lose another 25 million, they're fired.

That's 5%, that's like, that's nothing. They're not, they're not around. Protecting itself against even modest losses has made Millennium one of the most stable performers in the hedge fund industry and made Izzy Englinder a billionaire. Millennium has generated, you ready for this, $56 billion in gains for investors after fees since the fund's inception in 1989 among hedge funds that only trails Citadel. Millennium has had a single down year since inception, 2008, over the last five years,

it hasn't lost more than 1% in any month. I mean, that's, you talk about secret sauce. Yeah. That's what everyone wants. They're not crushing the S&P, but that's not what they're doing. They're giving you stability along with your returns, and they're micromanaging their risk takers

to the point of almost strangulation, and it's working. It's like the article mentioned this, but it really is the antithesis of how hedge funds made their fortunes. It was all, not all, a lot of it was gunslinging, huge risk taking, a lot of blowups. Here, 5% drawdown and you're done. I mean, 5% of your risk is cut in half, 7.5% of you're fired. It's unbelievable. They spoke about the turnover inside there. I can't imagine. I can't imagine the pressure. I don't feel bad for any of these people that are making $15 million a year, but

it's not really an enviable position. This is stress to the max. You know what I mean? Well, I think you don't walk around saying, I have a career at Millennium. You say, I'm trading at Millennium. We know somebody who works in one of these places. They said to us. 15% to 20% of the staff leave each year. Yeah. So you have a bullseye on your back as soon as you walk in. And everybody knows the deal.

Right. We know someone who's at one of these pod shops as a trader. And put it this way, he is not picking out furniture for his office. You know what I mean? Yeah Which but that's fine. You know that going in it's like You will perform here until you stop performing and then go do something else and it's normal if If 20% of the room gets up at the end of the year every year and leaves

It's not that weird if it happens to you a year later You know what I mean? Like it's it's it's just a different Mentality I I know a guy who trades for Schoenfeld, very, very similar. They're doing so much algorithmic stuff. They don't have that many human traders, even though Schoenfeld is massive. And he like comes and goes. Last time I saw him, he's like,

oh, I just left, I'm gonna start my own thing. And I just saw him again this weekend. He's like, yeah, I'm back at Schoenfeld. It's like, it's not your career. It's where you happen to be trading at the moment. Stig Brodersen So the only way that they could put up these type of numbers, I mean, obviously, they're brilliant investors or traders or whatever, but it's got to be mostly market neutral. So every long goes offset by an equal short, more or less. You know what I mean? In order to for in order to have the 5% be the third rail, you have to really be, keep your exposure pretty tight. In the final season, in the final two seasons of billions,

they had pivoted Axe Capital to be a pod shop in the script. And one of the, one of the storylines was one pod literally trading against another. Like I forget, like Taylor Mason was like super bullish on like energy or bearish. And then there was another group of traders like 10 feet away that had the opposite trades on. And they were like all trying to get wags to up their trading limits, to like net it out so that the fund would be picking aside. It was really interesting. Do you think, I mean, given the grueling nature

of that sort of risk management and what kind of pressure these people are under despite how highly paid they are, do you think like young aspiring PMs in the hedge fund world, like they want that personality. It's a certain personality. I think a lot of people would say, yeah, give me all the smoke. And a lot of people would say, I can't live like that. If you're an institutional allocator, you love this story. It's so, it's like so easy to grasp. It's like, we're not going to, we may not make a ton of money, but we're

not going to lose. Yeah. And that's a good, that's a good enough. And I'm sure they are well, well, well over subscribed, right? Like you're not getting in there. Get them. No, you got to be like a, you got to be like a set of some kind of a Saudi King or something. You have to be like a sith Lord. All right. As if we can't get any more bullish. I want to slash top it. I want to add on to a conversation that we had with Tom Lee about how we've got a beautifully bullish backdrop for equities. And I will caveat this with, I said this with Ben today.

And we actually used this line, this Mark Zandi thing where I'm about to read. This is not a prediction. I am only looking at the market as it currently exists and the economy as it currently exists and describing the situation that we're in today. Things can and will change. So this is not a forecast. I'm just saying where we are today. Okay. So Mark Zandi, who knows a lot more about things than I do, he's the chief economist at Moody's. He said, I've hesitated to say this at the

risk of sounding hyperbolic, but with last week's big GDP revisions, there is no denying it. This is among the best performing economies in my 35 years as an economist. Economic growth is rip roaring with real GDP up 3% over the past year. Unemployment is low at near 4% consistent with full employment. Inflation is fast closing in on Fed's 2% target. Grocery prices, rents and gas prices are flat to down over the past more than a year. Household financial obligations are light and set to get lighter with the Fed cutting rates. House prices have never been higher and most homeowners have more equity in their homes than ever. Corporate profits are robust and the stock market is hitting a record high on a seemingly daily basis. Of course, there

are blemishes. Here comes a Grand Rapids edge. As lower income households are struggling financially, there is a fear shortage of affordable homes and the government is running large budget deficits and thinks it could change quickly. There are plenty of threats. But in my time as an economist, the economy has rarely looked better. Chart off, please. I think people hear this and they say, ring, ring, ring, there's the top. All you dumbasses are bullish. I think people with that mentality and it's just it's a personality People are afraid to make money and you can't be afraid to make money in the bull market. You just can't all right I know you have more charts on this but you invoked Mark Zandi

I have to tell you that's really makes me nervous I'm not familiar with his game. Tell me he he can tweeted this. What would it all right? What would the replies like? All right. Forget it. I don't know. But what?

Forget about the person. One of the most. He's one of the most wrong people in the history of studying the economy. Like I got he the Wall Street Journal wrote about him this week. He endorsed Kamala Harris, so they said, Trump fans should be very excited. He's predicting a Harris win. Just a sampling, in October 2006,

he predicted the shaky housing market would bottom out in a year. It took five. In July 2007, quote, the economy isn't going to weaken any further. We had the Great Recession shortly after. He was involved in the Obama administration trying to craft their stimulus, which was not good work.

He's already dead. He's already dead. Stop. Stop. Or you could have just totally... He forecast the Obama stimulus would result in 141 million jobs in 2012. Like a lot of his stuff is politically tinged. Okay.

Well, I did not know that. Or instead of quote tweeting me on air, you could have just told me to delete that. So thank you very much. No, it's, it's, this is an important thing to make note of. Okay. If Zandy is beating his chest about the Biden economy, because he's, because he's, about the Biden economy because he's obviously pulling for a Kamala Harris. It's not that like he's lying. It is a great economy, but you don't want to see this guy pop out right now. I understand. So maybe pump the brakes. I get it. Okay. But the fact remains, despite this person's political persuasions and the fact that he's been wrong in the past,

who hasn't? The fact remains that this is the strongest year to take gain through three quarters, thank you to Bespoke. That's a fact. That's not a statement. This is a fact. This is a fact. Yes. Here's another fact. That breadth was incredible in the third quarter. Again, Chartkin-Matt, Chef's Kiss, we spoke about this a couple of weeks ago. You had a 5.4% average return with 300, that's for the index with 328 stocks above that above it. Not bad. Not bad. This is a great, this is a great chart and it's more important than anything Zandy or

anyone else has to say. Like this is, listen, that Zandy, I never liked him anyway. And this is a chart that we put on a couple months ago at the bottom. Look at this recovery chart on. Look at this. We're looking at the percentage of S&P 500 stocks outperform the index. It had been impossible earlier in the year, impossible to outperform. And look at the last 90 days. Look at that rip. Everybody should be looking at their portfolio and smiling. If you're not, look at your rip. Everybody should be looking at their portfolio and smiling. If you're not, look at your portfolio again.

We've got, so outside of the United States, because okay, turn off, maybe, maybe, this is fair. Hey, dumbass, everything that you're saying is reflected in the market. Okay, fair, the market is pricing in optimism. Clearly the market is pricing in lower rates and stronger earnings. I get it, I get it.

Okay, but here's what's not priced in, uh, the Shanghai from bespoke. Look at this rolling five day gain. Uh, is that bad or is that good? And it's definitely not priced in. Definitely not priced in to that point. We've got our boy, Todd, Sonia, strategicus looking at the MSCI China ETF, um, versus Chinese ETF flows.

And we're at a two standard deviation outflow. Nobody's excited about these until very recently, last year, there was a monster, monster inflow into the market. Next chart, please. $1.7 billion in the last three days, which is the highest in the last 15 years. So Josh, you mentioned this. Certainly, there's no optimism pricing to one of the biggest economies in the last 15 years. So, Josh, you mentioned this. Certainly, there's no optimism pricing to one of the biggest economies in the world. Yeah. And I'll go a step further.

One of the things Charlie Munger said toward the end of his life, they asked him a question about like, you know, investing in China or how could you support China? And he kind of flipped it on its head. He said, if the United States and China are aligned, who in the world could stand against us? Now, we're not aligned, but we do a lot of business together. And I would take that idea and get it away from the idea of there being a political alignment and just talk about this idea that this is the numbers one and two economies in the world. One of them is, quote unquote, firing on all cylinders. We agree.

Whether Zandy said it or not doesn't change. It's true. So now you add to that one of the worst performing large economies that's finally gotten religion. And by the way, the investor class has bought in that it's going to be different this time. So if you have China and the United States both growing, it's really tough to paint a picture that risk assets are not going to be rewarded. Yes, something bad can happen always. That's a caveat no matter what we say. But I think your bigger point is right.

You've got this really nice moment in time where US economy is shaking off the rate hikes and inflation is coming down, but growth is still there. Now you've got confirmation in value stocks and small cap stocks, in cyclical companies, almost everywhere you look that things have not fallen off a cliff. And now add that to this idea that the second largest economy in the world is maybe going to get its shit together at the same time. Do you remember 2017, the investment theme that won that year was global synchronized growth? And then we forgot all about that possibly being something that could happen. If it happens between,

and by the way, it's not just China, two of the best performing stock markets of the year, Singapore and Malaysia. And India? Both are 30% and India is on fire. So just keep in the back of your head that sometimes things are too good to be true and sometimes things that are really good just are true. And we haven't even mentioned the AI thing, which probably will turn into a giant bubble. Oh, just slap a little AI on the top.

OK, one other thing that we don't have, actually maybe even further in the case for a bullish backdrop, is there are still no IPOs. Yeah. There's still no IPOs. So when that spigot gets turned on, maybe OK. Maybe then we'll say, okay, time to chill. But look at this, crazy stat from CO2. 2022 to 2024 has seen fewer IPOs than both the financial

crisis and the post.com bubble. Now, this is probably not just a function of risk appetite. It's also a function of a lot of these would-be IPOs are A, underwater, and B, there's a lot more liquidity in the secondary market and private markets. So it's that too. But if this starts getting going, watch out. Let's double-click on this. A lot of IPOs is not bullish. A normal amount of IPOs is very bullish and is a fine line and I don't know exactly where you put it, but anytime you get like a massive wave of IPO like in 2000 or 2021, it's usually the end of something not the beginning. But like a healthy amount

of IPO would be nice. The bears would say a wave of IPOs actually is bearish because people have to pull money out of existing stocks to buy the new stocks. There might be something to that if you think it's a finite number of money that's in the stock market. I just don't believe in that theory. I don't think that's how it really works. But if you think it's like this is just the pool of assets for stocks. So if you start bringing in new companies, you're diluting and people are pulling money

out of Apple to buy them. I don't buy that. But I do buy that. I do buy that a lot of IPOs just signals too much investor enthusiasm. And usually that's closer to the end. That's what I think too. But it's not just the number of IPOs, it's the quality. And when you get a wave of companies that have never made money before

and they start coming out with a billion, five billion, ten billion dollars starting valuations, that's a sign that, all right, this thing is on its course. But we haven't had that in three years. So, you know, and it's doubtful that the initial wave of IPOs, if and when it comes, we think next year, it's doubtful that the initial wave of IPOs, if and when it comes, we think next year, it's doubtful that the first ones coming out of the shoot are going to be trash stocks because nobody wants them. So anyway, like me and Mark Zandi were saying, that was not the time to get Barrett.

I have to ping Red Holtz about Mark Zandi. Please don't. No, I don't think he's a bad guy. I just think that. No, I just, I don't want, but you know, Baggie loves to pile on people that were wrong. Yeah, but he's like a center left economist and that's kind of Barry's wheelhouse. So he might like him. We'll find out.

All right. When did this bull market, we'll do this quickly. I don't know. I don't know what I think. When did this bull market, we will do this quickly. I don't know, I don't know what I think. When did this bull market start? Let's just like, Ben did a piece called an epic bull market and we don't really need to, here it is, we don't really need to spend a ton of time here,

but like basically he's saying the bull market of 1982 to 2000 and then he's saying this bull market of 1982 to 2000, and then he's saying this bull market, and he's saying it starts March of 2009. And he's saying, if we want to throw that chart back up, John, real quick. So the dark blue line is the current bull market, which closely mirrors the returns that we got in the 82 to 2009 bull market. And that one was a little bit longer than the current one.

If you think this one started in 09, it's about 15 years. The problem for me, chart off, the problem for me is I don't look at this bull market as having started in 09, because we don't start the bull market from the lows of the secular bear market that preceded it. 1982 was not the low. The low was 74. So if we're going to start this one from 09, why wouldn't we start that one from 74? So I consider the secular bull market that we're in, and by the way, I called this in real time, starting in 2013, when you break above the 2000 high and the 2007 high. That's when this secular

bull market really started. Ben is saying no, because 2009 is a clear line in the sand for when the selling stopped and it was time to buy and therefore, so I don't like the asymmetry. If we're using 82, we have to use 2013. But he's got a strong case too. He's like, dude, that was the wipeout, 09. And everything since then has been straight up. So if you were to draw that beautiful, shaded box over the line, you know what I mean? You would draw it from 2000 on the SP 500. You would draw it from 2000 straight across to 2013 and that would be the secular bear.

So I agree with you. Also if you think back in time about people's attitudes towards risk in 2011, who the f*** was bullish? Are you kidding me? Nobody. You couldn't even joke about being bullish. Even when we were breaking out in 2013, people were like, all right, now let's see it. Now let's see if this bull really has legs.

So I understand. Listen, this is not black or white. You need to make a... I feel really strongly. I'm going to lose this because everybody is saying the bull market started in 09. And I understand why, and it's not definitely wrong. But until you're at a new all-time high, then you're still stuck in a secular bear market. Then investors are still underwater.

I agree with you. Wait, wait. When did the prior secular bear market. Then investors are still underwater. I agree with you. Wait, wait. When did the prior secular bear market start? It was 66 to 82. Right. 66 to 82. So why isn't 2000 to 2013 the secular bear market? It should be.

So you think I'm right? No, I agree with you. But I think most people disagree because it is a fair point. I have no rebuttal here. It's a fair point that you measure the bear market from the peak, right? You just do. You don't measure the bear market 20% below the peak. You measure it at the peak, peak to trough.

So same thing should the bull market be measured symmetrically. I don't know. Listen, it's fun. We'll never get to buy this. Is this an academic exercise or does it matter? Yeah, it doesn't matter. But here's why it matters. It doesn't matter.

To the extent that narratives drive everything, which they do, but I don't think this narrative is that influential, it matters whether you say we're in year 11 of the bear market or year 15 of the bear market. I agree. So that matters because in my opinion, it's year 11. You think we're in year 11 of the secular bull? Yes. Not 15.

Because when we draw that box over the S&P 500, the box will cover 2000 to 2013. It just will. Is Ben going to make you sleep on the couch for agreeing with me and not with him? How's this going to play out on animal spirits? I wear the pants in this relationship. I think you should take my case to animal spirits and debate Ben next week. How about that?

I want to hear it. OK. Just because I want to hear it. All right, let's talk. Let's do Meta and Apple. Did you watch Mark's presentation at all? Yes. He's pretty good.

I told you. I'm coming around on this kid. All right, John, let's do this clip. Now, we're using this new capability to build some features that I haven't seen on this kid. All right, John, let's do this clip. Now we're using this new capability to build some features that I haven't seen anyone else build. I mean, this is pretty interesting and novel stuff. Creative tools that we're adding to Imagine Edit, it lets you upload any photo and edit it precisely

with natural language in MetaAI across the apps. My family loves this. We spent a lot of time taking photos and making them more ridiculous. For people that either couldn't see what was happening or who were listening, it's a picture of Mark Zuckerberg and he writes, like, put roller skates on me, then put knee pads, then change my shirt to tie-dye and it happens like instantly, instantly. So they did a presentation where they unveiled some of their AI features and reels, some of the llama stuff, they got into the Ray-Ban glasses, they got into the Orion, which is

going to be what VisionPro probably should have been. So they unveiled that the new MetaQuest, which is VisionPro, by the way, they call it mixed reality, which I think is a much better term than spatial computing, which is Apple's trying to run with nobody. Nobody calls it spatial computing. Interestingly, he said, we've been working with Microsoft on something for the windows. So he said, uh, quest is an extension of your PC. He said that you could watch, you can watch YouTube or Amazon prime.

You could, you, he very specifically did not mention Apple. Of course they're competitors. That's the whole point. I thought the Xbox features that you could play in the Quest were really sick. But the real thing, the real big takeaway is he said that glasses are the perfect form factor for AI. And some of the stuff that he was showing on the prototype of Orion, like to me, I'm in, I think it's going to be massive. I think he's right. And, you know, we talked about this, it was either last week or the week before when he did the acquired podcast.

And one of the things, the takeaways, was how much he regrets all the talk about Apple just being this dominant thing. And he's just like, guys, that's just in the phone era. We're gonna get out of the phone era, and then we have the same playing field as they do. He hates kicking 30% of his profits up to Apple when people buy things on Instagram

or whatever on their phones. I think it makes him absolutely crazy. I don't think that he thinks his competition is any other like social media or whatever. I think he thinks his competition is for the form factor of the next wave of computing. And he thinks he's had to head with Apple more than anyone else. I really believe that. And you could hear it in the way he the way he dismissively talks about, oh, that's just a phone. Or he says, people aren't going to experience the internet on a tiny screen for much longer. Like that's really where this is headed.

The showdown is going to be meta versus Apple in the AI era for the consumer. And the glasses are the way that Zuck is going to position his company because he can't be beholden to Apple equipment, physical equipment. He has to have his own hardware platform and this is it. And it's pretty yeah the stock reflects you know Meta's on fire. They seem like unstoppable right now and they do have the potential to have as many people using their large language model llama as Apple has to use the open AI system that they're going to license. Like, is meta running circles around Apple right now? Yeah, on the edge. So they showed one clip of what they're able to do in Reels. You're going

to be able to watch people all across the world in whatever native language, wherever you live. And not only that, but they're able to dub the lips or change the lips so that it looks natural. If somebody is speaking Spanish and we're converting to English, it looks like the words, the mouths match the words. It's wild. Yeah.

So we could take clips from this show, we put them on Instagram and we could put them in a few other languages and see if we build an audience in Japanese or in everywhere. We're going global. We're going global right now What's happening and we're prestige worldwide dude, we're coming. All right. All right last last thing before we move on look at this chart This is the last three years. Look at this catch-up. So of course Facebook was in a horrific drawdown In fact, you know what credit to mark I call it meta now meta was in a horrific drawdown. In fact, you know, credit to Mark, I call it meta now. Meta was in a horrific drawdown and has come all the way back. So the race is on for sure. I think this is the most overbought of the mag seven right now, not overbought, like sell it, but like overboard just in terms of like how much momentum there's

been. He, uh, he's showing up, he's doing the pods, he's launching products, he's relaxing the curls of his hair. He's chill. Oh, one more thing. He's designing clothes. One more thing. He's going for it. So this is from Barclays.

There was lots of news about increased iPhone builds in early July, a few weeks after the introduction of Apple Intelligence. This was supposed to be the big thing, that the iPhone 16 was going to cause a wave of upgrades. So, Barclay says, based on our recent supply chain channel checks, we believe Apple may have just cut roughly 3 million units at a key semiconductor component for the December quarter. Our sell-through checks point to 15% declines year over year for global iPhone 16 in the

first weeks of sales. Chart off, please. That is not good because iPhone sales have not grown in years and this is supposed to be the upgrade cycle. And now maybe they're wrong, but if they're right, this is not great. Counterpoint. Every time Apple launches a product, this news article comes out. Such and such Asian supplier leaks word to a sell-side analyst that orders are lower

than expected. And then we forget all about it in three weeks when Apple comes out and sells a gigantic amount of units. Is Zandy bearish on the iPhone 16? Zandy's channel checks in Taiwan are super suspect. All right. I want to pitch CVS. This is not a you pitch.

I'm curious to hear it. Yeah. This is not my wheelhouse and I'm not in the stock currently. I just want, I'm not saying anybody should buy it. I just want to make the case for why it might work. You have my attention. One of my favorite activist hedge fund managers is heavily involved in the name.

I think this is not just any activist hedge fund and it's not one of the boring ones either. It's Larry Robbins. Do you see Larry? Do you see what happens? Put this picture up. Put this picture up. That's a Lebowski reference.

Larry Robbins, I was there that day at the Soan Conference. This is him wearing his kids' teams hockey jersey. I think he was the coach of the travel hockey program for his kids years ago. Anyway, Greg Zuckerman had the scoop on this last week. A major hedge fund investor will meet top executives of CVS on Monday. Larry Robbins, founder of healthcare focused Glenview has established a large position in CVS. The giant healthcare company amounts to 700 million of his $2.5 billion hedge

fund, according to a person familiar with the matter. So Glenview bought 1% of CVS's outstanding shares. According to my math, a 700 million dollar position in a 2.5 billion dollar fund is a 28% holding. That's a big bet. And I think it's worth just going over Larry Robbins' experience in the healthcare space so that people understand the potential here. In 2013, he became the hottest hedge fund manager in America. He made this huge bet on Obamacare passing and which stocks would be the biggest

beneficiaries. Let me read this. Robbins was previously involved in the turnaround of a large hospital system, Tenet Healthcare. The company stock has surged 661% in the last five years, trading at 163 per share recently. Larry has a reputation for coming in with a list of demands rather than having a more open discussion according to insiders. So you can see what happened here in the last five years,

but this goes back a little bit further. Let me just share this with you from Forbes. Larry Robbins' Obamacare trade helps him become one of the nation's hottest hedge fund managers. This is our friend Nathan Vardy, who we've had on the show. He had a return of 29.45% year to date through July of that year, one of the best performances among major hedge funds. At the time, his fund was $6 billion. He put a third of his money into five hospital stocks like Tenet, HCA, and LifePoint.

So, he knows the space. He's taken big swings before. He's very big in CVS. And I just want to... He boosted his stake last quarter by 440 percent. So he is very actively buying the stock right now. So the news today, they are now CVS is weighing a breakup. They spent like 70 billion dollars acquiring it or some insane number.

They bought Caremark, which is a PBM, pharmacy benefit manager, which helps corporations deal with all the drugs. And these acquisitions have not worked. Let's put up the five-year price chart of CVS. Horrendous, Mike. Terrible. And this is in an otherwise waging bull market. CVS, let's do the next chart. This is the percentage off the all time highs. The stock is in a 45% drawdown as we speak. I want to show you this versus actually a worse stock.

This is CVS versus Walgreens Boots Alliance WBA, which is a complete piece of shit down 80%. I think CVS having made those acquis, is probably the only thing stabilizing the stock, but it's also what's holding it back. You have an 11 times trailing PE, eight times forward earnings in a market that's selling a 23 times forward earnings, by the way. Well, clearly the market does not believe the earnings. Market does not believe that those earnings are to come through. 15 times free cash flow. Don't tell me valuations. All right.

Listen, look, you got a stock in an absolute free fall and people are expecting- And you got a Will the Beast in there. But people are expecting 12% earnings growth next year. If it's 10%, I still think the stock would rally at an eight multiple. And you have literally a Will to be a hedge fund manager who is now actively pushing this company to do something different. So I look, I didn't buy it yet. If I don't buy it, it'll probably double. If I buy it, it still could go up. We'll see what happens here, but here's what I want people to watch this. Here's what I know. There's a big fat gap up at 67

I mean that's money in the bank. The stores are decrepit. Do you go to CVS in America? Twice a week. I'm there all the time. It looks like a How do you even describe it? It looks like Sears right before it went out of business. That's fine. What's wrong with it? It's like some of the shelves are empty. That's how it always looked. So there's 9% upside to that gap, which like I said, mark my words. Would you buy it? You would buy it at 70.

No. You wanna see some life in it. I just, listen, for me personally right now, there's just, everything's working, you know? Yeah, that's the problem with this stock. Like why? Like if it, if it was, if we were in a sideways market, yeah. I mean, listen, I like the gap fill.

I do like the gap fill. But too many easier ways to make money. All right. On the stream, Rick G said Sears, I'm all in. Yeah, I invoked Sears. All right. That's funny. OK, I got two mystery charts.

Let's put up the first one, because I don't remember what I did first. OK. OK, so here's what. I have to guess two? Okay, I got two mystery charts. Let's put up the first one, because I don't remember what I did first. Okay. Okay. So here's, here's what I have to guess too. Well, we're going to play a little game. Here's what I see, Josh. I see, I see lower highs.

Okay. Do you? Well, I mean, clearly it clearly it's a long-term uptrend. So, you know, it's not open to interpretation. This is low. This is lower highs. Yes, they're lower highs and there's also a monster uptrend. So, you know, it's not open to interpretation. This is low. This is lower highs. Yes, there are lower highs and there's also a monster uptrend. So, uh, one of these will be the, will be the winner. Um, wait, this is one versus another. No, no, no. I'm sorry. I'm

sorry. I'm either, either it will resume higher because it's, and it's in an uptrend and it respects, you know, got to give it the benefit of the doubt. However, there's lower highs. I mean, it's clear as day. So you buy or sell this or you just, whatever to give it the benefit of the doubt. However, there's lower highs. I mean, it's clear as day. So you buy or sell this or you just whatever. No, the chart is in a defined downtrend. There's no- Oh, is it? Oh, okay. Well, in this period, in this timeframe, yes.

If you're gonna show me a bigger timeframe and say, look, it's in a bull market, okay, I could play that game with you too. I mean- You buy this or you sell this or you avoid it? Uh, I think it's Nvidia. It is. Okay, so I'm not selling it. I'm also not buying it.

Are you impressed or not really? You gave me no sector. You gave me no prices. I mean, I'm not talking about general motors. I'm not showing you general motors. You should be no prices. I mean, dude, I'm not talking about showing you general motors. I'm not showing you general motors. You should be impressed, dude. Come on. Okay. You have you respect. All right, Chad. Are we impressed with me? Let me hear it. All right. Respect. Okay. But here's the coup de grace. Try it on, please. Holy gazole. This is a wild chart now. But what the hell is this now? 39 cents? But no, it's a ratio. But isn't this wild?

So it's one stock divided by another stock. And we spoke about two of these in one of my segments. So this you should get. We spoke about two of these stocks in one of your segments today? Yes. Wow. OK.

Is it Meta and Apple? It is. Dude, I'm like... How crazy is this chart? I don't even think people understand that. Like what's happening here? How crazy is this chart? So this is, this is Apple priced in Meta.

Yeah. So, yeah, I mean, Meta stock is just crushing Apple. And it's... So Apple was kicking the shit pants out of Meta. What's the market cap on Eto right now? What's the market cap? Is it a trail? It has to be.

I don't know if it is, let's see. Meta, look at this, Y charts, thank you very much. Bing, bang, boom. Market cap of, it is, oh nope, here we go. Load it up, wow, 1.45. Yeah. And credit to Mark. To Johnny and stuff.

Anyway, I guess both charts, I'm in a good mood now. All right, hey everybody, thank you so much for tuning into the live. Did you know that tomorrow is Wednesday, which means an all new edition of Animal Spirits, starring Michael and Ben on your favorite podcast app. Later on tomorrow, it's Duncan and Ben

right here on YouTube with an all new edition of their Q&A show, which by the way guys, really easy to submit questions. You simply send an email to, I think it's Askthecompoundshow.gmail.com.'s ask the compound show at gmail.com Ask the compound show at gmail.com and if you ask a good question Duncan and Ben and whomever is the special guest that day will get to it. We want to thank Crane shares We want to thank Mark Zandi for sure. Who else that's it. Yeah. Thanks to shout to shout to Shout to Zandi stay strong brother. All right. That's it from us tonight guys.

Thank you so much. We appreciate you. We'll see you soon. Whether you're just getting started as an investor or you're managing a multi-million dollar portfolio, Ritholtz Wealth Management has the solution for you. It all starts with building the right financial plan. To speak with a certified financial planner today, visit riddholtzwealth.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.