The Compound and Friends - Strength Leads to Strength

Episode Date: October 18, 2024

On episode 162 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Warren Pies and Fernando Vidal of 3Fourteen Research to discuss: the perfect backdrop for gold, when to fade strategist price targets, overall market valuations, the bifurcated economy, and much more! Thanks to Global X for sponsoring this episode! To learn more about Global X’s entire suite of ETFs visit: https://www.globalxetfs.com/ Sign up for The Compound Newsletter and never miss out! Instagram: https://instagram.com/thecompoundnews Twitter: https://twitter.com/thecompoundnews LinkedIn: https://www.linkedin.com/company/the-compound-media/ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

But a lot of the stuff that you guys do is like different. It's not just like charts that you see anywhere. It's f***ing awesome. Yeah, we try to do primary research and replicate anything that we think is interesting as opposed to just cite stuff. Yeah, we try to just scrape the internet. Yeah, no, we're just copying. So I saw a tweet today that made me literally LOL.

It's from a gentleman named Tim Draper. Have you guys seen this? Did you see this? I saw it. Did you laugh? He gave the same amount of money to Trump. Stop, stop. Let me just read it. But did you actually laugh? I just can't believe what, I can't believe what goes on.

So the last sentence is the coup de grace, but it's all amazing. Alright, wanted to clear something up. I have donated to both the Harris and Trump campaigns roughly equal amounts. It allowed my wife and me to meet both candidates and make a more informed decision. I have come to the conclusion that both candidates have their hearts in the right place and while they would set different paths for America, this is the part. I am optimistic that either part will be a positive step. I am endorsing both candidates.

What the heck? What a great way to have your cake and eat it. It's so weak. It's as weak as possible. I am endorsing both candidates. He's like a famous venture capitalist, right? Is he crazy rich? He must be, right?

Yeah. I am endorsing both candidates. Same. Endorsing the scams. So I know that sounds funny to you, but that's like... The last part. I am endorsing both candidates. Maybe Chuck. I didn't see that one coming.

Yeah, but that's like more common, I think, than we think. And the replies are great. This is satire, right? Because I think no matter who wins, not just for president, but like governors, senators, people want access at a certain like level of wealth and you know certain businesses. People just like, I don't really care but one of you is going to win here's money. And then, hey I backed you.

I think it's more common. It's not a bad strategy. Most people don't tweet it out. It's not a bad strategy. No. I backed you. I backed the other person but I backed you too. I mean.

It's very practical. Advocating indifference. Yeah, I love it. That's my whole thing. If you had as much money as I did, if you were to meet these people, you'd be indifferent too. Did he get torched? Yeah. What do you think? Fernando, where are you from? Where do you live? So I'm in San Francisco Bay Area, but I grew up in Florida. I mean, Warren and I have pretty similar backgrounds growing up in small town Florida.

Were you at Ned Davis too? Yeah. So I started at Ned Davis in undergrad, kind of working part time in my junior year, and then got promoted to the research team, and then basically worked on the custom research team at Ned Davis, kind of working on projects for institutional clients. And then Warren came on as a strategist,

and part of like our group's job was to help the strategists do their studies and teach them our custom programming language that Ned Davis research had. So you're mostly like an engineer? I have like an engineering background. My undergrad is in finance. I did graduate school in computer science so I kind of have a foot in each world. So yeah, I have kind of more the technical side of things. He's giving Matt Levine a little, right? Little bit, yeah. Ned, you see it?

He's good. He's giving the little Matt Levine. How old are you guys? I'm 37. 43. Okay, good. Good? Why good?

I'll tell you why. I met somebody the other day and I was like, hell do you? That's not the first thing I said, but just in conversation, he goes 34, I'm like, fuck, I'm like older than people now. I felt like I was always the younger person. Well, welcome to my world. I know.

I know. That is the mark for when you know you're getting older. I used to walk into every room and be the young guy, and it's not like that anymore. Well, you're still the strongest. Oh, yeah. Do you get mad when you meet someone who does roughly the same thing that you do and they

started after you and they're more successful? What are you trying to say? I could commit murder is what I'm trying to say. And when I'm in that situation. But does that piss you off at all? So they started after me and they're farther ahead of me. Yeah. I mean.

And younger than you and more hair. Yeah. Well, that definitely the hair thing will get me. But beyond that, like I'm pretty, I just stay in my own lane. Doesn't bother me too much. Really? I'm the opposite of you. I am fueled by rage.

I'll tell you what fueled me is I heard Neil was coming after me for the- Oh yeah. Neil Dotto? Yeah, he looked great last time I saw him. He said I was motivating. He's only doing biceps though. I don't know if you know that.

Hey, they caught the kid that took over the SEC's Twitter account in January and tweeted a fake announcement that the Bitcoin ETFs were approved. Was it Jack Reigns? It's a 25 year old kid, yeah. He would do it just for fun. It's a 25 year old kid from Athens, Alabama and I don't know how he there was no two-factor authentication on

this This person's phone. That's how I tell you pulled off but like The price of Bitcoin shot up a thousand dollars per coin within minutes and I guess that was the that was the trade The FBI is saying there are other people involved. They haven't named co-conspirators, but they said there's co-conspirators. But this is how they caught the kid, I think. The Google searches were, how do I know if the FBI is after me?

I'm not even making this up. What would be signs that I'm under investigation? And then Verizon stores near me. Like those, which I don't know about the last one. But he was searching for news about himself and I guess like if you're searching for things like is the FBI looking at me, maybe you go into a file somewhere.

But basically he called the phone company and got the phone company to change the eSIM over to his phone. And that gave him all the passwords and there was no 2FA so he was able to log in and tweet us this. Now here's the irony. The actual ETFs got approved a week later and the price went up like 30 something thousand dollars per Bitcoin.

So what was like literally what was the point? So. Is he in trouble? I think it goes away 10 years probably. They charge him with, you want to hear the charges? Oh, for making money? Can't make money anymore? Yeah, it's a bull market.

What do they charge him with? It's like multiple things, like aggravated, aggravated identity theft, yeah no shit, access device fraud, or conspiracy to commit aggravated identity, I don't know, it's not great. And I think they're going to throw the book out because it's the SEC.

He's in trouble. He's in trouble. So Warren, you brought a notepad. Do you doodle or are you taking notes? You never know. He's quite an artist. If he starts sucking up. Josh is a doodler. I really am. Hey, can I play a song for you guys?

You got to put this on to hear it though. All right. Whether you want to keep Jerome Powell as chair of the Federal Reserve, his term as chair runs on to May 2026. Would you seek to remove, remove or demote him? Look, I think it's the greatest job in government. You show up to the office once a month and you say, let's see, flip a card. And everybody talks about you like you're a god. Oh, what will he do? I mean, before the guy used to walk into my office. He was like

What did he call me because he was keeping the rich too high what did he call him and I was wait What do you call Hill Jerome Powell? Yeah, who's like a dog a dog? He said that he was a begging like a dog Is that what he said? He's like begging in his office. I couldn't you would do that again in fact He actually dropped them too much when I did this Like a dog is that what he says? He's better than he would be. I think I'm better than most people would be in that position. I think I have the right to say I think you should go up or down a little bit. I don't think I should be allowed to order it, but I think I have the right to put in comments as to whether or not interest rates should go up or down. This is just an evolution of forward guidance.

Yeah, I love it. So I am ready for an America where the president not only is the commander in chief but also calls the shots on rate hikes. I'm kind of, let's just go, let's just see what happens. What's the worst that could happen? Imagine like one unemployment report comes in below expectations, like during the midterms where it matters, he cuts rates to zero Let's get the show let's get the show going to know that was the economic club of Chicago and it was moderated by

Bloomberg's editor-in-chief John Nickleff wait who I thought did an incredible job And there was actually some subset of stuff that came out of there. We just played the funny part 2,000% tariffs sounds like it might be a problem. Yeah, is this the election special? Yeah, no. We're not going to do political bullshit. No, I'm down to talk about it. Alright, yo. Welcome. Yeah, come on. Play me in.

Whoa, whoa, whoa. Stop the clock. John, before you clap, here's a word from our sponsor. Since 2008, Global X ETFs have been committed to empowering investors with unexplored intelligence solutions. GlobalX specializes in exchange-traded funds that offer exposure to the artificial intelligence ecosystem, including themes like data centers, robotics, semiconductors, and cloud computing. To learn more about GlobalX's entire suite of ETFs, from covered calls, fixed income, emerging markets, and more, visit globalxetf.com.

Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnik, and their castmates are solely their own opinions and do not reflect the opinion of Ritholt's Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholt's Wealth Management may maintain positions in the securities discussed in this podcast. ["Downtown by The Bumblebee"] That's you. That's me. You like that? That's my new job.

That's new? That's my new job. Is that my green? Hey, guys. Welcome to an all-new edition of The Compound and Friends. We're in New York City right now. The weather is literally flawless. Would you agree with that?

Yes? Nicole's bopping around. Holy cow, is it beautiful here. We have two extra special guests today. One a returning champion and one a brand new friend for the Compounded Friends. Warren Peis is back. Warren is a co-founder and strategist at 314 Research, an investment research platform that provides weekly insights, asset allocation frameworks, risk management, and Omakase Sushi. Welcome back, Warren Pies.

It's great to be here. Great to be back. Love having you here. Is this two or three? This is three. I actually feel like a friend. You're like a rock star at this point for the audience. All right.

And you brought with you your business partner, Fernando Vidal. Fernando is a co-founder and chief data scientist at 314 Research. Fernando is also the lead inventor on multiple patents related to machine learning for time series analysis and unsupervised learning. Warren and Fernando are also portfolio managers for the FCTE ETF, which began trading this July. We will definitely get to that later in the show. Guys, thank you so much for being here.

How are we feeling today? Great, amazing to be here. All right, you look super relaxed. I don't know, it's going to get a little hectic here. You guys have 500 charts? Yeah, we're ready for it. All right, awesome. A lot of content.

All right, awesome. A lot of content. Alright, awesome. So I want to start with this week on the YouTube channel. We did this thing about the two-year anniversary of the bull market. So let me show you something really quickly. This is from Chart Kid Matt. These are the sectors and how high they are above the 2022 bear market, like from that point. The S&P 500 plus 22% and then you've got like a lot of room to catch up in things like comm services,

real estate, energy, discretionary. Technology is plus 46% from that time. That's crazy because it had a what did XLK have a 35% drawdown? The biggest drawdown and the biggest recovery. It was a 35% give or take. So the fact that it's 46% above the previous highs. So it must have been a double from the low give or take. Yeah. So one of the things we were on I was on with Wapner today and the segment was called the everything rally,

which of course means today was the top. But we were going through like what's going on right now. You're up 3.9% in bonds this year in the AG. You're up 45% in Bitcoin, 32% in gold. You're up in the NASDAQ. You're up in the DAO. The FTSE is breaking out, all time record highs. You're up, EM is up 17%. Europe is up 11, Europe, everything. Like you call it the everything rally with a straight face. It must be fun for you guys to do market commentary these days, it's like almost nothing not working.

It's almost like where do you find opportunity when everything has already just worked? Well I think sometimes the hardest thing to do is just ride a bull market, you know? Yeah. And that's what I see is like, we came into the year as much as this has been a really positive year, and 23 was a positive year, if you go back and listen when last time I was here, like in early February, we talked about how in reality, I think most people were quite underweight coming into the year.

Like the big playbook for the election year was we're going to have a weak first half, strong second half. And obviously, I think we turned that on its head, right? As soon as the market came out, and it triggered something we call momentum thrust. So we saw a 19% rally in a three-month period. And whenever you get one of those, especially when you juxtapose that against really negative sentiment, it creates.

And high cash balance. And high cash balance. And coming out of a bear market. It was like you were like 19 for 19 times or whatever it was. It was like 100% hit rate. And we are tracking the path of those chases like perfectly. And strategists have been behind the ball all year.

They came into the year, targets for, median target for the end of the year coming in was 1% above the market, spot market. Today, they're 6% below the spot market heading into the seasonally strongest period of the year. It's a chase, you know. So this is why when we look out to Q4, it feels, and we did a lot of work recently on valuations and things like that, because we're out there scanning for risks. I think that's just like our nature and that's what how we

provide value to our clients. Like is there really any reason to get concerned here or you just seeing your own shadow shadow? So I think that chase continues through the end of the year. It's the length of time also. The two most prominent bearers on Wall Street both lost their jobs this year. You know what I mean? The two strategists who had the lowest targets and were most consistently bearish in 23, at some point earlier this year, I know they like made it like, oh no, he's going to do this now, yeah, okay. He ain't going to talk to clients anymore the way he's been talking to clients, that I'll tell you.

So, but like that's not like last week. That happened six months ago when the market's still rallying, think about how many people look at that and say, that's a sign of the top when they fire all the bears. Oh yeah, how much is Nvidia up since Johnson signed the bra? Oh, it might have doubled since then. I know it's up 100% since NVIDIA is Cisco.

Right. So, all right, I want to go through your charts guys, because this is like an incredible array of topics that you cover. I can't believe the breadth of the work that you do. This is truly epic. Who wants to start? What chart do we have? T something up and just talk about it.

All right, let's go. John will put them up and then you guys will react. So my question to you gentlemen, and what we're looking at for the audience who's listening and not watching is, we have asset performance by asset class for 2024, and Bitcoin and gold are leading the charge, and why do you think this is happening?

I mean, Bitcoin, we could, you know, flow is I think is probably part of it, but gold is one of the best performing asset classes this year. And I just, I'm not quite sure why. Well, I think that we came in here, we, you know, I don't want to say, make it like we get everything right, but coming in here, we said we thought gold

was going to get $2,500 an ounce. I think this is the perfect backdrop for gold. So we're running 7% fiscal deficits at the basically at peak employment. And so this is, and at the same time, you have probably the most. So what does that mean, like a dollar to basement? Yeah, it's dollar to basement.

I mean, I think that. And no end in sight. No end in sight. I mean, look what's going to happen right now. And that's where I think if you look at why is the market starting to go a little nutty right now as I do think a Trump? win is starting to get discounted in the market right now if you look at where the leadership is and things like that and So when you spin that forward, I think that the the con and I've talked to a lot of institutional asset managers and to be

Like we have no political dog in the fight But you know, we just call it how we see it these guys when, when you get them on the phone in private, they were most nervous about a blue wave. That was what they were nervous about. Whatever you think or whatever everyone else thinks, that's what I've heard in private conversations. Rationally, because a blue wave entails a higher capital gains tax, a higher buyback excise tax.

Neither of those are good for valuations or risk appetite. And in the case of Bitcoin, she's pretending to be interested because they'll write her checks. But like Trump became the Bitcoin champion this summer. He actually talks to the people in the industry and he's got Musk. And you know, I don't think he cares that much, quite frankly. I don't think he's into it. It's just like, oh, these people are rich.

And for me, this looks like a Trump rally trade, the Bitcoin part of it, at least. Yeah, even small caps. I mean, if you think about stronger dollars, small caps, banks rallying. I do think like you go back to 2016, this is the playbook we had a sell-off, we had a bond sell-off, which I think is what a huge risk to this market is if you're trying to find a risk is a potential bond sell-off and a

Trump victory. But this is the, I think everyone's going back to that playbook and kind of playing it out. And I think it mostly makes sense. The thing that is, that's going to be the flying ointment in my mind is here we are at 4-1 on the 10 year. We've come from 3-6 to 4-1 and basically a month since the Fed cut rates. And our work suggests that you're getting close to an area where that starts to pressure the market. And so if you're looking for a risk, to me, it's in the bond market here. And a Trump victory would, I think, throw some gas on that fire on the bond market. So we're going to come back to the Treasury.

Anything more to say on Bitcoin gold? I just think gold is like going back to the election. We have the most contentious election that I think in modern history you have. Each candidate is kind of going, jumping the shark further with policy proposals that are with reckless regard for fiscal. And you you know, I think that's that's concerning. I think that in the Fed, let's just be honest, like I'm you played Trump at the beginning. I am a Powell fan. I think Powell is something we talk about all the time is Powell was dealt an incredibly difficult hand with the pandemic and then crazy stimulus,

inflation, all these things that happen. I think he's done a really good job. I'm not a Powell critic. But let's be honest, they just cut 50 basis points. And core PCE is not at target. And so when you add all this together, the fiscal side, the lack of any will to close that deficit, and then what's going on with monetary policy,

you've got to put some money in gold. So you think that, you think that, so we made I think 32 or 33 record high closes in gold this year alone. These types of rallies in gold, they tend not to be short term. They tend to persist over the course of years. At least historically.

No, I mean, what you see is actually the pattern, and this is what we call it out at the beginning of the year. With gold, there's a pattern where you get a long-term consolidation, where you have a multi-year consolidation, and you break out to a secular bull market. And what we've said to clients is once you break out, and we broke out decisively, we look at equal-weighted gold. What's equal-weighted gold? Equal-weighted against a basket of currencies versus the dollar.

The dollar had strength while gold was consolidating. But if you looked at an equal weighted currency basis, you could see that gold was already breaking out. When did it break? So the breakout above the 2011 highs. So that's that qualifies. That's like a 13 year consolidation, give or take. Huge, especially after the pandemic.

We were between like 1950 and 1680 for all the years after the pandemic. And that's just building energy. But at the same time, the secular backdrop was looking so good for gold. And I just think this, this is like a runaway freight train. It's going to go to 3000. You know, it's so funny. They were like all these newsletters and pundits who cover precious metals and they're so granular in the detail.

Like this central bank is buying this many and I'm just like chart go up like it's a commodity who gives a shit I don't need the details when it breaks out of a 13 year consolidation keep your newsletter just go long. I heard that all at the beginning of the year they were like real rates are rising gold can't have a sustainable bull market when real rates are rising we wrote like a whole report we were like let's look at all the periods where real rates went up and gold was like up 20% in a six month period and there were actually a ton of them. So that's kind of just, you know, gold is a chameleon.

I always say it's like trying to model gold is like trying to nail the jellyfish to the wall. It's really difficult. What was the percentage return for the last gold bull market, which I think started in the late 90s and like during the housing crisis, it really got popular. But I think gold bottomed at, I want to say, 300 and out. Yeah, I was going to say it's a 4X, I think. It was a 4X last time.

4X, yeah. So it could be very early still. Yeah, I mean, I think that like 3000 is in the bag, in my opinion. Okay. All right, let's do the next one. John, what do you got? So one of the themes of the market

in recent weeks and months has been the broadening out. So you've got actually the Mag-7, which peaked in July, which had been doing a lot of the heavy lifting for the overall index. In fact, the S&P 493 has now broken out and we're making new highs in the index and the Equal Way despite MegaCap being sort of a headwind. Yeah, this is interesting because like tech,

we had a very shallow kind of earnings recession in 2022. Trailing 12 month S&P EPS was down single digits. And the worry, the big worry was that that was just going to continue and snowball into a recession. And it didn't. And one of the first sectors that pulled out of that recession, mainly because of this AI investment boom, is technology. So you saw that expressed in tech being the first one out

on the fundamentals to come out of this earnings recession risk area. And now the rest of the market is there. Estimates for the 493 are cranking up and more and more companies have positive year-over-year quarterly earnings in the 493. So it kind of makes sense that this is fundamentals really driving this catch up. The biggest sector in the 493 outside of tech or financials. What do you guys think is driving the breakout in financials? I mean at the moment, especially banks yield curve yield curve getting steeper. I'd look to the feds, the. Really, that's really, you had

the confluence of the Fed's SEP coming out where they're like, what is that? The summary of economic projections, they do it four times a year. So they wrote, they had one in September. And so that's where they project out basically how much they're going to cut rates. And so they, they went from 125 basis points of cuts in the June SEP to 200 basis points through 2025. Of course, they cut 50 basis points in September. So yield curve steeper is kind of consensus. And then I think the Trump trade is huge for finance. I mean, that's what the-

Why, regulation? Deregulation. I think the fact that you will have a steeper yield curve is something that a Trump policy would have. The median stock in the S&P 500 financials is negative 2% off its all time, of 52 week high. Every single stock. So the private equity names and I own two of them are just run away wildebeest right now and I think that like some of the big mega banks would love to get into the private

credit game in a meaningful way that they just aren't right now. Yeah I mean private credit. Can we put that chart back up? I want to ask you guys so Fernando a lot of people spent the first half of the year lamenting the fact that the rally was so narrow. They ignored the rally in financials, of course. And they said, this is all about five stocks, basically. It's Nvidia and Apple. And that changed in Q3. You're showing the Mag 7 underperforming throughout the course of the quarter. My question is like, was there a way to see that that trend change was about to happen and that because this 18% rally in the Russell almost entirely happened in the last three

months. I feel like if there's any inkling that you're about to get a rotation that powerful, shouldn't there be signs that it's about to happen? And if there are like, what are they? What would you look for if you're trying to play that game? I think it's probably, it's really hard to try to predict those rotations. Speak for yourself. Like, tech is something that there's so much expectations about the future and uncertainty that any, like, little whiff of, like, well, maybe it won't be this big,

it'll be this big, and maybe it'll be a revolution, but it won't be this big of a revolution, you know, is that's a sign of like tech weakening. But honestly, the rest of the market looks cheaper. We could argue about that. In fact, our recent pub that we did that we think that argue that whether or not the rest, the 493 are materially cheaper. Yeah, we think that it might be. Well, Apple's 40 times earnings. You're telling me the rest of the S&P is more expensive? Well, I don't want to go into specific stocks, but as a group, because it's really hard. That's another thing with tech. You just have to buy the basket. It's hard to chop up themes because these companies are competing in the same realm, and it's

hard to figure out who's going to win. But as a group, that group has amazing earnings growth. They've got all these tailwinds that AI is a new thing. But before AI, tech was still growing hundreds of billions in revenue at double digit rates for a decade. So AI is just the latest tailwind that they have. And their earnings growth is legit. You don't have to really reach for any kind of crazy optimistic scenario to think that they're going to be able to grow earnings off the back of the tail. So you don't think that there was like a lot of people have this fantasy that they're going

to catch a rotation like this, and they're going to exit tech trade and allocate to value or allocate small cap. But there's nothing in your work suggesting that that could have been like something that people would have had a hint about. I mean, I think I have an answer, which is rates. And I think that the- That's the inflection for the small cap.

I mean, you can say it's really hard to time rates, but we did upgrade bonds in early July, which coincided with this. And we downgraded bonds on September 19th. So we went from overweight to underweight and I do think that equal weight S&P which is basically what that S&P 493 represents is highly rate sensitive much more cyclical. So you have this to... July was the cut the first cut. Yes it's a cut trade, it's a Trump trade, it's lower rates in general and so the

challenge for that that other part of the market is gonna be once rates, as I expect, and we're still underweight bonds here, I think rates are still normalizing. Like the 10 year is what I'm talking about. And can this continue? Can this broadening continue in the face of rates going up and once we get to like say four and a quarter

or above that. And so that to me is the real driver of the inflection. All right, John, let's do the next one. Michael, you want to set this up? Yeah, so we're looking at a chart of the S&P 500 with the 50-day moving average overlaid. And we've got new all-time highs in September, which is seasonally uncharacteristic of what

normally happens. Guys, what does your work say on this matter? Yeah, well, I mean, this is only the second. So we're looking at new all-time highs that happen after a two-month drought. So you get it sometimes where you just continuously get all-time highs, kind of like we're doing right now, 47 in the year.

But when you have a drought and then the market has to break out to a new all-time high, that's only happened twice in 50 years in the month of September. It's very rare. So that's what we're looking at, is the list of all the cases where you actually get a new all-time high in September.

It was 1996, and then before that 1965, and then it was this year. That's it, as far as new all-time highs in September. The big implication when you spin it forward for where we're at. Well, those two moments are firmly in the middle of extended bull markets. Correct.

65 and 96, both one of those is three years before any kind of major top, and the other one's four years. Exactly. And here we are, we're in third year of the bull market now and you know, it would be odd for us to be done with this bull at this point in time, especially when you consider we had basically a bear market in 18, had a bear market in 2020, had a bear market in

2022. You don't get a bear market every two years. People act like it's been straight up for the last 15 years. It's just like, where were you? What are you talking about? Even this year, you had, if you go study, we had like a whole report where we did every single 5% or greater pullback in the market back to 1950 and what's the character.

And even the 8.4% correction we had in August, that reset sentiment. Totally. You know, so we're just resetting sentiment all the time. The asterisk though is these are ridiculously short bear markets for sure Yeah, never mean like yes, like 2020 throw it out. Well 2022 is normal. It's like two years. Yeah, that was a grinder That was like a grinder like fed hike. I guess it didn't feel that bad I think the S&P did I think on the S&P 500?

I think the max drawdown was 23 was 25 was 25. The NASDAQ was like 35. It felt really shitty. NASDAQ felt horrible. It doesn't feel as bad right now. I guess I felt good, which was the important thing. I did. You were horrendous. I'm a really bad judge of my own.

John, let's go to chart. Duncan, is that true you were here? Roll the tape. What was that like in 2022? Was I horrific? It's all a bore. So it's... This guy...

I'm a little shell shocked. I don't know. You guys did great work on some of the more seasonality stuff. The January barometer is real. I've never seen it put this way. So you have a chart that lays out the yearly highs by months. It's 1950. And your work shows that 56% of the years, the S&P 500 peaks in either January or December, which is pretty remarkable. So Nick, Nick Colas does the same, Nick and Jessica, said like 50% of all years, the S&P

hits its high of the year in December. Like if you only know one thing about market timing, like be in for that. Yeah, I mean this is, I was a seasonality skeptic like for a long time. I think if you look at it in the right way though, we're all judged by the calendar. Like everybody, just like you said,

whether it's the two guys that got fired who were strategists or if you're managing money, like you're beholden to the calendar. And so you start the year out and you're underweight and the market runs away from you, you're behind the bogey. But you get a chance though. Like you get the summer doldrums where the big guys go to Amagansett and Montauk and you do get that opportunity

to flip and some people do. What this shows to me is that the market usually goes up because there's a reason why the high for the calendar year is in December 40% of the time because usually the market goes up and it goes at a high for the year because to your point Warren, people that are under positioned

or were trailing the benchmark, they gotta chase. Career risk. That's it. For sure. There's more to it than that. You also get through the fiscal year for mutual funds and whatever sales they were going to make, they've made them in September and October. And then it's kind of like a clean slate.

Whatever money they're playing with, it's probably new long positions or adding to winners. 100%. So a lot of these things are like the human element of investing. It's not really, it's sort of seasonality, but it's seasonality driven by people's real world incentives. 100%, that's it.

That's the seasonality that I believe in. So to that point, you guys have a chart that shows that strong first halves historically lead to strong second halves because number one, there's a reason why the first half is strong, okay? It's usually a fundamental positive backdrop. And then the second half, it's a continuation

of the first half and then the people that are underinvested say, oh shit, I gotta catch up. And to Josh's point, the pullbacks in these cases are outside of 87, so you have the 87 case in here, but outside of that, the pullbacks and drawdowns in these years is short-lived and shallow because you, you, these guys are all waiting for a chance to get back in the market.

It's very similar to what we saw in August. So explain. So the purple line is the second half. If the first half was only up 10% or less. Yeah. All your line is when you have a strong first half. Look at that finish. So we're looking at July through December on this chart. This is a great chart. It's a really good chart. Yeah. And we have one in here. I threw in the doc that shows when

you're up 15 percent through Q3 because like that's kind of where we're at now. And that goes back to that September question. It's like what's the implications of us making a new all time high in September. It's aome, but you will get I think you get a slightly Less powerful. This is what you can correct me if I'm wrong on the history you get a slightly less powerful you know Santa Claus rally type period because Santa Claus is the end of the year rally is really about two things It's about the seasonality, but it's also about usually a giving version and given yes We weren't going there?

Okay. You've- Try to tell me what Santa Claus is about. That's right. I'm half Irish Catholic. I know all about what Santa Claus is about. One of the things that I'm curious to ask you guys is you're covering so much ground, different ways to think about the market, seasonality included.

Do you guys have internal conversations about like when to overweight one thing and when to underweight another? Like according to our work, this suggests a strong second half. However, according to these other things that we look at, it suggests a weaker period ahead. You have to make it like at a certain point, it's great to be that panoramic with your research but you kind of have to start prioritizing which of these forces is going to be more powerful than all the others. Yeah we have discretionary strategy so like our shop we run models that kind of we know exactly what they do and they're completely

systematic and then we also have discretionary strategy work where we kind of synthesize all this stuff so if we see something out there that says like all right seasonality is really good, but there's a freight train heading for us on this other dimension, then it's something that we have to weigh. But- Is that a quantitative process

or is that the two of you guys just trying to be intelligent and talking through it? Yeah, the things that are quantitative are the studies to make, like we make different arguments to each other and we weigh things. And every one of those arguments has to be backed up by data but ultimately like the job of strategy and writing every week like we do is trying to synthesize and figure out you know what's happening right now. Yeah we have like a base so to your point like a basic rule because I think big part

of this what I say to our clients is macro strategy is like the synthesis of chaos you have all this data and all this chaos coming at you and you have to organize it for your clients in a way that makes sense for them. And so like one big rule that we've been operating on is if you don't see a recession, we have a framework for that. I think we'll talk about and you in the Fed is easy and not tightening, then you can't be underweight equities. And that's just like a basic rule of thumb. You cannot see I have a client have a client, send them 80 charts. Okay, my daughter's getting married this weekend. Do me a favor, is it buy or sell? Like do you have those conversations?

Yeah, yeah, absolutely. Yeah, I mean I had like one of our clients, like a lot of hedge funds, you know, they want to get right to business. We're kind of academic researchers and I get it. I get where we're at. But you could justify, when you say stay overweight, if somebody wants to go deep, you're like,

okay, here's my 80 charts. So you have 90 slides and a lot of them are, like listen, I'd say, I don't know, 80, 90% of them are bullish, but you have like, cautionary things to watch out for, but I'm sure to Josh's question, there are people like, dude, just tell me, like TLDR, you guys bullish? Oh yeah, we were bearish in 22. I mean we I told you last year remember and I mean in uh You know I'm a pessimistic pessimistic at heart and I think Fernando's too

So we would we like to study history like with like the all-time high study. We showed you last time It's like we need this stuff to convince us to be more optimistic and there's a lot of people I think that's who we speak to in our client base. Okay, so seasonality's on our side. Let's do this strategy, strategist S&P 500 targets. So the fun thing over the last couple of weeks has been to watch everybody try to out-Belsky each other.

Like, Belsky was at 6,000 before anyone, and now he's like in the middle of the pack. These guys are like, it almost it's like an auctioneer. Do I hear 6,100, 6,100 go. So how do you look at strategists? Do you look at them as confirmation or contrarian signal or what's the framework here? I think we have a process where we actually have a trading strategy where you're long the S&P 500 when Strategists are their targets are within 5% or below of spot S&P 500 and you crush it if you if you follow that so you fade them

ultimately you fade them and You know we slot it in as a sentiment basically. Yeah, the sentiment reading its positioning center But you want to fade so then that must be working against you because these targets are now ripping not enough I mean you can see in fact right now We're at like we did this for October 15th and October 15th the average or median strategist target was still six percent below the market They can't catch up to the market. That's the most Relatively bearish this group's ever been on record. At this point in time. Do you go this deep? I'm curious, is it just their price target for the S&P that's too low, or were their earnings estimates

too low also? Or did they get the earnings right, but they had too low of a multiple apply to it? Like what's the reason why they're chasing? I don't really know. Well, I mean, I think there are two separate groups that are doing those, so it's like a bottoms up earnings estimate, I think, and then you have these guys who are doing their top down.

I think that they're doing the best job and they all do good work. And we just came out and said, we think the market's going to hit 7,000 by the end of 2026. So I mean, like we're in the same boat basically. But- 7,000 by 2026? How was your day on Twitter that day?

Was that comfy? It blew up and people were like, Warren's his own contraindicator now. This is crazy because I'm always talking about fading strategists and now I go out. Yeah, yeah, the other Warren. Right, yeah, it's like. With this chart, you guys are like quantitative haters.

Quantitative haters, yeah, I mean. What's the bottom pain, guys? That's the spread. That's the spread. What does that mean? The difference between that blue line, which is the median strategist target, and the purple line, which is the actual S&P. So what does it mean when the spread is declining, that means below the purple line which is the actual S&P. So what does it mean when the spread is declining,

below the zero line, that means they're getting further, the market is running further away from them? Yes. Yeah, as the red line goes down, that means the market is just outpacing their estimate. So talk me through this. In 2022, it looks like the spread was meaningfully positive most of the year. But this is the point. They were wrong all of 2022 and they've been wrong ever since.

Yeah, they were saying, the market's going to rip, the market's going to rip, and then it just kept going lower and lower. And instead of holding, you see the estimates kind of follow the market, but always stay above the... But I mean, in fairness, it should never be at zero, right? Because that's where the market is. Well, it can be there by accident. Yeah, that's a really good point. It might hit that level, but you're

not going to have 22 strategists on Wall Street all be neutral on the market. That'd be very weird. You're going to have bulls and bears. Yeah, yeah. Well, the thing to watch for on this going forward is you can see, if we took this back, at the end of 2021, I think it's on there, you saw this big ramp in estimates there.

And you see that at the- Perfect timing. That's when you get to the top. So like we studied every major top over the last like 30 years. And that's embarrassing now. And that's what they look like. Like they ramped up their earnings per share estimates

at the height of the bubble. Exactly. And their target. Just today, this morning, we were talking about like like, won't it be interesting, you know, when we get these kind of new updates, you know, for next year, how bullish are they going to get? Are they just going to reverse course? And everybody's just going to be...

That starts like right before Thanksgiving, right? November, yeah. Mid-November. So your guys' next chart is really a chef's kiss of a chart. I've never seen it broken down this way for this particular year. You look at this bull market and you say that the tier, the returns have tiered with market cap size. So everybody knows that the mega caps have taken the charge, but you break it down by stocks 1 through 10 in terms of their market cap weight, stocks 11 through 100, 1 through 2, 2 through 3, et cetera. And it really does go down the line in that order.

That's an ETF flow story and an AI story. No, it's not. No, it's not. No, it's not. No, it's not. The ETF flows is, that's our 2024 story. It's always that way. This is the rate story. I think it is rates. That's for a special reason.

The tiering is like perfect. And we actually, like this chart started as just like top 100, top 100 to 200. And then Warren's like, no, you know what? Warren, look what we have. I'm sorry, I still think I'm right. No, I really do. I really do. It's a hundred trillion dollars in wealth management.

Okay? Like that's, forget about how much money is in ETFs, how much money is in mutual funds, how much, SMAs, just combine. It's all wealth management. Every wealth manager is a smaller proportion of the money they're putting in goes into small caps, a slightly larger portion goes into mid caps, and much, much more goes into large caps.

That's not a 2024 phenomenon. It's been going on for the last decade. But it's being exaggerated now, more so than in the last decade, because more and more money is in the wealth management channel and not in the brokerage channel. I just think this is asset allocation. So this is never going to change? It flows. So this is never going to change? It's permanent? What are you saying? I think you could have a permanently higher multiple on large cap stocks relative to mid and small. You dumb bastard. That's controversial.

Permanent? The thing that I don't want her not permanent Not at not every minute of every day for the rest of our lives It's an upward drift because it's asset allocation. This is how people this is what people's portfolios Happens every year I have spoken we're gonna move on from this I want to hear about valuations market-wide. Fernando, go ahead.

So, well, I mean, we should probably just segue into talking about our most recent report. Yeah, I think you're right. So the market's expensive, right? Classically expensive. The market historically has a PE ratio of like, you know, you could say 19 historically, and we're at like 25, 26, right? So that's expensive, right? So in our latest report, we said, we made the argument that, well, maybe we're missing

something here, maybe it's absurd to think that today's market should trade at 18 or 19. And the biggest case that we made was that it's a sectoral composition effect. So we've got a market today that's extremely different than the market that drove, you know, that you're looking at when you're measuring that 18, 19 average PE. Today, tech and communication services,

like 40% of the market. Energy and financials is like a tiny fraction, you know. And you can't talk about the market multiple without mentioning what you just said. Yeah, no, it's, it would be crazy. Of course. You have structurally higher multiples in tech because the profit margins are higher. Right. So if tech makes up more of the market and is responsible for more of the market's earnings growth,

of course the valuation should be higher. Here's one more thing. I saw this from Jim Paulson. He said, do investors realize how high quality the S&P 500 index has become? S&P 500 index has become? S&P 500 companies possess outstanding unit growth prospects, extremely healthy financial strength, and very ample liquidity. And he charts it. He looks at the S&P 500 stock price, total debt as a percent of total equity collapsed.

Net debt as a percent of EBITDA collapsed. Cash short-term investments as a percent of 12-month EBITDA per share higher. It's not the same index. 20 years ago, 2004, we had companies in that index. I swear to God, coal miners, build a bear workshop was in the S&P. Those companies can't even go public now, let alone get into this index. Think about the hottest club in town. In 2006, it was like financials and energy

were outweighed tech and communication services by 14%. Today, it's a 39% swing in weighting now. And then you throw Amazon in there, it goes even higher, because that's consumer discretionary. Now, the one thing that people don't really think of, because this is like, that's the sectoral composition. But your point about margins is exactly right.

So margins lead to higher multiples, but especially on like a price to sales basis. So every dollar you get to sales, if you have a high margin business, you convert, you get a higher multiple, right? But one thing I noticed when I was doing work as kind of an energy and oil analyst earlier in my career is that the more cyclical businesses

and the more commodity of businesses, you actually get a reverse effect. So when profit margins go up, you get multiples compressing. It's a totally opposite relationship between margins and multiples. Because they're cyclical. They're cyclical. And investors know it's the top of the cycle and profit margins are coming down after the top of the cycle. Therefore, you actually want to buy cyclicals when they're the most expensive. Exactly and that's when you take a big chunk of the

market that would and you replace cyclical with like a more structural growing market when they get higher margins it's a structural phenomenon that leads to higher multiples the whole relationship changes. So we in our report we broke all that apart and basically said into Paulson's point the markets making it return on invested capital trailing five-year average for the market 23% it's a 2006 it was 10% that tells you there's a moat like what you could just reinvest money at that rate. So what should the multiple be? Is the market is is the market so high quality now for any of you that wants to take this

it's the S&P so high high quality now, that it's not just an all-star team relative to all other businesses in the United States. It's 500 Michael Jordans. It's the best two to five companies in every sub-industry in America. It almost like bears no relationship whatsoever with the experience of running an average company in this country. They live on their own planet. They're self-financing. They're not waiting for a loan from a bank to do anything. None of these companies.

To me, the S&P is pulling away to the same extent that the top 1% of households are pulling away. They almost occupy their own universe. I love that analogy and I totally, I mean I totally agree with that. It's part of why you see, you know, like for instance, not to all go back to the election, but Nate Silver, you know, he runs his model on the election and he has in there S&P 500. And like, you know, there's a lot of people who say like, As a variable that could swing the election.

Right. If S&P 500 is up, then people feel good and therefore they're incumbent. It's totally reversed because like you said, the S&P 500 is not reflecting the Main Street sentiment right now. No way. The businesses on Main Street have never been more divorced than the success of the 500 biggest companies. And they still all do business with each other. So it's not totally unrelated.

But just like if that's part of your mood ring for Main Street, you have no idea what's going on out there. It's still a night fight. For most people running a business, they're in a night fight every day. Apple does not wake up in the morning feeling like they're in a night fight. So wait, for now,

so what do you think about the valuations of the market today? What was your conclusion? Bye. The conclusion is that there's a way that you can argue that we're at fair value and that over the next two years, we should earn a pretty typical return on the S&P. Historically, it gets like 9%, 10% a year. And that multiples, like multiples at this stage of a bull market, you shouldn't expect

them really to contract. Multiples contract, you know, we're kind of mid late cycle and multiple should hold in. Earnings are expected to grow 30% from now to the end of 2026. So you know, 30% over the next two years just on earnings. And you could even say that multiples will fall a little and you're still going to get a pretty decent return on the S&P. Just from the fundamentals. You can still annualize it like 8% to 10% in that scenario. Just from the fundamentals of the earnings

doing what the analysts expect. S&P 493 is 19.6 times forward earnings. That's fair. Max 7 is 26.7. But does it even matter? Like, when thinking about multiples, I think to me what multiples tell me is that right now, the market is obviously trending higher.

The wind is at its back. So if it has a high multiple, then maybe there's less margin for safety. I think that's all you could say. It's not a timing thing or anything. It just tells you about expectations today. And expectations are high, which isn't bearish. But if we don't meet them, then there's more room to fall. Yeah.

I mean, for me, I think you have to have a certain amount of humility when you're looking at the market. And so when you sit there and say, and this has been our, we've had this, we've fallen in this trap. So like we've said, like we think the market looks overvalued. And that's what prompted this report is we've gone through this year, we're at 26 times trailing earnings on the market. Everybody knows that's expensive. And to go on TV, like I heard some, I'm not going to call him out here, but like I heard someone- Dan Greenhouse. No, bro, he's good. Okay. It's not him. We love that. And to go on TV like I heard some I'm not gonna call him out here, but like I heard someone in greenhouse No, bro. He's good. Okay. It's not him. We loved it

Oh, it's not insightful to say what God I want the indexes we know finish your thought What are they what the person saying? You know, it's a bubble we could go a little higher, but this is a bubble It's like that is the most mid-twit kind of argument that we're in a bubble Why don't you both candidates look at the collective wisdom of the markets and say, what am I missing? Why would this look? Is there a different perspective to view the valuations that tells me that makes sense? No, everyone's wrong but me. The market's wrong.

A lot of people like to say that. 20 times earnings for the median stock is by definition not a bubble. That's number one, just on math. Number two, it wouldn't matter if it's a bubble or not. You could get a market. The market topped in 2007 at 17 times earnings. So it's almost a moot point to like a single variable analysis of PE ratios. Ain't going to tell you if it's the top or the bottom.

But a lot of people do that, honestly. Well, that's why they're on Twitter. It's embarrassing. Yeah. That's why they're doing mid-Twit. Okay. We have so much more to get to. I'm going to talk less.

I want to hear more from you guys. Show me the chase chart. I'll take the under on that by the way. Keep going. All right. What are we looking at here? Well this is the version we looked at the one with a 10% gain in the first half. This is the composite average of the market when you have a 15% gain through Q3.

So that's what we're tracking at. And it goes back to that September study where you get a little% gain through Q3. So that's what we're tracking at. And it goes back to that September study where you get a little bit of a dip maybe. I mean, I don't think you want to like obey every single wiggle in this, but the bottom line takeaway from this is you still get that year in rally. It's just a continuous chase right to the end of the year.

Is this colored by the election at all or? There is no, we didn't do any kind of a slicing and dicing of election. I mean, everyone- Is the October dip more severe in election years? Yes. I would guess, yes. But we're not getting any seasonal tendency right now.

Like we're, every week, that's why I worry a little bit that when Trump gets elected, what's going to happen is we're going to get a big move in the rates market. This whole rally is getting pulled forward as he breaks out into betting odds and you could actually have that dip post-election. Let's do momentum thrust. So I love this chart that you guys made here because every time you have an average, like what you just showed, the current version never tracks the average, right? Because it's just a... you're just smushing a million different scenarios together

except for this one actually tracks it perfectly. What do we look at that, gentlemen? When we first started showing this chart, I was self-conscious. Because we started showing it before, like, you know, the... Oh, before it fit? Before it, like, you know, the... Before it fit? Before it, like very early on, like before the dash line. We were like, this is a breath thrust.

It's like, or a, you know... It's either a great chart or a chart crime. And we don't know yet. So what does it show for people that aren't watching? So it's showing 63 day returns in the S&P when we cross above 19%. And... 19% what?

First, 63%... Just a return. 63 day look above 19%. And... 19% what? For us, just a return. 63 days, look back, 19%. It's rare. It's like a, it's a rare event. So, extreme buying. So, what happens after extreme buying in a short period of time? We had a quarter where like the market was just crazy wrong and suddenly had to adjust, right?

What happens? So, it's like, you know, this is the average path. And we started showing it. And I was self-conscious. And I was like, man know, this is the average path and we started showing it and I was self-conscious and I was like, man you really want to show this, you know, this, what are the chances it attracts as well? And we just kept showing it because it was tracking perfectly in line with the composites. But you know why this works? This is human seasonality because you get these breadthrobs coming out of bear markets, no? Like aren't most of these out of bear markets?

Yeah, that's exactly what I thought from the get-go. And it was against the context of everybody was bearish coming into the year, and this happened. But these are also infuriating because you're telling people that just missed the rally, actually it's about to go higher. So much of our work is just justifying and proving to ourselves that strength leads to strength. That's such a hard thing to internalize and accept. That's the podcast title. Strength leads to strength. That's such a hard thing to internalize and like accept.

That's the podcast title. Strength leads to strength. Strength leads to strength. And it sucks because you don't want it to be like that. Strength leads to tops. You want it to be like I'm going to wait. I was going to say Warren and Fernando are too bullish, but let's do the other one. Let's do the other one.

All right. Let's talk background. Let's do the econ. Let's talk labor markets. So this is why I love your guys' charts. I've never seen it broken out. Sorry. This is so clean and delicious. What are we looking at?

You're looking at everything kind of... So we allocate everything to zero. So we're looking at the change of each one of these things. Payrolls, labor force, growth, continuing claims, and then job openings and the Joltz data. Did you invent this or has somebody done a version of this before? We invented it. This is so clean. It's a cumulative change.

Cumulative change, yeah. I mean, this is where Fernando and I work so well together because like I did these charts at Ned Davis for a long time and then Fernando is just a wizard. And I mean, I think like I sleep and visualize this stuff and he does too, I feel like. And it's like we can come up with new kind of ways to look at data. So what is the message? So you call the supply loosening the labor market. You're showing payrolls are up 7 million from the,

this is the peak of how many job openings there were. Peak jolt. So that was like when people were saying there were 20 million open jobs, and there's three jobs forever. Okay, so since that peak, you're showing 7 million people have been hired. You're showing the labor force itself

has grown by 4.5 million. You're showing the labor force itself has grown by four and a half million. You're saying, this is incredible to me, unemployment claims are flat cumulatively, holy shit. And then you're saying job openings have only declined by three and a half million, which is not that much. Yeah, so I think the Fed looks at the job openings falling and they interpret that as the labor market weakening. We also have seen the unemployment rate rise,

which obviously shows some loosening in the unemployment market. But I think that the message of this chart is it's a major labor force participation growth and people coming, whether it's immigration or people returning to the labor force after pandemic, mainly immigration, it's labor force growth that's driving unemployment rate up, is what we're saying. So that's like what was tripping up the song. That's what Claudia Somme said. The next chart is every cycle and it looks

totally different than the recessionary cycle. So the implications, so go ahead. So the next chart of the implications of claims being flat is what? Well, I mean it means this is not about people being laid off and losing their jobs and that's not what's driving it. It's not the end of a cycle. Exactly. It's not a recession. It's not a recessionary signal. So you know usually you see when payroll, when job openings roll over, you see payrolls roll over shortly thereafter and you see claims rise. That's your typical cycle.

Haven't seen that. So you showed the previous cycle peaks in 2000, in 2007, in 2019, and in everyone, of course, claims are going up. And now that's just, we're not seeing that yet. Correct. Yep. It's just a way to get at why is that unemployment rate going up? All right So here's the other side of this which you guys do that you do the Trump weave in your report you weave in a story

So labor concerns all the way all the weave private sector payroll growth. We this does resemble previous recessions What are we looking at here? Yeah, I mean our goal is to be objective, right? So like we might sound bullish but that's because the evidence is bullish and our clients trust us with that. And so we, this is some stuff that's looking there. The labor market has some points to pick at. And one is that the payroll growth we're seeing is not coming from the private sector. It's mainly, this is payroll growth year over year, ex government, healthcare, and education. Like really private payrolls.

Private. Yeah. The more cyclical areas of the economy and that's below the area with the mean of recession starts. So that's not bullish. No, it's not bullish. You look at part-time versus full-time? We've looked at that before. They both count toward the NFP report. Like people tend to say like,

oh, all these jobs are seasonal holiday bullshit. You worry about that or not yet? We've looked at it and we've looked at aggregate hours worked and things like that. They all kind of point to the same thing. So yeah, you're seeing our source of truth, which I think we'll probably talk about is the housing industry and residential construction

employment. Like you said, chaos, synthesis of chaos. So when we say there's no recession coming, we're basing that off of residential construction employment. We think that's the best indicator for leading the economy. It rolls over in the six months prior to your overall payrolls rolling over. And you get about an 8% to 10% drawdown there before you get any real drawdown. And dude, that doesn't signal a recession that causes it.

Exactly. Well, that's it. it's all tied together there, right? And so the stat I like to tell people is that 5% of jobs in the United States are construction jobs. But if you go through the average recession, 30% of jobs lost in recession are construction jobs. John, can you jump to the construction job gains not resembling a recession? Yeah, so the red line is now?

That's previous recessions. Oh, that's the... Okay. The red shading is all the recessions. The blue line is residential construction payrolls, and they're making new cycle highs. Now, what we do, because we find this to be so important, and Fernando, you can chime in any time you think that I'm missing something, But bottom line is we take all the moving parts. Housing starts, time, it takes to complete a home, the labor intensity of each unit,

we put it all together and we predict how many jobs this segment of the economy, how many jobs are needed for this segment of the economy. And so when we put all that together, we do see some weakness forming potentially in the pipeline. So this is why we're so focused on rates and how that interacts with the economy, because you need to see like mortgage rates fall to keep the housing market moving along. This is a pretty good leading indicator.

Like this really gives you some time before the recession hits. That's one of the things that has kept us from getting ever too bearish throughout this whole process. Construction jobs. Yeah, because we look at this as a- This would have saved your ass in 06 too.

When they stopped building. Well yeah, if you would have gotten out, yeah. Getting out as a signal for sure. Yeah. No, I mean, it's, look, the bottom line is if you're going to have a recession, you have job losses. And if you're going to have job losses, the cyclical areas have to pitch in. It's not going to be like the government wakes up and lays off, you know, 10% of the workforce

or something like that. It just doesn't happen that way. So the most cyclical area is residential construction payrolls. And that's the, so we focus on it's also, like said, tied in the consumer behavior and other parts of the economy. And this model that we have on construction payrolls, it allows us to take data like the housing starts data that comes out all the time and plug it in and say, like, what does that mean for recession? And it allows us to say, like, based on our model, this is not enough housing starts.

Or based on this model, you know, housing starts are in a place where... Do housing starts lead construction payrolls or are they concurrent? So it's a it's basically there's this funnel. There's a lot of factors. A big one is the time it takes to complete a home and housing starts basically fills the tank completions drains the tank. And if you're completing houses faster than housing starts need to fill the tank faster to make up for it. And right now we're kind of in a muddled through environment with housing

starts. The readings we're getting are kind of borderline for, for making us comfortable that we're going to avoid recession. But our model of payrolls for construction is pointing to us being a little oversupplied in jobs. So, and that's just based on, we're hoping that, you know, starts holding. Well, let rates come down a little bit more maybe. So getting back to jobs, you guys break down payrolls into different industry groups, I thought, which is interesting. So you show that only 62% of industries

have gained jobs in the past year and that's getting close to historical danger zone. What are we looking at? Same thing. It's the breadth basically of industries that are growing jobs and it's falling. I mean, this is like, you know, this is what I think the feds looking at stuff like this stuff like the housing market pipeline and they're seen and they're like we don't want to see unemployment go up anymore. We've basically had unemployment go up because of a supply increase. And anything from here is going to be really, you know, nonlinear, as they would say, in unemployment gains. And so this is just showing that the breadth of industries growing jobs has fallen to a

level that really marks closely with the start of recession. So this is something to watch. Absolutely. It's one of the other things we watch. I mean, the market tends to have a tough time once this gets below 60% too. Let's do this soft landing. Mortgage applications need to respond to lower rates. I agree. What chart are you on? I don't know. Like if you're like if you're if you're constructive on 25, part of the reason for that has to be like the housing market is going to normalize and activity, not prices,

activity is going to pick up and mortgage applications are kind of like the best way to think about future activity. Yeah, I mean, this is in order to revitalize the housing market, we've seen like this really strong relationship between mortgage applications and rates. And so when we first saw this plunge in rates coming off the middle of the year, you didn't get a response in applications. That was kind of concerning. Like we went down almost 6% and you didn't see an immediate tick up. So refinancing but not new.

Because it's still from such a high level. Yeah, but that's the thing. What's the magic number? They say five? Well I think that if you look at the national builders, they're like, yeah, you got to get a five in front of it. And they're able to buy down because they have huge margins and they can incentivize people. And that's why those builder stocks have ripped, right? Is because they can dominate the market in this environment. We had 668 on the 30th today, which is highest since the end of July.

It's kind of wild. Not good. Mike wants to play something about risk here. You have to do it. I meant I want to play something that Mike wanted to play. I got that. You have that? So hold on. Before we do it. I meant I want to play something that Mike wanted to play. I got that. You have that? So hold on, before we do this.

So Warren was on the floor of the New York Stock Exchange with our friend Michael Santoli and you said something that I thought was worth talking about. Video on. The Fed just cut 50 basis points and rates ripped on the back of that. So if we do a thought experiment where we say the Fed came out tomorrow and they took the Fed funds rate down to 3%, which is like say what they think neutral is, what happens to the 10 year?

I'm not quite sure that the 10 year actually goes down in that scenario and so I think that's a risk the market is gonna have to work with and struggle through here as we go out to the end of the year and into 2025. Yeah, those long 20-year-old... Kind of provocative. What's the thinking behind that?

Well, the thinking is that, there's something we talked about last time I was here, is that the 10-year has already discounted all of the Fed cuts. All of them? All of them, in my opinion. So they have 200 cuts planned. What's the terminal low for rates then? Based on their SEP, they think 2.9% is the terminal rate. So called the rate.

Right. We've done, I think that's low or potentially low. Like we look at something, the three-year rate two years forward. So we're basically saying when we subtract out the, we normalize what's going to the Fed policy and see what kind of rate you'd get between years three and five in the bond market. It's like three eight right now. So in my view, neutral is probably somewhere between that number and what the Fed's saying. But let's just give the Fed credit and say they're at 3% terminal rate. They managed to get down there.

Right. Okay. The historic spread for the 10 year versus the Fed funds rate is like 110 to 140 basis points depending on where you start your historic study. So if they get to 3%, the tenure is fair value, I'd say at four and a quarter. And so I think it's, for one here, we've already discounted all those cuts.

And I think the reason we're still below that level is because we're coming out of that growth scare. Anything sub 4% in a 10 year. So why does it matter? Because it represents competition for equities with a 10 year at 4%? Well number one, the 10 year is going to influence mortgage rates. It's going to influence. So one of the things we've been saying is this is a bifurcated economy.

So a lot of times, I think last time we talked about this is like who is calling for a rate cut was one of the things we talked about. And it's like, well, if you look at automobile sales, they're below 2018 levels. You look at existing home sales, they're below the trough in 2009. So there's a huge swath of the economy really is begging for lower rates.

And that's not transmitted through the Fed funds rate, it's transmitted on the long end. Look at this, here's your new auto sales. Yeah, we still haven't had a full recovery in the auto market. Yeah, and I think that's a rate story. I really do. It's a durable good story in general.

So you have to start selling. Because it's financing. So the long end went up a lot today. Max Zuccardi just tweeted, TLT had the worst day since after the Tokyo crash, long bond and the pressure. Is that good though? No, not in my opinion, no.

I mean, so what we look at again is, we have a chart in here. it's not about a level, I think on the 10 year that starts hurting stocks, it's when it goes up too quickly. So we have a study where- To shock. We take, yes, exactly. We take a 63 day rolling window

and once the 10 year hits the 80th percentile of that rolling window, it's hurt equities consistently since 2022. So here's, this is the chart. Because why? It's an inflation fear gauge. It's inflation fear gauge. since 2022. So here's the, this is the chart. So. Because why? It's an inflation fear gauge. It's inflation fear gauge. I think it's volatility.

But it moves fast. Yes, it's volatility. It's competition, like you said. It's a relative valuations are wrapped up in this. There's a lot of stuff that. Well, I guess it goes to timeframes because my mind would say, well, the long bond yields rising is economic strengthening.

But if it happens too quickly in the short term, it could be bad because it just dings. All right, so that's a risk. I want to make sure we don't miss any of these. Let's do the next one. The economy has never entered a recession with deficits this high. So there will eventually be a recession.

And let's assume nothing gets done on, by either party or anything bipartisan to actually address the deficit. Trump thinks he's going to grow his way out of it. Harris thinks she's going to tax her way out of it. Neither one of those things are really feasible politically. So that's like a systemic risk. Like what happens when you have a recession

with deficits like this, and then you really have to make hard decisions? We've never seen it. We've never had it before. We're at 7%. Sorry, put the bar chart up, John, if you don't mind, the green bars. Yeah, this is the, you talk about,

like again, there's so many big charts and like details and stuff, but this is big picture stuff. This is like, you give me five charts out of the deck, this is one of them that you need to internalize, which is just, it's very difficult to have a recession when you're running this kind of a deficit. And you're not fear-mongering with the dollar amount. You're showing this as a percentage of GDP.

Yes. Which is the way it should, you're not like squealing about the dollar amount of the deficit without any denominator. Not at all. And the thing I- Fernando looks like he hates when people do that. That's a chart. This is a transition mechanism through the stock market for the deficit. I mean, it's money creation. It's pure money creation to the economy. Like so it's a point Josh has made for years, which is that when the Fed hikes rates, it's just like, you know,

it's stimulative to anyone who has a strong balance sheet. It's for the for the upper crust of society and the S&P 500 and stuff. I mean, they're just, you know, you have 10 million dollars in your bank account and you have 5.5% money market fund. Try to outspend that. It's impossible. It's great for the treasurer at Apple. It's great for Berkshire Hathaway. They're just spewing cash. Life for Kay and Con. That is not restricting, that is not restrictive policy for people that already have money. Exactly.

Right. Exactly. And. Exactly. And that gets into the system. It's in a, economists would say those people have a low propensity to spend, but it's still getting into the system, you know. And you can spend it out in the CHIPS Act. The deficit can be made up of all these different projects we've seen coming through. Eventually with Trump, maybe it comes through as tax cuts, but it gets into the economy

pretty directly. Show me credit card delinquencies continue to rise. So this is like one of those waiting for Godot things that people like have been looking for, looking for. So now you kind of have some signs of it. Yeah, it just goes along with some of the unemployment stuff. I do believe that it's a bifurcated economy. Again, it's a similar theme.

It's why there's so many. What's the y-axis? Is that percentage of credit card holders who are doing it? Yeah, it's holders, not dollars, right? You know, you want to talk about this, Fernando? Yeah, I think it's holders. It's holders. It's not dollars.

If it was dollars, we'd be f***ing down. So 7% of credit card users in the US are currently behind on their bill. Is that what this is saying? By 90 days. By 90 days or more? Yeah, that's what this is saying, yes. That's correct.

So in 2010, that number for context was, what is that? 11%? Up there at 11. All right. So there's room for this to get worse. Yeah, I mean, this is about the low strata consumer, too. Does this ever turn around without a recession? No.

No, obviously, no. We haven't seen that. Okay. It's, there's a first time for, we're running a lot of experiments for the first time in this cycle though, you know. Okay. Let's do, let's do, let's do this last one. Soft landing.

Historically, credit creation ramps in the year following the first SL cut. So this is a soft landing cut we just had. Yep. Okay. So that's in distinction to an emergency cut or fighting a recession cut. Okay. So what's the message here of the chart? Well, this is going to the point of like the Fed being restrictive and fighting against that fiscal deficit is that in these soft landings, which you usually see when rates start getting cut against the context of a healthy economy, bank lending ramps up in the next year.

We've had very weak bank lending. So the Fed hiking rates has really, it has restricted the economy, just like we see in existing home sales and car sales, and you see it in bank credit creation. We have real bank lending is just way off trend from this hike cycle. If you get us off landing,

what you need is to see credit creation pick up because what that does it solves for a lot of these things we've already talked about in the podcast. All that low the rate sensitive stuff in the market, the more cyclical stuff, the equal weight, the small caps, all that stuff that's trailed that should that should benefit if we get credit creation out here in that and this kind of takes the baton from the deficit-fueled expansion that we've had over the first part of this cycle. How are you measuring credit creation?

What's the data source? Total bank lending. It's like a weekly file. So I think you're missing it. You think we're missing it? Well, there could be. What do you see? The credit creation is coming from Wall Street

and private equity. That's a fair argument that we're missing that side of it. It's like off balance sheet or whatever you want to call it. I think right now credit creation is like rampaging. I think there's like endless amounts of credit for anyone who wants it. But not consumer credit. Like back from back. Not consumer credit. Not consumer credit. Yeah.

If you have a business doing $5 million in revenue or more, there's 50 people who are willing to make you a loan via email. I get pitch emails every week. I don't know if you do too. Maybe what I'm referring to more is availability as opposed to actual creation, but I don't think anyone would say the quote unquote the problem with the economy right now is nobody will lend anyone money. I can get you a tow.

Well, I mean. You can get you a tow. Well, I mean. You can get your tow by three o'clock today. It's, there's something going on. And it's, I do believe that this loan, this private creation. Private credit, hello. What's going on, but why are auto sales so low? Why are auto sales still below 2018? Why is existing home sales below the trough in 2009?

Like these parts of the economy are huge components. I mean, durable goods, look at like restoration hardware, what they talked about with rates, they need lower rates. Like, that's high end consumers of durable goods. So I don't think that private credit is filling the gap that this is like a two for consumers. Now, I think that this is a if I recall off the top of head at $12 trillion data series, series. So I mean, 8% growth in credit creation from the traditional banking sector is like a trillion dollars of money creation almost that's coming into the economy.

I mean, it's hard to replicate that. I'm skeptical that private credit's replicating that. Well, Jamie is skeptical too. I'm a shocker. He basically, no, he basically says, look, all these people willing to provide loans, we'll do loans too. You could call it private credit, but we used to call it mezzanine.

It's the same thing. We're ready to, the thing is when the going gets tough, we're going to stand here and continue to make loans and service loans. And I can't say the same for all these other people that are out in the market trying to jam, you know, trying to jam private credit loans to everyone. But it's notable. So basically you guys on balance, this is like the way that I sum up,

and we had a lot more charts, but at a certain point people have to eat and use the restroom. But tell me if I have the summation right, okay? So you're in this situation now where earnings growth over the next two years should be like spectacular. You said 32% by the end of 2026? Yeah, 30% over the next two years by the end of 2026.

Okay, like nobody would be mad if it was even close to that, okay? Alright, fine. Valuations are elevated but with good reason. The companies we're talking about have incredible profit margins and they're growing and it's diversified. It's not just seven stocks. Okay. So you have that. The last thing you have is even if we don't get much lower in rates, we're still on a trajectory lower, which should take some of the constraint out of some of these industries, home building, autos, maybe. That's theos, maybe.

That's the hope, yep. Okay, so you have that. Working against that is unemployment trends are going where you don't want to see them go. And some of this stuff looks downright recessionary. And I think on construction and construction jobs, you guys said middle of the road, muddle through. Yeah, if you were going to say one thing, you asked about starts, single

family starts need to be like above 85,000 a month. Where are they? They're like 83 right now. And they've been, there was a month where they printed down below 70 and that's a recessionary print. So like you can say if we stay at 70,000 a month, single family starts, we're going to have a recession. But can't that be rolling sector recessions

like we had for the last couple of years? It's hard to, that's what I, well, my theory is that the housing market is too important to the health of the economy for it to be a rolling true recession in the housing market. It would be the first time. But wasn't there, aren't we in a housing recession still? Like in the last two years? Not on new construction, which is what goes into GDP.

So not on new construction. But like, but what about like real life? Like, well, real life, it's into GDP. So not on new construction. But what about real life? Well, real life, it's tough out there, like on existing homes. So if you're a title agent or a real estate agent, they're f***ed up. They had a horrible time. Durable goods have been in a recession,

but durable goods can be in a recession, and it's different than you start getting layoffs in the construction segment of the economy. So the summation though here, stay long. Pretty good. Stay long, right? Yeah. Don't worry too much about valuations yet because there's earnings growth that could bail those valuations out. Yep. And keep an eye on credit card delinquencies. Now it's seven. You don't want to see that at nine. And keep an eye on construction jobs and the labor market and,

uh, and keep an eye on construction jobs and the labor market and, uh, you know, some wackiness in the 10 year if that starts moving too quickly, but like that's so basically what you're saying is by Tesla, right? Is that the summation? I think that's an ultimate title of this, this week. You guys have fun on the show today. Yeah. So is this cool? Yes.

Really cool. Warren went home and said, yo, you got to come back up there. These guys are a lot of fun. Yeah. All right. He was getting. Yeah, it was really cool. Yeah, it was amazing. Yes, was this cool? Yeah, it was really cool. Warren went home and said, yo, you got to come back up there. These guys are a lot of fun. Yeah. All right. He was getting me pumped for it.

All right. Dude, we love having you guys and we love your research. And I might not get to every single thing that you send, but I never miss it when I get a chance. And I just think you guys have a really unique way of illuminating some of the biggest issues in the market. And you're very original. To Michael's point, we get everybody's decks. Yours don't look like anyone else's. So, shout out to you guys. How do people get your shit? of the biggest issues in the market.

client-based hedge funds, asset managers. Somebody has a Robinhood account. They're sort of institutional. You guys launched an ETF and you have $470 million in assets. How did you do that? You just launched. We have a stock selection system, our full cycle trend model that we've been running for three years and it's done extremely well. And so we had clients come to us and they're like, this thing rebalances every month. We pick 20 stocks out of the S&P 500. It's a quality screen and then we do a trend overlay. It's really unique. And they were like, look, this thing is great. It does turn over like three and a half times a year. So it's a high turnover product. Put an ETF. Put an ETF, we'll invest. And so that was-

Oh, meaning rather than people buying the stocks themselves and doing the trades. And so the SMA. Yep. But this is like a lot of assets. In an ETF wrapper you could lessen the impact of the taxable implications of that much turnover over the course of the year. Exactly. That's what we're doing. See that's brilliant. And so they said we want to invest in it. What's your ticker symbol on this? F-C-T-E. Where did this $500 million come from if you had to guess? Well, the Fed. Well, we've. Yeah, besides the.

Big asset managers. Like, we're, I don't want to, I can't drop names, but like we were in town meeting with probably the biggest asset manager in the world about getting us on their platform. OK. The PMs that are clients. I mean, it's been honestly like the most genuinely touching thing to see our clients, like family offices

that come through. I should give you money. Yeah, like we want, like here's $30 million, here's $40 million. Wait a minute, what's crazy is you're not an asset management firm, well now you are, but like it's not like you had the machinery to like, hey, let's launch a thing. So who did?

We partnered with a client. So we had a client who was an RIA, SMI advisory. And so SMI came in and they were like, they were leading the charge of like, we would love to be able to invest in this ETF. And so they really partnered with us and they basically said, we'll form a joint venture. So technically the ETF is owned by a whole nother company.

Yeah, it's an RIA. It's like a little bit, it's a little bit tricky because you can't double dip on fees. Who would you guys partner with on the ETF actually owned by a whole nother company. Yeah, it's an RAA. It's like a little bit, it's a little bit tricky because you can't double dip on fees. Who would you guys partner with on the ETF actually? Tidal or? Tidal and Commonwealth are our partners there. And, you know, as far as the trading side,

there's a whole nother group that does the actual implementation trading. And then Fernando and I were running that model and we're sending them the stocks. So you guys, so it's 20 stocks at a time? 20 stocks. Super time? 20 stocks. Super concentrated. Super concentrated.

But that's what people want now. They want something that looks really different from the mainstream ETFs they're already using. Yeah, and I'm telling you, we have PEMs at huge asset management firms and the first thing they come back to us is like, well, why don't you, how do you stack up against this other quality ETF?

Because our quality is our basin. You compare the statistics, we're totally different. You don't get lumped in with the momentum, like MTUM. That's not your comp. Your comp is quality. No, they try to compass to like QUAL or QLTY, but those are benchmark huggers. I'm just going to be honest.

You know why I love this? All right, these are the top seven holdings. Lamb Research, Alphabet, Medlar Toledo, I've never heard of that name, Brown and Brown, Pulte Group, Colgate, Palmolive, and Amphenol. All over the map. Like this is, what is this? We go, take the S&P 500, this is exactly the process

and we run it every month. Take the S&P 500, we have a quality screen, we grab the top 100 stocks by quality, and this is like return on invested capital, things we talked about, the stability, a drawdown stability of earnings, and we take those 100 stocks, we then rank them on our own kind of proprietary trend system.

So we're looking for intermediate uptrends and then pullbacks. So quality stocks and uptrends. Yeah, quality stocks in an uptrend with a pullback. That's our three criteria. And every month the portfolio has potential to be reconstituted? Our max turnover is six new names per month. Do you trim stocks or once they're out, they're out? They're out, they're out.

And then we rebalance to 5%. I like that too. Every single month you're getting rebounds. So if one stock went up 20% or something over the month and became outsized holding, it gets rebalanced back to 5%. So we're constantly harvesting gains there. I like that too. Congratulations guys.

Thank you. I love it. It's been amazing. And like honestly, you guys supporting us and the way you like... We are the most supportive. Congratulations guys. And you're like, hey, do you want to go on a show? And it's just been amazing for us. And without that kind of support from people all over the place, we wouldn't have been able to succeed. And so we really appreciate it. We love hearing that. Thank you. And thank you for all that you guys do.

We always close the show with favorites. Something that you're reading, something that you'd recommend to people, maybe a trip you've been on or... What are you coding? I don't know. Do you have any bits of code you want to share with us? I'm working on an AI agent to automate some of our chart creation.

And I'm not joking about it. Like it's coming along quite well. You're already pushing him out? No. I'm pushing myself. AI pies. Alright. Alright.

Moran, anything for you? I like... I'm like on the Neil Dutta tip where I watch garbage TV at night. So Love is Blind, it like helps. It's so good. You have to be able to shut your brain off, you know? Great shot. And that's why I've been watching it.

It's helpful. We've talked about this three times, but I can't get over it. Dude, I can't believe we haven't spoken about episode four. Yesterday when I left, it's like, we forgot to talk about episode four. One of the best episodes ever. So you're watching The Penguin on Max for you. It's shockingly quality.

It's like really good. Did you like the Batman, the movie The Batman for 2022? It's shockingly quality. Like really good. Did you like the Batman, the movie, the Batman for 2022? It's okay. Yeah, it was good. Matt Reeves. So they let him take Colin Farrell out of that movie and spin out into a TV show. Yeah, it's on my list. But you would think it's like all more comic book shit.

No, no, no, no, no. It's just the last episode, Chantani is, has a perfect score of 100% on Rotten Tomatoes. This does not literally ever happen. On IMDB, the episode has achieved a 9.5 out of 10, which is higher than the previous three episodes, which scored 8.8, 8.5, and 9.1 respectively. This is like Sopranos level accolades from, not critics, these are people watching the show, like regular people.

And I don't know what it is, the combination, the scripts are great, the actors are great. The writing, the, that's. Yeah, that's not Andy Garcia, by the way. It's not? We were both, we both thought it was. What? No, no.

You guys have really come around on this show. Yeah. Because I was listening last, like, few weeks ago. The first episode was good. You guys have really come around on this show. Because I was listening last like few weeks ago. The first episode was good. You guys were like, oh you guys are on a purple car. The most recent episode was so good. Wait who is the dad? That's not Andy Garcia? No. Looks like him. Who is it?

He's a younger actor. Oh wow. Yeah it's not him. The main girl in the movie she plays Sophia. Phenomenal. She was the wife in Wolf of Wall Street. Oh the original wife. Notenomenal. She was the wife in Wolf of Wall Street. Oh! The original wife.

Not Margot Robbie. The original wife that he ends up leaving. But I never saw her in anything. She's like a major part of the show. Everyone on the show is great. Shout out to Penguin. That's a good tip. You guys should watch that on the flight home.

There's four episodes. That's four hours. You could blast your way through it. So, all right. Mark Strong? We'll do this later. Hey, I want to thank everybody for listening. Guys, the downloads are going absolutely crazy for the show.

We're getting new reviews. The YouTube is blowing up. It's just, it's an amazing time to be making this show for you guys. And I just wanted to say thank you to all the viewers. Shout out to all the YouTubers and all the listeners. I don't care if you multitask us. Mike doesn't care. You could do whatever you want. Just listen to the show. Thank you John, Duncan, Nicole, Rob, Chart Kid, Matt, Sean, Daniel, everybody, Graham, everybody who works on the show. Everybody's on fire. And special thank you to our guests.

Warren Pies, Fernando Vidal, guys who are on Twitter. Are you tweeting or just him? Yeah, we're both on there. You're both on there? All right, follow the 314 guys on Twitter, on LinkedIn. Hit the website, do all the things. We love you, we'll see you soon. Twitter on LinkedIn, hit the website, do all the things. We love you, we'll see you soon.

Netflix just had a really good quarter. So revenues are 15%. Guys, is that good? Is that cool? Amazing. One more time? Yes, dude. We're ready.

We're ready. We're ready. We're ready. We're ready. We're ready. We're ready. We're ready. We're ready.

We're ready. We're ready. We're ready. We're ready. We're ready. We're ready.