The Compound and Friends - The Myth of Cash on the Sidelines

Episode Date: October 4, 2024

On episode 160 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Sam Ro and Dan Greenhaus to discuss: the future of podcasting, the surge in Chinese stocks, what an "average" year in the market looks like, streaming vs cable, and much more! This episode is sponsored by Pacer ETFs. To learn more about the Cash Cows series of ETFs, visit: https://www.paceretfs.com/products/cowg Sign up for The Compound Newsletter and never miss out! https://www.thecompoundnews.com/subscribe Instagram: https://instagram.com/thecompoundnews Twitter: https://twitter.com/thecompoundnews LinkedIn: https://www.linkedin.com/company/the-compound-media/ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

I thought I was getting Oasis pre-sale tickets today. But I don't have access to the pre-sale. Were they? So I'm getting, listen. Have you seen them before? No. I hesitate to say that out loud. Because I don't want to compete for tickets.

But next Future Proof, they play the Saturday night before at the Rose Bowl. There's a zero percent chance Oasis is playing Future Proof. Zero. No, at the Rose Bowl the night before Future Proof. So I'm going to Rose Bowl. Okay, fine. They are... Yeah, then I go to Future Booth.

I saw them in 02, I think it was, on the tour of Brotherly Love. Was that the last one? Something like that. It was Space Hog, it was three bands that all had brothers. Space Hog, then it was the Black Rose, and then it was Oasis. Amazing.

That was a radio sitting, I believe. Josh, look at this. Is there a Wi-Fi password? This is me in 2006. My dad just sent this to me. Look at the head of hair though. Pretty good. Yeah, not bad.

Pretty good. Not bad. I didn't want to say anything, but it's a lot of hair. It's a lot of hair. Yeah. It's a lot of lettuce. I was checked into a hotel one time, and the lady didn't understand the concept of going bald She asked me what happened to my hair and I said I lost it

She said where I said on in the shower and when you just fell out a hotel And she's like wait what I'm like, what do you mean? Wait what I went bald you Hello She never had a bald That's bizarre. Wait, where was this? I thought so. At a hotel. What country? Look at your head. This is like this on-ball where everyone has like, Let's not objectify each other.

It's like you don't even work on Wall Street. How do you have a full head of hair? I don't have a full head of hair. Did you go to Turkey? It's like you're not even Jewish. Do you know about the- By the way, speaking of- Happy New Year.

Happy New Year. Do you know about the people that go to Turkey and get the surgery? I read something about it. Why is it in Turkey? If we're in New Jersey, I would get it tonight. I was unprepared to answer Vince Vaughn wants a turkey apparently No, but you know why it's in Turkey. It's cuz you know it's cuz the lobbyists They have to yeah, yep, they have the best chemicals You got to go through health insurance and it'll cost 20 times as much here And it's an elective there are a lot of people that will just pay for it straight up here and don't

Need insurance that can't be the only just go bald. It's offered here somewhere. You know, actually, you know what it is offered here somewhere Cuz I'm actually join us. I actually wrote a research paper about balls. Yeah, and senior year of high school About hair transplant believe or not. It was about hair transplants And it got into the history of hair transplants and wigs and how like, you know, people like, I don't know if you know this, but way back in the day when people used to go bald, I'm probably like 16, 1700s. This was the part I wanted to cut.

We'll get to finance in just a second. My name's Cork! But like in like the 1500s, 1600s, when like royalty would start losing their hair, they were really concerned about this. And one of the original procedures was to actually just cut out the flesh in the middle of the scalp and then stretch it. No.

And tie it together. Or powdered wig. Powdered wig, yeah. Okay. I know somebody that's seriously... Mom? What podcast is this again? I know someone that's seriously. Mom? What podcast is this again? I know someone that's seriously considering going to Turkey.

It's like you take a first class flight, they put you in a five star hotel, and I think you're done in like three days. All right, before you get to this, I just want to say, Dan, we were after Future Proof, we were at the airport, it was me. Joe Weisenthal. Me, Joe, Sam, Josh was there, Phil Perman was there, and it was five minutes before two o'clock when the Fed was about to cut.

Can I guess what happened? You saw this on Instagram? I didn't see it. Can I guess? Go ahead. They cut. The Fed cut. Was there a guy in the airport playing Here Comes the Sun? It was honestly, it was too much. It was like too much. I said if I die now, this would be a great place to end it.

I wasn't there when the actual decision happened. It was f***ing surreal. There was a guy playing Here Comes the Sun. I saw him. As the guitarist in the airport. It was unbelievable. He literally started playing right at 2. It was almost as if he was getting paid from 2. It was too much.

Should I go get the guitar and play Here Comes the Sun now? It was too much. Yeah, Jon, play us in. Play us in. Do you guys have the budget for Here Comes the Sun? We will get sued into the Stone Age if we play Here Comes the Sun now. We can recreate it. Yeah, John, play us in. Play us in. No, we can, we will get. Do you guys have the budget for Here Comes the Sun? We will get sued into the Stone Age if we play Here Comes the Sun. Be epic.

We could sing it, I'm told. Would you get your news from Amazon, from Amazon Prime, if they put Brian Williams on? Would you? I think I might. Listen, you have to get your news from somewhere. Elon Musk is my only source of news. Let me ask you, let me ask-

This is one of the few things that cable still has that streaming doesn't, and Amazon just hired Brian Williams to cover the election in November. Listen, increasingly, obviously, are we live? Should we? Yeah, go ahead, yeah. He needs to make a flight. I'm all, he led. No, I gotta make a Rosh Hashanah dinner.

That's what I gotta make. He has to get home before sundown. I'm hosting now. Or he turns into a bagel. Shout to Lido Cotardelli. Nicole, you know about Lido Cotardelli. Of course I know. I feel like that's Anthony Cimetti.

Thank you for catering. Wait, what did you just say? I turned into a moxiball? Yeah. Hang on, hang on. Nicole, before you clap, a word from our sponsor. In a world where the stock market has been increasingly concentrated since the start of 2023, investors need to turn

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you check out PacerETFs.com slash products slash cow G. Welcome to the compound and friends. All opinions expressed by Josh Brown, Michael Batnick, and their cast mates are solely their own opinions and do not reflect the opinion of Ridholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholtz Wealth Management may maintain positions in the securities discussed in this podcast.

Oh! All right. All right. Hey guys, we're going to play around a little bit with where the ads are coming from. All right, all right. Hey guys, we're gonna play around a little bit with where the ad unit goes. Proud of this unit. So I don't know if we just did the ad

or we're about to just do the ad. So I apologize in advance for messing with the formula, but that's the way it's gotta be. This is the biggest investment podcast, literally in the world. You guys are the reason why. And I'm telling you right now, this fall we are coming so hard. We have some amazing shows planned.

Today is the start of a legendary run we're about to go on. Let me tell you something. My two guests today are fan favorites, repeat guests. These are like among the best shows. It's not that we don't like new guests, but when we have killer podcast guests that the fans already know and love, it just, it makes it a pleasure.

And I'd like to- Are you nuts messing with the mic? Yeah, don't touch the mic though. You'll be thrown right out of here. All right, guys. So without any further ado, let me tell you, let me tell you who's in the house today, Dan Greenhouse is the chief economist and strategist at Solace alternative asset management.

Solace manages over 3 billion for institutions and family offices and specializes in event-driven, distressed and special situation investment opportunities. Welcome back, Dan. and special situation investment opportunities. Welcome back, Dan. When we first started the podcast in 2021, I sent like four emails out to my favorite four people. And I said, we're gonna do the show

and you're gonna be a regular. And here's what we're gonna do. And it's gonna be in person and the pandemic. We're going back to New York and blah, blah, blah. And I do this like 500 word email and everybody I sent the email to responded with, I'm in except Sam was like, dude, this sounds amazing. But are you sure you want me to remember this? Yeah, find this email.

Yeah, you know, I say, you know, it's funny you mentioned that I was actually looking at that email thread and you're like, I'm terrible at this or something. What? Yeah, no, it's like you mentioned that. I was actually looking at that email thread. Okay. And you're like, I'm terrible at this or something. What are you? Yeah, no, it's like, this is not my thing. So it goes me? This is not my thing, because it's like, nothing gives me more anxiety than public speaking,

you know, God forbid TV podcast. I watched you give an interview at Future Proof to someone else, and I was like a third party. I wasn't even in it. You are 100% more comfortable now than you were a few years ago. Well yeah, I mean, you know, it's a big part of like what you do now. To be honest, you know, when I came on to the, you know, one of the first compound and friends, that was sort of my

practice. Yeah. I mean, you actually caught me at an interesting time, because, I mean, now this is like actually two or three jobs ago, but like it was a time when I was thinking you know what I think I might want to consider going out breaking out and going out on my own in which case you also have to do all your own marketing like you know it's like when you go independent you know you're responsible for getting the publicity out there so there was that part of this that there was that side of it that also pushed me but you know of course when you reached out to me, you know, that also is a big boost of confidence.

Look at you. Sam is the founder and author of Ticker, Spelled TKER, an award winning newsletter covering news data and insights informing long term themes for investors in the economy. Both of you guys are reliable sources for me to like know what's going on. And so I just wanted to say thank you so much. And it's great having you back. With that being said, Google Notebook language model has taken the world by storm this week. I gotta tell you something. This is the hundred and sixtieth show.

That was arguably your best transition. Thank you so much. With that being said, I saw them on CNBC playing with this thing. So basically, so my point is, basically now you can just like make a podcast by typing a few words into an LLN. Did Chris send you hours? It's not, you know, it's easier, it's easier than typing a few words. You just put PDFs, you throw a chapter from a book, you throw research notes in,

and you give it like three minutes, and it comes out with a 15 conversation between two people. So that's where I'm going with this. The four of us could each take a PDF of things we've written, throw it into a pot, and then we could go to Peter Luger, and just let the AI do the show.

Yeah, I mean, you know, I'm sorry, but like this could be the beginning of it Listen if that's how we're going out. No, but I mean I think there's like it'll there'll never be anything that replaces You know actual personalities people don't come on to this podcast because it's two finance guys. It's Josh Brown and Michael Did you hear this thing? Did you did you like hear anybody make a version of this? I don't know what so I could take I could take a research report Did you like hear anybody make a version of this? I don't know what's going on. Is that a thing?

I could take a research report. No, I'll save you some time. That you've written this and make a podcast of you talking. So what? Actually, this sounds probably terrible. So I've. Yeah, yeah, yeah. Hold on.

Try it. Try it. Hold on to the mic. Oh, actually, hold on. Let me set this up. So a week ago, I took all of the weekly sell-side research notes from all the firms that come in every Friday. I thumbed through some of them,

and then I heard about this on TikTok of all places. And so I download, I go to the website and it says just drop files here. Drop 20 files in here. Comes out with an FAQ, comes out with outlines. It's incredible. Who'd you put in there, like chief strategist on Wall Street? Well, that's the nice thing about this is it tells you all the

sources. Why don't we just actually jump into this? But yeah, I throw 20 notes into this thing and it comes back with a podcast. Hold it to the mic. Because we are diving head first into a mountain of economic intel today. Oh, yeah. We're talking reports from Black Rock, both foe, Deutsche Bank, even the funds.

I want to hear about like making news. I think our jobs are safe for now. Markets and, look, I know Financial Reports doesn't exactly scream thrilling Friday night, but hear me out. It's drier than my, well, nevermind. This is Joan Tracy. Wait, what?

What did she say? It's super informal, but hold on a second. What is this? Sam, Sam, Sam. Sam, Sam. I swear this has nothing to do with me. It's super informal, but hold on a second. Sam, Sam, Sam. I swear, I swear that this has nothing to do with me. It's just, it's just, it's just personality. That has everything to do with you.

It's the personality. You press play. Let me, let me, okay, Sam. Who else could it have done? It's Sam's. It's Sam's GPT. It's wild how this stuff actually hits home, you know? It's not just numbers on a screen.

Exactly, it affects everything. Give it like five seconds. Now let's talk about the big kahuna in the room. 2024 election. Oh boy. Here we go. Every election year is a little wild, right? Like economically speaking.

But this one, wouldn't you say there's an extra layer of, I don't know, intensity? Absolutely. This time feels different because the policy changes could be massive, depending on who wins. I mean, you look at the Deutsche Bank. Morgan Stanley reports. This time feels different because the policy changes could be massive depending on who wins. I mean you look at the Deutsche Bank Morgan's very better. We're listening to a podcast on a party This is a new thing we're doing now two candidates, especially when I can't take it anymore Yeah, I like that she starts off as a pervert and then and then

Keep it clean, but it's like they do such a nice job of like, hold on a second This is like. I just want to make a quick point about this. So this particular LLM aside, when ChatGPT came out and we were talking about it internally, I think the important point for people at home, it's considerably more prevalent now and more well known than when we originally saw this,

but where we're going with all of this, because that's a podcast Sam dropped in the notes, the information was fed to it, the voices are artificial, etc. etc. We now know you can obviously generate artificial faces, mouths, etc. Where this is going is in five years and 10 years, you're going to be able to go into your own SLM, a small language model, and say, I want to watch a Quentin Tarantino type movie starring Jessica Tandy. Jessica Tandy, I don't know where that came from.

But sorry, just- It's super specific to you. Jessica Tandy and Dolly Parton, it's set in 1970, film noir, et cetera, et cetera. And some version of, ultimately, your own content creation will be where this is going. And it started with, well,

what if Tom Cruise played Iron Man? And you just facial recognition, drop Tom Cruise's face right onto Robert Downey Jr. Et cetera, et cetera. But ultimately where this is going, and it's incredibly exciting, and it leads into one of the topics we're gonna talk about about Amazon News,

where content is gonna be five and 10 years from now is going to be one of the topics we're gonna talk about about Amazon News, where content is gonna be five and 10 years from now is going to be one of the most exciting developments of all of this. It reminds me of hip hop in the sense of like, here's a quaint of records from my parents' garage. I'm throwing a party, I'm gonna mix all these things up, and I'm gonna take like Sly and the Family Stone, and I'm gonna drop a break beat from Stevie Wonder

on top of it and I'm gonna create a whole new song using things that already exist. So if I'm in the mood to watch a version of Iron Man where Tom Cruise is in the suit, I can do that sort of thing. Probably there'll be a whole lot of copyright laws and stuff involved. You've already seen a couple of actors and actresses on the fringe.

Oh, I'm sorry, singers. I forget who, maybe it was Halsey, I don't remember, but when the Drake thing happened. Yeah, she said, remix me. Like, do an A.I. me song and I'll split the royalties. For the viewers out there, there was a moment in time where someone made a Drake beat, a Drake lyric, a Drake voice, and it ended up like number one on the iTunes charts, and obviously none of it was Drake.

And there was this big outcry, and this is for the younger viewers out there, go check out what happened with Napster in the 2000s, because I imagine we're going to go through something similar, but there was an artist, maybe it was Halsey, we don't know, who came out and said, use me, use whatever you want, just split the royalties with me. And so right now, Tom Cruise is obviously not signing on to this, but at some point, they're probably going to have to give way

and allow people to do this sort of thing. The next generation of artists is going to have to be way more comfortable with people creating their own art based on them. It almost seems like that's going to be a prerequisite for stardom in the future. I mean, you can already do it now. If you want to do a podcast, but in the voice of Donald Trump, give me, you can tell Chat GPT or Perplexity, whatever, write me a three page paper about the Paleolithic era in the voice of Donald Trump and it will do it.

Can you imagine the sick twist of mind that would ask for that? I just said it out loud. So here's my- that would ask for that? I just said it out loud, so I take offense. But before it gets too dystopic though, that does not mean, you know, movies made by directors and made by actual actors is gonna go away. There was a big gigantic AI report from Goldman Sachs a couple weeks ago exploring this, you know, the idea of this dystopia scenario

where everything gets replaced. But like there's a long history of things that existed that got this, like for instance, sliced bread, right? Mass producing white bread or something like that. You can buy a loaf of bread for 50 cents. Silent movies. Yeah, silent movies and all that stuff. There were people that thought it was the end of the world

because the movies had sound. Right, exactly. But they were mentioning that the market for artisanal handmade bread is a multi-billion dollar industry and it continues to boom. So there will continue to be that supply out there because, you know, like with movies, there's going to be people who want to see something with real actors, with real directors and all those little things that...

I want to take it a step further. It's worth even more. When everything is so easy, the authenticity becomes worth even more. When everything is so easy, the authenticity becomes worth even more. And that's why you see Taylor Swift, who basically like you can listen to every Taylor Swift song in the world at the tips of your fingers. You have her whole catalog. You could watch endless videos of her online for free. But being in the same building that she's in performing is worth something that's literally priceless to the fans. And you can't, just because it's a digital version

doesn't mean that it replicates the real thing. So a lot of the, so the humans are starting to fight back. The riotous strike, a lot of that was about protecting them from AI. Now the longshoreman strike is, they're trying to, you know, they don't want automation replacing them. Like this is going to become a more and more frequent occurrence. the Sherman strike is they're trying to, you know, they don't want automation replacing them. Like this is going to become a more

and more frequent occurrence. The problem with the automation argument is the US ports are among the least efficient. It's ridiculous. It's ridiculous. Anybody can go look this up. They're incredibly inefficient. And I saw a quote this morning, Jim Garrity

over at National Review, I believe it was Jim Garrity, found this old quote from the chair, I'm sorry, from The labor leader who said something who was lamenting the decline of toll booth collectors Let me fucking break like his his point was oh sure everybody likes going through nice and quickly But nobody gave a second thought to the union jobs that we lost as a result We're gonna do this later, but let's stay on this port strike Do you guys think that this is a material threat to the economy? Should it run on for two weeks or a month? Yes. If it runs on for two weeks or a month now?

Or you don't think it's going to run on? I have no insight, but I think if it's two weeks or whatever, it has, I mean, you're talking for the 14 ports affected, roughly a quarter of the country's imports, a quarter of the country's exports come in through those ports. We've had strikes before not too dissimilar to this one, so we can basically measure what traditionally happens. You end up with inventories building up, but then that obviously gets worked off. Subsequently, you're talking about something measured in half-tenths or tenths.

This union hasn't gone on strike in 50 years. This one has not, that's correct. But there have been transport strikes before. If it's two weeks or even three weeks, this is not. The economy is pretty healthy right now. Yeah, would I run to Costco and stock up on sausages? No. But certainly if it drags on a month, two months, three months,

that's a different story. But two weeks, three weeks is no effect. I think Dan's point about the economy being healthy right now, like I think that if there was any better time for this to happen, it's probably now when inflation is under control and unemployment is very low, people have incomes, people have savings, so that they can actually spend and whatever. But let's also remember that one of the biggest business

stories of the last four years has been global supply chain disruptions and how this was a huge problem for all these gigantic companies that have to go out and do business. But doesn't this say they're not over yet? It says they're not over, but they've had years to prepare for this kind of thing. Like everyone's, I mean, there's already been reshoring and unshoring and all this kind of stuff. The way businesses manage inventories and, you know, just in time versus, you

know, whatever the other case just in case. Yeah. Just in case inventory, like just in case is more of a thing now than it was two years ago, for instance. So I think companies are just generally better prepared for this. Before we before we get into what people actually want to hear us talk about the market and the economy, Josh, getting back to the thing you said about Brian Williams, nobody cares. Like news is not a valuable property anymore. Nobody, who's watching CNN? The thing that I'm saying though is the last two things that cable had that streaming didn't were live sports and news.

But is news still a valuable property? Yes. It is? Yes. Fox News is, obviously. Extremely valuable. Fox News is one of the best, one of the best businesses in the history of television. But they're a unicorn.

Well, but no. But so listen, I mean, it is accurate to state that the last two things that Linear has is live news and live sports. And that's, but the decline you've seen in subscriptions from 100 million down to 30 million now has been linear in nature. But you're probably reaching the end of the linearity

in the sense that the 65-year-olds, year olds, they're not going anywhere anytime soon. So I think you're going to see some leveling off from call it a mid single digit decline annually in subscriptions to something a little less than that. I mean, that's my guess, obviously, if only because of inertia, there's just a lot of people out there that aren't interested in. I'm sorry, just real quick. How, remember there was a, uh, was Aaron judges, uh, 60th home run game was only on Amazon and there was a humongous outcry among everyone's moms and dads because they didn't know how to watch the game.

You can have that happening every day. If it's Dak Prescott or, or Aaron judge or whatever sport it might be, linear still has those people locked in and they're not going anywhere. But Dan, they're getting us used to it. We're probably within five years of a streaming Super Bowl. We had a streaming only playoff game. Oh no, I disagree on that.

They're boiling us. They're boiling us and we're gonna get there. Football is still... It's today. Yeah, I'm not saying we're not going there. And listen, you've got Thursday night football, yeah, you've got Thursday night football on Amazon. Basketball obviously is gonna have some game streaming.

Wrestling on Netflix, that's millions and millions of people. I actually just watched the McMahon documentary. Sick. What a sick. So they're gonna have this three nights of wrestling a week. Did you watch it? And one of them will be Netflix.

They're getting us used to it. No, listen, Netflix has said all along, live, well, more recently, live sports, video games, et cetera, et cetera. I don't listen to sports, especially with what's going on at the regional sports networks, with ballies and baseball in particular, but hockey as well. There's a lot of, linear just can't afford

everything that's happening right now, so it's gotta find other distributors. If CNBC went on Peacock and the MSG network were like thrown into an ESPN bundle, I might seriously cancel my cable. You could stream MSG. You could stream CNBC right now. You just don't want more things.

I'm saying like the last few things that I genuinely, news and sports are the last two reasons to keep any cable subscription and not just strip it down to broadband only. It seems ominous for cable, but as far as like the- But great for broadband. It's great for broadband, probably. Yeah, I mean, I actually came into this conversation

thinking everyone's gonna say that this is a terrible idea for Amazon, but it sounds like an interesting- They're gonna do it. I think it's a terrible idea. Nobody's watching Brian Williams on Amazon. Well, of course they will. They're paying for it anyway. They're prime users.

I mean, the thing about the news business is the hardest thing to do in media is get audience. And so, which is why you'll hear about all these startups that hire 100 people and then they shut down in a couple weeks because they can't figure out how to get people. Amazon is one of the most visited properties. They're already there.

Yeah, they're already there. So it's just a matter of like putting something in front of this empty space. But to be clear, these properties have value. You mentioned Fox. Take a look at the stock price. Obviously, there's issues with subscriptions. There's no doubt about that. And all of these guys are trying to get other revenue streams.

The New York Times is a perfect example. The New York Times when Trump took office juggernaut was $10 a share. The New York Times is a perfect example. The New York Times, when Trump took office, juggernaut, was $10 a share. Now it's 50 bucks a share. They're charging you to play wordle. They're charging you for cooking. So it's not that you don't need alternative revenue streams, but people still want news, and that's obviously print.

And with respect to television, like there was a lot of lamenting about Tucker leaving Fox and what that would do to viewership and there's no doubt that Jesse at 8 has a smaller viewership base. First name basis? Who's Jesse? Jesse Waters at 8 o'clock. Oh, Jesse Waters.

Yeah, sure. I don't watch that shit. Okay, well. Sally Jesse? Sally Jesse Waters. Definitely not Sally Jesse Raphael for the... But there's no doubt that viewership is not... But there is a locked in audience for MSNBC and CNBC called a million

There's a locked-in audience for Fox call it two to three million depending on on the on whether it's hard news or the other Opinion hosts those people are not going anywhere. And so there is people do like real-time news and and From from Amazon standpoint you want people just you want people watching Now, is Brian Williams going to draw people? I mean, listen, CNBC tried this with Shep Smith. CNN tried it with Chris Wallace. These guys probably don't have an entrenched audience that goes. Well, you said those people aren't going anywhere.

They're dying. I mean, not to be crass, but they're not getting any more viewers. The old people watch news and nobody knows news viewers. But the thing is, it's like, if you're an Amazon customer or if you're on Prime, you have to go somewhere else to get news. Right. Once you don't have to, it changes.

Yeah, and some people leave, but it's a question of how many people are they able to keep on. And, you know, whatever this Amazon news venture is going to be, they're not dealing with all the legacy issues and legacy costs of all these other things. If we see a presidential debate, these are arguably the biggest nights for the news, is election nights and debate nights, and then, you know, obviously, God forbid, something terrible happens, but like those are the big nights. If for whatever reason, one of the streamers locks down a presidential debate and they're showing it live, that, I mean, that's that'll be a sign that, like...

To be clear, there's absolutely no reason, especially after what's happened in the last four and eight years with the breakdown of the presidential commission and how it traditionally organized these things. There's absolutely no reason why a streaming service cannot have a presidential level debate. Zero reason. Yeah, and somebody will get one. Yeah, absolutely. And somebody will get one.

During the... So the debate was this week. We're going to get into that in a second. The vice presidential debate was this week, and're going to get into that in a second, the vice presidential debate was this week, and I was watching something on a streamer. And if there had been like a little pop up in the corner, hey, the debate is starting right now, I never would have left the app.

The only reason I'm back on the cable, and I have to use a different remote, is because there's something on the news that is not on the streamer. Well, could it be syndicated on the streamers? Like simulcast it? Yeah, sure. Absolutely.

100%. All right, is the stock market getting ahead of itself? Why'd you ask it like the church lady? You said something very smart last time you were on and I want to remind you what you said. I asked about the odds. The mixture trade for New Towns? No, no, I asked about the odds that you were on March 15.

It's not that long ago. I said, what are the odds that another country could outperform the United States in 2024? And you said Chinese stocks have a good chance of catching up. Well, she I mean, that's like, there's the best performing large market. I said that entire sentence. No, I and I add the last part, you nailed it. Okay. Bullish because of an expanded middle class.

You mentioned LVS, TRIP. TRIP's at 51%, LVS is only at three. Split the difference. I'm gonna- And he said it was gonna be in late September. No, but I don't think anybody was saying like, China is the bet this year. Hold on a second.

Go ahead. I'm almost positive that was Peter Bookvar who was on with me. Yeah. You think that was him? Yeah, I'll take credit for it. That was on that show then. Yes, but Peter has been,

Peter, and here he is. Or hired. Peter, I think that was Peter. So all right, but you sat next to Peter, and let's be honest, that's like the important part. Yes, I'll take credit for Osmosis, but. You gotta be, either way, the point is, you gotta be surprised by the strength in the. Yes, I'll take credit for osmosis. But but you got to be surprised. You got either way. The point is, you got to be surprised by the strength in the US market. And of course, obviously, foreign markets, China, India. Yeah, I listen, I'm I've grown up in it. We've

all grown up in an era where the US market is just consistently outperformed for any number of reasons that that viewers may or may not be aware. And and after 20 years of people telling me diversify, diversify, diversify, just being in US stocks, particularly high growth stocks, for much of that time has been just fine. Missing nothing. And I also, listen, there's tons of research that tells you geographical diversification is a benefit to portfolio performance,

and I leave that out there to the RAs to impart that wisdom onto their investors and clients. But from my standpoint, the S&P 500 is pretty geographically diversified itself. And if you are a retail investor out there, I don't know that I need much more geographic diversification than the spider already provides me. That's bull. Yeah, you get like 40%, 30 to 40% of S&P 500 revenue is coming from abroad. So, Vanguard was selling a ton of international ETFs and Jack was like, donate them.

Yeah, I mean, if you're buying, if you're actually buying international stocks, companies that are run out of Europe and Asia or whatever, I feel like that's more of like a corporate governance play or a cultural play or a capitalism play. Whereas you could have a US run company with the US brand of capitalism operating in France or you can have a French run company operating there with their sort of approach to how business is done. So it's a question of how those companies. And their tax rates in there. Well we have casino companies in the United States

that effectively are getting all their growth from China. Those trade like proxies. And yeah, I mean, another way of looking at this too is automakers. This was particularly a big issue during the financial crisis. Why are all these automakers failing when these Japanese automakers operate differently? and you have all these things ranging from unions and pay and how the companies operate. So like, yeah, maybe, you know, in that sense, you have two businesses that both have US exposure, but it's a question of how the company is. If China does 30% this year and 30% next year, it's going to be a 5% weighting in like a quarter

of all wealth management portfolios. That's how it works. I saw a stat today from Brendan Ahern, answer to a client question, how much dry powder do Chinese citizens have? There's $43 trillion in bank deposits. Is that a real data point? You can't look at Chinese data points

to say and impart US. 43 trillion yuan? Yeah, not dollars. All right, calm down. It says dollars. Really? Well, not dollars. All right, calm down. It says dollars. 43? Well, whatever the number is. That sounds unlikely.

It's hard to impart US investing acumen approach to the Chinese market. It's just the Chinese economy. It's a lot of yuan on the sidelines, I'm just saying. Oh. Oh. Oh. So.

You should just go home now. We got some good data today. Out of these here United States, Carl Kittaneda tweeted, highest ISM services since February 2023 highest new orders since February 23 and I believe Josh isn't that Isn't that Nicole's his favorite data point or is it symbolist one of them said new orders is what you want to look at So new orders highest is February 23 highest price space in January weakest employment since June We've been talking about a bullish backdrop here on this show for a couple of weeks

But I want to ask the question to Josh's accent like are we getting ahead of ourselves in terms of performance we've got S&P 500 forward PE. People are saying the G word now. Goldilocks like are we discounting too much? Growing economy, rising earnings, falling interest rates. Oh Dan's shaking his head. Let him cut come they're saying it. I'm not saying it Listen Amazon news I implore Viewers tremendous. I implore the viewers and the listeners out there to heed these words For the last 20 years. No since let's just say since 2010

There has been a large group of people who at any moment in time would come out and tell you the five or 10 reasons why you should not be investing in the US stock market. And I sent over to you guys, because I knew something like this was gonna come up, clips, I don't know if we have it, but screen grabs of various newspaper articles from 2014, 2015, 2016.

On screen, John. By the way, while we have it, I want to draw everyone. Oh, it's not up there. I found one written by Sam. Oh, really? In 2014. No, it is, in fact, he was a business insider. It's not his fault. It was business, it was a business insider.

I was just a messenger. Fine, but. Hold on, read these headlines for the listeners. For the listeners, here's Jesse Solomon, CNN in 2014. Four signs that the stock market is overheating. Here's Jesse Solomon, CNN in 2014. Four signs that the stock market is overheating. Thanks, Jesse. There's Market Watch in 2016. There's market. This is Forbes at the top. How the S&P became expensive. 2016 and 2015 on the right. One is USA Today and the other is I don't know

what. But the point is these, this is, and these are just obviously one moment in time. Brett Aarons, why the US stock market is one of the most dangerous in the world. He wrote a lot of those. All right, so Dan is obviously complacent. Sam, let me ask you. No, I agree with that sentiment. Especially, I like the idea of going back into history

with these conversations, and a lot of those headlines, by the way, address valuations, PE ratios, price to sales ratios, which by the way, address valuations, P-E ratios, price sales ratios, which, by the way, is like the world's worst timing. That's how you lose money in the market. That's how you lose money in the market. Valuations are too high. I'm like, I'm going to sell or I'm

going to be out of the stock market. It's almost like we deserve a premium high. I mean, and the thing is, it's like in a given moment in time, you can probably say, oh yeah, stocks look expensive. But you're also battling with time there, right? Especially in an economy and a world where earnings tend to trend higher, right? If we're looking at, you know, expected earnings growth, that's double digit year over year.

And who knows how accurate this stuff is, but historically it's been pretty consistent. You're dealing with, you know, valuations where the denominator is now increasing so as time passes every quarter passes the denominator is getting bigger so you can have a you can have a you can actually have a scenario where valuations are coming down but stock prices continue going higher because the earnings are catching up so yeah it's yeah like valuations are disastrous especially when you add buybacks into the mix you have companies that are now capable of on a yearly basis buying five, ten, and fifteen billion dollars worth of stock. I'm not talking about Apple.

I'm talking about like your rank and file S&P 100 large cap can retire 10 billion worth of shares a year. This is another way where market caps don't climb, valuations don't climb, but stock prices do. But I want to get back to the essence of your question, and I just spoke to Dan Nathan about this. So the economy, so if we stipulate and accept this facts, the economy is doing fine, earnings are continuing to grow, there's no imminent signs of a recession or any sort of financial

crisis along the lines of what we've experienced in our lifetimes. So the stock market all else equal should go up in that type of an environment, and or any sort of financial crisis along the lines of what we've experienced in our lifetimes. So the stock market, all of us equals should go up in that type of an environment. And yet we find ourselves, the royal we find ourselves saying, well, are we getting a little ahead of ourselves here? And what I find just so amazing inherent in that question, which you're not asking out of the blue, obviously, there's all this stuff in the ether that would lead one to ask that. What I just find amazing is that in the face of this resiliency in the ether that would lead one to ask that. What I just find amazing is that the,

in the face of this resiliency in corporate profits and the economy, the reluctance of any number of investors to just go, okay, we're doing okay. I'm bullish. You're like, I'm bullish. I don't know, but you can't say that. People are afraid to make money. But when you say, is the market getting ahead of itself,

when anyone's... Who am I to know? No, no, no. It's not even that. It's like, what you're not saying is, am I wrong to buy? You're saying like, are prices like just too advanced and they'll get there eventually, but they've gotten there too quickly. That's what you're really asking.

The market goes up. The real question, it's not whether like, when I as a strategist come out and say, I think the market's going to 6,000 or something, it's going to get to 6,000, whether it's today, tomorrow, or the next day. The real money is made in your sector dispersion, and there's plenty of research to bear this out. Some I've done, some elsewhere. Saying this market goes up, that's no great feat.

Being permabullish is just, duh. The question becomes, do I want to continue to overweight tech stocks in this type of environment? Do I want to continue allocating to semiconductors or do I think cyclicals or do I think defenses or? Those are the decisions that ultimately generate the type of alpha that lead to, at least on the retail side of things, outperformance. On the institutional side of things, you're trying to find names that are either underappreciated or undervalued in that type of environment. But again, with that backdrop, I just, I don't understand.

I haven't, I've felt this way for two years. I go on TV or I talk to people who are bearish and I don't understand. Because I will let me fill in the blank for you. It's super embarrassing to, in an unqualified way, say, buy them here on bullish if they fall. It's way less embarrassing to, in an unqualified way, say, buy them here on bullish, if they fall. It's way less embarrassing to say, yes, but, and then they fall, and you say, but I said, but,

like I gave you the caveat. When I switched to the hedge fund from the sell side, one of my friends, former client's friends, who was on the buy side, used to tell me, there's no such thing as constructive,, there's no such thing as constructive, or there's no such thing as nervously bullish, or anything, you're either long or you're short. Well, yeah, in fact.

In fact, you're either long or you're short. And I bring that up because the number of people that go on TV. Cautiously optimistic. Cautiously optimistic, I'm sorry, I was struggling to remember, cautiously optimistic. There is no cautiously optimistic. The number of people who go on TV and talk reluctantly,

nervously, cite bearish or negative statistics or observations and are fully invested. Stop hedging. It's a numerous. It's a commentator stop loss. Yeah, that's right. But it's a career, but it's a career survival kit. But the people listening and the people watching,

watch these people and go, well, you know, the person I like was cautiously, I'm going to dial down or I'm going to tell my guy to sell this or that or girl. It's not helping anybody. It's not helping anybody. Speaking of the people watching, so Josh, I don't know if you guys know this about Josh. Josh doesn't think highly of himself.

He has a very low ego. So let me allow myself to pick Josh up off the mat. I can't even tell if you're being sarcastic or not. I'm being very sarcastic. Okay, thank you for that. Thank you for that. However, our friend Phil Huber just texted me this. A watcher of CNBC apparently is Bill Gross.

Okay. Bill Gross tweeted, Josh Brown on CNBC Today quotes the turkey from Jesse Livermore's tome. It's a bull market, you know. Not so sure myself, but anyone with the scope of financial history like Josh should be respected. I watch him as much as possible, smart investor.

Bill f***ing Gross tweeted that about Josh Brown. I met Bill for the first time at Future Proof last year. Did you talk stamps? I didn't get like 10 minutes with him. I got 5 minutes and I used 1 minute of that to set up a selfie. But it's the legendary Bill Gross. Like what could be better than that? Maybe I should go back to Twitter. Are people saying nice things like that about me all the time?

I doubt it. Bill Gross hired Tony Krasensky, my boss, so to speak, at Miller Dayback, and that allowed me to be the chief strategist at Miller Dayback. All right, so Dan, I hear you. Shout out to Bill Gross. We're with you. Josh and I have been very constructive,

because how could you not be? We're just trying to give maybe a little bit Of I'm trying to give a grandma a pitch myself because oh, I don't get embarrassed So here's this from more than capital the SAP 500 forward PE at the month of the first Fed cut is the highest It's been in history. This is a pretty neat chart again. Is it meaningful? I think to me listen Why shouldn't multiples be elevated? We have a very bullish backdrop. I Think the other thing to remember and Sam, I've been talking a lot. I apologize.

But the other thing to remember is that historical analogies, whether it's this or the last time the Fed cut by 50 basis points types observations is you have to remember the you have to keep in mind the royal, you have to keep in mind the uniqueness of this situation in the sense that unlike previous instances, there's no granted in retrospect, but even at the time, there's no obvious issues arising the way that there were in 2000 with just the incredible rally in stocks in 1999. And certainly the back half, you had stocks splitting two, three times per year, trading at a hundred times, assumed EPS, let alone

actual EPS, obviously 2007, you'd already had down the, you'd already seen the breakdown of the mortgage market, of the credit markets. So there were all sorts of warning signs. And this is not that. I don't, like, as I've said before, my job as a strategist in an actual sense, as I put it, to try to see today that which tomorrow

is so obvious in retrospect. And I look around and someone just, point to me the thing about which I should be worried. And the items that get cited to me are, credit card debt is high. Or. Distrait of hormones. Distrait of hormones, like,

which might be a real issue for the moment. Yeah, no, I don't mean to laugh at it. It's like nervous laughter. Okay, this is the thing. Yeah, but you know, if you're putting together a list of like what's the thing that's going to make me nervous, in booms and busts alike, there's always going to be a Strait of Hormuz in every boon history. Where is COVID on people's worries list? It's always what we don't see.

Maybe the Strait of Hormuz was... That's what risk is. It's not always what you don't see. We saw the housing market coming for three years. Barry did. Barry did. Barry did. Four years. I want to ask you guys, let's move the puck a little bit off of valuation.

Let's do this blue chart. So people, this is, maybe you guys can explain this to me. When I see this, I'm like, all right, I don't really, I see what it says, I don't know what it means. This is some daily chart book via Goldman. Via Morgan? This is a via, via, via? Sorry.

Non-dealer and US equity futures is at record high. So this is all investors, less market makers. Okay, so people are bullish. I would- It's futures positioning and it's implying that, like, everybody is bulled up. This is a dun, dun, dun type of chart. This is net?

Dan, you buy this? This is net? It's always net unless it says otherwise. I don't don't don't type of chart. Dan, you buy this? This is net? It's always net unless it says otherwise. I don't know. It says net, yes. Is it gross exposure or net? It says net. It says net. Well, listen, people are bullish for sure.

Forget how they talk. Why wouldn't they be? But why wouldn't you be? But also the important thing to remember about the futures data in general is you don't know what else is going on in a portfolio. And this is one of those things like cash on the sidelines, which I hope we'll talk about in a minute,

that people just cite as if it's in and of itself an important data point. I could be incredibly short in much of my book and be long futures as a hedge. And this is only capturing one part of your- This is only capturing one side of the ledger. But listen, we know people are dialing up risk. Not to the extreme that perhaps this chart suggests,

but we know people are dialing up risk because the Fed is cutting rates, getting back to the valuation conversation, that is a function of enthusiasm. If your knee-jerk reaction is to get bearish when people are bullish, that's a very good way to lose money over a very long period of time. Well, listen, real money is made going against the crowd. I think most asset managers would tell you, we're not every day though. But not every day. That's right. Not habitually.

One more thing I'd add, not that I'm any kind of expert in this. I mean, this is net, but we're also still talking about nominal dollars. And, you know, everything in nominal dollars. The market cap size is so much bigger now. Everything is much bigger now. So you know, household net worth, stock market. This doesn't look like it's adjusted for like overall S&P market cap.

So Sam, you're going to love an adjustment that we have coming up, so stay tuned for that. This surprised the hell out of me. Five year and 10 year returns. I-year and ten-year returns. I was going to ask a question and... Rolling five-year return including dividends. I was going to say, would you guys guess that they're higher than average? Because when I saw this chart, I was really surprised.

I thought, I assumed that for the last five years, certainly for the last ten years, returns are at the upper decile, historically. And that's not true. So over the last five years we're up 110% which is higher than the average of 73% but it's nowhere near it's nowhere near prior euphoric peaks next chart 10 years zooming out a little bit more. Again higher than average 250 versus 204 historically but not not this alone is

nothing it's not the late 90s not not it's not it's not the late 50s It's not it's not even close so coincidentally I was running some similar numbers for myself because I'm actually coming up on the third year anniversary of my newsletter. It's next week Thank you. Thank you. Um, and so every year we should go out that night and get Annihilated let's do it. I'm all about it. I'm all about it. Because for this stat alone, right? So year one, I launched in 2021, October 2021, a newsletter about how the stock market usually goes up.

Good timing, asshole. Great timing. Market goes down for 19%. 19%. The stock market usually goes up, newsletter. Stocks go down 19%. Subscriptions exploded. Subscriptions are actually really good because that's when people sign up for stuff. Low base. Low base.

All right. All right. Okay. Enough of that. We're getting lost here a little bit. Year two, the market goes up 19%. Year three, to date, today, the market's up about 30%. So 30, 19, minus 19.

Average annualized returns for the last three years, it's 9%. It's like magic. Boom, boom. Isn't that hilarious? A train's never late. Yeah, I mean, you know, it's funny. It also speaks to this whole issue

of average annual returns in the stock market, right? Everyone always tells you, oh, it's eight, nine, 10%, but eight, nine, 10% doesn't happen. Never. No. You get 9%, 10% average annual returns because you have a minus 19% year. You have a plus 19% year and you have a plus 30% year. Yeah. You need it down to get the average. This is another thing that bothers me so much. The average return is called upper single digits, is upper single digits when you average,

but seven percent in real terms. And everyone go, oh, but you never get seven percent or eight percent returns, whether you include dividends or not, but this bothers me so much. That's including down 50% years. Up years, which is what happens most of the time, is way better. Plus 20, plus 30, absolutely.

Way better than upper single digits. You're more likely to be up 20% than down. Yeah, I mean, 20% years are actually not, most of the time is way better. Absolutely. Way better than upper single digits. So frequent. So frequent. Yeah, I mean, 20% years are actually not, from a mode standpoint, if we all remember. Mode, you mode some of it. If we remember high school mathematics,

mean, median, and mode. I stopped after median. I never learned mode. 20% years, or within a reasonable range of that, is pretty common. Well, just think about recent. You do know mode, I've seen you put the chart out. Think about recent, but think about recent history.

Like 2017 was plus 30. 2019 was plus 27. These were normal bull market years. They weren't outrageous by historical standards. And those are insane returns. But what happens when you have people on TV and print constantly constantly constantly saying an average year is 7% Well because they're probably talking about long-term investing. No. And then it's true. No. No. Well yeah. On an annualized basis over time but the

frequency of 7% never happens. I know what you're saying. Who did we have on last week? Tom Lee. So we asked Tom Lee about like, you're not one of these guys that just, wherever the market starts the year, add 8% in stock price growth, 5% in earnings growth. Because to that point, it's not going to be 8%. It's going to be plus 20 or minus 10.

So two things. One, whatever one thinks about Tom Lee, Tom Lee knows what he's talking about. Tom Lee is a hero in this room. I'll tell you right now. That aside, I mean, Tom, as everyone knows, I have much more, I have a lot of respect for, having been one, institutional suicide strategists

are different from a lot of other people who call themselves strategists. Tom knows what he's talking about. And it's why when we all come on CNBC to start the year and say the S&P is going to be up 13%, everyone goes, oh wow, that's a, but no. It must be wildly bullish. It must be wildly bullish.

No, that's what a bull market looks like. That's what a bull market looks like. So what about this grinds your gears? No, this wasn't what grinds my gears. So what does? It was the cash on the sidelines. Oh, what got there? Chill, chill, chill.

Wait, I want to do a Chinese stock market chart. Oh, we're doing it. We're doing it. This is the top five market story of the year. Chart Kid Matt did this unprecedented surge in Chinese stocks. And basically, what you're looking at is the MSCI China index back 30 years.

And what are we trying to say with the forward returns? I got it. I can interpret this chart. Let me cook. The last two times this happened, it, I can interpret this chart. Let me cook. The last two times this happened, the forward returns are pretty good. Up 50 and up 70.

So. The last time after a surge. The last time after we got so we're up 33% of the last 10 days. The last two times that you had, because that's the only happened two other times and I'm teasing, it's a small sample size. But nevertheless.

Is this a double y axis? In statistics class we're told n equals two is insufficient. Yeah, it's a double y axis. It's a double y, but let's keep going because we've got more charts to is insufficient. It's a double y-axis. It's a double y. But let's keep going because we've got more charts to run through. In theory, it's two charts. We've got more charts.

So David Engels tweeted, China is now the world's best performing market this year. For fund managers, the rally may have reached a point where not owning anything, China, means the risk of underperforming the peers is material. The reversal higher the last three weeks has been mental. And I would agree with him. That's a technical term This is out of control just straight higher Katie Greifeld tweeted k-web took in $700 million yesterday its biggest inflow ever those units and of course, we've got to get the crack investors involved I mean that not pejoratively

It's a term of endearment yen, which is the three-time levered one, this is from Bao Chunis, Yin's weekly historical volume chart is insane. There's still two days left to go in this week, and it's already destroyed the record. And so here's the coup de grace. I'm sorry, there's a three-times levered Chinese stocky... Yin and Yang. What do you think Yang does? It's the bear.

So, but we spoke about... I'm lying, Yang does? It's the bear. So so chart So but we spoke about I'm like both of those we didn't make we didn't make these things up That's a pure that's a purely lock in the negative arbitrage This is what you have to deal with flows charts. I said to Matt this morning We have to normalize this because as Sam mentioned, of course the dollars are bigger now, right? So it tells you nothing you go back 15 years So what we did was we look at the six-day sum of the six biggest ETFs as a percentage of total assets Because it's not the dollars. It's the percentage of the total assets that even when you normalize it. It's even more impressive So 16% of the total assets and these six funds have come in over the last six days

Which blows away anything we've seen over the last decade so people are really moving you can only get this after a we've seen over the last decade. So people are really moving. You can only get this after a 15 year period of underperformance, where not only are people underweight, they've just literally written off the asset class. You got stocks in these indices that are seven times earnings with 20 or 30% of the market cap sitting in cash. And that's the only conditions. And think about the 43 trillion Dan. So we don't believe that number. I think when all is said and done, the sum total of the Chinese stimulus, the poly amount

is somewhere around 5-6% of GDP, which is a pretty sizable. It's a big multiplier on that too. Well, listen, yes, but listen, there are solutions that China is not willing to do that are more free market oriented that will be better for them in the long term. But in the short term, you're talking about easing up some some of the restrictions in the housing market. You're talking about injecting money into into banks and fermenting additional lending and ultimately potentially setting up a fund to just like outright buy stocks. All that is in the short term incredibly bullish. it's the underpinnings of all the charts that we just looked through.

But I would also just add, as someone who believes a lot in free market capitalism and free markets in general, this is not how you solve what's wrong with. With all due respect, the Fed and Treasury threw a combined $21 trillion at the stock market three years ago and it jumped start of the economy. There's no, that's, you can't say I don't like their intervention, I only like ours. No, well hold on, I didn't say I liked ours. That's first of all.

But it worked. But. How many votes do you have now? Like you can't say it didn't work, but what we did here, it worked. Just for the audience who's already mad at me because I said I ate you're Luger last time And you brought it up again. What happened last time?

We were talking about inflation I brought a Peter Luger and some a bunch of people in the comments were like that rich guy eating a Peter You're the only one eating a steak. I don't know. I'm a vegetarian Don't bring me into this You and Lynette sent me a video at from Peter Luger last week It's a bull market You and Lynette sent me a video from Peter Lugar last week. Last week. So, what happened? Literally last week. It's a bull market, man. It's a bull market.

I go to Outback. So, a stake at Outback. But now I've completely lost the point I was going to make. It was a good one though, I bet. Oh, we were about to get sidetracked by the difference between our state intervention and their state intervention. I mean, do you have like a very strong take on why it's so different?

Cause I don't. Well, you know, again, the implication was that I liked what we did. But the only thing I would add, and then I'm happy to move on so that he can make his train, is just there's been a lot of research that bears out, that shows the idea that at the zero lower bound, when the Fed is at zero, fiscal policy becomes the more dominant factor in terms of generating output. They did both though. Yes, but what you saw in 2020 that you did not see in 2008, and this is a much longer conversation about why we saw inflation this time and we didn't last time, is these decades

of papers that have been written saying when you get to zero and monetary policy is exhausted and stimulus, the government can dig holes and fill them up and have a much greater multiplier effect. What you saw in 2020 was exactly that. We just, why did the Bush checks in 2001 after 9-11, I think it was after 9-11, not have the same type of economic effect or the cash for clunkers program or the or any of the stuff, the fiscal packages that we had after 2008, why did they not have nearly the effect that happened in 2020 when we put $2,000 in people's bank accounts and spend $6 trillion as...

What's the answer? The answer is at the zero lower bound, which is where you were this time around, exactly what the government did is going to have exactly the type of stimulative effect that happened. Now, granted, we paid companies to keep people on board so that the link between employees and their work, employers and employees were not severed, and we gave people $2,000 to spend.

And just to oversimplify it, in 2008, I bought your watch, JPMorgan, and your watch is worth 100 bucks. And I took your watch and I gave you 100 bucks. I didn't make you any better off, per se. I liquefied you, but I didn't really make you any better off. This time around I said, keep your watch,

and here's $100, and here's $200. That has a meaningfully different effect. The research showed, and now in practice it happened. Now again, is this better or worse than what China's doing? They're both another podcast. Well China's doing theirs outside of an emergency. We're doing, we did ours in an emergency. Sure.

Wait, there's an emergency in China? What, for property investors? Yes. Yeah. Well, I know they have high unemployment, and I know that, you know. Youth unemployment is high. But listen, the problem with picking winners and losers, and this is a fun conversation on Fox in the evening,

but like in reality, the government shouldn't be picking winners and losers. And when you decide property investment, for in some cases, justifiable reasons, property investment is going to be the investment vehicle by which we're going to spur economic growth, consumption, savings, et cetera, et cetera. What do you do when you run out of properties to build

or to sell or an inventory or insert your word here? You need to pivot to something else. And instead what they're trying to do is just spur more property while I'm going to cut the down payment for second mortgages for second, for second homes. Uh, you know, I don't, you don't sound like you think what they're doing is going to work or in the medium term. No, I don't think so. I think in the short term, it could be.

So you would be, you would be thinking about the best way to fade this Chinese rally that we've just documented. I would argue for a country to be successful in the long term. And we now have lots of evidence. You're not buying the country, you're buying the stocks. Yeah, right now you're probably likely to get a pretty nice rally in Chinese stocks, even more than we've seen. Although I base that only on opinion. But again, if you're going to fix what's wrong in China, it's going to take a lot more than second mortgages and some fun to buy stock prices.

Where do you want to go from here? Let's skip the recession thing. For the sake of time. Are we having one? Well, just what I had in the doc was Ben Casemann wrote in the New York Times that in fact there was not even a recession in the second quarter or whatever. It was a 2023. Did you write about this? There was like a technical reason why there or not a technical reason

They had to go back and revise and it turns out. Yeah, it was like 22 recession never happened, right? Yeah, they were there were there's no longer two consecutive quarters of negative GDP according to the data And the revision was not out of like out of character with what we normally do. It wasn't some weird No, it's not but you know, again, it speaks to how data gets revised. And Enver never said, it's a myth, they never said it's too consecutive quarters. It's a general decline in business activity, which never took place.

All right, moving on. We're so rich. Economic has a chart. I can't remember, I don't know who he pulled this from, but household wealth, less total national debt, just hit a record high. And listen, these are the numbers, these are the facts, and I think a lot of this is trickling its way into the market, and part of why multiples have traded

higher today than they have, and not just today, high over the last 20 years than they had over the previous 100 years before that. So if I may, household wealth, which is net of debt, not net of national debt, that's a whole different... So household... Assets, my sell, liabilities. Household net worth. So take out the credit card debt, take out the mortgages, and what's left is $160 trillion.

Never before have we been here. So this is well above the pre-pandemic high. We were at $60 trillion 15 years ago. I want people to understand that. US households in 15 years have added $100 trillion in wealth. Now you can say, well, what's the dollar worth? All right, fine. Kill yourself, because that's not what matters.

What matters is this money has to be invested. Well, so two things. People with assets have never been richer. Sure, but two things. First, I apologize. I don't know what household net worth less total national debt means. Forget about the national debt.

Forget about that. But household net worth is $150 trillion or so. Just to be clear, that includes stock prices. So it's not like that money has to be invested, that money is already invested. Well, it is invested. That money is invested. It has to be and it is. It's not money still to be invested.

Yes, I'm sorry. It's not cash on the side. It's cash on the side for someone else, right? Do you know that stock market wealth is now like almost double home equity? Yeah. Really? I have to go equity. It's so much bigger now than home equity. Yeah. Really? Yeah. I have to go. It's so much bigger now than home equity.

Well, I mean, it makes sense. Like the growth of the stock market over the last 20 years versus the growth of the average house price. I will check. I mean, the problem with that data, and I have to go back and look, that'll be in the flow of funds in the national accounts for the Federal Reserve.

But the problem with that account is the vast majority of people don't own stocks in any direct fashion. It's not per capita. No, it's not per capita, that's right. I'm just giving you the overall number. And we know wealth is concentrated, but. Yeah, I mean there's 90 million owned homes.

And wait till the $7 trillion in money market funds comes into the market. So all right, Dan, now it's time to cook. What is your gripe with cash on the sidelines? I think you and I agree on this, but we disagree on the mechanics of how it works. Okay, there's no disagreeing with what I'm about to say. It is Rosh Hashanah, so...

You already alluded to this before when you talked about normalizing something. I alluded before, like, people go on TV and they sometimes say things, and not that I'm a genius or anything, but I think there are sometimes things, people just get into the ether. Stocks go up 7% a year, for instance, and everyone just repeats it as is. The consumer's 70% of the economy can probably be in that category as well. But the six trillion on the sidelines number

is one that just bothers me because it's so obviously stupid. Oh no, it's misleading. It's misleading. Yeah. Because it's never coming into the market. It's not not true, but it's misleading in terms of the implication.

Yeah, no, that's right. So I just I just listen some of it comes into the market, but the the implication there's six trillion that it's about to be It's about to be put to work. Yeah, two things there two things one and you can throw up the chart one is There's no cash chart. Okay. There's no cash on the sidelines. There's what is this? Okay? So this is the money that's been put... This is not my chart, but you guys showed it to me. This is... We can measure how much is in checking accounts. And this is that number and this is the... 4.5 trillion. This is the... You know, we gave people $600 and then we gave him $1400. What a chart. And wages went up. This is... This is... This is that day. That's not intervention. No. That's not trying... No, this is not trying to. No, this is a good type of intervention.

This is the Peter Lugar intervention. OK. What is this? Some other guy's chart. All right, let's go to the normalized chart. We're going to do, yeah, we'll do that later. Cash as a percentage of. Yeah, so the main point, the first point

is when people say there's cash on the sidelines, it's not on the sidelines. It's in something. It's in treasuries. it's in checkable accounts, it's earning interest, et cetera, et cetera. It is not an easy swap for Nvidia or Microsoft or whatever. But more importantly, and we alluded to this several times, numbers go up.

And so over time, cash in the sidelines, or I'm sorry, cash in money market accounts is going to go up, and you have to normalize it for something to show it from frame of reference for understanding that six trillion. Do we have my chart? Sorry.

No. Okay. Well you could do money supply. That's good, that's good. No, that was it. Yeah. We're gonna have to do some major editing. Now let's go, let's go.

Look at this. Yeah. That is that six trillion number divided by the market cap. And there is nothing impressive about that correct Now that is not to say that that's some portion of that and first of all That's a lot of first of all third of all some portion of that is institutional some portion of that is retail So it's almost half and half. I think it's not moms. No, it's skewed skewed. I think like maybe 70 30

It's we can check but it's not moms and pops that are sitting on six trillion. If somebody says that on TV and you're watching, if somebody's like, one of the reasons to be bullish is that there's $6.4 trillion in money market funds, that's what pisses you off because the person's acting as though that's going to be like a support to the... That's like the third leg of the stool. So when Dan sees that, he calls the producer of CNBC and goes, Put me on. Put my mic on! goes, put me on. Yeah, put me, put me.

This is Brian Jacobs at Altus Capital Advisors. You've probably heard the phrase cash on the sidelines used in market commentary suggesting there's a huge pool of money waiting to flood into the market. One reason this phrase persists is that the nominal amount of cash regularly hits record highs. Most recently households have been holding more than $4 trillion in checkable deposits. So he hates this shit too, Dan. This first chart that we had is the checkable deposits. But let me get to his point real quick. I want to hear what you think. When we look at the data more carefully, cash as a percentage

of total financial assets has been remarkably steady for over 20 years. That's the second chart with the colored bars at about 15% over time. And you can see that here. This is going back to 2004. This is the composition of it. Money market funds, savings deposits, check. It's roughly the same number as a percentage, which is the point that you made. And then the last thing here, let's do that last chart, percentage of financial assets. So he says, in more recent years, we've seen a rise in money market funds and a continued decline in savings deposits. So it's one offsetting the other. As you should.

As you should. But that's the point, it's cash. It's cash. The bottom line is cash is always moving. It's cash. It's not money that's going to flood into the stock market. And when people don't normalize the money markets, it's the same thing with moving. It's cash. It's not money that's going to flood into the stock market. And when people don't normalize the money markets, it's the same thing with Berkshire's cash pile. Of course it's growing.

His liabilities are growing. Of course it's growing. He's an insurance company. Right. So anyway, so it's just one of those things, like 7% that gets repeated, repeated, repeated. But that being said, last year. By the way, Dan's chart, the money

funds as a percent of S&P market cap. That's great. Yeah, and you can apply that same sort of methodology to buybacks too, by the way. You know, record buybacks, play no- Record buybacks, record stock market. Yeah, exactly, when you divide it by S&P market cap, it actually just goes-

What about margin debt? When they show you the chart of margin debt without the denominator of the size of the stock market. Let me tell you how long. One of the posts, if you find it, one of the posts on Big Picture is from me in like 2009 screaming about margin debt and what just a stupid observation this is.

Because this was a popular chart to put on Twitter. Margin debt has never been higher. It's the stock market. Yes, the stock market in 2009 went up 50%. Tells me nothing. How is this not a bubble? John, can you click that link and just put us on the web? This is the Wall Street Journal today.

Wall Street races to bring private credit to the masses. I know this is one of your pet peeves. People talk about private credit and they don't know what it is. It's still a, I don't need to know it as well as you do. I know what it looks like. I know what it is. It's still a, I don't need to know it as well as you do. I know what it looks like. I know what it sounds like. The asset class is interchangeable.

You could tell me NFTs, private credit. I will tell you that this article is the seventh inning. How is it not the seventh inning? Okay. Let me just start by saying there's nothing similar between private credit and NFTs. Other than that, you understand what I mean? I know what you're saying.

It's an activity bubble. I, listen, okay so. Not a valuation bubble, an activity bubble. The amount of people all rushing to do the same thing at once, forget about valuations. To do the same thing, to provide the private loans. Sure. City group just came over the top like Superfly Snooka with a $25 billion private credit fund that Apollo is going to put to work.

Is there any universe in which city of all banks puts $25 billion to work in private credit in a non-insane manner. It's a $2 trillion asset, guys. If investment grade companies start getting involved. So they're not the only player, everyone is involved. Listen, I'm not saying that, this is not a pet peeve of mine, but although there are a lot of people

who talk about high yield in private credit and that sort of stuff without a deeper knowledge of it, but listen, all private credit is, is the same type of middle market and lower quality loans that were being done by the banks in a pre Dodd-Frank era. Which they no longer do. Which they no longer want to do, can do. And so you've seen the birth of Blue Owl and Aries and all the private lending funds that

are now just providing $500 million loans, in some cases billion dollar loans or smaller, and the essence of the difference is they're not broadly syndicated, is the word you use. Which is probably a good thing, no? I am not suggesting the loans are gonna blow up when I talk about a bubble. I'm suggesting none of these people are getting the returns that the back tests are making them think they're gonna get

because of how crowded this type of activity has now become. Well, sure, but if I worked worked at blue owl or KKR One of those guys what I what I would say is listen. We've been doing it. We're getting those types of returns We we have a better relationship with the with the borrower we can construct the covenants in the loan documents in a way That's that's beneficial to everybody and doesn't have the type of liability management exercises and blowups that traditionally happens in the public market. And that's been largely true for those larger lenders. There is certainly a mad rush to get involved in private credit.

At least we agree on that part of it. It's an activity bubble, but to Dan's point, it's not a bubble that's going to burst. I'm not saying that. Okay. So I think what will probably happen is because there's so much competition for these deals because there's so much capital coming in Returns will be lower. That's all I'm saying. Yeah, it has to be that way has to be but the retail

Investor is coming in now. Yeah, and will be coming in in the next two years Well because the institutional investors are tapped at 30% of the portfolio is already in private assets for retail investors it rounds down to zero The thing that I that thing that that triggers me a little bit, or at least has my antennas up, is this private illiquid stuff coming into an ETF wrapper. That is a, wait a second. John, on that screen, put private credit assets under management chart.

I mean, you could remove the asset class from this. But a lot of this is regulatory. It's the banks. It's not activity that wasn't happening. I get it. I get it. But it's just like, anytime you just scroll down, I'll show you where to stop. Scroll to the chart that looks like a bubble.

You'll know when you see it. And then we can move along. But these are very... There we go. Okay, come on. So these are very expensive products. They're typically sold to sophisticated investors, and now they're being sold to people

who wander into a bank branch and have a financial advisor who sits in a felt cubicle, and that's not the way they were normally sold, and there is no way that version of a private credit sleeve is going to be as good as the back test of the asset class itself. It can't possibly be. But who am I to tell that person that they shouldn't be able to access any given asset

class? Access or bet on? What you would argue, I think, is RIAs and advisors have more responsibility in a KYC scenario to not pitch this to 65 year old retirees. Or at least not give them the impression that the returns KKR and Blue Owl have enjoyed are gonna look anything like what they're gonna get in the format that they're making the investment.

That's fair. That's fair. So that's when I say, Bob, I'm thinking from the perspective of the massive investors. But Dan, could you describe for the audience the difference between Blue Owl making a direct loan versus the way that the banks used to syndicate these loans? Well, roughly speaking, there's no difference. But the BSL market is exactly what you think of when you think of I'm JP Morgan or some

syndicate and I provide a loan to a company and then I don't want to hold on to that loan I'm selling it to a bunch of investors. That's the way they raised money for Elon's Twitter purchase Something like that. That's right. The banks make the loan and then they offload some investors. Although they're hung with some of them. But not in this case. But isn't there a big difference between that versus Blackstone or whoever being able to negotiate directly when it's one- one. The argument is that I can work more closely. I know this customer, this borrower more closely. We can construct a set of documents that serves both of our purposes.

And then ultimately I hold onto that loan. You have all the skin in the game. I have all the skin in the game. You have all the motivation to work this out. And the terms are malleable. If the company gets into trouble, you could extend it or whatever. So, broadly syndicated by definition

means other parties are involved. It's a little more difficult. Every man for himself. And it's in court. Yeah. And that's, well, when there's a renegotiation or a distressed exchange, as we call it, it can be pretty messy. And that's given rise, at least in the public markets, to what you may have read about this

whole liability management exercise or creditor on creditor violence, which is, to your point, a function of the degradation of document quality and the covenants. And so it's gotten to a scenario where sponsors and lenders and everybody's fighting for this value creation in these. So terms get looser, rates come down. Terms get looser.

And I'm trying to oversimplify. Now it's like, well, we'll whack it up later up later. One of the things that people are concerned about is that we haven't seen an economic downturn in quite a while. A real economic downturn. And so what happens if and when, because ultimately there will be an economic downturn, what happens if and when that happens? Well, what Blue Owl would say,

what KKR would say is, that's on me. Yeah, we have the most at stake. We have the most at stake to make sure that this loan is constructed in a way that doesn't damage my investments. So let me append that. We have the most at stake. We have the most at stake to make sure that this loan is constructed in a way that doesn't damage my investors. So let me append that. We have the most at stake. It's just us and the people who bought our interval fund, the people who bought our mutual fund.

Yes, but the customers of Ritholtz Wealth Management did not buy those funds. No. Those are presumably sophisticated, high net worth individuals, institutions, etc. Etc looking for uncorrelated returns Wall Street Wall Street treats sophisticated and wealthy as though they are synonyms sure and We all know wealthy people who are unsophisticated. We all know unwealthy people who are highly sophisticated We're gonna agree on a lot. My point is just there's nothing unique or new about what private credit I know I'm glad to hear that I feel better because I'm, that's not my area and I don't have an expertise, but I do understand when wealth managers are pitching something really hard.

I know they're being paid a lot to do it and I know it's probably not gonna have a great outcome for the last people in the door. I legit get seven emails a day on private credit. I get DMs. We're syndicating a loan, do you want to be in? I'm like, what the fuck are you talking about? I'm an RIA, you need me? That's bad. So the way that I take advantage of this is I own the stock.

I own Blue Owl, which right this second is hitting an all time high. Of course it is. Hey, tell me about Finland. What? I've been dying to hear this from you. You went to Finland? So this is an interesting post from Sherwood News.

Tell people what Sherwood News is, by the way. Yeah, so disclosure, I consulted on this project that is an offshoot of Robinhood. Robinhood owns the Snacks newsletter, which has a massive following. How many people are following Robinhood's content? That's a good question. They don't share.

I think the latest disclosures would tell you that Snacks newsletter is somewhere in the neighborhood of like 30 million subscribers. So for people that don't understand 30 million, this is one of the largest audiences in finance. Yeah, it's unbelievable. And it's an engaged audience too. So building off of the success of the Snacks newsletter, which, you know, historically just sends one newsletter out every day.

They built a newsroom and a site called Sherwood News that's now doing some original content, which includes a lot of really sort of accomplished veteran reporters and bloggers and up and coming writers and personnel. And you're in the mix. Oh, yeah. Our friend Jack Rains is in the mix. Yep, Jack Rains and Matt Phillips. Others.

Others, yeah. Matt Phillips has been on the show for sure. Yeah, Luke Kawa from Bloomberg for a little while. Yeah, a lot of really great people who are doing. So you guys are, so that's an interesting thing because you guys are all veterans. You've been covering markets for 10 years, 20 years in some cases,

and you're now doing media about the markets for an audience that I think is like mid-20s to early 30s. Yeah, and- You're telling them a lot of things for the first time that people in this room take for granted. And the interesting thing about the opportunity there is, you know, it's actually, you know, kind of like what we were talking about with Amazon, right? The audience already exists. They're there already.

Obviously you want to grow audience. Everyone wants to grow audience. But it's not a site that has to desperately go out and play the SEO game or the social media game to bring people in. That's right. So as a result, there's a little bit of flexibility there where they can actually have writers do stuff that's like interesting and risky that might not normally garner a high click viral audience. Right.

So if I write something for Forbes, it has to have something in the headline that's going to get people to click it because because nobody is gonna be there otherwise if you guys put something out to the Robin Hood distribution list it's possible like five million people are gonna see it right right and no one else in financial media can claim that right now I mean some some can but yeah I mean it's a tough it's a tough business because you know that the economics are just brutal. Because again, you have all these costs, whether it's the existing staff and the economics of media. Oh, they have to pay for traffic.

Yeah, you have to pay for traffic on all these things. Whereas with them, they had an incredibly successful newsletter, have, and now they're just giving that existing audience a little bit more to chew on. Okay, so what's this story about? So this is something that came out about a month ago, and it was based off of a study called the Gallup Emotions Report. And so basically the inspiration behind the story was

that there's these surveys that go around, I think the World Bank is involved in this, the happiness surveys. What are the happiest countries in the world? And they use metrics like social safety nets and health outcomes and things like that, right? And so you always get these countries from Northern Europe ranked very highly.

And then, of course, the US is very low for whatever reason. And then people started to realize that this doesn't really, anecdotally, people start to notice it doesn't really make a lot of sense, because there's actually a lot of people in Northern realize that, you know, this doesn't really, anecdotally people start to notice that this doesn't really make a lot of sense because there's actually a lot of people in Northern Europe that seem pretty unhappy. And so- They have high suicide rates there.

They have high suicide, there's a lot of issues. There's a lot of issues up there. They'll pitch black seven months out of the year. We'll start with that. So Gallup follows up and does another survey called the Emotions Report where they ask really simple questions like how many times do you smile a day questions like how many times do you smile day or how many times you get angry how much time

do you spend being stressed out how much how many times do you laugh today like real straightforward things that it's like well that's actual happiness right as opposed to what might be associated with happiness so um so this is and by the way by the way this all speaks to this whole issue of how economic prosperity or financial prosperity does not equal good vibes. I think this is actually something we've been talking about for years now, the whole vibe session thing, right? You have record unemployment, stock market up, housing is up, everyone in America is

unhappy. So, you know, so this first attempt, let's say on the left side, these are countries ranked by the World Happiness Rank, which is based off of these. Which has now been debunked, basically. Which is more or less debunked by this study, where on the right, these are countries ranked based off of emotions.

And it's just completely different. And it's like, there's a lot of countries there that you don't really associate with, you know. Yeah, what are the Kuwaitis so excited about? Calm down. Probably because they're all rich. This is a weird one. Senegal, the World Happiness Rank said they were 99th,

which is not good. The Emotions Rank says they're number 10 in the world. Yeah, you know, I'm sure there's gonna be issues and more things to be explored here, but I think the bottom line being that it's more confirmation that just because you have a lot of money, just because you have three houses and 10 cars does not necessarily mean that people are just happy. Why aren't we on here?

I think the US just always surveys poorly. Okay. Alright, well listen, it's one of these things where, like the rest of science, there's a replication crisis. All the things that they've been caught in, all these studies, they actually, they can't be repeated because they were fake to begin with. Yeah, but I do think it's interesting

and I think it's something to continue paying attention to because, again, we keep getting sentiment surveys where people are frustrated, unhappy, and they're trying to figure out ways to get around that. And apparently, being employed and being able to pay bills is not enough. I want to go to, as the last thing we'll do today,

the stock market rally broadening out. Talk about a reason to be happy. You would think that this would lead to massive outperformance by active managers. And Savita just dropped a haymaker this morning. And she was basically like, no, it didn't help. Were you surprised by this? What environment do we need?

That's my point. What is the environment that active management shines in? So in the third quarter of 2024, it's one of the best quarters of all time for individual stocks. There's a high number of individual stocks went up. 67% of individual stocks beat the index. Think about how dominant the MAG7 have been relative to every other stock that totally flipped this last quarter. the the mag seven have been relative to every other stock that totally flipped

this last quarter. So you would think if you're a stock picker, this has been an amazing environment for you. And it turns out not actually not really. Well, the problem with this is if you're an active manager and your benchmark is specifically the S and P 500, you've spent a year more being at least market weight, the large cap tech stocks, if not overweight.

This is a point Adam Parker keeps making. You have to at least be where they live. And if you're going to really outperform mathematically, it's just very difficult to do it without being 6% or 7% Meta or 6% or 7% Google. You need to really lean on those names. You know stocks are killing you otherwise. Otherwise you're just at best market perform.

And so you've spent a year and a half just orienting your portfolio in that direction and then all of a sudden in the third, and it's obviously getting worse over the last couple of quarters and then all of a sudden in the third quarter, you have this two thirds of the index are outperforming and the Mag-7 do not.

Active management is not going to, I imagine, flip that quickly after so long. There's just not enough time to see what's happening, although that is, rate cuts are starting and that was sort of the impetus. Look at this from Charcot, I forgot to put this in the doc. So we're looking at the S&P 500 members

above the 200 day moving average versus the NASDAQ, and we've got 78% of the S&P above and only 45% of the NASDAQ above. So he plots the difference between the two and it's stretched. The NASDAQ is underperforming to a pretty large degree based on this. And if you look at the Mag-7,

so we have the S&P at an all time high, the Equal at an all time high. The only Mag-7 name making at an all time high is Meta. And the other six haven't made it all time high in quite a while. Tesla way off the high. Amazon, Meta, Google too. making an Altim High as meta, and the other six haven't made an Altim High in quite a while. Yeah. Tesla way off the high, Amazon, the Terula.

Google too. So this is Savita, just 28% of large cap active funds outperformed their Russell benchmarks in September, bringing the third quarter hit rate down to 24%. Underperformance was broad-based, all styles, core, value, growth, all sizes, large, mid, small, lagging their benchmarks last quarter. Although healthier breadth was a tailwind for actives, funds were not positioned for

the market rotation, which she says they were underweight dividends and utilities and real estate or whatever. But it just goes to show like you hear, we could put this, I don't know if we can put the chart up or not, but this is just gives you the extent of how broad-based the underperformance was. It just goes to show like there almost is no environment in which a majority of active funds are going to like put up amazing numbers.

No, a majority will not. Not a majority. A majority will not. But at least the underperformance was nice. Well, but what I would just say about Solus, and I can't comment on our performance or our holdings, but we don't do large cap tech. I don't think I'm breaking any SEC rules by saying that.

So we're not in those large names, and so we're always in other names. And so when you see a broadening out, so to speak, the likes of which we saw in the third quarter, I am incredibly enthused by that because it means the rest of the world in which we traffic mid caps, small caps, troubled names, and even lower down and large caps. That's fantastic for managers who do active investing, aren't benchmarked to the S&P 500, at least we all kind of are a benchmark to this, but aren't specifically benchmarked to the S&P 500 and don't all kind of are a benchmark to this but aren't specifically benchmark to the S&P 500 and

Don't do large cap tech the third quarter was great. You start seeing all these names start doing really well That I'm just surprised that it didn't translate you you're saying like it's just not enough These are if I understand Savita's data set properly and I think Savita is one of the best on the street certainly at this stuff Those are like mutual fund managers who are specifically benchmarked to the S&P 500. No. And are trying to.

Mid-cap funds also struggle to outperform. Like large cap funds, most small and mid-cap funds also lag their benchmarks last month and quarter, posting similar Q3 hit rates of 27 and 31% respectively. Outperformance rates for small cap funds Q3 hit rates of 27 and 31% respectively. Outperformance rates for small cap funds were dragged down by a particularly tough July when only 14% of funds were able to beat the 10% pop in the Russell 2000. So this is not large cap growth.

This is across the board, active managers weren't ready for the shift in markets that we saw last quarter I have to look into the data, but but what I will say about the shift the funny thing is coming into the year You mentioned Tom Lee earlier One of the reasons Tom Lee said well the Russell is gonna be up 50% or whatever and one of the reasons I was arguing that you were gonna see a broadening and Small and mid caps would be where you'd want to be is because Finally we were going to start getting rate reductions by and it happened by the Federal Reserve And so the point is obviously in the first quarter that got pushed off because you had that spike in inflation

Which delayed the rate cuts that would have otherwise happened probably in March if not if not April And so that outperformance continued on the part of the mega cap tech names by the time you got to the summer It was pretty clear that by the fall, these rate cuts were finally gonna be here. So the funny or the interesting part about that chart is, even though we knew that rate cut was coming, whether it was this month or the next month or the month after that,

you knew that rate cut was coming. And if you believed, as I did, that those series of rate cuts would be the impetus for the broadening out, it was finally here and you still couldn't have positioned your portfolio in a way that would have it was hard to know which Alright, it's gonna broaden out but like what's gonna work? Well, that's all separate conversation, but but the broadening out was was Exploidable if you were ready for it. Do we want to do this? And by the way all that's you know supported by the fundamentals to it, right?

It's not just the price performance broadening out, but earnings growth expectations have been broadening out. Do we want to do this policy thing really quickly? No. Stock market historically overcomes. That's a lot. We'll save it for another day. All right.

Do you guys have fun on the show today? Yeah. You have fun on the show today? I'm sweating again. You know, it gets hot in here because we shut off the AC. Because we really want you guys to feel the pressure. No, because it sounds better. It's better for the listener.

We love the listeners. Guys, we'll do some favorites and we'll get out of here. Michael, I'd like to start with you this evening. Have you brought a favorite for the crowd? Is anybody watching... What's the Netflix Rad Byshow? The show with Kristen Bale? With Sprinkles. Do you love it? Do you know what we're talking about what's it called

something with us I didn't watch it yeah so it's a rabbi played by the kid from the OC Seth Cohen whatever his name is Adam Brody Adam Brody Adam Brody and then the girl is Kristen Bell, who is good in everything. And he starts dating her. And she's like, obviously not in the tribe. She's a podcaster. She's a podcaster. Of course she is. Yeah. Right. That's cute. How could you not be these days?

It's 2020. I don't watch that stuff normally, but Sprinkles got hooked. So I watched it with her. What do you normally watch? Like anything but that, honestly. Like literally I that, honestly. Like literally I watch movies, I watch, I like all the shows on Netflix, I watch Max. Oh, did you watch the second episode of Penguin? This is like a, this is like a, oh don't spoil that by the way,

because that show is amazing. Quite good, Colin Farrell is off the chain in that show. Anyway, Nobody Wants This is a, it's a good, it's a good, It's a drama, drama or comedy? It's a good, it's a good, it's very popular. Drama or comedy? It's a romcom. Romcom? Yeah. It's good for this moment.

It's light enough that like you watch it and it's like entertaining and it's the episodes of 30 minutes. It's easy. It's 30 minute romcoms. We need more. 25 minutes, I'm in and I'm out. Yeah.

Easy, easy. It's super easy. You know who the, oh, do you know who the other blonde girl is that she podcasts with? She's great. Who is she? Do you know where she's from? She looks familiar. Bro, she's the girlfriend in Succession.

Oh, she's... Yeah, of course. I saw an interview with her. She's Collin's girlfriend. Collin? Yeah. Yeah. Beautiful girl. I've never seen her in anything else. And I'm like, where do I know her from?

She's from... I saw an interview with her. Sam, you got a favorite for us? You know, actually, I was going to say the Penguin. It's really good. I think it's really good. I like... You saw the first episode. I saw the first episode. You explained why does he... His lip is incredible. Why is there a purple... Why does he have a purple Maserati? It's the only part that's out of character. Makes no sense. Maybe it comes out in episode three. That's a big plot device though. They see

the car and they know that he's nearby. Yeah, and it also connects with people who read the comic books and stuff like that. You can't just completely abandon the penguin persona. You got to do purple stuff or else the comic book reader's going to A-A them. What did you think of the second episode? I loved it.

I thought it would wear thin like Colin Farrell in a fat suit like with an ugly face like all right The novelty made sense in the movie and maybe I would watch an hour or two of that. It's terrific I know good. I like how it sort of challenges you to sort of understand where the bad guy comes from Like well, you know everyone on the show is a bad guy, which is why he could be the hero. Right. Because it's relative. Right, but like, I just, I like the idea

of like fiction or shows. This is why I'm a big fan of Cobra Kai. I don't know if you guys watch Cobra Kai on Netflix. Yeah, I binge it every time it comes out. Yeah, it's like every couple of episodes, the good guys become the bad guys and the bad guys become the good guys. And it's like, it gets into the complexities

of how people become what they become. Sam Rowe is a big fan of moral ambiguity. Moral ambiguity. Oh, and one more thing. I saw, this is random, but I saw the O Show at the Bellagio this summer. It's a Cirque du Soleil. My favorite is Cirque du Soleil.

Okay. You're a big drug users, Sam? I've seen three shows maybe in like 20 years and every time I go to this thing, it's just heart pounding. I'm going to Vegas this month, should I go to it? Yeah, absolutely buy tickets. Like this show has been selling out for like 30 years.

Should I go to O at the Bellagio or I only have one night or Peter Luger in Vegas? What would you do? I haven't been to the Vegas one yet. Do both. Yeah, you do Peter Luger and then go see O. All right. What do you got for us?

I didn't know I was looking. I didn't know I had to do something. Dennis, probably on Netflix. What have I watched? Tell you what, just do your half tour and we'll let you off the hook. So first of all, you're not going to the Sphere? I did that already, twice. Sorry, not to brag.

Who'd you see? Fish or the Dead? I saw you two and then I saw the Aronofsky movie with Bantnik. The second time I watched it. The Aronofsky movie does not count. It's all right. Okay, anyway, I saw Dark Matter.

There's nobody there. Great show. Dark Matter was great. I'm a big sci-fi guy. That was awesome. Dark Matter was terrific. And I mentioned. I didn't finish it.

Should I finish it? Yes. I mean, if you didn't like it, such thing would turn it off. I did not like it. I don't mentioned... I didn't finish it. Should I finish it? Yes. I mean if you didn't like it such that you turned it off. I did not like it. I don't know why I did it. They landed the plane. Very softly mind you. There's so much content. If you don't like something after one or two episodes, feel free to move on and I have a thousand shows. And then I just mentioned at the start, I watched the Mr. McMahon thing, which was... All right. I haven't like gone deep enough into it.

It was so good. It was quite good. If you're our age, especially having lived through the eighties, I watched it in two days. Uh, yeah, truly larger than life. Who's your favorite wrestler? Oh, his ultimate war. Well, I mean, other than Hulk Hogan, uh, it was ultimate warrior. Favorite wrestler. Yeah, it was ultimate warrior. And then, um, did you hear my super fly snuck around today? Yeah, it was Ultimate Warrior. Did you hear my Superfly Snuka reference today? Yeah, I did. I appreciated that. That was right when I was getting into it.

I remember I saw Superfly Snuka at the Louisville Gardens in the 1980s. I was like six years old. So I like the Iron Sheik because he had the camel clutch. And when he would put that on someone, the audience would go wild. I was, I like. Did you ever see a live match? As a kid. Yeah.

Yeah, and I took my son back when he was like eight years old. It's a whole different thing now. But I have to tell you, I have to tell you, I'm not a wrestling fan. I loved being there. Like I said to him on the way, I'm like, we were at the Barclays Center. I've never seen people as into the wrestling match

as they, like it's, it rivals, football rivals, and people are so excited about it. I always tell the story, the first time I went to a boxing match, a live one, it was Pacquiao Cotto in Vegas, and it was almost a race war, and it was one a race war. And it was one of the most exciting, exhilarating things I've ever been to.

Now that's, I mean, I could have gone earlier to other ones, but being at a live, I imagine WW is a little less race war-y, but the anger in the audience and the enthusiasm is really incredible. It's like a soccer match. So I'm going to check out the Vince McMahon thing. I should probably do it tonight. So good.

I want to recommend Audible for insomniacs. Do you guys sleep well? Yes? You know, it's funny you mentioned that. I'm having terrible sleep right now. All right, here's what I'm going to tell you to do. I have a prescription to write you. You download something that you would,

a book you would never read. Not a bad book, but just something that you would never sit down and read, like the classics. Like Dickens. Oh, that'll push you right to sleep. I'm doing right now, I'm doing The Odyssey. It's narrated by Claire Deans. I have a question for you.

I'm sorry for interrupting. Does this get into your dreams? Like, if you're listening to the Odyssey when you're sleeping, like, are you dreaming about fighting the Hydra? No, I don't have dreams because my soul is dead. So, I'm listening to the Odyssey right now. I can't make it four minutes. I'm just... I'm gone.

It's like ancient Greek, like, whatever, and it's being narrated in a very pleasant voice, and it's good. And I just discovered that she being narrated in Greek in a very pleasant voice and it's good Yeah, yeah, and I just discovered that she also narrated the Iliad. So when I finished this I got that I think this could last me a lifetime. I I can't stay awake for more than four minutes. You can't stay awake Why do you need a new book? No, no, no, no, no. I wake up at four in the morning I put on the audible and I'm out like a light again, as opposed to scrolling through my phone.

You ever try this? Anyone? All the time. I just see edibles. Well, you can't scroll through the phone, because the light tells your brain that it's daytime. Well, that's why you shouldn't do that. You should just put on the audible.

So, second one real quick. Live album this week, The Lumineers. They dropped the entirety of a 2022 show they played at Wrigley Field. This is like one of the best bands of the current era, I would say. Underappreciated, not a ton of radio hits, but a ton of hits.

You don't need radio hits anymore to get that big. You don't. I love live albums, and I'm a connoisseur, and I know good ones from bad ones. This sounds like a billion dollars and just an inquest. 32 songs. So I mean, you have to like the Lumineers for 32 songs, but highly recommend.

All right, that's it from us this week. I want to say thank you to all the people who have worked on the shows. Nicole, Sean, you've been incredible this week. Daniel, Rob, Graham, Chart Kid, Matt, Sean Russo who we're gonna have to talk to in a little while. Who else? Did I miss it? I got Graham? Duncan, we miss you. Duncan, where's Duncan? Oh, we'll talk. All right. Hey guys, thank you so much for listening to the show. Special thanks to Sam Rowe and

Dan Greenhouse. You can follow Sam on X. He is at Sam Rowe, S-A-M-R-O. He's also on LinkedIn. And please visit ticker.co, that's T-K-E-R.co, for literally daily insights on what's happening on Wall Street and around the economy. Also want you to follow Dan Greenhouse. on what's happening on Wall Street and around the economy. Also want you to follow Dan Greenhouse. Dan is on X Dan Greenhouse.

Very simple, D-A-N-G-R-E-E-N-H-A-U-S. Dan, thanks so much for being here. Thank you, Sam. We love you guys, you're the best. The Shana Tova, we'll see you soon. We'll see you soon.