Transcript
0:00 You like this weather? You're a skier, right? >> I was a skier, but I had >> I know you got >> two ACL surgeries. So, I'm I'm only skiing from my mind. It's an imaginary skiing now. >> Yeah. Virtual. >> I'm too old to have another injury. >> Somebody asked me recently if I wanted to go skiing. I don't know how to ski. It's too late. I'm going to die. >> No, it's not too late. >> No, my body. I'm going to tear something, too.
0:21 >> I if you like rollerblade or ice skate. >> No, your instinct is right. I was at dinner with Rob Sichin in Florida like 10 days ago and he was telling us like stories of his ski injuries. Like this guy, he has beating the out of himself. >> Yeah, >> he's got like titanium all over his body. >> He's kind of bionic. He has like a couple fake knees. >> He's almost an Optimus. I told him like an Optimus robot. He was He was saying he's a mogul skier.
0:48 >> I'm like what? I know what a mogul is. What What does that mean? He's like just bumps the whole way down. Well, who the would do that? That sounds like the worst part of skiing. >> Skiing attracts like some really extreme risk takers. >> So he goes, "Oh, JB, I love it. I love the mogul. I ski the mogul." You know, he >> Where's He isn't he from Pittsburgh? Where's that accent from? >> I don't know. It's amazing.
1:08 >> He did. He grew up in like Pennsylvania. >> But that accent is not from P. That's not a Pennsylvania accent. >> He's like JB, you know, I love the Mogals. >> Yeah. It's like It's a little bit like maybe he watched like Fat Albert growing up, you know? Look at this. What is this? What? Your >> My laptop's a JFK. >> No, no, no. I know that. I mean, you're >> So, that's what's going on.
1:30 >> No, no, no. The actual color of your icons. >> Oh, that's dope. >> I've never seen that. >> Yeah. Stick around, kid. Learn some >> >> stick around. Keep your eyes open. You never know how I'm going to surprise you. >> I hit the Speaking of Apple, whatever. I hit the emoji button or like the emo emoji to like create yourself >> and Apple's AI created me, but like I have like lots of hair. Like it looks nothing. I'm a bald guy.
1:58 >> Like how is that? >> You must have bought the premium package. >> Yeah, >> right. You >> All right. Here's here's your picture. 0% chance. >> Yeah. I want to see it. >> I mean Oh, it's so cute. It's like a It's the meat. >> It looks like your son, dude. >> That looks like your kid. >> Let me see it. What in the world? >> He said that's good. >> But you're like in a bubble. They put you in like a zoom >> in.
2:24 >> However, we So, we spoke at an event yesterday. Hard to believe it's yesterday. And they made those Funko doll. What are those called? >> Oh, Funkos. Funkos. >> Funko. So, they made dolls of us, me and Michael. And mine had a full head of blonde hair. >> Mine is bald. And Michael's was like literally baby Stewie from Family Guy. >> That was reminiscent of you. >> AI is going to take all of our jobs. Come on.
2:46 >> Not the illustrator. >> Come on. >> But that's like a meta AI. Remember how like they have the >> meta world or whatever on the board. >> Okay. All right. All right. >> All right. >> All right. Let's let's do let's do some pods. >> We have a full house. I'm a little bit nervous. >> Big audience. >> Did I get to meet everybody? Who else? Hi guys. We have an Alexa and Emily. >> Are you guys all fun?
3:14 >> Wait. From what? What is it called? >> Will you hire my daughter? She's a PR major at University of Miami. >> She needs an internship. >> Yeah. All right. Josh, do you know Ron and Sana? >> Yeah, of course. >> Emily and Sana. >> No. Really? I love your dad. >> How's he doing? >> He's good. >> Okay. All right. He's one of my He's one of my faves. So, say hi. Say hi for me.
3:38 >> Say hi for me. All right. >> All right. Let's get started. >> All right. >> All righty. The compound in front. >> We're about business right now. >> Today's show is sponsored by Franklin Templeton. Let's talk munis because for many investors taxes are a big part of the return story and municipal bonds generally provide interest that's exempt from federal and in some cases state income taxes.
4:17 >> That's right, Michael. But the MUN market isn't simple and index strategies can fall short. One solution, active management. Enter Franklin Templeton. They're one of the largest MUN bond managers in the market and offer more active municipal bond ETFs than any other manager, including national MUN ETFs and seven active singlestate ETFs. Put the power of Franklin Templeton's active MUN ETF lineup to work for you. Visit franklinleton.com/munetfs. Before investing, carefully consider a fund's investment objectives, risks, charges, and expenses. You can find this and other information in each perspectus or summary perspectus if available at franklinleton.com.
5:02 Please read it carefully. All investments involve risk including possible loss of principle. Franklin Distributors LLC member FINRA sipc. >> Ladies and gentlemen, welcome to the world's greatest investing podcast, The Compound and Friends. My name is Downtown Josh Brown. First time listeners, last time listeners, whatever it is, I'm here with my co-host, Michael Batnik. Michael, say hi.
5:33 >> Hello. Hello, >> you guys. We have the GOAT in the house today. I'm so Every time I see this on the calendar, Tom Lee is coming to town. I get so excited. You know how excited I get, right? Okay. All right. Tom is a co-founder, CIO, and head of research at Fundstrat Global Advisors. Previously, Tom was the chief equity strategist at JP Morgan. He is best known for his datadriven, often bullish market outlook and for being an early high-profile advocate for Bitcoin, Ethereum, and other digital assets. Tom, what more could I say? It's pretty good. Pretty succinct bio, right?
6:09 >> Yeah. Thank you. >> All right. are you bullish still? >> Yes. >> I heard you at the start of the year kind of being like, "Yeah, we'll probably get a correction in the first quarter." Did you say that? >> Well, we just think 2026 will look like last year. So, our base cases we are strong in the first part of the year. >> Okay. >> But then we have a draw down that feels like a bare market.
6:34 >> Okay. >> But we'll rally strongly and I think at least a 10% gain, maybe more now. >> So, we had we had that how how deep was the draw down last April? Last March? >> It was 20%. It was a bare market. >> Okay. And that did not did that start from an all-time high or not really. I forget. >> yeah, it did. >> It did. So it was rare. but maybe that's why it recovered so fast cuz it wasn't based on anything other than words.
7:02 >> That's right. If you have a decline and it's not leading to an economic downturn, those declines are usually V-shaped and symmetrical. >> Okay. Do you think that this one this year that I mean it's we have one every year. You think this one might have the potential to be based on an economic decline or probably not? >> I I I if I was guessing because it's like I'm just guessing. >> We're all guessing. >> Yeah, we're guessing.
7:28 >> They're educated guesses. That's what we're doing. >> Yeah, it's educated guesses that it can be a a policy shock like something coming from the White House or the market testing the new Fed. >> Okay. >> Or both. But that is probably like last year then. So it's a market decline because people take risk off the table, but it's not really an economic downturn. So it's so we end up recovering really well. >> We got two policy shocks in the last 5 days. We got the health insurance shock and the credit card shock. 10% cap on interest rates for credit cards.
8:02 I didn't even get a chance to see what he said about the insurance companies. I just assume it's not going to matter and never really happened. But what was that about? Do you remember? >> It was like It was like two days ago. It's it's a >> it's the reimbursement rates for Medicare and Medicaid and it was people were expecting it to be six to up to 9%. >> Right. >> And it's only.9%. It's actually consumer. Those are consumer friendly shocks.
8:27 >> Yeah. That doesn't sound like the type of thing that would derail the economy. It just sucks if you own UNH. >> Yeah. So if your health insurance bad can interject and say one thing. So on this show and on every show, we talk about what's happening with opinions about what's going to happen in the future. That's what we do, right? I was listening to, you know, the book by William Goldman, Adventures in Screen Trade. There's a line that's always quoted from that book, nobody knows anything. Like that is so William Goldman wrote a princess wrote Princess Bride. He was a screenwriter and a novelist. And during the book, he was talking he said it's 1982 and literally the whole point of the book is nobody knows anything. People that are making movies don't know how the audience is going to react. Like nobody knows anything is the whole point of the book.
9:07 He said, "I know we have nine months left in the year, but there is no doubt in my mind that ET will win best picture." It was 1982. He goes, "I don't care. Stephen Spielberg, ET is going to win." Gandhi won. So all of all the stuff that we're talking about in the future, we're all doing the best we can. >> Yeah, that's right. It's just a guess. The future is uncertain. I I agree. >> It's true. What do you do to stack the odds though in your favor if you have to if you have to have a view and you have to make a call or people are relying on you to all right we get it it's unknowable but like still what do you think how do you stack the odds in your favor to be right more often than you're wrong and you're the right person for me to ask this question of because you are right more often than you're wrong >> well yeah thank you which means I'm I've been >> I feel like we say that every time you come on you are due for a coach >> that's why he has an author garage here.
10:02 If he if he if you were wrong about the bull market the last three years be nobody on this bench hanging out with you. You know you know how that's how Wall Street works. >> Well, I'd come in my McDonald's fire. >> Tom, can I tell you I just spoke to a young man, >> right? I didn't get an answer to my question. >> No, hold on. More flowers. I spoke to a young man last month and he was he mentioned how Tom is always bullish. I said, "Listen, you don't get it. You're you're a senior in college.
10:26 It's easy to be bullish now, but there was a time, young man, not so long ago, when it was not cool to be a bull, where everybody was bearish and anybody that had the nerve to make the bullish case was ridiculed. And you have not been bullish since 2022. Like, you've been right the whole way. And I think that's a part of a big part of why you have commanded a legion of followers is because every time the market dipped, most people came out and said it's going to get worse. And you were like one of the lone voices who consistently has said it's probably going to get better.
10:59 So you're right. >> Thank you. >> So how so how do you how do you do everything you can so that when you are making a call, it's got a a reasonable shot at being right. >> Yeah. this is not a great analogy, but I'll explain it and then I'll explain how we do it. But let's say you're in your house, but the lights are off completely, but you're feeling your way around and then like so you feel like something fuzzy and then you figure out it's your like living room or if you like hit your foot on a corner and then you know you're in the kitchen, >> right? That's what I think trying to navigate markets are like because we don't really know where we are at any moment but like then you try to find what's gives you situational awareness and we do that by do a doing a lot of cross market analysis. So we take a lot of cues from volatility or what credit markets are doing or or commodities and that informs us of like what the state of the equity market is.
11:57 but a lot of our work also is trying to look at what this current snapshot of all that where does it place us you know does it put us back into 1950 or 70 or is this you know Hong Kong and so we're trying to >> see really important to you the point in the cycle that we're at you seem to pay a lot of attention to that is that something that you learned from someone else or is that something that you just figured out over time hey this is like the real signal this is what really matters matters.
12:28 >> you know, I don't remember where I heard it, but I remember hearing a few things in my early years. One was, you know, don't fight the Fed. And I think that's important. Another is, >> is that Marty Zwag? Who is Don't Fight the Fed. >> Ronald Reagan. >> Yeah, it was probably Ronald Reagan. Okay, go on. >> Yeah. Or it could be Uncle Martin. You remember that movie with Martin Short? He says, "Don't fight city hall."
12:49 Right. >> okay. >> And but the second is Demographics or Destiny. And I don't remember where I heard that. I could have heard it in college, but when I did wireless, that was a lot of the work I did when I was a cellular analyst was really building cellular penetration models based on what I call vintaging, like tracking what young people did and then we figured when they become adults, they're going to control everything, >> right? Okay. So, based on those two things and you're feeling around in the dark, where are we? Like, how would you describe the the position that we're in now? Because most people would say, what goes up must come down, it's been too good for too long, valuations are stretched, blah blah blah blah blah, you know, all the the whole litany of things. So, what what would you answer that given that you're using those those two ideas as a backdrop?
13:38 >> yeah. Well, a couple things that are observable. One is earnings growth is picking up this year. not just in the US, but globally. >> Yeah. >> That's not usually late cycle. >> Okay. and and market breath has improved a lot. >> Okay? >> You know, like this year someone said it's like a rolling risk appetite cycle like but it a lot of things are going up that >> means the market's broadening. Actually, it's also broadening outside the US.
14:04 >> Yeah. >> And then the third thing is there's arguably reasons to be optimistic incrementally like whether it's AI or blockchain. I I think especially coming out of Davos, you know, when I I didn't go to Davos, but I've been I was following a lot of the reports and the panels, it's clear to me traditional financial institutions are starting to build on blockchain as a productivity driver. That's a big story in the US, especially >> Fidelity just announced their stable coin. It's huge.
14:33 >> Yeah, that's right. And then today, the SEC and CFTC had a joint announcement. They want to make sure the US is the crypto capital of the world. >> Yeah. >> And then there's onshoring happening kind of everywhere. and defense. So, there's things that are driving global spending. >> Materials rallies tend to be late cycle. And I would argue the biggest bull market right now in the United States at least, maybe this is true in other places overseas, is energy stocks, gold miners, the base metals are rallying and all those related companies. I talked about a steel stock today as part of best stocks in the market. Like when was the last time a steel stock was one of the best stocks in the market? And yet here we are there are multiple. So like how do you square those two ideas?
15:19 >> Yeah. >> or do you not agree that metals and and oil rallying are late cycle? Do you think that's more midcycle? >> I mean one the precious metals move is probably the trade, right? like silver and gold are >> like if I was just an average investor that that trade has been working like every day and for weeks on end. So it it makes sense people are investing and it's they're astounding. And I talked to Tom Demar today about that.
15:50 >> you know he does think there's still room for that to extend. >> He doesn't think it's exhausted yet. >> No, he thinks gold can get to 8,900. >> Oh my god. This is the best. >> Nobody's ready for that. >> This is the best month since 2008. >> Yeah. >> Unbelievable. I I'm pretty sure at 8,900 this the Fed's balance sheet like dramatically improves or the US Treasury cuz we own so much gold. >> But the but the thing is who is left to buy it at 8,900? Who's the next buyer?
16:16 Like at that point wouldn't I guess what I'm asking is to get to 8,900 you would assume every central bank that's got the wherewithal to buy has at that point already bought. Or do I not understand how it works? It might be ass allocation because I I had a brief conversation with Joyce Chang from JP Morgan. >> Hang on. Let me just pick up all these names you're dropping. So, all right. Go ahead. I'm kidding. I'm teasing. Go ahead.
16:41 >> Oh, well, yeah. She was saying if you just do high net worth one a half a percent allocation, right, >> incrementally into gold, it's now you're at 9,000. >> Wow. >> So, it's it's just small amounts of money moving into precious metals that could get us there. >> Okay. Is gold similar to the stock market where we should expect V-shaped recoveries there because the tren the pro the primary trend is so powerful or could you envision a scenario where like a 15% drop in gold and a 25% drop in silver puts an end to the rally that we've been in? Like what would be your what would be your instinct if you saw a correction in these trades? And by the way, if both those two things happened, they would both still be in intermediate and long-term uptrends. But like how would you look at an event like that?
17:35 >> I mean, today today's kind of a snapshot, right? Today there was a big intraday decline in gold and now it's like down 1% and silver had a huge intraday decline and it's like barely down. >> The buyers just came flooding in. >> Yeah. Okay. And then someone's telling me, I'm not a commodity expert, but now I'm like learning a lot on the fly, but like the physical market's even tighter. So the prices are actually higher in the physical than >> in in the in these >> financial markets.
18:02 >> Okay. >> but it but and I'm going to quote Tom Demar. He he says this looks more like 7980. So then it might be a a topping process. >> Okay. I mean it's it's sort of parabolic and >> No, it is parabolic. >> It is silver definitely is >> I guess what I would ask you is can you think of a historic historical example where gold and silver were doing this and the stock market was rallying right alongside of them. It it seems like it's rare like the bull market for stocks didn't start in the early 80s until after gold and silver were destroyed. this is a little bit different. This is looks more like an everything rally. yeah, I mean someone pointed out and I think it's correct that and again we're not really sure exactly why but if someone said this is everything but the dollar then maybe it makes sense.
18:55 >> Yeah. Okay. >> Got two charts for you on this. first comes from our friend Todd Sen. We are looking at precious metal ETFs daily trading volume. >> That's a great graphic from Todd. >> he Todd calls it metal. >> He does great >> Metal Mania. this you know this the previous spikes got like maybe up to 20 billion and we're now at $64 billion. So people are going absolutely mental about this. And then our friend Warren P has a chart showing gold secular bull markets and the first bowl he he poses which is the real crazy one 1971 to 1980. Then we had the second one he marks that from 1999 to 2011. That's the purple one. And today the green one 2018 to 2026. So >> shorter and sharper than the last one.
19:41 >> Yeah. >> Okay. >> Yeah. By the way, if you do like Wall Street Bets top most talked about stocks, it's SLVN GLD. >> Unbelievable. >> I'm not Are surprised by that? >> No, no, no. Unbelievable where we are. >> Yeah. So Tom, one of the things, one of the narratives going into 2025 that has cooled off dramatically is bubble bubble and everything, especially the AI bubble. you don't hear much about that anymore. Oracle is in a 51% draw down, like 51%. Got cut in half.
20:13 Microsoft is down 12% today. and then just the broader market. You have a great chart, John. Chart for please. Showing that we've had six black swans. black swans might be extreme, but whatever. Six like events in the market since when does this go back to 20? What year is that? >> 19. >> Yeah. The end of 2019. >> Okay. And the PE has gone sideways. >> What What are these events? >> Where's the bubble? COVID shutdown, >> supply chain, inflation, >> fastest Fed hikes in history, >> tariffs, USA bombs Iran.
20:49 >> Yeah, there's been some >> So, some stuff has happened. And I don't know what's the message of the chart. What are what are you showing people when you show valuation alongside of those events? If this was a company and we threw six events that could should wipe out the earnings power of that company, but the company grew earnings, we would consider it super resilient and rerate it to a higher multiple. >> That's a great point, >> right? You would you'd be willing to pay more for that asset for the earnings of that asset.
21:16 >> Yeah. Because it's indestructible and and and and so today when people say the market's expensive, I kind of think we just threw six black swans at it and it's still the same period. >> Do you think the stock market's indestructible? I know not forever, but like is that how you feel? >> It's it's it is acting more indestructible than many people appreciate. >> For sure. >> Somebody >> cuz people don't tell me they think it's indestructible.
21:40 >> No, cuz who would say that out loud? It sounds crazy. >> Yeah. >> Somebody said to me that they can't they can't understand they're not like professional investor, but they have money in the market. They're just like, I can't understand how it feels like the country, like the social fabric of the country is being torn apart and the stock market keeps going up. And my response was like, yeah, cuz people have more faith in Tim Cook than they have in Congress. is that like it what you're saying is not only not in congruous, it actually explains people have more faith in the earnings power of American companies than they have faith in any of our elected officials. Yeah.
22:20 >> And that and that's and that's why they'd rather have their money in stocks than in a lot of other types of things that they could be doing. Yeah. >> I think there's a lot of truth to that. What do you think? >> I agree. I I remembered about 10 years ago coming across a survey where it was millennials who were much younger back then have more trust in tech companies than the government. So they're willing to share more information with the tech industry than the government.
22:43 >> Yeah, good bet. All right, let's let's get into Tom's outlook. >> Well, one of the one of the dynamics that I love about the market today is that the market is separating the wheat from the chaff and it's se the the winners and the losers are are diverging. So in 20 whatever over the years tech has been one trade right like they've all gone up together they've all gone down together and now not just now over the last 6 months John chart five please you see the big tech correlation so we're looking at the rolling six months and it's it's crashing so like today is a great example next one John you have Microsoft down 12 Meta up 10 these names generally obviously move in the same direction we've literally never seen a day like today. And it's it's funny because they both reported yesterday, same story, Capex, maybe the the market is spooked that Microsoft's 45% of their outstanding orders are are tethered to OpenAI. It's like that's a big question mark. but their spending is up 66%. Metas has doubled from year-over-year, but Meta is showing monetization in reals and the the the market is speaking.
23:51 >> Yeah. I mean, I I hear people parsing the reasons why they're afraid of Microsoft, right? whether it's the f the value of the future revenue book or whether it's because AI can redo Excel and teams and a lot of the products. I think maybe it just shows you people are still trying to figure out how AI is progressing because now they're just deciding that Microsoft's a loser in the AI race somehow. But I I would probably guess it's misplaced. I mean, I think Microsoft's been written off in the past. You know, in the pre 2000 era, people thought it was just a software company and it came roaring back.
24:30 >> Lost 400 billion in assets today. >> Now, that money can come right back in tomorrow. So, it's not it's not like saying like a fund lost 400 billion in assets. But can we just pause for a second and think about that number? That is the market cap loss of Microsoft in one day. It's pretty remarkable, right? Right. >> I think it's $1,000 per American citizen, right? >> M it must be, right? >> Yeah, cuz there's 330 million people.
24:55 So, >> it's it's pretty remarkable. I want to get into your I want to get into your outlook. John, I can't see what slide. I think it's I think it's the first one. >> so, walk us through what you're telling people they should expect in 2026. >> I I think it's a lot like 2025. fundamental story better, but one difference is instead of a hawkish Fed, we have a Fed that eventually the market will realize is dovish because we have a new Fed share and they're also not inclined to hike anymore.
25:29 >> Yeah. >> So, that's a positive. but the negatives are there are some signs of stress in the economy now because of high rates, whether it's consumer or private credit. And we know valuations are more expensive because we have three years of gains behind us back to back, >> right? >> And I I think that this is the year where we've seen more policy shocks coming. I think the White House is being more aggressive. I don't know if it's because they want to get things done before the midterm.
25:57 >> I would imagine that's part of it. >> Yeah. And and so that makes it harder for people to hold things with conviction. >> Okay. So I think all of that means the market can look like last year which we have a big draw down. However, there is good news you know the rule of first five days which is on the right side on the tailwind side. >> Yeah. >> It came in positive. >> Okay. >> Which is a good thing. But >> the first five days were up words. Yes.
26:24 >> Okay. But we just completed some additional work and Matt Sermino probably has like similar stats, but if the first week is positive and then the first month is positive, the probability of an upyear jumps to like 92%. >> Is that right? Yeah. >> I didn't I I knew that was a thing. I didn't realize it was that extreme. >> Some of that data sounds random, but like 92% is so strong >> and it's 75 years. So NF75 is still a lot to look at.
26:48 >> Yeah. >> Which which years fell into the 8%? Just out of curiosity, did you bother to look? >> I haven't looked anything. >> It's in the weeds, but that would be interesting to see what threw it off. It could be like 911 or something. >> Yeah. >> Like it could be like an obvious thing. >> What if it's like all it's like 08 and 200, you know, 74 or something. >> Okay. you so you have a bunch of headwinds here. And for the people listening that aren't seeing the slide, I just I think it's worth sharing a couple of things. We we got to the valuations are higher obviously because stocks have gone up. low-grade consumer stress in subprime and auto loans. We have been able to look through this not on the individual company level. Those the stocks that cater to the lower income consumer have absolutely felt the pain of what's happening there. But for the most part, like Apple stock does not care about that. You know, like the big stocks that matter are looking right through it. do you think that that could be the source of the next correction? is that there just becomes an overwhelming amount of evidence that there's too much struggle at the low end or do you think that that's a low probability thing to worry about?
27:57 >> I mean it's probably one of those things where it's a social question because you know it it is a burden for consumers like all this inflation. >> Yeah. >> And and then it can create problems for government leaders and so it can swing elections. >> Yes. but ma mathematically the consumer the lower 50% isn't as impactful to GDP as the upper half. Right. >> And I think that's why the market hasn't paid attention to that.
28:26 >> That hasn't been a stock market story. That's been a political story. >> Yeah. But then it can become like a that's why we have capping government credit card rates. at the way things are going, he's going to lose the house. And if he does, it'll be 80% because of the affordability crisis that the polls say is squarely being blamed on him. I I'm not saying you should agree with that or not agree with it. I'm just saying that is what the polls are saying. And then maybe 20% immigration enforcement chaos. But like to your point that may not be a market story today, but a blue wave in the house would absolutely become a market story because part of the bull case right now is all the deregulation which will obviously grind to a halt once they have to actually start voting on things.
29:14 >> Yeah. So that's why it makes sense like capping healthcare rates, trying to get oil down, credit card fees capping. Like those are things that would help a lot of folks. Well, also not to be the bearer of good news, and I'm not suggesting that the lower end consumer is on fire at all, but if a lot of those loans that are bad loans in the subprime auto market haven't happened in 2022, we're on the other side of that now. And if things were that bad, Ally Financial, which is the biggest lender to these consumers, the stock wouldn't be within, I don't know, 3% of a 52- week high.
29:45 >> Yeah. >> Right. >> And that's forward looking. >> Like, come on. Like, this is this is the truth. you have margin New York Stock Exchange margin debt at an all-time high. Michael and I would look at that and we're not as smart as you and we would just say yes, that's usually what you see when the stock market's at an all-time high. >> Margin debt >> just because it's a function of the overall size of the stock market capitalization. are you by adding that into your headwinds, are you implying that there could be something more to that?
30:14 >> Yeah, there there is a little signal. So, and we're we we'll probably start writing about it after >> this is margin debt. So, 1.214 is that 1.2 trillion. >> Yeah. >> as of November 2025 and that obviously is a record high. And for context, in July of 2023, it was 710 billion. So, it's almost a full double in 2 and a half years. >> Yeah. Okay. >> >> what's the signal there? What we found was if you look at the year-over-year change, it's actually positive for stocks until the percentage gain exceeds 38%.
30:48 >> The percentage gain of the margin debt itself. Yeah, >> we're there. >> Yeah. And actually, it's at 36 right now. So, it's almost there. Okay. >> because what it means is like most of the gain is now being fueled by the the consumption of leverage to drive the gains. so in that top decile in the last 30 years the forward returns go from 70% positivity to like 40%. So we're almost at the point where it might be a headwind.
31:15 >> So can I show you a chart from your protege chart? Go Matt. So I do like what you showed which is like the amount of money coming in and the year-over-year change. So what I had Matt do was show me show me margin debt as a percentage of Russell 3000 market cap. And it's pretty low, but it's accelerating like in a meaningful way. Check this out. >> Right. So historically low or like nothing to be too concerned with, but look at that rate. Look at that change >> expressed as a percentage. So it's 1.8%.
31:43 >> Yeah. So normalized for the overall market cap, but it's it's accelerating pretty violently. >> Yeah. And that's reflects a cohort of people because a lot of people don't use margin debt, but and you know, I don't think the Robin Hood community uses margin debt. They're probably buying more zero day trading options. >> Oh, I would say they're doing both. >> Okay. Or maybe both. Yeah, >> I would guess both. >> Yeah. So, so when we think of it as a percent market cap, it's not necessarily representing like how the cohort is trading. So, there's a cohort that's really employing this debt that they're exhausting their >> So, the 38% threshold, what happens then?
32:15 >> well, so forward returns turn negative. So, that's would be >> the whole stock market. >> Yeah. I mean, that would be the case for the Y there could be a draw down to kind of reset everything. >> Yeah. So, >> so if you get that draw down and a lot of that margin debt comes out of the system and we normalize at a lower level, most people, yourself, myself included, would say, "Okay, great. We had the cleanse." Like, you sort of need cleanses on the way toward higher prices. I don't even know that we would look at that as a headwind or or a negative.
32:44 >> Yeah. So, for investors, draw downs are good because everyone has a more ability to allocate at lower prices. >> But what did you say like like always, John, chart 7, please? The correction is happening under the surface. So Oracle, as I mentioned, cut in half. This is the Mac 7. Microsoft's in a bare market. Tesla's 14. Apple's down 10. Like there's opportunities, whatever. Like things are happening. >> Yeah. >> And the market's broadening out. Like it doesn't does the market not need Mac 7 for the next like higher?
33:11 >> Yeah. I mean, for me, if I'm an investor, I mean, and I didn't own Microsoft, I mean, they can buy it 22% cheaper, >> right? You could you could right you could buy it at a lower valuation than at any time over the last two years. and all that premium from OpenAI, that's all gone. You could almost argue that's part of what's hurting the stock. I want to ask you about the the software correction generally, not just Microsoft.
33:33 So, the I think the IGV is in a 25% draw down right now, and I don't know when the last time we've seen that, probably 22. every one of those names look like from workday to service now Salesforce.com like one after the other even the cyber security software names are down big >> look at this bare market so this is the application software sub industry >> so you have and here's why I'm bringing this up I think you're thinking about AI as a bull you just told us it's wreaking havoc on the stock market right now it's not the AI theme if anything is erasing market cap not adding it at least in software stocks. Now, I understand people are taking that money and buying utilities and God bless them, but like are we so sure that AI is a tailwind and not a headwind >> for investors?
34:25 >> Well, sometimes it's easier to see the losers and not the winners. >> Okay. >> I agree with that. >> Yeah. So, software I think is now being chosen as a loser because now AI can write code and and replace a lot of subscription services. and I don't know if you've seen the charts recently about tech employment. but it's actually declined. It's like one of the few industries where there's fewer people. >> Remember they said to everyone, "Learn to code."
34:47 >> Yeah. >> Not great advice. Learn art history. It turns out might be better advice. >> Do you think the market is right to kill software like this? >> Usually it's a signal. You know what I mean? because there's been you it you know it's washed out when you have bad news and it doesn't go down. But if you have bad news and it's going down, that means >> how about good news and it's getting so Service Now had great earnings. Stock is mauled and it was already getting destroyed.
35:16 >> Okay, so that's also a bad sign. If you go down on good news, it's a bad sign. >> I would argue the reaction in Microsoft relative to what they actually announced >> is a really bad sign >> because there was like nothing negative there. It was like slightly higher expenses, slightly lower Azure growth. >> It was 38%. It was 38% it took was their guide in Azure down from 39%. >> And the market's like, "All right, we'll take $400 billion, please. Thank you very much."
35:45 >> So that's like not a I know it's anecdotal, but that's not good when one of the largest stocks in the market >> reports a quote unquote regular quarter >> and they act like it's the end of the world. I I take that as like a a negative sign obviously. >> Yeah. And you know, I mean, I learned when I was an equity analyst like there's like a threequarter rule. Like if a stock misses, you know, you kind of can't touch it for three quarters or two or three quarters. So, >> okay.
36:10 >> But it's still an opportunity for an a long-term investor. >> Can we say that two things are true? the reaction of Microsoft today is not bullish. Obviously, it's I sense 12%. It didn't say anything terribly bad. The the street is worried about its open AI exposure to which I would say good. I love that there's no bubble that investors are actively rejecting the AI bubble again for the third time now. Oracle cut in half. Microsoft bare market investor bubble of the biggest stocks.
36:39 >> So just in terms of building a wall of worry, I as a long-term investor love that people are being cautious and discerning about risk. >> Yeah. And later this year, you know, many of these will actually become listed. So now you don't have to guess what it's worth or what its impact would be. I mean, part of it is OpenAI is like a mysterious like privately held, but now it'll be public and then now it looks like SpaceX plus XAI will be public this year, >> right? So, so you'll so you'll remove some of the mystery and the people that want to affect trades on what they think those stocks are worth will be able to do that all day long.
37:13 >> Correct. >> Are large IPOs like >> I don't know if historically is the right word. Isn't there something a little bit like too much supply? >> Yeah. Is it a top signal? Yeah, of course. >> I mean, it's going to suck up demand, right? Cuz it's a big amount of supply coming. >> Yeah. I So, I'll never forget I I learned this lesson when Blackstone came public in ' 07. >> They were like the quintessential play on booming real estate and they were like very heavily involved in emerging markets, mostly China. they were like in all of the quote unquote hot areas. And this is before we were talking about liquid alts and you know, the revolution. This was just about like this style of investing is the best style of investing and I think they bought equity office properties from Samzel at the top of the real estate market. I think if I remember correctly that IPO was like a meteor or or like an asteroid hitting the surface of the earth.
38:09 >> Yeah. So, when BX came public, first it wasn't a corporation, it was a partnership, which meant if you were stupid enough to buy the stock for your clients, which I was, you got to tell them you just lost half your money and you have a K1. Like, that's your that's your that's tell your account you have another K1. That's your gift at the end of this. But I I've always looked at those giant IPOs that Michael's talking about. And I think Open AI qualifies >> and SpaceX >> not as the beginning of something, but as the end of something.
38:38 >> Where does the money come from? It's hundreds of billions of dollars potentially. >> Well, yeah, but this might be different. Okay, and let me explain why. Like SpaceX when it goes public is actually a hu huge wealth creation event for many of the people who invested in SpaceX. I know some people who are seed in it 50,000 and I think their stake is worth 150 million. >> That's insane. >> Because the company's worth one and a half trillion. So like >> sounds inflationary. Well, I think that I think that's the equivalent like of a massive tax refund for the US economy.
39:14 >> well, they have to wait 6 months. they're locked up. They can't sell on the IPO date. >> Yes. But they might be able to get margin or they can >> we're going so much higher. So, you're saying that these people that get liquid from SpaceX shares, they're going to put it right back into the market and and to get us blocks. >> Yeah. So, so think of it as like the alternative world who said no return.
39:37 Suddenly all these venture funds that are 99% of the funds value is SpaceX has a huge distribution and like I like so all that money going into the economy again. >> So you're saying I should have Michael start cold calling the SpaceX seed investors. >> Yes. Yeah. Red Hold should actually, you know, do a a pilgrimage to all the >> We have very cheap credit. Very cheap. >> all right. We did the January barometer. We did the FINRA margin cap.
40:04 Where do you want to go next? Let's do the broad let's do the broadening. >> John chart 12 please. So it's it's Thursday it's 340 and Microsoft got killed today. Down 12%. what's XLK doing? Maybe that's not the bad XLK is down 2% but that's a bad waiting. The NASDAQ 100 is down 96 basis points. Okay. 96 basis points for for the NASDAQ 100 and the RSP equal weight S&P is down two basis points on the day flat. And this broadening trend that we're looking at. So this is a chart from Yuri Timmer showing the equal weight versus the cap weight and he showed that there was a clear narrowing earlier late last year and now it's broadening. So the S&P cap weight has turned sideways and you're seeing a breakout in the 493. I love it. I'm I think this now listen if the Mag 7 were really rolling over I would say all right well that's not good right because they're they are the leaders but the fact that they're going sideways and consolidating Microsoft notwithstanding I think this is as bullish as you could possibly be >> is that part of your bull case for this year is that we'll have like the next hundred stocks up making a making a play for new highs.
41:13 >> Yeah. And I think this is confirming a broadening is confirming a a bull market. It's very good for institutional stock picking because they can't own that much mag seven, >> right? >> And institutions can of course employ their own form of leverage through prime brokerage. So it it means that you could actually have new dip buying coming from institutions. I think this would be really good news. >> Your clients must love it. What are they asking you saying about this?
41:41 >> well yeah, I think they are breathing a slight relief that it's not just the mag 7 anymore. Finally. >> Yeah. And and so people are seeing especially the long short folks seeing good opportunities. A lot of them are doing non US. I yeah I think that if someone's global I think I understand now why they are looking at global like cuz there's now as someone point out there's going to be two countries that are winners in AI like the US and and China.
42:11 >> do we know that? Yeah, I mean I think China's AI works really well and you know China has done a good job on EVs and and then I learned recently they're actually pretty big on healthcare and biotech innovation like I think they are exporting more licenses than any other country. >> Okay. >> So like a lot of the European drugs are actually licensed from Chinese labs. >> so then it means the supply chain like the the countries adjacent to China could be doing better. So it's good for stock picking. I mean, so there's more stories out there.
42:42 >> I think the international story is so interesting because last year they did not have earnings growth, but those markets went up 20 and 30%. Because it was like a mind it was like a mindset shift and I think a lot of the leadership in those countries and the people that run the stock exchanges etc. They some of them it was just like jawboning, but some of them actually like passed rules like forcing companies to increase shareholder value. I think they all sort of looked at the United States recovery from the pandemic and said like what what are they doing that we're not doing? And I think all at once they kind of got the memo. Oh, their capital markets are on fire and look at all the benefits like the domino effect.
43:28 When stock prices are rising, you get increased consumer demand for everything under the sun. You get like you get executive confidence, you get more investment. It's just so it seems so obvious even if you're a socialist country, you should root for your corporate champions to get bigger, not penalize them and find new ways to sue them. And I think that's the switch that flipped and that led to that rerating last year. And then this year, to your point, now you're going to get the earnings growth in these countries. That explains the rerating of last year. And that's a pretty great like follow-through story. And I think that's why you're seeing people allocating going out of their way to allocate more to international large caps. My best guess is that's not like a six-month phenomenon. That feels multi-year to me, and I don't think it's late in those markets at all. What do you think? Yeah, I I think the more I look at it, the more I think what you said makes sense because then on top of that there's dollar could be kind of weakening.
44:30 >> that could only help. >> Yeah. So then it it could be a long there could be a long tail to that story. Now the more I look at it, the like the less I think it's just a one-year thing. >> Okay. I like that idea. I want to go to your to your your strategy again. So, what to own? Stocks that benefit from a stronger 2026. John, do you have this? Yep. >> All right. Energy basic materials. Is there more to say on energy?
44:58 >> Well, part of it is so energy and basic materials were our top sector picks this year. >> Yeah. >> But, and I didn't anticipate precious metals to do so well or the metals, but it was really because they had underperformed so long. the level of underperformance the last three years was something you only seen one other time in the last 75 years >> on precious metals. >> yeah. So I think it might well I think you I don't know where the slide is but there's like what we have a zcore how much standard deviations of underperformance.
45:30 >> Yeah. >> And it was at the same level you were at the at the 200. >> So you'd have to say the same thing about energy then >> energy has like done nothing for 5 years. >> Correct. So it was energy and basic materials and that's why we made it our top sector pick this year. Yeah, I think you're going to be right on that one. And those charts all look outstanding to me. >> Yeah, >> like they're being these stocks are under accumulation. I don't see any way around it.
45:51 >> Yeah. >> I have a question for you guys. >> Why do we say basic materials? Why don't we just It's >> cuz they're not precious. There's precious and there's base metal. >> But what but why not just materials? I mean, I never say basic materials, but I know that's what the sector is called. It's kind of weird. >> Wait, what do you mean? >> Basic materials. >> Yeah, that's the Gixs Gixs one. >> Yeah. Oh, right. how they classify all the where basic come from I don't know maybe we'll never know >> yeah you know why I think they were thinking of as a manufacturing process like these are the basic materials and then there's the inter room goods yeah and like >> industrial it goes into the industrials but you're right >> the more you know >> that was like a that's like an agrarian concept or something right >> yeah >> you have Bitcoin and Ethereum not surprisingly as what to own >> Tom what the hell is going on Bitcoin just crashing.
46:41 >> Can you tell Can you tell us can you tell us a little bit about the crypto market over the last 3 or 4 months because it was a very it was like a it was on fire and like the story made sense like all right you have pro- crypto administration in the White House now the SEC is on board now like everybody everything fell into place and you had people on both sides of the aisle Congress falling all over each other to collect money from the crypto lobby.
47:10 And it just looked like, "All right, finally it's a regulated market. It's accepted. Products are rolling out. People are using it. Inflows are hitting the funds." And then it like hit a wall. And I don't like have theories or whatever. We had JC Porets on last week two weeks ago. He's just like, "Oh, this is easy. They started trading options on Bitcoin. That was the top I which I guess was someday in o in October." I don't know. What's your story for why it's been so directionless over the last few months?
47:41 >> yeah, crypto was doing well until October. >> What so do you buy buy that story, the option story? >> A few things happened in October. Okay. >> so crypto was actually up like 36% and then from October to the end of the year it actually had a in some cases like a 40% draw down. >> Yeah. >> one was there was a big deleveraging. There was a a basically a pricing exploit that took place on one crypto exchange that led to a what they call an automatic deleveraging. Then that cascaded across all the crypto exchange and it was the biggest deleveraging event in the history of crypto bigger than what happened with FTX after SB.
48:23 >> So what happened to people with leverage got unwound and they were forced out of longs and it kind of wrecked the the wrecked the trend. >> Correct. And it was a it was a pricing error, but it liquidated over 2 million accounts globally. it wiped out I think a third of all market makers, which are important for they're the equivalent of central banks. And it crippled a lot of crypto exchanges. So, their balance sheets had took a huge hit.
48:46 >> Coinbase is in a 50% draw down. I think it's second 50% draw down since coming public. And Coinbase is a big company. So if that stock looks like that, you can only imagine the privately held players in the ecosystem what that must have meant to them. >> Yeah. So Coinbase, let's say, is a fortress balance sheet. Then imagine those who have like okay balance sheets. >> Okay. >> has that run its course? >> The in in 2022 it took about 8 weeks, 8 to 12 weeks before risk appetite could recover. So we're like kind of in that outside window.
49:20 >> Well, Salana's hitting new lows today. So Bitcoin is down six. Eth is down seven. It is not on its course. It maybe it might be accelerating to the downside. >> Yeah. >> But it's so weird with the like juxtaposed to gold like it was supposed to be supposed to be >> digital gold. >> Yeah. Well, there's other things happening. So like in Bitcoin, I think there is a a turning of the holders cuz one of them is, you know, Bitcoin's like 14 years old. So like the the the crypto punk, the 20-year-old is like becoming a mature person, right?
49:50 >> And and and many of them made fortunes. Yeah. So there's they've been selling their Bitcoin. >> Okay. >> and then as you know there's this quantum risk that is more Bitcoin specific because quantum developments are are accelerating. >> Yes. >> And about a third of Bitcoin wallets are not upgradable. So they're actually quantum vulnerable. >> Okay. >> Can I ask a dumb question? I don't know anything about this. Obviously, if if quantum computing was a thing and we could hack the Bitcoin blockchain, why wouldn't they hack, I don't know, the central bank or everybody's Chase account, like why would they go after Bitcoin first?
50:25 >> yeah. So, quantum operates like more like an AS6, like a a brute force of a of a repetitive calculation. So, it can break encryption. so Bitcoin's encryption is what can be broken. you're right. So you can break a lot of encryption but banks hopefully would be upgrading all their customer passwords make force you to do a new type of password and that's how you avoid quantum vulnerability. The thing is a like a lot of Bitcoin wallets like Satoshi's haven't ever been upgraded. So they and of course Satoshi's wallet.
51:00 >> How do you upgrade a wallet to make it so that the the blockchain itself that vulnerability to quantum computing will be protected against? >> You can you'd have to fork Bitcoin. I mean but or you'd have to contact the guy and say like upgrade your wallet if it's like a ledger wallet or whatever. >> So but I'm saying if you upgrade your wallet you're safe, but the price might not be safe. Well, if you >> you might be safe from losing your Bitcoin, but if there's a mass hacking event or there's some way that and like Michael, not an expert, but if a lot of nodes just go away because they're worried about that risk or if somebody even come somebody influential comes out and says, "I have information and I think like literally there's a quantum computer right now in the process of hacking the the the Bitcoin blockchain like that you could upgrade your wallet, but the price is going lower.
51:56 >> Well, one, if someone developed a quantum hack, >> Yeah. >> they wouldn't reveal it. Like a a nation state would just steal those one-third of the bitcoins >> until somebody starts to notice. >> Yeah. now, Ethereum, for instance, upgrades twice a year. So, it's qu they're already developing quantum resistance. So, like a lot of blockchains are going to be quantum resistant. >> Okay. >> just the way like Chase will upgrade all their encryption. >> Have you ever seen sentiment this bearish outside of FTX? Like people are just seem totally done. And I know crypto is so weird that it can get its mojo back in 2 seconds for no reason.
52:32 Could be up 15% tomorrow for all I know. But man, it looks like it's on the mat. It is right at multi-month support and it just looks pretty gnarly right now. >> yeah. So one actually from a technical perspective crypto is this is what Tom Demar actually is expected. So he's been hired as an adviser at Bitmine and he actually told us Thursday was an important day and it turns out today was an important day because we've had a big decline in in crypto. but this is more akin to the end of the selling not the beginning. So >> So you don't think we're seeing another leg lower? Well, for instance, Ethereum might go to 2400, but it's a touch and then that's the bottom. But that's going to coincide with precious metals peaking. I mean, remember, precious metals has sucked all the risk appetite out of speculation, out of crypto, right? A lot of it's come out of crypto into precious metals.
53:29 >> It's like unthinkable six months ago. Nobody could have foreseen back to we said nobody knows. I've heard that I have heard that story >> that the people trading crypto have moved over to gold and silver because it's working working better. they're probably telling themselves that they're being conservative right now. But there's another story that I've also heard from crypto people, which is that if you thought Bitcoin was a store of value away from the dollar, now with the ready access to stable coins and the full acceptance in the banking world of stable coins and pending legislation that might even allow stable coins to earn interest, stable coin holders to own what what purpose does Bitcoin serve? Like if we were using Bitcoin to get money out of fiat currency or get it out of the traditional financial system.
54:17 Well, now Bitcoin is fully a part of the traditional financial system. That's number one. And two, it moves too much to be useful as a store of value. It's useful as a trading vehicle. Stable coins are amazing as a store of value cuz it's a dollar and it's always a dollar. So, did the advent and mass popularity of Circle and and all of these stable coins now, Fidelity launched one this week, did that steal some of the use case away from Bitcoin?
54:47 >> Well, there's >> Have you heard that before? I I know I'm not the first person to say that. >> I have. But there is a really big story around blockchains which is Wall Street dismissed blockchain and crypto as like just experiments but now financial institutions are rebuilding settlement layers using blockchains. That's what standard charter said at Davos. The UBS CEO says that in a few years there's a convergence between digital assets and traditional finance because blockchains offer finality and a lot more security.
55:29 And and Larry Frink says he thinks that the entire financial system is going to operate on one common blockchain. >> But why is that good for Bitcoin? >> Well, it's pro it's probably good for Ethereum. >> Okay. >> Because Ethereum is >> You wouldn't be talking your book now, would you, Tom? >> I haven't written a book on that. >> So good at this. All right. Go ahead. Go ahead. say more about Ethereum. So, Ethereum's the useful blockchain that can actually help bring that sort of thing about >> because it's that's really where stable coins have been built. it's a you know, you do smart contracts so you can lock information and prevent it from actually being altered. You know, you can put a million page legal document on the Ethereum blockchain. If someone tries to change a period on that blockchain, the hash fails, right?
56:10 >> So, that's how you protect information, >> right? >> it's a 100% uptime. This is what Wall Street as they think about the narrative around the future is they're building their entire system on contracts like Ethereum which is really bullish for Ethereum. >> What is the timeline when you say they're building their entire system? I would say 99.99% of the whole financial system now has nothing to do with blockchain at all in 10 years. Is that 50% or is it 5% like what would be the bull case on the financial rails of let's just leave banking out of it. Let's just do Wall Street for example. So trading settlement etc. How much of that is on running on on Ethereum rails?
56:55 >> Well if any I might be able to give you a snapshot. So as we talk about Okay. So if we talk about stable coins, Tether has about 160 billion of US dollars tokenized on their as Tether is a company. >> Yes. >> and it but it's mostly running on on Ethereum. Even though it's only 168 billion, which is less than 1% of M1. So it's not even like risk assets. It's not credit equity tokenization.
57:26 >> They're going to make $20 billion this year. actually because of their balance sheet they might be making like 24 billion >> and that's just the interest on the treasuries that they own to back the the dollar value of the coin >> and because they're because they're over collateralized they actually own like now almost $30 billion worth of gold or something. >> Oh wow. >> Right. Okay. >> But they're so let's say they make 20 billion not 24 but somewhere between 20 and 24.
57:53 They're a top five most profitable profitable bank in the world. It's It's amazing. >> They make more money than Goldman or Morgan Stanley. >> That's amazing. >> And that's just a single A monoline product >> with 300 employees. >> Okay. Now, everybody is coming for that profit margin. As you know, JP Morgan, Fidelity, everyone will have their own in-house stable coin because why on earth would they allow something like this to continue? >> Yeah. What's better for the banks than a stable coin? I don't have to pay you anything. We just get to keep it all.
58:24 >> Yeah. >> Correct. Okay. And that's one product. So now you can build stock trading which you know Vlad and others want to tokenize stocks. >> Nicely too. >> Not using ETH though, >> right? >> They Well, they'll use an L2. >> Yeah, >> they might try to use other chains. There's other chains and some banks are using these privacy chains, which I'm not going to try to throw shade, but some have had exploits. Some have had famous exploits in other countries. So, >> okay. But I'm not like >> I don't want to be suicided.
58:57 >> You think if if they if they are build if they are tokenizing assets, you think if they're smart, they either build it on on ETH in an existing L2 or they come up with a new protocol. But like that's the right world to build that. >> Yeah. So let's say the Wall Street tries to do their own blockchain because they want to control the narrative. Then there's going to be a new JP Morgan that is like Tether that'll be built on the public chains cuz Tether is built on public chains and it's better than, you know, JP Morgan has 300,000 employees.
59:28 Tether is 300 and they make almost as much money as JP Morgan. >> Crazy. >> Tom, I got to ask. >> All right, stock market. Look at this candle for the close. Look at that bullish candle for SPY. >> Wow. Holy Is it a hammer? >> I mean, dude, >> I sort of like it. >> Near an all-time high. He can't even take it down for one day. >> It's a bull market. I don't know what else to tell you.
59:49 >> You have Mark, you have Mark Newton in house. >> We do. >> Okay. So, what is he what is he telling you on the technicals right now? >> He likes stocks in the interim in the near term. >> Okay. >> He's also in the same camp that we'll have something that feels pretty bad sometime in the middle of this year. >> Well, no. What's pretty bad? Because there's always a correction. Like you said earlier, you think bare market you think we get a 20?
60:10 >> Yeah, it could be 20 but from a higher level. Right. All right. So, let's say we're 7,300. I mean, that could be 1,400 points, right? So, then 5,900 could be the low. I mean, that would be painful. I want to do one more, one more with you, and not specific to the stock, but when people ask me, all right, AI, everybody gets it. Going to be huge. Companies are spending trillions of dollars. We all understand that. Like, what's the next leg to the bull market? My answer has been robots. I've been pretty clearly bullish on robots for 10 years now.
60:48 Tesla last night told the street they're going to stop making Model X. They're going to stop making Model S. I think the models that really matter there now is like the Model 3 and the Y. That's like what they're really going to focus on. And then the cyber cab. But then the decision to to stop making those cars is to focus full on autonomy, which is a fancy way of saying robotics. And he's talking about the humanoid robot being for sale to normal people by 2027. Now, we know he's usually 5 to 10 years early on his projections, but that's like part of the charm, I guess. but that's pretty a that's pretty notable that they're dropping two of their four top selling cars just to make robots and to make automated vehicles. What are your thoughts on that as a signal? And do you think the robot thing is going to be the next phase of the bull market the way that I do?
61:47 >> Robots could be huge, right? >> Not necessarily humanoid robot, but just the idea that autonomy is enough, >> correct? to be a new bull market that we're not even in yet. >> Yeah. Because robots are force multipliers. Like it makes every human a superhuman or >> or unemployed. But sure. >> Yeah. >> An unemployed superhuman. >> Yeah. If robots pay taxes, then you still come out ahead, right? Because you might start taxing robots. >> The robot makers at least will pay the taxes.
62:13 >> Yeah. Or, >> you know, or the Door Dash robot pays taxes. >> But you don't but you don't have this in your themes. Is it too early? We we do have labor shortage as one of our investment themes >> because they will use robots to supplant or or to fill the hole. >> Yes, there is a structural shortage of prime age workers that is going to be lasting for the next 10 years. So, it's there's a use case for robots, but I I I agree with you like that is a a really big unlock that in the real world you have agentic robots moving around and that's very productive. like it it could create a lot of GDP, but remember it could generate so much tax revenue that the US government doesn't have to tax people anymore. You might not even have to work.
62:56 >> Come on. So that's so that's that's what >> no more taxes. >> Yeah, I think we could stop paying taxes because the robots are the ones that are taxed. >> And then what? >> How do we people may not even work then because there's so much surplus generated by the robots. >> Robots pay taxes. >> Yeah. You you tax their activity. It's micro it's microtaxing. That's what you but you would need a blockchain. >> You are living in the future, my friend.
63:22 I love it. >> You're not at all in any way pessimistic about >> we we'll be the animals like we'll be the people the robots visit us in the zoo. We're just like sitting >> You're not in any way pessimistic about the combination of AI and robotics. So physical AI like the number one occupation for men in the United States like job title is driver. this is not about the future. This is right this second. Like, I understand it's the greater good and it'll be cheaper, better for consumers, like the cost per mile. I'm I'm I'm I'm all in, but I am worried about like the in between once everybody gets used to that. And that could be I don't know.
64:05 Couldn't that be decades? That's what we're seeing in the software stocks right now. like you're not at all pessimistic that like we might need a pretty vicious economic down cycle to get to that other side because a lot of people are going to get laid off all at once. >> I think the US is going to come out certainly as a winner and and China. Okay. >> So I think I'm like every American today is going to benefit from the surplus generated by robots.
64:32 >> You do? Yeah. >> Okay. but I give you an example like in 1935 before the advent of flash frozen. Okay, 30% of Americans worked on a farm, >> right? >> But and and food, you know, food spoilage on the supply chain meant you like you produce a lot of food but like it spoiled and so there were >> it couldn't go far. It couldn't get that far. >> And most grocery aisles were like fresh. >> Yeah.
64:58 within 20 years, flash frozen allowed food to go from 20% of the wallet to five and it went and took farming employment from 30% to 5%. So if if you were an economist in 1935 and said in the next 20 years 90% of all farming jobs are going to disappear because of this technology, >> that would have sounded scary. >> Yeah. People said like oh it's another depression but instead it was led to a boom. It's a great Steinbeck novel, East of Eden.
65:27 >> Love that book. >> And they're they're farmers. And then toward the end of the book, they get into flash frozen and actually refrigerated train cars, I think, is a big like plot point there cuz it takes place in that era that you're describing. Made me think of it. >> Yeah. So that's like robots cuz that that's 25% of the entire >> worried about these adjustments between now and then and people wandering around for 5 years before they feel the benefit of the surplus cuz right now Tom a lot of the benefit of all these things seems to be going to the top 50% of households. The bottom 50 don't have equity. and I just I feel like that's the same thing but on steroids.
66:08 where can we tell people to go if they want to subscribe to Funstrat? The best URLs to send people to? >> Okay. if they're interested in getting our research, which is almost daily videos and notes, >> it's fsinsight.com. Like f like funstret fsinsight.com. Awesome. I love what you're doing and congratulations on all your success and just thanks for hanging out with us. We love seeing you and we'd love to have you back at some point this year.
66:36 >> All right. This is my first of all, you guys have the best conference. >> Oh, thank you. You >> looking forward to Future Proof in Miami. Can't wait. >> Awesome. >> Wait, you're about to say something else nice? Keep going. >> Yeah. No, did you have one more nice thing that you want to say? >> I Okay, you guys, you also have a great podcast cuz I like listening to your voices. Like, I don't have to watch you guys talk. I can just listen.
66:56 >> we appreciate that. And and we'll and we'll see you again soon. Ladies and gentlemen, thank you so much for watching. Thank you for listening. Check out Fun Strat Funst Strat and Granny Shots. And remember, if you like the show and you want to tell people about it and help the algorithm, throw a like on that. Maybe do even like a review is good, right, Duncan? Reviews help. >> We love that. >> Why do the reviews help? People don't understand this.
67:19 >> It just gives people details about why they might like the podcast, >> right? That's it. >> Yeah. >> That's all you got for me? >> I mean, it's important. Do it. >> You didn't have a monologue prepared about comments. All right. All right. We'll let you off the hook. All right, guys. We'll see you next week. Thanks so much.