Josh Brown

All right, who's winning in the World Cup? Because I have no idea, like, where.

Sunu Vargas

Maybe France.

Josh Brown

No, but, like, where does the state. Where do the standings? Because teams have been knocked out already, right?

Sunu Vargas

Yeah, about five or six have been knocked out.

Josh Brown

Okay. Wow. Already.

Sunu Vargas

Yeah.

Josh Brown

All right, so who's.

Michael Batnik

Wow.

Josh Brown

Who's in contention for, like, to. To stay in the whole thing, do you think?

Sunu Vargas

I think it's several. Like, it's a round of 32. So you have 32 out of what, 48 teams.

Josh Brown

Okay.

Sunu Vargas

Still in the mix. But the ones that matter. You have Spain, France.

Josh Brown

Do they give you the locations of where, like, the final. Final games are gonna be?

Sunu Vargas

Yeah, the final's gonna be here in Jersey. MetLife.

Josh Brown

Oh, boy. I'll be sure to get the hell out of here.

Sunu Vargas

Yes. If it's anything like Jersey, that's tire thumper weather.

Josh Brown

Yeah.

Ryan Dietrich

So last night we ran around New York, had fun. We went to dinner. He goes back to the room. I'm working on stuff for the show and different things.

Josh Brown

You went straight to flash dances?

Ryan Dietrich

Yeah. Yeah, exactly. What's that, bro?

Josh Brown

I have friends that saw you there. Go on.

Ryan Dietrich

That's an AI image of Josh. That's not the real Ryan. And I was talking. What'd you do last night? He was literally watching, like, soccer documentaries at midnight last night. Okay. So, I mean, I was like. I thought I was kidding. I mean, you really were right.

Josh Brown

He's a man of culture.

Ryan Dietrich

Exactly.

Josh Brown

He's a man of culture and taste. Right? All right, so that's cool. That's cool, though, because it's not. How often does it come to new. The last one I remember in New York was, like, in 04 or something.

Sunu Vargas

94.

Josh Brown

94.

Sunu Vargas

94.

Josh Brown

All right, so that's the last time in the U.S. but then they do it everywhere in the U.S. yes, usually.

Sunu Vargas

Except Chicago, it feels like, because last time, 94, there was a game in Chicago. I think the opening game was in Chicago. This time, not quite around because that.

Josh Brown

On anything or.

Sunu Vargas

No. I think the cities that bid for it.

Josh Brown

Okay.

Sunu Vargas

You know, that Are part of the bidding committee. I think that's how it works.

Josh Brown

All right, well, I'm rooting for your team is the Netherlands.

Sunu Vargas

You said Netherlands. Yeah. Other than the US, Obviously.

Michael Batnik

Why do you like the Netherlands?

Sunu Vargas

So I started watching soccer when I

Josh Brown

was neither here nor there.

Michael Batnik

All right, let's start the show.

Josh Brown

Yeah. Yeah. Any more talk about. Any more talk about soccer? Our last eight fans.

Sunu Vargas

All right,

Josh Brown

thank you, Big John.

Michael Batnik

Whoa, whoa, whoa. Stop the clock. Here's a word from our sponsor. This message is brought to you by Nuveen. Private markets have become essential for building resilient long term portfolios. As traditional markets face increasing pressure from inflation, rising rates and economic uncertainty, investors are turning to private markets to find new sources of return and stability. Nuveen combines private market expertise with innovative solutions across real estate, credit infrastructure and natural capital, helping investors navigate volatility, manage risk and unlock lasting growth potential. Nuveen's integrated platform offers strategies across varied risk profiles engineered to enhance traditional allocations and support portfolio stability across a range of market environments. Grounded in experience and focus on the future, Nuveen delivers private market solutions designed to stand the test of time. Nuveen Unlocking Opportunity in private markets. Visit Nuveen.com to learn more. Investing involves risk, Principal losses Possible private market investments may not be suitable for all investors.

Josh Brown

This episode is sponsored by ClearBridge Investments. Amid rising geopolitical tensions and continued market uncertainty, investors are looking for stability. Even before recent developments in the Middle east, stocks backed by real assets were gaining momentum and can offer more predictable cash flows as volatility increases. Position your investment portfolio for wider equity participation with fundamentally driven Clearbridge active equity strategies. Clearbridge, a Franklin Templeton company. Go to clearbridge.com to learn more.

Sunu Vargas

Welcome to the compound and friends. All opinions expressed by Josh Brown, Michael

Ryan Dietrich

Batnik and their castmates are solely their

Sunu Vargas

own opinions and do not reflect the opinion of Ritholtz Wealth Management.

Josh Brown

This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. All right. All good?

Michael Batnik

Everyone's good.

Josh Brown

Duncan, you okay?

Sunu Vargas

Yeah, I'm great. You good? Yeah.

Josh Brown

All right. You got that microphone up there like you're in a recording studio. Like you're a backup center. Didn't mean to bring it down. Bring it down to face level. All right guys, we are in for a treat. Fan favorites, professional market commentators, strategists, economic experts Ryan Dietrich and Sunu Vargas are back. Ryan is the chief Market Strategist at Carson Group, an advisory firm with more than 60 billion in assets. Prior to Carson, Ryan spent more than a decade at Shaffer's Investment Research and six years at LPL Financial. Ryan also co hosts a top investing podcast, Facts versus Feelings. Very confident. My assertion. Alongside Carson Group colleague Sanu Snu is the Chief Macro Strategist at Carson Group. 20 years of experience in the asset management industry. Before joining Carson, he was a partner and Director of Research at Convex Capital Management where he co managed portfolios, advised clients and led the research team. Boys, it is a pleasure to have you back. Thank you for being here.

Sunu Vargas

Thank you.

Josh Brown

Yes. All right, we are. All right. I'm co host Michael Badnik, ladies and gentlemen.

Sunu Vargas

Round of course.

Josh Brown

Michael.

Michael Batnik

What's up? Good to see everybody.

Sunu Vargas

All right.

Josh Brown

Alan Greenspan died this week. I don't believe in this thing where when someone passes away you're not supposed to say negative things about them. I actually think you should double down. Do you guys want to trash Alan Greenspan in any way or any opinions whatsoever on the legacy of Greenspan?

Ryan Dietrich

It's a complicated legacy.

Josh Brown

Oh, look at him, he's getting, just getting warmed up. Do it.

Ryan Dietrich

By the way, another thing on my bio there. I'm a third time offender of joining this podcast. Okay, this is my third time. Thank you.

Josh Brown

This is your third.

Ryan Dietrich

This is my second. So thank you guys. The first one though is that birthday party you had with JC remember in February of 2024 we all went down that dark basement and had.

Josh Brown

Oh yeah, that was awesome.

Michael Batnik

Yeah, yeah, sounds like you're talking very romantic all your voice.

Ryan Dietrich

I've been told I have a face for radio, so I just, I go with it. So obviously he was well loved during the 90s. Market goes up, everybody's happy. And then you look at what he did with the bubble and left interest rates maybe a little bit lower after the bubble and a lot of people now look back and say, ah, maybe that contributed to the great financial crisis. Did it? Did it not? There's other factors to it, of course, but it's a complicated legacy, you know, and I looked, I know we sent you guys a ton of charts. I know, but the one that shows the breakdown of all the returns, I mean he was in charge of the Fed for 18 years. Right. He took over right before 87. Good handoff from Volcker. Market crashes gained 290% is 18 years annualized. It's like I'm going by memory here, like seven, seven and a half percent. So standard. But he was the second longest tenured and second largest return.

Michael Batnik

Wait, hang on. He's not a mutual fund manager.

Josh Brown

He doesn't get credit.

Ryan Dietrich

He's not. But people in this a financial podcast. Yeah, I mean that's true, but I mean, I guess, you know, so he was there a long time. Did okay. But there's.

Josh Brown

Stop telling me how much alpha he had. Wait a minute, wait a minute. The reason I ask about the legacy is, well, we're gonna put aside all the financial crisis stuff because it's ancient history. Although interestingly, a lot of people don't know this. One of the Fed's primary responsibilities. People think the FOMC is the whole point of the Fed. They're actually a banking regulator. I know. So, okay, so putting that as a banking regulator where the chairman of the Fed actively working against regulating. But we'll put all that aside. The legacy really to me is an increased focus on asset prices at the Fed. Some would argue that's where they should have gone because more and more of the economy is being driven by assets anyway. And I believe in that. But I think now we've been through several succeeding Fed chairs and the new Fed chair sort of is a little bit influenced by Greenspan. Sort of. A little bit Greenspan esque. He certainly wants to communicate less frequently. And he actually cited Greenspan recently, just prior to his passing, as somebody who inspired him. So I'm curious if you think as market participants, there's something that we should all sort of be aware of about this transition. What do you guys think?

Sunu Vargas

I think there's a myth that, you know, Greenspan didn't tell us what he wants to do, but he gave us a lot of speeches, for example, on how he thought the economy works. I mean, you go back to 94, and I would say, I think most people would probably say that he panicked about inflation, raised rates in a hurry, then 95, 96. I think he gave time for productivity growth to pull inflation lower.

Michael Batnik

Well, it started off he blew up California basically when he did that in 94.

Sunu Vargas

And then in 99, actually May of 99, he gives a speech saying that, yes, we've had really good years of growth, productivity growth, all of that, but the labor market is tight. I'm worried about inflation. What does he do Starting August of 99, he starts raising rates. Yeah, right. And I think he raised rates by 150, 175 basis points over the next 10 months, something like that. And then I think getting back to your point, I wonder if that was the start of like the Fed put when he started dropping rates after that. And then we got the housing bubble and all of that.

Josh Brown

I think 87 is the origin of the Fed put. Yeah, it's really the first time in modern history where the chairman of the Fed specifically does something and then says that it has something to do with not allowing the stock market turmoil to spill over into the real economy. And it works. We don't get a recession in 87. We don't have Any problems in the economy until like 1991, with nothing to do with the crash of 87, obviously. And I think that's then becomes this new thing where the market says, well, the Fed's not gonna let things get too outta hand because we know they're paying attention to the markets now. So that's sort of like, to me, that's where that whole thing starts. And then it gets taken to extremes in modern times.

Ryan Dietrich

Yeah. My favorite quote. I've got it here. If I turn out to be particularly clear, you've probably misunderstood what I've said and I think that's great. Cause he talks a whole bunch. That's not everyone. Yeah. Greenspan said everyone kind of nods their head. Oh, okay, that's pretty good. And there you go. And like you just. I believe the most recent statement, 130 words, that was one of the least we've ever seen outside of like a panic cut. Not panic cut, but a cut during COVID Then you gotta go back like Greenspan time. So again, and I know the image of the statement, everything's read it out and crossed out. I mean, that's. Apparently we're going back to some of that Greenspan period. It'd be more to the point.

Josh Brown

Callie hates this. So our chief strategist, Callie Cox, wrote a piece this week about less transparency. Regardless of how you feel about the new Fed chair, less is not more because it's more uncertainty in the markets and could lead to more volatility. I don't know if I agree with. I understand her point and it's a well written piece. I just sort of feel like the volatility is going to be here with or without the transparency, because how often they change their minds.

Sunu Vargas

I think you have all the. It's not just one person at the Fed making the decision. I think you could argue maybe in Greenspan's time, he had a lot of power over the rest of the committee. Now you have 12 members. Yeah, 19. About 12 vote. You know, Walsh is. And that's the difference between, you know, when Walsh says we're going back to the Greenspan era. No, Greenspan talked about the economy a lot. He talks about how he thinks about the economy a lot as well. Walsh doesn't want to say anything, apparently. We'll see how that, how long that lasts. But the rest of them are out there talking about.

Josh Brown

I think he wants, he wants to preserve the ability to react to higher frequency data, meaning more real time is 1 and 2. He doesn't want to have to Explain everything they do. Because if they have to change course or do nothing when people think they're gonna do something, he doesn't want everything to be telegraphed in advance. And I'm not saying it's good or it's bad. I'm just saying that's gonna be the more profound difference.

Sunu Vargas

He wants flexibility.

Josh Brown

Yeah, he wants flexibility. I don't hate the idea that if I have to explain everything to you, I'm probably not gonna do a good job. And the Fed maybe got too explainy in the post financial crisis. The press conferences, I think are a lot. The 12 members going out and making speeches for a month in between FOMC meetings contradicting each other. That might be a lot. And I think he wants to just put an end to a lot of it.

Ryan Dietrich

So a couple things. First off, it's a small world. Cause I hired Callie at LPL many years ago, so shout out to Cal.

Sunu Vargas

Yep.

Josh Brown

We love for a long time.

Ryan Dietrich

That's great. Sona and I might disagree on this one because we usually agree. I remember a time when the Fed just was there and it really wasn't that big of a deal. And now it. I. I'm with you, Josh. Every time you turn around, there's a different Fed member giving their opinion on something and I'm like, whoa, I didn't know that person was part of the Fed. And I know a guy like Sonu, he eats it up, he loves it all. And he, you know, keeps me in a job. It keeps him in a job. That's true too. I mean, I could live with less Fed, I guess. I do have a CMT behind my name. Chartered Market Technician. We'll get into my charts and stuff. I mean, I'd much rather just follow what the market's doing than what some various Fed member is saying they think is going to happen when the Fed doesn't have the best track record sometimes.

Michael Batnik

All right, let's talk about the market. I have a question for you boys. Ben and I just got finished recording a podcast with Derek Thompson. And the meat of the conversation was, is this a bubble? Ryan, what would you say to that question?

Ryan Dietrich

First off, I think you guys are almost up to 500, right? Congratulations. You're close, Right?

Michael Batnik

Thank you.

Ryan Dietrich

I listened to 400 of them, give or take. I mean, you guys are awesome.

Michael Batnik

Thank you.

Ryan Dietrich

Yeah, no, don't think it's bubble. I mean, I know there's parts of the market that feels that way. We can get into the meat of this. We will, we will. But the Short answer is no. The reality is these bull markets last longer than you think. I mean, I came on with you guys in February 2024. I look what we said. The title of it was something along the lines of why 2024 will still be good for the bulls.

Josh Brown

Right?

Ryan Dietrich

That wasn't popular. Read the, read the comments on YouTube. Markets up 47 since then. We come with you guys. Last July, I think you made a joke about our weight. You said, why? To stay overweight. I know what you were doing with that title.

Josh Brown

But nonetheless, it wasn't me.

Ryan Dietrich

I said, that's a good title. That's a good title.

Michael Batnik

Why?

Ryan Dietrich

To stay overweight or ways to stay away or something, whatever it was. But.

Josh Brown

Well, I did. I listened to you. I stayed overweight.

Ryan Dietrich

There you go. Exactly. That we all have. And I think we're still in this area where, yes, there's going to be volatility, the market's growing. But reality is these bull markets last longer than you think. This bull market just cracked the eighth longest since World War II. What in the world does that mean? Looking at the previous seven, right. The average length of those. This one's about three and a half years old, by the way. Starting October 2022, the average length of those other seven was like seven years. The shortest was like five years.

Josh Brown

I mean, what are you measuring this from the low of the previous bear market?

Ryan Dietrich

Yes. And I know there's very unofficial. Well down 20%. You have to pick a spot markets.

Michael Batnik

And when there's a 20% correction, is that how you measure it?

Ryan Dietrich

Technically, yes. That is exactly what we're using.

Michael Batnik

That's quantifiable.

Ryan Dietrich

It's quantifiable. And I get there's flaws with this stuff. I totally understand that. We had near bear Markets in 2011, 2018.

Michael Batnik

That's good enough.

Ryan Dietrich

Last year, we get it. But the reality is it's like a cruise ship. So I've described it, right? Bull markets are hard to stop. They're hard to turn around. And that's like a cruise ship. Once they get past that third year, they tend to keep going. And this is something we've talked about for a while and there's more to it than this. But just be aware, I mean, just literally, what are we in June? So let's say about 15 months ago, most European stocks just broke out to new highs from levels they traded out in 2007. So to think that, okay, we were just a year or so of Europe finally doing something, it's just gonna end. No, I mean, we getting in the way. We manage a lot of money. Like, what makes. I think so, not a little different. Yes. We have a podcast. Oh, I have a present. Oh, about that. You talk. I have a present.

Sunu Vargas

I mean, wait, I got to hear

Josh Brown

the end of this.

Michael Batnik

That was amazing.

Ryan Dietrich

We could do this earlier.

Sunu Vargas

Turned on, Talk about the podcast. Right? And managing money.

Ryan Dietrich

Oh, yes. I'm so excited about the present, which I forgot to give you guys.

Michael Batnik

We managed a lot of money. Presents.

Ryan Dietrich

Yeah.

Josh Brown

So we talking money.

Ryan Dietrich

You know, we. No, no, no. We talk about the stuff. Do it. But when you manage your own money. Carson just cracked 60 billion, like you said, and we manage a lot of that. And it's hard to manage money. It's really hard. It's really hard to manage money. It's really hard to have an opinion. We try our best to do both. And I think what the reality is, we're not going to. People bash me a lot for being bullish.

Sunu Vargas

Who?

Ryan Dietrich

Twitter still? Oh, yes. I mean, any tweet.

Sunu Vargas

I do.

Ryan Dietrich

It's like the market's been down a little bit in June.

Josh Brown

15% a year for. Trust me, I know you've been bullish

Michael Batnik

for a long time.

Ryan Dietrich

I mean. Yeah, I mean, so I'm Sonu was one out there in 2023 saying there'd be no recession, and I saw the reasons to be bullish. But anyway, and I see these things, and you see like, that cover of the New Yorker with George Washington all hungover, all beat up, says red, white, and kind of blue. It's not like there's excitement. Bull markets are supposed to feel fun, you know, and this one parts of

Michael Batnik

it do get us the president. So there is. We live in a bubble culture where everybody is. So everybody's dying to see bubbles everywhere. And there's some shit going on in the market that obviously smells bubbly. Like, we all. We all. We all could smell it. I can't even talk.

Sunu Vargas

It's so exciting.

Josh Brown

Wait, put it. What do you got there? Indiana Jones. Yeah.

Ryan Dietrich

What is that?

Michael Batnik

A rucksack? What is that?

Ryan Dietrich

Oh, my God.

Josh Brown

Okay, see? Oh, this is cute. Let me see. What do you think?

Ryan Dietrich

What do you think?

Sunu Vargas

I need one, too.

Michael Batnik

I mean, there's a Carson logo there, but fine. But fine. I love it.

Ryan Dietrich

It's my favorite podcast. The way you guys.

Josh Brown

You guys are very close.

Michael Batnik

Next time you guys come, you guys,

Josh Brown

yourself for the camera.

Michael Batnik

Love it.

Josh Brown

All right, all right.

Michael Batnik

So how quickly we forget, you know, what was a bubble?

Ryan Dietrich

What's that?

Michael Batnik

20. 21.

Sunu Vargas

21.

Michael Batnik

The I'm glad that an email. An email reminded us. It's like, guys, we just lived through a bubble. In 2021, Apple, the best of the bunch, fell 30%. Google 44. Amazon 56. Nvidia 66. Netflix 75. Metta 77. Ark, the poster child 80 still in a gigantic drawdown. We just had a bubble that popped and we like pretend that that didn't just happen and we're the whole cycle.

Josh Brown

It was the whole bubble cycle, including the busted IPOs, including the really bad ideas about other asset classes that happened. We had a whole thing.

Sunu Vargas

I just wrote a piece yesterday titled Tongue in Cheek.

Josh Brown

Hang on. Nicole, put this in my Rolls Royce.

Ryan Dietrich

I brought a couple together.

Michael Batnik

I got mine, I got mine. Okay.

Josh Brown

Here, hold on.

Ryan Dietrich

I actually have eight more in my bag for the whole team. So yes, there you go. Feel free and use it as a pillow.

Michael Batnik

Sony, what were you saying?

Sunu Vargas

I don't know. I would say I wrote this piece, Tongue in Cheek, saying how I learned to stop worrying and love the bubble.

Michael Batnik

Got it. Yeah, very good.

Sunu Vargas

Very Dr. Strangelovian.

Josh Brown

Okay, so it's not strange for us to have made the amount of progress in stocks that we have because we had the whole boom bust cycle recently. People are anchored to 2009 as being the big one and they, I guess they ignore all of the volatility along the way since then. And a full blown bear market in 2022 for mostly in tech, but elsewhere also. Okay, so your view is this could continue, but I know that there are always things that you're watching for. And what would change your mind, I think would be the big question.

Ryan Dietrich

I'll go first. So more of a technical point of view, right? 2021. Yes, everyone's making money. We all have money from the government, day trading, gambling, all that stuff. It felt a little crazy. And then in the fourth quarter, 2021, consumer staples started to rally a lot. They outperformed low volatility led by a lot in the fourth quarter.

Josh Brown

I remember this.

Ryan Dietrich

And not while JC was talking about it. Few technicians were talking about it. Most people were just having fun making money. And then yes, the war happened and that obviously contributed to a lot of it. But still, I think the market was giving a warning sign that something was changing under the surface. When you look at these trends and these technical things and then you fast forward to right now, I mean, equal weight consumer staples relative to the S&P 500 just on Monday hit like the lowest number, the lowest level in a long time. So we're not seeing that we're not seeing low volume. SUNY's got a lot of thoughts on low volume.

Josh Brown

Did the rally in staples in 21 coincide with the beginning of the rise. Rise of interest rates?

Sunu Vargas

It was before that.

Josh Brown

It was before.

Sunu Vargas

It was before that.

Josh Brown

The market sort of knew that the Fed was going to have to do something, I think.

Sunu Vargas

Yeah, inflation is a problem and the Fed was late.

Josh Brown

Right, okay. All right, that's interesting. But there's no sign of anything like that.

Michael Batnik

Let me offer one piece. Let me offer one piece of evidence for why this might be a bubble. And for the record, I don't think this is a bubble. But if I were to point to one thing, maybe it'll be this. So Micron reported yesterday, we'll get into the numbers which were outstanding. Micron's market cap is about to pass. Meta, does that sound right? Like literally they're both 1.3 billion?

Sunu Vargas

Well, this last quarter they made more profits than Nvidia made a year ago.

Michael Batnik

It's good business.

Sunu Vargas

Yeah, if you can get it right. But I think it's actually, you know, I think this can continue. I think there's. Unlike 2021, there's a real economy story here too. There's a macroeconomic story here. You look at, Even within the GDP data, you look at information technology equipment plus software, that's almost 5% of the economy, 5% of GDP. A few years back it was about 3%. That's a big increase for a relatively small piece of the economy.

Josh Brown

Here's what the bears would say. We stopped talking about the circular financing schemes with Nvidia because that was not a, that was not, didn't turn out to be a great bearish trade. However, things are only getting more circular with Amazon now doing deals with OpenAI. And it's like this clique of 10 or 12 companies. Meanwhile, those 10 or 12 companies are turning over not only all of their cash flow, but at this point, most of their revenue to two companies. One is in Taiwan and the other one is Micron and basically, and a

Sunu Vargas

couple in South Korea.

Josh Brown

Right. So you have the 10 biggest companies in the world saying, here's all our revenue for the next three years. We're giving you guaranteed deal. We're just gonna give it to two or three companies in the, in the Far east for components that apparently are so critical that one of those companies is now the 9th largest stock in the world.

Michael Batnik

But how is that a bear case?

Josh Brown

The bear case is Microns. Incredible earnings and revenue growth are predominantly coming from them being a choke Point and just raising prices. It's not volume. They're not making more. They can't.

Sunu Vargas

Yeah. It's inflation. Right?

Michael Batnik

Isn't that good?

Josh Brown

Yeah, well, 60% plus growth in average selling price. Are they gonna do that next year? They said today, the year after, they

Michael Batnik

said we now expect supply demand conditions for both DRAM and NAND to remain tight beyond calendar 2027. So last night they reported $41.5 billion of revenue up 74% quarter over quarter, 364% year over year.

Josh Brown

Very bullish if you're Micron.

Michael Batnik

So chart kid showed the since, since January 2025, the earnings, the forward 12 month forward earnings is up 1,440%. The stock is up 1,300%. Like that sounds like in line with what you would expect. Investors pay up for growth. They're not going to pay up.

Sunu Vargas

You're getting profit growth and they're getting it. But that the other side of the coin is inflation.

Josh Brown

The question is, is it sustainable or will companies ultimately figure out a way to do this and not pay as much for memory or not pay price increases from here? Will companies use their technological ingenuity to get around these bottlenecks in the future?

Michael Batnik

The market is saying no.

Josh Brown

Right now the market's saying they can't.

Michael Batnik

Market might be wrong.

Ryan Dietrich

Back to GreenSP. Right. December 5, 1996 was the famous irrational exuberance speech, which apparently he came up towards irrational exuberance in his bathtub. That's what they said. But the s and P 500 went up more than 100% the next three years.

Josh Brown

He was four years early.

Ryan Dietrich

Exactly. Nasdaq went up over 300%. So I know people have heard this before, but it's good to remember that. Yeah, the market was overvalued then because he said it was and a lot of people thought it was. And that's right when I started. So I don't remember it exactly, but read a lot of the history books and you look at the things now, I mean again we titled our outlook start of the year riding the wave. Our mid year outlook comes out in a couple weeks. It's still riding the wave. Creative. I know, you know, but when we look at it, we still think it makes sense to have exposure. We're slightly overweight technology here, you know, to just say it's a bubble maybe,

Josh Brown

but I don't think the issue is that it's a bubble. So I don't think the issue is that it's a bubble.

Ryan Dietrich

Okay.

Josh Brown

Micron's 9.5 times earnings.

Sunu Vargas

Not anymore.

Michael Batnik

It's way higher. But keep going.

Josh Brown

I don't think it is.

Michael Batnik

It is.

Josh Brown

I don't think it is.

Michael Batnik

It is.

Josh Brown

But either, either way if it's 10, it's 11. I don't think the issue is that it's a bubble. I think the bigger question is think about how fast things are changing. And we have short memories. Like one year ago there was a must own stock. It wasn't Micron. You remember what it was? Everybody had to own it. It was the consensus Palantir. Palantir.

Ryan Dietrich

Okay, how's that doing?

Josh Brown

It's down 50%.

Sunu Vargas

Right.

Josh Brown

It's not a hundred points 207 or 107 in nine months. And this happens all the time. The good news is the rotations in the market are powerful enough that we get bailed out. Because just as one group loses favor, another group rises to take its place. So the software stocks had been a drag on the market. Financials are making up for it. And now they're all at 52 week highs.

Michael Batnik

Can I show you boys a chart?

Ryan Dietrich

Yeah, yeah.

Michael Batnik

John. 19.2 please. All right. So since 2018, anytime the rest of the market outperformed the MAG7, the market was in a deep drawdown. Right? Makes sense. Right now over the last 27 days the 493 are outperforming the Mag 7 by 18%. That's a gigantic spread. In fact it's the most that we've seen since 2018. And the market is basically at an all time high. I cannot possibly think of a more bullish development that the Max 7 are absolutely breaking down. Microsoft looks like death. Microsoft relative to the spies is where it was in 2019. All of the outperformance in the last seven years, goodbye. The fact that the market is remaining as healthy as it is with industrials ripping, with regional banks ripping and the Max 7 getting their, you know what kicked in. I think it's fantastically bullish.

Josh Brown

You think rotations have been the most important factor.

Sunu Vargas

I'd say momentum is actually doing really well. Despite Mag 7 is not momentum. Mag 700. So you are seeing a lot of dispersion. Micron's 12% of the S&P 500 momentum index. But then this is where things could be stretched, right? You look at the excess performance of momentum S&P 500 momentum over the S&P 500 last 12 months. You look at the last 40 years, it's at the 95th percentile stretched last three years, last three years, it's at the hundredth percentile. Right, right. So momentum is definitely stretched. And that gets to, you know, now it can, you know what stretch can continue staying stretched.

Josh Brown

I wonder if we've ever seen momentum this stretched where there was an actual justification from earnings growth. Cause I could picture other times when momentum was stretched, but the quality wasn't there. Like in this case we're saying momentum is stretched and then we have a company like Micron go from a billion dollars to $24 billion in quarterly earnings and it's like, oh yeah, momentum is stretched because this is what these companies are doing.

Sunu Vargas

But then it gets back to your question as to how long can that profit grow.

Michael Batnik

Josh is so right. Because I think when people hear the word momentum, it has a negative connotation.

Josh Brown

Like they think of junky stuff.

Michael Batnik

These dummies are just chasing and there's no fundamentals.

Josh Brown

They just stop or they think of like Sam Altman launched a nuclear reactor company. That's what they think is momentum. And then you look and it's Corning, which has been in business for 150 years and it's like, it's Caterpillar, one of the top momentum stocks in the market. It's 100 year old company, blue chip Dow stock. So when people hear momentum, the immediate assumption is this is going to be some freaky biotech stuff or it's all semiconductors and it just isn't.

Sunu Vargas

It's large caps too, right? It's one thing for small caps to increase 100, 200% in a few months. Yeah, but now you're seeing that with your microns and sandisks and you know, SK Hynix, by the way, I said

Michael Batnik

micron was 1.3 billion. I'm obviously I meant trillion.

Sunu Vargas

It's a trillion.

Michael Batnik

Yeah, trillion.

Sunu Vargas

Trillion. It's a 1.3 trillion.

Michael Batnik

Yeah. Let me ask you guys this, so I want to show you. So just to sober up a little bit, two charts. The first one from Warren Pies, chart 13. So Warren shows, he says historically semis were priced as a cyclical industry. As margins peaked, price to sales ratios would fall. Over the past year though, semi multiples have exploded as margins hit all time highs. Either the industry has become less cyclical or it is a sign of exuberance. And it better well be the former because the next chart shows the evolution of the global fund manager survey that bank of America does. And we've never seen anything like this. The top line, it's everyone says, not everyone. The most people have said Long global semis are the most crowded trade. There's nothing else on this list that's even close, I guess US growth stocks in 2020. But everybody, everybody, everybody is all the way in on this trade.

Sunu Vargas

And it's not just semis. He's mentioned industrials. We looked at all the constituents of every single sector and I think there's a chart in there. But looked at the weighted average, how many of them are correlated with tech?

Josh Brown

Right.

Sunu Vargas

And even for industrials, more than 40%, 50% have a large correlation with tech. Same thing with utilities.

Josh Brown

Yeah, it's all one theme.

Sunu Vargas

Yeah, it's all. But then you get out into sectors like healthcare and there's zero.

Josh Brown

Right.

Michael Batnik

And healthcare looks great.

Sunu Vargas

Yeah, right, right. That's the other. Especially recently.

Josh Brown

Do you guys worry about crowded trades?

Ryan Dietrich

Yes, I think I love looking at sentiment. Right. If everybody's thinking alike, somebody isn't thinking journal patent. So there is some. Something there. But I do want to rewind for a second. You're talking about rotation. On Tuesday, S and p was down 1.4%. Yet 285 stocks in the S&P 500 were higher on Tuesday. Only five times going back over 20 years have we seen a day where the S and P was down more than 1% but more stocks were up and down. So we all understand why that was the day tech was imploded. But other stuff did well. Just yesterday, we're recording this Thursday, just yesterday, Wednesday market was flat ish. Down a tad 315 stocks. The S&P 500 were higher.

Sunu Vargas

Right.

Ryan Dietrich

And today, and we're not done doing this, market's down a tad. At least S and P is, but there's still more stocks up. So it's, it's. I think it's encouraging this rotation we're seeing and I know everyone on TV says it and it's kind of boring, but for listeners, I think it's really a good thing because yes, you get excited about the gains. We've seen the big IPOs. Tech's doing amazing. Momentum's 99th percentile, this and that. But to still have a diversified portfolio and own things like we've been saying for a while and people didn't like it when we were saying it a month ago. But industrials financials kind of, you know, have like a paired trade or barbell trade. Yeah, you got your tech over here, but they own some other cyclical.

Sunu Vargas

We have low volatility.

Michael Batnik

Yeah, nobody wants that shit.

Sunu Vargas

Yeah, nobody wants that.

Josh Brown

Well, giving you a correlation point. So I own tech, I own industrials, I own utilities.

Sunu Vargas

It's all tech.

Michael Batnik

Yeah, it's all.

Josh Brown

Hey, Mr. Kramer, am I diversified?

Sunu Vargas

No, I would not get no. Right. And that's why when we started, you know, the year, we were riding on momentum. We still are, but the more momentum gets stretched. We are more comfortable holding things like low volume.

Michael Batnik

Well, I like that you're saying that because this is where we are in the market. And Josh, you're going to love this one. Listed options on the Round hill T Rex 2X, Long Dram, Daily Target ETF are now available. So let me stop that one more time. The boys at Roundtail launched the greatest ETF of all time. Most successful launch of all time, maybe including Ibit, I don't know, whatever. Dram Genius launched at the perfect time. It's now 20 billion assets, maybe more credit to them. So then they launched RAM, which is if you. If some dram is good, 2x is better.

Sunu Vargas

Why not?

Michael Batnik

Okay, but now there's options on the 2s.

Josh Brown

I could buy calls on the 2x.

Michael Batnik

Yes.

Josh Brown

Well, why, what am I talking to you guys for?

Sunu Vargas

This sounds like South Korea.

Michael Batnik

You could buy calls on the 2x DRAM if we are not near some sort of a local top. Like, I know this should last a lot longer. There's a lot of enthusiasm here.

Sunu Vargas

So I have a, you know, theory that if we do see rotation, sustained rotation, not just weekend or two weeks, anything. If you see a rotation for about six months, tech is not doing well. Let's say tech is flat for the rest of the year and your healthcare comes back. Healthcare is outperforming, financials outperforming, maybe even comm services to a degree. Right. I think then the AI trade is done. It's sort of like even same thing.

Josh Brown

But what's the AI trade? Well, this whole group is.

Sunu Vargas

Yeah, yes. This whole momentum, basically, if you take momentum, it's basically an AI trade right now.

Michael Batnik

But, you know, but Nvidia is not working at all.

Sunu Vargas

Well, they're still up about, what, 10%? It's not. It's not Micron.

Michael Batnik

I mean, yeah, yeah, it's.

Sunu Vargas

It's sideways, but it's, you know, you have Micron in there. You look at the momentum index, it's Micron, Alphabet. You could argue Alphabet's not really working either. But then, you know, number five down the list is Lam Research. Right. And then you have Sandisk. You have amd.

Michael Batnik

Listen, dig, it's all those names.

Sunu Vargas

It's all those things.

Josh Brown

A very long list. Where does the puck go then if, if these stocks take a break. If these stocks cool off and it's been a really long time since they have, but we're seeing the hyperscalers take a break now and it's been about six months. So let's say these stocks take the second half of the year off. Where do people go?

Michael Batnik

Small caps. I know, I know, you're watching the ratio.

Sunu Vargas

Yeah.

Ryan Dietrich

They've already gone to small caps. I guess you could argue. I don't think most people realize it could be early. Yeah, I mean, the Russell 2 is up 20% for the year, give or take, and might close an all time high at least. S&P 600 is going to close an all time high. I think today that they were doing this.

Michael Batnik

Ryan, you're a technician. I'm going to hold up my computer. That's IWM Spy.

Sunu Vargas

Yeah.

Michael Batnik

How's that looking?

Ryan Dietrich

Yeah, on a relative basis, it's breaking out. Also if you look at the S&P 600 advanced decline line. So it's a cumulative basis. I mean, stocks going up versus down every single day, just yesterday on Wednesday. That closed an all time high along with price. The way I learned it a long time ago, breadth, leads price. So we are seeing plenty of market breadth and small caps. Why is that? Well, community banks are breaking out. Like Josh, you just said regional banks are strong. Biotech's going crazy. Those are big components to small caps. So I think again, it's all part of this. Let's say the AI large cap takes a break. Yeah, I don't think that's crazy, you know, and I think it's important.

Michael Batnik

It'd be weird if it doesn't take a break.

Ryan Dietrich

It'd be weird if it didn't. And you probably would want it to take a little bit of a break. But to see the leadership coming from these other areas. And again, it's more. I mean, if small caps are going up again, call me old fashioned, I think that's usually a good thing because we are a little more domestic by nature. There's a lot more small caps in our large caps. That's why, again with the portfolio, you should have a little bit of everything in there. Don't try to be a hero. We're still overweight, equities

Sunu Vargas

and overweight. Momentum to an extent.

Ryan Dietrich

Overweight and overweight at least.

Josh Brown

How many financial advisors work at Carson?

Ryan Dietrich

We have over 600 financial advisors in I believe 44 states.

Josh Brown

How many do you guys. Are you guys able to talk markets with on a given like let's say a monthly basis.

Sunu Vargas

Probably every Monday morning we have a call with 150.

Josh Brown

All right, so their clients. So the advisors clients are doing very well right now.

Sunu Vargas

Yes.

Josh Brown

Okay.

Ryan Dietrich

We were happy.

Josh Brown

What kinds of questions are you getting? Ner. Are you getting any nervous questions from clients relate relayed by the advisor like it's up so much. What do we do?

Sunu Vargas

The most recent question of the most popular one up until like last week was how do we get into SpaceX?

Josh Brown

Okay. Wow, that makes sense.

Ryan Dietrich

Yeah.

Josh Brown

Okay. Are they still asking as much as you want?

Sunu Vargas

Well, wait till anthropic and open a icon. It's not done yet.

Michael Batnik

Yeah, but the questions are still skepticism. Well, it's not how much should I buy?

Ryan Dietrich

Right.

Michael Batnik

For the most part or what do you think?

Ryan Dietrich

I know Liz Ann Saunders has said this before and I'm going to say it as well, but you know, I get to travel and present for advisors and clients. Room full of people. You do your dog and pony show for 45 minutes and it's 15Q&A. I've never in the last couple years been asked, hey, this is, this is pretty good out there. How high is this going to go? It's always the dollar is going to lose reserve currency status. Oh my goodness, look at all the debt we have. We can talk about that stuff too. The interest rates, all that, the standard stuff. You think because that's what you see on, you know, TV or you're reading about again, it just comes back to. It doesn't feel like people are really enjoying.

Michael Batnik

But wait, hold on. But I think the thing that the point that you just made is really important. I don't think we're ever going back to that world where everybody is cheerleading. I think the way the media and social media and everything and attention works, it's never going to be everybody's all in. It's just never going to happen. So if that's what you're waiting for as your signal to okay, now everybody's in. It's over. It doesn't work that way anymore. People, people will fight this the entire way.

Sunu Vargas

Yeah, I think you get the other question like, oh, is the dollar losing reserve status? Should I buy gold? Right. So those are very common questions, but

Josh Brown

you could have gotten those. You could have gotten those 15 years.

Sunu Vargas

Yeah, yeah. No, I think the barrenness, bearishness comes. It's manifest in that sort of way.

Michael Batnik

What do you guys make of the gold and silver unwind? This has been like violent.

Sunu Vargas

I think that's a sign of real Yields going up. The Fed becoming or perceived to be more hawkish when you talk about whether they think they'll raise rates or not. But yeah, I think real yields going up, that's hit gold and I would argue maybe even crypto for that matter.

Michael Batnik

I know gold ran into the war, but since the war started officially gold is down quite a bit.

Sunu Vargas

I think it was an inflation story and inflation picked up. Suddenly everyone was like, they priced out no more. Two rate cuts and now they're pricing in rate hikes. I think that's a headwind for gold.

Ryan Dietrich

So in our tactical models we run, we added some gold allocation on. I think it was March 31, 2023, right after the regional bank crisis. We didn't look at it like we looked like gold will do better than bonds. That's kind of how we looked at it. So you got a 60, 40 bucket. We're probably 68 to 69% equities and then call it 31, 32% other stuff. And we added some gold there. Obviously it's worked really well.

Josh Brown

You took from the bond allocation to etical.

Ryan Dietrich

Well, do you remember how we did it exactly?

Sunu Vargas

Yeah, we have a little bit of cash all so technically. But we wanted protection. We don't want to add duration so long treasuries. So we said, okay, what's another long duration asset that can protect the portfolio in a crisis? Gold.

Ryan Dietrich

And I think we talked about this last year with you just saying we thought rates would stay a little bit higher, we thought the economy do a little better. We've been saying this is an inflationary growth environment. Inflation might run three, three and a half percent this year, but the economy's going to do well. I mean, some of this stuff's playing out now. We actually just sold some of our gold allocation in our tactical models for the first time again since we analyst all back a long time ago. And it's like gone straight down every day. And Sonu was £1 on the table saying, look at real yields here going higher. You know, there's something going on here and that gold's not going to like that. And that's clearly what has happened in a big way. Now I see gold, you know, I think it cracked. 4000 people are starting to dog it a little bit. Maybe there's something there, but it's still, it's still an area that makes sense from a strategic point of view to have a little bit.

Sunu Vargas

But you know, we do have it in our strategic portfolios a little bit. But we almost sold most of it out in our tactical portfolio.

Josh Brown

I want to do one of your charts. John, can I have chart eight? You're showing it. Equipment and software investment as a proportion of GDP is now larger than during the dot com era peak. The charitable way of thinking about this is that the portion of digital activity in the economy is significantly larger. So we shouldn't be surprised to see equipment and software investments be much higher than back then. But maybe it's not in absolute terms, it's in a proportion of GDP terms. So I don't know how would you think about whether or not this. Because that in and of itself makes me want to sell Dell, which is one of the best stocks of the year. I don't know how would you think about this?

Sunu Vargas

But it's basically investment spending. Right. Investment in information process processing equipment, including things like chips, and then investment into software. Right. So all this is investment and then. So within GDP you have two sorts of investment. Broadly speaking, you have business investment, which is part of mostly of the stuff.

Josh Brown

Right.

Sunu Vargas

And then you have residential investment. During the housing bubble. You see that yellow line screaming all the way up to six and a half percent. Look at it.

Josh Brown

It's like half a McDonald's logo. You may say the other. Okay, you hungry? Well, that's more extreme than both the

Sunu Vargas

tech bubbles that you showed me. But it was a relative movement, the delta. Right. How fast did it go up? And I think the green line going up as fast as it is right now. That's the key rather than the level of it.

Josh Brown

Okay, if we see, and I think

Sunu Vargas

it continues going back to the point, going back, even connecting the markets, will this continue? I think once earnings season comes out during like July, these hyperscalers will tell us, oh, we're spending even more on this stuff.

Josh Brown

Could this green line match the peak of that residential bubble which was. It looks six and a half percent of GDP was residential housing in what is that? 2000, 2006, 2005.

Sunu Vargas

Yeah.

Josh Brown

Could, could, could this conceivably get there?

Sunu Vargas

Maybe. I mean, what's not included here is data centers. Construction related.

Josh Brown

Wait, what?

Sunu Vargas

That's not, that's not even in this. That's not in this.

Josh Brown

So what is this?

Sunu Vargas

This is it. Equipment, computers, things like that.

Josh Brown

Just buying servers.

Sunu Vargas

Yeah. And then software too.

Josh Brown

So the construction of the data center is not that separate.

Sunu Vargas

You add that we are starting to sonu.

Michael Batnik

Don't you think it's remarkable that the economy has been as resilient as it is with the yellow line residential spending? Absolutely. In an ice Age, like, what if we get a little bit of a comeback in housing?

Sunu Vargas

Well, that's the goal with keeping rates low, I guess. Warsh talked about it, right? He says, you know, he thinks rates are tight. If you look at the housing market.

Josh Brown

Yeah, I mean, they're definitely restrictive. They're restrictive of at least transactions. I want to do another chart of yours. Chart 11. This is interesting. I imagine you guys have an emerging markets allocation, equity allocation. What you're showing here is emerging market earnings forecasts have risen even faster than in the United States.

Michael Batnik

That's Bloomberg.

Josh Brown

So what's the tail of this chart? What are we learning from this?

Sunu Vargas

It's same memory chips, just how global? Samsung, how global it is. Tsmc. It's that AI trade.

Josh Brown

Are you surprised to see emerging market stocks doing what they're doing this year?

Sunu Vargas

No. Once you break it down, most of it is driven by South Korea and Taiwan.

Josh Brown

Okay.

Sunu Vargas

India's struggling.

Josh Brown

We're getting a lot of lift from again, the AI CapEx stocks.

Sunu Vargas

Yeah.

Ryan Dietrich

I'll say this, like two years ago, I would be a little surprised because I used to think of emerging markets in the old days, like a lot of commodity based things. The commodity's done pretty well, but clearly it's been more the AI trade. Now, John, we kind of hinted at this. I don't know the number, but the one about the June swoon, we sent that chart to you. The June swoon. It's. It's incredible. When you think about June, historically isn't that great of a month. Okay. We all know that during a midterm year, it's the worst month of the year. Okay, that's fine. And it's the second half of June when the trouble happens. And sure enough, right on cue, I mean, like right on cue, this is happening. And you guys should mention July. Sona just mentioned July earnings. You know, stock Traders Almanac. Mr. Hirsch. There we go. Jeff Hirsch, been all over this. He says this June swoon's actually a good thing because you get some selling, you get some weakness out of the way, and then you get into July. Now you can pick a reason why. I think it's because of earnings. The last 20 years, July has been by far the best month. I think it's higher. Either 12 or 13 of the past years or 13 of the 14, 13 of the 14 past years, whatever it is. We get to earning season in July. You get this little June swim in the late July. Then you get your higher movement, like Sonu said. And we've been thinking we're probably going to get more good news on earnings.

Sunu Vargas

Earnings.

Ryan Dietrich

I mean, it just is what it is. I mean, I. I know the historic beats we just had three months ago.

Michael Batnik

I love how to apologize. It is what it is.

Ryan Dietrich

Yes. It's just like, you know, but.

Michael Batnik

But those are record earnings. It is what it is.

Josh Brown

How dare you.

Sunu Vargas

Sorry.

Ryan Dietrich

And then profit margins. I don't know if we mentioned the margins on Micron when we started this conversation, but was 84 or 85. They said next one's be 84. That's unheard of, dude.

Michael Batnik

The revenue. The revenue is 41 billion. The operating expenses are like 2 billion.

Ryan Dietrich

Yeah, yeah.

Michael Batnik

But, yeah, obviously there's more expensive. But that's. It's unbelievable what is happening with this business. There's. I mean, we've never seen anything like this a year ago. No, I'm sorry. Back in April, I asked chart kid. Hey, this is like wild shit. Show me Micron's earnings over the last 12 months. At an April of 2026. In March of the year, prior earnings were $9 a share. And then they were 86. And that was three months ago. And now they're 132. Like we've never seen something. I've never seen anything like this.

Sunu Vargas

Step function, right?

Ryan Dietrich

Yeah.

Josh Brown

What did you make of how much stock they're going to buy back? And I think they retired a big chunk of debt. They had like 14 billion in debt. They bought back 5 billion of it. Retired. I mean, at least I guess that the answer is not only these companies seeing record results, they seem to be being somewhat responsible with it. I don't know if a buyback is the smartest thing to do.

Michael Batnik

I don't think they did any buybacks recently. But they were asked on the call.

Josh Brown

No, they authorized. They authorized a new. A new one.

Sunu Vargas

Video announced a dividend increase last time.

Michael Batnik

So they were asked a lot about their capital, about their capital program member. I don't know why I just thought about this, but Commander Zero and Blood Diamond, I'm sure you guys are very familiar with that movie. He just had so many dimes. You know what to do with all of them. It's sort of like, what do these companies do with all of the cash that they're producing? They have no idea what to do with it. It's almost ridiculous to buy back the stock. But one of the analysts are saying just buy back 10% of the float. Like, just do it now. Like what? Why not?

Sunu Vargas

It's only some of them too. Most of them, actually. If You, I had a chart in there showing equity supply. That's actually reverse where net equity supply is now positive.

Michael Batnik

Let's talk about in Q1. Here we go.

Josh Brown

What are we looking at, Sonia?

Sunu Vargas

This is, this is from the Fed equity issuance.

Josh Brown

Is this a headwind?

Michael Batnik

It's gotta be.

Sunu Vargas

I don't know if it's a headwind, but you're, you know, you're increasing supply. So normally.

Josh Brown

So for the first time in 26 years.

Sunu Vargas

Well, 2021 was positive.

Ryan Dietrich

2021.

Josh Brown

2021. Because that was the IPO boom.

Sunu Vargas

Boom. Yes. All right.

Josh Brown

But we've basically been in a situation where floats have been shrinking.

Sunu Vargas

Yeah.

Josh Brown

Companies have been buying back stock for about two decades. Borrowing to buy back stock.

Michael Batnik

So buybacks are dead. John, go to chart. My God, you boys, we got a lot of charts.

Sunu Vargas

And this is going to increase because Q2 you're going, you know, SpaceX and

Josh Brown

you know, it's a crazy visualization. It is. This is going to go higher, John.

Michael Batnik

26.

Sunu Vargas

It's going to go higher.

Michael Batnik

Yeah. So Bloomberg did a chart, big text but disappearing buybacks, Alphabet Meta, Microsoft and Amazon. The only one that is buying back shares right now are Microsoft. And you got to figure that that's probably going to zero too. How is this not a headwind? They were buying back a lot of the stock guys. Microsoft is in a 35% drawdown.

Ryan Dietrich

Of course you could argue it already is. We've talked a lot about the Mag 7. How much has underperformed.

Sunu Vargas

I mean Google just had you know, $80 billion that same week that SpaceX came and 40th they raised 80 billion in equity.

Josh Brown

SK Hynix is going to do a $29 billion I guess re IPO here in the United States.

Sunu Vargas

Right.

Josh Brown

They have a publicly traded company in Korea. They're going to issue like $30 billion worth of stock here so that. No, not ADRS. A listing here.

Sunu Vargas

Oh really?

Josh Brown

Wow.

Michael Batnik

Yeah, I can't wait to trade options

Josh Brown

on the double because they already have, I think they already have ADRs. This is like we're listing. I forget if it's the New York Stock Exchange or the NASDAQ, but they are going to drop another 30 billion worth of memory stock on US investors. Like I think it's imminent. So we went from the stock market is shrinking. Everyone's grabbing for whatever equity exists out there now. The flows have reversed. That was a real growing the pie of available shares. What do you think?

Sunu Vargas

That was a real cash on the sidelines. The cash on the Sidelines was cash. With corporations, especially the big mega cap tech companies, that was the cash on the sidelines. And what did they do with the cash? Bought equity. Now you think about that. Cash is no longer there. It's going to data centers. So there is a real economy thing happening. They're spending it, they're investing. That money is going to other companies. That's their profits. Right. But you're losing.

Josh Brown

Is that supply responsible? In part. I know it's new. Responsible in part for what could be a continued shrink of the multiple that investors are willing to pay. Like theoretically there's more shares they could buy, they could invest in. Why would they pay up for just a small handful of companies?

Sunu Vargas

Possibly. I mean, you know, then you think about like eps, right? What happens to eps? I mean, you know, if the number of shares are going up.

Michael Batnik

Less earnings per share.

Sunu Vargas

Less earnings per share.

Michael Batnik

Very good at math.

Sunu Vargas

Yeah, exactly.

Michael Batnik

All right, let me show you guys this. So a couple of weeks ago we showed a chart. The amount of market cap coming between SpaceX, OpenAI and Anthropic is more than all of the combined from 97 to the top. And that was a true IPO mania. John, chart 23, if you will. So chart kid looked at the aggregate IPO proceeds. So not market cap adjusted, but the amount of money that actually came to the market. Because we're talking about supply. Right. So how much money do these companies actually raise as a percentage of the market cap at the beginning of the year? And we are not through. We are, we have not seen OpenAI anthropic, but we are like one tenth of where we were in the 90s mania. So 0.18% of the S&P 500 market cap at the beginning of the year has come through new issuance. Now if you look at the market cap adjusted. Next chart, please. It looks a little bit more like what you would suspect. Right. It looks a little bit higher. And if we get open Anthropic, it's, it is going to approach the 90s. Like, let's just be real then you

Sunu Vargas

see 99, 2000 in there with the highest bars.

Michael Batnik

So it's gonna, it's gonna approach it. But I think you do have to adjust.

Sunu Vargas

Yeah. Or normalize it.

Josh Brown

Yeah.

Ryan Dietrich

Denominator blindness.

Michael Batnik

Right.

Ryan Dietrich

Everybody talks about the numerator, let's talk about the nominator.

Michael Batnik

But that's the question.

Josh Brown

So you don't, you don't seem to be particularly concerned about the growth in issuance. It sounds like you see it as you guys it sounds as though you see it as, okay, fine, but the money being raised from all of this is going right into the real economy. That's the positive way to think about it.

Sunu Vargas

And profits. Yeah, okay. And it goes back to, we've sort of thrown the towel in on timing. Could be a bubble. Maybe five years from now, who knows? We may look back in the spirit and say it's a bubble, but right now, investing, it's like, that's meaningless.

Josh Brown

Also, a lot of the people that are negative about this are the same people who said, I don't like financial engineering.

Michael Batnik

True.

Josh Brown

Well, this is the opposite now. Now we're robbing from the stock market to create jobs. You don't like this either.

Michael Batnik

You know what's so maddening about this right now? We're living through history as investors and it's really fun and exciting and it feels like we should know what's going to happen next. Doesn't it like, doesn't it feel like. Wait, how do you, how do you four guys not know that this is a bubble? Morgan Stanley just said that Tesla's revenue can hit $3.4 trillion by 2040. How do you guys not know it's a bubble? And I'm sorry, future listener in five years. But I don't, I don't know.

Sunu Vargas

Yeah, no, we've thrown the towel. Like, we can't time it. So then that's why we, like, we want to ride that wave with momentum. But also the more momentum keeps going up like this, we want to increase the size of our diversifiers too.

Josh Brown

Do you worry about inflation?

Sunu Vargas

Yes.

Josh Brown

Flattening yield curve.

Sunu Vargas

Always.

Ryan Dietrich

He's always worried about inflation.

Josh Brown

I don't mean generally. Do you worry about it? I mean right now, do you see that? If you're not worried about issuance of equity, which I totally get the argument, is this the real thing to be focused on, do you think?

Ryan Dietrich

We do. At the start of the year, we were thinking inflation was broadening out. SONU looks at 178 core components or components of the core PCE. This is before the war started and we were seeing things broaden out. And then the war obviously started and inflation did what it did. But you still look at core PCE and it's still trending higher. Right. It's not just about services, it's not just about goods. There's a AI bottleneck that's also in play. Pushing.

Josh Brown

Let's see that chart, John. It's 29.

Sunu Vargas

That's like Micron's margin expansion is Apple's inflation.

Ryan Dietrich

Yeah.

Josh Brown

All right, so. So Apple had a horrendous day today right there.

Ryan Dietrich

Yes, it did. Yeah.

Josh Brown

Apple fell 6, 7, right? What, 6 or 7%?

Michael Batnik

6%.

Josh Brown

Apple fell 6% is the biggest, one of the biggest stocks in the world. Fell 6%. That's a lot of market cap. That's directly related to them. Keep this chart up as directly related to them, telling the public, hey, prices are going up for consumer technology.

Michael Batnik

What do you think that the price would rise on that?

Josh Brown

So what, so what is this exactly?

Sunu Vargas

This computer. This is the personal consumption expendit index for computer software, accessories. Things like your tokens and stuff would be represented here.

Josh Brown

So this is the growing profit margin of the companies that are selling chips.

Sunu Vargas

It's the same coin, it's just the other side of that coin.

Josh Brown

And Apple's customers are going to pay for it. Yeah, but that's inflation.

Sunu Vargas

That's inflation.

Josh Brown

I mean, as real as inflation.

Sunu Vargas

It's like one company's margin expansion is somebody else's inflation.

Josh Brown

Okay, and this all comes out. Is it alarmist to like look at that and say, oh boy. Or look at what Apple said or is there a mitigating factor? What do you think?

Ryan Dietrich

To me there's mitigating factors. I mean it's, it strikes you when you look at that. I mean I'm, I'm kind of a simple person. I like to look at two things into the day that I think will help me understand what's going on in the market. First is advanced decline lines. Second are the credits markets.

Sunu Vargas

Right?

Ryan Dietrich

Advanced decline lines are literally like hitting all time highs.

Michael Batnik

Time.

Ryan Dietrich

We're doing this on small caps, on mid caps. S&P 500 is close. The New York Stock Exchange common stock only is very close. At an all time high. You tend to hit new highs in market breadth and the market peaks on average about 11 months later. Now listen, it's average. I can give you a time it was shorter and give you time it was longer. So we have that. And you look at credit spreads, I mean credit spreads, on triple B spreads and investment grade corporate spreads, there's not a lot of fear. I say there's a monster under the bed. The credit market's going to know it. That doesn't mean some of these industries aren't going to get over the top and have big implosions. But big picture, those are the things I think we need to focus on. And to me those matter more. And at the start of the year, I mean, again, getting back to kind of we Talk about this stuff. We create content, but we also manage money. At the start of the year, we positioned our portfolios for a higher inflationary world. We added managed futures. That's been a very dirty word for a couple years because they haven't worked at all. Managed futures done really well in this environment. I know gold's come back, but we had gold for a while. We did sell gold before it really started to break down. We had less bond exposures. We talked about. And you know, what does? Well, inflation's kind of high. Stocks. And I get it, we can pick some years. It hasn't happened, but historically stocks do okay in a higher inflationary world. So those are where we are. But then Sony, like kind of build on this. We don't think the Fed is going to cut. I know everybody kind of jumped on that bandwagon. Start of the year, we said we didn't think the Fed. I meant to say hike at the start of the year. We didn't. The Fed was going to cut because the question was, how many times is the Fed going to cut? It wasn't like when it was how many times.

Josh Brown

Everyone kind of had that walk in. It was one or two.

Ryan Dietrich

And we went against that. We said, well, they might cut. It's going to be harder than the market thinks. Unfortunately, that's played out now. We're the. I'd say 180 of that. Where now it's like, how many times are they going to hike? And again, Sonu's saying they probably aren't going to. And why is that again?

Sunu Vargas

I know the dot plot shows the, you know, the hawkish pivot, but count the votes, not the dots.

Josh Brown

Crude oil just fell. Crude oil just fell from 120 to 70. So if that was the urgent reason to hike, you don't have to worry about that anymore.

Sunu Vargas

Yeah, I think core services, excluding housing, is running hot. Right. I was looking at the numbers today. It was up in May, 0.5%, which is 6% annualized last three months. Core services outside of housing is running at 4% annualized. I think the Fed has an inflation problem, to be clear. I think they have an inflation problem, but I don't think they're going to cut. Which means policy or I don't think they're going to hike. Sorry. Which means policy is actually getting easier. They're basically going to run it hot. That's good for the economy. I think that's good for now.

Josh Brown

Put this chart up about guys 33. An inflationary period is not necessarily Bad for stocks. Unless the Fed gets really hawkish in a hurry. So the point that you're making, the pace.

Ryan Dietrich

Yes.

Josh Brown

We could survive a hike every few, every few months and a few meetings without one. We can't do another 50. 50. Oh my God, now they're doing 75. Now do 75 again. Obviously we ran that experiment, it doesn't go well. You don't think that, that that push is going to come to shove and

Sunu Vargas

we're going to have to do that at some point? It could. The further they fall behind the curve, if inflation stays elevated, then I think when they're trying to catch up, then we have a problem like 2022 right now if they went let's say 25. 25, let's say they hike 25 in July. I think the market has a little bit of a turbulence, but I think market gets over it because all the hyperscalers say we are still going to spend two and a half percent of GDP on this stuff. That's what matters for profits. I think it's okay. But let's say you get into 2027, inflation's still elevated. Suddenly they're like, oh, we, we've had 3% inflation for seven years, now we gotta hike. I think then it becomes a problem. I think then the Fed could potentially kill the bull market.

Josh Brown

Okay, we've done a lot of charts. Now we're scraping the bottom of the barrel.

Michael Batnik

Let's just hang out. What do you guys wanna talk about?

Josh Brown

John, if you please.

Sunu Vargas

Soccer.

Josh Brown

No, no, no. Can I scrape the bottom of the barrel?

Ryan Dietrich

Bottom of the barrel. I wanna see this.

Michael Batnik

That's good stuff.

Josh Brown

34. Sir Fire. Can you tell a story of what just happened here with bitcoin? All right, I'm showing you Bitcoin versus regional banks. Regional banks, the hottest trade in the market right now. That's not memory.

Sunu Vargas

Right?

Josh Brown

Aside from memory, these stocks are breaking out. We wrote about this today. To me, there's signal in regional banks. These companies are extremely reliant on people paying their bills, regular people. There's no capital markets in these stocks. These companies are doing home equity lines of credit, doing credit cards, doing auto loans. They're doing small business loans, middle market credit. But like the lifeblood of the economy, when these stocks are breaking out, it's very hard to make a macro doom case. Okay, I'm juxtaposing that with whatever the hell is going on in bitcoin. Not because there's any real relationship other than they both purport to be the financial system all of a sudden bitcoin just like fell through a trapdoor in January. Nobody seems to have a great reason why.

Michael Batnik

I do.

Josh Brown

You have a good one?

Michael Batnik

Yeah.

Josh Brown

Okay, well, I'd love to hear what it is.

Michael Batnik

It's this.

Ryan Dietrich

What's that?

Josh Brown

Bitcoin gold.

Michael Batnik

It's software.

Josh Brown

Oh, Bitcoin software.

Michael Batnik

Bitcoin's trading like software.

Josh Brown

Bitcoin is software?

Michael Batnik

Yeah.

Josh Brown

The other one I heard is people needed to liquidate digital assets to buy SpaceX and eventually Anthropox.

Michael Batnik

I know it's not maybe the most satisfying answer. It's software. It's code. It's trading like the biggest, like a gigantic software stock.

Josh Brown

Good enough for you?

Ryan Dietrich

Yeah, I think that makes sense.

Sunu Vargas

I don't think you have real yields going up. Same reason gold has come down. Well, there's debasement trade. Right, so.

Josh Brown

So bitcoin was gold. Now it's not gold. Now it's software.

Sunu Vargas

It was both.

Ryan Dietrich

All right, well, I'll change you on a regional bank. Community banks, so even smaller, they're breaking out. Let's talk about this a little bit.

Josh Brown

I looked at that today, but it's like.

Ryan Dietrich

I'm with you, Josh. I mean, I like to look at the big macro picture to tell stories. We're storytellers into the day to a degree. And when community banks are doing what they're doing, regional banks doing what they're doing, and the large caps are probably larger, banks are probably going to follow now is what it looks like. I know bank of America has done it. Some other ones have struggled. Yes. But those are, those are just bigger picture positives. It's just what is what it is. I mean, we remember older listeners, you know, 2006, 2007, financials were breaking down. They were weak. Yes. The market was hitting new highs. The advanced decline that already peaked and rolled over and then everything fell apart with the gfc. Well, we're not seeing financials breaking down. We're seeing smaller financial stocks do well. So it doesn't mean you can't have

Josh Brown

a. J.P. morgan made an all time record high today.

Ryan Dietrich

Yeah. And he got a tour of the office and you guys probably seen it. It's amazing. Office. And they're.

Josh Brown

You went over to the new J.P. morgan.

Sunu Vargas

J.P. morgan.

Michael Batnik

What do you think?

Sunu Vargas

It was great.

Josh Brown

Yeah, it's pretty cool.

Sunu Vargas

I think I'll take my kids there tomorrow.

Michael Batnik

Guys, look, one more. Microsoft and Bitcoin.

Ryan Dietrich

Yeah, there you go.

Michael Batnik

They're very, very similar.

Sunu Vargas

Or just do igv. Yeah, exactly. But to your point about community Banks. I think part of that is you mentioned consumers. It's a labor market. The labor market is doing okay. Yeah, I would argue it's doing. I was arguing at the start of the year that it was better than headline payrolls is suggesting. And now here we are over the last three months. It's doing well. One number for you today. We got personal consumption data. Last three months, nominal consumption. Eight and a half percent annualized pace. 8.5% annualized pace. Last three months. We live in a nominal world. And even real spending.

Michael Batnik

Even real. That's high.

Sunu Vargas

Real is. Most of it is inflation. Real is 2.1%.

Michael Batnik

Oh, never mind.

Sunu Vargas

Yeah. So a lot of it is inflation, but people are still spending.

Michael Batnik

But how big can the economy be to Josh's point? If regional banks are breaking out and industrials.

Ryan Dietrich

Industrial.

Josh Brown

It's like a very, very tough environment.

Michael Batnik

Small caps.

Josh Brown

We're at the end of something and.

Ryan Dietrich

You know, I'm gonna change gears for a second. I. I don't know if we have the statute of limitations, but congrats to your Knicks. I was watching you. I was living through you because I was a Bengal fan. We're terrible. You know, And I know it's different sport. I get it.

Michael Batnik

But it was really cool to watch Lawrence.

Ryan Dietrich

Yeah, that's true. We'll see. We'll talk football next time. But I mean, maybe better. But anyway. But congrats. It's fun to see that. And I was rude. I don't like. I don't.

Josh Brown

Who's your favorite? Who's your favorite? Next.

Ryan Dietrich

Oh, geez.

Josh Brown

Gotta like Jalen Brunson.

Ryan Dietrich

Yeah. I mean, as a Xavier guy. The Big east connection.

Josh Brown

Yes.

Ryan Dietrich

I guess you have to say.

Josh Brown

I was gonna say, as a lover of sports. He does not give anyone any reason to dislike that I can think of. He's gotta have near universal approval.

Ryan Dietrich

What was. I mean, you remember the quote they said, how did you drop to being a second round player?

Michael Batnik

Oh, what do they miss about you? Yeah, he said everything.

Ryan Dietrich

Everything. That was the coolest. Like, that was so cool. That was really cool. And he's right. I mean, he's the champ. But congrats, guys.

Josh Brown

All right, we'll take that.

Sunu Vargas

There's a connection. Netherlands. And the next. The Orange. The Orange came from the House of Orange. Netherlands.

Michael Batnik

No shit.

Sunu Vargas

The Knickerbockers. New York Knickerbockers.

Ryan Dietrich

Yeah. Wow.

Josh Brown

You know what a Knickerbocker is?

Michael Batnik

We did this already. I still forget.

Sunu Vargas

Do you?

Michael Batnik

You told me last time.

Josh Brown

You don't know Still.

Michael Batnik

All right, you know what your problem is?

Ryan Dietrich

Nature problem is, guys, I will say, you know, this is the third one I've done. Thank you. I mean, every time we come on, our Facts vs. Feelings podcast gets a huge bump. We really appreciate it.

Josh Brown

Josh, we love having you.

Ryan Dietrich

It's an honor to do this again.

Josh Brown

And you know what? You guys, you guys are pros. I love running into you on the speaking circuit. I love listening to your shows. And we just really appreciate you guys coming by and doing ours. So thank you so much for being here. Let's tell people. Let's tell people about the podcast. So you guys are. What's your cadence of Facts versus Feelings?

Ryan Dietrich

Facts versus Feelings come out every Wednesday morning.

Josh Brown

Okay.

Ryan Dietrich

There's another podcast comes out Wednesday morning. Listen that one first. Listen to us second.

Josh Brown

Animal Spirits.

Ryan Dietrich

We just follow you guys do it seem to work? But yeah, we talk about all the stuff. We just talked about Facts versus Feelings. And it's a lot of fun to. To do all this stuff. We have guests once in a while, but usually just Sona and I talking about everything going on out there.

Josh Brown

You guys are enough. Just like Animal Spirits, Michael and Ben are enough. All right. We really appreciate you guys.

Sunu Vargas

Thank you for having us.

Josh Brown

So, so much love and respect. Congratulations on all your success at Carson. Thank you for being here. And hey, everybody. Thank you for watching. Thank you for listening. We'll see you next week.

Michael Batnik

Thank you, guys.

Sunu Vargas

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Josh Brown

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