Retail Investors Just Plowed $100 Billion Into Stocks. THIS MONTH. | TCAF 212

Summary

• Retail Investment Surge: Retail investors have injected over $100 billion into US stocks in the past month, marking the largest one-month buying spree on record.
• Market Efficiency: The podcast discusses the increased efficiency of modern markets, highlighting the ability to trade large volumes with minimal market impact, contrasting with past trading environments.
• Speculative Trading: There is a significant rise in speculative trading activities, including the use of leverage ETFs and options, with retail investors heavily participating in these markets.
• Private Credit Concerns: The discussion highlights potential risks in the private credit market, particularly with business development corporations (BDCs) facing dividend cuts and increased scrutiny following financial irregularities in some companies.
• Market Dynamics: The podcast explores the impact of retail investor behavior on market dynamics, including the influence of social media and the coordination of retail investors in driving stock prices.
• Volatility Products: The conversation touches on the use of volatility-related products, emphasizing the challenges and risks associated with trading VIX ETFs and the importance of tactical use.
• Investment Strategies: The hosts discuss the importance of having a sound investment process, noting the difficulty in distinguishing between process and outcome in investment decisions.
• Market Outlook: Despite the current bullish market, there are concerns about potential market corrections and the role of private credit as a possible catalyst for future financial disruptions.

Transcript

I want you to know you look great. I just spent five days in Bokeh at the gym eating salads and and sushi and string beans. >> I know you were grinding. >> And I'm doing that so I could fit into a regular size chair. >> I saw you grinding on Instagram. >> You look skinny. >> I'm trying. I'm finally trying. I blamed it all my weight. >> No, you do. >> I said, "How'd you let me get this fat? >> You look great." >> And she said, "Oh, now this is me." >> She's like, "Are you kidding me? Do you see what I eat?" >> All right, come on in, Scott. We'll have you over here. You got your bokeh look on. >> All right, Scott, I got to tell you a story. >> When was the last time we saw each other until today? >> You know, I think it was in Vegas years ago for a CNBC event. >> Vegas? It's got to be 10 years then. >> I bet. >> Yeah. Okay. All right. >> You know, we may have bumped into each other. >> No, for sure. Um, in the old days when I used to do the Fast Money Five show, you were on the desk. That's probably >> Or sometimes you were the options guy. >> I was the option guy >> that they would cut to. >> Yeah. >> Yeah. Did they ever ask you to change your name to Najarian to do the options hits? Was that uh is that on the table? >> Uh when I re up my contract, we put it in there that they wouldn't ask anymore. >> All right. >> I got I got $150 every time they asked. >> What do you think of my pumpkin situation? >> Uh it's it's good. Which leads me to believe you had absolutely nothing to do with >> No, everything to do with it. >> You had nothing to do with it. I think you hired somebody. Nick, is that in the right place? >> What? >> He's just the [ __ ] It's weird. >> It's It is. Isn't it usually here? All right. >> It's definitely off. It's definitely >> All right. So, we have this thing in my town called It used to be called Dairy Barn. It was literally a drive-thru for eggs and milk. >> Drive through 7-Eleven. >> Yeah. Like you're on the way home from work, your wife's like, "I need a I need a gallon of milk." >> You They have those in in Ohio for booze. >> Okay. So, this is for dairy. Um, but it like sold and it had different owners and then it closed down and then this new group comes in and they call it the barn. And I don't I'm just glad it's reopened because it's super convenient. >> Don't tell me private equity is not a genius. >> I don't know what I don't I didn't know what they were about to do with this place. They turned it into this like viral Instagram sensation that is now backing traffic up. Like literally closing an entire lane of the main street through my town. People wrapped around the block. They're coming from like New England and the Bronx and Brooklyn and Queens and all over the place to like drink these viral iced coffees with donuts on top or All right. So, there's a new drink that they just launched which of course creates a aing like Defcon 5 traffic situation. It's an entire pumpkin. Not a mini pumpkin. A like a pumpkin pumpkin. >> They cut off the top. They hollow it out. They fill it with, I guess, pumpkin spice latte or something. They cover the whole thing in whipped cream, two giant cinnamon sticks, and they serve it to people sitting at picnic tables right out in the street. So, I've never seen it before. So, I pull up next to this this thing. There's, I don't know, hundred people waiting in line for to drink out of a pumpkin. There's a dude my age sitting at a picnic table with his wife. The wife's holding the camera. This is getting Look at the look on your face. It's getting worse and worse, right? The guy takes this pumpkin with two hands, lifts it to his face and like chugging out of a pumpkin and the wife is filming him and I just I couldn't stop myself. So, I just got back from the airport. I pull up to the corner. My wife is in the passenger seat. I lower the window and she's like go she's going, "Oh, no, no, no, no, no. Don't do it. Don't do it. Do it. >> This is not going to be good." >> I'm like, "Quiet. This has to be done." So, I yell to the guy. He literally has the pumpkin to his face. I go, "Sick picture, bro. Send me that. Definitely send me that. I need that pic, bro." >> What a dick. >> I know the worst. He slams the pumpkin down, this whipped cream in the air. His wife starts laughing at him or his girlfriend. So, so I speed off, of course, because I don't want to confrontate. So, so my wife's like, "What if he what if he follows you? What if he kicks your ass?" You know what? If that dude kicks my ass, the universe is telling me I deserve it >> by a pumpkin. >> By a pumpkin sipping freak >> who's got an Instagram girlfriend. Like, if that's >> right, what do you think? >> I think he's going to be a fake tough guy. Listen, somebody who's drinking a whole pumpkin full, >> can you imagine? >> Of pumpkin spice latte with the whipped cream. It's probably got cherries on top. >> Two-handed. >> Oh, like a maniac. >> No, that guy. No, listen. Pumpkin spice latte was the beginning of the end for civilization. >> I I sort of think that the the timing coincides with when I think everything started to suck. >> Yeah, I think we when we quit drinking black coffee and we started drinking everything has to have an umbrella in it now. They're not even drinking it though. It's there. So this look, >> you think it's performative? >> I know it is. God bless them. I want them to make money cuz it's my town and I want all the local businesses to thrive. >> Sure. >> Um so it's not really a comment on them. Like if it's just like the stock market, they're doing all these secondaries now. If people are willing to buy it, you should sell it. But when did men start having this need to have their significant other film them sip out of a pumpkin, drink whipped cream out of a pumpkin? Broading daylight. When did I don't even know when this started. >> Well, when are their children going to see that photo and start making fun of them? >> There will be no children. That's the point. This is emasculation on a level like previously unimaginable. How can you mate with a a person that's doing this? I don't think they're going to be a next generation. Honestly, I think this is it. >> Well, then that's great news. >> Well, that means it it ends. It it No, it ends it ends with them. >> It is. It's It's like a coral area of the Darwin. >> I think it's over. I It's got to be close to being over, right? Anyway, all right. Um, sorry, I had to get that off my chest. You okay? >> Are you going through the dairy bar? Are you going through the barn today for your uh >> Have you seen this [ __ ] that's going on on Instagram? Now I have to avoid Hillet Avenue. >> Have you seen I'm glad I'm glad I moved. >> Have you seen what's going on? Give me a little bit more. It is ridiculous. >> Give me a little bit more insight into where this is so I stay away. >> It's It literally All right. Just Just like Oh, here it is. Look at Look at this guy. Holy [ __ ] >> Oh, come on. >> Come on. >> Come on. >> Good. Good for them that Listen. Oh my god. The place is huge and they're selling a ton of this. How much is one of those? >> Look. Look at this. Look. He's going to pick it up and drink out of it. >> It's a bowl of It's a pumpkin filled with whipped cream. >> Wait a minute. What if the guy that you were harassing was the owner trying to promote his >> No, it's Trust me, this guy doesn't own anything. >> And how much they charge for one of these giant pumpkin things? >> Oh, I'm going to guess that's like it's 13. >> You know what? >> Oh, no. About double that. >> Maybe 20 bucks. I hope they get So, here's the other [ __ ] Like this is like an iced coffee with a with a donut or a piece of pie on top. Hold on. That's the place. This literally used to be like you just buy cigarettes on your way to the to the to the bar. That's what the >> back in my day. >> In my dayut apple cider donut. >> We'd be better off if they're back to selling cigarettes and a 40. >> Look at me with my apple cider donut ice cloth. I hope you drown in it. The whole purpose of this place was to get Parliament lights. >> Daniel's having an aneurysm. >> And then go and then go to uh and then and then go to the club, go to the bar. >> I'm just glad that Listen, we split our time between Chicago and New York. I'm glad that we don't go to Long Island, wherever that is. >> Stay away from Long Island. >> Here we go. >> It is. It's got to be Long Island. Tell me it's not Long Island. Of >> course it is. Where else would it be? >> Are you ready? >> It's >> We own this disaster. You're right. >> Confident friends, episode 212. [Music] [Applause] [Music] >> Curious about investing in crypto and not sure where to start? Start with Grayscale. Gayscale is the world's largest cryptofocused investment platform and has been in crypto since 2013. That's a long time when you consider how early we still are in crypto adoption. Gayscale also offers the widest selection of crypto investment products in the US. Over 30 different funds for investors to choose from. That's plenty of choice for both firsttime crypto investors or crypto experts. You may not be considering crypto for your portfolio today, but whenever you're ready, Gayscale can be your guide. Gayscale, invest in your share of the future. Investing involves risk, including loss of principle. For more information, visit gayscale.com. Let's go. The most ever. Come on. Big show, guys. Ladies and gentlemen, welcome to the best investing podcast in the world. First time guest Scott Nation. Scott is the author of The Anxious Investor as well as a history of the United States in five crashes. Scott is also the president of nation's indexes, the world's leading independent developer of volatility indexes and options strategy indexes. Scott, it's so great to be here. You had some other stuff that you wanted us to know that you you had done in the past. Can we talk about the Chicago Merkantile Exchange for a few a few minutes? >> Yeah. I mean, we were we were just talking about when when men really were men. >> Yeah. >> And you want to talk about a place where >> that was going on in spades? >> Yeah. >> The floor of the Chicago Merkantile Exchange. >> Yeah. Pure pure testosterone. >> And you were in the pit? >> Yeah, I was in the pit. I >> work with Jonathan Jonathan Novi. >> I stood next to Jonathan Novi for years in the S&P option pit at the Merkantile Exchange. And I'll tell you, you really get to know somebody when you stand next to him in a trading pit. That's Jonathan and I are still friends. >> You could you could see the other guy's soul basically cuz you're watching that fear and greed stuff and how they react to pressure >> and how they act and if they're a standup guy or if they're a weasel. >> Okay. >> And uh >> how would you describe Jonathan? More of the weasly side. >> Big weasel. >> No, Jonathan is one of my one of my advisers. >> One of my favorite people in the world actually. Honest guy, you you could be in a pit with 500 people. >> He's not answering the question. >> And I'm going to answer your question. You could be in a pit with 500 people. And so I probably got to know I probably came across thousands of traders in in my time there and I am still connected to maybe five of them, maybe a half a dozen. Jonathan is one. Two of my business partners were guys I mean I stood next to Bob Ward in the pit. That's how I met him. Um, but 99.99% of those people, everybody was just there trying to make money. >> Yeah. >> There's no reason to stay connected except to guys like Jonathan. >> Yeah. Is it is the uh is the market missing something not having something like that >> or have we like moved on without it and everything's more efficient now? >> Yeah, it's a it's a great question. And so for people to get the visual, I was one of those guys in a bright red polyester jacket with a gray mesh back jumping up and down like >> your first what was your first year there? >> Uh my very first year uh trading on my own was 1989. I just got started. But to your to your question, yes, we're missing something in that it was a place where young people could get started as traders and you paid your dues. I started as a clerk. Had a great job, out of school, quit, moved to Chicago to become a clerk at the board of trade. And you can't do that anymore. >> No. >> And so that's probably missing. On the other hand, it is so much it is so insanely efficient now. Markets are >> Yeah. >> that uh it >> I can't look back and and say, "Oh, I wish we'd go back." Because it's just it's a step back. The career onramp to professional trading now is like computer science degree >> or physics >> or physics >> or physics. Yeah. I mean we have a uh we have an adviser who has a PhD in math from Caltech is on our board >> right >> and he has told me that uh there is uh in finance now physics PhDs trump math PhDs. >> Why is that? >> I I don't know. Trump like the like they do better or they >> they're considered more valuable. A physics PhD is considered more valuable >> than a math ph. >> What about fizzed? >> Not not the same that used to be. >> Well, fizzed is great if you're the guy who's emptying the trash cans and sweeping up at the end of the day. >> But that's weird because I forget who I'm stealing this this from. Somebody said markets are way more like biological than they are like physics. anytime you think you've cracked something with math, they change the lock or they change the code. Um, I mean, you just said the markets are more efficient now than ever. What do you mean by that? I >> if you want to trade size now, and I don't care if it's interest rate futures or Nvidia shares or uh the S&P, you can trade immense volumes and with very little market impact cost. you can move the market against you to a very small degree. And there are millions of people on the other side who are happy to make markets and they're happy to make I don't know 120th of a penny a share and they'll do it until their heads cave in, >> right? >> And that wasn't always the case. >> So more efficient and there's a lot of liquidity. >> There's Yes. Okay. >> I can long time ago when we were trading treasury bond options at the board of trade. Uh, I can remember when PMCO came in, Bill Gross came in and he just sold a ton of strangles and he essentially killed the market by the time he sold about 150,000 of them. But he was like, "Yeah, I'll sell these strangles and if the market goes down here, I'm happy to buy more. If it goes up here, I'm happy to sell some. >> I'll sell these strangles." >> Oh. And we bought them Oh, we we bought them and bought them and bought them and bought them until our heads came in. >> Okay. Uh those are those those were the days >> they but on the other hand um the markets are so much more efficient now which is great for everybody and now opportunity exists for anybody. I don't care if you're male, female, 5'2, whatever. If you're smarter than the next person, then you're going to do well now. And that wasn't unfortunately that wasn't always the case. >> Okay. It was more about who you knew, how how close you could get physically, proximity to a trading post, >> right? Like like uh lineage like this is my grandfather's seat, like that kind of thing. >> Yeah. Not so much that proximity in the trading pit mattered, but for example, in the Euro dollar futures pit at the at the Merkantail Exchange, there was nobody on the top step who was shorter than 6'4. >> Actually, Jim Yurio Jim Yurio showed me that and he's not a tall guy. >> No, he's not. And he told me that same he explained that same story to me, >> right? And when the brokers in the Euro dollar futures pit were looking for a new clerk, being taller, a clerk being taller was even more important. So the prime place where they would recruit from >> Big 10 football pro uh Big 10 football and basketball programs. >> Wow, that makes sense. >> Yeah. >> So Scott, I can't think of a better person to have here for this week specifically. You're a market historian. Yep. >> You're a trader. You're a math guy. you know all about what we're going to talk about today which is retail having a real moment. There's a new book an old book that is being updated by Richard Thaylor and Alex Emis. The book is called uh the winner's curse and our friend Jason Zw interviewed them in the journal this weekend and here's what they had to say about bubbles. The main difference between then and now is the presence of the internet. Forums like Wall Street Bets allows people to coordinate their actions on a massive scale. Bubbles typically burst when some people start selling and others can't viably coordinate in the holding position. But phrases like diamond hands inspire people to collectively hold a position for much longer than before information technology was so widespread. And then secondly, the internet allows many more assets assets to become bubbles in the first place and now can take only a small group of people coordinating stocks like Kohl's or AMC to start what seems to be a trend. The end result is many more bubbles that will potentially last longer than in previous periods. >> That's interesting. Let's talk literally winner of the Nobel Prize, one of the smartest guys in finance. Um I I listen I watched from the sidelines during that whole meme stock thing and kind of like a lot of people maybe like you guys shaking my head just holy cow. Come on. Uh I I actually think that in general big bubbles kind of get cut off at the knees because of what we've been talking about. So many investors and so many people who are now willing to fade a big move like that. So the meme stocks that was an entirely different story that was that was purely uh emotional purely behavioral. I remember talking to a college student at the time when that was going on and very smart girl. She said, young woman, very smart, and she said, "Well, I'm I'm long GameStop because we know it's going to go to $1,000 a share." I'm like, "Well, how do you know that?" Well, it's it's going to go to $1,000. We all know that. Yeah. >> How do you not know that, dumbass? >> Right. And I It probably went up another $100 a share that day. And I'm probably I don't know, maybe I'm an idiot. >> Yeah. >> Um, >> so I I it's easy for people to get together now. And I'm not saying they're colluding, but it's all reinforcing and it's a self-aware bubble. They say, "Yeah, we know it's a bubble. Jump in. We're going to bumble it up even more." That's one aspect. The second aspect is if they can keep the ball in the air balls in the air long enough, the corporation can a raise money via secondary and get itself out of the sort of trouble that made it a $3 stock. That's one. We saw that with the movie theater. >> The second thing is they could pivot and adopt a new business model. So GameStop is going to be a Bitcoin treasury now or whatever. Like you know that's a new phenomenon. to Michael's point like this level of coordination was hereto for not possible in the age when people looked at a newspaper for stock ticker uh info and couldn't communicate with another million people who were involved >> and you were nice enough to mention my book the anxious investor in there I talk about hurting >> uh the hurting behavior that is much more common now and it's very easy for you to see somebody talk about something on social media and then you look at the stock. Oh yeah, it's up 5% this month. Let me get let me climb on board. >> Yeah. >> And that that's very common. And and also there's there's another thing that I write about in that book that people feel like they're part of a tribe >> when >> comes part of your identity >> when they're on when they're on board. And one of the favorite things that I write about phenomenon that I write about in that book is this thing called fantastic markets. And it written, the idea came from a couple of British guys, so they spell fantastic with a ph. But in the 1990s, the idea was people felt that if they owned Microsoft or Apple, either the shares or the products, they felt physically closer to Bill Gates or Steve Jobs. It was almost like they were buddies. It's like I Yeah. I mean, oh, now I own an iPhone, so Steve and I are friends. We're close, right? And that one strikes me as really dangerous because whether you you love Elon or hate him, there are people out there who think, "Oh, I own a 100 shares. He and I are best buddies now." >> Yeah. Well, so long as the stock price has been going up most of the last 15 years. >> Yeah. >> People pro people that have taken the ride love him more than ever. >> Yeah. I mean, sure. How How can you not? He's iconoclastic in a way that some investors have been begging for. >> Yeah. I want to ask you um about what you make of all of the uh what you make of like all of the new ways to speculate. So, I'm definitely going to ask you about um what's happening in the option market. But before we go there, let's just take a quick look at uh leverage ETFs. This is not that new of a phenomenon. These have been around for a long time, but the popularity of them is at a fever pitch. I don't know if that's because of just the the length of this bull market and the degree to which it's been running. Michael, what's in this chart? This is a a Todd chart. >> So Todd Sen updates this chart just taking the temperature of the market um and levered long, the ratio of how much money is in long versus shorts. It's about as high as it's ever gone. We've we've had $6.5 billion dollars come into these markets um in the first nine months of the year. I'm talking about I'm sorry single stock levered ETFs, which is a little bit different than this. $6.5 billion in single stock ETFs in the first nine months. There's almost $30 billion in single stock levered ETFs, which I don't even know if that shows up in this chart, but what does this tell you about where we are? And is this just now, Scott, is this just now a part of the market? Like is there any going back or is this just not a signal here anymore? before you answer like uh it's 10 to one. So you got $140 billion in levered long. I guess these are index ETFs, Michael. Yeah. >> Okay. >> And 14 billion in in inverse so or or you know betting on a negative outcome, >> right? >> I mean it's about what you'd expect at the high of a bull market, right? >> The thing that stands out to me is and to your question to to answer your question, no, we're never going back. We don't go back. >> When these sorts of products get invented and created and sold and boy, they're selling the hell out of them, aren't they? Then we don't really go back. The thing that surprises me is that there's not more inverse. And it's not I'm not saying that people ought to be loading up on inverse products because the market's going to tank. You would just think that just kind of through brownie in motion people would be have more of that stuff on in relationship to the broad market and they don't. >> Well, the problem is >> as a hedge. >> Yeah. as a as a hedge or a speculation. >> The problem is almost nobody makes money in these products even on the long side. So our friend Jeffrey Patac showed the Micro Strategy double lever long Daniel chart 3. So this thing is up 98%. This is this is the total assets in here. This thing is up 98% since inception just the price and somehow investors have lost $397 million in the aggregate and that's on the long side. So there's some really funky [ __ ] where Jeffrey said investors at investors traders actually made money on the short side which is not neither here nor there but these things are pure money incinerators and nobody cares. Yeah. Well and there are a couple of things like this. You know we're invol we're in the volatility space and so the same thing happens in in VIX ETFs levered or not. Um, you know, people want to be long VIX systematically and so they buy some of these ETFs >> like an insurance like an like an ongoing insurance premium that they're paying. >> Horrible idea. >> It's Oh, it it's terrible. >> Nobody should do that. >> No, because the the manager has to roll that product from one futures one expensive futures contract uh to an even more expensive futures contract every month. and talk about money incinerator >> between the roll costs and the actual expenses. So if you want to be trade those products, trade them, use them uh tactically. You can't. But these sorts of products, >> what is the right tactical use of a of a VIX of a VIX flavored ETF or ETN? Is it like ahead of a Fed meeting where you think the market's about to be shocked or like what how should that be used if at all? Probably not at all. Let's talk about the specific situation you're talking about before a catalyst. >> Hold on. Our sponsor today is VIX ETF. No, go ahead. >> And and quickly, SIBO, for example, hates us. They think that we're a competitor, okay, >> to VIX. They SIBO would be happy to kill us just to watch us die. Uh but VIX is the 800 lb gorilla. But no, >> traders are very smart now when it comes to these sorts of things. So if you buy something I if you buy VIX options before a catalyst whether it's a Fed meeting or a big unemployment number if we ever if we ever have one of those again um then as as soon as the data is out I mean instantaneously those options are worth less than they were 30 seconds ago. And so we call that the vault crush, volatility crush. That is a a headwind that's almost impossible to overcome. >> So So what right? So if you want to express that bet, why not just buy puts on on an index of stocks? Like why even bother trading a VIX like a volatility product? >> Well, the puts are going to even if the underlying doesn't move, the puts are going to be worth less 30 seconds later. >> Yes. So the big val the options have become much much much more popular over the past five or 10 years and for good reason. 20 years ago people were all about options because they got leverage. All they wanted was more and more and more and more leverage. Now people have come to the conclusion and some pretty sophisticated retail traders have come to the realization that the benefit of options is not leverage. It's not more more. It's that if you combine an underlying with an option, you can create a payoff profile that's absolutely superior to the 45 degree line that is owning or shorting the stock. But don't you think that's why people are in these leverage products? So there's 100 whatever we said 140 billion. It's the it's the off chance that you're in the AMD double levered ETF for the announcement like we had last week. And it's there's like a fun component in here. I think that people are in these these sorts of products or some of these buffered products, that sort of thing, is because they understand the value of the strategy, but they don't want to be bothered to do it themselves. >> Yeah. To easy button >> to a certain degree. It's the It's like going out to dinner. >> Yeah. >> I could make that >> or I can have I can pay somebody a little bit more money and make it for me. >> Uh retirement account, I can't use margin. Hey, I don't need it anymore. Now I buy this product, I get 2x AMD, >> right? And if Lisa Sue has a great appearance at a conference somewhere, instead of making 5% on on that day, I'll make 10. >> They made 45% last week in that one day. >> 45 times two literally two divided by six. But that's that's one name. And how many of those things are out there that lost >> but Michael's point is it's lottery. >> So Scott, uh, yeah. Well, that's unfortunately. Yeah, there's there's >> no but that's what it is. So Jason Zwig wrote wrote an article and again he knows he's screaming into the void. Nobody actually cares but it's it's astounding. So there was this new double levered software plat ETF whatever it was and it was small. This guy was just launching the product and he said the swaps were 1.7% a month. And so right off the bat the manager and this guy credit he's like I'm sh this is I can't justify this. The swaps alone were like 20% annualized. But if you're in this thing for a week, a day, a month, who they don't people don't care. So there's no amount of warning. There's no amount of tobacco warnings on the labels. People just don't care. >> People there unfortunately people have gotten to the point where they're like, >> you know, even if they have a great advisor. >> I know it's Batman. They like it. And they're like, say they're 6530 and they have that 5%. >> Yeah, I agree. >> They're they're like, you know, I'm going to roll the dice with some of this stuff. >> I agree. And in some cases, it's working out really well. And that's why it's so hard to talk them out of doing it. >> Think about all the financial adviserss who told their clients, "Don't buy Tesla. It's a money losing company. Don't buy Bitcoin. It's internet fake [ __ ] Listen to what Warren Buffett, Jamie Diamond, Charlie Mer, and the rest." Well, like if you are on the receiving end of that advice, don't do this, don't do this, don't do this, and then you make a million dollars doing it, you're probably done being talked out of recreational activities in the market. >> What you're talking about is not what he's talking about. Nobody's making a million dollars buying the double levered, >> I think. No, but directionally, a lot of crazy [ __ ] has paid off in the last 15 years. >> Well, or something even worse happens, Josh. You don't make the million dollars. But your friend or neighbor does and >> that's it. That's it. Then you're done. Then you're then you're like, "Oh, it's risky. >> Okay, how about this? Give me more of it. Here's five times the amount, right? >> How you like me now?" >> Right. Give me more of it. Oh my Oh my god. You mean my idiot brother-in-law? >> He made all this money. >> Yeah. >> And you told me not to. >> Do you agree? This is one of the hardest parts about knowing the markets is communicating to people the difference between process and outcome. And sometimes you could have no process whatsoever and an incredible outcome. And sometimes you can have an amazing process that historically works really well with a terrible outcome. And it's very very hard to disint disentangle those two ideas. >> Yeah. Uh, one of the things I write about in the anxious investor and Thaylor is the guy who actually first kind of started writing about it was this myopic loss aversion idea, which means that essentially, we'll put it this way, the less often you look at your portfolio or monkey around with it, the better your returns are. >> Yeah. >> And so I like I like a thought experiment. How much better would the average investor do if the stock market was open one day a year? You could only rebalance. You could only trade. You could only invest one day a year and the other 364 days a year you had to you had to sit on your hands. >> Can I introduce him to private equity? >> Yeah. Well, no, it is an interesting thought experiment. But so you would >> except you get liquid once every seven years. >> But you would say like obviously people would perform better, but what if on that one day people are like freaking the hell out? >> This my only chance to get out. By the way, everyone's a seller on that one day. No one's a buyer. >> You think so? >> The stock market goes to zero when it opens. >> Yes. Cuz the people are buying other things. They find something to do besides stocks. They're in crypto. They're in real estate. So on that day, >> well, you close the market for a year, guys. It's only open on Wednesday. >> Your point is well taken. The more you selling. >> I then if it's if everybody is selling on that one day a year, I want to buy. >> You want to buy. >> I want to be the buyer. >> So Scott, as you So you are a quantitative investor. you are looking at the math and objectively saying things are this way, things are that way. It doesn't mean you know the outcome of course, but you're giving yourself a chance. There is we are in this moment right now where there are so many outside forces um people acting in ways that may or may not make sense in the long term, but in the short term, whatever. It is what it is. So, >> they're drinking out of pumpkins, >> right? Yeah. >> There's like a whole thing going on. >> So, so Marlin Capital uh is awful as estimated from public data. So let's just say it's directionally right even if it's not 100% precise. Who knows? We have just witnessed the largest retail investing buying ever. Retail has bought over $100 billion of US stocks in the last month. The largest 1 million buying largest uh one month buying on record. Surely this amount of money coming into the market into these names >> has to have a dramatic impact on everything. retail investor just bought a hundred billion dollars of US stocks. Is this aggregating individual stocks? >> I don't know the methodology, but maybe maybe the next chart is is a is a good setup for this. So, Deutsche Bank has this chart that shows a basket performance relative to the to the rest of the market. And they're showing the stocks with the most net call volume, which as we know is what the retail investors are buying. And it's also showing the most shorted stocks, again, what retail investors are buying. And these things are on absolute fire. >> And it's hard to tell somebody this isn't rational. It's like what? Making money is not rational. It feels pretty rational to me. >> On its surface, is it is it totally irrational to be buying the most shorted stocks? I don't think so. I don't know. I mean, they're not going to be the most high quality stocks. We know that. >> I I hate for retail investors to get fired about fired up about some of these metrics. >> Yeah. Um, and I would expect, listen, the market's at all-time highs. I'm trying to do the math in my head. What's the what's the market cap of the US stock market? Almost 50illion. Okay. So, a 100red billion out of 50 trillion is actually not that big a deal. >> And so, I would expect that. Uh, I think the fact that retail investors as opposed to retail traders continue to put money in the stock market is a great thing. >> Agreed. >> I just I hope if the stock market is off 25% from the time from highs, let's say next year, middle of next year, if it's down 25% from here, I hope that that they're still buying and in fact they're buying more. And one of the things that drives me crazy when it comes to professionals is stock buybacks. Companies who are doing stock buybacks are the worst traders in the world cuz they double up themselves. Yeah. Yeah. Yeah. Yeah. If XYZ company XYZ announces a stock buyback or increases the size of their buyback, I'll bet you the stock has done really well over the past 12 months. >> Unfortunately, that is way worse. >> But isn't that human that's like human nature? That's like you when are you the most confident in your own stock? Probably after it's just gone up 40%. >> But these guys are supposed the CFO and the CEO of XYZ company are supposed to be professionals. They're supposed to be not devoid of emotion, but they're supposed to have stealed themselves against >> Here's the other side of that though. Here, uh, Berkshire Hathaway had a buyback and they said publicly, >> we're buyers below 1.3 times tangible book value. I think that's what it was. >> Yeah. >> The stock never even got close to that. So now it's just like, "All right, fine. We're we're not going to buy as much as we thought because we don't have an opportunity." In your mind, that's the right way to handle it. >> Well, it's you you can't I think the mistake there is you can't say this is what we're going to pay cuz it's never going to get down there. You have a natural put option. >> Maybe that's maybe that's brilliant though. >> Uh >> well, Scott, >> come on. >> You just spoke about like uh uh Okay. $100 billion. Yeah. It sounds like a lot of money, but if you normalize it for the size of the market. All right, we did normalize it. Hold on to your face cuz it's about to be blown off your body. Okay, Daniel, chart five, please. >> So, the retail stocks I had chart kid make this chart. We're looking at some of the most infred speculative names. So, I'm talking about Rieton, RGTI, uh, Alo, Chlore, Micro Strategy. So, what Matt did was he adjusted for the 20-day average volume, not of shares, of dollars traded. Okay? Dollars of shares traded against the Mag 7. And holy [ __ ] Regetti, which is a 1015 billion market cap, and Ollo and Cororeweave, which is approaching 100, Micro 100. Those names trade as many dollars as Netflix and Google, which are uh Google is a trillion plus dollar company. Is this wild or what? >> Well, this is a function of what we were talking about earlier. Markets are incredibly efficient. uh companies are able to brokers are able to sell their order flow and there are a bunch of institutional hedge funds are willing to buy it and make a 20th of a penny on all that volume and jin it up and we talked how how it's becoming more like like gambling for those names somebody's going to I don't know trade 100 shares or some call options and it's the 5% % that's not in the S&P or in Treasury bonds. >> But when you see this type of behavior, are you of the mentality that listen, if this is your 5% money, trade your ass off, have a great time. Does or does this bother you? >> No, this is human nature. >> Yeah, I mean this is human nature. >> Can I say one thing about this also? Well, what are there 10 11 stocks in in this group? >> I mean, I could have given you 20. >> Okay, fine. But like in every market era there these stocks exist. They're just different stocks. So, here are the names. >> Not to this degree. You're right, but not to this degree. >> So, you have you have CQIT and Regetti in here, which are uh and QS. This is quantum computing. What's Iran? I don't I still haven't bothered to Google it. Do I care? Stock goes up $5 a day. >> Quantum aviation. >> Get the out of here. All right, fine. >> What is that? >> Okay, nobody knows. It almost doesn't matter. Orbs and BMNR are these um digital asset currencies. micro strategy. >> One is Tom Lee, one is uh >> Dan Ives. >> Dan Ives. Uh Coree is AI. >> Uh strategy is another. >> What's the point of naming all these companies? That's not the point. >> Well, I'm just saying like if you pull these Joby Circle, if you pull these names out and you go back to 20 >> No, no, no. Stop. Stop it right there. Stop it right there. >> You will find the same version of that. >> There's no way. I'm guessing >> school school him. >> Hold on. There's no way. I am guessing that in 2000 that the companies that were in the bottom 20% of market cap were trading as much daily volume as IBM and Cisco and Yahoo. There's just no way. >> It's got to be different >> because in 2000 it was crashing but in 99. >> There's no way, dude. The small stocks were not trading as much as the Giants. No way. >> It was much more difficult to physically trade stocks in 1999. But how about this? One of the things I write about in the anxious investor is that uh and there's some wonderful research uh done on this in 1999 if a company changed its name to include >> yeah.com >> web.com any of that it doesn't didn't matter what they did uh they could be a cafeteria but if they now became cafeteria.com then the stock would zoom it was it was like crazy >> we saw that in 17 they all became blockchain companies. >> There you go. >> We saw that in we saw that in they're probably going to do that now with quantum >> and there's and the and or anything having to do with blockchain or crypto or anything. Uh and I and I guess if you if you're a shareholder, don't you want your guys to do that? Oh, we own this boring depends how long you own the share for. >> If you're a long but at least but now you have an option to sh to sell at a much higher price. They arrested these guys who owned a deli in in New Jersey. >> Those are good guys. I thought they were I thought they were on Long Island. >> Oh, they might have been >> I thought they were next to the place that sells the pumpkin spice latte and hollowed out pumpkins. But one thing real quick, in 2002 and 2003, the guys who wrote the paper about uh what happened in 1999 with renamings, they turned it on its head. And the companies in 2002 and 2003 that renamed themselves away from.com, web, all they outperformed the names that didn't. >> Yeah. >> So, >> because everyone wanted to be in traditional value stocks in that era, >> right? Yeah. So, if GM.com changes changes its name to GM and we don't have anything to do with the web, but we're going to make some great cars and a whole bunch of them. People were like, "That's for me now. I want old economy." We had real world examples where DLJ spun out DJ Direct. DJ Direct was going to be its online brokerage arm. They spun it out as a tracking stock for the first 6 months that outperformed regular DJ and then it flipped. So yeah, we do the So I guess I would argue we do this all the time, but to Michael's point, this might be the most extreme version we've ever seen cuz those companies that he's showing, >> they're small companies. Some of them are revenue. I was going to say some of them are telling investors we won't have a commercialized product till 2029 >> and >> and they're trading as much volume as Google >> right and I am firmly convinced that uh a combination of AI uh uh fusion energy which is probably 10 years away and quantum computing is going to be massive. It's going to be absolutely massive. But how in the world do you invest in a quantum computing business now? That's just that's darts at a dart. >> But that's the point. They're not investing. They're trading. >> But that's >> here's my question for you. Does that turn you off from the overall market like uh we're it's an it's a it's a expensive relative to history S&P. It's a very expensive NASDAQ. And then you have that activity as like a sideeshow. But it's not even a sidehow. It's the main event for a lot of investors. >> Yeah. Well, I hope that the main event for a lot of investors is putting money from from their 401k into SPY or TLT every month. I hope I >> self-direct an investor with a Robin Hood account is not doing TLT and spy. >> Well, I and I would take I I would argue with you're describing him as self-directed investor. Those aren't investors. In 2022 they were remember they were diving head first. TLT was >> put up the put up the evolution of meme. This is such a great chart. >> All right. So we love the we love the round guys. So this is no disrespect to them but it is just hilarious that they have a a meme ETF >> that was listed towards the end of 2021. >> Good timing. >> We know what happened. They got delisted in uh 2023. And I'm overlaying this with the ARC price just because I guess it's the closest proxy. And yesterday it's back. They resurrected a dead ETF. I don't know if that's ever been done before. I'm sure it has. >> I've never heard of that before, >> but uh >> Well, because the stocks are in favor >> because we're back. >> So, this is meme priced in ARC or ARC? >> No, it's not pricing anything. I'm merely putting the dots on the ARC price. I could have done the S&P, but this is a better proxy. >> All right, I'm going to do something I probably shouldn't do. What What is the management fee? Annual management fee for meme now. Do you know? >> 70 basis points. I made that up. I could I could check. There's I have an internet. >> I bet you it's over a buck. >> No way. No way on >> anse are these are not those guys. >> You you can get away with it now because people are completely price Scott. You can get away with anything right now. If Tom Lee dropped the time travel ETF. >> Well, that's my point. >> People would put a billion dollar. >> That's my point. People are completely price elastic when it comes to stock. But wait, I want to ask your opinion on this because Paul Tudtor Jones was on CNBC this week saying it feels like 1999. And maybe it does. I wasn't around in 1999 trading stocks. But this type of thing that is happening now is a new permanent feature of bull markets. It will never not there will the ability to speculate as we open the show with it's so easy. You just got to get used to this. >> Yeah, I don't I don't disagree with that. And to the degree that people are paying attention to the stock market in a way that they didn't 30 or 40 years ago is fantastic. The stock market is a great way to build wealth and provide for your retirement and finance your kids' educations as long as you only put a little bit of money in some of these knucklehead names. >> And to be clear, I do think that most people that are being reckless are doing it responsibly. Like I don't think that people are taking now, of course there's exceptions, but I do feel like generally pe speaking people are like, "Yeah, I eat my my vegetables and and potatoes and meat in my 401k and I'm having a hell of a lot of fun doing this and guess what? I'm making money, [ __ ] so shut up." What do you make of the blurring though of the lines between gambling in things outside of the stock market and the stock market? So, >> oh, the stock exchange yesterday. >> So, so, so ICE is not not the immigration ICE, the other ICE that controls the New York Stock Exchange. >> Um, they made a $2 billion investment into Poly Market at a valuation for Poly Market of what, 10 billion, whatever the number, some insane number. They're not even operating in the United States yet. And I assume they will be able to soon. Uh Koshi is operating United States. But this is a prediction market that ICE has now decided is worth more than like the biggest casino corporations. >> I love a prediction market. Don't call it gambling. >> Yeah, we call it betting >> prediction market. Um, but like if Robin Hood is going to combine sports gambling with prediction markets with investing in an IRA, stocks and bonds, and the next generation investor is going to grow up in an environment where you could just do all those things simultaneously, we really are like in a very different world. >> Very different world and and much more dangerous. I hate the intersection of investing and gambling because over time investing is not gambling. There there's never been a 20-year period where the S&P lost money once you account for dividends. Doesn't happen. >> We're doing our best to make that happen, though. >> Well, yeah, you you get to a high like this. So I and I have a dear friend dear friend who uh we're on a text chain four fraternity brothers and on Sundays he'll send us his goofy parlay bets. He has 20 and he you know he's risking $20 on a 20 leg parlay for fun. >> And I'm like yeah I'm like you know go with God that sounds fantastic. I think you're wrong here but >> you know I think the Chiefs are going to win but >> uh >> he's having a good time and that's fantastic. Yeah. You know, some some people spend a bazillion dollars on fishing gear. So, but the intersection of where people think that that investing and gambling are Yeah. It's that's incredibly dangerous. They're not. >> It's going to happen whether whether people like me and you like it. It's it's inevitable. Um there doesn't seem to be any restrictions against doing anything at this point. >> I don't I don't like fishing, but I if you you know, if you want to be a you know, go buy a bunch of fishing gear, go crazy. >> Can we show you a ratio chart? This is this is so one of the beneficiaries and one of the inventors of this new meme world that we're living in is of course Robin Hood. And uh this chart really and truly is a miracle. What I'm showing here is the market cap of Schwab divided by the market cap of Robin Hood. And at its peak, the discrepancy was 22 and a half times. So in other words, >> only two years ago, >> Schwab in at in 2023, Schwab's market cap was 23x Robin Hood. And two years and change later, it's converging on one. It's 1.3 times. Robin Hood's market cap is uh 135 billion and Schwab is 170 billion. >> It could have been like one of the greatest pure alpha pair trades I've ever seen. If you had put this trade on in 23, I want to be long Robin Hood shortwab. Holy cow. If this touches one, go the other way. >> Oh, you think you think that's the moment? >> That's interesting. I will I will say this and I had this conversation with some people um on social media right after Robin Hood launched. And as long as you understand what your what the deal is with Robin Hood, what your relationship is with them, then fine, then use Robin Hood. But I had a number of people say, "Well, it's free. Robin Hood is free." I said, "Well, it's not really free. It's just that you don't see where they're making money off of you. No, no, it's free to me. >> And at some point, you just have to, you know, >> slap your head and say, "Fine. Okay, I'm not going to waste any more time." >> If you understand their value proposition, then good. You know, I I'm all on that. The other brokerages are all doing are now all in the payment for orderflow business anyway. >> Yeah. >> So, that's number one. So, there's no alternative. That's one. And then two, yeah, I guess to somebody that's going to buy Apple and hold it for 10 years, does it matter if they pay a penny higher than a normal bid ask spread? Probably not. >> Well, and now it becomes a marketing problem. >> Yeah. >> Uh Schwab is your greatgrandfather's broker. >> Yeah. >> Robin Hood is, you know, for for a 20some. And that's the that's the marketing. >> That's Pumpkin Latte's guy's broker. >> I already pitched I pitched this to Schwab. I said, "You guys, Chucky S and Chucky S has a skateboard. Let's like let's do I don't look I don't think I don't think Schwab has a has a image problem because if you look at the amount of wealth that Schwab versus Robin Hood, it's still a huge difference. But in Wall Street terms, Wall Street is purely interested in what is the future path of earnings growth. And the story at Robin Hood is we're basically going to allow people to do whatever they want. Wait, we know what the numbers are. I think I think Robin Hood has $350, $400 billion worth of assets. I mean, not >> more than that. It's way more than that. >> Uh, >> no. Assets under management. >> Robin Hood. >> Oh, no, no, no. I thought you said Schwab. >> No, Robin Hood is like 350 to 400, >> right? And Schwab is 10 trillion. >> Yeah. Yeah. >> Well, but you you say you you say you don't care, but let's walk it back. What if you're a Schwab shareholder? >> Oh, no. They I agree. I'm saying >> they're lighting their hair on fire >> as a as a user. I don't care. And and I don't I'm not saying it's an investment problem. I'm saying it's a marketing problem for for Schwab shareholders. >> Yeah. You know what? Um it could be, but in a bare market, we just made that point. The companies that took off their name did better. You get into a substantial bare market for this type of trading activity and all of a sudden that's going to look like a bad word and you'll see the Schwabs of the world come back into favor on the stock market. >> Last thing to be clear, Schwab's shareholders are fine. The stock is up 45% over the last year. The thing is Robin is up 500. Well, and that's it's like we were talking about before at at Thanksgiving coming up, your idiot brother-in-law is going to say, "Oh, you're still invested in Charles Schwab stock. You know, I've been along for the Robin Hood ride for the last two years. So, the red car out in front, that one's mine, and you know, I see you still got that Buick >> and you're just going to you're going to want to throttle your idiot brother-in-law." I tell this I tell this story in one of my books about the ad campaigns on CNBC and other channels frankly every channel every sporting event. The difference between 1999 and 2001 in 1999 it was like uh Phil Jackson what's your next big trade going to be like people thought it was basketball and he's like on his laptop in the limo. Anna Cornova picking stocks. Shaquille O'Neal giving stock tips. Um Jackie Chan kick kicking a trade into the laptop that's in air while fighting off asalants. >> He's got money coming out the wazoo. >> Do you remember the Do you remember the commercials? Um do you remember the commercials in uh 2001? It was Sam Watston from Law and Order in a suit and the tagline went from Jackie Chan kicking his laptop to place a trade to investing is serious business. and he did this whole direct to camera monologue with like somber tones because the marketing of this stuff mirrors the recent experience of the people who are market participants. So, I guess my point is I don't know how excited you would be to be a Robin Hood shareholder in a bare market. And I kind of feel like you'd see the action rotate back to people wanting to be invested in Schwab because of its perceived permanence and stature. >> Let me ask you this. In 2001, if you had been Schwab, would you have hired Sam W or some >> 2001? in 2001 and said and had our marketing message is now eat your vegetables. Yeah. >> Or would you have just gone quiet? >> No, they did. They did. They eat your vegetables. >> What would you have done? >> Probably the same. >> I would have gone quiet. >> Why? >> I I don't think you I don't think you get anything from by reminding people how badly they've done over the over the previous 18 months and that you were part of that even though it's not your fault, >> right? Um, I I'm not saying you hide. >> You know who went quiet? >> Who? >> They they they put the E- Trade Baby to bed for a little while. >> Well, it's And they did E Trade was It wasn't Wasn't it E Trade that did he's got the money coming out the wazoo? >> Yep. Uh E Trade did the one Maybe it was E Trade did the one with the truck driver who owns his own private island from trading in the stock market. Remember that? >> Yeah. >> They He's got a picture taped up on his uh on his sun visor. They go, "What's that?" He goes, "It's my island." like they so some of these were like incredibly egregious and they all stopped on a dime and I really feel the same thing could happen this time. >> I think there's there's one difference >> going out on a limb >> and we were we were we were talking about it before. I think there's one difference here in that uh when the market sells off people do rush in to buy the effing dip. They rush in to buy the dip. And we were talking about before in the V space uh we are now in a market where traders are so accustomed to seeing V normalize after a volatility spike. >> Yeah. >> Uh and we saw it happen uh in April. April >> and we saw it happen twice last year. There was December and then there was another one I think in July of last year. And now traders are so it's so commonly rush in to sell that volatility spike. They just want to sell option just sell them like sell them like crazy uh when they see these V spikes because they know if you will that volatility is going to revert to the mean. You know, it's so interesting. And so they have to get and quickly. I was I had just gotten started in ' 87 and the option market took years to recover after 1987 and now it takes about 18 hours. >> Yeah. So, and what what level is like how does the VIX ever get to 35 if people are already um it just it just can't stand there. And I think that I never thought about this until just now. Josh mentioned earlier that the stock market can affect these businesses if they're able to feed the shareholders more stock, raise money, pivot, whatever. >> I never thought of this until just now, how the V spikes and I'm sorry, the Vault crushes can impact the world in a real way because this is what ends up on the newspapers. And as soon as these Vault crushes happen, it dampens the hysteria. Not that the media needs any more of it, but it dampens their ability to try and scare investors and generate clicks and all that stuff because the vault dis disappears pretty quickly. >> Yeah. It it reverts very very quickly. Surprisingly quickly to the point where guys that are my age are kind of shaking their heads a little bit. Uh because I think what's going to happen is this is going to involve this is going to continue to happen. Something crazy will will will hit the wire. uh stocks will be down 10%, V will be up a bunch and traders will rush into sell volatility and they'll pat themselves on the back and then at some point stocks are going to take another 15 or 20% down leg. >> V will spike again and these people will all be like, well, this trade always worked in the past. >> Yeah. What did we just do? Right. And and now I've lit, you know, I've lit my portfolio on fire by by shorting V. And I think we will eventually have unfortunately have that happen. Uh, one thing I will say, I get asked this question a lot because in my crash book, I talk about contraptions. There's always some financial contraption that injects leverage at the worst. >> Portfolio insurance. And you know the world only Josh the world only really broad world only learned about portfolio insurance on October 11th no October 12th >> of 1987 when somebody wrote about it in the Wall Street Journal. >> Yeah. >> Uh a lot of people didn't even know it existed until then. But portfolio insurance or mortgage back securities >> subprime >> sub. Right. Right. Uh and so people ask is retail trading all this retail trading involve selling and that sort of thing and zero DTE options is this the next contraption and the good news is I don't think it is. I don't think the system can build up enough size enough leverage in these things to be the next contraption. I think if the next contraption I if we have some sort of problem in the next few years and crashes are are very rare. Thank God. I write about five in that book. First one in ' 07, last one in 2010, the flash crash. Um, so they're very rare and thank God because they do incredible damage to psyches. >> Yeah. >> But if we do have some sort of big downdraft in the near future, I think it's going to be private credit is going to be the >> I totally agree. And can we skip ahead and and just go to that go to that story now? Let's >> do it. >> Okay. U we might go back to this gold Bitcoin thing because I want to get Scott's take on it. Um, private credit. It's not an anti-private credit message. What I'm about to say >> sounds like it's about going to bed. >> No, no, no. But to your point, like what's the mechanism by which the market actually gets nervous about something? Well, it's probably going to have something to do with one of the areas where the most money has been going. Yeah. >> That's sort of aberant relative to history. You have a lot of new holders of funds that are private credit. So, two things in the last couple of days. The first is the BDC's. So for people um business development corporations, these are publicly traded vehicle vehicles usually sponsored by larger organizations >> with leverage. >> Um they they dole out leverage as lenders and they themselves are backed with leverage and the goal is to capture the spread in between. >> Right? >> The designation BDC is they're paying out all the income in the middle. Can I show you a chart? This is the VANC um BDC income ETF ticker BIZD BISD. So this is an index of I guess the 20 biggest 25 biggest BDC's that are publicly traded that VANC puts into an index and they created a product. You can see now that we are below the April lows in this BISD ETF pricewise. And what I'm showing you >> I'm sorry the pricing is kind of ridiculous. This is a total return product, but they look shitty. >> Well, the I'm so glad you brought that up. The reason why this is falling is cuz the total return is being lowered by the fact that dividends are being cut. So, a lot of these nominally look like they're going to pay out 9 10 11%. But investors are smart and they're realizing as interest rates fall and god forbid acrruels nonacrruals or non-payment of debt starts to bubble up the dividends have to be cut and that's why these are falling. The pain at the bottom is volume. That's I think I did 30-day average volume. So you have volume spiking as people try to get themselves out of these ahead of dividend cuts which we know are likely for 26 because rates are coming down. Um do you have a strong opinion on the popularity of private credit amongst retail investors or in even institutions >> stay away? I I am not a fan at all for a lot of reasons. One it's it's almost completely opaque. fees are huge. It's a little We were joking earlier about private equity. Not a fan of that in a retail portfolio either for the same sorts of reasons. It's opaque. Fees are high. Returns are not particularly good. No liquidity. Uh you know, it's it's worse than a hedge fund slamming the gates in 08 or 09. And the these companies are going to these managers are going to say, "Yeah, but we have so much less volatility." >> Uh, next chart, Daniel. Uh, this is just a list of the this is these are the the uh BDC's. These are all very reputable sponsors. Aries, Blue Owl, Blackstone, Main Street, Hercules, Gallib, KKR, Morgan Stanley, Goldman Sachs. These are their BDC products that they've listed as tradable uh vehicles, >> right? And and I'm not taking aim at the sponsors. If there's a market for something and sophisticated investors want to buy it, then then they should fill the market niche. But my point is that to the degree that these the stuff gets sold because they say less volatility, you got to remember who's coming up who's pricing the stuff that's inside these portfolios. >> Yeah. >> It's it's it's the managers. So of course they have less volatility. So, the story here is, and full disclosure, I tried to catch a fall on that. I sold that I took a 5% loss and moved on uh in one of these BDC's. The story is that one of the big borrowers blew up. >> Yeah. >> Recently, they said that there's $2 billion or god knows how much, many billions of dollars where they they don't know where it went. >> First brands. So, >> so an auto there's some financing aspects of this where they're selling and buying the parts and the leases and the whatever whatever. So, I I want to not conflate two different things, but to Michael's point, this is part of the same stress now that we haven't seen in credit markets. Um, CLOS's are a really big business. They have been for a long time. Um, and basically the collateralized loan obligations and there's a company called First Brands, which is kind of like this conglomerate of like auto parts businesses, different brands in the auto parts space. Auto is always the first thing stressed in any economic downturn. the auto market itself is fine. This is about the companies in that ecosystem that sell parts. >> So investors are getting worried that this is maybe systemic that holy [ __ ] if there's a god knows how many billion dollars lost here. Are they actually reading the covenants? Like what do these deals even look like? So there's a lot of doubt there. I will just say this. Um the idea that this is going to be the first of the next leg to drop. High yield credit spreads are doing nothing basically. And if you look at the size of the private credit market relative to the rest of the loan market, it's it's tiny. It's a couple trillion dollars of a it's the the slice is absolutely tiny. So maybe should investors be careful perhaps. >> Yeah. And that's actually I've had this conversation with a couple of people recently. Is it big enough to spawn some sort of real disaster? >> Subprime was tiny, too. >> There was a time for now that's possible where there's just way more than we know about. >> Well, think about people people subprime. Nobody cares about that market. It was the bottom layer of something that was unstable above it. >> And and are you guys you guys are probably both old enough to remember long-term capital management. >> I was 12. >> Okay. Well, bastard. Uh but there were I mean those were supposed to be the smartest guys in the world. Uh bunch of Nobel Prize winners >> big enough to be so so systemic that the head of every bank was called in to meet with the New York Fed. >> Right. And what was their number? Their number was a $300 billion >> but the leverage what was it 50? >> Well, but the number the the amount of capital that was was $300 billion which is a lot of money but it's not all the money in the world even back in 1997 when that was. So the point is is if if this gets spread out over enough names uh then any of these things can cause problems. I was in. >> It causes a shaking of confidence which ripples. First Brands is the stone that you throw into the middle of the lake. It's inconsequential. It's the ripples. And just to just to barge in here with some numbers, this is a company that ended up in its in its bankruptcy filing, which will now be a three-year fight amongst creditors, 11 billion in li liabilities on three billion in revenue, which is not even the problem. The real problem is double factoring. They took the same collateral and used it for multiple loans. So now people are looking at everything they own. Like whoa whoa whoa whoa whoa. This is going on. That's the problem. >> Yeah. To Michael's point, there's about the number I saw today, $2.3 billion that they think was >> was essentially double factored. In other words, they sold it twice. >> Yeah. >> There's also and quickly try to be quick here. Um there's every crash not only has a financial contraption, it has a catalyst. And often the catalyst has nothing to do with finance. >> People forget that in 1987, the Friday before the crash of 1987, we were we essentially went to war with Iran. Column one of the Wall Street Journal in that Monday morning was not, oh, stock market lost a bunch of money last week. column one, page one of the Wall Street Journal that Monday was that we were essentially at war with Iran. Uh why do I bring this up? Because in 1929, what really really got the crash going was a fraudster in London, guy name of of Hatley, I think Hatry. Um he he had started forging uh stock certificates and then he was selling these stocks or borrowing against them and eventually somebody figured out oh my god this is a counterfeit stock certificate. I wonder how many of these we have. >> Yeah. >> And the number was actually relatively small but nobody trusted anything. >> That's what that's the thing that happens. >> That's right. And so they said I don't know if this stock certificate's genuine. Why am I going to wait around to find out? >> Sell them anyway. Right. And you bring that up because the weather in October of 1987 before the crash is not too dissimilar than what we're seeing today. >> I'm not I again I'm not a I'm not I don't I'm not a crash guy. I'm not one of those guys who thinks that uh you have to buy gold now because it's going to triple by the end of the week because the stock market's going. I'm not that guy. the First Brand's ownership is diffuse enough that we're not going to see one major player take a substantial hit just because of First Brands. Um, Jeff has a $700 million exposure, which sounds like a lot of money, and it is, but not really. UBS has one specific fund where 30% of its assets are First Brands, >> about $500 million. >> Okay. So, not not knowing, not knowing anything. So that's not taking anyone down, but that's forcing everybody to rethink the way they're investing in some of this stuff and maybe to ask some questions they weren't asking a week ago. >> But hang on, but not knowing anything cuz I am certainly a tourist in the space. The likelihood of this blowing over or turning into something, holy [ __ ] I'm just going to take the odds of it's it'll blow over and obviously this could age very poorly. >> Well, there's another one. It's called and it is involved in auto finance as well. And >> yeah, sentiment is weighing on the group right now of there's no doubt about it. >> This is another CLLO story that it's not. >> No, it is. It is. Well, I'm with you in that crashes are rare. Thank God because not only is a lot of money lost, but a lot of psychic energy gets gets, you know, wasted. >> But think about the stock market. How many stories over the years have have blown over? People were worried and then they weren't, >> right? Well, and we talked about long-term capital management. That was really ugly. I think the stock market was down 14% in that month and it it bounced back. But I but uh let's let's look at it a little differently in that um and and what I'm going to mention is >> two Bear Sterns Bear Sterns hedge funds >> in ' 06 >> in in I thought it was 07 but okay 06 07 were focused on on mortgages and subprime mortgages >> blew up. They went to zero. One had one used no leverage and one used uh some leverage and the one that didn't use any leverage fell 90% and the one that used a little bit of leverage. >> Opening shots of the financial crisis. >> That's right. And they and people were having exactly the same conversation then that we're having now. >> Was it October? >> No, it was I think it was I think it's August of ' 06 to be honest there. >> Okay. And and then within 18 months Beer Sterns is zero. >> Right. and and everybody is terrified and and the market is seized up and nobody can get any money out of their uh money market fund. >> So, it's the same it's the same situation then as now. We don't know. I don't think that the same out that we're going to have the same outcome. But sometimes the market gives you a little notice. >> Yeah. It's not just the B2C's, it's the equities too of the private equity companies. >> Correct. So, it's very possible we never speak of this again a week from now and there is no other first brands. I I agree with Michael where you still have to give the system the benefit of the doubt >> that this is not widespread fraud and people doing crazy [ __ ] everywhere, >> but >> it does it does get people asking new questions and looking a little bit more closely and that's new. I I want to finish by getting your take on uh this gold versus Bitcoin uh masterpiece from uh Chart Kid Matt uh at exhibit A. Um, Michael, why don't >> not at exhibit A, just to be clear, this is a Chart Kidm Matt production. >> Ah, what do I It's too It's too many names and things to keep track of. What What What are we looking at? >> I mean, you tell the story. This This is This is great stuff. >> Gold versus Bitcoin on a calendar year basis. Are you shock f two questions? First, are you shocked that we're in a stock market bull with both gold and Bitcoin also making uh record highs? And before you answer that, one last thing. The number one category of inflows of ETFs this year is treasury bills. >> Yeah, >> this is a weird weird thing. Really, >> this a weird like how crazy is what's right now? >> That makes no sense because you can explain all of the other ones with lower interest rates. >> Anyway, gold outperforming Bitcoin this year. It underperformed last year, underperformed the year before. Just a a straight ratio. I find that really fascinating. people are gold is not what you would typically associate with a stock market bull market and you definitely don't expect it to outperform crypto in a in an economic expansion like this. What the hell is going on? >> You would expect both of them you would expect crypto gold and the stock market to do well when together when interest rates are coming down. Sure. >> Okay. All right. All right. I'll buy that. I'll buy that. It's they're not it's not like gold is doing well because the stock market's doing well. They're all riding the same ride. Uh so I I don't that doesn't really mean anything to me. >> Okay. >> Um I I will say this though that in an environment where unemployment is at 4 and a.5%. Is there and I understand it's it's looked kind of crappy over the last few months and you can look at the revisions but unemployment's at 4 and a half%. Why in the world does that demand cutting interest rates? Inflation depending on how you look at it is anywhere between 2 and a half and 2.9% and the Fed's bogey is supposed to be 2%. So why in the world are they cutting interest rates? So my I have a bigger beef with the Fed giving into public opinion and cutting interest rates when it's really not appropriate. And the final thing I'll say, and this is I talk about this in in the crash book, the Federal Reserve does 10 times, maybe a hundred times more damage by keeping interest rates too low for too long than they ever do by having rates too high. M >> they they fostered the bubble in 1929 by refusing to raise interest rates even though they knew and the quote they used at the time was speculative orgy. >> Yeah. and >> my favorite type. >> There you the only good kind. Uh and uh and the same thing happened in 2004, five, six when Allen Greenspan refused to raise interest rates, thought that the banks were their own >> regulator should referee themselves. >> Nobody knows their risk better than they do. They'll modulate and forget. You cannot forget the whole I'll be gone, you'll be gone concept. >> Yeah. >> What's that concept? >> It >> Don't worry about it because by the time this matters, I won't be in this job and you won't be in the job that you're in. >> I will I will have gotten my bonus check, >> right? >> Uh I will I will actually have my own private island. Yeah. >> Uh I'll be retired somewhere. >> Somebody else clean it up. That's right. I don't disagree with you, but Chicago guys hate typically don't like the Fed. I've noticed that. >> Yeah. You guys, the Chicago contingent is very suspicious of anything central planning, especially uh the Federal Reserve. >> Yeah, I I get that. Uh cuz >> the Bears haven't won since 85. >> No. Uh >> I'm a Giants fan. I can't talk. >> We They won in ' 86. And it's not like everybody in Chicago has to know that in order to get into the city. >> The season was in ' 85. The Super Bowl was in ' 86. >> That's right. and they beat the >> Jesus out of out of the Boston cake eaters. >> Yeah. >> Um >> uh so my point is I don't I don't hate the Fed. I think we need the Fed. >> Uh it has it it has a role. Uh it should be a backs stop. I'm not one of those guys who thinks that the Jackal Island meeting that created the Fed was some sort of sabotage or larseny >> Jewish plot. I >> All right, last >> I'm I'm quickly I'm I'm a fan. I just think that they they do make policies. >> He's in on it. He's in on >> Hey, what kind what what kind of last name is Nations? What is that? Is that English? >> It is English. Uh the >> It's unique though, right? It is the first uh first member of of my uh first American in my family came over uh from Somerset, England in 1740. Oh [ __ ] >> As a 14-year-old indentured servant. >> Oh wow. >> Think of the average 14year-old today. >> Yeah. >> Do you think that guy would get on a boat and come over as an indentured servant? >> I can't indenture I can't indenture my kid to take the garbage out. >> Right. Yeah. Or or shovel the shovel the snow. I want to end the show with a a what I think is a perfect metaphor for the current economy and state of the the world right now. Tell me what you think of this, Scott. This is an article cvc.com. Delta Airlines customers are getting used to first class. Revenue from the pricier, roomier seats toward the front of the plane could eclipse sales from standard coach seats for at least a quarter or two next year. Delta executives said Thursday today. In the last quarter, Delta said ticket revenue from its premium cabin rose 9% from last year to 5.8 billion, while main cabin ticket revenue fell 4% from a year earlier to just over 6 billion. And the CEO said, >> "So just do first class fights. That's it. No pre no why what why are we putting coach people on the plane at all?" >> Do I have to think of everything? >> I think that's called a private jet. Um during an investor day last year, Delta said just 43% of its 2024 revenue was coming from main cabin tickets, down from a 60% share in 2010. uh basically it's flipped and now all the revenue is going to come from 5% of the customers, four 3% of the How is that of a metaphor for the the K-shaped bull market? >> There is there are so many businesses it seems like where that is the case where the not the the uber wealthy but the pretty wealthy, the welloff are happy to spend money. Yeah. Whether it's it's travel or dining or entertainment. I actually uh I I'll leave that one to you. I actually had uh I had drinks uh last night with a good friend, longtime friend who's a Hollywood uh not a Hollywood a Broadway uh promoter and producer and he was talking about they just had a show open. Average ticket price $450. Have absolutely average average ticket price. 450 bucks for one ticket. >> So that's a,000 bucks. You take your your spouse. >> Yeah. You take your husband um >> pack theater. >> Absolutely. And and sell they're selling they sell all that they can get at 450 bucks average. And you know what that means? That means that the ones up in front are probably double that. >> Yeah. >> And you know if you're a kid who's, you know, a college student who wants to go see a good luck with that. >> Wait till it's on Netflix. All right. Scott, did you have fun on the show today? >> I did. You guys are fantastic. I love the show. >> We uh lot of fun. >> We We're just big fans of yours. you're uh you're great on TV, you write great books, you know, you have such a great breadth of knowledge and uh just a appreciation from us for everything that you do. Thank you. >> Well, thank you. I appreciate what you guys do to to entertain and educate most importantly investors because it can be tough out there. It can be overwhelming and to the degree that people are educated when it comes to financing a retirement or a kids education, then you God love you. >> Uh Look at that. A wonderful what a wonderful way to end the show. Hey, we always finish with asking people what's one thing they're looking forward to or anything like anything at all that you want to uh share with the audience that you think they should hear about. And uh we'll we'll let you we'll let you go last. Michael, you go first. >> Okay. >> What are you looking forward to? >> Apparently, >> you haven't been home in a few uh a few days. >> I was thinking about it. I'm happy to be home. Uh looking forward to sleep in my bed. Um, Amazon Studios, I guess MGM is reportedly making uh, Heat 2, which I am quite quite excited about. >> All in. Uh, I just saw one battle after another. I went in Florida. I went to Fort Lauderdale to the They have a museum there that has a 70 millimeter IMAX. Oh, wow. >> And they show real movies on it from time to time. >> Um, this is one of the best movies I've seen in the last 10 years. and on the on the big IMAX screen, it just it's you feel like you're on a roller coaster ride. >> Uh my wife actually just saw that and she loved it. >> Yeah. >> Uh I I'll stay with the movie theme. Uh we have an apartment on the Upper East Side and we see the cast of uh Devil's Prada 2. >> Okay. >> All over the neighborhood. >> And Haway, Stanley Tucci. >> That's right. And uh and as you can tell, I'm not the world's biggest fashion guy. Yeah. >> Never read Vogue, but I love I loved the movie for some reason. For some Oh, it's it's actually a lot of fun. >> It's good. It's not a It's not a chick flick or whatever you would you would guess that it is. It's actually It's a nice time capsule of Manhattan in that period of time, too. >> Yeah. But also, you know, it some businesses are tough to be in. And let's pay let's face it is probably none tougher than publishing >> fashion magazines >> over the past few years. >> Is is there even one left? or books or newspapers. Uh, and so it's a time capsule, if you will, of when that business was really in its sweet spot, making a lot of money, fun to be around, that sort of thing. >> I got I got my thing that we're looking forward to. Um, we are doing a live recording of this show, The Compound and Friends in Manhattan on Octo What's the date? October >> 24th. >> October 24th. It's a Friday night. Doors open at 6 PM and uh it's me, it's Michael and our special guest Jim Kramer coming on the show for the first time and uh super excited about that. >> Hey, is this the one at the New York Stock Exchange? >> No, this is at the south this is at uh near the stock I can't say the location until people buy tickets actually. I I just But it's close enough. It's in the financial district. >> Where can they find out about it? >> Uh I'm going to tell people to I I don't know. I guess in the show notes we'll have links and uh all over the compound social media. We still have some seats left and we would love if you guys are fans of the show and you haven't been to New York in a while and you're looking for an excuse, me, Michael, Jim Kramer, Duncan, Nicole, John, Daniel, the whole gang will all be there and uh we're going to have drinks, we're going to have food, we're going to have some signed copies of Jim's new book and I promise it's going to be an epic night. So, >> final thing, final question. When is that again? October 24th. >> Sounds like fun. >> Thank you. So, thank you so much. All right, guys. Uh, that's it from us this week. Thank you so much for watching. Thank you for listening. Like and subscribe. Do all the things. Scott, where can we follow you? >> Well, you can follow me on I still call it Twitter, Scott Nations, or check out our offerings if you're interested in volatilityindexes.com. We provide bespoke volatility indexes for retail traders and sophisticated institutional traders. Help you create the best possible trade structure. >> nationsindexing.com. All right, we're out. Thank you guys. [Applause]