Investors Take On a Record $1 Trillion in Margin Debt! | WAYT?
Summary
Market Outlook: The podcast discusses the current state of the market, highlighting a record $1 trillion in margin debt, which is seen as a reflection of the market's growth rather than an alarming sign of excessive leverage.
Company Focus: Nvidia's earnings are a major topic, with discussions on its growth trajectory, the impact of AI, and its transformation from a gaming-focused company to a data center powerhouse.
Investment Strategies: The hosts emphasize the importance of not succumbing to FOMO (Fear of Missing Out) and suggest that investors should be cautious and consider the broader market rotation into sectors like small caps and value stocks.
Economic Insights: There is a noted disconnect between corporate America's optimistic outlook and Wall Street's more cautious stance, with many companies raising guidance despite broader economic uncertainty.
Sector Rotation: The podcast highlights a potential rotation into rate-sensitive stocks and sectors that have lagged, such as homebuilders and financials, as interest rates stabilize.
ETFs and Market Trends: The discussion touches on the proliferation of ETFs, now outnumbering individual stocks, and the implications for investors navigating a crowded market of investment products.
Insider Activity: Significant insider buying at Western Union is noted, suggesting potential undervaluation or strategic shifts, despite the company facing disruption from blockchain technologies.
Key Takeaways: The overall sentiment is bullish on the market's breadth and rotation, with a focus on the opportunities in sectors that have been underperforming as the market dynamics shift.
Transcript
[Music] What the hell? What just h What just happened to this kid? >> Turn the lights down. Go. >> Oh, all right. Hey everybody, welcome to an all new edition of What are your thoughts? My name is Downtown Josh Brown here with my co-host, Mr. Michael Batnik as always. Michael, say hello. >> Hello. Hello. >> All right. Michael is coming to us from uh Newport, Rhode Island this week. I feel like the whole world is in Newport, Rhode Island right now. >> Really? >> You get that sense? My whole Instagram feed. >> Okay. Well, I'm here. First time. Great. Great spot. >> So, this this I think this exact week last year, I was in Newport um visiting with uh our advisers in the area. Did you Did you go into the breakers? >> I don't remember. Let me see. >> No, you didn't. You would remember, dude. That's Vanderb's bathtub. >> No, I didn't do that. Oh, the mansion. >> Dude, you don't forget this. It was one of the greatest one of the greatest days of my life. >> We did the mansion tour, but we walked around outside. We didn't go inside to anything. >> So, the first tycoon is actually the only bio of the big four industrial guys that I didn't read. And now that I'm on my audiobook kick, forget about it. I'm going to slay this book at two seconds. >> Yeah, those homes are in those homes are complete complete and total insanity. There was no Hamptons in at turn of the century. So, Newport was where they went in the summer. That was like the billionaires from New York. That was the where they went. All right, let's say some quick hellos. The chat is lit right now. Um, I don't think he's with us tonight, but uh I wanted to mention uh Jack Rosenfeld has successfully uh recovered from heart surgery. He's one of our uh he's one of our regular pounders. And uh just wanted to give a shout out to Jack. You all can do the same thing in the chat. I'm sure he'll see it later. Magnus is here, Brian Grill, Benjamin Cliff. Um all the regulars are here tonight. We'd love to see you guys. Thank you for joining us for the live. It uh means a lot. We love the energy that you guys uh bring. Heather, I see you. Rob Fitzpatrick, what's happening? Matthew Steic. Um they're they're all here and uh and we love that. We have a sponsor tonight. Public the investing platform for those who take it seriously. You can build a multi-asset portfolio of stocks, bonds, options, crypto, and more. >> You can do everything. You can fund your account at 5 minutes or less. They've got AI AI AI, excuse me. AI >> AOI and AI out the ass. Okay, it is all happening. >> To read, dude. >> I do. >> It is all there. >> How about this? For a limited time, you can earn a 1% match on all IRA deposits, IRA transfers, and 401k rollovers. That's pretty sweet. Fund your account in 5 minutes or less. Find out more at public.com/wyt as in what are your thoughts? Paid for by public investing. Full disclosures in podcast description. Okay, I have one more item of housekeeping. Nicole will kill me if I forget. There's an impersonator on TikTok pretending to be the compound. Um, just to reiterate, we will never DM you ever. Especially not from the compound account. Like that's it just it's from a compliance perspective. It's never us. So, do not enter into any chat rooms or financial transactions or share any personal details with anyone DMing you pretending to represent us on Tik Tok or any other platform. Um, I also want to remind you guys August is portfolio review month at Red Holtz Wealth Management. We have certified financial planners standing by to take a look at your situation, review your current portfolio, and shed some light on how your allocation may or may not fit your long-term goals. go to rholtzswealth.com to get in touch. Hundreds of people have done it this month and this is your opportunity to talk to us. So, we uh we'd love to hear from you guys if uh if you're looking for some help. All right. Uh Mike, does it feel like um the media is overdoing or underdoing Nvidia earnings week or just right? >> I have to be honest, I can't answer that question because I haven't been paying much attention. But can I give you my take? >> It matters. There's a big one. I think it matters a lot. >> Um, >> and what's interesting is the options market, the last time I I looked, it only seems to be uh like a 6% implied move up or down, >> which I think is less than usual, but the last few reports, I don't remember the stock doing much. I don't I don't know like how long ago was the earnings party and then the stock was flat. You remember was that last summer? >> Oh man, chart made a chart of this. But John, go to the second chart, the options pricing chart. So to your point, yeah, it doesn't feel huge. Doesn't feel huge, but this is the actual in blue, the actual one day price change post earnings. And you saw that uh there's been a few blowouts actually. >> But you know what's >> Wait, you know what you're seeing in this chart? >> What? Like the uh the days of them reporting a great number and the stock rallying huge ended in 2020. the uh first quarter. How many quarters ago? >> That's right, Josh. One, two, three, four quarters ago. Or five quarters ago, excuse me. >> Um it just it doesn't it does not seem as though this is like the kind of rock and roll response to earnings that it used to be. Um and I guess that's just like the nature of the thing. Everybody knows the earnings are going to be good. >> Well, also when you're $3 trillion, it's hard to add $300 billion in market cap overnight. It just is >> the amount of support. >> Where is it even coming? Where is it even coming from? >> Um, let's throw up the first chart. This is so Chart Goat did serious work for tonight's show. Uh, and what we're looking at if you happen to be listening is Nvidia's price since the launch of Chad GBT versus or compared to it's growth in forward earnings estimates and the price is up 964%. and earnings growth I don't know why it's not earnings but earnings growth on a forward basis is up 1100%. >> So okay so the company's earnings have actually out the the growth in the company's forward earnings estimates 12 month forward estimates has been rising faster than its share price. >> Yeah that's right. >> Um nobody would guess that. >> We know that empirically because its multiple is shrinking >> right >> as as we go along. It's not as expensive on forward earnings as it used to be and it's sort of getting cheaper each time because it's not like they report 50% earnings growth which is I think the expectation uh tonight and the stock goes up 50 15%. It's not what's happening. If you're saying that Nvidia is a bubble because of the market cap just in a vacuum, oh, it's $4 trillion, it's a bubble, or how can Nvidia be bigger than the healthcare sector, whatever it is, you have to you have to give some context and chart did it. Look at the price versus the valuation. So Matt said, next one, please. Matt said, Nvidia went from Nope, next one. Went from 5 to 178. Thank you. Nvidia went from 5 to 178 and over the same time frame its forward PE ratio shrunk from 38 to 33. I feel like that's the only stat somebody needs to know to understand that the stock market/ semis are not in a bubble. So look at this. It went from 5 to 178 and it's trading below the average of the on a forward PE basis. It really is just a one of one remarkable growth story that we might never see again. >> Leave this slide up. That's not even the most insane thing. What is >> the most insane thing is that when it was selling at 70 times earnings at the end of 2022, that's when it was the most screaming of a screaming buy. >> Huh. You're right. >> And the reason that's the case is because 2022 was such a technology shitow. >> Yeah. >> That um and and Nvidia was partially reliant upon the crypto market for GPU sales. >> Oh, big time. it. So, so this so this period of time that we're referencing, end of 2022, there's no chat GPT yet. >> Chat GPT is launched in November 30th and it probably takes a full 30 days before everyone figures out what this means for GPUs. So the most ironic part of that chart is that the ultimate buying opportunity in this stock was when it was selling for 7070 times earnings, which should tell you a lot about the usefulness of backwardlooking PE ratios investing in growth stocks. >> Yeah, >> it's almost one of the most moronic things you could possibly be uh anchored to. >> Great. >> Um and that's an unbelievable illustration of that. We skipped over two charts. Should we go back and do them? I know Matt Matt put some effort into these. So, let's let's get into them. >> What are we looking at here? >> Uh, all right. This is just uh uh revenue by segment and so the whole thing is data center now. >> Yeah, but to your point that we just spoke about this used to be gaming. Uh remember like before crypto, this is a gaming stock. This is like Xbox and all that [ __ ] Once upon a time in 2015, before people were bullish on, they weren't saying AI back then. They were saying machine learning and virtual reality and augmented reality. That was the first time people started to get excited about Nvidia. But almost the entirety of the business was gaming. Literally chips for Sony PlayStations and Xboxes. And um the market cap was like 40 50 billion which made sense given the size of the company. So now it's 4 trillion. It's a 10,000x return. And um they're in a completely different business. >> It reinvented itself twice. >> And we've spoken about this a lot over the years. These gigantic winners uh the story changes all the time. >> Like not just the story, not just the narrative, but the actual company, what the company does and can do changes all the time. We did a episode of the compounded friends with Adam Parker three weeks ago and we titled the episode why valuation doesn't matter and instantly like you see the chatter oh this is the top the no it really doesn't cuz if Nvidia is going to be a completely different company you know and we don't know that it will be you know in the past this is hindsight bias but just the possibility that that could happen is the reason why companies like Tesla get the benefit of the doubt and the earnings multiple is so high cuz nobody that owns the stock now is valuing it on the amount of cars they sold over the last 12 months. Um there's one other chart in there. Did we get that? >> No. This this is the thing. >> This is the main thing, right? >> Okay. So this is data center revenue. So this goes back to 2022. You can't even see the bars 3 years ago. It's a tiny inconsequent not inconsequential but compared to now inconsequential. It's like they're ticking along at three billion a quarter, four billion, four billion, four billion, five billion. It's now a $ 41 billion business on a quarterly basis. People in the chat are asking why we're showing 2026 and it's not because we have a time machine. This is I think fiscal year 2026, which is just the the the way the company titles its uh the quarters it's reporting. >> Can I say one other thing? If if Nvidia is a $4 trillion market cap in two years, in three years, if it goes down to three trillion, down to two trillion, um that doesn't necessarily prove that it was a bubble because it is getting the benefit of the doubt of these valuations because the growth, the remarkable growth and what it ultimately could become depending on how big AI gets. And so the outcome might not prove anything. >> I know that might sound moronic, but like we don't know >> based on the estimates. Now it's not a bubble. If those estimates fail to come in because people's expectations are too high, that's just the story changing and the fundamentals changing. >> Yeah. So if if the growth rate slips dramatically and it's only turns out to have grown 5%. Instead of what's priced into the stock of 15 or 20% or whatever it is, all right, then people were too too bullish. >> So here are some things for you guys to look for uh when the company reports tomorrow night after the close. If you listen, we're recording this Tuesday. Um so it'll report uh Wednesday post close. This is a stock that's already up 35% year to date. um which is more than triple the S&P 500 up 40% over the last 12 months >> but wait but but a stock that was down 35% very quickly in the first quarter how insane is that >> recovered at all and then some um expected to report adjusted earnings of A1 on revenue of 46.2 2 billion and again as we pointed out almost all of that is data center which is the hyperscaler buildout for AI. Um last quarter uh excuse me this quarter last year for comparison 68 cents revenue of 30 billion. So yeah the stock over 12 months is up 40% but so are the expectations going into this quarter. Um so if they do these numbers that would be 49% earnings per share growth, 53% revenue growth respectively. So right in line with what the stock has done and maybe even uh faster. Um they're going to pay a 15% tax to uh the US government for anything they sell into China and that is already factored in by analysts. That's an 8 billion China related hit to earnings this quarter. It's a pretty big number. Um, there's a couple other things that I want to say about this. The big part of the story that you're going to hear the analysts ask about is the Grace Blackwell chip sales. Right now, they're selling the GB200, which is like their top-of-the-line, fastest, best, blah, blah, blah. And then in September, so next month, is uh the GB300 sales begin. And that's supposed to be not just incremental, but like an explosive improvement over the current Blackwell model. So, you're going to hear people ask about the timing and whether or not they're going to hit their fiscal fourth quarter uh uh uh their calendar fourth quarter. Um the other thing that's happening is really big orders um for Grock, which is the Elon Musk uh empire. Um and so you'll maybe hear some questions about timing for that. I think uh I just want to leave you with a couple of quotes from Wall Street. This is all the analysts came out and said reiterate you want to be long this stock into the numbers. Um JP Morgan, we expect July quarter results to be slightly better than our well then how are these your estimates or consensus estimates? Um they're talking about the GB200 shipment ramp and the start of GB300 ramp. Goldman Sachs quote to be clear we remain very bullish on Nvidia's prospects for driving outsiz growth in 26 based on positive hyperscaler capex commentary. So that's like Microsoft, Amazon, etc. Everyone who reported 3 weeks ago, they all reiterated their capex spend or actually raised guidance on that. Um bar raising our revenue and earnings estimates on a significant acceleration in GB200 sell through shipments. What they're doing is they're tracking the racks that go out from the OEMs with the chips already embedded in them. And that's how the analysts are getting a read through to h to like the pace of chip sales. They're saying like this number of racks went out from the OEM. Figure out the number of uh GPUs that would be on each rack and that's what's giving them confidence to reiterate or um or raise their numbers. Ste uh two more steifo we aim to build a view into the foundation of the mosaic of Nvidia's end customers which in totality include CSPs that's cloud service providers or hyperscalers neoclouds sovereigns and enterprises um will continue to grow supports a longer tale growth outlook blah blah blah one of the things is that it's not just new data centers it's swapping out old chips for new Nvidia chips um into those data centers once they're already in existence. So it's like a replacement cycle on top of a buildout. Um and the last one, this is Dan Ies at Wedbush. I'm going to read it as Dan. Okay. >> Okay. >> Let me get it character. The pieces of the AI puzzle are forming with massive strength from the hyperscalers seen this past earning season and use cases. Okay. Building across the board on the enterprise. Now, the biggest and most important piece in the AI puzzle is hearing from Jensen and Nvidia around demand. >> The godfather, the godfather, >> especially with a green light now on the China market. Okay. Uh, shout out to our buddy Dan goat. >> Green light on the China market. Um, anyway, >> all right. >> Two things. >> Um, that's really good. Two things. We heard from everybody, all of their major customers. We heard. This is not going I'd be surprised if it's a surprise. We've heard everything. Which brings me to my second point. Why are they like six weeks behind all their behind everybody else? Isn't that bizarre? It's like so anticlimatic. >> Smart. Um, Crowd Strike, too. Crowd Strike this week. Yeah, there's a there's a I don't I don't really know how it happens, but I feel like once it does happen where you schedule your earnings in this particular week, you don't really move move off of it because >> I was just going to say I have no idea how that happens. I don't I don't know. >> I'm sure there's I'm sure there's something >> for starters. For starters, when I started in the business, most of earning season was pre-market. It wasn't until we had thousands of companies in the West Coast like Microsoft that became really important that we started to have all these afternoon reports. But think about it. In order for a company in Certino or PaloAlto or Menllo Park or San Francisco to report before the bell, they'd have to wake up at 3:00 in the morning. So that's how earning season became an after hours phenomenon. um for you know for half the stocks at this point cuz like half the S&P is California-based companies and they report after 4 which is actually 1:00 their time. I don't know if you know how time zones work. Um but so that's just uh just a little tidbit for you. Buffett's the only one that does it right. >> Saturday >> Saturday and no [ __ ] conference call. >> Yeah, that's great. >> Figure it out. I I >> everything he does like that I love I love so much. Even though I love earning season. Um, okay. I really love it. >> Um, all right, Josh. This is this is a bull market of stocks, everything is working for the most part. >> Um, and a couple of weeks ago, maybe for the last couple of weeks, I've been saying like maybe to to to listeners, just like pump your internal brakes. If you feel like you're getting left behind, just like take a beat. Don't give it to FOMO. That's always good advice, but especially when stocks are going straight up. Uh, and I think I said sell something like two weeks ago. >> Yeah. Uh, and the market's gone sort of sideways, a little up to sideways, but this is a bull. >> No one's going to be mad at you for saying that. No one's going to be mad at you for saying that. I, Dude, three weeks ago, I said sell some Nvidia. >> Uh, no, dude. I'm not going It's probably going to 200 today. >> I am not embarrassed. >> Yeah. No. >> Um, but my point is this. My point is this. Market doesn't wait for you. Bull markets don't wait for you. Bull markets don't give you a chance to get in. There are so many stocks that are just hanging high. And they're all working. Like everything is working. This is like just if we could forget about everything fundamental. Forget about your opinion on what the the labor market. Forget about your opinion on on tariffs and cost pressures and the housing market. Just forget all that. Literally if you were just looking at stocks indexes you would conclude that we are in an absolutely uh global synchronous bull market and it's only getting started. Now that might prove to be wrong. Everyone could be wrong. That's certainly possible. But you have to give the stock market the benefit of the doubt. It's working and everything is breaking out. So I am bullish on the rotation trade. Let's go through a few charts. Uh this is gosh dang it. Who did I steal this from? Wow, look at this. Look at the equal weight. >> This is from the chart life. Okay, the Dow ripped out hard on Friday. Equal weight. New alltime highs. Micro caps. New alltime highs. Let's look at this new chart from Alfonso at All-Star Charts. Micro caps. They've been dogs. High rates have smooshed them. Multi-year highs. And this is phenomenal. The fundamentals are supporting this. So Matt made this chart showing MAG 7 ver on the left actual earnings growth versus consensus estimates and the actual earnings growth is slowing from insane numbers obviously right like that you can't continue to grow 36% forever but look what's happening to the actual earnings growth of the 493 and look what's happening to consensus estimates they are going up in a big way here's this for a rotation and then I'll stop talking look at this rotation European banks Yeah. >> Versus US banks. Are you kidding me? Does anybody know? >> Ultimate risk on signal. >> Does anybody So don't dig in your heels. You're not smarter than the market. It is all working. And maybe there's something that comes along tomorrow to knock us off our axis. Maybe it's Nvidia's earnings report. Certainly could be. But my goodness, this is a bull market. Don't fight it. I mean, the micro cap thing is shocking to me. I understand the action in the last week because of Jackson Hole. It's like the last boot on the neck of small cap stocks is this ridiculous what are we at four four and a half% interest rate. Whatever it is, it makes no makes absolutely no sense to anyone. Um so I get that Powell signaling a dovish move in September should be the trigger, but they started rallying well in advance. What that chart you just showed me? >> Yeah. Um, can can we put up the can we put up the uh >> and it's it's everything you want to see. It's discretionary over staples. It's home builders. It's financials. It's tech. It's everything you want to see. >> John, give me this S&P 493 earnings growth accelerating. Nobody knows this is going on. Like, nobody's even thinking about this, right? >> Look at Look at this. >> I don't I don't believe so. >> So, these are consensus on the right side. These are consensus estimates for everything but the MAG 7. And for Q3 2025, the number is 4.7% expected earnings growth, then 4 and a half, then it jumps to start off 26, Q1 9.9%. Then 10.9% the next quarter, then 14.3%. Um, now analysts always go into the new year overly optimistic and then they cut their um expectations as the quarters go on. We know that. But what we also know is that companies are beating the [ __ ] out of these estimates. And we just did 12% earnings growth this past quarter. X Nvidia. So let them I guess let them let them cut their estimates. If if we're really going to get anything even close to uh 10 14 somewhere between 10 and 14% earnings growth for the S&P 493, then the equal wage should be >> Yeah. >> at record highs. >> Why Why wouldn't it? Why wouldn't it be? >> So don't, please don't hear this. I know you can interpret it any way you want. Is Oh. Oh, Michael's flipping. Bob, listen. This not me. It's the market. The market is bullish. >> Sorry, let me correct. I got to correct somebody in the chat. Adam is saying, "Dudes, Momo stocks have been tanking non-stop for a month." Which >> not sure what Michael is talking about. No, that's what he's saying. the money is leaving a lot of these broken momentum names and it's going into the Russell 2000 and value and other areas of the market. So a stock doesn't doesn't get born and then die as a momentum stock. Just so everyone understands this. >> Who said that? >> Um uh Adam. >> Adam. So Adam is correct uh that there are a lot of names getting nuked. We spoke about this with who was on before Tom the week before Tom or maybe it was Tom. There is a great chart that I think Grant made. Grant >> uh Todd Todd Zone. >> Okay, maybe it was Todd Shannon showing that even though the market is at an all-time high, the number of stocks that are making alltime uh 52- week highs and 52- week lows is expanding and a lot of that is coming from the 52e lows. So, you're right, there are a lot of names getting nuked because AI is making winners and making losers. But if you step away just from the AI trade and the moment names that you talk about they're getting nuked and yeah, there are names that are getting smoked. Equal weight, small caps. When I say everything is working, okay, yeah, there's there's things that are not working, but everything that you want to see working in a healthy bull market, it's all happening. >> But I but I I I want to go back to the nomenclature of what is a Momo stock. Um like Reddit running from 70 to 200 is a momentum stock. But then when it falls from 200 to 100, it's not a momentum stock anymore, >> right? >> Like where you momentum has a definition. It's not a feel thing. It's like a former momentum stock. >> No, it's a formula. So, yeah, Circle's getting smoked. Figma's getting smoked. Coreweave is getting smoked. There are names. Absolutely. It's not It's not hard to find losers. But if you look at the aggregate, and I'm not just talking about the mega caps, the equal weight, the m the micro caps, the Russell 2000. It's a bull market. Let's move on. >> Yeah. Um I think that's a good point. I uh I think this ties right into it. Bloomberg has a piece about how like corporate America is more upbeat on the outlook into year end than Wall Street is. And this is pretty rare cuz a lot of times Wall Street is taking its cues from what corporate leaders are saying, especially when they especially when you're talking about like analysts covering sectors or um you know some of the strategists that do these surveys. So, like this time, Wall Street like sort of isn't listening. Corporate leaders and CEOs are are at least in the things they're saying and the way that they're giving guidance are super bullish right now. And there's a little bit of a disconnect. So, let me just share this with you and then I want to hear what you think. Among S&P 500 index companies that adjusted their revenue views in the current quarter, 44% have raised, which is the highest proportion since 2021. The share of outlook downgrades is only 14%. That's the lowest in the data going back to 2015. Um, quote, this is a Jeff uh uh equity research guy. quote, "There's basically no reason that a management team would want to raise guidance on something that they're not 100% positive on because they know the implications of that. >> I would argue that is a lot of what's powering stocks higher." And then the last thing on this, strategists at Goldman Sachs also flag the disconnect between what companies are saying and the macro picture. The firm has the firm's in-house barometer of economic activity among S&P companies. So they're tracking the real revenues of all companies excluding energy rose 4.8% this quarter from the same time a year ago exceeding the pace of economic growth. So companies are acting like it's 2019 like game on. And um the street it just can't get there mentally I guess um because they're just not as bullish. What do you think? >> You know who else flagged this? me. I said with Ben a couple of weeks ago, I am done listening to the headlines and the economists and the strategists and the this and that. There is such and I said this there is when you listen to the calls and I listen to a lot of these calls there is such a disconnect between what they're saying and to the point that the Jeffree make or the or uh whoever it was they're not they have no incentive to overpromise if they set the bar too high and they that's not what they're trying to do. They're trying to tell you the truth like if anything they're looking to sandbag. So whether >> they would be crazy to [ __ ] they would be crazy in this climate. They're not in the business you on on guidance. >> No, that's not what they're doing. So again, yes, there are companies that are having a difficult time as is always the case. But for all the ones that I listen to, the consumer is fine. Yes, the low end is struggling a bit. Um or more than a bit in certain cases, but they're all saying the same thing. Growth >> growth tariff concerns overblown. Like they're they're not seeing it. Look, 44% of the companies uh saying anything about guidance are raising. What else do you really need to hear? >> Now, wait, hold on. This is the critical point. Critical critical point. I am talking about large cap stocks. I'm talking about stocks that have no problem tapping capital markets. Okay. So, there is a big disconnect between what these companies are saying and how they're doing and how maybe Main Street is doing. And maybe that like that's also a large part of the story because yeah, there is a lot of people that are the labor market is slowing down. There is a lot of people that are like not doing great. Fact, but we're talking about the stock market and the companies powering the stock market are doing great. >> I'm with you on that. All right, let's um let's keep it moving. >> Okay, so we made the case or I made the case last week for rate cut stocks, I believe. Uh, and here's one that we never talk about. And we spoke earlier in the show, at the top of the show about Nvidia, and we talk often about the next earnings call and what stocks are going to do next week and maybe not enough time about these are actually businesses. And it's pretty miraculous that the price follows the fundamentals or the fundamentals follow the price, whatever. like price leads fundamentals, but they're tied together. So, this is a great example. Let's look at Wayfair, a rate cut stock that we just never talk about. >> This is this is Wayfair's operating income. Okay? And when people were staying at home and moving during a pandemic, the stock I'm sorry, the company the company, the fundamentals of the company went crazy. And then came the rate hikes. And then came the frozen housing market. And the company, the company got smoked. The fundamentals of the business got smoked. >> And then this company, by the way, is co is founderled. >> Uh this company made a lot of operational adjustments and efficiencies and they really turned their business around. And wouldn't you know it, the stock is up 64% year-to- date. But more importantly, look how the price Look how the price, it's a miracle. Look how the price follows the fundamentals or vice versa. John, toggle back and forth. Boom, boom, boom, boom. There it is. >> It's almost perfect. It's almost It's you, if you overlaid them, >> it's pretty good. >> Like a professional, we would be able to see both things happening at once. But it's almost perfect, dude. >> It's pretty good. >> Um, here's what's interesting about Wayfair. So Trump said something about tariffs, indeterminate amount of tariffs or something and the furniture stocks got wrecked yesterday. Um so RH would be a good example and um Ethan Allen, all these furniture companies, I don't care how high fallutin their brands are, they all have the [ __ ] made in China. So, um, Wayfair very interestingly does not struggle with the tariff issue the the way that all these other furniture sellers do because >> they have 20 they have 20,000 sub suppliers. >> Yeah. But they don't but they don't own it. They're a So, what I think people miss about the Wayfair model, they're like more like Amazon enabling third-party sellers of furniture under the Wayfair banner, but they don't themselves import the [ __ ] into the United States and pay a tariff. That's on the supplier to to figure that [ __ ] out. Wayfair is just passing along a piece of furniture from a seller to somebody that buys something on their website. And um it's a really different model obviously than the other publicly traded furniture companies. And I didn't I wasn't really like up to speed on the Wayfair phenomenon. We have a couch in our office from Wayfair. It's the easiest thing on earth. I I think we bought it. It it arrived like eight hours later. It was in a tiny box. I'm like, "How does a couch fit in that box?" I I swear to God. I took a I took a pen and ripped open the box along the seam and this couch like inflated itself and we just have a have a have a couch from Wayfair. I said, "Oh, now I get it. This is the easiest furniture purchase I've ever made in my life." This stupid office couch. I got it within hours of ordering it. So, I don't know how that happens. >> Well, the stock is working. The business is working. It's up 64% year to date. All right, moving moving on to one other >> Can I say one thing? I I do think that this is the next leg of the bull market is the rate sensitive names now that we're back into a cutting cycle. Even if it's a short-lived cutting cycle, these stocks have done nothing for so long. I really like the action in the in the home builders and the the the stocks related to houses, mortgages. Um it's time I'm seeing like property and casualty insurers per perking up. Um, and I just want to say my best stocks in the market list has 190 names on it. >> Wow. >> The average over the last year has been like 70. >> Wow. >> So that's what's on that list now. >> Yeah. >> Is the rate sensitive stocks that just woke up out of nowhere. >> Yeah. Okay. Yeah, that's working. All right. Um, I listened to Home Depot's call. I own the stock and this was very interesting speaking about like just listen to the calls. All right. So they were asked about what a potential rate cut would do for the business and I thought this was noteworthy. Certainly some relief on mortgage rates in particular could help. I think referring to it a bit of a frozen housing market with 40 plus year lower turnover rates and even new starts are struggling a bit. So lower rates would certainly help. We don't have a crystal ball on what that number is. When we talk generally though to our customers, each of our sets of consumers and pros, the number one reason for deferring the large project is general economic uncertainty that is larger than prices of projects of labor availability, all the various things we've talked about in the past. By a wide margin, economic certainty, economic uncertainty, excuse me, is number one. Uh, quote off, please. I thought that was remarkable and again a big source of why there seems to be an enormous disconnect between how the market is behaving between uh what economists and strategists and people are feeling. It's it's really something. It's >> not right. There's no gimmick. There's no gimmick that you could pull off to make people, millions of people all at once say, "Fuck it. I'll do my roof. I'll do my kitchen. I'll do the bathroom." Like, everyone has these projects that they're waiting to do. The only way these things end up happening is if people stay in their jobs and they feel confident that they're going to be in their jobs for a while. And unfortunately, the conference board numbers, consumer confidence is just horrible. >> Present conditions, future conditions, >> like none of these numbers look good. They all look like they're headed to the zero line. >> I really think this is this is the this is maybe this is recency bias, but I can't remember another actually that's not true. Co co was was like this uh where you have the stock market making an alltime high and you're just like I just don't get it. you, Home Depot is saying the number one reason is general economic uncertainty and you're seeing that everywhere and yet the stock market is breaking out all over the place. Now, when you really peel back the the layers of the onion, we can make sense of it very easily, right? It's it's AI, it's capex, and Amazon and Google, they they don't care about the the unease of the general population. Like, they're spending and rate cuts and inflation. Uh well, I don't want to say it's moderate or not, but like it so it makes sense, but it but it's it doesn't it does and it doesn't. >> Well, the 20% of Americans who I refer to as stock market Americans who own 85% of the stock market are not sitting around worrying about general unease. Not yet, because it hasn't touched them yet, >> right? >> So, we're talking about a different consumer >> and uh we're not talking about the people who are loading up their portfolio with stocks right now. That's entirely different person. >> For this next topic, for this next topic, I just want to say >> chart kid Matt, I called him at 440 and I said I said, "You've got five minutes. Can you make me a chart of margin debt as a percentage of S&P market cap?" And he said, "Yes, five minutes." I just said, "Go." I hung up on him. Listen, keep going. >> Because I because I ordered a chart from these guys and I think it's in here also. Did we order the same chart? >> Mine's better because I'm a professional. All right, you'll explain to me why yours is better. This is a piece at the Wall Street Journal. Tell us Demos. Margin borrowing may not be a great predictor of the S&P 500's next move, but it can still tell us something useful about how to invest. We'll be tell the judge of that. Relax. Basically, FINRA tracks the data. They don't know who's taking out the margin debt and they don't know what they're using it for. So, this is aggregate. But we topped a trillion dollars for the first time ever as of June according to the July margin data which I guess just came out in August. Um investors are borrowing money to buy stocks and Telus goes into detail about some of the reasons why it might just be a mechanical thing. One of those reasons which we're going to get to in chart form is just the fact that the stock market is bigger and so margin debt is sort of rising commensurately with the overall size of the market value. That's one thing. Another thing is shortselling. You do short selling using margin debt and when prices rise you have to post more collateral would be the way I would explain it but it's post more dollars to your equity balance in the account so you can maintain your short position. So, that's not people speculating on a higher market, but it's a scenario that would drive margin debt up. So, there's a lot of other [ __ ] going on, but um let me just quote a couple of things from here, and then I'll have you do the charts. Um if margin borrowing by individual retail investors was surging faster than the overall turtle total, it might signal uh exuberance among that crowd. But FINRA doesn't track who's doing the margin borrowing or what purpose they're using it. Um, margin loan books grew well over 15% at Charles Schwab and Interactive Brokers in Q2. We get that from the earnings report. Um, on top of fees generated by trading volume. This helps uh fuel growth in net interest income. Hence why these stocks went up so much. Robin Hood's margin book grew 90% in a second quarter from a year earlier. Okay. So, that's growing faster than the stock market's uh market cap. Um, uh, one other thing I wanted to do here. Uh, this can be a double-edged sword. If prices plunge, so can margin lending investors roll back, borrowing to slash risk, and as collateral needs shrink rather than grow. Margin debits can become credits and interest income falls. So, you're talking about the impact on the brokers and their P&L. >> But what about the turtles? Did I say totals or turtle? All right, let's just go with >> anyway. It's a trillion dollars in margin debt. And I know uh put this chart up from from WSJ real quick. This is what it looks like. Total debit balances in customers securities margin accounts over a trillion for the first time ever. And I know the way to rationalize this is to say, yeah, but look how much the stock market is up. Therefore, it's just keeping pace with blah blah blah. So, let's do my chart, which you can make fun of, and then we'll do yours. >> I'm not making fun of this. This is just typical you. It's very amateur. >> It's very amateur. This is FINRA margin debt versus the overall market cap of the Russell 3000. And all I'm trying to do here is establish the fact that it's not like these things have completely divorced each other or that the rate of change is so wild that there's a massive gap between the Russell 3000 market cap and the total margin debt. I'm not trying to uh do anything magical here, but this is just the way I visualize what's actually happening. And when you do that, it's not a five alarm fire, >> right? This is obvious. Like, what? Why would it be any? >> All right. [ __ ] you. Show me your chart. >> No, I'm I'm I'm patting you on the back. >> Oh, thank you so much. I appreciate that. >> Actually, no. I'm patting you on the head. Show my chart. >> Thanks, Dad. >> All right. Show my chart. All right. This is the chart. >> You adjust. So, margin debt as a percentage of market cap. This is all you need to know. That's it. This is it. Okay. >> So, let's tell people the numbers, please. >> 2008 to now. >> Yeah. So 2008 got a little nutty obviously 3.3% margin debt as a percentage of total market cap and if you look at it today it's 1.8%. And look at the change in the previous mania in 2021 again things went a little nutty. Uh and yeah they're on the rise today. Certainly on the rise from the lows but it's you know it's it's really nothing with nothing. Sorry. >> The message of this of your chart your chart's better than mine. The message of this chart is that we're not taking on enough margin debt. Yeah. What are you guys doing? Buy >> relative. >> Why are you guys so bearish? >> Relative to history. >> Did you not hit the bull market? >> Get involved. >> So, as a percentage of the S&P 500's market cap, you guys just are not fired up enough. >> Like, come on people. >> Get with it. More leverage. Actually, it's a great segue, Josh, to the next one. Well, to tell us Demos's credit, um, he did not the the headline was more alarmist than the piece. And the article was great. Great article. >> The article was great because I think he explained a lot of things. All right. Um, this is our last one. >> There are now officially more ETFs than stocks. I feel like that's good, right? >> Yeah. Why not? >> Is it is it good for you? Do you like it? >> There's There's only eight Nvidia leveraged ETFs. Like, it's not enough. >> Did you think we would get here? I always knew we would get here. >> Yeah, look at this chart. It was >> um there's another Bloomberg story, but it's Morning Star data. So, the Num uh here, I'll just quote the number. Thanks to a break neck pace of new launches, there are now more than 4,300 exchange traded funds, a figure that for the first time eclipses the total number of stocks, currently hovering around 4,200. Um, ETFs account for a quarter of the total universe of investment vehicles, up from 9% a decade ago. Issuers have been busier than ever this year, having launched more than 640 ETFs, a record setting pace that comes to about four per day. The number of funds that came to market in the first half, 469, nice >> was nearly 50% higher than the year earlier period and about 140% above the previous 5-year average. There's like a lot going on here. I would just point out one of those things is that it's cheaper than ever to get a product launched. So, it's not like people are like doing this huge lift. The paperwork's faster, the law firms charge less, the exchanges are streamlined. It's way easier to launch product than it was 10 years ago, 20 years ago. So, let's just establish that. The second thing is it costs less to keep a zombie ETF out there that barely has any assets. So, that also reduces the risk of launching something that doesn't catch on. And then the last component to this is these are not indexes anymore. >> We're not in Kansas anymore. These are active strategies. Some of them pretending to be factor. Some of them are two and 3x leverage, whatever. >> None of this is indexed. That's over. That game has already been won. >> So, what we're seeing now are basically almost more like stocks than they are like funds, >> I would argue. >> Um, >> right, from a risk profile perspective, from a concept uh perspective. >> U, the other thing is every time there's a successful product launch, that issuer doesn't just say, "Okay, great. We did it. They say, "What are three more funds we can launch and create a suite?" Because that's where the real money is. A an ecosystem of ETFs all keying off a similar theme. So Tom Lee's launching a bunch more. Um like just like Kathy did. So you have these um >> you have these runaway hits >> and then it's like well we need we have to put out another single. Yeah. Yeah. >> Or else the band is not going to, you know, >> like it's uh it's it's human nature for one successful ATF to be get 10 more attempts. >> Mhm. >> Uh it's a lot of turtles. >> Is it problematic? >> No. >> I mean, there's Well, well, well, hold on. There's a lot of >> It's a risk to the investor. >> Yes. I was going to say there's a lot of junk. There's a lot of [ __ ] being thrown against the wall and and some of it is sticking. In fact, a lot of it is smearing. A lot of it >> so disgusting. It's truly truly revoling. Okay. >> Do you do you think that the risk is that a lot of people are going to trip and fall over into some of these shitty products because they don't know any better? >> Yeah. Yes. And you know what? >> Like who's you know what the best way to do I'm sorry. The best way to learn is to do. So, I am optimistic that some people unfortunately get burned with more money than they should, but I'm bullish on investors learning. There's never been a more educated investor class ever. People are not dumb. They touch the stove once, they burn their hand, they don't touch it again. And so, a lot of these things that are being launched, if they don't work, they they won't take money in. >> I think the exchanges should raise their prices. >> I don't think more is more. I think the exchanges should say, "Okay, this is just activity for the sake of activity. >> All this market making [ __ ] going on with funds that barely have any money in it." I think one of the exchanges should differentiate itself from the other, like NASDAQ or New York. One of them should say, "We only do quality here. We're not focused on trading volumes. We're focused on what what we think is like best for uh the market." >> Oh, yeah. As a shareholder of New York Stock Exchange, I don't want that. They're running a business. This is capitalism. >> It's just I don't know if I mean >> Oh, stop it. Don't be this how it is. >> I come from the 1900s and where where I come from like things like mattered. I get nothing. >> Shut up. This is not Don't be an idealist. This is This is the world. >> I understand like nothing matters. All right, dude. So, why not 80,000 ETFs and >> I'm saying 10x that [ __ ] Yeah, why not? >> And it's just a lottery ticket. And maybe it's a piece of [ __ ] Maybe it's not. No one's really paying attention. I don't I don't know. You know what? We have a We have a great guest. We have a great guest on the compound and friends later I'll talk to it. Yeah. >> For me to get into a fight with. I don't have to fight with you over it. >> Yeah. Okay. I am I'm going to make the case for Dude, I'm bullish on the rotation trade. I It's been a minute minute. Uh I think we're here. Um and I >> You love these You love these head fakes. >> I I do. I'm a sucker. Uh I should have >> you every time. They get you every time. I forgot. I am a sucker. I forgot to bring the chart of the of the IWSPY, but I'm telling you, man, it's turning up. All right. >> This is the one. >> This is the time. This is the time. So, Bespoke tweeted last week, "There have only been 15 other days since 1990." This was was this Friday? Maybe when the cap weighted index fell at least point4% while the equal No, it's not Friday. What am I talking about? While the equal weighted index rallied 0.4%. I don't know if this is Wednesday or Thursday, but either way, it was an outlier and I think the rotation is on. Here's one area that I think is going to go. Maybe not a rotation trade per se, but Chinese internet. This is the time. Look at this. You believe in triple tops? I know we don't. >> Oh, that's going >> right. I don't own this, but I >> Chinese stock market is up huge this year and nobody's talking about it. >> Nobody cares. Chinese internet stocks are about to go crazy, I suspect. >> I don't believe in I don't believe in triple tops. >> No, not a thing. This is going to go. Uh Grant Hawkridge has a chart showing that the Russell 2000 has been below its all-time high for 950 days, which is one of the longest streaks of all time. Guess what? This baby's about to fly. Uh so >> I am a believer that the rally is broadening out for real, for real. For real. In fact, how about this? It is happening today. That's a fact. It doesn't, you know, it doesn't require faith or belief. It's happening today, but I believe that is is going to continue. >> If Nvidia misses and this is the top, they're going to clip you up. >> This this is going to go viral. It's going to go viral. I'm just I'm just saying >> I'm a big boy. I can take it. >> All right. Cuz it's it's happened to me. >> I've never been wrong on video before. Never ever. >> So, what are you what are you making the case on, though? Because you're saying rotation into the rest of the market, but then you're saying like Chinese internet, you're just seeing like everything. Chinese Chinese internet was a bit of an outlier. >> But the things that have not worked >> while the bull market has just soared. The things that the things have been left >> the everything else. The everything else >> everything the 493 the 493. >> I love it. I love it. Um and and I actually think you're going to be way right. Okay. This is going to be a tough one for you, but you're very good at this and I wanted to challenge you and then we'll get out of here. Here's my mystery chart. >> Say no more, Josh. No, I'm just kidding. Yeah, right. Not this time, my friend. All right, couple hints. It's a stock, not an ETF, not an index. Okay, >> it's a US stock. >> Okay. >> Um, it's a household name. >> Okay. >> It's probably the first company in US history to be literally put out of business by crypto. >> Okay. Western Union. >> Holy [ __ ] [ __ ] You good? >> I mean, that was a great clue. So, thank you. >> Look at this. Are you seeing this? >> I am. >> This is This is a $25 stock 5 years ago. It's $8 now. Why today? Why am I bringing it up today? >> Why, >> Michael. I got the nod. No, I'm just kidding. Here's what I want to tell you. Um, massive insider buying. Massive. Um, one of these guys, I think Matthew Kagwin is the CEO, um, on August 18th, which is when is that? Friday, bought 17,500 shares in the open market at $8.36. That's4 million. two days later uh or three days later on the 21st uh Devin Mcgranahan which I guess is a a board director or an executive bought 176,470 shares at $849. He now owns 900,000 shares. So he materially raised his position. Um, the bottom line, and this is this is NASDAQ data, over the last three months, there have been three open market buys, but over the last 12 months, the whole way down, 23 open market buys by insiders. Um, the number of shares bought over the last 3 months, 222,772 versus only 26,000 sold. over the last 12 months, 910,000 shares bought versus only 200,000 sold. >> There are almost like >> there are almost no publicly traded companies where you'll see a ratio of buys to sells like that. So, and granted, this could literally be put out of business by the blockchain. Remember, Western Union guys, for those of you who aren't aware, is remittances from uh immigrants who are trying to send money back home. Historically, they paid egregious fees to Western Union and now they can do it with um Bitcoin or stable coins or whatever. And uh this might be the first company in history to actually be disrupted out of business by blockchain or it might double. What if there's a Western Union stable coin? >> Dude, I'm I like that stock. I like how it's I like how it's uh I like it. I might buy it for real. >> I like that. You guys, the mystery chart. Very proud of you. All right, we're going to let Michael get back to his vacation. I want to remind you guys tomorrow is an all new edition of Animal Spirits, just like every other Wednesday morning. That's my favorite podcast. Make sure to listen. Uh Ben's got an all new edition of Ask the Compound. Um and then on Friday, very special guest. um multiple multiple uh appearances on the show and we're super excited to have him back. So, look for that on the Compounded Friends feed. Thank you guys so much for listening. Have an amazing summer Tuesday night. [Music]
Investors Take On a Record $1 Trillion in Margin Debt! | WAYT?
Summary
Transcript
[Music] What the hell? What just h What just happened to this kid? >> Turn the lights down. Go. >> Oh, all right. Hey everybody, welcome to an all new edition of What are your thoughts? My name is Downtown Josh Brown here with my co-host, Mr. Michael Batnik as always. Michael, say hello. >> Hello. Hello. >> All right. Michael is coming to us from uh Newport, Rhode Island this week. I feel like the whole world is in Newport, Rhode Island right now. >> Really? >> You get that sense? My whole Instagram feed. >> Okay. Well, I'm here. First time. Great. Great spot. >> So, this this I think this exact week last year, I was in Newport um visiting with uh our advisers in the area. Did you Did you go into the breakers? >> I don't remember. Let me see. >> No, you didn't. You would remember, dude. That's Vanderb's bathtub. >> No, I didn't do that. Oh, the mansion. >> Dude, you don't forget this. It was one of the greatest one of the greatest days of my life. >> We did the mansion tour, but we walked around outside. We didn't go inside to anything. >> So, the first tycoon is actually the only bio of the big four industrial guys that I didn't read. And now that I'm on my audiobook kick, forget about it. I'm going to slay this book at two seconds. >> Yeah, those homes are in those homes are complete complete and total insanity. There was no Hamptons in at turn of the century. So, Newport was where they went in the summer. That was like the billionaires from New York. That was the where they went. All right, let's say some quick hellos. The chat is lit right now. Um, I don't think he's with us tonight, but uh I wanted to mention uh Jack Rosenfeld has successfully uh recovered from heart surgery. He's one of our uh he's one of our regular pounders. And uh just wanted to give a shout out to Jack. You all can do the same thing in the chat. I'm sure he'll see it later. Magnus is here, Brian Grill, Benjamin Cliff. Um all the regulars are here tonight. We'd love to see you guys. Thank you for joining us for the live. It uh means a lot. We love the energy that you guys uh bring. Heather, I see you. Rob Fitzpatrick, what's happening? Matthew Steic. Um they're they're all here and uh and we love that. We have a sponsor tonight. Public the investing platform for those who take it seriously. You can build a multi-asset portfolio of stocks, bonds, options, crypto, and more. >> You can do everything. You can fund your account at 5 minutes or less. They've got AI AI AI, excuse me. AI >> AOI and AI out the ass. Okay, it is all happening. >> To read, dude. >> I do. >> It is all there. >> How about this? For a limited time, you can earn a 1% match on all IRA deposits, IRA transfers, and 401k rollovers. That's pretty sweet. Fund your account in 5 minutes or less. Find out more at public.com/wyt as in what are your thoughts? Paid for by public investing. Full disclosures in podcast description. Okay, I have one more item of housekeeping. Nicole will kill me if I forget. There's an impersonator on TikTok pretending to be the compound. Um, just to reiterate, we will never DM you ever. Especially not from the compound account. Like that's it just it's from a compliance perspective. It's never us. So, do not enter into any chat rooms or financial transactions or share any personal details with anyone DMing you pretending to represent us on Tik Tok or any other platform. Um, I also want to remind you guys August is portfolio review month at Red Holtz Wealth Management. We have certified financial planners standing by to take a look at your situation, review your current portfolio, and shed some light on how your allocation may or may not fit your long-term goals. go to rholtzswealth.com to get in touch. Hundreds of people have done it this month and this is your opportunity to talk to us. So, we uh we'd love to hear from you guys if uh if you're looking for some help. All right. Uh Mike, does it feel like um the media is overdoing or underdoing Nvidia earnings week or just right? >> I have to be honest, I can't answer that question because I haven't been paying much attention. But can I give you my take? >> It matters. There's a big one. I think it matters a lot. >> Um, >> and what's interesting is the options market, the last time I I looked, it only seems to be uh like a 6% implied move up or down, >> which I think is less than usual, but the last few reports, I don't remember the stock doing much. I don't I don't know like how long ago was the earnings party and then the stock was flat. You remember was that last summer? >> Oh man, chart made a chart of this. But John, go to the second chart, the options pricing chart. So to your point, yeah, it doesn't feel huge. Doesn't feel huge, but this is the actual in blue, the actual one day price change post earnings. And you saw that uh there's been a few blowouts actually. >> But you know what's >> Wait, you know what you're seeing in this chart? >> What? Like the uh the days of them reporting a great number and the stock rallying huge ended in 2020. the uh first quarter. How many quarters ago? >> That's right, Josh. One, two, three, four quarters ago. Or five quarters ago, excuse me. >> Um it just it doesn't it does not seem as though this is like the kind of rock and roll response to earnings that it used to be. Um and I guess that's just like the nature of the thing. Everybody knows the earnings are going to be good. >> Well, also when you're $3 trillion, it's hard to add $300 billion in market cap overnight. It just is >> the amount of support. >> Where is it even coming? Where is it even coming from? >> Um, let's throw up the first chart. This is so Chart Goat did serious work for tonight's show. Uh, and what we're looking at if you happen to be listening is Nvidia's price since the launch of Chad GBT versus or compared to it's growth in forward earnings estimates and the price is up 964%. and earnings growth I don't know why it's not earnings but earnings growth on a forward basis is up 1100%. >> So okay so the company's earnings have actually out the the growth in the company's forward earnings estimates 12 month forward estimates has been rising faster than its share price. >> Yeah that's right. >> Um nobody would guess that. >> We know that empirically because its multiple is shrinking >> right >> as as we go along. It's not as expensive on forward earnings as it used to be and it's sort of getting cheaper each time because it's not like they report 50% earnings growth which is I think the expectation uh tonight and the stock goes up 50 15%. It's not what's happening. If you're saying that Nvidia is a bubble because of the market cap just in a vacuum, oh, it's $4 trillion, it's a bubble, or how can Nvidia be bigger than the healthcare sector, whatever it is, you have to you have to give some context and chart did it. Look at the price versus the valuation. So Matt said, next one, please. Matt said, Nvidia went from Nope, next one. Went from 5 to 178. Thank you. Nvidia went from 5 to 178 and over the same time frame its forward PE ratio shrunk from 38 to 33. I feel like that's the only stat somebody needs to know to understand that the stock market/ semis are not in a bubble. So look at this. It went from 5 to 178 and it's trading below the average of the on a forward PE basis. It really is just a one of one remarkable growth story that we might never see again. >> Leave this slide up. That's not even the most insane thing. What is >> the most insane thing is that when it was selling at 70 times earnings at the end of 2022, that's when it was the most screaming of a screaming buy. >> Huh. You're right. >> And the reason that's the case is because 2022 was such a technology shitow. >> Yeah. >> That um and and Nvidia was partially reliant upon the crypto market for GPU sales. >> Oh, big time. it. So, so this so this period of time that we're referencing, end of 2022, there's no chat GPT yet. >> Chat GPT is launched in November 30th and it probably takes a full 30 days before everyone figures out what this means for GPUs. So the most ironic part of that chart is that the ultimate buying opportunity in this stock was when it was selling for 7070 times earnings, which should tell you a lot about the usefulness of backwardlooking PE ratios investing in growth stocks. >> Yeah, >> it's almost one of the most moronic things you could possibly be uh anchored to. >> Great. >> Um and that's an unbelievable illustration of that. We skipped over two charts. Should we go back and do them? I know Matt Matt put some effort into these. So, let's let's get into them. >> What are we looking at here? >> Uh, all right. This is just uh uh revenue by segment and so the whole thing is data center now. >> Yeah, but to your point that we just spoke about this used to be gaming. Uh remember like before crypto, this is a gaming stock. This is like Xbox and all that [ __ ] Once upon a time in 2015, before people were bullish on, they weren't saying AI back then. They were saying machine learning and virtual reality and augmented reality. That was the first time people started to get excited about Nvidia. But almost the entirety of the business was gaming. Literally chips for Sony PlayStations and Xboxes. And um the market cap was like 40 50 billion which made sense given the size of the company. So now it's 4 trillion. It's a 10,000x return. And um they're in a completely different business. >> It reinvented itself twice. >> And we've spoken about this a lot over the years. These gigantic winners uh the story changes all the time. >> Like not just the story, not just the narrative, but the actual company, what the company does and can do changes all the time. We did a episode of the compounded friends with Adam Parker three weeks ago and we titled the episode why valuation doesn't matter and instantly like you see the chatter oh this is the top the no it really doesn't cuz if Nvidia is going to be a completely different company you know and we don't know that it will be you know in the past this is hindsight bias but just the possibility that that could happen is the reason why companies like Tesla get the benefit of the doubt and the earnings multiple is so high cuz nobody that owns the stock now is valuing it on the amount of cars they sold over the last 12 months. Um there's one other chart in there. Did we get that? >> No. This this is the thing. >> This is the main thing, right? >> Okay. So this is data center revenue. So this goes back to 2022. You can't even see the bars 3 years ago. It's a tiny inconsequent not inconsequential but compared to now inconsequential. It's like they're ticking along at three billion a quarter, four billion, four billion, four billion, five billion. It's now a $ 41 billion business on a quarterly basis. People in the chat are asking why we're showing 2026 and it's not because we have a time machine. This is I think fiscal year 2026, which is just the the the way the company titles its uh the quarters it's reporting. >> Can I say one other thing? If if Nvidia is a $4 trillion market cap in two years, in three years, if it goes down to three trillion, down to two trillion, um that doesn't necessarily prove that it was a bubble because it is getting the benefit of the doubt of these valuations because the growth, the remarkable growth and what it ultimately could become depending on how big AI gets. And so the outcome might not prove anything. >> I know that might sound moronic, but like we don't know >> based on the estimates. Now it's not a bubble. If those estimates fail to come in because people's expectations are too high, that's just the story changing and the fundamentals changing. >> Yeah. So if if the growth rate slips dramatically and it's only turns out to have grown 5%. Instead of what's priced into the stock of 15 or 20% or whatever it is, all right, then people were too too bullish. >> So here are some things for you guys to look for uh when the company reports tomorrow night after the close. If you listen, we're recording this Tuesday. Um so it'll report uh Wednesday post close. This is a stock that's already up 35% year to date. um which is more than triple the S&P 500 up 40% over the last 12 months >> but wait but but a stock that was down 35% very quickly in the first quarter how insane is that >> recovered at all and then some um expected to report adjusted earnings of A1 on revenue of 46.2 2 billion and again as we pointed out almost all of that is data center which is the hyperscaler buildout for AI. Um last quarter uh excuse me this quarter last year for comparison 68 cents revenue of 30 billion. So yeah the stock over 12 months is up 40% but so are the expectations going into this quarter. Um so if they do these numbers that would be 49% earnings per share growth, 53% revenue growth respectively. So right in line with what the stock has done and maybe even uh faster. Um they're going to pay a 15% tax to uh the US government for anything they sell into China and that is already factored in by analysts. That's an 8 billion China related hit to earnings this quarter. It's a pretty big number. Um, there's a couple other things that I want to say about this. The big part of the story that you're going to hear the analysts ask about is the Grace Blackwell chip sales. Right now, they're selling the GB200, which is like their top-of-the-line, fastest, best, blah, blah, blah. And then in September, so next month, is uh the GB300 sales begin. And that's supposed to be not just incremental, but like an explosive improvement over the current Blackwell model. So, you're going to hear people ask about the timing and whether or not they're going to hit their fiscal fourth quarter uh uh uh their calendar fourth quarter. Um the other thing that's happening is really big orders um for Grock, which is the Elon Musk uh empire. Um and so you'll maybe hear some questions about timing for that. I think uh I just want to leave you with a couple of quotes from Wall Street. This is all the analysts came out and said reiterate you want to be long this stock into the numbers. Um JP Morgan, we expect July quarter results to be slightly better than our well then how are these your estimates or consensus estimates? Um they're talking about the GB200 shipment ramp and the start of GB300 ramp. Goldman Sachs quote to be clear we remain very bullish on Nvidia's prospects for driving outsiz growth in 26 based on positive hyperscaler capex commentary. So that's like Microsoft, Amazon, etc. Everyone who reported 3 weeks ago, they all reiterated their capex spend or actually raised guidance on that. Um bar raising our revenue and earnings estimates on a significant acceleration in GB200 sell through shipments. What they're doing is they're tracking the racks that go out from the OEMs with the chips already embedded in them. And that's how the analysts are getting a read through to h to like the pace of chip sales. They're saying like this number of racks went out from the OEM. Figure out the number of uh GPUs that would be on each rack and that's what's giving them confidence to reiterate or um or raise their numbers. Ste uh two more steifo we aim to build a view into the foundation of the mosaic of Nvidia's end customers which in totality include CSPs that's cloud service providers or hyperscalers neoclouds sovereigns and enterprises um will continue to grow supports a longer tale growth outlook blah blah blah one of the things is that it's not just new data centers it's swapping out old chips for new Nvidia chips um into those data centers once they're already in existence. So it's like a replacement cycle on top of a buildout. Um and the last one, this is Dan Ies at Wedbush. I'm going to read it as Dan. Okay. >> Okay. >> Let me get it character. The pieces of the AI puzzle are forming with massive strength from the hyperscalers seen this past earning season and use cases. Okay. Building across the board on the enterprise. Now, the biggest and most important piece in the AI puzzle is hearing from Jensen and Nvidia around demand. >> The godfather, the godfather, >> especially with a green light now on the China market. Okay. Uh, shout out to our buddy Dan goat. >> Green light on the China market. Um, anyway, >> all right. >> Two things. >> Um, that's really good. Two things. We heard from everybody, all of their major customers. We heard. This is not going I'd be surprised if it's a surprise. We've heard everything. Which brings me to my second point. Why are they like six weeks behind all their behind everybody else? Isn't that bizarre? It's like so anticlimatic. >> Smart. Um, Crowd Strike, too. Crowd Strike this week. Yeah, there's a there's a I don't I don't really know how it happens, but I feel like once it does happen where you schedule your earnings in this particular week, you don't really move move off of it because >> I was just going to say I have no idea how that happens. I don't I don't know. >> I'm sure there's I'm sure there's something >> for starters. For starters, when I started in the business, most of earning season was pre-market. It wasn't until we had thousands of companies in the West Coast like Microsoft that became really important that we started to have all these afternoon reports. But think about it. In order for a company in Certino or PaloAlto or Menllo Park or San Francisco to report before the bell, they'd have to wake up at 3:00 in the morning. So that's how earning season became an after hours phenomenon. um for you know for half the stocks at this point cuz like half the S&P is California-based companies and they report after 4 which is actually 1:00 their time. I don't know if you know how time zones work. Um but so that's just uh just a little tidbit for you. Buffett's the only one that does it right. >> Saturday >> Saturday and no [ __ ] conference call. >> Yeah, that's great. >> Figure it out. I I >> everything he does like that I love I love so much. Even though I love earning season. Um, okay. I really love it. >> Um, all right, Josh. This is this is a bull market of stocks, everything is working for the most part. >> Um, and a couple of weeks ago, maybe for the last couple of weeks, I've been saying like maybe to to to listeners, just like pump your internal brakes. If you feel like you're getting left behind, just like take a beat. Don't give it to FOMO. That's always good advice, but especially when stocks are going straight up. Uh, and I think I said sell something like two weeks ago. >> Yeah. Uh, and the market's gone sort of sideways, a little up to sideways, but this is a bull. >> No one's going to be mad at you for saying that. No one's going to be mad at you for saying that. I, Dude, three weeks ago, I said sell some Nvidia. >> Uh, no, dude. I'm not going It's probably going to 200 today. >> I am not embarrassed. >> Yeah. No. >> Um, but my point is this. My point is this. Market doesn't wait for you. Bull markets don't wait for you. Bull markets don't give you a chance to get in. There are so many stocks that are just hanging high. And they're all working. Like everything is working. This is like just if we could forget about everything fundamental. Forget about your opinion on what the the labor market. Forget about your opinion on on tariffs and cost pressures and the housing market. Just forget all that. Literally if you were just looking at stocks indexes you would conclude that we are in an absolutely uh global synchronous bull market and it's only getting started. Now that might prove to be wrong. Everyone could be wrong. That's certainly possible. But you have to give the stock market the benefit of the doubt. It's working and everything is breaking out. So I am bullish on the rotation trade. Let's go through a few charts. Uh this is gosh dang it. Who did I steal this from? Wow, look at this. Look at the equal weight. >> This is from the chart life. Okay, the Dow ripped out hard on Friday. Equal weight. New alltime highs. Micro caps. New alltime highs. Let's look at this new chart from Alfonso at All-Star Charts. Micro caps. They've been dogs. High rates have smooshed them. Multi-year highs. And this is phenomenal. The fundamentals are supporting this. So Matt made this chart showing MAG 7 ver on the left actual earnings growth versus consensus estimates and the actual earnings growth is slowing from insane numbers obviously right like that you can't continue to grow 36% forever but look what's happening to the actual earnings growth of the 493 and look what's happening to consensus estimates they are going up in a big way here's this for a rotation and then I'll stop talking look at this rotation European banks Yeah. >> Versus US banks. Are you kidding me? Does anybody know? >> Ultimate risk on signal. >> Does anybody So don't dig in your heels. You're not smarter than the market. It is all working. And maybe there's something that comes along tomorrow to knock us off our axis. Maybe it's Nvidia's earnings report. Certainly could be. But my goodness, this is a bull market. Don't fight it. I mean, the micro cap thing is shocking to me. I understand the action in the last week because of Jackson Hole. It's like the last boot on the neck of small cap stocks is this ridiculous what are we at four four and a half% interest rate. Whatever it is, it makes no makes absolutely no sense to anyone. Um so I get that Powell signaling a dovish move in September should be the trigger, but they started rallying well in advance. What that chart you just showed me? >> Yeah. Um, can can we put up the can we put up the uh >> and it's it's everything you want to see. It's discretionary over staples. It's home builders. It's financials. It's tech. It's everything you want to see. >> John, give me this S&P 493 earnings growth accelerating. Nobody knows this is going on. Like, nobody's even thinking about this, right? >> Look at Look at this. >> I don't I don't believe so. >> So, these are consensus on the right side. These are consensus estimates for everything but the MAG 7. And for Q3 2025, the number is 4.7% expected earnings growth, then 4 and a half, then it jumps to start off 26, Q1 9.9%. Then 10.9% the next quarter, then 14.3%. Um, now analysts always go into the new year overly optimistic and then they cut their um expectations as the quarters go on. We know that. But what we also know is that companies are beating the [ __ ] out of these estimates. And we just did 12% earnings growth this past quarter. X Nvidia. So let them I guess let them let them cut their estimates. If if we're really going to get anything even close to uh 10 14 somewhere between 10 and 14% earnings growth for the S&P 493, then the equal wage should be >> Yeah. >> at record highs. >> Why Why wouldn't it? Why wouldn't it be? >> So don't, please don't hear this. I know you can interpret it any way you want. Is Oh. Oh, Michael's flipping. Bob, listen. This not me. It's the market. The market is bullish. >> Sorry, let me correct. I got to correct somebody in the chat. Adam is saying, "Dudes, Momo stocks have been tanking non-stop for a month." Which >> not sure what Michael is talking about. No, that's what he's saying. the money is leaving a lot of these broken momentum names and it's going into the Russell 2000 and value and other areas of the market. So a stock doesn't doesn't get born and then die as a momentum stock. Just so everyone understands this. >> Who said that? >> Um uh Adam. >> Adam. So Adam is correct uh that there are a lot of names getting nuked. We spoke about this with who was on before Tom the week before Tom or maybe it was Tom. There is a great chart that I think Grant made. Grant >> uh Todd Todd Zone. >> Okay, maybe it was Todd Shannon showing that even though the market is at an all-time high, the number of stocks that are making alltime uh 52- week highs and 52- week lows is expanding and a lot of that is coming from the 52e lows. So, you're right, there are a lot of names getting nuked because AI is making winners and making losers. But if you step away just from the AI trade and the moment names that you talk about they're getting nuked and yeah, there are names that are getting smoked. Equal weight, small caps. When I say everything is working, okay, yeah, there's there's things that are not working, but everything that you want to see working in a healthy bull market, it's all happening. >> But I but I I I want to go back to the nomenclature of what is a Momo stock. Um like Reddit running from 70 to 200 is a momentum stock. But then when it falls from 200 to 100, it's not a momentum stock anymore, >> right? >> Like where you momentum has a definition. It's not a feel thing. It's like a former momentum stock. >> No, it's a formula. So, yeah, Circle's getting smoked. Figma's getting smoked. Coreweave is getting smoked. There are names. Absolutely. It's not It's not hard to find losers. But if you look at the aggregate, and I'm not just talking about the mega caps, the equal weight, the m the micro caps, the Russell 2000. It's a bull market. Let's move on. >> Yeah. Um I think that's a good point. I uh I think this ties right into it. Bloomberg has a piece about how like corporate America is more upbeat on the outlook into year end than Wall Street is. And this is pretty rare cuz a lot of times Wall Street is taking its cues from what corporate leaders are saying, especially when they especially when you're talking about like analysts covering sectors or um you know some of the strategists that do these surveys. So, like this time, Wall Street like sort of isn't listening. Corporate leaders and CEOs are are at least in the things they're saying and the way that they're giving guidance are super bullish right now. And there's a little bit of a disconnect. So, let me just share this with you and then I want to hear what you think. Among S&P 500 index companies that adjusted their revenue views in the current quarter, 44% have raised, which is the highest proportion since 2021. The share of outlook downgrades is only 14%. That's the lowest in the data going back to 2015. Um, quote, this is a Jeff uh uh equity research guy. quote, "There's basically no reason that a management team would want to raise guidance on something that they're not 100% positive on because they know the implications of that. >> I would argue that is a lot of what's powering stocks higher." And then the last thing on this, strategists at Goldman Sachs also flag the disconnect between what companies are saying and the macro picture. The firm has the firm's in-house barometer of economic activity among S&P companies. So they're tracking the real revenues of all companies excluding energy rose 4.8% this quarter from the same time a year ago exceeding the pace of economic growth. So companies are acting like it's 2019 like game on. And um the street it just can't get there mentally I guess um because they're just not as bullish. What do you think? >> You know who else flagged this? me. I said with Ben a couple of weeks ago, I am done listening to the headlines and the economists and the strategists and the this and that. There is such and I said this there is when you listen to the calls and I listen to a lot of these calls there is such a disconnect between what they're saying and to the point that the Jeffree make or the or uh whoever it was they're not they have no incentive to overpromise if they set the bar too high and they that's not what they're trying to do. They're trying to tell you the truth like if anything they're looking to sandbag. So whether >> they would be crazy to [ __ ] they would be crazy in this climate. They're not in the business you on on guidance. >> No, that's not what they're doing. So again, yes, there are companies that are having a difficult time as is always the case. But for all the ones that I listen to, the consumer is fine. Yes, the low end is struggling a bit. Um or more than a bit in certain cases, but they're all saying the same thing. Growth >> growth tariff concerns overblown. Like they're they're not seeing it. Look, 44% of the companies uh saying anything about guidance are raising. What else do you really need to hear? >> Now, wait, hold on. This is the critical point. Critical critical point. I am talking about large cap stocks. I'm talking about stocks that have no problem tapping capital markets. Okay. So, there is a big disconnect between what these companies are saying and how they're doing and how maybe Main Street is doing. And maybe that like that's also a large part of the story because yeah, there is a lot of people that are the labor market is slowing down. There is a lot of people that are like not doing great. Fact, but we're talking about the stock market and the companies powering the stock market are doing great. >> I'm with you on that. All right, let's um let's keep it moving. >> Okay, so we made the case or I made the case last week for rate cut stocks, I believe. Uh, and here's one that we never talk about. And we spoke earlier in the show, at the top of the show about Nvidia, and we talk often about the next earnings call and what stocks are going to do next week and maybe not enough time about these are actually businesses. And it's pretty miraculous that the price follows the fundamentals or the fundamentals follow the price, whatever. like price leads fundamentals, but they're tied together. So, this is a great example. Let's look at Wayfair, a rate cut stock that we just never talk about. >> This is this is Wayfair's operating income. Okay? And when people were staying at home and moving during a pandemic, the stock I'm sorry, the company the company, the fundamentals of the company went crazy. And then came the rate hikes. And then came the frozen housing market. And the company, the company got smoked. The fundamentals of the business got smoked. >> And then this company, by the way, is co is founderled. >> Uh this company made a lot of operational adjustments and efficiencies and they really turned their business around. And wouldn't you know it, the stock is up 64% year-to- date. But more importantly, look how the price Look how the price, it's a miracle. Look how the price follows the fundamentals or vice versa. John, toggle back and forth. Boom, boom, boom, boom. There it is. >> It's almost perfect. It's almost It's you, if you overlaid them, >> it's pretty good. >> Like a professional, we would be able to see both things happening at once. But it's almost perfect, dude. >> It's pretty good. >> Um, here's what's interesting about Wayfair. So Trump said something about tariffs, indeterminate amount of tariffs or something and the furniture stocks got wrecked yesterday. Um so RH would be a good example and um Ethan Allen, all these furniture companies, I don't care how high fallutin their brands are, they all have the [ __ ] made in China. So, um, Wayfair very interestingly does not struggle with the tariff issue the the way that all these other furniture sellers do because >> they have 20 they have 20,000 sub suppliers. >> Yeah. But they don't but they don't own it. They're a So, what I think people miss about the Wayfair model, they're like more like Amazon enabling third-party sellers of furniture under the Wayfair banner, but they don't themselves import the [ __ ] into the United States and pay a tariff. That's on the supplier to to figure that [ __ ] out. Wayfair is just passing along a piece of furniture from a seller to somebody that buys something on their website. And um it's a really different model obviously than the other publicly traded furniture companies. And I didn't I wasn't really like up to speed on the Wayfair phenomenon. We have a couch in our office from Wayfair. It's the easiest thing on earth. I I think we bought it. It it arrived like eight hours later. It was in a tiny box. I'm like, "How does a couch fit in that box?" I I swear to God. I took a I took a pen and ripped open the box along the seam and this couch like inflated itself and we just have a have a have a couch from Wayfair. I said, "Oh, now I get it. This is the easiest furniture purchase I've ever made in my life." This stupid office couch. I got it within hours of ordering it. So, I don't know how that happens. >> Well, the stock is working. The business is working. It's up 64% year to date. All right, moving moving on to one other >> Can I say one thing? I I do think that this is the next leg of the bull market is the rate sensitive names now that we're back into a cutting cycle. Even if it's a short-lived cutting cycle, these stocks have done nothing for so long. I really like the action in the in the home builders and the the the stocks related to houses, mortgages. Um it's time I'm seeing like property and casualty insurers per perking up. Um, and I just want to say my best stocks in the market list has 190 names on it. >> Wow. >> The average over the last year has been like 70. >> Wow. >> So that's what's on that list now. >> Yeah. >> Is the rate sensitive stocks that just woke up out of nowhere. >> Yeah. Okay. Yeah, that's working. All right. Um, I listened to Home Depot's call. I own the stock and this was very interesting speaking about like just listen to the calls. All right. So they were asked about what a potential rate cut would do for the business and I thought this was noteworthy. Certainly some relief on mortgage rates in particular could help. I think referring to it a bit of a frozen housing market with 40 plus year lower turnover rates and even new starts are struggling a bit. So lower rates would certainly help. We don't have a crystal ball on what that number is. When we talk generally though to our customers, each of our sets of consumers and pros, the number one reason for deferring the large project is general economic uncertainty that is larger than prices of projects of labor availability, all the various things we've talked about in the past. By a wide margin, economic certainty, economic uncertainty, excuse me, is number one. Uh, quote off, please. I thought that was remarkable and again a big source of why there seems to be an enormous disconnect between how the market is behaving between uh what economists and strategists and people are feeling. It's it's really something. It's >> not right. There's no gimmick. There's no gimmick that you could pull off to make people, millions of people all at once say, "Fuck it. I'll do my roof. I'll do my kitchen. I'll do the bathroom." Like, everyone has these projects that they're waiting to do. The only way these things end up happening is if people stay in their jobs and they feel confident that they're going to be in their jobs for a while. And unfortunately, the conference board numbers, consumer confidence is just horrible. >> Present conditions, future conditions, >> like none of these numbers look good. They all look like they're headed to the zero line. >> I really think this is this is the this is maybe this is recency bias, but I can't remember another actually that's not true. Co co was was like this uh where you have the stock market making an alltime high and you're just like I just don't get it. you, Home Depot is saying the number one reason is general economic uncertainty and you're seeing that everywhere and yet the stock market is breaking out all over the place. Now, when you really peel back the the layers of the onion, we can make sense of it very easily, right? It's it's AI, it's capex, and Amazon and Google, they they don't care about the the unease of the general population. Like, they're spending and rate cuts and inflation. Uh well, I don't want to say it's moderate or not, but like it so it makes sense, but it but it's it doesn't it does and it doesn't. >> Well, the 20% of Americans who I refer to as stock market Americans who own 85% of the stock market are not sitting around worrying about general unease. Not yet, because it hasn't touched them yet, >> right? >> So, we're talking about a different consumer >> and uh we're not talking about the people who are loading up their portfolio with stocks right now. That's entirely different person. >> For this next topic, for this next topic, I just want to say >> chart kid Matt, I called him at 440 and I said I said, "You've got five minutes. Can you make me a chart of margin debt as a percentage of S&P market cap?" And he said, "Yes, five minutes." I just said, "Go." I hung up on him. Listen, keep going. >> Because I because I ordered a chart from these guys and I think it's in here also. Did we order the same chart? >> Mine's better because I'm a professional. All right, you'll explain to me why yours is better. This is a piece at the Wall Street Journal. Tell us Demos. Margin borrowing may not be a great predictor of the S&P 500's next move, but it can still tell us something useful about how to invest. We'll be tell the judge of that. Relax. Basically, FINRA tracks the data. They don't know who's taking out the margin debt and they don't know what they're using it for. So, this is aggregate. But we topped a trillion dollars for the first time ever as of June according to the July margin data which I guess just came out in August. Um investors are borrowing money to buy stocks and Telus goes into detail about some of the reasons why it might just be a mechanical thing. One of those reasons which we're going to get to in chart form is just the fact that the stock market is bigger and so margin debt is sort of rising commensurately with the overall size of the market value. That's one thing. Another thing is shortselling. You do short selling using margin debt and when prices rise you have to post more collateral would be the way I would explain it but it's post more dollars to your equity balance in the account so you can maintain your short position. So, that's not people speculating on a higher market, but it's a scenario that would drive margin debt up. So, there's a lot of other [ __ ] going on, but um let me just quote a couple of things from here, and then I'll have you do the charts. Um if margin borrowing by individual retail investors was surging faster than the overall turtle total, it might signal uh exuberance among that crowd. But FINRA doesn't track who's doing the margin borrowing or what purpose they're using it. Um, margin loan books grew well over 15% at Charles Schwab and Interactive Brokers in Q2. We get that from the earnings report. Um, on top of fees generated by trading volume. This helps uh fuel growth in net interest income. Hence why these stocks went up so much. Robin Hood's margin book grew 90% in a second quarter from a year earlier. Okay. So, that's growing faster than the stock market's uh market cap. Um, uh, one other thing I wanted to do here. Uh, this can be a double-edged sword. If prices plunge, so can margin lending investors roll back, borrowing to slash risk, and as collateral needs shrink rather than grow. Margin debits can become credits and interest income falls. So, you're talking about the impact on the brokers and their P&L. >> But what about the turtles? Did I say totals or turtle? All right, let's just go with >> anyway. It's a trillion dollars in margin debt. And I know uh put this chart up from from WSJ real quick. This is what it looks like. Total debit balances in customers securities margin accounts over a trillion for the first time ever. And I know the way to rationalize this is to say, yeah, but look how much the stock market is up. Therefore, it's just keeping pace with blah blah blah. So, let's do my chart, which you can make fun of, and then we'll do yours. >> I'm not making fun of this. This is just typical you. It's very amateur. >> It's very amateur. This is FINRA margin debt versus the overall market cap of the Russell 3000. And all I'm trying to do here is establish the fact that it's not like these things have completely divorced each other or that the rate of change is so wild that there's a massive gap between the Russell 3000 market cap and the total margin debt. I'm not trying to uh do anything magical here, but this is just the way I visualize what's actually happening. And when you do that, it's not a five alarm fire, >> right? This is obvious. Like, what? Why would it be any? >> All right. [ __ ] you. Show me your chart. >> No, I'm I'm I'm patting you on the back. >> Oh, thank you so much. I appreciate that. >> Actually, no. I'm patting you on the head. Show my chart. >> Thanks, Dad. >> All right. Show my chart. All right. This is the chart. >> You adjust. So, margin debt as a percentage of market cap. This is all you need to know. That's it. This is it. Okay. >> So, let's tell people the numbers, please. >> 2008 to now. >> Yeah. So 2008 got a little nutty obviously 3.3% margin debt as a percentage of total market cap and if you look at it today it's 1.8%. And look at the change in the previous mania in 2021 again things went a little nutty. Uh and yeah they're on the rise today. Certainly on the rise from the lows but it's you know it's it's really nothing with nothing. Sorry. >> The message of this of your chart your chart's better than mine. The message of this chart is that we're not taking on enough margin debt. Yeah. What are you guys doing? Buy >> relative. >> Why are you guys so bearish? >> Relative to history. >> Did you not hit the bull market? >> Get involved. >> So, as a percentage of the S&P 500's market cap, you guys just are not fired up enough. >> Like, come on people. >> Get with it. More leverage. Actually, it's a great segue, Josh, to the next one. Well, to tell us Demos's credit, um, he did not the the headline was more alarmist than the piece. And the article was great. Great article. >> The article was great because I think he explained a lot of things. All right. Um, this is our last one. >> There are now officially more ETFs than stocks. I feel like that's good, right? >> Yeah. Why not? >> Is it is it good for you? Do you like it? >> There's There's only eight Nvidia leveraged ETFs. Like, it's not enough. >> Did you think we would get here? I always knew we would get here. >> Yeah, look at this chart. It was >> um there's another Bloomberg story, but it's Morning Star data. So, the Num uh here, I'll just quote the number. Thanks to a break neck pace of new launches, there are now more than 4,300 exchange traded funds, a figure that for the first time eclipses the total number of stocks, currently hovering around 4,200. Um, ETFs account for a quarter of the total universe of investment vehicles, up from 9% a decade ago. Issuers have been busier than ever this year, having launched more than 640 ETFs, a record setting pace that comes to about four per day. The number of funds that came to market in the first half, 469, nice >> was nearly 50% higher than the year earlier period and about 140% above the previous 5-year average. There's like a lot going on here. I would just point out one of those things is that it's cheaper than ever to get a product launched. So, it's not like people are like doing this huge lift. The paperwork's faster, the law firms charge less, the exchanges are streamlined. It's way easier to launch product than it was 10 years ago, 20 years ago. So, let's just establish that. The second thing is it costs less to keep a zombie ETF out there that barely has any assets. So, that also reduces the risk of launching something that doesn't catch on. And then the last component to this is these are not indexes anymore. >> We're not in Kansas anymore. These are active strategies. Some of them pretending to be factor. Some of them are two and 3x leverage, whatever. >> None of this is indexed. That's over. That game has already been won. >> So, what we're seeing now are basically almost more like stocks than they are like funds, >> I would argue. >> Um, >> right, from a risk profile perspective, from a concept uh perspective. >> U, the other thing is every time there's a successful product launch, that issuer doesn't just say, "Okay, great. We did it. They say, "What are three more funds we can launch and create a suite?" Because that's where the real money is. A an ecosystem of ETFs all keying off a similar theme. So Tom Lee's launching a bunch more. Um like just like Kathy did. So you have these um >> you have these runaway hits >> and then it's like well we need we have to put out another single. Yeah. Yeah. >> Or else the band is not going to, you know, >> like it's uh it's it's human nature for one successful ATF to be get 10 more attempts. >> Mhm. >> Uh it's a lot of turtles. >> Is it problematic? >> No. >> I mean, there's Well, well, well, hold on. There's a lot of >> It's a risk to the investor. >> Yes. I was going to say there's a lot of junk. There's a lot of [ __ ] being thrown against the wall and and some of it is sticking. In fact, a lot of it is smearing. A lot of it >> so disgusting. It's truly truly revoling. Okay. >> Do you do you think that the risk is that a lot of people are going to trip and fall over into some of these shitty products because they don't know any better? >> Yeah. Yes. And you know what? >> Like who's you know what the best way to do I'm sorry. The best way to learn is to do. So, I am optimistic that some people unfortunately get burned with more money than they should, but I'm bullish on investors learning. There's never been a more educated investor class ever. People are not dumb. They touch the stove once, they burn their hand, they don't touch it again. And so, a lot of these things that are being launched, if they don't work, they they won't take money in. >> I think the exchanges should raise their prices. >> I don't think more is more. I think the exchanges should say, "Okay, this is just activity for the sake of activity. >> All this market making [ __ ] going on with funds that barely have any money in it." I think one of the exchanges should differentiate itself from the other, like NASDAQ or New York. One of them should say, "We only do quality here. We're not focused on trading volumes. We're focused on what what we think is like best for uh the market." >> Oh, yeah. As a shareholder of New York Stock Exchange, I don't want that. They're running a business. This is capitalism. >> It's just I don't know if I mean >> Oh, stop it. Don't be this how it is. >> I come from the 1900s and where where I come from like things like mattered. I get nothing. >> Shut up. This is not Don't be an idealist. This is This is the world. >> I understand like nothing matters. All right, dude. So, why not 80,000 ETFs and >> I'm saying 10x that [ __ ] Yeah, why not? >> And it's just a lottery ticket. And maybe it's a piece of [ __ ] Maybe it's not. No one's really paying attention. I don't I don't know. You know what? We have a We have a great guest. We have a great guest on the compound and friends later I'll talk to it. Yeah. >> For me to get into a fight with. I don't have to fight with you over it. >> Yeah. Okay. I am I'm going to make the case for Dude, I'm bullish on the rotation trade. I It's been a minute minute. Uh I think we're here. Um and I >> You love these You love these head fakes. >> I I do. I'm a sucker. Uh I should have >> you every time. They get you every time. I forgot. I am a sucker. I forgot to bring the chart of the of the IWSPY, but I'm telling you, man, it's turning up. All right. >> This is the one. >> This is the time. This is the time. So, Bespoke tweeted last week, "There have only been 15 other days since 1990." This was was this Friday? Maybe when the cap weighted index fell at least point4% while the equal No, it's not Friday. What am I talking about? While the equal weighted index rallied 0.4%. I don't know if this is Wednesday or Thursday, but either way, it was an outlier and I think the rotation is on. Here's one area that I think is going to go. Maybe not a rotation trade per se, but Chinese internet. This is the time. Look at this. You believe in triple tops? I know we don't. >> Oh, that's going >> right. I don't own this, but I >> Chinese stock market is up huge this year and nobody's talking about it. >> Nobody cares. Chinese internet stocks are about to go crazy, I suspect. >> I don't believe in I don't believe in triple tops. >> No, not a thing. This is going to go. Uh Grant Hawkridge has a chart showing that the Russell 2000 has been below its all-time high for 950 days, which is one of the longest streaks of all time. Guess what? This baby's about to fly. Uh so >> I am a believer that the rally is broadening out for real, for real. For real. In fact, how about this? It is happening today. That's a fact. It doesn't, you know, it doesn't require faith or belief. It's happening today, but I believe that is is going to continue. >> If Nvidia misses and this is the top, they're going to clip you up. >> This this is going to go viral. It's going to go viral. I'm just I'm just saying >> I'm a big boy. I can take it. >> All right. Cuz it's it's happened to me. >> I've never been wrong on video before. Never ever. >> So, what are you what are you making the case on, though? Because you're saying rotation into the rest of the market, but then you're saying like Chinese internet, you're just seeing like everything. Chinese Chinese internet was a bit of an outlier. >> But the things that have not worked >> while the bull market has just soared. The things that the things have been left >> the everything else. The everything else >> everything the 493 the 493. >> I love it. I love it. Um and and I actually think you're going to be way right. Okay. This is going to be a tough one for you, but you're very good at this and I wanted to challenge you and then we'll get out of here. Here's my mystery chart. >> Say no more, Josh. No, I'm just kidding. Yeah, right. Not this time, my friend. All right, couple hints. It's a stock, not an ETF, not an index. Okay, >> it's a US stock. >> Okay. >> Um, it's a household name. >> Okay. >> It's probably the first company in US history to be literally put out of business by crypto. >> Okay. Western Union. >> Holy [ __ ] [ __ ] You good? >> I mean, that was a great clue. So, thank you. >> Look at this. Are you seeing this? >> I am. >> This is This is a $25 stock 5 years ago. It's $8 now. Why today? Why am I bringing it up today? >> Why, >> Michael. I got the nod. No, I'm just kidding. Here's what I want to tell you. Um, massive insider buying. Massive. Um, one of these guys, I think Matthew Kagwin is the CEO, um, on August 18th, which is when is that? Friday, bought 17,500 shares in the open market at $8.36. That's4 million. two days later uh or three days later on the 21st uh Devin Mcgranahan which I guess is a a board director or an executive bought 176,470 shares at $849. He now owns 900,000 shares. So he materially raised his position. Um, the bottom line, and this is this is NASDAQ data, over the last three months, there have been three open market buys, but over the last 12 months, the whole way down, 23 open market buys by insiders. Um, the number of shares bought over the last 3 months, 222,772 versus only 26,000 sold. over the last 12 months, 910,000 shares bought versus only 200,000 sold. >> There are almost like >> there are almost no publicly traded companies where you'll see a ratio of buys to sells like that. So, and granted, this could literally be put out of business by the blockchain. Remember, Western Union guys, for those of you who aren't aware, is remittances from uh immigrants who are trying to send money back home. Historically, they paid egregious fees to Western Union and now they can do it with um Bitcoin or stable coins or whatever. And uh this might be the first company in history to actually be disrupted out of business by blockchain or it might double. What if there's a Western Union stable coin? >> Dude, I'm I like that stock. I like how it's I like how it's uh I like it. I might buy it for real. >> I like that. You guys, the mystery chart. Very proud of you. All right, we're going to let Michael get back to his vacation. I want to remind you guys tomorrow is an all new edition of Animal Spirits, just like every other Wednesday morning. That's my favorite podcast. Make sure to listen. Uh Ben's got an all new edition of Ask the Compound. Um and then on Friday, very special guest. um multiple multiple uh appearances on the show and we're super excited to have him back. So, look for that on the Compounded Friends feed. Thank you guys so much for listening. Have an amazing summer Tuesday night. [Music]