AI Cycle: Extensive debate on whether the recent AI drawdown is a correction or crash, focusing on capex intensity, chip depreciation schedules, and unit economics; conclusion was the AI trade isn't over despite skepticism.
Nvidia (NVDA): Positioned as the potential catalyst to stabilize AI sentiment with earnings and guidance; guest would buy a sharp post-print dip and noted JPM's bullish setup amid detailed expectations for data center, margins, and China exposure.
Meta (META): After a ~27% drawdown, the guest initiated a buy around a market multiple (~19x forward), acknowledging a penalty box period but expressing long-term confidence and a favorable risk/reward.
Oracle (ORCL): Following a ~30%+ pullback tied to AI/cloud monetization doubts, the guest initiated a position, viewing the reset as an opportunity despite near-term volatility.
Semiconductors: The SOX entered correction after an extreme run where semis added ~$1T then gave back ~$830B; the reset and higher VIX were framed as healthy for a new climb.
Refiners (VLO): With crude potentially heading toward ~$52, refiners stand to benefit; Valero was cited as a top performer and part of a preferred list, and the refiners theme was highlighted as a targeted long.
Market Outlook: Skepticism is elevated (BofA survey on overinvestment in AI), yet positioning shows investors haven’t fully exited; retail dip buying is strong but may fade if weakness persists.
Risks: Private credit/BDCs (e.g., Blue Owl) face pressure from redemptions, dividend variability, and hyperscaler-related exposures; leverage-heavy single-stock ETFs showed severe drawdowns, underscoring risk management needs.
Transcript
[music] [music] Yeah, yeah, yeah, yeah. It's us. We're [music] back. Hey guys, uh wanted to say thank you so much for joining us. Those of you who are with us for the live on YouTube every Tuesday at 5:00 pm, we really appreciate it. Want to shout out some people in the chat before we uh say uh thank you to the sponsor. Uh Cliff is here. Jerry Jinma is here. Uh Christian Gra says Josh lowkey called the pullback like two weeks ago. Quote, "People are talking." I really did. I really did. I believe the exact phrase I used was >> get out. >> We are in a kayak headed over Niagara Falls. Uh um I I wish I could and uncall the pullback and and have it reverse, but I'm not that powerful. Chris Hayes is here. Akbar Muhammad, what up? Says what up y'all? What's up, man? Um Georgie's here. Everybody's here. Uh Nicole is in the chat. Everybody say hello to Miss Nicole. Uh, anybody else I I missed that I've been meaning to say hello to for a while? Uh, we'll do it we'll do it in post. We'll do it later. All right. Um, guys, tonight's show, like every week, Michael Banick and I talk about some of the biggest topics in the markets. Um, it's been hella active uh for the last couple of weeks. The VIX hit 25 today and uh we have all sorts of action to get into and we're so excited to be here and do it with you guys. But before we continue, I want to say a huge thank you to our sponsor, Public. Michael, tell us about Public. >> Today's show is sponsored by Public. That's right, Josh. Public is 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 also access industryleading yields like the 3.8% APY you can earn in your cash with no fees or minimums. But what sets public apart? AI isn't just a feature. It's woven into the entire experience from portfolio insights to earnings call recaps. Public gives you smarter contacts at every touch point. Plus, earn an uncapped 1% match when you transfer your portfolio, including IRA transfers, rollovers, and even contributions. Fund your account in 5 minutes or less. Paid for by public investing. Full disclosures in podcast description. Josh, you saw you saw the real >> I'm so sorry to I'm so so sorry to do this. Let's give people the URL. Public.com. That's publicub.comwyt. Did you Did you get to watch that demo that the public guys did for me yesterday? >> Not yet. I was just about to ask you. How'd it go? >> I mean, it's pretty sick, dude. It's like um it's in two stages. Stage one is available now, which they call generated assets. And some of you some of you guys have seen it on YouTube. Uh we published it last night. But basically generated assets is like I want a portfolio with only CEOs who are older than 45 years old and I want no companies that have economic exposure to Brazil. >> Equally weighted equally weighted can equate >> whatever you want weighted by earnings growth. Whatever >> just want bald CEOs. >> No, I I'm telling you that like this is what they built. And so, >> and so now you get this list, you don't have to trade it. They just they give you the list, they show you all the holdings and then if you click into the holding and explain how it got onto the list. So, it it enables you then to refine it in any way you want. And if you like what you ended up with, you can click trade with a certain dollar amount and it's like buying a stock. >> I love it. >> And it's you you end up it's not an ETF obviously because you just created it. you just end up with a basket of stocks that you can buy instantly, sell it instantly. It's like a it's it's like held by a ticker like just like all of your other holdings. So, if you like here's a really good example when the price of crude oil falls as it did again today um or or as it's been for the last week or two and now uh I think Goldman Sachs came out and said $52 crude next year. That's a negative for a lot of energy stocks, but there are stocks that that's bullish for, and that includes the refiners. Valero was one of the top performers in the S&P, also on my best stocks in the market list. You could say to it, build me a portfolio of stocks that um are involved in refining and benefit from low oil prices or whatever. It's going to give generate a list and you could just instantly be like long. >> I love it. like dude this is like so that's generated assets and then the next phase is they take that technology and they turn it agentic. So now it's like not only are you speaking this investment product into existence then you could tell it I want you to tax loss harvest that portfolio um look for tax loss harvest opportunities every 30 days or I need you to pull $5,000 out every month and put it into Bitcoin. like it'll it'll eogentically that's available in January like basically make the brokerage account into your your worker. It's I mean it's I love it. >> Yeah, these guys are these guys are on fire. I'm so proud of them. All right, let's get into the show. Um should we talk about the AI crash or nothing to see here? >> No, let's do railroads. >> Um is it an AI crash? >> Um no. >> Okay. Uh, Meta in a 27% draw down. Very fast. Not a crash. >> Crash. I would >> Oracle in a 30ish% draw down. Very fast. Is not a It's not an AI crash. Are you sure? >> I um Well, we're allowed to disagree. You might call it a crash. I mean, there are names that are crashing. Coreweave is absolutely crashing. >> Is it Is it an AI crash? I think there is a lot of disbelief. Uh certainly a lot of doubt. looks a lot different than it did a couple of weeks ago. For sure. >> Well, well, so if I just if I didn't say the names to you, if I didn't say Oracle and Meta, but I told you two of the seven largest market caps involved in the theme as well as the NEO uh the Neocalers like Coreweave, like if I just I said they were down 30% in a matter of weeks, you would say that sounds crashy. >> Let's not split hairs. It's ugly. >> Okay, we we could argue crash, not crash, whatever. There is there is I think what's different about this particular sell-off and they're all different is that this is calling into question a lot of the things that we believe two weeks ago. Hey, wait a minute. What's the depreciation schedule of these chips? You're saying six years, but really it's like three. That changes the that changes your balance sheet dramatically. Changes your financial statements dramatically. Maybe your earnings are going to be nowhere near what we think they are. And therefore, boom, reset. Needed it healthy. >> Right. What's so interesting is we always assumed all along that the thing that would put and this has been going on for 3 years by the way. We always just all like tacitly agreed that the thing that would put this all in jeopardy was when one or more of the players decided they wanted off the carousel and they were going to stop spending. That actually didn't happen at all. If anything, they've ratcheted up the amounts they're going to spend and the street >> is now saying maybe that's not the best idea or maybe we don't love the way you're financing it andor accounting for the expenses and that's so it was not what we all thought. >> Such a good point. >> Such a great I all I do is come to the table. >> No, you're so right. We thought um at least I thought that this would quote end when we listened to an earnings call and we heard something different >> where like the demand might not be what we thought it was and then oh [ __ ] Nvidia is down 26% overnight. That is absolutely not what c what happened and yeah >> credit to you. It's a good point. No. And that's and that's the you know the that's the funny thing the frustrating thing about markets but also the funny thing about life is like it's it's rarely the thing you're worried about. It's always something else that you probably um would not have conceived of in advance. And so that's what's playing out like nobody is saying all right that's enough. That's it's the opposite. And that turned out to be the bare case. And uh look it's one of the thing this is I'm doing this almost 30 years. It's one of the things that I most love about the markets is that it's a puzzle that'll never be solved, but then it's also one of the things that's really frustrating. Um, and uh, hey, here we are. Let's put up this VIX chart just to set the table. That escalated quickly. Um, we had a faster VIX rise. What when was that? Was that early October? Can you remind me? >> Yeah, that was the Friday when Trump was going to slap 130% tariffs on China again. That was that. Oh wow. And then All right. And then prior to that really nothing on this nothing on this scale this year. >> So I'm going to make the case >> until you go until you go back to Liberation Day. >> I'm going to make the case later in the show that um there's been a lot of nothing going on in the market, >> right? It's just been like there's been no news and it's been uh a lot of call it what you want, complacency, whatever. We've had a hell of a runup and the reintroduction of risk. Although nobody likes to see their stocks go down, myself included. We need this. You need to build a wall of worry to climb to new heights. It can't just be announcement. Boom. 35% to Oracle. That's not sustainable. So, we reset. There was a lot of doubt. And we'll see. Listen, I said to you guys yesterday, I love a wall of worry. I love I love it. Unless there's reason to worry, and you know, we'll find out. >> You sit on a throne of complacency. >> Excuse me. >> You You just said there was a lot of doubt. No, there like is right now a lot of doubt. There is a lot of doubt. >> Was I don't know if we're through this. >> No, excuse me. If I said was, I meant to say is. There is. There is a lot of doubt. >> And I don't know. I don't know if we're if this is overblown or not. Um I sus I I don't think the AI trade is over. How about that? I don't think this is the top. >> Either Nicole or Duncan just dropped a poll into the chat, but I I don't see the results. I don't even know what the poll was. >> What's What's the question? >> I don't like like bullish or bearish. And somebody responded, >> "Bullish or bearish?" That's got >> Somebody responded like most bearish. I don't I don't know. Duncan, can you pop in? >> We got We got We got to be more specific than that. >> I don't I don't really know what happened. >> It's It's in the chat there if you want to look. It's 64% bullish, 36% bearish. Uh 362 votes >> on what? And when? >> Uh are you bullish or bearish today? [laughter] >> Are you bullish or bearish? I do it every week. >> Great poll, Dunk. Okay. All right. >> Okay. I didn't know. Credit to Duncan every week. Okay. >> All right. Here's a here's a poll of um portfolio man uh >> uh the fund manager survey from Bank of America. Put this up. >> Okay. Like this is notable. >> Yeah. Absolutely. >> Record number of fund manager survey inves. So these are global portfolio managers that respond to Bank of America on a regular basis and they are this is um a record number now say companies are overinvesting. I assume they mean in AI too much capex. The net percentage who say companies are overinvesting is what does that look like to you? 20%. 20% of investors saying that that was a negative number in every survey ever up until this week. That I mean that look at it. That looks weird, right? >> Yeah. Dude, you know what's so funny? How fast narratives change. So you mentioned five minutes ago that this this Dow came out of nowhere. like the the depreciation expense like okay I that was on my bingo card. You know how what what could fix this in two seconds if if Sam Alman gets on another podcast next week and says guess what $30 billion in annualized revenue. Okay, over party back on. >> Oh, I don't know. I think he's caused himself some credibility. I was going to say, you know what could take us into a 50% draw down? He gets on another podcast, gets into a snit with the host, and drops off. >> Yeah, that wouldn't be good. >> That would do it. >> That wouldn't be good. >> All right. Um according to the fund manager survey the investors uh bullish running very low 3.7% cash levels um and uh more than 50% continue to think AI stocks are in a bubble and the contrarian trades being mentioned long sterling >> that pounds or silver I don't know >> pounds I okay >> um long foot long uh long footsie short emerging markets. Okay. Long discretionary short banks. I don't really understand that. All right. Next chart. This is that um more than 50% think AI stocks are in a bubble, but like they're not selling the stocks based on their positioning. So like everyone is still like, yeah, it's on the way to becoming a bubble. Like no, they don't really have a lot of people that are like it's a full-blown bubble and not only that, I'm expressing that with my portfolio positioning. I'm short or I'm out. That that's not what's going on right now. All the shorts are just people that tweet. >> Okay. It's not a I guess the question is if it if it is a bubble then it was a bubble. Okay. That it's on its way to popping because you can't say it's a bubble today when Meta is in a 27% draw down. We'll get to the numbers later. Oracle, it either was a bubble that is deflating or that's it. It's not a bubble. We're not in a bubble right now. There's no euphoria there anywhere. Everybody is skeptic. All right, let me So, let's do some skepticism. There was a very notable downgrade today from a small firm, Redburn Rothschild. I think they're British or based in London. Um, and if I'm wrong about that, don't nobody send me an email and get mad at me. I I'm doing the best I can. But like this got the market's attention. Redburn downgraded Microsoft and Amazon from buys to neutral ratings, saying the market is too complacent about the economics of Genai. They argue investors have been treating Genai like early cloud computing, but the numbers don't support that comparison anymore. So basically what they're saying is that Genai's economics, unit economics being like per customer, I assume, are far weaker than cloud 1.0 0 which was like 2015, 2016, 2017. Um the analyst said it takes six times more capital to generate the same economic value with Gen AI as it did during the buildout of the early cloud era. They're estimating $1 of AI infrastructure is only generating 20 cents of net present value. um they're being nerds about it and looking at the actual numbers, which I don't know why, but uh this is a thing that people used to do. And their basic take is the economics just don't work yet. They cut their target on Microsoft from 560 to 500, which is a big chunk. Um on slower monetization for AI workloads, and their Amazon target stayed at 250, but they still cut it to a neutral. Riskreward no longer looks asymmetric to the upside. They say AI workloads now account for more than half of AWS and Azure growth, but are delivering lower returns, higher depreciation, heavier capex, and slower payback periods. This is the first time since this analyst, Alexander Heisel, cut both stocks since 2022. What are your thoughts? >> My thoughts are it is way too early to look at the unit economics of these businesses. We have no idea what they're going to turn into or what they're going to become. Imagine looking at Facebook in 2014 and jumping to conclusions on oh the spend on the mobile buildout. It just doesn't support the all the whatever cap it. We It's too early. Now, healthy skepticism makes sense. I get all that. It is way too early. Which is why you see these companies gyrating wildly violently because there is a lot of uncertainty and right now investors are asking questions. They're selling. There's a reset. Good. These companies need to prove their worth. Let's say it. >> Counterpoint. I I I'm sympathetic to it's way too early because of course it's always too early. Like no, nobody knows in the future and there's equal amount of space for the optimist to be right. Okay. But don't we jump all over these people for being late? like like in other words, so they they're admittedly early, but what they're saying is like based on the current economics of the spend versus the payback. And we're going to talk a little bit more about that in a second with a with another chart. Like it's not encouraging and it's definitely not pointing toward a need for spending more. It's like, oh, we're barely making money if only we spend more. Like that's not that's not always how it works. >> Credit to this analyst for going out on a limb. I do I do respect >> no investment banking business for you Alexander >> but current economics tell me future economics which I know they can't I I get it. >> All right Nvidia reports tomorrow night. Can I share some of the storylines? >> By all means. >> All right. Um a lot of investors think that Nvidia is the thing that can stop the AI crash or you could call it AI correction. A lot of people are saying like if anyone or any thing or any event could put a pin in this and calm everybody down, it's a blockbuster number for Nvidia with with amazing guidance and the typical Jensen Wang optimism that we've all become accustomed to. And I sort of think that's right. Like if you and if you were to ask me like what could make this better or or way worse, it's a function of what what's going to be said tomorrow night at 5:00. >> You know, what would be very interesting is I I am assuming we're going to hear good things. I'm assuming we're going to hear good numbers, optimism. What if the street doesn't buy it and just wax it anyway? >> Well, well, pull up a chair cuz we're all going to find out together. Okay. Um JP Morgan is bullish. They put out a note today and they recommended a shortdated option trade, you know, for the Robin Hood crowd. Um, that will pay off if Nvidia's stock climbs after tomorrow's earnings. Uh, their target on Nvidia is 215. The stock closed 182ish 181. Um, we also have a bunch of bigname sellers in Nvidia over the last quarter. Peter Teal's macro hedge fund dumped its entire stake during Q3. it uh worth about $und00 million. And Masoshi's son uh famously liquidated his Nvidia stake. Um this is Soft Bank, $5.8 billion worth of stock, whacked it out. And some people actually are pointing to that sale as being the trigger for a lot of the selling in other NASDAQ stocks related to AI, which I sort of feel like it was happening first. and Nvidia has barely come down relative to the others. So, I'm not sure if I agree. Um, Michael Bur is out there allegedly with a short on against Nvidia, but who the hell knows because he's like initiating positions, then he's closing his fund, then he's teasing some event on November 25th. I don't I don't know who's going to set himself on fire in the street. I have no idea what that's about, but that's part of the story lines here. Um here uh earlier this month the securities filing showed that if Bur's hedge fund bought options that will pay off if Nvidia shares drop. So the idea is he shut down his fund meaning like the fund has to live with those trades and nothing happens until something happens with those trades. I I guess or he's kicking out his investors and converting to a family office maybe in order to hold those trades without anybody interfering with him. I don't I I have no idea. I'm just saying like this is the the speculation and then um I wanted to say two other things. Let's just give I want to give people the numbers. So the revenue expectation is 54.8 billion for the quarter. Um the earnings per share is a$126. Um, the data center revenue is expected to be 48.9 billion, which would be 59% year-over-year growth. Gross margin 73.5%. Can you imagine that? Um, and then guidance for next quarter, the whisper number is 61 billion. And then like the um the wild card is if anything is going on with China, which Jensen already told you expect nothing from China. and anything that happens there is like a cherry on top, not in not in the guidance. So, it's, you know, as usual, it's all about the data center. Everybody's going to want to know about Blackwell shipments and um I think the the I want to get your take on this. I think like the the number one question if I were a sellside analyst that I would ask during the call is what's your take Jensen Wang on the depreciation debate cuz these are all his customers. So keep in mind he's talking out of both sides of his mouth. On the one hand, he's mocking people for jokingly for using prior generations of GPUs like get with the program, you need Hopper, now you need Grace Blackwell, now you need whatever the next thing is. Um, but then on the other hand, all of his biggest customers have depreciation schedules where they're showing these chips will be in use and productive out to 5 years, in some cases 6 years. So like which is it? Please weigh in Mr. Wang because like this has got real consequences in this ecosystem and you're the most important player in this ecosystem. Weigh in on this on this debate would you please? Um what do you think about that question? Do you think anyone will ask it? And what do you want to know? >> Well that's what I was going to say. So we're on the same wavelength and I would say that there is a 140% chance that that question gets asked. What I what I like about this earnings season, >> Dan Ies asks it. No way. >> Some No, it 100% it comes up. >> It's not coming from Dan though. >> Um, throw up this chart that uh about Nvidia into earnings. This is by far the weakest setup or the weakest price action going into earnings over the last couple of years. >> I was even aware of this. >> There is a lot of doubt heading into the quarter and we'll see. I'll tell you what, if this if this thing does drop 10% overnight, I'm buying a snot out of it in the after hours. I'm telling you right now. >> Can you can we put that chart back up? This is the two week return heading into the earnings. >> I mean, if you're bullish, it's a nice setup that they just gave you. You're you're buying the stock 9% lower going into the number. So even if it's just an ontarget number and doesn't blow people away, it's not like you're buying it up 10% into that. >> So I sort of I sort of like that for for a long. >> Check this out. You know what we haven't spoke about in a while? Remember the ETF NVDL, the double lever granite shares ETF? The assets peaked, we have this chart, please, John. The assets peaked um I guess about a year ago at 6 oo 6.69 69 billion >> and the stock is up quite a lot since then. And I guess in a really sensational environment, you would expect investors to be piling into this thing. No, not really. Not at all. In fact, >> they cooled off on it. Look at that. That peaked in December of last year. I mean, one caveat is like the markets. Do you remember the markets post election going into year end? Yeah. that November to December period, it was bonkers. >> Yeah, you're right. >> It was B. And I just think that was less about Nvidia and more about like, oh my god, Trump won again. We're all we're all getting tax cuts. We're all getting laid. Like it was 100%. But but Josh, and also year to date at the peak a couple of weeks ago, Nvidia was up 50%. So you would expect people to be piling in, and they just really didn't. So here's here's where I'm at. the things got things were so wacky a couple of weeks ago with this one-way trade. Um I think we did this on the show or maybe it was on TKF. I had Chart Kid make a chart showing the rolling uh whatever day return. Where's this chart of semis compared to There we go. Semis added a trillion dollars in market cap in the past five days. You remember this? >> Yeah. And that was it. >> So that was that was the lit that was literally at the top. That was October 30th over a 5-day period. >> We said it was St. We You said this is ridiculous when you put the chart up. >> And so since then, guess how much has come out? $830 billion. That was the top. >> Holy [ __ ] That's so much money. Think just think about just pause on that. That's a trillion dollars came out of one sector of the market in a week, two weeks >> since since the top. >> So much. >> So I understand that these names are down bigly. Oracle, Meta, a lot of other names, Cororeweave, of course. But come on. Do you think these things were up so much? They were up so much. >> So, I wanted to say that. Put my chart up. That was before that. This is from the Wall Street Journal. Um, the headline is the Philadelphia semiconductor index enters correction territory. >> Good. >> But like look at the chart. Look where it came from. >> Right. >> So, yes, it's officially in a 20% draw down. 10% draw down. >> So, that's correction territory. Fine. But like a little bit of and to the journal's credit, they gave you that context. Um, you know, even with the even with the scary uh headline, they said um the last time the semis were in a actual bare market, which is 20% or more from a recent high, was January 22nd through April 8th. Um, you know, right into liberation day. The semis were in a 35% bare market by April 8th. Did you know that? I don't even remember it. I know what happened. >> Whacked into the stone age. >> Um, all right. Uh, Bergkshire Hathaway. So, this is Warren Buffett's, uh, one of his last trades of his life. He bought Google. >> Well, [laughter] he he he retired. >> He didn't buy this. >> Uh, I know, but whatever. Bergkshire Hathaway under his watch technically for the last couple of months. They did this in the summer. Uh, Bergkshire Hathaway disclosed 4.3 billion to4.9 billion dollars worth of Alphabet. You know what's funny? Uh, us two schmucks, we sold to Warren Buffett. >> Oh, literally. Uh, [laughter] I think I think I sold it in June, but close enough. Um, I sold it lower than where they bought it. I looked. Don't think I didn't look. Um, what was going to say? So, they bought almost 18 million shares. Uh, Loop Capital uh upgraded Alphabet today from a hold to a buy. >> Tough scene. >> Raised their target to 300. Didn't really help. Um the stock the stock looks better than the others right now. I think the halo from Bergkshire buying um but they uh they like they like the name. It didn't it didn't do much. Let me let me do a one-year Google price performance. If you want to know where I sold, just find the lowest point in the chart. [laughter] I think I'm June. I forget. Pretty pretty damn close. Pretty damn close to the the lows. I either sold right before or right after the lows. Uh, and and of course, look at it smiling back at me. >> All right, nobody's perfect. I >> look at this chart. Look at the smile in this chart. >> Yeah, you dumb bastard. >> All right, so Loop saying, uh, Google's core ad business is actually reacelerating. Search is showing stronger pricing and improving click-through rates, which helps reinforce their view that AI cannibalization fears were overstated. Overstated by me. Um, they're saying the Google Cloud Platform is being driven by higher margin AI workloads. That's so weird. I just read that workloads were lower margin for AI. Who knows anything? Um, they're also emphasizing Alphabet's balance sheet strength, cash flow plus slower capex intensity versus their peers. >> Yeah. Wait a minute. I thought Red Bush was talking about uh unit economics. >> Maybe they're looking at a different go uh alphab. They didn't downgrade Alphabet. downgraded um Amazon and uh and Microsoft. Loop says Alphabet's still the best riskreward among the mega cap AI names and um much less exposure to the severe capex burdens that Amazon and Microsoft are facing. Um all right, what I what I think this all boils down to is what's changed in the last two weeks is not the fundamentals of um the AI race. Uh, and I think everybody still understands that these companies sort of have to continue if they want to be relevant and competitive in the future. I think what's changed is what is the cost of it going to be and is there a payback that's going to come soon enough to justify the cost and also the way it's being paid for all the debt. So, I want to remind people why everyone was bowled up on these stocks in the first place. We're not all delusional. Raymond James is projecting that cloud revenue for AI will explode in the next 5 years to nine times its current value. Um, thank you John. So what what you're looking at here is the revenue from AI cloud products and services. This is what Ray J thinks they'll be able to charge all of the companies and people on Earth that want to utilize this tech. Like it's not it's not this mass fever dream of nonsense, you know? It's it's it's not like we're all kidding ourselves. Like this is the opportunity that they're all investing for. >> So, and and so and that's like on an annual basis. So, I want to remind people of that. Um the problem is who's going to pay for it and how. So, this is from the journal >> taxpayers die. >> Yeah. Sure. Eventually, JP Morgan's fundamental research created a financial model that projects total investment in global AI infrastructure through 2030, taking physical limitations into account. You know what the physical limitations are? There are already so many plans for um data centers and connecting them to the grid that companies like GE Vernova are telling Wall Street, we're booked out until 2028. If somebody came to us with a new project, we couldn't say yes to it until 2029. The physical limitations are you have to connect natural gas turbines to these transformers which look like gray houses shaped boxes or or box- shaped houses and like to get physically the electricity. Like that's that limitation. But the point is they're saying it's five trillion to build all the stuff that's being been committed to. What they did was they calculated how much new revenue these companies would have to generate to justify spending 5 trillion on these AI supercomputers. And what they came up with is AI products, chat GPT, um all the enterprise stuff that Anthropic sells, etc. would have to create an additional $650 billion a year indefinitely just to give investors a reasonable 10% annual return. >> Who was that? Who's the 650? >> JP Morgan. So just to put that number in perspective, 650 billion a year, that's more than 150% of Apple's annual revenue. Open AAI's current revenue is about 20 billion. So think about the distance between 20 billion and 650 billion for AI revenue to get to just for investors spending that 5 trillion to earn back 10%. >> Yeah. >> Um >> that would equate to every Hold on. That would equate to every iPhone owner in the world agreeing to pay an extra $35 a month >> for products and subscription like just to try to like figure out like what is the payback. So if you ask me like what's changed fundamentally nothing. What's really changed is the way we're thinking about the bill. What is the what is the cost? When do we recoup it? And how are we borrowing the money to do it? That's the really big change here. >> And the spark was lit when Sam Altman was asked, "Hey, wait a minute. You're doing $13 billion in revenue. How are you going to pay this $ 1.3 trillion bill that you amass over the next 10 years?" And he basically said, he hung up and said, "I can't wait to get for you to short my stock." He went like this. >> Yeah. Not not so Yeah. So are are the all of the questions all of the reasons for the air coming out recently? I think it all makes sense to me, [laughter] right? Like all of it all makes sense. I don't think anybody's dumb for selling. >> All right, you're up. >> All right, let's uh I want to talk about some charts that I found in the daily chart book who does a daily Well, it's a chart book daily and it's great stuff. So, this is from Citadel Securities. Retail investors continue to add into weakness, becoming the new price setters. Well, I'll be damned. During the latest pullback, retail flows showed one of the largest buy the dip events on record. >> Unbelievable. Look at that spike. I guess they know how to disentangle retail buyers from institutional buyers. Like, they know what they're looking at. >> Yeah. Vand Vand Vander Research does this as well. There's also something called a they have a a a retail risk on riskoff index. This Citadel. So this tool tracks whether retail investors are increasing or reducing exposure to different forms of market risk. This week saw the fifth strongest retail dip buying in the past two years. So stocks are dipping and we're buying. >> I'm gonna tell you something. How often do they run this? Weekly? every four every four I don't know >> I'm assuming yeah look looks like it [snorts] >> look the we we don't know what Nvidia will bring so I'm just going to tell you if it's more of this for the rest of the week I think that retail that that rorow [ __ ] is going to be way less I think there is I think retail buys the dip really quickly and with tons of conviction I just don't think they do it through on the third week >> completely agree completely agree Um, there was a great article in the FT talking about uh they call it uh the Squid Game market. How Asian retail traders are driving US meme stocks. I didn't come up with that name, so don't get mad at me. Look at this uh this is wild. So they say known for their >> It's like a little racist. >> Yeah, I think so. Known for their high-risisk tolerance, her behavior, and use of leverage, South Korean traders have piled into US markets this year. uh they their their holdings doubled $170 billion at the end of October and what they're particularly keen to buy are the crazy [ __ ] So I Ionic NQ uh is a huge huge holder of theirs is the fifth most popular US stock for South Korean investors. They do a lot of the leverage [ __ ] like they are having a party. >> Um you know what's interesting? the uh Asian stocks got murdered overnight and um that's like new because they yeah they have AI exposure like Europe was down 1% and I think Asia was down two and a half or three like as a as a group some of those markets got just absolutely annihilated overnight. They're sort they're sort of acting like our market. And it's weird, right? Because they don't have um they don't have Amazon and uh Microsoft and Meta in their indices. I mean, they have other companies that are exposed to the theme, but um this kind of went global over the last 24 hours in a way that a lot of US tech selloffs just um historically haven't or should not have. And um I I sort of feel like that's new. What do you think? Uh yes, funny you should mention because I don't I don't pay attention to to Asian markets that often, but I did see a headline this morning and I said uh hm different. >> Yeah, look at this. Look at this table from our friend Todd Zone. >> So the levered long single stock ETFs ETF drawdowns. >> So the monster ones, I'm sorry, not the monster, the my bad, the micro strategy ones from Defiance and T-Rex down 95 and 97% from 52 week high. And still MSTU is that at the peak? >> Wait, wait, stop. >> 500. No, I won't stop. 57% >> 500 $557 million in this thing. Let me see. >> Wait, wait, wait, wait. I don't understand. This is in dollars or in market cap, >> sir. That's% >> price. >> Wait, the 2x long Micro Strategy ETF is in a 100% draw down. >> Uh, >> like it's almost it's almost zero. >> It's down. I'm see. Well, it bounced today. So, yeah, basically it would Now it's only down 93. Now it's only in a 93% draw down. >> Oh my god. I'm just I'm eyeballing some of these. I didn't even know they had 2x's for there's a 2x for super micro. >> Need it. You got to have it. What's wrong with you? >> What crack smoking muppet is is 2x long SMCI? >> Holy [ __ ] >> What are we doing here? >> So this thing Okay, so that chart put it back on for a sec. that number the the the AUM that's as of today, dude. So the the T-Rex MSTU at its peak it had 3.4 billion. Now it's uh 550 million. What the hell are people doing? Why is there that much money this >> dude? It's Squid Game. Were you not paying attention? >> Isn't this this is like walking into Vegas like walk up to the first table you see? Oh, blackjack. I love blackjack. Here's $4 million. [laughter] Like, let's let's play like >> Yeah. >> It's This is like their balls off. Yeah. >> Did you know >> is it good? Is it Is it like sort of good? I mean, it's bad because we know on the other side of the trade is Ken Griffin and he's going to buy 10 more uh 10 more apartment buildings in Bickl. We understand like where this money goes. It doesn't disappear. It's transferred to somebody else. So from that perspective, it's not great for like wealth inequality because it's all going to Jane Street and Citadel, but is it like good because these are young people who need to get their education now before they do this with real money? >> Can't decide. >> Is it good? I mean, >> is it good? >> No, it's not good. Who is it good for? It's great for >> But isn't it the right But isn't it the right lesson? >> It's not good. Let's just be clear. It's not good. There is a there is a double levered uh BMNR the Bitcoin the bit minor Tom's thing. There's a double >> right you needed a double of that >> a double of that. >> Um listen this is this is unfettered capitalism. If there's >> who launched who launched the double T-Rex it's T-Rex B minor. >> So if there is a demand for these products um you know they'll be launched. >> Listen the only thing better than Tom Lee is double Tom Lee. So I get it. Just it's just I don't understand the dollar amounts here. Like why are these so big? Why are these why were these so big? >> So 57. So this thing just launched because it's not it's not old. And it was it just immediately $575 million. Like that's a lot of money. So is this good? No, it's not good. >> It's actually so [ __ ] up. >> No, it's not good. Come on. >> It's like it's like really bad. And uh there's nobody on in Nobody's watching this. Like we society we have decided deregulation and like anybody can launch anything and play at your own risk and the apps are encouraging it and there's like >> like there's nobody coming to save any of these people. No, nobody. >> So this is serious money when they listen when when you have the double levered spy ETF and you you touch a hot stove and you learn your lesson. Okay. But but this like why does this need to >> All right. I'm I'm going to say one thing and this will be unpopular but I don't care. I'm I'm as for deregulation as the next person and I do think adults should be allowed to do what they want to do within reason. I think we should draw the line at like scams, but like if something is a bet and a bet goes against you and you're an adult, like you know, that's that's just the way life works. Don't don't bet money you can't afford to lose. Okay, I'm I get it that that's where the fault lines are. But I also think that in the midterm elections, if um the Democrats have a little bit of a wave and they take some seats, uh it's going to be nervous time for the people that are running around Wall Street acting like robber baronss launching [ __ ] up products and um convincing people to do really dumb things. And ultimately, if you ever I don't know if it'll ever happen again, if you ever get a Democrat in the White House who brings in their own SEC uh person and they decide, you know what, let's do a look back and see who was taking advantage of the public. Like, a lot of this stuff is going to get drugged back out onto the carpet. Like, I I think right now we're in an environment where people are just like, I get to do whatever I want as long as I disclose and disclaim. I can I can launch anything. and I can encourage any kind of behavior. And that might not always be the case for >> happen. Who's to say where the line is? This one is good, that one is bad. It's just >> it doesn't it doesn't it's it's a it's it's it's not even a legal argument. It's a moralistic like was this in the best interest of the users of your brokerage platform? Like what are you how are you going to defend that? You're going to pay the fine. You can't defend it. I'm just saying like if you get a regime change at at um regulatory bodies who may want to go back and say we got to clean some of this stuff up from the last era and that really does happen and a lot of people right now seem to have short memories of prior episodes where that happened. So I just uh you know it's all fun in games and I know a lot of people are making a ton of money and I'm not player hating but like this stuff doesn't just go away. You launch a product that drops 98 [ __ ] percent. Like you don't you can't you can't just Well, it was the Trump it was the Trump era. What do you what do you want me to say? Like that's not how it's going to go. And I know it I know it's not because I've been around for a long time and I've seen the pendulum go in in both directions. All right. Uh let's do private credit. Our friends in private credit. you uh are really good about listening to the calls and I I like I just kind of like vibe comment on this stuff, but you actually do the work. And uh I wanted you to give me your take on what you heard the difference between what Blue Owl is talking about versus a firm like Apollo because it sort of seems like a boys and men separation between the boys and the men right now. >> Yeah. Um, so, so tell me a little bit about what you gleaned from listening to what the these companies are saying. >> So, I did this this morning with Ben on what are your on animal service. Excuse me. And >> All right, then we'll skip this and I'll just listen to that. >> No, no, no, no. I'll no stop. Um, no. I'm saying I'm prepared. So, okay. I listen to Apollo's earnings calls. Now, for those of you who are unfamiliar, Apollo is one of the gorillas in the private credit room. Uh, Mark Rowan, their their found co-founder and CEO, is an absolute wilderbeast. and he was asked very um pointed questions about the rate environment and um investors allocating away from private credit because these are floating rate securities and so as rates come down they are less um less enticing for investors and he answered the question like a [ __ ] man. He said, "Yes, listen, let's be grown-ups. This the the the the um opportunity set today is less attractive than it was one year, two years, three years ago." Hey, guess what? You could say the same thing for public equities. I wish I bought Nvidia three years ago. I mean, this this is what he said. He said, "So, yes, undoubtedly um we are tightening our standards. We are being diligent. We are not uh upper upping risk." Okay? And it was it was a phenomenal answer. And then you hear Mark Lip Schultz who was uh clapping back at Jamie Diamond after the cockroach comment. And so in um not in fairness but just in fact >> who is that now? Who is that? >> So Mark Lip Schultz is the is the uh founder and CEO of Blue Owl which is the biggest it's called GP Stakes company in in the world. GP Stakes is they are they are seeding a lot of these alternative asset managers. It's a great business and they're taking unit economics off of that business. Okay. They're also in the private credit game and you might have heard Blue Al because they are responsible for doing all of the largest deals with all these hyperscalers. They're financing um Metas and all all of them. He was asked a question about why their um why their BDC's which are public vehicles are getting sold and what investors may get wrong. And oh boy, the difference in the answer and the tone between what he said and what Mark Rowan said could not be more dissimilar. It was defensive. It was um nasty. It was investors don't understand. Well, guess what? I understand. The stock is down 50% from its highs. Almost. The BDC's are getting murdered. And now the FT did a report that they are trying to merge their private credit vehicle into the public credit vehicle into the BDC because they're getting redemptions out the ass. And some of the quotes from the article are so LOL, absolute clown of the week awards. So, we'll get to that in a second, but at a high level, that's the story. >> Let's let's show people what we're talking about in terms of the share prices. So, the first chart is the corporation Blue Owl itself, which is basically the GP sitting on top of all of their funds. >> This is the equity. >> Yeah. So if you're a shareholder in this, you own a piece of Blue Owl Capital Incorporated, the company. So whatever funds they launch, whatever fees they collect, whatever deals they do, you're like kind of like alongside the GPS. And this thing is a $13 stock now, down from almost 30. It's in a 38% draw down year to date. And there >> worse worse worse. It's down 38% year to date. It's the draw down is way worse. >> The draw down is bigger. there's but there's no it it appears that there's no end in sight. Uh it's a relentless down downtrend with very few positive weeks along the way and uh I don't know where this stops. Um the next chart though and this is the thing that I have been harping on. This is the BDC. So this is an a blue owl product that is itself publicly traded and basically they are making loans to private companies that um are either on better terms or done quicker than what these companies would be able to do with a tra traditional bank. Obviously we know because of regulations the traditional banks they're not lending as much. They don't take as much of their own balance sheet risk blah blah blah. So that's where this whole private credit boom came from. Uh it came from the last crisis where we decided we don't want deposit institutions that hold on to money for teachers and policemen to um engage in reck reckless engage in uh this type of risk-taking. So somebody had to step in and they did and they're all giant companies. But this BDC itself, the concern here is at the end of the day people own it for the yield. the yield on not just this but all of the BDC's is predicated on whatever the interest rates are in the real economy. And if you own something that pays I don't even know what the yield is on this now but let's say this year it was 9%. 10%. And the interest rate is on its way down. The Fed has been cutting. You already know next year the yield on this is going to be lower which generates selling which has not which not Blue Owl can't do anything about that. that's beyond their control. They didn't do anything wrong. It's just the natural progression of what happens to yield instruments in the stock market when the interest rate prevailing interest rate um goes lower. So, people are selling it for that reason. But there are also a lot of reporters that are hot on the trail of whether or not a lot of these loans in these portfolios will continue to perform, which has introduced a secondary uh concern. So now you have this thing selling off and the owners are like, "Wait, is it selling off because the dividend might go lower or is it selling off because the Financial Times is right and all of these uh loans are a mess?" And what Lipshits is trying to get across is these are just fantasies that we have to answer. Like people are people are making up stories and and everything is fine. >> But wait, there's a third correct that that that was basically his comment. They reported by the way at the end of October. So if they reported this week, the questions would be a lot harsher and the the [ __ ] answers that he gave would not fly. But there's a third leg to the stool that is they are in the perfect storm. >> The hyperscalers and the data centers that is now that are now coming into question. Hey, wait a minute. Meta has has an option to opt out of the lease. Like they are not where you want to be. And guess what? So thank I thank God I sold blue I own Blue O the equity. I sold it earlier in the year. To be clear, I think if you're selling Blue O here, you're an absolute donkey. Like I think that even >> and you would not and you would not be long the BDC. You're talking about the cor the corporation. >> I'm talking about the equity and I would much rather be long than short the BDC to be clear too. But there is there is there is a story there as well. So this is from the FT. Earlier this month, Blue Owl told it shareholders that it planned to merge its Blue Owl Corp Capital Corporation 2 fund. This is the private fund. Okay, this is the private credit fund which has $1 billion in assets and was one of the first private debt funds targeting wealthy individual investors with its OBDC fund which is the BDC the publicly listed one which has 70 >> the one that's the one that's currently in the process of crashing. >> All right. So they're talking about um merger of the two funds as redemptions of Blue Owl Capital Corporation 2 have climbed this year to a level where it would eventually be forced to restrict investor redemptions. Um they've pulled $150 million from the fund through the first nine months of this year. a 20% increase from last year. Um, okay. But here's the clown of the week quote. I'm sorry, Jonathan Lamb, CFO. Uh, in an interview with the FT, >> I think he's on the compound and friends later this week. >> At current prices, the investors in Blue Capital Corporation 2 could take a potential haircuts on their investments. But he said, and this is the I can't believe he said this out loud. The merger came with significant benefits such as the ability to own more liquid shares in OBDC. Excuse me. I thought the appeal was the illiquidity premium. What are you talking about? >> Why am I in private credit if you're if you're merging it with a public equity? >> It gets worse. It gets worse. Quote, "There's no doubt that this is a no-brainer transaction at 95 cents," said Lamb of the new merger. Wait, why? And guess what? They're not talking. They're They're not talking about 95 cents. They're talking about 80 cents. And no doubt. Excuse me, sir. What in God's name are you talking about? I have doubts. Lots of doubts. >> Yeah. >> Do you have a quotron? There's >> no doubt. There's only doubt. >> So anyway, >> will that stabilize? Wait a minute. If they do that, could that bring stability to the publicly traded BDC? >> Now also more assets into the portfolio. >> It's a It's a billion dollars. a publicly traded BDC has more leverage. So maybe this will take the leverage down a little bit. I don't I don't know where it goes from here, but um all of the smoke that they're inhaling they deserve. >> Um >> and to be clear, so I think the reaction might be justified. Is it an overreaction? Maybe we'll find out. Um but again, uh they're in the thick of it. Yeah. Not great. >> The dividend [snorts] yield is 12% on OBDC. >> Yeah. Is that it? Okay. Uh I I mean I don't know if that's I don't know if that's accurate and up to and up to date because I'm also seeing sources say it's 13.28%. Oh, and this is the other thing that people don't know about BDC's or or they should know, but you know, it's not it's not obvious. Like with stocks, like dividend paying stocks, like dividend aristocrats, you don't have like this crazy swing in in the quarterly payment. Like they tend to they tend to institute a dividend that they could stick to. They may not raise it a lot each year, but they try not to give you that variability. They try to give you >> floating. >> That's right. That's not what's happening with these. Like the dividend, you can't annualize that. You can annualize it, but you shouldn't because you're just making [ __ ] up. All you can go by is what they declare for next quarter and hope for the best for the following quarter. >> One, that's right. One last thing. Let's just look at the portfolio. So the as far as like what actually is going on in here, this is okay. This is not [ __ ] Okay. These are legitimate loans. There's 293 companies in here. I don't know if the marks are valid or what. Obviously, the street is questioning that, but these are these are legitimate services being provided to companies all around the country. It's a diversified portfolio. I don't know about the covenants, the lending standards or whatever, but all of this is obviously obviously coming under scrutiny. >> I wanted to just say as a cap to this chart off um this is what happens, >> Larry, >> when this is what happens when you decide our target market for this is the wealth management channel. Respectfully, you could put all the educational, and we talked about this with Shenali on the show, you could put all the educational materials you want in front of the adviserss, in front of their clients. When push comes to shove, and you need them to act like institutions, they will not. They cannot. They're not institutions. They're people who have bills to pay and dreams to achieve. They're not 100year college endowments that are funded in perpetuity. There you cannot count on wealth management clients behaving like pension funds, you idiot. So, I'm all for uh democratizing access. I totally get it. I'm not anti. I'm I'm not a hater. But like don't have a vehicle set up where the thing you're counting on is that some schmuck financial advisor um didn't sell this to people as low risk because it's bonds cuz I know they did cuz I listen to people talk and I've been around too long and I know that some people sold this right and some people didn't and this is the FO part of of of that process. >> No doubt. So all right. >> No doubt. All right. Um let's uh where are we at next? [cough] Um, [clears throat] sorry, I got lost in the sauce here. >> Stock market selloff. >> Okay. All right. Let's let's get into it. >> You got some charts here. >> I got some charts here. All right. Um, [sighs] let's actually skip the first one. Let's go to the beat and the misreaction. So, we've been all over this. The companies that are missing uh missing earnings. This is more impies, by the way. Um, are just getting taken out to the woodshed. Is it wood shop? Wood shop. What is it? It was woodshed. Shop. >> No, it's taken out behind the woodshed. >> I don't remember that. Taken out. It's like It's like a child abuse me. It's a child abuse metaphor. It's like like if you misbehaved, your dad would take you out behind the woodshed where nobody could see or hear you scream. >> Wow. All right. That got dark. All right. So, >> it's the etmology. >> Okay. So, All right. Um, check. [laughter] Yeah. I'm so I'm Check this out. Etmology. Okay. Go to go to the next I'm done with this. Go to the next table, John. >> [laughter] >> All right. Thank you, Sean. The great Shawn Russo. Top 20 worst market cap drawd downs from their peak. These are numbers, dude. Nvidia 594 billion, Meta 469 billion, Microsoft 349, Amazon 328, Oracle 300, uh, United Health 264, Tesla 220, Broadcom 215. So what is that? One, two, three. I don't know. There's like a dozen stocks that have lost hundred billion dollars or more in market value. >> Yeah. And these are everybody owns these stocks. Like like these are the stocks that are in all everyone's portfolio, right? >> Yeah. >> I mean that's like that's the salient point is like these are the most widely held stocks in the world. Um let me show you something. Let me show you something worse. These are the I asked Sean and Charid the largest nons&P 500 market caps that are currently in 50% draw downs. >> Why did you ask this? I'm curious. >> Okay, so the uh chart off. I'll explain it really quickly. These are the stocks that when you talk to some investors and they have some hot shot guy who's doing like some SMA for them like and I know of programs like this at Morgan Stanley at Mer at Merrill where it's like oh did you hear about this guy Todd whatever his name is he like has this concentrated portfolio of the best growth stocks and they're not in the index and like you know it's like this whole thing and in a bull market it looks unbelievable and And it's like like clients are high-fiving their advisor. But what we're seeing now is what ends up happening to these types of things, and it always does. It's only a matter of time. These are so these are nonsporically any money you make in these is pure alpha cuz they're it's not beta. Right. >> Right. >> All right. Here are the names. strategy is is uh 61% from its 52- week high. Atlassian, which is team 54%. Circle is in a 74% draw down. Did you know that >> before I showed it to you? >> I look I look at this chart a lot, but it's wild. >> Wild. And that's that company sells [ __ ] money market funds, just for anyone that doesn't understand. Okay. Hubspot 58%, Dolingo 67%. Alo 50%, congratul uh Riotony Computing 56. HIMS is in a 50% draw down. So, and there's real dollar amounts involved like strategy has shed 68 billion from its 52 week high. So um this is like the part of the market where people were making the most money like in the first half of the year, first eight months of the year and man it it it turns so fast and nobody taps you on the shoulder and tells you when to walk out of the party like nobody of course not. If anything, if anything, you're adding more money to those strategies. >> So, dude, I'm looking at Aqua and we were talking about this this this head and shoulders top, which as [laughter] only obvious in hindsight, like duh. But, so this thing ran to 190, right? It dropped like and consolidated a little bit down to 158, stabilized a little bit. Boom. The the door the bottom fell out behind the woodshed, whatever. Went down to 110. Okay. And then here's the dangerous part. >> I believe it's pronounced Oakllo. uh Japanese for uh capital loss >> the so the so it bounced from 115 back up to 150 creating this we're safe nope [ __ ] that's the right shoulder and then boom so like even in hindsight you're like you understand how people get trapped in these names it's so hard to get out >> it's so hard dude if you're not trailing it with a stop like you you could like go to the dentist and it's down 14% on no news and it's like well what do I do now I guess I'll just stick it diamond hands, blah blah blah, and then the next day it's down another 14%. Like these these when these things get going to the downside. Um I have two of these in my portfolio, like very small. Um I have Archer and Joby. >> Oh, you had a great line last week. I draw the line of flying cars. >> Yeah. Yeah. Well, my flying car my flying cars are demolished. Archer is way worse than Joby. They had they had good earnings reports. And when I say earnings, I'm doing um ironic air quotes. You just can't sit. All right. DJ Dow, let's put this up. >> Smushed >> 20% draw down versus 3.2% um over the time period from Jan 20123 to now. Is that >> That's right. All right. So So this next chart from Adam Parker, this is the point that I was trying to make earlier. I am not making light of a selloff, okay? I am only saying that there has been so much enthusiasm in the market and this is a clearing of the decks a reset. So Adam has a chart that shows the number of top 50 stocks. Okay, giant stocks. The number of top 50 that are up 50% over various windows. And look at the 12-month on top. There were just too many stocks that were going up too far too fast. Even if you zoom in to six months, you had Oracle uh multiundred billion dollar stock going up 35% on the announcement, which is obviously all gone gone uh back and more. Like it was just too much. And now is the reintroduction of risk, which is healthy in a bull market. You know what's not healthy? What's not healthy is no introduction of risk. What's not healthy is up 10% every month. That is dangerous. Okay? Giving some back, pullbacks along the way, that sets up for higher prices. And take this with a grain of salt. Who the hell? I can't see the future. But I like the setup. I think we see higher prices before the end of the year or at least early in Q1. >> Okay. Um, listen, I I I like the setup better than I like the setup in October when it was 20 straight days of stocks being up a half a percent. >> I that I that I did not like. So, we'll see. Maybe this ages very poorly, but whatever. >> All right. I'm going to call an audible. We're going to throw topic five out. It was uh more AI [ __ ] and I think I'd rather kill myself. Yeah. >> Um All right. You're gonna make the case. >> I uh >> I buy. All right. Good. >> I I bought Meta today. >> Um >> you did. You put 19 times forward earnings. I like it. >> Dude, it's a market multiple. I don't give a [ __ ] You know what I mean? Like I'm comfortable holding it. If it gets murdered, I'll buy more. I swapped Home Depot, which I should have done a long time ago. Um obviously the housing storing story is not housing. Took a 7% loss on that in my in my IRA, whatever. I can't take a tax right off, but no big deal. Um I like Meta here. I'm comfortable with it. We need to go into the story. It's down 25%. People are selling for for legitimate reasons. I'm buying. >> You have two and a half months before you have to worry about an earnings report, so that's good. Um, I mean, I think the stock's in the penalty box. >> Oh. Oh, no. It It definitely is. >> No, no, no. I mean, like, even if we get a year-end meltup, after all, I don't know that this is one of the leading names in that meltup. Um, I I sort of I I sort of like I like the purchase here. I would not be a seller here. We've learned so many times what happens when everybody gets bearish on Zucker Zuckerberg. Like whenever that happens, it's only a matter of time before he pulls another ace out of his sleeve and the stock is ripping back to highs again. And so I I feel like that will ultimately happen. >> It is deeply out of favor. So am I early? Yeah, maybe >> you might be early, but I I don't I don't disagree with you. I I I like it. I'm not in the stock at all right now. And um I was I was eyeballing it. Last thing, I als I als I also bought Oracle. I never owned Oracle my entire life. I sold Disney and I bought Oracle. >> I like that last 50 times earnings. Uh >> don't care. Throw that chart up. Throw the throw the chart up. We I'm just kidding. But whatever. >> We don't have it. All right. Everyone knows what the Oracle chart looks like. It looks like [ __ ] Congratulations on your purchase. All right. Um mystery chart time. >> Okay. >> This is ironic. >> I'm not even going to give you a hint. You don't deserve one. [laughter] >> What is it? >> Is it triple top? Um, >> you know how there's no such thing as triple tops? Well, today there is. >> Man, I love it. Um, I assume that we spoke about this name today. >> Oh my god, dude. Please get this right. >> Oh, okay. Facebook. >> What? There's a price next to the the ticker. What are you talking about? >> I don't know what we Wait, what? >> Facebook. You just bought Facebook. >> I don't know what you said. Please get this right. You I panicked. This is so much worse than this. >> Oh, Nvidia. [laughter] >> I'm telling you, the price is 345. >> I'm telling you, I'm not cheating. I'm not looking at my screen. What the [ __ ] is the stock? >> Do the reveal. [laughter] >> Oh. All right. Whatever. Whatever. >> You just sold it. All right. For those listening, it's >> Dude, when I'm done with the stock, I'm done. I erase this from my memory. you uh >> chart back on [clears throat] >> the [snorts] All right, so it is triple top for now. The CEO basically said the three drivers of home improvement spending all of them were working against the company. One of those is home price appreciation. You don't have it. Another one of those is I forget what they were. Um >> he said he said no natural disasters. >> Dude, it's a it's a very very good company. Extremely high quality in every way. just in a moment in time that does not work for their their earnings and as a result they took down guidance which is appropriate. >> Um this will be a strong buy and it won't >> I was about to say if this if this goes back to 275 I'm backing up the truck. >> Um somebody in the chat Rivian Millionaire is saying first time in 26 years Home Depot didn't beat. Is that true? >> That's wild. Wow. >> Should we chat? I believe him. I believe him. That guy's trustworthy. >> [sighs] >> Ah, all right, dude. I'm dying. You just sold the stock 10 minutes ago and you and you don't know the chart. >> I mean, in my I sold it this morning. I had a busy desk. >> You really wiped your brain clean of that thing. >> All right, that's that's it from us, guys. Thank um I'm told we're close to breaking a record for the live. Thousands of you joined us tonight. We appreciate it. Um >> I also want to let everybody know tomorrow's Wednesday morning, which means an all new edition of Animal Spirits with Michael and Ben. Um, we'll do Ask the Compound later this week and then a very special guest on the Compound and Friends, uh, which we're going to get out to you on Friday. So, please keep it locked here on the compound. We'll see you soon. [music] >> [music]
Only One Thing Can Stop The AI Crash | WAYT?
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[music] [music] Yeah, yeah, yeah, yeah. It's us. We're [music] back. Hey guys, uh wanted to say thank you so much for joining us. Those of you who are with us for the live on YouTube every Tuesday at 5:00 pm, we really appreciate it. Want to shout out some people in the chat before we uh say uh thank you to the sponsor. Uh Cliff is here. Jerry Jinma is here. Uh Christian Gra says Josh lowkey called the pullback like two weeks ago. Quote, "People are talking." I really did. I really did. I believe the exact phrase I used was >> get out. >> We are in a kayak headed over Niagara Falls. Uh um I I wish I could and uncall the pullback and and have it reverse, but I'm not that powerful. Chris Hayes is here. Akbar Muhammad, what up? Says what up y'all? What's up, man? Um Georgie's here. Everybody's here. Uh Nicole is in the chat. Everybody say hello to Miss Nicole. Uh, anybody else I I missed that I've been meaning to say hello to for a while? Uh, we'll do it we'll do it in post. We'll do it later. All right. Um, guys, tonight's show, like every week, Michael Banick and I talk about some of the biggest topics in the markets. Um, it's been hella active uh for the last couple of weeks. The VIX hit 25 today and uh we have all sorts of action to get into and we're so excited to be here and do it with you guys. But before we continue, I want to say a huge thank you to our sponsor, Public. Michael, tell us about Public. >> Today's show is sponsored by Public. That's right, Josh. Public is 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 also access industryleading yields like the 3.8% APY you can earn in your cash with no fees or minimums. But what sets public apart? AI isn't just a feature. It's woven into the entire experience from portfolio insights to earnings call recaps. Public gives you smarter contacts at every touch point. Plus, earn an uncapped 1% match when you transfer your portfolio, including IRA transfers, rollovers, and even contributions. Fund your account in 5 minutes or less. Paid for by public investing. Full disclosures in podcast description. Josh, you saw you saw the real >> I'm so sorry to I'm so so sorry to do this. Let's give people the URL. Public.com. That's publicub.comwyt. Did you Did you get to watch that demo that the public guys did for me yesterday? >> Not yet. I was just about to ask you. How'd it go? >> I mean, it's pretty sick, dude. It's like um it's in two stages. Stage one is available now, which they call generated assets. And some of you some of you guys have seen it on YouTube. Uh we published it last night. But basically generated assets is like I want a portfolio with only CEOs who are older than 45 years old and I want no companies that have economic exposure to Brazil. >> Equally weighted equally weighted can equate >> whatever you want weighted by earnings growth. Whatever >> just want bald CEOs. >> No, I I'm telling you that like this is what they built. And so, >> and so now you get this list, you don't have to trade it. They just they give you the list, they show you all the holdings and then if you click into the holding and explain how it got onto the list. So, it it enables you then to refine it in any way you want. And if you like what you ended up with, you can click trade with a certain dollar amount and it's like buying a stock. >> I love it. >> And it's you you end up it's not an ETF obviously because you just created it. you just end up with a basket of stocks that you can buy instantly, sell it instantly. It's like a it's it's like held by a ticker like just like all of your other holdings. So, if you like here's a really good example when the price of crude oil falls as it did again today um or or as it's been for the last week or two and now uh I think Goldman Sachs came out and said $52 crude next year. That's a negative for a lot of energy stocks, but there are stocks that that's bullish for, and that includes the refiners. Valero was one of the top performers in the S&P, also on my best stocks in the market list. You could say to it, build me a portfolio of stocks that um are involved in refining and benefit from low oil prices or whatever. It's going to give generate a list and you could just instantly be like long. >> I love it. like dude this is like so that's generated assets and then the next phase is they take that technology and they turn it agentic. So now it's like not only are you speaking this investment product into existence then you could tell it I want you to tax loss harvest that portfolio um look for tax loss harvest opportunities every 30 days or I need you to pull $5,000 out every month and put it into Bitcoin. like it'll it'll eogentically that's available in January like basically make the brokerage account into your your worker. It's I mean it's I love it. >> Yeah, these guys are these guys are on fire. I'm so proud of them. All right, let's get into the show. Um should we talk about the AI crash or nothing to see here? >> No, let's do railroads. >> Um is it an AI crash? >> Um no. >> Okay. Uh, Meta in a 27% draw down. Very fast. Not a crash. >> Crash. I would >> Oracle in a 30ish% draw down. Very fast. Is not a It's not an AI crash. Are you sure? >> I um Well, we're allowed to disagree. You might call it a crash. I mean, there are names that are crashing. Coreweave is absolutely crashing. >> Is it Is it an AI crash? I think there is a lot of disbelief. Uh certainly a lot of doubt. looks a lot different than it did a couple of weeks ago. For sure. >> Well, well, so if I just if I didn't say the names to you, if I didn't say Oracle and Meta, but I told you two of the seven largest market caps involved in the theme as well as the NEO uh the Neocalers like Coreweave, like if I just I said they were down 30% in a matter of weeks, you would say that sounds crashy. >> Let's not split hairs. It's ugly. >> Okay, we we could argue crash, not crash, whatever. There is there is I think what's different about this particular sell-off and they're all different is that this is calling into question a lot of the things that we believe two weeks ago. Hey, wait a minute. What's the depreciation schedule of these chips? You're saying six years, but really it's like three. That changes the that changes your balance sheet dramatically. Changes your financial statements dramatically. Maybe your earnings are going to be nowhere near what we think they are. And therefore, boom, reset. Needed it healthy. >> Right. What's so interesting is we always assumed all along that the thing that would put and this has been going on for 3 years by the way. We always just all like tacitly agreed that the thing that would put this all in jeopardy was when one or more of the players decided they wanted off the carousel and they were going to stop spending. That actually didn't happen at all. If anything, they've ratcheted up the amounts they're going to spend and the street >> is now saying maybe that's not the best idea or maybe we don't love the way you're financing it andor accounting for the expenses and that's so it was not what we all thought. >> Such a good point. >> Such a great I all I do is come to the table. >> No, you're so right. We thought um at least I thought that this would quote end when we listened to an earnings call and we heard something different >> where like the demand might not be what we thought it was and then oh [ __ ] Nvidia is down 26% overnight. That is absolutely not what c what happened and yeah >> credit to you. It's a good point. No. And that's and that's the you know the that's the funny thing the frustrating thing about markets but also the funny thing about life is like it's it's rarely the thing you're worried about. It's always something else that you probably um would not have conceived of in advance. And so that's what's playing out like nobody is saying all right that's enough. That's it's the opposite. And that turned out to be the bare case. And uh look it's one of the thing this is I'm doing this almost 30 years. It's one of the things that I most love about the markets is that it's a puzzle that'll never be solved, but then it's also one of the things that's really frustrating. Um, and uh, hey, here we are. Let's put up this VIX chart just to set the table. That escalated quickly. Um, we had a faster VIX rise. What when was that? Was that early October? Can you remind me? >> Yeah, that was the Friday when Trump was going to slap 130% tariffs on China again. That was that. Oh wow. And then All right. And then prior to that really nothing on this nothing on this scale this year. >> So I'm going to make the case >> until you go until you go back to Liberation Day. >> I'm going to make the case later in the show that um there's been a lot of nothing going on in the market, >> right? It's just been like there's been no news and it's been uh a lot of call it what you want, complacency, whatever. We've had a hell of a runup and the reintroduction of risk. Although nobody likes to see their stocks go down, myself included. We need this. You need to build a wall of worry to climb to new heights. It can't just be announcement. Boom. 35% to Oracle. That's not sustainable. So, we reset. There was a lot of doubt. And we'll see. Listen, I said to you guys yesterday, I love a wall of worry. I love I love it. Unless there's reason to worry, and you know, we'll find out. >> You sit on a throne of complacency. >> Excuse me. >> You You just said there was a lot of doubt. No, there like is right now a lot of doubt. There is a lot of doubt. >> Was I don't know if we're through this. >> No, excuse me. If I said was, I meant to say is. There is. There is a lot of doubt. >> And I don't know. I don't know if we're if this is overblown or not. Um I sus I I don't think the AI trade is over. How about that? I don't think this is the top. >> Either Nicole or Duncan just dropped a poll into the chat, but I I don't see the results. I don't even know what the poll was. >> What's What's the question? >> I don't like like bullish or bearish. And somebody responded, >> "Bullish or bearish?" That's got >> Somebody responded like most bearish. I don't I don't know. Duncan, can you pop in? >> We got We got We got to be more specific than that. >> I don't I don't really know what happened. >> It's It's in the chat there if you want to look. It's 64% bullish, 36% bearish. Uh 362 votes >> on what? And when? >> Uh are you bullish or bearish today? [laughter] >> Are you bullish or bearish? I do it every week. >> Great poll, Dunk. Okay. All right. >> Okay. I didn't know. Credit to Duncan every week. Okay. >> All right. Here's a here's a poll of um portfolio man uh >> uh the fund manager survey from Bank of America. Put this up. >> Okay. Like this is notable. >> Yeah. Absolutely. >> Record number of fund manager survey inves. So these are global portfolio managers that respond to Bank of America on a regular basis and they are this is um a record number now say companies are overinvesting. I assume they mean in AI too much capex. The net percentage who say companies are overinvesting is what does that look like to you? 20%. 20% of investors saying that that was a negative number in every survey ever up until this week. That I mean that look at it. That looks weird, right? >> Yeah. Dude, you know what's so funny? How fast narratives change. So you mentioned five minutes ago that this this Dow came out of nowhere. like the the depreciation expense like okay I that was on my bingo card. You know how what what could fix this in two seconds if if Sam Alman gets on another podcast next week and says guess what $30 billion in annualized revenue. Okay, over party back on. >> Oh, I don't know. I think he's caused himself some credibility. I was going to say, you know what could take us into a 50% draw down? He gets on another podcast, gets into a snit with the host, and drops off. >> Yeah, that wouldn't be good. >> That would do it. >> That wouldn't be good. >> All right. Um according to the fund manager survey the investors uh bullish running very low 3.7% cash levels um and uh more than 50% continue to think AI stocks are in a bubble and the contrarian trades being mentioned long sterling >> that pounds or silver I don't know >> pounds I okay >> um long foot long uh long footsie short emerging markets. Okay. Long discretionary short banks. I don't really understand that. All right. Next chart. This is that um more than 50% think AI stocks are in a bubble, but like they're not selling the stocks based on their positioning. So like everyone is still like, yeah, it's on the way to becoming a bubble. Like no, they don't really have a lot of people that are like it's a full-blown bubble and not only that, I'm expressing that with my portfolio positioning. I'm short or I'm out. That that's not what's going on right now. All the shorts are just people that tweet. >> Okay. It's not a I guess the question is if it if it is a bubble then it was a bubble. Okay. That it's on its way to popping because you can't say it's a bubble today when Meta is in a 27% draw down. We'll get to the numbers later. Oracle, it either was a bubble that is deflating or that's it. It's not a bubble. We're not in a bubble right now. There's no euphoria there anywhere. Everybody is skeptic. All right, let me So, let's do some skepticism. There was a very notable downgrade today from a small firm, Redburn Rothschild. I think they're British or based in London. Um, and if I'm wrong about that, don't nobody send me an email and get mad at me. I I'm doing the best I can. But like this got the market's attention. Redburn downgraded Microsoft and Amazon from buys to neutral ratings, saying the market is too complacent about the economics of Genai. They argue investors have been treating Genai like early cloud computing, but the numbers don't support that comparison anymore. So basically what they're saying is that Genai's economics, unit economics being like per customer, I assume, are far weaker than cloud 1.0 0 which was like 2015, 2016, 2017. Um the analyst said it takes six times more capital to generate the same economic value with Gen AI as it did during the buildout of the early cloud era. They're estimating $1 of AI infrastructure is only generating 20 cents of net present value. um they're being nerds about it and looking at the actual numbers, which I don't know why, but uh this is a thing that people used to do. And their basic take is the economics just don't work yet. They cut their target on Microsoft from 560 to 500, which is a big chunk. Um on slower monetization for AI workloads, and their Amazon target stayed at 250, but they still cut it to a neutral. Riskreward no longer looks asymmetric to the upside. They say AI workloads now account for more than half of AWS and Azure growth, but are delivering lower returns, higher depreciation, heavier capex, and slower payback periods. This is the first time since this analyst, Alexander Heisel, cut both stocks since 2022. What are your thoughts? >> My thoughts are it is way too early to look at the unit economics of these businesses. We have no idea what they're going to turn into or what they're going to become. Imagine looking at Facebook in 2014 and jumping to conclusions on oh the spend on the mobile buildout. It just doesn't support the all the whatever cap it. We It's too early. Now, healthy skepticism makes sense. I get all that. It is way too early. Which is why you see these companies gyrating wildly violently because there is a lot of uncertainty and right now investors are asking questions. They're selling. There's a reset. Good. These companies need to prove their worth. Let's say it. >> Counterpoint. I I I'm sympathetic to it's way too early because of course it's always too early. Like no, nobody knows in the future and there's equal amount of space for the optimist to be right. Okay. But don't we jump all over these people for being late? like like in other words, so they they're admittedly early, but what they're saying is like based on the current economics of the spend versus the payback. And we're going to talk a little bit more about that in a second with a with another chart. Like it's not encouraging and it's definitely not pointing toward a need for spending more. It's like, oh, we're barely making money if only we spend more. Like that's not that's not always how it works. >> Credit to this analyst for going out on a limb. I do I do respect >> no investment banking business for you Alexander >> but current economics tell me future economics which I know they can't I I get it. >> All right Nvidia reports tomorrow night. Can I share some of the storylines? >> By all means. >> All right. Um a lot of investors think that Nvidia is the thing that can stop the AI crash or you could call it AI correction. A lot of people are saying like if anyone or any thing or any event could put a pin in this and calm everybody down, it's a blockbuster number for Nvidia with with amazing guidance and the typical Jensen Wang optimism that we've all become accustomed to. And I sort of think that's right. Like if you and if you were to ask me like what could make this better or or way worse, it's a function of what what's going to be said tomorrow night at 5:00. >> You know, what would be very interesting is I I am assuming we're going to hear good things. I'm assuming we're going to hear good numbers, optimism. What if the street doesn't buy it and just wax it anyway? >> Well, well, pull up a chair cuz we're all going to find out together. Okay. Um JP Morgan is bullish. They put out a note today and they recommended a shortdated option trade, you know, for the Robin Hood crowd. Um, that will pay off if Nvidia's stock climbs after tomorrow's earnings. Uh, their target on Nvidia is 215. The stock closed 182ish 181. Um, we also have a bunch of bigname sellers in Nvidia over the last quarter. Peter Teal's macro hedge fund dumped its entire stake during Q3. it uh worth about $und00 million. And Masoshi's son uh famously liquidated his Nvidia stake. Um this is Soft Bank, $5.8 billion worth of stock, whacked it out. And some people actually are pointing to that sale as being the trigger for a lot of the selling in other NASDAQ stocks related to AI, which I sort of feel like it was happening first. and Nvidia has barely come down relative to the others. So, I'm not sure if I agree. Um, Michael Bur is out there allegedly with a short on against Nvidia, but who the hell knows because he's like initiating positions, then he's closing his fund, then he's teasing some event on November 25th. I don't I don't know who's going to set himself on fire in the street. I have no idea what that's about, but that's part of the story lines here. Um here uh earlier this month the securities filing showed that if Bur's hedge fund bought options that will pay off if Nvidia shares drop. So the idea is he shut down his fund meaning like the fund has to live with those trades and nothing happens until something happens with those trades. I I guess or he's kicking out his investors and converting to a family office maybe in order to hold those trades without anybody interfering with him. I don't I I have no idea. I'm just saying like this is the the speculation and then um I wanted to say two other things. Let's just give I want to give people the numbers. So the revenue expectation is 54.8 billion for the quarter. Um the earnings per share is a$126. Um, the data center revenue is expected to be 48.9 billion, which would be 59% year-over-year growth. Gross margin 73.5%. Can you imagine that? Um, and then guidance for next quarter, the whisper number is 61 billion. And then like the um the wild card is if anything is going on with China, which Jensen already told you expect nothing from China. and anything that happens there is like a cherry on top, not in not in the guidance. So, it's, you know, as usual, it's all about the data center. Everybody's going to want to know about Blackwell shipments and um I think the the I want to get your take on this. I think like the the number one question if I were a sellside analyst that I would ask during the call is what's your take Jensen Wang on the depreciation debate cuz these are all his customers. So keep in mind he's talking out of both sides of his mouth. On the one hand, he's mocking people for jokingly for using prior generations of GPUs like get with the program, you need Hopper, now you need Grace Blackwell, now you need whatever the next thing is. Um, but then on the other hand, all of his biggest customers have depreciation schedules where they're showing these chips will be in use and productive out to 5 years, in some cases 6 years. So like which is it? Please weigh in Mr. Wang because like this has got real consequences in this ecosystem and you're the most important player in this ecosystem. Weigh in on this on this debate would you please? Um what do you think about that question? Do you think anyone will ask it? And what do you want to know? >> Well that's what I was going to say. So we're on the same wavelength and I would say that there is a 140% chance that that question gets asked. What I what I like about this earnings season, >> Dan Ies asks it. No way. >> Some No, it 100% it comes up. >> It's not coming from Dan though. >> Um, throw up this chart that uh about Nvidia into earnings. This is by far the weakest setup or the weakest price action going into earnings over the last couple of years. >> I was even aware of this. >> There is a lot of doubt heading into the quarter and we'll see. I'll tell you what, if this if this thing does drop 10% overnight, I'm buying a snot out of it in the after hours. I'm telling you right now. >> Can you can we put that chart back up? This is the two week return heading into the earnings. >> I mean, if you're bullish, it's a nice setup that they just gave you. You're you're buying the stock 9% lower going into the number. So even if it's just an ontarget number and doesn't blow people away, it's not like you're buying it up 10% into that. >> So I sort of I sort of like that for for a long. >> Check this out. You know what we haven't spoke about in a while? Remember the ETF NVDL, the double lever granite shares ETF? The assets peaked, we have this chart, please, John. The assets peaked um I guess about a year ago at 6 oo 6.69 69 billion >> and the stock is up quite a lot since then. And I guess in a really sensational environment, you would expect investors to be piling into this thing. No, not really. Not at all. In fact, >> they cooled off on it. Look at that. That peaked in December of last year. I mean, one caveat is like the markets. Do you remember the markets post election going into year end? Yeah. that November to December period, it was bonkers. >> Yeah, you're right. >> It was B. And I just think that was less about Nvidia and more about like, oh my god, Trump won again. We're all we're all getting tax cuts. We're all getting laid. Like it was 100%. But but Josh, and also year to date at the peak a couple of weeks ago, Nvidia was up 50%. So you would expect people to be piling in, and they just really didn't. So here's here's where I'm at. the things got things were so wacky a couple of weeks ago with this one-way trade. Um I think we did this on the show or maybe it was on TKF. I had Chart Kid make a chart showing the rolling uh whatever day return. Where's this chart of semis compared to There we go. Semis added a trillion dollars in market cap in the past five days. You remember this? >> Yeah. And that was it. >> So that was that was the lit that was literally at the top. That was October 30th over a 5-day period. >> We said it was St. We You said this is ridiculous when you put the chart up. >> And so since then, guess how much has come out? $830 billion. That was the top. >> Holy [ __ ] That's so much money. Think just think about just pause on that. That's a trillion dollars came out of one sector of the market in a week, two weeks >> since since the top. >> So much. >> So I understand that these names are down bigly. Oracle, Meta, a lot of other names, Cororeweave, of course. But come on. Do you think these things were up so much? They were up so much. >> So, I wanted to say that. Put my chart up. That was before that. This is from the Wall Street Journal. Um, the headline is the Philadelphia semiconductor index enters correction territory. >> Good. >> But like look at the chart. Look where it came from. >> Right. >> So, yes, it's officially in a 20% draw down. 10% draw down. >> So, that's correction territory. Fine. But like a little bit of and to the journal's credit, they gave you that context. Um, you know, even with the even with the scary uh headline, they said um the last time the semis were in a actual bare market, which is 20% or more from a recent high, was January 22nd through April 8th. Um, you know, right into liberation day. The semis were in a 35% bare market by April 8th. Did you know that? I don't even remember it. I know what happened. >> Whacked into the stone age. >> Um, all right. Uh, Bergkshire Hathaway. So, this is Warren Buffett's, uh, one of his last trades of his life. He bought Google. >> Well, [laughter] he he he retired. >> He didn't buy this. >> Uh, I know, but whatever. Bergkshire Hathaway under his watch technically for the last couple of months. They did this in the summer. Uh, Bergkshire Hathaway disclosed 4.3 billion to4.9 billion dollars worth of Alphabet. You know what's funny? Uh, us two schmucks, we sold to Warren Buffett. >> Oh, literally. Uh, [laughter] I think I think I sold it in June, but close enough. Um, I sold it lower than where they bought it. I looked. Don't think I didn't look. Um, what was going to say? So, they bought almost 18 million shares. Uh, Loop Capital uh upgraded Alphabet today from a hold to a buy. >> Tough scene. >> Raised their target to 300. Didn't really help. Um the stock the stock looks better than the others right now. I think the halo from Bergkshire buying um but they uh they like they like the name. It didn't it didn't do much. Let me let me do a one-year Google price performance. If you want to know where I sold, just find the lowest point in the chart. [laughter] I think I'm June. I forget. Pretty pretty damn close. Pretty damn close to the the lows. I either sold right before or right after the lows. Uh, and and of course, look at it smiling back at me. >> All right, nobody's perfect. I >> look at this chart. Look at the smile in this chart. >> Yeah, you dumb bastard. >> All right, so Loop saying, uh, Google's core ad business is actually reacelerating. Search is showing stronger pricing and improving click-through rates, which helps reinforce their view that AI cannibalization fears were overstated. Overstated by me. Um, they're saying the Google Cloud Platform is being driven by higher margin AI workloads. That's so weird. I just read that workloads were lower margin for AI. Who knows anything? Um, they're also emphasizing Alphabet's balance sheet strength, cash flow plus slower capex intensity versus their peers. >> Yeah. Wait a minute. I thought Red Bush was talking about uh unit economics. >> Maybe they're looking at a different go uh alphab. They didn't downgrade Alphabet. downgraded um Amazon and uh and Microsoft. Loop says Alphabet's still the best riskreward among the mega cap AI names and um much less exposure to the severe capex burdens that Amazon and Microsoft are facing. Um all right, what I what I think this all boils down to is what's changed in the last two weeks is not the fundamentals of um the AI race. Uh, and I think everybody still understands that these companies sort of have to continue if they want to be relevant and competitive in the future. I think what's changed is what is the cost of it going to be and is there a payback that's going to come soon enough to justify the cost and also the way it's being paid for all the debt. So, I want to remind people why everyone was bowled up on these stocks in the first place. We're not all delusional. Raymond James is projecting that cloud revenue for AI will explode in the next 5 years to nine times its current value. Um, thank you John. So what what you're looking at here is the revenue from AI cloud products and services. This is what Ray J thinks they'll be able to charge all of the companies and people on Earth that want to utilize this tech. Like it's not it's not this mass fever dream of nonsense, you know? It's it's it's not like we're all kidding ourselves. Like this is the opportunity that they're all investing for. >> So, and and so and that's like on an annual basis. So, I want to remind people of that. Um the problem is who's going to pay for it and how. So, this is from the journal >> taxpayers die. >> Yeah. Sure. Eventually, JP Morgan's fundamental research created a financial model that projects total investment in global AI infrastructure through 2030, taking physical limitations into account. You know what the physical limitations are? There are already so many plans for um data centers and connecting them to the grid that companies like GE Vernova are telling Wall Street, we're booked out until 2028. If somebody came to us with a new project, we couldn't say yes to it until 2029. The physical limitations are you have to connect natural gas turbines to these transformers which look like gray houses shaped boxes or or box- shaped houses and like to get physically the electricity. Like that's that limitation. But the point is they're saying it's five trillion to build all the stuff that's being been committed to. What they did was they calculated how much new revenue these companies would have to generate to justify spending 5 trillion on these AI supercomputers. And what they came up with is AI products, chat GPT, um all the enterprise stuff that Anthropic sells, etc. would have to create an additional $650 billion a year indefinitely just to give investors a reasonable 10% annual return. >> Who was that? Who's the 650? >> JP Morgan. So just to put that number in perspective, 650 billion a year, that's more than 150% of Apple's annual revenue. Open AAI's current revenue is about 20 billion. So think about the distance between 20 billion and 650 billion for AI revenue to get to just for investors spending that 5 trillion to earn back 10%. >> Yeah. >> Um >> that would equate to every Hold on. That would equate to every iPhone owner in the world agreeing to pay an extra $35 a month >> for products and subscription like just to try to like figure out like what is the payback. So if you ask me like what's changed fundamentally nothing. What's really changed is the way we're thinking about the bill. What is the what is the cost? When do we recoup it? And how are we borrowing the money to do it? That's the really big change here. >> And the spark was lit when Sam Altman was asked, "Hey, wait a minute. You're doing $13 billion in revenue. How are you going to pay this $ 1.3 trillion bill that you amass over the next 10 years?" And he basically said, he hung up and said, "I can't wait to get for you to short my stock." He went like this. >> Yeah. Not not so Yeah. So are are the all of the questions all of the reasons for the air coming out recently? I think it all makes sense to me, [laughter] right? Like all of it all makes sense. I don't think anybody's dumb for selling. >> All right, you're up. >> All right, let's uh I want to talk about some charts that I found in the daily chart book who does a daily Well, it's a chart book daily and it's great stuff. So, this is from Citadel Securities. Retail investors continue to add into weakness, becoming the new price setters. Well, I'll be damned. During the latest pullback, retail flows showed one of the largest buy the dip events on record. >> Unbelievable. Look at that spike. I guess they know how to disentangle retail buyers from institutional buyers. Like, they know what they're looking at. >> Yeah. Vand Vand Vander Research does this as well. There's also something called a they have a a a retail risk on riskoff index. This Citadel. So this tool tracks whether retail investors are increasing or reducing exposure to different forms of market risk. This week saw the fifth strongest retail dip buying in the past two years. So stocks are dipping and we're buying. >> I'm gonna tell you something. How often do they run this? Weekly? every four every four I don't know >> I'm assuming yeah look looks like it [snorts] >> look the we we don't know what Nvidia will bring so I'm just going to tell you if it's more of this for the rest of the week I think that retail that that rorow [ __ ] is going to be way less I think there is I think retail buys the dip really quickly and with tons of conviction I just don't think they do it through on the third week >> completely agree completely agree Um, there was a great article in the FT talking about uh they call it uh the Squid Game market. How Asian retail traders are driving US meme stocks. I didn't come up with that name, so don't get mad at me. Look at this uh this is wild. So they say known for their >> It's like a little racist. >> Yeah, I think so. Known for their high-risisk tolerance, her behavior, and use of leverage, South Korean traders have piled into US markets this year. uh they their their holdings doubled $170 billion at the end of October and what they're particularly keen to buy are the crazy [ __ ] So I Ionic NQ uh is a huge huge holder of theirs is the fifth most popular US stock for South Korean investors. They do a lot of the leverage [ __ ] like they are having a party. >> Um you know what's interesting? the uh Asian stocks got murdered overnight and um that's like new because they yeah they have AI exposure like Europe was down 1% and I think Asia was down two and a half or three like as a as a group some of those markets got just absolutely annihilated overnight. They're sort they're sort of acting like our market. And it's weird, right? Because they don't have um they don't have Amazon and uh Microsoft and Meta in their indices. I mean, they have other companies that are exposed to the theme, but um this kind of went global over the last 24 hours in a way that a lot of US tech selloffs just um historically haven't or should not have. And um I I sort of feel like that's new. What do you think? Uh yes, funny you should mention because I don't I don't pay attention to to Asian markets that often, but I did see a headline this morning and I said uh hm different. >> Yeah, look at this. Look at this table from our friend Todd Zone. >> So the levered long single stock ETFs ETF drawdowns. >> So the monster ones, I'm sorry, not the monster, the my bad, the micro strategy ones from Defiance and T-Rex down 95 and 97% from 52 week high. And still MSTU is that at the peak? >> Wait, wait, stop. >> 500. No, I won't stop. 57% >> 500 $557 million in this thing. Let me see. >> Wait, wait, wait, wait. I don't understand. This is in dollars or in market cap, >> sir. That's% >> price. >> Wait, the 2x long Micro Strategy ETF is in a 100% draw down. >> Uh, >> like it's almost it's almost zero. >> It's down. I'm see. Well, it bounced today. So, yeah, basically it would Now it's only down 93. Now it's only in a 93% draw down. >> Oh my god. I'm just I'm eyeballing some of these. I didn't even know they had 2x's for there's a 2x for super micro. >> Need it. You got to have it. What's wrong with you? >> What crack smoking muppet is is 2x long SMCI? >> Holy [ __ ] >> What are we doing here? >> So this thing Okay, so that chart put it back on for a sec. that number the the the AUM that's as of today, dude. So the the T-Rex MSTU at its peak it had 3.4 billion. Now it's uh 550 million. What the hell are people doing? Why is there that much money this >> dude? It's Squid Game. Were you not paying attention? >> Isn't this this is like walking into Vegas like walk up to the first table you see? Oh, blackjack. I love blackjack. Here's $4 million. [laughter] Like, let's let's play like >> Yeah. >> It's This is like their balls off. Yeah. >> Did you know >> is it good? Is it Is it like sort of good? I mean, it's bad because we know on the other side of the trade is Ken Griffin and he's going to buy 10 more uh 10 more apartment buildings in Bickl. We understand like where this money goes. It doesn't disappear. It's transferred to somebody else. So from that perspective, it's not great for like wealth inequality because it's all going to Jane Street and Citadel, but is it like good because these are young people who need to get their education now before they do this with real money? >> Can't decide. >> Is it good? I mean, >> is it good? >> No, it's not good. Who is it good for? It's great for >> But isn't it the right But isn't it the right lesson? >> It's not good. Let's just be clear. It's not good. There is a there is a double levered uh BMNR the Bitcoin the bit minor Tom's thing. There's a double >> right you needed a double of that >> a double of that. >> Um listen this is this is unfettered capitalism. If there's >> who launched who launched the double T-Rex it's T-Rex B minor. >> So if there is a demand for these products um you know they'll be launched. >> Listen the only thing better than Tom Lee is double Tom Lee. So I get it. Just it's just I don't understand the dollar amounts here. Like why are these so big? Why are these why were these so big? >> So 57. So this thing just launched because it's not it's not old. And it was it just immediately $575 million. Like that's a lot of money. So is this good? No, it's not good. >> It's actually so [ __ ] up. >> No, it's not good. Come on. >> It's like it's like really bad. And uh there's nobody on in Nobody's watching this. Like we society we have decided deregulation and like anybody can launch anything and play at your own risk and the apps are encouraging it and there's like >> like there's nobody coming to save any of these people. No, nobody. >> So this is serious money when they listen when when you have the double levered spy ETF and you you touch a hot stove and you learn your lesson. Okay. But but this like why does this need to >> All right. I'm I'm going to say one thing and this will be unpopular but I don't care. I'm I'm as for deregulation as the next person and I do think adults should be allowed to do what they want to do within reason. I think we should draw the line at like scams, but like if something is a bet and a bet goes against you and you're an adult, like you know, that's that's just the way life works. Don't don't bet money you can't afford to lose. Okay, I'm I get it that that's where the fault lines are. But I also think that in the midterm elections, if um the Democrats have a little bit of a wave and they take some seats, uh it's going to be nervous time for the people that are running around Wall Street acting like robber baronss launching [ __ ] up products and um convincing people to do really dumb things. And ultimately, if you ever I don't know if it'll ever happen again, if you ever get a Democrat in the White House who brings in their own SEC uh person and they decide, you know what, let's do a look back and see who was taking advantage of the public. Like, a lot of this stuff is going to get drugged back out onto the carpet. Like, I I think right now we're in an environment where people are just like, I get to do whatever I want as long as I disclose and disclaim. I can I can launch anything. and I can encourage any kind of behavior. And that might not always be the case for >> happen. Who's to say where the line is? This one is good, that one is bad. It's just >> it doesn't it doesn't it's it's a it's it's it's not even a legal argument. It's a moralistic like was this in the best interest of the users of your brokerage platform? Like what are you how are you going to defend that? You're going to pay the fine. You can't defend it. I'm just saying like if you get a regime change at at um regulatory bodies who may want to go back and say we got to clean some of this stuff up from the last era and that really does happen and a lot of people right now seem to have short memories of prior episodes where that happened. So I just uh you know it's all fun in games and I know a lot of people are making a ton of money and I'm not player hating but like this stuff doesn't just go away. You launch a product that drops 98 [ __ ] percent. Like you don't you can't you can't just Well, it was the Trump it was the Trump era. What do you what do you want me to say? Like that's not how it's going to go. And I know it I know it's not because I've been around for a long time and I've seen the pendulum go in in both directions. All right. Uh let's do private credit. Our friends in private credit. you uh are really good about listening to the calls and I I like I just kind of like vibe comment on this stuff, but you actually do the work. And uh I wanted you to give me your take on what you heard the difference between what Blue Owl is talking about versus a firm like Apollo because it sort of seems like a boys and men separation between the boys and the men right now. >> Yeah. Um, so, so tell me a little bit about what you gleaned from listening to what the these companies are saying. >> So, I did this this morning with Ben on what are your on animal service. Excuse me. And >> All right, then we'll skip this and I'll just listen to that. >> No, no, no, no. I'll no stop. Um, no. I'm saying I'm prepared. So, okay. I listen to Apollo's earnings calls. Now, for those of you who are unfamiliar, Apollo is one of the gorillas in the private credit room. Uh, Mark Rowan, their their found co-founder and CEO, is an absolute wilderbeast. and he was asked very um pointed questions about the rate environment and um investors allocating away from private credit because these are floating rate securities and so as rates come down they are less um less enticing for investors and he answered the question like a [ __ ] man. He said, "Yes, listen, let's be grown-ups. This the the the the um opportunity set today is less attractive than it was one year, two years, three years ago." Hey, guess what? You could say the same thing for public equities. I wish I bought Nvidia three years ago. I mean, this this is what he said. He said, "So, yes, undoubtedly um we are tightening our standards. We are being diligent. We are not uh upper upping risk." Okay? And it was it was a phenomenal answer. And then you hear Mark Lip Schultz who was uh clapping back at Jamie Diamond after the cockroach comment. And so in um not in fairness but just in fact >> who is that now? Who is that? >> So Mark Lip Schultz is the is the uh founder and CEO of Blue Owl which is the biggest it's called GP Stakes company in in the world. GP Stakes is they are they are seeding a lot of these alternative asset managers. It's a great business and they're taking unit economics off of that business. Okay. They're also in the private credit game and you might have heard Blue Al because they are responsible for doing all of the largest deals with all these hyperscalers. They're financing um Metas and all all of them. He was asked a question about why their um why their BDC's which are public vehicles are getting sold and what investors may get wrong. And oh boy, the difference in the answer and the tone between what he said and what Mark Rowan said could not be more dissimilar. It was defensive. It was um nasty. It was investors don't understand. Well, guess what? I understand. The stock is down 50% from its highs. Almost. The BDC's are getting murdered. And now the FT did a report that they are trying to merge their private credit vehicle into the public credit vehicle into the BDC because they're getting redemptions out the ass. And some of the quotes from the article are so LOL, absolute clown of the week awards. So, we'll get to that in a second, but at a high level, that's the story. >> Let's let's show people what we're talking about in terms of the share prices. So, the first chart is the corporation Blue Owl itself, which is basically the GP sitting on top of all of their funds. >> This is the equity. >> Yeah. So if you're a shareholder in this, you own a piece of Blue Owl Capital Incorporated, the company. So whatever funds they launch, whatever fees they collect, whatever deals they do, you're like kind of like alongside the GPS. And this thing is a $13 stock now, down from almost 30. It's in a 38% draw down year to date. And there >> worse worse worse. It's down 38% year to date. It's the draw down is way worse. >> The draw down is bigger. there's but there's no it it appears that there's no end in sight. Uh it's a relentless down downtrend with very few positive weeks along the way and uh I don't know where this stops. Um the next chart though and this is the thing that I have been harping on. This is the BDC. So this is an a blue owl product that is itself publicly traded and basically they are making loans to private companies that um are either on better terms or done quicker than what these companies would be able to do with a tra traditional bank. Obviously we know because of regulations the traditional banks they're not lending as much. They don't take as much of their own balance sheet risk blah blah blah. So that's where this whole private credit boom came from. Uh it came from the last crisis where we decided we don't want deposit institutions that hold on to money for teachers and policemen to um engage in reck reckless engage in uh this type of risk-taking. So somebody had to step in and they did and they're all giant companies. But this BDC itself, the concern here is at the end of the day people own it for the yield. the yield on not just this but all of the BDC's is predicated on whatever the interest rates are in the real economy. And if you own something that pays I don't even know what the yield is on this now but let's say this year it was 9%. 10%. And the interest rate is on its way down. The Fed has been cutting. You already know next year the yield on this is going to be lower which generates selling which has not which not Blue Owl can't do anything about that. that's beyond their control. They didn't do anything wrong. It's just the natural progression of what happens to yield instruments in the stock market when the interest rate prevailing interest rate um goes lower. So, people are selling it for that reason. But there are also a lot of reporters that are hot on the trail of whether or not a lot of these loans in these portfolios will continue to perform, which has introduced a secondary uh concern. So now you have this thing selling off and the owners are like, "Wait, is it selling off because the dividend might go lower or is it selling off because the Financial Times is right and all of these uh loans are a mess?" And what Lipshits is trying to get across is these are just fantasies that we have to answer. Like people are people are making up stories and and everything is fine. >> But wait, there's a third correct that that that was basically his comment. They reported by the way at the end of October. So if they reported this week, the questions would be a lot harsher and the the [ __ ] answers that he gave would not fly. But there's a third leg to the stool that is they are in the perfect storm. >> The hyperscalers and the data centers that is now that are now coming into question. Hey, wait a minute. Meta has has an option to opt out of the lease. Like they are not where you want to be. And guess what? So thank I thank God I sold blue I own Blue O the equity. I sold it earlier in the year. To be clear, I think if you're selling Blue O here, you're an absolute donkey. Like I think that even >> and you would not and you would not be long the BDC. You're talking about the cor the corporation. >> I'm talking about the equity and I would much rather be long than short the BDC to be clear too. But there is there is there is a story there as well. So this is from the FT. Earlier this month, Blue Owl told it shareholders that it planned to merge its Blue Owl Corp Capital Corporation 2 fund. This is the private fund. Okay, this is the private credit fund which has $1 billion in assets and was one of the first private debt funds targeting wealthy individual investors with its OBDC fund which is the BDC the publicly listed one which has 70 >> the one that's the one that's currently in the process of crashing. >> All right. So they're talking about um merger of the two funds as redemptions of Blue Owl Capital Corporation 2 have climbed this year to a level where it would eventually be forced to restrict investor redemptions. Um they've pulled $150 million from the fund through the first nine months of this year. a 20% increase from last year. Um, okay. But here's the clown of the week quote. I'm sorry, Jonathan Lamb, CFO. Uh, in an interview with the FT, >> I think he's on the compound and friends later this week. >> At current prices, the investors in Blue Capital Corporation 2 could take a potential haircuts on their investments. But he said, and this is the I can't believe he said this out loud. The merger came with significant benefits such as the ability to own more liquid shares in OBDC. Excuse me. I thought the appeal was the illiquidity premium. What are you talking about? >> Why am I in private credit if you're if you're merging it with a public equity? >> It gets worse. It gets worse. Quote, "There's no doubt that this is a no-brainer transaction at 95 cents," said Lamb of the new merger. Wait, why? And guess what? They're not talking. They're They're not talking about 95 cents. They're talking about 80 cents. And no doubt. Excuse me, sir. What in God's name are you talking about? I have doubts. Lots of doubts. >> Yeah. >> Do you have a quotron? There's >> no doubt. There's only doubt. >> So anyway, >> will that stabilize? Wait a minute. If they do that, could that bring stability to the publicly traded BDC? >> Now also more assets into the portfolio. >> It's a It's a billion dollars. a publicly traded BDC has more leverage. So maybe this will take the leverage down a little bit. I don't I don't know where it goes from here, but um all of the smoke that they're inhaling they deserve. >> Um >> and to be clear, so I think the reaction might be justified. Is it an overreaction? Maybe we'll find out. Um but again, uh they're in the thick of it. Yeah. Not great. >> The dividend [snorts] yield is 12% on OBDC. >> Yeah. Is that it? Okay. Uh I I mean I don't know if that's I don't know if that's accurate and up to and up to date because I'm also seeing sources say it's 13.28%. Oh, and this is the other thing that people don't know about BDC's or or they should know, but you know, it's not it's not obvious. Like with stocks, like dividend paying stocks, like dividend aristocrats, you don't have like this crazy swing in in the quarterly payment. Like they tend to they tend to institute a dividend that they could stick to. They may not raise it a lot each year, but they try not to give you that variability. They try to give you >> floating. >> That's right. That's not what's happening with these. Like the dividend, you can't annualize that. You can annualize it, but you shouldn't because you're just making [ __ ] up. All you can go by is what they declare for next quarter and hope for the best for the following quarter. >> One, that's right. One last thing. Let's just look at the portfolio. So the as far as like what actually is going on in here, this is okay. This is not [ __ ] Okay. These are legitimate loans. There's 293 companies in here. I don't know if the marks are valid or what. Obviously, the street is questioning that, but these are these are legitimate services being provided to companies all around the country. It's a diversified portfolio. I don't know about the covenants, the lending standards or whatever, but all of this is obviously obviously coming under scrutiny. >> I wanted to just say as a cap to this chart off um this is what happens, >> Larry, >> when this is what happens when you decide our target market for this is the wealth management channel. Respectfully, you could put all the educational, and we talked about this with Shenali on the show, you could put all the educational materials you want in front of the adviserss, in front of their clients. When push comes to shove, and you need them to act like institutions, they will not. They cannot. They're not institutions. They're people who have bills to pay and dreams to achieve. They're not 100year college endowments that are funded in perpetuity. There you cannot count on wealth management clients behaving like pension funds, you idiot. So, I'm all for uh democratizing access. I totally get it. I'm not anti. I'm I'm not a hater. But like don't have a vehicle set up where the thing you're counting on is that some schmuck financial advisor um didn't sell this to people as low risk because it's bonds cuz I know they did cuz I listen to people talk and I've been around too long and I know that some people sold this right and some people didn't and this is the FO part of of of that process. >> No doubt. So all right. >> No doubt. All right. Um let's uh where are we at next? [cough] Um, [clears throat] sorry, I got lost in the sauce here. >> Stock market selloff. >> Okay. All right. Let's let's get into it. >> You got some charts here. >> I got some charts here. All right. Um, [sighs] let's actually skip the first one. Let's go to the beat and the misreaction. So, we've been all over this. The companies that are missing uh missing earnings. This is more impies, by the way. Um, are just getting taken out to the woodshed. Is it wood shop? Wood shop. What is it? It was woodshed. Shop. >> No, it's taken out behind the woodshed. >> I don't remember that. Taken out. It's like It's like a child abuse me. It's a child abuse metaphor. It's like like if you misbehaved, your dad would take you out behind the woodshed where nobody could see or hear you scream. >> Wow. All right. That got dark. All right. So, >> it's the etmology. >> Okay. So, All right. Um, check. [laughter] Yeah. I'm so I'm Check this out. Etmology. Okay. Go to go to the next I'm done with this. Go to the next table, John. >> [laughter] >> All right. Thank you, Sean. The great Shawn Russo. Top 20 worst market cap drawd downs from their peak. These are numbers, dude. Nvidia 594 billion, Meta 469 billion, Microsoft 349, Amazon 328, Oracle 300, uh, United Health 264, Tesla 220, Broadcom 215. So what is that? One, two, three. I don't know. There's like a dozen stocks that have lost hundred billion dollars or more in market value. >> Yeah. And these are everybody owns these stocks. Like like these are the stocks that are in all everyone's portfolio, right? >> Yeah. >> I mean that's like that's the salient point is like these are the most widely held stocks in the world. Um let me show you something. Let me show you something worse. These are the I asked Sean and Charid the largest nons&P 500 market caps that are currently in 50% draw downs. >> Why did you ask this? I'm curious. >> Okay, so the uh chart off. I'll explain it really quickly. These are the stocks that when you talk to some investors and they have some hot shot guy who's doing like some SMA for them like and I know of programs like this at Morgan Stanley at Mer at Merrill where it's like oh did you hear about this guy Todd whatever his name is he like has this concentrated portfolio of the best growth stocks and they're not in the index and like you know it's like this whole thing and in a bull market it looks unbelievable and And it's like like clients are high-fiving their advisor. But what we're seeing now is what ends up happening to these types of things, and it always does. It's only a matter of time. These are so these are nonsporically any money you make in these is pure alpha cuz they're it's not beta. Right. >> Right. >> All right. Here are the names. strategy is is uh 61% from its 52- week high. Atlassian, which is team 54%. Circle is in a 74% draw down. Did you know that >> before I showed it to you? >> I look I look at this chart a lot, but it's wild. >> Wild. And that's that company sells [ __ ] money market funds, just for anyone that doesn't understand. Okay. Hubspot 58%, Dolingo 67%. Alo 50%, congratul uh Riotony Computing 56. HIMS is in a 50% draw down. So, and there's real dollar amounts involved like strategy has shed 68 billion from its 52 week high. So um this is like the part of the market where people were making the most money like in the first half of the year, first eight months of the year and man it it it turns so fast and nobody taps you on the shoulder and tells you when to walk out of the party like nobody of course not. If anything, if anything, you're adding more money to those strategies. >> So, dude, I'm looking at Aqua and we were talking about this this this head and shoulders top, which as [laughter] only obvious in hindsight, like duh. But, so this thing ran to 190, right? It dropped like and consolidated a little bit down to 158, stabilized a little bit. Boom. The the door the bottom fell out behind the woodshed, whatever. Went down to 110. Okay. And then here's the dangerous part. >> I believe it's pronounced Oakllo. uh Japanese for uh capital loss >> the so the so it bounced from 115 back up to 150 creating this we're safe nope [ __ ] that's the right shoulder and then boom so like even in hindsight you're like you understand how people get trapped in these names it's so hard to get out >> it's so hard dude if you're not trailing it with a stop like you you could like go to the dentist and it's down 14% on no news and it's like well what do I do now I guess I'll just stick it diamond hands, blah blah blah, and then the next day it's down another 14%. Like these these when these things get going to the downside. Um I have two of these in my portfolio, like very small. Um I have Archer and Joby. >> Oh, you had a great line last week. I draw the line of flying cars. >> Yeah. Yeah. Well, my flying car my flying cars are demolished. Archer is way worse than Joby. They had they had good earnings reports. And when I say earnings, I'm doing um ironic air quotes. You just can't sit. All right. DJ Dow, let's put this up. >> Smushed >> 20% draw down versus 3.2% um over the time period from Jan 20123 to now. Is that >> That's right. All right. So So this next chart from Adam Parker, this is the point that I was trying to make earlier. I am not making light of a selloff, okay? I am only saying that there has been so much enthusiasm in the market and this is a clearing of the decks a reset. So Adam has a chart that shows the number of top 50 stocks. Okay, giant stocks. The number of top 50 that are up 50% over various windows. And look at the 12-month on top. There were just too many stocks that were going up too far too fast. Even if you zoom in to six months, you had Oracle uh multiundred billion dollar stock going up 35% on the announcement, which is obviously all gone gone uh back and more. Like it was just too much. And now is the reintroduction of risk, which is healthy in a bull market. You know what's not healthy? What's not healthy is no introduction of risk. What's not healthy is up 10% every month. That is dangerous. Okay? Giving some back, pullbacks along the way, that sets up for higher prices. And take this with a grain of salt. Who the hell? I can't see the future. But I like the setup. I think we see higher prices before the end of the year or at least early in Q1. >> Okay. Um, listen, I I I like the setup better than I like the setup in October when it was 20 straight days of stocks being up a half a percent. >> I that I that I did not like. So, we'll see. Maybe this ages very poorly, but whatever. >> All right. I'm going to call an audible. We're going to throw topic five out. It was uh more AI [ __ ] and I think I'd rather kill myself. Yeah. >> Um All right. You're gonna make the case. >> I uh >> I buy. All right. Good. >> I I bought Meta today. >> Um >> you did. You put 19 times forward earnings. I like it. >> Dude, it's a market multiple. I don't give a [ __ ] You know what I mean? Like I'm comfortable holding it. If it gets murdered, I'll buy more. I swapped Home Depot, which I should have done a long time ago. Um obviously the housing storing story is not housing. Took a 7% loss on that in my in my IRA, whatever. I can't take a tax right off, but no big deal. Um I like Meta here. I'm comfortable with it. We need to go into the story. It's down 25%. People are selling for for legitimate reasons. I'm buying. >> You have two and a half months before you have to worry about an earnings report, so that's good. Um, I mean, I think the stock's in the penalty box. >> Oh. Oh, no. It It definitely is. >> No, no, no. I mean, like, even if we get a year-end meltup, after all, I don't know that this is one of the leading names in that meltup. Um, I I sort of I I sort of like I like the purchase here. I would not be a seller here. We've learned so many times what happens when everybody gets bearish on Zucker Zuckerberg. Like whenever that happens, it's only a matter of time before he pulls another ace out of his sleeve and the stock is ripping back to highs again. And so I I feel like that will ultimately happen. >> It is deeply out of favor. So am I early? Yeah, maybe >> you might be early, but I I don't I don't disagree with you. I I I like it. I'm not in the stock at all right now. And um I was I was eyeballing it. Last thing, I als I als I also bought Oracle. I never owned Oracle my entire life. I sold Disney and I bought Oracle. >> I like that last 50 times earnings. Uh >> don't care. Throw that chart up. Throw the throw the chart up. We I'm just kidding. But whatever. >> We don't have it. All right. Everyone knows what the Oracle chart looks like. It looks like [ __ ] Congratulations on your purchase. All right. Um mystery chart time. >> Okay. >> This is ironic. >> I'm not even going to give you a hint. You don't deserve one. [laughter] >> What is it? >> Is it triple top? Um, >> you know how there's no such thing as triple tops? Well, today there is. >> Man, I love it. Um, I assume that we spoke about this name today. >> Oh my god, dude. Please get this right. >> Oh, okay. Facebook. >> What? There's a price next to the the ticker. What are you talking about? >> I don't know what we Wait, what? >> Facebook. You just bought Facebook. >> I don't know what you said. Please get this right. You I panicked. This is so much worse than this. >> Oh, Nvidia. [laughter] >> I'm telling you, the price is 345. >> I'm telling you, I'm not cheating. I'm not looking at my screen. What the [ __ ] is the stock? >> Do the reveal. [laughter] >> Oh. All right. Whatever. Whatever. >> You just sold it. All right. For those listening, it's >> Dude, when I'm done with the stock, I'm done. I erase this from my memory. you uh >> chart back on [clears throat] >> the [snorts] All right, so it is triple top for now. The CEO basically said the three drivers of home improvement spending all of them were working against the company. One of those is home price appreciation. You don't have it. Another one of those is I forget what they were. Um >> he said he said no natural disasters. >> Dude, it's a it's a very very good company. Extremely high quality in every way. just in a moment in time that does not work for their their earnings and as a result they took down guidance which is appropriate. >> Um this will be a strong buy and it won't >> I was about to say if this if this goes back to 275 I'm backing up the truck. >> Um somebody in the chat Rivian Millionaire is saying first time in 26 years Home Depot didn't beat. Is that true? >> That's wild. Wow. >> Should we chat? I believe him. I believe him. That guy's trustworthy. >> [sighs] >> Ah, all right, dude. I'm dying. You just sold the stock 10 minutes ago and you and you don't know the chart. >> I mean, in my I sold it this morning. I had a busy desk. >> You really wiped your brain clean of that thing. >> All right, that's that's it from us, guys. Thank um I'm told we're close to breaking a record for the live. Thousands of you joined us tonight. We appreciate it. Um >> I also want to let everybody know tomorrow's Wednesday morning, which means an all new edition of Animal Spirits with Michael and Ben. Um, we'll do Ask the Compound later this week and then a very special guest on the Compound and Friends, uh, which we're going to get out to you on Friday. So, please keep it locked here on the compound. We'll see you soon. [music] >> [music]