Join Downtown Josh Brown (CEO, Ritholtz Wealth Management) and Michael Batnick (Managing Partner, Ritholtz Wealth …
Transcript
So sorry we're late. We're live now, I think. >> Guys, give confirm. >> Give us a give us a sign. Tell us that we're actually here. >> All right. Sorry. I was busy negotiating a ceasefire in the Gulf the street. Looks like we got everything under control. I think it's a 30-day ceasefire. Did you read that? >> I saw a tweet. >> All right. 30 days. >> Yeah. Right. >> Yeah. 30. Well, we already won, so I don't even understand why it's a Right. Wasn't there a victory? All right, we're back. It's another edition of all all new edition of What are your thoughts here on the Compound channel? First time listeners and viewers, my name is Downtown Josh Brown here with my co-host, Michael Batnik. Michael, say hi. Hello. Hello. You guys, we uh we're super excited to see everybody that's here for the live. I saw literally every pounder I've ever heard of, plus all sorts of new names and faces. Thank you guys so much for showing up. Uh last week we broke a record, had over 2,000 people come for the live. We'll see how we do tonight. Uh, we have an ad read. We'll get through this and then we'll get right to the show. We have tons to do. Tonight's show is brought to you by Betterment. >> That's right, Josh. Every RA knows attention. You don't want to turn people away. You don't want to require high minimums. And you want to help clients who are just getting started because that's that's where long-term relationships begin. But here's the truth. Those simple accounts, they take a lot of work. Account opening, trading, rebalancing, and before long, your staff and back office are underwater and trying to stay afloat. That's why established RAAS are turning to Betterment Advisor solutions. It's the platform built for segmenting your book and streamlining those smaller and simpler accounts. Explore what segmentation can do for your business today. Lower your operational lift, but keep your standard of service high. All with Betterment Advisor Solutions. Your biggest regret will be not doing it sooner. Learn more at betterment.com/ >> Betterment Advisors/advisor. All right. >> Thanks. Thanks to Betterment. Not only are they a sponsor, we actually use the service ourselves at Rholtz and uh we appreciate it. Okay. Uh let's let's let's not beat around the bush here. The economy >> the economy is just not good. >> It's and it's get and it's going in the wrong direction in many ways. Not in all ways, but in many ways. And it's super noisy and hard to um just stare at any one data point and try to draw a conclusion. And we don't try to do that. But like um we came into January talking about like four or five% GDP and now we're scraping the bottom. We're talking about.7% growth. And I know that number moves and it's varied and it um is prone to constant revisions. So it's not the end all be all, but I do not think it's a good economy right now. I it's certainly not as good as it was last year and the year before. It's um >> it's it's it's mid as hell and uh I think the market is sort of reflecting that to some extent. What do you think? >> I don't know. The market doesn't really care about the economy. I think there's a lot of >> Yes, it does. Chart on >> which chart? >> On Friday, the S&P 500 broke below its 200 day moving average for the first time since May 2025. And then after the close, Trump tacoed the Iran situation with a tweet about we're in talks with the Iranians if there's any left and uh they want to be cool and we're going to figure some [ __ ] out. And then Iran came out and said no, nobody's talking to you. There are no deals. There's nothing even even being discussed. Uh the market didn't seem to really care. This is like part for the course. And uh then it looks like today after after the close there was some sort of a ceasefire announcement and that's great. Uh we like a ceasefire I guess but the reality is it doesn't matter that much outside of the price of oil. What what to me I think is really worth talking about. Thank god earnings growth is holding up. I think that's what's keeping the S&P 500 from being down worse than 7%. Mhm. >> Um because almost everything else that you could point to seems to be going in the wrong direction and I want to show you a few things and just get your your read on the situation. So Brian Westberry at First Trust is talking about the hard numbers. Real GDP growth for the fourth quarter of last year according to Atlanta Fed uh GDP now which is a model. Um they were talking about 5.4% in January. Now it's 7%. Um, we've had a bunch of punk labor reports and uh, private payrolls were up 33,000 per month. Um, Jerome Powell said the other day there's been effectively zero job creation so far this year. And West points out if you pull out health care and social assistance, private payrolls are actually down. Manufacturing jobs are down. Retail jobs are down. The inflation numbers are not good either. uh he calls them bizarre. Producer prices rose.7% in February are up 3 and a.5% over a year ago. But the increases are on the services side, not the good side, which is actually not the thing that people were worried about. And yet here we are. Um prices for goods in the PPI are up 2 and a half% over the last year. Services are up 3.8%. So that's strange. There's some weird stuff going on with consumer prices as well. Uh it's very tough to look at this through the lens of a normal economy because so much of this has never actually normalized from the pandemic. But um when you put those things together, it's just not a pretty picture on the hard data side. What are your thoughts? >> The thing that drives the economy is consumer spending and consumer spending is obviously going to be impacted in a bad way by higher gas prices. The good news is the stock market doesn't trade off GDP, but the bad news is the GDP is contracting, I think, because the consumer is probably weakening. And it is a middle, it is a muddied picture, as it almost always is. There's some good, there's some bad. Um, retail sales are not growing. Consumer spending is pretty sluggish. So, I would describe the economy as fine. It's not like the defaults are picking up in a meaningful way. The labor market's soft. Uh, not a lot of hires. Not a lot of fires. Initial jobless claims look totally fine. Continuing claims look totally fine. So it's it's middle. I I would say like it's nothing. It's not it's not great at all obviously. And it's I wouldn't say it's terrible. It's somewhere in between. >> I think it's terrible because I don't think of the economy as being a stat in a static condition, good or bad. >> You thinkable? >> I think the economy is terrible because I always think about the economy as something that's on its way in one direction or the other. and the direction that it's on its way to is the wrong direction. So that's why I would say ter that's why I personally would say this sit this economic situation actually is terrible. >> I don't think you know terrible the word you don't know what that word means. >> I'm not saying I'm not saying it's the worst economy I've ever seen. I just think it's a terrible economy. >> We uh we we have had interest rate cuts. Um, we now have uh we now have fiscal uh stimulus in the form of the tax bill that was passed last year, which takes effect this year. We have this AI boom that is absolutely creating um economic activity and you add all those things up and they're not really helping most people. >> Well, it's creating economic anxiety is what it's creating. >> It's it's I mean, look, I I think it's not great. And you you said uh there's no problems of credit yet or what did you say? How did you phrase it? >> I said credit quality is fine more or less. I mean there there are pockets of problems. >> Yeah, the pockets of problems are getting bigger. This is Peter Bvar today. Shifting gears to private credit. I'm sure you all saw the Apollo news keeping its withdrawal rate at 5% which is the right thing to do rather than satisfy the 11% requested. The fact that 11% is being requested is the problem. Um, also the Moody's downgrade of the FS KKKR Capital Corp Private Credit Fund to junk status. Yes, I do believe some credit issues are surfacing, but will instead state here again the unhealthy relationship between private credit and some in retail with the differing time horizons and views on liquidity. Um either way, an increase in redemptions and a rise in default rates will lead to a higher cost of capital for borrowers and a tightening of lender lending standards. So this what I mean it's not like in it's not in the in the garbage yet, but that's the direction. So when I say terrible, these are the things that you don't want to see. And here's uh Peter posted a chart of the LSTA leverage loan index. I'm not sure the I think on the Y ais he's indexing to 100. >> I think he's indexing to 100. But again, we're we're we're talking not the absolute level. We're talking about directionally. This is not the right direction. This is not what we want to see. >> Yeah. Financial financial conditions are tightening and the cost of capital is going up. Interest rates going up meaningfully is not really what you want to see. So, I'm not here to say that the economy is good by any means. I think terrible is a bit of a stretch. In fact, I know it is. Here's what I will give you, though. It is remarkable to me, and I know we're about to talk about it, that the economy has done, even fine considering that the housing market, a third of the economy is absolutely frozen. Frozen solid ass. The housing market is just absolute ass. Look, chart on. Okay, there's a lot going on here. The top line is the 30-year mortgage rate, which drives a lot Um, obviously if you have a low fire, low hire environment, you're not seeing huge dislocations in the labor market. The only other thing that would have as big of an impact would be what the cost to borrow to buy a home is. And it's stuck above 6%. It almost fell below for like 10 seconds, but this is now multiple years of a 6% plus 30-year mortgage rate. Here's the uh in the next pane uh US existing home inventory and you can see a pattern of higher lows. Inventories are starting to rise. I wouldn't say that on the surface that's definitely a negative because you know I think for a lot of reasons we've been underhoused and we've wanted to see that come back but I think it's more indicative not of a lot of building but just a lot of not buying. >> Next. >> Yeah. Go ahead. Uh, US housing starts. Okay, we're doing some more building. It's not it's not shooting the lights out, but not not the worst thing. The bottom pain, though, really for me is the story. This is US existing home sales, and you can see we are at uh what looks to be 10-year lows. Uh 4 million US existing home sales. These this is yearover-year data. U they're showing you when you look at the trend. And to Michael's point, since the middle since let's let's call it 2023, it's now almost the middle of 2026. It's basically 3 years of a flatlining US existing home sale. And that wears on people because people that want to sell uh aren't aren't getting the amount of interest from buyers that they hope they'd get. Prices are affected, etc., etc. Um, let me show you a couple one other Wait, hold on. Before you do that, I'll do you one I'll do you one worse. If you look at US pending home sales, so combining existing and new, all-time low. Alltime low. Nothing is happening. >> Now, why why is that? Why does that matter? >> Here's where I want to go. So, I say the economy is terrible. This is the most important part of the economy for most Americans outside of whether or not they have a job. this like like one, two, and three is do I have a job? Okay, great. Number one. Number two, what is the situation with whether or not I can buy a house, sell a house? What's my home situation? And then number three probably has something to do with a car. Um, and that's it. It's not the stock market. It's not Bitcoin. This is not the things that really matter to most people. Roughly 65 to 70% of Americans own a home. Housing accounts for 25 to 30% of total household assets. For the median family, it could be 70% of their net worth. >> And that creates maximum sensitivity in the consumer economy, the real economy to the prices of houses, the availability of houses, what they're worth, whether or not they can be sold. and and that is the real wealth effect away from the top of the K. Um, a 10% move in home prices produces a meaningful change in perceived wealth for most households. A 10% move in stocks doesn't really change all that much on the ground for for the the economy. Um, and here is the K Schiller 20 home price index. So these are the 20 biggest housing markets in the United States averaged. And uh what you can see here is we may be going negative uh in in home prices on a yearover-year basis. Um home prices are up 1.4% year-over-year, which obviously is not the end of the world. But >> so what, dude? This is not the story. >> The story is the chart that shows the number of home buyers. >> This is Denny. >> This is the problem. This is the whole kit and kaboodleoodle so to speak. There are this is the opposite of the pandemic when you listed a house, you sold the house in 20 minutes, best and final, who's going to one up it right now. There are so the ratio of sellers to buyers is in a historic imbalance. And the problem >> it's almost 2 to1 for the people listening. It's it's 2 million versus 1.3 million buyers. So, the big problem, I mean, this is you're looking at it, but it's that home prices aren't budging. They're not coming down, and they probably will, and they definitely have to. And you combine that with the fact that mortgage rates are going in the wrong direction. It's really ugly, and it's not getting better. >> So, Red Fin says there were 630,000 more sellers than buyers in February. >> Yeah, that's right. 40 46.3% more sellers than buyers. That is the largest gap since Red Fin began tracking this in 2013 and a huge jump from this time last year when there were 29% more sellers than buyers. And we didn't think that was great. This is way worse. And um it's it's it's seasonally adjusted which means this is this is not just about oh it's March, wait till May. It's a it's a bigger story. There are two million people selling a house right now and just not enough not enough uh interest in buying. Um one other thing, one of the big home builders, LAR, in order to maintain sales in the current environment, they spent an average of 14% on the final sales price on incentives in the first quarter of this year, which is back to 2010 levels. They had to do this [ __ ] after the housing crisis. So, in other words, >> a $450,000 home sold with a 14% incentive rate >> uh translates to LAR handing over $63,000 to the buyer in the form of uh incentives. And uh this is here's a chart. What you're looking at is Lenar's sales incentives on home deliveries as a percentage of the revenue of of that home. And you can see this 14% level is completely abnormal, way elevated versus our experience in the no in the last 10 years. And and obviously they can't keep doing you can do that to get through a weak season. >> You can't just do that forever. So needless to say, the stock got the stock got whacked hard. It's down. It's in a 50% draw down. >> They whacked it off, Michael, >> big time. And uh it's obviously not just LAR. You look at PY DR, all of the home building suppliers. I said this to Ben today on the pod, a great example of how difficult individual stock picking is. Since April 2021, there have been $9 trillion worth of cumulative home sales. Actually, >> $9 trillion. You can only imagine how much of that flowed through to Home Depot's bottom line. >> Tens of billions of dollars. Literally. >> Oh, yeah. >> The stock is flat since then. >> Yeah. So, right. So, what does it take for that thing to go up? >> What's What's this collection of charts you have here? So just tying a bow on this. Where are we in the economy? Jobless claims are strong. Continuing claims are sort of elevated. Redbook sales are strong strong. Travel, we'll talk about that later, are strong. Card spending, we know it's K-shaped. Uh bankruptcies are rising, not great. Business formation is surging. We don't speak about that often, but maybe we'll do that one week. Bank loan growth is slow. >> Desperation. >> Well, I don't know about that. There's there's a lot of technology that's embedded in that. It's never been easier. But anyway, the it is a mixed economy for sure. And if I'd say if it is it getting better, is it getting worse? Obviously, it's getting worse. Hence, terrible. >> Not the same thing. All right. Um, let's do this. We're going to talk about the retail trader wash out. And I'll open the story by sharing this. Citadel Securities nets record 122 billion dollars trading hall in 2025 up 25% from the previous full year. >> Oh my god. >> And you could think of Citadel as the rake. They are the market maker. Every time you buy an option or sell an option or this or that, they're just scraping pennies every day. A lot of pennies. So they absolutely feasted on retail activity which is now 25% of the market. Obviously, it's pulled back since. So, some charts from Gungeon that showed that retail traders have have retreated. Um, all right. We're looking at a chart of retail volumes and the chart shows the retail as a percentage of total single stock volumes over a 5day period and it it it hit hit a fever pitch, fever peak I should say, a crescendo if you will, of 15%. >> And has cooled officially. >> When was that? December. December. >> Yeah. And this is like off like literally off a cliff. But does and I'm trying to figure out does that happen in a lot of Januaries? >> I'm I'm just looking back at the chart and I'm trying to see. >> I don't think this is a seasonal thing. I think it's a stock market thing. The stock market sucks and they're getting burned. We'll get to that more in a second. Zero DTE options, so options that expire in 25 minutes after you buy them, are near a one-year low as a share of total S&P contracts. And I think this is >> this is >> that's the gambler that's the gamblers running out running out of money after five or six trades went against them. It's just not fun anymore. >> It's not fun anymore. >> That's what that's the reality. And and uh I get it. The dispersion in the market, the rotations, the the fact that some of the most popular stocks, not just amongst retail, but like period, are among the biggest losers this year. Stocks that no one's ever heard of are leading the market. Um, like that it's this is not a retail market. You know what two of the biggest stealth winners are in the market this year? >> SanDisk and Sienna. Like >> throw those out. Those are fun. AT&T and Verizon, >> right? Not fun. >> No, no retail investor is trading that [ __ ] >> Like >> that's Jenny. That's Jenny Harrington. Credit to her. >> Yeah. And Jenny's no fun. No, I'm just kidding. >> Um, all right. So Goldman says Thursday saw the most selling from long only investors across their trade floor >> since they began tracking in 2022. And of course the lack of activity from retail investors is whacking off Robin Hood in a real way. The stock is down 54% from its highs. >> I mean this thing this thing is this thing is trading like like they had horrible news. I don't I don't think Robin Hood has had horrible news. I just think >> Well, they did. They did. Uh it's bit. So, options are the number one money maker. >> Yeah. >> Crypto number two. Crypto number two. And the the buy the dip. The dip keeps dipping. >> So, it's Listen, these people, these traders um can come back in a blink. So, I'm not I'm not in any way, shape, or form suggesting that they're gone forever, but a lot of the things that kept them coming back, obviously, it's just not working. >> What do you mean these people? You talking about my Gen Z friends? They'll be back. >> Of course, >> they'll be back and they'll come back smarter. Of >> of course they will. I think I think 2024 and 2025 were sort of toxic environments in that they gave people or 232 for that matter. I basically think we had a three-year period of time that gave people a a false sense of ability and um the dips were bought quickly. The glamour stocks led the market. There's a lot of intuitive stuff going on like um AI is a hot theme therefore buy all these AI stocks and they went up. You had you had things like Oracle doubling like I I just think it was an environment that lent itself to like retail retail alpha if that makes sense. >> It does make sense. The retail trader from 23 to 25 kicked the [ __ ] out of professionals just they did. >> Yeah. And now this right and now this year you you just have like stocks that the retail trader is not interested in or aware of or are leading the market. >> They're not buying energy stocks and industrials. They're just not they haven't heard of these names. >> They right they've never been in a market environment where these names led. I think industrials have the I think industrials as a sector have the most stocks that are still up or something like that. People this is these are not Robin Hood stocks. These are companies that make boilers and and uh and fences like these are they just they don't they don't rise to the the level of awareness for the Gen Z investor. >> You know what stock is rightly getting whacked in a big way. >> Um and this goes to the hurting consumer because this is quite literally the first thing that you stop doing. Door Dash. >> Door Dash is in a 45% draw down. >> Yeah. When you're when the >> first to go >> That's right. When the cost to fill your tank goes up 30% in a month. >> No, dude. That's where you're cutting back. >> And you find that [ __ ] food. >> That's right. Once you Why don't you make a grilled cheese? >> Get off your ass and and and cook something. All right. Um I'm now at the point where I'm reading a Halo article every day. Some days three, five. I don't I can't even keep track. >> Dude, Bloomberg has a Halo section on their website. I >> I'm going to sue everybody. I don't know what else to do. >> You just be flattered. That's all. It's all you can do. >> I'm I'm super flattered and ligious. And I I'm not even asking for money. I just want people to be like, "Down Josh Brown made this up, popularized it, coined it, and we're using it as the premise for yet another research report, yet another article. >> It belongs. It's in the public domain. You did a public service. >> I But I want something." So, I'm not asking for a lot. I just want you like >> you want you want credit. You keep asking you keep asking for it. You got it. You have the credit. Nobody doesn't know that it's yours. >> I did think this was a good article. I emailed the reporter. Don't don't you worry. I was like, "Hey, you know who I am. It's my [ __ ] You're writing about my [ __ ] Uh this is Bloomberg. Private capital firms are starting to swap software systems for hard hats as the AI boom forces the industry into a quick rethink of its priorities. Blackstone, Bane, and Brookfield have all been talking of an increased focus on heavy assets with low obsolescence. This so-called halo trade is targeting makers of everything from ship engines to conveyor belts that are considered less likely to be made EXTINCT BY AI. And then they got a quote from Jonathan Gray at Blackstone about it. And then they said it's also in Europe and >> it's global. >> Halo is everywhere. I >> did you ask did you ask where that chart came from? They showed a chart in the in the article that shows the that counts the number of mentions of the word halo and it goes back several years. I don't understand what >> No, they could not >> like >> it says it's it says data based on prepared remarks and management answers. >> No way. >> No way. No. No way. You You can't tell me on 200 conference calls in 2021 CEO said the word halo. >> It says literally mention of Halo in transcripts uploaded to Bloomberg terminal. Nobody said the word Halo unless it was by accident in 2021. >> You know what this is like? You know the movie where the guy wakes he's a singer songwriter. He wakes up in a world where nobody knows the Beatles ever existed >> and he and he becomes the biggest star in the world because he likes he starts recording I want to hold your hand and uh and he becomes the biggest. Like what do you mean? Like, did I just wake up in a world where people were using this term that I invented two months ago in 2021? What is What is this chart? What What are these What are these people trying to do to me? I guess >> you actually steal it from somebody else. That would be >> I'll kill you. I I'll take my my tire thumper and I'll put an end to you. All right. Um >> All right. >> Oh, put it put the chart up. Let's do the chart. >> I think this is kind of interesting. >> This looks good. you getting long here? >> No, I'm not. Um, but for all the hemming and hawing, the thing hasn't the thing. Listen, >> what's what's the what's the nominal what's the nominal yield? Uh, now >> it's March 26. It's March 24th. >> This thing has obviously puked. This is the P, by the way, this is an ETF of the publicly liquid >> um BDC's. >> And it's gone sideways since February 3rd. >> I am I am not >> I am not calling a bottom. I'm I'm not. >> But here's what I want to say about these things. >> Where did it come from? At 17, it went to 12. And it was at 17 it was probably yielding 8%. What is it yielding now? 13. Not that they're going to pay any of that out. You know how we say all the time that um news follows price? If the stocks aren't going a certain direction, like wherever the stocks are going, that's that's the narrative that is written about it. >> Usually, yeah, >> almost always. Sometimes sometimes there are obvious there are there is news >> there events that change. Yeah. Yeah. I'm with you on that. This is really interesting because I I'm not faulting entirely the media for writing about this. How could they not? It's juicy. It's salacious. The asset class has has 10xed. It's transparent. It's high fees. Like, they should be covering it. But and also, if they didn't, or if they stopped, and I know that's not their job, the prices would not be doing this. Or maybe not the prices, but like it's really interesting for all the heming and hawing, and we're going to continue to cover it. a bad year for the the private BDC's and these are public. Like what does a bad year look like for Cliff Water? Because 2008 was down 6% for the index. So is a bad year down 2%. That'd be really bad. It's just kind of hilarious that we're spending this much time as we should and we will and yet the context is this thing could fall 2% and that would be really really really bad. >> I I guess I'm not following what you mean. It fell. It already fell substantially more than 2%. >> These are the public. >> Oh, you're talking about the private ones. >> Yeah. >> Well, I think the story here is not about the price of the public BDC's or the or the private BDC's. I think the story is we have a situation where um ordinary muppet money was herded into 20 or 30 different products, some public, some private. Unfortunately, in the case of the private BDC's, the entryway is the size of a football field and the exit is the size of a phone booth. And everybody wants out at the same time because they think if they don't get out now, the prices will be worse and maybe even if there are advisers in the mix, which of course there are, the reputational risk as well. And that's really the story. And I don't I don't know that I I know um I know the people that cover this professionally and are investors, they're focused on the prices and the values and the NAV and the discounts and the I get that. I'm saying like for the media, the story is about, oh my god, they did it again. They got all these regular people to buy all these bizarre instruments and now it's going bad. And why they really love this is every single person that runs one of these private equity firms also owns a professional sports team. >> Yeah, >> they are monopoly men. They are billionaires with capital B's >> and the media just they [ __ ] love it. It's like catnip. >> So it's a lot of it's a lot of I knew this is [ __ ] So throw this chart up. This is the >> this is the nav of Aries >> publicly traded. You could buy it tomorrow. Not saying you should. This is a chart of the NAV. So, not the price. Okay. The net asset >> asset value of all the assets, right? >> Based on their own based on their own calculations. It needs to be said. >> So, so it's worse than that. It's based on calculations of a third party that they paid to come up with the NAV. >> Yeah. I mean, >> so show So, show the next chart. So that's the that's the public one and this is the private one. And this is the historical performance of Apollo's debt solution BDC, >> right? This doesn't trade. This does not trade. >> This does not trade. >> They tell you what it's worth every time they put out a report. >> This line of up and to the right with zero interruptions and there's been some [ __ ] between between January 2022 and now. Now it went down a little bit. Uh actually went down more than a little bit, but since then straight up and to the right. This is the part that the media rightfully says, "Wait a minute." >> Yeah. >> Hold on. You're telling investors that you've got 600 basis points above sofur, no volatility. >> Yeah. >> Up until the right only. Always semi-liquidity. All right. Okay. I want to use Apollo again. Look at this portfolio. This is for their private BDC. They don't have a public one. This is for Apollo's private BDC. Show the portfolio overview. There are uh the show the industry diversification, John. Do we not have that? Oh, I put this in late. My bad. Um all right. Anyway, there are uh this is 100% first lean. 96% floating rate and unlike Bred who I said 26% of the portfolio is is software related. Uh >> oh. >> Yeah. >> With that's not what you want to hear. >> With Apollo, it's 12%. There we go. Thank you. >> We have it. Okay. So, look at this industry diversification. It's 12% software, 7% healthcare providers and services, 6% financial services. >> Look how many slices there are. >> All right. So, my point is, dude, this is not going to blow up. And I don't know anything. Okay. I don't I maybe I look like a giant jackass, but these are not dumb people. In fact, they're the opposite. >> Yeah. But this is the problem. But this is the problem. >> You're referencing Apollo. They are the best in the world at what they do. There's 50 other companies in the same space that are not as good at Apollo, don't have the pedigree, don't have the track record, don't have the amount of analysts covering um or you know all of these credits that are in these portfol you you can't show the gold standard and draw just like you wouldn't show the worst player in the industry and say this is what it all looks like. >> So the point so the point is they are getting swept up in this just like everybody else. There's no reason why they would be immune. The stock is down 40%. >> Yeah. >> And historic default rates, whatever they are, like I guess my point is this. This stock is trading like their loans are going to absolutely get cremated. And maybe they will, and maybe they won't. >> I don't think so. I don't think so. I don't think the stock is down 40% because people think Apollo's whole portfolio of loans is going to blow up. I think you're wrong. I think the stock is down 40% because it went up 100% on the expectation that Apollo was going to be able to grow 20% a year for the next 5 years as it onboarded 20 million retail investors. And that dream has gone up in smoke and with it the multiple associated with that sort of growth. And what you're seeing is give back from the gains. Th this was one of the big winners over the last few years as private equity and private credit came into their own on Wall Street. This stock went up huge. So did Blackstone. So they all did, but this one went up a lot. And what you're seeing now is not a referendum on the credit quality of their loan portfolio. No way. This be down way more. What's actually going on is people are saying, "Oh [ __ ] worst fundraising environment ever coming up for the next one to three years while they wait for us all to forget about the redemptions and the asset gating." And that's the reality. And people could look at it and say, "Oh, it's cheap." Yeah, probably is. It's also going to be left for dead. I don't think people are going to forget so easily. >> I agree. I don't All right. That's what That's what you're That's what you're witnessing here. >> I completely agree. Everything you just said is correct. The uh the difference, >> I'm really good at this. >> The difference between the BDC's and the interval funds, they look almost identical. The difference is the interval funds have a legal obligation to buy back up to 5% of the shares outstanding on a quarterly basis. >> Yeah. >> And so Cliffwater is the biggest interval fund and they will be buying back 5% of shares for who knows how long. And who knows how long their credit facilities last and who knows if they have to offload some of the loans. No, this is all to to be determined. There's a couple blow over. I don't think it's probably I don't think it's going to. It's going to be a while. The loans could turn out to be fine if people could settle down. Um but the private BDC's have no legal obligation. Now, there could be bigger problems if they just say no, we're just not doing it. We're not giving you guys money back this quarter. It it would impair it's for the betterment of the shareholders. We'll see how this plays out, but it is obviously not going away anytime soon. >> Yeah. And you know, a lot of the apologists for the space and the defenders have said, "Well, look at Beit. They were in the, you know, they were they had their turn in the in the sleeping bag as everybody beat them with bars of soap and batteries and socks. Um, I know it's oddly specific, but I went to a very violent summer camp. They and they had their time and then Bit eventually was able to say, "Okay, redemptions are no longer an issue. Call us. Whatever you want, you could have back." Because the ship was was writed. They steadied the ship. They they lasted. They lived through it. Um and so a lot of people have said that's what will happen here. And maybe that's true, and I hope so. I just don't know that this is going to go the same way. There's >> real estate. Real estate, sorry. Real estate, a real estate portfolio has a tangible quality to it that a portfolio that is 40% soft SAS software just doesn't have. >> Ding, ding, ding. The problem is these companies say, "Listen, the historic default rate is this and the historic recovery rate is 94 cents on the dollar. We're senior secured. We get paid back. Yeah, the equity will get wiped out. will get paid back with what? >> There's no factories or land or or inventory. It's software. What are you getting paid back with? >> That's right. >> So, a a better comp and also not apples to apples is I follow the Substack Covenant Light who writes all about this type of stuff >> and Apollo was in the middle of it. Remember the energy trade the unwinded of 2014 2015? >> They've been through they've been through that with this. So, they survived. Listen, they're gonna survive this. I mean, let's let's not be, you know, ridiculous here, but it is going to be a very slow bleed and where it ends, nobody knows. All right, let's keep moving. We just did a lot of that. >> I I mean, do you want do you want the good news? >> I'd love good news. New opportunities are being created. If you do if you do not have money at risk now and you were ever interested in exploring adding private credit uh to your portfolio, you like over the next year, you're going to get a crack at I think some distressed valuations in the space and uh choose your choose your fund uh very carefully if if this is something that you want to do. Definitely a better entry than two years ago when it looked maid offesque. Just every month it's up. No, I'm I don't I can't t believe me, I won't be the one that gives you the timing of it. >> I only mean I only mean literally the prices have not come down yet. And this is part of the problem is that there are there is leverage here >> and if these companies are tapping their credit facilities at the banks and they can't mark down their loans because guess what? Some of their covenants get triggered or tripped by the banks. It's like wait a minute you can't you can't have more with three times leverage like no you got to sell we need some money like a margin call. >> So then that's more selling of portfolio holdings which puts more pressure on the overall asset class. >> It's it's not great. >> I'm I'm not saying like rush off the sideline. I'm saying if you were interested in the space. Okay. It's about to come your way. You didn't have to chase it. >> Yeah. It's not all bad. Okay. >> So software got whacked off again today. I mean that was that was a baby bounce, dude. So throw this throw this chart on the screen. >> We did have some >> to my credit I didn't believe the bounce on Monday. >> Okay. >> To my credit >> we had we had uh we had rotation today which is good. Financial stopped going down. You like that? At le uh at least the big bank stopped going down. Um we had 260 stocks I think were up today but the NASDAQ was more decliners than than advancers. >> Does Microsoft does Microsoft go down every day? >> Pretty much. So, let's go through some charts. This is IGV. It's Salesforce. It's Microsoft. >> This chart, this chart looks like it it it looked me the wrong way on the subway. >> It's just >> So, this thing went from like to 75 >> and it, you know, it's a baby bounce and it can't even sustain that for a minute. Like, not good. >> Disgusting. >> Not good. Um, next chart, please. Uh, I threw two in IGV here. Let's Okay, perfect. Thank you, John. Um, Microsoft, are you kidding me? I >> I mean, it's got like it looks like the the devil character from South Park. Look at the horns at the top. >> It just it looks like >> it looks like Satan. This How could you buy this? >> It >> Well, I c every candle is redder and longer than the one before. >> I will be buying the absolute snizz out out of Microsoft, but not going down. >> Support at 350. Maybe we'll see. >> That was liber Well, that was the liber That was the liberation day bounce at three uh 350 was a false breakdown. And then that gap that gap up is when Trump tacoed. >> I need I need a down 4% day that closes up 2%. When that happens, I'll buy it, but not before that. And now they're getting to Google. >> Why not? Wait, can we can we pause on Microsoft? Why not just buy calls? >> You don't want to be long this stock. You just want the bounce, right? You see it at 355. just just buy the 375 calls. It's not like a base it's a it's a base hit. It's a base hit, but you commit very little capital and it's not like a position in your portfolio. >> Okay, I will report back on that. I like where your head's at. >> Uh Alphabet like the secular winner >> has now broken below previous support. Not great. >> Um I wrote this up. I wrote this up in best stocks the market with Sean. yesterday and I basically said this I hate this chart. Um sometime not everything we write is like go buy this. We said >> lay off Alphabet here. It's in no man's land technically and we said Apple looks like it's about to break its 200 day and that might have happened today. Um so I I I I just I look at these stocks and I understand what's happening. They're being used as a source of funds. >> Yeah. >> And they're big and there's a lot of money and there's a lot of liquidity in these stocks and people want liquidity right now >> and they're just pulling it out. last chart chart kid made this for me. I wanted him to show me since uh since software bottomed on 20 on 223 what stocks so there was a lot of bounces but as we can see in the on the left a lot of stocks bounced and rolled over they did not keep their bounce a lot of stocks did so here's the stocks that did not bounce and there's there's there's others but and these and these are particularly the stocks that have been in the AI disrupted camp okay >> so S&P Global a stock that I bought and sold rolled over big time same thing with CrowdStrike Same thing with Salesforce, Service Now, Workday, Adobe, and FICO. Forget about it. My god. Um, and in the winter camp, >> we said that but we said this. We said with those stocks, you can't prove a negative. The the sellers the sellers are are basically saying, I know they are in some way disrupted. I don't know the extent. Therefore, I'm selling every upday until I lower my risk here. The sellers are not saying like what's the valuation? >> Yeah, >> it's a much more existential issue here. And you can't pro none of those Service Now can't come out and say, "All right, we've proved it. Eureka, >> here are the results from from the lab. We are 100% undisruptable." Nobody could say it. >> Knowing what little I know, I do believe that this is overblown. I do believe that the incumbents are ultimately going to be the biggest beneficiaries. >> Prove it. >> Totally. Totally erroneous >> depending on your time frame. Prove right now. Prove it. Right now the sellers have the sellers are in control. Period. Hard stop. That's it. And they might look foolish. >> Some of those stocks have insider buying. >> Doesn't matter. Nobody cares. >> Yeah. Nobody cares. >> Um so are these a good buy? Well, what's your risk tolerance? How much tolerance for pain do you have? Blah blah blah blah blah. Okay. Stocks that did stick to landing. Dell Expedia. That's a surprise to me. Netflix and even that rolled over pretty hard today. So maybe that didn't into it. Same same deal. Actually, you know what? A lot of these stocks rolled over today. Um Palunteer block. So yeah, man. It's hard. The sellers the sellers are in control right now of these names. >> Those those uh news clips with the 5hour lines at Atlanta airport and um and LaGuardia. >> Could you imagine? But those are like advertisements for being long Expedia because look at what look at what people are willing to endure in addition to the higher jet fuel price uh raising ticket prices. People are standing in LaGuardia for 5 hours just to get somewhere. >> That's super Polish Expedia in an alternate universe. Um all right, we're going to do this college grad unemployment thing. I I'm telling you, >> I think I'm on to something. I think this is going to be a politically explosive issue come June when yet another wave of college graduates uh leaves the commencement ceremony, spends 30 days hunting for a job, looks at mom and dad um and goes, "I I don't know what you want me to do." And I I I know that this is an acute thing to me because I'm in this and and so I know part of this is like me projecting this onto everyone, but it's too big to ignore. It's too big to ignore. Um co-pilot tools, LLM tools, these things are carrying out the exact functions that had formerly been the province of the college-aged uh college grad Excel monkey for decades. and hiring managers at companies are being told stop. Don't bring on how many PE college grads do we normally hire? 60. Okay, hire 10. Let's see what happens. Give them the give them hire 10. Give the older people more AI. Let's see what happens. Axios wrote about this today. Chart on. What you're looking at here is a thousand US adults. The gold line is non-ol grads and the pink line is college grads. And they're asking people what they think. Is this a good time to find a quality job? And as you can see in the non-ol grad camp, things look okay. 44% says yes, it is. 27% college grads say it is a good time to find a job, which means almost 3/4 say that it's not. uh workers with higher levels of formal education are way less optimistic than those with less school. >> Um and and just just to like put a a bow on this, that is the widest gap on record going back to 2001. >> So it always was the case that people with college degrees were more confident about whether or not it was a good time to get a job than people without college degrees. And that is now flipped. And the gap is exploding. The unemployment rate for uh college grads is now 6%. For the overall economy, it's like 4.2 or 4.3. And then they took a look at Indeed. There were 29% fewer job listings for software developers in March than there were pre- pandemic. That is massive industry uh shrinking. um 27% fewer marketing jobs, 36% fewer listings for media and communications roles. These are college education jobs >> and they are literally vanishing right before your eyes. We made two charts. I know Sean uh and Matt worked on these. I want to put these up. This is a be this is uh unemployment rates for recent graduates versus all workers. And I want you to pay attention, Michael, and audience to the red. This has been a trend that's been enforced since the pandemic and has gone into hyperdrive since the advent of chat GPT. And when the bars on the bottom are in the red, that is a higher unemployment for recent grads versus all workers. our entire lives. This goes back to 1990. We have never been in an environment where it was harder for a college educated kid to get a job than for a non-educated kid to get a job. Our entire lives until the last 5 years. And now it's picking up steam. Um let's do this uh unemployment by major. Now don't laugh at people that got an anthropology degree. You ain't so You ain't so brilliant yourself because look what's right below that. Computer engineering 7.8% unemployment rate. Computer engineer. Let me repeat. Computer engineering 8% unemployment. Computer science 7% unemployment. Remember 10 years ago where you laughed at people and said learn to code. Those are those people. 8% unemployment for the people that quote learn to code. So, you could laugh at the art history people and the environmental studies people and and and you can do that if you want. You're going to laugh at a computer science uh major. Um the 10 majors with the lowest unemployment, special ed, miscellaneous education, elementary education. So, that's tax dollars, guys. um agriculture, foreign language, geography, engineering, social services, nursing and secondary education. So plenty of employment still in um government supported types of jobs and in education and not much else. So we have a lot of people educating people who are going to come out of school and not have anything to do. and it looks like it's getting worse. And I do think this will become a political issue. Um, and and the AI thing is going to be under the microscope like never before. And you're going to see, I don't know if it's the Republicans or the Democrats, but somebody's going to push back on all this and ask the question out loud, why are we allowing this? And I'm not telling people how to feel about the issue, but I really do think it's going to come to a head this summer. What do you think? I agree with everything you said. I think this is terrible. I'm surprised that it's only 5.6% or 6 point whatever it is. I I would have thought it would be higher. I don't know how this manifests itself politically. I don't know what the solutions are. >> I think that number will be I think that number will be 6 to 7% by the time the this next wave of college grads. They don't graduate until May. >> Yeah. Who's hiring these kids? I mean, many of them will get hired, but less than last year, certainly less than the year before. And again, it's not that there are no jobs. It's not the labor market is crashing. It's a slow to hire environment cuz people are like, "Well, let's just see. Let's wait and see what all this AI that we're spending all this money on. Let's see what it can really do before we just add the requisite body count that we've been uh headcount I should say that we've been accustomed to adding each year like almost on on uh on automatic. Let's not be automatic. Let's let's hang tight. And you're seeing that sentiment multiplied by I don't know 8 million businesses large and small. And this is what the the net result is. And people are not going to be happy. Here's what here's one area that I could see uh hiring continue at the pace that it was historically. Heavily rated regulated companies, banks for example, that need to carry favor in Washington. They say you hired 2,000 kids last year, >> you're not hiring one less than 2,000 kids this year. Something like that. I know that's a that's a band-aid. J JP Morgan spent the last three years telling people that they're basically automating their own jobs and then and then uh you know it's it's not even about laying people off. It's the not hiring. >> Yeah. >> And that's why I think the labor statistics that we're all citing to say that the economy is pretty good. It's holding up. It's hanging in there. It's misleading. It's older people at the top of the income scale who just aren't worth replacing because the AI is not skilled. Those people are fine. Young people who now not only can't afford to buy a house, also can't afford to fill their car's gas tank and have no idea where they're going to get hired. It almost doesn't matter what they have a degree in. >> This is this is >> I'm telling you it's terrible. And I mean >> I agree. I agree. I shouldn't be wor This is the This is I think I think the biggest like hum human humanitarian I don't know crisis is strong word, but this is the big one. This is really bad. If anyone is still out there and hasn't killed themselves yet, let's do make the case. >> Yeah. All right. So, you mentioned that ex that what's going on in the airport is a is a great case for Expedia. I actually made the case last year. I don't know if you remember this. In September, I made the I made the case for Clear and my case was not scientific. It was just I heard her on Patrick Ostron's podcast and I remember she said, "I am a [ __ ] animal." And I wanted to bet on her and I and I never did. And uh and the stock is absolutely on fire for reasons that are for reasons that are very very obvious. >> Why did you buy? You just you just forgot to buy it. >> I just kind of forgot about it. Um John saw the stock price up there. >> Yeah. >> So massive buying, massive breakout, huge volume. >> When did you when did you tell us about this? >> September. >> Holy [ __ ] It was like 30 bucks. >> Yeah. So I, you know, probably not the best entrance today, but if it has a low volume pullback, I probably still won't buy. >> This is just clear at the airport. Like the eye scare, that's it. >> So I'm sure >> people don't cancel this. They get a free they get a free trial and then they start paying. >> The retention ratio is actually less less good than I thought. It's like 92%. It's not bad. Um, they actually stopped reporting it, which is a little bit concerning, but >> ironically, I'm sure that people that pay for Clear were losing their goddamn minds because that was probably no better than TSA. I mean, I'm sure it was a little bit better, but I bet you the Clear line at LaGuardi was at the exit at this point. So, the company is working. The margins are improving, the cash's accelerating, but what an unbelievable commercial this experience has been for. >> Yes. Are those people like speedr runninging the security line? the people that have clear >> probably not because I've been >> it's probably better but it's probably better >> but it's probably terrible because I've been in many clears around the country where there's just too many people there's nothing they could do about it I don't know how you get more monitors but I was at Miami two weeks ago and I went straight through with clear it was wonderful so I don't know but >> don't worry they sent ICE to the airport to help with the TSA lines and if the um if the militias are not successful at speeding things up they will send in UFC fighters, I'm told, is the next wave of the same. >> I think I feel like it'll be fine. All right, let's do mystery chart and then we'll get out of here. >> My mystery chart. Please pop pop it up for us. All right, this is a sector of stocks. It's global and probably the only one that looks like this right now. >> Yeah. >> And I would love to hear what you think it is. >> Oh, these have to be energy stocks. >> Final answer? >> No. What am I looking at here? >> You're looking at stock charts. >> Oh, individual stocks. >> They're all different stocks and I told you it's international. There some of them trade in different currencies. So Sean like normalized it. >> The final answer. >> Yeah. Okay. You'd be wrong, sir. >> Pop it. >> Oh, okay. >> Oh, the only other sector that's up. >> Yep. That's good stuff. >> You made a good guess. You probably made the guess that I would have made because I don't know what these charts look like. Um, chart back on please. >> This is SKH Highix, Samsung, SanDisk, Micron, Western Digital. >> Western Digital Western I'm sorry, my bad is so hot right now. >> These these stocks are just I don't know even know what to say. This is this year's bubble. It'll it'll get real ugly for the people that buy it today, I assume. Uh although maybe I would have said that a week ago and they're all up another 15%. So, >> just sell before everybody else does. >> Sell, right? Sell before everyone else does. All right. Great job with the chart, uh, Sean and John. Thank you guys. All right. Hey, everybody. Did you know tomorrow is Wednesday, which means an all new Animal Spirits podcast with Michael and Ben for the YouTubers right here on our Compound YouTube channel, Spotify, Apple, anywhere fine podcasts are played. We'll have an allnew Ask the Compound. After that, that'll be live. Duncan and Ben Carlson are taking your questions. So, get those questions into us. What is the email address, guys? I think it's ask >> ask the compound >> showgmail.com. Ask the compound show@gmail.com. If you want to have your question featured by Ben and Duncan and their special guests on Friday, we'll have an allnew Compound and Friends. Can't wait to see you then. Thank you guys for listening. God bless. Good night. Heat. Heat.
Actually, the Economy is Terrible | WAYT?
Summary
Join Downtown Josh Brown (CEO, Ritholtz Wealth Management) and Michael Batnick (Managing Partner, Ritholtz Wealth …Transcript
So sorry we're late. We're live now, I think. >> Guys, give confirm. >> Give us a give us a sign. Tell us that we're actually here. >> All right. Sorry. I was busy negotiating a ceasefire in the Gulf the street. Looks like we got everything under control. I think it's a 30-day ceasefire. Did you read that? >> I saw a tweet. >> All right. 30 days. >> Yeah. Right. >> Yeah. 30. Well, we already won, so I don't even understand why it's a Right. Wasn't there a victory? All right, we're back. It's another edition of all all new edition of What are your thoughts here on the Compound channel? First time listeners and viewers, my name is Downtown Josh Brown here with my co-host, Michael Batnik. Michael, say hi. Hello. Hello. You guys, we uh we're super excited to see everybody that's here for the live. I saw literally every pounder I've ever heard of, plus all sorts of new names and faces. Thank you guys so much for showing up. Uh last week we broke a record, had over 2,000 people come for the live. We'll see how we do tonight. Uh, we have an ad read. We'll get through this and then we'll get right to the show. We have tons to do. Tonight's show is brought to you by Betterment. >> That's right, Josh. Every RA knows attention. You don't want to turn people away. You don't want to require high minimums. And you want to help clients who are just getting started because that's that's where long-term relationships begin. But here's the truth. Those simple accounts, they take a lot of work. Account opening, trading, rebalancing, and before long, your staff and back office are underwater and trying to stay afloat. That's why established RAAS are turning to Betterment Advisor solutions. It's the platform built for segmenting your book and streamlining those smaller and simpler accounts. Explore what segmentation can do for your business today. Lower your operational lift, but keep your standard of service high. All with Betterment Advisor Solutions. Your biggest regret will be not doing it sooner. Learn more at betterment.com/ >> Betterment Advisors/advisor. All right. >> Thanks. Thanks to Betterment. Not only are they a sponsor, we actually use the service ourselves at Rholtz and uh we appreciate it. Okay. Uh let's let's let's not beat around the bush here. The economy >> the economy is just not good. >> It's and it's get and it's going in the wrong direction in many ways. Not in all ways, but in many ways. And it's super noisy and hard to um just stare at any one data point and try to draw a conclusion. And we don't try to do that. But like um we came into January talking about like four or five% GDP and now we're scraping the bottom. We're talking about.7% growth. And I know that number moves and it's varied and it um is prone to constant revisions. So it's not the end all be all, but I do not think it's a good economy right now. I it's certainly not as good as it was last year and the year before. It's um >> it's it's it's mid as hell and uh I think the market is sort of reflecting that to some extent. What do you think? >> I don't know. The market doesn't really care about the economy. I think there's a lot of >> Yes, it does. Chart on >> which chart? >> On Friday, the S&P 500 broke below its 200 day moving average for the first time since May 2025. And then after the close, Trump tacoed the Iran situation with a tweet about we're in talks with the Iranians if there's any left and uh they want to be cool and we're going to figure some [ __ ] out. And then Iran came out and said no, nobody's talking to you. There are no deals. There's nothing even even being discussed. Uh the market didn't seem to really care. This is like part for the course. And uh then it looks like today after after the close there was some sort of a ceasefire announcement and that's great. Uh we like a ceasefire I guess but the reality is it doesn't matter that much outside of the price of oil. What what to me I think is really worth talking about. Thank god earnings growth is holding up. I think that's what's keeping the S&P 500 from being down worse than 7%. Mhm. >> Um because almost everything else that you could point to seems to be going in the wrong direction and I want to show you a few things and just get your your read on the situation. So Brian Westberry at First Trust is talking about the hard numbers. Real GDP growth for the fourth quarter of last year according to Atlanta Fed uh GDP now which is a model. Um they were talking about 5.4% in January. Now it's 7%. Um, we've had a bunch of punk labor reports and uh, private payrolls were up 33,000 per month. Um, Jerome Powell said the other day there's been effectively zero job creation so far this year. And West points out if you pull out health care and social assistance, private payrolls are actually down. Manufacturing jobs are down. Retail jobs are down. The inflation numbers are not good either. uh he calls them bizarre. Producer prices rose.7% in February are up 3 and a.5% over a year ago. But the increases are on the services side, not the good side, which is actually not the thing that people were worried about. And yet here we are. Um prices for goods in the PPI are up 2 and a half% over the last year. Services are up 3.8%. So that's strange. There's some weird stuff going on with consumer prices as well. Uh it's very tough to look at this through the lens of a normal economy because so much of this has never actually normalized from the pandemic. But um when you put those things together, it's just not a pretty picture on the hard data side. What are your thoughts? >> The thing that drives the economy is consumer spending and consumer spending is obviously going to be impacted in a bad way by higher gas prices. The good news is the stock market doesn't trade off GDP, but the bad news is the GDP is contracting, I think, because the consumer is probably weakening. And it is a middle, it is a muddied picture, as it almost always is. There's some good, there's some bad. Um, retail sales are not growing. Consumer spending is pretty sluggish. So, I would describe the economy as fine. It's not like the defaults are picking up in a meaningful way. The labor market's soft. Uh, not a lot of hires. Not a lot of fires. Initial jobless claims look totally fine. Continuing claims look totally fine. So it's it's middle. I I would say like it's nothing. It's not it's not great at all obviously. And it's I wouldn't say it's terrible. It's somewhere in between. >> I think it's terrible because I don't think of the economy as being a stat in a static condition, good or bad. >> You thinkable? >> I think the economy is terrible because I always think about the economy as something that's on its way in one direction or the other. and the direction that it's on its way to is the wrong direction. So that's why I would say ter that's why I personally would say this sit this economic situation actually is terrible. >> I don't think you know terrible the word you don't know what that word means. >> I'm not saying I'm not saying it's the worst economy I've ever seen. I just think it's a terrible economy. >> We uh we we have had interest rate cuts. Um, we now have uh we now have fiscal uh stimulus in the form of the tax bill that was passed last year, which takes effect this year. We have this AI boom that is absolutely creating um economic activity and you add all those things up and they're not really helping most people. >> Well, it's creating economic anxiety is what it's creating. >> It's it's I mean, look, I I think it's not great. And you you said uh there's no problems of credit yet or what did you say? How did you phrase it? >> I said credit quality is fine more or less. I mean there there are pockets of problems. >> Yeah, the pockets of problems are getting bigger. This is Peter Bvar today. Shifting gears to private credit. I'm sure you all saw the Apollo news keeping its withdrawal rate at 5% which is the right thing to do rather than satisfy the 11% requested. The fact that 11% is being requested is the problem. Um, also the Moody's downgrade of the FS KKKR Capital Corp Private Credit Fund to junk status. Yes, I do believe some credit issues are surfacing, but will instead state here again the unhealthy relationship between private credit and some in retail with the differing time horizons and views on liquidity. Um either way, an increase in redemptions and a rise in default rates will lead to a higher cost of capital for borrowers and a tightening of lender lending standards. So this what I mean it's not like in it's not in the in the garbage yet, but that's the direction. So when I say terrible, these are the things that you don't want to see. And here's uh Peter posted a chart of the LSTA leverage loan index. I'm not sure the I think on the Y ais he's indexing to 100. >> I think he's indexing to 100. But again, we're we're we're talking not the absolute level. We're talking about directionally. This is not the right direction. This is not what we want to see. >> Yeah. Financial financial conditions are tightening and the cost of capital is going up. Interest rates going up meaningfully is not really what you want to see. So, I'm not here to say that the economy is good by any means. I think terrible is a bit of a stretch. In fact, I know it is. Here's what I will give you, though. It is remarkable to me, and I know we're about to talk about it, that the economy has done, even fine considering that the housing market, a third of the economy is absolutely frozen. Frozen solid ass. The housing market is just absolute ass. Look, chart on. Okay, there's a lot going on here. The top line is the 30-year mortgage rate, which drives a lot Um, obviously if you have a low fire, low hire environment, you're not seeing huge dislocations in the labor market. The only other thing that would have as big of an impact would be what the cost to borrow to buy a home is. And it's stuck above 6%. It almost fell below for like 10 seconds, but this is now multiple years of a 6% plus 30-year mortgage rate. Here's the uh in the next pane uh US existing home inventory and you can see a pattern of higher lows. Inventories are starting to rise. I wouldn't say that on the surface that's definitely a negative because you know I think for a lot of reasons we've been underhoused and we've wanted to see that come back but I think it's more indicative not of a lot of building but just a lot of not buying. >> Next. >> Yeah. Go ahead. Uh, US housing starts. Okay, we're doing some more building. It's not it's not shooting the lights out, but not not the worst thing. The bottom pain, though, really for me is the story. This is US existing home sales, and you can see we are at uh what looks to be 10-year lows. Uh 4 million US existing home sales. These this is yearover-year data. U they're showing you when you look at the trend. And to Michael's point, since the middle since let's let's call it 2023, it's now almost the middle of 2026. It's basically 3 years of a flatlining US existing home sale. And that wears on people because people that want to sell uh aren't aren't getting the amount of interest from buyers that they hope they'd get. Prices are affected, etc., etc. Um, let me show you a couple one other Wait, hold on. Before you do that, I'll do you one I'll do you one worse. If you look at US pending home sales, so combining existing and new, all-time low. Alltime low. Nothing is happening. >> Now, why why is that? Why does that matter? >> Here's where I want to go. So, I say the economy is terrible. This is the most important part of the economy for most Americans outside of whether or not they have a job. this like like one, two, and three is do I have a job? Okay, great. Number one. Number two, what is the situation with whether or not I can buy a house, sell a house? What's my home situation? And then number three probably has something to do with a car. Um, and that's it. It's not the stock market. It's not Bitcoin. This is not the things that really matter to most people. Roughly 65 to 70% of Americans own a home. Housing accounts for 25 to 30% of total household assets. For the median family, it could be 70% of their net worth. >> And that creates maximum sensitivity in the consumer economy, the real economy to the prices of houses, the availability of houses, what they're worth, whether or not they can be sold. and and that is the real wealth effect away from the top of the K. Um, a 10% move in home prices produces a meaningful change in perceived wealth for most households. A 10% move in stocks doesn't really change all that much on the ground for for the the economy. Um, and here is the K Schiller 20 home price index. So these are the 20 biggest housing markets in the United States averaged. And uh what you can see here is we may be going negative uh in in home prices on a yearover-year basis. Um home prices are up 1.4% year-over-year, which obviously is not the end of the world. But >> so what, dude? This is not the story. >> The story is the chart that shows the number of home buyers. >> This is Denny. >> This is the problem. This is the whole kit and kaboodleoodle so to speak. There are this is the opposite of the pandemic when you listed a house, you sold the house in 20 minutes, best and final, who's going to one up it right now. There are so the ratio of sellers to buyers is in a historic imbalance. And the problem >> it's almost 2 to1 for the people listening. It's it's 2 million versus 1.3 million buyers. So, the big problem, I mean, this is you're looking at it, but it's that home prices aren't budging. They're not coming down, and they probably will, and they definitely have to. And you combine that with the fact that mortgage rates are going in the wrong direction. It's really ugly, and it's not getting better. >> So, Red Fin says there were 630,000 more sellers than buyers in February. >> Yeah, that's right. 40 46.3% more sellers than buyers. That is the largest gap since Red Fin began tracking this in 2013 and a huge jump from this time last year when there were 29% more sellers than buyers. And we didn't think that was great. This is way worse. And um it's it's it's seasonally adjusted which means this is this is not just about oh it's March, wait till May. It's a it's a bigger story. There are two million people selling a house right now and just not enough not enough uh interest in buying. Um one other thing, one of the big home builders, LAR, in order to maintain sales in the current environment, they spent an average of 14% on the final sales price on incentives in the first quarter of this year, which is back to 2010 levels. They had to do this [ __ ] after the housing crisis. So, in other words, >> a $450,000 home sold with a 14% incentive rate >> uh translates to LAR handing over $63,000 to the buyer in the form of uh incentives. And uh this is here's a chart. What you're looking at is Lenar's sales incentives on home deliveries as a percentage of the revenue of of that home. And you can see this 14% level is completely abnormal, way elevated versus our experience in the no in the last 10 years. And and obviously they can't keep doing you can do that to get through a weak season. >> You can't just do that forever. So needless to say, the stock got the stock got whacked hard. It's down. It's in a 50% draw down. >> They whacked it off, Michael, >> big time. And uh it's obviously not just LAR. You look at PY DR, all of the home building suppliers. I said this to Ben today on the pod, a great example of how difficult individual stock picking is. Since April 2021, there have been $9 trillion worth of cumulative home sales. Actually, >> $9 trillion. You can only imagine how much of that flowed through to Home Depot's bottom line. >> Tens of billions of dollars. Literally. >> Oh, yeah. >> The stock is flat since then. >> Yeah. So, right. So, what does it take for that thing to go up? >> What's What's this collection of charts you have here? So just tying a bow on this. Where are we in the economy? Jobless claims are strong. Continuing claims are sort of elevated. Redbook sales are strong strong. Travel, we'll talk about that later, are strong. Card spending, we know it's K-shaped. Uh bankruptcies are rising, not great. Business formation is surging. We don't speak about that often, but maybe we'll do that one week. Bank loan growth is slow. >> Desperation. >> Well, I don't know about that. There's there's a lot of technology that's embedded in that. It's never been easier. But anyway, the it is a mixed economy for sure. And if I'd say if it is it getting better, is it getting worse? Obviously, it's getting worse. Hence, terrible. >> Not the same thing. All right. Um, let's do this. We're going to talk about the retail trader wash out. And I'll open the story by sharing this. Citadel Securities nets record 122 billion dollars trading hall in 2025 up 25% from the previous full year. >> Oh my god. >> And you could think of Citadel as the rake. They are the market maker. Every time you buy an option or sell an option or this or that, they're just scraping pennies every day. A lot of pennies. So they absolutely feasted on retail activity which is now 25% of the market. Obviously, it's pulled back since. So, some charts from Gungeon that showed that retail traders have have retreated. Um, all right. We're looking at a chart of retail volumes and the chart shows the retail as a percentage of total single stock volumes over a 5day period and it it it hit hit a fever pitch, fever peak I should say, a crescendo if you will, of 15%. >> And has cooled officially. >> When was that? December. December. >> Yeah. And this is like off like literally off a cliff. But does and I'm trying to figure out does that happen in a lot of Januaries? >> I'm I'm just looking back at the chart and I'm trying to see. >> I don't think this is a seasonal thing. I think it's a stock market thing. The stock market sucks and they're getting burned. We'll get to that more in a second. Zero DTE options, so options that expire in 25 minutes after you buy them, are near a one-year low as a share of total S&P contracts. And I think this is >> this is >> that's the gambler that's the gamblers running out running out of money after five or six trades went against them. It's just not fun anymore. >> It's not fun anymore. >> That's what that's the reality. And and uh I get it. The dispersion in the market, the rotations, the the fact that some of the most popular stocks, not just amongst retail, but like period, are among the biggest losers this year. Stocks that no one's ever heard of are leading the market. Um, like that it's this is not a retail market. You know what two of the biggest stealth winners are in the market this year? >> SanDisk and Sienna. Like >> throw those out. Those are fun. AT&T and Verizon, >> right? Not fun. >> No, no retail investor is trading that [ __ ] >> Like >> that's Jenny. That's Jenny Harrington. Credit to her. >> Yeah. And Jenny's no fun. No, I'm just kidding. >> Um, all right. So Goldman says Thursday saw the most selling from long only investors across their trade floor >> since they began tracking in 2022. And of course the lack of activity from retail investors is whacking off Robin Hood in a real way. The stock is down 54% from its highs. >> I mean this thing this thing is this thing is trading like like they had horrible news. I don't I don't think Robin Hood has had horrible news. I just think >> Well, they did. They did. Uh it's bit. So, options are the number one money maker. >> Yeah. >> Crypto number two. Crypto number two. And the the buy the dip. The dip keeps dipping. >> So, it's Listen, these people, these traders um can come back in a blink. So, I'm not I'm not in any way, shape, or form suggesting that they're gone forever, but a lot of the things that kept them coming back, obviously, it's just not working. >> What do you mean these people? You talking about my Gen Z friends? They'll be back. >> Of course, >> they'll be back and they'll come back smarter. Of >> of course they will. I think I think 2024 and 2025 were sort of toxic environments in that they gave people or 232 for that matter. I basically think we had a three-year period of time that gave people a a false sense of ability and um the dips were bought quickly. The glamour stocks led the market. There's a lot of intuitive stuff going on like um AI is a hot theme therefore buy all these AI stocks and they went up. You had you had things like Oracle doubling like I I just think it was an environment that lent itself to like retail retail alpha if that makes sense. >> It does make sense. The retail trader from 23 to 25 kicked the [ __ ] out of professionals just they did. >> Yeah. And now this right and now this year you you just have like stocks that the retail trader is not interested in or aware of or are leading the market. >> They're not buying energy stocks and industrials. They're just not they haven't heard of these names. >> They right they've never been in a market environment where these names led. I think industrials have the I think industrials as a sector have the most stocks that are still up or something like that. People this is these are not Robin Hood stocks. These are companies that make boilers and and uh and fences like these are they just they don't they don't rise to the the level of awareness for the Gen Z investor. >> You know what stock is rightly getting whacked in a big way. >> Um and this goes to the hurting consumer because this is quite literally the first thing that you stop doing. Door Dash. >> Door Dash is in a 45% draw down. >> Yeah. When you're when the >> first to go >> That's right. When the cost to fill your tank goes up 30% in a month. >> No, dude. That's where you're cutting back. >> And you find that [ __ ] food. >> That's right. Once you Why don't you make a grilled cheese? >> Get off your ass and and and cook something. All right. Um I'm now at the point where I'm reading a Halo article every day. Some days three, five. I don't I can't even keep track. >> Dude, Bloomberg has a Halo section on their website. I >> I'm going to sue everybody. I don't know what else to do. >> You just be flattered. That's all. It's all you can do. >> I'm I'm super flattered and ligious. And I I'm not even asking for money. I just want people to be like, "Down Josh Brown made this up, popularized it, coined it, and we're using it as the premise for yet another research report, yet another article. >> It belongs. It's in the public domain. You did a public service. >> I But I want something." So, I'm not asking for a lot. I just want you like >> you want you want credit. You keep asking you keep asking for it. You got it. You have the credit. Nobody doesn't know that it's yours. >> I did think this was a good article. I emailed the reporter. Don't don't you worry. I was like, "Hey, you know who I am. It's my [ __ ] You're writing about my [ __ ] Uh this is Bloomberg. Private capital firms are starting to swap software systems for hard hats as the AI boom forces the industry into a quick rethink of its priorities. Blackstone, Bane, and Brookfield have all been talking of an increased focus on heavy assets with low obsolescence. This so-called halo trade is targeting makers of everything from ship engines to conveyor belts that are considered less likely to be made EXTINCT BY AI. And then they got a quote from Jonathan Gray at Blackstone about it. And then they said it's also in Europe and >> it's global. >> Halo is everywhere. I >> did you ask did you ask where that chart came from? They showed a chart in the in the article that shows the that counts the number of mentions of the word halo and it goes back several years. I don't understand what >> No, they could not >> like >> it says it's it says data based on prepared remarks and management answers. >> No way. >> No way. No. No way. You You can't tell me on 200 conference calls in 2021 CEO said the word halo. >> It says literally mention of Halo in transcripts uploaded to Bloomberg terminal. Nobody said the word Halo unless it was by accident in 2021. >> You know what this is like? You know the movie where the guy wakes he's a singer songwriter. He wakes up in a world where nobody knows the Beatles ever existed >> and he and he becomes the biggest star in the world because he likes he starts recording I want to hold your hand and uh and he becomes the biggest. Like what do you mean? Like, did I just wake up in a world where people were using this term that I invented two months ago in 2021? What is What is this chart? What What are these What are these people trying to do to me? I guess >> you actually steal it from somebody else. That would be >> I'll kill you. I I'll take my my tire thumper and I'll put an end to you. All right. Um >> All right. >> Oh, put it put the chart up. Let's do the chart. >> I think this is kind of interesting. >> This looks good. you getting long here? >> No, I'm not. Um, but for all the hemming and hawing, the thing hasn't the thing. Listen, >> what's what's the what's the nominal what's the nominal yield? Uh, now >> it's March 26. It's March 24th. >> This thing has obviously puked. This is the P, by the way, this is an ETF of the publicly liquid >> um BDC's. >> And it's gone sideways since February 3rd. >> I am I am not >> I am not calling a bottom. I'm I'm not. >> But here's what I want to say about these things. >> Where did it come from? At 17, it went to 12. And it was at 17 it was probably yielding 8%. What is it yielding now? 13. Not that they're going to pay any of that out. You know how we say all the time that um news follows price? If the stocks aren't going a certain direction, like wherever the stocks are going, that's that's the narrative that is written about it. >> Usually, yeah, >> almost always. Sometimes sometimes there are obvious there are there is news >> there events that change. Yeah. Yeah. I'm with you on that. This is really interesting because I I'm not faulting entirely the media for writing about this. How could they not? It's juicy. It's salacious. The asset class has has 10xed. It's transparent. It's high fees. Like, they should be covering it. But and also, if they didn't, or if they stopped, and I know that's not their job, the prices would not be doing this. Or maybe not the prices, but like it's really interesting for all the heming and hawing, and we're going to continue to cover it. a bad year for the the private BDC's and these are public. Like what does a bad year look like for Cliff Water? Because 2008 was down 6% for the index. So is a bad year down 2%. That'd be really bad. It's just kind of hilarious that we're spending this much time as we should and we will and yet the context is this thing could fall 2% and that would be really really really bad. >> I I guess I'm not following what you mean. It fell. It already fell substantially more than 2%. >> These are the public. >> Oh, you're talking about the private ones. >> Yeah. >> Well, I think the story here is not about the price of the public BDC's or the or the private BDC's. I think the story is we have a situation where um ordinary muppet money was herded into 20 or 30 different products, some public, some private. Unfortunately, in the case of the private BDC's, the entryway is the size of a football field and the exit is the size of a phone booth. And everybody wants out at the same time because they think if they don't get out now, the prices will be worse and maybe even if there are advisers in the mix, which of course there are, the reputational risk as well. And that's really the story. And I don't I don't know that I I know um I know the people that cover this professionally and are investors, they're focused on the prices and the values and the NAV and the discounts and the I get that. I'm saying like for the media, the story is about, oh my god, they did it again. They got all these regular people to buy all these bizarre instruments and now it's going bad. And why they really love this is every single person that runs one of these private equity firms also owns a professional sports team. >> Yeah, >> they are monopoly men. They are billionaires with capital B's >> and the media just they [ __ ] love it. It's like catnip. >> So it's a lot of it's a lot of I knew this is [ __ ] So throw this chart up. This is the >> this is the nav of Aries >> publicly traded. You could buy it tomorrow. Not saying you should. This is a chart of the NAV. So, not the price. Okay. The net asset >> asset value of all the assets, right? >> Based on their own based on their own calculations. It needs to be said. >> So, so it's worse than that. It's based on calculations of a third party that they paid to come up with the NAV. >> Yeah. I mean, >> so show So, show the next chart. So that's the that's the public one and this is the private one. And this is the historical performance of Apollo's debt solution BDC, >> right? This doesn't trade. This does not trade. >> This does not trade. >> They tell you what it's worth every time they put out a report. >> This line of up and to the right with zero interruptions and there's been some [ __ ] between between January 2022 and now. Now it went down a little bit. Uh actually went down more than a little bit, but since then straight up and to the right. This is the part that the media rightfully says, "Wait a minute." >> Yeah. >> Hold on. You're telling investors that you've got 600 basis points above sofur, no volatility. >> Yeah. >> Up until the right only. Always semi-liquidity. All right. Okay. I want to use Apollo again. Look at this portfolio. This is for their private BDC. They don't have a public one. This is for Apollo's private BDC. Show the portfolio overview. There are uh the show the industry diversification, John. Do we not have that? Oh, I put this in late. My bad. Um all right. Anyway, there are uh this is 100% first lean. 96% floating rate and unlike Bred who I said 26% of the portfolio is is software related. Uh >> oh. >> Yeah. >> With that's not what you want to hear. >> With Apollo, it's 12%. There we go. Thank you. >> We have it. Okay. So, look at this industry diversification. It's 12% software, 7% healthcare providers and services, 6% financial services. >> Look how many slices there are. >> All right. So, my point is, dude, this is not going to blow up. And I don't know anything. Okay. I don't I maybe I look like a giant jackass, but these are not dumb people. In fact, they're the opposite. >> Yeah. But this is the problem. But this is the problem. >> You're referencing Apollo. They are the best in the world at what they do. There's 50 other companies in the same space that are not as good at Apollo, don't have the pedigree, don't have the track record, don't have the amount of analysts covering um or you know all of these credits that are in these portfol you you can't show the gold standard and draw just like you wouldn't show the worst player in the industry and say this is what it all looks like. >> So the point so the point is they are getting swept up in this just like everybody else. There's no reason why they would be immune. The stock is down 40%. >> Yeah. >> And historic default rates, whatever they are, like I guess my point is this. This stock is trading like their loans are going to absolutely get cremated. And maybe they will, and maybe they won't. >> I don't think so. I don't think so. I don't think the stock is down 40% because people think Apollo's whole portfolio of loans is going to blow up. I think you're wrong. I think the stock is down 40% because it went up 100% on the expectation that Apollo was going to be able to grow 20% a year for the next 5 years as it onboarded 20 million retail investors. And that dream has gone up in smoke and with it the multiple associated with that sort of growth. And what you're seeing is give back from the gains. Th this was one of the big winners over the last few years as private equity and private credit came into their own on Wall Street. This stock went up huge. So did Blackstone. So they all did, but this one went up a lot. And what you're seeing now is not a referendum on the credit quality of their loan portfolio. No way. This be down way more. What's actually going on is people are saying, "Oh [ __ ] worst fundraising environment ever coming up for the next one to three years while they wait for us all to forget about the redemptions and the asset gating." And that's the reality. And people could look at it and say, "Oh, it's cheap." Yeah, probably is. It's also going to be left for dead. I don't think people are going to forget so easily. >> I agree. I don't All right. That's what That's what you're That's what you're witnessing here. >> I completely agree. Everything you just said is correct. The uh the difference, >> I'm really good at this. >> The difference between the BDC's and the interval funds, they look almost identical. The difference is the interval funds have a legal obligation to buy back up to 5% of the shares outstanding on a quarterly basis. >> Yeah. >> And so Cliffwater is the biggest interval fund and they will be buying back 5% of shares for who knows how long. And who knows how long their credit facilities last and who knows if they have to offload some of the loans. No, this is all to to be determined. There's a couple blow over. I don't think it's probably I don't think it's going to. It's going to be a while. The loans could turn out to be fine if people could settle down. Um but the private BDC's have no legal obligation. Now, there could be bigger problems if they just say no, we're just not doing it. We're not giving you guys money back this quarter. It it would impair it's for the betterment of the shareholders. We'll see how this plays out, but it is obviously not going away anytime soon. >> Yeah. And you know, a lot of the apologists for the space and the defenders have said, "Well, look at Beit. They were in the, you know, they were they had their turn in the in the sleeping bag as everybody beat them with bars of soap and batteries and socks. Um, I know it's oddly specific, but I went to a very violent summer camp. They and they had their time and then Bit eventually was able to say, "Okay, redemptions are no longer an issue. Call us. Whatever you want, you could have back." Because the ship was was writed. They steadied the ship. They they lasted. They lived through it. Um and so a lot of people have said that's what will happen here. And maybe that's true, and I hope so. I just don't know that this is going to go the same way. There's >> real estate. Real estate, sorry. Real estate, a real estate portfolio has a tangible quality to it that a portfolio that is 40% soft SAS software just doesn't have. >> Ding, ding, ding. The problem is these companies say, "Listen, the historic default rate is this and the historic recovery rate is 94 cents on the dollar. We're senior secured. We get paid back. Yeah, the equity will get wiped out. will get paid back with what? >> There's no factories or land or or inventory. It's software. What are you getting paid back with? >> That's right. >> So, a a better comp and also not apples to apples is I follow the Substack Covenant Light who writes all about this type of stuff >> and Apollo was in the middle of it. Remember the energy trade the unwinded of 2014 2015? >> They've been through they've been through that with this. So, they survived. Listen, they're gonna survive this. I mean, let's let's not be, you know, ridiculous here, but it is going to be a very slow bleed and where it ends, nobody knows. All right, let's keep moving. We just did a lot of that. >> I I mean, do you want do you want the good news? >> I'd love good news. New opportunities are being created. If you do if you do not have money at risk now and you were ever interested in exploring adding private credit uh to your portfolio, you like over the next year, you're going to get a crack at I think some distressed valuations in the space and uh choose your choose your fund uh very carefully if if this is something that you want to do. Definitely a better entry than two years ago when it looked maid offesque. Just every month it's up. No, I'm I don't I can't t believe me, I won't be the one that gives you the timing of it. >> I only mean I only mean literally the prices have not come down yet. And this is part of the problem is that there are there is leverage here >> and if these companies are tapping their credit facilities at the banks and they can't mark down their loans because guess what? Some of their covenants get triggered or tripped by the banks. It's like wait a minute you can't you can't have more with three times leverage like no you got to sell we need some money like a margin call. >> So then that's more selling of portfolio holdings which puts more pressure on the overall asset class. >> It's it's not great. >> I'm I'm not saying like rush off the sideline. I'm saying if you were interested in the space. Okay. It's about to come your way. You didn't have to chase it. >> Yeah. It's not all bad. Okay. >> So software got whacked off again today. I mean that was that was a baby bounce, dude. So throw this throw this chart on the screen. >> We did have some >> to my credit I didn't believe the bounce on Monday. >> Okay. >> To my credit >> we had we had uh we had rotation today which is good. Financial stopped going down. You like that? At le uh at least the big bank stopped going down. Um we had 260 stocks I think were up today but the NASDAQ was more decliners than than advancers. >> Does Microsoft does Microsoft go down every day? >> Pretty much. So, let's go through some charts. This is IGV. It's Salesforce. It's Microsoft. >> This chart, this chart looks like it it it looked me the wrong way on the subway. >> It's just >> So, this thing went from like to 75 >> and it, you know, it's a baby bounce and it can't even sustain that for a minute. Like, not good. >> Disgusting. >> Not good. Um, next chart, please. Uh, I threw two in IGV here. Let's Okay, perfect. Thank you, John. Um, Microsoft, are you kidding me? I >> I mean, it's got like it looks like the the devil character from South Park. Look at the horns at the top. >> It just it looks like >> it looks like Satan. This How could you buy this? >> It >> Well, I c every candle is redder and longer than the one before. >> I will be buying the absolute snizz out out of Microsoft, but not going down. >> Support at 350. Maybe we'll see. >> That was liber Well, that was the liber That was the liberation day bounce at three uh 350 was a false breakdown. And then that gap that gap up is when Trump tacoed. >> I need I need a down 4% day that closes up 2%. When that happens, I'll buy it, but not before that. And now they're getting to Google. >> Why not? Wait, can we can we pause on Microsoft? Why not just buy calls? >> You don't want to be long this stock. You just want the bounce, right? You see it at 355. just just buy the 375 calls. It's not like a base it's a it's a base hit. It's a base hit, but you commit very little capital and it's not like a position in your portfolio. >> Okay, I will report back on that. I like where your head's at. >> Uh Alphabet like the secular winner >> has now broken below previous support. Not great. >> Um I wrote this up. I wrote this up in best stocks the market with Sean. yesterday and I basically said this I hate this chart. Um sometime not everything we write is like go buy this. We said >> lay off Alphabet here. It's in no man's land technically and we said Apple looks like it's about to break its 200 day and that might have happened today. Um so I I I I just I look at these stocks and I understand what's happening. They're being used as a source of funds. >> Yeah. >> And they're big and there's a lot of money and there's a lot of liquidity in these stocks and people want liquidity right now >> and they're just pulling it out. last chart chart kid made this for me. I wanted him to show me since uh since software bottomed on 20 on 223 what stocks so there was a lot of bounces but as we can see in the on the left a lot of stocks bounced and rolled over they did not keep their bounce a lot of stocks did so here's the stocks that did not bounce and there's there's there's others but and these and these are particularly the stocks that have been in the AI disrupted camp okay >> so S&P Global a stock that I bought and sold rolled over big time same thing with CrowdStrike Same thing with Salesforce, Service Now, Workday, Adobe, and FICO. Forget about it. My god. Um, and in the winter camp, >> we said that but we said this. We said with those stocks, you can't prove a negative. The the sellers the sellers are are basically saying, I know they are in some way disrupted. I don't know the extent. Therefore, I'm selling every upday until I lower my risk here. The sellers are not saying like what's the valuation? >> Yeah, >> it's a much more existential issue here. And you can't pro none of those Service Now can't come out and say, "All right, we've proved it. Eureka, >> here are the results from from the lab. We are 100% undisruptable." Nobody could say it. >> Knowing what little I know, I do believe that this is overblown. I do believe that the incumbents are ultimately going to be the biggest beneficiaries. >> Prove it. >> Totally. Totally erroneous >> depending on your time frame. Prove right now. Prove it. Right now the sellers have the sellers are in control. Period. Hard stop. That's it. And they might look foolish. >> Some of those stocks have insider buying. >> Doesn't matter. Nobody cares. >> Yeah. Nobody cares. >> Um so are these a good buy? Well, what's your risk tolerance? How much tolerance for pain do you have? Blah blah blah blah blah. Okay. Stocks that did stick to landing. Dell Expedia. That's a surprise to me. Netflix and even that rolled over pretty hard today. So maybe that didn't into it. Same same deal. Actually, you know what? A lot of these stocks rolled over today. Um Palunteer block. So yeah, man. It's hard. The sellers the sellers are in control right now of these names. >> Those those uh news clips with the 5hour lines at Atlanta airport and um and LaGuardia. >> Could you imagine? But those are like advertisements for being long Expedia because look at what look at what people are willing to endure in addition to the higher jet fuel price uh raising ticket prices. People are standing in LaGuardia for 5 hours just to get somewhere. >> That's super Polish Expedia in an alternate universe. Um all right, we're going to do this college grad unemployment thing. I I'm telling you, >> I think I'm on to something. I think this is going to be a politically explosive issue come June when yet another wave of college graduates uh leaves the commencement ceremony, spends 30 days hunting for a job, looks at mom and dad um and goes, "I I don't know what you want me to do." And I I I know that this is an acute thing to me because I'm in this and and so I know part of this is like me projecting this onto everyone, but it's too big to ignore. It's too big to ignore. Um co-pilot tools, LLM tools, these things are carrying out the exact functions that had formerly been the province of the college-aged uh college grad Excel monkey for decades. and hiring managers at companies are being told stop. Don't bring on how many PE college grads do we normally hire? 60. Okay, hire 10. Let's see what happens. Give them the give them hire 10. Give the older people more AI. Let's see what happens. Axios wrote about this today. Chart on. What you're looking at here is a thousand US adults. The gold line is non-ol grads and the pink line is college grads. And they're asking people what they think. Is this a good time to find a quality job? And as you can see in the non-ol grad camp, things look okay. 44% says yes, it is. 27% college grads say it is a good time to find a job, which means almost 3/4 say that it's not. uh workers with higher levels of formal education are way less optimistic than those with less school. >> Um and and just just to like put a a bow on this, that is the widest gap on record going back to 2001. >> So it always was the case that people with college degrees were more confident about whether or not it was a good time to get a job than people without college degrees. And that is now flipped. And the gap is exploding. The unemployment rate for uh college grads is now 6%. For the overall economy, it's like 4.2 or 4.3. And then they took a look at Indeed. There were 29% fewer job listings for software developers in March than there were pre- pandemic. That is massive industry uh shrinking. um 27% fewer marketing jobs, 36% fewer listings for media and communications roles. These are college education jobs >> and they are literally vanishing right before your eyes. We made two charts. I know Sean uh and Matt worked on these. I want to put these up. This is a be this is uh unemployment rates for recent graduates versus all workers. And I want you to pay attention, Michael, and audience to the red. This has been a trend that's been enforced since the pandemic and has gone into hyperdrive since the advent of chat GPT. And when the bars on the bottom are in the red, that is a higher unemployment for recent grads versus all workers. our entire lives. This goes back to 1990. We have never been in an environment where it was harder for a college educated kid to get a job than for a non-educated kid to get a job. Our entire lives until the last 5 years. And now it's picking up steam. Um let's do this uh unemployment by major. Now don't laugh at people that got an anthropology degree. You ain't so You ain't so brilliant yourself because look what's right below that. Computer engineering 7.8% unemployment rate. Computer engineer. Let me repeat. Computer engineering 8% unemployment. Computer science 7% unemployment. Remember 10 years ago where you laughed at people and said learn to code. Those are those people. 8% unemployment for the people that quote learn to code. So, you could laugh at the art history people and the environmental studies people and and and you can do that if you want. You're going to laugh at a computer science uh major. Um the 10 majors with the lowest unemployment, special ed, miscellaneous education, elementary education. So, that's tax dollars, guys. um agriculture, foreign language, geography, engineering, social services, nursing and secondary education. So plenty of employment still in um government supported types of jobs and in education and not much else. So we have a lot of people educating people who are going to come out of school and not have anything to do. and it looks like it's getting worse. And I do think this will become a political issue. Um, and and the AI thing is going to be under the microscope like never before. And you're going to see, I don't know if it's the Republicans or the Democrats, but somebody's going to push back on all this and ask the question out loud, why are we allowing this? And I'm not telling people how to feel about the issue, but I really do think it's going to come to a head this summer. What do you think? I agree with everything you said. I think this is terrible. I'm surprised that it's only 5.6% or 6 point whatever it is. I I would have thought it would be higher. I don't know how this manifests itself politically. I don't know what the solutions are. >> I think that number will be I think that number will be 6 to 7% by the time the this next wave of college grads. They don't graduate until May. >> Yeah. Who's hiring these kids? I mean, many of them will get hired, but less than last year, certainly less than the year before. And again, it's not that there are no jobs. It's not the labor market is crashing. It's a slow to hire environment cuz people are like, "Well, let's just see. Let's wait and see what all this AI that we're spending all this money on. Let's see what it can really do before we just add the requisite body count that we've been uh headcount I should say that we've been accustomed to adding each year like almost on on uh on automatic. Let's not be automatic. Let's let's hang tight. And you're seeing that sentiment multiplied by I don't know 8 million businesses large and small. And this is what the the net result is. And people are not going to be happy. Here's what here's one area that I could see uh hiring continue at the pace that it was historically. Heavily rated regulated companies, banks for example, that need to carry favor in Washington. They say you hired 2,000 kids last year, >> you're not hiring one less than 2,000 kids this year. Something like that. I know that's a that's a band-aid. J JP Morgan spent the last three years telling people that they're basically automating their own jobs and then and then uh you know it's it's not even about laying people off. It's the not hiring. >> Yeah. >> And that's why I think the labor statistics that we're all citing to say that the economy is pretty good. It's holding up. It's hanging in there. It's misleading. It's older people at the top of the income scale who just aren't worth replacing because the AI is not skilled. Those people are fine. Young people who now not only can't afford to buy a house, also can't afford to fill their car's gas tank and have no idea where they're going to get hired. It almost doesn't matter what they have a degree in. >> This is this is >> I'm telling you it's terrible. And I mean >> I agree. I agree. I shouldn't be wor This is the This is I think I think the biggest like hum human humanitarian I don't know crisis is strong word, but this is the big one. This is really bad. If anyone is still out there and hasn't killed themselves yet, let's do make the case. >> Yeah. All right. So, you mentioned that ex that what's going on in the airport is a is a great case for Expedia. I actually made the case last year. I don't know if you remember this. In September, I made the I made the case for Clear and my case was not scientific. It was just I heard her on Patrick Ostron's podcast and I remember she said, "I am a [ __ ] animal." And I wanted to bet on her and I and I never did. And uh and the stock is absolutely on fire for reasons that are for reasons that are very very obvious. >> Why did you buy? You just you just forgot to buy it. >> I just kind of forgot about it. Um John saw the stock price up there. >> Yeah. >> So massive buying, massive breakout, huge volume. >> When did you when did you tell us about this? >> September. >> Holy [ __ ] It was like 30 bucks. >> Yeah. So I, you know, probably not the best entrance today, but if it has a low volume pullback, I probably still won't buy. >> This is just clear at the airport. Like the eye scare, that's it. >> So I'm sure >> people don't cancel this. They get a free they get a free trial and then they start paying. >> The retention ratio is actually less less good than I thought. It's like 92%. It's not bad. Um, they actually stopped reporting it, which is a little bit concerning, but >> ironically, I'm sure that people that pay for Clear were losing their goddamn minds because that was probably no better than TSA. I mean, I'm sure it was a little bit better, but I bet you the Clear line at LaGuardi was at the exit at this point. So, the company is working. The margins are improving, the cash's accelerating, but what an unbelievable commercial this experience has been for. >> Yes. Are those people like speedr runninging the security line? the people that have clear >> probably not because I've been >> it's probably better but it's probably better >> but it's probably terrible because I've been in many clears around the country where there's just too many people there's nothing they could do about it I don't know how you get more monitors but I was at Miami two weeks ago and I went straight through with clear it was wonderful so I don't know but >> don't worry they sent ICE to the airport to help with the TSA lines and if the um if the militias are not successful at speeding things up they will send in UFC fighters, I'm told, is the next wave of the same. >> I think I feel like it'll be fine. All right, let's do mystery chart and then we'll get out of here. >> My mystery chart. Please pop pop it up for us. All right, this is a sector of stocks. It's global and probably the only one that looks like this right now. >> Yeah. >> And I would love to hear what you think it is. >> Oh, these have to be energy stocks. >> Final answer? >> No. What am I looking at here? >> You're looking at stock charts. >> Oh, individual stocks. >> They're all different stocks and I told you it's international. There some of them trade in different currencies. So Sean like normalized it. >> The final answer. >> Yeah. Okay. You'd be wrong, sir. >> Pop it. >> Oh, okay. >> Oh, the only other sector that's up. >> Yep. That's good stuff. >> You made a good guess. You probably made the guess that I would have made because I don't know what these charts look like. Um, chart back on please. >> This is SKH Highix, Samsung, SanDisk, Micron, Western Digital. >> Western Digital Western I'm sorry, my bad is so hot right now. >> These these stocks are just I don't know even know what to say. This is this year's bubble. It'll it'll get real ugly for the people that buy it today, I assume. Uh although maybe I would have said that a week ago and they're all up another 15%. So, >> just sell before everybody else does. >> Sell, right? Sell before everyone else does. All right. Great job with the chart, uh, Sean and John. Thank you guys. All right. Hey, everybody. Did you know tomorrow is Wednesday, which means an all new Animal Spirits podcast with Michael and Ben for the YouTubers right here on our Compound YouTube channel, Spotify, Apple, anywhere fine podcasts are played. We'll have an allnew Ask the Compound. After that, that'll be live. Duncan and Ben Carlson are taking your questions. So, get those questions into us. What is the email address, guys? I think it's ask >> ask the compound >> showgmail.com. Ask the compound show@gmail.com. If you want to have your question featured by Ben and Duncan and their special guests on Friday, we'll have an allnew Compound and Friends. Can't wait to see you then. Thank you guys for listening. God bless. Good night. Heat. Heat.