New York, New York

One of those weeks…

This was one of those weeks that was a reminder to the world why New York City is still New York City. No place like it on earth. Within a few days we hosted the most watched NBA Finals of the century so far and pulled off the biggest IPO ever.

This week millions of New Yorkers came pouring out into the streets each game night, culminating in one of the biggest citywide celebrations in the 400 year history of this town. Maybe we’re still in the glory days of NYC or maybe that time has passed a long time ago (this depends on who you are talking to and what era they lived here) but right now, in this moment, we are the center of the universe once again. It’s still New York or Nowhere.

(the game was 1800 miles away in Texas)

Anyway, while Donald Trump, Michael Bloomberg, Jimmy Fallon, Larry David, Jerry Seinfeld, Jay-Z, Timmy Chalomet, Taylor Swift, Sydney Sweeney, Ben Stiller, Fat Joe, Tracy Morgan, Chris Rock, Adam Sandler, Spike Lee, Mariska Hargitay and every other NYC-native or -adjacent celebrity were rooting for the Knicks at the most expensive basketball games ever attended, a few blocks away the Nasdaq was preparing to host the biggest initial public offering of all time. I’m happy to report the $2 trillion SpaceX IPO did not turn out to be a meteor hitting planet earth (and, by extension, your retirement account) after all. It was totally fine. Contained. The Dow Jones rallied 350, the Nasdaq ran 80 points. No sweat.

The concern about the deal’s unprecedented size gave way to the frenzy of willing buyers who gleefully accepted every share of stock on offer - an estimated $86 billion worth including the greenshoe allotment. The stock began trading around midday and the offering seemed to have gone off without a hitch, dozens of Wall Street investment banks and their market-maker partners finding an equilibrium of buyers and sellers at a price that was 19% above the $135 offering price by the end of trading Friday.

Here’s how the New York Times describes this monumental event in Wall Street history:

I went into the weekend thinking about how incredible our capital markets are. Only in America can a company start itself up in a garage and within a few decades become one of the most valuable businesses on earth. It takes intrepid entrepreneurship, sure. But what’s also required is you, the American investor. The Germans and the Japanese and the British and the Brazilians have their founders and their risk-takers, but what those markets are missing is the tens of the millions of ordinary people who are willing to back these dreams and gambles with their own investment capital. Nobody does this like we do. We are the descendents of dreamers and gamblers - many of whom left everything behind and took the ultimate gamble with their very lives on the line in order to get here. This started in the 1600’s and it continues until this day. Without the American investor, there is no SpaceX. Without the city of New York, there’s no transference of these risks from venture capital to the public stock markets.

The Knicks championship allows ten generations of fandom to take a deep breath and let fifty years of heartbreak melt away. The SpaceX debut sets us up for OpenAI’s and Anthropic’s trillion-dollar offerings, creating a whole new cohort of billionaires, centi-millionaires, deca-millionaires and millionaires next door.

New York City isn’t just having a moment. It is the moment. If you haven’t been back in awhile, book a flight. We’re announcing an event for early December that might give you the perfect reason to come to Manhattan. Subscribe to The Compound Insider and be the first to hear about it. Very soon!

Brian Levitt on The Compound and Friends

New York State of Min

This week Michael Batnick and I hosted our friend Brian Levitt, the Chief Global Market Strategist and Head of Strategy and Insights at Invesco. Brian’s pretty sanguine about the investing environment we have in front of us. Inflation elevated but due to fall with oil prices, credit spreads under control, household balance sheets and corporate investment at record highs, profit margins continuing to expand and no real stresses for the most consequential cohort of consumer households. It’s full speed ahead, at least for now.

Knicks in Five

We had a discussion about the fallacy of the “knockout punch” and why it seems that every big, bad event that’s going to knock the stock market off its course ends up petering out. The SpaceX IPO is just the latest example of this phenomenon, which includes FOMC meetings, elections around the world, White House policy decisions, earnings reports and all sorts of other detritus in the post-Great Financial Crisis era. There’s a whole coterie of market watchers who have it a twenty year mission to identify the next “Lehman Brothers” moment, in real time, and these people have cost you a fortune if you’ve taken action based on any of their relentless hysteria.

I made the point that, by the time Lehman was filing for the largest bankruptcy ever and shocking the world, markets were already deep into a bear and the economy had already unraveled. The “Lehman” moment knockout punch was very real - but it came as a consequence of the terrible financial markets, it wasn’t itself the cause. The knockout punch rarely (never?) arrives when things are going well. The way it really works is that the markets are struggling, the economic data is surprising to the downside, some shocks start to hit and everyone gets really negative AND THEN the knockout punch comes.

Madoff fessed up in December of 2008, three months after the Lehman bankruptcy and two months after the TARP rescue vote in Congress. Things has already been bad for a year before these events became a series of catastrophes for the economy and the stock market. That’s how it works every time. The mood changes, the losses become widespread and then the knockout punch slams into us, seemingly out of nowhere. Not the other way around. It just feels like it’s going to be that way.

I don’t think the process I’m describing is well understood so I wanted to highlight it here today. It’ll save you a lot of time and aggravation scanning the headlines for knockout punches in a bull market for the rest of your life once you understand it. Be sure to send this post to a friend or family member who could use this explanation as well.

You can listen to Brian and I along with Michael and the whole gang discuss this concept and more on an all new edition of The Compound and Friends below. I think you’ll love it.

2000-esque dispersion

One other thing you’ll hear about on the show this week is a breakdown of Savita Subramanian’s much-discussed note this week calling for investors to take profits, especially in tech stocks. She points out several similarities between today and the tech bubble peak in February 2000 that are just too close for comfort. The chart above depicts the extent to which the stocks within the tech sector have been diverging - with AI capex theme winners running away with game and other technology stocks (software) being left in the dust. We haven’t observed anything like it since the dot com bubble and bust.

I had some opinions on this as did Michael and Brian…

Why the Knockout Punch Never Comes

THE COMPOUND & FRIENDS

Why the Knockout Punch Never Comes

Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by ⁠Brian Levitt⁠, Chief Global Market Strategist at Invesco⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ to discuss: whether the AI trade has become too crowded, why earnings growth still supports the market, and what investors should actually watch for signs of trouble.

Maybe it’s not 1999, it’s 1966?

There’s a precedent for today’s space mania in the stock market.

Something I've spent the last few days thinking about...

Everyone is racing to sell as much stock as they can at the same time. This is a 180 degree turn from where we were three years ago during the "staying private for longer" and record-setting share buyback era. The switch flipped.

Alphabet just did a second IPO for its data center business after ten years of share buybacks.

SpaceX wants $75 billion.

Anthropic and OpenAI will be right behind it with gigantic offerings.

Wall Street's sell-side is turning over the couch cushions to find this money. The covers of the books have 30 firms on them. The roadshows at JPM and Morgan Stanley look like Coachella.

Fidelity just lowered its retail account minimum for IPO participation from half a million bucks to $2,000.

Robinhood is launching venture funds for the TikTok crowd.

CNBC is running a SpaceX segment in every hour block of daytime programming.

I know it's not 1999. It could be 1966.

Exactly 62 years ago this week a company called COMSAT went public. It had investments from AT&T and a hundred other players in the communications business. Investors were bulled up on space and it was the SpaceX of its day. The $200 million IPO was massively oversubscribed.

The whole thing started when President John F. Kennedy used the surprise Russian launch of its Sputnik spacecraft in 1957 to galvanize the nation. He used it as an example of Eisenhower-era complacency while in the Senate. In 1961, as President, he cited it again during a joint session of Congress in which he first laid out his administration’s intention to beat the Russians at something more meaningful:

"I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the Moon and returning him safely to the Earth."

In the summer of 1962, Kennedy signed the Communications Satellite Act which created COMSAT as its public-private corporate vehicle to launch a constellation into orbit. This kicked off what they called the Space Race when they taught it to you in high school but on Wall Street it launched an absolute frenzy for stock market investments involving rockets and component suppliers to NASA and anything that had even a loose connection to the theme.

COMSAT’s IPO was not the end. Companies came public much earlier then than they do today. The stock was for sale at $21 and then ran to $28. Within a few years it would get to $87 before the craze had run its course. Public investors who had “chased” each other into the stock on IPO day still had lots of potential upside in front of them.

Within weeks there were companies adding “Astro” and “Space” and “Orbital” to their names. Their share prices would quickly go vertical as the appetite for Space Age investments only grew in intensity. Burton Malkiel tells the story of one such company, which sold record players…

“Promoters, eager to satisfy the insatiable thirst of investors for the space-age stocks of the Soaring Sixties, created more new issues in the 1959–62 period than at any previous time in history … It was called the tronics boom, because the stock offerings often included some garbled version of the word “electronics” in their title, even if the companies had nothing to do with the electronics industry. Buyers of these issues didn’t really care what the companies made—so long as it sounded electronic, with a suggestion of the esoteric. For example, American Music Guild, whose business consisted entirely of the door-to-door sale of phonograph records and players, changed its name to Space-Tone before “going public.” The shares were sold to the public at 2 and, within a few weeks, rose to 14.”

Here’s the New York Times documenting the success of COMSAT’s initial public offering a few days after the debut:

Yes, you could make a few changes and publish the same article today, precisely sixty two years ago to the day. Livermore said there is nothing new under the sun. The names and dates change but not human emotion.

“There is nothing new in Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again."

The fervor intensified. Malkiel relays:

“the 1960s saw a proliferation of then new-age but now-forgotten companies whose names ended in ‘onics’ or ‘tron.’ Companies taken public included Transitron, Dutron , Vulcatron and Astron , as well as Circuitronics, Supronics and Videotronics, according to ‘A Random Walk Down Wall Street,’ by Burton Malkiel, a Princeton University professor who has studied stock markets. Much like today, some companies changed their names and sold IPOs under the rubric of a fast-growing concern. ‘Buyers of these issues didn't really care what the companies made -- so long as it sounded electronic, with the suggestion of the esoteric,’ Mr. Malkiel noted in his seminal book. ‘The name was the game.’“

The market topped in 1966 on an inflation adjusted basis with a nominal price top in 1968 but the bear market lasted a full 16 years.

There are important fundamental and mechanical differences (as there always are) but the vibe is not different at all. We have a generation of investors who've never seen a meaningful market top or prolonged period of disappointment in stocks. The 60's was no different. Ben quoted John Brooks's Go-Go Years a while back in saying more than half of Wall Street's salespeople and portfolio managers had begun their careers after 1962 with no memory of anything but UP!

Rising rates killed the economy at the end of the 60's because the government was funding LBJ's socialism and the Vietnam War simultaneously and there just wasn't enough money to cover the deficits. We're doing the same today with tax cuts and Iran / Ukraine. There's simply not enough money for rates not to rise.

But that's not what killed the stock market back then and it won't be this time. What actually happens is that supply eventually catches up to demand. Three mega-IPOs plus surprise equity raises by mega-cap companies already public could be the final nail. Once everyone has "access" to all the stock they could possibly want, the prices stop rising. This changes the mood. Disillusionment sets in. It's hard to get the psychology back on track once this happens. Go ask your friends in crypto.

I'm hoping the SpaceX deal isn't the end. COMSAT wasn’t the market top for the Go-Go era or the Space Age. But it was the beginning of the end because it set the tone and served as a signal for the suppliers of stock that they could swing for the fences. And that’s exactly what they did. So much so that the supply eventually overwhelmed the demand. Happened in ‘66. Happened in ‘99. Happens every time.

Will happen this time too.

In NASCAR, the waving of the white flag indicates the final lap of the race. This is where the most desperate, aggressive behavior always happens. In the 10-year period between 2007 and 2016, every single 400-lap Daytona race had a crash take place during this last lap. All of them.

Is it a bubble?

Bloomberg News:

So is it a bubble?

Yes, of course it is. But that doesn’t make it all bad. Everything successful eventually becomes a bubble. That’s part of what defines the success of the thing. Some bubbles end gradually in old age (I call these waves but we don’t have time for this digression today) and some bubbles burst spectacularly (the ones you end up reading about and fearing). But bubbles are the things that naturally accompany investor enthusiasm for a thing and investor enthusiasm rarely materializes out of nowhere and for no good reason.

How do we know definitively that a bubble is in the process of being formed? A simple checklist via the experts Brent Goldfarb and David Kirsh, authors of “Bubbles and Crashes – The Boom and Bust of Technological Innovation” makes it obvious.

Via Periscope by Srinivas Peri:

How can you possibly say the SpaceX IPO isn’t checking every one of these boxes?

I’m not saying short the stock, but my god, let’s at least be honest with ourselves about where we are.

NASA ETF

I wrote about Rocket Lab (RKLB) in this space a few weeks back. I’ve also talked about Planet Labs (PL). Both stocks have had meteoric rises this year but are now coming back to earth (pun intended) on the heels of earnings reports that were really good but apparently not good enough. This is what happens when expectations cannot be matched and the aforementioned disillusionment sets in. Thanks to a 22% post-earnings decline in PL today, the Tema Space Innovators ETF (ticker NASA, because UFO was already taken) is getting absolutely shit-hammered right now (it’s a technical term). NASA’s largest holding is Rocket and third largest holding is Planet. The only thing these Labs are cooking up this week is profit-taking.

In the chart above, you see a lot of broken dreams. Whose dreams? The buyers who made NASA the largest of the space-themed ETFs were presumably there because it was the only fund that claimed a pre-IPO position in SpaceX as part of its holdings. My data source lists SpaceX private shares as approximately 6% of this ETF’s assets. No wonder it leapt to the front of the pack. Unfortunately, for people buying it in search of “access” - there’s that word again - they were reminded today that the remaining 94% of this fund is invested in something other than SpaceX.

SpaceX is the Hottest IPO Ever

While I was out this week, Michael hosted our friend Aaron Dillon for an inside-baseball conversation about the SpaceX IPO, how advisors are explaining the index inclusion thing to clients, how the lock-up expiration will be handled and more. You can watch or listen below on our advisor-focused podcast, Talking Wealth:

TALKING WEALTH

SpaceX is the Hottest IPO Ever

Josh and Michael dig into why a year-end melt-up is still on the table: positioning, flows, Fed expectations, earnings, and what could keep surprising investors into the close of the year.

“We’re short compute”

Okay, by now everyone understands this.

We spent a lot of time discussing the structural shortage of compute (through an investor’s lens, not a technological lens) on the recent TCAF episode we did with Ankur Crawford. She explained how, at this point, there simply isn’t enough token capacity for all of the AI workloads, present or future. This lack of capacity has effectively been the only restraint on AI revenue growth for the OpenAIs and Anthropics and Geminis of the world. At least, this is now what their leaders are effectively saying.

Dario Amodei, at a fireside chat last week, had jaws dropping around the world as he casually mentioned Anthropic is now on a $30 billion annual revenue run rate as of the current quarter (we wouldn’t know otherwise, it’s a private company) and that $50 billion is in sight. This is up from approximately zero dollars just a couple of years ago. It’s up from an annual run rate of $9 billion as of the end of last year.

As Dario explained, the company was planning for a 10x growth rate and instead the reality is looking more like 80x. These are growth rates that traditional securities analysts simply cannot process. It’s literally stunning and no one knows what to even say in response to this.

But they do know what to do. Upon hearing this little tidbit, the Nasdaq and its chip stocks took off to the upside. The buying seemed limitless, with gigantic stocks making 7%, 12% and 15% daily moves like they were microcaps and not worth trillions already.

And as bullish as we all are about what growth rates like these will mean for revenue and earnings growth for the stocks associated with the AI capex theme, surely we’ve got to be hitting some sort of a limit - at least in the short-term. I have a few charts to show you below that I believe represent unsustainable things…

Above, you’re looking at the net income expectations for Nvidia (I am long) and in the right pane you’re seeing the stock market’s investors refuse to re-rate the company’s valuation. Nvidia sells at a 24 PE despite a growth rate significantly higher than any company at its size has ever experienced. This is because Nvidia actually trading at a multiple that befits its growth rate would make its market cap larger than almost every other stock in the market combined. The sheer size of this company has now effectively pinned the potential multiple it will sell at to a number far below what the company probably “deserves” if we’re being consistent. It’s absolutely bizarre to see the largest companies in the stock market also have the highest growth rates and best profitability, but that’s the modern Nasdaq in a nutshell. We’re living through things that shouldn’t be possible, and yet, here we are.

Kai Wu (of Sparkline Capital) was one of our guests on The Compound and Friends this week. He brought a bunch of great charts including this one - another aspect of the current moment that seems unsustainable. This is the percentage of market cap for the whole S&P 500 currently residing with the top seven index constituents. We have literally left earth and are orbiting in space on this metric alone, as you can see. The betting man would say “surely this must reverse at some point” but the problem is he may have been saying that most of the last three years and he’d have been wrong. During the 2022 tech crash, this did temporarily reverse as Meta and Amazon fell into 50% drawdowns butyou can see on the chart how big of a head-fake that was.

Above I’m showing you the share of S&P 500 overall profits currently captured within the top ten component stocks. We’re at 34% and that number is rising. This is 50% higher than a decade ago and a full double from 1996, before the internet. This concentration of profits among the largest companies is obviously (I can say “obviously” at this point) among the great secular trends of our era. And while the pace of this might be unsustainable, directionally - I would guess - it’s unlikely to reverse. The rich get richer, the big get bigger, something pretty major would have to come along to put a stop to it.

The furious rally in semiconductors is not happening in a vacuum. In the chart above you’re looking at the profit outlook for the stocks that comprise the SOX index of chip companies. As you can see, it’s an upside shock for the ages, with the earnings expectations for next year rising by nearly 100% over the past 12 months. The rate of this upside shock is obviously unsustainable. Eventually, the analysts catch up with their forecasts. Will 2028 be as big of a surprise as 2027 is? Doubtful.

In the final chart of this run I am showing you the semiconductor index market cap as a percent of the S&P 500 via our friends at Bespoke. Can this go to 30%? 40%? It could. Is it likely to do so at the current rate of speed? Semis were 5% of the stock market as recently as 2019 and now they’re almost a quarter of it. A lot of this is Nvidia and Broadcom but then there’s also KLA and LRCX and AMD and MU and MRVL and QCOM and TXN and INTC and AMAT and ASML and TSM and they’re all just going and going. At this pace, they’ll be half the stock market by this time next year and, well, I don’t f***ing think so.

These charts are all totally unsustainable - and yet completely understandable given what’s been going on. We’ll have to check back in on some of this stuff later in the year to see whether or not this was a moment in time for us all to take a deep breath and check ourselves. It’s not a given as extreme things can always become more extreme.

In any case, we’re witnessing (and making money from) one of the greatest bull markets in history. Let’s not gloss over that fact. I was on the floor of the NYSE this week as Cerebras (CBRS) began trading as the largest IPO since Snowflake (SNOW) back in the fall of 2020. One of its lead investors and board directors, Brad Gerstner, told me it’s just the beginning for what the company does - chips for AI inferencing. He’d been invested in the company for nine years before it’s debut on the Nasdaq on Thursday.

Josh and Brad on Cerebras IPO day, Thursday May 14th 2026

When he wrote his first check, it was still five years before the world would be introduced to ChatGPT and the first LLMs. As recently as a year and a half ago, CBRS had to pull its S-1 due to lack of institutional investor interest in owning a semi with a concentrated customer list. The orders for the IPO this week were 20-to-1 buyers versus sellers.

It’s insane to think about how quickly attitudes have changed.

Kai Wu and Ben Carlson on The Compound and Friends

smart cookies

For a wide-ranging discussion on the charts above and some of the biggest events of the week, you’re going to want to check out this week’s all new episode of The Compound and Friends.

Ben Carlson, Director of Institutional Asset Management here at Ritholtz Wealth, and Kai Wu, founder and CIO of Sparkline Capital sat in for the conversation and we covered a lot of ground: The Nvidia situation. What to make of the Anthropic valuation. Whether software disruption is still in its early innings or already priced into everything. The acceleration of market cycles and what it means for how long any thesis actually has to play out. And Kai's framework for intangible assets.

We also got into Ben's new book, Risk and Reward, which he says is the best thing he’s ever written (imagine how high a bar that is!).

You can watch and listen at the links below!

Nasdaq Euphoria is Hitting its Limit

THE COMPOUND & FRIENDS

Nasdaq Euphoria is Hitting its Limit

Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by Ben Carlson and Kai Wu⁠ to discuss: Nvidia, Anthropic, software disruption, intangible assets, faster market cycles, and Ben’s new book Risk and Reward and much more!

Introducing Porterhouse

Ritholtz and Franklin Templeton team up to bring you the latest innovation in asset management

disclaimer: nothing in this note is intended as financial advice or an inducement to buy or sell any individual stock, see our full terms & conditions here.

I am extremely excited to tell you about the launch of our proprietary Porterhouse strategy, which is happening this week. If you’ve been watching me on CNBC or reading my columns at CNBC Pro, you’re very aware of the research we’ve done on The Best Stocks in the Market. I’ve spent almost 30 years on Wall Street and, in that time, I’ve learned an elemental truth about how people interact with the stock market - they simply don’t know where to begin.

You ask people why they’re trading the stocks they’re involved with and, for the most part, they can’t give you a good answer. They buy the things they hear about from friends or in a Barron’s article or based on what the anchors are talking about on TV. They buy the stocks that are in the news or, these days, in the memes. They follow random people on social media and trade the stocks they see other people trading. Or they take tips from their golf buddies or their nephew who “works in tech” or they get newsletters delivered into their inbox or whatever. Almost no one has a process. And their portfolio holdings reflect that randomness. Most investors don’t have a rhyme or reason for what they buy or when they buy it. They certainly don’t have a consistent answer for when they sell. It’s a combination of serendipitously hearing about a stock, a little half-assed research, a spontaneous decision to pull the trigger and then a periodic news look-up on Yahoo Finance.

They have no starting point. They take in all the noise and do sudden, non sequitur things. The result is the kind of portfolio slop we are frequently hired by people to fix. When we see the chaos that’s been wrought in people’s stock holdings - the overlap, the disparate position sizes, the concentrations, the missing sector exposures - it can sometimes call for portfolio triage. Trades turn into investments when stocks decline. Profits are taken impulsively in stocks that continue trending higher. Average-downs become quicksand. It’s a jungle out there.

I wanted to change that. I wanted to show people which pond they should be fishing in to start with. And then show them which fish to reel in and which to throw away. And then show them when to cut bait and put the rod down. I wanted to bring some semblance of order to the stock selection process. This was the genesis of the Best Stocks in the Market list that my research associate Sean Russo and I began to write and speak about. It became one of the most popular segments on my show, The Halftime Report. In time, this led to a twice-weekly column for the Pro site. I’m informed by CNBC’s editors that these columns are regularly among the most-read pieces they publish.

But the thing we kept hearing from people was “Why can’t you just do this for me?” There are hundreds of thousands of people who want to actively trade their own accounts, but millions of people who would prefer to have someone else do it for them. Porterhouse is our answer for those folks who want to be in the Best Stocks but don’t have the time, energy, focus or discipline to run it on their own. This obviously includes many of our own clients. This is the big idea that led to the creation of our new Porterhouse portfolio strategy.

We’ve built this on Canvas, which is the custom indexing platform run by Franklin since their acquisition of O’Shaughnessy Asset Management whom we originally partnered with in the early days of our firm. The relationship between Ritholtz and Franklin has enabled us to accomplish things for our clients that I had never imagined would be possible. We are a power user of Canvas custom indexing technology and this latest innovation is the culmination of years of cooperative effort.

You can read the official press release of the launch here.

In a letter to Ritholtz clients earlier this month, I explained:

We’re not positioning the strategy as a replacement for the diversified portfolios we manage as part of our core asset allocation strategy. It’s intended to compliment those portfolios and serve as a specific sleeve within the broader allocation. It’s been purpose-built for eligible clients who want it as an addition to everything else we’re doing. It won’t make sense for everyone, but for the people who want something like this, this has been a labor of love to bring it to life.

If you’re reading this and you’re not yet a client of the firm, perhaps this would be a good time to learn more about what we do and whom we do it for. There will be a 30 minute webinar next week to walk you through what Porterhouse looks like and how it works. I cordially invite you to join us by registering here.

Ritholtz Wealth Management (“Ritholtz”) is a Registered Investment Adviser. Registration does not imply endorsement or a certain level of skill or training. Advisory services are only offered to clients or prospective clients where RWM and its representatives are properly licensed or exempt from licensure. Advisory services are only offered to clients or prospective clients where Ritholtz Wealth Management and its representatives are properly licensed or exempt from licensure. Investing involves risk and possible loss of principal capital and there is no guarantee that the intended outcomes are achieved. Past performance is no guarantee of future returns. No advice may be rendered by Ritholtz Wealth Management unless a client service agreement is in place.

The Porterhouse Portfolio Strategy is separately managed through Franklin Templeton/O’Shaughnessy Asset Management, a Sub-Adviser of Ritholtz Wealth Management. The Porterhouse Portfolio Strategy is new, with no operating history, and therefore does not have a performance history. As a result, prospective investors will have no track record or history on which to base their investment decision.

Twelve Rules for Riding a Bubble

My friend Jeff deGraaf is a legendary technician and a cofounder of RenMac, one of the most respected institutional research platforms on Wall Street. I asked him to join us last night for an all new What Are Your Thoughts for a timely discussion about bubbles given what’s gone on with the memory chip stocks and the related explosion in the Korean KOSPI stock market.

Jeff’s says the US semiconductor sector became an official bubble a couple of months ago based on his definition of an index or sector that doubles inside of two years. Identifying a bubble is the easiest part. Knowing what to do when you’re in one and then actually doing it is much tougher. Which is why Jeff republished his 12 rules over the weekend.

Jeff joined us to walk us through his current thinking on the current state of the market and to explain his rules. It was epic, I hope you caught the show or have it on your list of things to watch / listen to.

In case you need the links, they’re below. Michael and I also discuss the AI capex boom as an industrial bubble and we take a look at the new record 115 stocks that are now worth over $100 billion. You’re going to love it, I promise!

Twelve Rules for Riding a Bubble

THE COMPOUND & FRIENDS

Twelve Rules for Riding a Bubble

Josh and Michael with RenMac’s Jeff deGraaf, what’s not to love?

Why Matt Ankrum is less worried about software disruption than everyone else is

The Coffee Can investor refuses to sell

awesome convo

Matt Ankrum has spent his life analyzing and investing in stocks and, in that time, he's become obsessed with the 100 baggers. The stocks that go up and up for decades, turning small investments into enormous fortunes. His research into the topic has led to both a book by him and a family project that could potentially turn his college-age daughters into heiresses if things play out according to his plan.

He's going to put $250,000 into twenty different stocks (a total of $5 million) when he identifies companies that have the potential to become a Home Depot or a Monster Energy or an Apple or an Nvidia-type situation. Five million bucks on a portfolio of potential 100 baggers with the aim of seeing this collection of equities turn into a half-billion dollar fortune. He has strict rules that prevent him from selling early and jeopardizing the magical compounding he is hoping for. He understands that in some cases, the stocks he selects now (he's already picked 13 of the 20) will turn out to be dogs, badly missing his expected return or even failing to best the S&P 500. His screening process begins with quality and profitability so it's unlikely he'll end up with a lot of bagels, but yes, that too is something that could happen if the world materially changes in the decades to come (spoiler: it will).

These are the 100 baggers Matt looked at

It's a cool idea and his friend Neeraj Khemlani decided to write a book about it. The Coffee Can Investor is now out and for sale (Amazon link). You can learn all about Matt's methodology and get the list of stocks he's putting away. Or, you can listen to us interview both Matt and Neeraj on The Compound and Friends! Links below.

Neeraj and Matt’s daughter Morgan

I have some stocks that I've owned for well over a decade, like Nvidia, Apple, Berkshire Hathaway and JPMorgan. You hear me talk about them all the time. I don't think, based on their current size, that any of them could become 100 baggers from today's valuations. I wouldn't say it's impossible but I would say it's highly unlikely.

More from Matt’s work, a sector by sector categorization of history’s 100 baggers

Which is why I am still out there looking at opportunities like Shake Shack, Joby, ServiceTitan and some of the smaller names you've seen me mention and write about. I'm fascinated by the idea of the 100 bagger, even if I don't think that's the way the typical investor should be thinking about their equity exposure. It's a difficult game to play and most people attempting it will end up with lots and lots of losers, even if they do pick a few grand slams that pay for those losers over time.

But if you're interested in the concept, this episode is literally perfect for you!

we’re locked in

One thing I wanted to mention is that Matt's portfolio has a lot of SaaS software in it, which is already trading lower than where he added it to the coffee can. We asked him if he wished he could have a do-over and he emphatically said no. He's not a disbeliever in AI. Rather, he believes, as I do, that some of today's incumbents will be among the most profitable providers of AI technologies to their respective verticals. Matt asked rhetorically how many of the top twenty ecommerce websites are New Economy players versus those that had been around decades before the turn of the century. He says it's just Amazon and Chewy and one or two others. The rest of the ecommerce opportunity has gone to the incumbents who adopted the internet for their own purposes. Target, Walmart, Costco. It's an interesting lens to think about the AI opportunity through.

I think there will be major casualties but also major surprises like the way Walmart has become a faster growth company than Amazon in recent years. I do not believe in a narrative that says every company that existed before AI has nothing but trouble ahead and that AI-native startups are going to upend every major player by virtue of the fact that they're shiny and new.

It literally never works that way.

Make it make sense.

Toast’s forward estimates vs price and PE ratio

Sometimes it just gets too dumb. I bought more Toast last week. Famous last words but I think the market has now, perhaps appropriately, taken the multiple down for this name enough. At this point, any further erosion in valuation just flies in the face of what’s actually going on. Toast is not only not going to get disrupted by AI, they are actually going to be the most likely candidate company to be bringing AI to the 150,000 or so restaurants, bars, hotel stores, etc that they currently have their hooks into as the payments provider. No other pure-play company sells as much software into the hospitality business.

As you can see above, the earnings and revenue estimates for next fiscal year continue to trend higher and higher while the share price (and its multiple on forward earnings) keeps falling lower and lower. Either the analysts are totally wrong and none of this expected growth is going to happen OR the rocket scientists who are selling it down at any price are going to watch me double my money.

Maybe there’s simply no bottom because every BBQ joint, Chinese takeout kitchen, roadside diner, tavern, fast food joint, Italian restaurant, steakhouse, cantina and fine dining establishment that has standardized on their payments platform, kitchen supply reordering system, payroll processing module, reservations management system, et al will just rip it all out and code their own replacements using Anthropic. I know how ridiculous that sounds and so do you, but humor me for a moment. In that world, I am dead wrong and the stock goes to $10. I’m willing to bet that the future looks absolutely nothing like that and that, three years from now, Toast will be spending half its conference calls answering analyst questions about the growth in its ToastIQ business (that’s what they call their AI product for restaurant owners). It’s entirely possible that the handheld waiter and waitress point of sales gadget is just the Trojan Horse enabling this company to be the preeminent AI solution for a million businesses. No one else seems to think this is possible, hence the relentless selling week after week after week.

I think it’s stupid. I doubled the size of my position.

I will grant you that maybe 50x earnings last year wasn’t the right valuation. I don’t think 20 is either given the TAM and the growth rate. The parent company of their biggest direct competitor (Clover is owned by Fiserv) just had one of the most spectacular blow-ups we’ve ever seen. Another competitor, Block (which owns payment processor Square), is spending most of its time indulging the founder’s crypto delusions. Jack Dorsey really is a gem - from running Twitter, which Mark Zuckerberg famously said was like “a clown car that crashed into a goldmine”, to overseeing this, a stock in a 75% drawdown from all-time highs, now trading at the same level that it did eight years ago in 2018.

Sorry, back to Toast. I guess you could say I’m not worried about competition at all. They’re growing share and winning more business every quarter. Three years ago, the company had 79,000 restaurants using their platform. As of the last quarter for which we have data, Q4 2025, it’s over 164,000. They’re growing location count at a 27% CAGR over the last three years and it’s not impossible to envision 20% + growth over the next three years. It’s a great big world out there and the business has already begun to grow internationally.

The more locations, the more platform usage and take-rates from guest checks. And, as restaurant employees become experienced and knowledgable about the company’s systems, it becomes more likely that other employers will adopt it - and more importantly, keep it. However much you think a homemade AI solution may save these restaurants, my guess would be it would never be enough. Think of the aggravation and potential for errors. It’s cheaper to keep Toast and use whatever purpose-built AI solutions that they themselves bring to the table.

But who knows. Maybe I’ll get killed in the stock. Or maybe the sellers will be left in tears. Let’s find out.

Attention: I am a long-term shareholder in Toast. I am not recommending that you buy or sell the stock. I don’t give advice to non-clients on the internet. This is me speaking about my own activities. I have a gigantic disclaimer you can read too if you need this spelled out even further.

How to Find 100 Bagger Stocks

THE COMPOUND & FRIENDS

How to Find 100 Bagger Stocks

Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by Neeraj Khemlani and Matt Ankrum to discuss: what 100 bagger stocks look like, the search for high quality companies, the impact of compounding and exponential growth over decades, and much more!

Ironically, Nvidia’s secret weapon is its software

Let’s take it as a given that everyone else’s chips will get better…

One of the bear cases on Nvidia these days is that chip building programs at Google and Amazon (historically, two of the largest, most voracious purchasers of Nvidia GPUs) are going to continue to make progress. Google’s TPUs and Amazon’s Trainium chips will enable hyperscalers to run certain instances and workloads with silicon that costs less than a Blackwell cluster and is a more efficient draw on the data centers’ electricity.

As Ankur Crawford told us on the show last week, the type of compute needed for me to pull up my crispy oven buffalo wing recipe shouldn’t be the same as what AbbVie might need to discover the cure for male pattern baldness - surely a ten trillion dollar drug, I don’t understand what the hold up is. And, in the future, it won’t be. Some workloads will be sent to the GPUs while others are handled by ASICs that are purpose-built, cheaper to run, and good enough for the job. We’ll see hyperscalers getting a lot more focused on which chips, for which workloads, for which customers, at what time of day, etc. And so people worry that Nvidia will somehow be forced to cede market share as lesser chips become more useful to the millions of corporate customers and their needs throughout AI ecosystem.

And I don't dismiss it out of hand. But while I've been hearing these arguments from the Nvidia bears (it's a miracle there are any left), I've been able to compartmentalize them. That $700 billion capex figure I mentioned? It's already obsolete. The big five hyperscalers are on track to spend over $600 billion on infrastructure in 2026 alone, with roughly 75% of that tied directly to AI. Goldman Sachs notes that consensus estimates have been too low two years running. The market keeps getting bigger faster than anyone models it.

Here is the part the bears keep glossing over. Google has been building its own custom AI chips, TPUs, since 2016. Nvidia's data center revenue still grew 142% last year. Those two facts coexisting tells you something important about how this market actually works. Custom silicon doesn't replace the GPU ecosystem. It runs alongside it, handling narrower workloads while Nvidia owns the rest. Anthropic, OpenAI and others have been explicit that inference demand is growing faster than anyone projected. The "we don't know how big this gets" argument stops being a hunch and starts looking like the most defensible position in the room.

If we're all going to be walking around employing agents as personal assistants and digital coworkers three years from now, it's highly doubtful we're going to run into a glut of compute, unless the efficiency of the models just absolutely explodes, enabling us to do a lot more with a lot less than we think. Also a possibility. I try not to close my mind off to these things. I won't be the first to know and neither will you.

So if we can’t be sure of the overall size of the market, then it’s okay for us to harbor some uncertainty about whether or not a near-monopoly like the Nvdia GPU business may cede some market share to other players. We don’t have to be sure of this happening or not. Better to stay focused on the overall size of the pizza than start worrying about whose slice is bigger or smaller than expected. We’ll eventually get to the slice measuring part of this as the market matures. I don’t think that’s a 2026 concern.

The actual moat

Most people think Nvidia's moat is the chips. It's not. It's the software that runs on them, and that software has a 20-year head start. CUDA, which stands for Compute Unified Device Architecture, started as a Stanford grad student's side project. Ian Buck was messing around with GPUs for non-graphics computing in the early 2000s, built a programming language called Brook to make it work, and Nvidia hired him. Jensen saw immediately what this could become. The genius move wasn't the technology. It was the go-to-market. Nvidia made CUDA compatible across its entire product line, from cheap gaming cards all the way up to data center hardware. A student could learn it on a $300 GPU and apply those exact same skills to a machine running a frontier AI model. That continuity created an army of developers who knew one platform, deeply, and had no reason to learn anything else.

Here's what that army looks like today. As of this year's GTC conference, Nvidia counts 6 million developers building on CUDA, with over 7,000 applications running on the platform. That number was 1.8 million five years ago. For competitors, the picture is bleak. Switching a real production AI workload from CUDA to AMD's alternative, called ROCm, isn't a weekend project. It's a multi-month engineering effort with no guarantee it performs as well on the other side. That friction is the moat. Better chips can be designed. You cannot design away 20 years of institutional knowledge baked into millions of developers, thousands of libraries, and every major AI framework ever built.

The Azure Example

I really want to hit on this point because those of us who have been through a few cycles ought to have learned it whenever we think about competition, moats, market share and the like. There’s a human element to what makes a particular tech company’s products proliferate. Sometimes the engineers and IT folks just want to keep their jobs. Or stick to what they’re already comfortable with. In the 1980’s, the unofficial slogan was “Nobody ever gets fired for buying IBM.”

We have seen this movie before. A generation ago, Microsoft quietly seeded the entire Fortune 500 with IT departments full of people holding Microsoft certifications. Those certifications weren't charity. They were a calculated land grab. By the time cloud computing arrived and every company on earth needed to make a decision about where to run their infrastructure, the people making that decision already knew one ecosystem. Azure won deals not because it was always the best product, but because the person evaluating it had spent their entire career inside Microsoft's world. CUDA is running the same play, one generation later, in a much bigger market. The researchers, the engineers, the PhD students building AI systems today learned to do it on CUDA. When their companies write the checks, that history travels with them.

The new "nobody gets fired for buying IBM" is nobody gets fired for building on CUDA. It is already the default answer in every AI job posting, every university curriculum, every research lab onboarding checklist. The researchers and engineers making nine-figure infrastructure decisions five years from now are learning on it right now. By the time their employers are writing the checks, the decision is already made. This is exactly how Microsoft won a generation ago and became such a dominant force during the cloud wars. In this current technological revolution, the lock-in is already here.

CUDA is being taught in universities, required in job postings, and baked into the workflows of every serious AI research lab on earth. When a company goes to hire the team that will build their AI infrastructure, they are not getting people who evaluated all the options and chose Nvidia. They are getting people who only know one way to do it.

Disclaimer:

I am personally invested in Nvidia for over a decade. I’ve sold some along the way (it’s a 10,000 percent-plus return, no choice) but I intend to hold my core position forever. I do not give investment advice on this site, I am sharing my point of view. You are free to make your own decisions, as always. As is the case anytime I talk about stocks, my complete compliance disclaimer applies. Have fun reading all nine million words of it, because apparently, we have decided as a society that adults are incapable of taking responsibility for their own actions. The market is rough, stocks go down, get a helmet.

Okay, I think that should cover it.

Adam Parker says Nvidia is misunderstood

Adam and Rob on The Compound and Friends this week

My friends Adam Parker (Trivariate Research) and Rob Sechan (NewEdge Capital) came on the show this week and to say that we had a blast would be an understatement. It was one of the most fun, information-packed episodes we’ve ever done.

Michael and I in studio this week

Adam wanted to talk Nvidia and its moat because he thinks people don’t fully appreciate how meaningful that’s going to be as AI spreads out and infiltrates every aspect of our lives. It’s all going to be built on the CUDA architecture that 6 million engineers have been trained upon. This should keep competing chips in a supporting role and the Nvidia GPUs as the lead performer in the show.

This is how the stock gets from $4 trillion to $10 trillion in market cap, in Adam’s view.

What do you think? Is he going to be right? You can watch and listen to the whole thing at the links below. Thanks for all the reviews of our show you’ve been leaving at Spotify, Apple and YouTube, by the way. It helps a lot and we appreciate it.

NVDA breaking out (again)

After nine months of consolidation - and three straight earnings reports in which both the results and forward guidance were mind-blowing in their scope - we are seeing the stock finally break out again. In the chart above, I am showing you weekly closes going back three years with a 50-week moving average and 14-period RSI in the bottom pane. Momentum is confirming price as the stock challenges its old highs from last summer.

It’s been biding its time in this range between =$180 and $200 and then, out of nowhere, it resumed the climb. Now we’re looking the name just below the July 2025 highs around $210.

Nvidia is a late reporter but that doesn’t matter. Because in the coming two weeks we will be hearing from its five or six largest customers. If early indications from the recent reports out of Lam Research (chip equipment) and Micron (memory chips for AI) can be believed, demand for semis is not only still in full swing, it could actually be accelerating.

What you’re seeing in Nvidia’s move this past week is a sudden psychology shift among the bulls. While the stock was consolidating, it looked like you had plenty of time to get in. What’s the rush?

The forceful break back above $200 may have changed some people’s attitudes and injected a bit of urgency into the scene. You couldn’t give it away at $180 all winter, now they have to have it at $205.

You see how price can shift the narrative. This time, it happened overnight.

Nvidia’s on my list of The Best Stocks in the Market. Sean and I may cover it for CNBC Pro this coming week.

Why Nvidia is Going to 10 Trillion Dollars

THE COMPOUND & FRIENDS

Why Nvidia is Going to 10 Trillion Dollars

Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by Adam Parker and Rob Sechan to discuss: software stocks, AI and corporate profitability, searching for value in the current market, and much more!

Waiting on a bubble that hasn’t arrived yet

Let me clear my throat…

The AI theme on Wall Street could eventually end in a bubble and crash but it’s not there yet.

This is the conclusion of Alger’s star portfolio manager Ankur Crawford.

I’ll add to that idea.

For starters, saying we’re not in a bubble is not the same thing as saying the stocks related to the AI theme won’t ever come down. Too many people speaking on the markets deal in absolutes. As Obi-Wan warned us in Episode III, “only the Sith deal in absolutes.”

So if I say it’s not a bubble, I’m not saying there won’t be a drop in share prices. I am only saying the vast majority of investors are not recklessly speculating on technology bets that are extremely improbable to have a payoff. The payoff from AI-related capex spend is already in progress. Not every project will have proven to be successful in the long-term, but what other endeavor could you ever make this claim for.

The reality is that we are still short computing power given the explosive use of generative AI and there is no end in sight. Yet. And until there is, the spend will continue. Ankur doesn’t think - given already announced capex plans and the current supply-demand imbalance for chips - that we will see this market go into any sort of surplus through at least 2028.

What is more likely, at this stage in the game, is that the technology will advance sufficiently so that companies will begin saying they are able to accomplish more inferencing with their existing infrastructure so that the cost of all this compute can come down. They will not be saying the demand has come down. They’ll just get better at satiating it. This is a positive, not a negative. If you disbelieve this idea, then your only out is a world in which we close Pandora’s box, everyone stops using AI tools in their work and play, and we pretend it never happened.

Which of these scenarios seems most likely - hyperscalers get better at prioritizing chip and electricity use or people just stop generating tokens and delete the app? If it seems obvious, it should be.

And again, for the people in the back, two things can be true at the same time. The AI theme could be perfectly rational AND the related stocks could fall. Here’s Micron’s drawdown chart over the last three years. Don’t tell anyone, but this company absolutely destroyed the analysts’ earnings expectations the last time they reported, gave increased guidance out as far as the eye could see and then the stock promptly fell over 30% (bottom pane):

It’s since recovered, but this is the point. Stocks don’t always obey the fundamentals of the backdrop. Because they are owned by people, traded by algorithms created by people and perceptions change as quickly as human emotions.

This is what investors have to put up with if they’re going to win. Many cannot.

One year ago today Micron was selling for $68 per share. It closed Friday at $455. Riding a stock for a a septuple (7x) over the course of a year means enduring periodic corrections that could be mindblowing in scope. Anyone who says this is easy is lying.

Someday, Micron, Ciena, Dell, Sandisk, Nvidia and the others will fall 30% and just keep on falling. Everyone knows it. This spring it didn’t happen. Maybe this summer. Maybe in the fall. Maybe three years from now when the world has finally caught up on the demand for compute and nobody needs needs the next optical router or server rack cooling system or graphical processing unit or shipment of DRAM.

We’re not there yet. That’s the message of the markets this month. That’s the message we got from Ankur on this week’s brand new episode of The Compound and Friends.

The Nasdaq has just recorded its 13th consecutive positive daily close. That’s something that has only happened three times in history. From the March 30th low, the index is up 16%. If you’re watching from the sidelines, it’s easy to say “bubble.” It’ll definitely make you feel better about yourself.

Then what?

There are lots of reasons to be cautious right now (there always are). While it’s true that valuations for mega-cap tech have come down since the start of the year, it’s not like they’re pricing in worst-case scenarios surrounding the naval conflict in the Strait of Hormuz. Nobody believes in this war ending cleanly except for the software programs that run the Dow Jones up a thousand points every time Trump insists it’s a done deal. If you want something to worry about, worry about that instead.

Because the AI revolution isn’t going to be turned back. In many ways it has barely even begun. Autonomous driving is in the first inning. The Low Earth Orbit (LEO) economy is in the first inning. Humanoid robots are in the first inning. OpenAI, SpaceX and Anthopic haven’t even come public yet. We may end up with a bubble (because we always do), but let’s not fade something that hasn’t even arrived yet.

One thing we can say for certain is that none of this is going back into the box.

talking semis and data centers with a materials scientist turned portfolio manager

You can watch or listen to Ankur’s appearance on the show at the links below. I guarantee you’re going to learn a lot from her just as Michael and I have. I’m biased, of course,, but this episode is incredible.

Ankur Crawford is a rock star, I can’t wait for you to hear this episode

Rocket Lab Corp (RKLB)

Speaking of the Low Earth Orbit economy, this is a chart of Rocket Lab, the best publicly traded proxy we have for space-related investor enthusiasm. With the SpaceX IPO potentially coming as soon as this June, investors who haven’t gotten access to pre-IPO shares of Elon Musk’s rocket company are buying this one instead. Rocket Lab has re-usable rockets and contracts to launch both commercial and government satellites into space. They’re also building and operating the equipment necessary to tow satellites and other orbital devices into their proper place. The company is based in California and launches its rockets from two places, New Zealand and Virginia. They’re winning new contracts and iterating their technology at a rapid rate. It’s a stock that should be on your screen. You’ve heard me talking about Planet Labs (PL) and Joby (JOBY) and Archer (ACHR). Here’s another name in the same theme.

Why Bubble Talk is Totally Wrong

THE COMPOUND & FRIENDS

Why Bubble Talk is Totally Wrong with Ankur Crawford

Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by Dr. Ankur Crawford to discuss: the strongest names in AI, the future of the Mag 7, the semiconductor market, the case for Amazon, and much more!

Scalpel or Shotgun?

I bought some IGV on Friday

Has the software sell-off been overdone - at least, in the short-term? I thought so. I got long.

I took a shotgun approach. I know all the big names in this ETF generally but I don’t spend a ton of time on each of them every quarter or think I have an edge over the folks who do. I basically just wanted to buy pure, unadulterated panic at the close of trading last week. So I did. IGV is the iShares Expanded Tech-Software Sector ETF and it’s in a 30% drawdown since October.

It’s bouncing today, mostly thanks to Microsoft, Crowdstrike and Palo Alto. I don’t know if the bounce lasts an hour, a day, a week or a month. I won’t be here long.

Jonathan Boyar is not hunting with a shotgun. He’s digging in with a scalpel. Knowing these companies inside and out is his business. He writes them up, tracks them over months and years (decades) and lives and dies by their rallies and crashes.

Here’s what Jon and his team told their clients about Salesforce (CRM), one of their portfolio holdings, back in February:

No one knows for sure whether or not the bounces in this sector or in Salesforce in particular are just stops along the way toward even lower lows. In a situation like this, it’s important to know whether or not you’re an investor in software businesses (I am - Toast, Crowdstrike, ServiceTitan) or a trader (I’m also trading IGV) and know the difference. An investor is looking to add on weakness. A trader is walking away.

At Boyar they are investors. They buy misunderstandings and misperceptions. They use their own time horizon as a weapon and go on offense when others are on defense. It’s harder than I am making it sound. And it doesn’t always work. Not every value stock turns out to be a value. But when it does work - when it really works - it’s better than sex. Or so I’m told, I don’t know about that.

Anyway, Jonathan Boyar was the perfect guest for this week’s The Compound and Friends. Couldn’t have timed it better. We had a blast talking about Microsoft, Salesforce, Adobe, Sphere, MSG, Scott’s Miracle Grow and so many other names he’s currently buying, selling and passing on. Over 50,000 people have already watched this episode on YouTube and the audio podcast downloads are probably double that.

You’re going to love it. I promise.

Jonathan Boyar on The Compound and Friends

we laughed and learned with Jon

These are Cheap Stocks with Catalysts

THE COMPOUND & FRIENDS

These are Cheap Stocks with Catalysts

Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by ⁠Jonathan Boyar⁠ to discuss: finding value in a volatile market, Mag 7 valuations, the only publicly traded basketball team, how Uber could win big on autonomous, and much more!

All my bullies are bitter seventy year old men

It’s this weird thing…

When you spend most of your life being unremarkable, you’re lacking the experience of what it’s like to have people be jealous and act out against you. Imagine a girl who grows up as “the pretty one” from a young age. By the time she’s an adult, she’s already lived through a lifetime of other girls hating her, picking on her, gossiping about her and being mean every chance they get. I’ve witnessed this with my own kid. At a young age she couldn’t always understand why other kids - not just any kids, her friends - were doing and saying some of the things they were about her. “What did I ever do to deserve that?”

So I would say things like “You didn’t do anything. Just by existing you’re going to find yourself in these situations everywhere you go. You didn’t hurt this girl and she doesn’t actually dislike you. But you’re a constant reminder of her own insecurities. The things she doesn’t like about herself. She also doesn’t like you getting attention that she’s not getting. It doesn’t matter what you say or do, you can’t change the effect you’re having on her. It’s not your fault. Try to be nice regardless.”

I didn’t experience anyone being jealous or embittered by my presence for most of my life. I was entirely unremarkable. Not particularly good looking, not a great athlete, not the valedictorian, not the most popular kid at school. I could write and I could win arguments and I could make people laugh. Nobody cared. So I didn’t experience what my kid experienced as a child, a teen or a young adult. No negative attention. Most of the time, no attention at all.

It wasn’t until the last ten years when the bitter old men started being mean to me. At first I was like “What the f***? I’m cool with everyone! I have friends everywhere I go on Wall Street…” It made no sense that someone could have a problem with me. Eventually I talked to a person who is very wise in the ways of the world. He explained it to me:

“Josh, these are seventy year old day-traders. Failed hedge fund managers. Guys who sold their businesses without making a lot of money. Guys who never had the career they think they deserved. Guys that flamed out early and have been doing twitter bullshit ever since. All losers. Nobody who is winning has a problem with you because winners don’t have a problem with anyone. They’re too busy to pick fights over petty jealousy.”

And then I looked around and realized how right he was. Someone whose RIA didn’t make it. Someone who is thirsty for attention to sell a newsletter. Someone whose column is no longer grabbing any readers. Someone who used to be on TV. Someone who used to sell books. Once I saw it, I couldn’t unsee it. And then I got the chills. “Am I doing this stuff to anyone, even if inadvertently? I hope not.”

That was probably around 2019. I’m paraphrasing how it was explained but it really stuck with me. A year later I removed myself from the scene entirely to avoid these types of pointless interactions. I recognized the power of only showing up in places when I wanted to, not rolling around in the mud all day. For a few years after my graduation from the online slap-fighting pits, people would take it upon themselves to email and let me know if some has-been or pseudonymous weirdo was talking about me, just in case I might have missed it. Thanks for that.

The feeling of having some nasty old man lashing out over his own personal and professional failings was so strange to me. No one had ever been envious or jealous of anything I had ever done up until I got into my forties. So I had no experience with this sort of thing. No natural defense mechanisms or internal scripts to run through. I was dealing with it for the first time. “I get why they’re unhappy, but what do I have to do with it?”

Nothing. I just exist and it triggers them. It’s not a lot of people fortunately because I never engage. Engagement is what fuels this sort of thing. There are people on the internet who spend their whole day courting this sort of negative attention, for one reason or another. They thrive on it. I think that’s a personality flaw. I can’t imagine it being helpful for their business. I have gone in the opposite direction.

The triggering is impossible to completely avoid. Even the Pope has people talking shit about him on the internet. I appear on TV or one of my articles gets attention or my podcast does big numbers and it’s like a slap in the face for some older guys who, despite all their time in the market, are facing near-complete apathy from investors and the industry. Imagine pining away for a media mention or a TV hit and then I pop up on the channel you can’t seem to turn off, despite your professed hatred of it? Imagine battling it out on the internet for newsletter subs after thirty or forty years of “professional” trading and the subs just stop subbing? Imagine running an old fashioned conference business and then you see thousands of people register for and post about Future Proof for weeks and weeks on end? I get it. Maybe I’d hate me too.

One thing worth pointing out is that many would-be bullies don’t even realize why they’re so angry. They’re not introspective about it at all, they just get triggered and attack. It’s like they can’t help themselves. These are figures worthy of pity rather than scorn, no matter what they say. Punching back down is going to look unattractive to the outside observer. The self-satisfaction in having done so will also underwhelm. You can’t win by making someone who feels bad feel even worse. That’s not a victory.

So you don’t see me fighting back. Or getting into flame wars with people. I don’t even respond privately anymore. I’ve bumped into people in person who’ve tried to antagonize me online and they act like it never happened. Like it’s just a game or why should I be mad everything’s going okay for me so what’s the big deal. People are so f***ed up. I’ve learned, after a long time, to laugh it off or ignore it. I get a little better at this every year.

The world is full of bitter old men who’ve been disappointed by how their own lives turned out. By how their careers turned out. By how their investments turned out. By how their kids turned out. By how their marriages turned out. We can’t change that. Life is hard. What we can do is avoid turning out this way ourselves. I hope I never become someone else’s seventy year old bully. I can’t imagine it happening but I suppose it could.

The Good Guys list

So I’ve come up with a Good Guys list of people who have reached sustained success in their careers and don’t seem to be bitter about anything or jealous of anyone. People who just seem happy to be alive and doing what they love. People who go out of their way to encourage the younger professionals in their midst to carry on to even greater heights. These are the men and women I look up to. They’re further along in life than I am and have a lot more money and success under their belts. Concrete achievements that don’t require any additional explanation. Awards, accolades, titles, the sale of a business or two, claims to fame, relationships, etc. You already know they made it, they don’t have to tell you themselves. Most importantly, the Good Guys I am talking about use their wisdom, influence and experience to inspire the next generations behind them. I want to grow up to be just like them. I like how they carry themselves. I appreciate how they find their joy and purpose in helping younger people.

One thing you’ll never see the Good Guys do is spend the time they have left sitting on social media, sniping at their imagined “rivals” like a jealous old bitch with nothing better to do. If you end up as an old man yelling at the TV or fighting with the internet, then basically you lost. I don’t know how else to put it. And you’re advertising it to everyone else - not a great look.

I think you want to have examples in front of you in terms of how you want to turn out. And examples of how you don’t. And, most importantly, you want to be able to say at all times that you’re headed in the direction of being a Good Guy.

Who are your Good Guys? Who are the men and women that have shown you the path you want to follow? If you don’t have a list yet, start making one.

Here are some names from my Good Guys list: James O’Shaughnessy, Jan van Eck, Guy Spier, Rich Bernstein, Jurrien Timmer, Andrew Ross Sorkin, Stephanie Link, Nick Colas, Ric Edelman, Chris Davis, Jenny Johnson, Dr. David Kelly, Savita Subramanian, Joe Terranova, Jeff deGraaf, Kunal Kapoor, Peter Boockvar. There are others. You will never see these people talking badly to or about others, picking fights, creating drama or tearing their peers down to make themselves look better. They remain focused on positivity and progress. They mentor younger people and are happy to witness the accomplishments of their colleagues. They can disagree in a respectful manner without making it personal. They don’t throw bombs. They don’t troll. They don’t seek to enrage people for clicks or out of spite. They have all had successful careers in finance and investing. They’ve all had their struggles to overcome too. And they’ve come through with their character intact. Their humanity intact. These are the people I want to emulate as I move forward.

In an attention-based economy, the shortcut is to start fights and stir up a tornado. That gains you followers and renown today but it stunts your growth over time and turns people off in the long-run. It’s a bad trade. While that sort of behavior may generate the most attention, there are also Good Guys everywhere. They may be quieter, but they exist. You just have to look around and watch how people carry themselves.

Gentleman Jim

Jimmy Lebenthal is one of the Good Guys. He’s a from a family of Good Guys who established a brand in the municipal bond market generations ago. When he left the Navy, he joined the family business and learned from the previous generation before blazing a trail of his own in wealth management. I’ve seen him operate as a market commentator, a professional investor and a corporate leader over the last thirteen years and everything he does is gentlemanly. I wish I could say that about myself but I haven’t always carried myself this way. Jim has and, as a result, his reputation on Wall Street is solid gold. He’s an example worth following.

Jim isn’t right about every stock he recommends. He doesn’t always get the W. None of us can. It’s not a profession of being right all the time. What we do in this world boils down to how well can you capitalize on being right and how quickly can you recover from being wrong. Jim can run this obstacle course with the best of them. I have seen him do it.

You can get a copy of his new book, How To Ride The Subway, right here.

Plus! You can listen to him on an all new edition of The Compound and Friends at the links below. Jimmy is buying the fear right now, pointing to the fact that so far in 2026 we’ve gotten nothing but earnings revisions higher plus the valuation reset in large cap stocks that everyone claimed they wanted to wait for. Well, here it is. As earnings rise and prices fall, starting valuations have become less challenging for new-money buys. He also makes the case for Amazon, Citigroup and Oracle, three of his favorite stocks right now.

The S&P 500 loses its 200-day moving average

Of all the things that happened this week, the S&P 500 losing its 200-day moving average is the most notable. For the first time in ten months the market has fallen out of an uptrend. This could reverse itself, so it’s important not to turn immediately bearish. Whipsaws above and below the 200-day are common and confusing. But we can’t ignore it entirely.

There’s more. The Russell 2000 is the furthest gone of the major stock averages, now in an official correction (down more than ten percent) and well below both its 50 and 200-day. The Dow Jones Industrial Average closed just above correction territory but is testing its own 200-day.

Some other details…

Dell, ONEOK, Fedex and Chevron were four of the top five stocks in the S&P 500 this week while the rest of the market struggled in the wake of persistently high oil prices, a reticent Federal Reserve statement and the usual concerns about SaaS disruption and private credit woes. All four names have been featured by Sean and I in our Best Stocks in the Market research at CNBC Pro and in my related TV appearances. One of the central tenets of what we do is to try to show readers where the strength in the market actually is. These stocks worked this week and have been working all year so far. It’s worth being aware of.

But I want to point your attention to the stocks that fell. Micron had a blockbuster earnings report. They shot the lights out last quarter and guidance was better than expected for the full year. The stock fell anyway, similar to the way Nvidia was treated after their recent blowout quarter. This is never a good sign. Micron (and the other memory chip stocks) are all still up a lot on virtually any timeframe you want to use, but we don’t like seeing stocks top on great news. It’s the converse of something we like a lot - stocks trading higher on bad news, which is a great buying signal. It remains to be seen whether or not the lack of enthusiasm is mainly macro-driven in the context of the war or if it’s a larger signal about risk appetite in the data center trade.

You can ignore the Super Micro crash - turns out it’s a fraud and some of the executives of the company got busted for disguising servers, deceiving auditors and violating US trade policy while smuggling Nvidia GPUs into China. What a f***ing shitshow, but not a market signal for tech investors.

Are We in a Bear Market?

THE COMPOUND & FRIENDS

Are We In a Bear Market?

Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by ⁠Jim Lebenthal⁠ to discuss: stock market volatility, who's winning the AI race, risks and opportunities in private credit, Jim's favorite stocks, and much more!

Schwab’s CEO Rick Wurster on The Compound and Friends

Rick crushed the appearance

This year at Future Proof Citywide we wanted to bring out the one person everyone in wealth management needs to hear from right now. That person is Rick Wurster, Chief Executive Officer of the Charles Schwab Corporation. Schwab has been absolutely on fire over the last year, adding tens of millions of new retail accounts - a third of which are coming from the Gen Z segment. In the popular imagination, Schwab is not competing for this younger client. The popular imagination is just flat-out wrong. Of the 46 million new brokerage accounts opened there in 2025, approximately one third are from Gen Z households.

We had a wide-ranging and candid conversation about some of the things advisors care most about. We touched on the decision Schwab made to raise the minimum account size for the advisor referral network from $500,000 to $2 million. I asked Rick how advisors utilizing Schwab as a custodian should feel about the brokerage giant competing with its own internal wealth solution and going direct to consumer. His answer was a good one and I saw lots of nodding from the massive crowd who watched the live recording.

We asked Rick about prediction markets and other speculative activity that has been gaining in popularity. He drew an important distinction between the value of prediction market information versus the betting activity itself.

We talked through how Schwab sees the current competitive landscape, with Robinhood entering the custody space at the low end and Goldman Sachs getting more aggressive at the high end. Rick’s willingness to engage on this topic and be very specific surprised some people in the audience.

With $12 trillion in assets under management and one of the largest customer bases in all of financial services, Schwab is in a position of significant influence over what the next ten years on Wall Street are going to look like and which innovations will actually take hold. Rick’s AI takes are vital given how much of this technological revolution will directly meet the consumer on his platform.

My media team went above and beyond to make the YouTube, Spotify and Apple Podcast versions bring you into the event and make you feel like you’re sitting there on the beach with us. This is one of the most extraordinary episodes we’ve ever produced. I hope you love it. You can watch or listen to the show on the platform of your choice at the links below!

A Sit-Down with Rick Wurster, CEO of Charles Schwab

THE COMPOUND & FRIENDS

A Sit-Down with Rick Wurster, CEO of Charles Schwab

Josh and Michael are joined by Charles Schwab CEO Rick Wurster to discuss: the future of finance, AI's impact, being the $12 Trillion king of brokerages, and much more!

That which cannot be disrupted

It turns out that people enjoy being with other people.

I know, it’s so weird. Why would anyone ever bother seeing other humans when they can just peck their thoughts and questions into a chat box. It’s so much more efficient. Well, regardless, I guess we live in a world where not everything can be reduced to a mathematical equation. I guess we’d better just get used to that.

The stocks that represent the physical economy, which I’ve been referring to as Heavy Assets, Low Obsolescence, spent the past week rallying hard as technology stocks continued to melt down.

And then late in the day Friday, two new ETF filings hit the SEC’s website, both commandeering my HALO term. I’m not sure how to feel about this. They say imitation is the most sincere form of flattery. Okay, I’m flattered. But shouldn’t I be getting some money? I’m not a lawyer but I have a lot of lawyers. I guess we’ll figure it out.

These two filings hit within two minutes of each other. It got a big reaction from the ETF reporters. I haven’t decided how I feel about it (or looked into the funds’ methodologies) yet.

I’m going to speak with these guys and try to learn some more about what they’re planning, I’ll report back once I do.

One thing is for sure - my big idea about how to navigate this year in the stock market has exploded in to the public consciousness. All the major investment houses on Wall Street are putting out notes, quantitative baskets of stocks and strategy pieces on HALO. It’s a full blown thing now.

So I thought that today I would answer a question posed to me internally on my research team’s Slack channel: What is the ultimate HALO stock. I came up with four that would definitely make the list. No one is talking about these stocks but they represent the epitome of HALO as an investing concept. These companies are all about live events and completely immune to the current fears about AI disruption.

Let’s run through them…

This is Sphere Entertainment (SPHR), which is only an obvious buy in hindsight. I’m sick to my stomach that I missed it. I saw U2 at the Sphere when it first opened. On a subsequent trip to Vegas I saw the science documentary they’ve been showing on nights that they don’t have a concert. Then they brought in the Eagles and Dead & Co which was proof of concept that there are lots of different kinds of audiences for this. And then they did a revamp of The Wizard of Oz which complete with atmospheric flourishes and sold $300 million dollars worth of tickets since it’s launch in August. It’s unbelievable. Now you can sit back and imagine all of the potential opportunities they have to bring in top acts and then sell out these theatrical film experiences based on beloved IP. It’s a grand slam.

Right now the Backstreet Boys are finishing up their residence at the Sphere. This spring they’ll bring in Phish and No Doubt (I’m going to that one in May). They just announced a string of “no repeat” weekends with Metallica playing completely unique sets on Thursdays and Saturdays in October (shit, I probably have to go back for that too). The Sphere is HALO. Chatbots and AI agents can’t touch it.

I don’t own this stock but a million years ago I used to sell it to my stock brokerage clients over the phone. I’m talking 2003, 2004. Anyway, the stock has been absolutely on fire. Michael Batnick is long the stock personally and has been beating this drum for over a year now. On Friday they reported what has to be their best quarterly earnings ever. They crushed it.

IMAX’s Q4 numbers and full year 2025 total should put the "theaters are dead" crowd into a permanent coma. A record $410 million in revenue, up 16% year-over-year. They grabbed a record 3.8% of the total global box office. Cash flow jumped 33% to $185 million with 45.1% margins, which is insane. The Q4 alone was a blowout, with revenue up 35% to $125 million and earnings per share of $0.58, that’s a double vs last year. Record full-year operating cash flow of $127 million, a gain of 79% vs 2024. They started building 65 new systems in the last quarter. Gross margins were 57%_, net income is up 34% and the box office hit a $336.2 million quarterly record.

In 2026 they’re going to break the scale. Management guided to a record-shattering $1.4 billion at the box office for this year. They’re planning to drop another 160 to 175 systems into the network and keep EBITDA margins locked in the mid-40s. And now they have Christopher Nolan’s already sold out run for The Odyssey (he actually shot the film with special IMAX cameras) while Denis Villeneuve comes back with the final Dune of the trilogy. There’s a Ryan Gosling film called Project Hail Mary, a Michael Jackson biopic (I’m good, have fun). Disney’s got two big ones coming - The Mandalorian & Grogu and Avengers: Doomsday. This company is single-handedly saving Hollywood. The studios are fighting over securing enough theaters for the IMAX release of their films. Fans are fighting to get tickets, selling these showings out as soon as they come online. AI isn’t a factor here. IMAX is HALO.

This is the C shares of the Liberty Media tracking stock for Formula 1, the hottest sport in the world. There are A shares (FWONA) that carry voting rights but these are more liquid and widely used by retail. Then there are B shares that are listed in the OTC market (FWONB). Why are there three classes of shares for the same company which is, itself, a tracking security for a business that is controlled by Liberty Media Group? The answer is that nobody knows. John Malone just likes doing tracking stocks with the various businesses in his Liberty Empire. There are like a dozen different tickers and, just to keep you on your toes, he is constantly reclassifying things and even exchanging entire portfolios of different media holdings between them. It’s like an MC Escher drawing, nobody even bothers to try to untangle it anymore. Malone is a media investing genius and a billionaire, I won’t question it.

The bottom line is if you’re bullish on racing and motorsports, this is the stock. It has 100% ownership of Formula 1, which manages the global commercial and broadcasting rights for the world’s premier racing series. It also has an 84% stake in Dorna Sports, the commercial rights holder for MotoGP, Moto2, Moto3, and World Superbikes. Also under the FWONK umbrella is a 30% stake in Meyer Shank Racing, 24% of the high-tech hospitality venture F1 Arcade, 7% of the youth-focused digital media brand Overtime Sports, and a 7% interest in the Kroenke Arena Company. They also own the permanent Las Vegas Grand Prix pit building through its LV Diamond Property subsidiary. As you can see above it’s had a messy few months but this is as HALO as HALO gets. Whether you’re watching the races or related content on TV, streaming or the internet, they’re getting paid. And if you’re attending in Dubai, Miami, Vegas, Austin or anywhere else, they’re also getting paid. Formula 1 is HALO, even if they start letting AI do some of the driving.

Last one is a stock I own and have owned personally for years. It’s one of the best investments I’ve ever made. LiveNation (LYV) is the most important company in the live concert business worldwide. It’s also part of the Malone empire. Liberty owns approximately 30% and controls almost half the votes.

If the pandemic and its aftermath have taught us anything, it’s that live music is one of the most undisruptable enterprises on earth. The desire to take in a performance, in-person, among a crowd of fellow show-goers dates back to the dawn of civilization. It will never not be important to people. We love going to shows. Every age, race, gender, nationality, genre fan base - the concert business transcends any barrier you can think of. LiveNation is the company that brought the concert business into the twenty-first century. They do an incredible job.

If you’re going to be a long-term investor here, you’re going to have to weather periodic outbursts from politicians launching anti-trust investigations given the company’s dominance. They are the leading platform for ticket sales (Ticketmaster) and they own or operate a lot of venues around the world. Artists frequently use them as a shield as they seek to maximize the profitability of their tours via mechanisms like dynamic pricing. Bruce Springsteen doesn’t want his working class fans to know that the ticketing algorithm is constantly adjusting to capture top dollar for every seat in the arenas he’s playing, using real-time demand data to not leave any money on the table. This is America, he should be able to do that. If you’re a Bruce fan, be happy for Bruce. It’s not true that the ticketing firm makes most of the money. The artist is making most of the money. In some cases, almost all of it. The ticketing company is handling the details and getting the tickets into the hands of the people who want them.

The fans don’t always understand this so LiveNation has to take some of the heat, in the same way the NFL team owners have paid Roger Goodell $700 million in career earnings to take the punches they don’t want thrown in their direction. The reality is that when you go to a show being run by LiveNation’s ticketing operation at a LiveNation venue, you’re getting the best possible fan experience under the sun. It’s totally seamless, from the way the app works to the way that ticketing process works with the amphitheater, stadium, arena or concert hall. And yes, the artists are all making a fortune right now too - they’re getting a way better deal from a LiveNation partnership than they get from the Spotify partnership.

LiveNation is expected to do over $25 billion in revenue this year. When they reported Q4 earnings in the middle of February, they said they had already sold 67 million tickets for shows this year and that 80% of its large-format venues were already booked for 2026. In recent years, LiveNation began building its own company-owned venues (VenueNation) to give it even more control of the fan experience. They project that over 70 million people will see a show at one of their owned and operated facilities this year. AI is not currently working on building stadiums to host Taylor Swift concerts. LiveNation is big time HALO.

Obviously nothing you read on this site should be considered as financial advice. Do your own research and take responsibility for your own decisions. And if you want help, you can talk to us anytime.

The Strategas Boys in TCAF

Dan Clifton and Chris Verrone in studio

Chris Verrone almost didn’t make the taping on Thursday. He was trapped in a Mexican hotel being told by security not to head to the airport. The cartel was hanging police officers from the bridge and burning down buildings to retaliate against the government for taking out their leader. Finally, he got word that they could get him and his group out of the country and back to the USA safely. We saw him the next day. I don’t think I’m going back to Mexico for a vacation any time soon. Anyway…

The official Compound “Public Equity” long-sleeve tee is now available in our store. Go to idontshop.com to grab yours before they run out.

Dan Clifton is the policy wonk at Strategas and his insight complements the macro and trend work that Chris does on behalf of clients. In addition to the research products they sell, the firm also has a few ETFs based on the macro and the political views of the team.

We had a fascinating discussion about the political problems large-scale AI projects are now running into across the country. We talked midterms, positioning, asset allocation and some of the hottest trends in the market today. This was a classic episode of The Compound and Friends - if you’re a fan of the show you’re going to love it!

Data Centers Are the New Fracking

THE COMPOUND & FRIENDS

Data Centers Are the New Fracking

On episode 231 of The Compound and Friends, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by Daniel Clifton and Chris Verrone of ⁠Strategas Research⁠ to discuss: AI's backlash, the Stock Re-rating, Midterms, Anthropic vs The DoD and more!

It’s a Tuesday night in September, 2024…

…and everyone’s riding on a natural high.

And yes, probably some alcohol too.

We’re at Perq’s, which is where we always throw the afterparty when the concert ends at Future Proof in Huntington Beach. It’s a mile walk along the ocean into town. We take the whole place over. They’re happy to see us. Hundreds of people pouring in on a weeknight, ordering dozens of shots, beers and whatever else they can pour as fast as they can.

bringing the band on stage with Mids, September 2024

The singer hears that we’d just come from a Third Eye Blind show so he grabs his guitar, leans into the mic and strums the opening chords of Semi-Charmed Life. Everyone loses it. That was the song the band had just closed with, dosing 5,000 attendees with an aural happy pill all at once. I look up and people are swinging from the rafters. Sean and Nick are on stage dancing. The girls are belting out all the words. There are whole pizza pies being carried overhead like stage divers, to and from the back of the bar.

The singer switches gears, now he’s doing Wagon Wheel. Perq’s explodes into a group singalong. People on the curb outside are trying to see what the hell is going on in here.

Someone says “it was some sort of financial conference” and they look at us like we’re crazy.

I’m sitting in front of the musician as he conspires with the cocktail waitresses to turn the bar into our own little Mardi Gras. And then Ben Carlson leans in to ask me a question.

“Who’s having more fun than us?”

No one, I say.

“Right???”

You’re right. Literally no one.

We cheers’d. He was asking rhetorically because he already knew the answer. Everyone around us that night knew the answer.

I think about what Ben said a lot. Especially when things don’t go well or something temporarily goes wrong or, as my partners say, I need to count down from 20 to regain composure (happens more than I’d like to admit). I recall it. Not the night itself as there have been many such days and nights. Just the idea.

We carved out this niche in our industry and built an entire world around it. An ecosystem, they call it. Partners, co-workers, colleagues, friendly competitors, fans, industry friends, clients, vendors, readers, viewers, potential customers, potential hires. If you’re in our orbit, you know Ben was right. Still is right. I may take it for granted at times, but never for too long.

Today I woke up and I had mysteriously - impossibly - turned 49 years old. I don’t know how that’s even feasible. If you’ve been with me since the early days of The Reformed Broker blog, that was 18 years ago. I was 31 with a two year-old baby. She’s in her sophomore year of college now. The firm I eventually co-founded from zero went on to become the hottest brand in wealth management. Not the biggest, as I said recently, but in my opinion the best. We own the whole thing, me and my team. We own our own media platform too. We do whatever we want and answer to no one but our clients. It’s the sickest position to be in you could possibly imagine. And then twice a year we throw a massive festival on the beach inviting thousands of our closest friends in the business. Next month I’ll be on stage in Miami interviewing Rick Wurster, the CEO of Charles Schwab. We’ll do it live for the entire industry to be a part of and we’ll record for you guys on the pod. Can you believe it? Me either.

So when Ben’s not around and I need a reminder, I repeat the question he asked me at Perq’s that night.

Who’s having more fun than us?

My job is to make sure I can continue to say “No one” for decades to come.

I’m 49, feeling 29, and grateful for all of it. Grateful for you too. Thanks for sticking with me.

Pre-Crisis Vibes in the Air

 

They call what you’re seeing above a change in the internal logic of the stock market this year. The decline is happening monotonically. I just taught myself that word so allow me to use it. Monotonically describes a process, function, or sequence that changes consistently in one direction—either never increasing or never decreasing. The most expensive stocks at the start of the year (X axis) are down the most (Y axis) since January 1st. The cheapest 1, 2, 3, 4, 5 and 6 deciles are down the least. That internal logic - that in a multiple compression regime the biggest multiples must be compressed the most - makes sense intuitively. And it’s happening.

Here’s another one from Chart Kid Matt we talked about on What Are Your Thoughts last night. Leadership is coming from stocks in the tiniest sectors sectors of the market. Energy and Materials are smaller than Microsoft. They’re ripping.

Above, you’re seeing the multiple compression play out versus price. Stocks are flatlining as earnings continue to grow - we’re on pace for 14% EPS growth this year according to The Street. The sellers don’t care. They’re spooked. Less confidence in the future. A dollar of earnings today is “worth less” than it had been three months ago given the uncertainty everyone’s feeling about AI, the economy, the consumer, the capex boom, you name it.

Pre-Crisis Vibes.

I don’t know how else to put it.

They’re sorting it out. Making their calculations. Selling the stuff they’re worried about and buying the stuff they’re not. It’s as if everyone, all at once, got the memo to prepare for something.

But what?

You can watch (or listen to) Michael Batnick and I discuss this environment at the links below. Make sure you’re subscribed - we’re going to take you through this, whatever it is. I promise.

Pre-Crisis Vibes All Over the Stock Market

THE COMPOUND & FRIENDS

Pre-Crisis Vibes All Over the Stock Market

Join Downtown Josh Brown (CEO, Ritholtz Wealth Management) and Michael Batnick (Managing Partner, Ritholtz Wealth Management) for another episode of What Are Your Thoughts and see what they have to say about the biggest topics in investing and finance!

The Ick

AI-generated content gives me the ick…

I can always tell when I’m seeing a video that’s been created by AI or reading a paragraph in an article that’s been authored by it. I know it’s AI because I have an instant revulsion to it, almost like an allergic reaction or a mental gag reflex. It’s hard to describe. It’s what the Gen Z girls refer to as “the ick” and it’s real. I click away as soon as I know. And I know quick. I can see it in things I click on, I can see it on social media feeds, I can see it in my email inbox. And it’s an instant “f*** this” - I won’t read or watch any of it.

Will I always feel that way? Will my whole generation feel that way while subsequent generations feel less that way until the majority of the population just gets used to it? Will the AI ever get good enough to consistently fool me? Will I get over it, either way, because life goes on and there’s plenty of other things to focus on? Will I someday sit through an entire AI-generated movie where the direction is AI, the writing is AI, all the performances are given by AI actors, the stunts are AI, the backgrounds are AI, AI wrote the music, AI edited the film, etc?

I don’t have the answers to any of these questions. But I do know this: I am on ChatGPT, Claude and Gemini all day long. I’m replacing it with search in nine out of ten cases. It’s better than search because it serves me the answer rather than sending me on a treasure hunt filled with blue links that may (or may not) have the answer. It collaborates with me on recipes I’m attempting, helps me adjust for ingredients I don’t have, customizes for a specific serving amount, improves my technique and looks at my in-progress pics to offer assistance on the fly. It answers my questions instantly (not always correctly, how human of it) about every subject under the sun. I probably prompt it with questions or commands hundreds of times per day for just $20 a month. What an amazing thing.

So why am I so grossed out by its creative output? If it’s so useful and practical, why can’t it also be my favorite writer, composer, painter, producer, performer?

I think I know why. It’s because it feels like a trick. Art, for most of us, is connected to the feelings the artist is experiencing and the experiences the artist is responding to. You can’t manufacture that with an algorithm. You can mimic it. But if you’re an artist yourself or a person who deeply appreciates art (not everyone, I know), then the moment you see the AI trying to pull the trick, it makes you want to turn away. Ick.

Anyway, that’s what I think. We’ll see if I still feel that way in six months or six years. Maybe I’ll get over it.

Someone DM’d me a 30 second video clip of an AI-simulated famous actor walking through studio backlots to briefly pose for photos with his old castmates from decades of movies he’d made. The verisimilitude of him and the other simulated celebrities was pretty perfect. And the idea was clever enough to have spawned hundreds of other versions (I don’t actually know which one was the original). I admired the cleverness of the idea and the perfection of the execution. They’re all well done. For example, here’s Marty McFly visiting the sets of other movies, taking selfies with the main characters.

Instagram post

Not terrible. And someone had to come up with the ideas so it’s not totally devoid of human involvement. It just feels…not human. Maybe they’re too well executed?

I didn’t send this to any of my friends (which is what the person posting it wants) because it felt meaningless. I was about to and then I thought “What’s the point of sharing something so fake and empty?”

Then I pictured someone retorting back “What about a Pixar film from Disney? The characters are computer-generated too. Isn’t that also fake and empty?”

No, it’s not.

“What’s the difference"?”

I don’t know precisely how I’d phrase the difference. I just know it is different and that this difference is important.

Living in the Analog World

I made the Wall Street Journal today in a new feature article about the hottest investment theme in the stock market this year - the HALO trade.

I made this term up for you guys a couple of weeks back (you can read it here) and it has already become a thing. The media is writing about it, other bloggers and substackers are too, it’s all over social media, even the big brokerage firms are including it in their research notes.

Here’s JPMorgan:

Here’s Morgan Stanley strategist Mike Wilson:

Here’s Barron’s quoting me the other day on the idea:

Anyway, in today’s story, reporter Hannah Lang takes a closer look at the stocks that are working this year in the context of my HALO idea and explores whether investors are taking it too far. I told her that of course they will. On Wall Street, no one ever says “okay, enough is enough.” The mentality is always “if a little bit is good then a lot is better. And if a lot is better then way more is great!” Usually, people have to lose a lot of money before this wears off. And then it starts all over again in some other pocket of the markets.

For right now, the stocks of companies that inhabit the physical world - trucks, semiconductors, agriculture and construction equipment, chocolate, coffee, senior living facilities, medical offices, houses - these are the place to be while the disruption question hangs over the asset-light world of software and services.

Analog products, analog assets, analog places. Put another way, so far this year you want atoms, not bits. Will there be swings back in the other direction? Yes. Counter-trend rallies as things get carried too far? Yes. Rotations out of the blue that shake everyone up? Of course. But this is the major trend.

I’m telling you this because I don’t want you to get the impression that I think you need to run out and buy a whole portfolio of industrials and staples. It’s working now but it will, of course, be taken to a ridiculous place by the time we’re done. Don’t do ridiculous things just because other people are. At my firm, we preach and deliver on diversification. It’s why we’ve lasted so long and how we grow the firm every year. Because we protect investors from chasing themes - we’re not running away to join the circus with them.

You can read the Journal’s story with my quotes here:

Wall Street’s Latest Bet Is on ‘HALO’ Companies With AI Immunity (WSJ)

If we can help you with your portfolio or financial plan, the place to let us know what’s going on is right here. Ritholtz has over thirty financial planners across the country standing by to show you why new clients are flocking to the firm every day. Talk to me.

Michael Batnick handled the hosting responsibilities on this weekend’s The Compound and Friends and it was an incredible episode. Robin Grew and Kristina Hooper of The Man Group, one of the largest (and oldest) hedge funds in the world, came on to discuss all of the biggest questions facing investors today. Without my interruptions and outbursts, the show runs beautifully and they get to so many fascinating facts and insights. I highly recommend you listen, all the links are below…

Looks Like a Bull Market, Feels Like a Crash

THE COMPOUND & FRIENDS

Looks Like a Bull Market, Feels Like a Crash

Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠is joined by Robyn Grew and Kristina Hooper of Man Group to discuss: the 2026 outlook, AI's impact and recession possibilities, as well as International markets, private credit, and much more!

Anthropic or xAI IPO in 2026? AGIX ETF Offers Exposure

Anthropic and xAI may be edging closer to the public markets. Click to read how IPO speculation is building and how investors can access both these private AI leaders today through KraneShares AGIX ETF. LEARN MORE

When the cost of intelligence goes to zero

A thought exercise…

Think of a subject you know nothing about.

I’ll go first.

New England whaling in the 1800’s. I wouldn’t even know where to begin. Something about lamp oil and Herman Melville? I could probably bullshit you for five minutes. I don’t think I could do six.

But now I can type “You are a professor of New England history at a prestigious college. Prepare me for an appearance on Jeopardy where “Whaling” will be a category in one of the rounds. I’ll need enough superficial knowledge on the topic as I can possibly retain without too much so that I forget the important stuff. Make me appear to be knowledgeable on the subject within five minutes.”

ChatGPT will absolutely get this done. It will even offer a quiz after you’ve read the material to lock it all in. And if you go through this exercise, you can appear credible in a 20 minute conversation on the subject with someone who knows less than you about whaling. Which is everyone. Behold! Intelligence on demand.

But that’s not intel. Intelligence is now free. Intel is different. It’s the stuff you have to hunt down and assemble yourself. It’s the stuff insiders know that will not be readily apparent or accessible to the LLMs. In some cases, it’s the secret layer of knowledge that might actually be worth something in the context of trading or investing. Because you don’t get paid in the stock market for the stuff everyone already knows or can calculate. By definition, it is valuable because you can take action with it before others can figure it out if you work hard enough. LLMs are a shortcut to intelligence. They’re not going to provide you with the thing we think of as “intel.”

What’s not going to change despite the widespread intelligence running like hot and cold water through ChatGPT and Claude is that there are still going to be experts. What will change is that we will also have legions of people with “chauffeur knowledge” - which is fine but is not a replacement for expertise. It’ll get you through a round of Jeopardy, but will anyone be paid for it? Why would you pay for what’s already free?

Sam Koppelman and Nathaniel Horwitz on The Compound and Friends

Michael and I with the Hunterbrook Media boys in NYC this week

I was reminded of this on Thursday when my friend Sam Koppelman and his business partner Nathaniel Horwitz came by The Compound to tape the podcast. Sam and Nathaniel founded Hunterbrook Media which is a hedge fund attached to a working, well-funded newsroom. They’ve hired some of the best investigative journalists they could find - including the legendary Bethany McLean, whose landmark work unraveling the Enron fraud became one of the most consequential series of articles in Wall Street history. Hunterbrook is going to hunt for intel, manufacture the story based on the facts their reporters uncover and then trade on it. By definition, they will have something more valuable than the sort of chauffeur knowledge anyone else can order up from a chatbot. They’ll be using their own intel.

Intelligence is a commodity but intel is a valuable good.

Last year the hedge fund outperformed the S&P 500 with a long-biased book of stock trades and a few notable investigations that became national news. It’s an incredible story that Michael Batnick and I were excited to bring to you. If you haven’t heard it yet, you can listen or watch at the links below!

Inside the Baddest Hedge Fund in America

THE COMPOUND & FRIENDS

Inside the Baddest Hedge Fund in America

Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by Nathaniel Horwitz and Sam Koppelman of ⁠Hunterbrook ⁠to discuss: how investigative journalism can be an edge in investing, the Sable Offshore story, how Sphere is changing entertainment, and much more!

I know you want to play for a bounce in software…

I do too. Added to Uber, ServiceTitan and Toast this week at 52 week lows in my personal account. Probably too early, we’ll see.

These are long-term investments and companies that I believe ultimately benefit from increased automation and generative AI. Why? Because they have the user base, the network effect and the distribution. So plugging in technologies that lower their costs to deliver services to their customers is an obvious margin benefit. Toast is selling technology solutions to cooks, chefs, restaurant owners, waitresses, sommeliers and bartenders. These are the people who are second-to-least likely to start coding their own software using an LLM and somehow implementing it into their payment systems and reservation management workflows.

The only people who are even less likely to rip out their enterprise software in favor of a homemade replacement are the general contractors, swimming pool diggers, landscapers, gardeners, roofers and plumbers who use ServiceTitan (TTAN) for appointment setting, project tracking and invoicing. In my mind, there’s not a chance that either of these companies is going to suffer from some sort of mass exodus off platform by their respective user base. Once the employees of a Marriott hotel buffet or a tree removal service are trained on a particular app or software product to help the business run, it’s pretty much a lifelong entrenchment. Try to avoid battling with inertia whenever possible.

Here’s Toast’s price versus the forward earnings per share estimates as a trend line.

<Adam Sandler Moron Voice> ORANGE LINE GO UP</Adam Sandler Moron Voice>. Nobody gives a shit right now. Literally no one. I added to my position but I don’t expect any sort of instant gratification.

While I’m extremely confident in the fundamentals of these companies and their dominant market share situations, I can’t say the same about their stock prices. Even if the software bounce from Friday is extended another few days, I wouldn’t be surprised to see these stocks roll right back over again. I am advising people who have a time frame of anything less than one year to stay out of this fight and stop trying to bottom-tick these enterprise software stocks. Some of them have gotten absurdly cheap and some of them have just been disrupted out of existence and we don’t yet know which is which or what the time table might be.

Here’s a look at the IGV, which is the market commentator’s shorthand for what’s happening with the sector:

My colleague on CNBC, Stephanie Link, made a very important point on the air this week - the problem with all these falling knives is that there is no proof point we can look at on the calendar and say “By May 17th it will become apparent that Workday is not disruptable.” It’s just one hundred percent crowd psychology at this point.

Even the fundamentals won’t save these stocks from the multiples re-rating lower. We know this for a fact because they all (almost all) had great earnings reports so far this quarter. It doesn’t matter. Investors are focused on the three-year outlook, not a quarterly screengrab of the last 90-day period - and they are extremely pessimistic about that outlook given the acceleration in AI adoption and innovation. They just don’t think these companies can survive it with their current margins and growth rates intact.

Bounce

We were due for a bounce and we got it on Friday. Below you’re looking at the extreme readings in RSI (a measure of momentum) along with the depth of each stock’s drawdown circa Thursday. Just to give you some perspective, when technicians see a 30 RSI reading they refer to a stock as being oversold. A reading in the 20’s is like if a company suddenly came out and filed for bankruptcy. Now, I’m not cherry-picking - these are the 12 largest companies by market capitalization in the Software ETF. In a normal environment, sellers don’t do this to their holdings or buyers don’t let things get this drastic:

But we’re not in a normal environment. We’re in a vomitorium. And when people are vomiting up every stock in a sector, indiscriminately, you don’t need to be a buyer but you should probably stop being a seller.

But to Stephanie’s observation, when does that pessimism wear off? No one can tell you. It’s all vibes. There’s no way of knowing until we get there. We may see several “false bottoms” along the way. I think you need more people to give up. That sort of capitulation sometimes requires time, not just a plunge in price. It needs rollovers and failed rallies and disillusionment before the seeds can be planted for a new season of growth. And in the absence of a proof point that this is over, observing sentiment (through the lens of price) is literally all we have to go on.

In other stocks and scenarios you often do have a proof point. Sometimes it’s an FDA approval for a drug. Sometimes it’s the announcement that a negatively perceived merger is being called off or an unpopular CEO is being fired. Sometimes it’s iPhone sales data for the month of June or the opening weekend of a new film. Either the bulls were right or the bears were right but, for god’s sake, at least we know. If you’re buying Caterpillar during a twenty percent drop from a 52-week high, you can say to yourself “as long as they have a good earnings report, the sellers will stop selling and the stock will be fine.” That’s a proof point. You’ll either be wrong or be right depending on whether the earnings are good or bad. You can’t say that about Salesforce or ServiceNow.

Earnings reports in the software space - both “good” and “bad” - are only being seen through the lens of “this company is fucked” or “ this company is a beneficiary and will take more business from the AI wave than will be taken from them.” Not surprisingly, as Anthropic and Gemini come out with products at a breakneck pace, more and more software companies find themselves classified into the latter category - the fuck-ees - rather than the former category where you’d want to be - the fuck-ers.

I’m going to tell you that I think any bounce in the software group - not every stock but the sector as a whole - is going to be short-lived and an exercise in frustration. Your fellow investors are not yet done trying to figure out what all this means. Which means the uncertainty may persist for a long time before a new consensus is formed. I could be wrong and there will be exceptions but, in my experience, this is a battlefield worth avoiding until a sustained stabilization in prices. It’s going to be awhile.

So what do you do?

The above shows you the hint that there is a new theme in town. I’m going to get to that in a moment…

The key thing is that we’re not exactly in a bear market. This past week, Chart Kid Matt, Sean and Michael Batnick were going wild in our little group chat about how well the rest of the market has been enduring some of the most brutal tech stock sell-offs we’ve ever seen.

Some of the charts we’re discussing:

S&P MidCap 400 new highs this week

S&P 600 (small caps with earnings) also new highs this week

Matt: Largest YTD return spread for equal weight minus cap weight back to 1992

Sean: Best five-day stretch for Consumer Staples since Covid

Michael: Where the winners are (and aren’t)

Always a bull market somewhere

There are plenty of stocks still making new highs. They tend to belong to very specific groups, only one of which is obviously tech (semiconductor memory suppliers). The rest of the best performers year to date belong to an entirely different theme. This emerging theme does not currently have a name, which I am going to fix right now. I hereby give you express permission to use it and teach others what it means and why it’s working. Not only is it a backronym, it is also a perfect litmus test for anyone seeking to add a new stock to their portfolio in 2026 (and possibly beyond).

I’m using the backronym H.A.L.O. to describe the types of stocks that I expect to serve as a winning haven from this year’s feverish pitch of disruption fear. HALO stands for Heavy Assets, Low Obsolescence. These are undistruptable companies from an AI standpoint. There’s nothing Sundar Pichai and Sam Altman can take from them.

HALO stocks are immune to Claude Code. Anytime people are freaking out about Claude Code and ripping capital out of the shares of its perceived gallery of victims, these are the types of stocks that are being bought instead. There will be big HALO days and then ordinary days where it’s hard to see the difference. Thursday was a big HALO day. Friday was not.

So what is a HALO stock in actual practice? Let’s start with a gigantic one…

Here’s Exxon, a stock I am miraculously not losing money in since my late fall purchase (praise the Seven):

Sean and I wrote about Exxon for our CNBC Pro column as it broke above this obvious consolidation flatline and it’s gone straight up ever since. Why? Oil prices have done dick. What’s going on? I will tell you:

Exxon Mobil Corp is HALO.

This is not the same as saying Exxon Mobil is risk-free. Of course no stock is without risk. But Exxon does not face this very specific, acutely painful risk of AI disruption that everyone is racing from and bracing for. It’s a mega-cap stock with plenty of room for the trillions of dollars looking for something that’s not going to end up in the crosshairs of DeepSeek or Perplexity. Compared to software disruption risk, the risk of prices moving for a barrel of oil is like a walk in the park these days.

Energy stocks, with a few exceptions, are HALO - Heavy Assets, Low Obsolescence. You get it now? This is the sweet spot of the stock market.

These are the names you can buy and not worry about. They can be thought of as potential beneficiaries of AI given the extensive costs of their existing operations, marketing, service delivery and decision-making processes. Or you don’t even have to go that far - you can just look at them and apply the following simple test: Will chatbots and LLMs lessen or eliminate the need for (blank) in the near future?

If the answer is no, you might have a HALO stock on your hands. If the answer is yes or Maybe, that’s not HALO. Doesn’t mean it can’t work, just makes it complicated for 2026. I am personally focused on HALO stocks only at the moment.

This is an amazing moment, where the entirety of the post-Financial Crisis period is seeing its internal stock market logic being flipped on its head. We spent fifteen years salivating for so-called Asset Light business models with high margins, reliable cash flows and steady revenues. These are the cashflows that Big AI is coming for.

Whether or not a thousand publicly traded software companies will be snuffed out like the Jedi Order after Chancellor Palpatine invoked Order 66 remains to be seen. This doesn’t matter right now. What matters is that the market thinks it’s a possibility. You can have nerves of steel and the patience of a saint to try and fight it. Or you can look elsewhere. HALO is the elsewhere.

Let’s try a few examples, shall we?

Look at the chart above. That’s Walmart (WMT). Walmart is HALO. Almost everything they sell is heavy. They have actual, physical assets like the best logistics network on earth, parking lots, stores, shelves, warehouses, inventory. Automation can only help them do what they do more efficiently and without the tax of so much human labor. In the meanwhile, groceries and tires and furniture and dresses don’t get disrupted in an AI-enabled world. You will still need to get dressed and serve your family dinner once in awhile. Walmart is HALO. Heavy Assets, Low Obsolescence.

Is McDonald’s a HALO stock?

You’re goddamn right it is.

So is Starbucks.

And Valero.

And Baker Hughes.

And Martin Marietta - they make concrete. ChatGPT doesn’t and won’t.

I could go on. I have hundreds of these. Up and to the right. Up and to the right.

If some of these names sound familiar, Sean and I have been spoonfeeding them to you on TV every week, one after another, as part of our Best Stocks in the Market research. You can keep me on mute, I don’t care. Just letting you know what’s been going on.

Anyway, Phillips 66 and Corning and Applied Materials and Vulcan Materials and Delta and Caterpillar and Ventas and Hershey may have very little to do with each other based on conventional GICS classification. But in my classification system, updated for today, they are all HALO. No large language model is going to obviate the need for chocolate, senior living facilities, airplanes, tractors, fiber optics and screen glass, asphalt, etc. These are all Best Stocks based on our criteria and they’re all trending higher. HALO, HALO, HALO, HALO.

John Mowrey on The Compound and Friends

John came to get down

On this week’s all new edition of TCAF we had a guest on whose portfolio has the type of stocks that are working right now in it.

He is John Mowrey of NFJ Investment Group, a boutique asset manager specializing in non-traditional value investing. John made his first appearance on our show (his first podcast, period, it turns out) and absolutely crushed it. We had a blast learning from him and you will too.

they’re just Uggs, relax

You can watch or listen to our conversation with John at the links below.

What to Buy in the Momentum Stock Slaughterhouse

THE COMPOUND & FRIENDS

What to Buy in the Momentum Stock Slaughterhouse

Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by ⁠John Mowrey⁠ to discuss: the free fall in software stocks, what makes a value stock, how to measure a bear market, the crypto crash, and much more!

Differentiated Alternative Investments in Accessible Interval Fund Structures

CION is a leading provider of alternative investment products, offering institutional-quality strategies in interval fund structures and supporting advisors and investors with education and service to help build portfolios with potential to maximize risk-adjusted return. LEARN MORE

Meltdown in the Gold and Silver Market

What a difference a week makes

How information spreads among traders in 2026: CNBC and Bloomberg are much less important as a transmission mechanism of stock or ETF ideas. They come in later and amplify what’s already happening. The new transmission mechanism occurs on message boards like Reddit, on social media (mostly Twitter) and on the trading apps themselves via “the community.” The apps are designed to increase engagement, keep traders checking in on their portfolios and, most importantly, doing transactions. That’s how they get paid. Nothing keeps traders active like showing them the gains and activity of other traders. So a theme like gold and silver becomes a giant meme once the trend becomes obvious to everyone via the speed of online chatter. The ETFs and associated equity plays bubble up to the surface and stay there, being shown to millions of eyeballs. Eyeballs that were staring at AI themed trades just a few months ago are now focused on miners, leveraged ETFs and all sorts of other precious metals stuff they’d never before beheld. Those eyeballs belong to people who don’t exactly know what it is they’re doing in the stock market in the first place. If you ask them why they’re trading, they’ll tell you “to make more money” and it’s not any more thought out than that.

Here’s my friend Todd Sohn’s chart (via Strategas) capturing the meme-ified madness in full swing from just a few days ago:

Imagine a million monkeys on typewriters attempting to produce Hamlet but substitute this futile pursuit of Shakespearean genius for an equally futile chase for Robinhood riches.

Of course, I am overgeneralizing because there plenty of experienced people who use these apps but, as a percentage of overall daily activity, they’re a rounding error. In the aggregate, it’s got all the sophistication of a shopping mall riot.

The masses are being herded like cattle into these trades via the same kind of algorithmic suggestion engine that’s made Billie Eilish and Sabrina Carpenter the stars of the Spotify era. Billie and Sabrina are amazing musicians and positively radiate star power and personality. They have a little something extra to them - Billie’s whisper / scream delivery and tomboy fashion, Sabrina’s sexually charged lyricism and an almost cartoonishly diminutive stature. This little something extra has captured people’s attention while catapulting their songs in the algorithms that determine what a hit is.

Once enough Spotify users agree that something is a hit, there’s a vortex effect that sucks in everyone until it’s just an understood thing that Billie and Sabrina are going to be everywhere each time they drop new music. This happened for Drake, turning him into one of the biggest artists of the Spotify era, a position he’s been holding for most of the last decade. These platforms are what made his career, to the point where when it appeared the algorithms had been deliberately turned against him in the summer of 2024, he took the record labels to court over it (and lost).

The popularity of these artists in the suggestion engines, like alchemy, is transformed into popularity in real life. I suppose it’s better than a radio DJ getting an envelope of cash to promote someone’s new single. I’m not complaining about how we create stars these days, I’m just pointing out that we’re creating popular trades the same way. People are having them served to them and opting in with buy orders, the same way they’re being suggested the new Olivia Rodrigo song once it’s been established that they also listen to Taylor Swift. “People who like to trade the 2x MSTR ETF also love SLV!”

What a debacle.

Too much leveraged retail money chasing the same “can’t lose” trade based on the recent returns and the story they’re telling each other about tariffs and Trump, geopolitics and societal collapse, on the message boards. You ask one of these people what they’re doing putting on leveraged silver trades after a quadruple in price and they look at you like you’re from Mars. They don’t say “I’m buying it because it’s going up” because that’s a statement so obvious it almost doesn’t need to be said. “Just look at it!” is what they’re screaming inside of their own heads. They’re talking about gold and silver around town and in the barber’s chair. “You should get in on this.”

And then, in one fell swoop, it’s all falls down.

My research team tells me we have daily trading data back to 1968 and this week featured the worst single day for silver prices ever.

Gold held up better, but still. For a risk-off trade, this was something else.

When the CME hiked its margins for gold and silver futures trading for the second time in a year, that was your signal that the authorities were seeing way more leverage and speculation in these contracts than they felt comfortable with.

From December 31st:

Both gold and silver reacted to that bit of news by selling off for a few hours and then resuming their uptrends, trading signicantly higher throughout the month of January.

Until Friday.

Here’s GLD and SLV price along with drawdowns from all-time highs (in percentage terms)…

The scary thing is that both were so extended that, even with this massive one-day drop, they’re both still very much within statistical uptrends. I show you both versus their 50-day and 200-day moving averages - the rallies remain intact.

I wouldn’t touch this SLV blow-up here (leverage unwinds aren’t often a 24 hour kind of event) but gold looks buyable. Perhaps this was the refresh (and margin blow-out) that was needed to keep the bull market going longer.

If you’re long an asset, parabolic moves and meme-ification are not your friends.

I buy gold when it’s in a bull market. The last bull market ended badly (2011) and, someday, this one will too. I have no story about. No leverage. No theories. No mythology. No price targets. Maybe I’m just another monkey typing Shakespeare too, but in a downtrend I’m not reciting a thesis or praying for the selling to stop. I’m doing something else.

I like higher prices better than I like religion in a brokerage account.

The Greatest RIA Succession Story of All Time

Miss Nicole, Batnick, Chart Kid Matt, me and Kris in NYC this fall

You may have seen us in the news this week, especially if you work in the wealth business. That’s because we’ve just executed the best succession plan anyone has ever seen in the RIA world.

My partner Barry turned 64 this past fall and we began to talk about the long-term future of the firm we named for him when we founded it back in 2013. My partners Michael and Kris, along with many of our longest-tenured executives, are going to help me make a run for it. We think we have a good chance of becoming the largest, most successful truly independent advisory firm in America. Most of the other firms in existence that are our size or larger have already sold a stake in their companies to private equity funds if they haven’t sold outright to a PE buyer or a strategic acquirer. And that’s great for the founders who needed exit liquidity to fund a retirement or take their risk off the table.

But if that had happened to us, given our unlimited growth potential and explosive growth rate, that really would have been a shame. To see this firm turn into yet another merger morsel for the highest bidder would have been the letdown of my career.

Future Proof 2025, Huntington Beach with Kris, Michael, Ben, Dan L and our friend Stacie

Fortunately, Barry sees the same potential that all of our employee-shareholders see. And to facilitate our bright future as an independent firm, he’s done something truly heroic. By making his own shares available internally - at a lesser valuation than a PE firm would have purchased them at - he’s put his money where his mouth is. Almost no one else in his position has done this. It’s an extraordinary vote of confidence in the rest of us and a reaffirmation that there will never be a decision undertaken at this firm by anyone other than ourselves. Our clients can rest assured that we’re going to be here under existing management throughout their retirement. Our employees and advisors can go about their business without looking over their shoulders or wondering who the next owner is going to be and what they’re going to do to “drive synergies” or “introduce efficiencies.”

We talk to advisors around the country every day and many of them have relayed the disappointment that’s set in once the founder hands his or her ownership off to someone from the outside who isn’t emotionally or spiritually attached to the business. It starts with small changes and leads to bigger ones - even potential conflicts of interest with the clients depending on the situation. There’s a lot of disillusionment out there, especially among advisors who’ve jumped to one of these firms expecting independence. Finding themselves back in a neo-wirehouse situation with financial or contractual handcuffs attached is pretty depressing. Now, granted, we don’t hear from people who are happy, and there’s probably plenty of that too - we only hear about the shitshows.

lobster roll-loading before the Peter Lynch podcast recording in Boston

The thing is, there are a lot of shitshows these days. Some of the largest aggregators or roll-up RIAs in America are now owned by Middle Eastern sovereign wealth funds, Canadian pension funds or professional bean counters from Boston. Predictably, the vibes are now pitch black. There are lots of quiet implosions occurring as charismatic founders depart (or get pushed out) and the fleece vests move in. I know of one mega RIA that hasn’t had a CEO since the fall and spends as much time suing its departing advisors as they do actually giving advice to clients. They’re like a law firm with a financial planning business on the side. Imagine working there.

The execution of our internal succession plan necessitated an early update of our annual Form ADV filing, which also revealed that we’ve grown from $5.6 billion to $7.6 billion over the last 12 months through 12/31/2025. I don’t know how many firms of our size are organically adding assets at a rate of $2 billion in a year but I would bet there just aren’t any. You have to get the magnitude of what we’re doing to understand why I’m so zealous about maintaining what’s special about this place and these people. Barry’s decision allows us to do exactly that - maintain the magic that is Ritholtz. We now have 29 shareholders among our 86 employees and more will be added as time goes on. Most importantly, no one else outside the firm has any say in how we operate whatsoever. And, god help me, I will keep it that way for as long as I can.

the night we took over Chicago last summer

As the CEO and largest shareholder, the responsibility I now feel is monumental. I’m going to do my best. I told my partners and staff that I will not let them down. And if you’re a client of the firm, that means you. I got you.

And if you’re a financial advisor who is reading this and saying “Hey! That’s what I’m looking for!” No problem, shoot us a note. I can’t guarantee an immediate response but we would absolutely love to hear your story.

Thanks to all the reporters who covered our transaction this week.

Here’s Barron’s:

And here’s wealthmanagement.com:

I couldn’t respond to every single well-wisher and commenter who offered their words of encouragement and support this week so consider this my heartfelt thank you. On behalf of all of us here at Ritholtz, we love you back.

Tom Lee Returns on The Compound and Friends

My friend Tom Lee has been persistently bullish on the US stock market for as long as I’ve known him and, despite environments like 2011, 2018 and 2022, it’s paid to listen to him. His optimism and “yes, but what can go right?” mentality have helped millions of ordinary people (and institutional investors) reap the gains of the current secular bull market despite the legions of naysayers and moments of uncertainty. Tom’s research emphasizes demographics, credit availability, earnings growth and innovation to make these calls. It’s been the right set of variable to focus on and probably will be for the foreseeable future.

Tom is upbeat about 2026, a year he thinks will look a lot like 2025. But there are some headwinds he’s worried about, which we got into on the pod this weekend.

You can see these cataloged below, along with the (hopefully) offsetting tailwinds he believes will win out as the year goes on.

You can listen to the whole conversation at the links below on either Apple, Spotify or watch it on YouTube. Subscribing to the shows on the service of your choice means never missing an episode, delivered directly to your feed.

Want to go deeper? The Compound and Friends has an email newsletter in which we reveal the next guest on the show and share lots of other behind the scenes stuff. You can subscribe here:

The Compound Insider

What Tom Lee’s Worried About in 2026

THE COMPOUND & FRIENDS

What Tom Lee’s Worried About in 2026

Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by ⁠Fundstrat's Tom Lee⁠ to discuss: market headwinds in 2026, why Tom is still bullish, the precious metals rally, the crypto bear market, Tesla's big bet on robots, and much more!

Reflation is the term on everyone’s lips

A storm is coming. I spent the last two days getting the house ready for it. Filled up all our cars’ gas tanks. Hit the supermarket, the butcher shop. Bought DuraFlame logs (they were sold out, I got the bootleg brand) for the fire place and some split wood to get us through the nights. I brought a garbage can into the garage in case we can’t access the side of the house. I made a monster batch of my turkey chili and tupperware’d it. Took out the shovels. Been running the faucets and sending water through the pipes. Everyone else around here is doing the same. The stores were ransacked. Lines were long. No eggs left - the entire rack cleared out. It’s like muscle memory from Covid or Hurricane Sandy before it. Sandy knocked out the power to my home for eight days. After day three we were sleeping in front of a fire to avoid freezing to death and just generally living in Mad Max times. I think I had a helmet with horns on it and one of my arms was replaced with a whaling harpoon. Nobody around here wants to take any chances this time. Nor should they. Trust no one or nothing you don’t absolutely have to. Prepare.

A new storm has taken place in the investment world this year. The whole reflation / small cap / transport / metals / emerging markets thing had gotten started last year and this year it’s running away in the lead.

Here’s Tony Pasquariello, managing director and head of global hedge fund coverage at Goldman Sachs, on how the year is shaping up so far in the markets…

I know you want the why. Why are these markets in particular doing what they’re doing? It’s not complicated. We’ll take them one by one.

Gold represents global instability and lost faith in the US dollar. It’s working while the existing world order seemingly comes more unglued everyday. The President of the United States is currently involved - verbally and militarily - in conflicts around the world, both real and imagined. Trump wants peace between Russia and Ukraine and there’s no sign of any progress whatsoever. He’s trying. He’s also got a regime change in Venezuela underway and is expecting continued cooperation from the country’s new leadership on getting their domestic energy infrastructure going again - with, of course, the help of several US oil producing corporations. Iran, Gaza, Greenland, maybe Colombia, allegedly Cuba - there’s no telling what’s next. And when world leaders are on edge and unsure of where they stand vis-a-vis the US, you can’t be surprised to see their central banks (and probably their sovereign wealth appendages) accumulating gold as an insurance policy. They’re buying gold every month.

When Russia first invaded Ukraine, we turned their accounts off, seized the assets of their oligarchs around the world and used their dollar-based reserves and the international banking system against them. The lesson, for both Russia and everyone else watching, was that dollars are only a risk-free store of wealth if you’re on the side of the current administration. And if you’re not, you had better be long some other sort of capital reserve. I’m not suggesting this is the only reason for the gold bull market, I’m just telling you it’s the obvious one.

Silver’s rally is an echo of the gold bull market. It usually follows gold and acts as a high-beta shadow on both the way up and the way down - sexier and more volatile, a more extreme expression of the same idea, a toy for traders who prefer the futures market as a beta trade versus playing gold miner equities. The metals and their related equities all go up and down together - silver doesn’t have it’s own story and doesn’t need one. People will say “They need silver for AI! It’s used in old timey photography and transistors!” No. That's not what’s driving it. It’s speculators riding the coattails of gold. The industrial use of silver will not stop people from selling millions of tonnes of it the next time there’s a drop in gold.

But, for now, both are going higher. Speaking of Goldman Sachs, this past week they raised their house outlook for gold by year-end. The new target is $5400 an ounce which implies nearly nine percent higher from here. That doesn’t seem like much of a stretch. Here’s the three year look at S&P’s precious metals index. It’s mostly gold and silver futures with a touch of platinum. They simply will not stop buying these metals:

Some of the other winning trades year-to-date that Tony mentioned…

TWSE is Taiwan and that’s basically Taiwan Semiconductor’s recently reported fabulous earnings outlook doing the heavy lifting. The KOSPI is South Korea, which, uniquely among the world’s country stock markets, is hugely skewed toward technology stocks. Roughly 36% of the South Korean stock market’s total capitalization is in just two semiconductor companies - SK Hynix and Samsung. The broader tech sector in addition to semiconductor stocks is about 40 to 45% of the total. This is the AI trade. Like I said, not complicated. Say hello to the South Korea ETF - if it looks like a chip stock that’s not a coincidence:

The European defense stocks are a revelation. This was an obvious trade last year when the debates over NATO funding and whose responsibility Ukraine’s border defense would be turned into a wave of announcements from European capitals about rearmament and a commitment to their own national security. That obvious trade hasn’t slowed down amidst the Davos discussion about whether or not Trump would be willing to take Greenland from the Danes by force. The Europeans are awake now. Here’s the US-traded ADR for Rheinmetall AG, a German defense contractor and military weapons supplier whose stock price hasn’t moved in decades, til now:

The rally in memory stocks is right back to AI. Here’s SanDisk and Micron, two stocks that have found themselves sitting on top of the biggest supply-demand imbalance in all of Chipdom right now, a great place to be. SanDisk’s story is crazy - it’s the flash memory business that spun out of Western Digital one year ago in February as its own standalone company. The stock price is already up over a thousand percent! Micron, comparably speaking, is a bit of a slouch. It has only quadrupled in the past year.

The rare earths rally is a little bit tech industry demand and a little bit geopolitical pawn - the perfect trade this winter. Look at the MP Materials chart. The stock hits its 200-day moving average just as the year turns over and on January 1st it looks like someone fired a starting gun. This is a $12 billion “pure play” on rare earths minerals based in Las Vegas, NV. The company was only founded recently, in 2017, to take advantage of the relative shortage of sites containing rare earths anywhere outside of China. Their “Mountain Pass” mine is in California and is said to be the only active and significant deposit of these minerals anywhere in America.

Lastly, Tony mentioned JGB yields shooting up. This is the not-so-bullish story of the year so far. Similar to what happened when Liz Truss proposed a massive, inflammatory spending plan as Prime Minister of the UK and wrecked the gilt market, Japan’s new PM had a bit of a moment. Japan’s bond market got punched in the face by Sanae Takaichi, whose big-spending, tax-cut-heavy plans freaked everyone out and sent JGB yields jumping. The market basically heard “even more debt, no funding plan” and immediately demanded higher yields to hold Japanese bonds. Ake-ome!

This is just the 10-year’s current market price:

The Japan thing got a lot of attention because it’s a prominent example of the government wanting to continue to pile on more debt and spending and then, all of a sudden, the potential buyers say “No.”

My pal Garret Baldwin at Me and the Money Printer summed it up:

One of my favorite bull markets of the moment is in the Dow Transports. The cost of moving people and things is higher. This is being driven by demand in a domestic economy that is still - somewhat improbably - better than many have given it credit for.

The charts you’re seeing below are the shippers, expeditors and truckers that are large weights in the IYT transports ETF - please bear in mind this is just three months:

Sean and I have been discussing these transportation names since the summer on TV and in our Best Stocks in the Market write-ups. I don’t think the move is over. The railroads don’t look as good as the truckers, but maybe that’s the next leg higher.

What all these winning trades have in common is that they are part of the reflation trade, part of the AI trade or part of the geopolitical storm trade. And all three of these trades have aspects that are interwoven together - gold and borders and AI competitiveness and supply chains, it’s all sort of one big story where you have to understand these smaller stories in order to keep up.

It feels as though, all at once, every country is doing what it can to get ready - the on-shoring of manufacturing, throwing up of trade barriers, a race to secure steady supplies of chips, large-scale re-arming, gold stockpiling, etc.

There’s a storm coming. You can see it in the markets as plain as day.

Jeremy Grantham on TCAF

The legendary Jeremy Grantham in studio this week

Jeremy Grantham’s first appearance on The Compound and Friends was in the fall of 2023. He gave us a lot to think about and a ton of historical context. In Grantham’s sixty years as a professional money manager, he’s seen quite a lot.

But what he’s seeing right now with AI, he tells us, is something else entirely. It may be a bigger event than anyone alive has ever lived through. Jeremy thinks the societal impact of AI will be unlike anything we’ve seen since the railroad in the 1800’s and the advent of electricity in the early 1900’s. He believes the AI revolution will be even more profound than the birth of the internet.

buy me here

Michael and I were honored and thrilled to debate ideas with the GMO co-founder and legendary portfolio manager at our New York City headquarters this week. Grantham is celebrating the publication of his new book - The Making of a Permabear - a combination of his life story and everything important he’s learned about navigating the markets, allocating assets amid uncertainty and managing money for other people. The title is meant to be tongue-in-cheek but it’s a bit too subtle according to the author. He wanted “Permabear” in air quotes, as this is how many on The Street and in the media have wrongfully mislabeled him. He hasn’t always been pessimistic, but, admittedly, it’s been awhile since he wasn’t.

with the legend

Jeremy’s co-author, Edward Chancellor, is himself a legendary market historian, having written the all-time classic Devil Take the Hindmost, a History of Financial Speculation. Chancellor was talked into working with Jeremy and has spent thousands of hours on the new book. For those who lived through many of these moments, this is a chance to relive them through the eyes of one of the most respected investors of all time. And if this history is all new to you, Grantham and Chancellor are quite a tandem of tutors to help get you up to speed.

In our new conversation with Jeremy Grantham, we cover everything from the rise (and struggle) of the Magnificent 7 stocks, the profound implications of artificial intelligence, equity market valuations, investor psychology, the business side of investing, the trouble with profit margins, the plight of the working class, the population ice age now being experienced by Asian countries and soon to be felt here in the west and so much more.

the giraffes on his tie is his signature wardrobe move, the suit was made 48 years ago on Saville Row in London. Grantham is lowkey dapper AF

Jeremy believes a storm is coming for us in the form of civilizational upheaval. We do not have the birth rates required to maintain the status quo of our economic growth engine. And even if western nations decided to re-commit to mass immigration, it’s not clear that this would even matter when you consider the decline in birth rates around the world. The decline in working age populations in Japan and China is a taste of what the United States and Europe will someday experience unless something drastically changes. He doesn’t have a clue what that might be. The silver lining is that slower population growth may relieve some of the pressure from our natural resource constraints and the overall environmental impact of humanity. We went deep with him and just barely held on.

We had a blast learning from the old master and I hope you will as well. You can listen or watch the show at the links below!

Stop Ruining My Perfectly Good Bear Market

THE COMPOUND & FRIENDS

Stop Ruining My Perfectly Good Bear Market

Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by Jeremy Grantham to discuss: stock market bubbles, the ups and downs of managing money, how the wealth divide has grown so wide, the future of clean energy tech, and much more!

Prices vs Narratives

What you’re looking at above is a great example of a phenomenon I want to teach you about today. It’s a chart from my friend JC Parets at TrendLabs who points out that, contra to all the bubble talk in the stock market surrounding AI capex, the companies building the data centers actually saw their share prices peak relative to the rest of the stock market way back in October. They stopped going up a long time ago, with the exception of Alphabet (GOOGL). This is a ratio chart of Magnificent 7 stocks (colloquially, “the AI Trade”) versus the SPY ETF. Could be noise and a false breakdown - or the start of a larger roll-over. We’re watching it.

But the prediction people can make from this is not the point. Rather, the fact that the price action has changed while the old narrative about a bubble persists is what’s interesting here.

Year-to-date (through midday Friday) this is how the field looked:

GOOG +6%

AMZN +3%

NVDA +1%

TSLA -2%

MSFT -5%

META -5%

AAPL -6%

Not that we’re terribly concerned with stock prices in a two week window, I’m just illustrating the point that it’s hard to have a bubble in AI data centers if the AI data centers’ owners and largest customers aren’t playing along. I think this is perfectly healthy. I don’t think we should be rooting for $3 and $4 trillion market caps to be exploding to $5 and $6 trillion. Gains in moderation, given what’s gone on over the last three years, are better than a parabolic, blow-off top. I love the tape these days. Most investors should. All sorts of reasonable, rational games are working here.

Rocket from the Crypt

I’ll show you one we haven’t talked about in awhile. I don’t know if you remember a few months back I had the CEO of Rocket Companies, Varun Krishna, on Live from The Compound. He was great. Rocket has built America’s killer refi machine. Varun called it an engine. Rocket has ten percent market share in refi, nationwide. And while mortgage rates sucked this past year, he made two critical acquisitions to prepare for the turn - first, he bought Redfin, a leading real estate portal on the internet for both house-hunters and the brokers in search of them. Then they closed their acquisition of Mr. Cooper, the largest standalone mortgage servicing platform in the country. These deals gave Rocket an end-to-end answer for consumers, from finding the house to applying for a loan to closing on the property to making mortgage payments. They are now dominating the mortgage business and the mortgage business is coming back to life.

As I explained in the video, I am a shareholder in RKT so I am, of course talking my book (who the hell’s book am I supposed to be talking?). The stock is up over 100% over the last 12 months and I don’t think it’s done going up. I used the Liberation Day sell-off in April to lower my average cost (the stock sold down to $11, inexplicably) as I explained on CNBC that afternoon (watch the clip here).

A simple question

I asked a very simple question, rhetorically - the question I asked myself as I pressed the buy button near 52-week lows for the stock:

My thought process was that, as bad as the current narrative was for the mortgage business, prices would change faster than people would be able to process the changing of the story.

Well, the refi boom is coming. It took awhile but last week the rate of a 30-year mortgage finally dipped below 6%. In the 5’s, you’re going to see some action.

Don’t listen to my opinion on the subject. Listen to what buyers and sellers of the stock are telling you:

If you missed it, there will be down-days and dips. The company is in the early innings of a turnaround just at the moment its whole industry is seeing a turn for the better. I love situations like these. The refis are just the start of what should be a generally better housing market with more turnover and increased buyer confidence so long as the labor market holds up.

And, just for fun, we shared this chart a while back on What Are Your Thoughts, it shows the sensitivity of Rocket’s price relative to prevailing 30-year mortgage rates:

You would think this would have been obvious to investors last year but, alas, they were still hearing the old story.

This past week things began to change. Now it’s not just the Federal Reserve cutting interest rates. Trump is directing the Federally-controlled housing agencies Fannie and Freddie to utilize a combined $200 billion of their capital to purchase mortgage bonds in the marketplace, thus pushing down borrowing rates across the system. It’s not “Quantitative Easing” insofar as the money to do this is already sitting on the balance sheets of the two GSE’s, as opposed to being printed out of thin air as it was for previous QE programs. I think of it as mobilizing assets that are otherwise not contributing to a solution to the affordability “crisis.” Of course, the counter-argument to doing this is that it’s just going to push up the prices of homes, and maybe that’s what happens, but price appreciation won’t be equally felt by everyone, everywhere, so the bias toward action is probably a net win for the market. We need to create turnover and break the ice.

Not that a 5% and change mortgage is terribly attractive in absolute terms, but it finally might be in relative terms. Remember - the narrative was that the housing market is dead and homeowners are locked up because high rates make it undesirable to move or refinance. That’s an old story. The price of Rocket has already doubled and people still haven’t stopped telling the old story. Once people learn a story, they get good at telling it - to themselves and others - so they just keep telling it. By following price, you can see reality changing (or perceptions changing) before the new story becomes widely told.

Here’s the new story - “The golden handcuffs are slipping: For the first time since 2020, the share of U.S. homeowners with mortgages set at 6% and higher, exceeds those with mortgages below 3%.”

It’s a start.

Chart via Axios:

Tell me, is anyone telling this story yet? Nope. They’re still talking about frozen sellers and locked out buyers.

I remain long RKT and short storytelling.

The stocks to buy in 2026

I’ve been on The Street for almost three decades and in all my time meeting a thousand thousand people from every corner of the business, I can tell you with certainty that there’s no one as simultaneously enlightening and entertaining as my boy JC. Whenever he joins us on TCAF, the views and downloads go crazy. This weekend, they’re running double the typical average.

First 24 hours looking good, you guys are feeling this one:

And with good reason - the show was packed with illumination and laughter. What else could a person possibly want out of their favorite podcast?

We talked about the problems of arrogance and having way to much confidence in the investing business. We did a whole run of charts showing the best themes and trends in the current environment. I pitched some charts of my own to the expert to see what he thought of some of the current Best Stocks in the Market. Lots of other stuff too, you kind of have to listen or watch.

Before I send you over to the show below, I just want to say thanks for all the positive feedback I got for the site / email redesign. I am still working some stuff out but I think we made it more readable regardless of where you’re getting it and that was the most important thing. Font sizes, colors, borders, graphical elements, etc - how do we improve the readers’ experience? I hope you like what we did. Special thanks to the team at Pixels and Ricky Figueroa.

These are the Stocks to Buy in 2026

THE COMPOUND & FRIENDS

These Are the Stocks to Buy In 2026

Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by TCAF legend ⁠JC Parets⁠ to discuss: the stocks to watch in 2026, people JC has learned to fade, the sectors looking to break out, the magazine cover indicator, prediction markets, and much more!

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There’s not going to be another 1929

At least, I don’t think so…

Human beings are pattern-matchers. It’s in our DNA. Our great great great great great ancestors 100,000 years ago knew that a stampede of zebras on the Serengeti was indicative of there being predators in the area. Those who could match that pattern with previous mauling deaths for the tribe knew to run and were thusly able to pass their DNA on. Those who saw the galloping zebras and did not detect the pattern ended up as lunchmeat for something with big teeth and claws. Their descendants are not with us today, because there weren’t any. Multiply this remote example times a billion instances of primitive human pattern-matching and you come to the realization that there is an evolutionary reason why most of the investing public is constantly on bubble watch. We can’t help it.

Dr. Sam Goldstein cites the father of modern neuropsychology, Alexander Luria:

Given how finely attuned the human brain has become to the seeking of patterns for the sake of our very survival, it’s no wonder we’re seeing 2008, 1987 and 1929 everywhere we look. Humanity did not evolve with financial markets. We’ve only got about 300 years or so of stock trading and most of us can trace back the first person in our family to ever buy or sell a financial instrument to within a few generations. Adrenaline, on the other hand, is not 300 years old. It’s ancient. Our brains evolved to ensure we could survive the physical forests, not the jungles of Wall Street.

Andrew Ross Sorkin live in-studio

As nice a guy as you think he is.

I met Andrew almost ten years ago when he had put together a New York City dinner table full of Bitcoin enthusiasts and skeptics from both the emerging crypto world and the traditional Wall Street world (guess which role I was there to play) and we hit it off. Our paths have crossed at dozens of CNBC and industry events since and I was lucky enough to have attended some of his legendary DealBook Summit events over the years too. But we’ve never really been on-air together so getting a chance to talk to him on my own turf at The Compound was really exciting.

Compounders Nicole, John and Duncan with the Notorious A.R.S.

Andrew’s new book is an absolute home run for anyone who wants to understand perhaps the greatest financial calamity in American history. Sorkin writes it like a screenplay, putting you into the real conversations and decisions that are taking place among characters that begin to feel real and present as the narrative unfolds. If you don’t enjoy this telling of the story, maybe reading books just isn’t for you.

You can get your copy here if you don’t have it already.

We thoroughly enjoyed making this episode and the feedback so far has been over the top. Views in the first 48 hours have already broken 40,000 on YouTube which is a pace that 86% higher than usual. Audio downloads are screaming as well. I appreciate you guys helping us start the year out strong. If you’re not subscribed to The Compound’s regular email blast (free!), this is your signal to get into the game - we’re going to be doing a lot more for you, the fans, all year.

The boys are back in town, the first live TCAF taping of ‘26

You can watch and listen to this episode at the links below. Cheers!

It's not 1929, but it might be - Andrew Ross Sorkin

THE COMPOUND & FRIENDS

It’s not 1929, but it might be - Andrew Ross Sorkin

Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by ⁠Andrew Ross Sorkin⁠ to discuss: 1929 vs today, looking back at the SPAC mania, the art of the interview, Andrew's dream guest, and much more!