원문 보기
Do you like this weather? You're a skier, are n't you? I was a skier, but I know you had two ACL surgeries. So I only ski with my mind. It's imaginary skiing now. Yes. Virtual. I'm too old for another injury. Someone recently asked me if I wanted to go skiing. I don't know how to ski. It's too late.
I'm going to die. No, it's not too late. No, my body. I'm going to break something too. If you like skating or ice skating. No, your instinct is correct. I was having dinner with Rob Sichin in Florida about 10 days ago and he was telling us stories about his skiing injuries. This guy has destroyed himself.
Yes. It has titanium throughout its body. It's almost bionic. She has a pair of fake knees. He's almost an Optimus Prime. I told him like an Optimus robot. He said he was a mogul skier. I was like, "What? I know what a pothole is. What does that even mean?" He says : "Just bumps all the way." Well, who would do that?
That sounds like the worst part of skiing. Skiing attracts people who take extreme risks. Then he says, "Oh, JB, I love it. I love bumps. I ski on bumps." You know, isn't he from Pittsburgh? Where's that accent from? Do n't know. It's incredible. He did it. He grew up in Pennsylvania. So , but that accent isn't from there.
It's not a Pennsylvania accent. He says, "JB, you know, I love potholes ." Yes. It's a bit like I watched Fat Albert as a kid, you know? Look, that 's fine. What is this? What? My laptop is at JFK. No, no, no. I know that. I mean your So , that's what happens. No, no, no. The true color of your icons .
Oh, that's great. I'd never seen that before. Yes. Stay, kid. Learn something. Um, stay. Keep your eyes open. You never know how I'm going to surprise you. I pressed it, speaking of Apple, uh, whatever. I pressed the emoji button or like the emoji to create yourself and Apple's AI created me, but I have a lot of hair.
It doesn't look anything like it. I'm a bald guy. How is that? You must have purchased the premium package . Yes. That's right. You. Okay, very good. Here, here's your picture. 0% probability. Yes. I want to see it. I mean, oh, she's so cute. It's like, it's the meat. He looks like your son, mate. That's what your child looks like.
Let me see her. What the heck? He said he's fine. But you're like you're in a bubble. They put you inside, like in a Zoom room . However, we...spoke at an event yesterday. It's hard to believe it was yesterday. And they made, uh, those Funko Pop! figures. What are their names? Oh, Funkos. Funko Pops.
Funko. Then they made dolls of us, Michael and me. And mine had a full head of blond hair. Mine is bald. And Michael's was literally Baby Stewie from Family Guy. That reminded me of you. AI is going to take all our jobs. Come on. No to the illustrator. But that's like a meta AI. Remember how they have the, uh, meta world or whatever on the board.
Good. Very good. Very good. Very good. Very good. Come on, let's do it, let's make some podcasts. We have a full house. I'm a little nervous. Large audience. Did I get to meet everyone? Who else? Hi guys. We have Alexa and Emily. Are they all fun ? Wait. What for? What's her name? Will you hire my daughter?
She studies public relations at the University of Miami. You need an internship. Yes. Very good. Josh, do you know Ron and Sana? Yes of course. Emily and Sana. No, really? I love your dad. How is he? Alright . OK. Very good. It's one of my favorites. So, say hello. Say hello to him for me. Say hello to him for me.
Very good. Very good. Let's begin. Very good. Very good. The Compound in the lead. We're in business right now. Today's program is sponsored by Franklin Templeton. Let's talk about municipal bonds because for many investors taxes are a big part of profitability, and these bonds generally offer interest exempt from federal and, in some cases, state taxes.
That's right, Michael. But the municipal bond market is not simple, and index strategies may fall short. One solution: active management. Introducing Franklin Templeton. They are one of the largest municipal bond managers in the market and offer more active municipal bond ETFs than any other manager, including national municipal ETFs and seven active single-state ETFs.
Put the power of Franklin Templeton's active municipal ETF line to work for you. Visit franklintempleton.com/munetfs. Before investing, carefully consider a fund's investment objectives, risks, fees, and expenses. You can find this and other information in each prospectus or summary prospectus, if available, at franklintempleton.com.
Please read it carefully. All investments involve risks, including the possible loss of capital. Franklin Distributors LLC, member of FINRA and SIPC. Ladies and gentlemen, welcome to the world's best investment podcast, The Compound and Friends. My name is Downtown Josh Brown. First- time listeners, last-time listeners, whatever you are, I'm here with my co-host, Michael Batnick.
Michael, say hello. Hello. Hi guys. Today we have the best of them all here. Every time I see this on the calendar, that Tom Lee is coming to town, I get really excited. You know how excited I get, right? Alright . Very good. Tom is co-founder , chief investment officer and head of research at Fundstrat Global Advisors.
Previously, Tom was chief equity strategist at JP Morgan . He is best known for his often bullish, data-driven market outlook and for being one of the first high-profile advocates of Bitcoin, Ethereum, and other digital assets. Tom , what more can I say? It's a pretty good and concise biography, isn't it?
Yes, thanks. Very good. Hey, are you still bullish? Yes. I heard you earlier this year saying something like, "Yes, we'll probably have a correction in the first quarter." Did you say that? Well, we just think 2026 will be similar to last year. So, our base case is that we are strong in the first part of the year.
OK. But then we have a drop that feels like a bear market. OK. But we will recover strongly and I think at least a 10% gain, maybe more now. So, how deep was the fall last April? Last March? It was 20%. It was a bear market. OK. And that's not true, did it start from an all-time high or not really? I forget it.
Yeah, he did. He did it. So it was weird. But perhaps that's why he recovered so quickly, because it was based on nothing but words. That's how it is. If you have a downturn and it does not lead to an economic recession, those downturns are usually V-shaped and symmetrical. OK. Do you think this year's [economic downturn]—I mean, we have one every year— could be based on an economic downturn, or probably not?
Uh, I, I, I, if I were guessing , because it's like I'm just guessing. We 're all guessing. Yes, we're guessing. These are well-founded assumptions. That's what we're doing. Yes, those are well-founded assumptions that it could be a political clash, like something coming from the White House or the market testing the new Fed.
That's fine. Or both. But that's probably like last year then. So, it's a market downturn because people are taking risks, but it's not really an economic recession. So, we ended up recovering very well. We had two political clashes in the last 5 days. We had the health insurance shock and the credit card shock.
Uh, a 10% cap on credit card interest rates. I didn't even get a chance to see what he said about insurance companies. I just assume it won't matter and it never really happened. But what was that about? Do you remember? It was like, it was like two days ago. Yes, it is, it's a... those are the reimbursement rates for Medicare and Medicaid, and people were expecting them to be 6 to 9%.
TRUE. And it's only 0.9%. It's actually for the consumer. Those are consumer-friendly shocks. Yes. That doesn't sound like the kind of thing that would derail the economy. It only sucks if you own UNH. Yes. So, if your health insurance... can I interrupt and say one thing? So in this program and in all programs, we talk about what is happening with opinions about what will happen in the future.
That's what we do, right? I was listening to, you know, William Goldman's book, "Adventures in the Screen Business ." There is a line that is always quoted from that book: nobody knows anything. William Goldman wrote "The Princess Bride." He was a screenwriter and novelist. And throughout the book, he would talk, saying that it was 1982 and literally the central point of the book is that nobody knows anything.
People who make movies don't know how the public will react. The central point of the book is that nobody knows anything. He said, "I know we have nine months left in the year, but I have no doubt in my mind that ET will win for best picture." It was 1982 . He says, "I don't care. Stephen Spielberg, ET is going to win." Gandhi won .
So everything we're talking about regarding the future, we're all doing the best we can. Yes, that's correct. It's just a guess. The future is uncertain. I agree. It's true. However, what do you do to tip the odds in your favor? If you have to, if you have to have a vision and you have to make a decision, or people depend on you to...it's okay, we understand, it's unknowable.
But still, what do you think? How do you tip the odds in your favor to be right more often than you're wrong? And you're the right person to ask this question because you get it right more often than you get it wrong. Um, well, yes, thank you. Which means I've, I've been. I feel like we say that every time you come over.
You need a coach. That's why he has a retinue here. If he , if, if you had been wrong about the bull market of the last three years, there wouldn't be anyone on this bank hanging out with you. You know, you know that's how Wall Street works. Well, it would come with my McDonald's. Tom, can I tell you that I just spoke to a young man?
Right? I didn't get an answer to my question. No, wait. More flowers. I spoke to a young man, um, last month and he mentioned how Tom is always optimistic. I told him, "Listen, you don't get it. You're a senior in college. It's easy to be optimistic now, but there was a time, young man, not that long ago, when it wasn't fashionable to be optimistic, when everyone was a pessimist.
And anyone who had the courage to take an optimistic stance was ridiculed. And you haven't stopped being optimistic since 2022. I mean, you've been right the whole time . And I think that's a big part of why you 've commanded a legion of followers , because every time the market went down, most people came out and said it was going to get worse.
And you were one of the few voices consistently saying it was probably going to get better. So you're right. Thank you. So, how, how do you go about making sure that when you make a decision, you have a reasonable chance of being right? Yeah. Uh, this isn't a great analogy, but I'll explain it and then I'll explain how we do it.
But let's say you're at home, but the lights are completely off, and you're feeling your way around the room." You're walking along, and, for example, you feel something soft and you deduce that it's your living room, or if, for example, you stub your toe on a corner, then you know you're in the kitchen, right?
That's what I think about trying to navigate the markets, because we don't really know where we are at any given moment, but you try to find what gives you situational awareness, and we do that through cross-market analysis . So we take a lot of signals from volatility, or from what the credit markets or commodities are doing, and that tells us what the state of the stock market is.
But a big part of our job is also trying to see, with this current snapshot of all that, where it puts us, you know, does it take us back to 1950 or 1970, or is it, you know, Hong Kong? And so we're trying to... It seems very important to you where we are in the cycle, you seem to pay a lot of attention to that.
Is that something you learned from someone else, or is it something you just figured out over time: "Hey, this is the real signal, this is..." "What really matters?" Uh, you know, I can't remember where I heard it, but I do remember hearing a few things in my early years. One was, you know, don't fight the Federal Reserve.
And I think that's important. Another one is, is that Marty Zwag thing? Who is "Don't Fight the Fed"? Ronald Reagan. Yeah, it was probably Ronald Reagan. Okay, go on. Yeah. Or it could be Uncle Martin. Remember that movie with Martin Short? He says, "Don't fight the city council." Right. Um, okay. And the second one is, "Demographics are destiny." And I can't remember where I heard that.
I might have heard it in college, but when I was working in wireless, a lot of the work I did as a cell phone analyst was really building cell penetration models based on what I call "vintaging," like tracking what young people were doing. And then we thought, when they become adults, they're going to control everything, right ?
Okay. So, based on those two things, and as you're feeling your way around In the dark, where are we? How would you describe the position we're in now? Because most people would say, uh, what goes up must come down, it's been too good for too long, valuations are stretched, blah blah blah blah blah, you know, the usual litany.
So, what would you say to that given you're using those two ideas as background? Um, yeah. Well, there are a couple of things that are observable. One is that earnings growth is increasing this year. Um, not just in the US, but globally. Yeah. That's not usually typical of a late cycle. Okay. And market breadth has improved a lot.
Okay. You know, someone said this year that it's like a shifting risk appetite cycle , but a lot of things are going up, which means the market is widening. In fact, it's widening outside the US as well. Yeah. And the third thing is: you could say there are reasons to be progressively optimistic, whether it's with AI or blockchain.
I think, especially after Davos, although I didn't attend , I was following many reports and panels, and it's clear to me that traditional financial institutions are starting to build on blockchain as a productivity engine. That's a big story in the US, especially. Fidelity just announced its stablecoin.
That's huge. Yes, that's true. And today, the SEC and the CFTC made a joint announcement. They want to ensure that the US is the cryptocurrency capital of the world. Yes. And then there's the relocation that's happening everywhere. And defense. So there are things driving global spending. Materials rallies are usually late-cycle.
And I would say the biggest bull market right now in the US at least—maybe it's the same elsewhere overseas— is energy stocks, gold miners, um, base metals are going up, and all those related companies. Today I talked about a steel stock as one of the best performers in the market. When was the last time a steel stock was one of the best performers in the market?
And yet here We're there, there are several. So, how do you reconcile those two ideas? Yes. Um. Or don't you agree that the metals and oil rally is late-cycle? Do you think it 's more mid-cycle? I mean, the precious metals move is probably the trade, right? Like silver and gold are... If I were an average investor, that trade has been running every day for weeks on end.
So it makes sense that people are investing, and it's amazing . And I spoke to Tom Demar about that today. Um, you know, he does think there's still room for that to extend. He doesn't think it's run out yet. No, he thinks gold can get to 8,900. Oh my God. This is the best. Nobody is ready for that.
This is the best month since 2008. Yes. Incredible. I'm almost certain that at 8,900, the Fed's balance sheet improves dramatically, or the US Treasury, because we have so much gold. But, But the thing is, who's left to buy it at 8,900? Who's the next buyer? I mean, at that point , I don't know, I guess what I'm asking is that to get to 8,900, one would assume that every central bank with the resources to buy would have already bought by then.
Or am I missing something ? It could be asset allocation, because I had a brief conversation with Joyce Chang at JP Morgan. Hold on a minute. Let me jot down all these names you're mentioning. Okay, fine. Go ahead. I'm just kidding . I'm teasing. Go ahead. Oh, well, yes. She was saying that if you just allocate one to one and a half percent of high net worth, right ?, incrementally into gold, well, now you 're at 9,000.
Wow. So, it's just small amounts of money moving into precious metals that could get us there. Okay. Is gold similar to the stock market where we should expect V-shaped recoveries because the main trend is so powerful, or could you imagine What about a scenario where a 15% drop in gold and a 25% drop in silver ends the rally we've been on?
I mean, what would your instinct be if you saw a correction in these trades? And , by the way, if both of those things happened , they would both still be in intermediate and long-term uptrends. But how would you view such an event? I mean, today is like a snapshot, right? There was a big intraday drop in gold today, and now it's down about 1%, and silver had a big intraday drop and is almost unchanged.
Buyers just came in droves. Yes. Okay. And then someone tells me—I'm not a commodities expert , but I'm learning a lot on the fly now—that the physical market is even tighter. So prices are actually higher in the physical market than in these financial markets. Okay. Um, but—and I'm going to quote Tom Demar.
He says this is more like 1979-1980. So it could be a topping process. Okay. I mean, it's kind of parabolic, and no, it's parabolic. Silver definitely is. Uh, I guess what I would ask is if you can think of a historical example where gold and silver were doing this and the stock market was going up along with them.
It seems kind of weird, like the stock market bull market did n't start in the early ' 80s until after gold and silver were destroyed. This is a little different. This looks more like a rally of everything. Yeah, I mean, someone pointed this out, and I think it's correct , and again we're not quite sure why, but if someone were to say this is everything but the dollar, then maybe it would make sense.
Yeah. Okay. I have two charts for you on this. The first one comes from our friend Todd Sen. We're looking at the daily trading volume of precious metals ETFs . That's a great chart from Todd. He calls it metal. He does a great job. Metal mania. This, you know, the previous peaks went maybe as far as...
20 billion and now we're at 64 billion dollars. So people are going absolutely crazy about this. And then our friend Warren P has a chart showing the secular bull markets for gold. And the first bull market he outlines, which is the really crazy one, is from 1971 to 1980. Then we had the second one, which is from 1999 to 2011.
That's the purple one. And today's is the green one, from 2018 to 2026. So shorter and steeper than the previous one. Yes. Okay. Yes . By the way, if you look at the most talked-about stocks on Wall Street Bets, it 's SLV and GLD. Unbelievable. I'm not surprised at all. No, no, no. Unbelievable where we are.
Yes. So Tom, one of the things, one of the narratives going into 2025 that has cooled dramatically is the bubble of everything, especially the AI bubble. You don't hear much about that anymore. Oracle is down 51%, Like 51%. It's been cut in half. Microsoft is down 12% today. And then, just the overall market.
You've got a great chart, John. Chart, please. Which shows that we 've had six black swans. Black swans might be extreme, but whatever. Six events like that in the market since—when does this go back, to 20? What year is that? 19. Yes. Late 2019. Okay. And the price-to-earnings ratio has been sideways.
What—what are these events? Where's the bubble? The COVID shutdown, the supply chain, uh, inflation, the Fed's fastest rate hikes in history, tariffs, the US bombing Iran. Yes, some ugly stuff has happened. So, some things have happened. And , uh, I don't know what the message of the chart is. What are you showing people when you compare the valuation to those events?
If this were a company and we threw six events at it that could or should end up its earning capacity, but the company still grew, we would consider it super resilient and assign it a higher multiple. That's a big point, isn't it? You'd be willing to pay more for that asset, for the earnings of that asset.
Yes. Because it's indestructible, and, and, and today, when people say the market is expensive, I think we just threw six black swans at it and it's still the same. Do you think the stock market is indestructible? I know not forever, but is that how it feels to you? It's behaving more indestructibly than many appreciate.
Definitely. Someone— because people don't tell me they think it 's indestructible. No, because who would say that out loud? It sounds crazy. Yes. Someone told me they can't, they just can't understand; they're not a professional investor, but they have money in the market. They just say, I don't understand how it seems like the country, the social fabric of the country, is tearing itself apart and the stock market keeps going up.
And my response was, yes, Because people have more faith in Tim Cook than they do in Congress. Is that what you're saying? Not only is it not inconsistent, but it actually explains why people have more faith in the earning power of American companies than in any of our elected officials? Yes. And it is—that's why they'd rather have their money in stocks than in many other things they could be doing.
Yes. I think there's a lot of truth to that. What do you think? I agree. I remember about 10 years ago I came across a survey where millennials, who were much younger then, trusted tech companies more than they trusted the government. So they're more willing to share information with the tech industry than they are with the government.
Yes, that's very likely. Okay, let's get into Tom's perspective. Well, one of the dynamics I love about the current market is that it's separating the wheat from the chaff, and the winners and losers are becoming increasingly distinct . So, for the past 20- something years, tech has been a single operation , right?
Kind of They've all gone up together, they've all gone down together, and now, not just now, but over the last six months. John, chart five, please. You see the correlation of the big tech companies? We're looking at the last six months, and it's plummeting. So, today is a great example. Next one, John.
You have Microsoft down 12, Meta up 10; these names generally, obviously, move in the same direction. We've literally never seen a day like today. And it's funny because they both reported yesterday, the same story, capital spending; maybe the market is scared that 45% of Microsoft's backorders are tied to OpenAI.
It's like, that's a big question mark. Uh, but their spending is up 66%. Meta's is up doubling year-over-year, but Meta is showing monetization in Reels, and the market is talking. Yeah. I mean, I hear people analyzing the reasons why they're scared of Microsoft, right? Whether it's the value of future revenue or if it's Because AI can remake Excel and Teams and many of the products.
Um. I think maybe it just shows that people are still trying to understand how AI is progressing because now they're just deciding that Microsoft is a loser in the AI race somehow. But I'd probably guess that's kind of out of line. I mean, I think Microsoft has been written off in the past. You know, in the pre- 2000 era, people thought it was just a software company, and it came back strong.
It lost $400 billion in assets today . Now, that money can come back tomorrow. So it's not like, say, a fund lost $400 billion in assets. But can we pause for a second and think about that number? That's Microsoft's market capitalization loss in one day. It's pretty remarkable, right? Right. I think that's $1,000 per US citizen, right?
M, it must be, right? Yes, because there are 330 million people. So, it's pretty remarkable. Um, I want to get into You, I want to get into your perspective. Uh, John, I can't see which slide it is. I think it's, I think it's the first one. Uh, so, tell us what you're telling people they should expect in 2026.
I think it's going to be very similar to 2025. The fundamental story is better, but one difference is that instead of an aggressive Fed, we have one that the market will eventually notice is accommodative, because we have a new Fed chair and they're not inclined to raise rates any further. Yes. So that's a positive.
But the negative is that there are signs of stress in the economy now because of the high rates, whether it's consumer or private credit. And we know valuations are more expensive because we have three consecutive years of gains behind us, right? And I think this is the year where we've seen the most policy shocks.
I think the White House is being more aggressive. I don't know if it's because they want to accomplish things before the midterm elections. I imagine that's part of it. Yes. And that makes it harder for the People holding their positions with conviction. Okay. So I think all that means the market could look like last year, where we had a big drop.
However, there is good news, you know, the first five days rule is on the positive side. Yes. It turned out positive. Okay. Which is a good thing, but the first five days were bullish . Yes. Okay . But we just completed some additional work, and Matt Sermino probably has similar statistics, but if the first week is positive and the first month is also positive, the probability of a bullish year goes up to about 92%.
Is that true? Yes. I did n't know that... I knew that existed. I didn't realize it was so extreme. Some of that data seems random, but 92% is very solid, and that's 75 years. So N=75 is still a lot to analyze. Yes. Which years fell within that 8%? Just out of curiosity, did you go to the trouble of looking?
I have n't looked at anything. It's getting into the details, but it would be interesting to see what... It ruined things. It could be like 9/11 or something. Yeah. As it could be something obvious. What if it's like 2008 and 1974 or something like that? Okay. You have a lot of headwinds here. And for those of you listening who can't see the slide, I think it's worth sharing a couple of things.
We've come to the point where valuations are higher, obviously , because stocks have been rising. Low-level consumer stress in subprime and auto loans. We've been able to look beyond this, not at the level of individual companies. Those stocks that cater to the lower-income consumer have absolutely felt the pain of what's going on there.
But for the most part , Apple stock, for example, doesn't care about that. You know, the big stocks that matter are looking beyond that. Do you think that could be the origin of the next correction? Is it just that there will be an overwhelming amount of evidence that there's too much struggle in the lower sector, or do you think it's a low-probability thing because What to worry about?
Uh, I mean, it's probably one of those things where it's a social issue, because, you know, it's a burden on consumers, like all this inflation. Yes. And then it can create problems for government leaders, so it can change elections. Yes. But mathematically, the bottom 50% consumer doesn't have as much of an impact on GDP as the top half.
Right. And I think that's why the market hasn't paid attention to it. That hasn't been a stock market story . That's been a political story. Yes. But then you can and become something like, that's why we have the government limiting credit card rates. At the rate things are going, he's going to lose the House.
And if it does, it will be 80% due to the affordability crisis that, according to polls, is directly attributed to him. I'm not saying you have to agree with that or not. I'm just saying that's what the polls say. And then perhaps 20% chaos in the application of immigration law. But as you rightly say, that may not be a market story today, but a blue wave in the House would absolutely become a market story, because part of the bullish argument right now is all the deregulation, which will obviously stall once they have to start voting on things.
Yes. So that's why it makes sense to cap health care fees, try to lower oil prices, and limit credit card fees. Those are things that would help a lot of people. Well, I'm not exactly the bearer of good news either, and I'm not suggesting that the low- income consumer is at their best at all . But if many of those loans that are bad loans in the subprime auto market have n't happened in 2022, we're already on the other side of that.
And if things were that bad, Ally Financial, which is the largest lender to these consumers, wouldn't the stock be, I don't know, 3% below its 52-week high. Yes. That's right. And that's looking to the future. Come on, please. This is it, this is the truth. You have, um, the New York Stock Exchange margin debt at an all- time high.
Michael and I see it, and we're not as smart as you, so we'd just say yes, that's the usual thing to do when the stock market is at all-time highs. Margin debt is simply a function of the total size of the stock market capitalization . Um, by adding that to your headwinds, are you implying there might be something more behind it?
Yes, there is a small sign. So, and we'll probably start writing about it later... this is margin debt. So, 1.214, is that 1.2 trillion? Yes. Uh, as of November 2025, and obviously it's a historic record. And for context, in July 2023 it was 710 billion. So it has almost doubled in two and a half years.
Yes. Okay. Uh, what's the signal there? What we discovered was that if you look at the year-over-year change, it's actually positive for stocks until the percentage gain exceeds 38%. The percentage gain on the margin debt itself. Yes, we're there. Yes. And in fact, it's at 36 right now . So we're almost there.
Okay . Uh, because what it means is that most of the profit is being fueled by the consumption of leverage to boost profits. So, in that top decile of the last 30 years, future returns go from a 70% positivity rate to 40%. So we're almost at the point where it could be a headwind. Can I show you a chart of your protégé?
Go ahead, Matt. I like what you showed, which is the amount of money coming in and the year-on-year change. So I asked Matt to show me margin debt as a percentage of the Russell 3000's market capitalization. And it's quite low, but it's accelerating in a significant way. Look at this. TRUE. Historically low or nothing to worry about too much, but look at that rate.
Look at that change expressed as a percentage. So it's 1.8%. Yes. It's normalized for total market capitalization, but it's accelerating quite violently. Yes. And that reflects a group of people, because many people don't use margin debt, and I don't think the Robin Hood community uses it either. They are probably buying more daily expiry trading options.
Oh, I would say they're doing both . Okay. Or perhaps both. Yes, I would say both. Yes. So, thinking of it as a percentage of market capitalization doesn't necessarily represent how the group is performing. So , there is a group that is really using this debt and exhausting their 38% threshold. What happens then?
Well, future returns turn negative. So that would be the entire stock market. Yes. I mean, that would be the reason why there might be a crash to reset everything. Yes. So, if that drop happens and a large portion of that margin debt leaves the system and we normalize to a lower level, most of us, including you and me, would say, "Okay, great.
We got the cleanup." It's like you need cleanings on the way to higher prices. I don't even know if we would see it as an obstacle or something negative. Yes. So for investors, the drops are good because everyone has more ability to allocate at lower prices. But what did you say, as always, John , graph 7, please?
The correction is happening beneath the surface. Then Oracle, as I mentioned, was cut in half. This is the group of the Magnificent 7. Microsoft is in a bear market. Tesla is down 14%. Apple is down 10%. There are opportunities, whatever. Things are happening. Yes. And the market is expanding. Does n't the market need the Magnificent Seven to rise further?
Yes. For me, if I'm an investor and didn't own Microsoft, I can now buy it for 22% less, right? You could buy it at a lower valuation than at any other time in the last two years. And all that bonus for OpenAI, that's all gone now. You could almost argue that that's part of what's hurting the stock.
I want to ask you about the correctness of software in general, not just Microsoft. I think the VAT is down 25% right now, and I don't know when was the last time we saw that, probably in '22. Every one of those names looks terrible. From Workday to ServiceNow, Salesforce.com, one after the other; Even the names of cybersecurity software have fallen significantly.
Look at this bear market, this is the application software sub-industry. So you have, and this is the reason why I bring this up. I think you think of AI as a bull market; you told us it's wreaking havoc on the stock market right now; It's not the issue of AI; if anything, it's erasing market capitalization, not adding it, at least in software stocks.
Now, I understand that people take that money and buy utilities, and God bless them, but are we so sure that AI is a tailwind and not a headwind for investors? Well, sometimes it's easier to see the losers than the winners. OK. Um, I agree with that. Yes. So, I think software is now being voted out as a loser because AI can now write code and replace many subscription services.
And I don't know if you've seen the recent charts on technology employment. Um, but it has actually decreased. It is one of the few industries where there are fewer people. Do you remember when they told everyone, " Learn to program"? Yes. It wasn't great advice. Learn art history. It turns out that might be better advice.
Do you think the market is right to punish software like this? It's usually a sign. Do you know what I mean? Um, because you know, the market is exhausted when there's bad news and it doesn't go down. But if there's bad news and it's going down, that means, what if there's good news and it keeps falling?
Service Now had excellent profits. The action was massacred and was already being destroyed. Okay, so that's a bad sign too. If you come down with good news, it's a bad sign. I would say that Microsoft's reaction to what they announced is a very bad sign because there was nothing negative there. There were slightly higher expenses, and slightly lower Azure growth.
It was 38%. It was 38%, they reduced their projection in Azure from 39%. And the market said, "Okay, we'll take 400 billion, please. Thank you very much." So that's not it, I know it's anecdotal, but it's not good when one of the biggest stocks in the market reports a, quote-unquote, normal quarter and they act like it's the end of the world.
Obviously I take it as a negative sign. Yes. And you know, I learned when I was a stock analyst that there's a three-quarter rule. If a stock fails, you know, you can't touch it for two or three quarters. Okay then . But it remains an opportunity for a long-term investor. Can we say that both things are true?
Um, Microsoft's reaction today is not optimistic. Obviously, I receive 12%. He did n't say anything terribly bad. Wall Street is worried about its exposure to OpenAI, to which I would say: good. I love that there's no bubble, that investors are actively rejecting the AI bubble, for the third time now.
Oracle was cut in half, Microsoft in a bear market, the bubble of big investors in the largest stocks . So, in terms of building a wall of concern, as a long-term investor, I love it when people are cautious and discerning about risk. Yes. And later this year, you know, many of these will actually start trading.
So now you don't have to guess how much they're worth or what their impact will be. I mean, part of it is that OpenAI is kind of mysterious, like a private company, but now it's going to be public, and it looks like SpaceX plus XAI will be public this year, right? So you'll remove some of the mystery, and people who want to trade based on what they think those shares are worth will be able to do so all day long.
Correct. Are large initial public offerings like... I do n't know if "historically" is the right word. Isn't there a bit too much supply? Yes. Is it a ceiling sign? Yes of course. I mean, it's going to absorb the demand, right? Because a large number of offers are coming. Yes. I will never forget, I learned this lesson when Blackstone went public in 2007.
They were like the ultimate bet on the real estate boom and were heavily involved in emerging markets, mainly China. Like, they were in all the so-called "hot" areas. And this was before we talked about liquid alternative assets and, you know, the revolution. This was simply about this style of investment being the best style of investment, and I believe they bought Sam Zell's Equity Office Properties at the peak of the real estate market.
I believe , if I remember correctly, that public offering was like a meteor or an asteroid hitting the Earth's surface . Yes. So, when BX went public , it wasn't a corporation, it was a partnership, which meant that if you were stupid enough to buy the stock for your clients, which I did, you had to tell them they'd just lost half their money and had a K-1 form.
Like, that's it, that's it, tell your accountant you have another K1. That's your gift at the end of this. But I've always seen those giant public offerings that Michael talks about. And I think Open AI qualifies and SpaceX not as the beginning of something, but as the end of something. Where does the money come from?
That's potentially hundreds of billions of dollars. Well, yes, but this could be different. Okay, let me explain why. Like SpaceX, when it goes public, it's actually a huge wealth-creation event for many of the people who invested in SpaceX. Um, I know some people who put in 50,000 at the seed stage and I think their stake is worth 150 million.
That's crazy. Because the company is worth one and a half billion. So, as inflationary as it sounds. Well, I think that's the equivalent of a massive tax refund for the US economy. Um, well, they have to wait 6 months. Uh, they're blocked. They cannot sell on the date of the IPO. Yes. But perhaps they can gain some leeway, or they can go much higher.
So you're saying that these people who get liquidity from SpaceX stock are going to put it directly back into the market and get us blocks? Yes. So, think of it as the alternate world that said there was no going back. Suddenly, all these venture capital funds, 99% of whose fund value is SpaceX, have a large distribution, and all that money goes back into the economy.
So, you're saying I should have Michael start cold calling SpaceX seed investors? Yes. Yes. Red Hold should, you know, make a pilgrimage to all the We Have Very Cheap Credit. Very cheap . Uh, okay. We did the January barometer. We hit the FINRA margin cap . Where do you want to go now? Let's expand, let's diversify.
Um, John, chart 12, please. So it's Thursday, it's 3:40 and Microsoft was annihilated today, down 12%. Uh, what's XLK doing? Perhaps that's not so bad, XLK fell by 2%, but it's a poor weighting. The NASDAQ 100 fell 96 basis points. Okay, 96 basis points for the NASDAQ 100 and the RSP, the equally weighted S&P , fell two basis points on the day, flat.
and this expansion trend that we are observing. So, this is a chart by Yuri Timmer showing equal weighting versus market capitalization weighting, and it showed that there was a clear narrowing at the end of last year and now it's widening. So, the S&P market capitalization has gone sideways and you're seeing a breakout at 493.
I love it. I think , listen, if the "Magnificent 7" were really falling apart, I'd say, okay, that's not good, right? Because they are the leaders. But the fact that they remain sideways and are consolidating, despite Microsoft, I think is the most bullish thing there could be. Is that part of your bullish thesis for this year, that the next 100 stocks will seek to reach new highs?
Yes. And I think this confirms an expansion, it confirms a bull market. It's very good for institutional stock selection because they can't have so many of the "Magnificent 7", right? And institutions can, of course, employ their own form of leverage through preferential brokerage. So this means that there could actually be new buying on dips by institutions.
I think this would be very good news. Your customers should be delighted. What do they ask you or what do they say about this? Well, yes, I think they're breathing a sigh of relief that it's no longer just about the "Magnificent 7". At last. Yes. And that's how people are seeing it, especially those with long and short positions, as good opportunities.
Many of them are investing outside the US. Yes, I think if someone is global, now I understand why they look to the world, because now, as someone pointed out, there will be two winning countries in AI, like the US and China. Um. Do we know that? Yes, I mean, I think China's AI works very well, and you know, China has done a good job in electric vehicles, and I recently learned that they are quite big in health and biotechnology innovation; I think they are exporting more licenses than any other country.
OK. So many European medicines are actually licensed from Chinese laboratories. That means the supply chain, like in countries adjacent to China, could be improving. So it 's good for selecting stocks. In other words, there are more stories out there. I think the international story is very interesting because last year they had no growth in profits, but those markets rose 20 and 30%.
Because it was like a change of mindset, and I think a lot of the leadership in those countries and the people who run the stock exchanges, etc., some just talked, but others actually passed rules forcing companies to increase shareholder value. I think everyone watched the United States recover from the pandemic and said, "What are they doing that we're not?" And I think, suddenly, they got the message.
Oh, their capital markets are on fire and look at all the profits, like a domino effect. When stock prices rise, you get higher consumer demand for everything out there . You get, um, you get executive confidence, you get more investment. It seems so obvious, even if you're a socialist country, that you should support your corporate champions to grow, not penalize them and look for new ways to sue them.
And I think that was the switch that was flipped and led to that requalification last year. And then this year, as you said, you're now going to get the profit growth in these countries. That explains last year's reclassification. And that's an excellent continuity story. And I think that's why you see people striving to allocate more to large international companies.
My best guess is that this is not a six- month phenomenon. I think it's something that will take several years, and I don't think it's too late for those markets at all. What do you think ? Yes, the more I analyze it, the more I think what you said makes sense, because in addition to that, the dollar might be weakening.
Um. That alone could help. Yes. So there could be a long way to go for that story. Now, the more I look at it, the less I believe it's just a one-year thing. Good. I like that idea. Um, I want to go back to your, to your, uh, to your strategy again. So, what should you have? Stocks that benefit from a stronger 2026.
John, do you have this? Yes. Very good. Energy and basic materials. Is there anything else to say about energy? Well, part of it is that energy and basic materials were our top sector picks this year. Yes. But I didn't anticipate that precious metals or metals would do so well, but it was really because they had underperformed for a long time.
The level of poor performance over the past three years was something that has only been seen once before in the last 75 years. in precious metals. Uh, yes. So I think I could, well, I think, I don't know where the slide is, but there's something like a Z-score of how many standard deviations of poor performance we have.
Yes. And it was at the same level as you were in 2000. So you'd have to say the same about energy then. The energy sector hasn't done anything for 5 years. Correct. So it was energy and basic materials, and that's why we chose it as our main sector this year. Yes, I think you're going to be right about that.
And I think all those graphics are excellent. Yes, as if these shares were under accumulation. I don't see any other way to look at it. Yes. I have a question for you. Why do we say basic materials? Why not simply...? It's because they're not precious. There are precious metals and there are base metals .
But why not just materials? I mean, I never say basic materials, but I know that's what the sector is called. It's a little strange. Wait, what do you mean? Basic materials. Yes, it's the GICS one from GS. Yes. Oh, that's right. How they classify everything, where the term "basic" comes from, I do n't know, maybe we'll never know.
Yes, you know, I think they thought of it as a manufacturing process, like these are the basic materials and then there are the intermediate goods, yes, and as manufacturers, that goes to the manufacturers , but you're right. You'll never go to bed without learning something new . That was like an agrarian concept or something , right?
Uh, yes. You have Bitcoin and Ethereum, as expected, as the must-haves. Tom, what the hell is going on? Bitcoin is simply plummeting. Can you tell me? Can you tell us? Can you tell us a little about the cryptocurrency market in the last 3 or 4 months? Because I was very...I was like...I was burning up.
And, like, the story made sense, like, okay, you have a pro-crypto administration in the White House now, the SEC is on board now, like, everything fell into place, and you had people on both sides of the aisle, in Congress, fighting to collect money from the crypto lobby. And it just seemed like, "Okay, it 's finally a regulated market." It is accepted.
Products are being launched. People are using it. " Capital inflows are coming into the funds ." And then, it kind of hit a wall. And I don't have any theories or anything like that. We had JC Parets on last week, uh, two weeks ago. He just goes, "Oh, this is easy." "They started trading options on Bitcoin." That was the peak, which I guess was sometime in October.
I do n't know. What's your theory as to why it's been so directionless the last few months? Uh, yeah, crypto was doing well until October. So you buy that story? The options story. Some things happened in October. Okay. Um, so crypto went up like 36%, and then, from October to the end of the year, they had a drop of about 40% in some cases.
Yeah. Uh, one was that there was a huge deleveraging. There was basically a price vulnerability on one crypto exchange that led to what they call an automatic deleveraging. Then that spread to all the crypto exchanges, and it was the biggest deleveraging event in crypto history. bigger than what happened with FTX after SB.
So what happened is that people with leverage were liquidated and forced out of their long positions, and that ruined the trend. Right. And it was a pricing mistake, but it wiped out over 2 million accounts globally. Um, it wiped out, I think, a third of all market makers, which are important because they're the equivalent of central banks.
And it crippled a lot of cryptocurrency exchanges. So, their balance sheets took a huge hit. Coinbase is down 50%. I think it's the second 50% drop since it went public. And Coinbase is a big company. So if those shares are like that, you can only imagine what it must have meant for the private players in the ecosystem.
Yes. So Coinbase, let's say, has a rock-solid balance sheet. Then imagine those who have just acceptable balance sheets. Okay. Um. Will that be over? In 2022, it took about 8 weeks, 8 to 12 weeks before the Risk appetite might recover. So we're kind of on that outside edge . Well, Solana is hitting new lows today.
So Bitcoin is down six. ETH is down seven. It has n't followed its course. Maybe it's accelerating downwards. Yes. But it's very strange, when you compare it to gold, like it's supposed to be. Digital gold. Yes. Well, other things are happening . For example, with Bitcoin, I think there's a shift in the headlines because, you know, Bitcoin is like 14 years old.
So, like, the 20-year-old crypto punk is becoming a mature person, right? And a lot of them made fortunes. Yes. So they've been selling their Bitcoins. Okay. Um, and as you know, there's this quantum risk that's more specific to Bitcoin, because quantum developments are accelerating. Yes. And about a third of Bitcoin wallets can't be upgraded.
So, in fact, they're vulnerable to quantum computing . Okay. Can I ask a dumb question? I do n't know anything about This. Obviously, if quantum computing were a reality and we could hack the Bitcoin blockchain, why wouldn't they hack, I don't know, everyone's central bank or Chase account ? Why would they go after Bitcoin first?
Uh, yeah. So, quantum operates more like an ASIC, like a brute-force, repetitive calculation. Therefore, it can break encryption. Uh, so Bitcoin's encryption is what can be broken. Uh, you're right. So you can break a lot of encryption, but banks, hopefully, would be updating all their customers' passwords, forcing you to use a new type of password, and that's how you avoid the quantum vulnerability .
The thing is, many Bitcoin wallets, like Satoshi's, have never been updated. So they, and of course Satoshi's wallet. How do you update a wallet so that the blockchain itself, that vulnerability to quantum computing, is protected? You would have to do a Bitcoin fork. I mean, or You'd have to contact the guy and tell him, "Upgrade your wallet," if it's a Ledger wallet or whatever.
So, what I'm saying is, if you upgrade your wallet, you're safe, but the price might not be. Well, you might be safe from losing your Bitcoins, but if there's a massive hacking event or some kind of— and look, Michael, I'm no expert—but if a lot of nodes just disappear because they're afraid of that risk, or if some influential person comes out and says, "I have information, and I think there's literally a quantum computer in the process of hacking the Bitcoin blockchain," you might upgrade your wallet, but the price will plummet.
Well, first, if someone were to develop a quantum hack, yeah, they would n't reveal it. A nation-state would just steal that third of the Bitcoins until someone starts to notice. Yeah. Um, now, Ethereum, for example, gets upgraded twice a year. So, they're already developing quantum resilience. So, a lot of blockchains will be resistant to quantum computing.
Okay. Um, just like Chase. It will update all its encryption. Have you ever seen such bearish sentiment outside of FTX? It's like people are totally fed up. And I know cryptocurrencies are so weird that they can regain their magic in two seconds for no reason. It could go up 15% tomorrow, for all I know.
But man, it looks like it's on the ropes. It's right at a multi- month support level and it's looking pretty bad right now . Uh, yeah. From a technical perspective , this is what Tom Demark was expecting regarding cryptocurrencies. He was brought on as an advisor at Bitmine and he told us that Thursday was a big day, and it turns out that today was, because we had a big drop in crypto.
But this looks more like the end of the sell-off than the beginning. So, you do n't think we'll see another drop? Well, for example, Ethereum might hit 2400, but it's just a touch and then there's the bottom. But that's going to coincide with precious metals peaking. I mean, remember, precious metals have absorbed all the appetite for the The risk of speculation, of crypto, right?
A lot of it has flowed out of crypto into precious metals. That was unthinkable six months ago. Nobody could have predicted it, going back to what we said about nobody knowing anything. I've heard that story. That people trading crypto have moved into gold and silver because it's performing better. They're probably telling themselves they're being conservative right now.
But there's another story I've also heard from crypto experts, which is that if you thought Bitcoin was a store of value away from the dollar, now with easy access to stablecoins and their full acceptance in the banking world, plus pending legislation that could allow stablecoins to earn interest, what purpose does Bitcoin serve?
Like, are we using Bitcoin to take money out of fiat currency or the traditional financial system? Well, now Bitcoin is an integral part of the traditional financial system. That's the first thing. And second, it moves too much to be useful as a store of value. It's useful as a trading vehicle. Stablecoins are amazing as a store of value because they are A dollar, and it's always a dollar.
So, has the rise and massive popularity of Circle and all these stablecoins—Fidelity launched one this week—robbed Bitcoin of some of its use case? Well, there is. Have you heard that before? I know I'm not the first person to say that. I have . But there's a really important story surrounding blockchains: Wall Street dismissed blockchain and crypto as mere experiments, but now financial institutions are rebuilding settlement layers using blockchains.
That's what Standard Chartered said in Davos. The CEO of UBS says that in a few years there will be a convergence between digital assets and traditional finance because blockchains offer finality and much more security. And Larry Frink says he believes the entire financial system will operate on a common blockchain.
But why is that good for Bitcoin? Well, it's probably good for Ethereum. Okay. Because Ethereum is... You 're not speaking in your own self-interest, are you, Tom? I haven't written a book about that. So good at This. Very good. Go ahead. Go ahead. Tell me more about Ethereum. So, Ethereum is the useful blockchain that can really help accomplish those kinds of things, because that's where stablecoins have actually been built.
Um, it's a...you know, you do smart contracts so you can lock information and prevent it from being altered. You know, you can put a million-page legal document on the Ethereum blockchain. If someone tries to change one point in that blockchain, the hash fails, right? So, that's how you protect the information, right?
Um, it has 100% uptime . This is what Wall Street thinks about the narrative of the future; they're building their entire system on contracts like Ethereum, which is very bullish for Ethereum. What's the timeline when you say they're building their entire system? I would say that 99.99% of the entire current financial system will have nothing to do with blockchain at all in 10 years.
Is that 50%? Or is it 5%? What would the Bullish case on financial platforms? Let's leave banking out of this. Take Wall Street, for example. So, trading, settlement, etc. How much of that is actually happening on Ethereum platforms? Well, if any at all. I could give you a quick rundown. So, while we're at it...
okay. So, if we're talking about stablecoins, Tether has about $160 billion tokenized as a company. Yes. Um, and...but it's mostly running on Ethereum. Although it's only $168 billion, which is less than 1% of M1. So it's not even risky assets. It's not credit or stock tokenization. They're going to make $20 billion this year.
Actually, because of their balance sheet, they might be making about $24 billion. And that's just the interest on the treasury bonds they hold to back the dollar value of the coin. And because they're overcollateralized, they actually hold almost $30 billion in gold or something like that now . Oh, wow.
Right. Okay. But Let's say they make 20 billion, not 24, but something between 20 and 24. They're one of the five most profitable banks in the world. It's...it's amazing. They make more money than Goldman or Morgan Stanley. That's amazing. And that's just a single, monoline A product with 300 employees.
Okay. Now, everyone's coming for that profit margin. As you know, JP Morgan, Fidelity, they'll all have their own internal stablecoin, because why on earth would they allow something like that to continue? Yes. What's better for banks than a stablecoin? I don't have to pay you anything. We keep everything.
Yes. Right. Good. And that's just one product. So now you can, uh, build equity trading, which, you know, Vlad and others want to tokenize stocks. And very good, too. Though without using ETH, right? Well, they'll use an L2. Yes, they might try to use other chains. There are other chains, and some banks are using these privacy chains, which I'm not going to try to criticize, but some have They've had exploits.
Some have had famous exploits in other countries. So, that's fine. But it's not like I do n't want them to kill me off. You think if they're building, if they're tokenizing assets, you think if they're smart, they'll build it on top of ETH on an existing L2 or create a new protocol. But that's the right world to build that in.
Yeah. So, let's say Wall Street tries to make its own blockchain because they want to control the narrative. Then there'll be a new JP Morgan that's like Tether that will be built on public chains, because Tether is built on public chains and it's better than, you know, JP Morgan has 300,000 employees.
Tether has 300 and they make almost as much money as JP Morgan. It's crazy. Tom, I have to ask you about Digital Treasures. This was really hot. Uh, you got into the game, I don't know, eight months ago. You can correct me if I'm wrong. And this was the way people gained exposure to crypto with leverage.
If Bitcoin went up a 2%, the strategy was going up much more than that. The strategy is now down 70%. Bitmine is experiencing similar pain given that nobody wants to own the underlying asset. Let's assume a bottom is coming soon for these strategies and these assets. Why gain exposure through a digital treasury company instead of simply owning the underlying asset?
Uh, well, of the digital asset treasuries , really only two have been successful. I mean, empirically, since October only two have actually been able to buy more crypto. Micro Strategy and Bitmine, both have bought over $2 billion . It's a business of scale. It's not a cottage industry. There shouldn't be 50 of these.
Yes. Okay. Now, Bitmine is still doing well because Ethereum, which is what it owns, generates revenue. Bitmine has close to $1 billion in cash, and the staking rewards on its Ethereum will be almost $400 million this year. I see. And they're making $40 million on their cash holdings. Okay . So which is a very profitable company.
Is it trading at a discount to the underlying asset, or not anymore? No, it's trading at a slight premium. I understand. But let's say you treat it as net income; it's like the 780th most profitable company in the US today. Have you analyzed the correlation between, say, the price of ETH and Bitmine, and found any logic—that is, if someone were to ask what percentage of the drop in the strategy or in Bitmine is due to the price movement of the underlying asset?
I'm sure it's a moving target, but it has to be almost all of it. Right. That's right. And there are two betas. Declina is asking because he's asking if those assets—not the stocks—if the coins stop going down and start going up, why would you buy the treasury version? You're going to make more money buying the treasury because the treasury has a beta against the drop due to the price of the underlying asset going down, but when the price recovers, you unlock the treasury's ability to raise more.
Money quickly. Okay. And Bitmine has what we call risky bets, you know, he made an investment in Beast Industries. He's one of Beast's biggest shareholders now. Which is... Do you like him personally? Did you get along ? Our corporate values are really aligned. Okay. Because, you know, he's highly ethical.
I understand. Kindness matters. He's a genius. He's the best. Obviously, I know I'm not. Yeah. There'll never be another Mr. Beast, maybe never, right? I mean, someone with a billion followers. He was a pioneer and amazing at what he did. Yeah. Okay. So, you're making investments like that that aren't directly correlated with the price of ETH, but they'll probably always trade alongside the price.
But that's how you create pathways to Ethereum, because, you know, Mr. Beast's audience is, well, he 's the most important person for Gen Alpha, Gen Z, and a lot of millennials. Those are the next wave of financial consumers, right? So, you know, Beast Financial is obviously going to be an effort Really successful, and what is he doing?
Well, they'll reveal it—they already have— they've revealed Beast Financial, but it's okay, I do n't want to share their plans. Last, last question. I know a lot of our audience isn't interested in crypto, so apologies to those listeners. Where does the money come from for you guys to keep buying ETH when the market keeps going down so much?
Uh, it's institutional buyers. So, Morgan Stanley, Arc Asset, Fidelity, they're big holders of Bitmine. What percentage of all the ETH do you own now? I know the goal was, uh, was it 5%? Yes. Uh, currently it's 3.52%. You're almost there. If you include the cash that hasn't been deployed, it's close to 4%.
So we're about 70% of the way there. Have you given any public guidance on when you think you'll reach that goal? And if you do, will you raise that goal or will you then say, "Alright, mission accomplished." Are we ETH's war chest? Uh, no, we haven't given any guidance. Okay. But it'll probably be sometime this year.
Something to keep in mind, at 5%, that's close to $500 million a year in net income. Wow. And if Ethereum recovers to its Bitcoin ratio back to its all- time high, that's close to 12,000 ETH . That's close to $2 billion a year in net income. So, that's no small thing. Yeah. Very good. Stock market. Look at this candle for the close.
Look at that bullish candle for SPY. Wow. Holy cow. Buyers, is that a hammer? I mean, dude, I kind of like it. Near an all-time high. They can't even pull it down for a day. It's a bull market. I don't know what else to tell you. You have, uh, Mark, you have Mark Newton in the house. We have him. Good.
So, what's he telling you about the technicals right now? He likes stocks, uh, short- term. Good. He's also in the same vein, that we're going to have something that will feel pretty bad sometime in the middle of this year. Well, no. What is "pretty bad"? Because there's always a correction. Like you said before, you're thinking bear market, you think we'll have a 20% drop?
Yes, it could be 20%, but from a higher level, right? So, let's say we're at 7,300. I mean, it could be 1,400 points, right? So 5,900 could be the low. That would be painful. I want to do one more. One more with you , without talking about specific stocks, but when people ask me about AI, everyone understands that it's going to be huge .
Companies are spending trillions of dollars. We all understand that. What's the next stage of the bull market? My answer has been robots. I've been pretty bullish on robots for the last 10 years. Um. Tesla announced last night that they're going to stop making the Model X and the Model S. I think the models that really The important ones now are the Model 3 and the Model Y.
That's what they're really going to focus on . And then the Cybercab, but the decision to stop making those cars is to focus entirely on autonomy, which is a fancy way of saying robotics. And he talks about the humanoid robot being available to the general public by 2027. Now, we know he's usually 5 to 10 years ahead of his time in his projections, but I guess that's part of his charm.
But it's quite remarkable that they're dropping two of their four main cars just to make robots and automated vehicles. What do you think of that as a signal? And do you think robots will be the next phase of the bull market, the way I see it? Robots could be huge, right? Not necessarily humanoid robots, but just the idea that autonomy is enough, right?
To be a new bull market that we're not even in yet. Yes, because robots are force multipliers. They make every human a superhuman or an unemployed person. But of course. Yes. A Unemployed superhuman. Yes. If robots pay taxes, then you win, right? Because you could start collecting taxes. At least the robot manufacturers will pay taxes.
Yes. Or, you know, the DoorDash robot pays taxes. But you don't have this within your themes . Is it too soon? We have the labor shortage as one of our investment themes. Because they will use robots to replace or to fill the gap. Yes, there is a structural shortage of working-age workers that will last for the next 10 years.
So there is a use case for robots. But I agree with you that it's a great advance that in the real world we have autonomous robots moving around, and that's very productive. It could create a lot of GDP , but remember, it could generate so much tax revenue that the US government wouldn't have to tax people anymore.
Maybe you wouldn't even have to work. Come on. So that's what no more taxes is. Yes. I think we could stop paying taxes because the robots are the ones that will be taxed. And then what? How do we... People might not even work then because there's so much surplus generated by robots . Robots pay taxes.
Yes. You tax their activity. It's micro-taxation. That's what it is, but you'd need a blockchain. You're living in the future, my friend. I love it. You 're not at all pessimistic, huh? About us being the animals, like, that we'll be the people the robots visit at the zoo. We're just sitting around.
You're not in any way pessimistic about the combination of AI and robotics. So, physical AI, like the number one occupation for men in America, the job title is driver. Um, this isn't about the future. This is right now. I understand it's for the greater good and it'll be cheaper , better for consumers.
Like the cost per mile. I totally agree. But I'm worried about the in-between period, once everyone gets used to it. And that could be, I don't know. Couldn't it last for decades? That's what we're seeing in software stocks right now . You're not at all pessimistic about the fact that we might need a pretty vicious economic downturn to get to the other side, because a lot of people will be laid off all at once.
I think the United States will certainly come out a winner, and so will China. Okay. So I think every American today will benefit from the surplus created by robots. Really? Yes. Okay. Um, but let me give you an example, like in 1935 before the advent of deep freezing. Okay. 30% of Americans worked on a farm.
Right. But what about food? You know, food spoilage in the supply chain meant that you produced a lot of food, but it would go bad, so it had to be there. It could n't go far. It couldn't go that far. And most of the grocery aisles were fresh produce. Yes. Um, in 20 years, deep freezing allowed food to go from 20% of the budget to 5%, and it took farm employment down from 30% to 5%.
So, if you were an economist in 1935 and you said that In the next 20 years, 90% of farming jobs will disappear because of this technology— that would have sounded terrifying. Yes. People were saying, "Oh, it's another depression," but instead, it led to a boom. It's a great Steinbeck novel, " East of Eden." I love that book.
And, uh, they're farmers, and toward the end of the book, they get into deep freezing and, in fact, refrigerated railcars; I think that's a major plot point there, because it happens in that era you're describing, it made me think about it. Yes. So that's like robots, because that's 25% of everyone worried about these adjustments between now and then, and people wandering around for five years before they feel the benefit of the surplus, because right now, Tom, a lot of the benefit from all this stuff seems to go to the top 50% of households; the bottom 50% have no capital.
Uh, and I just feel like it's the same thing, but on steroids. But maybe I'm being too forward. Maybe I'm being too pessimistic about it. I mean, social policy, yeah, it has to change. Um, okay. You know, I hope people get productive with their extra free time. I mean, maybe everyone has free time. I do n't think that's a good thing.
I think people have to do something. What are you going to do? Watch Judge Judy? People want to be needed. Yeah. We don't want people watching TV, do we? We want people to aspire to something, right? And then, if robots take that away, like Elon said—and I'm not sure if he was joking the way he said it, but he predicts massive civil unrest followed by massive prosperity—it's like, "Okay, well, can you estimate the timelines for this stuff?" Because maybe I'll be going on vacation for a few years." So that's the thing I'm thinking about.
And obviously, there's always a lot of paranoia about technological displacement. That's not new. But this time it just feels very visceral. Yeah. And we're at a time when the country is very divided as well, you know, but hey, we're seeing some good things, like organized religion is making a comeback.
And you know, I think guys like Jimmy Donaldson, who promote goodness and virtue, that's a good thing. Yeah, Mr. Beast. That's what I'd rather see people promoting, instead of division. But yeah, I'm kind of optimistic about how all this is going to play out. Well, one thing we all agree on: grannies are uniting.
What's happening with granny shots? How are we doing with that? Yeah, granny is doing well. Last year, granny outperformed the overall market by, I think, 700 basis points. And this year, it's outperforming it by 150. What does that portfolio composition look like this year versus Compared to the previous one?
Very different, or not so much? It is, it's different. There's, there's a greater inclination toward industrial materials, basic materials, and some commodity materials. Yes, commodity materials. Okay. Uh, the total assets of the three, now there are three grannies. There's the original grannie, and then there's the small- and mid- cap grannie, called Granny J.
Grn. What's that? That's the small-cap grannie. Small- and mid-cap. Yes . Okay. What are the main grannie's assets? It's 4.4 billion now in one year. Yes. That's crazy, man. And, uh, is that true? Did you break a record? I think in the first year. I think, I think up to 3 billion it was the fastest for an independent equity entity, not a big firm.
The last time you were here I think you were at 1 billion and we were like, " Come on, how in 3 months?" We doubted the grannie's power. I never doubt the grannie. So the total of the three is like 4.8 Now. That's incredible. And, wait, what 's the third one? Uh, the granny...Granny of what? No, the granny...International granny?
No, that, that's coming. Of course it is. But there's the income granny. Yes, we're going to give you a license. I gave you the whole suite. I introduced you to the whole thing. I want an equal weight granny, and I want her right now . Wait, what's the third granny? It's the income granny. So it's ...
Pay attention. You know, it would be great if you named them the real "Golden Girls." Just, just saying. I think we'd like that. Yes. So, okay, Tom. Well, we love your optimism, and, uh, we need it. We had Jeremy Grantham sitting in that seat last week . So, we need, we need a bit of pH balance. Yes.
A bit ...Have you ever met him? I had one, I had an informal chat with him once. Right. What, what are your impressions of him? Uh, well, he's very Wise. Yes. Very intelligent. Yes. He's really into... Wise is what they say. What you 're saying he is, is older. Yes. Yes. And he's very interested in extractive things, like forestry, fishing, and owning land.
I mean, that's prudent. Yes. True. Because those are things that have worked out well. But I disagreed, and this was probably back in 2012. I disagreed with his terrible outlook on stocks. Yes. Well, good call. One of the things Grantham doesn't talk about; Michael and I were talking about it shortly after we spoke with him.
He's probably given more money philanthropically to causes he cares about than anyone we've ever met . Well, that's for sure. He's one of the great philanthropists, and he's not the kind of guy who, before the podcast, says, " Hey guys, mention all my philanthropy." So we didn't get to that. And I actually feel like we should have .
He's an amazing, amazing gentleman. So, I'm glad to hear that You appreciated it too . Where can we send people if they want to subscribe to Funstrat, learn more about Granny Shots, what the best URLs are? Okay. If they're interested in getting our research, which is almost daily videos and notes, it 's fsinsight.com, like F for Funstrat.
fsinsight.com. Okay. What else? And if they want to learn about Granny Shots , the website is grannyshots.com. Okay. And we explain the process. We have weekly videos there explaining our holdings and how we own the shares. It's a very transparent product; we even talk about the weekly performance, good or bad.
Yes. And of course, if they're interested in learning about Bit Mine, I guess they can Google it. Great. I love what you do, and congratulations on all your success. Thanks for being with us. We love seeing you and would love to have you back sometime this year. Yes. This is my... first of all, you guys have the best conference.
Oh, thank you. You're... looking forward to Future Proof in Miami. I can't wait. Great. Wait, were you going to say something nicer ? Go on. Yes. No. Do you have anything nicer you want to say? Okay, you guys have a great podcast too because I like hearing your voices. I mean, I don't have to see you talk.
I can just listen. We appreciate it. And we'll see you again soon. Ladies and gentlemen, thank you so much for watching. Thank you for listening. And check out Fun Strat, Fun Strat, and Granny Shots. And remember, if you like the show and want to tell others and help the algorithm, give it a like. Maybe even a review would be nice, right, Duncan?
Reviews help. We love that. Why do reviews help? People don't get this. It just gives people details of why they might like the podcast, right? Is that all you've got for me? I mean, it's important. Do it. You did n't have a prepared monologue about the comments. Okay. Okay . Okay, we'll let this one slide. Very Okay, guys. See you next week. Thank you very much.
Comments 0