BEARS SURRENDER! Wall Street Pessimists FLIP BULLISH On Stocks

0:00Hello, everyone. One of the biggest pessimists on Wall Street. He just flipped bullish. Watch out. A housing expert is going to explain to us just how much your income needs to increase to make housing more affordable again. And one of the best traders alive, he's going to sit down with me and explain what he's seeing in the market right now that makes him so cautious. We're live today from the desk of Anthony Pompliano.

0:29Before we get into today's episode, I need your help. I'm trying to get to 1 million subscribers on YouTube, but we only have 25 ,366. I know every single one of you that subscribe. So go ahead, hit that button, and let's get into today's show. Now, ladies and gentlemen, Mark Spitznagel is one of my favorite investors in the entire world. He's notorious for running an investment strategy that intentionally loses money for very long periods of time. Yeah, that's right. Now, he hopes that a big market crash is right around the corner. That's why he loses money all the time. When the market crash materializes, Spitznagel and his firm make an insane amount of money.

1:03And I mean insane. Now, Spitznagel's Universal Investments runs a tail risk hedge fund. They got$20 billion in assets under management. To put the strategy in perspective, when most of Wall Street was freaking out back in April due to the tariff policies, Universal was busy booking a 100 % gain that month. 100 % in a single month. It's not bad, right? Now, Spitznagel is one of my favorite investors because his worldview balances daily pessimism in his portfolio. with a data-driven approach to long-term patience. Not many people can intentionally lose money every single day for long periods of time.

1:37Mark's written two great books on this perspective, The Dow of Capital and Safe Haven. I highly suggest that you read both of them. But you may be surprised to learn that Mark Spitznagel, the man who's betting on a market crash every day, is actually bullish on stocks right now. A little bit of a mind bender. In a recent interview with the Wall Street Journal, Spitznagel said that he expects stocks to surge much higher before there's any material market correction. It's good news, I guess. Spencer Jacob writes, the alarming part of Spitznagel's current outlook is that he sees conditions akin to 1929.

2:07That's the year of the big Wall Street crash. The silver lining for those hoping that the bull market music will keep playing for a while longer is that Spitznagel thinks that this is more like the early part of 1929 when stocks added significantly to their roaring 20 gains. Maybe that's good news. So the perma bear on Wall Street is actually bullish right now. Maybe that's a good sign for investors that are long. But potentially it's also a sign of the market top too. He finally capitulated. I'll let you decide what you interpret from that development. But Spitznagel's not alone in his recent optimism.

2:38Wisdom Tree's Jeff Winninger writes that the S &P 500 is up 15 % this year. The primary reason is that it occurred is because of the big scary tariff war that got overhyped. If you look at this like a bar tab receipt, You can see that your table ordered lobster, filet mignon, expensive wine, martinis, oysters, and more. But someone added a bowl of chicken noodle soup, that's the tariffs, and we were told that the soup was reason enough to panic out of stocks, send volatility to Lehman levels, send the S &P 500 reeling by the same order of magnitude as the COVID crash, and all the rest of the drama that happened.

3:11What an interesting year, Jeff says. Now, smart money is positioning themselves for stocks to go up too. Mike Zaccardi points out that U.S. margin debt is now at an all-time high. That's bullish, according to Mike. You want to see confirmation between stock prices and margin debt. It's a smart money indicator. But retail investors, they don't want to be left out of the party either. They had the highest weekly inflow into the market for all of 2025 just last week. That means retail is bullish as well. So what about the Federal Reserve? Well, they seem to want to throw gas on the fire too. Creative Planning's Charlie Belolo shows that the bond market is pricing in two more 25 basis point cuts this year and three more 25 basis point cuts next year.

3:51That would bring the Fed funds rate below 3%. After a brief hiatus, easy money is back, Charlie says. Easy money is back, Charlie. Everyone's bullish. Even the man constantly betting on a market crash is now bullish. Maybe you sitting at home can be the contrarian that times the top of the market. But my guess is things in motion will stay in motion. The market's going much higher. And the pessimists, they're going to be left crying. And those who understand to simply buy great assets and chill, they're going to be laughing all the way to the bank. Everyone knows that home affordability is a massive problem in the United States.

4:24People want to own a home and they can't. They literally can't afford it. Now, of course, people always focus on what some of the drivers of the problem are. We don't have enough regulation at the local level that empowers builders to build more supply. If you don't have enough supply, home prices end up being unaffordable. Also, the cost of capital is too high. Mortgage rates are through the roof. And so if people can't afford the mortgage payment, obviously homes become unaffordable as well. But one of the things I don't hear a lot of people talking about is what is the actual economic data that would need to change in order to actually hit affordability levels?

4:56Well, Lance Lambert, who's the founder of ResiClub, I think the best platform when it comes to understanding the residential real estate market. He recently had a tweet that goes through three important data points. The first is U.S. incomes. Lance says that U.S. incomes need to spike 60 % to return to pre-pandemic housing affordability levels. 60%. That's insane. Home prices would need to fall 38 % to return to that same affordability level, almost 40 % for home prices to fall. And mortgage rates, they got to fall more than 400 basis points from over 6.5 % down to under 2.3%. That would bring us back to pre-pandemic affordability levels as well.

5:34So here's the deal. I don't think incomes are going up 60 % anytime soon. I don't think home prices are falling 40%. And I don't think mortgage rates are going to fall 400 basis points. So ultimately, that data makes it seem even less like we are going to get back to affordable housing. Instead, we have to go back and focus, build more supply and get the federal interest rate to come down. Those two things are the gateway to affordable housing in America. And if we want people to be able to fulfill the American dream, which a part of is owning the home that they live in, then of course, we're going to have to address the issue, deregulate at the local level and start building more supply.

6:12I recently had the pleasure of sitting down with Tom Sosnov. I did it at the Independent Investor Summit. He's the founder of Tasty Trade. He previously built Thinkorswim. He sold multiple companies for a billion dollars. This guy's the real deal. As an entrepreneur, he's one of the best traders that you're ever going to come across. Tom sat down and gave me an entire state of the US economy and financial markets. What's he seeing? What's he thinking? And why is he a little bit more cautious than maybe other people that you're going to hear from? Here's my conversation with Tom Sosnoff. All right, Tom, the Trump economy.

6:44Everyone wants to talk about it. He had a lot of economic promises that he made on the campaign trail. So did his opponent. We only get to run one of the experiments, which is the Trump, because he's the one who won. Do you think that the economy is better or worse than what we expected, given the economic policies that he was talking about coming into office? Thanks for having me, first of all. So I get the fun questions. I like these. Based on the stock market, so far so good. Based on the job market, so far so bad. So I would say, you know, listen, if I'm ranking it, I'm saying at best three or four out of 10.

7:29But the stock market likes it. I mean, again, markets are very cyclical. So some of it has to do with him and some of it doesn't. When you look at the stock market in particular, and you go back to the 90s, the stock market has pretty much gone up under every single president except for Bush. Bush got hit with the GFC right at the end there. And you see the individual stocks that are going up are very concentrated, right? Everyone knows the MAG-7 story. We see the AI stocks doing well. how much of that do you think is driven by the government versus technology? And the reason I ask that is many people in the audience here are trying to figure out, okay, how do I think about my portfolio?

8:09How do I think about the assets that I buy? How much of it is government policy versus I should be understanding what the technology is and what's driving the innovation and growth there? Well, I'm an efficient market theorist. I guess you would categorize me as that. So I'm going to say that not that much is driven by the government and not that much is driven by what's happening in Washington. And most of it is driven by what's happening in the economy. I mean, we have a very powerful foundation to our economy and we have a giant pool of liquidity. And because of that, I think the government plays a pretty small role.

8:46Now, many people may not know this. You're one of the best traders in the world. You said that. I'm positive. That's true. you have Tasty Live, and you guys are marrying what I'll call kind of content and education and learning with trading. And I think that it has become a microcosm of what's happening in the broader economy, where many of the people in this room, they are not full-time investors. They have other jobs. They have other businesses that they run, but they're doing a lot of investing. What are some of the lessons that you've learned in, you guys technically do all the content, and you spend all the time on the other stuff, but you're still investing.

9:24Are there certain things that you would give as advice to many people in the room in terms of how to navigate their dual lives that they have right now? Yeah. I mean, I'm kind of a junkie, so it's hard for me to have – I'm not really – I don't have a good dual life. I don't have any balance. Junkies are understated, by the way. Yeah. But I look at my role in this industry. So I've been doing this 44 years now. And I started off as a market maker on the SIBO, and then I ended up building two brokerage firms, Thinkorswim and Tasty. And I look at my role as more of engagement than anything else. I try to get people involved, and I try to build tools that challenge them.

10:09So my whole life has been about, or the last 25 years, has just been about challenging people to take risk. Like, I don't even care what you do. I don't care how you do it. I don't care what strategy you use. I don't even care what product you use. Like I could care. I'm not playing for outliers. I'm not playing for, you know, I'm not trying to suggest anything. I'm just looking. I just want to get people involved in the game of taking risks so that everybody else here has a role. You know, like we're kind of, we bring the players to the table. And so I've always seen my role as one not to educate, but just to engage people, to excite them, and then to get them to learn how to take risk and to process things faster.

10:53When you say you created Thinkorswim, I think you sold it for what, a billion dollars? Just under a billion. Just under a billion dollars. And you turned around and you created Tasty. These brokerages have been a huge part of many people in this room, whether they use those brokerages or other brokerages, giving them direct access to the market without having to have a financial advisor or a stock broker. And when you started 40 years ago, that was not the case, right? There's been a significant change in the rise of the retail investor. How does that change financial markets, right? Like one of the things that I think a lot about is many people in this room are trying to find investments, but also the more individual investors in the market, the more the market changes, the more that asset prices and the way you value these companies, all this stuff is evolving because the market participants are changing.

11:40So what have you seen from your seat as you've watched this over four decades? Well, I have a lot of confidence in the consumer slash the retail investor, because what I've seen is that they take things very, they have this practical slash like actionable approach. And what they were missing, I should back it up for a second. There's also this massive demand on the street all over. It doesn't matter what country you're in, it doesn't matter what demographic, there's a massive demand for speculation and there's a massive demand for risk. The problem is there was never the technology to facilitate that and there was never the content.

12:21So the age of kind of digitizing everything allowed us to deliver content for virtually nothing. And when I say content, I mean content that can challenge you. So it's not CNBC or Bloomberg-like content where basically they're telling you what they think about the markets. This is content where they're essentially challenging you. Like, here is a strategy. Go try to apply it yourself. And so that's the real big difference. And what that's done is when we first built TOS, 8 % of the retail volume was derivatives. Now it's getting very close to 80. Nobody trades stocks anymore because stocks are too expensive and they're too capital inefficient.

13:04Everybody trades options, futures, options on futures, event-based contracts, whatever it is, anything else. Wait, back up for a second. 8 % with options. It's now close to 80%. With options, futures, and futures options. And then whatever other kind of derivatives there are, like, you know, I'll throw Bitcoin in there. I'll throw digital assets in there. I'll throw, you know, some of the spot markets, event-based, whatever. But yeah, when we at Tasty Trade right now, we are 95 % not stock. So we trade a little less than 3 % stock. Now, that is mirrored by like zero day options have become obviously very popular in the market.

13:46Is that a good development or a bad development in your opinion? Well, it's a great, anything that engages people, anything that gets you to participate. But like people say to me a lot, like, was the whole meme stock movement? Was that good or bad? And the answer is it was transformational, so it's good. Anything that brings people to the game, it's really good. Now, the whole zero DT thing, we actually created that. So we did that when we were at Thickerson. We presented the product to the SIBO, and then they took it and ran with it. Now, when you see people, you know, Eric Jackson was talking about Open Door.

14:24There's a bunch of these stocks now that have started to become very popular. One of the aspects I don't have an answer for, but I think it's very interesting as an investor, is you can invest on fundamentals or you can invest on momentum. And it's very easy to see momentum in social conversation now. You can see that people hate it. A lot more people tweeting about Opendoor, whatever it is. Sure. The companies that seem to be capitalizing on this, look at GameStop maybe, right? Ryan Cohen and those guys went from a company that, frankly, was very shorted for a good reason. They were able to short squeeze hedge funds.

14:57They now have something like$10 billion of capital on their balance sheet. And they have such a large position in treasuries plus the revenue that they drive. It's a profitable company, right? The mania actually saved the company. And so it feels like, in a way, retail investor engagement is now becoming such an important part of these businesses because it's helping them get out of bad situations. It's helping them capitalize their business. It's putting them in a very, very different position. How do you invest in a world where it's not just about, hey, let me put a stock screener up and try to find something that looks attractive.

15:31There's this whole other external component that is driving the value of these companies. So that's what I've spent the last 25 years doing is trying to get people not to think in terms of, oh, here's a stock that's trending up. Here's a stock that for whatever reason, you read a story in the Wall Street Journal about the CEO or something. I don't want people thinking that way. I want to take the fundamental and the technical side out of trading and out of investing because I think it's very misleading for people. I think what people need to understand is that there's a very sophisticated, very accurate, theoretical derivatives model out there, which means that there is literally an expected move to every single stock that has an underlying set of options.

16:15So what happens there is you can get a very good picture, like close to, and it's real, it's not like some made up probability of success. It's a real probability of success where you can, where you know what the expected move is higher or lower. So you can look at a stock, you used Opendoor as an example. You can look at a stock like Opendoor, which has explosive volatility, and you can say it's a$10 stock and it's got a, let's just say a$3 expected move higher or lower over the next 30 days. Now you can make kind of an informed decision of what strategy you want to use and how do you want to play the stock?

16:48Because now you have a kind of, you're living inside of that one standard deviation curve and you have a 70 % chance of being right if you want to play a certain direction. Now you said a$3 move. Well, it's just giving context. That's all it is. Yeah. But how would you determine the$3 move is the range? You don't determine it. The option marketplace determines it. So there's this massive amount of money out there that is, that's set by all the high-frequency trading firms that essentially sets the implied volatility, which equals the expected move. So what we're trying to do is to get people to just recognize that, hey, when you look at your screen and you open up your platform, you actually have more information in front of you than most professionals have.

17:32Because professionals will look at the screen and some institutional investor will go, oh, you know, XYZ stocks trading for$20, I think it's going to 100. But that's idiotic. because XYZ is trading for 20. And the reality is there's a 70 % chance it's going to 22. And that's the real way to look at investing, trading, life, everything like that. So we take the entire industry and look at it probabilistically, look at it quantitatively. And what we found is that individual investors appreciate a probabilistic quantitative approach and a mathematical approach more than they want a subjective fundamental approach.

18:11How frothy do you think the stock market is right now? Very. Really? Like big crash on the horizon frothy? Bull markets make geniuses out of a lot of really dumb people. True, true. We have a record number of dumb people right now that think they're geniuses. I'm very nervous about the stock market. I can't find a single sector commodity or underlying or country even at this point or currency. so so i've told you this before i i trade every product i don't care what it is stock options futures everything remember the junkie comment and so i can't find anything i think is cheap and i'll throw digital assets in there as well throw everything in there nothing is cheap right now so that's kind of my definition of frothy and do you look at things like uh inflation and debasement and stuff like that and just say hey look actually maybe everything is just resetting higher?

19:07No, I don't look at any of that stuff. I'm not a fundamental player. I do think about things like, I mean, I've thought for the last six months that bonds were cheap relative to stocks, but they've just made up that difference in the last couple of weeks. So now they're probably pretty fairly priced. And do you think the bonds still have relevancy at all? The bond market has less relevancy than it has in the past. And I think some of your previous guests and speakers were saying virtually the same thing. The bond market has lost some of its relevancy over the last 10 or 15 years, pretty much since 2008.

19:45But at this point now, it's probably priced right for the first time. People focus way too much on what the Fed is going to do. They should just focus on bond prices. And that's something else we do. Once you understand how the bond market works, see, most retail traders read about bonds and they read about the Fed and most institutional traders do that, but nobody actually trades the yield curve. So what we do is we teach individual investors how to trade the yield curve. And we trade things like yield curve, bonds, notes, twos, fives, tens, twenties, thirties, I don't even care, whatever it is.

20:19And so I think that's really valuable because then it gets people to really understand how the economy works, how bonds work. Yeah. One of the things everyone cares about with bonds is obviously interest rates. There's been a lot of conversation about interest rates in the media, if we do get an interest rate cut in September, whether it's 25, 50 basis points, do you think asset prices respond and go higher? And so this frothy market we have becomes ultra frothy and it's all driven by the Fed? Or is there some other way to analyze this? No, I think the bond market drives the Fed decision. And the Fed had a very difficult time over the last couple of months because basically the bonds were trading in that 113 to 115 range.

21:03And the 10 years were trading in the 110 to 111 range. And the Fed had no choice. They could not lower rates. When bonds rallied in the last couple of weeks up to, they traded 118 yesterday and the notes traded over 113, almost 114. When you get to those levels, it makes the Fed decision really easy. So the Fed can't do what the bond market's not allowing it to do. Now the bond market's allowing the Fed to do whatever they want. So for the next rate cut, whenever that comes, whether it's 25 or 50 basis points, now they can do it because the bond market has priced it in. Now, while the financial world is kind of figuring out what they're going to do and what's going to happen in the geopolitical world, in the American social kind of dynamic, there's been a lot of things that have happened over the last two or three weeks.

21:52We've got Russia, China, and India. I've got videos and photos of them all hanging out, looking pretty chummy. We've obviously got the woman on the train in Charlotte. We've got Charlie Kirk, who was killed this week. It just feels like because of our access to information, there's an acceleration of things are changing. Do you buy into that or do you think that, no, literally it's just we have more information and nothing is different than it was in the past? I buy into parts of it. I think the whole concept of America first and being an isolationist kind of mentality in a world that's clearly going to be globalized over the next 5, 10, 15, 20 years, if you're not playing certain games, like if you're not tokenizing, if you're not digitizing, and if you're not globalizing, you're just being stupid.

22:46You're missing the bigger picture. So I do worry that America is making some very bad strategic decisions with respect to globalization. I do feel like our trade policies are dangerously bad approach. And so I worry about that stuff. But at this point, the stock market hasn't agreed. And the other thing that you can watch, which we watch closely, are the different fear indexes. And at this point, the fear indexes are just not triggering anything. So there's all these red flags, like you mentioned, what's going on in the rest of the world, what's happening, what kind of divisiveness is out there socially, politically, whatever else.

23:27But the reality is those are all red flags. But the fear indexes, which are tradable, are not suggesting the same thing right now. Yeah. One of the aspects I'd love to get your opinion on is these prediction markets. I'm pretty bullish on these. I think they're pretty interesting developments. developments. They're event-based contracts, right? Have you guys done anything there? Are you thinking about these? How do you see this playing out? We actually built our own exchange. So yeah, we have gone down that route. The challenge with prediction markets is very similar to sports betting. I'll give you the simple numbers.

23:59If you think about sports betting, the markup on sports betting is like, let's say five or 10%, right? So if you bet$100 ,000, you're paying five or 10 ,000 in big, whatever you're going to do. It's way too much. It's impossible to be successful. So then you get to event-based markets. And right now, the event-based markets are trading at 1%. So you bet$100 ,000, you're paying$1 ,000 in fees. If you buy or sell $100 ,000 worth of Apple, you're paying$1. So you have Apple with$1 in fees, which make it an incredibly good market. So whether you want to trade Apple, NVIDIA, Palantir, whatever you want to do, you're paying basically$1 in fees to trade$100 ,000 worth.

24:40In the event-based market, you're paying a thousand. So the negative drag from the event-based contracts is really not good until they tighten those markets, meaning until, you know, until those markets get high-frequency, until the high-frequency market-making firms get in there and crush those markets. I don't like the space, but I think it's necessary. And I think it's good for the future because anything that broadens the product base for retail investors is great. But, you know, all these markets have to get tighter. The thousand dollar fee in that example, Is that coming because the exchanges are setting the fee or that's the spread between?

25:15No, that's what these, there's not enough competition yet for event-based markets. When the CME launches their event-based market and other listed exchanges do, then those markets will get crushed. Got it. So you think it's more of just get the big boys who are high frequency traders in. Once they come in, they'll tighten those spreads and it'll make it much more attractive. It's always like that. Just the same thing happened in digital assets. In order to get the markets tight, you needed big firms to come in and make markets. You need really a listed, central, cleared, all that other stuff. Right now, the event-based exchanges like, you know, Calci and PolyMarkets, I mean, they're great from an innovation standpoint, but they're small-time crooks.