Almost Midnight, Micron Preview, Alan Greenspan RIP, Hello Jane Street, the Case for Meta

13:01Michael Batnick:The average stock is about 30 % above its 200-day moving average with SanDisk, Micro on a Western Digit, the most extended. Obviously, Intuit, all the way on the bottom, most extended to the downside. but this dispersion that we're seeing in tech is really something else.

13:17Downtown Josh Brown:Just the range of outcomes for tech stocks versus other, I guess, I don't know. I guess like healthcare seems like sort of an extreme range of outcomes for those stocks. Go back, throw that back.

13:31Michael Batnick:Healthcare does, not surprisingly, utilities are very tight. Industrials are wide. Energy is very tight. They all move together.

13:38Downtown Josh Brown:It's a cool visualization. I like it.

13:40Michael Batnick:Industrials are wide because stocks like G.E. Vinova, I'm guessing, is an industrial. There's a whole AI trade in there and AI winners and AI losers, but this is a great chart.

13:50Downtown Josh Brown:Riley in the chat is saying RSP is green today. Not by much. No, it wasn't. Was it? It wasn't? No. It was down 34 basis points,

13:59Michael Batnick:but whatever.

13:59Downtown Josh Brown:I did notice a lot of stocks green and the tape blood red all throughout the course of the day. And - Staples, healthcare, the boring shit was green. And Microsoft was - The financials rallied today. Almost all the insurance companies, almost all the banks that I follow, the financials were green. And they were not dragged down by this.

14:23Michael Batnick:Asset management was blood red. BlackRock down 3.5%. Goldman down a percent. But insurance, bright green. Regional banks, bright green insurance companies, all the way green. what's so interesting about 2026 is it's so binary it's either ai up software killed or ai breather or in this case ai killed software bright green so nvidia down four uh broadcom down three we already spoke about you know the other chip names um but service now up three percent salesforce up two percent now granted these names have gotten absolutely uh battered so a two percent It doesn't really mean anything, but it's binary.

15:03Downtown Josh Brown:It's one day a week, opposite day, where they crush the SanDisk micron component of the market and ServiceNow catches a bid. But the thing is, if you zoom out and look at the year-to-date chart, you'll realize these temporary reprieves where they rally the software stocks or the home builder stocks. It's short-lived. They're not making any forward progress at all. Correct. The software stocks I own, they've stopped going down, but they're definitely not going up. And they're just – they're like in this stasis and it's not helping anybody.

15:39Michael Batnick:So I'm not suggesting this by any stretch of the imagination. But people have been asking if I'm worried about AI because it's 40 % of the S &P and it's whatever percent of the Q is like, where do I go? Do I go to Europe? Yeah, there's not really a lot of AI there. Do I go to like low vol stocks here, like staples, whatever? They're not really exposed to AI. If AI is really going to peak, then maybe software is a good hedge. But it would have to go a lot lower.

16:04Downtown Josh Brown:Be very selective in software. I'd stay with cybersecurity and very little else. I don't trust anything.

16:15Downtown Josh Brown:Microsoft rallied today. Some of the Mac 7 stocks caught a bid today. They've been just obliterated in the last week or two. Microsoft looks – I mean it's the biggest software stock in the world. It's not really a surprise, but it looks so bad. They're beating up Goldman Sachs. They're beating up Alphabet now. Why?

16:36Michael Batnick:Because one of their head guys left? I mean that's the excuse. I don't know. That's really nice. I don't know.

16:42Downtown Josh Brown:All right. Let's keep moving. It's almost midnight. Do you know that, Michael? What clock are we looking at? I know your analogy with the clock that has no hands and everyone's trying to know like what time is it? What time is it?

16:59Michael Batnick:That's not mine. That's Adam Smith. By the way, it's probably midnight in Korea.

17:03Downtown Josh Brown:Yeah, right now. Yuri and Tim are at Fidelity shows us the US earnings clock. I thought this was a really cool visual. It takes a second.

17:13Michael Batnick:What in the world? No, no, no.

17:15Downtown Josh Brown:Just give me like five seconds and I'll walk you through it. It's not that complicated. It just looks crazy. This is Urien. The U.S. earnings clock continues to advance in the sweet spot quadrant, which is 9 p.m. to midnight, boosted by favorable financial conditions. Today looks quite a bit like 2021 and even 2017, 2018. So look at this clock as like four slices of pizza. And those are the four quadrants. and the 9 p.m. to midnight is exactly where it would be on a traditional clock. And in that quadrant, financial conditions are loose and earnings are growing. Okay, I like that. You like that?

18:01Downtown Josh Brown:Yeah. When the clock strikes 12, it doesn't mean the party's over, but you're in a new quadrant and that's where financial conditions start to tighten even as earnings continue higher. And that's a tricky moment because if you're just looking at the company's earnings and you're listening to the management commentary, all appears to be well. But the thing that's happening behind the scenes or in the background is threatening future earnings growth because financial conditions start to tighten. And then ultimately, you dip into the next realm, which is financial conditions are tight and earnings are down.

18:45Downtown Josh Brown:And that is the worst quadrant on the clock. And that's the 2020 to 2022 example, as you could see, he's illustrated. So that's just one part of what I wanted to show you. Urien continues, the secular wave is alive and well, but getting on in age, per the chart below. Hold it for a sec, guys. Hold it for a sec. For the S &P 500, the 10-year price CAGR, cumulative annual growth rate, is 13.7%. And the income, which is dividends and buybacks, is 3.9%. That means the share of income of the total return is only 25%. So in other words, that 13.7 % growth rate for the market, only a quarter of it is coming from the traditional activities of dividends and buybacks.

19:39Downtown Josh Brown:Now let's put that up. And this is why that could be, it's not problematic definitively. It's that ultimately that becomes a constraint on further upside. Does that make sense? And you could see here, he goes back to the year 1900 and you could see that when we get to this period of time where equity returns far outpace the portion that's coming from dividends and in recent history buybacks, we get stretched to a limit and then there's a snap back to reality. Before I move on, Michael, do you understand what he's showing in this chart? Yes. Does it have any resonance with you or not really? No.

20:24Michael Batnick:Why not? I love Yerian's work and I'm sure he mentioned this in the piece. You have to show the earnings. The reason why we're up 13.7 % on a compounded annual growth over the last 10 years is because earnings are basically driving all of that.

20:40Downtown Josh Brown:I think he's making that point with the clock. Earnings are growing. This is the sweet spot. We're in it right now. He would agree with that. Next chart. so that that that stretch that i'm talking about he goes on to say that's in line with past mature secular bull markets i don't think we're at the end yet but between this statistic the new equity supply boom and the cannibalization of buybacks from capex for me it seems like we're getting close to the final innings. This plateau chart that you guys are looking at, again, the black line on top, you're talking about the growth rate itself and what you're seeing on the bottom, that 10-year income as a percentage of the 10-year cumulative annual growth rate.

21:37Michael Batnick:I don't know. This is pretty noisy to me.

21:38Downtown Josh Brown:It's just another way of saying like we're – I hate long in the tooth. I don't use that phrase personally. But if you think financial conditions tightening potentially threaten the earnings outlook, earnings growth outlook, I should say, we could still continue to see great earnings growth, but see the conditions in the background make it harder for that to last longer.

22:04Michael Batnick:Well, that's the clock. That makes a lot of sense. We had a new high, new all-time high um in the ratio of levered long AUM to inverse leverage AUM at 16 times so i don't know what time it is for these people at this party but they're drunk and they got to go home this is four in the morning shit so next chart look at this this is the daily trading volume of 70 conductor etfs yeah this thing could use a breather i don't like i don't you know i'm I'm not rooting for anybody to lose money, but we need to sober up a little bit.

22:41Downtown Josh Brown:It's just dumb. What is this? Is this people doing derivative trades based on - This is the daily trading volume of levered ETFs. But what I'm trying to figure out from you, maybe you don't know, is this like they're day trading them or they're using them to hedge positions?

23:04Michael Batnick:They're doing what they do.

23:07Downtown Josh Brown:What do they do? They're trying to make money. What is the meaning of that level of activity? Dude, listen.

23:12Michael Batnick:The reality is these people have made a shitload of money. Great for them.

23:16Downtown Josh Brown:What do you mean these people?

23:18Michael Batnick:All right. Great for them. Great for them. But it can't last forever. All right. Let's talk about prediction markets. So before we do that, you don't think it's almost midnight? Do I think the bull market is almost over? No. Do I think it's closer to midnight than what would be the opposite of midnight? What's the opposite of midnight?

23:44Downtown Josh Brown:6 a.m.? Yeah.

23:46Michael Batnick:Yeah, sure. We're closer. You know, the clock has passed 6 p.m. I would say that. What time is it? 8.30.

23:55Downtown Josh Brown:Okay. I'm going to say 10.30.

23:59Michael Batnick:When is it going to be midnight?

24:01Downtown Josh Brown:No.

24:04Michael Batnick:Okay. Pass. Charles Schwab is wading into the prediction markets. This is from the Wall Street Journal. The brokerage is working with SIBO to roll out all or nothing options contracts that allow customers to place yes or no wagers on the performance of the S &P 500. According to people familiar with the matter, I don't know who those people are, but we were on stage with Rick Worcester, the CEO of Schwab, back in March. Wait. Did he lie to us? No. No, he didn't lie to us. Here's what he said. OK. I pulled the quote. So I think as we think about those three parts of prediction markets, information I think is relevant and we'll make available.

24:41Michael Batnick:Financial predictions at some point we may do. So he said it. And sports we really want to stay away from because our entire mission of our company, the reason all 33 ,000 people get out of bed every day is to make people better off in their financial life. So he didn't lie to us. He literally said, he said, I think it's relevant and we'll make available.

25:02Downtown Josh Brown:Yeah.

25:03Michael Batnick:So I'm dying to hear what my problem is, please.

25:10Downtown Josh Brown:Well, you're too young.

25:15Downtown Josh Brown:So Josh wrote in the doc, read what you wrote. Oh, I'll tell you what your problem is. You haven't figured it out yet. The cosmic joke of being over 40. I don't really know where I was going with this. This reminded me of the scene of The Departed. You know what your finalist problem was? So this is what your problem is. It's not your fault. It's not your fault. It's not your fault. You're extremely experienced by most measures in every way except for you haven't been around long enough to have seen enough, to have arrived at the point that I'm about to make. And everybody who's watching, chatting it up, I hope you're enjoying yourselves.

25:58Downtown Josh Brown:I want you to take a two-second break from typing and listen to me. And if you're driving, pull over. The cosmic joke is that the more I hate something, the more I know it's definitely going to happen. And you have not yet arrived at this point because you're fresh on the scene, fresh-faced, youthful, enthusiastic. You haven't gotten to where I've gotten, which is when I hear something like, for example, tokenizing stocks so they could trade 24 hours a day. I say, this is what I say, that is the worst f***ing idea I've ever heard. I guarantee they're going to do it. And sure enough, like, so we interviewed the CEO of Schwab about prediction markets.

26:50Downtown Josh Brown:I didn't need to hear his answer because I hate this so much that I already knew he was going to do it. And so this is what I want people to retain. If you hear something, some innovation, and it gives you a physical feeling of revulsion, like you're just disgusted by it, it's almost guaranteed it's going to happen. Almost guaranteed. I don't like what they did to professional sports with the gambling I don't like what they did to college athletics with the name image likeness I understand the reasons behind it no hate for the kids that are finally getting paid I get that too I don't think we need 24-7 trading we didn't need any of this crypto shit none of it has solved a single problem in our economy or world or society and no I'm not a fucking Venezuelan refugee so no it doesn't touch me in any way and I don't like this either.

27:52Downtown Josh Brown:I really don't think people need to be making yes, no bets in brokerage accounts and that's how I knew it was going to happen and Fidelity will do it and SoFi will do it and every other Me Too firm up and down Wall Street, every venture backed, FinTech, WizKid, they're all going to do it and most people will not be better off as a result but they'll do it anyway and I knew they would do it because I hate it. And that's what your problem is.

28:23Michael Batnick:Okay.

28:24Downtown Josh Brown:Do you disagree with any of it? No. I mean, it's true. You just haven't arrived there yet. But you know what's going to happen? You're going to age. Time's going to go by. You're going to get older. And one day you're going to say to me, this is the worst idea I've ever heard. Guarantee it happens. And then on that day, I'm going to say, young Michael, you've graduated. Okay. you're in the club now you're in the club now you understand the cosmic joke now you understand it's it's this is just like the way of the world okay and uh you haven't gotten there yet oh shit Alphabet

29:04Michael Batnick:Alphabet is replacing Verizon and the Dow

29:09Downtown Josh Brown:that hasn't happened yet how about that don't you feel like that shit happened 10 years ago

29:14Michael Batnick:yeah What were they waiting for? So Alphabet's stock is$350. So where does that place it? You know what my go-to for Dow Jones holdings is? It's CNBC. CNBC has a great Dow 30 link. So let me sort by price. So Apple will be the 10th, like the 8th. No, I'm sorry. I'm sorry. Oh, shit. One, two, three, four. It'll be the fifth biggest stock in the Dow.

29:42Downtown Josh Brown:They weren't asked to split. No, no. It's$350. It's a$350 stock. I guess they don't have to.

29:46Michael Batnick:Goldman and Caterpillar, by far the biggest. They're both$1 ,000. Then UnitedHealth is$400. Then Microsoft,$370. And then it'll be Google,$350. How is Nike still in the Dow? So the Dow is like the Mag 7 with a couple of gas stations? So the Dow just became the Nasdaq 100 because Verizon, dude, Verizon is$46 a share. See ya. So they replaced the second smallest stock in the Dow with now the fifth largest. Okay.

30:17Downtown Josh Brown:What stock can't get kicked out of the Dow?

30:20Michael Batnick:Disney.

30:21Downtown Josh Brown:I have a good answer for this. No, Disney could in a heartbeat. Could? Yeah, totally. Totally. It might. All right. It actually might.

30:28Michael Batnick:So shower your wisdom upon us, old crusty one.

30:34Downtown Josh Brown:I'm not crusty. Nor am I old. I'm very youthful. I'm very youthful. But what I was getting off my chest was not an age-related thing.

30:41Michael Batnick:All right. What can't they kick out?

30:43Downtown Josh Brown:It was age-related. There's one company in there that's the only company that does what they do. McDonald's? Just tell it. What is it? You want to be serious? Go! Boeing. You cannot say that we're not going to have airplane, like literally airplanes in the Dow Jones.

31:07Michael Batnick:That was a very, very, very underwhelming reveal. Let's get back to the matter. But there's no other Boeing. Who gives a shit? What is that the criteria? There's only, you need an airplane's in there?

31:18Downtown Josh Brown:Yeah, you do because it's an industrial average. And this is like arguably one of the most important industrial segments of the economy. So if you're going to keep calling it an industrial average, do you need an airplane manufacturer? And there's really only one.

31:32Michael Batnick:Well, by Josh Brown's rules, if you hate it, you know it's coming out. All right. It's coming out. I can't wait. I cannot wait. Get it out.

31:42Downtown Josh Brown:They could kick Disney out.

31:44Michael Batnick:Yeah, they could. Okay. All right. So back to the matter of hand. So have you seen the exchange stocks? Look at these.

31:52Downtown Josh Brown:They're crashing.

31:53Michael Batnick:Look at these. We're looking at SIBO, CMA.

31:58Downtown Josh Brown:Can I ask you, is this perpetual futures spooking the investors in these stocks? Quite literally. I think this doesn't make any sense in the world.

32:06Michael Batnick:and people people are saying it's the perps no literally they were saying it wouldn't happen so this this article is now this article is two weeks old um the cftc last week approved perpetual futures a type of future style contract with no expiration date for bitcoin trading on calci um investors are worried that the cftc could give the green light to other asset classes and of course they will so cme uh had its biggest weekly drop since 2020 cbo plunged more than eight percent. Biggest weekly drop since 2020. Barclays analyst said the concern is that perps could come to equity products and potentially displace CME, SIBO, S &P products.

32:45Michael Batnick:I don't know, man. This seems so overdone. This seems so overdone. Can you put that chart back up? I want to buy CME.

32:53Downtown Josh Brown:Which? This is what I want to hear from you. CME is the one?

32:57Michael Batnick:Yeah. This is the king. uh teranova just bought sebo he said today on tv whatever that works too um this makes no sense what about okay why is nasdaq down i i don't think nasdaq has as much to do with this i just put it on there um but look at like you know look at ice jeez ice owns you know what this is for me

33:20Downtown Josh Brown:this is the case for stop losses. If you are like riding a trending stock, this is why you would use a stop loss because you couldn't have imagined perpetual futures being the spark that creates this fire. Like there's no way to know in advance. So just let price tell you that people's sentiment around the stock is changing and the uptrend is over. That's the case for a trailing stop.

33:50Michael Batnick:In hindsight, and it's always easier in hindsight, the Ice stock looks like a really great rounding top.

33:58Downtown Josh Brown:I'm not buying any of these. I like the brokerages better. Interactive Brokers made a record high today. IBKR. It's going to break 100. I bought Robinhood last week. It looks great. I like the Brokers better than the exchanges right now.

34:17Michael Batnick:Um, yeah, I, I, I, I got it. Um, but I, I, I think I'm gonna buy one of this. Um, all right, let's do, uh, let's do Jane Street. I go ahead. What do you have to say about this?

34:31Downtown Josh Brown:It's interesting. It's interesting. So, uh, Greg Zuckerman wrote this and Greg, um, has written books, articles about the most interesting, uh, firms in the history of wall street. notably we had him on our show he did a book about renaissance technologies and um that's one of our

34:53Michael Batnick:most watched episodes we've ever done that was so i think a million people watched it

34:58Downtown Josh Brown:did i make that up i think it's something insane like that i'm looking now whatever keep going all right anyway greg has a really big piece at the wall street journal and i want to just spotlight it and make sure people didn't miss it. I'm going to give you the opening. Mystery has long shrouded Jane Street, the Wall Street trading giant. Its traders rely on proprietary algorithms, making it hard to understand how the firm generates its profits, privately owned, only trades with its own money, so its moves are difficult to track. It's also an unusually flat organization, no leader at its helm to speak on business television or serve as its public face.

35:42Downtown Josh Brown:The purpose of the article was to say, this is now a company that started 26 years ago, that's got 3 ,500 employees. They are trying to recruit 500 more employees this year. And the reason they're talking to the media for the first time in 26 years and actually revealing their own existence is that they're worried if they don't, the caliber of AI engineers that they want to hire won't want to go there. They won't think that this firm has the compute

36:20Michael Batnick:or the capital to afford. Isn't that a fascinating thing? So sick. So that was the takeaway of the article. By the way, the Greg Zuckerman video, that was six years ago and he had 340 ,000 views.

36:32Downtown Josh Brown:So that was big. So they, in April, announced a deal to invest a billion dollars in CoreWeave and spend$6 billion on CoreWeave's AI cloud platform. After inking the transaction, the firm asked CoreWeave to publicize the deal in a press release. And the CoreWeave guy, the co-founder who's quoted here is like, wait, what? Yeah. And so it turns out they, like many other successful firms, are in this rat race for talent. And they want like AI engineers to know that that's like a legit place to go. They have a stake in Anthropic that they bought from the bankrupt estate of FTX. They bought Sam Bankman Freed's stake in Anthropic in 2024.

37:29Downtown Josh Brown:Their private company portfolio is worth$20 billion. And this is the last thing I'll say on this. I don't think people understand. We talk about successful firm. In Q1 of this year, Jane Street earned$10.3 billion on$16 billion in trading revenue.

37:48Michael Batnick:Yeah, it's like NVIDIA margins.

37:49Downtown Josh Brown:It's insanity.

37:50Michael Batnick:So it earned more than Morgan and Goldman combined or just about? What?

37:56Downtown Josh Brown:Morgan Stanley and Goldman Sachs each earned$5.6 billion in the quarter. Unreal. Those firms have 130 ,000 employees. Jane Street has, I told you, what did I say, 2 ,500? 3 ,500. Unbelievable. So the point is, the only reason we know about that profitability is, and we talked about this on the show before, Jane Street has bonds that are publicly traded. And so they have to put these filings out here. But just think about a firm that conceivably could have$20 billion in profit. Nobody knows of anyone who works there. There's no ticker. It's not public. There are no outside shareholders. The whole thing is internally managed.

38:34Downtown Josh Brown:It's probably the most impressive firm on or off Wall Street working in finance today. I would say right at this moment. I know people will say Susquehanna or people will say Millennium maybe or Citadel. I really think on a profitability basis, it's got to be this. And it's a wild story. So I wanted to make sure people caught that article at Wall Street Journal. It was very good.

39:00Michael Batnick:All right. Let's talk about the MAG-7 breakdown. So these charts are available for advisors at Exhibit A, the next two that we're about to show. And they are unbelievable. If somebody were to tell you that this would have happened at the beginning of the year, you would say like, Wait, how? I don't understand. We did predict this. Did we? I don't remember predicting it. We predict a lot of things. So maybe we did. Chart on. So this is showing the S &P 500 at the start of the year was 68.46. Today, it's 74.73. And 628 points of the S &P were contributed by the 493. The MAG7, as a group, collectively, have taken points off of the S &P.

39:46Downtown Josh Brown:We said that, Michael, we did a whole segment. If you had to bet, would you rather have the Mag 7 this year or the 493? Dude, I've been saying this. Are you kidding me? I've been saying this all year. But I think we concluded you'd rather have the 493 because they're the AI users. And this was going to be the year where we don't want to invest in the company spending all the money. We want to invest in the customers who are now seeing the earnings growth as beneficiaries of the AI technology. We did a whole thing on this. I'm not hallucinating it.

40:20Michael Batnick:I also said software over semis. So I should be in the permanent penalty box for that one. But anyway, be that as it may. Be that as it may. Next chart.

40:27Downtown Josh Brown:I've said worse. I'm longing Netflix with an average cost in the 90s. It looks like it's going to zero. I'm pretty sure it is. All right. Don't feel bad.

40:37Michael Batnick:But the gap is widening. The 493 are up 14, nearly 15 % this year with the max of a flat. It's getting more extreme, which is amazing. And what's happening, it makes sense. You don't have to like scratch your head like, oh, it doesn't. It makes perfect sense. The AI stocks, they're being re-rated or de-rated, as Sherwood says.

40:57Downtown Josh Brown:But be specific, not the AI stocks, the hyperscalers. OK.

41:01Michael Batnick:So the average forward PE, that's right. The average forward PE for Meta, Amazon, Google, and Microsoft is near a multi-year low. So the average forward PE collectively at the peak was 29 times. It's now 21 times forward. And the reason why is because their free cash flow is disappearing because they're spending all their money on CapEx and R &D. So look at the chart from Samba. Listen, team. Right now, and Meta is the worst performer of the bunch. Is this new? This is from his new piece? Yeah, this is from today. Did you read it already? I watched the video. Okay. So Meta is expected to spend basically 90 % of their revenue, not their free cash flow, of their revenue.

41:45Michael Batnick:And guess what the market is saying? Uh-uh. Don't like this. Next chart from Tracy via, who made this? Nomura, hyperscaler free cash flow projections. Holy shit balls.

42:01Downtown Josh Brown:The red is everybody's free cash flow?

42:03Michael Batnick:That's Amazon, Microsoft, Google, Meta, and Oracle. So the fact that these are being derated, duh. I mean, of course they are. The market's not dumb. Yeah.

42:14Downtown Josh Brown:Blake Fisher in the chat is saying this is just business as usual for Amazon. He's right. Like they kind of – Amazon has been playing this game since they came public.

42:25Michael Batnick:That's true. That is true. All right.

42:27Downtown Josh Brown:We're not as accustomed to this with Alphabet. And now they're selling stock and they're selling bonds. and they're diluting, and it's gone further than we thought it would.

42:40Michael Batnick:So here's a chart that we shared in January from ChartKid. And I definitely remember saying, hey, man, I think the small cap, large cap ratio, I really think it might have bottomed this time. Here we go. So the red dot is when we first showed these charts. The top pin is the mag 7 divided by the 493. And we said, wait a minute, this looks a little bit different. And the inverse of that was small caps divided by large caps. And they've both continued. So they went sideways since we published that, but they're breaking out today. The small cap, large cap ratio is breaking out in a serious, serious way.

43:13Michael Batnick:And Max Evans relative to the 493 are breaking out.

43:16Downtown Josh Brown:It never lasts.

43:17Michael Batnick:Oh, okay.

43:18Downtown Josh Brown:It never lasts. Enjoy it. I'm enjoying it. I own stocks that are going up while Meta and Microsoft go down. I'm very happy. History suggests you'll get three to six months of this small cap renaissance. History doesn't suggest shit. Some shit will happen with interest rates and they'll whack those small caps right back down to earth.

43:43Michael Batnick:We'll see. Maybe.

43:45Downtown Josh Brown:Do you have a strong point of view about the upcoming Russell rebalance? You're going to see some of the biggest winners in the Russell get pulled out of it. Micron is a really obvious example, but there are others. Is a lot of this small cap comeback relative to large cap, just miscategorized securities that are about to be rebalanced out at the end of the month? Micron? Yeah. It's very strangely not in the Russell large cap universe.

44:21Michael Batnick:No, that's not true.

44:23Downtown Josh Brown:What do you mean?

44:24Michael Batnick:Dude, it's like a trillion dollar market cap. Of course it is.

44:26Downtown Josh Brown:Yeah, now it is. What do you think it was last year this time when they were categorizing.

44:31Michael Batnick:You don't think Micron's in the Russell 1000? I'm positive it is. One million percent positive.

44:38Downtown Josh Brown:They're going into it. They're being added to the Russell 1000. No way. Wait, why? Are you sure about that? 100 % sure. 100 % sure. I feel like it's once a year and it's the end of June. No, it's not in the most 2000. No way. Stop. I think it's in – not only do I think that, I also think it's in the value index. No, Josh, chill. Stop. Micron is the biggest stock in the Ross 1000 value index. That's okay. That's what I meant. Not in the small cap index. Okay. All right. Well, let me ask you this question. Let me ask you this question. what would it take for the year to end and see mega cap versus small cap continue along this trend?

45:34Downtown Josh Brown:Like money coming out of large caps and continuing to go to small caps.

45:38Michael Batnick:What's interesting is that, by the way, micro caps too. Micro caps divided by the S &P is ripping severely. And what's interesting is that the cost of capital is not going down. And that has traditionally, just in a vacuum, been the single biggest driver of small caps, large caps. And if these companies are burdened with higher interest rates, so the fact that it's happening despite high interest rates makes me think that this actually does have legs. Now, if the MAX 7 comes back, then this trend will reverse very quickly. Right.

46:11Downtown Josh Brown:So that's what's happened every single time over the last 10 years. so if this is a number I don't think I would say

46:18Michael Batnick:I wouldn't be shocked because all it takes is the Max 7 coming back and then it's over

46:25Downtown Josh Brown:I guess stranger things have happened I feel like this is Lucy holding the football for Charlie Brown very well could be

46:35Michael Batnick:it's the same thing over and over again

46:37Downtown Josh Brown:and the same people get excited about it every time it happens the same people Guilty as charged. Get all fired up. Guilty as charged. Let's talk about Alan Greenspan.

46:49Downtown Josh Brown:That was a hell of a stretch. He was a good dude. No. The Wall Street Journal wanted to get one last kick in the ribs. Greenspan did this thing where he was like stridently anti-regulation most of his adult life. He was like a Reagan guy.

47:11Michael Batnick:He was a big Ayn Rand guy.

47:12Downtown Josh Brown:huge big guy in rand uh that was like a lifelong mentor of his and he was just one of these people that was like the the markets will regulate themselves because the companies are self-interested enough that they won't destroy themselves like that that will be the governing factor and whoops no it didn't go that way uh spoiler so wall street journal op-ed so uh for people that not paying attention. He was the Fed chair under four presidents. He had been there longer than most Fed chairs, except for one other.

47:52Michael Batnick:When Reagan appointed him, Ayn Rand was in the Oval Office with him. Yeah.

47:57Downtown Josh Brown:So that was in 87. And the first time he got tested was the crash of 87. And he used interest rates as a tool to calm people's nerves. And Barry Ritholtz has written about this. He learned the wrong lesson from that episode. He learned that, oh, look, 1987 didn't end up spilling over into the real economy because I saved the day by reacting to the stock market with a drop in interest rates. And then, of course, he would employ that again and again and again, notably in 97, 98 with the blow up of long term capital. And then, of course, famously leading into the financial crisis. He was ratcheting rates higher, reacting to commodity price inflation that he didn't see coming.

48:45Downtown Josh Brown:Like, I sort of feel like the first half of Greenspan's tenure was incredible, particularly with Clinton in office in the 1990s. And then in the second half, everything went wrong.

48:56Michael Batnick:So wait, so it was him, Rubin and Larry Summers at the helm.

49:01Downtown Josh Brown:Yeah. And - Well, Rubin, Robert Rubin Clinton was also a deregulator. He was the treasury secretary. And Larry Summers, the same. And under the influence of the three of them, Clinton was convinced to repeal the Glass-Steagall Act. The Glass-Steagall Act was sort of a Depression-era regulation that kept brokerage and banking separated. As soon as that happened, as soon as that repeal happened, again, under Clinton, you started seeing things like banks buying brokerage firms. And once that happened, basically the place where people's deposits were, were connected to casinos. And I don't think that that was like the primary cause of the financial crisis.

49:52Downtown Josh Brown:Well, it was this. It was this.

49:54Michael Batnick:It was this. So I watched yesterday, there was a documentary on Frontline PBS about all about Bernanke's, Bernanke, oh my God, all about Greenspan's legacy. And they, the three of them, fought very hard for the CFTC to have no oversight of derivatives because they didn't even think, they didn't even want fraud to be regulated because that's how much they believed in the free markets. They thought that fraud would be weeded out, the bad actors, whatever. They were such free market enthusiasts. And Greenspan, to his credit, did something in front of the nation. And this man was the rock star of financial rock stars in the 80s and 90s.

50:35Michael Batnick:He apologized. And to do so publicly, Becky Hammond can't even admit that she was wrong about Jalen Brunson. And that's who cares. This guy's entire mantra was free markets. And he got in front of the world and he said, my entire worldview was wrong. That's really, really, really hard to do. What do you think? He literally said that.

50:59Downtown Josh Brown:He did not say that.

51:00Michael Batnick:Yes, he did. I watched it yesterday. Dude, I watched it yesterday.

51:04Downtown Josh Brown:But he put more of the blame on the companies than on the Fed itself. He said - He shifted the blame.

51:12Michael Batnick:I'm not saying that he was a great guy. I'm just saying I watched it yesterday. He said in front of Congress, in front of Henry Waxman, remember that guy? He said, my entire view of the world has been proven wrong, which is really, really hard to do. Not defending him, but he does deserve credit for that.

51:33Downtown Josh Brown:Okay. I don't 100 % disagree. but I think what he did was he sort of said, he did, it was sort of a mea culpa, but I don't think he held himself or the Fed responsible. What he said was we should, his worldview was wrong because he assumed people wouldn't blow up the economy because they would be looking out for themselves. So it was sort of not like the Fed was responsible for this. It was more like, I'm disappointed in the executives of these banks. So it was like sort of not far enough for a lot of people. It would be the only way I would differ with that.

52:14Michael Batnick:Well, yes, you're right. He didn't say, I'm sorry for almost literally destroying the world economy because effectively that's what they did.

52:21Downtown Josh Brown:Right. So we have this thing that's with us still to this day called the Greenspan put. And this is stock and bond market participants believe and with good reason that the Fed is, when push comes to shove, going to respond to tremendous turmoil in the investment markets. That's my worldview. Yeah. I think they follow the 200-day moving average. I have to be honest with you. So I think that the Greenspan put is the legacy of Alan Greenspan. And I think they talk about the dual mandate, which is stability of prices in the real economy and keeping unemployment low. And I think those things are the guiding star.

53:09Downtown Josh Brown:But I think the rhetoric and the speeches changes and sometimes the policy rate around very volatile stock markets. And I think it's sort of an unofficial third mandate is thou shalt not crash the stock market. And, you know, this is lesser or greater depending on who's sitting in the seat. But I think the institution, the legacy of Alan Greenspan is the institution when Greenspan was there had no Bloomberg's, no Bloomberg terminals anywhere. And now they probably have a thousand Bloomberg terminal on a lot of people's desks in that building. And I think that's that's part of the Greenspan legacy.

53:50Downtown Josh Brown:We don't have to say more about it. We're going to do tons of Fed stuff this year. as I know Kevin Warsh is going to speak in the middle of July to Congress. So let's hold the rest of our Fed commentary till now. All right.

54:02Michael Batnick:I quickly want to talk about some of the stocks that are 52-week lows. By the way, this is a hilarious headline. Not that hilarious. Ha ha. But Microsoft Satya Nadella, we can't let AI giants eat the economy. Oh, really? Are you speaking about your stock price? Because it's not looking so great. He's getting eaten. Yeah. No kidding. All right. They're now releasing cheaper models and Anthropic is kicking the shit out of them in the enterprise.

54:27Downtown Josh Brown:And now all of a sudden, AI might be problematic.

54:30Michael Batnick:So if you look at a list of stocks that are making 52-week lows, it's not really expanding to the point of like, oh, shit, I'm worried. But the names that are on the 52-week low list or within 5 % of their 52-week lows, they are notable.

54:43Downtown Josh Brown:Give them to me.

54:44Michael Batnick:All right. This is an order of the least bad to the trade desk. To the trade desk, okay?

54:51Downtown Josh Brown:Okay.

54:52Michael Batnick:And the least bad is MasterCard and O 'Reilly Automotive. These are each 19 % off their 52-week high, all right? And then everything else is in a bear market. These are names. McDonald's, CME, AT &T, S &P Global, Uber, ICE, Fox, Comcast, Intuitive Surgical, Ulta. And now we're in the 40 % below. Those are 20 to 35. Domino's Pizza. Palantir. Dude, this was like the retail favorite stock. Palantir. Palantir has crashed. It's in a 40 % drawdown. And it looks really bad. It looks really bad. 42%, excuse me. Netflix. I can't believe it. Netflix, a stock that I also own. It's my smallest position, but I would love to add.

55:38Michael Batnick:If this goes a lot lower, I'm getting aggressive. I'm not scared of this one.

55:41Downtown Josh Brown:Well, it's going lower.

55:42Michael Batnick:Good. I'll buy more. You know what's interesting? I told Ben today, I've never lost 30 % on a stock in my life. I don't think. I'm down 30 % on Netflix. Not selling. Excuse me. Nike, down 47%. Adobe, cut in half. Lulu, Intuit, and the Trade Desk. There are a lot of names on this list. A lot of big, big names. That's 20 big names.

56:07Downtown Josh Brown:Could I find 20 names that are within 5 % of 52-week highs that sort of offset this? That's not the point I'm trying to make. I'm just saying. No, I know. I'm just thinking out loud. Like there are a lot of name brand stocks that are at 52-week highs. Like I would say like Delta, Hilton. But the point is the S &P is like 1 % off its all-time high. Yeah. But you're right. These are like notable blue chip stocks in every sector. And a lot of these names are crashing. Yeah. Like it's weird to see an intuitive surgical at a 52-week low and a Palantir cut in half. Like it's – Not cut in half. It's a little bit.

56:47Michael Batnick:So I just thought it was notable. All right. I am going to make a very tepid case for Meta. Lean into it. No, I'm not – well, I don't own the stock. I'm not buying the stock. So it's tepid. But I want to say two things. Let's sell the price chart on here first, please. Third chart down. So this stock is in no man's land. I don't buy names like this. It looks so bad. Yeah, it doesn't look good. Oh, man. Like, I don't buy stocks like this. It's literally in the middle of nowhere, okay? Oh, my God. What the hell? This looks so bad. It doesn't look good. Look at the rallies. Look how fast the rallies get sold.

57:26Michael Batnick:Yeah, it doesn't look good. Looks like it's going a lot lower.

57:29Downtown Josh Brown:Generational top.

57:30Michael Batnick:I'd be excited to buy it at like 470, okay? At the Liberation Day low. Or the Tariff Day low, for that matter. All right. Here's what I will say though. If I were to pull the trigger, the only right way that I would convince myself like, all right, buy it now because when these stocks turn. It sounds like when OJ Simpson. If I would have wrote the book. If I did it. No, no, but I'm serious about this. If I pull the trigger. I'm serious about this. The price changes of these names so fast. Remember when Amazon, out of nowhere, all of a sudden, went up 25%. If you blinked, you missed it. It's very difficult.

58:10Michael Batnick:It's very easy in hindsight to react to, oh, I should have bought it. In real time, these things happen fast. They don't let you in. All right. Stock looks like shit. And nobody's excited about this name for reasons that we just mentioned. So the forward PE is, I'm sorry, 20 times trailing earnings. All right. 18 times forward. Meta is trading at 18 times forward earnings. That's kind of nuts. Now, why is it traded at 18 times forward earnings? We just said they are spending almost all of their freaking revenue, or will be, on CapEx. But there was interesting news last week. They are introducing a subscription service.

58:48Michael Batnick:Now, you might say, like, that's a reach. That's a hell and a way. I don't like this. How desperate are they? Because it's an advertising company, and it's the best advertising company in the world, except for Google. But there might be something here. it's Instagram plus and Facebook plus. And I don't know if it's targeted for influencers specifically. Might or might not move the needle, but they're, they're doing things.

59:08Downtown Josh Brown:Okay. So these are not, these are not subscriptions in the traditional sense. These are really subscriptions for power users. I actually think it's going to work. I don't know if it's a reason to buy the stock because the incremental revenue growth coming from some of these things that they're launching is really not going to move the needle relative to how much they're spending on data center stuff. So, but, but I wanted to bring that bull case out because probably my favorite, one of my favorite analysts covering the stock, Mark Mahaney says it's time to buy. So his piece is called time to subscribe.

59:50Downtown Josh Brown:and well, first, we reiterate our outperform rating and$930 price target. That's 50 % higher than where the stock is today. So he's like pointing at the stands.

1:00:03Michael Batnick:Well, yeah, sad to me, it's pretty washed out. I like that, good for him.

1:00:05Downtown Josh Brown:On the heels of meta rolling out consumer and business paid subscription plans for its family of apps, as well as a new suite of meta one AI subscription. All right, put meta one aside. We don't have time for that today, but that's like their chat GPT, right? That's like their use our AI instead of open AI's AI. But just I don't even want to go there. The app subscriptions are interesting and they could work. People didn't understand how powerful what they did with Reels was going to be, and then it became the most important revenue growth engine in the company. So what Mark is saying is subscriptions across Facebook, Instagram, and WhatsApp, consumer meta one AI tiers that bundle app level perks with expanded meta AI usage and business slash creator oriented meta one tiers that add verification, discovery, links, insights, support, and workflow tools.

1:01:09Downtown Josh Brown:We don't expect these offerings to materially alter near-term revenue growth given phased availability and likely low initial conversion. We believe even modest penetration against Meta's multi-billion dollar user ecosystem, 3.6 billion daily users, could create a meaningful high margin revenue stream over time. So put this graphic up. Like this is an example. this is Instagram plus$3.99 a month, more control over your story, more insights, more reach and discovery. You could bribe Instagram to show your stuff to more people, more customization. Like are there a million people who will pay$3.99 a month?

1:01:57Downtown Josh Brown:Yes. Are there 10 million people? I think yeah.

1:02:00Michael Batnick:Yeah, maybe.

1:02:00Downtown Josh Brown:Out of a population of 3.6 billion. Yeah. Will 10 million people, yes. Okay. And that's the point. So Mahaney is saying$5 to$10 billion in annual revenue opportunity, assuming 2 % to 4 % penetration. Does that move the needle? What's their revenue? Are they doing$150 billion? For every 1 % penetration, it would generate$2.5 billion in incremental revenue and$1.7 billion in incremental operating profit, assuming a 70 % margin. So it becomes meaningful as they iterate and figure out how to get more people to say yes. And the thing about Instagram and WhatsApp and Facebook, they're very good at introducing something, looking at the results, and then figuring out how to get more people to use it and pay for it.

1:02:52Downtown Josh Brown:And I would not bet against them being able to do this. But the thing is, it's not big enough. it may not be big enough to offset the reason the stock is going down. But I did want to bring that out. All right, we have a mystery chart, and then we're going to bounce. Put that up. I just bought this piece of shit. How much money am I going to lose, and what is it?

1:03:16Michael Batnick:Okay.

1:03:18Downtown Josh Brown:Is this Nike? Look how good you are at mystery chart. It might be the best on the whole channel. I don't know.

1:03:29Michael Batnick:How much lower could it go? You can only lose 100 % tops. No, seriously.

1:03:34Downtown Josh Brown:Earnings are a week from today. I think there'll be terrible earnings report.

1:03:41Michael Batnick:I could see the stock going to$32 after it reports and that'll be the bug.

1:03:47Downtown Josh Brown:All right. I might have bought right before the last horrible earnings report. But that's it. And that's fine. I could live with that. I think Tim Cook is loading up. I just want you to understand that. The CEO is buying million-dollar blocks of stock. You never buy stocks like this. No, never. This is so far outside my wheelhouse. But Tim's on the board. He's buying. The CEO is buying. There's another board director who's buying. And look, nothing can happen here. It's too big to be acquired. So there's no catalyst. Like LVMH does$80 billion in revenue a year. Nike with a 30 % premium from today's valuation would be$90 billion.

1:04:34Downtown Josh Brown:LVMH cannot do this deal. They did Tiffany and it almost broke them. And that was like$17 billion. So it's out of reach for any rival bidder, buyer. Oh my God. Nike's market cap. Hold on, hold on. 63. It was$280. Yeah. You also can't have an activist here because Phil Knight's son controls all the votes. So there's an A share and a B share. The B shares are publicly traded. But the A shares is where all the board director, where all the decisions take place. And those do not trade. So nothing, there's no like, there's no catalyst other than they get their shit together. I did want to make this point to you.

1:05:20Downtown Josh Brown:I'm paying close attention. I think they're playing the World Cup beautifully With product ready to go For a billion fans around the world Who really care about this in every country And more importantly for American eyes and ears I think they nailed it in the NBA playoffs and finals They got lucky, it was the Knicks But they were betting that it would be the Knicks And as a result, they had their go-to-market strategy Perfect They had the celebrities wearing the shoes. As soon as the games were won, they had pre-orders for drops. Rather than piss people off the way they normally do, do a drop, have the bots buy it up.

1:06:06Downtown Josh Brown:It sells out. You have to go on StockX or a resale. They said, you know what? Now we're going to do pre-orders. And we're actually going to give fans the chance to own this shit when it's ready. Let me show you some of the shoes.

1:06:19Michael Batnick:Jalen doesn't even have his own shoe. He wears Kobe's most of the time.

1:06:21Downtown Josh Brown:He wears Kobe's. We're going to get there in a second. John, this is a Foot Locker exclusive, Air Force One. You and I won't wear these. They're ugly as shit. They're literally candy corn orange. We're not going to wear them. But this is a Foot Locker exclusive. They had pre-orders ready to go on Foot Locker's website coinciding with the victory. I don't know when those shoes come out. It might be August. It's like later in the year. But the pre-order go-to-market strategy is going to make a lot more money for Nike and a lot more fans happy. Next one. These are dope. These are Jordan 3s. Those have been around for a while.

1:07:03Downtown Josh Brown:These are Jordan 3. No, they haven't. Yes, they have. Jordan 3, Nick's Retro.

1:07:07Michael Batnick:Those are not new.

1:07:08Downtown Josh Brown:Yes, they're new and they're coming out. They're not out yet. They're not out yet. Stop. Please. I pray. I pray that you stop.

1:07:15Michael Batnick:Bro, I've seen those sneakers for like three years. Don't tell me those are new.

1:07:18Downtown Josh Brown:You've seen a variation that you think is these. They're not these. Hold on one second. These are a pre-order. Oh, no. He's about to pull the most decrepit sneakers out of his closet that mankind has ever witnessed. I don't know how long I'm going to sit here and wait for him. I might just do the rest of the show for you guys. I'm back. Here we go. Let's see what you got.

1:07:48Michael Batnick:Those are not new, dude.

1:07:49Downtown Josh Brown:Yes, they are. They're retro. You're going to pull out the originals?

1:07:52Michael Batnick:No. Imagine I had these. No, they're not these.

1:07:57Downtown Josh Brown:Okay. So, Nikes. What the f*** is this kid doing?

1:08:02Michael Batnick:Next, Nikes.

1:08:06Downtown Josh Brown:I don't understand. Did you take a gummy before we did the show? Just look. What does that have to do with anything? You're making the case for Nike, asshole. I showed you. I just got new Nikes. Oh, okay. All right. Next. That was something. These are - Those are horrible. These are Kith exclusive with Nike. These are the Air Max 95s. I don't like these either. I don't wear Air Max 95s because they're very narrow and the toe box is too small. And I'm gigantic. So I don't really wear these. And then there's the last one. These are the ugliest ones I'm going to show you. These will probably be the top sellers Out of all the ones I showed you These are those Statue of Liberty green So you're right Jalen was wearing these These are Kobe 5 Protros But this new colorway New York versus New York comes out August 1st I think they're going to sell A lot of these And it's not that this is going to move the needle for Nike For their earnings But I think it's a signal That they have figured out what they've been doing wrong they've been pissing off their most likely repeat customers with this stupid drop strategy where every time they announce a new shoe it's already sold out before you could even buy it and you have to like go buy it from someone else for$700 the pre-order strategy I think is a a material development in the history of Nike where they're going to stop pissing everyone off and start actually making money again and pleasing their customers.

1:09:44Downtown Josh Brown:What are your thoughts?

1:09:46Michael Batnick:So those sneakers that I just bought, you know where I bought them? Not from Nike. It was annoying. I had to buy them from StockX.

1:09:52Downtown Josh Brown:Yeah. This has been an ongoing issue.

1:09:55Michael Batnick:So if they are going to do what you're suggesting, then maybe the StockX – how could it get worse?

1:10:02Downtown Josh Brown:It can get worse. All right. So here's how it gets worse. Their China business is a disaster. and everyone knows it. So it's not gonna be a shock. We don't know if there's any bottom. China has now competing footwear companies like Li Ning that are comparable in quality to Nike. And there's a lot of nationalism in China where they actually prefer their own brands to American brands in most cases other than the iPhone. And so there might not be any bottom to the Apple China business. to the Nike China business. And I almost think they should do what NVIDIA did. Just like count it out. It's 15 % of their revenue.

1:10:49Downtown Josh Brown:And shrinking. And it's been a huge issue. So that could get worse. The other thing that could get worse for Nike is the tariff-related cost side. And that's also been a huge issue for the stock.

1:11:02Michael Batnick:I don't think that investor sentiment could get much worse. No.

1:11:07Downtown Josh Brown:Now, it's in a 75 % drawdown. It hasn't had an up year since 2021. Oh, my God. It's in the worst drawdown in Nike history since coming public in 1982. Look at this. So, no, it absolutely cannot get worse. The fundamentals could get worse, but I don't think the investor sentiment can get worse. That doesn't mean the stock can't go lower. Problem is. Whatever. I took a shot. I took a shot.

1:11:33Michael Batnick:It's not like 12 times forward revenue. It's still like, I think, 18 or 20 times.

1:11:38Downtown Josh Brown:it's just, it's this incredible, it's this incredible like battleship situation where it could legitimately take like three, four years to turn this thing. Like, but it's happened. We've seen it. Ford is at a 52-week high. Intel is at a 52-week high. We've seen Chipotle, multiple comebacks. We've seen Netflix, multiple comebacks. It could do it. Why not? I'm not saying it's definitely going to happen, because some of these don't ever turn. Under Armour never turned. They died. I forgot about that brand. I know, but Under Armour was the thing that spooked Nike investors in the 2000s decade. In 2005, Nike shareholders were legitimately afraid of Under Armour.

1:12:27Downtown Josh Brown:Dwayne Johnson. Anyway, it's not a high conviction. I'm not pounding my fist on the table. I bought some. I know it's the worst stock in the world. Well, we'll see what happens. All right. We went way too long. Guys, thank you so much for watching. Thank you for listening. Shout out to the live chat. You guys are the best. We miss you when we're not here. We'll be here next week. Tomorrow is Wednesday. All new animal spirits. We'll do Ask the Compound. We'll do the Compound and Friends to finish out the week. And keep it locked. We'll talk to you soon. Thank you, guys. Good night.

1:13:34Downtown Josh Brown:Thank you. involves risk and possible loss of principal capital. No advice may be rendered by Ritholtz Wealth Management unless a client service agreement is in place. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required compatibility and availability varies 18+.