Does the Stock Market Know Something We Don’t?

25:51corporate America figuring it out in a very bullish stance. Of course, can I make the case for a September pullback? Yeah. But the fact of the matter is big momentum is risk-on for this. You're in pretty good shape. This happens at every significant low, these types of surges for offenses versus defense. We're also seeing, it's funny, the market, like as soon as we talk about narrow breadth, and there is some narrow breadth, and we'll talk about it in a sec, and concentration. Yesterday, Frank Capillary tweeted, The S &P 500 just logged back-to-back 80 % breath days for the first time since April.

26:29Even more telling. And it's one day, but whatever. Tech had the lowest amount of advance in stocks at 69%. And the equal weight outperformed by more than 1%. So maybe this is like the catch-up trade that happens every single time we seem to mention breath weakening. Yeah. I think a lot of it's coming from discretionary too, to be honest. Corners of discretionary have been off the field for a while. Durables. Homebuilders. Homebuilders back. No, they got hit today because rates popped again. But that's been a pretty important cyclical group that's coming back on the field. Some of the autos, they've been a pain trade, starting to come back.

27:07Retails are right. Now the restaurants are taking a hit. But like discretionary is working. Tech, semiconductors, industrials, machinery. That's that breath right there. It's the non-NVIDIA Microsoft type stuff that's still pretty good. Equally S &P is a day off of a new all-time high. All right, we'll zoom out to zoom in. Shannon, you brought a chart, chart 11. So all-time highs are bullish. They are. Talk about it. So, I mean, I think this is the challenge is that you generally tend to see in particular when the momentum factor is behind as a tailwind. And I am not a technician. I'm just going to say that right now.

27:40I listen to folks. you know and and I but I think why I pointed this out is that the question I get the most is like I have I missed have I missed it right and so every time we cross one of these all-time highs what I continue to look at is if you actually break this down and I didn't bring this in terms of all of the different periods where we have continued to set all-time highs what you'll find is that there is a persistence in the performance. What's the outlier here is sort of that 18-month period. And that's really what has been happening over the course of the last couple of years. So that's much higher than it was if we had drawn the same graph prior to COVID.

28:23And what you're seeing is that, you know, in terms of this average gain after, you know, an all-time high, what we've seen is that the concentration that we're experiencing over the last five years is moving this average gain higher. So if you take out this previous period where we've had some really strong performance that's been concentrated in tech, these numbers are a bit more modest in terms of the percentage gain, but the persistence is pretty similar. And so I think that's an important point is that, you know, we're not necessarily saying that we're going to replicate this type of performance after an all-time high, what we're saying is that it tends to be kind of a persistence in that performance after an all-time high, and you kind of are set in that bull market run.

29:12Because if you think about what happens when we get a big pullback, right, you get sort of that spike back up too. And what's happened over the course since the GFC is that those lows have been higher and we've just continued to, we're cushioning the bottom now. So it's likely that this number in terms of the average gain is going to continue to grow over time because we're not seeing the sharpness of those bottoms. We're not seeing the depth in those bottoms because of the cushioning of all of these other factors that we've talked about. I was about to say, do we think that this is like a permanent feature of the market, which is the sharp declines and the sharp rallies?

29:47But I keep having to re-reminding myself that 2022 was a thing and it wasn't that long ago. and the stock market topped on January, was it 21 or 22? 22, right? January like 3rd, 2022. Okay. And it didn't bottom until I think October. October 12th. And tech stocks bottom on December 31st. Yeah. So that was a legitimate, it was a two-year bear market and people act like that never happened. As much as I worry about, we'll get to the concentration stuff. The MAG7 as an index went down 50 % that year. Yeah, which is acting like it didn't happen. It's a generational decline. It just happened. Meta, I keep saying, it sounds like a broken record, but Meta was down two thirds, like literally.

30:29Oh, I remember saying to some of my teammates, Meta's never going back to a new high. It's it, it's done. And that was clearly wrong. All right, so this is not a thing that people like to hear,

30:44but a pause or a pullback is coming. And I think that pauses and pullbacks are healthy. A stock market that goes straight up is not healthy. So, Todd, you have a chart that shows the best 65-day change since 1950. Is there anything special about 65 days or that's how long ago the low was? Three months. Okay. Three months, quarter. So the best three-month change. And we got this chart template. So talk us through this. What are we looking at? So now we're a little bit past it, right? April 8th was the low. And then second, third week of July was three months off of that low. We just wanted to take stock of where we were.

31:23And that percentage change, just on the index level, the S &P 500, we were up 25.8%. That's one of the best three-month percentage changes in the history of the S &P. What does that mean, right? Every major market low has seen a surge off the low. The next one to three months, the probabilities are kind of a coin toss. You don't know. And so far, they've been a good coin toss. But it's also the don't be too surprised if you get a pause or consolidation we were just talking about. The more important point was the next 6 to 12 months, similar to Shannon's chart about new all-time highs, if we get there, is that the returns and the positive hit rates skew very much in your favor.

32:01So this is price momentum. Price momentum is extremely good for the long run. Of course, things overheat in the near term. It's not a shock to see things pulled back. So the recovery off the April was great on a price level and internally. The rescues were good too. Warren Pies did similar work. Chart 12, please. where he shows what happens when you've got the daily sentiment break above 70. I think this is a proprietary indicator. I don't know if this is RSI or if it's something different. But anyway, he shows the path. And once you get that extended extreme optimism, naturally, I mean, obviously, this shouldn't shock anybody.

32:36It tends to weigh in returns. And he's got one that goes a little bit further back, going back to 1980. And once we get these extreme readings, the compound annual growth rate above 60 drops to 1.1 % versus 9 % for buy and hold. So we are a bit extended. And if we go sideways, it should be nothing at all to worry about. Wouldn't be a shock. No. Right? It's not a hero call, I think, to say the market would consolidate. No, it's definitely not. It definitely doesn't take courage to say that. I guess my question whenever we say that, and I've been guilty of saying that, for like three weeks now too.

33:16So I'm going to put myself in this camp is like, well, so what? Like, what are you going to do about it? I mean, but this is what I'm saying is like, I actually think that that is more critical. And what the August, September timeframe over the last number of years, I mean, how much do we complain about? Like we used to be able to just take a vacation in August and that's completely off the table now in terms of what's happening from a volatility standpoint in the market. But if you think about, you know, what does that period mean? and how am I going to react to that August, September time period?

33:46The challenge with this year is that we've got a flurry of readings that are going to be really important from an economic perspective here in the US. We've got Jackson Hole. And after the last couple of press conferences, I don't know how much confidence you have in the messaging that's going to come out of Jackson Hole, but I'm a little concerned. And then we've got the Fed meeting. And then we really roll into, I think in the fourth quarter, I think that investors are going to start to look at something like the big, beautiful bill and the deregulation that you talked about earlier. And they're like, OK, so when is this like we're going to start seeing this transmit.

34:18Right. And so this timing of this period of this normal seasonality that we experienced coincident with all of this really market moving data. I mean, we look at last summer, we obviously had the unwinded the yen carry trade. But that was sort of the push into August and some of the volatility that we experienced. I'm a little bit concerned that perhaps investors will not feel quite as constructive in investing in September. So I think we could see this as a little bit longer a period, maybe it lasts six or eight weeks where we get some squishiness in the equity market, where we feel like that sentiment is not quite there.

34:58And I just wonder how that could potentially manifest into like the fourth quarter when we're really looking for people to be reallocating and likely increasing their allocations to some of the laggards that we talked about earlier. So this is a good point. It's like, all right, so what? We're extended. Who cares? What's your point? So what? We should expect a short-term pullback in the next couple of weeks. And what do I do about it? Like, what am I supposed to do then? Right, right. All right. So here's what I would say. If you are fully invested or where you want to be, yeah, you're right. Who cares?

35:27Go live your life. Enjoy. Enjoy the gains. Say thank you. Market can't fall for more than today. Even today, we had a gnarly PPI reading in the morning. Yields shot up. Stocks fell at the open. Stocks are now flat. S &P's flat. Equal rates down. Who cares? Nobody cares. But here's what I would say. If you are feeling, like if you are underinvested and you're feeling like fear, this market will not let me in. I can't believe I'm missing all those gains, if you're feeling those feelings, and how could you not, if you're underinvested, then I would say, just wait, just wait. And you might have to wait a week, two weeks, three weeks, a month, two months.

36:07You will get a better entry, probably, maybe. Is that fair? I think that's fair. I mean, that's what I think. I mean, that's my view is that, you know, we're looking down the potential for an entry point for people that feel like they've missed it. You'll get one. You'll get one. But we hear this all the time. And I think that's why the work that Todd does is really important to thinking about – It's kind of you. No, but thinking about how do we square that longer term – I'm a fun partner here to be a – That's a Seth Rogen. You should bring out Seth Rogen. So I feel like there is a – I feel like there's an opportunity to square some of those or overcome some of those objections with mirroring it with some of the technical data.

36:48Because I think that there are times when this is going to feel very uncomfortable, especially after the PPI reading. Do we get another, you know, really lackluster nonfarm payroll support? Then we start to hear about recession concerns and considerations. And that's not our camp. But I think being able to combine it with that technical work and that look, I think that that's where you can really push and catalyze that investment for people who are like, I've been waiting and I've been missing it. my teammate with Shannon, I think you know Dan Clifton. He's one of the best policy analysts on the street.

37:22He's the best policy analyst. I've heard we should have him on the show multiple times. You should. He's amazing. I can't speak for his work, but he's big on this kind of September to remember because there's just a lot going on here. And there's a wild card in the White House that has a cell phone, which has access to social media. Isn't it December? Is that a Lexus commercial? It is a Lexus commercial. Yeah. Okay. For all those people that buy cars. So Dan is big on that. We get tariffs, the bills, everything. I can't speak for his work, but that's his thing right now. All right, let's speak for your work, Todd.

37:55All right, so let's maybe something more tangible in terms of what the short term can bring. So you have a chart that shows Levered Long versus Inverse ETFs AUM. And to me, this is one of the best charts in terms of showing where we are in terms of people's feelings. And when you're sort of like in the middle, who cares? But we are basically at all-time highs. So what are we looking at, Todd? This is just, so Levered assets, they're getting big within ETFs because they're just, they're easy. They're access points for anyone, right? You don't need margin. You can just open up a brokerage account and buy 2X or 3X, whatever.

38:35Tesla, semiconductors, S &P. So we like to track the assets in these products. There's 130 some odd billion in Levered long, And that's an all-time high. Yeah, yeah. Probably closer to 135 billion today. And then inverse ETF assets have about 13 billion. So we take the ratio of them. That's at about 10 to 1 today. We started the year at 12 to 1. I think the more, this is a new sentiment data point to me in the data set. These products really exploded in 2020. So they're becoming more important. If you're trying to get a feel about how aggressive investors are, traders rather, I should say, this is the go-to chart.

39:07So again, sentiment, not anywhere near where it was at the start of 2025. But if I'm putting together a list, this is at the top of, hmm, maybe we should worry about that. Isn't this just a, like, to your point, is it just cheap leverage? Like, does, you know, is the existence of an opportunity to have cheap leverage in an environment where leverage is more expensive? Like, is this, you know, is there some, like, spurious correlation there in terms of? I think that's spot on, right? This is access. All right. So do you think that 10 to 1 is a ceiling or is this going to go to 20 to 1? I'd be shocked if it stopped here.

39:40Now it depends if the market all of a sudden pulls back 10%, that's going to clear. But I'd be shocked if this was the ceiling. So we speak about this one a lot. NVDL. This is the Granite Shares 2X Long NVIDIA. This peaked in assets. Five and a half, six billion, something like that. This peaked at six and a half billion dollars in November 2024. So the total AUM in this thing, and NVIDIA is sort of the poster child of this recovery, of this bull market. Not sort of, it is the poster child. total assets are down a third. So, I don't know. Take that for what it's worth. The interesting thing for me is you're seeing these issuers come out with much smaller underlying now.

40:18So, Bullish is going to have 2X. The filing's already out there. The Quantum Computing Name, Soundhound, DraftKings. Listen, this is it. We're not coming back. They're going. We're not coming back. Yeah. All right. So, Jason Gepford. On Thursday and Friday, this is last week, the NASDAQ 100 hit record highs with fewer than half its members trading above their 50-day moving average. Thursday's reading was the weakest in history. Chart 15, please. Friday's was the sixth weakest out of 751 days when this - Oh, I love a good distribution. When this happened. So in English, all-time highs, not a lot of participation.

41:03It's not new. This is nothing that we don't know. This is nothing that we haven't been speaking about for a long, long time. Maybe let's skip ahead a little bit. Chart 20, guys. So, Todd, you describe this as the chart that keeps you up at night. Oh, it's my favorite. All right. This is… That's a lot coming from a chart guy. It's my favorite chart. I'm all the way in on the U.S. stock market. I'm bullish to infinity. But, and I'm not trying to be like sour glass at full, But we need to just take a beat and understand what the hell is happening. Todd, what are we looking at? So listen, I'm a broken record with this chart.

41:41We've talked about it. You've shown it. I feel bad. But I think so. The S &P 500 is our investing diet, right? You think about your diet. You have protein, carbs, whatever. That's the S &P 500. The diet of it is becoming more and more of less stocks, right? I guess that's an ox. Less of more? More of less? Um, defensives have disappeared in the S &P 500. Healthcare, staples, utilities, energy, they're down to about 19 % of the index. NVIDIA is 8%. It's almost larger than healthcare and industrials. Two massive sectors in the American economy. And then if you add in Microsoft, which is 15%, they're almost larger than all four of those combined.

42:18So there's just this wackiness going on with the index and what you're, you're investing every day. So NVIDIA and Microsoft. Yeah. And there's a lot inside of Microsoft, right? Yeah, that's the argument. There's LinkedIn. These are multiple companies. There's Slack and there's a million other things in there. But nevertheless - You heard that about financials too. Oh, I like that. That's a good one. But nevertheless, NVIDIA and Microsoft are almost as large, not quite, but getting there as every staple, every energy stock, every healthcare, and every utility. Shannon, what do you do with this chart?

42:53So I also, I think it points to the concerns about index investing in general. I don't I'm not going to disagree with you that the index is constructed this way. And so I feel like if you're if you're really looking at this from a perspective of like, how do I diversify my risk? How do I think about how my portfolio is built? Well, I think you need to figure out where all these defensives, where they lie and how you can construct a portfolio getting more access to them. Because you're telling me that none of these four sectors, staples, energy, healthcare, and utilities, are going to continue to produce growing earnings and that there are not opportunities there.

43:35You look at utilities and energy alone and you think about the shift that we're seeing in terms of electrification and urbanization and a growing middle class globally. You need both of those things. Healthcare, I mean, it's been a dog. It's been such a difficult road investing in health care. Were you about to say effing? No, I wasn't. I know better than to do that. It's been such a difficult road. But I guess my challenge here is that this argument that there are these underlying exposures in these companies and that we need to be, you know, less concerned about them because of their kind of conglomerate status.

44:13I just caution people on that because we have seen conglomerates in the past. You fill in the blank of those names. those eventually get broken up. That value becomes dissipated. But what I view this as is like, this should be the catalyst for you to look at how do the products that these companies are making, how do those become monetized outside of the tech sector? And that is where you saw the growth, for instance, from 2001 through the financial crisis, right? You saw technology being integrated into everyday businesses and that shift coming out of the GFC in 2010. and what we saw in terms of the growth of technology stocks, it was based on that fundamental shift where regular companies were incorporating technology to increase productivity and do their work better.

44:59The AI tailwind is much longer, but it's going to be much more pronounced in terms of its impact in this breadth trade. So that's why I argue that breadth is going to occur because it's the broadening out of the AI trade that is one of the major tailwinds for that to occur. So that's the optimistic take, and that's where I am, I think. I don't think investors are dumb. I don't think that the index is dumb. NVIDIA and Microsoft and all of the Mag7 and the hyperscalers are responsible for so much of the earnings of the index. There's not a giant disconnect between the earnings, their contribution to growth, and where they are in the index.

45:33It makes sense. The optimistic take is that this AI industrial revolution is real and the productivity will advance other sectors and you will see productivity expansion, margin expansion. Obviously, utilities are powering the data centers. And so you could see this nightmare scenario for the doomers who say that this is going to end badly, where you see a catch-up trade where the S &P 493 starts to benefit from all the advancements in AI. Yeah. Can I ask, Todd, I have a question for you. I'd love for you to describe that pain point that's going to occur, though, as the earnings growth decelerates for those top names and you maybe don't have the reacceleration to the same extent of the other 493.

46:18That would be an index issue then, right? Right. Because you're so overloaded to those names that maybe are not meeting expectations anymore. And then the rest of the index is not going to be able to hold up the boat. Right. So that would be the painful part. That's almost like a 2000-type scenario. Ideally, you don't want that to happen. I just think it's super fascinating how these names are just overtaking entire sectors. It almost feels like the market is intent on breaking the 40-act structure. Oh, in terms of the limits? Yeah, because you already see it in sectors, right? These sector ETFs can't track the tech discretionary-type stuff anymore because of the RIC rules, regulated investment company rules.

47:00And it's not going to happen for the S &P, but it's almost heading in that direction of, oh, we're going to break this thing because it's almost 100 years old. You saw Russell getting in front of that by changing their index construction. So, I mean, I think this is really where the challenge is. And I think that this concentration that we're seeing that we experienced, admittedly, we've seen index concentration historically. But we didn't have as much money tied to index investing. And I think that that's going to create this tension and this stress. And I think that's why you see the potential for some pretty marked drawdowns because there's so much tied to these indexes that it's no longer an environment where you had prior to the GFC where you had a lot of active allocation.

47:49Now, it's very much index tied. But this idea that there's going to be like some sort of hard reset where the behavior investors - It's a slow bleed. Oh, you mean on the index for active versus passive. Just that investors are going to start allocating differently. We've experienced several challenges. In the first quarter of this year, NVIDIA fell 37%. Again, going back to 2022, what happened? Like we did all that. So I guess the obvious bear case, like the real bear case, it's all in terms of like, Will all of this spending translate into revenue and revenue that can be protected and expanded?

48:26So this chart, this looks like a SACGen chart. I'm sorry, I don't have credit for where this came from. But one of the bull cases for these tech companies is how capital light they were. The margins were so incredible. We haven't seen businesses growing at 20 % with gross margins of 60%, 70 % and higher in some cases. So this chart shows that the big seven, it's showing CapEx as a percentage of cash flow, has, as we've known, gone straight up. So in 2015, it was 25%, and now it's almost 45%. Whereas the rest of the index, it is pretty capital intensive. Is the clock ticking? At what point are investors going to ask, hey, where's the money, Lebowski?

49:19I think we have this period where we're experiencing, just like in Silicon Valley, where you want to stay pre-revenue. You don't actually want to have to start reporting how much money that you're making on these investments. Because right now, you're still investing for the future. You're still investing for growth. And so I think the longer that these companies who've spent this much money are able to push out that they're continuing to just build the foundation for growth and they're not being pressed by investors who, you know, we've talked about the rationale by why those stocks get bought when they do.

49:51If they're not being pressed by their shareholders to articulate fully how this is being monetized, I think this can go on for a longer period of time because I don't think shareholders, I don't think investors are asking those questions. I think they are still in this as soon as they start reporting, however, that this is translating. You've seen that in firms like Oracle, right, in terms of how is our AI spending being incorporated into sales? And are we getting that land and expand approach and we're getting more revenue dollars per customer? The hyperscalers don't have to answer those questions right now.

50:29The companies that are using AI are having to answer those questions. I still use it to make cartoons. So the largest AI firms are now spending 1.3 times earnings on CapEx. That is a lot. And at some point, they're going to have to answer for this. And you're right. The longer the street gives them the benefit of the doubt, you don't want to disappoint. So that's a long way down. That to me would be the catalyst for something to go wrong when they just stop meeting expectations and the costs don't make the ends meet, all right? There have been questions, though. I mean, you know, Meta's seen some periods where there's been questioning on their spending and, you know, how that was going to translate to their particular business model.

51:17You know, I think the other thing with this is that I just recall those periods where these same companies were under a significant amount of investor scrutiny for not doing enough with their capital, for sitting with cash on the balance sheet for extended periods of time before they paid dividends, when they weren't reinvesting, when they were talking about doing everything internally from an accelerator perspective. So I don't disagree with you, but I just, I think that there is, there's also the opposite, which is they're just sitting with this cash on the balance sheet. And I don't think that was tenable for investors either.

51:50Is this yours? Yeah, this is mine. So this, I mean, this is the point that you're just making. Yeah. I mean, I think, you know, when you go back into the 2010s and they were just taking out, Big tech was taking out low interest rate debt, and they were doing buybacks. I mean, there was a lot of questions about why they weren't investing, why they weren't putting that money to work. And this is AI CapEx proxy. So, I mean, obviously, we weren't talking about AI in the 1990s. But if you think about the companies that are investing in AI now, this shows you kind of the growth rate of that spend. And you could argue that the 1990s, you saw tech companies really benefit from that CapEx coming into the dot-com bubble.

52:31That went way down in the 2000s, but it was picked up by the rest of the market. So maybe, again, we're setting ourselves up for the spend has been done in the 2020s by these large tech companies. And then the translation of value of that sort of happens in the following decade, which I think is what our thesis is and why the broadening out trade has longer legs. So the boom and the bust, the boom in the 90s, the bust in the 2000s, and then 2010 sluggish spending. And now here we're all the way back. Remember, it was like, I guess in 2013, 2014, it was all just like financial engineering talk.

53:05These companies just weren't spending, weren't reinvesting. I guess there was still a lot of PTSD from the crisis. But I think that continued for tech and well into 2014 and 15. I mean, there was a very high bar in terms of tech company spending on innovation. And what was really happening then? You think about what was doing well during those periods. It was a lot of the consumer, right? It was ad spend. It was iPhones. It was consumer-related, which, frankly, probably doesn't require the same amount of spend as the innovation that we're trying to put into place today. Here's something. USCF filing.

53:45Oil plus Bitcoin. Yep. That made me, okay. This is like a backstory at a whole wheel of cheese. I mean, what in the world? So, all right. Just to reiterate, there's an ETF out there that is launching. And why not? Launch it. Who cares? Yeah. 100 % exposure to crude oil and 100 % exposure to Bitcoin. But who said, hey, wait a minute. You know what I really need? This. This is the point. This is where energy is at. And I'm going to put the bottom in energy here. Like, it's irrelevant, right? Count the table on that, Todd. I want to hear it. I want to hear it. I agree with that. I can make a case for energy, but like it's opportunity cost.

54:29So this is where we're at. We're just saying, all right, let's do oil and Bitcoin. Plus Bitcoin. Yeah. I don't know. Maybe that's the bottom. I think this is like a, this is a geopolitical doomsday trait. What do you mean? Like Middle East, Russia, Ukraine, you, you, you know, just concern, like, you know, Bitcoin store of value plus oil prices are going to shoot through the roof because of continue. I view this as like I could see some of my I could see clients who are like, this world's going to hell in a handbasket. I can say hell, right? That's allowed. Well, you know, you're right. If that's your outlook.

55:01That's sort of what I think this is. I actually think that that feels and I don't disagree with you on the energy thing. but this to me feels like somebody was like, we've got the bunker people. This is for them. This plus NVDL. Here's another one from Balthunas where he gives you a hat tip-towed. Ark. Oh, yeah, yeah. Do you want me to recite the tweet? Yeah, what's the tweet? I love bantering, pestering Eric. He's one of the best. Ark, the other week, took in about$800 million in a day. And we were all like, huh, that's interesting. but then it turned out to be a tax rebalance. The money came out the following days, right?

55:39This is what you can do in ETFs. You bring money in, money goes out. It's a heartbeat trade. It's all for tax purposes. You don't generate capital gains. The last couple of days, they've really taken in a lot of money. And Eric and I are both like, this feels like they're rebalancing again. They're doing a bigger creation unit and it's just going to come out in a redemption unit the following days. Because think about ARK. It's on a huge run. Outside of Tesla, a lot of the stocks in there have massive gains. Roku, Roblox, Coinbase, Palantir, Robinhood. They got it on Circle. So I think what's happening is there's money that's going in, but this is going to come right back out because of tax purposes.

56:18So it's not sentiment. I think this is more them using the ETF wrapper to avoid capital gains. You know what happens all the time? You think about stocks that have just had a monster run, and we talk about them on the way up, and then when they fizzle out, it's like, who cares? So I just checked. Circle, for example. Circle is down another 8 % today. It's doing the circle of life. That's right. That's right, Todd. It was a high of$299. It's now at$140. Cut in half very quickly. Remember Figma a couple of weeks ago? And they were like, oh, these bankers got the IPO wrong. They're ripping off their clients to enrich their other clients, which never made any sense to me.

56:55It popped to$143. It is now at a pre-IPO low of$76. dollars. So maybe whoever the bankers were actually got them as much money as they possibly could have. Did you know Roblox is bigger than Apollo and market cap? Do your kids play Roblox? Not yet. Yours? Never. No. Good for you. I held firm on that. So. Good for you. It probably saved me a lot of money based on how successful Roblox is. Just relating it back to the ARC stuff Like there's a big holding in circle and whatnot. But can we talk about, but, but do you think that is, that's IPO specific to, I mean, what is your, what's your, I mean, I, I mean, I can give you my take, but I would love you guys' take on, you know, there's been this excitement around, you know, we're seeing IPOs again and they're coming off and they're successful.

57:44And then, you know, we're losing part of that narrative. Like, do you, do you think that, do you think that that the most recent IPOs have been successful enough to create this reacceleration of public market listing? Or do you think that it's still, you know, we're still further away from that? I think there's been a backlog. Not I think, there has been an absolute backlog for the past couple of years. The window was jammed tight. And anybody that's been waiting to go, now is the time. And they've been waiting for a while, these ones. And I think, I don't know if investors, all investors realize that these companies that have gone public more recently have been waiting.

58:22for a while to do it. It's not just, but it's not just IPOs. It's M &A. You brought some stuff. There's a lot of M &A activity going on as well. There is. And I mean, there's probably more discussion of M &A than we're actually seeing, you know, closed deals, at least in the last couple of months. But if you look at, for instance, like Goldman Sachs announced that they weren't going to do their second round of layoffs because activity has picked up from an iBanking perspective. So, you know, you're seeing this tick. and this is M &A announced transactions, so obviously not closures yet, but I think it's an important graph.

58:56The challenge is that I think we're in an environment where some of this is going to be impacted by rates as well. So I think some of this tick up is also in anticipation of a lower interest rate environment. So I feel like a lot of these cross currents that you started the show talking about, this one could be impacted. Although I do think a lot of the M &A at this point is gonna be large companies with plenty of capital market access and cash stores to be able to do these acquisitions. I think that's going to pick up faster than some of the smaller companies. I hear you talking about M &A. We're talking about IPOs.

59:33And if I'm looking to diversify away from big tech, just financials. Makes sense. Makes sense to me. They're working. Capital market names up and down the cap scale have been great. NASDAQ, ICE, which I own. Oh, the exchanges too. Yeah. Yeah, the exchanges are interesting because they're data and they're getting into crypto. So that's another part of that segment. So if the financials are acting well, then the economy should be in pretty good shape too, big picture. Does the – Shannon's giving me a look here. No, I'm not giving you a look. I'm going to let – go ahead. Not you. No, no, no. You go.

1:00:07All right. How much does the labor market matter to investors today? Like there seems to be like a minute a couple of weeks ago where claims were picking up and then sort of people stopped caring because they stopped going up, which is a good thing. Can the stock market survive what is a slowing, albeit whatever, economy? Like the economy is pretty fine right now. It's not great. I actually think that this is sort of just like what I've been trying to grapple with as I'm looking at payroll data. I think July was so bad and it was such a huge revision. that I think investors are kind of taking a step back and saying, and really saying, okay, this is probably not, like these are probably not the final numbers.

1:00:55Like there's got to be, there's just so much noise in these numbers that I'm not going to base my decision-making from an investment perspective on this particular print because I'm going to need to see more data because this is so counter to the data that we had already received. I don't think it's about data accuracy or there was manipulation of that data. I think it just comes down to the data that we're getting is based on smaller, smaller sample sizes. It's extrapolated out. It's just not as quality data on a month-to-month basis that we used to have. In terms of consumers, however, you know, one of the things that we continue to look at is we look at the cohort between 16 and 25.

1:01:33And that unemployment rate is almost at double digits at this point. And so you can ask me what I think will, if investors are concerned about the labor market, I think that companies that have more exposure to a younger demographic, I think should be more concerned. Because that's where we're really seeing the impact of a slowing labor market is in sort of pre-30-year-old hiring. Well, you saw a lot of the fast food restaurants or the quick service restaurants get killed this week. Cava, Sweetgreen. So the market is working. Like the companies that are missing, Trade Desk is being disrupted in a serious way by Amazon and others.

1:02:19The companies that are under pressure, where their business model is under pressure, are getting annihilated. So it's not like everything's going up. The opposite is true. Except for Cheesecake Factory. Well, Bespoke had a great chart earlier in the week showing that for whatever reason, like dine-in restaurants, even like the cheesecakes of the world versus the quick service. And I think that has a lot to do with people coming into the office or lack thereof. I think that there are some really interesting demographic trends that are, and I think quick service is a great example. I think some travel will be disrupted based on kind of lower, younger cohorts, you know, not being able to find jobs.

1:03:02I think that the type of retail from an apparel perspective, I think that certain stores will do better than others based on that, you know, target. Is it fast? You know, I would be a little bit concerned about fast fashion. What's fast fashion? Like Lulu? No, like H &M. No, no, no. Like very, Very, you know, seasonal kind of churn and burn, low cost pieces that you buy from a seasonal wardrobe perspective. And then you don't care about the quality because you're not going to wear them again next season. Party city. Or the Halloween stores. No, I mean, I think, but I do think that that's where the labor market concerns are likely.

1:03:41The other thing, though, and I would be interested to hear your view on this, is that if I look at the labor market and we've looked at this, I think that what investors are looking at is they're anticipating that A, or they're attributing this weakness in the labor market to AI, that people aren't hiring because they're substituting those jobs for AI. I actually don't know that that's probably the cause of this, but I can see where that attribution would come. And I think it speaks to some of the things we talked about earlier in terms of like the tale of AI. Because if you think companies are changing their hiring practices because they're becoming so efficient at implementing AI, why wouldn't you continue to invest in that?

1:04:21But I think that's probably not the rationale between around younger hiring not happening. I think there's probably some other factors, just like businesses being more conservative and discerning in this environment. I think conservative is the right word. It's a politically volatile environment, right? There's all sorts of stuff going on. And I guess there's some fringe AI use cases, right? You can get a robot to make your salad at Sweetgreen. So maybe that's also part of it, just looking way out in the future. But I go back to the political volatility. I think it's just too much for certain companies to handle.

1:04:53And they're just going to say, you know what, let's just dial it back for a few years. I think companies are using AI as cover to slow down their hiring. And I also think that it's real. I do buy it. I got a heartbreaking email earlier this week from a 25-year-old financial professional who is sitting for the second level of his CFA. He has a one-year-old and he got laid off. He's an analyst. And he said it was 100 % because of AI. And the employers didn't say explicitly that, but they said, you know, with the tools that we have today, blah, blah, blah. I really don't, like, I hate being alarmist, but I do worry about the entry-level rules because that is, entry-level jobs are grunt work.

1:05:35And grunt work is the first thing that's being replaced by a lot of these tools. And there's already challenges, whether it's student loans or the cost of housing in terms of household formation of those individuals. And so we're exacerbating that problem potentially by having a bunch of people come into the workforce that were geared for these types of jobs. These types of jobs aren't there. That doesn't fix itself in two to three years. People don't go to trade school, you know, all of a sudden. It's going to take five to 10 years and end for a shift in some of these other trends that we're talking about, such as manufacturing, reshoring, or automation, that's going to change.

1:06:08That doesn't happen overnight. But isn't a lot of the work that you do being outsourced now to AI stuff? Me, no. I don't think it takes a human to look at ETFs and what the heck is going on in them. Are you? Anything? I think that's funny because I actually, I think all of us - You can't be replaced. I think that, I can though. Thanks a lot. No, I think some of the things that I would take up time for me, take up less time for me because I'm utilizing AI. But I think everybody is going to sit here and say, my job can't be disrupted by AI. I really feel like we should all, I agree with you on that point, that we need to be introspective about what do we do that provides value that cannot be replaced.

1:06:52I think that is a conversation both individuals need to have with themselves, but also companies are going to have over time to think about how do we, because companies would also argue that they're looking to incorporate AI in order to maximize the value-added pieces of people's jobs. It's hard to add value when you're 22 years old and you don't know anything about the industry you're entering. Shannon, you have a chart showing U.S. employment. This is a big part of the story. Foreign versus native workers. And I have to ask, what are these charts? Where do you make these charts? What are we looking at here?

1:07:25I've never seen this before. They're like yellow. Is this Excel? What is this? No, this is our branding. So I make them at MB Private Wealth. We make them, I should say. It's not me. It's our team. What's the story here? So one of the long-term things that we're watching is this shift in immigration and how it could potentially be inflationary over time. It got a lot of – there was a lot about this in November, December, January that there was going to be this big shift in immigration policy. And then tariffs hit and everyone's like, oh, yeah, immigration on the back burner, even though we continue to see, obviously, pretty meaningful shifts in immigration.

1:08:01I look at this primarily from an inflation standpoint longer term in terms of foreign-born workers decreasing as a percentage of the population, native-born workers increasing, and the potential wage impact on that. I mean, we have heard from industries. We hear from farmers. You know, we hear specifically, I mean, I don't know if you saw some of the news coming out of like Nebraska, for instance. Oh, sorry. So I think that one of the things that we need to think about is that if services inflation is truly what the Fed is most concerned about, and you think about areas like medical care services, which was hotter in the CPI report that we just received, There's a lot of foreign-born workers in that.

1:08:47And ostensibly, they have accepted lower wages over the course of the last number of years, particularly in the last, you know, as you see this chart here, you know, seven, eight years where this has really increased in terms of those workers. I look at this as an inflation issue and a labor supply issue, and we're continuing to see that. So I think this is something where, again, going back to specific industries, going back to specific sectors, companies. How many entry-level employees did they employ? How much of this could potentially be disrupted by AI, which could offset some of this decline?

1:09:26But I think this is important when you think about, are we in a higher inflationary environment going forward? And I think that this is part of it because wage inflation is likely to continue to persist if we're hiring more and more native-born workers. So since Trump presidency, foreign-born workers shrank by 3%. And of course, their cheaper labor, native-born workers grew by 2%. So yeah, maybe some pressure on prices. That's a pretty short time period to see that type of decline. Yeah. What was the Nebraska story that you referenced? Oh, you know, the inability to have enough workers to harvest and the fact that it's impacting state revenue collection because volumes are down.

1:10:10And the Nebraska governor, I think, came out saying that it was because there's a shortage of workers from a farm perspective. Okay. Todd, you have anything to add on Nebraska? Well, our guest, Sam. Nobody cares about Nebraska. It was just an example. My teammate who's joining us in the room here, Samantha, she covers Nebraska, so she's got firsthand boots-on-the-ground type experience here. All right. And I'm not wrong, right? No? No? Todd and Shannon, Thank you for hanging with us today. Before we get out of here, the new thing that we do is what are you most looking forward to? Shannon, what's up?

1:10:47What do you got going on? Like for the rest of the day? Or life. Or just... Anything. What's up? What are you looking forward to? Leaving here. All right, Ty, what are you looking forward to? I'm going on a family trip next week. Where are you going? Utah and Colorado. Oh, hell yeah. Wife, my two boys. Then Future Proof. That's right. And then the new Tron movie. You're into that stuff? I love that. Jared Leto's in it? Well, yeah, that part I don't know, but Jeff Bridges. Jeff Bridges is back. Yeah, it's Tron. And are you excited for Blues Traveler opening for Bush? I will be, have left by then.

1:11:19Sorry. Where are you going? I got to go back to Vancouver. I'm not joking. I'll be in Vancouver twice in a month. Unbelievable. Leaving, okay. Canuck. All right. Shannon, what are you looking forward to? I'm excited to, as I always do, eat at Land Ho in Orleans on Labor Day weekend. Why do you always do that? It's just a thing we do. That's what we do. We spend our weekend down there. And my son starts high school in a couple of weeks. So I'm really excited for him and him taking on that new challenge. And I'm going to try to figure out what he should be studying so that when he graduates, he can enter into this increasingly difficult job.

1:11:55Is he athletic? He is athletic. Maybe that's it. He plays golf and baseball. I can't replace athletes. Not yet. All right. This was fun. Thank you so much. listeners, thank you for listening Josh will be back with us next week we have a very special guest next week, it's not Dan Ives but let's say it's Dan Ives adjacent thank you for listening, we'll see you next time