Economic Data Deteriorates, Private Credit Struggles, Retail Traders Give Up

15:43Downtown Josh Brown:46.3 % more sellers than buyers. That is the largest gap since Redfin began tracking this in 2013. And a huge jump from this time last year when there were 29 % more sellers than buyers. And we didn't think that was great. This is way worse. And it's seasonally adjusted, which means this is not just about, oh, it's March, wait till May. It's a bigger story. There are 2 million people selling a house right now and just not enough interest in buying. One other thing, one of the big home builders, Lenar, in order to maintain sales in the current environment, they spent an average of 14 % on the final sales price on incentives in the first quarter of this year, which is back to 2010 levels.

16:37Downtown Josh Brown:They had to do this shit after the housing crisis. So in other words, a$450 ,000 home sold with a 14 % incentive rate translates to Lennar handing over$63 ,000 to the buyer in the form of incentives. And this is – here's a chart. What you're looking at is Lennar's sales incentives on home deliveries as a percentage of the revenue of that home. And you can see this 14 % level is completely abnormal, way elevated versus our experience in the last 10 years. And obviously, you can do that to get through a weak season. You can't just do that forever. So needless to say, the stock got whacked hard.

17:30Michael Batnick:It's in a 50 % drawdown. They whacked it off, Michael. Big time. And it's obviously not just Lennar. You look at Pulte, DR, all of the home building suppliers. I said this to Ben today on the pod, a great example of how difficult individual stock picking is. Since April 2021, there have been$9 trillion worth of cumulative home sales. Actually,$9 trillion. You can only imagine how much of that flowed through to Home Depot's bottom line. Tens of billions of dollars. Literally. the stock is flat since then.

18:09Downtown Josh Brown:Yeah. So, right. So what does it take for that thing to go up? What's this collection of charts you have here?

18:17Michael Batnick:So just tying a bow on this, where are we in the economy? Jobless claims are strong. Continuum claims are sort of elevated. Red book sales are strong. Travel, we'll talk about that later, is strong. Card spending, we know it's K-shaped. Bankruptcies are rising, not great. Business formation is surgery. We don't speak about that often, but maybe we'll do that one week. Bank loan growth is slowing.

18:41Downtown Josh Brown:Out of desperation.

18:43Michael Batnick:Well, I don't know about that. There's a lot of technology that's embedded in that. It's never been easier. But anyway, it is a mixed economy for sure. And if I'd say, is it getting better? Is it getting worse? Obviously, it's getting worse.

18:55Downtown Josh Brown:Hence, terrible.

18:56Michael Batnick:Not the same thing. All right. Let's do this. We're going to talk about the retail trader washout. And I'll open the story by sharing this. Citadel Securities, Nets record,$12 billion trading hole in 2025, up 25 % from the previous full year. Oh my God. And you could think of Citadel as the rake. They are the market maker. Every time you buy an option or sell an option or this or that, they're just scraping pennies every day, a lot of pennies. So they absolutely feasted on retail activity, which is now 25 % of the market. Obviously, it's pulled back since. So some charts from Gungeon that showed that retail traders have retreated.

19:40Michael Batnick:All right, we're looking at a chart of retail volumes. And the chart shows the retail as a percentage of total single stock volumes over a five-day period. And it hit a fever pitch, fever peak, I should say, a crescendo, if you will. of 15 % and has cooled up dramatically.

20:03Downtown Josh Brown:When was that? December?

20:05Michael Batnick:December. Yeah.

20:07Downtown Josh Brown:And this is like literally off a cliff. But I'm trying to figure out, does that happen in a lot of Januaries? I'm just looking back at the chart and I'm trying to see.

20:17Michael Batnick:I don't think this is a seasonal thing. I think it's a stock market thing. The stock market sucks and they're getting burned. We'll get to that more in a second. Zero DTE options. so options that expire in 25 minutes after you buy them, are near a one-year low as a share of total S &P contracts. And I think this is probably -

20:35Downtown Josh Brown:That's the gamblers running out of money after five or six trades went against them. It's just not fun anymore. It's not fun anymore. That's the reality. And I get it. The dispersion in the market, the rotations, the fact that some of the most popular stocks, not just amongst retail, but like period, are among the biggest losers this year. Stocks that no one's ever heard of are leading the market. Like it's not a retail market. You know what two of the biggest stealth winners are in the market this year?

21:09Michael Batnick:Sandisk and Sienna, like -

21:10Downtown Josh Brown:Throw those out. Those are fun. AT &T and Verizon.

21:14Michael Batnick:Right, not fun.

21:15Downtown Josh Brown:No retail investors trading that shit. That's not fun. That's Jenny Harrington, credit to her.

21:21Michael Batnick:Yeah, and Jenny's no fun.

21:23Downtown Josh Brown:No, I'm just kidding.

21:24Michael Batnick:All right. So Goldman says Thursday saw the most selling from long only investors across their trading floor since they began tracking in 2022. And of course, the lack of activity from retail investors is whacking off Robinhood in a real way. The stock is down 54 % from its highs.

21:47Downtown Josh Brown:I mean, this thing is trading like they had horrible news. I don't think Robinhood has had horrible news. I just think - Well, they did.

21:57Michael Batnick:They did. So options are the number one moneymaker. Crypto number two. And the buy the dip, the dip keeps dipping. So listen, Listen, these people, these traders can come back in a blink. So I'm not in any way, shape, or form suggesting that they're gone forever. But a lot of the things that kept them coming back, obviously, is just not working.

22:25Downtown Josh Brown:What do you mean these people? You talking about my Gen Z friends? They'll be back. Of course they will. They'll be back. And they'll come back smarter. Of course they will. I think 2024 and 2025 were sort of toxic environments in that they gave people, or 23 too, for that matter. I basically think we had a three-year period of time that gave people a false sense of ability. And the dips were bought quickly. The glamour stocks led the market. There's a lot of intuitive stuff going on, like AI is a hot theme. therefore buy all these AI stocks and they went up. You had things like Oracle doubling.

23:09Downtown Josh Brown:I just think it was an environment that lent itself to retail alpha, if that makes sense. It does make sense.

23:17Michael Batnick:The retail trader from 23 to 25 kicked the shit out of professionals.

23:22Downtown Josh Brown:Yeah. And now this year, you just have stocks that the retail trader is not interested in or aware of or leading the market.

23:31Michael Batnick:They're not buying energy stocks and industrials. They're just not.

23:34Downtown Josh Brown:They haven't heard of these names. Right. They've never been in a market environment where these names led. I think industrials as a sector have the most stocks that are still up or something like that. These are not Robinhood stocks. These are companies that make boilers and fences. They don't rise to the level of awareness for the Gen Z investor.

24:00Michael Batnick:You know what stock is rightly getting whacked in a big way? And this goes to the hurting consumer, because this is quite literally the first thing that you stop doing, DoorDash. DoorDash is in a 45 % return.

24:15Downtown Josh Brown:Yeah. Yeah. When the... First thing to go. That's right. When the cost to fill your tank goes up 30 % in a month... Nah, dude. You get off your ass... That's where you're cutting back. That's where you're cutting back. And you find that f***ing food. That's right. You get in your car. Why don't you make a grilled cheese? Get off your ass and cook something. All right. I'm now at the point where I'm reading a Halo article every day. Some days three, five. I can't even keep track.

24:42Michael Batnick:Dude, Bloomberg has a Halo section on their website.

24:45Downtown Josh Brown:I'm going to sue everybody.

24:46Michael Batnick:I don't know what else to do.

24:48Downtown Josh Brown:You just be flattered. That's all. That's all you can do. I'm super flattered and litigious. And I'm not even asking for money. I just want people to be like, Downtown Josh Brown made this up, popularized it, coined it, and we're using it as the premise for yet another research report, yet another article.

25:09Michael Batnick:It's in the public domain. You did a public service.

25:11Downtown Josh Brown:But I want something. I'm not asking for a lot. I just want somebody to be like,

25:15Michael Batnick:You want credit. You keep asking for it. You got it. You have the credit. Nobody doesn't know that it's yours.

25:21Downtown Josh Brown:I did think this was a good article. I emailed the reporter. don't you worry. I was like, hey, you know who I am? This is my shit. You're writing about my shit. This is Bloomberg. Private capital firms are starting to swap software systems for hard hats as the AI boom forces the industry into a quick rethink of its priorities. Blackstone, Bain, and Brookfield have all been talking of an increased focus on heavy assets with low obsolescence this so-called halo trade is targeting makers of everything from ship engines to conveyor belts that are considered less likely to be made extinct by ai and then they got a quote from jonathan gray at blackstone about it and then they said it's also in europe and it's global

26:14Michael Batnick:halo is everywhere did you ask did you ask where that chart came from they showed a chart in the in the article that shows the, that counts the number of mentions of the word halo, and it goes back several years. I don't understand what.

26:28Downtown Josh Brown:No, they're not. It says data based on prepared remarks and management answers. No way. No way. No, no way. You can't tell me on 200 conference calls in 2021, CEO said the word halo it says literally mentioned I know but it's fake low in transcripts

26:54Michael Batnick:upload it to possible terminal nobody said the word halo unless it was by accident to 2021

27:00Downtown Josh Brown:you know what this is like you know the movie where the guy wakes he's a singer songwriter he wakes up in a world where nobody knows the Beatles ever existed yes and he and he becomes the biggest star in the world because he starts recording, I want to hold your hand, and he becomes the biggest. What do you mean? Did I just wake up in a world where people were using this term that I invented two months ago in 2021? What is this chart? What are these people trying to do to me? I guess. Can you actually steal it from somebody else?

27:35Michael Batnick:That would be -

27:36Downtown Josh Brown:I'll kill you. I'll take my tire thumper and I'll put an end to you. All right. All right. What is this? Oh, put the chart up. Let's do the chart.

27:48Michael Batnick:I think this is kind of interesting.

27:49Downtown Josh Brown:This looks good. You getting long here?

27:51Michael Batnick:No, I'm not. But for all the hemming and hawing, the thing hasn't – the thing – listen.

28:01Downtown Josh Brown:What's the nominal yield right now? Listen to me.

28:07Michael Batnick:It's March 26th. It's March 24th. this thing has obviously puked this is the pump by the way this is an etf of the publicly liquid um bdc's and it's gone sideways since february 3rd yeah i am i am not i am not calling a bottom i'm not but here's what i want to say about these things where did it come from at 17 it went to 12

28:34Downtown Josh Brown:and it was at 17, it was probably yielding 8%. What is it yielding now? 13? Not that they're going to pay any of that out.

28:42Michael Batnick:You know how we say all the time

28:48Michael Batnick:that news follows price. If the stocks aren't going a certain direction, like wherever the stocks are going, that's the narrative that is written about it.

28:59Downtown Josh Brown:Usually, yeah.

29:00Michael Batnick:Almost always. Sometimes there are obvious news that - Yeah, yeah, yeah. There are events that change.

29:06Downtown Josh Brown:Yeah, yeah. I'm with you on that.

29:07Michael Batnick:This is really interesting because I'm not faulting entirely the media for writing about this. How could they not? It's juicy. It's salacious. The asset class has 10x. It's transparent. It's high fees. They should be covering it. But and also, if they didn't or if they stopped, and I know that's not their job, the prices would not be doing this. Or maybe not the prices, but it's really interesting for all the hemming and hawing, and we're going to continue to cover it. A bad year for the private BDCs, and these are public, what does a bad year look like for Cliffwater? Because 2008 was down 6 % from the index.

29:46Michael Batnick:So is a bad year down 2 %? That'd be really bad. It's just kind of hilarious that we're spending this much time as we should and we will. And yet the context is this thing could fall 2 % and that would be really, really, really bad.

30:00Downtown Josh Brown:I guess I'm not following what you mean. It already fell substantially more than 2%. These are the public ones. Oh, you're talking about the private ones.

30:09Michael Batnick:Yeah.

30:10Downtown Josh Brown:Well, I think the story here is not about the price of the public BDCs or the private BDCs. I I think the story is we have a situation where ordinary Muppet money was herded into 20 or 30 different products, some public, some private. Unfortunately, in the case of the private BDCs, the entryway is the size of a football field and the exit is the size of a phone booth. And everybody wants out at the same time because they think if they don't get out now, the prices will be worse. and maybe even if there are advisors in the mix, which of course there are, the reputational risk as well. And that's really the story.

30:51Downtown Josh Brown:And I don't know that, I know the people that cover this professionally and are investors, they're focused on the prices and the values and the NAV and the discounts. And I get that. I'm saying like for the media, the story is about, oh my God, they did it again. they got all these regular people to buy all these bizarre instruments and now it's going bad and why they really love this is every single person that runs one of these private equity firms also owns a professional sports team yeah they are monopoly men they are billionaires with capital b's and the media just they love it it's like catnip so it's a lot of it's a lot of i knew

31:39Michael Batnick:this is bullshit. So throw this chart out. This is the NAV of Aries publicly traded. You could buy tomorrow. Not saying you should. This is a chart of the NAV. So not the price, okay? The net asset value.

31:54Downtown Josh Brown:The asset value of all the assets based on their own calculations, it needs to be said.

32:00Michael Batnick:So it's worse than that. It's based on calculations of a third party that they paid to come up with the NAV.

32:09Yeah.

32:10Downtown Josh Brown:All right.

32:10Michael Batnick:So show the next chart. So that's the public one. And this is the private one. And this is the historical performance of Apollo's debt solution BDC.

32:22Downtown Josh Brown:Right. This doesn't trade. This does not trade.

32:24Michael Batnick:This does not trade. They tell you what it's worth

32:27Downtown Josh Brown:every time they put out a report.

32:28Michael Batnick:This line of up and to the right with zero interruptions. and there has been some shit between January 2022 and now that went down a little bit. Actually, it went down more than a little bit. But since then, straight up to the right, this is the part that the media rightfully says, wait a minute. Hold on. You're telling investors that you've got 600 basis points above SOFR, no volatility up until the right only always, semi-liquidity. All right. Okay. I want to use Apollo again. Look at this portfolio. This is for their private BDC. They don't have a public one. This is for Apollo's private BDC.

33:09Michael Batnick:Show the portfolio overview.

33:15Michael Batnick:Show the industry diversification, John. Do we not have that? Oh, I put this in late. My bad. All right. Anyway, this is 100 % first lien, 96 % floating rate. And unlike B-Cred, who I said 26 % of the portfolio is software related. Uh-oh. Yeah. With Apollo, it's 12%. There we go. We have it. Okay. So look at this industry diversification. It's 12 % software, 7 % healthcare providers and services, 6 % financial services. Look how many slices there are. All right. So my point is, dude, this is not going to blow up. but I don't know anything, okay? Maybe I look like a giant jackass, but these are not dumb people.

34:01Michael Batnick:In fact, they're the opposite.

34:03Downtown Josh Brown:Yeah, but this is the problem. But this is the problem. You're referencing Apollo. They are the best in the world at what they do. There's 50 other companies in the same space that are not as good at Apollo, don't have the pedigree, don't have the track record, don't have the amount of analysts covering all of these credits that are in these portfolios. Like you can't show the gold standard and draw, just like you wouldn't show the worst player in the industry and say this is what it all looks like.

34:34Michael Batnick:So the point is they are getting swept up in this just like everybody else. There's no reason why they would be immune. The stock is down 40%. And historic default rates, whatever they are. Like, I guess my point is this, this stock is trading like their loans are going to absolutely get cremated. And maybe they will. And maybe they will.

34:58Downtown Josh Brown:I don't think so. So I don't think so. I don't think the stock is down 40 % because people think Apollo's whole portfolio of loans is going to blow up. I think you're wrong. I think the stock is down 40 % because it went up 100 % on the expectation that Apollo was going to be able to grow 20 % a year for the next five years as it onboarded 20 million retail investors. And that dream has gone up in smoke. And with it, the multiple associated with that sort of growth. And what you're seeing is give back from the gains. This was one of the big winners over the last few years as private equity and private credit came into their own on Wall Street.

35:38Downtown Josh Brown:This stock went up huge. So did Blackstone, so they all did. But this one went up a lot. And what you're seeing now is not a referendum them on the credit quality of their loan portfolio. No way. This would be down way more. What's actually going on is people are saying, oh shit, worst fundraising environment ever coming up for the next one to three years while they wait for us all to forget about the redemptions and the asset gating. And that's the reality. And people could look at it and say, oh, it's cheap. Yeah, probably is. It's also going to be left for dead. I don't think people are going to forget so easily.

36:15Downtown Josh Brown:I agree.

36:16Michael Batnick:That's what you're witnessing here. I completely agree. Everything you just said is correct. I'm really good at this. The difference between the BDCs and the interval funds, they look almost identical. The difference is the interval funds have a legal obligation to buy back up to 5 % of the shares outstanding on a quarterly basis. And so Cliffwater is the biggest interval fund and they will be buying back 5 % of shares for who knows how long and who knows how long their credit facilities last and who knows if they have to offload some of the loans. This is all to be determined. This could blow over.

36:56Michael Batnick:I don't think it's going to. It's going to be a while. The loans could turn out to be fine and people could settle down. But the private BDCs have no legal obligation. Now, there could be bigger problems if they just say, no, we're just not doing it. We're not giving you guys money back this quarter. It's for the betterment of the shareholders. We'll see how this plays out. But it is obviously not going away anytime soon. Yeah.

37:16Downtown Josh Brown:And you know, a lot of the apologists for the space and the defenders have said, well, look at B. Reid. They were in the, you know, they were, they had their turn in the, in the sleeping bag as everybody beat them with bars of soap and batteries and socks. Um, I know it's oddly specific, but I went to a very violent summer camp. They, and they had their time and then B. Reed eventually was able to say, okay, redemption's no longer an issue. Call us, whatever you want, you could have back because the ship was righted. They steadied the ship. They lasted, they lived through it. And so a lot of people have said that's what'll happen here.

37:59Downtown Josh Brown:And maybe that's true. And I hope so. I just don't know that this is going to go the same way. There's - Real estate, real estate, sorry, real estate, a real estate portfolio has a tangible quality to it that a portfolio that is 40 % SaaS software just doesn't have. Ding, ding, ding.

38:22Michael Batnick:The problem is these companies say, listen, the historic default rate is this, and the historic recovery rate is 94 cents on the dollar. We're senior secure. We get paid back. Yeah, the equity will get wiped out. We'll get paid back. With what? There's no factories or land or inventory. It's software. What are you getting paid back with? So a better comp, and also not apples to apples, is I follow the substack Covenant Light who writes all about this type of stuff. And Apollo was in the middle of it. Remember the energy trade, the unwinded 2014, 2015? They've been through that with this. So they survived.

39:00Michael Batnick:Listen, they're going to survive this. I mean, let's not be ridiculous here, but it is going to be a very slow bleed. And where it ends, nobody knows. All right, let's keep moving. We just did a lot of that.

39:10Downtown Josh Brown:I mean, do you want the good news? I love good news. New opportunities are being created. If you do not have money at risk now and you were ever interested in exploring adding private credit to your portfolio, you like over the next year, you're gonna get a crack at, I think some distressed valuations in the space and choose your fund very carefully. If this is something that you wanna do, definitely a better entry than two years ago when it looked Nadoff-esque, just every month it's up. No, I can't talk, believe me. I won't be the one that gives you the timing of it.

39:53Michael Batnick:I only mean literally the price have not come down yet. And this is part of the problem, is that there is leverage here. And if these companies are tapping their credit facilities at the banks and they can't mark down their loans because guess what? Some of their covenants get triggered or tripped by the banks. It's like, wait a minute, you can't have them with a three times leverage. Like, no, you got to sell. We need some money, like a margin call.

40:14Downtown Josh Brown:So then that's more selling of portfolio holdings, which puts more pressure on the overall asset class.

40:20Michael Batnick:It's not great.

40:21Downtown Josh Brown:I'm not saying like rush off the sideline. I'm saying if you were interested in this space, okay, it's about to come your way. You didn't have to chase it.

40:31Michael Batnick:And that's not all bad. So software got whacked off again today. I mean, that was a baby bounce, dude. So throw this chart on the screen.

40:40Downtown Josh Brown:I didn't believe the bounce on Monday, to my credit.

40:46Michael Batnick:We had rotation today, which is good. Financial stopped going down. You like that? Well, at least the big banks stopped going down. We had 260 stocks I think were up today, but the NASDAQ was more decliners than advances. Does Microsoft go down every day? Pretty much. So let's go through some charts. This is IGV. It's Salesforce. Tire thumbs. Microsoft. Tire thumbs.

41:14Downtown Josh Brown:This chart looks like it looked me the wrong way on the subway.

41:18Michael Batnick:it's just so this thing went from like that candle to 75 and it you know it's a baby balance and it can't even sustain that for a minute like not good disgusting not good um next chart please uh i threw two in igv here let's okay perfect thank you john um microsoft are you kidding me

41:41Downtown Josh Brown:i mean it's got like it looks like the the devil character from south park look at the horns at

41:47Michael Batnick:the top it's just it looks like three it looks like satan this how could you buy this it well

41:54Downtown Josh Brown:i every candle is redder and longer than the one before i will be buying the absolute snizz out out of microsoft but not 350 i supported 350 maybe we'll see that was liberal that was deliberate that was the liberation day bounce ed three uh 350 was a false breakdown and then that gap that gap up is when Trump tacoed.

42:17Michael Batnick:I need a down 4 % day that closes up 2%. When that happens, I'll buy it, but not before that. Now they're getting to Google. Can we pause on Microsoft?

42:27Downtown Josh Brown:Why not just buy calls? You don't want to be low on this stock. You just want the bounce, right? You see it at$3.55? Just buy the$3.75 calls. Isn't that like a base? It's a base hit. It's a base hit, but you commit very little capital and it's not like a position in your portfolio.

42:47Michael Batnick:Okay, I will report back on that. I like where your head's at. Alphabet, like the secular winner, has now broken below previous support. Not great.

43:00Downtown Josh Brown:I wrote this up in Best Stocks in the Market with Sean yesterday, and I basically said, I hate this chart. Not everything we write is like, go buy this. We said, lay off Alphabet here. It's in no man's land technically. And we said Apple looks like it's about to break its 200 day. And that might have happened today. So I look at these stocks and I understand what's happening. They're being used as a source of funds. And they're big. And there's a lot of money. And there's a lot of liquidity in these stocks. And people want liquidity right now. And they're just pulling it out.

43:33Michael Batnick:Last chart. Chart Kid made this for me. I wanted him to show me since Software Bottom on 223. What stocks. So there was a lot of balances, but as we can see on the left, a lot of stocks bounced and rolled over. They did not keep their balance. A lot of stocks did. So here's the stocks that did not balance. And there's others. And these are particularly the stocks that have been in the AI disrupted camp, okay? So S &P Global, a stock that I bought and sold, rolled over big time. Same thing with CrowdStrike. Same thing with Salesforce. ServiceNow, Workday, Adobe, and FICO. Forget about it. My God.

44:09Downtown Josh Brown:um and in the winter camp we said that but we said this we said with those stocks you can't prove a negative that the set the sellers the sellers are are basically saying i know they are in some way disrupted i don't know the extent therefore i'm selling every up day until i lower my risk here the sellers are not saying like what's the valuation it's a much more existential issue here and you can't none of those service now can't come out and say all right we've proved it eureka here are the results from the from the lab we are 100

44:52Michael Batnick:undisruptible nobody could say it knowing what little i know i do believe that this is overblown i do believe the incumbents are ultimately going to be the biggest beneficiaries totally totally erroneous depending on your time frame because right now prove it right now the The sellers are in control, period, hard stop. That's it. And they might look foolish. Some of those stocks have insider buying. Doesn't that? Nobody cares. Yeah, nobody cares. So these are good buy. Well, what's your risk tolerance? How much tolerance pain do you have? Blah, blah, blah, blah, blah. Okay. Stocks that did stick the landing.

45:24Michael Batnick:Dell, Expedia. That's a surprise to me. Netflix. And even that rolled over pretty hard today. So maybe that didn't. Intuit, same deal. Actually, you know what? A lot of these stocks rolled over today. Palantir, Block. So yeah, man, it's hard. The sellers are in control right now of these names.

45:39Downtown Josh Brown:Those news clips with the five-hour lines at Atlanta Airport and LaGuardia. Could you imagine? But those are like advertisements for being long Expedia. Because look at what people are willing to endure. In addition to the higher jet fuel price, raising ticket prices, people are standing in LaGuardia for five hours just to get somewhere. That's super Polish Expedia in an alternate universe. All right, we're going to do this college grad unemployment thing. I'm telling you, I think I'm onto something. I think this is going to be a politically explosive issue come June when yet another wave of college graduates leaves the commencement ceremony, spends 30 days hunting for a job, looks at mom and dad and goes, I don't know what you want me to do.

46:33Downtown Josh Brown:And I know that this is an acute thing to me because I'm in this. And so I know part of this is like me projecting this onto everyone, but it's too big to ignore. It's too big to ignore. Co-pilot tools, LLM tools, these things are carrying out the exact functions that had formerly been the province of the college aged college grad Excel monkey for decades. And hiring managers at companies are being told, stop. Don't bring on. How many college grads do we normally hire? 60. Okay. Hire 10. Let's see what happens. Hire 10. Give the older people more AI. Let's see what happens. Axios wrote about this today.

47:21Downtown Josh Brown:Chart on. What you're looking at here is a thousand U.S. adults. The gold line is non-college grads and the pink line is college grads. And they're asking people what they think. Is this a good time to find a quality job? And as you can see, in the non-college grad camp, things look okay. 44 % says yes, it is. 27 % college grads say it is a good time to find a job, which means almost three quarters say that it's not. Workers with higher levels of formal education are way less optimistic than those with less school. And just to put a bow on this, That is the widest gap on record going back to 2001.

48:13Downtown Josh Brown:So it always was the case that people with college degrees were more confident about whether or not it was a good time to get a job than people without college degrees. And that is now flipped and the gap is exploding. The unemployment rate for college grads is now 6%. For the overall economy, it's like 4.2 or 4.3. And then they took a look at Indeed. There were 29 % fewer job listings for software developers in March than there were pre-pandemic. That is massive industry shrinking. 27 % fewer marketing jobs. 36 % fewer listings for media and communications roles. These are college education jobs.

48:58Downtown Josh Brown:And they are literally vanishing right before your eyes. We made two charts. I know Sean and Matt worked on these. I want to put these up. This is a butte. This is unemployment rates for recent graduates versus all workers. And I want you to pay attention, Michael, and audience to the red. This has been a trend that's been in force since the pandemic and has gone into hyperdrive since the advent of ChatGPT. And when the bars on the bottom are in the red, that is a higher unemployment for recent grads versus all workers. Our entire lives, this goes back to 1990. We have never been in an environment where it was harder for a college-educated kid to get a job than for a non-educated kid to get a job.

49:46Downtown Josh Brown:Our entire lives until the last five years. And now it's picking up steam. Let's do this unemployment by major. Now, don't laugh at people that got an anthropology degree. You ain't so brilliant yourself because look what's right below that. Computer engineering, 7.8 % unemployment rate. Computer engineering, let me repeat. Computer engineering, 8 % unemployment. Computer science, 7 % unemployment. Remember 10 years ago where you laughed at people and said learn to code? Those are those people. 8 % unemployment for the people that, quote, learn to code. So you could laugh at the art history people and the environmental studies people, and you can do that if you want.

50:36Downtown Josh Brown:You're going to laugh at a computer science major. The 10 majors with the lowest unemployment, special ed, miscellaneous education, elementary education. So that's tax dollars, guys. agriculture, foreign language, geography, engineering, social services, nursing, and secondary education. So plenty of employment still in government-supported types of jobs and in education and not much else. So we have a lot of people educating people who are going to come out of school and not have anything to do. And it looks like it's getting worse. And I do think this will become a political issue. And the AI thing is going to be under the microscope like never before.

51:28Downtown Josh Brown:And you're going to see, I don't know if it's the Republicans or the Democrats, but somebody is going to push back on all this and ask the question out loud, why are we allowing this? And I'm not telling people how to feel about the issue, but I really do think it's going to come to a head this summer. What do you think?

51:46Michael Batnick:I agree with everything you said I think this is terrible I'm surprised that it's only 5.6 % or 6. whatever it is I would have thought it would be higher I don't know how this manifests itself politically I don't know what the solutions are

51:59Downtown Josh Brown:I think that number will be 6-7 % by the time this next wave of college grads they don't graduate until May

52:09Michael Batnick:who's hiring these kids

52:11Downtown Josh Brown:I mean many of them will get hired but less than last year, certainly less than the year before. And again, it's not that there are no jobs. It's not the labor market is crashing. It's a slow to hire environment because people are like, well, let's just see. Let's wait and see where all this AI that we're spending all this money on. Let's see what it can really do before we just add the requisite body count that we've been, head count, I should say, that we've been accustomed to adding each year, like almost on automatic. Let's not be automatic. Let's hang tight. And you're seeing that sentiment multiplied by, I don't know, 8 million businesses, large and small.

52:54Downtown Josh Brown:And this is what the net result is. And people are not going to be happy.

52:58Michael Batnick:Here's one area that I could see hiring continue at the pace that it was historically. Heavily regulated companies, banks, for example, that need to carry favor in Washington. They say, you hired 2 ,000 kids last year, you're not hiring one less than 2 ,000 kids this year. Something like that. I know that's a band-aid.

53:21Downtown Josh Brown:J.P. Morgan spent the last three years telling people that they're basically automating their own jobs.

53:29Downtown Josh Brown:It's not even about laying people off. It's the not hiring. That's why I think the labor statistics that we're all citing to say that the economy is pretty good. It's holding up. It's hanging in there. It's misleading. It's older people at the top of the income scale who just aren't worth replacing because the AI is not skilled. Those people are fine. Young people who now not only can't afford to buy a house, also can't afford to fill their car's gas tank and have no idea where they're going to get hired. It almost doesn't matter what they have a degree in. I'm telling you, it's terrible and I mean it.

54:06Downtown Josh Brown:I agree.

54:06Michael Batnick:I agree.

54:07Downtown Josh Brown:Shouldn't be this hard.

54:09Michael Batnick:Shouldn't be this hard. This is, I think, the biggest humanitarian crisis is a strong word, but this is the big one. This is really bad.

54:19Downtown Josh Brown:If anyone is still out there and hasn't killed themselves yet, let's do make the case.

54:23Michael Batnick:Alright, so you mentioned that what's going on in the airport is a great case for Expedia. I actually made the case last year. I don't know if you remember this. In September. I made the case for Clear. And my case was not scientific. It was just I heard her on Patrick O'Shaughnessy's podcast. And I remember she said, I am a f***ing animal. And I wanted to bet on her. And I never did. And the stock is absolutely on fire for reasons that are very, very obvious. Why don't you buy it?

54:55Downtown Josh Brown:You just forgot to buy it?

54:56Michael Batnick:I just kind of forgot about it. John, so the stock price up there? Yeah. So massive buying. Massive breakout.

55:04Downtown Josh Brown:huge volume. Wow. When did you tell us about this? September. Holy shit. It was like 30 bucks?

55:11Michael Batnick:Yeah. So probably not the best entrance today, but if it has a low volume pullback, I probably still won't buy it because I'll forget.

55:17Downtown Josh Brown:This is just clear at the airport? It's just clear at the airport. Like the iScare, that's it? So I'm sure - So people don't cancel this. They get a free trial and then they start paying.

55:26Michael Batnick:The retention ratio is actually less good than I thought. It's like 92%. It's not bad. They actually stopped reporting it, which is a little bit concerning. But ironically, I'm sure that people that pay for Clear were losing their goddamn minds because that was probably no better than TSA. I mean, I'm sure it was a little bit better, but I bet you the Clear line at LaGuardia was at the exit at this point. So the company is working, the margins are improving, the cashflow is accelerating, but what an unbelievable commercial

55:53Downtown Josh Brown:this experience has been for sure. Yes. Are those people like speed running the security line, the people that have Clear? Clear? Probably not. But it's probably better.

56:04Michael Batnick:But it's probably terrible because I've been in many clears around the country where there's just too many people. There's nothing they can do about it. I don't know how you get more monitors. But I was at Miami two weeks ago and I went straight through with clear. It was wonderful. So I don't know. But don't worry.

56:17Downtown Josh Brown:They sent ICE to the airport to help with the TSA lines. And if the militias are not successful at speeding things up, they will send in UFC fighters, I'm told, is the next wave of. I'm here in the same thing. We're in the same source. I feel like it'll be fine. All right, let's do mystery chart, and then we'll get out of here. My mystery chart, please, pop it up for us. All right, this is a sector of stocks. It's global, and probably the only one that looks like this right now.

56:49Michael Batnick:Yeah.

56:49Downtown Josh Brown:And I would love to hear what you think it is.

56:51Michael Batnick:Well, these have to be energy stocks.

56:55Downtown Josh Brown:Final answer? No.

56:56Michael Batnick:What am I looking at here?

56:59Downtown Josh Brown:You're looking at stock charts. Oh, individual stocks. They're all different stocks, and I told you it's international. Some of them trade in different currencies, so Sean normalized it.

57:09Michael Batnick:Final answer.

57:10Downtown Josh Brown:Yeah? Okay. You'd be wrong, sir. Pop it.

57:19Downtown Josh Brown:Oh, okay. Oh. The only other sector that's up. Yep. That's good. Good stuff. You made a good guess. You probably made the guess that I would have made because I don't know what these charts look like. Chart back on, please. This is SK Hynix, Samsung, SanDisk, Micron, Western Digital. Western Dig. Western Dig. I'm sorry, my bad. Memory is so hot right now. These stocks are just, I don't even know what to say. This is this year's bubble. It'll get real ugly for the people that buy it today, I assume. Although maybe I would have said that a week ago and they're all up another 15%. So just sell before everybody else does.

57:58Downtown Josh Brown:Sell right. Sell before everyone else does. All right. Great job with the chart. Sean and John. Thank you guys. All right. Hey, everybody. Did you know tomorrow is Wednesday, which means an all new Animal Spirits podcast with Michael and Ben for the YouTubers right here on our compound YouTube channel, Spotify, Apple, anywhere fine podcasts are played. We'll have an all new Ask the Compound. After that, that'll be live. Duncan and Ben Carlson are taking your questions. So get those questions into us. What is the email address, guys?

58:31Michael Batnick:I think it's ask the compound show at gmail.com.

58:37Downtown Josh Brown:Ask the compound show at gmail.com. If you want to have your question featured by Ben and Duncan and their special guests on Friday, we'll have an all new compound and friends. Can't wait to see you then. Thank you guys for listening. God bless. Good night.

58:53Michael Batnick:Thank you. or investment product. Past performance is no guarantee of future results. Investing 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.