Eric Jackson and the Search for the Next 100 Bagger

12:15Downtown Josh Brown:Oh, yeah, you never cut in. Well, no, I'm really curious what you think. The level to which this is extraordinary. I mean, am I overstating it? Am I understating it? What do you think is the situation? Well, they are like probably the, the biggest, um, private firm. No, no question. And you, you are right that they are linked up to, uh, all these other mega mag sevens that everybody already cares about so much. And so it's, um, it, it is. And they have this guy who, you know, everybody freaked out about with his Brad Gerstner comments, uh, last weekend. And, and I've never heard so many references to Jeff Skilling and Ron, uh, and the comment that he made in like 2020 or no, 2001 on an earnings call where he called, uh, one of the analysts and a hole for not knowing, you know, questioning his, uh, his financial models or something.

13:10It was that same kind of a vibe. And so there were, you know, there's so many people that reacted to that saying, oh, this is the, the, the sign that this is the top and we're ringing the bell. Now this is obviously an AI.

13:22Downtown Josh Brown:When the founder starts yelling at Wall Street. Yeah. Okay. How dare you question me for like, you know, how I could spend 1.4 trillion on outlays for the next eight years. So we're going to get to that. All right, go ahead. Let's start from the beginning of the saga over the last week.

13:37Michael Batnick:So prior to this week, OpenAI was operating mostly in the background. I know people that were following the story obviously were familiar with Sam. He's public on Twitter. But they were merely for the general public. They were the ones that was powering all the announcements, the Oracle pop, the this, like that, but this was the week that they really took center stage. So here's what happened in summation. We're going to dive into each of these. So it started with the restructuring for them to pave the road to go public. That's what kicked this off. Then Elon and Sam Altman got into a fight on Twitter.

14:17Michael Batnick:sam's co-founder the deposition came out this week and not pretty a lot of ugly allegations in there then sam as we mentioned was on a podcast with brad gerster and satya and got super defensive about very reasonable questions attacking made-up shorts um and then uh the cfo yesterday stuck her foot in the mouth and said um the government might need to backstop them And everybody's like, wait, what? She didn't actually say that. And then them saying today, no, no, no IPO. And then, of course, the denial. Sam and her saying, no, no, we don't want a government backstop. We just want X, Y, and Z.

14:54Downtown Josh Brown:Let's take these one by one. The restructuring, Microsoft is already consolidating these losses from their open AI investment. That's a thing that's already happening. But clarifying what Microsoft's stake is, is an important step toward the IPO. because like they're going to end up with what percentage? 27 % or something. What's the number? And a 20 % claim on their revenue. Okay. That I think is what shoves this whole thing into broad daylight. Like, okay, they're on the IPO runway. Even if there's no timetable attached, they are now saying we're moving forward. And this is the first step that one of the first steps we have to take.

15:34Downtown Josh Brown:I don't know. What was the Elon Sam fight? Right.

15:37Michael Batnick:By the way, just the trillion dollar mark, like IPO. Come on. Come on. I'm$20 billion of revenue. All right. So Sam, hold on. Let's start here. So Brad Gerson was defending what he was saying. People reading too much into Sam being feisty. I love that about him and our founders. We laughed about it after. If you listen to his words, here's what is said. And I think uh buco capital made the point i know you love that guy um said sam breaks people's brains just like elon it's a thin line between grifter and visionary and creating true believers to harvest their capital requires rhetoric that makes non-believers recoil elon hates sam not just because he stole his company but his whole playbook and josh and i were just talking about this like it's a similar thing to what carp is doing galvanizing the shareholder base pumping up the stock getting mad at everybody else it's not too dissimilar from what you're trying to do but it's an effective strategy.

16:35Yeah. I mean, I'm not the biggest Sam Altman fan. Like I am, I love Alex Karp and people take shots at Alex Karp

16:44Downtown Josh Brown:because Alex Karp of Palantir. He was on CNBC earlier this week doing the same thing against Michael Burry. That went well. You know, and, but he's always been like that. He's always taken that antagonistic approach to the shorts. So it's not affected. It's not him. I don't know. I don't think it's anything more than the fact that he doesn't like these shorts. He believes in his company. I agree with you. I don't think that's as performative as some people think. I do think there's some element of it, like let's create this us versus them thing for the retail shareholders so that we have this army of defenders.

17:20Downtown Josh Brown:I think there's a tiny bit of that, but I genuinely think when you build a company over 20 years, you become completely intertwined with it to the point where somebody's saying something negative about your company. it's like somebody insulting you or slapping you in the face. But Carp seems authentic. That's my point. I think it's genuinely insulting to him when somebody is saying, I'm going to short your stock because it's almost like I'm going to bet against you personally. Right. So I totally get that. Sam gives off a different vibe. Sam doesn't have a stock to bet against though. No. And like, I don't know, if I put my junior psychologist hat on, like there is like some defensiveness in him.

17:57There is some like weird vibes you do pick up on. There have, there, there is a lot of smoke around this company. Like we haven't even touched on the fact that, what was it like two or three years ago when like basically everybody quit that company because of Sam. And then, and then there was this like board fight, uh, and a bunch of board members left. There was a woman on the board then who just did a podcast where basically she sort of out and out said to that Sam lied to the board back then.

18:23Downtown Josh Brown:And that controversy was about the fact that, and this is Elon's problem with it or stated problem with it, is that open AI was originally meant to be a foundation that was going to save the world from AI while developing a type of AI that would be like helpful. and then all of a sudden it shifted to, well, we have a for-profit arm too, because we need to, because we're going to have to fund this technology and that's totally reasonable. And then it shifted to, actually, most of this is going to be for-profit. And not only that, we're now in bed with Microsoft. And the true believers who were like, democratize AI for the people, were like, wait, what the f*** just happened?

19:04Downtown Josh Brown:Microsoft owns a stake in it. So that power struggle then leads to Sam saying, it's either me running this thing or it's not going to work out. And the board sides with him because you need him because he's the reason why anybody is investing to begin with. Okay, so that's explicable. What's inexplicable is being in the position that he's in, going on Gerstner's podcast and saying something to the effect of, there are times where I wish we were public so that people could get short and I could burn their asses. It's like, wait, what?

19:36Michael Batnick:That's crazy.

19:37Downtown Josh Brown:That's crazy. That's super defensive. and even if you're taking it personally and that's why you're that way, that's a lot. And then he says to Gerstner, who is arguably among his top five most visible defenders and proponents of him. And shareholder. He says, if you don't want your stock, no problem. I guarantee I'll get somebody to buy it from you right now. So people hear that and they're like, whoa, what's going on with this dude personally? That he's all of a sudden. So I am of the belief that where there's smoke, there's fire. That part was weird. That was super weird. And that tells me that behind the scenes, there's a lot of that going on.

20:17Downtown Josh Brown:And we just saw a little bit of a glimpse of it. What do you think? I agree. I mean, I think it was a dickish comment. I think that, but like, are we out to give awards to these guys for being like the best human beings? No, but here's where it matters. If you're an investor in any of the companies that have just seen a 20 % rise in their share price because they, quote, are in a partnership with OpenAI. This matters to the public investors in many of the largest companies in the world, including NVIDIA, Microsoft, and everyone else who's doing deals with OpenAI as fast as they can. So I think that's why this is such a fascinating situation.

20:55Downtown Josh Brown:We don't have a share price to gauge, is OpenAI rising or falling in the eyes of the public?

21:02Michael Batnick:If it was public, how much does it fall after that comment?

21:04Downtown Josh Brown:15 % immediately more or in 2025 logic, it actually rallies. Yeah. These days. Yes, probably. Yes. And I mean, the question, I mean, that says more about today's public markets than anything. I mean, I think, I think the bigger, you know, bigger issue here is, is that like AI and what's going on with AI is bigger than open AI. And like, and so there, there are forces at work right now where, you know, Sam is an interesting player in all of this, but he's just like one kind of weird guy. He's not just one. He's at the center. But it's$13 billion in revenue. Palantir has a$500 billion market cap and is on a$5 billion annual run rate.

21:42Michael Batnick:And it's$1.4 trillion. It's a big deal. And it's$1.4 in commitments. Like, OpenAI is powering everything. And he's acting bizarre and him fighting with Elon. So he tweeted, Sam did. And this is in the middle of all of this. This is the day before Halloween, a tail in three acts. So he shows a picture of him getting a Tesla. John, we have this? Your order is complete. And then he responded, hi, I'd like to cancel my reservation. Could you please refund me the 50K? Which is sort of a weird thing to do anyway. It seems like he's just f***ing with Elon just to do it. And then it says, address not found.

22:13Michael Batnick:So then Elon tweeted to him, you stole a nonprofit and you forgot to mention Act 4 where this issue was fixed and you received a refund within 24 hours. But that is in your nature. And I feel like Sam -

22:26Downtown Josh Brown:This isn't gentle ribbing. These guys - No, it's personal. You kind of hate each other, right?

22:30Michael Batnick:Because also, doesn't it feel like from the shareholder base that Sam is basically copy pasting what Elon did with Tesla? Yes. I mean, but then you could say that Elon copied and pasted with a grok, you know, like what Sam did with open AI. So I don't know, this is like, boys will be boys.

22:45Downtown Josh Brown:You know, this is like, yeah, but the stakes are like a trillion dollars. That's the thing. I grant you, I grant you, obviously like you, you know, I'm not trying to make light of the, you know, the fact that like mag seven has all these commitments to open AI and vice versa. But I just think that the, that these guys, you know, in the grand scheme of things, like these markets will roll on like AI, you know, everyone was freaking out over this, the CFOs comments yesterday or whatever, uh, about a government backstop. Sarah Fryer, but those weren't her. She did not use the term backstop. This is what she said.

23:16Right.

23:17Michael Batnick:So read what she said.

23:18Downtown Josh Brown:Okay. I got it. It's, uh, this is a Bloomberg article quote, uh, chat gpt creator open ai the world's largest private company is asking the u.s government to provide loan guarantees for its massive infrastructure expansion that will eventually cost more than one trillion dollars she was at a business conference for the wall street journal and she she said this is where we're looking for an ecosystem of banks private equity maybe even government federal loan guarantees would quote really drop the cost of the finance again no shit uh why even make a loan how about a grant anyway people flipped out on uh financial twitter and then she finished that that routine by saying ipo is not in the cards right now uh yeah that won't be up to you that'll be up to your uh your privately held shareholders when they've had enough won't be up to um did uh did finance twitter flip out too much over this well i i think the, uh, the idea that, oh my gosh, is open AI, you know, are they going to get bailed out?

24:25You know, with Sam's weird answer on the podcast, it symbolizes that, you know, these guys are like another Enron or something like that. And therefore like, we're going to be all as taxpayers on the hook for them. I mean, I just, it's, it's overdone. It's, it's a great company with great engineers. Like the, like, like to bring it back to open door, you know, um, open Of course. Open Door has been around for like 10 years, right? And so Open Door had some amazing AI and machine learning people before people were talking about AI, even like in the, you know, 2017, 2018, they had rock stars and they don't today because a lot of them quit.

25:05And, you know, and basically there are two places where all the rock stars quit. Anthropoc and Open AI? Open AI and Meta. Meta, right. Those are the two companies that have been paying the most. So the rock star engineers have gone there. So they have amazing people at this company. And so a flighty CEO at the top. Well, the real concern is now you have some of the biggest publicly traded companies in the country

25:30Downtown Josh Brown:where analysts are baking in orders and revenue coming from these open AI commitments. And you have somebody like Brad Gerstner innocently ask something like, how could a company with 13 billion in annual revenue have$1.4 trillion worth of commitments? And then that answer. And then all of a sudden people like, wait a minute, maybe these growth numbers that we're baking in for our public investments are not actually going to materialize. It calls everything into question.

26:00Michael Batnick:That's the problem. I think, you know, if I was going to try to make the case for open AI though, like, or in Sam's defense, okay. I would say there's never been a company out there that's shown the growth of our company. I totally agree with that. Like it's the, from the moment of like November, 2022, when that chat GPT three came out, like there's all these various charts that show like the adoption rate on chat GPT has just been off the charts.

26:25Downtown Josh Brown:It makes TikTok look slow, right? It just blows by, you know, forget the iPhone, forget all the things, Instagram adoption. Now what they've done with that momentum is very wise, right? They've made themselves too big to fail in AI, meaning there are so many partnerships now, including with NVIDIA, including with you name it, Apple. There are so many partnerships, so many overlapping deals or bilateral deals. There are whole groups of companies that are working together that nothing can happen to AI without it affecting the whole, I don't want to say house of cards, the foundation of the house that we've built on this theme.

27:08Downtown Josh Brown:And that's the part that's concerned. I mean, it's brilliant on their part. Well, and so like, and you say, oh, 1.4 trillion in commitments. Like, like, I don't even know what that word means, by the way. That's what like, so I think it's, I think it's supposed to be eight years or something out or so, but the question is like, if, if you are the CEO of this company, like, are you taking your foot off the gas? No. Anthropic is like breathing down your neck and like Google's coming at you with Gemini.

27:34Michael Batnick:But what does that mean? Take their foot off the gas. Slowing down. Should you not make those commitments? Yeah. Should, like, the question, like, take, like, basically, the, the, the, the, what finance Twitter is saying is, oh, just take it slow. Just go easy. Oh, get profitable. Just get profitable first. But if you believe. These companies never get profitable first. They always, like, go and breakneck speed. Right.

27:54Downtown Josh Brown:If you believe what Satya. So, by the way, so Sam Altman drops off the podcast shortly after that. He's like, I got to go. And the way, the way Brad was like, okay, no problem. Thanks for being here. it sounded like he knew in advance that he would drop off, but people turned that into a conspiracy. Like he couldn't take the heat. I don't believe that, but whatever. That was the interpretation. But the thing about keeping your foot on the gas, if you don't, somebody else will. And there's a lot of money out there waiting to invest in anything that looks like it's winning. Right. So you're right.

28:29Downtown Josh Brown:I agree with you. And I would say that the, um, there, there has never been a platform, if you want to call AI a platform, there hasn't been a platform ship, a shift at this big, you know, before it's mobile. Like you want to compare the ship from desktop to mobile to this, to AI, like you're talking about like superhuman intelligence, right? Like what's the value of like owning that and like sort of being the first to kind of really dominate AGI or whatever. How valuable is that for the U S to beat China? How valuable is it for one of the Well, if you look at the CapEx, you can only conclude that the smartest people in the room believe it's the most valuable trophy of all to capture.

29:12Downtown Josh Brown:And some would even take it a step further and say, if they don't, they're done. It's right. You look at the way Alphabet and Meta are spending on this. It looks existential to them. Yeah. Like that's the only interpretation you could have is that they're betting the company on it because they have to. Right. And it, I mean, and also the, the interesting thing about those, that spending is nobody ever talks about the operating cashflow of these mag sevens. And if you, yes, the CapEx has been like up into the right, but the cashflow has also been highly correlated with that and leads like the, the up into the right, you know?

29:48So there's always been a huge buffer of cashflow for these companies. So they're never spending out of their pockets. And these, the folks who are making these decisions at these companies, someone was telling me, like, you don't understand, like, how much, like, thought and preparation goes into the business cases before they spend billions and billions of dollars in commitments in their budgets. So they're not stupid. And they know that there is going to be payoffs from these capital commitments to build out these data centers.

30:15Downtown Josh Brown:Will they all have a payoff or is someone going to lose? Is it a foregone conclusion that Meta's AI strategy is going to pay off? Well, I think the biggest risk is going to be that the energy grid can't keep up with the demands. So the data centers will be there, but will the energy be there to kind of power that? And that's why there's been such a scramble just in the last year to build nuclear, you know, get Three Mile Island going again and all this kind of stuff.

30:39Michael Batnick:Matt has said that Reels has had a$50 billion run rate and thanks to what they're able to do with the compute. But I think there's a bunch of different risks. That's one, that there's just a meltdown. We just can't power all these things.

30:48Downtown Josh Brown:Or a political risk. everyone's electricity rising, like socialism. Yeah, that would do it. In order to support the growth of these data centers in your neighborhood. That would do it. That's not popular.

30:58Michael Batnick:Another risk is that we hear on one earnings call, uh-oh, the demand is not what we think it is. And these things gap down a million percent. But we're not close there because they all said on the last call that they're undersupplied. They all said the same thing. So that's probably in the future. But then the third risk, which is coming to fruition this week is, hey, wait a minute. Open AI is at the center of all of this. And there is now doubt about the person leading the company. And also, there was this narrative in 2022 and certainly in 23 that Google's in trouble. Like they better – and Google stock got killed.

31:30Michael Batnick:And now Gemini is growing faster than OpenAI.

31:33Downtown Josh Brown:Let's put that chart up, John. Corporate AI. This is enterprise large language model market share. So it's the percentage of the market that they're estimating these companies have. and the only two heading higher are Anthropic and Google. Meta, I guess that's Llama, is falling, at least relative to the others, not falling in absolute terms. And so this is it.

31:57Michael Batnick:If OpenAI, if they can't make good on the$1.4 trillion that they've committed to, and obviously all of this is showing up in analysts' earnings per share estimates, lower. Right.

32:08Downtown Josh Brown:Let me share this with you. Deutsche Bank's AI hedge, navigating the data center debt surge. Deutsche Bank AG is taking cautious steps to mitigate risks from its burgeoning exposure to the data center sector. I guess they're raising debt for all these build-outs. Okay, fueled by the explosive growth in artificial intelligence, cloud computing, blah, blah, blah. Executives at the German banking giant have been discussing strategies such as shorting a basket of AI-related stocks or employing derivatives to transfer risk. This is a financial time story who would be nothing less than gleeful to see this entire thing crash and burn.

32:48Downtown Josh Brown:We should point that out. What do you think when you see headlines like that? If that's even 10 % true, it's a little concerning. Well, like my first question is like, what are all these AI stocks? Because when I turn on the TV and I see AI is in a bubble, like, okay, NVIDIA. Broadcom. We know Palantir. Micron. Micron. Dell. Okay. Hewlett Packard out of all of those, I would like, none of those is in a bubble in with respect to it's like multiple that it's trading at now relative to where it's traded at historically, except for Palantir provided the earnings next year show up. Yeah. Then we got no problems.

33:27But like when, when I last looked at Nvidia, for example, it was, um, trading like below the 50th percentile of it's like sort of like 32 times earnings and three years ago it was like 90. Right.

33:38Downtown Josh Brown:Yeah. So I think people have been skeptical that Nvidia is going to be, be able to keep up these like multi-billion dollar quarters. And so therefore they're ratcheting down their kind of future expectations, which is why they're multiple has been, you know, relatively conservative compared to where it's traded at in the past when it was a faster grower. So it's really only Palantir Palantir. You know, I love Palantir. I love Alex Karp. Yeah. What are you? I missed, I missed it. I missed a problem with this. I give, I tip my cap to Dan Ives for that. We'd have Navy seals coming through the window.

34:09But, uh, last I looked trades at 86 times next year's revenues. You will take it. You will like it. In this room, we believe in America. So I think Michael Burry has, you know, for some reason he gets lauded as this like brilliant guy because he was on the big short and everybody reports his puts, uh, on his late team latest 13 F. But nobody ever goes back like six months later and says, oh yeah, I remember all these puts he bought. like they expired like worthless and all this you know well he does admit he does say things like i

34:40Downtown Josh Brown:was wrong like that go to cash call or whatever sell one one word tweet sell he owned it right um one of the thread boys was pointing out that like for the last four years or whatever it is his uh 13 his 13 f's have been coming out perfectly within a 24-hour window of of the same date uh quarter after quarter after quarter after quarter this one happened like 10 days early and coincided with the earnings call for palantir almost like by the way before this thing reports you should know that i own puts right you think he's sending a message in the timing of his 13 f's or have we all just been like eating too many of these mushroom chocolates and we all need to calm down i i think we're yeah i think we're all getting a little too hyper hyper hyper focused i agree with that it's like you know what what color was you know his pee when he you know got up in the morning or something i agree with that um there are people comparing the behavior of sam altman in recent days and weeks to uh sam bankman freed in 2020 or 2021 that seems a little extreme too i i would say but like this is the mood out there there's a lot of people that want to see this thing either because they missed out super bullish to be honest when I hear all that angst and concern too.

36:02Yeah. So yeah. Like remember the world was going to end because Elon called the guy that got pedo guy. And then, and then world was going to end because he, you know, he sort of made these comments about, uh, Bob Iger, you know, like, uh, go F yourself and all this kind of stuff. So I, you know, and, and yet we all went back and we bought Tesla again, you know, it's like, So I just think like, you know, the market rolls on.

36:25Downtown Josh Brown:You know, that's a really good point. And it ties into what you're doing now. The investor class is not precious about the norms and traditions that we grew up with in the 80s, 90s, 2000s, 2010s. Like the investor class now, they love seeing the leadership of these companies acting as unconventionally as possible, telling people to go themselves that they don't agree. Like it almost, it's like almost like a version of pro wrestling and we're not precious about, well, in my day, a CEO would never act like that. Well, it's not your day. Right. It's a new day. The audience for these antics is 27 years old.

37:05Downtown Josh Brown:They're on Robin Hood. They're plowing money into their account every week. They're buying options. They love this shit. This is, it's a spectator sport. So you can fight that tide or you can stay completely out of it or you can lean into it. Right. Eric Jackson has chosen to lean into it. Tell us about your midlife crisis. How did it start? And are you having as much fun as it looks like you're having? The stocks are working, so that's good. But like, what's going on with Eric Jackson? I think the midlife crisis actually started here in this room. We did it? Three years ago. All right, fine. Or whatever.

37:42When you guys asked me to, in the middle, it was June 2022. and you guys asked me to say, like you were talking about, oh, will tech ever come back because the things are so bad? We thought, we thought. It's so us. You know, like -

37:56Michael Batnick:What was the title of the show? Is this as bad as it gets? Yeah, yeah, something like that. So you pitched Open Door - Duncan, look it up. I want to know. Open Door and Carvana. Well, I think you said, you know, give us name names. Name names, Eric. Give us the name of a stock that's going to come back from the dead. Yeah, yeah, yeah. One of these like left for dead companies. Okay. And so I said, well, I got two. And I mentioned Carvana and Opendoor. And I gave the reasons why. Very similar businesses. And one's going after cars. And one's going after homes. And all this kind of stuff. And I don't know if you can pull up that chart.

38:29That shows like for the next six months after that podcast. John, let's roll up. I did not see that until like this morning.

38:37Downtown Josh Brown:Your Carvana call on this show was one of the best. like Babe Ruth point at the stands. That was one of the best calls I've ever seen. No, it wasn't. Not for the first six months. No, it wasn't. What do you mean, no, it wasn't? How much did the stock go up from that day? I know you know. Can I present the case? Yeah. All right, charts on. By the way, why is it 700 degrees in here? You guys doing that on purpose? I'm shedding a layer. Get the call to lower the thermostat.

39:06Michael Batnick:So yes, it was a legendary call. Carvana is up 1 ,200 % since. John, let's roll through some charts, please. So you pitched this on June 17th, 2022. Looks great, like on the big picture. So these stocks were in massive. The red line is Eric. The red line's a podcast. Massive drawdown. So nobody wanted anything to do with these names. Next chart, please. And then ever since, we know what happened. Carvana's up 1 ,200%. Opendoor had a rocky road. But let's zoom in a little bit. So Josh said Eric called the shot. It was one of the greatest calls of all time. And actually not even close.

39:42Downtown Josh Brown:No, greatest calls I've ever seen personally.

39:44Michael Batnick:Really? Because after Eric said that, these stocks fell 90 and 80%. You have to have patience as an investor, Michael.

39:49Downtown Josh Brown:I tell you this all the time. I've tried that line with my own hedge fund investors, Josh. And nobody cares when you're 90 % drawdown.

40:00Michael Batnick:So Eric called Carvana, which was a hundred bagger. But right after he came on, it fell another 80%. 90%, excuse me, opened or fell another 80. So you absolutely nailed it, sort of. But I don't know.

40:14Downtown Josh Brown:So the episode was called, It Can't Really Get Worse. Oh, it got 90 % worse. It got worse. Wait a minute. So this is important though. You didn't buy all your stock in Carvana and then come on the show. You probably bought that dip. This is what it means to be an investor. Dip. If you like a stock, what was it,$2 at the time? No, when we were on, I think it was$20 or something. Carvana. And it went down to two? And it went down to two? It went down to$350 was the low. $1.50. It ended up being your average cost if you were able to reveal. It had been at$400. Right. It came all the way down to$3.50 in December 22.

40:51And then it's come all the way back to$400. That's unbelievable. Oh, shit. Was it the best performing stock of last year? For several years. Several years. But what's so incredible. So what happened is, uh, I knew this stock, I knew Carvana we're talking about Carvana first, and then we'll go to open or I knew I traded Carvana well, because like in the years prior to COVID I'd been like a small mid cap, like growth tech investor. And so, you know, Carvana IPO didn't, I think 2016 or something like that. So it was a go, go stock. Like wall street didn't care. It was like balls to the wall, you know, keep building these bubble gum machines by the interstates.

41:30Uh, don't, don't run it for profitability, just run it for growth. And they, they were obliging and the stock did, that's how they went from like 15 bucks to 400.

41:37Downtown Josh Brown:0 % interest rate era. That was the logic. Right. Yeah. But what was interesting to me in 2022, when the stock was collapsing is that the CEO, Ernie Jr. Ernie Garcia Jr. He bought$70 million of his own stock that year, seven zero. And so like one and a tranche in like March of that year, when it was like, I think it was like 50 bucks at the time. And then another, another tranche around June when we had that podcast around like$20 million.

42:05Michael Batnick:He followed you into his own stock. But then, but then later on in the year, uh, around Thanksgiving that year, uh, there were two guys, one was the chief product officer and other, like another junior management team guy. Uh, one bought three and a half million dollars worth of stock at$7 and 50 cents. And the other guy bought about 700 K worth of stock. But you, you never like you see Toke, like CEOs token, buying their own stock at the lows, like Michael Dell, like he bought Dell.

42:31Downtown Josh Brown:And they're billionaires, right? It almost doesn't matter. You never see like a chief product officer buying three and a half million dollars worth of stock. Yeah, where'd you get that money from? Because like probably 98 % of his wealth is tied up in the stock already through RSUs and all this kind of stuff. And so he's, so it turns out that guy was a Canadian guy. He followed me on Twitter, Dan Gill's his name. And so like I reached out to him in January of 23. And I was like, hey, can we chat and stuff? So I called him up and I said, hey, you know, Dan, I gotta be honest with you. like I look at a lot of like insider filings, you never see like people like you with respect, you know, spending three and a half million dollars on their own stock, especially like a battleground stock, like Carvana, like, and he was like, Oh, shucks, you know, like, I'm just, you know, I, we, we've got a tough road ahead of us.

43:16It's not guaranteed, but we really believe in each other. We all went to Stanford together. So we know each other on the management team and all this kind of stuff. And I said, like, I, I said, to be honest, I don't know if I, if I had that conversation with my wife. Like I'm the chief product officer for Carvana and like, Hey honey, let's take three and a half million out of the IRA. We're going to roll it into more Carvana. Okay. Cause I really believe in Ernie and the team and we've got this, you know, to be honest, I don't know if my wife would have, would have been opening up.

43:44Downtown Josh Brown:No way. That's a high, she said, she's like, wait, you work there. No, that's a high level of conviction. Why was that stock of $2. What are the people think it was a fraud? I'd go on these TV shows where I'd debate like the, the wall street analysts covering it. And I was like, Hey, you know, Johnny from Wedbush or whatever. Like, how'd you come up? I'd say this off air. I wouldn't say this on air. It's like, how'd you come up with your$20 target? You're basically saying like, you think as a running company, this should be worth 40, but there's a risk that it might go bankrupt and therefore go to zero.

44:14So you just pick 20. It's like, yeah, basically that's how we did it. Oh my God. So,

44:17Downtown Josh Brown:But what are the barest things? What, what, the person that sold it at$3 must have thought it's going to zero. Right. It's going to file for bankruptcy. They can't keep up with their debt. The debt. They had too much debt from building all the bubble gum. And rates were rising. Rates were rising. Who's going to buy a car from this service? This service is dead. And yet you talk to people that use Carbon and they loved it. Even at$3.50 where, you know, they didn't care about the stock price. They actually loved the service. So that's, so I didn't get in right away. I was still like working away.

44:45I had a big, I had a billionaire like in, who was an investor in my fund who pulled out at the end of 22 after like, I had two years of bad performance. And, uh, and I was like, and he was like 99 % of my AEM. And so I was like, Oh my God, you know, like, like, and I had all these like lawyers and Cayman's directors and people, I was paying money, like a lot of money to saying, Eric, you just got to shut, shut the firm. You know, it's like not worth it. Like, You got to stop doing this. He's all, he was all your funds. And now you've had like these bad 21 and 22 years, the way that you do it in the hedge fund world, just shut down.

45:23And then like six months later, start again and you don't have to show it anymore. And so, and nobody, because you don't have to worry about a high watermark because it's

45:30Downtown Josh Brown:a brand new fund, right? You're never going to hit a high watermark back when you're down enough. Yeah. But I didn't even care about that. And I just said, you know what? The whole thing's paid for. And I don't know. I just did. It didn't feel right wanting to shut this. although I didn't feel great thinking like, what the heck am I going to do with the rest of my life? You know, and how did I get here? Am I going to be able to keep paying for my kids' schools and all this kind of stuff? This stock resurrected you. Is that too much or is that about right? Yeah, I mean, I got to work on building like the little AI team within the company.

46:02And the first iteration of the first model that they built, these guys come to me and they say - Find me the next Carvani using AI right now. They said in May 23, They said, Oh, okay. I ran the numbers boss, you know, and, uh, uh, okay. Like show me the list of like what the model says, you know, should be my, you know, top 10 positions in my portfolio and number two on the list in terms of size was Carvana at 11 bucks a share at that time. And I was like, are you sure about this? Like, I, I, can you check your numbers again? Can you take this back? And like, just, just humor me. Cause I, I, like, I don't want to like just sort of jump, you know, both feet in and like, you know, make sure, you know, find out later, like two weeks, you were like, oops, you know, we didn't update the simulator and this and that and all this.

46:46And so it took him a week. He came, he comes back and he's like, no, it's, it's, uh, it's good. Yeah. You know, I think you should really buy it. And by that time it was like 15 bucks. And that's, that's one of the most interesting things about these hundred baggers is that they get priced basically as if they're going out of business, but when they start moving up, it's violent, you know, especially with a lot of shorts. So, so this went from like$3 and 50 cents in December of that, of 22 to by June, it was like 25 bucks. It was over 25 bucks. So that, and, and it was just a combination of like, oh, the earnings weren't so bad.

47:19Like they weren't great, but they weren't terrible.

47:21Michael Batnick:Why don't you sell at that point? Where's the conviction coming from? Well, uh, so I got in, so I, I trusted the model and got in at 15. And so then, and then I, you know, stayed with it. And I, you know, the models kept saying, no, stick, stick with it, stick with it. Uh, but there, but between 15 and 150 bucks with Carvana, there were three separate times where it had major drawdowns. There were, there was one 66 % drawdown that it had in the middle. And so like, this was like a major position.

47:48Downtown Josh Brown:You rode through that with a full position. I kept it. So it went from, and then it drew down in 10 days. It went from like 88 bucks to like 42 bucks, like no news. There was no news. I mean, I don't know. There's just like macro stuff, or maybe Sam Alton said something and pissed the markets off or something. And so, um, but then when I, so I just decided like, I'm going to stick with it. And, but at one 50, I started having this voice in the back of my head. Like the billionaire who used to have money with me, he had like some Swedish guy who was like his chief investment officer who worked at his, um, family office.

48:23Right. And so he would always be on my case, like, Eric, why don't you take a profit when it stock two X's or three X's you, you, what, what, that's not good enough for you. You like, you need a five X to sell like a 10 X, like a hundred X mother. So, uh, like, and that's the mentality like that we're, we're all sort of taught growing up. It's like, it's all about batting average. It's like, just to eke out a gain over the market. Like you don't just sort of like, Hey, I'm going to like roll the dice and just sort of, you know, let it all hang out and stuff like, uh, like some of these people like that you hear about and trading crypto or something.

48:58And so I, but at one 50, I, it was too much. I was like, I'm sitting on a 10 bagger. I know this guy would be like all over my, my, my ass saying like, I got to sell this thing. So I, I just, but even then at one 50, I, I shit, I shit you not. I believed that this thing was going to go to 400 bucks. And, but I said to myself, this thing is volatile. And so I'm so smart. I was the guy who like got into Carvana early. So I'll just like trade it. Like I'll, I'll just sell it, sell it 180, buy it back at 130 fantasy that everyone thinks they're going to do. And honestly, like if you added up all the trades from like 150 to 400, I'm sure I lost money on all those trades.

49:35That doesn't work. And so, but it did go,

49:37Downtown Josh Brown:it ultimately did go to 400, which is what it's pulled back. It's now 300, but still a great company. I don't, I don't know. I don't own a position in it now. So, but then earlier this year, like my, the midlife crisis is like, I'm paying for all these AI guys. And they were like building all kinds of models, option models, crypto models, you know, earnings models and all this. And I was like, guys, like, I'm not like a billionaire myself here, you know, like I can't keep funding this thing out of my pocket. You're not looking for experiments. You're like applied AI guys. Let's just pick, you know, two models that seem like they're going to work.

50:09Okay. And like, it looks like the Carvana model had something there. So let's just try to find hundred baggers. Let's do that in the hedge fund. And then the other thing that worked was the crypto models so that's what we're going to do with this sort of gen 2 crypto dat thing which

50:24Downtown Josh Brown:we can talk about later we'll skip we'll skip the crypto for this week because i want to get to some of your new ideas so open door was well let's start let's start with open door so this is an idea that is currently in motion like it's not early or you think it's early but it's already gone up a lot you're already right so you sent it what was the what was the tweet that he said at 88 cents. I don't know. You tell us, what was it? Well, I just wrote out like, it was something like eight or nine threads. You said this, you said$82. Yeah. That was the Babe Ruth call my, call my shot moment. I was like, this thing is going to go to 82 bucks a share.

50:59So let's,

51:00Downtown Josh Brown:let's just start with the reaction. You have people that know you at that point, but you have a lot more people that know you now. Right. But then you have people like me who know you from your past life as a very buttoned up activist investor. No, but you're a guy. Like you're a legit guy. So I've never seen you do anything like that. Be like this 80 cent stock's going to$82. I think people thought maybe that you were hacked. People that know you for a long time know you're like just an all around good guy, calm. That's the midlife crisis-y part to me. I'm like, oh, this guy's lost his mind. Oh yeah, no, I got DMs from like - All right.

51:39So I'm not the only one that had that. Adam Schurstein, who used to write at the street.com. The scam buster of biotech stocks. He's like, honestly, Eric, are you okay? Are you okay? Yeah. Honestly. Like, I just, I don't, I don't, I don't want to pry. I don't want to pry. But like, seriously, I want to check in on you.

51:55Downtown Josh Brown:Did Herb Greenberg come at you? No. Okay. No, I didn't hear from her, but I heard from lots of people, obviously. Lots of hate. People thought it was crazy and thought it was ridiculous. And I had so, I had no shame.

52:09Michael Batnick:No, I thought the stock was going to work, but I honestly do think it is crazy because iBuying, you know a lot more about it than I do at this point, but I feel like it had, it was an experiment that failed. Now, granted, it was in the absolute worst possible environment. iBuying in a housing bubble, probably not a great business. We found out. But I think -

52:27Downtown Josh Brown:Zillow threw in the towel on iBuying.

52:29Michael Batnick:But didn't we also learn that you kind of need people involved? Because I remember vividly, one story that came out was some dude who's like, this house next to me, there's a gigantic barking dog in the backyard neighbor and nobody, this house was on the market for three years because everybody knows that the neighbor's dog is impossible. We'll never stop barking. And open door came in and bought it and sold it a year later for a hundred thousand dollars, whatever the case was. And it was like, yeah, you kind of need people to do this. So why do you think that this is a business model that makes sense in the real world?

52:59Well, like, so what, why I did all of those things is like a combination of just like my own mistakes from the past. And so like learning from the mistake of not owning enough Carvana and not getting into Carvana early enough, uh, not calling my shot with Carvana. Well, I, I mean, I guess I did, but I wasn't very precise on this podcast. I didn't say Carvana was going to go back to$400. And, um, I, I mean, the two models of Carvana and Opendoor were, were very similar. So Carvana doesn't make most of its money from buying and selling cars. It's like I buying for cars. They don't make money from that.

53:37They make money from finance and interest. 80 % plus of their EBITDA margin that they have today. There are a lot of great stocks that are just like that type of thing. So I always believed, and it was part of the original tweet thesis for Open Doors, they got to do mortgage and title for sure. That's where they're going to make their money. There's a reason why there's two guys who own NBA teams who run mortgage companies.

53:58Downtown Josh Brown:That's United Wholesale Mortgage, which is Matt Ishbia. and then Dan Gilbert, Rocket, which I'm long. Right. You probably think that Open Door is going to compete with Rocket. Is that part of your thesis? I think Rocket's a great company. Because we will rock you. I think I have another company better that's more of a direct competitor to Rocket. We'll crush that shit too. But Rocket, I mean, the reason to be bullish on mortgage companies and the housing market and American housing is - The worst environment ever right now. How could it get worse? We're at the beginning of the rate cut cycle. You know, it's a huge market.

54:31Rocket, you think of it as this gorilla. It's only got a 6 % market share. Well, compete with every bank in the country, for starters. So there's an opportunity for everybody at the table to kind of get in there. And these guys, you know, Dan.

54:45Downtown Josh Brown:So tell me more about what you just said. Open Door scores the same on your model as Carvana did. I'm not saying give us the whole AI formula, but like, what are the important things? If you're out there looking for a hundred baggers, what are the things that you're looking for? Well, there's, there's a bunch of technical things you can look for. So there are signs of capitulation in the stock and just the seller exhaustion and things like that. And there's signs like getting above a certain moving average that makes sense for that particular stock, you know, which it tells you the narrative has changed amongst investors, right?

55:18Yeah. From a fundamental perspective, there's a major re rating that happens when companies go from money losers to money makers. And so Carvana, people thought that Carvana was going to go bankrupt, right? Because they couldn't make money and they couldn't keep up with their debt. And then suddenly they were able to shift and show that, oh, we can make like a decent EBITDA margins here.

55:35Downtown Josh Brown:That forces bearers to say, to reevaluate whether or not they want to stay on the short side. Right. And then that alone could trigger upside momentum, which attracts new investors. Yeah. And now short covering is, is another factor that you would look at. Like everybody like all loves to, you know, go through all the most shorted stocks. And just because a stock is heavily shorted doesn't necessarily for good reason. Many with good reason.

56:00Michael Batnick:So open door reports in five minutes. And then by God, I really hope this doesn't get awkward. I swear to God, if there's some gaps down 30%, I'm just going to leave and feel very bad. But how are they doing fundamentally? Like, I know it's very, very early. The CEO just left. We're going to hear from the new one. Is this a viable company? For sure. It's viable. Yeah. No. They just, so they just, the C, the guy who was the COO at Shopify, who was like a$200 billion, I think we would all agree. Canadian tech giant. Legit company. Yeah. Right. He, so basically he had to do nothing for the next year or two.

56:34And probably Toby Lucky, who's the founder CEO is going to bump up to chairman and somebody is going to get elevated to CEO of that company and make a lot more money. he willingly left even though he had go do this stellar uh reputation to become the ceo of open door a three billion how much stock did they have to give them they gave them on type but that's good though if you're a shareholder 82 million shares fully unlocked to him which wasn't a coincidence because 82 was my price target for it okay you're when you're in communication with

57:04Downtown Josh Brown:the board of directors now they're taking you seriously they've been for a while yeah okay how long did it take for you to break through and be like guys i'm building the open army you need to have me in your corner well adam bain uh who used to run sales at twitter do you remember we know um he's on the board and so i think the same day that i sent that tweet out on july 14th with my like 82 dollar price target adam sent me a dm saying come on really you know like he couldn't believe it like i love i love adam by the way and super nice guy so uh and and then it was like a couple weeks later and he sees the stock moving up so much like it was 10 days after that first tweet where the stock got halted because it traded three times its float on one day like and and they just halted it for like 13 minutes it went from like it had gone from like 51 cents at the end of june to um i think it was like got halted we're almost touching five bucks um in late late july but this type of shareholder grassroots mania starting on social media like it's effective and i feel like companies that have nothing left to lose because their share prices trading under$5, they're now actively embracing, they're cultivating this.

58:15Downtown Josh Brown:So if a shareholder comes along and wants to get really vocal and whip up a frenzy about a stock, again, back to we're not precious anymore. Historically, the board of directors would be like, shh, don't encourage it. Now we just saw Hertz save its own life. We saw AMC save its own life by cultivating this type of investor frenzy. So it's now it's a two way street. It's not just a thing that's happening to companies. It's a thing that companies are actively participating in. I could tell the old CEO, she wasn't used to it. She was from that old school, right? She was like, it was just, I'm just going to ignore this guy.

58:54And then she couldn't do that for, for so long. And the board initially was like, no way we're engaging with this. And then they've obviously totally come around. And now everybody since, uh, look at these other companies that I've taken positions in like better or, or some of these others, like they've been very spying.

59:11Downtown Josh Brown:They're like, Hey, like, we love you. And like, we want to support the retail and we're going to do video calls and that open doors doing a video call today, just like volunteer. Eric Jackson organized a breakdancing, uh, competition to save the rec center. Everyone's very excited when you're, so now you're in the mix. No, I think it's, I think it's cool. Well, now the question is, and you guys talked about this on a previous show, is it a meme stock or is it a cult stock? No, no, no. That's not the question. It's a cult stock. The question is twofold. Do you get nervous that somebody will look at this and say.

59:45Downtown Josh Brown:This doesn't look kosher to me. This guy's long the stock and being extremely vocal about it on social media. I'm not saying what you're doing. By the way, I draw no distinction between that and somebody getting on stage at Iris own conference just because they're wearing a suit and saying this$20 stock should be a hundred. Why is that okay? But doing it on Twitter is not. So I like it. And if it makes people money, great. but the dark side of this is if something goes wrong, you kind of become forever associated with, for better or for worse. Yeah. No, I had a meeting this morning with some guy in Hudson Yards who, like he's anonymous on Twitter.

1:00:27So we like met him in person. He's sort of famous because he tweets out these photos of his open portfolio. He's like gone, like in one of his portfolios, he's full port open. And it's like seven, he showed it to me this morning. I think it's like - How much money did you make him? Well, it's a$17 million portfolio. He was in it before I tweeted about it. Okay. But, um, you know, he's very happy, but he was saying to me, he said, man, I just don't know if I could have done what you, you did, where you just like stick your name out there. You know, what if you were wrong? Like, what if you, what if, like, I mean, you just go back to Canada and

1:00:59Downtown Josh Brown:pretend that happened. Like I've gone through so much crap in the last few years. Like you look at that chart, like I've had like big drawdowns in my head. So I had this billionaire, like turn his back on me and walk away. You know, I'd gone through like this sort of like internal crisis and stuff. So like when people say like, oh, how do you have the gall to self-respect to stand in front of Drake's house, making a video talking about open door? I'm like, you know, I just don't care. Like, you know, like I believe in open door. I believe in kind of like the types of philosophies that I'm advocating.

1:01:30You know, I've been amazed with like all the, it's predominantly been like middle-class people who are in the open army. And they're from like, I would say it's like 70 % are outside the U S all over the world.

1:01:41Downtown Josh Brown:The open army are people who have bought the stock and get it, are willing to celebrate the company on social media with each other. That's it. It's nothing more. Yeah. It's not, it's, it's a new version of GameStop, you know, it's a, it's a retail group, but they, but they, you know, they, they are much smarter than, than what you typically kind to get, you know, get vibes from Wall Street towards retail. It seems slightly more cerebral than GameStop. It's taking place more on X than it is on Reddit is my understanding. Oh yeah. Okay. There's a lot of weirdos on Reddit now. I love Reddit. No weirdos on Twitter.

1:02:18Imagine

1:02:18Michael Batnick:this thing peaks at$81.

1:02:20Downtown Josh Brown:You know, Reddit's got weirdos. Twitter has people who will like physically harm you in real life if you disagree with them on something political. Do you sell them merch like how organized is the the open army no i do you have a newsletter that they're subscribing to or how do you communicate to them other than through tweets i i haven't telepathically i am i am you know i i i actually just had a zoom with phil perlman who's going to help me like start a newsletter because i i haven't had a newsletter i haven't been monetizing this i have a hedge fund my phil impression yeah jeez bro like you do the you do the letter Yeah.

1:03:00Of course you drew the letter. He's like, Eric, I fucking love it. You're authentic. You've tapped into something with this rising dynasty and you're just going to ride it, okay? Because it's you. It's you. Shout out to Dr. Phil.

1:03:15Michael Batnick:So what about these people that you said they're mostly middle class? Are you like, listen, I'm as enthusiastic as they possibly could be, but and also be responsible. Yeah, for sure. Like, so I started doing this, uh, Drake series, right? Like these daily videos in front of.

1:03:31Downtown Josh Brown:Yeah. So what, for the people that are totally mystified by, we keep saying Drake, what are you doing? So my 16 year old in the summer, he's like, dad, you're always like talking about how you think opens his great stock. Uh, his name's Julian. He's 16. He's a great 12. Once his dream is to get like a D one scholarship. We have a son the same age. Okay. Um, and he said, uh, but like most people don't watch CNBC, they don't watch Bloomberg and stuff like, uh, so like, how are you going to reach? I don't know. I have no idea. He's like, well, why don't you do like a video in front of Drake's house?

1:04:01And I thought, I thought he meant like a one time, like, you know, go take a selfie or do a little video. Hey, I'm Eric Jackson in front of Drake's house. Yeah. I was like, yeah, great idea, Julian. You want to come over and be my cameraman and stuff. And he's like, no, no, you gotta, you gotta do it like every day until he buys open stock. And I was like, what? And he's like, yeah, no, it has to become a thing to be viral. It's that's the only way it can be viral. I was like, what even weekends? Like, oh yeah. even weekends too. Like how long? Well, it's open-ended. That's why people will tune in.

1:04:29Cause they'll be like, you know, intrigued. It'll be like the Truman show. And they're going to want to see it. And they're going to want to see it happen. Right. Right. So, so, uh, I said, okay, I'm up for it. So we would go over there. We started filming these videos, usually only like three, four minutes in front of his house. He said, Hey, I got a whiteboard, dad, you know, hold it, hold it up. And you know, day one, day two. So, uh, it's a white, Yeah, so Pretty nice house gonna keep coming back until Drake buys one share look like such a

1:04:57Downtown Josh Brown:f**king nerd in this

1:05:02Not for you you're about to play a show in Copenhagen no rest for us over here I've been up since three analysis on open door All right day 19 Drake back here first of all I want to say I've never seen this competition your merch. Day 35 back here at Drake's had a big ringstone this morning. I got a microphone here.

1:05:23Michael Batnick:People complained. I can't hear you. Day 80. Day 80? Oh my God. This is kind of nuts. Hold on, hold on. We love you. I love that he has a payphone in front of his house. Isn't that cool? He has the British like the red payphone? No, it's a Canadian bell payphone. I don't know. Anyway, so, I mean, this thing, I don't know, it's got like 10 million impressions across all the different videos. And so I feel a certain pressure to get to your point, Michael, like, you know, like you, you get all kinds of weirdos sending you messages saying, like, I put all my money into open door and stuff. Like, I don't know if that's, you know, what I would advise, you know, just talk to your financial advisor and all that.

1:06:02But, uh, some people are really like into it and excited about it. And you do feel a sense of responsibility, obviously. I would hope so. And so, and so, um, and the other thing that you feel is like, how do you keep it fresh? How do you like, if you're, you're talking there every day, like what, like, oh, he didn't buy any shares today. So I checked back tomorrow. You have his, his bodyguard bought stock. Yeah. So on day 10, uh, we went over at like eight 30 at night. It was dark. Uh, and like in the middle of, uh, the, the, the payphone, by the way, turns purple at nights, uh, which is really cool.

1:06:33I, if, if open door goes to 82, I'm definitely getting a payphone that turns purple in front of my house for sure. Um, so this guy comes out of the bushes, you know, and he, and I, at first I thought he was going to, Hey, stop recording. Get out of here, guys. He let me finish. And then like, he comes over and like, he's like, guys, what's going on here. We've been watching you for the last 10 days on the security cameras. What you're talking about stocks or something. And I was like, well, uh, no, uh, it's actually one stock in particular. And I whipped out Yahoo finance. And I was like, it's called open door.

1:07:04And we, you know, I'm, I was a hedge fund manager who was early into Carvana and it a hundred acts. And we think like, uh, open door can a hundred X and, uh, you know, his name's Bucky and he's like a hundred X. Like, so what if I put 10 ,000 bucks in this stock? Like, uh, you know, it could a hundred X. I was like, yeah, you know, Bucky, if you did that and I was right. And it goes to a hundred X, you'd, you'd be worth a million bucks. Your, your investment would be a million. He's like, well, I'm buying this thing on Monday morning. What does this thing trade and all this kind of stuff? So anyway, he's a great guy.

1:07:33he owns stock goes to zero you're never going in front of that house again he owns better he owns open okay uh and so he he said to me like he's like you know the guy you got to talk to here is future i was like future drake's manager he's like yeah future's drake's business manager he does all his ovo stuff and you know anything business he is him so i'm gonna hook you up but he's drake's in europe right now it's on tour for the next two months or something so i still haven't met future um i called i was texting with bucky a couple weeks ago and he's like oh man they just went to the Bahamas.

1:08:05I think they all travel like as an entourage or something. And so he's like, but don't worry. Trust me. I'm going to get them.

1:08:12Downtown Josh Brown:I got the cheat code for you. You have to get in touch with Bobby Althoff. She gets these like one-on-one interviews with him. They just did another one. They were in bed together. It was as pointless as the one before, but maybe more pointless. But the point is get her to buy the stock because he follows her. So you got to think about it orthogonally. Am I saying that right word? You know, I refuse to learn what that word means. I hate that word. Orthogonal to Drake are the people that you know have some way of being in Drake's eye. And so I would think about like, where do you see him dropping likes?

1:08:47Downtown Josh Brown:Or where do you see him actually? He doesn't do a lot of media, which I think the last mystique left about him at this point. Right. But he does her show for God knows what reason. I want to ask you about some of your new investing ideas. and we don't have a million hours to spend on these. And I want people to follow you so they can learn more about them. So we'll do like a mini lightning round. But before we do, are these all potential hundred baggers or not necessarily? Yeah, I mean, I don't - You won't buy something now. Nothing goes into my portfolio that I don't feel has the possibility to 100X.

1:09:22Is that gangster? No, it could be four years, could be five years.

1:09:25Michael Batnick:You're shaking your head. I mean, that's one word to describe it.

1:09:27Downtown Josh Brown:Why aren't you an active ETF at this point? I don't know. People have asked me that. I guess Dan Ives hit a billion the other day. Yeah. Where's Tom Lee? Two billion. Yeah. He must be with. Okay. You're telling me you couldn't have$500 million under management with a strategy like this. If everyone just says I'm putting a grand in, let's see if Eric can turn it into a hundred grand. Right. I'm just saying. Yeah. No, there's a, there's a big, there's a big retail following. All right. Here's your stocks. We did open door to death. Better B E T R. Right. What is this? Well, actually, I think this is going to be the poster child for why AI is not a bubble.

1:10:02So they're a mortgage originator. And if you've ever heard of them, you probably heard that the CEO was the guy who fired a thousand people on the Zoom call. I remember that. December 2021. That social clip. And so it became like a DEI thing. Like, oh, you're radioactive. Ruthless. Wall Street CEO didn't care and fired all these. Well, the truth was better, you know, mortgage originator went from a$55 billion a year run rate at the beginning of 2021 for mortgages that they were originating to 5 billion by December of 2021. So if your business drops like 90%, like you are going to need to like cut costs, you don't, he had a thousand people in India that were basically pushing paper around in order to send out commitment letters.

1:10:46So people could, you know, get mortgage offers from different places. He made the company untouchable, which is why it sells off. So, and then it took a while for them to SPAC because like they got slow rolled at the sec. Cause they thought it was a DEI kind of issue and stuff. Oh, it was in public yet. Yeah. It wasn't public yet. Didn't even anyway, the stock immediately sold off soft bank owns like 17 % of it. Cause they thought it was going to be like the next big thing in mortgages. They had started 10 years ago, building an AI, um, team to kind of automate the whole process, but in 2021, it was still too early.

1:11:18They still had to rely on humans. And the funny thing is when I started doing the research that year in 21, they, they could have done over$240 billion worth of originations, but they just physically didn't have the people to push the paper around to do that. So anyway, they fired all those people. They decided to kind of refocus on AI. The guy who actually built their original matching algorithm at Better was the guy who built the Spotify music matching algorithm. And that still is, he's responsible for 82 % of the code that still runs at Spotify. But he came to Better to kind of build this mortgage matching algorithm.

1:11:56Now they're ready for prime time. They've, they've, and they don't need all those people that they used to employ before.

1:12:01Downtown Josh Brown:All right, so it's a working business. It's not a, it's not a pipe dream. It exists. It's a, it exists. It's like a player. How much revenue do they do? And what we're going to see, like their earnings are next week. We'll see, did like, just like we saw with Rocket a couple of weeks ago or whenever they had earnings, does a little blip down in mortgage rates translate immediately into increased volumes. And so thinking ahead, like what might this business look like in a year or two years? How much revenue do they do now? Right now, they're something like, I'm trying to think of their market share.

1:12:35You don't know. 2.6%, I think, national market share is, but I don't know what their revenue is. But they're one of the, they just got forgotten about as a SPAC. And so they basically now have to prove that they don't need these people to kind of - That they have a mousetrap and it's automated and it works.

1:12:57Downtown Josh Brown:Yeah. Okay. Every time I turn on CNBC and I see the ticker going by the bottom, I see this IREN stock. I still haven't bothered to learn what it is. I know people have made a ton of money in it. And I know it's like one of the most actively traded names on Robinhood. What the hell is IREN? So Iron and Cypher, you probably heard of CoreWeave. Because CoreWeave is sort of - Is it Iris Energy or not? That was their original name. And now they sort of just go by Iron. Okay. So CoreWeave has been one of the most successful IPOs just in the last year. They IPO'd like last March. Yeah, we are. And they were seen as another AI play, data center play.

1:13:37But the funny -

1:13:38Downtown Josh Brown:I knew that one was going to work because of how bearish I was on it. Came out at 40, went to like 160 or something. I was about to look at you so sideways. Yeah, no, I knew it would work because I hated it. All right, so what is this? But what's interesting about them is that they're sort of like a middleware player stuck between the metas and the Googles, the hyperscalers on top. But they actually don't own any of the data centers themselves. CoreWeave doesn't. They don't own the land. They don't have the connections to the power grids. They have to go to the irons and the ciphers or the core scientifics and do partnerships with those players to get access to those data centers.

1:14:18And so anytime they sign a deal with a big hyperscaler, they've got to turn around and

1:14:22Downtown Josh Brown:wait, I ran owns, actually owns the data center and core weave is leasing it. They don't partner with each other, but I'm saying that core weave, you know, has to do deals with iron and cypher, because they wanted to position themselves as we're asset light. We're like, you know, high margin. So we don't get into the weeds of owning that land, but it turns out that actually owning that land, having the connection with the local power authority, whatever, utility, and at a fixed rate, by the way, like that's critically important to, you know, being able to deliver the kinds of gigawatts that now these hyperscalers need.

1:15:00Downtown Josh Brown:So this is a land or a facility owner? So they buy the land in, you know, iron and uh in west texas predominantly they've got like two huge sites coming online where they actually bought the land they negotiated the the deals for the power consumption rates uh and then they started physically building out the data centers themselves before actually then going to the hyperscalers and signing the deals with them okay so they're kind of coming up from underneath of core weave and almost like disrupting where's the stock holy stock was like five bucks

1:15:31Michael Batnick:in April. Now it's 67. Yeah. So I, I bought, I started buying it at nine bucks. Do you still think that you still think it's, it's going to a hundred X from nine bucks to from nine to 900. You think so? So it's now at 70 something, I think, or something, you know, low 70s. $18 billion market cap. Wait, hold on.

1:15:49Downtown Josh Brown:Don't interrupt the process by which I make money here. Yeah. Cypher is the same thing. Same thing, but smaller. All right. But, but the thing that's big about both iron and Cypher is that, you know, the reason why I liked them as opposed to a core Scientific or some of these other players that are out there is that they iron and cipher have three gigawatts in their pipeline that are going to be turned on or energized in the next 12 months. Like it's under contract. We know it's going to have it. So when you hear that Microsoft saying, oh, we're going to spend more money on CapEx to build up more data centers, that's probably like five years away for them.

1:16:19Right. Cause they got to go out and they got to buy the land and build the data centers. So they're going to be looking to do deals with people that actually have access to the data centers now. So when I was buying it at nine bucks or Cypher, I was buying, you know, just below four bucks. You know, like people were saying, oh, these guys are just like former Bitcoin miners. Who cares about Bitcoin miners? Those traded a low PE and all this.

1:16:41Downtown Josh Brown:Is that what they did though? They transitioned from Bitcoin mining to this? Yeah, so they learned from how they built out their data centers for running Bitcoin mining. All right, HUT8 was a Bitcoin miner. Is it still? It is still. And it has a new partnership with the Trumps. H-U-T, guys. Yeah. So they, they partner with, uh, there's a new, uh, ticker called American Bitcoin where they own 65 % of it. And, uh, so Eric Trump and Don jr. Are kind of JV partners with them and that, but their basic Hutt's main business is similar to iron and cipher where they they're building out all these data centers.

1:17:14So you like this, you like this theme because it's basically the energy shortage theme that like there's not enough, uh, to, you know, to, to power all these, queries for JAT-GBT.

1:17:23Downtown Josh Brown:Okay. Sana Biotechnology, S-A-N-A. This company is working on a cure for restless leg syndrome, I'm told. Type one diabetes. Oh, same shit. All right. This is a hundred bagger? It's a biotech? It's a$1 billion stock today. So to go to$100 billion. That's a lot. They would have to prove, you know, they've basically shown that they've taken a stem cell approach to kind of developing drugs. And the first application of their particular approach to stem cell research was in type one diabetes and they had good animal results. But just earlier this year, they showed in a very small handful of humans, basically they, you know, cured them of type one diabetes.

1:18:10So type one, not treated, cured to this point, to this point where they, they, they're, what they developed was able to help these people develop the ability to produce more insulin, which is what goes away, which causes type 1 diabetes.

1:18:25Downtown Josh Brown:Who do they have a partnership with in large pharma? Anyone? Nobody, yeah. So that's a big catalyst when that happens, right? That, and also they've got to go through the process of showing on a bigger scale and a human scale. What does Feuerstein tell you about it? Does he like it? Who? Feuerstein? No, I haven't spoken to him with him. I've spoken with others, And one of my sons actually has type one diabetes. So like I've been, you know, so I've seen firsthand like what it's like. And, and a hundred years ago, I mean, uh, anybody with type one diabetes would, would be dead basically within a few months.

1:18:55So it's a, it's a huge, uh, market opportunity. I like that one.

1:18:59Downtown Josh Brown:I want to make sure we get to the rest BT BT BTQ technologies. So it's a quantum play. It's post quantum cryptography. So basically if, if you, well, everybody else out there is sort of building quantum computers Post-Quantum? So the thing about Quantum. Just f***ing buy it. What's wrong with you? So last January, Jensen Wong said, oh, I think Quantum is like 30 years away, right? And now everybody's saying, oh, actually, including Jensen. Well, he created an uproar with that. Yes. And then he's like, all right, sorry. And it was self-serving too, because guess what? Like if Quantum Computer really was developed, you know, a QPU would displace GPUs that Jensen sells as kind of the new kid on the block.

1:19:41So you have these like small little startups like INQ and Rigetti trying to build their own quantum computers. This is even smaller than those? Well, they're trying to be the, you know, you'll like this. They're trying to be the crowd strike for quantum. So they're basically trying to prevent a quantum attack because why would you want to prevent a quantum attack? Oh, it's a cybersecurity for the quantum age. A quantum computer could hack into everyone's crypto wallets and basically steal all the -

1:20:06Downtown Josh Brown:The only way to fight a quantum computer is with a quantum computer. Right. We all know that. So that's what they do. All right. We'll check in on that a couple of years from now. DeFi Technologies, D-E-F-T. Yeah, I've been in this one a year and a half. Their core business is they basically sell ETFs for crypto in Europe. And so not kind of a slow growing, not exciting business, but they are just now getting into using their knowledge of how they can create these kinds of crypto related instruments and get them listed on exchanges. They're actually trying to tokenize all the sovereign debt in the world, which hasn't been tokenized as yet.

1:20:49So it's a super small market cap company, super big ambitions. Maybe it'll work. Maybe it won't. It's obviously like a big asymmetric payoff. I don't think it's going to work. All right, last one. They have the knowledge and ability to kind of do it and going after it. That's why I like it.

1:21:05Downtown Josh Brown:You say Ether and ETH adjacent scaling is a company called ETHA. It's just a public company. Is it a treasury or it's something else? No, this is just the ETF, like the BlackRock ETF for ETH. Oh, ETHA is the ticker. Yeah. So it's just a bullish bet on Ethereum. Why not just buy Ethereum? Why buy the ETF? Well, I would say like wait a month or so and there's going to be a Gen 2 treasury stock hopefully trading called EMJX, which is mine, which will be multi-asset, including Bitcoin and Ethereum and some other Carvana coins that will be part of our treasury. We'll have you on to talk about that.

1:21:43Downtown Josh Brown:I guess the question is, would you like to hire me as your business manager? Well, let me pitch you the idea first. This is like - You're going to get me into merch. No, we're going to go so far beyond merch. You know how we're like in this moment where the more extreme version of something is the one that wins versus the more moderated? Look, I mean, look who we just elected mayor. Well, Trump too, both sides. It's just whatever is the loudest, most extreme, craziest shit that people would normally be like, that'll never happen. That's the thing that happens. Like the craziest outcome is the most likely.

1:22:19Downtown Josh Brown:That's what most people, when you talk to people on the street, feel about the world that we currently live in today. There are some like scientific reasons for that, including the internet and just the ability to amass huge followings for things that stand out. So, all right, we all understand that concept. you could have like the first meta, meta meaning like, like almost like ironically, like an in joke. You could have the first meta active ETF. We literally call it lottery. And no, but see, you see your reaction. This is the problem with people today. No, you see your reaction. That's the reaction I want.

1:22:59Downtown Josh Brown:Guys, my new active ETF. It's a collection literally of lottery tickets. get along this thing with money that if it goes to zero, you don't care. If you got a million people to put a thousand dollars into this, you would have one of the biggest active ETFs in the world. And that could be your base of capital, the way that Buffett has insurance premiums and different people do fund of funds and they get consultants to send their money. This is how I get money for my ETF. I tell people it's literally a collection of lottery tickets. some are zero, some are a hundred baggers, some are 500 baggers for all I know, but this is explicitly what I'm doing.

1:23:41Yeah. No, it's don't you think that would be a hit? Yeah, I think so. And I doesn't care right now about that. I feel like, well, I don't think there's anything wrong. It's a venture capital model applied to public stocks. Yes. And you were telling people you're probably going to blow up. Look, if I have 10 investments, he's on board. If I have no, I'll make the case if I have 10 investments. Okay. And one is a hundred bagger and you know, the rest, you know, a few like keep their value and a few, and a few go up a little bit, seven go to zero, which never happens for public stocks. I'm still, I'm still sitting on a 10 X in my portfolio from my a hundred bagger in one position.

1:24:17Right. So that's the value of slugging percentage. But you need one of those. But you do need one of those. Yeah. And the critics will say, oh but like carvana was a fluke and you know it'll never prove him wrong how how often can you find 100 bagger so i i remember i tweeted at one point like i i i anticipate or i hope to find one of these 100 baggers every six six months or something and people were like six months come on that is that is insane yeah 100 bagger every six months how many do we have now like we've got it like well i don't know how many how many companies how many companies ever 100x from single digits

1:24:54Downtown Josh Brown:It's, it's gotta be a tiny number. It's not a big number. No, and it's getting harder and harder. The more the open AIs of the world stay private, you know, like you, you, it'd be easier in the night 98, 99 when the globe.com was IPO and with no revenue. But, but so, but what I'm saying is like, people are willing to look, we see people doing zero data exploration options in record numbers. People are doing lottery tickets already. They're sports. They're doing more sports gambling than they are retirement investing. Right. So we can't change the world. We can feed the public what it wants. I mean, that's one thing I'm trying to do with this whole rising dynasty thing, like, and communicating with this middle-class, you know, open army folks that are following us.

1:25:37I was like, don't waste your money on these, like, you know, sports betting. Don't, don't, there's so many ways. You know, zero DTEs. Yeah, waste your money on my penny stocks. Zero DTEs, no. Carvana, good. Open door, good. You know, zero DTEs and sports betting, bad. You know, that is sort of my message.

1:25:53Downtown Josh Brown:So you're telling people, all right, I get it. You're going to gamble because you're middle-class and you don't see a path to yourself becoming wealthy. But they're telling me they're doing this anyway. That's right. I get so many messages from people saying, hey, I'm an electrician, I'm a pipe layer or whatever. I had a guy who was like a painter, like he paints houses and stuff. And he was saying like, I spend three, four hours a night studying stocks. And we had a debate about - Is that your painter? We talked about - You're a plumber. he he we talked about post-quantum cryptography in this btq must have been a fascinating conversation he like he knew more about it than i did before we wrap so if you were to launch the lottery fund okay and i'll just give that to you you can just have it yeah i want a board seat every all the traditional media this is the top barons financial times it would point to you this charlatan is selling people a dollar and a dream grifter you know how much money you would raise because of that negative press in today's day and age.

1:26:51Downtown Josh Brown:The press doesn't even understand that it works this way. We understand it. I had a coffee with Tim Sykes, you know, a few months ago here in New York. And he was like, you got to, this is great what's happening with you and Open Door. You got all these haters. You got like Martin Shirelli coming after you and all this. It's perfect. You want that. You want the energy. Because when the energy is there with the positive and the negative. Strong feelings. It's people are paying attention. They care. They care. All right, dude, I wish you luck, pal. I think what you're doing is super interesting.

1:27:23Downtown Josh Brown:I love it. I love that it's working for you. I hope it keeps working for you and your army. And, you know, I'm a fan of yours personally. And to see you finding professional success doing something this much fun, I feel like it's cool. So I appreciate it. If I've ever given you the impression, thank you guys. If I've ever given you the impression that I don't think it's cool, that's not the case. I'm rooting for you. You know, I am. It's all good. All right. How do you feel? deal.

1:27:47Michael Batnick:No comment.

1:27:48Downtown Josh Brown:No comment at all? This will end in tears? You could say it. One of us should probably say it just to hedge the show.

1:27:54Michael Batnick:I mean, I think a lot of this shit is nuts, but I hope it works. Well, it's working so far. Yeah, good. I hope it continues to. A lot of the stocks are nuts or a lot of the philosophy is nuts? The post-quant, you lost me at post-quantum. I hope it works. I want people to make money. So I hope it works. I hope it goes to 81, 89 because that would be the funniest thing ever. I'm kidding. I hope it goes to 82. All right. Now we always end

1:28:12Downtown Josh Brown:the show by asking people what non-extradition country they're planning to visit when their portfolio blows up. What are you thinking? Panama? What do you got in mind? Dude, what are you looking forward to? Tell the audience. Well, I'm - Drake finally buying the stock. I'm looking forward to the Open 82 party in Vegas. So now that's become like a meme unto itself. And like people have made AI videos. Wait, what is this? People want to have a party when Open door hits 82 bucks a share. Oh, and so, and then they were debating, Oh, should we do in Tokyo, LA, but Vegas, Vegas one. And, uh, and then, so somebody, uh, I got on Sora or one of these AI video generating sites and created like a video of like Drake and Eric and Keith, and like all these people.

1:29:00So, uh, you know, I, I think that would be pretty cool. People have told me like, well, I'm flying in for my Antarctica. I'm flying in from Mongolia.

1:29:07Downtown Josh Brown:So I'll tell you how it's actually going to go. Drake is promoting Steak, which is a gambling app. Drake is not afraid of controversy in any way, shape, or form. He actually courts a lot of negative attention, especially these days. He thinks he's a supervillain. Drake is going to buy the stock. And the party's not going to wait until Vegas at 82. It's going to be in Toronto. And I feel like that's going to be your – if you can make that happen, even if the stock doesn't go to 82, I feel like you'll still be pretty satisfied. And you guys will be invited. And then your kid gets to meet Drake and it all comes full circle.

1:29:40All right, dude, rooting for you.

1:29:42Downtown Josh Brown:I'm afraid for you, but I'm rooting for you. And I just, I hope everybody can make a lot of money. All right, that's it for the show this week. I want to say a huge thank you to John, Duncan, Nicole, Rob, Chart Kid, Matt, Sean. We've done some incredible, Daniel. Who else am I leaving out? Graham, Keith. We've done some. Travis. Travis, we've done some incredible work this week on video. Guys, Animal Spirits on YouTube every week. Hits so hard. What else? Ask the Compound has been good lately. It's always good, but especially good lately. Taking off. Yeah. And last thing I want to tell you about is the Ownership Channel.

1:30:21Downtown Josh Brown:So we have a lot of markets conversation on the Compound. The Ownership Channel is about what wealthy people or business owners or founders or employee shareholders of companies actually do with their money. not trading but really more about just the process of being wealthy becoming wealthy what are the right things to do we have an awesome interview up with John Chaffetz from Timberlane if you haven't checked out the ownership channel by Ritholtz now would be a good time we'd love for you guys to watch it give us some feedback tell us what you think alright that's it from us thank you so much for listening and watching see you soon

1:31:03One more intro.

1:31:33Downtown Josh Brown: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+.