Former Trump Trade Official Steve Pavlick on Tariffs, Negative Wealth Shock, Pulled Earnings Guidance

25:35And from that – Here's what we got. Here's what we got to change for this. So we got them to reduce their trade restrictions. You could look at here's what the rates were before on tariffs. Here's where they are now. Here's the deficit. You can quibble whether or not that's the right metric to use, but Trump likes it, the trade deficit. So it was this number before. Now it's gone down to this number, and we are exporting this many more products here. OK. So we got – OK. So we got Zimbabwe to the table. Big step. They have agreed to take the tariffs off what we ship there, like as part of a negotiation and we'll take – OK.

26:08Okay, so is there any chance in hell that we're going to have a positive trade deficit with Zimbabwe? Probably not, but can we get it better? Look, this is where I get to the last thing. So we talked about like the three. Even Vietnam, like I'm joking with Zimbabwe, but even Vietnam, we're not going to have a positive trade deficit with Vietnam ever. We're not going to sell them more than they sell us, period. It's never going to happen. I agree, and this is where I was going to say the last week, we did three of the four buckets. We did reciprocal. We did sectoral. We did Canada, Mexico. And the fourth bucket all to itself is China.

26:43And if you're looking for right now, it's difficult to wrap your head as to why are we doing this? And if behind the scenes, part of the negotiations is can we isolate China? Are you getting some of these trade partners to pull away from them and actually work with us? Then I think there's probably a longer negotiation could be more pain ahead with China. But ultimately, that's probably an art of the U.S. national interest to do that. And so you mentioned Vietnam. I thought I could be overreading this. It was very interesting to me when Trump singled them out Friday saying, hey, they want to negotiate a deal here.

27:14Because I sort of mentioned Vietnam has probably been the worst offender in terms of basically letting China come in and reroute their products there. So that message is being communicated now because all these other countries are watching how their peers are responding here. You know, and so I think we see Vietnam starting to pull more towards the U.S. and stuff. Well, wait a minute. OK, maybe we ought to start doing that, too, and consider that. So I think you may see some sequencing here as to announce the deals. And there's also probably an element of, do you want to sort of hold some of these deals back and announce them in a batch?

27:42And the reason for that maybe is if you sort of announce, okay, we've made one big deal early on, does that sort of become the template for everybody else? Where it's like, okay, the Trump administration was able to reach a deal with, you said, Zimbabwe. Okay, well, we'll just sort of try to strike something similar. Does that sort of hurt your process and your negotiations moving forward? So that issue with China, I think, is going to be the dominant topic of our time. And if there's some larger aspect, reason behind why are we doing all this now, if it turns out that it was, hey, all along these conversations, it was about getting these other countries away from China, then I think that might, in the end, history may be kinder to Trump.

28:21OK. Did did did Mexico and Canada get carved out of this particular wave because those are much more politically fraught negotiations for both Republicans and Democrats and maybe just too messy to tackle in the earliest stages of this? You know, I actually see a little differently because last time and I was still there when this was going on. We talked about sequencing last time. The first block Trump focused on was Canada and Mexico. That was the negotiation of USMCA. Because it was it was repealing NAFTA effectively and redoing NAFTA. Right. It was. But also going back to he did that before he pivoted to China.

29:01The idea is like you need to secure, fortify your relations with your neighbors to the north and south. Make sure China can infiltrate them. One of the unforeseen and hindsight probably should have saw this coming was China rerouting products to Mexico. That's something that they need to close down. And so I think this is about, OK, how do we accelerate these USMCA renegotiations ahead of July 2026? Can you sort of put that North American bloc on firmer footing to allow Trump to pivot a little more aggressively towards China? I think there's something with that. And look, I think you're right, too.

29:33I mean, just because of the nature of our borders, we rely so much more on trade. You have congressional interests there. So I think that's why I have them sort of in a separate block there. And again, I think a lot of this political stuff is just theater. Just be honest. And they have their own issues there in Canada. So I'm more optimistic that beyond the April 28th election that eventually we'll sort of reach an agreement. I think Mexico's done a great job. I mean, Claudia Scheinbaum, the president down there, has really, I think, done a master class of other world leaders when you look at how do you deal with President Trump?

30:05I think she's really heading shoulders above the rest. Do you think the – so you must know this. The world leaders, they have to play their role in making Trump look good. And maybe Claudia is a great example of this where she understands exactly what he needs in order to not overly attack Mexico in a trade war. And she's willing to give it to him, and that's political theater on her end. Like it's almost like, well, this is a play and I already know what role he picked for himself. And I already know how he wants the third act to go. And therefore, I should write my role around his role and we can get through this quicker.

30:49You think that when you say political theater, it's not one sided. It's not just us blustering. It's the other side understanding what they need to do in order for us to all get a happy ending to the play. Right. I mean, for everybody has their own domestic political interest. And in some ways, Trump may actually help Scheinbaum in the sense that he gives her some political cover to maybe be more aggressive on the border, do some things that maybe she probably wanted to, but may not have been in her domestic. And now she can say, this is part of what I had to do. You know, and it's maybe candidly with Mexican government needs her to do.

31:27It was just to be very difficult domestic politics there. So she's able to sort of, I think, you know, triangulate that stuff. And, you know, with Carney, it's a little bit different. You know, I mean, Trump has sent the Liberal Party in Canada through the roof. I mean, they were facing obliteration with Justin Trudeau. But there's other political dynamics, too, where it's like, OK, if you are in a country and you're opposing Trump as a world leader, in some cases, that's politically the popular thing. So it's important to watch these effective dates for when you come out for some of these retaliations that these other world leaders are.

31:59Yeah, it's a really good point. Like resisting Trump in Canada is politically – it's a great side to be on and he makes it easier for you. Like the political theater that you described, he's putting you in a starring role. I mean it would surprise me if like behind the scenes we find out Carney and Trump have been talking this whole time and Carney is saying thank you for getting me elected to prime minister by coming out and doing all this stuff. I say that cheap, but there's a lot of that, I think, more going on than people realize. And to that point, it's like, OK, elections behind us sort of said what I had to on the campaign trail.

32:40Carney knows it's not Canada's interest to escalate things further. Let's find a resolution. All right. I got I got a few more for you. So you so what was your what was your term? What years were you a part of this? Sure. So I was on the Trump transition team back in August of 16, I guess. Interesting times there at Trump Tower. Joined the Treasury Department, day one employee, January 2017, and then left in October of 18 to join RenMac. So that was my experience there. And then my role was as a legislative liaison for the international portfolio. So working as administration sort of spokesman with Capitol Hill on issues related to trade, foreign investment, particularly China.

33:24Okay. So if you had to guess, or maybe you know, it seems to me that there were a lot more rifts among the people involved in the trade discussions in 2018. It felt like within the same day, you could see headlines saying the exact opposite. Things were being discussed between the various parties. and of course, Representative Lighthizer was sort of the face of this. This time around, it seems like while they're all saying variations of the same thing, there don't seem to be rifts. There seems to be higher message discipline. I'm not sure if that's just an accident or that's on purpose and maybe that could change.

34:10And also this time around, it seems like Scott Besson at Treasury is the face of this thing along with Lutnick. Whereas I don't remember the Treasury being as heavily featured in the media defending the tariffs as they are this time. So I'm just like giving you my perspective of this as somebody who's consuming the news and doesn't know anything about what's happening internally. But like what's your interpretation of what we're seeing? I think your analysis is spot on and that's somebody who was sitting there before. And there are some reasons for this. I mean look, I don't know. Mnuchin was not doing what Besant is doing now.

34:51You would agree with that? Yeah. What I will say is I think Mnuchin was probably more aligned with Gary Cohn, Larry Kudlow, more of the free traders and sort of pushing back against more of the Navarros, the tariff enthusiasts that you like. And United States Trade Representative Bob Lighthizer, accomplished trade attorney, strong views. I guess he'd be more in the pro-tariff camp. But, you know, the president, in my experience, always liked healthy debate and sort of was sort of, OK, let's team of rivals. Like, you know, let's go ahead and let's duke it out. I mean, candidly, too, like that role was new to him versus now you're sort of in this interesting situation where he had four years out of office.

35:33A lot of time to think about what is this team going to be like and try to get maybe he would say more cohesive group. And so I think that's the difference now, at least in the Treasury secretary position, is, you know, Besson sort of, I think, reading the room is like this is direction Trump is to go in tariffs. There's a reason he's pulling forward. It's clearly a priority for him, something he feels strongly about. And so even if he maybe not necessarily agrees with all the philosophy that's been going on, I don't know, this is an interest if you want to keep your job to sort of come out and try to push back against these things.

36:02So I think you're right where there's probably less public dissension, but I still think privately there's a lot of conversation, shall we say, behind the scenes as to the best approach. OK, so on that topic, and we'll end here, the calculations themselves have been the subject of a great deal of ridicule. The formulas, the Greek letters, where these numbers came from, the fact that they're trying to factor in the trade deficits themselves to come up with what the appropriate level of tariffs would be. the fact that there were some territories that were thrown in here where no humans live. It's all polar bears.

36:45It's all penguins. OK, great memes. We all got a lot of that was like almost like a little bit of gallows humor. We all got out of this situation as we watched our 401ks crash. As you're looking at this, somebody that was once on the inside of this, like what's your take on just the general amount of dissent derision that's greeted the execution of these tariffs including the rollout the big cardboard poster like how do you without getting yourself into trouble like how do you think about how do you think about the response to this stuff generally from from the the cognoscenti on social media well I mean people are where do you stand on penguin tariffs, I guess, is what I really want to know.

37:34Pro-penguin? Yeah. I guess I'm pro-penguin. I don't know if these are big tariffs. But penguins are stealing all our good egg-hatching jobs. Exactly. We were low on eggs for a while, so don't rule that out. Substitute? Right. Yeah, I guess where I come down on it is, you know, we talked before about how President Trump's the ultimate decision maker. We also mentioned that you have competing interests there presenting a lot of different plans. My sense is he probably had a variety of plans presented to him up until the very last minute. And at that point, it was sort of like, let's do the reciprocal rate, but let's also do this universal tariff rate, and then sort of like, let's find a way to back into some analysis to support the direction we want to go.

38:15And I think, you know, perhaps that explains why they chose the approach it in with the math. My guess is that the White House, which Preston publicly would say, the trade deficit captures both the tariff and non-tariff measures. That's why they decided to use that as their currency manipulation, the barriers to entry, the regulation that only applies to us. Yeah, I get that. And Trump from his, you know, hey, I want to be able to market this is the visual. It's like, you know, here's what they're charging us. And here's what we're going to charge. Now, again, a lot of people probably will follow the math and economic logic sort of or lack thereof behind it.

38:53But to most. Well, that's why the market. I mean, that's the the proximate call. I think the market was weak going into it and would have fallen either way the crashiness of the market is directly correlated to that moment where they held up the the board and people just said whoa whoa whoa whoa that don't look like 10 it's not that's not what that's not what our expectations which were already bearish that that's like way out of control versus what we thought that's what i think happened there it's your point about expectations because trump had been messaging hey, I'm going to be very generous.

39:29I'm going to bring it much lower than them. You're sort of looking at it and go, okay, well, you know, Europe tariffs 10 % on our cars. We're at two and a half. So maybe we'll end up at five. Like, you know, okay. Then you're like, whoa, whoa. All right. You busy, you busy these days? You're inundated at that? Yeah. I mean, when I'm not doing work and there's a lot of work to be done, I got, But my oldest is going to be four in August. The youngest is going to be two in July. So you got your work cut off your – all right. Hey, Steve, I just want to say thank you so much for joining us. We really appreciate you kind of giving us an idea from the inside what's happening and what you see now from the outside being in Washington and talking to people.

40:14So this is super helpful to us. Thank you. Where should people follow you to get more of those insights? Of course, RenMac is the easiest place to go. Anywhere else? Yeah, I would say. You got a signal chat cooking somewhere? I do not. I have not much on social media. Red Mac podcast on Friday. All right. Awesome. You're the man. Thank you so much, Steve. We'll talk to you soon. Thanks for watching. Thanks for listening, guys. We're out.

40:58Yeah, yeah. All right. So what are your thoughts, guys? It's 5 o 'clock East Coast time. Michael Batnick and I are live tonight. We're so excited to be here. We've got a full chat. Looks like Jay Luther is back. We haven't seen him in a minute. Todd Dennis is here. Bob Sacamano, 6 '6", 26 is here. He said, Josh was calming on TV today. Thank you. Maybe I shouldn't have been. Let's see. Matthew Stevick says, Josh called today's bear market rally perfectly on CNBC with confidence. I appreciate that, Matthew. It's tough because so many people are in this mode that it's always going to be a V-shaped recovery.

41:44And the problem is they just don't know what time it is. When you're in a bear market, it's sell the rip. It's not buy the dip. So this is just situational awareness. I'm buying the crash. Heather McFarlane is here. Rachel Fentwit, we see you. Roger, Mark Shevlin, James Sykes, Cliff. Love you guys. Great to be with you all tonight. We have a sponsor. Let's give Betterment Advisor Solutions a shout out before we get right into the show. That's our sponsor today. Imagining a better future is the first step. Investing in that future with Betterment Advisor Solutions is the next. Whether you're launching your own practice, looking to streamline client onboarding, or just searching for efficient ways to scale your firm, Betterment Advisor Solutions is here to help.

42:29They automate to make tax optimizations simpler. They provide support to make administrative tasks easier. At Betterment Advisor Solutions, they're building innovative tech for anyone who's ever said, I think I could do better. So grow your RIA your way with Betterment Advisor Solutions. Learn more at betterment.com slash advisors. Investing involves risk. Performance not guaranteed. All right. Say that again. Yeah. All right. We're starting with stock market damage. Michael, take it away. Okay. Well, before we – how are you feeling? I'm fine. I think we're like all over this. Like honestly. I think we – I think from the start we said this is not just a dip.

43:10Then we said this is not just a correction. Like I think we're giving people the truth. It's not what we want to say. Like it's not what we want to have happen. But look, the number one thing here is that they're going to wipe out a year's worth of earnings gains. And they're telling you they're going to do it. And it's happening. And I don't know how you really avoid that. So once you know that that's what's happening, then the only place you could pivot to is, okay, well, what's the multiple? And when this bullshit started, it was 21. And now it's still 18. And the long-term average is 16 and a half.

43:47So you're still statistically expensive. The Fed is in the penalty box. They can't come out onto the ice just yet. Ain't going to be no fiscal stimulus this time. The last time we had a massive recession threat, COVID, right? That ain't happening. And so you have an expensive stock market. You have a huge earnings wipeout potentially the longer this goes. You have all kinds of geopolitical shit thrown into the mix too. you got problems in the bond market. It's just, it's a catastrophe. Yeah, but other than that - Why tell people it's not? Other than that - Has been my attitude. Other than that, it's pretty good.

44:31So you don't speak to me - No, but do you - Hold on, hold on. But like, do you agree? Like, why tell people that this is one in the mill and totally ordinary when it's clearly not? I don't think anybody's saying that. Yo, I disagree with you. I think people are putting these fucking charts up. They're saying the average inch of your drawdown is 14%. You're way past that. No, I am, but not everyone is. And I think whether or not you're way past that probably is a function of what your investment strategy is. If you're a Vanguard only, stay the course, never do anything, then you're still putting those charts up.

45:09And if you have a brain in your head and that's your strategy, you shut your mouth. If you can't stop talking and you're a chimpanzee crashing your symbols together on fucking LinkedIn or on Twitter all day, that's you're telling people this is normal and it totally isn't. It's completely abnormal. So I don't want to pretend that I saw this coming because I definitely didn't. I was not like this is going to pass. I was the opposite. I was in the Bill Ackman camp. So Bill's been tweeting. And somebody said, good job speaking out, but it seems like you should have foreseen the chaos. And he said, I don't think this was foreseeable.

45:42I assumed economic rationality would be paramount. My bad. And that's where I was. I don't want to pretend like I saw that. I thought that he was going to. It's not for, not about being foreseeable. It's acknowledging the current situation as it unfolds. So it's different. It's different than saying, oh, on January 1st, everybody should have known that this guy was going to take the economy off the cliff to make a, to make a point or something like that's not foreseeable, of course, because who would do this? But even, even before liberation day, I didn't think that he was going to pull the trigger.

46:12Like there was the analogy that I gave is there was a red button on his desk that said push to detonate the economy. And he did it. I didn't think he was going to push it. Still time. 506 East Coast. Still time for what? Midnight. The reciprocal tariffs take effect. So we can say two things. Number one, this is not normal. This is not fun. This is not cool. It can also. Hold on. Let me address something. Tyler Dredd. Dude, could you listen to me? This is important. Trump has been talking about tariffs all during the campaign trail. Correct. and the number being floated was 10 % tariffs and geographic carve outs and sectoral carve outs.

46:52That's not the same as 38 % tariffs on. What about 104 John? Can we play that video? T that up. Um,

47:29Awesome.

47:43Okay. So he was not running out of - When did she write her tell-all book? He was not running on 104 % tariffs to China. No. I mean, obviously nobody would have voted for it. Obviously. Okay. So we could say two things. Number one, this is all shitty. It can also be, with the benefit of hindsight, a wonderful opportunity not to minimize the carnage for people that have the intestinal fortitude to stay sober. because this is a panic moment. People are panicking. Chart on, please. Over the past four days, the S &P 500 lost 12%, and it could have been way worse if we didn't have that bounce yesterday.

48:23So there is full-on liquidation. Bespoke tweeted just the fourth time, this was last week, just the fourth time since 1952 when the five-day trading week began that we had a 10 % two-day drop so far for the S &P. 87, 08, 2020, 2025. This shit is serious. It's one for the record books. Yeah, and what's so insane about it is this is before the economy really exhibits any of the effects of this. Like we just got a jobs report for March. That was all things considered a pretty good report. The only layoffs of note were government. Um, like, like we did not, this is not a situation where like things went bad and then the market reacted.

49:09This is totally the opposite. And the best, the best way I heard it put, uh, today was, uh, Goldman Sachs says right now we're in an event driven bear market that is soon to tip into a cyclical bear market. They mean cyclical in the sense that the economic cycle. So it's going to, so it's not yet an economic bear market. It's all of this is happening. You come in. No worries. I'm just talking to my friends. All right. So that's the difference between this and those other episodes you cite. The stuff from – or outside of 87. The stuff from November 2008, economy was already in a massive recession.

49:52And then that crash coincided with like Congress failing to act in October and then all the after effects of that, even once they finally passed TARP. Like the damage was already done. It was too late. Nothing's happened yet. So for people who hear that and say, well, then why in the world would I own stocks today? I would say two things. Number one, the stock market on average bottoms five months before GDP does, right? Stocks are a discounting mechanism. So five months before GDP does. To the point about we haven't even seen the hard data start to roll. We're going to see lower earnings. There's almost no doubt about that.

50:33The S &P also bottoms on average. And we have a chart that we'll use in TCAF. Nine months before earnings per share does. Nine full months. So think back to 2020. And that's an average, meaning it could be even earlier. Think back to 2020. The stock market bottomed in 12 trading sessions. And on the way up, and when we made new highs and names like Hyatt and Hilton or whatever the names were, I can't even remember at this point, you were like, or I was like, this doesn't make any f***ing sense. Am I smoking dust? You're telling me that these companies are better today, in a better position today than they were in 2019?

51:08How? And the whole way up, people were fighting it because the market fell 35%. It saw it coming. We knew. So the question now is, how much has the market discounted? We don't know. Obviously, we'll find out. But Nvidia is down 40%. There is wipeouts everywhere. So throw these charts on. This is stale stuff. This is S &P 500 new lows. I think I pulled this on on Friday. So new lows are spiking, whether you're looking at 1, 3, 6, 12 months. It's worse today. It's way worse. Breath, forget about it. No stocks are above any moving average, OK? This is all zero. So we know the market gets the memo very quickly.

51:46And this idea that you are going to wait for the economic dust to settle, like again, think about 2020. It's not to say it's going to play out exactly the same, but it doesn't wait. It doesn't let you back in. Yeah. And what will end up happening, and we've talked about this before, and this is what the bears hate the most. As things are getting worse, the stock market begins to look through it. and that's the moment where you're like, wait, am I taking crazy pills? Did they see that job support this morning? Did they see that PMI? Dow Rowley's on, blah, blah, blah, blah, blah. Yeah, that's how it happens.

52:19So it's very frustrating when you get out and then the market runs away from you and then you're forced to buy back and hire and it's really hard for people to do. Because the news is getting worse. That's a really good argument for not throwing out all your stock exposure, of course. Another really good argument is that It's not a guarantee that in a recession, all sectors in the market will be treated equally. And we've seen the consumer staples get to a 21 forward multiple. Consumer staples are now more expensive than almost any other sector of stock. The other phenomenon that's worth discussing, and I suppose it's possible, is that some of the things that are happening now could really easily be undone because it doesn't require an act of Congress.

53:10It's the mind of one man who decides he's made his point or he wants to move on to the next thing. Yesterday was a dress rehearsal. We saw what happens. On the fake headline, there was a 7 % rally in 20 minutes. So we saw how that's going to play out. All right. All right. Here's a great data point from Jonathan Harrier. 62 % of S &P 500 holdings are at a 50-day low. This is a wipeout. Crossing above the 60 level is rare, happening only 15 times in the past 20 years. Then he goes on to show this is not by any stretch of the imagination a good thing that forward returns are all of a sudden going to rise.

53:42He says volatility is here to stay. When you see this type of action, it's mixed in the short term. How are investors behaving? Well, it depends which investors you're talking about. Vanguard investors, Josh, who you just mentioned earlier, VOL, which is Vanguard's S &P 500 ETF. This is from Balchunas. Took in cash every day last week, every day for a total of$3.3 billion, which is almost double its record pace set last year. Not necessarily surprising though, because this is what happens every sell-off, but still amazing. You simply can't scare them. Well, these people who are making these purchases - Resolute.

54:18Yeah. Assuming they're not day trading VOL, which I doubt they are. These people will be very rewarded someday. And the key is you have to not care when that someday is. You have to be okay with that someday being next January. At 20 % lower or worse. Right. It's, you know, it's, it's, if that's the route that you're going down, I'm dollar cost averaging. I'm adding even more to my account when markets fall. I have a long time horizon and I simply don't care. You will win. There's no question. The only question is how much pain you have to go through and how much time. So I am one of those people.

54:56I had some money in fixed income for this very purpose. Like whenever there was an opportunity and am I early? Yeah, probably, but I don't care. This is my rule. When there's a panic, I buy. I have no choice. That is like my, that is. I saw that email you sent to your fixed income manager. It was really funny. You're like, give me my cash. No, what I said was when there's a market crash, I buy. That's my policy in reference to naked gun. But I needed the cash. I'm out. Is the 10-year falling because everybody's pulling money out of bonds so they can buy stocks? Excuse me. Is the 10-year rate falling and the 10-year rising and the 10-year bond falling because sellers want a dollar cost average into stocks?

55:38I don't think that's wishful thinking. Okay, so check this out. This is from Jay Capel. This is a chart that shows all the dates when the fear and greed model was at three or lower. I don't know what's in there exactly. But this is panic. And three months later, the win rate, meaning higher prices, is 84%. Wait, what's the blue stochastic? It's a fear and greed model. I'm sure it's proprietary. Oh, okay. I see. Six months later, higher 63 % of the time. One year later, actually not that great. So interesting. But you know what? You have a long-term time horizon. You're able to withstand pain because I'm not making like a call that this is down, that today is the bottom.

56:17Who the hell knows? But when I see fire, I have to run in. Sorry. That's just how I roll. All right. Back to back. Let's look at Todd's own. Back to back days of record inverse volume. $30 billion on Friday and over$35 billion yesterday. The massive spike from inverse ETF suggests downside is overcooked in the near term. Again, the key word being the near term, because can we get a relief ladder that ultimately fails 100 that's what a bear market is you get all these rallies that fail wearing people down uh next chart who's who's who's doing this um 35 billion dollars in volume on inverse etf so etfs that bet against the market i mean i can't just be like day traders this is no it's got to be hedge funds right because these are great vehicles for them if they're trying to accomplish something um and not sell long holdings but so if you want these So if this morning you were like, stocks up 4%, I call bullshit.

57:10I want to hedge my portfolio. Boom. You nailed that. All right. So we've shared this from Todd a bunch. Last week, it was 12 to 1. I'm sorry, it's a couple of weeks ago. Then last week on the show, we shared it was 7 to 1. And when I say 7 to 1, now it's 4.5 to 1. What I'm talking about is the AUM of levered trades that go up with the market versus the inverse. So at the peak, just a couple of weeks ago, when it was all animal spirits, it was 12 to 1. Now it's down to 4.5 to 1. My point is, in the short term, as Tom mentioned, sentiment is all the way washed out. He has another chart showing flows into - Whoa, whoa, whoa.

57:45Back, back. This is the mother of all buy signals if we get it. If they cross? When that, yeah. If we have more ETF assets in levered inverse short, levered inverse ETFs versus levered long, if we even get, I'm going to say, if we even get within spitting distance, you don't need another signal. Only watch this. So yeah, I will sell my kids and put the money into the market. That's all you need. Like literally, that's all you need. You don't need to see anything else. I will also say, listen, this is everyone has their own risk tolerance. Okay. Like this is not, I'm not telling you to pile in because I don't know if the next 20 % is lower or higher.

58:25But for me, when I see panic, I just, I have to buy and we'll see how it works out. All right. People are rushing to cash. He has a chart showing the treasury bill ETF flows 10 day sum. and 65-day sum, and we are seeing very elevated readings. And this is what happens in a panic. People panic. Yeah, I'm not sure if there's any real takeaway from like treasury bill ETF flows because as we've learned over the last few years, like people put money into T-bills or into money markets for reasons that are indifferent. you know now i know this time there's an obvious correlation stocks are crashing people buying t bills but i'm like people aren't necessarily going to pull money out of those um to chase a stock market rally we've seen that money be really sticky yeah right so like that's like one of the that's one of the big lessons everybody has learned from um the the recent past but the rush is real obviously um rush is definitely and i think you know let over the weekend i was like i'm a little bit nervous i'm not feeling nervous sunday night i was feeling nervous you got the sundays you got the sunday scaries sunday scaries uh they closed and they closed the nasdaq green yesterday um not the s &p not the dow i thought that was interesting um today was one of the all-time worst i was on the i was on cnbc today the market was up a thousand by the time the show ended the market was up 700 and i looked over at judge and i said this thing's cooked like they couldn't hold a thousand point rally for more than three hours it's it's like super that's like super telling um that they're still hanging on these headlines and these breathless breaking news reports so this is this is what a bear market does by the way it tricks you and fools you so many times there's so many uh mirages and false oases Oasis.

1:00:19Oasis. What's a plural of Oasis? Is there one? Oasis. All right. So let's talk about. Oasis. Anyway, it's always a mirage. The point is it's a mirage. Don't stop. Step one. You're in the hole. Stop chasing the mirage. It's not going well. It's not going well. All right. Go ahead. All right. Let's talk about tariffs. Like why? So I think this is the thing and tariffs were never a like partisan issue. It was always an agreement from economists on both sides of the aisle that tariffs are a negative some game. They lead to less demand. They lead to trade wars. You tariff me, I'm going to tariff you.

1:01:06It is a tax. It is simply a tax. In a prior episode, I very clearly explained the first time Trump ever on record in the media was talking about tariffs was on the heels of losing an auction for the piano from Casablanca. and the buyer, and this is late 80s, the buyer was a Japanese billionaire who swooped in at the last minute and outbid him. And he went on with Diane Sawyer and he did this entire rant about how Japan is kicking our ass and we need to tariff, tariff, tariff, tariff. This is a 40-year obsession. He does not hide that. He said, I've been obsessed with this for 40 years. So to the answer, why tariffs?

1:01:53It's because tariffs. That's it. You were talking with Steve yesterday. I think you made a good point that if there was a more targeted, measured approach for our national security, vital interests that we need, that we can't be reliant on the rest of the world in the event of a COVID-type shutdown, I think most people would say, yeah, fine. Everybody. Biden passed the Chips Act. Yeah. Both parties, every age group, every demographic, we need to make semiconductors here and we need to write policies that stop other countries from undercutting us. Everybody would say you're right. You're right.

1:02:34Can you say the same for Air Force Ones? Probably not. So I totally agree. It's the blanket tariff. It's just – it's terrible. So Roger Lowenstein said in his sub stack, using tariffs to eliminate the trade deficit will risk undermining American strengths. Talk about a cure that is worse than the disease. Far from being ripped off, Americans benefit from importing cheaper and or better goods, which enhance our quality of life in myriad ways. Moreover, trade is part of a circular movement, not only of goods, but also of money. The US trade deficit of$918 billion last year was the mirror image of a$918 billion capital surplus or infusion from investors.

1:03:17Sooner or later, all of the net$918 billion that Americans spent on foreign goods was invested in American capital assets such as stocks, real estate, bonds, or short-term assets such as treasury bills. Alas, Trump has not read Updike. Neither have I, for the record. you're talking to the wall i know there's no point is there's half look no i'm i come from the school where nobody ever learns anything the easy way and you know that i've said that many times about a whole range of subjects this is just one of those examples where unfortunately you're not going to get through to anyone until they learn and they'll learn um i don't think the majority of Trump voters are excited to go work in factories and mines.

1:04:03I just, I don't believe it. I think the rural Trump voter that is not a farmer, but maybe lives in a community that's sustained by agriculture. It's, they're going to have to go through this. I don't know. I really don't know how else to, I really don't know how else to put it, but I can promise you this, people from Wall Street are not going to have any impact on this dialogue. So now you've heard from Larry Fink. He's a New York Jew that manages money. Nobody's listening. Ken Langone is an Italian guy with a New York accent. Nobody gives a shit. It's just this is the reality of the situation.

1:04:41And we all unfortunately are going to have to go through this lesson together. And listen, it's America. 54 % of American adults between the age of 16 and 75 are reading at a sixth grade level or below. That's more than half the country effectively is not going to bother to spend any time trying to actually understand or figure anything out. And that's both parties. That's not like that's not a north-south thing. It's not a red-blue thing. This is just the state of where we are. And so it's a lot of people flicking their phones up and down, scrolling TikTok, and just they're going to have to learn.

1:05:24And we have to sit here and watch. And I don't know. Look, the only way this ends is if Congress decides that they're going to step in and say this is unconstitutional and we're putting a stop to it. But you need people from both parties and not just Rand Paul who nobody listens to. You need influential Republican congresspeople to listen to their constituents who are feeling the pain from this, Republican and Democrat, and just decide, you know what? We're going to block this. This is not legal. It's not constitutional. It's not productive. But it's not enough pain yet. So we were looking at$280 a share for the S &P 500.

1:06:03Let's say that falls, I don't know, 15%. All right? So 280, doing math, it's dangerous. So that gets you to 240-ish. And let's say we were trading at what? 22 times earnings? Let's say we say, all right, you know what? Not feeling too groovy about these earnings. 16 times, that gets you to$3 ,800 or$3 ,800 on the S &P. It's not inconceivable if this shit doesn't relent. Typical recession, you wipe out between 20 % and 30 % of earnings. No, I don't think it's that high. I saw different numbers. 20 % to 30 % of earnings? In a recession. and not in an earnings recession, in an actual recession. You wipe out 20 % to 30 % of earnings.

1:06:46But the worst news is what happens to the multiple. But so you bottom it 14 times earnings. If I told you what a 30 % earnings wipeout from today's estimates for the next four quarters combined with the 14 multiple looks like, you would not want to know where the S &P is. And this idea that it's only the rich that care about the market, it couldn't be further from the truth. It's literally backward. It's stupid. These people are acting like it's only the rich that own stocks. 60 % of the country own stocks. Who do you think could weather a storm? People with rich people. 100 % of the country has a job where they work for someone who is very much guided by how stocks are doing.

1:07:24So maybe I'm in the denial phase of grief. But this idea that people are not just going to – that we're going to just let this happen, that the rats aren't going to scurry off the ship, that we're just going to tank earnings 30%. I just – I don't buy it. I don't think it has to get that bad because, again, it's not a natural disaster. It's not a war. Yeah, we could just stop. I mean, metaphorically, it's a war. We could just stop. But it's not – this is not people on the battlefield blowing each other up. This is not an earthquake just took out a major U.S. city. Like, I trade – dude, I managed money through the Twin Towers being blown up like three miles from where I was sitting.

1:08:06Like I've been through way worse than this. So I agree with you. I don't actually think that we're going to have to go through a massive recession and just to make the stop. I do think Congress will step in soon. I think he's going to make a deal. And they're the only ones that can. And they're the only ones that can. So to avoid sounding like a broken record, I don't – what would I have to see? What would you have to see? What would I have to see to change my mind in that, oh, he's not looking to negotiate? Well, no. They're saying he wants to negotiate. He's saying that. They're actually saying it.

1:08:37I think he's negotiating. I think this is a terrible execution. Everyone agrees. So anything else? Everyone agrees. Even these red-pilled venture capitalists that have spent the last six months cheering him on, they've all turned. Elon Musk has turned. His brother, Kimball Musk, is just lacerating Peter Navarro right now. Again, Larry Fink spoke out. Ken Langone. Jamie Dimon will be on the JP Morgan earnings call on Friday. I highly doubt he's going to be able to make it through that call without having some stuff to say about this. So that part of it has already started to turn. The thing that has to take place to end this, Congress has to be more afraid of their voters than they are of Trump.

1:09:25Right now, Republicans in the Senate and in the House are terrified of Trump and somewhat scared of their voters. When that flips and they realize they have more to lose by pissing their voters off longer and they're no longer afraid of the White House to the extent they are today, then you're going to see this stuff end up in the courts and get blocked and get halted. But I think we're far away from that. So his approval rating – I think it's not there yet. It's not crashing. It's early. I mean we – the tariffs haven't even started. They start tomorrow. Dude, it hasn't happened to anyone yet.

1:10:01Right. Anything else to say on this topic? What's this iPhone stuff that you wanted to do? Gosh, dang it. The screen is freezing. All right, let me jump over here. Okay. Put this up. Here we go, John.

1:10:17Forgive me. Okay. This is from the Wall Street Journal. Take a look at this iPhone 16 Pro. Your cost for the 256 gig version is$1 ,100. The cost of all the hardware inside, the bill of materials was about$550 to Apple when the iPhone was introduced. And now they're saying that the new tariffs are going to take that from$550 up to$846. Apple is not just going to absorb all of that and see their margins on hardware go from 45 % down to whatever percentage it would be. It doesn't work like that. Yeah. So the argument coming from the tariff camp is this is the problem. This is the root of the problem.

1:11:05It's not a symptom of the problem. We should be able to make these things more efficiently than we are. But we gave up trying. We don't have people in this country working on this. We don't have the modern factories, and we're not even trying to make the iPhone cheaper. But if we hadn't given up on manufacturing and outsourced it to Asia for the last 30 years, we would be able to make an iPhone for cheaper. I'm not saying they're totally wrong or that I'm totally – I'm just saying that's what they would say back to this idea of the$3 ,000 iPhone. So this afternoon, what really got the reversal underway, and Apple's been under pressure this entire week, rightfully so, White House, Trump believes the US has capability to make iPhones.

1:11:50And this just destroyed the stock that was already getting destroyed. Over the last four days, Apple has lost 23%. This chart is a bit stale. It's 23%. So 23 % in the last four days, that is worse than the great financial crisis. It is worse than anything since the dot-com bubble. The stock is in a 34 % drawdown. So to the point that I made earlier about stocks being forward-looking, does Apple deserve to be down 34 %? Yeah, probably. It happens in two seconds. And so I actually bought Apple at the close. I can't tell you the last time I've owned a stock, but it is pure panic, pure panic. Here's Gene Munster.

1:12:26He said over the past five trading days, Apple investors have slid into panic mode, shares are down 23 % since April 2nd. It's going to get ugly with China over the next month, which will intensify the panic. My eyes are on the horizon looking out three months from now. I believe Apple will be largely spared from the impact of tariffs, giving Cook's favorable relationship with Trump and Xi. The biggest wild card is a broader consumer, which could weaken in a recession. That risk, in my view, is already priced in. Apple's in the eye of the storm, though. Oh, yeah. And we did this on a show a few months ago.

1:13:00We talked about how like this, of all the large cap tech stocks, this one and Tesla would be the most susceptible to a trade war with China. And that ended up being exactly how it played out. They are easily the two worst of the Mac 7. Everything that they do, not everything, I'm not an Apple expert, but most of it is manufactured in China. So yes, they move things to India, but that's just cobbling the pieces together. All of their manufacturing components are done for the most part in China. Ben Thompson wrote this last fall. Go ahead. Well, I was going to say it's their second largest iPhone market.

1:13:37And unlike 2018, yes, there were competitor phone companies, but nowhere near as powerful phones and nowhere near as good at reaching the consumer as the domestic phone competitors are today. So that's their number two market that they sell into. not for long, I would tell you. And then they're manufacturing there. So not only do they rely on the Chinese consumer not going all jingoistic and boycotting American products and responding to Trump by saying, F you to the next iPhone upgrade, but we also need to have so many of the components to come from that. So my thesis is that there will be a resolution somewhere.

1:14:17And if I'm wrong and this shit lasts, Apple would be down 60 % from its highs. Do you agree? uh yeah here's well if this stays on apple it was so expensive it was so expensive in january it was one of the most expensive large cap stocks i think it was 38 times earnings at one point itself was never traded that like that and it had zero growth and then it had zero sales growth it was a replacement value business the stock had been rallying on improving margins as more and more of the revenue was on the services side and not the device and they were getting the benefit of see how they're actually not spending that much on AI.

1:14:54That was part of the story. All right. Here's Wall Street. Apple price target cut today to 170 from 200. Reiterated underweighted key bank. Lower valuation multiple. Data points paired with weaker commentary on upgrades from the carriers suggest a miss on iPhone, while we also expect a miss on iPad and a beat on Mac. The impacts of higher costs could be offset by higher average selling prices, but that would impact demand. So there's almost no way out. Here's Goldman. Apple price target cut 242 from 294. Reiterated buy at Goldman. We reduce estimates for Apple to better reflect the net impact of the US reciprocal tariffs through lower margins and lower revenue.

1:15:36In the newer term, we expect these costs to be primarily borne by company margins. And as a result, now forecast fiscal year earnings estimates that are below guidance. Last one. Oh, that's it. That's enough. This stock's in the hurricane. They're in the eye of the storm. There's no way around it. And I do agree with you. If in one, there's some sort of a resolution, you're going to want to be long. You're going to want to be long this time. All right. Here's what Ben Thompson wrote. This is really important because it's not just about Apple. He said, Apple can not only not manufacture an iPhone in the US because of cost, it also can't do so because of capability.

1:16:13That capability is downstream of an ecosystem that has developed in Asia and the long learning curve that China has traveled and that the US has abandoned. Ultimately, though, the benefit to Apple has been profound. The company has the best supply chain in the world, centered in China, that gives it the capability to build computers on an unimaginable scale with maximum quality for not that much money at all. Lastly, here's a coup de grace. This benefit has extended to every tech company, whether they make their own hardware or not. Software has to run on something, whether that be servers or computers or phones, hardware is software's most essential component.

1:16:52And so if Apple goes down, everybody goes down. That's me, not him. And Foxconn, which is a huge manufacturing concern in Asia, they rely very heavily on Apple for their own revenue, and they are a huge employer there. So it's not like nobody gets heard here on the other side, which is, and I think, look, I don't know if this transcends the Trump situation, but I think Tim Cook has a great relationship with the Chinese. He's keeping his mouth shut right now. I think he has no choice. If you had to be any CEO in the world, I think he's the one that you would least rather have his cards because the needle that he as the thread is, it seems almost impossible.

1:17:43He, look, they can't raise prices on all their products because that's politically fraught also. You think that will escape the eye of Sauron if they start selling iPhones for$1 ,900? That might actually be an even worse situation. Do you think Buffett's boys are buying again? No. All right. Here's what I think is the biggest risk to the market going forward from here. imagine there is no guidance and i don't mean to um to paraphrase john lennon yeah like imagine imagine so we're gonna get earnings reports starting thursday for the season we're gonna get the banks first and just think about an environment where everybody pulls their earnings guidance now paradoxically i think the banks are the least likely to pull their guidance because I think they have a pretty firm handle on what they'll earn given prevailing rates where they are.

1:18:43They can't forecast the economy better than anyone else. But the big question mark with the banks is how much do they start reserving against potential losses? They're all in the credit card business. They're all in the home loan business, the auto loan business. That'll be interesting. But I think just generally speaking, This is the next shoe to drop for stocks. If you get 100 S &P 500 conference calls and the net result is they're all pulling their guidance, they refuse to give anyone an outlook. And by the way, how could they? This is problematic for both the multiple and for just the day-to-day trade as that process plays out.

1:19:24And we really haven't seen a big wave of companies pull their guidance together in a really long time. Here's Ed Yardani. Industry analysts have been lowering their S &P 500 earnings per share estimates, but they remain high at$268.85 and$307 for 2025 and 2026. That 268 would be 9.2 % growth and 14.2 % for 2026. Those estimates are likely to fall over time as estimates typically do since analysts tend to be too optimistic initially. they will fall a lot if Trump tariff turmoil causes a recession. Let's put this first chart up. So basically, it's a really big stretch to believe that estimates can stay where they are.

1:20:20And the only real question is by how much do they have to fall throughout the course of the next year. Ed is saying that forward earnings per share has been flattening out at a current record high of 279. That puts the forward PE at 18.1 based on, this was yesterday's close. So that's pretty high PE given the potential for downside risk here. Look at that. Just to reiterate, we were at an all-time high in earnings. All-time high in earnings. Next chart. Earnings season. The analyst consensus expected growth rate for Q1 S &P 500 earnings has dropped sharply since the start of the year. So that would be that blue line at the bottom.

1:20:59That's a really steep drop for Q1, which we're about to get. But he notes the actual results will be better. However, the forward guidance that company managements give analysts is likely to weigh on estimates for the remaining three quarters of the year. So it's the uncertainty. What do you think about my idea that that is the next shoe to drop? I don't know. I don't hate it. I think the problem is, you just mentioned, it's the uncertainty. This is a confidence game. I know. So pulling the earnings guidance is at the heart of what causes market uncertainty. It does not instill more confidence in the future.

1:21:39And when the leaders of these companies have no clarity on what the rules of the game are going to be. They pull back. They go to the silence. They stop playing. And if they stop investing, how do you not see a hit to earnings? Here's Sam Rowe. He's worried about this too. Companies could decline to provide guidance. He's citing David Koston at Goldman Sachs who wrote on Friday, quote, we expect during upcoming quarterly earnings calls, fewer companies than usual will provide forward guidance for both Q2 and full year 2025. five, typically 20 % of companies provide quarter ahead guidance while 43 % of companies provide full year guidance.

1:22:22So I don't know, does the 20 % go to 15 %? Does the 43 go to 30? This is the problem. And, and if we were selling at 15 times earnings, I would say, okay, the market could live with that. Hold on. We're not the rest of the market is like the S and P four 93 are like, I think it is like close to 15. So we have discounts on a lot of shit. Now, if they pull guidance, the only response you could have as a rational investor is to say, good idea. Because you know the only thing that's worse than pulling guidance is giving guidance and then looking like an asshole when you disappoint everybody on the next report.

1:22:59Well, they also have the opportunity to kitchen sink it. So not only might they not pull guidance, they might like substantially lower their guidance. Put up this B of A chart, John. This is also from Sam. It's Bank of America. The number of S &P 500 companies providing guidance plunged in the 2020 period. And that made sense. Why wouldn't they pull their guidance? How could you – you see that drop off? So that's like kind of what's at risk here is a COVID-style plunge in companies wanting to give anybody any idea of what next quarter will look like. And I think during the pandemic, it was understandable.

1:23:41I think now it's also understandable, but maybe less forgivable. And institutions will just react by saying, okay, trim, sell. I think what they're going to do, if I had to guess, is they would say based on current policies as we understand it, this is what would happen if the tariffs stay on. This is what happens if they go down to 10%. You think they will? I think they will. You think they'll do like best case, worst case? And if they don't, the sell side certainly will. The street will. All right. Last thing on earnings. This is Nick Colas. He wrote this today. Our friend Nick Colas from Datatrek.

1:24:13Investor confidence in future corporate earnings is more than twice as important to stock prices as whatever the companies in the S &P 500 actually deliver. Which is why volatility is so high right now. And he says we have a 30 % range of possible 2025 earnings between 189 at the low end, 270 at the high end. Unbelievable. That creates a 65 percentage point band of S &P fair values because P.E. multiples could be anywhere from as low as 14 to as high as 22. So this is how you rip the confidence out of the market. And he notes it took the S &P 500 eight years to go from an eight times forward earnings multiple in March of 09, the bottom, to 18 times in 2017 as investors gradually regained faith in the system.

1:25:11The Fed screwed that up, and in 2018, multiples fell back to 14 times. Then the Fed pivoted in 2019. We got back up to 18 or 19 times. So it's this seesaw, right? So it took two years since Russia invaded Ukraine for the PE and the Fed's rate hiking cycle for the PE to get from 15 up to 21 where it started this year. And now we're watching that confidence erosion on multiples in reverse. And it probably doesn't – honestly, it probably doesn't stop at 18. So that's – why are you bearish? I don't think companies are going to give forward guidance. and I don't think we're as low as we need to be on the multiple to say that we're discounting all the risk.

1:25:59It's not that complicated. It's also a stock by stock basis. No, it's not. What do you mean? Not in the short term, it's not. No, agreed, agreed. It's not. It should be and it will ultimately be. The market's a weighing machine over time, but in the short term, it's a panic machine. But I think the market investors are doing a good job of differentiating the massive risk in Apple versus Netflix. On some days, you see dispersion and you see them buying things like mortgage companies. I talked about Rocket, which is a recent purchase I made. You see them buying utilities. And then on other days, they just sell everything.

1:26:37They would sell everything. All right, let's talk about this. I think that, so tweet on from Zuccardi. Johnson Redbook retail sales soared 7 % year over year, nearly the highest since December 2022. And he said, tariff front running question mark. I think that you are going to see some really funky shit in the data over the next couple of weeks and months. Oh, I agree. And you're going to see some distortions. Trot off. You might even see some positive distortions and he might claim victory. Oh man, that's going to be a stretch. So, all right. So people racing to build inventory ahead of the tariffs could make it look like the manufacturing renaissance is already in hand.

1:27:17What if we see a boom in iPhone sales because people are buying an iPhone before the tariffs get slapped on? I think it's like rational. There was an article about that. People racing to buy their iPhones ahead of the tariff. I call it bullshit. No one did that. What do you mean? Is there anyone in your life that ran to an Apple store to buy a phone this weekend? Robin literally asked me, what should we be buying? You should tell her we should be selling. We should be – she has the wrong instinct. She has the wrong instinct. So the ultimate question is – or maybe not the ultimate question. One of the questions that I have is what breaks the back of investors who have learned for 15 years to buy the dip?

1:27:55What does it? Time. More days like today. So like a really heartbreaking thing would be like a three-day rally that then rolls back over onto itself. We haven't really had that yet. I think it's going to be hard to do it. We've been straight down, dude. It's happening. It just – look, there's a lot of investors who weren't around through 2000 and 2002. There are a lot of investors who weren't around from 07 to 09. They really don't know what it's like to be down six months straight. It is so debilitating mentally, and it causes a change in behavior. And it just hasn't gone on long enough. It's not the depth of the correction.

1:28:43That's not the thing. It's the amount of times the rallies fail that change investor behavior, and it's too early. I agree. But that's going to take, I think, maybe longer than you think. In 2022, remember there was a stat like we have never seen a 20 % decline, retrace 50 % of that, and then roll over to make new lows. Well, we did make new lows. And then, of course, it did. We did. And in 2022, there was small outflows on net, but it was all from mutual funds. ETFs, buyers did not relent. So I think it's going to take, it's not just going to be one quarter. Now this is different. It's politically driven and people are like really scared, but I think, I think they're going to be more resilient than I think people might think.

1:29:22Like if you're, if you're looking for the retail washout to mark the bottom, I don't know if we get that. Yeah. Well, yeah, I'm not sure. I'm not sure if I could say yes or no on that. Let's do some flow stuff because I thought this was interesting. Bank of America said every single type of client bought last week. Huge inflows. Last week, the S &P 500 fell 9%. That was the biggest one-week sell-off since October of 2008. Clients were net buyers of$8 billion of US equities. This is just at Merrill Lynch Bank of America, okay? That's the fourth largest weekly inflow in the history they've been keeping data back to 08.

1:30:08Clients bought both single stocks and ETFs with inflows across all three size segments. So when they say all client groups, institutional investors had their first inflows in three weeks, biggest since December. Private clients, that's regular rich people, have been buyers for 17 weeks straight, had their sixth largest weekly inflow on record. Hedge funds were small net buyers for the first time since early February. And even corporate client buybacks came in and started to track above typical seasonal levels for the first time in five weeks. You were talking about that and you're like, no way.

1:30:43And I was with you. No way is any CFO buying stocks now. I guess they were. Well, they are, but very tepidly considering the damage to their share price. That should have been a record, and it wasn't. And that tells you how cautious CFOs and treasurers are being. Barclay says, we've seen a significant delevering by quants, not yet by retail. Systematic funds are in the process of substantial deleveraging. The bulk of it is likely done. In contrast, direct retail may have started reducing their equity exposure, but they haven't capitulated. And then last, JP Morgan says massive selling Monday. After historic dip buying by individuals last week and overall bullish activity, retail investors are now net sellers.

1:31:33This is yesterday. They turned bearish on NVIDIA, along with Tesla, and the rest of the Mag 7 except for Alphabet. bet. So maybe that's a sign that retail is beginning to capitulate. I bet you today looked a lot like Monday. Not to be too cute, but sorry, I can't help myself. Speaking of JP Morgan, the famous quote, in a bear market, stocks return to their rightful owners. I really do believe that to be the case. Okay. So I guess that's Vanguard. I guess that's their rightful owners because that's where the buying is coming from. All right. We're going to wrap. We're going to make the case. And then I'm told you have a mystery chart for me tonight.

1:32:08I do. You're not going to get this one okay all right i think this is i think you'll agree i think you'll agree with this you could find safety in microsoft and netflix right now not like pure safety like they're not going to go down at all but if you are long only and you must be invested in stocks i think those are two smart places why do you say microsoft netflix i would agree but why microsoft it's rolling over pretty hard um here's martin peers of the let's let's do the charts on each and then I'll explain. It looks terrible. But this drawdown is nowhere near the drawdowns that we've seen in other stocks of its ilk.

1:32:47And it didn't really have the run up. Next one. Hold on. Just to pause on that, Josh, you're 100 % right. Microsoft hasn't done crap in a while, despite the open AI and all that sort of stuff. It's in a - This is no big deal, dude. It's in a 20 - Well, it's in a 25 % drawdown. So not nearly as bad as NVIDIA, of course, but not nothing. No, not nothing, which is why I think it could be viable here. All right, Netflix. Let's do Netflix. Aside from the fact that this is a head and shoulders and should be avoided at all costs, I think it's a consumer staple. It's in the telecom and it's in the tech, excuse me, the communication services sector.

1:33:27But I honestly think this is the last thing people cut. You're 100 % right. Nobody's canceling their Netflix unless we get a depression. I don't know that this matters. It still trades at 35 times forward earnings. Morgan Stanley called Netflix its top pick replacing Disney in the sector for this year. Reiterate overweight,$1 ,150 target. We expect Netflix to demonstrate relative resilience in a weaker global macro. Momentum in its core subscription business combined with recent dollar weakness should de-risk 2025 estimates, even in a softer ad market. It's only down 2 % this year. Yeah. The analyst said advertising growth is expected to double in 2025.

1:34:15Ads still remain a small part of the overall business. They're only 10 % to 15 % of revenue growth and only 5 % of total revenue. But the ad-supported tier strategically will keep people from abandoning their Netflix subscription. Um, two hours of daily viewing per member. The engagement is really strong. That's why nobody cancels over 94 billion hours were streamed in the second half of 2024. Uh, plus they have sports now, which keeps it even more defensive. So I like that idea. Here's Martin peers on Microsoft. Uh, what does he say? It doesn't matter. These are, look, these are, Microsoft is not caught in the eye of the storm in terms of tariffs.

1:34:58they're not selling iPhones it's not quite as fraught a political situation as you have with Apple and it's like a hugely steady cash flow business it's very heavily reliant on businesses and businesses are not like throwing away their Microsoft subscriptions just because they have a couple of tough earnings quarters so I think both of these places are places that you could hide out what do you think? Netflix Netflix, yeah, it's all dependent on whether – if the market melts down, everything is going down. Yeah, no, it's all relative. I'm saying if you have to own stocks, these are stocks you could wrap your head around right now.

1:35:39Netflix for sure. It's a consumer staple. Nobody is canceling it. I think the earnings are going to be less volatile than the overall market. What a f***ing week, man, huh? It's Tuesday. It's Tuesday. It is Tuesday. Okay. Listen, this sucks. It's not fun. Um, but if you are the type of person and we all are at some point in our lives, I've looked at a stock chart and said, I can't believe I didn't buy it. I had the chance. I missed it. Now, listen, this might be different. Maybe this is not one of those times. I don't know. I can't see the future. You're going to show me a stock that you think people are going to turn around.

1:36:18Just in general. Like if you're, if you've ever said that to yourself and we all have, and you're not buying today, then you never get to say to yourself ever again. I'm sorry. Okay. I think that's fair. Like, let me get this straight. There's nothing you want to buy? Right. I totally agree. Yeah, and you could say that, like, yeah, this might not be the optimal price to buy, and everybody's got a different risk tolerance. But, like, there's – come on. There's opportunities. I bought some stuff Friday. I bought – these are core forever holdings. I bought Chevron. I bought Amazon. I bought – I know you bought some Amazon too.

1:36:52I added to Uber. like these are stocks that I'll be in years from now. If you think that cybersecurity, I bought CrowdStrike is a secular growth story. And of course it is. All right, enough of that. Okay, chart on. Josh, this is, I'm showing you the best performing stock in the S &P 500 year to date.

1:37:15Now, this is a - How great is that? This is a stock. The reason why is because it got just kneecapped. I don't know if it's down 70 % or what. it's been a secular loser. But you actually made the case for the stock and then it got kneecapped again. But nevertheless, you made the case. You were wrong on the short term. I need one more clue. Oh shit, I forgot to make this chart. Do we have the chart of the best 10 stocks and the worst 10 stocks? John, do you have that? I think I sent it to you, maybe I didn't. There we go. It's in this group, so that's a bit too easy, but. Oh, it's in the blue in this group?

1:37:49Yeah. Sencora. Nope. No. Huh. Okay. St. Cora sounds like the whiskey that Bill Murray drank. Lockheed? No. I don't even know what you're talking about. It's CVS. I made the case for CVS. Was I smoking crack? Remember one of the big hedge fund managers took a long position in there? A big position? Yeah. Oh, all right. Maybe. I mean, I definitely didn't buy it, and I don't want any credit for it. Well, nevertheless, it's the best performing stock in the S &P 500. What is this, an$11 stock? I don't even know where. All right. That thing's still publicly traded. That's a miracle. Oh, yeah. There's an activist in it or something.

1:38:31Yeah. Right. I didn't buy it. All right. What's the worst stock in the S &P 500? Do we know year to date? I think it's Decker's. I would have guessed either tech or apparel or something consumer discretionary. So what are these? These are the 10 worst stocks since Liberation Day. I don't want to buy any of these. Bear with me one second. No, these are not for me. The worst stock year to date, Y-Charts, Y-Charts, Y-Charts. It's Western Digital down 48%. And then actually the same exact amount, Decker's Outdoors. So yeah, nobody's buying Uggs. Why would you? Yeah, later for that. All right. Hey guys, thanks so much for joining us for the live.

1:39:16We really appreciate it. If you're listening on the podcast, please go ahead and leave us a rating and review. It goes a long way and it helps signal to everyone else that there's quality here. And we love you for it. I wanted to mention tomorrow is Wednesday, which means an all new edition of my favorite podcast, Animal Spirits with Ben Carlson and Michael Batnick. Ben needs a hug. Ben is living in Michigan, which is unfortunately going to be like an epicenter of this trade war stuff. and I think it's affecting a lot of people around him. And least you could do is tune in and listen to him bitch and moan.

1:39:53So that's tomorrow morning. We'll have Ask the Compound later this week and an all new edition of the Compound and Friends. Plus, we're doing a surprise drop on Thursday and I think you guys will be super excited about it. So, all right, that's it from us. Have a great night. Stay alive through 25. Stay in the game. We'll talk to you soon.

1:40:19Whether you're just getting started as an investor or you're managing a multi-million dollar portfolio, Ritholtz Wealth Management has the solution for you. It all starts with building the right financial plan. To speak with a certified financial planner today, visit ritholtzwealth.com. Don't forget to check us out at youtube.com slash the compound RWM. Make sure to leave a rating and review on your favorite podcasting app. If you love investing podcasts, check out Michael and Ben every Wednesday morning on Animal Spirits. Thanks for listening.

1:41:16your whole life. Arbeit, Kinder, Partner. You can't do anything wrong. Stimmt, nice. It's not like Steuern. Steuern completed? Safe. With VisuSteuer. Now test it.