Google Pops, Belief in the American Dream Drops, Regional Bank Stocks Rally Ahead of Rate Cuts

16:52Downtown Josh Brown:Yes. And Google is and was at that time that you sold it, the lowest multiple of the MAG7 stocks, way lower than Meta, Microsoft, Apple. And a lot of people said, well, it's cheap for a reason. They have this existential crisis that people are skipping Google search and going right for the answer on chat GPT. That narrative was obviously wrong. I don't know if it's going to be wrong long term.

17:20Michael Batnick:Well, no, no, it was wrong. Maybe not forever, but for now it was wrong.

17:25Downtown Josh Brown:The news that you were rattled by was they asked Johnny Ive at a conference, a question about this exact ruling, like how big of a deal it would be. and he made this offhanded remark about how like Google searches are not even like something, something to the effect of like Google search, Google searches are like falling off, uh, iPhone usage. I forget the exact way that you phrased it. Um, a lot of people got nervous about it. I took a profit in this thing close to 200. Um, obviously at this point, I wish I hadn't, But I felt vindicated when it fell. And Jimmy Laventhal was sticking to his guns.

18:06Downtown Josh Brown:He's on Google. He wrote out the downturn. I assume he's still in it. But this was the thing that people were most afraid of. They had this anti-competitive or allegedly anti-competitive deal with Apple where Google paid Apple$50 billion in order to be the default search engine and default browser in the iOS devices. I thought it was 20, but either way, it's a lot of money. Um, no, it was like 50 dude. I think it was 50, uh, over multiple years, but like companies like duck, duck, go. We're arguing like, this is complete bullshit. Like it's not a fair, it's not a fair playing field. If, if Google is always the default, people thought that the judge was going to push for a remedy, um, because Google lost, wherein Google was forced to sell the Chrome browser.

18:58Downtown Josh Brown:and that's not what happened here so the worst case scenario is off the table and that's enough for for a big rally here in the stock i'm not convinced that there's not going to be cannibalization i do google searches still i get the gemini summary it's good perfect for me i don't click shit i know that's costing them somehow i just i don't think i don't think it's big enough where we're like actually seeing the result of that but like give it a few quarters i still think that's the biggest risk for Google is a behavior change. For 20 years, people never even thought twice. Anything they were wondering about the answer to, they just went straight to Google.

19:40Michael Batnick:Dude, people still use Yahoo. Behaviors are entrenched. That's tough.

19:44Downtown Josh Brown:I don't know those people. I believe that you're right because they still come across AOL email addresses. But what we're talking about is billions of people, not a handful of people.

19:54Michael Batnick:John, throw that in the last chart up. This just blew my face. Google divided by meta. I didn't realize the extent to which Meta had kicked their ass. Isn't this wild?

20:02Downtown Josh Brown:Yeah. And by the way, Meta thinks that their AI efforts are going to be a competitive threat to Alphabet. Like they all do.

20:12Michael Batnick:Yeah.

20:12Downtown Josh Brown:So I'm not convinced. I'm not convinced we've seen the worst of this story. But the judge thing, like the remedy thing, this is a clear upside catalyst, obviously, which is why the stock is up so much in the after hours.

20:29Michael Batnick:The stock is up so much. Okay. All right. So the topic that I had before the Google breaking news, which is now 8%, is that I don't know if you know this, but I've confirmed we're in a bull market. How can you tell? Yeah. No, it's true. So this chart, I've never seen anything like this before, and it might take you a minute to process it, and it might take me a minute to explain it. Chart on, please. So what we're looking at, this is from Ned Davis Research, and it is so good. So we are looking on the y-axis at the percent of stocks above various moving averages, okay, within different areas of the market.

21:07Michael Batnick:So large cap growth is orange. Next is mid-cap growth, et cetera. And on the x-axis is the moving average days. So focus your eye on the top left quadrant, okay, Josh? So what this is showing you is that basically all of 95 % of small cap value stocks are above their 10-day moving average.

21:28Downtown Josh Brown:I believe that.

21:29Michael Batnick:Okay. And then the dashed line all the way at the end, that's the 200-day. The dashed line all the way at the end to the right. You see that? The vertical dashed line? Yes. That's the 200-day. So small cap growth has the lowest percentage of stocks above their 200-day moving average. It looks like it's about 55. Large cap growth, it looks like it's 78%, give or take. Anyway, this is a beautiful chart, and everything's above the moving averages. It is a broad rally.

21:56Downtown Josh Brown:Yeah, it's interesting. Wait, what's the gray?

22:01Michael Batnick:That's small cap growth.

22:02Downtown Josh Brown:Small growth. So even after that whole spiel we went through about junk stocks leading the market, Like it's still, I guess these stocks had such a far distance to travel to get back to their 200 day that they're still the lowest percent of all the groupings to have like a lot of stocks in their category up there.

22:26Michael Batnick:Yeah.

22:27Downtown Josh Brown:So it's crazy. I guess that's a function of how far below all time highs those stocks started out.

22:34Michael Batnick:Yeah, they got railroaded. All right, so we spoke earlier in the show, just a second ago, when I was naming all the top performing stocks. These are like not the names that people, that I would think are leading the market this year. So duality research, they should be on their radar if you're not. If they're not, check out this beauty of a chart. They're showing the average number of daily advancers by calendar year. And 250, that horizontal line, that's break even, right? There's 500 stocks in the index. 264 stocks on average are advancing on a daily basis in 2025. That's the highest level since 2021.

23:11Michael Batnick:This is a broad rally. And the things that are rallying, Josh, before I move on, do you have any comment here?

23:19Downtown Josh Brown:No, but it's notable that this is a better quality rally than last year or the year before on this metric.

23:26Michael Batnick:Yes. So I've been saying that in bold markets, chart off for a second. In bold markets, especially ones that have lasted as long as this and are sharp from the bottom, of course, you're going to see nonsense, right? Like that just, especially in 2025, that you will never not see nonsense ever again. With Reddit and the message boards, that will never not exist, the way that people galvanize together to force oxy higher. That will never not happen. But don't let it distract you from the quality nature of this rally. Next chart. Is this bullish, Josh? This is the equal weighted version of consumer discretionary names divided by consumer staple names.

24:01Michael Batnick:Decade, multi, multi-decade high. Yeah.

24:04Downtown Josh Brown:I just, the, my only comment would be look at the end of 2021, how fast that went away into like the high of the year for 2022 for, for the whole stock market was January 1st and they just relentlessly took it away. So it's a, it's a great representation of what's happening now. I don't think we should hang our hats on it as though there's any permanence to it. 100%. They can rip it away so fast. They could rip it away so fast.

24:34Michael Batnick:100%. I'm saying today we are clearly, clearly cleanable market. And you're 100 % right. As quickly as we got here, it could be ripped away. This other chart, also from Doubt Duality Research, shows the same thing.

24:46Downtown Josh Brown:What the f*** is a risk sniffer? That sounds perverted.

24:51Michael Batnick:What is going on here? It's showing the same thing that I just did in the light green line, which is discretionary divided by stables. But they're also showing you that credit spreads are showing you the same thing. So this is high yield spreads inverted. It's basically just showing that bonds, that credit markets are confirming the strength. That's all that's showing you.

25:08Downtown Josh Brown:Well, I like when the bond markets don't look the polar opposite of a stock market rally. That's good. So we've got that going for us, which is nice. High beta. You risk sniffing, son of a bitch.

25:19Michael Batnick:That's all day, baby. High beta divided by low vol, also at multi-year highs. And you know what's interesting, Josh? I know we're going to talk about this in the next topic. The wide chasm between the labor market slowdown, how people are feeling, and how consumer stocks are behaving. XRT is working in a big way. Of course, it's not every retailer. Target, for example, is getting destroyed compared to Walmart and Costco.

25:58Michael Batnick:Anyway, this is really not.

25:59Downtown Josh Brown:I don't know how the XRT is weighted. I haven't looked at it in a while. I'm guessing Walmart is pretty big. It's equal weighted?

26:07Michael Batnick:Yeah.

26:08Downtown Josh Brown:Oh, really?

26:08Michael Batnick:Yeah.

26:10Downtown Josh Brown:So for me, I always would prefer to look at consumer discretionary as a sector. rather than specifically the retailers because it's so messy. Like we just, we don't necessarily have an economy where most things are purchased as a retail good anymore. Like services are so much more important. And I just feel like discretionary folds in travel and leisure. And I just, I like it better than looking specifically at the retail. Okay, fine.

26:41Michael Batnick:So look at RSPD, which I just showed you at an all-time high. And if you divide it by the staples, I don't know how I'm high. The reason why we use RSPD as opposed to XLY, XLY is like 40 % Amazon and Tesla. So that's useless now. It's a signal.

26:54Downtown Josh Brown:Yes.

26:55Michael Batnick:All right. Regional banks and the bank index from JC. New six-month size, new year-to-date highs, not bullish, not bearish. Excuse me.

27:04Downtown Josh Brown:Yep. We're going to talk about our regional banks later in the show. I was talking about them on TV today. I think it's a big story. All right. Almost done. The rally is global in nature.

27:14Michael Batnick:This is from Callum Thomas. The black line is the MSCI ACQUI XUS. And the red line is the percent of countries above their 200-day moving average. And it's about as high as it ever gets. And interestingly, Josh, and maybe the sentiment survey is just completely trash and has no meaning. Could be. There's still more bears and bulls, at least according to the AI sentiment survey. Yeah, you could throw this out. But the reason why I think it's interesting in this case, even though there's areas of euphoria, we mentioned the junk rally, there's still a lot of skepticism in the rally. There's still a lot of people that sold it or pissed off and missed it that are bearish.

28:01Michael Batnick:So maybe this is still a wall of worry yet.

28:04Downtown Josh Brown:It is, and I'm going to agree with you on that because I don't hear anybody that's like giddy and euphoric. There's a little bit of euphoria about AI, but I think it's more in the private markets, just the willingness to fund things and write huge checks and pay huge valuations. In the stock market, we have these one-day IPO pops, and then these stocks get absolutely slaughtered for the next two weeks. That's not euphoric behavior. Euphoric behavior is like a company comes public, triples on the open day, and then triples again two weeks later. And we really don't have that. And so I just, I don't see the euphoria.

28:45Downtown Josh Brown:I see way more skepticism, way more pessimism. And I'm just talking anecdotally. I don't, I don't have the data to back it up other than what you're showing me here, but that actually squares with what it feels like to actually talk to people.

28:57Michael Batnick:I agree with you agreeing with me. And I like it. It means that there are still disbelievers, which is what you want to see.

29:03Downtown Josh Brown:It lengthens this. It lengthens the cycle. If people stay pessimistic as the market advances, those are future buyers. and it lengthens the cycle.

29:12Michael Batnick:I was about to say something inappropriate. I'm not going to. However, we are coming to a seasonally weak period of the year. Take it for what it's worth. But September sucks. Shut on, please. September is the only month, or the second, I guess February. It doesn't really count. It's flat. September is the only month with a legit negative return since 1950. And if you look at presidential years, the first year of a presidential cycle, it's even worse. Way time to buy. Yeah, maybe. If you're an asset accumulator, you should look at that chart and you should say, how

29:47Downtown Josh Brown:could I raise my accumulations in the late summer, early fall? Now, I don't think it'll really make a big difference in the long run, but you definitely shouldn't look at that and say, oh, now would be a great time to get out. Unless you're like literally getting out forever, which I don't think is our audience on YouTube. I think the pounders are in accumulation mode and you should get excited by a month that on average is negative. this is the big story at the wall street journal and i wanted to i wanted to get into it because i think it's at the heart of some of the pessimism in the stock market and i think it's at the heart of the pessimism on social media um just generally speaking we really do have like a little bit of a a pessimism crisis on our hands and uh i'd love to hear what you think the wall street journal did a survey at the University of Chicago in the middle of July, 1 ,527 adults.

30:46Downtown Josh Brown:Respondents completed the survey online, except for 42 who were interviewed by phone. Let's put up this graphic. This is the title. Americans lose faith that hard work leads to economic gains. And I don't remember what the story is with these two guys, but here's the salient point from the piece. The share of people who say they have a good chance of improving their standard of living fell to 25%. That is a record low in surveys dating back to 1987. More than three quarters of people said they lack confidence that life for the next generation will be better than their own. 70 % of people said they believe the American dream that if you work hard, you will get ahead no longer holds true or never did.

31:33Downtown Josh Brown:That's the highest level of pessimism in 15 years of surveys. There are minor differences, like Republicans were less pessimistic than Democrats. That's because Republicans hold the White House. That's how it always is. An index that combines six poll questions found that 55 % of Republicans and 90 % of Democrats held a negative view of prospects for themselves and their children. 90 % of Democrats. Really? Really? Okay. And let's put this chart up. The question asked is, people like me have a good chance of improving our standard of living. Look at the disagree. Over 70%. Agree is just over 25%.

32:25Downtown Josh Brown:And you can see this going back to 1990. It's pretty bad.

32:29Michael Batnick:So the disagree part is down, but it's not dramatic. The agree part, that's the holy shit, what just happened.

32:37Downtown Josh Brown:Right. People will not agree with that statement to a huge degree. All right, next one. Next one. This is the same article. Actual versus predicted consumer sentiment. This is crazy.

32:51Michael Batnick:What happened in 2020? It's like something happened. I can't put my finger on it. Yeah.

32:54Downtown Josh Brown:I wonder what that could have been. But it's – so for me, this is like 80 % inflation. What do you think?

33:00Michael Batnick:All right. I have a couple of reasons why this is happening. Number one, I think surveys are broken. And I think that it's not a crisis of pessimism. I think it's partly manufactured. Now, there are reasons for this. There are absolutely reasons for this. But when I say surveys are broken, Ben and I did a rant on this last year where I can't remember who did the survey. And I'd love to see the questions that they were asking. but there was data, air quotes, that were showing that people thought this economy was worse than the bottom during the GFC. Some of the things that people were answering were so far off the reservation that it just said, Matt, that's it.

33:36Michael Batnick:I'm done. I'm done with service forever. It tells you nothing. It does tell you something. It tells you nothing and something. So don't take it literal, but take it seriously. All right. COVID broke everything. It broke the economy. It broke how a lot of people live. And it led to obviously a surge in inflation of which the cumulative effects we are still dealing with every day. The prices have not gone down. And that is the number one thing. Okay. That's the number one thing. Number two, all that we hear is that there's a crisis and that people are pissed off. We hear it every day from the news.

34:15Michael Batnick:We hear it from the politicians, all that they talk about, both sides are the world's going to hell. You can't succeed anymore. The other party, that's all the messages. It's not about uplifting. It's just about blame. This country's going to hell. That's all that you hear. And then number three, the stock market, and I would say especially the crypto market, being fueled by the internet and social media has really shown the spotlight on if you are not in the asset accumulating class like our viewers are, it feels very much like you're getting left behind, which is true. So I think it's a combination of all of those things.

34:55Michael Batnick:We're never going back. It will never not look like this. Like for the rest of time, it will never not look like this.

35:00Downtown Josh Brown:I think Facebook and Twitter are a huge part of the problem.

35:03Michael Batnick:100%.

35:04Downtown Josh Brown:Just for fun, spend 15 minutes if you have an old Facebook account, log back into it. I had to do that the other day to go into this ticket group to get tickets for something. So I went back into Facebook. I mean, it's probably like May or something that I'm talking about. But this is after years of not only not posting, just like forgetting that it even existed. It's like baby picture, baby picture, baby picture, Israel, Palestine. Baby picture, baby picture, Israel Pals. It's just like that. Just the dumbest people you know are the loudest on Facebook. And then the second dumbest people you know are in there disagreeing with them in their mentions.

35:53Downtown Josh Brown:Okay. Twitter is, I mean, it's just migrants raping people. Like that's the whole thing is like racist posts about this race rapes more people than that race. And Europe is falling. and I'm like, what the f*** is this site? Social media. I used to be very active there. I don't even understand. People are so unhappy because of what the algorithm is motivated to show them that they assume their quality of life has to go down. So social media.

36:24Michael Batnick:They just assume it. It's so bad. And obviously the algorithm, it is designed to keep you on your phone and nothing keeps people on their phone, like being outraged. And being fed bad news, not good news. That keeps you on your phone. It's so stupid. I couldn't even do like five minutes. It's sick. I also, and I'm not, there are obviously issues in this country, in this world, legitimately why people are upset, but I kind of reject it. I just don't believe it. I think that there is such a disconnect between the online internet and the way that people answer surveys versus the way that people are actually in their regular life.

37:00Michael Batnick:I don't believe that people are as upset as these surveys are suggesting. I just dismiss it out of hand.

37:06Downtown Josh Brown:Oh, I think they are, but they don't have the facts. I don't believe it. I think they're upset for other reasons. And they're answering a survey almost like they're venting. I don't think they know what unemployment rate is. I really don't think they have any idea. I don't think they know anything, quite frankly. I think they're pissed off because of what the algorithms are feeding them and what their bills look like, what their credit card bills look like and how much everything costs. and they can't picture it getting better because quite frankly, right now they're right. It's not. It's not getting better.

37:41Downtown Josh Brown:Prices are not ever going to come down. They might go up slower. But if prices like actually go down on a net basis year over year, we have a way bigger problem.

37:50Michael Batnick:I just don't believe that people are as unhappy as these polls are suggesting.

37:54Downtown Josh Brown:All right, let me share this with you. This is also Wall Street Journal. Middle-class vibe has shifted from secure to squeezed. The middle class, generally considered to be households making roughly$53 ,000 to$161 ,000 a year, is playing an outsized role in that waning optimism. After months of tracking high-income earners' increasing confidence about the economy, households making between$50 ,000 and$100 ,000 made an abrupt about-face in June. They now more closely resemble low-income earners' gloomier views. So in other words, let's put this chart up. Okay. I don't know why they insist on doing three shades of blue.

38:38Downtown Josh Brown:It's sort of ridiculous, but this is meaningful. Look at the people with incomes above 100 ,000 or what I refer to as stock market Americans. It's up and to the right. Now look at this middle bucket, 50 ,000 to$100 ,000. This just collapsed over the summer. and I don't know, maybe it's the tariff stuff. This is so noisy.

39:02Michael Batnick:Why are we day trading the consumer sentiment?

39:05Downtown Josh Brown:And then obviously income people, 50 ,000 and under, have just had a horrendous post-pandemic experience because of high prices. But I just think it's something to be watched by investors that that middle class 50 to 100 ,000 sentiment is now collapsing? Because yes, stock market Americans are doing great because they own Costco and Walmart and Apple and all these stocks are at or near highs. But the spending by this middle class cohort is the reason why those stocks have held up so well. And that spending is not guaranteed if that line gets worse, the downside. What do you think?

39:50Michael Batnick:I don't know, man. I just think it's really noisy. Like what happened in the last 60 days to make that collapse?

39:58Downtown Josh Brown:Tariffs.

39:58Michael Batnick:In the last 60 days? People are feeling tariffs?

40:01Downtown Josh Brown:Well, tariffs happened 120 days ago. And 60 days ago, the pricing resulting from those tariffs started to get worse.

40:09Michael Batnick:I don't like spending a lot of time on things that I think – like negativity I think is manufactured. I really do.

40:15Downtown Josh Brown:Not saying anything's fine. Okay, but it's also impactful if it persists.

40:21Michael Batnick:It's impactful for political reasons, which might be the most important of them all, because people vote based on how they feel. But for the stock market, for what we spend time on the show talking about, I don't think it's particularly that important.

40:34Downtown Josh Brown:I really think that interest rates have to come down in order to fix it and that it is fixable. I just think the rate that people are paying for mortgages, the rate they're paying on their debt. Look, you can't fix the cost of everything. in people's lives. We were talking to Jan Van Eck about electricity costs for the lower class. It's a huge line item in their household budgets. Like, I don't know that you can really fix that. I don't think policy fixes that. It's just an unfortunate fact of life. Deliberately maintaining interest rates as though we're a 5 % GDP economy, I think is absolutely absurd, especially when you look at the squeeze that people are feeling.

41:17Downtown Josh Brown:So I understand we're trying to guard against rising unemployment versus the trade-off and not having inflation. I really don't think inflation is the risk here. I think people are crying, uncle, and they're venting to these surveys because no one else will f***ing listen to them. And I don't think it just goes away on its own. And you can cut interest rates by 25 basis points. you're probably not changing the reality for most people, which we'll talk about later in the show. But like, man, anything that we can do to ease the pressure on this group of people, I think would help for some of that pessimism to dissipate.

41:58Downtown Josh Brown:Right now, it might be at its fever pitch. And I think rates are playing a role in that. Yeah.

42:06Michael Batnick:Okay. Nice segue, perhaps, to -

42:09Downtown Josh Brown:Now say something super bullish.

42:13Michael Batnick:Roger Lowenstein wrote an article yesterday, how and why U.S. capitalism is unlike any other. I didn't read this yet. This is important. He wrote, early corporations were hardly models of transparency, but the quintessential openness of American society saw later expression in the American invention of corporate disclosure. Congress abolished debtors' prisons in 1833. Liberal bankruptcy laws also removed a shackle from would-be borrowers. As the freedom to fail is also the freedom to succeed, capital flowed more copiously than in any other country. Today, our legal systems, highly developed protections of the sanctity of contracts, is a uniquely American asset.

43:08Michael Batnick:I never really thought of it that way, but I saw a video over the weekend of Bezos being interviewed, I can't remember by who, where he spoke about US exceptionalism in risk-taking. And particularly what makes us different than almost any other country, I shouldn't say almost any, any other country, is our willingness for these venture capitalists in particular, and their investors, to sure, let's throw$50 million at a seed company with a 5 % chance of success.

43:37Downtown Josh Brown:That's sort of - Or wearing failure as a badge of honor is another thing that's uniquely, I don't even want to say American. I want to say Californian.

43:46Michael Batnick:When the fire stick failed or whatever, yeah, whatever the tablet that Bezos built, that was a huge flop. Yeah. He wore it not as a badge of honor, but I remember him writing about it and went like viral at the time because people were just like, this is how you do it.

44:02Downtown Josh Brown:Yeah. So, but one of the things back to what we were talking about before, like one of the things that's kind of a fly in the ointment here is that basically to the person who's not part of this game, the person who's not part of like venture capital, Wall Street, they don't have assets. The way they look at it is every time rich people get a little bit uncomfortable, as my friend Garrett Baldwin put it in his new blog, there's some sort of like rescue immediately. like, oh, FDIC limit. Don't worry about that. We got you. Like, we'll take care of you. Great financial crisis. No, no, no, no. Don't be silly.

44:40Downtown Josh Brown:We'll do cash infusions for all you guys. Silicon Valley Bank, like that whole episode was like just a recent example, but there have been so many over the years where like rich people really as a group don't get uncomfortable for too long before the treasury, the Fed, Congress, Everybody's riding to the rescue. And that's what I think middle income people look at. And they're just like, so let me get this straight. I have the freedom to fail. But if I have billions of dollars on the line, no one's going to let me fail because I'm too important to somebody politically to actually ever take that kind of pain.

45:21Downtown Josh Brown:And that's how you get a situation where every crisis leads to the people who are already rich being even richer and the people who are locked out of the system just taking the consequences on their own. And that's what I think, that's what's at the heart of a lot of the problems that, look, I have an active account on Blue Sky. Not everyone on Blue Sky is a socialist. Not everyone on Blue Sky hates capitalism, but like a lot of them do. And no matter what you say, like post something about the economy, jobs numbers surprise to the upside. I'll be like, all right, but hurry up and get to cash because this whole thing, they were about to tank this thing to make people rich again.

46:02Downtown Josh Brown:Like they literally look at like market corrections as organized in order to help the people who already owned all the assets. You talk about the Fed cutting rates. They sort of see it as like, yeah, of course they're going to cut rates because someone's going to tell them they have to. And they don't see it as like, oh, they're going to cut rates to help regular people. So people hate the Fed. They hate, I mean, and it seems, I had thought it would get better given that we're in a 4 % unemployment economy. Michael, honestly, it only seems to be getting worse. It only seems to be getting worse.

46:39Downtown Josh Brown:And I don't know what changes it. But again, I think the rate cuts are like the route toward maybe making the pressure on people be less. So we'll see. I mean, we'll see if it plays out that way.

46:53Michael Batnick:All right. I thought this was an interesting chart from Goldman. over 40 % of equity holdings by European funds are in the US versus just 15 % in 2009. This is wild, huh?

47:07Downtown Josh Brown:They're buying our stocks. Is that the answer? That's what's going on? Yeah. Percentage of total equity holdings. Yeah. I mean, what choice do they have? They don't have their own version of our NASDAQ 100. They really don't. They have a few.

47:27Michael Batnick:so i i totally i totally get it um all right this is uh sort of kind of related maybe a non-secret but i just thought this was mind-blowing uh somebody tweeted throw this up no matter what happens today 70 million working americans will still be buying nvidia every month whether they realize it or not and they calculated the amount of money coming into these names on a daily weekly a monthly basis. And on a daily basis,$95 million is going into NVIDIA,$83 million into Microsoft, $75 million into Apple. Just a mind-bending, face-blowing amount of money. Yeah.

48:04Downtown Josh Brown:So this is something I explained to people, I don't know, 13 years ago now. I think this is one of the unsung heroes of what has now become the second best bull market ever from the lows in the great financial crisis. Just the sheer number of people who don't even look, they just have a portion of their paycheck diverted into large cap stocks and they almost never change it. They almost never pull money out of it. Even in retirement, they're rolling these things into IRAs and continuing to accumulate as though nothing changed. And this was the thing that people, one of the big things that people didn't see coming.

48:45Downtown Josh Brown:Like, how is it possible that we would have low volatility, high returns, trillion-dollar companies? This is one of the enabling factors. I think if the 401k is$9 trillion, what's it going to be in five years? What's it going to be in 10 years? 20 trillion? Could it be more? So that is volatility mitigation on steroids. Nothing the Fed does with QE or whatever, nothing the Fed does can compare to the mollifying effect of every two weeks, 70 million people willingly allowing part of their paycheck to buy these stocks. They buy them up, they buy them down, they buy them flat, they buy them in high volatility, they buy them in low volatility.

49:34Downtown Josh Brown:It's a vol dampener for the ages. which I think I spoke about pretty early. And now it's funny to see it kind of becoming conventional wisdom. Nick Majuli sort of flipped bearish on his blog this week. I wanted to hear what you thought about it. He's got some anecdotal stuff about Chamath and the new SPAC. And he's looking at, do we have this chart? S &P 500 price to sales over time. I don't love these. This is one of those, this line looks like that line, or this point in time looks like that point in time, but he does have a point. Nick says, as you can see, the price to sales ratio of the S &P 500 hit an all-time high of 3.41 during the peak of the dot-com bubble in December 99.

50:25Downtown Josh Brown:It hit another relative high of 2.98 in December of 2021, and it's at 3.2 today. it is this point in time where people are paying up on a price to sales ratio. We might blow through this like it never happened, but I totally understand why he's looking at this like maybe people are a little bit too excited or maybe the market's a little bit overvalued. What do you think?

50:54Michael Batnick:Is there anything different about the composition of the market today versus the dot-com bubble?

51:00Downtown Josh Brown:yes but price to sales is price to sales it's different companies okay i'm saying i'm just saying it is all right and i'm just saying

51:07Michael Batnick:nonsense what about what about the fundamentals what about the margins what about the leverage what about the moats you can't i you can't have it

51:17Downtown Josh Brown:come on yeah i know i think that is the thing that's different um i don't think he would dispute that i think what's different is the recurring revenue nature of the companies that are really large in the index versus in 99, these were not recurring revenue companies. These were companies that had to sell a million computers every month or they would miss earnings. And also, obviously, I love

51:41Michael Batnick:Nick. Chamath launching another SPAC. Okay. How about 500 IPOs a day, each going up 2000 %? Like, come on.

51:49Downtown Josh Brown:We're not quite there. He's not shorting the market. So Nick is basically saying like, um, it's very rare for him to get cautious or, or a little bit bearish.

52:01Michael Batnick:He went to, he went to 20 % treasuries. Yeah. So, um, listen, this is not a cheap market, obviously. Okay. I'm not, I'm not here to say that this is a, that this is a bargain by any stretch of the imagination.

52:13Downtown Josh Brown:It's notable because this is the, this is the, um, this is the just shut up and buy guy.

52:19Michael Batnick:Yeah. And guess what? That's it. If he gets a sell off, I know what he'll be doing.

52:23Downtown Josh Brown:Yeah. He will just shut up and he'll be lying. He will shut up and just keep buying.

52:27Michael Batnick:The thing about expensive markets is obviously they can persist. But if and when there is an event, and there will be an event, obviously, because there always is, something will happen that we could not have foreseen, whether it's another SVB or more tariffs or whatever. It doesn't matter what it is. When you have stocks that are trading this high, all right, a stock, let's just use the index as an example. A stock that's trading at 12 to 14 times earnings, if it misses by a penny, it can go down 3%. If a stock is trading at 150 times sales and it misses by a penny, it could fall 30%.

53:07Downtown Josh Brown:Execution has to be perfect.

53:08Michael Batnick:Right. So there's not a lot of wiggle room here, not a lot of margin for safety. We got to keep growing. And if we don't, yeah, there'll be a sell-off, obviously.

53:16Downtown Josh Brown:Last chart from Nick. Total market cap of US stocks with a price to sales ratio above 20.

53:23Michael Batnick:I have a big time actually for this one. so let's see it invidian palantino because you you got to admit you got to admit it's something

53:30Downtown Josh Brown:bro i know you have an explanation for why it's not the same okay let me go so put that chart back on this looks like six trillion and change correct okay 4.5 of it is palantino video get that chart off my screen great explanation thank you and but still but still no no no no

53:52Michael Batnick:No, but still.

53:52Downtown Josh Brown:That's it. Jay Luther's in the chat saying Batnick is risk sniffing.

54:00Michael Batnick:Always sniffing.

54:04Downtown Josh Brown:But you haven't caught any risk yet with all that sniffing. Just not quite. Not in these charts, at least.

54:11Michael Batnick:Clear as a whistle, Josh.

54:13Downtown Josh Brown:All right. Let's do make the case. I've been whining and crying about rate cuts for an hour. So if we get them, and we've talked about some of the ways that we think will benefit. We talked about Rocket a couple of weeks ago, ad nauseum. So we're not going to go there. The regional bank charts are indeed looking really exciting. I asked Sean to post a few of these, and I wrote up regional banks for CNBC Pro. We talked about it on TV today. Let's put a PNC, inverse head and shoulders. Um, inverse head and shoulders, one of the most reliable reversal patterns that technicians follow. Nothing's foolproof.

54:56Downtown Josh Brown:Nothing's guaranteed, but you like to see these. And, uh, when you emerge from an inverse head and shoulders, you should be into a new leg of a, of a bull market. You should be in a new bull market. I should say. Can I say one thing?

55:08Michael Batnick:So the neckline breakout was like one 80 and you got the retest right at the, right at the 200 day. I think JC would say this is like textbook.

55:16Downtown Josh Brown:It not only is a textbook, you have a golden cross here. And look how well behaved this stock was when it retested both the 50 and the 200 at the same time. She's going higher. And not crazy overbought yet to 72 RSI. The other thing about inverse head and shoulders is you want to see them accompanied by rising volume. Guess what? So PNC looks phenomenal. I think this is one of the largest of the regional banks, maybe not the biggest, but among the biggest. Here's fifth third, same chart, same chart, not as far along, a little bit further from the December high from from last year. But, you know, this is this this one's a little bit more tame.

56:01Downtown Josh Brown:But I would tell you, this is what you want to see happening. very simple. Chart off. Regional banks are more sensitive to increased mortgage and mortgage refinance activity than the major money center banks. They need it more. It's a bigger part of their business. They don't do more revenue in mortgages than the bigger banks. The revenue that they do is more meaningful to them, but it's not just revenue. It's activity. It's foot traffic back into the branches. It's phone calls. They need lower rates. Now, do they give something up in net interest margin? Yes, because when rates come down, you do see a compression of the spread between where they borrow money and where they lend it out at.

56:48Downtown Josh Brown:But the increased activity that you get when rates fall more than makes up for that slight net interest margin compression. So this is a huge catalyst for these stocks getting some relief on overnight rates, which then feed all along the chain until they get to business loans and mortgages and all that good stuff. Wait, hold on.

57:13Michael Batnick:So two things on that. Obviously, regional banks are more exposed to the community, Main Street, than Wall Street banks, so the money center banks are. But also, look at how steep the curve is. If rates come down, that might actually be good for them because they're borrowing at a lower overnight rate and they're still lending out longer. Like, they're going to do just great.

57:30Downtown Josh Brown:It's very good for them. That's exactly right. Put this chart up, guys. First one. This is the number of homeowners who might benefit from refinancing by interest rate level. Great chart at the journal. As you can see, the further you get to the left, which is 7.5 % rates on the x-axis, the less people would want to refinance there. And then the lower you get on the x-axis, you get to 5.5%. All of a sudden, you got 5, 6, 7 million people. So the way they figure this out is they say, here, let me read this. Homeowners with high mortgage rates are starting to get excited. Chart off the average 30-year fixed rate mortgage dropped to a 10-month low of 6.56%.

58:14Downtown Josh Brown:According to Freddie Mac, the rate has inched down for nine of the past 12 weeks, tracking expectations that the Fed will cut its own rates next month. More than 2 million homeowners could now save money. That's the average 30-year fixed rate on the screen. More than 2 million homeowners would save money if they refinanced today, which is up from 1.7 million at the end of July. And if rates get to 6%, 6 million people would reduce their rate by at least 0.75 percentage points. You sniffing? Yeah. That's not risky smelling, my friend. That's opportunity. Anyway, the Mortgage Bankers Association has an index that tracks refinance applications.

58:57Downtown Josh Brown:It was up 19 % from a year ago during the week ended August 22nd. So this market is working. Rates are coming down in the mortgage market and people 20 % jump in refinance applications or what you would refer to as refinance applications. This market is working as it should. Let me ask you a question, Josh.

59:20Michael Batnick:When you refinance, do you refi? I don't refinance.

59:24Downtown Josh Brown:I refinance.

59:25Michael Batnick:Do you refi or do you refi?

59:28Downtown Josh Brown:I refinance. Do you refi? I don't abbreviate it. Okay.

59:33Michael Batnick:It's a sacred act.

59:34Downtown Josh Brown:And I think it's crude to be talking about refinancing.

59:38Michael Batnick:Okay.

59:39Downtown Josh Brown:It's not a Toyota. I refinance the house. Sure you do.

59:46Michael Batnick:Anyway, I love regional banks.

59:47Downtown Josh Brown:You're lucky I'm not saying refinance because that's where it's going next. Here's the KRE. This is the regional bank ETF versus the XLF, which is like Citi, JP Morgan, blah, blah, blah. Look at this outperformance off the April low, 35 % versus 23%. And by the way, all those XLF names look great. They're all at record highs. Here's the regional bank ETF with its moving averages. Golden Cross, stair-step higher. not quite above last year's high, but certainly look like they want a challenge. Here's Truist. TFC, this is a big one. What do you think? Triple top or goodbye?

1:00:35Michael Batnick:Goodbye.

1:00:35Downtown Josh Brown:That's what I think. This is the one I talked about on TV today. Here's Huntington Bank. Look at this wildebeest. Triple top or she's going? Nope. What do you think? See ya. Yeah. I got this chart on TV.

1:00:51Michael Batnick:you proud of me i love it oh really

1:00:57Downtown Josh Brown:uh this is a dt jb joint let me show you another uh here's the inverse head and shoulders in huntington bank hbam now this was a little pornographic this one they would not put on tv i didn't mean it to be that way oh my god i didn't i didn't draw it to be don't all don't nobody screen grab this. I don't need this. Inverse wiener and balls. We all say it. I didn't mean to do it that way. Josh, come on. All right. Anyway, so that's my, uh, make the case. What do you, what do you think? Bullish?

1:01:33Michael Batnick:Yeah. I love it.

1:01:34Downtown Josh Brown:Okay. Okay.

1:01:35Michael Batnick:Um, all right. I've got a mystery chart. In fact, I've got several. Well,

1:01:38Downtown Josh Brown:maybe I'll, maybe I'll sniff it out. Let's see what happens.

1:01:41Michael Batnick:John, if you please. Okay. Would you buy this?

1:01:46Downtown Josh Brown:Yes.

1:01:47Michael Batnick:I thought you might say that.

1:01:49Downtown Josh Brown:Well, is this ETH priced in Bitcoin or some annoying shit?

1:01:53Michael Batnick:No. Okay. I think I have one more chart. Wait, I bought it. What did I buy? This is you bought the Russell 2000 divided by the S &P 500.

1:02:03Downtown Josh Brown:Okay. So no hints, just you full reveal? Oh, you asked. What else you got?

1:02:09Michael Batnick:You asked. All right, John, what other charts did I bring? All right. So this is surprising. I cherry picked a little bit. This is going back to the second week of last July. Is that surprising?

1:02:20Downtown Josh Brown:The second week of last July? Is there a significance to that date? Yes.

1:02:25Michael Batnick:I wanted the numbers to line up. That's the significance. But the point is - Are these stocks? No, no. This is it. It's the same thing. Same thing. Oh, got it. The reveal is over, Josh. Isn't this surprising? Over a year of same performance?

1:02:39Downtown Josh Brown:I would not have guessed that over the last year, the Russell had kept pace with the S &P. Me either. I mean, you cherry picked it, but so what? But so what? It's over a year. It's over a year.

1:02:49Michael Batnick:I think I have two more. All right. This was interesting from Yardenny. He's showing operating per share earnings on a forward basis. I mean, large cap, LOL. Why are stocks going high? I wonder why. But look at the blue and the green. The mid cap and the small caps turning up. Not nothing.

1:03:08Downtown Josh Brown:Yes.

1:03:08Michael Batnick:Not nothing. John, do I have anything else? I thought maybe one more. Oh, yeah. All right. So this is from Todd's own and the old is a lot of noise here. The only one I want you to pay attention to is the bottom chart, which is the one year rolling flows for small caps and were two standard deviations below the average. I mean, nobody wants these stocks. It's crazy, right? I like the setup.

1:03:33Downtown Josh Brown:So this, I couldn't, I can't follow you into this. I get why you like the setup though. This is your type of, that is your type of setup. You like that those things where like nobody will say anything good about them.

1:03:44Michael Batnick:I bought Western Union and I listened to the conference call. They know about stable coins. They're not at sipping the wheel.

1:03:50Downtown Josh Brown:We're taking some shit in the chat. Shit in the chat. Brian Schatzer says, ah, yes, technical analysts, astrology for middle-aged white men. Tell me more about your cup and handle. So we're just studying what buyers and sellers are actually doing. I think that's less astrological than say, guessing what an earnings multiple might be on a company's earnings. That to me seems way more bullshitty than actually studying the price itself. But okay, I'm with you, man. No, we don't all have to agree. We don't have to all agree on that. I'm supposed to tell everybody that the new trucker hats have arrived at the compound shop.

1:04:29Downtown Josh Brown:Guys, do we have, don't these look awesome?

1:04:31Michael Batnick:Love it. Can't wait to read them.

1:04:34Downtown Josh Brown:Nicole said I have one of each sitting on my desk. I'm going to pick one to bring to Future Proof next week. Which one do you think I'd look better in? The blue or the red?

1:04:43Michael Batnick:I'm rocking the white, so you rock the blue.

1:04:46Downtown Josh Brown:The white one. Okay. I mean, these are pretty sick. Great. Love them. I think we're going to sell these out, to be honest. If you guys want to see the hats for yourself, irononshop.com. We've never done anything like these trucker hats before, and they are absolute fire. So go ahead and check those out. Guys, I want to mention tomorrow's Wednesday, All New Animal Spirits, Michael and Ben. And then we'll do Ask the Compound later in the week. Duncan and Ben and then Mike and I will be back with two guests and an incredibly informative show the compound and friends on Friday so keep it locked we love you thanks for liking and subscribing and we'll talk to you soon

1:05:45Downtown Josh Brown:Hey, everybody. Chart Kid Matt here. If you're a financial advisor and still copy-pasting charts into PowerPoint for clients, we've got a fix. The same charts you've seen all over the compound can now be branded for your firm. Updated daily at ExhibitA4Advice.com. That's ExhibitA4Advice.com to learn more.