It's Like Free Money

5:57Downtown Josh Brown:We could probably look that up somehow. Yeah, the Dow had 20 ,000. Where was the Dow 10 years ago? Are there charts of the Dow going back 10 years?

6:03Tracy Alloway:Does that information exist online? So it's work at Bloomberg.

6:08Michael Batnick:You should know this. Do you guys have Dow 50 ,000 guests prepared no we don't i would say even when back when we started in 2015 people still hated the

6:19Downtown Josh Brown:dow 17 500 a year uh holy shit so in 10 years the dow has gone from 17 but it's what's so crazy is no one's talking about the proximity to 50k it's almost like a given in people's minds whereas

6:32Michael Batnick:i remember approaching dow 20 000 it was huge it was like a seesaw just under that level for months

6:38Downtown Josh Brown:and it was like, is it going to happen? Is it going to happen? Nope. We're not talking about Dow 50 ,000 yet? 2.7 % away?

6:46Tracy Alloway:Wake me up when it's Dow 100 ,000. That's my view. Well, let's... That's coming. Yeah.

6:50Downtown Josh Brown:Well, that's a double.

6:52Tracy Alloway:Market doubles all the time.

6:53Downtown Josh Brown:I know.

6:54Tracy Alloway:I know. Give it two years. Is that your 2026 target? The problem is memories are short and everyone's used to big numbers now.

7:04Downtown Josh Brown:Yes. Like, everything is at a record high. Everything is, like, valued at one trillion dollars or whatever and so they they stop having it so doug bonaparte wrote something recently our mutual friend doug everything now costs a thousand dollars which i think is sort of accurate and then i was going to say like every number that we talk about on wall street is now probably like in the trillions yeah it's all trillions from now on you know it's really embarrassing one banana joe you know it's really embarrassing it's like

7:33Tracy Alloway:Like, if I hear about a successful company or I say, oh, so-and-so, David Zaslav, he's going to be a billionaire for this Warner Brothers. I'm like, what? He wasn't a billionaire already? What's he been doing all this time? Why do I know his name? Yeah. I thought he was a big deal. I thought he was a successful businessman. He's not even a billionaire yet.

7:51Downtown Josh Brown:What is he doing all this time? What has he been wasting his time with? Yeah.

7:55Tracy Alloway:I thought he was.

7:56Downtown Josh Brown:Yeah. All right. How are we looking? We're good. Yeah? All right. Because you're out of time. so whatever it looks like that's what it looks like you clicking for us today? let's go Daniel Daniel Power ladies and gentlemen also our visual arts guru creates all our logos and all our stuff kick a bow

8:21Downtown Josh Brown:you really crushed that one Daniel Jesus Christ I'm gonna go home

8:27Michael Batnick:whoa whoa whoa stop the clock here's a word from our sponsor Today's show is sponsored by Neuberger Berman. What does the Fed's rate cut mean for your fixed income portfolio? Lower rates are great for borrowers, but for investors parked in ultra short funds, not so much. The yield edge fades as rates fall. That's why you might consider the Neuberger Berman short duration income ETF ticker NBSD. NBSD aims for consistent and efficient income and invest across rates and credit markets at the front end of the curve, targeting an investment grade risk profile. If falling rates make ultra short options less compelling, consider NBSD.

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10:27Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.

10:49Downtown Josh Brown:Ladies and gentlemen, welcome to one of the best investing podcasts in the world. We are sitting with financial slash economic podcasting royalty, literally. Tracy Allaway, along with co-hosting the Odd Lots, writes about markets, finance, and the economy at Bloomberg. Tracy was the head of Bloomberg's Asia Pacific News Desk and led the cross-asset markets team. I first met you though when you were at FT. That's right. I actually remember when we first met because I drink way too much Blue Moon. And ever since that night, I cannot drink Blue Moon ever again. Why? How much did we drink? I can't remember.

11:29For obvious reasons.

11:30Downtown Josh Brown:We were annihilated somewhere? Enough to never want it again. I have that reputation. I do turn it up. I turn it up. You turn it up. And with Tracy, old friend of mine, super excited to have you here for the first time. I can't believe it's the first time. Joe Weisendahl is an editor at Bloomberg co-hosting their flagship markets program, What'd You Miss? I did. I did. I know. I remember the origin story of What'd You Miss, by the way, from your Twitter.

12:03Tracy Alloway:From my tweets, yeah.

12:04Downtown Josh Brown:Joe is also the co-host of the OddLots podcast with Tracy Allaway. and let's give a round of applause for Joe. Thank you. Yes?

12:11Tracy Alloway:All right.

12:12Downtown Josh Brown:Do you remember where we met? We've talked about this on there. Where did we meet? I probably met you at Business Insider, like, just visiting, no?

12:19Tracy Alloway:Maybe, but the first time I think we met was at Michael Jordan's Steakhouse. Oh, that could be. Remember that night? Do you remember?

12:25Downtown Josh Brown:Oh, yeah, yeah, yeah, yeah. Yeah. 2010-ish, 2009. Yeah, yeah, yeah. Wait, what were you doing there?

12:31Tracy Alloway:Well, we got to, I don't remember the crew.

12:33Downtown Josh Brown:He's a big Michael Jordan Steakhouse fan.

12:36Tracy Alloway:I don't remember like what the pretense was, but I do a crew of some of us. I do.

12:42Downtown Josh Brown:Somebody sent emails, blind emails to a whole group of the earliest financial bloggers of which you were one. I was one and was like, hey, there's going to be this meetup. Everyone's going to get together. And it was like, honestly, I think I met like five or six people that still talk to to this day at that dinner. It's very it was very bizarre. I think we had Campbell apartment first for drinks. Yeah. and then migrated upstairs to Jordan's Steakhouse. Anyway, you enjoying all this? Is this fun for you? I love it. I love history. All right. We have a lot to get to with you guys. The first thing is the aftermath of last night's Oracle report.

13:20Downtown Josh Brown:We were going to just look at the stock market reaction. So Oracle was in a huge drawdown going into the number, and today fell 14.5%. This is the worst, almost the worst day for Oracle going back to 2002. So it's a four decade old company experiencing one of its worst days ever. It's 40 % off its high. Largest drawdown since the dot-com bubble. And this is in the context of an overall stock market making record highs.

13:50Michael Batnick:Yeah. So that's the interesting part. Yeah. Is that this didn't bring down the rest of the market.

13:53Tracy Alloway:I think that's really interesting.

13:54Michael Batnick:The semis are at the high of the day right now. The stock market, as we just mentioned, all-time highs. The fact that this didn't kill the vibes is really interesting. The band played on.

14:01Tracy Alloway:I've been thinking about this, which is the thing that we always say when we talk about the market this year. It's like the AI-led market. It's AI is holding up the entire market, a handful of big tech companies, and everyone else is doing badly. And yet, actually, you know, so you mentioned Oracle. Meta is not having a particularly good year, right? And so the stock market is not perhaps as reliant on a handful of these giants as maybe people perceive. And the fact that like Oracle can tank and it doesn't take down the market should, as you're implying, like maybe cause people to rethink a little bit about the story that we've been telling about 2025.

14:40But I do think that the sentiment has shifted a little bit on AI companies or tech companies themselves. Right. And actually, Josh, I was listening to one of your episodes, I think it was a couple weeks ago, and you actually enunciated it very well, this idea that we've moved on from the moment where it's just about the narrative and people throwing out big numbers into the air. And we're getting into the point where investors actually care about whether or not the revenue is coming in to back that investment up.

15:09Downtown Josh Brown:There's this really interesting thing that happened this fall, and it reminds me of crypto. You guys had Sam Bankman freed on notoriously and Matt Levine. What's in the box? And Sam effectively explained his Ponzi scheme or some of the crypt, not just someone else's Ponzi scheme.

15:30Michael Batnick:Matt Levine goes, wait, wait, wait.

15:31Downtown Josh Brown:But you could literally draw maybe not a price line, but a sentiment line the day before you aired that episode and the day after. And the day after started a new chapter in the crypto market, it was 2022? Yep. Okay. Where people were just like, actually, I'm going to say this out loud. That sounds bullshitty to me.

15:54Tracy Alloway:Yeah.

15:55Downtown Josh Brown:People finally felt comfortable, like almost like the emperor has no clothes. And I think the parallel there was like what happened on Brad Gerstner's podcast with Sam Altman, different Sam. I'm not a big fan on backing people financially whose names are Sam these days. You would back Sam Rowe. Yeah, I was about to say, don't tell Sam Rowe.

16:16Tracy Alloway:Sam Rowe is an exception always, right? A hundred percent.

16:18Downtown Josh Brown:A hundred percent. His first name's not Bi. It's not Bi Sam Rowe. All right. So I would a hundred percent. But my point is something shifted, not slowly, not gradually, but like he had a horrible podcast appearance of all things, not even on a news network. Gerstner's like a shareholder. He's an investor of the company. He's an investor of the company. He asked a question that couldn't really be answered in a good way. And I was wondering if you guys have felt that seismic shift in the moment that it happened. Well, these are the things that happen when your valuation is built on vibes, right?

16:53And I would say crypto is mostly built on vibes. And crypto actually does a really good job of adapting to the narrative. So, you know, it used to be an inflation hedge, the new gold. And then it became a play on the Trump administration. it's reinvented itself so many times. Every year. Yeah, really. And AI, you know, for most of this year has been exactly like that. It hasn't necessarily transformed itself just yet, but it's certainly built on, again, that story that it's telling investors, which is at some point in the future, the trillions of dollars of revenue are going to be rolling in.

17:28Tracy Alloway:The thing about that moment with Brad Gerstner is when Brad asked that question, he almost certainly thought he was lobbing up a softball, right? He's an investor in opening. So he's like, okay, this is the question that everyone's curious about. Not an ambush. It's not an ambush. It's not 60 minutes. And he's like, I'm going to, because he's like, I'm sure Sam has some stock answer ready for this one. And so he's like just throwing up an alley-oop. Yeah. And so the fact that it wasn't, he was like, what, you want to sell the stock?

17:54Downtown Josh Brown:What was the question? You guys are making$1.3 trillion in commitments. So he said, yeah.

17:59Tracy Alloway:So he said, you guys have$13 billion in revenue. How are you going to make a trillion dollars in capital spending? Brad, I'll buy your stock back. He's like, oh, but what? You ought to short the stock. But there's two things. So one, I'm sure he thought that like he was giving him a very, just an opportunity to explain the math. And he did. I also think it's very, what's really interesting about this, and you connect it to the stock market, which is that OpenAI is a private company that is very important to the public stock market. Oh, yeah. And so if you wanted to have a truly informed view on, say, NVIDIA or CoreWeave or any of these names, you would want to have some insight into the balance sheet and the P &L statement of a company like OpenAI.

18:37Tracy Alloway:We're in this very weird situation in which there's so much riding on an opaque company. And so we're looking for these like little crumbs that we get from podcasts, et cetera. And that's the only thing we got.

18:49Downtown Josh Brown:We said this in October. We did a live episode with Kramer. I know you guys did too, by the way. I enjoyed that. And I referred to OpenAI as like Kaiser Soze. Like in Usual Suspects, he doesn't show up until the end.

19:03Tracy Alloway:like he's like not in the market yeah it's weird but everybody else is so reliant or a lot of other

19:10Downtown Josh Brown:companies are so reliant on the every pronouncement of sam altman and it's not long ago where proximity

19:17Tracy Alloway:to sam altman was like the most bullish thing on earth i know and now these stocks they can't catch

19:22Downtown Josh Brown:a bid this is why we need tokenization if open ai so all right if open ai was public um what do you

19:30Michael Batnick:guys think it would be down like if it from its high 40 let's say let's put the high the day before

19:35Downtown Josh Brown:the the the gerstner podcast where is it today from there down 40 at least that's an interesting question we are very good at this sounds down 40 subject you know they've i know they've reconstructed

19:47Tracy Alloway:like open ai baskets right where they have these proxies so i know it's like nvidia and core weave and a couple other companies that are perceived oracle oracle and then there's like the google the alphabet basket. That one is like Broadcom, which is doing phenomenally well. And a couple of these other ones that are seen as part of the alphabet universe. And I think like, you can just look at that line and basically divert the alphabet basket and the open AI basket basically diverged right after that interview.

20:15Michael Batnick:So we're talking about the market at an all-time high and just this narrative. It's only AI that's leading the charge. It's only five stocks. What a load of horseshit. Yeah. Like literally - Wells Fargo hit an all-time high. Wells Fargo is ripping through highs. So Microsoft, which is effectively another good example of a publicly traded stock that's linked to open AI, right? Big investors, 10 million dollars. Big time.

20:35Downtown Josh Brown:They're eating a percentage of the losses.

20:37Michael Batnick:So Microsoft stock, it peaked in July. And the stock is flat for a while. So it's this idea that it's just not just them. But I got to say on Wells Fargo, this is the problem, right? Which is AI is so huge right now that it touches literally everything. And I'm sure there's an element of Wells Fargo that's like, we're going to fire all our workers and institute models. And investors are getting excited about that.

20:59Downtown Josh Brown:You couldn't be more right. Like I was talking about the Hartford Group today on the air. This is a 150-year-old-ish insurance company. Here's how old Hartford Group is. Do you know why it's based in Hartford? Oh, that was an insurance capital. It was. Do you know why? No. Okay. Because you could stand on a roof and see the ships come in from England. And are you familiar with the expression, someday my ship will come in? If you were in the insurance business and you were insuring cargoes, transatlantic, Hartford is the right place to stand on a building and literally like a widow's walk. That's amazing.

21:39Downtown Josh Brown:And actually see your ship come in. That's how old this company is. Why is it rallying right now? They spend more money, more dollars of revenue than any other insurance company on technology. You talk to an insurance agent who writes a lot of policies, goes through Hartford as one of their carriers. They make it the easiest to get a quote back. So like an insurance broker goes in, types their client situation. Hartford's tech. And the whole story with the Hartford group is that their AI investments are going to pay off before anyone else's. So you're exactly right. That's such a huge component of this rally in small caps and mid caps.

22:18Downtown Josh Brown:the AI investments actually should lead to increased profitability next year.

22:23Tracy Alloway:That's the hope, right? Like people have been talking about this, like the next wave of the AI trade, so to speak, is at least in theory, the companies that will get much better operating leverage. We hope. Right, in theory. I mean, so, you know, obviously the financials, intuitively, there's a lot of opportunity. Because there was also that open AI deal with Thrive recently. Yes. And they're going to like open AI is essentially going to be now a de facto equity holder in a bunch of companies that consume AI products. But intuitively, that's got to be health care, drug discovery.

22:59Downtown Josh Brown:All of that should speed up. These companies spend so much money.

23:03Tracy Alloway:Accounting, law firm. I mean, I don't. But all of these stodgy businesses.

23:06Michael Batnick:Wait, so are we bullish on AI again? All of it. Absolutely. But all of these stodgy businesses like accounting and law firms where AI is already penetrating. there is like they're following the PE playbook with venture style investing which is very unusual I'm excited to see how that turns out but there is so much opportunity and you're going to see this at least analysts are expecting this to show up in margins for all the rest of these companies yeah Daniel so are the CEOs because they're putting out the press releases going

23:30Downtown Josh Brown:you know we're using cutting edge AI all the time fire chart 3a for me fire I mean that's not great though no from a sentiment standpoint is that the cover this is the this is today's cover of a person of the year issue of time magazine it is the architects of ai they they won it as a group i won my bet on kalshi i had jensen wang winning nice and i still got credit for it even though he's part of a group and this is that iconic lunch atop a skyscraper image from i don't know 100 years ago, whatever. So first of all, I can name almost everyone except for one person.

24:08Tracy Alloway:Yeah, I can. I don't know who the guy on the far left is. Is that Anthropics CEO? No, the Anthropics CEO. That's Mark Zuckerberg. No, it's not. No, the Anthropics one is in the blue vest there. It's Mark Zuckerberg.

24:18Downtown Josh Brown:It's Mark Zuckerberg.

24:19Tracy Alloway:Oh, that's Mark Zuckerberg. You're right. It is? So it's Mark Zuckerberg, Lisa Su, Elon Musk, Jensen Wong, Sam Altman. I think that's the DeepMind guy.

24:28Downtown Josh Brown:That's the Hassan. Yeah, the DeepMind guy.

24:30Tracy Alloway:That's the deep pine guy that led to Gemini. And then Dario Amadei. And then she's the professor at Princeton, I believe.

24:37Downtown Josh Brown:You are a certified dork. Take a bow. Am I wrong on the lesson? No, she world something. I'm embarrassed. World Labs. I don't know her name. I got to say, Zuckerberg had a makeover recently. I did a decent job.

24:52Tracy Alloway:I did a decent job. Zuckerberg had a makeover recently. He looks pretty good.

24:55Downtown Josh Brown:Look, they gave him the swag on the thing. Yeah, that's right. Wait, is this the first time they've done a group as person of the year? No, they've done some goofy shit. Like one year they did you. Wait, wait, I was actually just gonna say that. They put a mirror on the cover.

25:08Tracy Alloway:No, no, that was a great call. Let's revisit that. What year was that? That was 2004, I believe, or maybe 2005. But like, that might have been one of the most vindic - Given where media went. It was about social media? It was about the dawn of social media. It might have been 2006. Did they send us from Lebowski? It was a YouTube-style image. Like, could was there a better like think about like Babe Ruth calling his shot and nailing it? Like what transpired over the next 20 years or 19 years since that in terms of seeing that was a great call. We made fun of it at the time, but they nailed it.

25:38Downtown Josh Brown:We did mock it. But it's right. It did turn out that that was the dawning of this era where people were going to be uploading photos and videos themselves relentlessly. Yes. Yeah. They called it.

25:49Tracy Alloway:It was one of the great it was maybe their best one ever.

25:52Downtown Josh Brown:I'm sure they've done other. Oh, didn't they have a group cover of the Committee to Save the World? That's right. From the financial crisis?

25:58Tracy Alloway:Yeah, that one. Another one maybe not as held up well for various reasons.

26:03Downtown Josh Brown:Who was in that? Like Geithner? Larry Summers.

26:07Tracy Alloway:Larry Summers. Larry Summers. Robert Rubin. Oh, boy. Epstein? Epstein. Well, not Epstein. Larry Summers, Robert Rubin, and Alan Greenspan. Those were the three.

26:18Downtown Josh Brown:Here's what Ed Yardani said about this cover. First of all, he doesn't like it, like me. He has a knee jerk, like an instinctual aversion to, oh, here we go again. There's some history here. Jeff Bezos was named person of the year at the end of 1999. I remember that cover. His head was in a box. This is the cover curse. The stock, right. The stock lost 90 % over the next 18 months. Not great. I mean, it worked out okay. Elon Musk was the person of the year in December of 2021. 2022 might have been one of the worst years of his life. I mean, comparably speaking. He bought Twitter shortly after.

26:55Downtown Josh Brown:His personal reputation took a hit. And then he became the first person in history to lose$200 billion in net worth.

27:01Tracy Alloway:But that's so - So Yardeni's -

27:03Downtown Josh Brown:Yeah, no, I get it. Yardeni's Twitter was the low. His take is, the AI trade is turning into a Game of Thrones. Yeah. In the past, the Mag-7 had their own kingdom surrounded by big moats. They each had their unique monopolies. Now they are competing with one another, threatening each other's kingdoms. So that's what's changed. Wait, you said you don't like the cover? I don't love when something becomes so obvious to everyone because it feels like, it doesn't mean everything's going to crash. It just feels like how much money could there be left to make? You want something a little more interesting.

27:34Michael Batnick:I do, but it's not like it's Sports Illustrated for kids. Like it's, you know, it's like a, it's a worldly magazine and AI is the thing. But I hear your point.

27:44Tracy Alloway:You know, the other thing, so, you know, there's the, everyone talks about the cover curse. The other famous curse is the new headquarter curse. And, of course, we're, like, a few blocks away from the new J.P. Morgan headquarters, which is a beautiful building. But we're in the moment of some curses, apparently. And I was like, okay, the biggest bank, which is another stock that's, like, that's basically an all-time house. In fairness, though, to J.P.

28:04Downtown Josh Brown:Morgan, they didn't break ground this year. You know what I mean? They've been doing it forever. They've been building that for 10 years. Actually, I have a funny story about that new building. Remind me to tell you after this report. Oh, man. Okay. Is there like a Freemason section in the building? Joe, I just got an email from somebody that works for us.

28:24Michael Batnick:Who said, that's Duncan. Who said, tell Joe Weisenthal I'm a huge fan, please.

28:29Tracy Alloway:It's right here.

28:32Michael Batnick:That's our guy. You want to tell him yourself? Yeah. Thank you. Yeah, Duncan, he's right here. It wasn't from Duncan.

28:39Downtown Josh Brown:Oh, okay. All right, so. Oh, hey, was there a Federal Reserve meeting this week? Oh, yeah. Yeah, I honestly, there was a lot going on this week, including the Odd Lots 10-year anniversary party. So I wasn't really in the right headspace. But I forgot about that, like leading. Did anything happen? They cut rates by 25 basis points as expected. Yeah. That's it. Nothing happened. No, no, no. They announced$40 billion per month of T-bill purchases. That's the interesting thing. And a lot of people were actually caught off guard because the way they're doing it this time, it's not a steady purchasing.

29:14It's not like, you know, you buy 40 billion at the set time every month and there's like a schedule. They say they're going to ramp up purchases ahead of moments where liquidity gets tight. So, for instance, the April tax date, that's when a bunch of tax revenue comes into U.S. Treasury. And because of that, bank reserves tend to get pretty scarce. So people are really interested. That sounds like a good idea. This is active liquidity management by the Fed. Wait, we don't do that already? No. No.

29:44Downtown Josh Brown:Well, not in this way. Is this longer dated bonds run off because they mature? And instead of replacing them with the same maturity, they're opting to buy shorter term T-bills? Is that what they're doing? Well, I think they're doing T-bills because the main concern is in the funding market, right? It's this repo craziness. So they want to have overnight money sloshing around and available. And banks are still refusing to use the standing repo facility for some reason. And, you know, that's what it's there for, liquidity management. But they don't want to use it.

30:16Tracy Alloway:The one other thing about the Fed decision, there's no, there were three dissents and two of them. So the Kansas City Fed President Jeff Schmidt and Chicago President Austin Goolsbee both voted for no cut. Stephen Myron, that was the third dissent. He voted for 50, 50 cuts. But this is very important when we think about 2026, because we know Trump is going to appoint someone who presumably will come in with something of a mission to get lower rates. We're all assuming. Kevin Hatchett.

30:47Downtown Josh Brown:Kevin Hatchett. Kevin Hatchett is coming in to cut rates to zero as though it's COVID. But I came up with that.

30:53Tracy Alloway:The fact that there are like there are three dissents to this one, the two hawkish dissents, means like he's going to have to do a sales job on the whole committee. and uh you know like powell got the committee around because as recently as three weeks ago or two and a half weeks ago odds of a rate cut for this meeting were less than 50 percent powell got the uh the committee on board and the market and the market and so it's really shows like that whoever replaces powell is hopeful for uh hopefully has some clout within the committee

31:25Michael Batnick:otherwise not gonna be able to get what he wants so bloomberg intelligence reported that yesterday was the most dovish presser since 2021. So you guys break it down. There's hawkish sentences of which there were very few. There are moderate hawkish sentences of which there were a little bit less. But dovish and moderate dovish, most since 21. I also didn't listen to the call. And as a matter of fact, as a matter of fact, can we just cancel December Fed meetings? We're all too busy in December. I agree. Wait, how did they do? Sorry. Who has time for this? It's AI, Josh. Christmas parties are more important.

32:02Downtown Josh Brown:They're reading the amount of the sentences that come off as moderate, moderate dovish, dovish, and hawkish. Can I just say one thing about the market reaction? So obviously a dovish statement from Jerome Powell was really good for stocks, as was an increased forecast for GDP next year, lower inflation, stable unemployment. That's like the dream mix for equities, right? But the really interesting thing about Wednesday is you didn't see that same reaction in the junk bond market. So credit spreads on junk bonds actually blew out a little bit on Wednesday, which is really weird because in theory, that same mix that's good for equity should be good for corporate debt, too.

32:43Tracy Alloway:The one other thing, too, about I hadn't seen this chart until you guys showed it, but you're thinking about what made this a particularly dovish cut is the opening paragraph of the statement said inflation has risen since our last meeting and remains elevated. What is it? So think about what that means. The stock market's at all time highs. Inflation is above target as it's been for half a decade. It's rising and they're still cutting. So by implication, that is extremely dumb.

33:15Downtown Josh Brown:But they have three mandates. One is keep unemployment in check. Two is moderate price increase. And all-time highs in the stock market. And no, three is not be sent to Guantanamo by Donald Trump.

33:29Michael Batnick:Yeah, that's right.

33:29Downtown Josh Brown:So to satisfy the third part of the mandate is very important.

33:32Michael Batnick:This was the spark for the stock market. Leasman was asked if AI was a factor, what's going on out there? when you get more growth without a decline in unemployment. And this is what Powell responded. And this is what sent the market higher. Powell said, so the implication is higher productivity. Haven't heard that in a while. And some of that may be AI. Also, productivity has been structurally higher for several years now. So if you start to think about it as 2 % a year, you could sustain more growth without more job creation, which is maybe not great for society, but it's great for the stock market.

34:06Everything is about AI now, even the entire U.S. economy. There was one estimate that I saw saying that 40 % of U.S. GDP growth for this year came from AI. That's insane. That's more than consumer spending.

34:17Tracy Alloway:That's productivity directly? I don't know how. Oh, build up. I think it was the capital expense. It was direct. But, you know, interesting. Like, I believe to some extent that AI is contributing to greater productivity. It's probably true to some extent. Well, the other thing interesting to think about is like—

34:33Michael Batnick:Rigging endorsement show.

34:34Tracy Alloway:Oh, do you believe it?

34:35Michael Batnick:I guess. I guess.

34:37Tracy Alloway:But no, think about how tight the labor market was in 2021 and 2022. Yeah, it was an emergency. Yeah, and for the first time in years and years and years, companies couldn't take for granted that they put a help on it sign in the window that they would get. So that forces companies to find productivity gains that they might not have. We can't find work. Oh, we're going to like, you know, you're going to place your food order on an iPad. Chiasques. Yeah. So it's possible, and I'm not totally sure, but it seems at least possible that some of the productivity growth that we're seeing now is the fruits that are being born from when all these companies were severely resource constrained and had to find new ways to continue doing business.

35:17Downtown Josh Brown:I think that's definitely true. But I also think there's this thing now with every business owner I talk to, at least, they don't know to what extent AI is going to enable them to stop putting people in seats. And the bigger the company, the less they know. So they know that AI is helping their coders code and helping their white-collar employees bang through tasks like drafting emails and reading documents. They know that for sure. I don't think most companies are able to, like, calculate a dollar amount. But the further this goes, the more advanced it becomes.

35:56Tracy Alloway:Yeah.

35:57Downtown Josh Brown:The easier it will get to measure. And, like, when you hear people talk about efficiencies, AI, job losses are the efficiencies. Like that's there's no other no other efficiency. It's we don't need as many people to do what we do as we thought we did. Well, the thing you always hear from the labor market optimists, I guess, is this idea that, well, we're going to lose some jobs, probably a lot of jobs, but they're going to be replaced with new jobs for the new golden age of AI driven productivity gains. Right. And I'm really curious. So many life coaches. Yeah, I'm very curious to see what those jobs actually are.

36:33Right. Yeah, employment counselors. What if it's not job loss?

36:37Michael Batnick:Like, what if it's just like people that got into a house and had a mortgage prior to 2022? What if it's like, listen, if you were in the labor market, you're good. But the pool of labor is going to remain relatively constant because we just don't need to hire as many new people, especially on the entry level.

36:56Downtown Josh Brown:This is what college kids are faced with. And recent graduate unemployment looks like a recession. If the whole population was at that level. That's going way higher. That's going way higher.

37:07Tracy Alloway:Yeah, for sure. You know, I think this is not a forecast or anything like that, but one possible thing that I've been thinking about and I've said a couple of times is, okay, in any corporation, we've all seen the memos, you need to figure out how to use AI, right? Everyone, figure out a way. And so how do you establish if you're a middle manager that you are successfully implementing AI within your division? Well, you're like layoff 10 % and say, oh, we're doing the same work with 90 % of the, with 10 % reduction. It's such a great point.

37:37Downtown Josh Brown:It's like the proof.

37:38Tracy Alloway:But it seems like, so yeah, so you don't actually really do anything with AI. You just prove it by firing people. It's at least, at least seems possible to me that a number of companies will again find themselves short of labor. That actually they did not have AI-driven productivity gains. That these were layoffs because someone wanted to show that they were getting more lean. I also think Doge was like a sort of cultural thing where like every lots of managers, like we're going to do our own version of Doge and really see what's necessary. Firing was in. Firing was in. And it may be that sometime in 2026 or beyond that we get a bunch of a burst of catch up hiring when companies realized, wait, these weren't, we really didn't have the productivity gains to justify these layoffs.

38:21Tracy Alloway:We actually need to hire people back.

38:21Downtown Josh Brown:You're saying you think that's the way it goes?

38:23Tracy Alloway:I think it's possible. I think it's like, I think it's possible that companies might find themselves a short labor next year. This is one of the things that we learned from the pandemic experience or the pandemic like really hit home when you have these big disruptions they set off like this extreme cycle in behavior where people like either can't hire enough so the next year they want to hire more employees and build like a backlog a safety net basically and then they find themselves bloated and then they fire everyone and then the next year the same thing happens. It happened with housing investment post-2008 as well, right?

38:58Yeah. Home builders are still scarred from 2008 and we've kind of been trapped in a cycle ever since.

39:05Downtown Josh Brown:It's like a pendulum and it gets more extreme. One extreme to another. Tracy,

39:09Michael Batnick:why are global yields rising? I don't know why I just said it like that. Oh, good question. But why are, so we had the Fed cut yesterday and yet, like the long end in particular, why is this happening? Daniel, try on, please.

39:19Downtown Josh Brown:No segue. He just goes right in. Let me say.

39:22Tracy Alloway:Oh, good chart.

39:23Downtown Josh Brown:Yeah, what is this? What is it? What is it? We're looking at.

39:26Tracy Alloway:I got to say, it's funny, though. It's like, oh, look at Japan. But it's important to know for viewers at home that that's on the left side of the scale. So what looks like the highest is actually still far and away the lowest of the long end. But what is the story here? Seriously. I mean, I think it's a mix of higher inflation and economic growth expectations. And even though everyone's talking about the U.S. stock market today, like the European stock market has had an amazing year. Every one of these stock markets has had a good year. Yeah, exactly. Exactly.

39:53Downtown Josh Brown:So so yields are following perceived economic growth and prosperity.

39:58Tracy Alloway:There's so much that's happened over the last few years. But I think that another big phenomenon that has nothing to do with AI is so we know that there is some kind quasi de-globalization happening, at least in the specific sense that every country feels we have to have our own semiconductor fab. Yeah, we have to start defense defense. So you have this combination. And when you reduce trade, that's anti-productivity, right? Because we can no longer outsource as much as we want. So you have this anti-productivity phenomenon coupled with increased spending because that's how you get all this self-sufficiency.

40:33Tracy Alloway:So you have more money coming into a less productive system. I think there's good reason to think that inflation over the medium to long term will just be higher than it was due to just the combination of those two factors. And that's how you get the high. This is staying higher yields. It's nice that de-globalization is good for investors, but also the globalization story was also good for investors. It's always good for investors. It's always good for investors.

40:55Downtown Josh Brown:Well, no, because like if you're in Europe right now, you don't want to see a repeat of the internet where four companies in the United States are selling you everything AI related.

41:07Tracy Alloway:Yeah.

41:07Downtown Josh Brown:So the French are backing Mistral and they're trying to foster all of these startups. And the Germans are rearming, which I never thought I'd be so bullish to hear a phrase like, hey, look, the Germans are rearming again. But there are all these Eurocentric economic growth drivers now that did not exist even like two years ago. And those stock markets, they look like our market or better in many cases. As Joe would say, capital H history, right? Like it's an actual shift. in world global history. Well, you remember like - Trump has been a catalyst for, I think, waking up Europe.

41:43Tracy Alloway:Yeah, he has. I mean, do you remember like after 2010 when the euro crisis is like, when is Germany going to spend some money? 15 years later, you got your answer. And then 15 years later, it's like, oh my God, we've been waiting for this forever.

41:55Downtown Josh Brown:All it took was the second term of Donald Trump and a Russian invasion of Ukraine. And a war in their next door name.

42:01Michael Batnick:And it's funny, you guys like started your career. Maybe not started, but austerity was the word, one of the words of the decade.

42:07Downtown Josh Brown:How did that go, the whole austerity thing? It wasn't great.

42:09Tracy Alloway:Well, you know what I think about that time, which is very strange, is these days, 2025, the idea of austerity seems so alien, right? Oh, totally. Either party, right? No one has any appetite for higher taxes. No one has any appetite for cutting spending anywhere, right? And this is the case in the US, and it's the case in Europe. And it's really hard. Like, wait, what were the political conditions in 2010 that actually elected leaders felt comfortable doing austerity? because that seems like another world now.

42:38Downtown Josh Brown:We had these two old codgers, Simpson and Bowles. Maybe they're still alive. I apologize, guys. They were doing this national tour with the deficit shtick, and they were like folksy and old-timey.

42:51Tracy Alloway:They did a rap, and they had puppets. They were rapping, and they were making— Rapping about the deficit.

42:55Downtown Josh Brown:There were YouTube videos. So what was the zeitgeist? That was the zeitgeist. It was like popular post a financial crisis to say if we don't get serious about deficits, it's going to happen again. Thank God we didn't get serious about deficits because we haven't had a recession yet 15 years later. I think the crisis had a lot to do with it. Is there, say more. Oh, well, what was I going to say? When you have a crisis, the natural instinct is let's cut back on spending. Yeah, well, okay. What's remarkable about the Eurozone crisis is it wasn't just countries imposing austerity on their own people.

43:33It was also, you know, the European Union at that supranational level imposing austerity on its members. The north against the south. And contrast that with the moment today where, you know, the EU is trying to hold on. But in general, it feels like everyone is going in their own little direction. It seems impossible to think that would happen now.

43:54Downtown Josh Brown:One of the standout performers amongst European stocks rallying are like Italian banks. Greece is doing well. Like tourism driven countries are actually outperforming industrial manufacturing like countries like in the north. And it's kind of it's kind of interesting where like the roles have sort of reversed. I like the idea of Europe as like a tourist destination for people who want to look at like a non-capitalistic society. You just go there and watch the French drink wine at lunch and stuff like that. Protest. That's right. Set things on fire.

44:27Michael Batnick:Speaking of bubbles, is there a bubble in money market funds? There is$8 trillion and going up every single day. It's really incredible when you consider the context and the backdrop of the stock market.

44:41Downtown Josh Brown:Yeah.

44:41Michael Batnick:And the fact, I mean, it's just. But what you're showing in the bottom pane is. Money's not moving.

44:45Downtown Josh Brown:Yields have come down from five and a third percent to three spot, eight, six percent. And it doesn't matter.

44:51Michael Batnick:And it looks like it's like going vertical, the institutional money market funds.

44:55Tracy Alloway:I just think, you know, if you have money that you don't want to put into risky assets, If you don't want to put this top market, like, then you just want liquidity, right? And you're still getting paid almost 4 % for - You're still beating inflation. Yeah, you're still beating inflation. We're pretty close. Why are you, like, reaching a little bit for that extra 40 bips or whatever?

45:16Michael Batnick:It sounds like somebody's sitting on a lot of cash.

45:18Downtown Josh Brown:Joe, come on. Put it to work. Okay. Is that cash on the sidelines? Joe, put it to work.

45:23Michael Batnick:You guys, I don't - I never - I can't answer that question. Have we established whether that's a myth or not? It's a riddle. It can't be answered. This is absolutely cash that's on the sidelines.

45:30Downtown Josh Brown:You know, it's funny. It's like the - Yes, but if it comes into the stock market to buy, that means somebody has to sell stocks for that. Someone had to sell them. Yeah, I know. Which then goes into money market funds. There's all these people.

45:40Tracy Alloway:I know there's all these people that are like, there's no such thing as cash on the sidelines.

45:44Michael Batnick:This is literal cash and it is actually on the sidelines. Now, the idea that for every buyer, there's a seller is true. But also guess what? The stock market goes up every day and that's not every day. The stock market goes up guaranteed every single day. But it's - Can you promise me that? Yes, of course. But it's positive sunk. And this is like the big, big difference between this and the prediction markets. I won't call it betting. Is that the - You can call it betting, by the way. The individual gamblers, somebody wins, somebody loses. And eventually, people are going to get tired of losing because you lose more than you win because the rake is so high.

46:19Michael Batnick:Not just in prediction markets, but in gambling markets, betting apps. Like, you are going to lose because the house, there's a rake in there. And eventually, people are going to be like, this isn't fun anymore. Yeah. This was one of the things I found really interesting when we did that episode with the sports better. This idea that like if you're actually good at sports betting. Nobody's actually good. Well, in theory, if you are, like the house actually cracks down on you and starts limiting the size of your bet. Literally. So all these guys are making new accounts constantly and starting out by making stupid bets so that they look bad.

46:52That's right. And then making the big money.

46:54Tracy Alloway:Can I say, just actually, I want to like rant a little bit about this because. Turn on the TikTok camera. No, you have all of these people and they like – they're these cynics. There's professional cynics on Twitter and they're like, oh, the stock market is like rigged and only like the big guys win. And we're creating these new assets, crypto and prediction markets and all this stuff. It's not rigged like old Wall Street. It will never get rigged. But it's like, but like, look, are there issues with the stock market? I suppose. But the US like real like legacy capital markets is probably the fairest, most democratic, legitimate market to have ever existed in history.

47:31Tracy Alloway:You pay almost no spread. The like scale of manipulation and insider trading is so marginal in the US stock market. If you're really good at investing, they don't kick you off. They don't kick you off the Schwab platform or wherever you trade. Like it is – and it's rare because if you look around other countries and including very developed countries, I mean, go up north to Canada. Like they always have frauds. Every time a country – a company gets big, the entire like Vancouver stock exchange, these like penny-anny junior gold miners that you have no idea. Like U.S. capital markets – Well, AIM in the U.K.

48:07Tracy Alloway:is another one, right? Yeah, AIM in the U.K.

48:09Downtown Josh Brown:Tracy, do you want to apologize to your Canadian listeners? Oh, I can think of one in particular who's going to be upset. I'm so sorry. I apologize for Joe's behavior again.

48:20Tracy Alloway:Joe is cooking. But like, seriously, like U.S. legacy regulated capital markets are so good. And the fact that there are so many people sending this message, oh, it's all rigged. Only the big guys could not be more wrong.

48:31Downtown Josh Brown:Do you hear as much of that, though, as we used to hear? I'm not on Twitter for six years, so I don't know. So smart. Is it the same level of distrust? No. Because I feel like now it's all gambling and it's nihilistic and it's like yeah i know it's rigged and i'm part of the rigging i think the nihilism part is important right it's not that people like don't think that this is crazy behavior it's that they all think they can make money off of it despite it being crazy the rig and the rigging here's what's so funny about the rigging stuff the people who probably were complaining the loudest about how it's all unfair and it's the jews whatever it is um what actually ended up happening is those are today's Robinhood users.

49:12Downtown Josh Brown:Yeah. And 100%, they're giving a penny to Citadel every time they trade. And you know what? They don't give a shit anymore. Who cares about it? Nobody cares.

49:19Tracy Alloway:This idea is like, oh, Citadel's - Came in for order flow. It's like, okay, fine. Citadel gets a penny. Do you remember Brad Katsuyama? But that's the rigging. But that's crazy. Yes. So the HFT scare was like, that was a crazy moment, actually. So Brad was on TV

49:33Michael Batnick:arguing with the guy from Badge. It's like, it's rigged. You're taking a penny per trade. It's like, yeah. It's a penny. Do you remember the Michael Lewis book on HFT? Did you read it? Yeah. There's a passage in there where he describes like a guy who's about to place a trade on his computer. And he like hovers his arrow above the buy button.

49:52Downtown Josh Brown:He almost got scammed for a penny. And then he claims the price. The price moved because he hovered his cursor on the button. Oh, my God. Like that's how outraged people were at that time. Can you believe it? the the bid ask spread grew by half a cent all because of me that's the um i mean it's crazy because like people don't remember that was the rigging people that was what they were complaining

50:15Tracy Alloway:about because like for a long time there were no increments of stocks between one 16th right that was like before decimalization it was like fractions so there was a period where like first of all the bid ask spread was a minimum uh whatever a 16th of bro i used to sell people

50:29Downtown Josh Brown:stocks at 10 and a quarter that we're making markets nine and nine and seven eighths by by

50:35Tracy Alloway:and then it was a massive you know it's like a really big deal that in the late 90s online you could get a ten dollar commission so i have no patience for these people worried about like oh i'm like citadel gets a penny here you know there was this whole category of financial blogger back

50:50Downtown Josh Brown:then yeah whose whole shtick was the markets are rigged therefore you should not invest

50:56Michael Batnick:Well, zero hedge still exists. So guys, Vlad was on with us two weeks ago talking about prediction markets. Calci raised a billion dollars in new fund. They had an$11 billion valuation, which is twice the value that it raised just two months ago. They raised$300 million in October, which is insane. On Robinhood's most recent call, the CFO said that prediction markets reached an annualized revenue run rate of$100 million within a year of the launch, which is their fastest in history in October volumes, put the run rate at closer to$300 million. Here's my take on this. As I mentioned, I think the individual gamblers are going to get tired of this, right?

51:36Michael Batnick:90 % of the volume on Cal sheet in October was sports betting because the CFT said, okay, fine, you can do it now.

51:43Tracy Alloway:So that allows them to preempt state laws.

51:45Michael Batnick:So that was the explosion. But Chris Dierks, this was a Bloomberg article actually by your colleague, I want to give her credit, Lou Wang, she said, or hey, I apologize, why it's harder to tell gambling from investing nowadays. So in the article, they quoted Chris Dierks, a pro sports bettor who used to work for Druckenmiller. Okay. So he works for a company called Novig, a sports focused prediction market company. Oh, Novig. Yeah, get it? Novig. Oh. I actually didn't. Even I get it.

52:14Tracy Alloway:I met some Novig guys. That one escaped you? Yeah. Okay.

52:18Michael Batnick:So he used to work for Citadel and Jane Street. and when it comes to sports betting, in his view, the deck is stacked differently. Quote, I don't want to compete against the smart people. I want to compete against the dumb people, he says. What has the highest volume markets in Robinhood is going to have the dumbest customers and that's where I want to be. Yeah. Well, this is the problem though. Everyone thinks they're smarter than everyone else. This goes back to the idea that like, no one thinks what they're doing is like, actually going to pay off in the long run necessarily. It's all short-term bets, thinking that you're going to get out before everyone else.

52:50Michael Batnick:But the difference is you can be dumb and still be profitable over time in the stock market because stocks are biased to go up. Guess what? Sports betting that ends tonight, they're not biased to go up. It's zero sum. You're not going to make money. So I think people are drunk on this spectacle right now. I do think that it can be a big market. So for example, if you're a hedge fund and you want to bet that the Fed is going to lower interest rates and you say, OK, so I think that that's going to impact inflation this way and the dollar this way. why not just bet on the prediction markets? But guess what?

53:20Michael Batnick:You could do that on CME. There's driven us for that already.

53:22Tracy Alloway:So I have a few thoughts. So one is like a good prediction market that could be very useful is like, all right, I would have a position on Tesla, but I want to hedge the exposure of like their car sales. So you could bet like, you could bet the car sales. Great. The problem is there's no volume on that market. Exactly. So there's no volume. Today. Today. That could change. It could change. It absolutely, but like, as of today, this is not a useful instrument for institutions. Now, on this point, like about what's going to happen is you have to keep bringing in fish into the tank to feed the whales.

53:54Tracy Alloway:Eventually, people are going to lose money, to your point, and then it's going to drop. And what I think is the real risk is because there's no insider trading laws or as such, or it's not the same, like you would be very skeptical. You know, there was this incident, I think this week or last week, where there was a market on who are going to be the most searched person on Google for the year. And someone like nailed all of the bets. And there's a speculation that they were Google. But if you think that there are like insiders who like really know stuff, why would you ever participate in that?

54:28Downtown Josh Brown:Here's a more here's a more practical example. There's a bet. There's a bet right now who will win Warner Brothers. That's useful. Yeah. Right. Right. So Netflix or Paramount. If you're let's say so if you're a lawyer working on the deal, you owe a duty of care to your client. You obviously aren't going to bet that. But let's say you just talk to people that are involved in negotiations and somebody says, David Ellison is so pissed he's going to walk away from the table. I don't know. Is that insider trading? If I bet it on Calci versus if I go in the stock market and try to express that using options on Netflix.

55:03Downtown Josh Brown:I mean, I'm sure it is. They'll try to make a case on it. someone's going to be the example, I guess, is what I would say there.

55:10Tracy Alloway:But like, so a market, I mean, I agree. And I don't know how the law is ultimately going to shake out. I mean, the two things I'll say is I really think that there will be a test case.

55:18Downtown Josh Brown:There will be a test case.

55:18Tracy Alloway:And I think that if the prediction market companies should want there to be some regulation, because again, if you want to have random people participate in this, it would be nice for them to know that there aren't sharks who have all the inside information who are going to win every bet against them. But the other thing that I'll say, like, that strikes me as potentially a very useful market. If that ever got like if these sort of like deal markets ever got to be liquid, it's like, OK, it's right today. It's at 65 percent. Netflix is whatever. Tomorrow it's 65 percent. That could be a very useful instrument.

55:51Tracy Alloway:That's great. For traders.

55:53Downtown Josh Brown:The election outcomes are very useful now.

55:55Michael Batnick:But it's the same idea because let's just say that Paramount wins the deal or loses the deal. Who's to say for sure how that's going to impact the stock? Just bet on the outcome. Just bet on the outcome. Or hedge out the outcome. I do think that a few things. I do think that the prediction markets are going to grow. I do think that there will be liquidity. There's none right now. I tried to do a bet and I moved it from 60 cents to like 90 cents. Like honestly, there's no liquidity there. And also, there's no way that it's going to, not real way. I would be very shocked if it does anything remotely approaching equity values or trading like that.

56:27Michael Batnick:Like the idea that it's going to migrate there seems far-fetched.

56:30Downtown Josh Brown:I am going to make a prediction that you could bet on though. we will see the launch of a prediction market hedge fund. Well, this is what I was about to say, right? So you're seeing financial institutions get into this space. So we had Cliff Asnes on the podcast a while ago. They're exploring sports betting. The CME - Susquehanna is providing liquidity on one of these exchanges. The CME is doing these like kind of weird little contracts where you basically bet on the number going like up or down. Dude, Novig.

56:58Michael Batnick:Novig. Novig is a sports-focused prediction market company. Like they're there.

57:02Tracy Alloway:So the one thing I will say, and this actually gets back to -

57:05Downtown Josh Brown:One of these Twitter know-it-alls though that you guys hang out with is going to launch. That's right. They're going to say, I am so good - It's actually going to be me and Tracy. I'm so good at knowing how everything in the world is going to turn out that I am willing to charge people 2 % and 20 % to find out. So I'm going to do it.

57:21Tracy Alloway:So here's something that I think will actually be interesting. It actually gets back to the first thing that we were talking about with open AI, which is, I suspect that we're going to see a greater maturation and more liquidity in various, whether they're tokens or contract markets relating to private companies. So that because a prediction market can be structured as de facto equity, right? Is OpenAI going to have a$55 billion or whatever, sorry,$550 billion valuation as of X date or something. And you can start betting that. And then the more narrow you specify the contract, the more that line essentially starts to look like open AI stock, et cetera.

58:05Tracy Alloway:And so I do think this idea that I've been thinking about a lot is I think the difference between a private company and a public company, which used to be a very binary thing, it's going to look more like a spectrum of degrees of publicness where the spectrum is going to be, on the one hand, you're going to have highly liquid companies with a high degree of transparency. And on the other end, you're going to have illiquid companies with very, very moderate or very little transparency and everything would just fall into the spectrum, but it'll all be tradable.

58:35Downtown Josh Brown:Well, let's go there right now because there is a private company that is changing hands on a daily basis in the private markets. And that's SpaceX. Yeah. There are probably dozens at this point of SPVs or venture funds that bought it from somebody who bought it from somebody. That stock is everywhere. I know lots of people who are invested in SpaceX who have nothing to do with the venture world. It's like sort of exactly what you're describing. It's this combination. I think we're going to say the same thing, which is like the problem with all this opaqueness is you can't tell relationships within the capital stack to each other.

59:12So like, again, Like you're only seeing a slice potentially of what's going on with that company. And you don't know what else is going on behind the curtains.

59:21Tracy Alloway:Well, the other thing I was going to say, we did an episode with the president of perplexity. And he was talking about how they have to be sort of discriminating. You know, people always want to invest in these companies, but they do not want to let an investor in who is really not actually interested in the company, but just interested in creating a vehicle such that private investors. can trade and get access to perplexing.

59:45Downtown Josh Brown:That's what happened when Vlad announced tokenized private companies. Yeah. There was a blowback.

59:51Tracy Alloway:Yeah.

59:52Downtown Josh Brown:And they sort of stopped talking about it. Yeah. Because I think a lot of people who are executives at privately held companies, don't you dare list my company. Number one, you're misleading people. They think they're investing in it. And meanwhile, they're buying -

1:00:06Michael Batnick:NFTs.

1:00:07Downtown Josh Brown:Yeah, they're buying like a facsimile of a stock certificate. It's not real.

1:00:11Tracy Alloway:They're buying a company that owns a company that owns a company that owns a company that owns shares. A shadow of a company.

1:00:15Downtown Josh Brown:So guys, also this week, SpaceX said they're moving ahead with plans for an IPO. They want to raise more than$30 billion. This will obviously be the biggest deal of all time.

1:00:27Tracy Alloway:Yeah,$1.5 trillion at valuation, I think they're aiming for.

1:00:30Downtown Josh Brown:So Saudi Aramco raised$29 billion, which I think was the - Oh, I remember that. The record holder, and this will leapfrog over that. Is there that much money in the market for these companies? Like in public markets? So I want to do a prediction market with you guys, though. Does this happen in 26? Just the IPO or the IPO plus the valuation you just said? No. Just the IPO. No parlays. Give me the bet. Yes or no. What do you think? I'm going to go with - How much would you put on no?

1:00:59Michael Batnick:Where is the yes and the no? I would say the no is - 50-50. Okay, 50-50. The company is saying we're doing it. I should point out the company is saying that they're doing it. So the yes is 60.

1:01:09Downtown Josh Brown:Yeah. I'll buy no for 40 cents.

1:01:11Michael Batnick:Okay.

1:01:12Downtown Josh Brown:Elon owns 40 % of this. If it goes public at a$1.5 trillion valuation.

1:01:17Michael Batnick:Sam Rao would say that's a lot of money.

1:01:19Downtown Josh Brown:So here's my next question though. Isn't Tesla the loser? Because right now, the only way to invest directly in Elon Musk for 99 % of the population is Tesla. And now I'm giving you diet Tesla. Like I'm giving you an alternative.

1:01:37Tracy Alloway:Space Tesla.

1:01:37Downtown Josh Brown:Well, now you could have space Tesla. Wait, aren't they going to merge? Which, well, when one gets into trouble, the other one will buy it. Yes, of course. We understand how that works. But isn't that interesting? Now, two Elon vehicles, does the enthusiasm cancel itself out across those two market gaps? I never really thought about this question. It's a good question.

1:01:57Tracy Alloway:Yeah, hadn't thought about that. I'm very clever. I mean, on one serious note. One serious note. I think it's going to go public. I'm going to take the yes. Yeah, so, I mean. $420 per share?

1:02:07Downtown Josh Brown:$420, anyone? Come on. It has to. It almost has to. On a serious note, you could see why it's seizing, the company's seizing this particular moment, which is like government spending is just not in vogue, like we were talking about earlier. And so this idea of private companies stepping in to perform government functions or things that were done by government bureaucracies or whatever earlier, you're seeing that with NASA, right? Like SpaceX is kind of like the only game in town. And he has Starlink revenue, which is not dependent purely on, although governments are big customers, is a commercial business there that could be a monster business as more people trust it, especially if it's publicly traded.

1:02:53This is the replacement of public services, public entities with private capital. And I think that's going to be like a really big trend.

1:03:01Michael Batnick:Can I read you something from one of the Bloomberg articles about SpaceX? they expect to use some of the funds raised in an IPO to develop space-based data centers. Well, of course. Oh, yeah. Including purchasing the chips required to run them. Space chips? Guess what? Like, we laugh. Like, that's going to happen. Like, Gavin Baker was saying that with Patrick, that there are going to be data centers in space that use the dark side of the moon to cool the liquids or some shit. I don't know. It was way over my head. We can't even figure out how to - I don't know why, but I'm in. we can't even figure out how to like reliably cool data centers on earth though right exactly

1:03:37Downtown Josh Brown:they gotta go to our space they're not building a data center in space they're gonna drag one up from f***ing idaho into orbit they're gonna i don't i think the idea is that you're using the sun's rays to power it yeah which is free i mean once you once you build it and then and then you just turn your back to the sun and then space is very cold so it'll be self-cooling at the same

1:03:56Tracy Alloway:time so i mean i'm short okay let's it's obviously obviously we should all invest i think in the next 10 years i do not think that there will be a data center in space oh i do i would say i would bet yes yeah okay that's good all right we'll revisit this you would bet that based on what

1:04:13Downtown Josh Brown:just because they're saying it yeah oh i would have no idea which way to bet but your faith in

1:04:17Michael Batnick:elon musk is that just do it if he's saying he's gonna do it i genuinely believe that there will be data centers in space.

1:04:24Tracy Alloway:All right. That's good.

1:04:25Michael Batnick:Now, is it outer space? Now, that's, I don't know where outer space begins, but.

1:04:28Downtown Josh Brown:All right. We got a couple more things to bang through with you guys. Daniel, can I please have chart 12? I just, we don't spend a million hours on this. This is from ChartKid Matt.

1:04:40Michael Batnick:We were going to segue from prediction markets into this. All right.

1:04:43Downtown Josh Brown:So this is from ChartKid Matt, who is obviously a part of the compound, also runs a charting service for financial advisors called Exhibit A. And he is showing that in 18 of the last 26 years, the stock market actually outperformed the average of all of the Wall Street strategists. So 70 % of the time, actually, strategists aren't bullish enough. Doesn't that fly in the face of this narrative that Wall Street's always bullish and always pumping up? It turns out it's the opposite. And I've never seen it displayed that way. What do you think about this? It's a cool chart. It's a great chart. Wait, I have a question.

1:05:25Are the estimates based on the macro analysts looking at the S &P 500? It's a strategist. The guys that have stock market targets. So this is key because I think if you're a corporate analyst looking at a specific company, the bias generally is pretty bullish. And I'm kind of amazed that you still hear so many people saying great quarter on calls. I guess it's like a joke. Congrats on the quarter, gentlemen.

1:05:47Downtown Josh Brown:It's a joke between them now, right? But I think the macro strategists, like you're kind of biased to try to find the non-obvious story. That's right. Yeah, you want to make a name for yourself. The next chart is even better.

1:05:58Michael Batnick:Daniel, chart 13. So this shows it by year. So the y-axis is the, what actually happened for the year. We will send you these guys, by the way. Yeah, yeah, thank you. And the x-axis. So like 2003 strikes me as something really interesting. They expected a 25 % gain. And they were right. Like, credit to them for not throwing in the towel after three really shitty years.

1:06:19Tracy Alloway:Where's 2003? Top right.

1:06:21Michael Batnick:Oh, yeah. Okay, there it is. It's like 2008 as an example. Listen, nobody could see the future. But they expected a 7 % return right down the fairway. And actually… It fell 40%.

1:06:30Downtown Josh Brown:Very close, though. I just… I think it's an interesting… So, because we're in strategist target season. We have one more on this. Chart 14. The greatest…

1:06:40Tracy Alloway:The happiest time of year. macro outlook season.

1:06:42Downtown Josh Brown:And I read all this shit still. I know better and I still read it because I find it helpful to hear what people think, right? Yeah, yeah. And that's why they write it. They don't consider themselves to be Nostradamus.

1:06:53Tracy Alloway:No, they don't. And I think it's useful and I think, you know, like it's good to put a number and most people just, they want to see the thinking behind it, right? Like, I don't think you're going to like dump your macro strategy. Like, oh, you said it was going to be up 9 % and it was up 18%. But you want to see like, what was their reasoning? How did they work through this? How did they bottom? What are their -

1:07:13Michael Batnick:Yeah, I read Playboy for the articles. Don't forget. Don't forget.

1:07:16Downtown Josh Brown:The clients want to know what the banks think. Yeah. Obviously. Like, we're giving you all this money to invest for us, or we're trading with you. Yeah. Like, what's your view? And speaking of Canada, what is Scotiabank's problem? All right, wait. So, let's see. Hold on.

1:07:30Michael Batnick:Come on, dude. They're at$63.78. Isn't the S &P higher? Come on.

1:07:34Downtown Josh Brown:So, let's set this up. This is Wall Street Strategist 2026 S &P 500 targets. The average target for next year, 7 ,512, which implies from yesterday's close, about a 10 % return. It's like magic. About a 10 % return for the S &P. Give or take. Which relative to recent years is actually on the bullish side. Because two years ago, I think the call for 2023 was flat. Yeah. And of course, we went up 30%. So I don't know. I find it's interesting to just see where people's heads are at.

1:08:07Tracy Alloway:Can you just pause for a second? It's insane that like we have this thing in America that by and large, like that's like 10 % year after year after year. It's just like free money. No, I'm not getting jinxed. I have been saying this. The returns to the market in America have really been extraordinary. Did you see the bank on that chart? That's like bang on 10%.

1:08:25Downtown Josh Brown:Oh, there was one.

1:08:26Tracy Alloway:It's UBS. Amazing.

1:08:27Downtown Josh Brown:Of course it was. It's a shortcut. Yeah. Can I tell you that 10 years in podcasting, you're kind of like the simpsons like this we're still funny though right no still funny we're the simpsons except we're still funny like think about most most of the financial podcasts that exist today were started in the last 24 months most of those will not be here in 24 months okay that we know but you guys have longevity that very because i'm trying to think of what show lindy they were uh michael and ben were early they were 2017 i felt late and he felt

1:09:02Michael Batnick:The only ones who I know are before you is Patrick and Barry. And Matt. That's probably about it.

1:09:07Downtown Josh Brown:Wait, was Barry Masters in Business? Yeah, that was before us. Yeah, yeah, yeah. Wasn't it a radio show for a while? Although I guess it doesn't really matter.

1:09:15Tracy Alloway:But it did. It started before us. Is that an asterisk in the record book? No, Barry was definitely around.

1:09:21Downtown Josh Brown:I mean, you guys are incredible. And I don't listen to every single episode. No one does. But anytime it pops up in my feed, I never turn it off because it's always good.

1:09:31Tracy Alloway:That's very kind.

1:09:31Downtown Josh Brown:So I really feel that way. You guys are like two of my favorite people and getting to listen to the two of you and your guest selection, I would say, probably you guys, Meb and Patrick to this day, the best guest selection. Like you guys talk to people I've never heard of and I'm doing this shit 30 years and you talk to amazing people and I'm like, where do they find this person? That's the most satisfying part of the job, actually.

1:09:56Tracy Alloway:You know, one of the things, you know, it's always fun to have a big name. It's always fun to land. Ask this. Is it Reed Delio? I love those guys. It's great to chat with them. But there is literally nothing more satisfying than finding that person no one has heard of. And it's like, oh, that person's amazing. Like that is, that's the dream when we find those people. The thing that I'm quite proud of actually is that we built the podcast on exactly that. On finding the experts or the best person to talk about exactly, you know, a topic that was in the news. We didn't, you know, now we get the big names.

1:10:29But when we started, we definitely didn't. It was, you know, mostly people that you never heard of.

1:10:34Downtown Josh Brown:But you know what else you guys do? You make people famous. Because there are a lot of people who are now considered the it guest on a topic that I heard for the first time on your show. Wasn't the Flexport guy? Yeah.

1:10:48Michael Batnick:You guys were the first to put him on? Yes.

1:10:50Downtown Josh Brown:You know, the great analyst covers Nvidia, Stacey Wasgand.

1:10:54Tracy Alloway:Yeah, he was on our show.

1:10:54Downtown Josh Brown:I heard him on Odd Lots a year before he was on CNBC. He's great. But you guys have done that with a lot of like category people who are now like the go-to. But I think you guys have contributed to their - We've had people testify in front of Congress and stuff like that as experts.

1:11:10Tracy Alloway:Guests call in and talk to the White House during the Biden administration.

1:11:13Downtown Josh Brown:Who's the worst guest you've ever had? Tracy, you go first. She's going to answer. I'm not going to name a specific name. But you have that person in your head. Where's O's Pearlman? Pull it out of her.

1:11:25Michael Batnick:I was just thinking the same thing.

1:11:26Downtown Josh Brown:We need a mentalist in here to pull it out of us. Here's the thing. It's someone who didn't end up coming on the show. Oh.

1:11:32Tracy Alloway:So we're obliged. I know. We have one of those. I should not say we made an agreement. Yeah, we have one of those. Fans for life. One person. No, well, one person can't. We really can't say it. We're not. Don't try to ask us more questions because we actually made an agreement. There was a incident not that long ago in which we had a guest who was very reluctant to do podcasts. and they were sort of like not sold on the premise of podcast but they're a PR person so I convinced them oh Joe and Tracy are cool whatever and they came on it's an older

1:12:01Downtown Josh Brown:so it's an older person we're not gonna say anything no clues no clues okay

1:12:06Tracy Alloway:because we made an agreement that we were and the person heard our intro and was not thrilled and walked out of the studio oh that like jokey talky thing that you guys do they overheard that they were in the room Because we always do the intro with the person in the room.

1:12:23Downtown Josh Brown:And they're like, Jerome Powell.

1:12:24Tracy Alloway:Did I say Carl Icahn is that sensitive? They basically said nope and got up and walked out. This is not what I signed up for. Yeah.

1:12:30Downtown Josh Brown:Oh, shit. So we never had it quite that bad. We had somebody that we invited and they said yes and then blew us off. And then we had one person. I'm not going to say the person's name either. Who was so obnoxious, cynical, that I basically said, I don't care if this person literally invents cold fusion tomorrow. That person will never be in a room with us. So we've had like, but it's very rare. Yeah. Most people are so happy to just be part of the conversation.

1:13:01Tracy Alloway:You know, we had one episode. It was actually, so people have asked us, did we, did you ever have a episode that you didn't air? And there's been a few, but there was one and it sort of has a few. Kanye West. There's been a few, there's not many, but there's been a couple. but this one sort of has a happy ending because there was a guy someone came on it's not it was just like not a good it was not a good conversation we didn't know what to do about it so i sent a email to the guys like look i'm really appreciate you coming in i don't think like the conversation totally worked um it's something was just off about the whole thing i don't think our listeners are gonna like the vibe i think we're just gonna shelve this one and he responded he's like thank Thank you.

1:13:39Tracy Alloway:I know I sort of whipped. He's like, I was not on my A. Oh, we had one of those. Yeah, we had one of those. And he's like, thank you for not airing it. It was actually so disappointing. We aired it.

1:13:47Downtown Josh Brown:No, you know what? We had somebody who's such a nice person, and they're a huge fan of the show, and I think they got really, like, nervously excited sitting here. Yeah, that happens. And I felt really bad for him. I still press publish. I want to congratulate you guys, though, on 10 years. It's super cool. What is next in the Odd Lots universe? What can your fans and our fans look forward to? Honestly, I think it's more of the same. Yeah. It's basically having, like, great, interesting, engaging conversations with the perfect guest. That's it. It's a very simple premise. You do it better than anyone.

1:14:19Downtown Josh Brown:Thank you so much. We're friends, but we're fans, and we're just so happy for you. Round of applause for Joe and Tracy. You hear the audience? We can't get it up. Hey, can we show this picture, though? Daniel, chart 18, please. So this is this is you guys on Instagram and I mean you guys look great if you're like a brand great for like a great photo it's that's a hot that's a real these are real cameras it makes so much of a difference when a real camera is really I know it really does it

1:14:53Tracy Alloway:elevates I know it's like oh it's like you forget what a real photo or the names of the drapes that's our team by the way you know I just wanted to say Carmen Rodriguez Dash Bennett and kill brooks did it it's a five-person operation only me and tracy tend to get all the attention for obvious reasons it really is a team effort so i'm glad that we have that picture that's really awesome and that they because they don't want the articles about us and stuff it never mentions

1:15:14Downtown Josh Brown:their name i always feel bad about it that's that's i mean that's that's super fly to acknowledge to acknowledge everyone that's a part of it and uh you guys i mean work a little bit harder you might get six people helping who knows all right uh everybody if you are not subscribed to odd lots and you like this show, I'm pretty sure you'll like that show. Most of you are subscribed to both. So it's just it's it's an amazing thing. And here's to another 10 years. Thank you. All right, guys, thank you so much. 10 years on the count. Yeah, that's right. Guys, thank you so much for watching. Thank you for listening.

1:15:49Downtown Josh Brown:Like button, subscribe button. Thanks to the crew. We'll talk to you soon.

1:16:00Tracy Alloway:start.

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