Memory Is a Bubble, Nvidia’s Blow-Out Quarter, SpaceX Is Coming With Jan Van Eck

12:35Downtown Josh Brown:It's like over$60 billion or something like that. Is it the most successful, in those terms, sector ETF in the market? It's got to be. Not sector, industry. Because sector is like XLK. It's certainly the biggest semi by a mile.

12:49Michael Batnick:Do you guys consider yourself like an indie? Are you the biggest indie? Or are you so far past indie? How do you consider yourself like VanDuck Asset Management? Yeah, indie. But you've got to be the biggest. because you're not you're not state street you're not a bank right right and you're not black rock but you but you're wisdom tree we're yeah you're that's right now right now we're pretty big but you're huge we're relying on smh and some other things but yeah and and we've actually had a big european business so our european assets last year went from like 11 billion to 45 billion how why we had a defense ctf and then a bunch of other things and you know trump is like sell you You know, he's our top salesperson for a defense ETF in Europe.

13:31Downtown Josh Brown:That's what I think. When I think about you guys have some of the most iconic, I don't want to call them thematic because they're indexes, but you have GDX, SMH. Every trader on earth knows what these things are. And in the case of SMH, I almost think it's become shorthand for the sector. Nobody talks about the fill up the socks anymore. It's almost like talking about the KBW bank index, which nobody does. Yeah, the reason SMH has performed so well is it's only that… We've been around. Right, but… Second worst performer, though, we spoke about. Yeah, but for people that are listening, it's how you construct it.

14:09You can call it, I'm sure 20 ETFs called semiconductor, but what are the rules of inclusion? And the cap, meaning the biggest holding in our ETF can be up to 20%, and that's NVIDIA. And so the main differential on performance is because of NVIDIA. The other ETFs have smaller weight, Plus, they own all those midsize companies that really it's a viciously competitive industry. And they all kind of went sideways.

14:36Downtown Josh Brown:It's an interesting point. I don't know why equal weighting is so popular for sector or industry group ETFs. I don't understand. Do they hate momentum? Because why wouldn't you want Broadcom and NVIDIA to become outsized positions? And the reason I'm asking that is I think about like biotech. uh xbi versus ibb xbi owns i don't know one percent of 100 biotech stocks or whatever it is why do you want why does anyone want that why wouldn't you want when the sector's in favor you want the biggest biotechs that are going up the most to be the biggest part of the portfolio i own xbi but why do you because it's the high because it's high beta no no no stop stop stop backwards stop right because it's higher beta because like if you want to small cap gold mine you're taking the winners talk and cutting them down yeah am i right i want the juice

15:32Michael Batnick:tell him he's wrong i'm not buying and holding this forever we live in this era where it's been all momentum all large caps in every sector like that has driven performance emerging market like top top to bottom but in the old days you wanted the smaller companies like small caps like small cap gold miners used to be gdxj used to trade much more volatile and much more on the upside than gdx yeah but that that's the reason sometimes manufacturers just create these things to

16:00Downtown Josh Brown:create them though josh yeah okay i so for me if i think a sector is going to be in favor and i want to be long the sector it seems you would almost have to have brain damage to say but i don't want the winners to be more than two percent no no no no you're conflating things

16:15Michael Batnick:you think you think that bigger market caps are automatically the winners they have been that's no they have been for a hundred years no they haven't no they haven't you have 15 years 20 years waiting by market cap and waiting by momentum i mean we just built porterhouse it's not the same thing the s &p 500 allocates by market cap waiting and market cap waiting is not always it has been the last 15 years those are not always the first for either you guys true or false

16:40Downtown Josh Brown:periods in which equal weight or small caps would be the other way to phrase that outperforms large caps are sporadic and short duration. In the last era of 15 years or whatever. Are there entire decades? Yes. There are entire decades where an equal weight approach is better. Remember all the academic literature. Remember like, you know, there's whole firms based on this. You want value and you want small cap, right? Yeah. Yeah, and you've seen this chart. As soon as they publish that research, that's how you lose clients and AUM.

17:15Michael Batnick:You know the chart from Ned Davis that showed if you invested a dollar in the S &P versus a dollar in the largest weighted stock at the time, investing in the largest stocks at the time up until Apple in 2013 when it broke the mold was a terrible strategy. It's been in the last era, the last 15 years, where the largest have also happened to have the best momentum, the best earnings growth, et cetera, et cetera. But it's not permanent. And it's not always. No, I mean, I wanted to talk about, you know, we'll talk about semis and NVIDIA maybe in this pod, but like that's the question. It's like, oh, the biggest companies, they always fail.

17:46You always look back and go to the top 10 in the 70s. They never make it to the 80s and 90s.

17:51Michael Batnick:I do think that era is, it's a structural permanent shift in my opinion, because the amount of money that it takes to compete these days, not just with AI and the computer and all that stuff, although that's a big part of it, the moats are more durable, I think, than they have been in the past. Obviously, not with everything. Intuit is down 23 % today. Obviously, things change and stuff, but the moats with capital are different than I think they were in the 50s.

18:18Downtown Josh Brown:I think there's two other things. We've never had network effects businesses on the scale that we have them now. That's it. So that's number one. It's the internet. So that's the internet. Number two, we stopped enforcing antitrust 25 years ago. Both parties are guilty to some extent. We just allowed companies to not only dominate one industry, but to spread out horizontally and dominate 12 industries. I don't see any real political momentum to reverse that. And so in that environment, we have network effects businesses where the bigger they are, the more profitable they become. And no wherewithal whatsoever to trust bust.

18:56Downtown Josh Brown:Why would you think that there's going to be any sort of durable advantage to small caps? it's like what is the story but the only thing i could come up with is a bear market and the small caps have less to fall because they were already at a lower multiple i i can't come up with why that would be a durable advantage to be smaller in the year 2026 so i mean i could be wrong it's today's market structure i agree it's all about earnings and if you look at earnings right the tech giants it just yeah they're lapping they're lapping everyone else on earnings growth If you could have small companies that used to grow faster earnings-wise, that's a great story.

19:36But Michael and I will have a response for you.

19:38Downtown Josh Brown:Kroger is a publicly traded company. If you wanted to equal weight companies that are involved in the supermarket business, you would get an equal amount of Kroger as you would Amazon. Amazon literally could give groceries away for free so long as people are paying the prime fee. Like, it almost wouldn't even matter. There's no world in which for any reason that's just going to flip itself on the internet.

20:04Michael Batnick:No, it feels like we've been at the end of the runway for the story for the last 10 years and it just keeps extending even prior to AI. So I was listening to a podcast by Matt Bellany about like vertical video is now the next big thing. So Reels is monetizing such an incredible amount. They're at a$50 billion annual run rate and Reels just started monetizing in like 2022 or 2023. Reels has now surpassed Netflix. All of Netflix, just Reels, does more revenue than Netflix. And if you think about what we just saw this week with SpaceX S1 and what Starlink is doing, have you seen what's happening to the broadband cable companies?

20:43Michael Batnick:They are literally crashing through the floor, all of them. It's unbelievable. So it just keeps getting bigger and bigger and bigger. But that's the genius of Elon. right creating this whole you know satellite phone network like who thought i mean who thought right and that's the argument against the antitrust policy or for the the laissez-faire antitrust policy is someone will come along and they'll compete and they'll leapfrog you that still is

21:12Downtown Josh Brown:possible it's you could still come it's hard but it's possible you could still come out of nowhere but it just the likelihood of it seems less may that may not be true a lot of this is like anecdotal or a feel thing, but like the likelihood just seems less that the businesses that we talk about every day are disruptable in any way. The good news is they all compete with each other. There was a time when like, I think Steve Jobs sat on Google's board, stuff like that. They're all amazing competitors and they do compete. They just don't compete with small companies. They compete against each other.

21:50Downtown Josh Brown:Amazon Prime competes with Netflix every day. and apple tv youtube compete youtube is competing with uh you know like they're all competing for attention in a macro sense and then on a micro level every one of them has a business going up against another one just think like what waymo versus tesla versus uber like that'll be a battle royal for the next 10 years and open ai came out of nowhere right and suddenly have hundreds of millions of users now whether they can monetize it you know but but still right so it's possible and AI, we weren't even talking about AI five years ago, right?

22:24Michael Batnick:So five years ago when you were here, or it wasn't five years ago, but one of my favorite appearances that you made on the show was when you were screaming about the bond market and how there's no buyers. And that was a long bond market ago. We are not in Kansas anymore. How much of the sovereign debt around the world was negative yielding? I can't remember what it was, but it was a lot. All right. I assume, I know you weren't happy about that. I assume you're not happy about the current yields today either. Meaning, listen, I, in my 10-year macro view, bullish AI, bullish India, really worried about our debt levels in the United States.

23:05It's a timing thing in the markets. Like, it's like the housing crisis. It's going to hit at some point. We just don't know when. But how do we know? So I'm the most sensitive. I'm freaking out. And everyone's like, you on chill what's going to hit we're borrowing a trillion dollars a year right our budget deficit was six and a half percent now shrunk to the low fives if trump spends all this money on defense it's going to have a six handle again when the gut when the markets lose confidence the fed has no control over the 10 year yeah so right now everyone's not even paying attention i don't know when this is going to be the one thing i do point out is the uk bond on the long end uk bond yields are going up.

23:43Japan, they're way off. 30-year bonds. 30-year bonds, long duration bonds.

23:48Downtown Josh Brown:Can you explain what you think went on in the last week where all of a sudden the 30-year treasury hit a high it hadn't been at since 2007? And the market, the stock market, did not even blink. We were so caught up in this AI cap. And maybe that's part of why the 30-year bond is doing that. I'd love to hear what you think. Yeah, no, it's an interesting question. Why didn't equities react more to the backup in rates, I guess, if you want to put that way? They did a little bit. They wobbled.

24:16Michael Batnick:Housing stocks did. Yeah, they wobbled, but they didn't really fall over. And I think that's why I am bad on timing on this thing, because I just don't think it's a worry right now. Why are rates doing that? Why are rates going up? Well, we had a bad oil. No, we had a bad inflation print, right? I know, but because I think that's it. Look, I think it's two things happening at the same time and you can't prove it. That's a wonderful thing about finance. It's the bad CPI and PPI numbers, right? So people are worried about inflation and they're just worried about you need higher nominal yields and the higher interest rates in a higher inflation environment, right?

24:51Otherwise, real rates go down. Okay. At the same time, this war seems to last forever and we're spending a lot of money. If we spend another half a trillion dollars on defense next year, it's a blowout. It's a budget blowout.

25:05Michael Batnick:But what do you think go when this goes bad when something sorry just to be clear the markets may not price it in for another decade but i'm just saying it's something i want you say it's a blowout 500 billion dollars to fight oran for a year okay it's not we don't have that we don't have that's the hidden secret like he can go over to china and talk to xi jinping we don't have that money that's our big achilles heel in the united states the markets are not paying attention at all i'm with you. Is that why Iran is able to hold out? They're well behaved, I would argue. But, you know, when the 10 year goes over, I don't know, five or five and a quarter, I'm going to be freaking out.

25:40Is that why the Iranians are able to hold out?

25:44Downtown Josh Brown:I don't think they think about that. You don't think they think about the financial situation of the country that they're going, because we think of nothing but blockading them and harming them financially. You don't think it's crossed their mind? I think it's very much in China. I think it's very much in China's mind. I think they think were really weak because of that, ultimately. And they're going to catch up on the technology front. And one day, they're going to wake up, and they're going to say, we have more gold than the United States. And we've got a military that's competitive. And your financial system, we blew up during the financial crisis.

26:20They were fine.

26:21Downtown Josh Brown:Wow. Some would argue they swept some things under the rug like they did during COVID. But we could debate that. I'm not extolling China. I'm just saying it's a, it's a, it's from a geopolitical perspective, it's a weakness for the United States, but I don't think Iran cares about that.

26:35Michael Batnick:Let me paint an alternate possibility of what's happening in the market. So friend of the show, frequent guest Warren Pies tweeted this great chart, chart three, Daniel. He said S &P 500 forward sales growth is projected at 18 % over the next 24 months. Historically, this corresponds to 12.4 % nominal GDP growth, about 6 % annualized, something to consider as yields and the Fed look for a new equilibrium. That's pretty tight. Directionally, it's pretty good. So this is the glass half full view of what's happening. It's like, listen, sales growth is really strong. Economic growth is really strong.

27:15Michael Batnick:Why would 10-year be at 3 %? That wouldn't make sense either. Right. Sorry, that's really, you're right. That's the third point that might be explaining higher yields, which is our economy's heating up, which is great.

27:30Downtown Josh Brown:So anything good happening in the economy is either directly or indirectly related to AI. There's nothing, my opinion, there's nothing else good in the economy. The housing market's terrible. The bottom third of the country can't pay their bills. delinquencies are starting to edge up very slowly in a lot of areas. People are having trouble with cell phone bills. They had trouble with utility bills over the last six months. Auto delinquencies starting to come off the bottom. Existing home sales, you literally can't buy or sell anything. Nobody else is. There's a lot of negatives in the economy.

28:07Downtown Josh Brown:None of that shit matters to the S &P 500. We have, I read Adam Parker today, basically says there's 263 companies in the S &P that are involved in building the AI infrastructure. It's like more than half the market, whether it's Caterpillar or a digital REIT or a utility or companies selling equipment to a utility, it doesn't matter. Almost everything happening that's positive is directly related to AI CapEx build out or selling AI something to people. I don't see that changing. I could be an idiot. I could be wrong. And I'm not even saying it's a negative for investors, but like anything that's away from the AI theme, stocks aren't working.

28:52Downtown Josh Brown:The companies aren't hiring people. Like it just, it really seems to be getting into a place where the entire, Adam says the entire S &P has become an AI momentum ETF. How, is that too extreme for your taste? Or what are your thoughts on that concept? I think there's another industry besides AI. And you talk about this. It's the wealth industry. It's the industry that we're in. We're part of this AI boom, though. Right. Okay, so we're definitely related. We're at the hip. But I'm just saying our businesses are booming. But AI is driving the stock market.

29:25Michael Batnick:It's driving the wealth.

29:25Downtown Josh Brown:But wait, right. IPOs, wealth creation on a massive scale, and stock prices, which drive AUM fees. That's what's going on. They're in the same trade. It's very reflective, and it's all based on one thing. And the wealth that's going to happen from these SpaceX and Anthropic IPOs. I was at dinner with someone who bought a house in Noe Valley in San Francisco. A week later, someone bid another million dollars for the same house. The amount of cash that's going to be hitting northern California for the people who haven't left. It's a tsunami of cash. It's insane. The amount of wealth in this country is beyond my experience.

30:06So you said it's reflexive. So the risk, though.

30:09Downtown Josh Brown:I think it's recursive. I think it's a circle. It's a round and around we go. Because, like, hear me out. The person that's a SpaceX early shareholder, maybe they're an employee, maybe they're an investor. So the first window to sell for this deal, I think, is five weeks. Like, it's very different. No, it's a six-month lockup. No, it's not. You're wrong. They're changing the way they do this specifically for SpaceX. they're having a rolling lockup period. And I think like within a few weeks, the first sales can be made. You can't dump your whole position. But I think the liquidity coming from these wealth creation events will be very different than prior IPOs where they made you wait six months, nine months.

30:53Downtown Josh Brown:You're talking about a$2 trillion IPO. Even if you allow 10 % of shares to be sold, think about how much new cash that is. What does that cash do? It finances the construction of new McMansion, probably Ferrari, more Rolexes, tons of stock market activity, tons of wealth management activity, fee-related stuff, maybe starting new companies with that money. Like, it's just, it's, so it's recursive. It's, and I don't know what breaks the cycle. Obviously, a stock market crash would do it. Barring that, I just don't know where it ends.

31:30Michael Batnick:But this could break the cycle. So Tom Lee was talking about this. He said the amount of, same thing, the amount of wealth that's going to be created is going to be staggering. Guess what? The amount of wealth has to also come from somewhere. Because who is going to finance these purchases of SpaceX and OpenAI and Anthropic on the open market? Where does the$80 billion in cash come from? And what is that going to do to the stock market? Index funds, ETFs. So is there enough money to support it? I think that's, they're smart. SpaceX is smart in two senses. They know they've changed the rules of a lot of indices so that ETFs, like some of ours, we've changed our rules or created them that way.

32:05We can buy pretty much right after it lifts. Normally, an ETF would have a rule of depending on how much they rebalance or how frequently they rebalance six months later or even a year later for some ETFs. So the initial float, I heard, is only going to be like 3 % or 3.5%, which is teeny. You normally wouldn't get included in an index. with that little float because it can whip around so much. So I think they're really managing this intelligently, but it's going to be a lot of shares to unlock. Like it's going to be like 10%. It's going to be, it's got a lot of cash. I've heard some people say, this is great that SpaceX will be in the NASDAQ.

32:46Downtown Josh Brown:It'll be in the index in 10 days because how stupid would it be to have the fifth largest publicly traded company outside of the index that's meant to represent the stock market What are they going to wait for it to go up another 100 % at it? So I heard that version. Yeah. And then I heard the other version, which is, so basically the world's richest man says to the stock market, here's how things work now because I need my shareholders to be able to sell and you need to provide suckers in the form of ETF shareholders. So I don't feel strongly in either direction. I understand both arguments. What are your thoughts as an asset management executive?

33:26Downtown Josh Brown:It should be in the indices, right? It should be. I mean, the basics. I think that's right. And it's just interesting that our industry, the ETF industry, is learning because the market's changing, right? And we've never seen anything like this. Tesla coming into the market took about eight years too long. Yeah. Right. It was so big, and they pushed it off as long as they could. And then by the time they added it, the index fund shareholders missed like 90 % of the move, right? Yeah. So they don't want to repeat that, which I think is good.

33:58Michael Batnick:If we can swallow these companies coming public, I don't know when OpenAI Ananthropic are going to. Obviously, they seem primed. But if we can get past this without the market just cratering, what's left for the bears? Deficits. I told you. Yeah, 10-year rates. No, but come on. No, I'm serious. Like, you guys are really good at history, right? Always the risk, you know, financial crises have come from the banking system, Right. Banks have done stupid stuff and they've blown up. This time, the blow up will be in D.C. Yeah, but there's a difference between government debt and the amount of leverage that is in the system at the corporate and household.

34:36Michael Batnick:There's not a lot of leverage in the system. There's not. It's all equity. It's VC. It's like it's not. After the financial crisis, we solve the private sector's debt issues. Right. So we just got to keep our eye on the government. But look, I'll give you my acid test when I meet with clients. I'm like, is the U.S. government going to meet all its obligation in the next 10 years? 90 % of us say, of course they are. That's ridiculous. No way. We are not fixing the Social Security Trust Fund. That will run out of money. No, it will not. Payments will be cut 20 % in the early three. Where are you going to get the money from?

35:10We'll find it. No.

35:11Downtown Josh Brown:Taxes. Yon. It's going to cost. That's my triggering effect. Under whose administration? You can't fix a retirement system three years before it goes bankrupt. Hear me out. You can't. Hear me out. No need for retirement because no one's going to be working. Just saying, this is something that I'm hearing. I'm hearing no more work. Nobody needs to work. It'll just be a citizen dividend from AI productivity.

35:36Michael Batnick:Let's talk about the incoming new Fed chairman. So this is a Donald Trump appointee, Kevin Warsh, expected to lower rates. Obviously, the president was pressuring Jerome Powell, calling him all sorts of names. And the Wall Street Journal wrote an article recently, the economy Kevin Walsh is inheriting is not the one that he wanted. So the previous Fed, for the most part, let's go to chart two. There was consensus. Everybody was on the same page in terms of when it's time to raise rates, when it's time to cut rates. For the most part, this is from the Wall Street Journal showing Fed governors and regional banks and how many members were dissenting.

36:16Michael Batnick:And from 19 -

36:18Downtown Josh Brown:Almost no dissent.

36:18Michael Batnick:From 18 to 24, everybody was on the same page. And all of a sudden, there was a lot of different opinions about what the Federal Reserve and what the chairman should do about the direction of interest rates. And the market was pricing in a couple of rate cuts. And all of a sudden, it's pricing in a rate hike. And I thought that idea was ridiculous. I don't think it's that ridiculous as I did six months ago. And they always say, I don't know if they're like what the data shows, that they always test. The market always tests a new Fed chairman. Looks like we're setting up for that again. Could be.

36:50it's a different environment, right? I think coming into the year, like, Besant was scathing about Powell, right? The critique was, you know, yeah, you had consensus in the Fed, and those people were out of their minds and out of touch with reality. This, you know, the temporary inflation, they were all, they were all, they all agreed with each other. They were all wrong and massively wrong, right? Too late, Powell. And I think as we get away from I mean, he was very articulate and communicative and obviously, you know, a responsible public official. But I think he won't look so great in retrospect.

37:25I don't know if we'll hear that much from Warsh, right? He is kind of the Fed shouldn't do so much camp, right? And like, if inflation is up because of oil prices, do you think the Fed should? The Fed has no control over oil prices. So I think their instinct is to do nothing and to say less. And so I think that's kind of where we're at. But I don't know how he deals with all the different voices at the table. But that's kind of – I've penciled in for the last six months already kind of not a lot of change in monetary policy this year. I don't think that's a risk to the market. I think it's good, just stable policy.

38:05Downtown Josh Brown:I think that's a thing that we all agree on. Like I've been saying, I don't understand why there are 12 different people speaking on behalf of the Fed in different cities throughout the course of the month. Even when there is no rate decision, why am I hearing these people's names all day? I'm not saying don't give speeches. I think the Janet Yellen Fed was the worst example of this. It was just a cacophony day after day after day. and when you actually look at rates during her term, almost nothing happened. Like there was no reason. There was really no, it's nothing to do with her. There was no reason for there to be a ton of rate stuff and then Trump, you know, he's got to get rid of her.

38:47Downtown Josh Brown:She doesn't, she's not central casting. She doesn't look the part. Fine. I'm not saying I like the decision. I don't like this. I'm just saying he puts his guy in and Powell to his credit, I think he's serious, but he also, another one, could not stop talking. couldn't I stop doing things also? Like changing direction, making a 180 from one month to another. This month, we're nowhere near normal. Next month, hey, we're going to cut three more times. Make up your mind or shush. Shush. I mean, we put a lot of thought. No question, Warsh was the most kind of hardcore of the nominees. And we thought a lot about like, is he going to like shrink the balance sheet and really upset the bond market?

39:31And I like my personal view is not our house view is I'm not that worried. I just think he's not going to react as much. But that's really a concern, right? If he starts really shrinking the balance sheet, that might have an effect. A retract, you know, contraction. When you get in the shower, let's say the temperature is not perfect.

39:49Downtown Josh Brown:Do you just get in and let your body get used to whatever it is? Or are you twirling the cold, twirling the hot, like trying to find the perfect temperature? I'm the first thing. Like whatever the shower is within reason, it's enough for me. It's fine. I'm here to take a shower and get out. I feel like the Powell Fed is characterized by this idea that they have to constantly be turning the knobs left and right. And I hate it. And I don't think it helped in the end. There were times to do things, times not to. It's very hard to know. We all get that. But the constant talking about it and mind changing, like I hope we get an era where we almost never hear from launch.

40:30Downtown Josh Brown:I like that bet. I like that about the Greenspan era. Came out twice a year, like Santa Claus, and it was enough.

40:37Michael Batnick:But also, in Powell's defense, look at where the Fed funds rates were during his tenure. It's a lot easier to sort of do nothing when we're at a more normal, neutral rate or close to a neutral rate than when we're at 1%. Don't give me a story. Let's talk to the conductors. I mean, he blew up Silicon Valley Bank, right? And he raised rates so quickly. And that was his jurisdiction. That could have been so much worse. He's a regulator. It could have been way worse. But he shouldn't have blown them up in the first place. We agree. That was so obvious that it was coming. Quarter after quarter, they were having to write down a portfolio.

41:11Downtown Josh Brown:Remember Bank of America had$120 billion in mortgage bonds they were upside down in or something on their portfolio? Yeah. Right around the corner.

41:19Michael Batnick:Should somebody be aware of that before we jack interest rates up 13 times? All right. Let's talk Nvidia and semis. So they reported last night, business as usual, Colette Kress, CFO, said, with analysts now forecasting hyperscaler CapEx to exceed$1 trillion in 2027, an agentic AI beginning to proliferate all industries, AI infrastructure spending is on track to reach$3 to$4 trillion annually by the end of this decade. Holy shit. Makes sense. I mean, supply is here. Their demand for AI is here. We have such a compute shortage, it's impossible for us to get our minds around it. That's where we're at.

42:01In 10 years, we're going to look back and go, oh my goodness, that was so silly. How could we have missed this? Whether it's a trillion a year or two trillion a year, whatever it is, the demand. And the other news of this year, right, that I find so interesting is corporate America is willing to pay for this build out, right? They're paying money for Anthropik. And I love that NVIDIA broke out data center. That's cool. Revenue from non-data center revenue. Because to me, you know, corporate America, if I were running a huge corporation, I'd want my own instance of AI because of security concerns.

42:35And who's mixing my data with other people's data?

42:38Downtown Josh Brown:You don't want to be intermingled in a data center. If you're a large corporation, you need your own situation. Totally. I don't want some guy at AWS or woman miskeying something and suddenly, like, my data is exposed, right? And that's a huge risk. Here are some of the myths that have been blown up in the last six weeks since Liberation Day. The first myth is that there was going to be some CapEx slowdown because one of the hyperscalers was going to blink. Nobody's blinking. And at this point, they probably couldn't even if they wanted to. The customer demand is what's fueling this. not the hubris of Satya Nadella.

43:26Downtown Josh Brown:It's what the customers are, that we need more compute. So it's not like one man's whim. I want to keep spending. Right. They're being told that they need to keep spending or those workloads are going to go to someone else's cloud. I mean, isn't that simple? Yeah. Okay. I don't really hear the CapEx bearers anymore. They kind of have gone away. They're coming up with their new story, right? The circular financing, like the whole thing is spinning plates or whatever. I'm not hearing a ton of that. The cybersecurity stocks, I think almost all of them are back at all-time highs. Ripping. Another myth blown up that every type of software would be instantly worthless thanks to Claude.

44:11Downtown Josh Brown:It seems obvious now in hindsight. It does show there's a path forward for software companies. if they do something that's important enough that people won't screw around with vibe-coded versions. What do you think about that idea? I mean, to your first point, it is kind of amazing that hyperscalers have gone from very capital-light, high-margin businesses to capital-intensive businesses, and the stock market's kind of not carried too much unless your name is Oracle, right? Because they're going to have to start borrowing money, right? I mean, they're kind of doing it a little weird off-balance sheet now.

44:44and usually the stock market would kind of punish companies like that like they were the perfect company high margin low capital needs and now they've kind of changed and i'm a little surprised they haven't been punished though microsoft and meta are not on the new high list

44:59Downtown Josh Brown:the only one that is is alphabet because it has its own llm yeah but they're still spending money on it apple's on an ultimate today yeah apple not involved in ai at all right they don't even actually acknowledge that AI exists yet.

45:16Michael Batnick:Yeah, you gave us a cool chart showing how you guys are using it. So the journal reported this as everybody's getting ready to come public. Anthropics revenue is set to more than double to 10.9 billion in the second quarter. I'm pretty sure that's like quarter over quarter. I don't think it's year over year. Then they were at$4 billion. So they're now at a$40 billion annual run rate. You know, nothing, we haven't seen anything like this. We keep talking about it. You shared a chart with us, chart nine, Vanex token usage at Claude. So walk us through this. Like, how are you guys using them? And these, what is this?

45:48Michael Batnick:That's a lot of tokens. Are you guys, is this a lot of money that you guys are spending with these LLMs? What's the left axis? That's number of tokens? That's number of tokens, right. So contextually, we use chat. We got an enterprise chat last year, and then we added Claude. So this is only like a snapshot. I just picked one of the charts. and we started it only in February of this year. And just kind of eyeballing it, we've doubled our token usage in three or four months. But part of it's moving away from chat. There are a couple of interesting things. Claude will actually tell you how many tokens you're using.

46:22OpenAI doesn't.

46:24Downtown Josh Brown:Sorry, moving from chat GPT to Claude. Yeah, but I'm saying the Anthropic, Claude, tells you how many tokens you're actually using. That's why I say actual at the top. Whereas OpenAI, you don't really know how many tokens you're using. It's really weird. You know, you do the queries, but they just don't report that information to our CTO. The other thing about this, actually, it surprised me that it's not steeper. And I think that goes to everyone else's narrative, which is that corporations are going to take years to deploy AI. Is this because you're constrained?

46:58Michael Batnick:You can't get more? No, it's just people need, yeah. Well, no, it's just also not enough people at Van Heck are deploying AI in their day-to-day. I mean, it's growing.

47:09Downtown Josh Brown:Okay, people aren't using enough tokens. To me, I look at that, I wish it were steeper, right? But do you know what they want them to be doing? Like, do you have ideas for what they should be doing and they're not doing them? Or do you want, like many companies, you want your employees to play and come up with ways to make themselves more efficient? Yeah, I'm not smart enough to think through every workflow application. So I want them to be as creative as possible. well, that's why we don't have any budget for this. They can do it as much as they want. I think to put a number on it, we spend$750 ,000 a year right now on both of these.

47:44If you think about that and what investment people cost, like there's a positive payback, right?

47:50Michael Batnick:You'll be at a million dollars in a second. And I think they reported they have a thousand enterprises and it's probably 2000 at this point that are paying a million dollars and people that are not at the enterprise level, like I'm paying whatever, a hundred bucks a month, whatever it is. and I'm running out of tokens. So this is like in a micro level, but -

48:06Downtown Josh Brown:They're weight limiting us.

48:06Michael Batnick:So last night I asked it to summarize, give me the best points of the S1 for SpaceX. And it took a minute and I, you know, I'm just curious, like, wow, that was really awesome. How many pages, how many words were in the S1? And I said, like, actually, we only were able to go through the first 40 pages because you hit your limit. And I was like, son of a biscuit.

48:25Downtown Josh Brown:Yeah, well, that's why - You should have stopped by Van Ack and used one of the - He said, there's no budget. Just come on in and start clauding yourself, whatever you want. How come Barry's not paying for an enterprise version here? It's good. It's a great point. We're working with it. We're talking with the enterprise folks at a lot of AI to be determined. Okay.

48:45Michael Batnick:But in terms of how it's impacting like workflows for financial professionals, Gavin Baker was on Patrick's podcast yesterday, and he was saying there are so many podcasts where material market-moving executives are speaking, and I can't listen to seven of them in a day, but I need to know what they're saying because oftentimes they're saying things that are not in the transcripts that are golden nuggets. And I am using the agentic agents to transcribe all of them and to feed them to me.

49:15Downtown Josh Brown:Right. Are you, when you look at that token usage, are you delineating between what Michael's talking about, like an always on agentic thing that might be running for 24 hours versus somebody at their desk that has an idea and wants to follow a mental thread toward a possible solution to a problem? No, we don't do that, right? Would you be interested to know the two different versions of token use? So one of my colleagues corrected me on this, right? So a lot of this usage is kind of prompt into their website and have them run a task. And then obviously now you can build up memory and that requires a little bit less compute and all that kind of stuff.

49:55That's very different than the open-claw agentic AI, where they are doing the whole task, and you don't need to intervene. You don't need to ask them. The hamster wheel is just turning. And that is, we're very early days at VanEye. We've only allowed some of our analysts to go do that on their home computer, sort of, or in a sandbox. Because the risk is unbelievable with our proprietary data, right?

50:20Downtown Josh Brown:This is what Gemini Spark, what they announced this week at the IO conference is like, just imagine Gemini just always running and doing things on a regular basis without the prompt. And that's, that's the agentic part that we're, you're right. It's like, people are talking about it, but I don't know that there are any companies coming out and saying, we're agentically running this whole revenue operation inside our business. Then we might get there by the end of the year. so we're in a different world though we're in a world of client data yeah like you are we are it's we're in a heavy regulated heavily regulated business i i know a lot of the um fintech guys are running around on linkedin talking about all this shit but in reality i actually don't think there are going to be big innovations that are initiated in financial services i think like most innovation waves, we're going to be more toward the end than toward the beginning.

51:18Downtown Josh Brown:Just given the nature of how little you can really experiment when you have people's personal data. So that's just my gut. I still think we should try. And I still think that we should be experimenting or asking questions and trying to answer them with this new technology. I don't think we should be taking customer information and uploading it into a cloud and hoping that it will spit back critical insights while simultaneously potentially compromising the people that we're responsible to. That's a corporate policy here. We're not going there. So I know a lot of firms want to, but it won't be us.

51:56It kind of depends on what you're doing. We have some tasks that are just like, someone told me like 47 spreadsheets to run the accounting for one of our hedge funds. Well, that's right. That's crazy. That's obvious. Yeah.

52:08Downtown Josh Brown:Yeah, yeah, yeah. No, but so you add enough of those things, you're saving bodies, right? Do you think the productivity boom has a positive externality in the stock market that outruns the threat of automation-driven job loss? Like, are you a glass half full or a glass half empty or undecided? I'm a glass half full. Okay, just always by nature. But I think a lot of, oh yeah, totally unbiased that way. But I do think, I think history, supports that. If you look at charts of how automation has affected different jobs, sure, secretarial jobs are down 75 % in two decades. But it took two decades for that change to happen.

52:55Maybe AI accelerates things, but people are slow to change in general. 40 million women entered the job force after World War II. If you look at an employment chart, you can't see a blip, right? Right, because that's not how employment works.

53:10Downtown Josh Brown:They were absorbed and new jobs were created. And I see, you know, the AI, sorry, the IT guys at VanEck, who literally last year thought, oh my God, my job is in danger because AI is going to take my job. They are now 5x more productive and they're more needed, not more needed, but as needed as they were. So I just, but I do think it's a huge concern for a lot of people because they're technophobic. People are concerned about their jobs. Like that is completely legitimate. Somebody at UBS put out sort of like their own model of what this looks like, and they compared SaaS software companies to newspapers in the 90s.

53:49Downtown Josh Brown:Do you think it could be that dire for a lot of software businesses? Like we basically ended up with two newspaper companies probably left? I think there's no AI without data. So if you can add value by organizing data, and that's where a lot of this AI activity right now is, it's better organizing data because you realize you've got this great tool, but if you don't have data to process internally that's valuable, and some things are obvious, but some things aren't, that's really where the value is. And so I look at if Salesforce, we're a big Salesforce user, if they can efficiently organize our data, okay, maybe there's some value, but I would pay less for it.

54:33We shortened our Salesforce contract, you know, to only two years. And so what you see happening in the data lake is separate and, you know, it's competitive. It's it deserves a re rating. OK, so you got it.

54:48Downtown Josh Brown:It's it. Well, you got it. It's appropriate. Can we talk about chips a little bit? Sure. OK. How outrageous is this on the scale of one to 10? What we've seen go on. I'm not saying like talk down the SMH, but like some of the moves, I think Intel's up 100 % this year. Daniel, chart 11. Some of the moves, not for you to comment individually on the stocks, but like this seems sort of unsustainable. Yeah, and you think,

55:14Michael Batnick:we're looking at Micron and SanDisk. The EPS went from$9 in March, 2025 to 85 bucks. For Micron, SanDisk went from$2 to$99. This is the forward EPS. You think that this is a bubble or what exactly do you think? So I look at, you know, I take my 10-year perspective. Looking back, do these companies have competitive moats? That's how I look at this kind of stuff.

55:38Downtown Josh Brown:Yeah, and the answer is yes. And so I have a thesis on NVIDIA. Maybe we can get to that. I don't think these memory companies have a competitive moat. Okay. Because memory, you know, chips became, you know, NVIDIA went from a single commodity GPU provider to being the mainframe of AI. Love to talk about that more, right? These companies, they don't really have competitive technology. Sure, it's a duopoly for the most part for memory. But they're vulnerable. And most of their profits are coming because they're like, oh, you need my stuff? I'm going to raise my prices. It's not really value added.

56:16Jensen is giving you much more compute. He's like the Walmart of compute, right? He's just giving you better value and more quantity. And that's ultimately what everyone wants. Is that true? This stuff, they're just raising their prices.

56:27Downtown Josh Brown:When you see this earnings expectation, let's just take Micron,$9 to$85. The majority of the growth is not selling more units. It's prices. It's price? Yes. What disrupts that? You're not going to get a new memory chip company spring up, are you? Yeah. We don't know, but Chinese memory manufacturers could definitely export. What if the models get more efficient at the utilization of memory? Well, that'll happen too. That'll definitely happen. So this is a whole ecosystem. That's why I love to say, who's going to be around in 10 years? Because this whole ecosystem is going to change, right? It's pre-learning.

57:04It's inference. Every part is memory. It's every single part. There's vicious competition, right? And it's changing, right? At some point, our CTO is going to say, stop spending$3 million. Or I'm going to tell him, stop spending$3 million on compute. And he's going to say, OK, I'll do fewer API requests and all this kind of stuff, right? So he'll change his programming to make it efficient. Actually, we're already doing that. So it's a changing, evolving system. My thesis is that NVIDIA is a blue chip survivor because of CUDA, because of the software. There's nothing more motivated than a founder who used to be at a commodity business, which he was when he was just selling GPUs to game players, right?

57:52Then, wow, now I can control an ecosystem, right? so he did a deal on inference. He's doing a deal everywhere in the universe to be, and you know, the analogy I look at is IBM, right? IBM has survived for many, many decades because it was super close to the end customer. And they pivoted from being hardware to software, and then software to services. And they survived. So you have to be able to pivot as a company. But if you're in that position, it's kind of in a way, I'm more optimistic than my colleagues, but I think it's NVIDIA's game to lose. At least as being one of the blue chip providers.

58:28Downtown Josh Brown:Every serious person working in AI is fluent in the CUDA software platform and how to use it and all the certifications in the AI space, all the training. It has, it's the bedrock of AI. You don't see that as being shakable anytime in the next few years. That's the key to selling more chips. They'll get competition. Google has its own chips. like there's other chip makers out there. But their ecosystem, it'll be, the ecosystem has to be the cheapest per token at the end of the day. Cheapest per result that you want. And so that's why I'm a bull on NVIDIA because he's like, I call him the Walmart of this ecosystem.

59:12He's always trying to drive costs down. That's why he said like my competitors could give their chips away. It doesn't matter. They're so inefficient. I will kill them.

59:21Downtown Josh Brown:Last night, they reported, like, yet again, one of the most insane victory laps of a quarter we've ever seen from any company ever. Earnings were up 125%. Revenue was up, like, 80 or something. They guided higher by$4 billion than expectations for the rest of the year. Gross margin, 75. They did everything that everyone wanted and more. the stock I know it rallied 15 % into the news but fell

59:54Michael Batnick:down 1.5 %

59:56Downtown Josh Brown:today can I give you my theory on this? Nvidia has been I'm going to call it flat for 9 months or a year and so what was interesting to me is SoftBank sold so someone who had made a ton of money said okay I like to take higher risk and I'm going to redeploy my capital So I love what people are talking about after the internet bubble and how there had to be a rotation in these stocks like Amazon. All these people, it took years to kind of grind through a different shareholder base. And that's kind of, I think, what's happening, right? NVIDIA is going from hyper growth to kind of more blue chip investor base.

1:00:37It's still hyper growth, but I get your point. No, and so they're looking and it's got all the DNA of a great blue chip stock. They're starting to pay out dividends. They're doing stock buybacks. They've got great margins. And their cash flow is phenomenal, right? So I think that's what explains why the stock, the forward earnings have come down. But it's sort of like, can I sleep at night owning this stock? I'm like, absolutely. That's me. I may not make as much money as the next guy.

1:01:08Downtown Josh Brown:When did SoftBank sell? Sometime last year. And you think that was the pressure on the stock? that kept it in a horizontal plane. No, no, not that per se, but it triggered my thinking, Josh, that all these people that have made so much money in this stock, they're just rotating through it. I get it. Like, I get it. That's all I'm saying. It's like, that's what's happening in my mind. What do you think about this? I asked the people on the trading desk on Halftime Report today, the existing buyback left on the previous authorization was$39 billion. They jacked it up. They took it to$80 billion last night.

1:01:43Downtown Josh Brown:I said, does anyone think that this is meaningful for like the share price? They were all like, no, it's not. I understand it's a$5 trillion market cap and 80 billion, but still, it's another person sucking up stock when somebody else gets bored with it and wants to sell. What do you think?

1:02:01Michael Batnick:I think the answer is why the stock isn't moving the way that you would expect a company to when it reports its way. It's a gigantic stock and it takes a lot of buying pressure. It's an elephant. 80 is not enough. It's like you and me trying to move an elephant. Like it's just, it's a lot of weight. But getting back to our conversation, I don't think, I mean, no, it's meaningful. Getting back to the conversation about equal weight versus cap weight. This blew my face off. So Bank of America put out a chart, chart 17. The earnings outlook is more dependent on a few stocks than ever before. And this is not new news, but this in particular, the top five is a quarter of the index earnings.

1:02:34Michael Batnick:And there's one name in here that I said, holy shit. But NVIDIA, Google, Microsoft, Apple, and then Micron. You could have given me 100. Well, I probably, after 100 would have guessed. You could have given me 30 guesses. I don't think I would have said Micron. So again, it's NVIDIA, Google, Microsoft, Apple, and Micron are a quarter of the earnings of the index.

1:02:56Downtown Josh Brown:What if I said which one of these won't be on here in 24 months? Micron. Very obviously Micron. Five years, 10 years, Micron. Okay, five years. Okay. Okay. Just by process of elimination. Like which, you know, NVIDIA. It's so insane how much they're paying in taxes. Yeah. Micron. Like in these Korean memory chip makers. Like someone gave me the statistic. I can't remember it this week. But they're like, those two companies are like equal to the entire prior year's tax revenue for the country. They'll solve the deficit. For the country. You talk about. We should move them here. You're right. You talk about 10-year macro forecasts.

1:03:38Downtown Josh Brown:NVIDIA is going to be as important to automation and robotics as it is right now for large language models and chat, right? Like stipulated. Like they're planning to play heavily in robots, cars. Isn't that the reason not to be shouting stock bubble right now? Like we haven't even gotten the humanoid robots. the self-driving cars just hit the road in the last six months almost no one's been in one yet like for because we were talking about like well all right fine eventually this will be a bubble but like you want to say bubble now before the first time a robot brings you a martini in a bar like today you want to say bubble i i just i'm mystified i look at what spacex is coming to the table with and tesla and all the stuff jensen's talking about now which is physical ai and i just feel like yeah i get it stock prices will rise and fall but like we want to say this is the top before the robots are even here it's not only that again compute demand is here and supply is here that's that's the so until they get to an efficient market like what are we talking about we're going to look back and go like what were what you know what was the who was missing the big trend i don't think we're missing the big trend you guys are all over it i'm just saying now having said that josh I like that clarity from you, though.

1:05:01Within the ecosystem, there are corrections. Like, Oracle was down 50%, right? That's a crash. Because OpenAI. That's a salt, brother. OpenAI looked like it was being lapped by Anthropic, right? And so there are pieces of this ecosystem that will go up and down. Do you guys have a robotics ETF? You must. Yeah. What is it?

1:05:17Michael Batnick:I could ask you. I'm asking you. I bought. Tell me. I bought. I bought. Okay. I'm not that shy. No, it's crazy, though.

1:05:23Downtown Josh Brown:Like, the rules for talking about ETFs. We're learning this because we have ETFs now. No, I can't say what they're called. What's your ETF called? I think the rule is you have to say Candyman three times. You can put it in a bottle and throw it into the ocean if somebody finds it.

1:05:41Michael Batnick:Here's the anti-bubble. I can give you a riddle, and if you solve it, I can tell you the thing. No, we can do Wordle for our ETF. So, Daniel, chart 18. All right. S &P 500 margins going through the roof. This is from Peter Beresin. We're looking at the S &P 500 profit margin forward trailing. This is remarkable. I mean, and this is almost kind of scary because there are political ramifications coming. I mean, they're here today, but they're definitely coming when we see more layoffs and you see S &P 500 prices and margins at all-time highs. That is, for society, that is a dangerous cocktail.

1:06:18Downtown Josh Brown:He's not as worried about it. Well, listen, let's just articulate exactly what we're talking about. No, let's relit again. We got the midterm elections. right let's say that the republicans lose the house okay are you are we going to change monetary policy no are we going to change fiscal policy no right so what they'll impeach trump a couple more times right nothing will happen it'll be that'll just be performance right are we going to solve inequality in america in the next 12 months no you know i mean there's no there's no Anyway, not to get in my soapbox. There's never been a society where you've had egalitarian wealth.

1:06:59Michael Batnick:Period. In the history of the world. Well, Josh has a paperback book coming out where he wrote about that.

1:07:04Downtown Josh Brown:Yeah. So, thank you, Michael. What an assist. So, this is contractually obligated. Harriman House would like for me to mention there's a paperback edition of my book coming out this summer. But to Michael's point. That does look good. But we tried that. So to Michael's point, I think it's, I should probably know this. What was the name of the blog post? Chapter two. You weren't supposed to see that. Name of the book. And we named the book after it. But like, it was this thing where we had a moment where everybody had enough money to not work. And it was COVID. And it was 2021. And everyone could just start a business or start f***ing baking sourdough loaves or.

1:07:52Downtown Josh Brown:maybe show up at Wendy's for their shift, maybe not, maybe work from home or pretend to work. People could just like switch careers, switch states they lived in. And everyone had enough money in the bank that like, like for a moment, it didn't last long. And what I wrote about is how it literally tore society apart. We ended up with people marching in the streets, burning stores down, race riots, fast food companies that couldn't open the doors because nobody would show up to work. Like it's maybe the worst possible thing for everyone to have enough money all at once. It's so pitch black to say it out loud.

1:08:35Downtown Josh Brown:And I went through all of the aid that was paid out. And I came up with, and I did this in a pre-AI, by the way, this myself. I came up with like$20 trillion worth of just giveaways and money raised and Broadway and small businesses and restaurants and sporting events and just like all of the – here, don't worry. Shh, shh, shh. Please, just don't riot. We broke society. Like Powell is – Powell at having rates too low is the least of it. we kind of reordered society by virtue of doing a version of UBI. Like, here, you're good. Your bank account's full. Your bills are paid. Any other problems? No, that's great.

1:09:21Downtown Josh Brown:I'm going to go fly a kite now. The country broke, and we can't do it again. So, like, I guess the bigger point is we actually need people who are hungry enough to strive and show up to their jobs. so I don't know that there is some future where it's like oh don't worry corporate profit margins are so high we'll just distribute the money we can't do it it's I think I put it even I guess I would just say I feel like wealth can be very corrosive this is not even wealth though I know that's not what you're talking about but I'm also talking about wealth don't worry about going to work happiness comes from you get happiness from your family you get happiness from working, from having meaning in your life.

1:10:07And wealth is an enemy of that. Wealth can make you lazy. It can lead to bad habits. It can amplify bad habits. So no one, I think, thinks that, look, I think capitalism is good. Materialism is bad, right? I'm from Long Island.

1:10:26Downtown Josh Brown:I don't know if I agree with that statement. Materialism is bad? material over it can't be consumerism that can't be your only value in life I think your point is and whether it's religion or family or work like we all need our communities we need satisfaction from something else is my point I'm really kind of making the same point that you are yes and all I'm saying is some of the wealth and some of the pockets and maybe it's because I live in Westchester or whatever but like it's it's very it's jarring to me compared to the era that I grew up do you have a lot of like Like, do you have a lot of non-working wealthy people in the community?

1:11:04Downtown Josh Brown:It's not that. It's just like the concept of a private jet. Like, I mean, obviously, I don't fly private, right? It's just weird, right? And kids, your kids go to school with kids that fly private, right? That's just weird.

1:11:19Michael Batnick:I watch your life on TV. It's called Your Friends and Neighbors. That is literally my neighborhood.

1:11:24Downtown Josh Brown:Where I live, the wealthiest people are the people who work the most hours. Like, I don't live in a place where that linkage is broken. The people who are the—would you agree with that? The most prosperous people in my town. I'm a micro—it's a micro example. But, like, the most prosperous people financially are also the people who do not stop working.

1:11:47Michael Batnick:We don't have inherited wealth in our town.

1:11:49Downtown Josh Brown:Right. Nobody who inherits money would live where we live. Or like Nepal babies. They live on the North Shore, like not near us. Yeah. Right. So it's like I always think of materialism. It's like, yeah, but they earned it. Like they – because we don't have anybody who's just like laying around cash and checks. You're talking about Michael's new set of clothing. No. Now, where Barry lives on the North Shore, it's a whole other story. With the wine cellar. I actually don't – right. I actually don't know a lot of people who live there that actually work. So it's a whole different –

1:12:20Michael Batnick:But that type of wealth is corrosive.

1:12:22Downtown Josh Brown:Yeah.

1:12:22Michael Batnick:That, the inherited wealth and the overnight success, that's why the most miserable pricks on the planet are the people that won like the lottery of finance. Whether it's an overnight literal lottery winners or people that sold the business. And you're also ostracized from your community when you have that much money and you live in a normal neighborhood. Like if Josh and I had$100 million an hour town, people would be like, what do you, get out of here.

1:12:43Downtown Josh Brown:You got to hide it. Or why are you here? Right. Yeah, yeah, yeah. People don't want their kids necessarily to even be around like a household that's like that where everybody's... I agree. I think that's neat. And I'm not saying inherited wealth is necessarily bad because it can allow people to buy houses for their kids and stuff like that. So I'm not on a soapbox, but I'm just trying to make that distinction because I think capitalism is something that kids should learn to appreciate in school. what a great system we live in and what wealth and new technology enables for our generation, for this country.

1:13:21It's amazing. We have full employment and we live in a great free country, relatively speaking. And that capitalism narrative can be very negative and corrosive, what kids are taught. That's my differentiation.

1:13:33Michael Batnick:And of course, there is nothing wrong with being born into wealth and having successful parents. We're marrying into it. Well, that's even better. But when did you take over your company? you know yeah 2010 didn't you listen but i was there in the 90s i forgot i was i joined after law school in 93 right so oh and we were losing money so it was clear no we were he inherited he inherited my brother and i took over we had to fire 40 of the firm so i wanted to ask you about i wanted to ask you about like your opinion on this we we had a project where we um we have all

1:14:10Downtown Josh Brown:these different investment strategies inside the firm, different allocations, and they have names. And one of the names for one of the strategies is Lenox Hill. They're all neighborhoods in Manhattan. So Lenox Hill is the 70s, let's say from Fifth Avenue to maybe Madison or to Park, right? So like 70th up to 80th. It's a micro neighborhood in New York, but it has the the Metropolitan Museum of Art has all those limestone buildings on Fifth Avenue. And one of the things about that is that's from 100 years ago, the quote unquote robber barons. They created all this wealth. But what they did with their wealth is they built these institutions for the public.

1:14:56Downtown Josh Brown:They built opera houses and museums, and they set aside nature preserves, things like Central Park, not just in New York, but all over. There was something about making money in a filthy business like steel or shipping or copper mining or even JP Morgan in banking, cutting people's throats all day, being John D. Rockefeller, being like relentlessly aggressive, but then turning around with all of that accumulated wealth and building things for the public. I'm not saying we don't have philanthropists. I'm aware of Michael Dell and Michael Bloomberg. I understand that. But it does feel to people that we don't have that same civic payback from people that are now creating themselves as trillionaires.

1:15:46Downtown Josh Brown:Do you think that's too harsh? Or do you think like the modern day robber barons are doing enough in a civic setting so people walk by these institutions and say, yeah, I understand. I got this back from the people who built Palantir and Tesla. and like what do you think about that idea because all they brag about now is i create jobs but like if you don't work for the company i don't give a f**k that you create jobs yeah it's sort of gates versus look at this shithole city i live in i don't care that you created jobs for people that i don't know like look at this massive wealth you've accumulated why aren't you reinvesting in the in the places that people live yeah it's bill gates right who made a lot of money and then very thoughtfully invested in a lot of different technologies and philanthropies versus Elon Musk, who's like, I'm going to make as much money and create as much wealth.

1:16:41Downtown Josh Brown:And then, well, he thinks he's saving humanity by enabling us to get to the moon. And he might be right, but none of us who are alive today will experience the benefit of that.

1:16:49Michael Batnick:But yeah, don't you, don't you think that's part of the problem with doing what Josh is suggesting is that the cities and the governments that run the cities are so shitty at distributing and executing and there's so much corruption. Like Amazon searched for a new headquarters or one of the projects that they tried to come here and we villainized them and we drove them out. Like I think a lot of these people, and they are doing, there's a lot of people that are incredibly philanthropic. That's like sort of quiet. I mean, that's more your world than ours, of course. But there's people that are doing that.

1:17:23Michael Batnick:But at the public institutional level, it's hard yeah yep the i i think it's a great question i think we don't really know because a lot of the wealth has been created in the last decade or two and so we don't know what they're really going to do with i want to give them a break and also i'm not sure what's so obvious to give money to um you know i i give to educational institutions um primarily uh that's

1:17:50Downtown Josh Brown:Michael Dell. I forget the number. Is it$10 billion or$2 billion to all of the Trump accounts? Right. Just like I'm adding to your accounts personally. So it's not a museum with columns. I understand. And maybe most of the recipients don't even know where it came from. I understand that too. But like, it's a bold example of somebody who's been philanthropic his whole life, seeing a need and saying, you know what, I believe in that cause and here I'm gonna turn on the afterburner for what those accounts could grow into. I think that's amazing. I just don't think there maybe is enough of it. And that's why we have people like AOC literally voting down and chasing out an Amazon project that would have employed people who live in her district.

1:18:39Downtown Josh Brown:It almost seems insane, but maybe that's part of the problem is they don't come off as philanthropic as they are. You know, I think also, and I'm just kind of going back to the history books here, there were some amazing philanthropists. Like the Rockefeller family is just insane. I mean, like, you know, could spend an hour just listing all the things that they did, just in New York, much less around the country and the world. But, you know, probably there were a lot of Robert Barron people that made a lot of money, that just started their own private banks and managed their money and didn't do a lot with it.

1:19:15And so I bet there's probably both types in both eras if we were going to be fair about it. So here in New York. But I do think it's an issue for our society now, right? This wealth inequality bothers a lot of people. And you're right. They're very public figures.

1:19:30Downtown Josh Brown:Yeah. Here in New York, we have this incredible tradition of like the fabulously wealthy doing real, I mean, Vanderbilt's name is still on everything and Carnegie's name is on a ton of stuff. And we have modern day Ken Langone, I think is like one of the greatest men who's ever lived. He basically said to the NYU medical school from here on out, every student is tuition free. All that I ask is you take your education, go back to the place you came from or go somewhere new and treat people. And like, I wish there were 10 or 20 of those, but there's like one of those.

1:20:09Michael Batnick:Barry Dillard did the park down there.

1:20:10Downtown Josh Brown:Yeah. Yeah, so people have done stuff. You're right. Ken Langone's a giant. I mean, he's a giant. Absolute giant. I agree. And he's also hands-on, right? I mean, he really transformed NYU Medical Facility, but he really was, he didn't just write a check, is my point. He really, really helped the morale of the place. Do you think we can turn this anti-capitalism wave around? And if so, does it require some sort of like grand gesture or is it just like time? because right now, I think we do have a lot of people in their 20s who might like permanently be anti-capitalist and I think hurting themselves, but it's also like not great for the continuation of America if it persists.

1:20:56Well, I'm really into celebrating our 250th and understanding what it was all about. and so yeah I think academia is kind of becoming a little bit more balanced over time and you know I think there's so yeah I think that's fixable and that's the distinction I made between materialism and capitalism right our system is really good and I think sometimes they confuse it just with oh those rich people that I hate them or I'm envious of them and that kind of stuff and it's like well yeah but think about the system and what it's done and then you don't have to no one's worshiping materialism, I guess is that.

1:21:33That's my point. And the very younger generation, we should talk to Howard Lindzen about this, is not the DGEN economy, but there's like a pushback, right, for dumb phones and being unplugged and more people getting involved in religion. So we'll see. Society always kind of adjusts.

1:21:53Downtown Josh Brown:Funny you bring that up. They're bringing back rock and roll music because of how imperfect it is to experience in person. guitarist plays the wrong chord every once in a while the singer loses their voice and it's so different from the world that kids live in online where there are no imperfections and everything is very plastic and sterile and you know they manage you through an algorithm exactly where they want to get you you go to a rock show somewhere in Brooklyn and every night's a different experience and uh it's kind of cool to see analog things plugging an instrument into an amp versus a f***ing laptop at a dayclub in Las Vegas.

1:22:31Downtown Josh Brown:So I like that there's a counterculture sort of groundswell of that amongst young people. I think social media was a technology that had a lot of negative social implications. And I know a lot of people talk about it, but I think that's not the, it's the, not the diagnosis. It's kind of the pushback on what are the behaviors. And I think a lot of our institutions were super slow. Like John Haight wrote this book about what I just mentioned is like take phones out of schools make kids talk to each other like we should have done that a decade ago like really but it's happening now but but that's one of the biggest misses in my lifetime is like wow this created a lot of weird behavior and it still affects politics i still know like probably you have friends too that are totally caught on the right or the left and they just they have no perspective because they're in the echo chain i can't talk to those any people anymore but but they were in our society like and they just don't you know they don't shut up on social media.

1:23:28Michael Batnick:I have a physical device. It's called a brick where I lock my social media when I get home because I am addicted like everybody else. And I don't want to be scrolling when I'm in bed with my kids, which I have been for the last seven, nine years of their life. So when'd you do that? Two months ago.

1:23:46Downtown Josh Brown:They took the phones out of my kids high school this year. Yeah. Same. It was like they didn't miss a beat. The kids are fine. It's so much better. They don't need it. They don't need it. Right. What, they don't need poison? Yeah. They took comedy clubs, putting the phones in pouches. Get over it. It's an hour and a half. But what if the babysitter calls? Okay, you stay home then. Everybody else wants to hear the comics say what they're going to say without the fear of seeing a camera in their face. Like, I feel like, I'm not saying like no phones anywhere. I'm saying where appropriate. Yeah. Put the phone down.

1:24:21Downtown Josh Brown:Do something different. so easier said than done for most people weird way to end the show yeah anyway but don't put the phone down when we drop this episode ladies and gentlemen john great job today daniel thank you did you have fun on the show today awesome love you guys all right uh shout out to jan van i want to tell people uh you guys are an incredible asset management firm we think the world of you um i every time i see you on tv or i hear you saying something i know i'm gonna learn something and you brought us some history books. So tell the audience which books you handed to us and I'm probably going to read one of them at least on vacation next week.

1:25:01So 1776, what's the one book? I was talking to someone at a bank who didn't know anything about history and frankly, I didn't know a lot 10 years ago. What's the one book you want to give someone? Founding Brothers by Joseph Ellis.

1:25:14Downtown Josh Brown:Founding Brothers. Founding Brothers. Okay. And it's not a page turner, but it explains who all the founders were, their different political philosophies, and their personalities. And so it's a good grounding. It's not military history, like who cares? It's not focused just on one founder. It's the people. It's ensemble. It's a one book, I guess. And I reread a bunch for that. And then the other book is totally different. It's how the Scots invented the modern world. And it's just...

1:25:45Michael Batnick:Besides for the iPhone, what did they invent? they're so fierce and like all over the world like they settled hong kong right they they settled australia to seven settled hong kong the scots were the fighters in the british empire look look at the mix you know blah blah blah all over the place right they are the they were the fighters i think seven presidents were scots irish like huh like andrew jackson like all these people They were really the, and it's a really fascinating story. Oh, what's the, what's the. And obviously they were big investors, right? It was the Scots, the Dutch and, and, you know.

1:26:22Downtown Josh Brown:What, okay. And then there's another book that I read a million years ago, how the Irish saved civilization. So the Scots and the Irish were more important than we, than we think. Yeah. That's a more narrow story. I would say about how they saved like some, some Christian documents. copying the written canon of Christianity before it was burned everywhere else or whatever. Exactly. All right. So I think I'm going to read the Scots one just because I've read a lot about American history already, but I've never heard that story. So, all right. John, we think the world of you. Thank you so much for joining us on the show.

1:26:58Downtown Josh Brown:We appreciate you. Guys, thank you for listening. Thank you for watching. We'll see you soon. Have a great week. Thanks again.

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