Meta’s Muse launch, Josh is wrong on Netflix, internals weaken, 10-year bonds at 5%, Buffett steps away

15:38Downtown Josh Brown:It did ignite a very interesting rally in CPU stocks. Did you see any of this stuff? I did. Give me my chart. I don't know. What's the connection? I'll explain in a second. The blue line is Advanced Micro Devices, AMD, which just went absolutely wild. We'll talk about more in a second. Purple is Arm Holdings. Green is Qualcomm. And orange is, you can't really see the magnitude of the rally, but it's Intel. Intel was up 15%, I think, yesterday. Yeah, it was a big deal. It doesn't look like a big deal on the scale of this chart, but it was. Here's what's going on. Muse has a very unusual technical architecture that reshuffles the way people are thinking about the AI chip trade.

16:24Downtown Josh Brown:Most AI apps obviously lean heavily on GPUs, which is what NVIDIA is dominant in. Muse is keeping a secure virtual machine for every user. And that machine is handling browser sessions, what's called tool calls, where you prompt something and it has to call on a specific tool. sandboxing, all types of things that CPUs carry out in an AI workload. I think what's notable is that I mentioned ARM Holdings and Qualcomm, neither of which are making traditional CPUs, but they are very heavily betting on and invested in inference on device, which means they make specific chips for cell phones, for mobile phones where people can do that inference work directly on the device rather than routing it to the AI data center.

17:28Downtown Josh Brown:So that's why those stocks, Qualcomm went up 9%, ARM holdings went up 17%. So those are like patent stories, chip stories. But it's the same idea is that this is a gentic workflow that is going around the GPU layer and carrying out these gentic tasks without what we typically see. Let me put up this AMD chart real quick. Did you know, Michael, AMD has now joined the trillion dollar market cap club? I sure did not. Wow, unbelievable. And is almost twice the size of Intel, which is 615 billion. Wow. So AMD is just above a trillion. What are your thoughts?

18:12Michael Batnick:I have no more thoughts. Chart off. You just ate the whole bone. You just ate the entire rib and then threw me the bone. You ate it all. You ate all the meat. I have nothing else to add. You did great. Very tasty. Do you think this meta rally, given how powerful it's been, has legs into year end? Yeah. Yeah. Yeah. I do. I do.

18:36Downtown Josh Brown:So do I. Yeah.

18:37Michael Batnick:Dude, this is a monster breakout. This is a game changer. This has legs. New highs are coming.

18:43Downtown Josh Brown:Isn't this the type of stock where people are going to be like, I can't believe I didn't buy it when they put out Muse. Yeah, totally. Has it gone up? I already feel like 165 points though. Can you buy it here?

18:55Michael Batnick:Well, that's how you know it's going higher.

18:57Downtown Josh Brown:Because it's so hard.

18:58Michael Batnick:Yeah.

18:59Downtown Josh Brown:I think we'll get a consolidation period, but I don't think it's over. Yeah, reasonable. It's too big. It's too big of a deal. Think about what that chart I showed you with the lower highs. the whole thing was like there's no ROI. Meanwhile, there was in the form of reals monetization which is AI there was some monetization but now it's like no one's saying that.

19:25Michael Batnick:There was 50 billion of monetization but nobody was talking about it. How about this? The stock is 750 it'll be at$1 ,000 next year and I won't own it. Assholes like me were yelling at them to start renting out their compute. Right. Like give us the revenue now. Right. Matter of fact You might not need to do that anymore. I'm pretty sure that in the last two months, I bought and sold it. I'm like almost positive. I don't even remember, but I'm almost positive that I did.

19:48Downtown Josh Brown:All right. Well, congratulations. Thank you.

19:51Michael Batnick:I get an honorary idiot trophy. Okay. Let's talk about this. Breath in the stock market stinks. So the index itself is right near an all-time high after the pretty nice rally we've seen in the last couple of days. By the way, shout out to Tom Lee. Am I right?

20:12Downtown Josh Brown:Say more.

20:13Michael Batnick:Tom Lee said the bull market was going to start tomorrow at 2.15. So he was a day early. But because the – It started the next day. It started the next day at 2.15.

20:23Downtown Josh Brown:So for people watching this without the context, he's not – he doesn't think he's clairvoyant. 2.15, the next day he said that was the Fed meeting.

20:34Michael Batnick:But all right. So we're getting that. We got the rally. but there's not a lot of stocks participating in the rally, which is nothing really new. We've had this conversation countless times over the last decade. And I think generally speaking, we've stayed mostly positive saying that when the stock market is near an all-time high and you got the washout under the surface, that has, in a bull market, that's bullish because you already got the, what I call a bullish washout. And then the stocks catch up to the stock market. That is what has traditionally happened. Doesn't mean it will always happen, but it is also a fact right now that breath does stink.

21:11Michael Batnick:So Jason Geffert tweeted, we've never in almost a hundred years seen breath this bad. The S &P is knocking on new highs, but there are many more stocks at lows than highs. So he said the only remotely similar setups were 1973, 1999. He's not doing that to be scary. That is just what the data, that's just what it shows. But what you'll notice in that chart, actually, let's go to the next one. So Ryan said, Ryan Dietrich said, as nearly everyone has noted, breadth has been weak the past month or so. But Scott Charts noted one positive is that breadth, and you can see this right here, breadth peaked with price this time.

21:46Michael Batnick:Remember, at major peaks, you see breadth peak well before price. And I'll give you exhibit A for this. Chart off, please. And John, let me just talk to this. I don't need this table. So in 1990, so right now, Josh, the stock market is up 14 % year to date. And I asked Charkid, there's a lot of stocks that are getting the shit kicked out of them. What percentage of the stock market is down 30 % or more year to date, okay? And it's 4%. So S &P up 14%, 4 % of the market is down 30 % or more. That's way less than I would have thought, honestly. I thought it was -

22:20Downtown Josh Brown:I was gonna say, I would have said 10%.

22:22Michael Batnick:Yeah, me too. I thought it was way more. I was surprised. Okay. This is what a bearish divergence wipeout looks like. For example, in 1998, the S &P 500 was up 29%. And 10 % of the index was down 30 % or more in 98. And then in 99, the market was up 21%. And 14%, 14 % of the market was down 30 % or more. That is clearly not even remotely what is happening today.

22:56Downtown Josh Brown:Yeah, it's not big enough. It's not 4 % versus 14%. It's a different planet. Different planet. The 14 % of stocks that were making lows as in 1999, the market was ripping. I can tell you exactly what they were. It was literally retailers. And retailers were a really big part of the S &P 500 back then. like you can't even imagine how many of them there were sears was a dow stock blue chip oh wow we had

23:25Michael Batnick:companies like what was it what was the ticker for sears do you remember it was s and then it became shld when it became sears holdings oh i remember that one yeah huh um by the way uh my

23:38Downtown Josh Brown:least favorite um cyber security stock is sentinel one and i wrote it up for cnbc this week with Sean. And one of my main reasons for refusing to get involved with the stock, even though it's breaking out. Ticker? It took Sears' old ticker symbol. You don't do that. You don't take the Sears ticker symbol. What are you, fucking high? Like literally the worst judgment imaginable. It's a bad omen.

24:01Michael Batnick:Bad judgment.

24:02Downtown Josh Brown:Now people might say, GB, you're living in the past, man. Doesn't matter. Yes, it does. There's karma attached to tickers. Ticker symbols are magic. They're like ancient runes. They're like hieroglyphs. Don't fuck around with that. Anyway, where was I? Oh, in 99, all of these retailers were the reason for that stat that you're pointing out. And it was very similar to this summer when we had the Sasspocalypse. There was this whole trade of long the NASDAQ, short the retailers. And there was no XRT ETF back then. So you literally had to pick tickers and people were picking linens and things, which is gone.

24:47Downtown Josh Brown:Radio Shack, which is gone.

24:48Michael Batnick:Oh, Borders. Was that publicly traded? Probably. Yeah, totally.

24:51Downtown Josh Brown:BGP. Pier 1 Imports. There were a ton of retail stocks in the S &P and in the market. There was a company called Sam Goody, which sold CDs and guitars. Okay. Guitar Center was a stock. We were shorting. Like we. Radio Shack. was riding those stocks down. The other thing that was going on is there was a massive wave of bankruptcy for steel stocks. And those were also very important stocks in the market in the 90s. By 99, they were all almost zero, but those were contributing to that drag down effect. In this case that you're citing, having 4 % of stocks getting killed while the market is up double digits, like I'll take that all day.

25:35Downtown Josh Brown:That happened the rest of the years.

25:36Michael Batnick:It's nothing. Literally, in 23 and 24 and 25, it was 2, 4 and 5 while the market was ripping. So it's nothing new. Throw up this chart of cap weight versus equal weight. This is a hell of a rip that we got in the mega caps or the cap weight relative to the equal weight. Look at this rip, Josh, over the past couple of weeks.

25:53Downtown Josh Brown:This is Apple, NVIDIA, and Meta all at the same time getting their shit together. Because Amazon's been flat for four years, and Alphabet has been hanging near highs for a long time. What had to happen to generate this Contra move to the broadening, you had to get Apple and Nvidia back in gear and both of them are within pennies of record highs. And obviously this meta thing came out of nowhere. Think about the market cap of those three stocks combined.

26:25Michael Batnick:Yeah.

26:25Downtown Josh Brown:Is it 10 trillion?

26:27Michael Batnick:Is it 12 trillion? So whatever. Yeah, it's a lot. Five, four, and two?

26:32Downtown Josh Brown:It's a lot. That's it. That's the whole story right there.

26:34Michael Batnick:So to very oversimplify, I was just talking about this with Ben, to very oversimplify the AI trade, name one stock. What's the AI trade?

26:45Downtown Josh Brown:Like what stock personifies the AI trade?

26:48Michael Batnick:Yes. Don't overthink it.

26:50Downtown Josh Brown:NVIDIA.

26:51Michael Batnick:Correct. So NVIDIA is the sum of everything AI, right? It is trading at 16 times forward earnings. Yeah. Isn't that nuts? I haven't looked at that chart in a while. 16. It is trading at a discount to the market because there is so much disbelief of the sustainability of the earnings.

27:11Downtown Josh Brown:Do you know the whole semiconductor sector is now at like a 10 or 20 % discount for the S &P? Is that phenomenon you're pointing out is happening at Broadcom? There is so much.

27:21Michael Batnick:I think this is so great. There is so much disbelief that even if they're right, even if the earnings are not sustainable, unsustainable. I really feel like that's mostly in the price. 16 times forward earnings? Not all of it. I'm not saying NVIDIA can't fall 30%.

27:37Downtown Josh Brown:Yeah, but imagine if these companies are still printing record quarters a year from now.

27:42Michael Batnick:Exactly.

27:43Downtown Josh Brown:And guiding towards your record quarters a year from now. Imagine that.

27:47Michael Batnick:Won't be trading at 16 times earnings then. All right, let's talk about the stock that you and I both own that cannot get out of its own way. I'm going to tell you right now, this is my worst call of the year. What do you think? uh i don't uh yeah mine too i mean well i've made worse calls unfortunately we need to get

28:01Downtown Josh Brown:into that it's bad all right i have not made a lot of bad calls this year i mean i i i always make a few every year because i'm fucking human and i don't i don't think it's the end of the world to be wrong on things it's not that's not the game that i play um but i've been double wrong on this like i'm wrong a lot but i use stops i did the opposite here i was i was like averaging down the whole way. And I just, uh, I just refuse to see reality. We're talking about guys, we're talking about Netflix. So I've been wrong in every venue I've talked about this stock. Um, I've been wrong writing about it.

28:35Downtown Josh Brown:I've been wrong on TV about it. I've been wrong on, uh, on this show about it. And, um, I want to show you the three year chart.

28:46Downtown Josh Brown:so this stock was ripping like in 24 this was a hot name and the first half of 25 and then i'm not a thousand percent sure why it all of a sudden fell apart other than the company waded into this

29:02Michael Batnick:warner brothers mishigas that's the entire reason because look look around the cliff what a horrible

29:07Downtown Josh Brown:decision that was. I never liked that. I never liked the idea. I didn't understand it at the time, but I also was sort of like open to the idea that, you know what? It's a$400 billion company. They could do whatever they want now. I was like sort of open to that idea. The bears were like, if they think they need to absorb Warner Brothers and it's labor issues and it's dead,$30 billion in debt Netflix thinks it needs to absorb? Why? And that was the right take, and it wasn't my take, and I was wrong. I want to show you – show me on this chart. I know where I should have sold. I had two chances, and not necessarily at the high.

29:58Downtown Josh Brown:Tell me where you think I should have sold. Before I do that, I will just say, credit to me, I bought this thing after it got killed.

30:08Michael Batnick:So I did buy near the lows in February, I believe, and I sold it on the rip. But then stupidly, when it filled the gap sometime in May, that's when I bought it again. Because I thought I was going to catch the gap fill. I tried to get too cute. So I'm now down 19 % of the stock. All right, back to the chart.

30:25Downtown Josh Brown:Where should I have sold? I bought it. My first purchase was at 100, not pictured on this chart. I bought it in the summer of 25. I did not pay the high. The high, I think, was 130-something. So I paid like 100. Okay. That was my first price.

30:40Michael Batnick:So I think here's the right answer. You can't see where my mouse is, but I'm hovering over May 2026. So when I bought it, when it filled the gap, right? You see May 26? Uh-huh. So it filled the gap, went sideways, and then broke down. Probably that's where I should have sold and where you should have sold. So right around, that looks like, I don't know,$80 or so. So I'm between May and July, 2026.

31:05Downtown Josh Brown:I'm going to tell you that's not where I think I should have sold. And not because the price is higher, but I obviously should have sold shortly after the death cross. So for those of you who are not familiar with a death cross, it's very simply when you have a 50-day moving average cross below the 200-day moving average. Basically, it's not science. It's like a shorthand for the negative momentum in the near term has now overwhelmed the longer-term trend, and the sellers are in control of the stock. So it's not an automatic silver bullet, always right kind of thing. But it is a signpost that tells you the psychology in a stock has meaningfully changed.

31:52Downtown Josh Brown:It may or may not coincide with the fundamental change. In the case of Netflix, there really was no fundamental change at that point. But it was a sign that people were losing enthusiasm for this. So where did that happen? That looks like the first week of December. Bucktown. Yeah. Yeah, and you know what? It did not, like in this particular case, it did nothing but fall. It looks like it fell every single day. I know it didn't. It looks like it fell every single day from December to March. Isn't that what it looks like to you?

32:30Michael Batnick:So I agree with you. When I was looking at the chart, I was looking at the right-hand side. I was saying when I should have sold. I didn't realize you owned it all the way back then. You should have sold. You dumbass. I added. I fucking added to it. but okay but but fast forward to today i like i'm afraid to sell i'm not selling it i feel this seriously i think we missed we missed the window now it is true that it's never too late to sell i generally buy that that adam but the the old bald man knows when to break the rules

32:57Downtown Josh Brown:all right i already well i already broke my rule because i'm stuck in it but here's well i added to it on that gap down my earnings my average price is 81 it's a 73 stock that's not bad we have you're better than i am the stock was at 82 days ago the thing is i'm really stubborn and i don't just want to come out of this thing unscathed i actually after all this time you know the way i am it owes me i'm violating every i'm violating every stock market rule on the books and off the books i I insist on making money here. I actually think I'm going to because of the live events, the NFL, and their increasing penetration into things that bring in a lot of new users who then don't churn out.

33:45Downtown Josh Brown:And I want to share with you the bear case and the bull case, according to Wall Street. There's a guy at Wells Fargo that has the low street target. He's at 57. I think it's either. There's two guys. One guy at HSBC just cut his price target to$76 today. This guy at Wells Fargo cut his price target on September 18th to$57. That's implying more than 25 % downside from here. Here's why. Compressed valuation multiple. He's going from 21 times forward to 15 where he thinks it should trade. He cut his earnings for 27. He cut his earnings for 2028. He's saying viewing averaged 1.6 hours per subscriber per day in the first half.

34:37Downtown Josh Brown:That's down 8 % from 2023 levels adjusted for password sharing and geographic mix. He's saying hours for Netflix's top 100 original titles, which is what they live and die on, by the way, fell during the period. Their share of US TV watching is now below 8%. And his problem with the story is Netflix has lacked big original series, and it's showing engagement trends look worrying to us. So his point, which is different than the other bear I'll talk about in a second, is that Netflix, they're spending$20 billion this year on content. We need the next, it's crazy, right? We need the next Stranger Things.

35:21Downtown Josh Brown:We need the next reason that people are talking about Netflix with their friends and subscribing. They need a Bridgerton. They need an Ozark, something that is unique to Netflix that gets people in the real world when they click the TV off talking about it. Paramount has those shows. Everybody I know is talking about Lioness. So good. Landman. Paramount has that shit right now. What Netflix show is anyone talking about? Honestly, is there another Narcos? Is there anything? So what's the bull case?

35:59Michael Batnick:Why do we own this piece of shit?

36:00Downtown Josh Brown:Last thing on the bear case. Today, HSBC, they don't care about Netflix's original program. They think the company's fucked either way because they think YouTube has just opened up a new threat-level surface that there is no answer to.

36:47Downtown Josh Brown:Quote, so they both are bearish, but for two different reasons. I want to ask you, which of those you agree with more? Is the problem the lack of creativity and hit shows, or is the problem like basically they're going against Darth Vader and the Empire in the form of YouTube, and it doesn't even matter what they put on the air?

37:08Michael Batnick:It's obviously both, but I feel like the YouTube distraction market share story, I feel like that's in the price. I feel like all of that is so well understood you think so yes 100 we've been talking this for a long time I feel like that part is so well understood is Netflix being reactive by adding

37:29Downtown Josh Brown:podcasts and taking things away from YouTube for money yeah yeah and then getting into vertical of course to capture the 18 year olds who apparently won't watch anything sideways

37:42Michael Batnick:But the bigger issue is there's no hits. Okay. So you think that's the real – well, that sounds like the thing they could turn around.

37:51Downtown Josh Brown:Correct. Okay. They just – hey, Taylor Sheridan.

37:56Michael Batnick:Well, that's too late, but – Is it? Yeah. He just did a deal with Universal after Paramount. Oh, he did?

38:03Downtown Josh Brown:Yeah. That's his next stop. What's Universal? Peacock? NBC? All right. Here's the ball case. Evercore ISI doubled down. They actually raised their target from 100 to 110. I'll just give you the highlights. U.S. subscriber penetration actually hit a multi-year high of 63%, according to their own survey. Japanese penetration rose to a record 22%. Churn intentions, meaning people get asked, are you likely to cancel, improved in both markets. Live event viewership jumped to 60 % of users in September from 42 % in March, which means they have broadened out the portfolio of live events to the point where more than half of users are interested in what they're putting on.

38:56Downtown Josh Brown:In Japan, 45 % of newly surveyed subs said they joined because of the World Baseball Classic promotion. Netflix Clips, which is their short-form content, reached 46 % usage amongst Japanese respondents, 38 % in the US. It's a lot. It's a lot going on. Can I just say, last thing on Netflix? I can't imagine it getting to 110 without a major change. It's not just going to float there.

39:28Michael Batnick:It's not just going to float there. So you mentioned earlier how many times are we going to learn to not bet against Mark Zuckerberg? And I feel like Netflix has earned that same right with the stipulation that yes, all of the bear case is legitimate. I'm not saying the stock is getting punished for no reason. There's good reason. But if you look at the stock chart and you see all the drawdowns, there are multiple different 70 % drawdowns. Now, I'm not sitting to a 70%. If this goes that way, I'm out. But right now, it's down 47 % from its highs. People are bearish. We know.

40:03Downtown Josh Brown:They're buying back. They bought back$4.7 billion dollars worth of stock in q2 they have a 25 billion dollar buyback authorization still outstanding let's go be aggressive i love it um they should be able to grow earnings double digits for as far as the eye can see and they're going to okay uh the one difference between what you're saying they earned all this time and you're right a lot of times when 2022 is a great example the stock was more than cut in half and then they launched ad supported and password fix and the stock worked um it's a different guy yeah the ceo is gone yeah so so far ever since reed left this has not been going well and i just think that's like an added wrinkle yeah i don't i don't hear investors calling for the head of of anyone at the company but it is not being led by the same people who have turned it around like 10 different times.

41:06Michael Batnick:But Sarandos and Peters have been there for decades.

41:08Downtown Josh Brown:Those are content guys. It's a business problem.

41:10Michael Batnick:It's not new guys. Okay.

41:13Downtown Josh Brown:I'm saying those are Hollywood guys. Those aren't like business guys.

41:18Michael Batnick:Please make a hit. Get people excited again. All right. I want to give a shout to Adam Parker and Trivariate Research who consistently produce some of my favorite digestible research. It's not 97 pages. It doesn't sit on my Chrome tab for three weeks before I delete it.

41:41Downtown Josh Brown:You feel bad? Like I should finish this. I read it every week. I'm the same way.

41:46Michael Batnick:No, it doesn't sit there. It does not sit there. No, no, no.

41:48Downtown Josh Brown:But like the research stuff that you're talking about where you keep looking at it out of the corner of your eye and you know it's there. You can't bring yourself to finish it.

41:57Michael Batnick:Like Mobison's updated piece on public to private equity. I remember reading this 10 years ago. It's 91 pages. This is going to just be here for a long time before I exit out. Yeah.

42:07Downtown Josh Brown:I can't do it. So anyway, they wrote a post,

42:13Michael Batnick:buy and hold doesn't work. And they quantified how difficult individual stock selection is on a buy and hold basis, which is great shit. So they say the odds of beating the market have fallen sharply only 23 % of the top 500 stocks, US stocks held for 10 years, beat the index and the latest observation for three year holdings. The hit rate is 28%. So the unfortunate truth, you have to trade unbelievable.

42:45Downtown Josh Brown:Yeah. And I think this is even harder than most people would have guessed. What do you, what do you think about that?

42:51Michael Batnick:It's way worse. You're right. Worse.

42:54Downtown Josh Brown:Like most people would not guess it's this, it's this futile.

42:56Michael Batnick:And it's not just that it's difficult to beat the index. It's that the cost of being in the bad stocks is brutal. So for example -

43:07Downtown Josh Brown:Or missing the huge winners. Like you can't recover from it.

43:10Michael Batnick:He says stocks bought three years ago that lagged the S &P 500 fell behind by an average, by an average of 62%. So throw this chart on. We're looking at the percentage of stocks on the left side. Percentage of stocks beating the S &P over three years. And on the right side is over the last 10 years. And it's the exact same chart if you're not watching. It's upper left to the lower right. And it's not just the top 500. It's the top 2 ,000. So what is it, like 30 %? Oh, we just said it's 27%. Only 23 % beat for a 10-year period. Next chart. So it's not just that the losers have sucked, which is the left-hand chart.

43:56Michael Batnick:which shows the mean three-year return relative to the S &P for the losers. Look at the winners. So the mean loser is down like 80 % versus the index and the winners are destroying. So the gap is just massive, massive, massive, massive. And I'll leave you with this. What I thought was really interesting and pretty intuitive was the percentage of stocks beating the S &P 500 over a 12-month period, if you look out one year, you have a better chance looking out 10 years or three years. And I think the reason why, chart off please, over a one-year period, you could sort of credibly say, all right, this is way overdone.

44:38Michael Batnick:The market is misunderstanding the bear case. They're taking it too far. And over the next year -

44:42Downtown Josh Brown:Not over 10 years.

44:43Michael Batnick:Over the next year, I have pretty good clarity as to what's going to happen. Over a 10-year period, whether you're in biology or chemistry or politics or sports or this, nobody could say anything about the next 10 years for any field, especially the stock market. Impossible.

44:59Downtown Josh Brown:And you're just wrong. Impossible. Like the market is not misunderstanding a stock for 10 years. You're just wrong.

45:06Michael Batnick:Too many things change. Right. So if you're going to pick stocks, you don't have to day trade, but buying and holding individual stocks is really not a great idea.

45:17Downtown Josh Brown:Well, yes, but I have a different takeaway because the problem is everybody anchors to Berkshire Hathaway, and he has successfully done this. It doesn't mean every sale he made was good in hindsight. It doesn't mean every buy worked out, and Berkshire Hathaway trades. like every quarter, even in the Buffett era, the Buffett and Munger era, every quarter the 13F comes out and they bought and sold stocks. Like people misunderstand like, oh, Warren Buffett, he buys and holds forever. No, there's like eight stocks he bought and held forever. Eight out of 800 that have come and gone from the portfolio.

46:01Downtown Josh Brown:What he does is so brilliant. he lets the market tell him that he's in a forever stock and then like 10 years goes by and it's like well no reason to sell it now look at my look at my cost basis but like in that first one or two year period you very rarely find him holding losers he like just like it almost if he's wrong on the buy, they'll sell. People think that he's like this buy and hold machine. If that were the case, think about how many dead companies and bankrupt companies he would have ridden to zero that they had owned in the 60s and the 70s and the 80s. He kept his winners. He kept his winners, which is what I do.

46:46Downtown Josh Brown:I learned it from him. All right, that's one. Two, part of the problem here, if you're going to try to be a buy and hold person, is your starting point. Where do you select the stocks that you want to buy and hold for the long term? The thing that a lot of investors do is just randomly approach the market. And they flip on CNBC, and it's Fast Money, and it's Guy Adami and Tim Seymour, and I like those guys. Nothing specific to them. And it's you. Yeah, it could be me. And we're going around the table, and we're just batting back and forth ticker symbols. oh I guess those guys are talking about that stock that's what I should trade that happens to everybody because you just assume a stock in the news is a stock worthy of you knowing and I understand that having a starting point and starting with winners already is so much better than starting with noise and sometimes the winners are the ones in the news obviously but I think like what we do with best stocks in the market it's all right fine you want to trade stocks, motherfucker, step right up.

47:53Downtown Josh Brown:Start with these 200 stocks that are already making people money. Is Netflix one of those 200? No. Netflix hasn't been on that list, I think, since we started it. But you know what is? Dell. Would most people a year ago have picked Dell out of a hat? I think I'm going to start trading this stock. Of course not. No. They make PCs. What is this? They make servers. Dell has been on the list since we started it. I don't think it's ever come off. That's an example of like, and they're not all Dell. Where do we start? Well, let's start with Eli Lilly. Let's start with stocks where people are up and making money and they're accumulating more and the valuation is re-rating higher and the earnings are growing.

48:42Downtown Josh Brown:Like that's your starting point. Not what are these guys talking about on a barstool? somewhere at a sports bar, that's your starting point for stocks. No wonder you can't stop losing money. You're not fishing in the right pond. And Fami's been talking about this forever. Our friend John, who sadly passed away. John Borman was always, he said, if you want to buy a stock because it'll go up, start with a stock that's already going up. Like, this is not, I didn't invent this, but it's like one of the few things that I just have always believed in. And what you just showed me from Adam Parker, I think is an illustration of that.

49:23Downtown Josh Brown:Like most stocks are not going to do well relative to the market. It's impossible for most stocks too. Right. Which is why we have trillion dollar market caps. That money was diverted from going into the other 400 stocks that suck. It's like, oh, everyone's buying this. there must be a reason. All right. Can we do bonds real quick?

49:47Michael Batnick:I bought bonds.

49:49Downtown Josh Brown:I wanted to ask you, should we just lock this in? We're not looking at this chart technically. Give me the 10-year yield. I'm not going to tell you what you think I am, which is that it's about to break out because it's a yield on a bond. I don't know. Last time it got to these levels at the end of 23, it was a no-brainer. Lock it in 5%. You didn't see it again for almost two and a half years. Now we're back at this level.

50:19Michael Batnick:It doesn't matter. Chardoff, it doesn't matter if you don't need to call the top in bonds. I'm very thrilled with a 5 % yield on a 10-year. And guess what? If it goes to 5.8%, I'll be even happier. You don't need to know.

50:35Downtown Josh Brown:All that is is opportunity that you missed. It's not the end of the world.

50:40Michael Batnick:I haven't owned bonds in, I don't know, ever, ever, ever. To me, this just seems like prudent asset allocation. Bonds are offering an attractive real rate of return. And if stocks keep going up, fantastic.

50:51Downtown Josh Brown:Let's double down on that for the viewers with treasury bonds. If you buy a treasury at a 5 % yield and six months later, the yield is six, yes, you missed out on some potential upside. But if your plan from day one was you're going to hold onto the bonds, you're not trading bonds. You're saying, I'm going to buy a 10-year bond and hold it for 10 years. It doesn't make a difference what happens to the yield after.

51:19Michael Batnick:You're going to get your 5%. Well, yes. I will in all likelihood not be in bonds for 10 years. But the point is this. The point is a move from 5 % to 6 % of the 10-year, I don't know exactly what it costs you, but you're not losing that much money because you already have the 5 % cushion. So the risks are asymmetric. You go from 5 % to 6%. Okay. Your total return goes down 3.5%. Don't quote me on that. But guess what? What if yields do come in? What if there is a recession?

51:47Downtown Josh Brown:What if the stock market wobbles? 5 % to 4%, you get a huge boost. I guess the point I'm making is it's not the equivalent of buying a stock at 10 that drops to 8. That's not the same kind of thing. No, of course not. Missing the right price in bond yields is not quite the same thing. And there's no cushion in stocks.

52:05Michael Batnick:Equity can go to zero.

52:08Downtown Josh Brown:That's exactly right. The other thing is no one is stopping you from taking your coupon and reinvesting that in higher yielding bonds. Right. No one is set. So in other words, let's say you put$100 ,000 into a 10-year bond, lock in a 5 % rate. They're going to pay you$5 ,000 over the course of the first year. You could take that$5 ,000 and buy bonds that are yielding a higher yield. And this is very common. This is what people do in fixed income. Nobody's stopping you. The other thing nobody's stopping you from doing is laddering out and saying, all right, I'll buy$50 ,000 at 5%. And if it gets to five and a half, I'll buy another$50 ,000.

52:52Downtown Josh Brown:You're welcome to do that too. So I think that's a really key point. I do want to show you the yield curve. Okay. Normal. Good. Totally normal, shaped the way that you would want it to be shaped. And actually, the 10-year is the juiciest part of the curve from my perspective. like this is, first of all, look at the improvement from the dark blue line to the light blue line. Look how much higher the yield is now than it was one year ago. And quite frankly, that is what you should be doing. If you have excess cash that you don't know how to invest today, and your time horizon is 10 years, and you can't afford loss of principal with that cash for one reason or another, this is now a great option for you.

53:41Downtown Josh Brown:It's a way better option than it was a year ago. Let me show you the long term here. This is another critical thing for people to understand. The level 5 % on the tenure is not some sort of like no man's land, which the media is attempting to portray it as. If anything, the rates from 2010 to 2020 were the aberration. That made no sense. this is actually normal. And if you go back and look by decade, this is pretty much where rates were or higher for most of recorded history. Completely normal. I want to show you this rates versus oil chart real quick too. This is from SIBO via Daily Chartbook.

54:33Downtown Josh Brown:The three-month rolling correlation between the US 10-year yield and WTI oil prices hit a high of 65 % last week, meaning extremely correlated. That's above the highs we saw during the depth of COVID and the 2011 Arab Spring. All right.

54:48Michael Batnick:So what happens, Shash, when oil pulls back?

54:52Downtown Josh Brown:I think the story here is where yields go from here will be less dependent on the Fed and more on the situation in Iran. The 10-year yield is not controlled by the Fed. The Fed controls overnight money. The 10-year is being batted back and forth by whether or not we're going to have World War III and oil supplies coming through the Strait of Hormuz globally, et cetera, et cetera. Last thing, counterpoint to this 5 % being problematic. Michael, did you know we have just broken a new record according to Fidelity? The number of stock market millionaires with 401ks has expanded by 19 % from the first quarter.

55:38Downtown Josh Brown:We now have 769 ,000 401ks at Fidelity with over a million dollars. That's it? Yeah, that's a lot. You don't think that's a lot?

55:50Michael Batnick:No.

55:51Downtown Josh Brown:401ks only. How many would you have guessed would be over a million dollars? Millions. Well, there are millions, but just at Fidelity and just 401k, not people's overall wealth. 3 % of Fidelity's 25.8 million 401k account holders are now millionaires. I don't know. If you actually look at nationwide household wealth, one-fifth of American households are millionaire households.

56:23Michael Batnick:That's a lot of households.

56:24Downtown Josh Brown:You see anybody celebrating that anywhere?

56:26Michael Batnick:Nope. I try to. We try to.

56:30Downtown Josh Brown:I sort of feel like that's, I don't know, really good news.

56:34Michael Batnick:That's great news. All right, let's end. I know we're going late, but we got to say goodbye to Warren. Chart kid. I'm sorry. Sean.

56:42Downtown Josh Brown:He did not die. He sat down as chairman.

56:46Michael Batnick:So he had a hell of a run.

56:52Michael Batnick:Oh, my bad. Sean made this chart looking at Warren Buffett's legacy. You could screenshot it and take a look later because we're not going to spend too much time on it. But it's a great history of what he's done. For example, in 1972, and it's showing the growth of, I guess,$10 or whatever it is. In 1972, he acquired Sea's Candy. He started buying Coca-Cola, as we mentioned, in 1988. Still holds it. He's done some shit. 2016, they started buying Apple. All great, great work, Sean. But two other things that I want to show this is really incredible. The annualized return from various starting points.

57:27Michael Batnick:I mean, just unbelievable.

57:29Downtown Josh Brown:Like almost no matter when you bought Berkshire Hathaway, it was a winner. Wow. All right.

57:35Michael Batnick:And then the most face-melting chart. This is one of my favorite investing data points. I think I heard this from MedFaber first, that if Berkshire Hathaway fell by 99%, it still would have outperformed the S &P 500 since 1965 when he started running this thing.

57:56Downtown Josh Brown:it sounds fake it's not so it's so i mean you have to have gone back in time and boarded in 1965 for this to be relevant to you but the mathematical point about compounding is he

58:08Michael Batnick:really did it he really did it yeah like that's not a fake stat um all right anyway his son howie is stepping in to be the chairman of the board um whatever who really cares uh let's let's talk

58:18Downtown Josh Brown:about my make the case josh i can't believe you're about to do this i saw it in the doc i said i can't wait to hear this.

58:26Michael Batnick:If I jinx the stock market rally, then I apologize. But I am going to make the case for one Cathie Woods, AR. You never go full ARK word. I'm doing it. I want to set this table by saying this. People are bearish. They're sure as shit, not bullish. So we have the fewest bulls in a year from the AAII survey. The fewest bulls in a year. And at the same time, the number of bears rose by the most in one and a half years, pushing the bull bear spread down to the lowest since May, 2025. And chart off, please. I don't think it will take very much for the sentiment to come back really, really fast if the stock market starts moving and it is moving.

59:15Michael Batnick:So look at this chart of arc. Purple line, please. I mean, it could fail here, but would you bet on it?

59:25Downtown Josh Brown:Would you bet on it failing right here? The problem is I'm just looking at an ETF where the holdings change every day. It's not an index. Like in other words, if you showed me this and you said, this is the BlackRock blah, blah, blah fund. And I know it's like a static group of stocks. I got you. I would tell you the tacticals are meaningful. She could turn this whole portfolio over tonight.

59:47Michael Batnick:Okay, but she's not going to because she, so your point is well taken. There should be skepticism because you're not buying and holding an index. But the pond that she fishes in doesn't change very often. She buys the shit. And I don't mean the shit, the garbage, but she buys what she buys. She buys innovation. So look at this chart. So these are her top six holdings and they're all working pretty well. Number one and number two are Tesla and SpaceX. And they both just went on a hell of a run, especially SpaceX. Number two is Tempest AI. She owns Circle and Coinbase and CRISPR. So it's innovation, it's crypto, it's genetics.

1:00:25Downtown Josh Brown:These stocks are all massively off their highs and in long-term downtrends. All of them. Even SpaceX, I mean, I know it's been public for six weeks, but even that's in a downtrend, technically speaking, relative to where it started.

1:00:40Michael Batnick:So if the risk on comes back into the market in a meaningful way, I think that ARK is going to massively benefit and it looks like it's going to break out but could it could it be setting up

1:00:51Downtown Josh Brown:for a double top sure it's a good pitch and i understand why you're making it and i actually applaud the guts that it takes for the first time ever i actually want to challenge you not only do i not agree i want to take the other side i want to tell you that what she'll do unfortunately this has been the history she will sell her winners and buy more of her losers And so some of those stocks might work, but the portfolio management strategy is when people on social media start chirping at her. I can't believe you were so dumb to buy CRISPR. She will literally take that as a cue to buy more stock.

1:01:30Downtown Josh Brown:And very often it doesn't work out well for ARK shareholders. And I love Kathy personally, but I'm just telling you, she has like more guts than most portfolio managers. and she has more guts than is actually good for a person to have. So I would like to do a challenge. When do you want to? You're in?

1:01:49Michael Batnick:You're in.

1:01:50Downtown Josh Brown:Okay. You might end up being right. I'm not like table pounding, but I want to see if my logic wins out over yours because not only are we going to look at the result, we're going to look at the actual portfolio turnover and if I was right about what would happen. We'll take a snapshot of the holdings today. We'll take a snapshot in the future.

1:02:10Michael Batnick:and see if she...

1:02:11Downtown Josh Brown:Okay? Does that sound good?

1:02:12Michael Batnick:Yeah.

1:02:13Downtown Josh Brown:All right, real quick, mystery chart, and then we'll get out of here. I'm not sure if you're going to get this one. You're very good at this. I'm showing you since inception of a stock that I recently pitched on this show. Oh, I know it.

1:02:25Michael Batnick:It's Airbnb.

1:02:27Downtown Josh Brown:No, I didn't pitch Airbnb on the show, did I? I thought you did. Okay, keep going. Since inception, so that's your clue. You can see it came public in 21.

1:02:35Michael Batnick:I'm with you.

1:02:35Downtown Josh Brown:I have pitched this stock for Make the Case on this show this year. Huh. It's like the mother of all U-shaped recoveries is the way I'm thinking about this.

1:02:51Michael Batnick:It's a very rare winner in 2021. Is it?

1:02:55Downtown Josh Brown:Not yet. It's not even a winner yet because look where it started. It's just barely.

1:03:00Michael Batnick:Just barely. Is it Affirm?

1:03:04Downtown Josh Brown:Affirm. That's such a good guess, but it's not.

1:03:06Michael Batnick:Okay. I don't know. Take one more. Well, do you want to give me any sort of clue other than you pitched it in 21? No, I pitched it. No, no, no. I understand. I pitched it this year. I get it. It came public in 21. One more. Give me a little bit of a clue. How many stocks have I pitched on Make the Case this year? I don't know. 20? Give me one more clue.

1:03:25Downtown Josh Brown:Okay. Oh. there is a super inappropriate almost borderline rapey Christmas song where the ticker symbol the ticker symbol appears in the name of that highly disturbing

1:03:44Michael Batnick:song oh my god I don't want to guess just what is it I don't want to guess what is it is that the craziest clue what in the world oh

1:03:55Downtown Josh Brown:oh Oh, I didn't think that you were going to get it. No, that was bad.

1:04:01Michael Batnick:That was bad.

1:04:02Downtown Josh Brown:What was bad? That you didn't get it? Yeah. You should have gotten it, you mean?

1:04:05Michael Batnick:Yeah.

1:04:06Downtown Josh Brown:All right. For the listener, it's Snowflake. I want to show you a technical chart here too. All right. This is where I think like this area, July 29th is where I bought it. So right around there is when I would have pitched it. I want to point out to the viewer one thing. this obviously could have ended up not working i basically bought the high so it made a high in june and then it spent a full month consolidating and then it ran right back to that high and look what rsi was doing at the time it was getting a little bit overbought but people

1:04:44Michael Batnick:were excited about the stock that's my setup i won't i don't do well i always in fact i almost

1:04:50Downtown Josh Brown:always lose buying value stocks, buying lows. This is what I do. I pull the buy trigger at the high after I've already missed out on a lot of the performance. And it doesn't always work, but I have an exit. To me, this is the thing that keeps you out of trouble if you want to play these types of stocks.

1:05:12Michael Batnick:Not buying them when they get killed. You're right. You're right. Why do I do this to myself, Josh. Why do I do it too? I still do the wrong thing.

1:05:20Downtown Josh Brown:All right. That's it for us today. Special thanks to everybody watching on YouTube. Thank you to the Spotify people, the Apple podcast people, no matter what platform you're on, the most important thing for you to do is leave a rating, leave a review. Super meaningful. We love you for it. We appreciate it. Tomorrow's Animal Spirits. Of course, we'll do Ask the Compound later that day and we'll finish Shout out the week with an all-new edition of the Compounded Friends. Keep it locked right here. We'll talk to you soon. Thanks, guys.